Engineering & Capital Goods News

Tax Cases Monthly Round-Up: December 2022


Supreme Court

Case Title: CIT Versus Swapnil Finance Pvt. Ltd.

The Supreme Court disposed of the appeal on the ground of low tax effects. The division bench of Justice M.R. Shah and Justice Sudhanshu Dhulia observed that the monetary limit to file an appeal before the Supreme Court is Rs. 2 crores.

Case Title: State of Jharkhand and others Versus Linde India Limited and Another

The Supreme Court has held that the main function of oxygen in manufacturing steel is to reduce the carbon content; therefore, it can be considered a refining agent but not a raw material, so the concessional rate of sales tax is not available on oxygen.

The division bench of Justice M.R. Shah and Justice M.M. Sundresh has set aside the order passed by the Jharkhand High Court and restored the orders passed by assessing officers to revisional authority—the Joint Commissioner.

Delhi High Court

Case Title: M/s. Vallabh Textiles Versus Senior Intelligence Officer

The Delhi High Court has directed the GST department to return the amount of Rs. 1.80 crores along with 6% interest as the recovery of tax made during the search was not voluntary.

The division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju has observed that no recovery of tax should be made during search, inspection, or investigation unless it is voluntary.

Case Title: ReNew Hans Urja Pvt. Ltd. vs. Central Board of Indirect Taxes and Customs

The Delhi High Court has granted interim protection against the retrospective denial of the vested right of the benefit of concessional rate of duty under project import regulations granted to solar power developers.

The Division Bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju have directed the customs authorities to refrain from taking any precipitative steps at the time of import of goods pursuant to the registration of contracts under the Project Import Regulations, 1986.

Case Title: Dhruv Krishan Maggu Versus Principal Directorate General

Citation: 2022 LiveLaw (Del) 1187

The Delhi High Court has refused to release laptops, computers, documents, and other things that were seized by the Directorate General of GST Intelligence (DGGI) during the search.

The single bench of Justice Prathiba M. Singh has observed that the “documents, books, or things” can be retained for a maximum period of four and a half years, within which period the notice has to be issued, plus thirty days from the date of the erroneous refund.

Case Title: R.K. Overseas Versus Senior Intelligence Officer, DRI

The Delhi High Court has held that the exporter is otherwise not entitled to duty drawback and, if already paid, is liable to be reimbursed because the buyer did not send any export proceeds within the required time frame.

The division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju has observed that since the amount that is lying credited to the petitioner’s account, concededly, represents a part of the duty drawback sanctioned in favor of the petitioner against 20 shipping bills, no such direction can be issued that would ultimately result in the petitioner getting access to the funds.

Bombay High Court

Case Title: Jotun India Private Limited Versus The Union of India

The Bombay High Court has dismissed the writ petition challenging the advance ruling given by the Maharashtra Appellate Authority for Advance Ruling (AAR).

The division bench of Justice Nitin Jamdar and Justice Gauri Godse has observed that the authority and the appellate authority followed the entire procedure and that full opportunity was given to the petitioner. There was no evidence of a violation of natural justice principles due to a lack of opportunity to be heard.All points put forth by the petitioner as to why anti-fouling paint should be considered part of the ship were taken into consideration, and the authority and the Appellate Authority took a particular view of the matter.

Case Title: Hyprecision Hydraulik versus State of Maharashtra & Ors.

The Bombay High Court has ruled that failure to furnish a declaration duly certified by the Octroi Inspector, would not render the importer ineligible for refund of Octroi Duty under Section 194(2) of the Mumbai Municipal Corporation Act, 1888 (MMC Act).

The Bench of Acting Chief Justice S. V. Gangapurwala and Justice Arif S. Doctor held that production of a duly certified octroi exemption form is not a substantive requirement but merely a procedural requirement to enable an eligible party to claim refund of Octroi under Section 194(2), on imports made in pursuance of a specified contract executed with the Government.

Madras High Court

Case Title: Tvl.Marimuthu Venkateshwaran Versus The Commissioner

Citation: 2022 LiveLaw (mad) 494

The Madurai Bench of the Madras High Court has lifted the cancellation of the GST registration as the tax returns were not filed by the taxpayer due to health-related issues.

The single bench of Justice Mohammed Shafiq, while considering the directions issued in the cases of Tvl. Suguna Cutpiece Vs Appellate Deputy Commissioner (ST) (GST) and others, has directed the department to revoke the cancellation of the GST registration.

The Madras High Court has quashed the order canceling GST registration without referring to the reason for the non-filing GSTR-3B return.

The single bench of Justice M. Sundar has remitted the matter back to the appellate authority with a directive to examine the matter on the merits based on available records and based on the opportunity already given to the writ petitioner/assessee under sub-section (8) of Section 107 of the CGST Act.

Case Title: M/s Ultratech Cement Limited Versus State of Chhattisgarh

Citation: Writ Petition (T) No. 128 Of 2015

The Chhattisgarh High Court has held that the lease charges paid by the Railways Department are not subject to the levy of value-added tax (VAT).

The single bench of Justice P. Sam Koshy has observed that the right to use goods or the use of goods is not the relevant factor to justify the levy of taxes.

Kerala High Court

Case Title: M/s Crescent Construction Versus Deputy Commissioner of State Tax

Citation: 2022 LiveLaw (Ker) 631

The Kerala High Court has held that the mistake of applying the wrong value-added tax (VAT) rate can be rectified.

The single bench of Justice Gopinath P. has observed that, as per Section 66 of the KVAT Act, once it is brought to the notice of the officer that there is a mistake in applying the correct rate of tax, it is within the power conferred on the officer to rectify the mistake.

Allahabad High Court

Case Title: Umesh Kumar Versus State Of U.P. [Writ Tax No. – 648 of 2021]

Citation: 2022 LiveLaw (AB) 513

The Allahabad High Court has held that the rejection of registration solely on the ground of delay in moving the revocation application is not sustainable in law when the entire tax is deposited.

The single bench of Justice Rohit Ranjan Agarwal has observed that once the department has accepted the return and there are no outstanding dues, the department should not obstruct the business of an assessee.

Gujarat High Court

Case Title: M/S Firmenich Aromatics Production (India) Pvt. Ltd. Versus Union Of India

The Gujarat High Court has issued a notice to the central and state government seeking to know the steps taken for constituting the GST Tribunal.

The bench of Justice Sonia Gokani and Justice Mauna M. Bhatt was presiding over the petition, which involved the issue of the non-formation of the GST Tribunal, which has not been formulated though nearly five years have passed.

Case Title: Shree Govind Alloys Versus State of Gujarat

The Gujarat High Court has held that mere e-way bill expiry does not establish an intention to evade taxes.

The division bench of Justice Sonia Gokani and Justice Mauna M. Bhatt has observed that the detention was on the ground that the goods were subject to the expiration of the e-way bill number, which had expired during the transit, and this cannot be the ground for detaining and seizing M.S. Billet along with the truck.

Case Title: FCS Manufacturing (India) Pvt. Ltd Vs Deputy Director Of Income Tax

The Gujarat High Court has directed the department to release the bank account from the attachment of the subsidiary of the Taiwan Company subject to the personal undertakings of the directors.

The division bench of Justice Sonia Gokani and Justice Mauna M. Bhatt, in order to secure the revenue’s interest, has directed the department to continue the attachment of FD with DBS amounting to Rs. 2.65 crores.

Case Title: Shree Govind Alloys Pvt. Ltd.

The Gujarat High Court has held that the department could not establish any element of tax evasion with fraudulent intent or negligence.

The division bench of Justice Sonia Gokani and Justice Mauna M. Bhatt has observed that the delay was of almost 4 1⁄2 hours before the e-Way bill could expire. It appeared to be bonafide and without establishing any fraudulent intention.

Case Title: Atlafbhai Rajabali Dosani Vs Superintendent

The Gujarat High Court has quashed the order of cancellation of registration and directed the department to restore the registration of the petitioner.

The division bench of Justice Sonia Gokani and Justice Mauna M. Bhatt has observed that the zero supply led the petitioner to believe that he was not required to file the returns. The assessee’s consultant had not advised him correctly, which led to the non-filing of the return, which has now been filed.

Case Title: Adani Wilmar Limited versus Union of India

The Gujarat High Court has ruled that the notification issued under Section 25 of the Customs Act, 1962, enhancing the rate of customs duty, would be applicable only on the bills of entry presented after the said notification was e-published in the electronic Gazette and digitally signed.

Punjab and Haryana High Court

Case Title: Deepak Kumar Versus State of Punjab

The Punjab and Haryana High Court has held that the provisions of the VAT Act do not provide for the registration of the FIR, and since the VAT Act is a code in itself, the provisions of the IPC also cannot be invoked. Therefore, an FIR could not have been registered against a person who has allegedly evaded tax.

The single bench of Justice Jasjit Singh Bedi has observed that there is no provision for the registration of an FIR in matters such as those of alleged tax evasion. The provisions of the act only provide for a mandatory penalty.

Karnataka High Court

Case Title: Al Tisource Business Solutions Pvt. Ltd. Versus Deputy Commissioner of Central Tax

The Karnataka High Court has held that the interest on a delayed tax refund is payable on the expiration of 3 months from the date of filing the refund application.

The single bench of Justice R. Krishna Kumar has observed that merely because there were certain deficiencies or lacunae in the refund claim by the petitioner, the circumstance cannot be relied upon or made the basis by the respondent or department to contend that it was entitled to pass the refund sanction order beyond the prescribed statutory period of three months.

Case Title: Xiaomi Technology India Pvt. Ltd.

The Karnataka High Court has quashed the provisional attachment of fixed deposits worth Rs. 3700 crores against Xiaomi. The single bench of Justice S.R. Krishna Kumar has quashed the provisional attachment of the fixed deposit subjected to various conditions.

CESTAT

Case Title: M/s. Citibank N.A. Versus Commissioner of Customs

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has deleted the penalty under the Customs Act against CitiBank on the purchase of an ATM within India.

The two-member bench of Suvendu Kumar Pati (Judicial Member) and Sanjeev Shrivastava (Accountant Member) has observed that a transaction concerning the purchase of an item within India, which is unrelated to its importation and to the importer as the transaction is confined between the Appellant Citibank and Philips India, does not support the imposition of a penalty under Section 112 of the Customs Act against Citibank.

Case Title: M/s. Maa Foundry Private Limited Versus Commissioner of Central Excise & Service Tax

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the allegation of clandestine manufacture and removal of finished goods by the Appellant made in the Show Cause Notice was merely based on assumption and presumption.

The bench of P.K. Choudhary (a judicial member) has observed that the charge of clandestine clearance is a serious charge, and the onus to prove the same is on the department to adduce concrete and cogent evidence. In the absence of corroborative evidence, the charge of clandestine clearance cannot be leveled against the assessee.

Case Title: Shreno Ltd. Versus C.C.E. & S.T.-Vadodara-i

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has observed that excise duty is not payable on scrap, which is neither generated from the manufacturing process nor generated from the cenvatable input or capital goods.

Case Title: Atul Dhawan Versus Commissioner of Customs

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the department bears the burden of proving that the goods are smuggled.

The bench of Anil Choudhary (a judicial member) has observed that the show cause notice is vague as the valuation of the goods has been done by the Revenue without any relied-upon documents, i.e., copy of any retrieved documents from the mobile/CPU of the appellant/assessee.

Case Title: M/s.Nitin Industries (Trade Name) Versus Commissioner of Goods & Service Tax

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has observed that the credit has been accumulated due to the clearance of excisable goods during the Excise Law Regime for export and that the bar of unjust enrichment is not attracted.

The bench of Anil Choudhary (a Judicial Member) found that the appellant had not begun production or manufacturing activities, nor had any taxable goods been cleared, on or after 1.7.2017. The debit recorded by the appellant in the electronic ledger (DRC-3) amounts to a reversal of credit transferred to the GST regime. The appellant is entitled to a refund under the provisions of Section 142(3) of the CGST Act, which provides that the assessee can file a refund claim on or after the appointed day for a refund of any amount of credit, duty, etc. paid under the existing law (Central Excise/Service Tax), subject to clearing the bar of unjust enrichment.

Case Title: Bathinda Industrial Gas Pvt. Ltd. Versus Commissioner of CGST

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that freight charges are not deductible from the assessable value of liquid CO2, despite the fact that they were separately charged in the invoices and the gas was sold at the time of clearance from the appellant’s factory.

The two-member bench of Rachna Gupta (Judicial Member) and P. Venkata Subba Rao (Technical Member) has observed that the authorities below are held to have wrongly confirmed the duty demand against the appellant on the basis of the inclusion of freight charges in the assessable value.

Case Title: Virgo Suitings Pvt. Ltd. Versus Commissioner of Customs

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the customs duty refund claim paid through the Duty Entitlement Pass Book (DEPB) scrip.

The bench of Ajay Sharma (Judicial Member) has observed that the department has failed to establish through any kind of document or case law that debit of any amount under the DEPB scheme is not a mode of payment of duty, and therefore the benefit cannot be denied to the appellant.

Case Title: M/s Surya Jyoti Global Logistics, Customs Broker Versus Commissioner of Customs

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the customs broker is not required to obtain any “recommendation” or a certificate from any officer that the exporter is “bonafide.”

Case Title: M/s. Raheja Regency Cooperative Housing Society ltd. Versus Commissioner of GST & Central Excise

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the limitation prescribed under Section 11B of the Central Excise Act, 1944, is not applicable to refund claims for service tax paid under a mistake of law.

The bench of Ajay Sharma (Judicial Member) has observed that the appellant cannot be said to be liable to pay service tax in any way because what was paid by the appellant was not tax as defined by the Finance Act of 1994. As a result, the amount paid by the appellant does not have the character of a tax but is simply an amount paid due to a mistake of law.

Case Title: Chhaya Mahalley Versus Commissioner, Customs, Central Excise & CGST

Case Title: Matta Paints And Hardware Store Versus The Commissioner

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has observed that the amount seized in cash by the authorities is to be refunded along with the interest.

The bench of Rachna Gupta (Judicial Member) has observed that the appellant is entitled to a refund of interest on the principal amount at the rate of 12% from the date of its seizure.

Case Title: Reliance Jamnagar Infrastructure Limited Versus Commissioner of Central Excise & ST

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax refunds on trenching pipelines installed partly in SEZ and partly outside but for use in the operation of the SEZ are admissible.

The two-member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the construction service received in relation to trenching and pipeline construction was exclusively for SEZ only. A part of the same will be outside the premises of the SEZ, but that does not mean that service was received for anything other than authorised operations in the SEZ.

Case Title: J M Huber India Pvt Ltd. Versus C.C.E. & S.T.-Surat-ii

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is demandable when the commission received is in convertible foreign exchange.

The two-member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the commission agent service provided to a foreign-based entity for promoting or marketing their goods in India constitutes an export of services, given that the Indian agent’s activity includes providing promotion or marketing, technical support, installation, commission, etc. for the sale of goods by foreign-based entities in India on a commission basis.

​​Charge Of Double Benefit Sustains Only If Assessee Claims Refund, Utilises It For Paying Excise Duty: CESTAT

Case Title: Bright Engineering Works Versus C.C.E. & S.T.-Daman

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench has ruled that the charge of double benefit is only valid when the assessee claims a refund and uses it to pay excise duty.

The bench of Ramesh Nair (a judicial member) has observed that it set aside the order passed by the Revenue Department rejecting the refund application of the assessee. The refund cannot be denied on the basis of the Appellant receiving a double benefit as a result of the non-transfer of unutilized CENVAT credit.

Case Title: Vriddheshwar SSK Ltd. Versus The Commissioner of CGST & C.Ex

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the cenvat credit on parts for the efficient functioning of machines for manufacturing.

The bench of Ajay Sharma (Judicial Member) has observed that the appellant is justified in availing the Cenvat credit on various items, namely, S.S. Welding Tube, Steel, Tubes, Alloy Steel Pipe, Prime HR Steel Coil, M.S. Wire, M.S. Slate, S.S. Welded Tube, HR Steel Pipe, and Link Outer, which are used in those machines that are manufacturing the final product.

AAR

Applicant’s Name: Rajasthan Housing Board

The Rajasthan Authority for Advance Ruling (AAR) has held that services provided by the Rajasthan Housing Board in relation to any function entrusted to a municipality under Article 243 W of the Constitution are exempt from GST.

The two-member bench of Umesh Kumar Garg and M.S. Kavia has observed that the Rajasthan Housing Board is covered under the definition of “government authority.”

Applicant’s Name: Capfront Technologies Pvt. Ltd.

The Karnataka Authority for Advance Ruling (AAR) has held that the GST exemption is available on the transfer of an independent part of business pertaining to mobile software.

The two-member bench of M.P. Ravi Prasad and Kiran Reddy T. has observed that the transfer of an independent part of business pertaining to the “Loan Front” app, a mobile software, qualifies as a transfer of going concern, and the said activity amounts to “service by way of transfer of going concerned as an independent part” and thus is exempt from GST.

Applicant’s Name: Tube Investment of India Limited

The Uttarakhand Authority of Advance Ruling (AAR) has ruled that the Input Tax Credit (ITC) is not admissible on the amount paid to the canteen service providers and on the amount recovered from the employees.

The two-member bench of Rameshwar Meena and Anurag Mishra has observed that the nominal amount of recoveries made by the applicant from the employees who are provided food in the factory canteen would be considered a “supply.”

Applicant’s Name: M/s Shraddha Traders

The Chhattisgarh Authority for Advance Ruling (AAR) has held that 5% GST is payable on rejected or damaged paddy seeds.

The two-member bench of Sonal K. Mishra and Abhinav Aggarwal has observed that rejected paddy seed that is not fit for human consumption would merit classification under chapter heading 100610.

Applicant’s Name: Mean Light Co.

The Karnataka Authority of Advance Ruling (AAR) has held that the products “satin rolls” and “taffeta rolls” with sizes between 19 mm and 40 mm are classifiable under tariff heading 5807 10 20 and attract 12% GST.

The two-member bench of Kiran Reddy T. and M.P. Ravi Prasad has observed that taffeta rolls are made up of polyester yarn with an acrylic coating to protect from raveling or fraying and also to have better printing quality. Satin rolls are made up of polyester yarn with an optical or non-optical coating for brightening and removing impurities. They have plain selvedges on both sides of the fabric and are cut with hot blades to arrest fabric fraying. Thus, the products qualify to be covered under “narrow woven fabrics.”

Applicant’s Name: Testmesures Spherea Solutions Private Limited

The Karnataka Authority of Advance Ruling (AAR) has held that a concessional rate under GST is not applicable to maintenance and repair services of test-bench equipment for aeronautics.

The two-member bench of M.P. Ravi Prasad and Kiran Reddy T. have observed that the concessional rate of GST of 5% is applicable to only Maintenance, repair or overhaul services in respect of aircraft, aircraft engines, and other aircraft components or parts. The applicant is providing maintenance and repair services of test bench equipment (Mermoz system) which are used for testing the airworthiness of an aircraft. The equipment does not qualify to be an aircraft or an aircraft engine.

Applicant’s Name: Yaadvi Scientific Solutions Private Limited

The Karnataka Authority for Advance Ruling (AAR) has held that the reverse charge mechanism (RCM) is not applicable to reimbursement of expenses paid on behalf of the company at actuals that are incurred by the employee staff, who is also a whole-time director of the company.

The two-member bench of M.P. Ravi Prasad and Kiran Reddy T. has observed that reimbursement of expenses at an actual cost that is incurred by the employee staff on behalf of the company is not subject to tax.

Applicant’s Name: Shree Constructions

The Telangana Authority of Advance Ruling (AAR) has ruled that 18% GST is payable on work contract services for constructing warehouses and cold storage godowns for Telangana State Industrial Infrastructure Corporation Limited (TSIICL), which will rent out the facilities.

Applicant’s Name: M/s. IVL India Environmental R&D Pvt Ltd.

The Maharashtra Authority of Advance Ruling (AAR) has ruled that the transfer of monetary proceeds by IVL India to the applicant IVL Sweden will be liable for payment of integrated goods and services tax under the reverse charge mechanism.

The two-member bench of M. Rammohan Rao and T.R. Ramnani has observed that other than the service provided by the applicant to the Municipal Corporation of Greater Mumbai (MCGM), there is a very definite service being provided by IVL Sweden, located outside India, on account of its experience, credentials, and expertise, to the applicant, located in India, that enables the applicant to perform under the contract. There is no doubt that the services are being supplied in the taxable territory, i.e., India.

Applicant’s Name: Healthy Life Foodtech Pvt. Ltd.

The Maharashtra Authority of Advance Ruling (AAR) has held that 18% GST is payable on glaze gels.

The two-member bench of M. Rammohan Rao and T.R. Ramnani has observed that while sugar-baked confectionery is directly sold to ultimate end users for consumption, glaze gel is not consumed by end consumers, rather its product is used by cake manufacturers as a filling between sponge layers of cakes.

The applicant manufactures glaze gels and markets them to bakeries all across India. The glaze gel is processed in a manner similar to boiled sugar confectionery.

Applicant’s Name: M/s. Tata Motors Limited

The Maharashtra Authority of Advance Ruling (AAR) has held that the supply of Tata garbage tipper vehicles to Municipalities shall attract 28% GST.

The two-member bench of M. Rammohan Rao and T.R. Ramnani has observed that garbage tipper vehicles can be used for the transportation of goods. The starting words of Entry 8704 are “Motor Vehicles for the Transport of Goods.” Thus, the rate of tax applicable shall be 28%; as only refrigerated vehicles are taxable at 18%; and all trucks covered under heading 8704 are taxable at 28%.

Applicant’s Name: M/s. Mumbai Aviation Fuel Farm Facility Pvt Ltd.

The Maharashtra Authority of Advance Ruling (AAR) has held that Input Tax Credit (ITC) is not available on goods and services used for the construction of a pipeline laid outside the factory premises.

The two-member bench of M. Rammohan Rao and T.R. Ramnani has observed that, as per the explanation to Section 17 of the GST Act, “plant and machinery” does not include a pipeline laid outside the factory premises.

Applicant’s Name: Das & Sons

The Orissa Authority for Advance Ruling (AAR) has held that “Raula Gundi,” which is “chewing tobacco without lime tubes,” attracts 28% GST with a 160% Compensation Cess.

The two members of the bench, G.K. Pati and P.K. Mohanty have observed that “Raula Gundi,” i.e., chewable gundi, is “chewing tobacco,” the principal or predominant ingredient of which is tobacco.

Applicant’s Name: M/s University of Kota

The Rajasthan Authority of Advance Ruling (AAR) has observed that affiliation provided by Kota University to its constituent colleges for imparting education is a supply and taxable under GST.

The two-member bench of Umesh Kumar Garg and M. S. Kavia has observed that the affiliation services provided by Kota University enable the institution to conduct the course or programme and do not relate to the admission of students to the course or programme or the conduct of examinations for admission to the institution. The exempted examination services are those related to admission to the institution and not to the examination based on which degree, title, etc. are conferred to the students, as claimed by the applicant. Therefore, the “affiliation” fees collected by Kota University are not exempt from GST.

Direct Taxes

Case Title: S.M. Overseas (P) Ltd. Versus CIT

Delhi High Court

Case Title: PCIT Versus Pawa Infrastructure (P) Ltd.

Citation: 2022 LiveLaw (Del) 1215

The Delhi High Court has held that the leasehold rights held by the assessee in the plot were a capital asset and that the compensation received by the assessee from the Government of Goa on the cancellation of the plot was a capital receipt and not a revenue receipt.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that if an agreement for the transfer of rights in an immovable property is not performed by the transferor, the transferee is entitled to compensation as he/she is deprived of the price of escalation. Therefore, the character of the payment received as compensation by the transferee bears the character of a capital receipt. The payment of interest in the facts of the present case is compensatory in nature and, therefore, does not bear the character of a revenue receipt.

Case Title: Rajinder Kumar Versus State

The Delhi High Court upheld the prosecution for an undisclosed foreign bank account, observing that the age at the time of the offense must be taken into account, not when the proceedings were initiated.

The single judge bench of Justice Suresh Kumar Kait has relied on the decision of the Delhi High Court in the case of Pradip Burman vs. Income Tax Office, in which it was held that Circular/Instruction No. 5051 dated 07.02.1991 issued by the Central Board of Direct Taxes (CBDT) does not bar the initiation of prosecution for those who have attained the age of 70 years.

Case Title: PCIT Versus PEC Ltd.

Citation: 2022 LiveLaw (Del) 1186

The Delhi High Court has allowed the deduction of expenses undertaken under the Corporate Social Responsibility (CSR) endeavor under Section 37 of the Income Tax Act, 1961.

The division bench of Justice Rajeev Shakdher and Justice Tara Vitasta Ganju has observed that the memorandum, which was published along with Finance (No. 2) Bill 2014, clearly indicated that the amendment would take effect from 01.04.2015 and, accordingly, would apply in relation to assessment year 2015-2016 and the subsequent years.

Case Title: PCIT Versus Simon India Ltd.

The Delhi High Court has held that reinstatement of year-end losses on forward cover purchase contracts is allowable in spite of the fact that the forward contracts have not been closed.

The division bench of Justice Vibhu Bakharu and Justice Purushaindra Kumar Kaurav, while upholding the findings of the tribunal, held that the loss on account of forward contracts cannot be considered speculative.

Bombay High Court

Case Title: M/s Bhatewara Associates Versus Union Of India

The Bombay High Court has condoned a year-long delay in filing the Income Tax Return (ITR) over “genuine hardships.”

The division bench of Justice Dhiraj Singh Thakur and Justice Abhay Ahuja has observed that technical considerations cannot come in the way of substantial justice. It is neither an allegation of malafide nor an allegation that the delay has been deliberate.

Case Title: The Principal Commissioner of Income Tax Versus M/s. Vardhan Builders

The Bombay High Court has allowed the income tax deduction under Section 80-IB on the grounds that a completion certificate was issued by the competent authority.

The division bench of Justice Dhiraj Singh Thakur and Justice Valmiki S.A. Menezes, while upholding the order of the Income Tax Appellate Tribunal (ITAT), observed that there was no allegation by the survey team during the earlier survey conducted in the year 2006 that the assessee was not raising the construction as per the approved plan. It was also held that if there was any modification to a completed residential unit for which a completion certificate had been issued by the competent authority, the assessee could not be held responsible.

Case Title: Chowgule & Company (P) Ltd. Versus JCIT

The Bombay High Court at Goa has held that failure to disclose fully and truly all material facts is an essential jurisdictional parameter that must be fulfilled before any notice can be issued for reopening the assessment proceedings after the expiration of four years from the end of the relevant assessment year.

The division bench of Justice M.S. Sonak and Justice Bharat P. Deshpande has observed that in the absence of any allegation or a plain statement about compliance with the jurisdictional parameter, the reassessment notice cannot be ordinarily sustained.

Case Title: Pr. Commissioner of Income Tax versus Trigent Software Limited

The Bombay High Court has ruled that the expenditure incurred on development of a new product, in respect of the same business already carried on by the assessee, which subsequently failed to come into existence and was abandoned, is eligible for deduction as revenue expenditure.

The bench of Justices Dhiraj Singh Thakur and Abhay Ahuja observed that though the assessee had treated the expenditure incurred on development of a new product as ‘Capital work in progress’ in its books of accounts, however, since no new asset came into existence which would be of an enduring benefit to the assessee, the expenditure incurred was revenue and not capital in nature.

Madras High Court

Case Title: K.Balasubramaniam v. The Commissioner, Greater Chennai Corporation and others (batch cases)

Citation: 2022 LiveLaw (Mad) 524

The Madras High Court recently upheld the validity of the Government Order issued by Tamil Nadu’s Municipal Administration and Water Supply Department and the consequential resolutions of Greater Chennai Corporation and Coimbatore Corporation by which the property taxes in Chennai and Coimbatore were revised and increased.

Case Title: Murali Krishna Chakrala Versus Deputy Director,

Citation: 2022 LiveLaw (Mad) 495

The Madras High Court has held that the chartered accountant (CA) is not required to go into the genuineness or otherwise of the documents submitted by his clients.

“A Panel Advocate, who has no means to go into the genuinity of title deeds and who gives an opinion based on such title deeds, cannot be prosecuted along with the principal offender. Applying the same anomaly, we find that the prosecution of Murali Krishna Chakrala, in the facts and circumstances of the case at hand, cannot be sustained,” the division bench of Justice P. N. Prakash and Justice G. Chandrasekharan observed.

Case Title: Molasi Primary Agricultural Versus ITO

The Madras High Court has held that the TDS exemption under Section 194N of the Income Tax Act is not applicable to cash withdrawal by primary agricultural credit co-operative societies.

The bench of Justice Anitha Sumanth has noted that the provisions of Section 194 N provide for a mandatory deduction of 2% of cash withdrawals and the object is to discourage and drive the move toward a cashless or cash-free economy.

Case Title: Tax Recovery Officer Versus Union Bank of India

The Madras High Court has held that the orders of attachment passed by the Tax Recovery Officer or Income Tax Department were subsequent to the mortgage created in favour of the secured creditors and have no legs.

The division bench of Justice R. Mahadevan and Justice Mohammed Shaffiq has observed that even if recovery proceedings are quashed for any reason, the bankers’ and financial institutions’ rights to claim priority in terms of Section 31 B of the Recovery of Debts and Bankruptcy Act and Section 26 E of the SARFAESI Act would still be available. The right to recover under the Income Tax Act, of 1961, must yield to the provisions under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act, and thus, the exercise of attachment may not serve any useful purpose.

Himachal Pradesh High Court

Rejection Of Appeal For Restoration Of GST Registration – Delay Of 1 Day Is Hyper Technical: Himachal Pradesh High Court

Case Title: Sunil Kumar Vij Versus Union Of India

The Himachal Pradesh High Court has held that the rejection of an appeal for the restoration of GST registration for a delay of 1 day is hyper-technical.

The division bench of Justice Tarlok Singh Chauhan and Justice Virender Singh has allowed the claim of the petitioner, stating that the view taken by the appellate authority is quite hyper-technical and academic and that rejecting the appeal for a delay of one day is in gross violation of the principle of natural justice and that cancellation would prevent the fundamental right of doing business.

Case Title: Pr. Commissioner of Income Tax Versus The Kangra Central Co-op Bank Ltd.

The Himachal Pradesh High Court has held that the non-scheduled bank was required to tax the interest on the sticky loans and non-performing assets (NPAs) on a receipt basis.

The division bench of Justice Sabina and Justice Sushil Kukreja has observed that an amendment to Section 43D by Finance Act, 2017 was made by which the scope of section 43D to Co-operative Banks was extended. Although the amendment was sought to take effect on April 1, 2018, it was likely to be treated as retrospective in nature.

Allahabad High Court

Case Title: Prashant Chandra Versus Harish Gidwani Deputy Commissioner Of Income Tax Range 2

The Allahabad High Court ruled that the outstanding amount showing on the web portal against the applicant/assessee was to be deleted immediately following the judgment, but the authorities allowed the outstanding amount to remain on the web portal for seven months, clearly violating the judgment.

The single bench of Justice Irshad Ali has imposed a fine of Rs. 25,000 along with simple imprisonment for a period of one week on the contemnor who was the Deputy Commissioner of Income Tax. In case of default, the contemnor would suffer one day’s further simple imprisonment.

Gujarat High Court

Case Title: Map Refoils India Ltd. Versus National Faceless E-Assessment Center

The Gujarat High Court has quashed the assessment order of income tax worth Rs. 101 crores on the grounds of a violation of the principle of natural justice by the National Faceless Assessment Center.

The division bench of Justice N.V. Anjaria and Justice Bhargav D. Karia has observed that the respondent/department will be at liberty to proceed with assessment under the provisions of Section 144B of the Income Tax Act, 1961, as permissible under the law, after issuance of a show cause notice and draft assessment order so as to provide an opportunity of hearing to the petitioner.

Case Title: Devendra Babulal Jain versus Income Tax Officer

The Gujarat High Court has ruled that the Directors of the assessee company cannot be held negligent merely because they failed to deposit before the Assessing Officer 20% of the demand raised, so as to seek stay of demand during the pendency of an appeal before the CIT(A). Thus, the Court held that jurisdiction under Section 179 of the Income Tax Act, 1961, holding the Directors of the assessee company liable to pay the company’s outstanding tax dues, could not have been invoked by the Income Tax Authorities.

ITAT

Case Title: Sudhir Chadha Versus ACIT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the department is not allowed to travel beyond the issues involved in limited scrutiny cases.

The two-member bench of N.K. Choudhary (Judicial Member) and Pradip Kumar Kedia (Accountant Member) have observed that the assessee was selected for limited scrutiny, and the addition in hand does not emanate from the grounds on which the case of the assessee was picked up for limited scrutiny.

Case Title: Abhishek Ashok Lohade versus ITO

The Pune Bench of the Income Tax Appellate Tribunal has ruled that where the assessee fails to establish the genuineness of the transaction of sale and purchase of shares, and fails to rebut the findings of quasi-judicial bodies regarding the bogus transaction in shares, the said transaction is void ab initio. Thus, applying the principle of fraud, the ITAT held that the assessee was not eligible for exemption of capital gains under Section 10(38) of the Income Tax Act, 1961.

Case Title: ITO Versus Dr. Satish Natwarlal Shah

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that there need not be any “occasion” for the assessee to receive a gift.

The two-member bench of T.R. Senthil Kumar (judicial member) and Annapurna Gupta (accountant member) noted that the assessee received the gift from his own brother, who has been a non-resident since 1966. The allotment of shares was made under the NRI quota to the assessee’s brother in the USA. Thus, the source and genuineness are being proved beyond doubt.

Case Title: BBC World Distribution Ltd. versus ADIT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the distribution revenue earned by the assessee- BBC World Distribution Ltd., from distribution of BBC World News Channel in India, is not in the nature of royalty and thus, it is not taxable in India in the absence of a Permanent Establishment.

The bench of G.S. Pannu (President) and Saktijit Dey (Judicial Member) held that distribution rights transferred by the assessee to BBC World India, to distribute BBC News Channel in India, did not fall under the definition of copyright under Section 14 of the Copyright Act, 1957. Thus, the ITAT concluded that the distribution revenue was not taxable as royalty.

Case Title: ACIT Versus Ascend Telcom Infrastructure (P) Ltd.

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that the additional evidence cannot be admitted without calling for a remand report or comments from the AO.

The two-member bench of Laliet Kumar (Judicial Member) and R.K. Panda (Accountant Member) observed that if the CIT(A) chooses to admit any additional evidence, in that case, he/she is required to provide the Assessing Officer with a reasonable opportunity to examine the evidence or document or permit cross-examination of the evidence produced by the assessee.

Case Title: Dy. Commissioner of Income Tax Versus M/s. Vodafone India Ltd.

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), while allowing deduction to Vodafone, held that deduction for telecommunication services is available in respect of “profits of eligible businesses” and is not restricted to “profits derived from eligible businesses.”

The two-member bench of Vikas Awasthy (Judicial Member) and M. Balaganesh (Accountant Member) has directed the Assessing Officer to allow the benefit of deduction under section 80IA of the Income Tax Act in respect of interest income as well as miscellaneous income.

Case Title: Grih Kalyan Kendra Board Versus ITO

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that a mistake in the personal information of the assessee is always rectifiable at any stage.

Case Title: DCIT Versus AMRI Hospitals Ltd.

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that the advance was given for setting up a hospital project, and since the project was abandoned and the advance given could not be recovered, the sum is allowable as a revenue expenditure.

The two-member bench of Sonjoy Sarma (Judicial Member) and Manish Borad (Accountant Member) has observed that the advance was given for setting up a hospital project that was abandoned as a business loss under Section 28(1) of the Income Tax Act.

Case Title: M/s. Tata Industries Limited versus Dy. Commissioner of Income Tax

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that investments made by an assessee company to exercise control over other investee companies constitutes a business activity.

The bench of Rahul Chaudhary (Judicial Member) and M. Balaganesh (Accountant Member) held that though the dividend income is taxable under the head ‘income from other sources’ in view of the specific provision contained in Section 56(2)(i) of the Income Tax Act, 1961, however, since the assessee Tata Industries is an investment company, income in the form of dividend received by it is in the nature of business receipts.

Case Title: Fernandez Foundation Versus Commissioner of Income Tax (Exemption)

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee hospital is charging on the basis of commercial rates from the patients and is not entitled to registration as a charitable organization under Section 12A of the Income Tax Act.

The two-member bench of Laliet Kumar (Judicial Member) and R.K. Panda (Accountant Member) has observed that the assessee is charging on the basis of commercial rates from the patients, either outdoor or indoor, and the assessee has failed to demonstrate that the charges or fee charged by it were based on a reasonable markup on the cost.

Case Title: Santshreshtha Gajajan Maharaj Sevabhavi Sanstha Versus The Commissioner of Income-tax

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the deduction under Section 80G of the Income Tax Act to the trust, which is not substantially religious.

The two-member bench headed by R.S. Syal (Vice President) and Partha Sarthi Chaudhury (Judicial Member) has observed that if a trust or institution incurs expenses for religious purposes, which are inclusive and only a small part of the income, and if the substantial work done by the trust is charitable in nature and benefits the public at large, then the institution or trust has to be granted exemption under Section 80G.

Case Title: ITO Versus Mittal Court Premises Co. Op. Society Ltd

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the deduction under section 80P(2)(d) of the Income Tax Act in respect of interest earned by cooperative societies from investments made with cooperative banks.

The two-member bench of Aby T. Varkey (Judicial Member) and Amarjit Singh (Accountant Member) has relied on the decision of the Karnataka high court in the case of PCIT VS Totagar’s Cooperative Sales Society, in which it was held that the interest income derived by co-operative society by way of investment made with a co-operative bank would be entitled to a claim of deduction under Section 80P(2)(d).

Case Title: Rahul Cold Storage Versus The Income Tax Officer

The Raipur Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the addition on account of cash deposited in bank accounts during the demonetization period.

The bench of Ravish Sood (a judicial member) has observed that the AO, by not rejecting the books of account, has clearly accepted that the cash deposited in the bank accounts by the assessee firm during the year under consideration was not from its disclosed sources.

Case Title: M/s Longia Engineers Versus Pr. CIT

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has held that matters that were not subject to limited scrutiny cannot be raised in revisionary proceedings.

The two-member bench of Diva Singh (Judicial Member) and Vikram Singh Yadav (Accountant Member) has observed that the matter relating to wages and labor expenses, which was not subject to limited scrutiny, cannot be raised in revisionary proceedings under Section 263 of the Income Tax Act for the first time.

Case Title: M/s P R Packaging Service Versus ACIT

Case Title: M/s. Birla Edutech Limited versus ITO

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that Section 154 of the Income Tax Act, 1961 can only be exercised by the Assessing Officer for rectification of mistake which is apparent on the face of record.

The Bench of Pramod Kumar (Vice President) and Aby T. Varkey (Judicial Member) held that the issue whether Section 79 of the Income Tax Act was applicable in the case of the assessee where there was a change in its shareholding, was a debatable issue which involved interpretation of various sections and provisions of law, including the Income Tax Act, 1961 as well as the Companies Act, 1956.

Case Title: M/s. TVS Finance & Services Ltd. versus ACIT

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the land received by the assessee in the normal course of its finance business, in lieu of a business loan foregone, would assume the character of a business asset and not a capital asset, irrespective of its treatment in the assessee’s books of accounts.

Case Title: Anik Chatterjee Versus ITO

The Delhi Bench of the Income Tax Appellate Tribunal has allowed the capital gain exemption under section 54 of the Income Tax Act on the grounds that the amount equivalent to the capital gains has been used for the acquisition of a new house.

The two-member bench of Yogesh Kumar US (Judicial Member) and Dr. B. R. R. Kumar (Accountant Member) has observed that the agreement for sale was signed on August 8, 2014, and the payments had been completed by October 8, 2014.

Case Title: Shri Jay Atulbhai Mody Versus ITO

The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) has held that the property transferred by the assessee to his mother for consideration of Rs. 5 lakh is liable to be brought under the ambit of capital gain.

The two-member bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member)has directed the AO to refer the matter to the Department Valuation Officer (DVO) to determine the value of the property in accordance with the provisions of Section 50C of the Income Tax Act.

Case Title: Pallav Pandey Versus ACIT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the expenses incurred towards the transfer of shares.

The two-member bench of Yogesh Kumar U.S. (Judicial Member) and B.R.R. Kumar (Accountant Member) has observed that the expenses incurred by the assessee are allowable transfer expenses as per Section 48 of the Income Tax Act, and both the lower authorities have committed an error in disallowing the expenses incurred by the





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