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Tax Cases Weekly Round-Up: 7 August To 13 August, 2022

Mariya Paliwala
15 Aug 2022 6:43 AM GMT
Tax Cases Weekly Round-Up: 7 August To 13 August, 2022
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Delhi High Court Definition Of Relative Under Senior Citizens Act Can't Be Treated At Par With Income Tax Act, 1961: Delhi High Court Case Title: Miss Indira Uppal Versus UOI Citation: 2022 LiveLaw (Del) 764 The Delhi High Court has held that the petitioner's real intent was to ensure that gift tax is not levied on donee. The petition does not promote the maintenance and...

Delhi High Court

Definition Of Relative Under Senior Citizens Act Can't Be Treated At Par With Income Tax Act, 1961: Delhi High Court

Case Title: Miss Indira Uppal Versus UOI

Citation: 2022 LiveLaw (Del) 764

The Delhi High Court has held that the petitioner's real intent was to ensure that gift tax is not levied on donee. The petition does not promote the maintenance and welfare of senior citizens.

The division bench of Justice Manmohan and Justice Manmeet Preetam Singh Arora has observed that as per the object of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 and the Income Tax Act, 1961, the expression "relative" is not used in a similar context. The term "relative" being wholly context-specific, there is no reason to assume that the criteria used in defining it in one context will provide even a useful starting point in another context.

Income Tax Dept. Can't Withhold Refunds In Mechanical And Routine Manner: Delhi High Court

Case Title: Trueblue India LLP Vs Deputy/Assistant Commissioner of Income Tax Circle

The Delhi High Court has held that an order under Section 241A of the Income Tax Act cannot be passed in a mechanical and routine manner. The refunds cannot be withheld just because the notice under Section 143(2) has been issued and the department wants to verify the claim for deduction under Section 10AA of the Income Tax Act.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that the order under Section 241A was generic and no attempt was made by the department to substantiate how the grant of the refund is likely to adversely affect the revenue.

Amendment To Section 36(1)(va) Of Income Tax Act Is Prospective In Nature: Delhi High Court

Case Title: Pr. Commissioner of Income Tax -7 versus TV Today Network Ltd.

The Delhi High Court has allowed the assessee- TV Today Network Ltd.'s claims for deduction of expenses in nature of 'consumption incentive' offered to the advertisers for booking more advertisement space.

The Bench, consisting of Justices Manmohan and Manmeet Pritam Singh Arora, reiterated that the 'due date', in case of delay by the assessee in depositing the employees' contribution to Provident Fund under Section 36(1) (va) of the Income Tax Act, 1961, is to be reckoned as the date for filing the return under Section 139 (1) and not the due date as prescribed under the relevant Labour statute. The Court added that the amendment to Section 36(1)(va), vide the Finance Act, 2021, is 'for removal of doubts' and hence, it cannot be presumed to be retrospective since it alters the law as it earlier stood.

Sum Directed To Be Refunded To Assessee Is A debt In The Hands Of Dept.: Delhi High Court Allows Interest On Refund U/S 244A

Case Title: PCIT Versus Punjab & Sind Bank

Citation: 2022 LiveLaw (Del) 776

The Delhi High Court held that the Punjab & Sind Bank is entitled to a refund of money deposited by it upon re-computation by the department and interest is liable to be paid under Section 244A(1)(b) of the Income Tax Act.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that a sum has been found refundable to the assessee as a consequence of a reduction in the taxable income. The sum directed to be refunded to the assessee is a debt in the hands of the department, and for the department to term "payment of this debt" as "interest" is fallacious. In fact, it is on the payment of this debt that the assessee is demanding that the department be liable to pay interest for the period that the department retained the money.

Bombay High Court

Exporter Not Required To Hold IEC Number To Avail Benefits Under'Service Exports From India' Scheme: Bombay High Court

Case Title: Smarte Solutions Pvt. Ltd. versus Union of India and Ors.

The Bombay High Court has ruled that the requirement of holding an Import Export Code (IEC) number at the time of rendering services in order to avail the benefits under the Services Export from India Scheme (SEIS), as imposed by the Foreign Trade Policy 2015-2020 (FTP), is against the intent and purpose of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act).

The Division Bench of Justices S.V. Gangapurwala and Vinay Joshi held that the said condition cannot be termed as mandatory in nature for availing the benefits under the SEIS since it is against the principal legislation, i.e., the FTDR Act.

Assessee Eligible For SVLDRS Declaration Since The Demand Of Duty Quantified On Or Before June 30, 2019: Bombay High Court

Case Title: B. Chopda Construction Private Limited V/s. Union of India and Ors.

The Bombay High Court has allowed the declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 on the grounds that although there was an audit, the amount of duty quantified has also been quantified before 30th June 2019.

The division bench of Justice K.R. Shriram and Justice Milind N. Jadhav has observed that the rejection of the petitioner's declaration on the ground that the final audit report was issued after June 30, 2019 was incorrect.

Madras High Court

Service Of Preparation Of Scalp, Fitment And Maintenance Of Wig-Indivisible Contact: Madras High Court

Case Title: White Cliffs Hair Studio Private Ltd. Versus Additional Commissioner

Citation: 2022 LiveLaw (Mad) 338

The Madras High Court has held that the primary activity is the manufacture of the wig, for which the central excise duty is remitted. The fitment of the wig, including the preparation of the scalp and optional maintenance of the wig itself, is incidental to the manufacturing and supply of the wig.

The single bench of Justice Anitha Sumanth has relied on the decision of the Supreme Court in the case of Imagic Creative Pvt. Ltd. Vs. Commissioner of Commercial Taxes. The Supreme Court has specifically noted the difference between a composite contract and an indivisible one. A composite contract is one that would involve components of sale and service, whereas an indivisible contract, also involving components of sale and service, is one where the distinction between the two is very fine and difficult to determine.

Kerala High Court

Assessee Has Statutory Right To File An Appeal Even After Voluntary Payment Of GST/Penalty: Kerala High Court

Case Title: Hindustan Steel and Cement Versus Assistant State Tax Officer

The Kerala High Court has held that assessees have a statutory right to file an appeal even after the voluntary payment of GST or penalty.

The single bench of Justice Gopinath has observed that the culmination of proceedings in respect of a person who seeks to make payment of tax and penalty under Section 129(1)(a) does not result in the generation of a summary of an order under Form DRC-07 and cannot result in the right of the person to file an appeal under Section 107 being deprived.

Allahabad High Court

Non Refund Of Licence Fee For Model Shop, Unused Due To Covid Prohibitions: Allahabad High Court Asks Dept To Explain

Case Title: Nidhi Agarhari Versus State Of U.P. And 3 Others

The Allahabad High Court has held that the department has practically refused to comply with the directions of the Court and has shown misconduct and a flagrant breach of the principles of judicial discipline and propriety.

The division bench of Justice Surya Prakash Kesarwani and Justice Jayant Banerji has observed that the conduct of the department may require the imposition of an exemplary cost and the initiation of appropriate proceedings. However, one opportunity is afforded to the department to file the personal affidavit within one week and show cause as to why an exemplary cost may not be imposed upon them for showing misconduct.

Income Tax Officers Are Frequently Violating Principles Of Natural Justice: Allahabad High Court

Case Title: Nabco Products Private Limited versus Union of India and Ors.

The Allahabad High Court has criticized the Income Tax Authorities for frequently violating the principles of natural justice. The Court ruled that the harassment caused to the assessees and the breach of principles of natural justice by the Income Tax Officers has become uncontrolled due to the absence of an effective system of accountability of the erring officers.

The Bench of Justices Surya Prakash Kesarwani and Jayant Banerji directed the Central Board of Direct Taxes (CBDT) to take steps to remove the shortcomings in the computerisation system controlled by it and to develop a system of accountability among the erring officers and employees of the revenue department.

Gujarat High Court

Gujarat High Court Directs CBIC To Refund IGST On Ocean Freight

Case Title: M/s Louis Dreyfus Company India Private Limited Versus Union Of India

The Gujarat High Court has directed the Central Board of Indirect Taxes and Customs (CBIC) to refund the Integrated Goods and Service Tax (IGST) on ocean freight within six weeks along with the statutory rate of interest.

The division bench of Justice N.V. Anjaria and Justice Bhargav D. Karia has relied on the decision of the Supreme Court in the case of Mohit Minerals Pvt. Ltd. vs. Union of India in which GST on ocean freight was struck down.

Rajasthan High Court

Collection Of Relevant Or Tangible Material Required For Opening Section 148A Proceedings: Rajasthan High Court

Case Title: Abdul Majeed Versus Income Tax Officer

The Rajasthan High Court has held that the authority is required to reach satisfaction that income chargeable to tax has escaped assessment but in cases where three years have elapsed from the end of the relevant assessment year, the order under Section 148A for issuance of notice could be passed if there were no statutory impediment as contained in Section 149(1)(b) of the Income Tax Act.

The division bench of Justice Manindra Mohan Shrivastav and Justice Shubha Mehta has observed that the department failed to place before the Court any material to suggest that the income exceeding Rs. 50,00,000 chargeable to tax has escaped assessment, which would warrant issuance of an order under Section 148A(d) followed by issuance of a notice under Section 148 of the Income Tax Act.

Jharkhand High Court

Summary Of SCN In Form GST DRC-01 Cannot Substitute Requirement Of Proper SCN: Jharkhand High Court

Case Title: Roushan Kumar Chouhan Versus Commissioner of State Tax

The Jharkhand High Court has held that the summary of show cause notice in Form GST DRC-01 cannot substitute the requirement of a proper show cause notice under section 73(1) of the CGST Act, 2017.

The division bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan has observed that the levy of a penalty of 100% of tax dues reflected in the Summary of the Order contained in Form GST DRC-07 is in the teeth of the provisions of Section 73(9) of the CGST Act. As per Section 73(9), the Proper Officer while passing an adjudication order can levy a penalty up to 10% of the tax dues only.

ITAT

Loss Arising From Investment In Equity Shares, Non-Convertible Debentures, Zero Coupon Redeemable Preference Shares Covered Under "Business Loss": ITAT

Case Title: Seshasayee Paper and Boards Ltd. Versus The JCIT

The Income Tax Appellate Tribunal (ITAT) has held that the claim of loss arising from investment in equity shares, non-convertible debentures and zero coupon redeemable preference shares is not a capital loss. The loss is eligible for deduction in the computation of business income as a business loss.

The two-member bench of Mahavir Singh (Vice-President) and Manoj Kumar Aggarwal (Accountant Member) has observed that for the sale of shares and the amount advanced by the assessee to various industries towards working capital, the real character of the transaction was those akin to loans and not equity investment.

ITAT Deletes Addition Made On Streedhan Based On Social Status

Case Title: Gyanendra Singh Shekhawat Versus The ACIT

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the addition made on "Streedhan" based on social status.

The two-member bench of Sandeep Gosain (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) has observed that the AO failed to verify that the assessee was living with his parents and belonged to a Rajput family where the fact of having jewellery as Streedhan by the assessee's mother and wife cannot be ignored. Keeping in view of high status, family tradition, deduction on account of purity and the deduction towards Streedhan, the excess jewellery found was nominal.

ITAT Deletes Addition On Excess Gold Belonging To Assessee's Mother

Case Title: Muppavarapu Kavitha, Vijayawada Versus Asst. Commissioner of Income Tax

The Visakhapatnam bench of theIncome Tax Appellate Tribunal (ITAT)has deleted the addition of excess gold belonging to the mother of the assessee, who is staying with the assessee as the only daughter, and considered it to belong to the family members of the assessee.

The two-member bench of Duvvuru R.L. Reddy (Judicial Member) and S.Balakrishnan (Accountant Member) has held that in the case of a person who is not assessed for wealth tax, gold jewellery and ornaments to the extent of 500 gramsper a married lady, 250 grams per an unmarried lady, and 100 grams per male member of the family should not be seized.

ITAT Allows Deduction On Penalty Levied By SEBI For Shortfall In Margin Money

Case Title: DJS Stock and Shares Ltd. Versus DCIT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT)has allowed the deduction of the penalty levied by the Securities and Exchange Board of India (SEBI) for a shortfall in margin money.

The bench of B.R. Baskaran (Accountant Member) has observed that the penalty levied by SEBI for shortfall in margin money cannot be considered as a penalty for violation of any law falling within the ambit of section 37(1) of the Income Tax Act.

Interest Payment On Late Payment Of TDS Not Eligible For Deduction Under Business Expenditure: ITAT

Case Title: Universal Energies Ltd. Versus DCIT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that interest payment on late payment of TDS is not an eligible business expenditure for deduction and it is not compensatory in nature.

The two-member bench of A. D. Jain (Vice President) and Dr. B. R. R. Kumar (Accountant Member) has observed that the payment of interest on late deposit of TDS levied u/s 201(1A) is neither an expenditure only and exclusively incurred for the purpose of the business nor a deduction under section 37(1) of the Income Tax Act.

CESTAT

SFPs Classifiable As Parts Of Telecom Equipment: CESTAT Allows Customs Duty Exemption To Reliance Jio Infocomm

Case Title: Commissioner of Customs-Mumbai (Air Cargo Import) Versus Reliance Jio Infocomm Ltd.

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted the customs duty exemption to Reliance Jio Infocomm and held that the Customs Excise and Service Tax Appellate Tribunal (CESTAT) is classifiable as part of telecom equipment.

The two-member bench of S.K. Mohanty (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the SFP is part of the I/O card module of the Ethernet switch apparatus, which can function only when connected with an Ethernet switch providing an interface between two domains, i.e., electrical and optical. As such, they are considered parts and are correctly classifiable under CTH 8517 7090 of the Customs Tariff.

Activity Of Mediator Cannot Fall Under Business Consultant Services,No Service Tax Under RCM Applicable: CESTAT

Case Title: M/s Paradeep Phosphates Ltd. Versus Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the activity of a mediator cannot fall under business consultant services.

The two-member bench of P. K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the appellants/assessee are not liable to pay any service tax on the reverse mechanism on the services rendered by the mediator.

Retracted Statement Cannot Simply Be Brushed Aside : CESTAT

Case Title: Jeen Bhavani International Versus Commissioner of Customs-Nhava Sheva-III

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the contents of the retracted statement cannot simply be brushed aside to conclude that the assessee/appellant has indulged in the activity of undervaluation of goods.

The two-member bench of S.K. Mohanty (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and having also made a few payments as per the statement, it cannot lead to self-assessment or self-ascertainment.

No Customs Duty On Spare Parts Supplied For Warship: CESTAT

Case Title: Larsen Tourbro Limited Versus C.C.-AHMEDABAD

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the spare parts supplied for warships are exempt from customs duty.

The two-member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the interceptor boat supplied by the appellant was a warship. The intercepted boats used by the Coast Guard Ministry of Defence Government of India are only for the security of the coastal border of the country and the boats are not used for any other purpose. The interceptor boats are equipped with arms and ammunition. Therefore, it is absolutely without any doubt that the interceptor boat is a warship.

AAR

Manpower and Labour Supply Services Attract 18% GST: AAR

Applicant's Name: M/s. Sri Bhavani Developers

The Telangana Authority of Advance Ruling (AAR) has ruled that the manpower supply or labour supply services by the manpower supply agency fall under SAC 98519 and are taxable at the rate of 18%. The tax has to be paid by the manpower supply agency.

The two-member bench of B. Raghu Kiran and S.V. Kasi Visweswara Rao has observed that GST will not be attracted for labour engaged on a daily basis or for employees, etc., if the service is rendered in the course of employment.

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