Calcutta High Court Taxation Law Digest 2023

1. Tribunal Being Fact-Finding Body, Unless Perversity Shown, High Court Can't Interfere: Calcutta High Court

Case Title: PCIT Versus Britannia Industries Ltd.

Citation: 2023 LiveLaw (Cal) 3

The Calcutta High Court has held that unless and until the order passed by the Tribunal suffers from any perversity or ignores any vital fact in an appeal under Section 260A of the Income Tax Act, the Court is not expected to interfere with the order.

The division bench of Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharya has observed that the issues related to an erroneous and prejudicial order and the lack of proper inquiry on which the show-cause notice under Section 263 was issued are fully factual. The Tribunal, which is the last fact-finding authority, has elaborately considered the factual position and granted relief to the assessee.

Case Title: Commissioner of Income Tax (International Taxation & Transfer Pricing) versus M/s. The Timken Company

Citation: 2023 LiveLaw (Cal) 8

The Calcutta High Court has reiterated that consideration for advisory services cannot be treated as Fees for Included Services under Article 12(4)(b) of the India-US Double Taxation Avoidance Agreement (DTAA). The Court thus upheld the ITAT's order setting aside the additions made to the foreign assessee Company's income for the compensation received by it for rendering advisory services to its Indian subsidiary.

The bench of Justices T.S. Sivagnanam and Hiranmay Bhattacharyya also took note of the Calcutta High Court's decision in M/s Timken India Limited v. Deputy Commissioner of Income Tax (2016), where it was ruled that the advance ruling sought by the Indian subsidiary, regarding its tax obligations while remitting payment to its foreign holding company under an agreement, was not binding on the foreign company.

Case Title: M/s. Down Town Temptation Private Limited and Another v. Additional General Secretary, Finance Department, Government of W.B. and Others.

Citation: 2023 LiveLaw (Cal) 12

A single judge bench of Calcutta High Court held that the state must act within legislative intendment of a statute in the matter of grant of excise licences to persons and entities under the provisions of Bengal Excise Act, 1909 and the 2003 Rules.

Justice Moushumi Bhattacharya while hearing a writ petition observed:

“The State cannot add to the legislative object or curtail the right of an entity where the Act and the Rules do not provide the basis for such curtailment. The State is also under an obligation to preserve the equality and fairness mandate in the Constitution and is hence precluded from applying different standards to different entities on the pretext of ensuring a crime-free environment in the establishments where liquor is sold and consumed.”

Case Title: B.K. Consortium Engineers Pvt Ltd. v. Indian Institute of Management (Calcutta) AP/237/2021

Citation: 2023 LiveLaw (Cal) 14

The Calcutta High Court has held that the period of limitation would begin to run from the date offinal payment for the claims that are rejected under it.

The Court held that once a claim that was existing at the time of preparation of the final bill is rejected in the final payment, the limitation period commences which cannot be stopped by issuing unilateral letters by a party.

The bench of Justice Shekhar B. Saraf held that at the stage of appointment of arbitrator the Courts do not perform a meagre cosmetic exercise and simply refer every dispute to arbitration but are expected to apply judicial minds to determine the aspects of arbitrability of the dispute.

Case Title: M/s Harsh Polyfabric Versus UOI

Citation: 2023 LiveLaw (Cal) 18

The Calcutta High Court has held that a writ court cannot answer the classification of products under the Customs Tariff Act as it requires technical analysis.

The single bench of Justice Md. Nizamuddin has observed that a writ court in the exercise of its constitutional writ jurisdiction under Article 226 of the Constitution of India should not act as an expert to scrutinize the composition and mode of manufacture of a product and do the job of classifying a product as to under which classification list of the Customs Tariff Act the product falls since it requires scientific and technical analysis to be conducted by experts in scientific and technical fields.

Case Title: Ashok and Sons (HUF) Vs. Joint Commissioner

Case Citation: 2023 LiveLaw (Cal) 37

The Calcutta High Court has held that the GST department was lawfully permitted to impose a penalty under Section 129 as well as the SGST as the goods were found to be detained in the territory of the state.

The bench of Justice Bibek Chaudhuri has observed that Section 129 of the Central Goods and Services Tax Act, 2017, empowers the statutory authority to detain the vehicle and seize the goods. The goods shall be released only upon payment of a penalty equal to 200% of the tax payable on the goods.

Case Title: Mega Flex Plastics Ltd. & Anr. Versus The Union of India

Case Citation: 2023 LiveLaw (Cal) 41

The Calcutta High Court, while upholding the ruling of the Orissa Appellate Authority, held that the classification of polypropylene bags cannot be changed just to avail a lower tariff rate.

Justice Md. Nizamuddin has observed that the polypropylene bags manufactured by the petitioner are made from plastic granules and cannot be treated as textile articles.

The assessee/petitioner is a manufacturer of polypropylene leno bags by weaving polypropylene strips (tapes). Polypropylene is a variety of plastic. The major raw material in the manufacture of PP Leno bags is plastic granules.

Case Title: PCIT Versus Durgapur Projects Ltd.

Citation: 2023 LiveLaw (Cal) 53

The Calcutta High Court has held that in cases of compulsory acquisition of a capital asset (land or building, or both), the provisions of Section 50C of the Income Tax Act cannot be applied as the question of payment of stamp duty for effecting the transfer does not arise.

The division bench of Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the property was acquired under the provisions of the National Highways Act 1956. The property vests by operation of the said statute, and there is no requirement for payment of stamp duty in such vesting of property. As such, there was no necessity for an assessment of the valuation of the property by the stamp valuation authority in the case at hand.

Case Title: Asian Switchgear Private Limited Versus State Tax Officer

Citation: 2023 LiveLaw (Cal) 57

The Calcutta High Court upheld the penalty and stated that there was no requirement in law to verify the reason for transporting goods in a vehicle without a proper e-way bill.

The bench of Justice Amrita Sinha has observed that the vehicle in which the goods stood transferred for being transported allegedly to the pre-recorded destination, did not have an e-way bill. The provision of Section 129 will be attracted.

Case Title: Orbit Projects Private Limited Vs Income Tax Officer

Citation: 2023 LiveLaw (Cal) 59

The Calcutta High Court has imposed a fine of Rs. 20,000 on the assessing officer for issuing the income tax assessment notice to the non-existent company.

"It also appears from the past record that in respect of another assessee, this court has imposed the personal cost of Rs. 10,000 upon the very same Assessing Officer, Bitan Roy, by order dated August 2, 2023," the bench of Justice Md. Nizamuddin observed.

Case Title: Sandip Kumar Singhal Versus Deputy Commissioner, Revenue, Bureau of Investigation North Bengal Headquarter & Ors.

Citation: 2023 LiveLaw (Cal) 62

The Calcutta High Court has directed the refund of the penalty and held that the department was vacillating between Sections 67 and 68 of the GST Act, depending on whether the goods are in transit or in the godown.

The bench of Justice Amrita Sinha has observed that initially the authority invoked the provision of Section 67 but thereafter shifted its stand and relied upon Section 68 read with Section 129 for the imposition of penalty. The authority was confused as to which provision to invoke for the imposition of a penalty. At one point in time, the goods were held to be stored in the godown without the proper documents and without a valid e-way bill, and immediately after, the goods were held to be in transit. A single consignment of goods cannot be held to be stored in the godown and in transit at the same time.

Case Title: S. K. Finserve Private Limited Vs Assistant Commissioner of Income Tax

Citation: 2023 LiveLaw (Cal) 74

The Calcutta High Court has quashed the income tax notice issued in the name of a non-existing company, in spite of the department having notice and knowledge of non-existence of the company.

The single bench of Justice Md. Nizamuddin observed that the notice has been issued in the name of the company, which has already been amalgamated on December 12, 2016 with effect from April 1, 2015, and that the department has been intimated about this amalgamation, which is a matter of record, and that such a notice in the name of a non-existing company is not tenable in the eye of the law.

Case Title: Indu Goenka Vs. Assessment Unit, Income Tax Department & Ors.

Citation: 2023 LiveLaw (Cal) 81

The Calcutta High Court had quashed the Assessment Order and held that the assessing officer has reduced the procedure to an empty formality, which has to be deprecated.

The division bench of Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the first 21 pages of the assessment order are a verbatim extract of the show cause notice. On pages nos.22 and 23 in two paragraphs the reply given by the assessee has been summarised. From pages nos.23 to 36 of the assessment order it is once again an extract of the show cause and ultimately on pages nos.37 and 38 the total income has been determined and the assessment is completed.

Citation: 2023 LiveLaw (Cal) 329

Case: M/s. Kayal Construction Vs. The State of West Bengal & Ors

The Calcutta High Court has recently dismissed writ petitions by M/s Kayal Construction, which had been awarded tenders floated by the state government, on the condition that the petitioner would bear expenses for all the taxes/cess payable.

Petitioners contended that the rates for the taxes/cess payable had been specified in the terms of contract, and that due to the subsequent implementation of the Goods & Services Tax (“GST”) in 2017 they were compelled to bear additional expenses. Through these petitions, they claimed a refund of the additional expenses made by them.

In dismissing the petitioners' case, a single-bench of Justice Sabyasachi Bhattacharya held:

Introduction of the GST regime has not taken away the certainty of price. Even if the petitioner argues that the taxes have been enhanced, the same was factored into the original clauses of the contract. Mere replacement of Sales Tax, Excise Duty, VAT and other similar taxes by the GST regime does not change such parameters in any manner. In fact, even Sales Tax, VAT, Excise Duty and other levies specifically enumerated by way of example in the contract can very well be enhanced from time to time by the revenue authorities.

15. Classification Of Private & Public Companies In Excise Rules For Exemption From Payment Of License Fee Is Ultra Vires The Constitution: Calcutta High Court

Citation: 2023 LiveLaw (Cal) 342

Case: New Kenilworth Hotel Private Limited and another v State of West Bengal and others

The Calcutta High Court has recently directed the West Bengal State Excise Department to refund a sum of approximately Rs 92 lakhs to the Kenilworth Hotel Private Limited, which were levied as excise fees for 'change in management' upon the death or retirement of a member.

In striking off the 'unconstitutional and discriminatory provisions' under the Excise Rules, which allowed for the levy of such fees from only private companies and not public companies, a single bench of Justice Moushumi Bhattacharya held:

The intention in the present case is to ensure the level-playing field guaranteed under Article 14 of the Constitution in terms of treating a Private Limited Company on an equal plane; specifically when the basis for creating a distinction for the required purpose is found to be absent. The sum of Rs. 64.50 lakhs which was paid and the further sum of Rs. 5.5 lakhs, which was paid subsequent to filing of the present writ petition, aggregates to Rs. 70 lakhs.