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2023 (12) TMI 485 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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NCLAT rejects delay condonation appeal filed beyond 15-day limitation period despite merger doctrine argument
The NCLAT dismissed both the delay condonation application and the main appeal. The appellant argued that under the doctrine of merger, limitation should be counted from a subsequent clarification order dated 17th August, 2023, rather than the original order dated 2nd May, 2023. The NCLAT held that since the appeal was filed against the original order and not the subsequent clarification order, the doctrine of merger did not apply. Relying on SC precedent in DSR Steel, the tribunal ruled that the original order must be challenged within the prescribed time limit, and the appeal was filed beyond the 15-day limitation period that the tribunal could condone.

Limitation for filing appeal - condonation of delay - merger of orders - effect of subsequent clarification on limitation - review/rectification and its effect on limitationLimitation for filing appeal - condonation of delay - Whether the application for condonation of delay in filing the appeal against the order dated 2nd May, 2023 should be allowed. - HELD THAT: - The Tribunal found that the limitation for filing an appeal against the order dated 2nd May, 2023 commences from the date of passing of that order, as the appellant was present and heard on 2nd May, 2023 and the order was then pronounced. Time spent pursuing a subsequent application does not automatically suspend the running of limitation unless the subsequent order itself vacates or modifies the earlier order in a manner that renders the subsequent order the operative order for appeal. The appellant's contention that the period during which I.A. No. 2679 of 2023 was pending should be excluded and limitation counted from the date of the subsequent order was rejected. The Tribunal held that it had jurisdiction to condone only a limited period (fifteen days) and, on the facts, the appeal was filed beyond the permissible condonation period. (See paragraphs 7 and 12.) [Paras 7, 12]Delay condonation application dismissed and memo of appeal rejected.Merger of orders - effect of subsequent clarification on limitation - review/rectification and its effect on limitation - Whether the subsequent order dated 17th August, 2023 operates to merge, vacate or modify the earlier order dated 2nd May, 2023 for purposes of limitation. - HELD THAT: - The Tribunal examined the subsequent order dated 17th August, 2023 and held that it merely clarified that Respondent No. 6 had filed a reply earlier and that this clarification would form part of the May 2, 2023 order. The later order did not vacate, reverse or modify the operative effect of the earlier order so as to render the subsequent order the effective order for appeal. The Tribunal distinguished the present facts from cases (and paragraphs of DSR Steel) where a review/rectification results in vacation and re pronouncement or modification of the earlier order; paragraph 25.3 of DSR Steel was held applicable, confirming that dismissal or mere clarification of a subsequent application does not merge the original order for limitation purposes. Consequently, there was no merger and the original order remained appealable from its date. (See paragraphs 8, 9, 10 and 11.) [Paras 8, 9, 10, 11]The subsequent order dated 17th August, 2023 did not merge with or revive the May 2, 2023 order for limitation; the original order's limitation period governs.Final Conclusion: The appeal against the order dated 2nd May, 2023 was filed out of time; the subsequent clarification dated 17th August, 2023 did not merge with or modify the earlier order for limitation purposes, the application for condonation of delay is dismissed and the memo of appeal is rejected.

2023 (12) TMI 474 - CESTAT NEW DELHI Central Excise

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Issues Involved:
1. Confiscation of goods.
2. Imposition of penalty on appellant No. 1.
3. Imposition of penalty on appellant No. 2.

Summary:

1. Confiscation of Goods:
The issue before the tribunal was whether the confiscation of seized goods and the imposition of redemption fine of Rs 15 lakhs was correct. The Central Excise officers found excess stock of MS ingots and MS Angles at the appellant's premises, which were not recorded in the statutory books. The tribunal noted that while there was some excess stock, the Department failed to provide cogent evidence to prove that the excess stock was intended for clandestine removal without payment of duty. The tribunal referenced the case of Dhanraj Enterprises vs CCE, which held that non-accountability in RG-1 register does not ipso facto indicate an intention to evade duty. Consequently, the tribunal set aside the redemption fine imposed on the goods.

2. Imposition of Penalty on Appellant No. 1:
The tribunal examined whether the imposition of penalty under Rule 25(1)(b) was justified. It was emphasized that for invoking Section 11AC and Rule 25(1), there must be evidence of suppression, collusion, etc., with an intent to evade duty. The tribunal noted that while excess quantities were found, there was no corroborative evidence to show an intent to evade. The tribunal referenced the Delhi High Court's decision in Ganpati Rolling Mills, which clarified that the requirements of Section 11AC must be fulfilled before imposing penalties under Rule 25. The tribunal concluded that the Department failed to establish the necessary intent to evade, and thus, the penalty under Rule 25(1) could not be upheld.

3. Imposition of Penalty on Appellant No. 2:
The tribunal reviewed the penalty imposed on the authorized signatory under Rule 26(1). It was noted that the essential ingredient for invoking this rule is evidence of involvement in actual evasion or abetment. The tribunal found no such evidence against the authorized signatory. Citing the case of Carpenter Classic Exim Pvt. Limited, the tribunal held that personal penalties on employees acting under the direction of their employer need not be imposed. Therefore, the tribunal set aside the penalty imposed on appellant No. 2.

Conclusion:
The tribunal, after considering the rival contentions and the lack of sufficient evidence to prove intent to evade duty, set aside the impugned order and allowed both appeals.

CESTAT sets aside confiscation and penalties for unrecorded MS ingots lacking evidence of deliberate clandestine removal intent
CESTAT New Delhi set aside confiscation, redemption fine, and penalties imposed on appellants for excess MS ingots and angles found without statutory record entries. The tribunal held that mere violation of Central Excise Rule 10 and improper accounting does not establish deliberate intent for clandestine removal without corroborative evidence. Department failed to prove suppression or collusion with intent to evade duty beyond finding unrecorded stock. Penalty under Rule 25(1) could not be sustained absent evidence of actual evasion or abetment. Personal penalty on employee appellant was also set aside as no benefit to employee was established. Appeal allowed.

Confiscation and penalty under Rule 25 - Penalty under Rule 26(1) - Section 11AC conditionality for invocation of Rule 25 - Requirement of intention/culpable mental state to evade duty - Reliance on statutory records and Rule 10 maintenance - Insufficiency of eye-estimation and lack of corroborative evidenceConfiscation and penalty under Rule 25 - Requirement of intention/culpable mental state to evade duty - Insufficiency of eye-estimation and lack of corroborative evidence - Whether confiscation of unaccounted MS ingots and MS angles could be sustained. - HELD THAT: - The Tribunal found that although excess MS ingots and angles were discovered without entries in statutory books, confiscation under Rule 25 (on the premise of clandestine removal) requires cogent evidence of a deliberate intention to remove goods without payment of duty. The Department bore the burden to prove such intention and did not produce corroborative evidence. The stock estimation was done by eye estimation and the Panchnama and Panchas did not establish a reliable physical verification method. Citing precedents, the Tribunal observed that mere improper accounting or absence of entries does not ipso facto establish intent to evade payment of duty. In these circumstances confiscation was unsustainable and the redemption fine set aside. [Paras 8]Confiscation/redemption fine on the seized goods set aside for lack of cogent evidence of intent to evade and unreliable stock verification.Section 11AC conditionality for invocation of Rule 25 - Confiscation and penalty under Rule 25 - Requirement of intention/culpable mental state to evade duty - Whether penalty under Rule 25(1) on the assessee (appellant No.1) could be upheld. - HELD THAT: - The Tribunal held that Rule 25(1) is expressly "subject to the provisions of Section 11AC" and therefore the ingredients of Section 11AC (fraud, collusion, wilful mis-statement or suppression of facts with intent to evade duty) must be satisfied before imposing penalty under Rule 25. In the present case, other than statements, no corroborative material established intent to evade, nor was there evidence of prior similar conduct. Reliance on mere non-entry in records or on eye-estimation was insufficient. In view of settled authorities, penalty under Rule 25(1) could not be sustained. [Paras 9, 10, 11]Penalty imposed on appellant No.1 under Rule 25(1) set aside for failure to establish the Section 11AC ingredients and requisite intent to evade duty.Penalty under Rule 26(1) - Requirement of intention/culpable mental state to evade duty - Insufficiency of eye-estimation and lack of corroborative evidence - Whether personal penalty under Rule 26(1) could be sustained against the authorised signatory (appellant No.2). - HELD THAT: - The Tribunal noted that Rule 26(1) requires that the person be shown to have acquired possession of or be concerned in dealing with excisable goods which he knows or has reason to believe are liable to confiscation. There was no evidence that the authorised signatory personally benefited, directed, or abetted any clandestine activity; the statements relied upon were later retracted and no corroboration was produced. Prior Tribunal precedents indicate personal penalty on an employee or signatory should not ordinarily be imposed where the record does not establish personal involvement or benefit. Accordingly, the penalty on appellant No.2 was not sustainable. [Paras 12]Penalty on the authorised signatory under Rule 26(1) set aside for absence of evidence of personal involvement, knowledge or benefit.Final Conclusion: The impugned order confirming confiscation and imposing penalties is set aside: confiscation/redemption fine quashed for lack of evidence of intent to evade and unreliable stock verification; penalty on the assessee under Rule 25(1) quashed for failure to satisfy Section 11AC ingredients; personal penalty under Rule 26(1) on the authorised signatory quashed for lack of evidence of personal involvement or benefit. Appeals allowed.

2023 (12) TMI 465 - SC Order Income Tax

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Petition Dismissed for 340-Day Delay Despite ASG Representation; Procedural and Merit-Based Decision.
The SC dismissed the special leave petition due to a 340-day delay, notwithstanding the representation by the learned ASG. The dismissal was based on both procedural delay and the merits of the case. All pending applications related to the petition were also disposed of.

2023 (12) TMI 461 - ITAT DELHI Income Tax

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NRI assessee wins appeal for indexed cost of improvement on property renovation despite documentation gaps
ITAT Delhi allowed the assessee's appeal regarding capital gains computation. The AO had rejected the assessee's claim for indexed cost of improvement on property, citing lack of proper documentation including payee details, PAN, invoices, and bank statements showing renovation payments. The assessee, being an NRI, explained that cash withdrawals through cheques issued to Alok Lal were used for kitchen renovation work. ITAT found the explanation plausible, noting undisputed renovation work worth Rs. 9,50,000. The tribunal directed AO to allow cost of improvement with indexation and re-compute capital gains, accepting the assessee's submissions as genuine despite absence of written agreements.

2023 (12) TMI 460 - ITAT MUMBAI Income Tax

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ITAT allows section 80-IC deduction after finding Form 10CCB filed timely with original return
ITAT Mumbai allowed the appeal regarding deduction under section 80-IC for an eligible unit in Rudrapur, Uttarakhand. The AO denied the claim stating Form 10CCB was not filed before the due date. ITAT held that since the assessee had specified domestic transactions exceeding Rs. 5 crores requiring compliance with section 92E, the due date for filing return was 30/11/2015 under clause (aa) of Explanation-2 to section 139(1). The original return filed on 29/11/2015 with Form 10CCB was valid and timely. The tribunal ruled that detailed examination of Form 10CCB compliance was beyond the limited scope of section 143(1) processing, which only permits prima facie adjustments. The CIT(A)'s order upholding the denial was set aside.

Deduction under section 80-IC - due date of filing return under Explanation-2 to section 139(1) - requirement to furnish report under section 92E - validity of original return under section 139(1) - revised return under section 139(5) - scope of processing under section 143(1) - application of section 80-AC - Form 10CCB as evidence for compliance with section 80-IC(7) - interest under section 234C (consequential)Due date of filing return under Explanation-2 to section 139(1) - requirement to furnish report under section 92E - validity of original return under section 139(1) - Whether the return filed on 29/11/2015 was a valid original return filed within the due date. - HELD THAT: - Explanation-2 to section 139(1) treats an assessee who is 'required to furnish the report' under section 92E as falling within clause (aa), making the due date 30th November of the assessment year; the clause requires only that the assessee be required to furnish the report, not that the report actually be furnished by that date. The assessee had disclosed details of specified domestic transactions in Form 10CCB filed with the return and subsequently filed Form 3CEB, confirming that it was required to furnish the report under section 92E. Accordingly, the return filed on 29/11/2015 was within the due date of 30/11/2015 and is a valid return under section 139(1). [Paras 10]The return of 29/11/2015 is a valid original return filed on or before the due date (30/11/2015) under section 139(1).Deduction under section 80-IC - Form 10CCB as evidence for compliance with section 80-IC(7) - scope of processing under section 143(1) - Whether the deduction claimed under section 80-IC could be denied by issuance of intimation under section 143(1). - HELD THAT: - The assessee claimed the deduction under section 80-IC in the original return and filed Form 10CCB on the same date (29/11/2015). The limited scope of processing under section 143(1) permits only prima facie adjustments and does not permit detailed examination of compliance with procedural conditions under section 80-IC(7)/80-IA(7) and Rule 18BBB. As the return was valid and Form 10CCB was presented with the return, the case does not fall within the narrow category permitting denial under section 143(1)(a)(ii) read with its Explanation. Therefore the denial of the claimed deduction by way of section 143(1) intimation was not justified. [Paras 13]The deduction claimed under section 80-IC cannot be negated by the section 143(1) intimation; the intimation is set aside insofar as it denies the 80-IC claim.Revised return under section 139(5) - validity of original return under section 139(1) - Whether the revised return filed on 29/03/2017 was admissible and whether the CIT(A)'s reliance on prior precedent was applicable. - HELD THAT: - The original return filed on 29/11/2015 was processed by intimation dated 26/11/2016 under section 143(1); the subsequently filed revised return of 29/03/2017 was therefore not the subject-matter before the CIT(A). Because the Tribunal has held the original return to be a valid return under section 139(1), reliance on the cited precedent concerning invalid original returns is inapposite to the facts of this case. [Paras 11]The revised return of 29/03/2017 is not material to the appeal; the CIT(A)'s adverse finding on the revised return lacks basis given the validity of the original return.Application of section 80-AC - validity of original return under section 139(1) - Whether provisions of section 80-AC (denial of certain deductions for belated returns) applied to deny the 80-IC deduction. - HELD THAT: - Because the Tribunal has held that the original return was filed on or before the due date under section 139(1), the deeming or denial consequences contemplated by section 80-AC, which apply where returns are belated, do not arise. The applicability of section 80-AC is therefore excluded on the facts. [Paras 12]Section 80-AC is not attracted and cannot be invoked to deny the deduction under section 80-IC in this case.Interest under section 234C (consequential) - Levy of interest under section 234C. - HELD THAT: - The levy of interest under section 234C is consequential upon the assessment adjustments. The Tribunal treated this matter as consequential and observed that it does not require separate adjudication in the appeal. [Paras 14]The issue of interest under section 234C is consequential and no separate adjudication was undertaken.Final Conclusion: The impugned intimation dated 26/11/2016 under section 143(1) is set aside insofar as it denied the deduction under section 80-IC; the original return of 29/11/2015 is held to be a valid return filed within the due date (30/11/2015) and related objections are unfounded. Grounds 1-7 are allowed; the interest issue under section 234C is consequential.

2023 (12) TMI 459 - ITAT DELHI Income Tax

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Issues involved:
The appeal challenges the assessment order passed under section 143 (3) r.w.s. 144C read with section 144B of the Income-tax Act, 1961 for the Assessment Year 2017-18, involving issues related to transfer pricing adjustments, interest on outstanding receivables, levy of interest under section 234A, and merger implications.

Transfer Pricing Adjustment:
The assessee, incorporated during FY 2016-17, filed a return declaring nil income. The Assessing Officer (AO) proposed a transfer pricing adjustment of INR 21,52,899 without any reference to the Transfer Pricing Officer (TPO). Despite objections raised before the Dispute Resolution Panel (DRP), no relief was granted. The appeal contends that the adjustment related to another entity, Boeing Corporation India Ltd. (BCIL), which merged with the assessee post the subject year. As the transaction in question was not entered by the assessee and the TPO order referred to pertained to BCIL, the Tribunal held that the assessment order, based on BCIL's transaction, was liable to be quashed. Consequently, the transfer pricing adjustment was deleted.

Interest on Outstanding Receivables:
The assessee argued that since it did not engage in business operations during FY 2016-17, the issue of interest on outstanding receivables did not apply for that year. The AO's decision to levy interest under section 234A was contested, highlighting that the return of income was filed within the specified due date under section 139 (1) of the Act. However, the Tribunal's decision did not specifically address this issue as the focus was on the transfer pricing adjustment.

Merger Implications:
The merger of BCIL with the assessee, approved in FY 2017-18, raised concerns regarding the treatment of transactions and adjustments made in BCIL's assessment in the hands of the assessee. The Tribunal emphasized that as BCIL was an independent entity until March 31, 2017, any adjustment related to BCIL should not impact the assessment of the assessee. The Tribunal concluded that the assessment order, based on BCIL's transactions, was not applicable to the assessee post-merger, leading to the deletion of the transfer pricing adjustment.

Conclusion:
The Tribunal allowed the appeal, setting aside the orders of the lower authorities and directing the deletion of the transfer pricing adjustment. The decision was based on the lack of TPO reference for the assessee, the non-applicability of BCIL's transactions post-merger, and the absence of entered transactions by the assessee for the subject year. The Tribunal's ruling focused on the specific issue of transfer pricing adjustment, highlighting the importance of accurate attribution of transactions and adjustments in merger scenarios.

ITAT deletes transfer pricing adjustment where AO wrongly applied another entity's TPO findings to assessee company
ITAT Delhi allowed the assessee's appeal and deleted the transfer pricing adjustment made by the AO. The assessee, incorporated in March 2017, had no business operations during FY 2016-17 and no TPO reference was made. The AO erroneously applied TPO findings from Boeing Corporation India Ltd. (BCIL) to make identical additions against the assessee. Since BCIL merged with the assessee only on April 1, 2017, it remained an independent entity until March 31, 2017. The international transaction in question was undertaken by BCIL, not the assessee, making the assessment order liable to be quashed.

Transfer pricing adjustment - reference to Transfer Pricing Officer - use of TPO order in assessment of different entity - scheme of merger-appointed date - double taxationTransfer pricing adjustment - reference to Transfer Pricing Officer - use of TPO order in assessment of different entity - scheme of merger-appointed date - double taxation - Validity of the transfer pricing adjustment made in the assessment when no reference was made to the TPO and the AO relied upon a TPO order passed in the case of a different entity which merged subsequently. - HELD THAT: - The Tribunal found on the material on record that the assessee was incorporated on 9 March 2017 and had no business operations in the year under consideration. There was no reference to the Transfer Pricing Officer in the assessee's case. The assessing officer had relied upon the TPO order dated 29 January 2021 in the case of Boeing Corporation India Ltd. (BCIL) and made an identical transfer pricing addition in the assessee's assessment despite that the international transaction in the TPO order related to BCIL. BCIL was an independent entity up to 31 March 2017 and merged with the assessee with an appointed date of 1 April 2017; therefore transactions adjudicated in BCIL's TPO order did not pertain to the assessee for the year under assessment. Reliance on another entity's TPO order in the absence of a TPO reference in the assessee's case resulted in an adjustment that had no factual or procedural foundation and risked double taxation. The Revenue did not successfully controvert these factual and legal contentions. For these reasons the Tribunal concluded that the assessment order insofar as it records the transfer pricing adjustment is without basis and must be set aside. [Paras 8, 9]The transfer pricing adjustment made by relying on the TPO order of another entity without any TPO reference in the assessee's case is quashed and the addition is deleted.Final Conclusion: The appeal is allowed: the TP adjustment in the assessment is set aside and deleted because the addition was based on a TPO order in respect of a different entity (BCIL) and there was no TPO reference or corresponding transaction in the assessee's case; consequential double taxation is avoided.

2023 (12) TMI 458 - ITAT DELHI Income Tax

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Issues Involved:
The judgment involves the acceptance of additional evidence under Rule 46(1)(d), treatment of payments to M/s. For-A Company Ltd., scrutiny of sundry creditors, and applicability of section 41(1) regarding remissions or cessation of trading liability.

Acceptance of Additional Evidence under Rule 46(1)(d):
The Revenue appealed against the acceptance of additional evidence without independent findings. The Tribunal held that the evidence submitted by the assessee, including confirmation from M/s. For-A Company Ltd., was crucial and duly supported by bank statements and payment details. As the assessee had provided necessary documentation, the Tribunal dismissed the appeal of the Revenue on this issue.

Treatment of Payments to M/s. For-A Company Ltd.:
The Assessing Officer added the outstanding amount to the total income due to non-compliance by creditors and lack of details from M/s. For-A Company Ltd. However, the Tribunal found that the assessee had made payments to the company, supported by bank statements and confirmations. As all necessary details were furnished, the Tribunal dismissed the Revenue's appeal regarding the outstanding balance to M/s. For-A Company Ltd.

Scrutiny of Sundry Creditors:
The assessee was questioned about the genuineness of sundry creditors, and the Assessing Officer issued notices under section 133(6) to confirm transactions. Despite non-receipt of replies from all parties, the Tribunal emphasized that absence of replies does not justify treating the creditors as bogus. The assessee provided details of payments and cessation of liabilities in subsequent years, which were duly considered by the Tribunal in dismissing the Revenue's appeal on this issue.

Applicability of Section 41(1) - Remissions or Cessation of Trading Liability:
Considering the provisions of section 41(1) and relevant case law, the Tribunal declined to interfere with the order of the ld. CIT(A) regarding the applicability of clause (a) of subsection (1) of section 41. The Tribunal referred to precedents and judgments to support its decision, ultimately dismissing the appeal of the Revenue.

Separate Judgment by Judges:
The judgment was pronounced by Shri Saktijit Dey, Hon'ble Vice President, and Dr. B. R. R. Kumar, Accountant Member on 08/12/2023.

Revenue's appeal dismissed for adding unexplained sundry creditors without proper evidence or show cause notices
The ITAT Delhi dismissed the Revenue's appeal regarding unexplained sundry creditors. The AO added amounts to the assessee's income after creditors failed to respond to notices issued under section 133(6) through the ITBA Portal. The ITAT held that absence of replies from creditors does not automatically make them bogus without evidence. The AO failed to issue show cause notices before making additions and did not confront the assessee about non-receipt of replies. Applying section 41(1) provisions and citing precedents including Vardhman Overseas Ltd and T.V. Sundaram Iyengar Sons Ltd, the ITAT upheld the CIT(A)'s order declining to treat the creditors as cessation of liability.

Admission of additional evidence under Rule 46A - genuineness of sundry creditors and treatment of outstanding balances - remission or cessation of trading liability under section 41(1) - treatment of foreign creditor payments and proof by bank evidence and confirmationsAdmission of additional evidence under Rule 46A - Ld. CIT(A) rightly admitted additional evidence filed by the assessee under Rule 46A as the assessee was prevented by sufficient cause from producing the same before the AO and the evidence was crucial for adjudication. - HELD THAT: - The CIT(A) examined the assessee's application under Rule 46A and the Assessing Officer's remand report, and concluded that the assessee had been prevented by sufficient cause from producing the evidence before the AO. Given the materiality of the documents to the controversy and their relevance to the genuineness of creditors and payments, the CIT(A) admitted the additional evidence for adjudication of the appeal. [Paras 6, 7, 8]Admission of the additional evidence under Rule 46A was upheld and the evidence was considered in adjudicating the appeal.Treatment of foreign creditor payments and proof by bank evidence and confirmations - No addition could be made in respect of the outstanding balance payable to M/s FOR-A Company Ltd. as the assessee furnished bank statements, payment details and confirmation from the foreign supplier establishing the payment. - HELD THAT: - The Tribunal reviewed the material showing that M/s FOR-A Company Ltd., a Tokyo-incorporated supplier, was paid in foreign currency and that the payments were reflected in the assessee's bank statements and confirmed by the supplier. On this basis the Tribunal accepted the assessee's evidence and agreed with the CIT(A) that the addition made by the AO in respect of the FOR-A balance was not sustainable. [Paras 10]The addition in respect of M/s FOR-A Company Ltd. was deleted and Revenue's appeal on this issue dismissed.Genuineness of sundry creditors and treatment of outstanding balances - remission or cessation of trading liability under section 41(1) - Additions in respect of sundry creditors held not warranted where absence of replies from creditors did not, by itself, prove payables to be bogus and where subsequent payments and cessation/remission evidence were furnished; invocation of section 41(1) was considered and the CIT(A)'s conclusions were sustained. - HELD THAT: - The Tribunal noted that the AO issued notices under section 133(6) but made additions without confronting the assessee about non-receipt of replies and without independent evidence to show the payables were not genuine. The assessee produced confirmations, PAN, bank statements, ledgers and evidence of subsequent payments/cessation of liability. Applying the principles concerning remission or cessation of liability under section 41(1) and having regard to the precedents relied upon by the CIT(A), the Tribunal declined to interfere with the CIT(A)'s acceptance of the assessee's case. [Paras 11, 12, 13]The additions in respect of sundry creditors were not sustained and the CIT(A)'s order declining to make those additions was upheld.Final Conclusion: The Tribunal dismissed the Revenue's appeal: the CIT(A)'s admission of additional evidence under Rule 46A was upheld; the addition relating to M/s FOR-A Company Ltd. was deleted on proof of payment and confirmation; and the CIT(A)'s findings rejecting additions in respect of sundry creditors and applying section 41(1) were sustained.

2023 (12) TMI 444 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Issues Involved:
1. Whether the Liquidator is entitled to receive a fee from the Scheme Proponent for the period of compromise and arrangement.
2. Whether the Liquidator's claim to retain the amount received from the Scheme Proponent is justified.
3. Whether the Adjudicating Authority committed any error in directing the refund of the amount to the Scheme Proponent.

Summary:

Issue 1: Entitlement of Liquidator's Fee from Scheme Proponent
The Liquidator claimed a fee of Rs.23,01,000/- from the Scheme Proponent for the period of compromise and arrangement. The Liquidator justified this fee based on Regulation 4(2)(a) read with Proviso to Regulation 2B(3) of the Liquidation Regulations, 2016, arguing that the fee is necessary to prevent non-serious proposals from halting the liquidation process without consequences. However, the Adjudicating Authority held that the Liquidator is not entitled to receive any fee from the Scheme Proponent. The Tribunal emphasized that Regulation 2B only refers to the cost incurred by the Liquidator in relation to compromise or arrangement and does not include any fee. The Liquidator's fee must be paid from the proceeds of the liquidation estate as per Section 34, sub-sections (8) and (9) of the Insolvency and Bankruptcy Code, 2016.

Issue 2: Justification of Retaining the Amount
The Liquidator received a total amount of Rs.23,88,280/- from the Scheme Proponent towards the liquidation fee and costs. The Adjudicating Authority directed the Liquidator to refund this amount, stating that the liquidation cost, including the fee, was wrongly claimed from the Scheme Proponent. The Tribunal noted that the Liquidator can only claim the cost incurred in relation to the compromise or arrangement from the parties proposing it, and not the fee. The Tribunal found the Liquidator's claim to retain the amount unjustified and unsupported by any statutory scheme.

Issue 3: Error in Directing Refund
The Tribunal supported the Adjudicating Authority's decision to direct the refund of the amount. It was determined that the Liquidator was not entitled to the claimed fee of Rs.23,01,000/- and was only entitled to expenses amounting to Rs.1,11,172/-. Consequently, the Tribunal modified the refund amount to Rs.22,77,108/-, as per the Liquidator's own calculation of expenses.

Conclusion:
The Tribunal concluded that the Liquidator was not entitled to claim any liquidation fee from the Scheme Proponent and upheld the Adjudicating Authority's order for refund, with a modification in the amount to Rs.22,77,108/-. The Tribunal also directed that a copy of the order be forwarded to the Insolvency and Bankruptcy Board of India for information and appropriate action. The appeal was dismissed.

Liquidator must refund wrongly collected fees from scheme proponent under Regulation 2B of Liquidation Regulations 2016
The NCLAT dismissed the liquidator's appeal challenging an order directing refund of fees charged from a scheme proponent. The liquidator claimed Rs. 23,01,000 as liquidation fee for the period during which a compromise and arrangement scheme was under consideration. The NCLAT held that under Regulation 2B of the Liquidation Regulations, 2016, liquidators can only claim costs incurred in relation to compromise arrangements, not liquidation fees, from scheme proponents. The liquidator was entitled only to expenses totaling Rs. 1,11,172, requiring refund of Rs. 22,77,108. The tribunal modified the refund amount but upheld the adjudicating authority's direction to refund wrongly collected fees.

Liability for costs incurred in compromise or arrangement under Regulation 2B(3) of the IBBI (Liquidation Process) Regulations, 2016 - payment of liquidator's fee from the liquidation estate under Section 34(8)-(9) of the Insolvency and Bankruptcy Code, 2016 - distinction between 'liquidation cost' and 'liquidator's fee' under the Liquidation Regulations, 2016 - entitlement to reimbursement of expenses incurred in relation to compromise or arrangementLiability for costs incurred in compromise or arrangement under Regulation 2B(3) of the IBBI (Liquidation Process) Regulations, 2016 - distinction between 'liquidation cost' and 'liquidator's fee' under the Liquidation Regulations, 2016 - Whether the liquidator was entitled to charge and retain his liquidation fee from the scheme proponent for the period during which a compromise or arrangement under Section 230 was under consideration. - HELD THAT: - Regulation 2B(3) expressly allocates any cost incurred by the liquidator in relation to a compromise or arrangement to the corporate debtor where the scheme is sanctioned, and to the parties who proposed the compromise where it is not sanctioned. The definition of 'liquidation cost' in Regulation 2(1)(ea) and the proviso thereto distinguish costs incurred in relation to compromise or arrangement from liquidation cost. Regulation 4 governs the liquidator's fee, and Section 34(8)-(9) provides that the fee for conduct of liquidation proceedings is to be paid from proceeds of the liquidation estate. Regulation 2B refers only to costs in relation to compromise or arrangement and does not authorize charging the liquidator's fee to the scheme proponent. Consequently, the statutory scheme demonstrates a clear separation between recoverable costs in relation to a proposed compromise or arrangement (borne by the proponent if the scheme is not sanctioned) and the liquidator's fee (payable from the liquidation estate under Section 34 read with Regulation 4). The liquidator therefore was not entitled to retain the liquidation fee he charged the scheme proponent for the period the scheme was under consideration. [Paras 16, 17, 18]Liquidator not entitled to charge or retain his liquidation fee from the scheme proponent for the period during which the compromise or arrangement was under consideration; only costs in relation to the compromise or arrangement are claimable from the proponent where the scheme is not sanctioned.Entitlement to reimbursement of expenses incurred in relation to compromise or arrangement - payment of liquidator's fee from the liquidation estate under Section 34(8)-(9) of the Insolvency and Bankruptcy Code, 2016 - Whether the Adjudicating Authority erred in directing refund of amounts realized from the scheme proponent and, if refund is warranted, the correct quantification of the refund. - HELD THAT: - The liquidator's own statement of claim (paragraph 14 of his reply) separated a claimed liquidator's fee from other expenses. Having held that the fee could not be charged to the scheme proponent, the only amounts the liquidator could legitimately retain were the expenses properly characterized as costs related to the compromise or arrangement. Applying the liquidator's own computation, the fee component claimed (as per his account) is not allowable against the proponent; after permitting retention only of the expenses properly claimed, the appeal court found the refund amount directed by the Adjudicating Authority required modification. The Adjudicating Authority's direction to refund the amount received was therefore correct in principle; on recalculation using the liquidator's figures the Tribunal modified the refund to the sum determined in its order. [Paras 21, 22]Adjudicating Authority did not err in directing refund; direction modified to require refund in the quantified sum as ordered by the Tribunal, while permitting the liquidator to retain the expenses properly claimed.Final Conclusion: Appeal dismissed subject to modification of the refund directed by the Adjudicating Authority; liquidator was not entitled to retain the claimed liquidation fee charged to the scheme proponent and must refund the specified modified amount, while being permitted to retain the properly claimed expenses; copy of the order to be sent to the Insolvency and Bankruptcy Board of India for information and appropriate action.

2023 (12) TMI 434 - CESTAT AHMEDABAD Central Excise

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Issues Involved:
1. Whether M/s. Panchmahal Steel Ltd. correctly availed Cenvat Credit on inputs like waste/seconds of SS Patta/Patti, SS Circle, SS Flat, SS sheet, etc.
2. Whether M/s. Panchmahal Steel Ltd. correctly availed Cenvat Credit on duty-paid inputs like MS scrap.

Summary:

Issue 1: Cenvat Credit on SS Patta/Patti, SS Circle, SS Flat, SS Sheet
The main contention was whether M/s. Panchmahal Steel Ltd. had received the SS articles for which they availed Cenvat Credit. The Revenue denied credit based on the assumption that the appellant used virgin material rather than off cuts/defective/seconds/waste SS articles. The impugned order confirmed the demand and imposed penalties on the appellant and various suppliers. The appellant argued that documentary evidence supersedes oral evidence and that they had received and used the defective material in their manufacturing process. The Tribunal noted that the lower authority denied cross-examination of witnesses, making the statements inadmissible. The Tribunal found no evidence of the alleged substitution of prime material with scrap and no proof of flow back of amounts. The Tribunal concluded that the appellant correctly availed Cenvat Credit on SS scrap and set aside the impugned order.

Issue 2: Cenvat Credit on MS Scrap
The dispute involved whether the appellant correctly availed Cenvat Credit on MS scrap, which was allegedly not received. The Revenue's presumption was based on a single instance where domestic scrap was found in the appellant's factory. The appellant argued that they had not availed any credit on the domestic scrap and that the impugned order generalized this single instance to deny credit for all past procurements. The Tribunal found that the Revenue did not substantiate its case with evidence and relied on mere conjectures. The Tribunal held that the appellant correctly availed Cenvat Credit on duty-paid MS scrap and set aside the impugned order.

Conclusion:
The Tribunal allowed all the appeals, setting aside the impugned orders and granting consequential relief to the appellants. The Tribunal emphasized the lack of corroborative evidence and the inadmissibility of statements obtained without cross-examination.

CESTAT allows appeal on CENVAT credit for SS waste and MS scrap, revenue fails to prove diversion allegations
CESTAT Ahmedabad allowed the appeal regarding incorrect availment of CENVAT credit on inputs including SS Patta/Patti, SS Circle, SS Flat, SS Sheet and MS scrap. The tribunal held that the appellant had correctly availed credit on SS waste and scrap received through dealers, finding no cogent evidence of diversion or replacement. Regarding MS scrap credit, despite revenue's allegations that domestic scrap was received without duty payment, cross-examination revealed witnesses either couldn't remember transaction details or gave contradictory statements. The tribunal found no evidence of cash procurement from open market, flow back of amounts, or identification of domestic scrap suppliers for the substantial 9078 MT quantity involved. Revenue failed to substantiate allegations beyond conjectures, lacking corroborative evidence for serious charges, resulting in demand being quashed.

Cenvat credit - admissibility of credit on scrap/seconds/defectives - inadmissibility of statements recorded without cross-examination - requirement of corroborative evidence for diversion/replacement of goods - evidentiary value of transporters' statements - penalty under Rule 15 and Rule 26Cenvat credit - admissibility of credit on scrap/seconds/defectives - inadmissibility of statements recorded without cross-examination - requirement of corroborative evidence for diversion/replacement of goods - Cenvat credit availed on SS inputs described as waste/seconds/off cuts was lawfully available to the appellant and the demand based on alleged non receipt/diversion of SS prime material is not sustainable. - HELD THAT: - The Tribunal found that the invoices and accompanying documentary records described the supplies as pieces/seconds/defectives/cuttings of SS patta/patti/coils/plates and that there was no cogent evidence of diversion or substitution by suppliers or of replacement sourcing by the appellant. Requests for cross examination had been rejected by the lower authority; while such rejection affects the evidentiary value of oral statements, the available documentary evidence itself supports the appellant's case. The revenue relied primarily on oral statements and conjecture that prime grade material was diverted to utensil manufacturers, but no utensil manufacturer was identified and no flow back of funds or alternate suppliers of substituted scrap were shown. Transporters' statements were held to be of limited value. On these bases the Tribunal held that, in absence of corroborative material, the demand premised on non receipt or diversion of SS inputs could not be sustained and the credit was correctly availed. [Paras 6]Demand in respect of Cenvat credit on SS scrap/waste/off cuts set aside and credit held to have been lawfully availed.Cenvat credit - admissibility of credit on scrap/seconds/defectives - inadmissibility of statements recorded without cross-examination - requirement of corroborative evidence for diversion/replacement of goods - evidentiary value of transporters' statements - Cenvat credit availed on duty paid MS scrap was lawfully available and the generalized presumption-based on an isolated finding of domestic scrap-cannot support a demand on almost 9,000 MT of MS scrap. - HELD THAT: - The Tribunal noted a single stray instance of domestic scrap found at the factory for which no credit had been availed, but held that revenue impermissibly generalized that instance to conclude that all past procurements were non cenvattable domestic scrap. Investigative material relied mainly on oral statements whose evidentiary value was diminished (witnesses retracted, could not be cross examined or did not remember particulars). There was no evidence of sellers having sold the large quantities of duty paid scrap to third parties, no proof of cash purchases from local suppliers, and no demonstration of flow back of funds. The Tribunal also observed that no samples were drawn for testing and that transporters' statements did not establish non receipt. Following similar precedents where identical demands were set aside, the Tribunal held that without corroborative evidence the revenue's case on MS scrap could not be sustained. [Paras 6]Demand in respect of Cenvat credit on MS scrap quashed and credit held to have been lawfully availed.Penalty under Rule 15 and Rule 26 - requirement of corroborative evidence for imposition of personal penalty - inadmissibility of statements recorded without cross-examination - Personal penalties and other consequential measures premised on the unsustained demand were not maintainable and the impugned orders confirming demand and penalties were set aside. - HELD THAT: - Because the Tribunal quashed the substantive demands for both SS and MS scrap on the grounds that revenue relied on conjecture and uncorroborated oral statements (many not properly cross examined or retracted), it followed that penalties imposed on the appellant and various suppliers could not be sustained. The Tribunal observed legal limitations on basing penalties on statements lacking cross examination and emphasized the absence of evidence of diversion, flow back of funds or culpable conduct by suppliers. Consequently the impugned orders, including penalties, were set aside. [Paras 6, 7]Personal penalties and other orders founded on the quashed demands set aside; appeals allowed with consequential relief.Final Conclusion: On the facts and documentary record, and in absence of corroborative evidence of diversion or substitution of duty paid SS and MS scrap, the demands and consequential penalties confirmed by the lower authority cannot be sustained; the impugned orders are set aside and the appeals are allowed.

2023 (12) TMI 433 - CESTAT CHANDIGARH Central Excise

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Issues: (i) Whether a separately established unit manufacturing machinery and commencing commercial production after 07.01.2003 qualified as a new industrial unit eligible for exemption under Notification No. 50/2003-C.E. (ii) Whether the refund claim was barred in whole or in part by unjust enrichment.

Issue (i): Whether a separately established unit manufacturing machinery and commencing commercial production after 07.01.2003 qualified as a new industrial unit eligible for exemption under Notification No. 50/2003-C.E.

Analysis: The exemption notification covered new industrial units commencing commercial production on or after 07.01.2003 as well as existing units undertaking substantial expansion. The decisive consideration was whether the unit in question was a separate industrial unit and whether it had commenced commercial production within the notified period. The notification did not incorporate any requirement that eligibility depended upon a certificate from the District Industries Centre or any other State authority. On the facts, the separate unit set up by the assessee for manufacture of machinery was treated as a distinct unit and, following the reasoning applied in the comparable precedent relied on by the Tribunal, it satisfied the condition of a new industrial unit.

Conclusion: Yes. The assessee was entitled to the exemption in respect of the separate unit that commenced production after 07.01.2003.

Issue (ii): Whether the refund claim was barred in whole or in part by unjust enrichment.

Analysis: The assessee produced a Chartered Accountant's certificate which was not disproved by contrary evidence. At the same time, the record showed that a portion of the duty element had been recovered from customers, and that amount could not be refunded. The claim based on an asserted cum-duty adjustment for the remaining amount was not accepted, as the real question was whether the duty incidence had been passed on.

Conclusion: The refund was not barred entirely, but relief was denied to the extent the duty burden had been recovered from customers.

Final Conclusion: The exemption objection failed for the separate unit, but the refund was confined by the doctrine of unjust enrichment, resulting in partial relief to the assessee.

Ratio Decidendi: For exemption under a notification framed for new industrial units, a separately constituted unit that begins commercial production after the specified date can qualify as a new unit, and refund is allowable only to the extent the duty incidence has not been passed on.

New industrial unit exemption and unjust enrichment limit refund where duty has been passed on to customers.
A separately constituted unit manufacturing machinery and commencing commercial production after 07.01.2003 can qualify as a new industrial unit for exemption under Notification No. 50/2003-C.E. where the notification turns on separate establishment and the start of production within the notified period, and does not require a District Industries Centre certificate or similar State authority certification. On refund, the doctrine of unjust enrichment limits relief to the extent the duty incidence has not been passed on: a Chartered Accountant's certificate may support the claim, but any duty recovered from customers remains unrecoverable. The result was exemption recognition for the separate unit, with refund restricted by pass-on of duty.

Exemption under Notification No.50/2003-C.E. - new industrial unit - commencement of commercial production - substantial expansion - unjust enrichmentNew industrial unit - commencement of commercial production - exemption under Notification No.50/2003-C.E. - Whether the machinery manufactured by the appellants in a separate unit which commenced production after 07-01-2003 is eligible for benefit of Notification No.50/2003-C.E. - HELD THAT: - The Tribunal applied its earlier reasoning in Tirupati LPG Industries Ltd. to hold that Notification No.50/2003-C.E. covers (a) new industrial units which have commenced commercial production on or after 07-01-2003 and (b) existing units undertaking substantial expansion. The word "new" must be read with reference to 07-01-2003 and includes units set up before that date which commenced commercial production on or after that date; commercial production is distinguishable from trial production/commissioning. The appellants had established a separate unit for fabrication of machinery and commenced commercial production after 07-01-2003. On these findings the Tribunal held that such machinery cleared from the separate unit is eligible for the notification's benefit. [Paras 7, 8, 9]The machinery manufactured by the separate unit which started production after 07-01-2003 is eligible for exemption under Notification No.50/2003-C.E.Exemption under Notification No.50/2003-C.E. - Whether the notification requires a certificate or permission from the District Industries Centre or other State authority as a pre-condition for grant of benefit. - HELD THAT: - The Tribunal examined the notification and found no condition requiring certification or prior permission from the Director of Industries, District Industry Centre or any other State authority as a pre-condition to claim the exemption. Reliance placed by the Department on the State policy definitions was rejected insofar as reading such a condition into the central notification. [Paras 6, 9]No requirement of a certificate/permission from the District Industries Centre or similar State authority exists in Notification No.50/2003-C.E. and such a condition cannot be read into the notification.Unjust enrichment - Whether the appellants are liable to refund on the ground of unjust enrichment in respect of the refund claimed. - HELD THAT: - The appellants produced a Chartered Accountant's certificate quantifying recoveries; the Department did not rebut that certificate by evidence. The Tribunal accepted that the appellants did not claim an amount which had been recovered from customers and noted confirmation of that fact in the Revenue Officer's report. However, the Tribunal rejected the appellants' contention that a portion should be allowed on cum-duty basis where evidence showed recovery of the amount representing duty from customers. The determinative question was whether amounts representing duty had been recovered from customers; where so recovered, the appellants were not entitled to refund for that portion. [Paras 10]Unjust enrichment was not established as to the amount covered by the Chartered Accountant's certificate and the unclaimed recovered amount; however, the appellants are not entitled to refund for the portion which represented duty recovered from customers.Final Conclusion: Appeal partly allowed: benefit of Notification No.50/2003-C.E. granted in respect of machinery manufactured by the separate unit which commenced commercial production after 07-01-2003; no state-certificate/permission is a pre-condition for the notification; refund allowed except in respect of amounts shown to have been recovered from customers (portion representing duty).

2023 (12) TMI 415 - DELHI HIGH COURT Income Tax

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Issues:
The issues involved in the judgment are whether the scope of assessment under section 153A extends to income unearthed based on statements recorded during post-search proceedings and whether a fresh material received after the date of search is sufficient to reopen the assessment under section 153A.

Summary:
The appellant/revenue challenged the order of the Income Tax Appellate Tribunal, which dismissed the appeal against the assessee pertaining to the Assessment Year 2011-12. The respondent/assessee, engaged in developing a Special Economic Zone for IT services, filed its return of income, which was processed under Section 143(1) of the Act. Subsequently, a search and seizure action was conducted, leading to the issuance of a notice under Section 153A of the Act. The Assessing Officer disallowed a deduction claimed under Section 80IAB of the Act, leading to penalty proceedings. The respondent challenged the order before the Commissioner of Income Tax (Appeals) and raised the issue of the legality of invoking Section 153A without incriminating material. The CIT(A) partly allowed the appeal, leading to the current appeal before the High Court.

The appellant/revenue contended that a statement recorded in post-search proceedings formed the basis for disallowance of the deduction claimed under Section 80IAB of the Act. The legal position regarding the consideration of material found during a search for assessment purposes was discussed, with different High Courts taking divergent views. The High Court's decision in the case of Kabul Chawla was upheld by the Supreme Court, emphasizing the importance of incriminating material for making additions in assessments.

The High Court examined the legal principles laid down in previous cases and concluded that the statement of Shri B.P. Singh, recorded after the search action, cannot be the basis for initiating proceedings under Section 153A. The Court found no substantial question of law for consideration under Section 260A of the Act and dismissed the appeal.

In conclusion, the High Court dismissed the appeal as it found no substantial question of law for consideration under Section 260A of the Income Tax Act.

Revenue cannot reopen finalized assessments without finding incriminating material during search operations
Delhi HC held that no addition can be made to completed assessments without incriminating material found during search. Assessment for AY 2011-12 was finalized before search date of 29.10.2013, with no pending assessment. Since no incriminating material was discovered during search and the statement relied upon by revenue was recorded after search action, the proposed question of law was not admitted as substantial. Court followed SC precedent in Abhisar Buildwell approving Delhi HC's earlier ruling in Kabul Chawla case.

Assessment under Section 153A limited to incriminating material unearthed during search - reopening of completed assessments in absence of incriminating material - post-search statements cannot validate Section 153A where no incriminating material was seized - application of Kabul Chawla principle - distinction between pre-search incriminating material and material obtained after search - non-admittance of substantial question where facts do not attract reopening under Section 153A Assessment under Section 153A limited to incriminating material unearthed during search - post-search statements cannot validate Section 153A where no incriminating material was seized - distinction between pre-search incriminating material and material obtained after search - application of Kabul Chawla principle - Whether the decision in Kabul Chawla applies where fresh material/information is received after the date of search sufficient to reopen assessment under Section 153A - HELD THAT: - The Court declined to admit the substantial question of law because on the facts no incriminating material pertaining to the assessee was seized during the search; the only material relied upon by revenue was a statement recorded after the search. The Court reiterated the legal position in Kabul Chawla as approved by the Supreme Court in Abhisar Buildwell, namely that completed assessments can be interfered with under Section 153A only on the basis of incriminating material unearthed during the search or requisitioned documents discovered in the search, and that in absence of such incriminating material no additions can be made in respect of completed assessments. The Court distinguished Dr. A.V. Sreekumar on its facts: in Sreekumar the revenue had incriminating documents received prior to the search (via a Tax Evasion Petition) which themselves led to the search; that factual matrix is absent here where the material now relied upon was recorded post-search and was not seized. Applying these principles to the present facts (assessment for AY 2011-12 was completed prior to the search and no incriminating material was found during the search), the Court held that the Kabul Chawla principle governs and the proposed question could not be admitted as a substantial question of law. [Paras 8, 9] The proposed question was not admitted and there is no substantial question of law for consideration under Section 260A. Final Conclusion: The appeal is dismissed; the Tribunal's order upholding that no addition could be sustained under Section 153A in absence of incriminating material seized during the search is affirmed and the proposed substantial question was not entertained.

2023 (12) TMI 390 - ALLAHABAD HIGH COURT Customs

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Bail Granted in Gold Smuggling Case Due to Lack of Foreign Markings, Legitimate Purchase Claim, and No Criminal History.
The court granted bail to the applicant in a case under s. 135(1)(A) of the Customs Act, 1962, involving alleged smuggling of gold from Bangladesh. The decision was based on the absence of foreign markings on the gold, the applicant's claim of legitimate purchase with a GST invoice, no criminal history, and time already spent in jail. The applicant was ordered to be released on bail with conditions, including not tampering with evidence, not pressurizing witnesses, and appearing on all trial court dates.

2023 (12) TMI 380 - CESTAT CHANDIGARH Service Tax

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Software services provided to Indian customers from India qualify as export of services under Rule 3(2)(a)
CESTAT Chandigarh allowed the appeal regarding export of services classification. The revenue department had confirmed demand arguing that services provided from India were consumed domestically by Indian customers, thus not qualifying as export of services under Rule 3(2)(a) of Export of Service Rules. The Tribunal relied on coordinate bench decisions in Orbit Research Associates case and larger bench ruling in Arcelor Mittal case, along with Bombay HC decision in A.T.E. Enterprises case, holding that the appellant's services qualified as export of services and were not liable for service tax under Business Auxiliary Service category. The impugned order was set aside.

Export of services - Business Auxiliary Services - services provided from India and used outside India - location of the service recipient determines use of service - interpretation of Export of Service RulesExport of services - Business Auxiliary Services - services provided from India and used outside India - location of the service recipient determines use of service - Whether the commission payments received by the appellant for providing business development/auxiliary services to overseas group entities qualify as export of services and are not liable to service tax. - HELD THAT: - The Tribunal held that the services rendered by the appellant fall within the definition of export of services under the Export of Service Rules because the actual recipient of the Business Auxiliary Services is the overseas entity which is located outside India and payment was received in convertible foreign exchange. Relying on the Larger Bench decision in M/s Arcelor Mittal Stainless (India) Pvt. Ltd., the Tribunal applied the principle that for intangible services the crucial factor is the location of the service recipient and whether the benefit accrues outside India, not the place of physical performance or the location of the end-customers in India. The Circular dated 24.02.2009 was treated as clarifying that the phrase "used outside India" means the benefit accrues to a recipient situated outside India and that services provided from India to a foreign entity to enable it to book orders for customers in India can qualify as export of services. Applying those precedents and reasoning, the Tribunal concluded that the department's view - that the services were consumed in India because they facilitated supplies to Indian customers - was not tenable where there is no contractual privity with Indian customers and the overseas entity is the service recipient. [Paras 6, 10]Impugned order confirming demand under service tax set aside; appeal allowed with consequential relief.Final Conclusion: The appeal was allowed and the order of the Commissioner confirming demand, interest and penalties was set aside on the ground that the services provided by the appellant to overseas group entities constituted export of services under the Export of Service Rules.

2023 (12) TMI 374 - CESTAT CHANDIGARH Central Excise

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Issues: (i) whether inserting the 100 gm toothpaste and toothbrush into the combi pack amounted to manufacture; (ii) whether exemption under Notification No. 50/2003-C.E. could be denied because the declaration was filed late; and (iii) whether the extended period of limitation was invokable.

Issue (i): Whether inserting the 100 gm toothpaste and toothbrush into the combi pack amounted to manufacture.

Analysis: The activity was confined to completing the combi pack already initiated by the principal manufacturer. Chapter Note 6 to Chapter 34 treats labelling, re-labelling, repacking from bulk to retail packs, or any other treatment rendering the product marketable as manufacture. The combi pack, however, was already marketable when received, and the job-work only completed the packing arrangement. The manner in which the product is marketed does not itself make the goods marketable.

Conclusion: The activity did not amount to manufacture, and the demand could not be sustained on that basis.

Issue (ii): Whether exemption under Notification No. 50/2003-C.E. could be denied because the declaration was filed late.

Analysis: The principal manufacturer had already informed the Department of the outsourced process and furnished the relevant particulars before the declaration was formally filed by the appellant. The notification was intended to confer area-based exemption, and the filing of declaration was treated as a procedural requirement where the substantive conditions were otherwise satisfied. The delay in filing the declaration did not defeat the exemption, particularly where the unit was located in the eligible area and the necessary details were already on record.

Conclusion: The appellants were entitled to the exemption under Notification No. 50/2003-C.E. despite the delayed declaration.

Issue (iii): Whether the extended period of limitation was invokable.

Analysis: The Department had been informed about the nature of the activity from 2007 onwards through the principal manufacturer's letters. The appellants acted under a bona fide belief that the activity was not manufacture but taxable as service. There was no positive act of suppression with intent to evade duty.

Conclusion: The extended period of limitation was not invokable.

Final Conclusion: The process undertaken by the appellants was not manufacture, the exemption claim could not be rejected for delayed declaration, and the demand was unsustainable on limitation as well.

Ratio Decidendi: Where the goods are already marketable and the job-worker merely completes packing supplied by the principal manufacturer, the activity does not amount to manufacture; a declaration requirement under an area-based exemption may be treated as procedural when the substantive eligibility conditions are otherwise satisfied and the Department already has the material particulars.

Manufacture and area-based exemption: completing a combi pack was not manufacture, and delayed declaration did not defeat relief.
Inserting toothpaste and a toothbrush into a combi pack did not amount to manufacture because the goods were already marketable and the job-worker only completed the packing arrangement initiated by the principal manufacturer; the demand therefore failed on that ground. Delay in filing the declaration did not justify denial of area-based exemption under Notification No. 50/2003-C.E. because the substantive eligibility conditions were met and the Department already had the relevant particulars on record; the exemption was available. Extended limitation was also unavailable because the Department knew of the activity from earlier correspondence and there was no suppression with intent to evade duty; the demand was time-barred.

Manufacture - labelling or re-labelling of containers - repacking from bulk packs to retail packs - adoption of any other treatment to render the product marketable to the consumer - exemption under Notification No.50/2003 - job-worker and principal manufacturer relationship - service tax versus central excise duty - declaration requirement procedural or mandatory - extended period of limitation - marketability versus manner of marketingManufacture - adoption of any other treatment to render the product marketable to the consumer - marketability versus manner of marketing - The activity of inserting a 100 gm toothpaste and a toothbrush into a promo pack by the appellants does not amount to manufacture. - HELD THAT: - The Tribunal examined Note 6 to Chapter 34 which treats labelling, repacking from bulk to retail and any other treatment to render the product marketable as manufacture. The appellants received combi packs and inserts from the principal manufacturer, M/s CPIL, and merely placed the supplied 100 gm tube and toothbrush into blank slots and closed the pack. The goods were marketable before reaching the appellants and M/s CPIL had provided packaging with MRP and declarations. The adjudicating authority failed to distinguish between marketability and the manner of marketing; the appellants only completed packing initiated by the principal manufacturer. On these facts the process undertaken by the appellants does not create a new marketable product and therefore does not constitute manufacture. [Paras 13, 14, 15, 16]Process of inserting supplied items into the promo pack is not manufacture and does not attract central excise as manufacture.Exemption under Notification No.50/2003 - declaration requirement procedural or mandatory - job-worker and principal manufacturer relationship - Appellants are eligible for exemption under Notification No.50/2003 despite delayed filing of the declaration. - HELD THAT: - The Tribunal noted that M/s CPIL had intimated the Department by letters dated 11.10.2007, 01.11.2007 and 28.01.2008 providing particulars required by the notification prior to availment of benefit. Given that the appellants performed the activity in the specified area and the principal manufacturer had furnished requisite particulars, the Tribunal treated those intimation/letters as satisfying the substantial condition of the notification and characterised the formal declaration as procedural. Reliance on precedents (including Gillette and Vasantham) and authorities supporting liberal construction of area-based beneficial exemptions led to the conclusion that the appellants' belated declaration (filed 20.02.2009) did not disentitle them from the exemption; alternatively the principal manufacturer's declaration was effective for the job-worker. [Paras 18, 19, 20, 21, 22]Appellants entitled to benefit of Notification No.50/2003 either on the strength of CPIL's intimation or their belated declaration; the declaration requirement is procedural in the facts of the case.Service tax versus central excise duty - job-worker and principal manufacturer relationship - The appellants' activity was correctly treated as a job-work/service activity for which they had paid service tax; it did not, on the facts, attract central excise duty as manufacture by the appellants. - HELD THAT: - The record establishes that appellants registered and paid service tax under 'Business Auxiliary Service' believing that they were job-workers performing packing for CPIL. The Tribunal found that, since the process did not amount to manufacture (see analysis on manufacture), the appellants were discharging service tax for the job undertaken. The principal manufacturer remained responsible for clearing finished combi packs. The Tribunal noted absence of findings by the adjudicating authority to show that the appellants' activity converted into manufacture attracting excise. [Paras 12, 16, 17]Activity attracts service tax treatment for the appellants and does not attract central excise duty as manufacturing activity by them.Extended period of limitation - declaration requirement procedural or mandatory - Extended period of limitation is not invokable against the appellants on the facts of the case. - HELD THAT: - The Tribunal observed that the Department was informed of the appellants' activity by CPIL as early as 2007 and conducted audits without raising objection to payment of service tax; there is no positive act of suppression or mala fide on the part of the appellants, who entertained bona fide belief that their activity was chargeable to service tax. In these circumstances, invocation of extended period was not justified. [Paras 23]Extended period cannot be invoked; demands based on extended period are not sustainable.Final Conclusion: Impugned order confirmed to the extent of findings set aside: the appellants' process did not amount to manufacture; they are eligible for exemption under Notification No.50/2003 either through CPIL's intimation or their belated declaration; their activity was properly treated as service (service tax paid) and extended period is not invokable. Appeal allowed with consequential reliefs as per law.

2023 (12) TMI 373 - CESTAT CHANDIGARH Central Excise

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Case Remanded for Further Review Due to Insufficient Findings and Natural Justice Violation on CENVAT Credit Reversal.
The Tribunal remanded the case to the Commissioner for further examination due to insufficient findings on whether the appellants reversed the duty paid on zinc ash or availed credit on all items and input services. The Tribunal noted a violation of natural justice as certain reports were not considered. The appellants are required to submit necessary documents to clarify their reversal of CENVAT credit. The Adjudicating Authority must obtain a comprehensive report to determine eligibility for the exemption. The appeal was allowed, and the case sent back for reconsideration.

Remand for fresh consideration - violation of principles of natural justice - reversal of CENVAT credit - eligibility for exemption under Notification No.12/2009 - adjudicatory examination of conflicting field reportsViolation of principles of natural justice - adjudicatory examination of conflicting field reports - Whether the adjudicating authority wrongly ignored the report dated 16.03.2010 without recording reasons, thereby violating principles of natural justice and requiring remand. - HELD THAT: - The Tribunal found that the Commissioner obtained two conflicting reports from the jurisdictional field formation but did not give any reasons for not considering the report dated 16.03.2010 which indicated reversal of CENVAT credit by the appellants. The absence of any finding explaining the rejection or non-consideration of that report amounted to a breach of natural justice because the appellants were deprived of consideration of material favourable to them and no reasons were recorded to displace that material. In these circumstances the Tribunal concluded that the adjudicatory process was defective and the matter must be remitted for fresh consideration with directions to examine the earlier report, supply it to the appellants if necessary, and afford them an opportunity to respond. [Paras 4]Findings of the Commissioner set aside and matter remanded for fresh consideration to remedy the natural justice violation.Reversal of CENVAT credit - eligibility for exemption under Notification No.12/2009 - Whether the appellants have reversed the CENVAT credit (including credit on imported zinc skimming and common input services) necessary to claim the exemption and whether the adjudicating authority must verify and record the same. - HELD THAT: - The Tribunal observed that the record did not clearly show whether the appellants had reversed CENVAT credit attributable to inputs and common input services (including imported zinc skimming) which is a condition for claiming the exemption contained in Notification No.12/2009. The appellants had made inconsistent contentions and the Commissioner relied on a later field report without resolving discrepancies. The Tribunal directed that on remand the Adjudicating Authority must require the appellants to submit documentary proof of which credits were reversed, and may, if necessary, obtain a categorical and comprehensive report from the field formation to determine entitlement to the exemption. The Tribunal noted that identical factual situations had been remanded in earlier proceedings, reinforcing the need for fresh inquiry. [Paras 2, 3, 4]Issue not finally adjudicated on merits; remanded to the Adjudicating Authority to verify reversal of CENVAT credit and determine eligibility for the exemption.Final Conclusion: Impugned order set aside; appeal allowed by way of remand to the Adjudicating Authority with directions to consider the report dated 16.03.2010, record reasons if any report is not relied upon, require the appellants to produce documents showing which CENVAT credits were reversed (including on imported zinc skimming and common input services), obtain further field reports if necessary, and thereafter decide entitlement to exemption under Notification No.12/2009.

2023 (12) TMI 372 - CESTAT CHENNAI Central Excise

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Issues: (i) Whether the Commissioner (Appeals) was incorrect in rejecting the appeal on limitation without issuing notice to the appellant, and whether such rejection violated principles of natural justice; (ii) Whether the appeals were time-barred.

Issue (i): Whether the Commissioner (Appeals) was incorrect in rejecting the appeal on limitation without issuing notice to the appellant, and whether such rejection violated principles of natural justice.

Analysis: The question of limitation was treated as a mixed question of fact and law requiring examination of the service of the show cause notices and orders. The appellant was aware of the delay issue and the facts concerning receipt of documents were within its special knowledge. The Tribunal applied the principle that the party asserting a fact must prove it and held that prejudice from lack of a separate limitation notice was not established. The service record and surrounding circumstances were sufficient to decide the limitation issue.

Conclusion: The Commissioner (Appeals) was correct in rejecting the appeal without a separate notice on limitation, and there was no violation of natural justice.

Issue (ii): Whether the appeals were time-barred.

Analysis: The record showed dispatch details for the notices and orders, and in some instances postal acknowledgements were available. Section 37C of the Central Excise Act, 1944 and Section 27 of the General Clauses Act, 1897 supported deemed service by properly addressed and posted documents. The appellant failed to establish non-receipt or to show that an alternate address had been supplied. The Tribunal also drew adverse inference from the available service evidence and the long delay in filing the appeals.

Conclusion: The appeals were time-barred.

Final Conclusion: The challenge to the limitation-based dismissal failed on both legal and factual grounds, and the dismissal of the appeals was sustained.

Ratio Decidendi: Where dispatch and service evidence show proper service of adjudication documents, a limitation objection may be decided as a mixed question of fact and law, and the burden lies on the appellant to prove non-service and justify the delay.

Deemed service and limitation: dispatch records, notional receipt, and burden on appellant justified dismissal without separate notice.
Properly addressed and posted adjudication documents attracted deemed service under Section 37C of the Central Excise Act, 1944 and Section 27 of the General Clauses Act, 1897, so the limitation objection could be decided on the available service record as a mixed question of fact and law. The appellant had special knowledge of receipt issues but failed to prove non-service or supply of an alternate address, and the existing dispatch evidence, acknowledgements, and surrounding circumstances justified an adverse inference. Rejection of the appeal on limitation without a separate notice did not violate natural justice because no prejudice was shown, and the appeals were held time-barred.

Time-bar - service by registered post with acknowledgement - natural justice - notice before rejection on limitation - burden of proof as to service - section 37C of the Central Excise Act, 1944 - deemed service under the General Clauses ActNatural justice - notice before rejection on limitation - burden of proof as to service - Whether the Commissioner (Appeals) erred in rejecting the appeals without issuing a notice on the question of time-bar in breach of principles of natural justice. - HELD THAT: - The Tribunal held that proceedings before the Commissioner (Appeals) are of simplified procedure but refusal to issue a separate pre-hearing notice on limitation does not necessarily breach natural justice. The question of limitation involves mixed questions of fact and law and requires ascertainment of facts on evidence adduced by the appellant; a prima facie conclusion of time-bar could not be reached without hearing factual pleadings. Further, the appellants were aware of the statutory delay between the orders and filing of appeals and thus bore the primary responsibility to prove any justification for delay; Section 106 of the Evidence Act places the burden of proving facts especially within the knowledge of a party on that party. Prejudice from non-issuance of a separate notice was not established on the facts; therefore non-issuance of a notice did not vitiate the impugned order. [Paras 5]No breach of natural justice; rejecting the appeals without a separate notice on limitation was not impermissible on the facts.Time-bar - service by registered post with acknowledgement - section 37C of the Central Excise Act, 1944 - deemed service under the General Clauses Act - burden of proof as to service - Whether the appeals were barred by limitation because the impugned show-cause notices and orders had been served in the manner required by law. - HELD THAT: - The Tribunal examined the dispatch and postal acknowledgement evidence supplied by the department and the statutory scheme for service under section 37C, read with the deeming provision in the General Clauses Act regarding service by registered post. The departmental letter dated 27/09/2021 demonstrated dispatch details and, for some documents, postal acknowledgement cards; several show-cause notices and an earlier order were issued and received well before the appellant's claimed closure of the factory. The Commissioner (Appeals) found the appellant's contention of non-receipt inconsistent with these facts and concluded the appellant had not discharged the burden to prove non-service or an alternate address. Given the available direct and circumstantial evidence of dispatch and receipt, an adverse inference was drawn against the appellant and the delay in filing appeals (ranging years after the orders) could not be condoned. The Tribunal, endorsing this fact-and-law conclusion and distinguishing the authority relied upon by the appellant, found the pleas on limitation unsustainable. [Paras 6, 7]Appeals were time-barred; departmental evidence of service justified dismissal of the appeals on limitation.Final Conclusion: The impugned order is upheld; the appeals are dismissed on the ground that they were time-barred and there was no violation of natural justice in the manner relied upon by the appellant.

2023 (12) TMI 1298 - ITAT KOLKATA Income Tax

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Trust wins appeal after Section 80G registration rejected for incorrect clause mention deemed rectifiable mistake
ITAT Kolkata allowed the appeal regarding Section 80G registration rejection. The trust's application was rejected due to incorrect clause mention, which the tribunal held was a rectifiable mistake rather than illegality. The CIT(E) should have allowed correction instead of requiring fresh application withdrawal. The tribunal condoned the delay, directing that the revised application be treated as timely filed. Following precedent in West Bengal Welfare Society case, the tribunal held that provisional registration holders can apply for final registration regardless of prior activity commencement. Matter remanded to CIT(E) for merit-based decision.

Condonation of delay - treatment of withdrawn application as continuance or rectification - final registration under Clause (iii) of the first proviso to Section 80G(5) - eligibility to apply for final registration after grant of provisional approval irrespective of prior commencement of activities - remand for fresh adjudication on meritsCondonation of delay - treatment of withdrawn application as continuance or rectification - Whether the delay in filing the fresh application dated 13/02/2023 (after withdrawal of an earlier inadvertently defective application) should be condoned and the fresh application treated as filed within the prescribed time. - HELD THAT: - The Tribunal found that the assessee had originally filed an application for final approval but, due to an inadvertent reference to the wrong clause, was advised to withdraw and file a corrected application. All material facts were on record at the time of the first filing and the mistake was rectifiable. Instead of rejecting on a technicality, the CIT(Exemption) ought to have permitted rectification or treated the application as falling under the correct clause. Considering these circumstances, the Tribunal held that the delay caused by withdrawal and refiling was excusable and that the time consumed in filing the revised application should be ignored. The Tribunal therefore directed that the application be treated as filed within the prescribed time and condoned the delay. [Paras 5]Delay in filing the fresh application is condoned; the fresh application shall be treated as filed within the prescribed time and the time taken to file the revised application will not be taken into account.Final registration under Clause (iii) of the first proviso to Section 80G(5) - eligibility to apply for final registration after grant of provisional approval irrespective of prior commencement of activities - remand for fresh adjudication on merits - Whether the assessee's application for final registration under Clause (iii) of the first proviso to Section 80G(5) is time-barred because the assessee had commenced activities prior to grant of provisional approval, and the consequential direction to restore the matter for fresh decision on merits. - HELD THAT: - Relying on the coordinate-bench reasoning reproduced in the order, the Tribunal construed the proviso to Section 80G(5) such that final registration can only be sought after grant of provisional approval. The proviso must be read to mean that, following grant of provisional registration, an assessee who has not commenced activities may apply within six months of commencement, or within six months prior to expiry of provisional approval, whichever is earlier. Grant of provisional approval therefore enables an application for final registration even if activities had commenced earlier. Applying that construction, the Tribunal concluded that the CIT(Exemption)'s view that the application was time-barred was incorrect. In consequence, the Tribunal set aside that aspect and restored the matter to the file of the CIT(Exemption) with a direction to decide the application on merits notwithstanding any delay. [Paras 6]The application is not time-barred merely because activities commenced earlier; matter is restored to the CIT(Exemption) for fresh adjudication on merits irrespective of the delay.Final Conclusion: The Tribunal allowed the appeal for statistical purposes: delay in refiling is condoned, the fresh application is to be treated as timely, and the matter is remanded to the CIT(Exemption) for fresh decision on merits regarding final registration under Clause (iii) of the first proviso to Section 80G(5).

2023 (12) TMI 1291 - ITAT RAJKOT Income Tax

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Tribunal Overturns Tax Commissioner's Order, Citing Jurisdiction Overreach and Misclassification in Income Assessment.
The Tribunal ruled in favor of the assessee, quashing the Principal Commissioner of Income Tax's (PCIT) order. It held that the PCIT exceeded jurisdiction by deeming the assessment under Section 143(3) erroneous without verifying the income classification. The limited scrutiny was specifically for verifying the depreciation claim and did not allow inquiry into whether the income should be assessed under "business income" or "other sources." Consequently, the PCIT's revisional order was deemed unsustainable, and the appeal by the assessee was allowed.

Revisionary power under Section 263 of the Income Tax Act, 1961 - limited scrutiny - scope of assessment under section 143(3) - conversion of limited scrutiny into regular scrutiny - distinction between income charged as "business and profession" and as "other sources" - jurisdictional limits on reassessment/revisionRevisionary power under Section 263 of the Income Tax Act, 1961 - limited scrutiny - conversion of limited scrutiny into regular scrutiny - distinction between income charged as "business and profession" and as "other sources" - Whether the Principal Commissioner of Income Tax could invoke his revisional jurisdiction under Section 263 to hold the assessment framed under section 143(3) as erroneous and prejudicial to revenue for not treating lease rent as income from "other sources" when the assessment was selected for limited scrutiny. - HELD THAT: - The Tribunal found on the material on record that the assessment was selected for limited scrutiny under the section 143(2) notice specifically to examine the admissibility of the depreciation claim. Limited scrutiny confined the AO's enquiry to that issue and did not permit the AO to probe or re-characterise the nature of the lease rent income as being assessable under "other sources" rather than as "business and profession" unless the limited scrutiny was formally converted into a regular scrutiny. The PCIT, by invoking Section 263 to fault the AO for not verifying the head under which lease rent was charged, thereby attempted to review matters that were outside the scope of the scrutiny actually conducted. The revisional power under Section 263 cannot be exercised to examine items that were not the subject matter of the limited scrutiny selection; the PCIT exceeded jurisdiction in doing so. The Revenue's representative did not controvert that limited scrutiny was not converted into regular scrutiny, nor did he controvert that in an earlier assessment year the income was accepted as business income. For these reasons the revisional order was held unsustainable and was quashed. [Paras 7]Revisional order under Section 263 quashed; appeal allowed.Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the PCIT exceeded jurisdiction by invoking Section 263 to re-open matters outside the scope of a limited scrutiny selection; the revisional order was quashed.

2023 (12) TMI 1290 - CESTAT CHANDIGARH Central Excise

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Finality of exemption refund bars recovery as erroneous refund under section 11A, with interest and penalty also failing.
A refund or credit granted under an area-based exemption notification and allowed to attain finality cannot be reopened as an erroneous refund for recovery under section 11A unless the statutory grounds for such recovery are met. The Tribunal relied on jurisdictional High Court authority to hold that the demand based on alleged erroneous self-credit could not survive, and the related interest and penalty under section 11AC also failed.

Self-credit of Education Cess and Secondary and Higher Education Cess - area-based exemption under Notification No.56/2002 - recovery of erroneous refund under Section 11A of the Central Excise Act - extended period of limitation under proviso to sub section (1) of Section 11A - finality of refund order - fraud, collusion, wilful misstatement or suppression of factsSelf-credit of Education Cess and Secondary and Higher Education Cess - recovery of erroneous refund under Section 11A of the Central Excise Act - finality of refund order - fraud, collusion, wilful misstatement or suppression of facts - extended period of limitation under proviso to sub section (1) of Section 11A - Whether self-credit of Education Cess and Secondary and Higher Education Cess taken by the assessee during March 2012 to September 2012 can be treated as an 'erroneous refund' and recovered under Section 11A of the Central Excise Act. - HELD THAT: - The Tribunal examined the impugned order which characterised the appellants' self-credit of cesses as an "erroneous" credit and confirmed demand under Section 11A with interest and penalty under Section 11AC. Reliance was placed on the jurisdictional High Court's ruling in CEA 06/2018 which held that a refund sanctioned under Notification No.56/2002 and having attained finality cannot be termed an "erroneous refund" recoverable under Section 11A unless the refund was erroneous by reason of fraud, collusion, wilful misstatement or suppression of facts or contravention of the Act and rules with intent to evade duty. The Tribunal noted that the appellants were availing area based exemption under Notification No.56/2002 and had taken self credit, and that subsequently the jurisdictional Assistant Commissioner had addressed the admissible refund (quantified/rejected by specified OIOs). In view of the High Court's legal principle limiting the scope of Section 11A to cases involving fraud, collusion or similar culpable conduct and the finality of refund orders under the Notification, the impugned order treating the self credit as an "erroneous refund" recoverable under Section 11A could not be sustained. [Paras 5, 7]Impugned order set aside; appeal allowed.Final Conclusion: The Tribunal allowed the appeal, set aside the order treating the appellants' self credit of education cesses as an "erroneous" refund recoverable under Section 11A, and upheld the principle that a refund order under Notification No.56/2002 which has attained finality is not to be treated as an erroneous refund recoverable under Section 11A except where fraud, collusion, wilful misstatement or suppression of facts is shown.

2023 (12) TMI 1515 - ITAT MUMBAI Income Tax

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Lease premium classification as capital expenditure sustains disallowance of proportionate revenue deduction for leasehold land.
Proportionate lease premium paid for leasehold land was treated as capital expenditure and therefore disallowed as a revenue deduction, consistently with the position adopted in earlier assessment years. Declarations under Section 158A, accepted by the Assessing Officer, required the eventual High Court decision on the identical question of law to be applied to the relevant assessment years. The disallowance remained confirmed, subject to consequential application of that decision.

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