TMI Tax Updates - e-Newsletter
February 16, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
GST
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The activity of supply, design, installation, commissioning and testing of reverse osmosis plant and O &M work by the applicant is a Works Contract of Composite Supply. This composite supply is a mixed of goods and services and predominant supply is supply of services.
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Polypropylene Leno Bags whether laminated with BOPP or not would be classified as plastic bags under HS code 3923 and would attract 18% GST.
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The transfer of goods / capital equipments, exclusively used for Mid-Day Meal (MDM) program and Anganwadi meals program sponsored by Government, between different kitchens of applicant which are 'distinct persons' as per GST law is covered under the scope of 'supply'
Income Tax
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Charitable activity - The explanation that the property was inadvertently purchased in the name of individuals by an innocuous mistake, can only be taken with a pinch of salt.
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TDS u/s 192 - exemption towards leave encashment - There is no reason for them to think that its estimate of employee’s income under the head “Salaries” was incorrect as the belief it entertained was that its employees were to be regarded as employees of State Government and that its employees are entitled to exemption of the entire sum of unutilized leave encashment u/s.10(10AA)(i).
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The loss arising on account of cancellation of forward contract would also be a business loss and therefore the assessee is entitled to claim the said loss in his books of accounts.
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Benefit of section 11 & 12 - conversion of loans to the corpus donations - these amounts having been accepted as genuine loans in the earlier years and having been accepted as corpus donations in the year under appeal, benefit of section 11(1)(d) cannot be denied.
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TDS u/s 195 - professional services - Fees for Technical Services (FTS) - the definition of “Fees for Technical Services” has to be given a restrictive meaning similar to that of the expression “Fees for Technical Services” appearing in the DTAA between India and U.K.
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Reopening of assessment - addition u/s 68 - ex-parte order passed by the CIT(A) - non service of notice to the address of advocate - matter restored before CIT(A)
Customs
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Exchange Rates Notification No.11/2019-Custom(NT) dated 15.02.2019
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Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver
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All documents in English language in the appeal proceeding before the Appellate Tribunal - Article 348 of the Constitution of India.
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Refund of Customs Duty - mistake in the bills of entry committed by CHA - though officers can not rectify the mistake in the BE, they can consider the refund u/s 27.
DGFT
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Discontinuation of physical copy of Advance /EPCG Authorisations issued from 01.03.2019 onwards, for EDI ports
FEMA
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Investment by Foreign Portfolio Investors (FPI) in Debt
Indian Laws
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INDIA’S FOREIGN TRADE: January 2019
Service Tax
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Vires of Section 67 in Chapter V of the Finance Act, 1994 (Act 32 of 1994) - Valuation - inclusion of expenses and salaries paid to the Security Guards and the statutory payments like contributions to ESI and EPF in the 'gross amount' - Writ Appeals are dismissed.
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Cenvat Credit - input services - advertising service was obtained through agents - The finding of the Commissioner Appeals for holding that impugned services are Business Auxiliary Service which are not taxable hence not eligible for taking audit is held to be an erroneous - credit allowed.
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Nature of activity - It is hard to hold that sweeping of roads or cleaning of drains cannot be considered as cleaning services as claimed by the appellant
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Port services or not - It is a percentage of that, which the IGTPL pays to CPT, in lieu of surrendering their rights to carry out and provide port services in the subject terminals. There is no port service by the CPT to IGTPL.
Central Excise
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Recovery of amount collected by appellant from their customers - It cannot be accepted that delay in taking up the adjudication proceedings denovo would vitiate the demand u/s 11D - Demand confirmed.
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CENVAT Credit - various input services - Restaurant Services - short term accommodation services - since these services are related to business, credit allowed.
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CENVAT Credit - input services - the construction service relating to modernisation, renovation and repair of the factory continued to be within the meaning of ‘input service’ and accordingly, the service tax paid on such service is eligible to credit.
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Claim of exemption for Parts of Electric Motors cleared to various zones of the Railways for use as spare parts - the benefit of N/N. 67/86 will not be available in asmuchas the benefit can be extended only to parts which are used in the factory of production as component parts.
Articles
Notifications
Customs-
11/2019 - dated
15-2-2019
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Cus (NT)
Exchange Rates Notification No.11/2019-Custom(NT) dated 15.02.2019
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10/2019 - dated
15-2-2019
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Cus (NT)
Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver
GST - States-
G.O.MS.No. 83 - dated
31-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms No.33 Revenue (CTII) dated 24.01.2018
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G.O.MS.No. 82 - dated
31-1-2019
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Andhra Pradesh SGST
Waiver of late fee on late filing of GSTR 3B from July, 2017 onwards
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G.O.MS.No. 81 - dated
31-1-2019
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Andhra Pradesh SGST
Amendment Notification No. GO Ms No.83 Revenue (CT-II) dated 16.02.2018
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G.O.MS.No. 80 - dated
31-1-2019
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Andhra Pradesh SGST
Andhra Pradesh Goods and Services Tax (Twenty-Eighth Amendment) Rules, 2018
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G.O.MS.No. 79 - dated
31-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms No.476 Revenue (CT-II) Department Dt.20.09.2018
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G.O.MS.No. 78 - dated
31-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms.No.497 Rev.(CTII) Dept. dated 28-09-2018
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G.O.MS.No. 77 - dated
31-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms.No.475 Rev.(CT-II) Dept. Dt.19-09-2018
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G.O.MS.No. 27 - dated
18-1-2019
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Andhra Pradesh SGST
Amendment Notification No. G.O.Ms No.259, Revenue (CT-II) Dept. Dated 29.06.2017
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G.O.MS.No. 26 - dated
18-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms No.256, Revenue (CT-II) Department, dated 29.06.2017
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G.O.MS.No. 25 - dated
18-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms No.588 Revenue (CT-II) Department, dated 12-12-2017
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G.O.MS.No. 24 - dated
18-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms.No.259, Revenue (CT-II) Department, dated 29.06.2017
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G.O.MS.No. 23 - dated
18-1-2019
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Andhra Pradesh SGST
Exemption on supply of gold by nominated agency for export of jewellery
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G.O.MS.No. 22 - dated
18-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. 582, Revenue (CT-II) Department dated 12-12-2017
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G.O.MS.No. 21 - dated
18-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. in G.O.Ms 258, Revenue (CT-II) Dept., dated 29.06.2017
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G.O.MS.No. 20 - dated
18-1-2019
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms.No.497 Rev.(CT-II) Dept. dated 28-09-2018
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G.O.MS.No. 622 - dated
7-12-2018
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Andhra Pradesh SGST
Amendment in Notification No. G.O.Ms.No.476 Rev.(CT-II) Dept. Dt.20-09-2018
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G.O.MS.No. 620 - dated
7-12-2018
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Andhra Pradesh SGST
Prescribing time for filing GSTR-10 by cancelled dealers
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24 /GST-2 - dated
11-2-2019
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Haryana SGST
Amendment in Notification No. 112/ST-2 dated 18.10.2017 under section 96 of HGST Act, 2017
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23/GST-2 - dated
11-2-2019
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Haryana SGST
Haryana Goods and Services Tax (Second Removal of Difficulties) Order, 2019
Insolvency and Bankruptcy-
F. No. 30/3/2016-Insolvency - G.S.R. 114(E) - dated
8-2-2019
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IBC
Insolvency and Bankruptcy Board of India (Medical Facility to Chairperson and Whole-time Members) Scheme, 2019
Circulars / Instructions / Orders
News
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INDIA’S FOREIGN TRADE: January 2019
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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India signs Legal Agreements with the World Bank for First Programmatic Water Supply and Sewerage Service Delivery Reform Development Policy Loan for Shimla, Himachal Pradesh
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India - U.S. Commercial dialogue and CEO forum held in New Delhi
Case Laws:
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GST
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2019 (2) TMI 834
Classification of supply - Supply of goods or supply of services - activity of supply, design, installation, commissioning and testing of reverse osmosis plant - rate of GST - composite supply of works contract - CBEC Circular 58/1/2002-CX dated 15/1/2002 - Held that:- The supply of Reverse Osmosis plant along with its installation, commissioning and operation and maintenance is a single supply. According to definition of works contract under GST regime, the supply of goods and services are done by the supplier simultaneously which is for immovable property. Hence in works contract supply of goods and services together is compulsory - Thus, based on above facts and concept such contract shall be a single supply and cannot be treated as distinct supplies. Since all the conditions of composite supply are satisfied, it is a composite supply. The activity proposed to be undertaken is a composite supply of works contract, the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time. Thus, the activity of supply, design, installation, commissioning and testing of reverse osmosis plant and O &M work by the applicant is a Works Contract of Composite Supply. This composite supply is a mixed of goods and services and predominant supply is supply of services. Since this supply is undertaken for a Government Department viz. PHED which is a Government of Rajasthan Department, hence the rate of tax applicable on given service (as it is a works contract service) shall fall under Entry 3(iii) with HSN Code 99544 and it should be IGST @ 12% (CGST @ 6%, SGST @6%).
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2019 (2) TMI 833
Classification of goods - PP Leno Bags - whether classified under Chapter 63 or under Chapter 39 of Tariff Act? - challenge to advance ruling decision. Held that:- It is pertinent to mention that the Note 2(p) of the Chapter 39 of GST Tariff (plastics and Articles thereof) does not cover the goods of Section XI (Textiles Textile Products). In the instant case, the impugned product, by no way of stretch of imagination, could be termed as Textiles or Textile Products. Therefore, unless the impugned goods have been manufactured from the material which qualifies as Textiles of the Chapter 63, it would not be proper to consider the same to be classifiable under Chapter 63053300 - the goods i.e., woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated, made from the plastics or articles thereof are excluded from the Section XI of Tariff Act. If the impugned goods were made of textile material of polypropylene, then only the same would be classifiable under Chapter 63 and the aforesaid fact is absent in the instant case. Therefore, the impugned goods cannot be classified under Chapter 63 and shall be classifiable under Chapter 39. Also, the Respondent cannot be allowed to change the classification which they had pursued for last 9 years in view of the fact that they are now intended to avail lower tariff rate of GST, which is devoid of merit. CBIC, vide para 7 of the Circular 80/54/2018-GST dated 31-08-2018 has clarified that Polypropylene Leno Bags whether laminated with BOPP or not would be classified as plastic bags under HS code 3923 and would attract 18% GST. Thus, Polypropylene Leno Bags shall be classifiable under Heading No. 392390 of the Tariff Act.
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2019 (2) TMI 832
Classification of supply - supply of goods or services or both - Mid-Day Meal Programme - Anganwadi meals programme - Charitable Trusts - scope of supply - Preparation and serving of food to children of government schools under Mid-Day meal Program of Government and serving of food under Government sponsored Anganwadi meals - Transfer of goods/capital equipments exclusively used for mid-day meal program and anganwadi meal programme - sale of scrap which was generated during Mid-Day Meal program. Preparation and serving of food to children of government schools under Mid-Day meal Program of Government and serving of food under Government sponsored Anganwadi meals - Held that:- The activities undertaken by the applicant are not covered under the definition of charitable activities - The activities undertaken by the applicant under Mid-Day Meal Programme and Anganwadi meals programme is a supply in accordance with the Section 7 of CGST Act, 2017. However, MDM programme is taxed Nil by the virtue of Notification No. 12/2017 dated 28.06.2017 mentioned at serial number 66 heading number 9962 - The Preparation and serving of food under Government sponsored Anganwadi meals programme which is undertaken by the applicant who receives reimbursement from the government of Rajasthan @ ₹ 5.40 per pregnant women/ lactating nursing mothers/ adolescent girls and ₹ 5.25 per child per day. (as per the MOU dated 22.12.2010 between the TAPF and Director cum Deputy Secretary, Women Child Development Department, Government of Rajasthan). Therefore, the above said activity is against consideration and hence it is covered under the scope of 'supply' as per section 7 of CGST/RGST Act, 2017. Transfer of goods/capital equipments exclusively used for mid-day meal program and anganwadi meal programme - Held that:- As the activity of 'transfer' is covered under definition of supply under section 7 of CGST/RGST Act, 2017. Thus, the transfer of goods / capital equipments, exclusively used for Mid-Day Meal (MDM) program and Anganwadi meals program sponsored by Government, between different kitchens of applicant which are 'distinct persons' as per GST law is covered under the scope of 'supply' as per section 7 of CGST/RGST Act, 2017. Sale of scrap - Held that:- The sale of scrap is an activity of sale for a consideration as mentioned in definition of 'supply' as per section 7 of CGST/RGST Act, 2017.
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2019 (2) TMI 831
Request for withdrawal of Advance Ruling application - Applicant has not submitted requisite fee for advance ruling - Classification of goods - quilt (other than cotton quilt). Held that:- Since the applicant withdrew the application, therefore no ruling is given.
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2019 (2) TMI 829
Calling for records - applicability of time limitation under Section 25 of the KVAT Act, 2003 - vires of clauses (d) and (e) of Section 174 of the Kerala Goods and Services Tax Act 2017 - existence of powers under erstwhile Entry 54 post 15.09.2017 - the decision in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT] relied upon.
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2019 (2) TMI 828
Detention of goods - for each invoices, separate e-way bill has not been generated - Held that:- It is to be noted that, it is not a case where e-way bill does not mention all the invoices. There may be practical difficulty for the Department in tracking the invoices, when multiple number of invoices mentioned in the e-way bill generated. The goods and vehicle shall be released to the petitioner on executing a bond - petition disposed off.
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2019 (2) TMI 827
Provisional attachment of Bank Accounts - section 83 of the Gujarat Goods and Services Tax Act, 2017 - Held that:- A perusal of the record of the case reveals that the petitioner is not a fly by night operator and has paid duty and tax to the tune of more than rupees one hundred crore in the last year. Under the circumstances, the respondent shall explain the expediency and the rationale behind ordering attachment of all the bank accounts of the petitioner and virtually bringing its business to a grinding halt. Issue Notice returnable on 23rd January, 2019.
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Income Tax
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2019 (2) TMI 826
Grant stay beyond 365 days - as submitted by respondent that the extension given by the ITAT has expired and, therefore, this matter has become infructuous. In view of the aforesaid submission made by the learned counsel, this Special Leave Petition is dismissed as having become infructuous, leaving the question of law open.
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2019 (2) TMI 825
Interest earned on sums lent to the contractor constituted a separate stream - “other sources of income” OR “business income” - Held that:- SLP dismissed.
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2019 (2) TMI 824
Power and jurisdiction to withdraw the approval granted u/s 10(23C)(vi) - validity of show cause notice that it was not signed by the competent authority - Held that:- Since the Income Tax Appellate Tribunal on the facts of the case also came to the conclusion that there was no ground for the withdrawal of the approval u/s 10(23)(vi) of the Income Tax Act, 1961. We see no reason to entertain the Special Leave Petition under Article 136 of the Constitution. Special Leave Petition dismissed.
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2019 (2) TMI 823
Sales suppression detected on survey - Whether could be taken as taxable income when there was no suppression found on purchases? - Held that:- No reason to interfere in the matter. The special leave petitions are, accordingly, dismissed.
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2019 (2) TMI 822
TDS u/s 192 - disallowing the reimbursement of the salary and related expenses under Section 40 (a) (ia) - Held that:- Payment was towards reimbursement of the salary expenses paid towards deputed employees and personnel for doing the work of JV as per the contractual agreement in the Joint Venture Agreement. The employees working for the joint venture were actually not the employees of assessee compnany. The employees and personnel deputed by the company giving such workers on loan to the assessee company continued to be the employer, the assessee merely reimbursed the expenditure in terms of salary structure of the employees to the employer company. There was, therefore, no question of deducting tax at source while reimbursing such costs - Decided in favour of assessee
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2019 (2) TMI 821
Reassessment proceedings - Addition of bogus purchases - ITAT setting aside a reassessment order - Held that:- The assessee did not rely merely upon the deposit of the amount but rather movement of the goods, which is borne out by the VAT authorities’ stamp on transit challan i.e. chungi, at the border. Other evidence such as the stock register, factory certifying the receipt of the goods as and when they were moved into the premises; clearly recorded in the statutory central excise registers RG-1 etc., were sufficient proof to show that the purchases were not bogus. Moreover, the CIT(A) re-apprised all the evidence, unlike the AO, who was largely influenced by the so-called credit entry providers. This Court is of the opinion that having regard to the detailed analysis of the CIT(A), with which the ITAT’s finding concurred, no question of law arises
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2019 (2) TMI 820
AMP expenditure to be regarded as an international transaction and subjected to the rigors of Chapter X of the Act - TPA - Held that:- The grievance of the appellant is that this issue though raised was not decided by the Tribunal in the impugned order of the Tribunal. This even though it had remanded the issue of determining the ALP of the transactions to the AO/ TPO. Mr. Thakkar points out that on remand, the Assessing Officer passed an order even examining the issue of transaction being an international transaction or not. This order of the AO (on remand) is now in the appeal before the Tribunal. Thus, the issue raised herein viz. whether the transaction is international transaction or not for the purpose of determining AMP expenses is before the Tribunal and is now fixed for hearing on 10.3.2019. Tribunal is now considering issue whether the AMP expenses incurred by the respondent in an international transaction or not. This by virtue of the order of the AO / Transfer Prising Officer in the second round. Therefore, it would be appropriate that the Tribunal decides the issue in the second round without in any manner being fettered by the impugned order. We dispose of this appeal with direction to the Tribunal to decide the issue which is a subject matter of dispute in second round of appeal along with this appeal. It is made clear that other issues raised in the first round of appeal (except those remanded) are not to be re-adjudicated by the Tribunal.
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2019 (2) TMI 819
Disallowance u/s 14A r.w.r. 8D - Held that:- Rule 8D of the Rules cannot be invoked where the suo moto disallowance made by the respondent assessee is not found to be satisfactory by the Assessing Officer having regard to the accounts of the assessee. In the absence of recording the aforesaid fact of nonsatisfaction in terms of Section 14A(2) of the Act, invocation of Rule 8D is not permissible.
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2019 (2) TMI 818
Addition u/s 68 - Addition being amount of share application money received by the assessee during the year - Held that:- We note that the finding of the Tribunal is essentially a finding of fact which has been rendered after making reference in detail to the documents on record which establish the identity, capacity and genuineness of STSPL to make the investment. In this case, the respondent has gone beyond the requirement of the law as existing in the subject assessment year 2008-09 by having explained the source in terms of Section 68. Besides, the reliance by the CIT (A) on the decision of McDowell (1985 (4) TMI 64 - SUPREME COURT) is not applicable to the facts of the present case. The Apex Court in decisions in the cases of Union of India & Anr. Vs. Azadi Bachao Andolan & Anr (2003 (10) TMI 5 - SUPREME COURT) and Vodafone International Holdings B.V. Vs. Union of INdia & Anr. (2012 (1) TMI 52 - SUPREME COURT OF INDIA) also held that principles laid down in the case of McDowell (supra) is not applicable across the board to discard an act which is valid in law upon some hypothetical assessment of the real motive of the assessee . Thus, imputing a plan on the part of the respondent assessee and STSPL to evade tax without any supporting evidence in the face of the detailed facts recorded by the impugned order of the Tribunal, is not justified. - Decided against the revenue.
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2019 (2) TMI 817
TPA - ICRA Online Ltd. from the list of comparables as being high profit margin company when Indian Transfer Pricing Regulation does not provide exclusion of same but arriving at the arithmetic mean of profit margin of the comparable companies - Held that:- The impugned order of the Tribunal also does not dispute the position in law as reiterated in Barclays Technology Centre India Pvt. Ltd. (2018 (8) TMI 574 - BOMBAY HIGH COURT) that mere high profit margin would not warrant an exclusion of a company from the final list of comparable. However, in the present case, the Tribunal has found on examination of facts that, the profit margin in the subject assessment year declared by ICRA Online Ltd. was abnormally high, taking into account the manner in which it conducted its business. This to conclude that the profit margin declared by ICRA Online Ltd. does not reflect a normal business trend and, therefore, was excluded from the list of comparable. This view of the Tribunal is essentially a finding of fact. The same is not shown to be perverse. Include ACE Softwares Exports Ltd. as comparable when its profitability cannot be worked out in the absence of segmental data - Held that:- The activities rendered by the respondent assessee in the application engineering segment which involves the use of CAD/CAM services, which are similar to ones performed by ACE Softwares Exports Ltd. These services namely; CAD/CAM services would fall under the broad category of IT Enabled Services and, therefore, would be broadly functionally comparable. We note that the Tribunal rendered a finding of fact that ACE Software Exports Ltd., was not a persistent loss making unit. It further found that the loss suffered in the subject assessment year is on account of normal business and not on account of factors beyond the normal business environment. We find that the Tribunal has rendered a finding of fact which has not been shown to be perverse in any manner. In the above view, the question as proposed does not give rise to any substantial question of law. The appeal is admitted on the substantial question of law at Sr. No.(i) above - Whether on the facts and circumstances of the case and in law, the Tribunal was correct in considering internal TNMM as most appropriate method when the relevant data for comparison is not available for transfer pricing analysis?
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2019 (2) TMI 816
Eligibility for deduction u/s 80IB - appellant did not fulfill the condition of employing ten or more number of persons in its manufacturing process - Held that:- What is important to note is that to be entitled to the benefit, the assessee should show that it is an industrial undertaking manufacturing or producing articles or things and the industrial undertaking should employ 10 or more workers in a manufacturing process carried on with the aid of power or employee 20 or more workers when manufacturing process is carried on without the aid of power. The assessee would state that they carried on their operations with the aid of power. If that is so, the onus is on the assessee to show that they not only manufacture or produce articles or things in their industrial undertaking but also employed 10 or more workers in the manufacturing process carried on. This aspect of the matter has not been established by the assessee by producing sufficient proof to show that the Chowkidar is a person who has also employed in the manufacturing process. There should have been a clinching materials produced to show that the assessee is an industrial undertaking which does manufacturing or produces articles or things. The authorities below as well as the Tribunal on facts found that the assessee does not fulfil the conditions. We cannot examine the factual finding as if we are the third Appellate Authority. Thus, for the above reasons, we hold that the assessee has not made out a case for interfering with the order passed by the Tribunal and there is no substantial question of law arising for consideration. - Decided against assessee
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2019 (2) TMI 815
Charitable activity - exemption claimed under Section 10(22) denied - whether the assessee can exclude the income that is derived from the educational institutions claiming the benefit under Section 10(22) and show the income derived otherwise than from the educational institutions alone for the purpose of taxation? - Held that:- The majority view was that the “non-profit” motive has to be tested against Indian activities and since the assessee therein was carrying on only commercial activity of selling printed books and materials, within India, it cannot claim the exemption under section 10(22). This aspect has application in the instant case because here too the profit motive was discernible from the purchase of land in favour of the personnel in management. In Queen's Educational Society [2015 (3) TMI 619 - SUPREME COURT] it was reiterated that if the activities are primarily for educating persons, the fact that institutions make surplus profit incidentally from such activities does not make the institution a profit making institution. What is relevant is that the purpose of education should not get submerged under the profit making motive. The ultimate test is whether on an overall view of the issue in the assessment year concerned, the object is to make profit as opposed to imparting education. Applying the ratio to the case in hand, even though it is true that the assessee is running an educational institution, it cannot be said that the society exists solely for educational purposes and not for profit. The Tribunal rightly concluded that the acquisition of property in the name of individuals is indicative of the fact that the profits of the institution was being used for self aggrandizement; which is the explicit motive. The explanation that the property was inadvertently purchased in the name of individuals by an innocuous mistake, can only be taken with a pinch of salt. We also find that the assessee is a society, formed with many objectives, one of which is imparting education. Hence, the assessee cannot be found to be an institution established and existing solely for educational purposes. The assessee also has declared income from cultural activities, which again reinforces the finding that the object is not solely education. - Decided against the assessee
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2019 (2) TMI 814
Deduction u/s. 35DDA - payment made towards Voluntary Retirement Scheme - whether payment made to the employee under Employees Voluntary Retirement Scheme and cannot be held as a contribution to the Superannuation Fund of the employees? - Held that:- We find that the assessee had submitted before the AO and CIT(A) that it had paid the sum to its employees on their opting to avail the Voluntary Retirement Scheme and that it was not a contribution to the approved Superannuation Fund as observed by the AO. The assessee had claimed the sum as a deduction u/s. 35DDA and was allowed during the assessment u/s. 143(3) of the Act. Thus, it is clear that the payment is not towards the Superannuation Fund as held by the AO. In fact Section 2(6) of the Income Tax Act defines the – “approved superannuation fund" as a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with the rules contained in Part B of the Fourth Schedule. Fringe Benefits are defined u/s. 115WB of the Act Clause-C of Section-1 thereof refers to - any contribution by the employer to an approved superannuation fund for employees. In the case before us, the payment made towards Voluntary Retirement Scheme is not a contribution to the approved Superannuation Fund for employees as rightly held by the CIT(A). - decided against revenue
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2019 (2) TMI 813
Validity of reopening of assessment - reason of re-opening - Held that:- As relying on BIR BAHADUR SINGH SIJWALI VERSUS INCOME TAX OFFICER WARD 1, HALDWANI [2015 (2) TMI 60 - ITAT DELHI] the reasons recorded by the Assessing Officer, were not sufficient reasons for reopening the assessment proceedings. We, therefore, quash the reassessment proceedings. Reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment.- Decided in favour of assessee. - Decided in favour of assessee
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2019 (2) TMI 812
Penalty under section 271AAA - assessee has not substantiated the manner of earning of income - The assessee’s responses to this is that neither any question in this regard was raised during search nor it is an issue of source of income as the item discovered were only certain jewellery - Held that:- We find that the conduct of the assessee in this case is not contumacious so as to warrant levy of penalty. We further place reliance from the Apex Court decision rendered in the case of Hindustan Steel Ltd. vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] wherein it was held that "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Accordingly, we set aside the orders of the authorities below and delete the levy of penalty. - Decided in favour of assessee.
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2019 (2) TMI 811
Penalty u/s. 271(1)(c) - penalty was levied became subject matter of action u/s.263 - Held that:- We find that the CIT(A) has not decided the appeal on the ground that section 263 order has been passed in this case and the matter is under challenge before the ITAT. We do not find any reason as to why in such circumstances, CIT(A) shall refrain from deciding the merits of the appeal before him which relates to sec.143(3) order passed. It cannot be said that this appeal has lost its relevance if an order u/s. 263 is passed by the CIT on the original assessment order. The appeal against the order u/s. 263 will take its natural course before the appellate forums. It by no means obviates appellate proceedings before the present CIT(A). The assessee is aggrieved by this action of the CIT(A). Accordingly, we remit this issue to the file of the CIT(A). The ld. CIT(A) shall consider the issue afresh and pass a speaking order on this issue, after giving the assessee proper opportunity of being heard. Appeal by the assessee is allowed for statistical purpose.
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2019 (2) TMI 810
Revision u/s 263 - admissibility of deduction u/s 80P on interest income as well as miscellaneous income - Held that:- In the instant case, the AO examined the issue and allowed the deduction u/s 80P after conducting the necessary enquiries. Since the AO has examined the issue and taken a conscious decision that the interest on bank deposits and the miscellaneous income as allowable u/s 80P, hence, there is no case for invoking the jurisdiction u/s 263 by the Ld.Pr.CIT. Thus, there is no error in the assessment order which required to be modified. Accordingly, we are unable to sustain the order of the Ld.Pr.CIT and allow the appeals of the assessee.
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2019 (2) TMI 809
Levy of penalty u/s 271(1)(c) - debatable issue - taxability of income and the year in which the income is to be taxed also in dispute - capital gain - Held that:- The assessee has taken a different view and under the impression that the receipt is not taxable at all and even if it is taxable it is to be taxed in the subsequent assessment years i.e. 2011- 12 and the entire information was placed before the AO. AO did not make out a case of furnishing inaccurate particulars or concealment of income and the CIT(A) relied on the decision of Reliance Petro Chemicals, wherein, Hon’ble Supreme Court held that merely because, the assessee had claimed the expenditure, the claim was acceptable or not acceptable to the revenue that by itself would not in our opinion attract the penalty 271(1)(c) of the Act. As relying on the decision of Hon’ble High Court of Bombay in the case of Metal Rolling Works Limited Vs. CIT [2011 (10) TMI 29 - BOMBAY HIGH COURT], wherein held that once the receipt is disclosed, the assessee cannot be said to have concealed the particulars of income In the instant case, it is undisputed fact that the Hon’ble High Court has admitted the appeal of the assessee with regard to quantum and the entire information is furnished by the assessee in the return of income. In view of the foregoing facts and circumstances of the case , we hold that in the instant case, the assessee has neither concealed the income nor furnished the inaccurate particulars of income, hence, there is no case for penalty u/s 271(1)(c). - Decided in favour of assessee
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2019 (2) TMI 808
Computation of LTCG - addition of sum received by the 4 siblings of the assessee directly from the purchaser and which finds mention in the registered sale deed - Whether the persons shown as siblings have received the payments as laid out in the recitals of the sale deed? - Held that:- In the interest of substantial justice would be well served if the impugned order of assessment dated 30.03.2016 for Assessment Year 2013-14 is set aside and restored back to the file of the AO for the limited purpose of verifying whether the persons shown as siblings, i.e., consenting witnesses are actually the siblings of the assessee and whether they have received the payments as laid out in the recitals of the sale deed dated 18.11.2012. If the assessee’s claim is found to be factually correct, then the AO shall adopt the sale consideration arising/accruing to the share of the assessee at ₹ 8 lakhs and re-compute the assessee’s LTCG on sale of the aforesaid property at Baluvanahalli, Kolar Dist accordingly complete the assessment for Assessment Year 2013-14 in the case on hand. Assessee’s appeal allowed for statistical purposes.
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2019 (2) TMI 807
Claiming deduction u/s 80P(2)(a)(i) - assessee is a co-operative credit society extending credit facility to its members - interest income received by the assessee by depositing the surplus funds collected from the members - Held that:- The assessee while carrying its activities i.e. extending credit facilities to its members, collected the deposits which are not immediately necessary to extend the credit facilities to its members, deposit in the bank and interest received. We find that there is proximity between the business carried by the assessee and the interest received. Respectfully following the decision in the case of Andhra Pradesh State Co-op Bank Ltd. (2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT) and also by following the decision of the coordinate bench of the tribunal in the case of M/s. Kakinada Co-op Building Society Ltd. (2016 (3) TMI 14 - ITAT VISAKHAPATNAM), we hold that the interest income received by the assessee by depositing the surplus funds collected from the members is eligible for deduction under section 80P(2)(a)(i) of the Act. - Decided in favour of assessee.
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2019 (2) TMI 806
Addition u/s 68 - source of such deposits in the banks - receipt of advance from proposed sale of property - genuineness and credit worthiness of transactions - Held that:- The assessee cannot produce the person for confirmation, because he is no more. The assessee was creditor to him. The assessee has been alleging that part of the money received back in cash. In these circumstances, unless there is other evidence with the AO to believe that the assessee has some other source of earning should not be disbelieved. If this was not the source for the assessee to deposit ₹ 16 lakhs, and there should be some other mode which can be expected that the assessee must have earned income from that mode. No such things could be brought on record. Generation of agriculture income could only be estimated by considering the land holding. The man has deposed that he was having sufficient resources and paid advances for purchase of a office space. It is difficult to ascertain the exact affairs of what vendee planned for future of his children for acquiring such office space and from where he has arranged the money. But surrounding circumstances is clear that he remained strict to his stand that a sum of ₹ 10.10 lakhs was given to the assessee. In such circumstances, if any unexplained money possessed by him, ought to be considered in his case and not in the hands of the assessee. It is to be appreciated that the assessee has explained the source and proved genuineness of the transaction. Owner of 15 bigas of agriculture land with one son running pan-shop and another son working in dyeing mill, it can be expected he must have the sources for arranging ₹ 10 lakhs for making investment in real estate. Therefore, we are of the view that the assessee is able to fulfill all the ingredient of section 68 and no addition deserves to be made in her hand. We allow this appeal, and delete both the additions. - Decided in favour of assessee.
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2019 (2) TMI 805
Reopening of assessment - A.O made disallowance of depreciation of trucks and dumpers to 15% as against 30% applicable to vehicles used in hire business - Held that:- We observe that the assessee owns the trucks and dumpers as commercial vehicles and is using them for hiring business since last many years. The claim of depreciation @30% has been allowed in the preceding years, there is no dispute about the assets being put to use and ready to use for hiring business. This activity continued in the subsequent years also. These assets namely trucks and dumpers are part of the 30% block of the assets as on 1.4.2007 and WDV is shown at ₹ 19,48,988/- in the audited statement attached with Form 3CA of the Tax Audit Report. Depreciation is eligible on assets which are ready for use and which are already used immaterial of the fact that such assets were used in the year or not” - thus the assessee is entitled for 30% depreciation on the WDV of trucks and dumpers which are purchased as commercial vehicle and consistently used in the running of hiring. Thus Ground of the assessee stands allowed.
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2019 (2) TMI 804
Accrual of income - Non disclosure of receipts - Assessee could not prove the invoice raised by it during the year was in the nature of advance only - Held that:- Findings of the CIT(A), we are of the view that AO has brought to tax revenue of ₹ 2,89,17,000/- in the current year primarily on the ground that DS of ₹ 10,93,559/- was deducted by M/s Sistema Shyam Teleservices Ltd. on the bill for entire amount invoice by the assessee in November, 2011. It is noted that the assessee had offered the receipts in two financial years and claimed proportionate credits of TDS as per Rules, hence, AO has not rightly made the addition. It is further noted that payments have actually been received in two separate financial years and not in the current year and assessee also booked expenditure with reference to the payments made in the two financial years. CIT(A) has rightly deleted the addition in dispute which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute and reject the ground raised by the Revenue.
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2019 (2) TMI 803
TDS u/s 194H - merchant discount/collection charges paid on account of credit card transactions - Held that:- We agree with the averment of the AR that the issue is squarely covered in favour of the assessee by the judgment in the case of C.I.T. vs. JDS Apparels Pvt. Ltd. [2014 (11) TMI 732 - DELHI HIGH COURT] wherein it has been held that since the bank was making the payment to the assessee after deduction of bank charges, there was no occasion for the assessee to deduct tax at source and further the bank was not acting on behalf of the assessee but on the other hand was acting on behalf of the customers while processing payment through debit cards and credit cards. - Decided against revenue
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2019 (2) TMI 802
Penalty u/s. 271(1)(c) - AO has treated the income declared under capital gain as income from business which has resulted in the variation of amounts between returned and assessed income - Held that:- We find that assessment in this case was completed u/s. 143(3) of the Act on 13.12.2011 wherein the AO treated the income arising out of sale of land declared by the assessee under the head capital gain as income from business. This change of head resulted in the levy of tax at higher rate on the appellant. CIT(A) has rightly observed that the basic premise i.e. the impugned income is to be taxed as business income and not as capital gain does not survive. Therefore, there is no ground for levy of penalty u/s. 271(1)(c) of the Act. Hence, Ld. CIT(A) correctly deleted the penalty of ₹ 6,35,91,247/-, which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. - decided against revenue.
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2019 (2) TMI 801
Addition u/s 68 - notice u/s 131 issued to directors of assessee, was also not answered - Held that:- It is observed that notice u/s 131 issued to directors of assessee, was also not answered. CIT (A) has also not himself verified any documents filed by assessee even though he has coterminous powers with that of AO. No enquiries has been made by CIT(A) regarding whether shares were issued to alleged share applicants as Master details of assessee reproduced in assessment order shows paid up shares to be 1 lakh. In our view CIT(A) failed to find out nature of transaction. Merely on basis of Ration Card, Share Application forms, Voter ID etc. CIT(A) deleted addition. We thus reverse the order of CIT(A) as same has been passed without proper verification of facts as per law. Under such circumstances we deem it fit and proper to set aside this issue back to Ld. AO for fresh adjudication to decide the issue in light of decision in case of CIT vs. NDR Promoters [2019 (1) TMI 1089 - DELHI HIGH COURT]. AO shall conduct fresh enquiries on basis of documents filed by assessee, and also shall take up any independent enquiries as it deem fit and proper as per law. Assessee shall file all requisite details as called for or any other details as needed to prove its claim. - Appeal by Revenue is allowed for statistical purposes.
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2019 (2) TMI 800
Exclusion of Other Income for deduction u/s 80IC - income from sale of scrap - Held that:- Assessee has filed certain details of sale of scrap, discount from suppliers, excess provision written back, credit balance written back and miscellaneous income before us which required verification by the authorities below as to its direct nexus of being derived from undertaking on which deduction u/s 80IC was claimed is required to be proved. There is no quarrel with this proposition of the assessee that sale of scrap is to be considered for deduction u/s 80IC but however we are of the view that the assessee has to show that this income from sale of scrap has direct nexus and was derived from the industrial undertaking on which deduction u/s. 80IC was claimed to get benefit of deduction u/s 80IC. This is a factual matter and requires verification of fact and the facts may differ from year to year. Hence for verification purposes, we are restoring the matter back to the file of the AO wherein the assessee will be required to prove through cogent evidences that these incomes from sale of scrap was derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under Section 80IC. Similar is for the other incomes viz. discount from supplies, excess provision written back, credit balances written back and miscellaneous income, we are of the view that the assessee has to show that these incomes from discount from supplies , excess provision written back, credit balances written back and miscellaneous income have direct nexus and were derived from the industrial undertaking on which deduction u/s. 80IC was claimed by the assessee to get benefit of deduction u/s 80IC. Hence for verification purposes, we are restoring the matter back to the file of the AO wherein the assessee will be required to prove through cogent evidences that these incomes from discount from supplies, excess provision written back, credit balances written back and miscellaneous income were derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under the provisions of Section 80IC of the Act. Ad-hoc disallowance of 2% of total Miscellaneous Expenditure booked by the assessee under the head ‘Miscellaneous Expenses’ in its books of accounts - Held that:- No incriminating material has been brought on record by the AO and by the CIT(A) to prove that these are not business expenses and these were not incurred wholly and exclusively for the purposes of business of the assessee. The authorities below have merely disallowed 2% of these miscellaneous expenses on ad-hoc basis without brining any incriminating material on record merely on the presumption that these expenses may not be verifiable. The contention of the authorities below that TDS might not have been deducted on some of these expenses also lacks merit as the assessee has brought on record tax audit report to prove that there was no default in compliance of TDS. The complete details of these expenses were furnished by the assessee before the authorities below. Disallowance of these miscellaneous expenses on adhoc basis @ 2% of miscellaneous expenses was made by authorities below merely on conjectures and surmises without bring any incriminating material on record and such disallowances on adhoc basis in the manner done by the authorities below keeping in view facts and material on record before the authorities below is not permissible. Thus, the assessee succeeds on this issue and the entire disallowance of miscellaneous expenses as was made by the AO and as confirmed by learned CIT(A) stood deleted.
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2019 (2) TMI 799
Addition u/s 68 - unsecured loans received from seven parties - disallowance of interest on the aforesaid loan amount - Held that:- All creditors were having sufficient bank balances in their bank accounts for giving credit to the assessee. Thus, there were no reasons for the AO to doubt the creditworthiness of the creditors except creditor mentioned at sl. No. 2. The AO has not made further investigation on the veracity of the documents submitted by the assessee. The issue is, therefore, squarely covered in favour of the assessee by order of the Tribunal in the case of M/s Topline Buildtech Pvt. Ltd. (2018 (4) TMI 793 - ITAT DELHI). AO has nowhere mentioned in the order, if assessee was asked to produce the creditors for examination on oath. No evidence has been brought on record, if the amount in question came from the coffer of the assessee. There is no dispute that AO accepted the identity of the creditors. These facts, therefore, show that assessee has been able to prove the creditworthiness and genuineness of the transaction in the cases of the creditors namely Smt. Shashi Lata Bhargav, Shri Prateek Ahluwalia, Shri Sarin Kumar, M/s T.S. Sethi & Sons, M/s C.S. Sethi & Sons and M/s G.S. Sethi & Sons. Thus, additions in their cases cannot be made in the hands of the assessee. The disallowance of interest is also deleted. In the case of Smt. Kamini Ahluwalia-(2), it is not in dispute that prior to giving loan to the assessee there were cash deposits of the equivalent amount of the credit in her bank account. There were insufficient bank balances in her account for giving loan to the assessee. In case of credit entry of ₹ 3 lakhs on 12.11.2010 cash was deposited for clearance of the cheque on 15.11.2010. These facts clearly support the findings of the authorities below that transaction of the assessee with Smt. Kamini Ahluwalia was not genuine. We confirm the addition of ₹ 9 lakhs on account of unexplained credit in case of Smt. Kamini Ahluwalia. The proportionate disallowance of interest in this case is also confirmed - Decided partly in favour of assessee.
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2019 (2) TMI 798
Bogus LTCG - addition u/s 68 - Addition of commission received as sale consideration/LTCG/exempt income on sale of scrip - Held that:- The transactions of sale of shares by the assessee was duly backed up by material/evidence including contract notes, demat statement, bank account reflecting transactions, the stock brokers have confirmed the transactions, the shares having been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless there was any material/evidence to prove that the assessee or any one on his behalf has rigged the stock price. It should be noted that the Stock Exchange and SEBI are the statutory authorities appointed by the Govt. of India to ensure that there is no stock rigging or manipulation - The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. The facts of the case of the assessee are identical with the facts in the case of Kiran Kothari HUF [2017 (11) TMI 1075 - ITAT KOLKATA], wherein the co-ordinate bench of the Tribunal has deleted the addition and allowed the claim of LTCG on sale of shares of M/s TTML. So we, respectfully following the same, set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and delete the consequential addition. Addition as unexplained expenditure towards commission charges of sale of such shares by the operator. We have already held that the transactions relating to LTCG were genuine and not the accommodation entries as alleged by the AO. Consequently the addition is hereby directed to be deleted. We accordingly hold that the issue is allowed in favour of the assessee.
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2019 (2) TMI 797
Receipts of the assessee from National Highway Authority of India - characterization of income - whether the same do not qualify as fees for technical services, and not taxable under the provision of section 44D r.w.s. 115A of the Act? - Held that:- As decided in assessee's own case [2016 (2) TMI 667 - ITAT DELHI] it is not controverted that assessee was carrying on similar activities in the preceding years as well, and the income earned form the said activities have been accepted by the Department as business income of the assessee and assessment made u/s 143(3) of the Act. Principle of consistency has been accepted by the courts in many judicial precedents and some of the landmark decisions in the cases are of Radhasoami Satsang v. CIT: (1991 (11) TMI 2 - SUPREME Court ), CIT v. Lagan Kala Upwan: (2002 (12) TMI 74 - DELHI High Court), Saurashtra Cement & Chemical Industries v. CIT: (1979 (2) TMI 21 - GUJARAT High Court ), Commissioner of Income Tax v. Paul Brothers: (1992 (10) TMI 5 - BOMBAY High Court ) and Commissioner of Income Tax v. Modi Industries Limited: [2010 (8) TMI 51 - DELHI HIGH COURT ]. Therefore on this ground too assessee deserves relief. According to the provision of section 44D rws 9 (1) (vii) of the act assessee’s receipt from NH is not taxable as FTS under that section but under normal provision of income tax act as business income. On this count we confirm the order of CIT (A). - Decided against revenue
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2019 (2) TMI 796
TPA - transaction of freight forwarding and cargo handling services - TPO held that since the freight cost is a key driver as such, same should be used as diagnostic tool for selection of the comparable and therefore he applied a filter of freight cost/freight income - Held that:- TPO held that since the freight cost/freight income of the assessee is 80.90% as such, he applied a range of 75%-85% (freight cost/freight income) for selection of the comparables. While doing so, the TPO has not looked into the functions of the comparable i.e. Balmer, Lawrie & Co. Ltd. In fact, the TPO’s own filters are not in proportionate with the range of 75%-85% (freight cost/freight income) for selection of the said comparable. Therefore, we direct the TPO/AO to exclude this comparable from the list of the comparables. Addition u/s 14A - Held that:- The assessee claimed that no expenditure was incurred to earn the exempt income. In fact, assessee could not establish that it has not claimed any expenditure on exempt income. Therefore, we do not see any valid ground to interfere in the findings given by the Assessing Officer. Ground No. 2 is dismissed. Tansfer pricing relating to intra group services - Held that:- TPO accepted that services were rendered and received by the assessee. Once the rendering and receiving of the services were not disputed which is supported by the evidences, the TPO is not correct in holding that arms length value of the management fee is Nil and accordingly making an upward adjustment. Therefore, the finding of the TPO is not correct and this addition does not sustain. Ground No. 1 is allowed. Disallowance u/s 14A - AR submitted that no further investment has been made and therefore no expense incurred. The change in investment balance is on account of re-investment of dividend income - Held that:- It is pertinent to note that no further investment has been made and therefore no expense incurred. The change in investment balance is on account of re-investment of dividend income, since the “ABN AMRO Cash Mutual Fund” plan was a Dividend Reinvestment Plan. Thus, Ground No. 2 is allowed.
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2019 (2) TMI 795
Determination of ALP of AMP expenses - Held that:- TPO for determining ALP of AMP expenses. AO/TPO shall call for all agreements entered into by assessee with its AE for purchase and resale of Cannon products in India. Needless to say that assessee will be allowed reasonable opportunity of hearing during proceedings and Ld.AO/TPO shall call for all necessary evidences/documents which shall be produced by assessee to substantiate its claim. Ld.AO/TPO shall determine the issue by applying law in force. Benchmarking alleged international transaction of AMP expenses by using PSM as most appropriate method - Held that:- As we have already set aside issue relating to nature of AMP expenditure to Ld.AO/TPO, applicability of most appropriate method relating to same head of transaction also deserves to be set-aside. It is also observed that, this is the consistent view taken by this Tribunal in case of assessee for preceding Assessment Years, copies of orders are placed before us. Inclusion of selling/business promotion expenses in scope of AMP expenditure when DRP for Assessment Year 2011-12 excluded similar expenses - Held that:- Admittedly this Tribunal in orders for preceding Assessment Years directed Ld.TPO to exclude sales related expenditure/subsidies received by assessee. Insofar as business promotion expenses are concerned, Ld.TPO shall consider the same after perusal of relevant agreements entered into by assessee with its AE and to decide this issue as per law. TDS u/s 195 - payments in respect of reimbursement of salaries of seconded employees without deducting TDS - Held that:- In our considered opinion, inference that could be drawn from documents filed by assessee does not distinguish present case from Centrica offshore India (P.) Ltd. case (2014 (5) TMI 154 - DELHI HIGH COURT) and documents produced by assessee are no substitute for Secondment Agreement and fails assessee in discharge of its burden of proof. It would be relevant to go through secondment agreement before coming to a conclusion. Neither before DRP nor before us assessee filed Secondment Agreement. Assessee is therefore directed to file Secondment Agreement before Ld.AO and Ld.AO is then directed to verify the same. In the event assessee is not able to demonstrate through the Secondment Agreement that the payment made to A.E. is in nature of reimbursement of salary paid by A.E. to seconded employees in India, Ld.AO shall consider the issue as per law. We are therefore remitting the issue back to file of ld.AO to verify nature of reimbursement as per law.
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2019 (2) TMI 794
Penalty u/s 271(1)(c) - disallowance of corporate Social Responsibility (CSR) - Held that:- It is nowhere specifically stated that it will not be effective retrospectively neither is there any judgement specifically on this issue holding it "not retrospective". Therefore, AO is directed to disallow the said expenditure. The AO is directed to give effect to the above mentioned order and issue demand notice. He is also required to initiate penalty u/s 271(1)(c) / for furnishing inaccurate particulars of income by the assessee. Upon hearing both the counsel and perusing the record, we find that it has been held by the ITAT in Jindal Power Ltd. [2016 (7) TMI 203 - ITAT RAIPUR] that explanation 2 to section 37(1) comes into effect from 01.04.2015. DR has referred to the decision of ITAT Hyderabad Bench said to be a contrary decision. We find that it is settled law that if two views are possible, one in favour of the assessee should be adopted. In these circumstances, the ld. CIT(A)’s directions to disallow the same is not sustainable. Even otherwise it can be held that there could be two views on this issue and if the A.O. has adopted one view, which admittedly is a plausible one, the ld. CIT(A) is not vested with jurisdiction u/s. 263 qua this issue. This proposition gets support from the Hon'ble Apex Court decision in the case of Malabar Industrial Co. Ltd. vs. CIT [2000 (2) TMI 10 - SUPREME COURT]. Hence, we quash the direction given by the ld. CIT(A) in this issue. Loss/damages and other write off - Held that:- We find that there is no cogent basis for the accounting done by the assessee. The assessee has received the sum of ₹ 3 crores towards insurance claim. The loss on account of fire loss has already been booked by the assessee. There is no case that further loss is to be booked. Hence, this treatment of part of the insurance claim as advance is not at all correct. Thus, the A.O. is totally wrong in accepting this postponement of income. As a matter of fact before parting, we may add that the entire insurance claim receivable needed to be accounted for on accrual basis. In the result, we uphold the order of the ld. CIT on this issue. - Appeal by the assessee is partly allowed.
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2019 (2) TMI 793
TDS u/s 192 - Assessee in Default u/s 201(1) - KPTCL paid “Cash equivalent of unutilized leave at the time of their retirement” to its employees with no deduction of tds - Consequences for failure to deduct or pay - Held that:- The obligation of the Assessee u/s.192 is only to make bonafide estimate of income of his employee under the head salaries. Such obligation cannot be tested on the parameters laid down on exercise of power by authorities under the Act exercising powers u/s.132 or u/s.147 of the Act. Apart from the above, we have already set out the circumstances under which belief was formed by the Assessee while deducting tax at source on salary paid to its employees in the earlier order of the Tribunal which is extracted in paragraph-10 of this order. We are of the view that said conclusions will hold good for the present appeals also, as the facts and circumstances are same in these appeals and the appeals already decided by the Tribunal. Circumstances explained by the learned counsel for KPTCL regarding the manner of formation of KPTCL and the action of the revenue in not questioning KPTCL’s action in the past several years after its formation and the manner of exercise of control and affording protecting to employees of KPTCL by the State Government were definitely factors which weighed with KPTCL when it made estimate of its employees income under the head “Salaries”. There is no reason for them to think that its estimate of employee’s income under the head “Salaries” was incorrect as the belief it entertained was that its employees were to be regarded as employees of State Government and that its employees are entitled to exemption of the entire sum of unutilized leave encashment u/s.10(10AA)(i) of the Act. For the reasons given above and respectfully following the decision of the Tribunal referred to paragraph-10 of this order, we hold that KPTCL has discharged its obligation u/s.192 and hence proceedings u/s.201(1) & 201(1A) of the Act deserves to be quashed and are hereby quashed. All the appeals of KPTCL are allowed. - Decided in favour of assessee.
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2019 (2) TMI 792
Disallowance of crystallized losses of foreign exchange contracts - loss was amortized in books but claimed as a deduction while filing Return of Income - Held that:- It is a decision of business man to minimize the losses on account of fluctuation in the foreign exchange rate and therefore it is very much connected with the assessee’s business. Since in assessment year 2010-11, the assesseecancelled some export orders and as a result, the forward contracts linked with the export ordersshould also be cancelled and therefore it is natural that the bank has charged the cancellation charges of the forward contract, which is nothing but a business loss. Therefore, since the forward contracts have been taken in connection with the business and for the purpose of business hence the loss arising on account of cancellation of forward contract would also be a business loss and therefore the assessee is entitled to claim the said loss in his books of accounts. In view of the facts and precedents narrated above, it is abundantly clear that the Assessee Company has correctly accounted for the loss on account of Cancelled Forward Contract for hedging of Foreign Currency Risk and is an allowable Business Loss under section 28 of the Act. The loss on account of forward contract and loss on cancellation of forward contract, is a business loss and assessee is entitled to set offthe said loss against the business income, hence we delete the disallowance - Decided against revenue Disallowance being prior period expenses the liability for which crystallized during the relevant previous year - Held that:- We note that the transportation charges of ₹ 1,00,000/- paid to M/s Santosh Transport Services pertaining to assessment year 2007-08 and it was stated that there was a dispute regarding the bill amount therefore, it could not be paid in the year in which it was incurred. The dispute got resolved during the assessment year under consideration hence, it was finally paid. We not that assessee is following mercantile system of accounting and the assessee’s expenditure has got crystallized during the assessment year under consideration, therefore the assessee is entitled to claim the expenses. We note that the assessee had incurred the said expenditure for the purpose of business and liability has crystallized during the assessment year under consideration. Hence the addition needs to be deleted - Decided against revenue Disallowance being replacement cost of seven ring frames - treated by the assessee as revenue expenditure u/s 37(1) however, AO treated the same as capital expenditure - Held that:- This issue is squarely covered against the assessee by the Judgment for assessment year 2005-06 as held Expenditure for replacement of a new ring frames is an addition to existing plant and machinery of the assessee giving enduring benefit and as such is capital in nature. - Decided against assessee
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2019 (2) TMI 791
Disallowance of cash expenses - non submission of invoices/vouchers for these expenses - CIT(A) upheld the disallowance of expenses to the tune of 5% of these expenses - assessee is engaged in the business as a clearing , forwarding and shipping agent - Held that:- The business remaining the same in both AY 2013-14 and AY 2014-15 there is no plausible explanation for not incurring these expenses for AY 2014-15. The assessee in any case has not submitted any invoices/vouchers for these expenses for AY 2013-14 even before us while for AY 2014-15 , the assessee duly submitted invoices/vouchers before the AO and in our considered view, the matter need to be remitted back to the file of the AO for de-novo adjudication of this issue after giving the assessee an opportunity of being heard in accordance with principles of natural justice in accordance with law. The assessee is directed to produce all relevant invoices/bills/ vouchers before the AO in set aside de-novo proceedings and also to provide justification for incurring these Documentation Expenses and Transportation Expenses in this year under consideration which was stated to be not incurred in immediately succeeding year i.e. AY 2014-15. The Revenue appeal is allowed for statistical purposes on this issue Disallowance of reimbursement of the expenses - assessee did not submit requisite details before the AO which led the AO with a view to check leakage of revenue to disallow 5% of these expenses - Held that:- We have observed that the assessee is clearing , forwarding and shipping agent. The assessee claimed net agency commission from its clients and also claimed reimbursement of the expenses. The assessee did not filed requisite details before the AO. The assessee has filed details of these expenses before us which was stated to have been claimed as reimbursement of expenses from its clients. The assessee has also filed some of the bills raised by it on its various clients to make home its point that these are merely reimbursement of expenses. The assessee has also contended that profit element embedded in these reimbursement of expenses to the tune of ₹ 13,08,911/- was offered for taxation and has already suffered taxation . The P&L account is placed on record in file. These details required verification and with a view to render complete justice to both the parties, it is considered necessary and fit to restore the matter back to the file of the AO for making proper verification - Appeal of the Revenue is allowed for statistical purposes
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2019 (2) TMI 790
Exclusion of Other Income for deduction u/s 80IC - income from sale of scrap - Held that:- Assessee has filed certain details of sale of scrap, discount from suppliers, excess provision written back, credit balance written back and miscellaneous income before us which required verification by the authorities below as to its direct nexus of being derived from undertaking on which deduction u/s 80IC was claimed is required to be proved. There is no quarrel with this proposition of the assessee that sale of scrap is to be considered for deduction u/s 80IC but however we are of the view that the assessee has to show that this income from sale of scrap has direct nexus and was derived from the industrial undertaking on which deduction u/s. 80IC was claimed to get benefit of deduction u/s 80IC. This is a factual matter and requires verification of fact and the facts may differ from year to year. Hence for verification purposes, we are restoring the matter back to the file of the AO wherein the assessee will be required to prove through cogent evidences that these incomes from sale of scrap was derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under Section 80IC. Similar is for the other incomes viz. discount from supplies, excess provision written back, credit balances written back and miscellaneous income, we are of the view that the assessee has to show that these incomes from discount from supplies , excess provision written back, credit balances written back and miscellaneous income have direct nexus and were derived from the industrial undertaking on which deduction u/s. 80IC was claimed by the assessee to get benefit of deduction u/s 80IC. Hence for verification purposes, we are restoring the matter back to the file of the AO wherein the assessee will be required to prove through cogent evidences that these incomes from discount from supplies, excess provision written back, credit balances written back and miscellaneous income were derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under the provisions of Section 80IC of the Act. Ad-hoc disallowance of 2% of total Miscellaneous Expenditure booked by the assessee under the head ‘Miscellaneous Expenses’ in its books of accounts - Held that:- No incriminating material has been brought on record by the AO and by the CIT(A) to prove that these are not business expenses and these were not incurred wholly and exclusively for the purposes of business of the assessee. The authorities below have merely disallowed 2% of these miscellaneous expenses on ad-hoc basis without brining any incriminating material on record merely on the presumption that these expenses may not be verifiable. The contention of the authorities below that TDS might not have been deducted on some of these expenses also lacks merit as the assessee has brought on record tax audit report to prove that there was no default in compliance of TDS. The complete details of these expenses were furnished by the assessee before the authorities below. Disallowance of these miscellaneous expenses on adhoc basis @ 2% of miscellaneous expenses was made by authorities below merely on conjectures and surmises without bring any incriminating material on record and such disallowances on adhoc basis in the manner done by the authorities below keeping in view facts and material on record before the authorities below is not permissible. Thus, the assessee succeeds on this issue and the entire disallowance of miscellaneous expenses as was made by the AO and as confirmed by learned CIT(A) stood deleted.
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2019 (2) TMI 789
Assessment u/s 153A - assessment being time barred - Held that:- As perused the relevant records especially the documentary evidences filed by the assessee in the Paper Book as mentioned above and the Written Submissions filed by both the parties, especially the Written Submissions of the CIT(DR) and we are of the considered view that in this case the AO has passed the assessment order on 28.03.2013 and according to the evidence of the postal authority which we have reproduced under para no. 5.1 at page no. 14 & 15 of this order. We are also of the view that the assessment order dated 28.03.2013 has been dispatched on 01.04.2013. Therefore, keeping in view of the order passed in the case of Sri Trinadh Chowdary vs. ACIT, Corporate Circle 1(2), Bhubaneswar & Ors. [2018 (9) TMI 1798 - ITAT CUTTACK] we are of the considered view that assessment in dispute is time barred, hence, respectfully following the ITAT, Cuttack Bench decision in the case of Sri Trinadh Chowdary vs. ACIT (Supra), we set aside the assessment order and allow the ground no. 1 raised by the assessee
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2019 (2) TMI 788
Penalty u/s 271(1)(c) - deduction claimed by the assessee U/s 80IB(10) disallowance under normal provisions; and under special provisions of I.T. Act U/s 115JB - Held that:- the assessee’s claim U/s 80IB of I.T. Act has been upheld by Co-ordinate Bench of ITAT, Delhi. Therefore, no penalty U/s 271(1)(c) of I.T. Act is leviable in respect of quantum additions under normal provisions of Income Tax Act, under which the AO had made addition, on account of disallowance of deduction U/s 80IB of I.T.Act Issue as to whether amount of deduction U/s 80IB of I.T. Act is to be included as Book Profit for the purpose of Section 115JB of I.T. Act was disputable, on which two different views were legitimately possible; one such view being in favour of the Assessee. On a the disputable issue of quantum addition, on which two different views are legitimately possible, of which the one favourable to the assessee has been adopted by the assessee; eventually, the Assessee may or may not succeed in the quantum proceedings and the disputable issue, on which two different views were possible, may eventually be decided against the Assessee in quantum proceedings. However, the assessee cannot be burdened with penalty U/s 271(1)(c) of I.T. Act, if on a disputable issue of quantum addition, on which two different views were legitimately possible, the Assessee decided to adopt the view which was favourable to the assessee; in a case in which all necessary details were filed by the Assessee in support of the claim and when no material inaccuracies were found in these details, and when the assessee is not guilty of suppression of any material facts. As regards the contention for Assessee, that the AO did not make specific charge against the assessee - whether the penalty proceedings were for ‘concealment of the particulars of income’ or for ‘furnishing of inaccurate particulars of income’ it is already found that the disputable claim made by the assessee neither amounts to ‘concealment of particulars of income’ nor to ‘furnishing of inaccurate particulars of income’; it is immaterial whether the Assessing Officer made specific charge against the assessee whether the penalty proceedings were for ‘concealment of the particulars of income’ or for ‘furnishing of inaccurate particulars of income’. Therefore, presently we decline to express an opinion on this contention of the Ld. Counsel for assessee; because this is merely any academic issue at present.
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2019 (2) TMI 787
Benefit of section 11 & 12 - conversion of loans to the corpus donations - Held that:- There is not even an iota of adverse observation as to the nature of impugned donations not being in the nature of corpus donations. Therefore, these amounts having been accepted as genuine loans in A.Y. 2009-10 and having been accepted as corpus donations in the year under appeal, benefit of section 11(1)(d) cannot be denied. Addition u/s 68 - Cash Credit - Genuineness of loan - Held that:- We find that assessee has brought sufficient material on record to prove that lenders have confirmed the amount of loans, which have been given through banking channel and the lenders were assessed to tax and that the loans have substantially been repaid back through banking channel. We would like to refer to various pages of the paper book relied upon by Ld. Counsel in the synopsis at page 8-9-10. We have gone through the various pages of the paper book as referred by Ld. Counsel and we are of the considered opinion that not only the identity and creditworthiness of the lenders stand proved but also the genuineness of the loans stands proved. In the present case there is no share capital involved nor is there any statement of accommodation entry having been given by any person. Therefore, addition made in the assessment order is hereby deleted in view of above mentioned factual evidences establishing the identity, capacity of the lenders and genuineness of the loans. Benefit of exemption u/s 10(23C)(iiiad) - Held that:- The income of the assessee trust is exempt u/s 10(23C)(iiiad) and it is held accordingly. Income of the assessee trust is exempt u/s 10(23)(iiiad) and benefit of section 11 and 12 having been allowed.
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2019 (2) TMI 786
Reopening of assessment - earlier income of the assessee was assessed u/s 153C - addition on loans received - Held that:- In the present case, it is an admitted fact that the original assessment of the assessee was framed u/s 153C of the Act after making the deep scrutiny. In the original return, the assessee furnished the particulars of the loan received from M/s Nazar Impex Pvt. Ltd. in the Tax Audit Report wherein the details of the loans or deposits received from various persons have been mentioned, so it cannot be said that the facts relating to the receipt of loan from M/s Nazar Impex Pvt. Ltd. was not available to the AO who made the assessment after making proper scrutiny. Reopening was done on this basis that a search operation u/s 132 of the Act was carried out by the Directorate of Income Tax(Investigation), Mumbai on 03.10.2013 at Rajendra Jain Group, Sanjay Choudhary Group and Dharmichand Jain Group of Mumbai, only on the basis of the above information, this case was reopened which is evident from para 5 of the aforesaid reasons recorded wherein the AO had clearly stated that the said information was in his possession and on that basis he had reasons to believe that the assessee had concealed the fact regarding the amount of ₹ 31,50,000/- received from M/s Nazar Impex Pvt. Ltd. However, the said amount was considered as genuine earlier when the assessment was framed by the AO u/s 153C of the Act. AO simply acted upon the information received from the Investigation Wing and did not apply his own mind. Therefore, the reopening u/s 147 by issuing the notice u/s 148 of the Act only on the basis of information received from the Investigation Wing was not valid. Accordingly, the reassessment framed by the AO is quashed. - Decided in favour of assessee.
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2019 (2) TMI 785
Set off of carried forward business loss and current business loss against the income from other sources - Held that:- The assessee company is not carrying any business. The assessee has earned income from renting of the property and the same is offered to tax by the assessee under the head "Income from house property". Apart from above assessee has interest income of ₹ 3,87,540/-. Expenses in respect of house property have already been allowed as standard deduction u/s. 24(a) of the Act. The assessee has claimed expenditure in respect of remuneration to Director. The Commissioner of Income Tax (Appeals) rejected the claim of assessee on the ground that since there is no business of the assessee, there is no question of business loss. The provisions of section 72 allow set off of business loss/carried forward business loss against income under any head (except under the head "Salaries"). But to claim loss, the assessee has to show business activity was carried during previous year or in the past which resulted in generation of loss. There is no material available on record controverting the findings of CIT(Appeals). - Decided against assessee.
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2019 (2) TMI 784
Disallowance of bogus purchases - CIT-A restricted addition to 8% by granting the benefit of gross profit (4.5%) already declared by the assessee - whether the assessee has not proved the genuineness of the transaction? - Held that:- AO got information that the purchases made by the parties, mentioned in the assessment order are suspected parties and are mentioned at the website of Maharashtra VAT Department. The assessee claim to have made purchases of ₹ 34,92,40,689/-, therefore, the assessee was asked to furnish the details of purchases made from these parties. The notices issued/served under section 133(6) of the Act, however, there was no reply from the concerned parties. The facts are that neither the parties were produced nor the transaction was substantiated with positive material therefore, the Ld. Assessing Officer made the addition at the rate of 12.5% of such bogus purchases. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the GP was adopted at the rate of 8% by granting the benefit of gross profit (4.5%) already declared by the assessee. The Revenue is aggrieved and is in appeal before this Tribunal. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, admittedly, there cannot be any sale without purchases and only the profit element embedded in the bogus purchases can be added. Since, the assessee has already declared gross profit @ 4.5%, therefore, we find no infirmity in granting the benefit of the GP already declared by the assessee, because in the competitive world of trade, there may not be huge profit. - Decided against revenue
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2019 (2) TMI 783
Addition on account of bogus creditors - difference between creditors recorded in his books vis-à-vis balance in the books of creditors - conditions fulfilled in order to treat cessation of liability as income under section 41(1) - Held that:- Assessee explained the difference between creditors recorded in his books vis-à-vis balance in the books of creditors, stating that said difference was due to goods in transit or payment in transit. The assessing officer rejected the explanation of the assessee without providing any valid reasons. Besides, the assessing officer failed to adduce any evidence on record to prove that the difference in creditors is a bogus and out of unaccounted money. Just to work out the difference in sundry creditors is not sufficient, the AO ought to adduce any tangible material on record to prove that the said difference belongs to unaccounted money of the assessee. We note that assessee’s purchases had not been doubted by the Assessing Officer. AO also did not doubt the sales made by the assessee therefore,so far the accounting principles are concerned, if the total sales and total purchases are not doubted then balance of creditors are going to be genuine, if it is not otherwise proved by the assessing officer. We note that the difference between creditors recorded in his books vis-à-vis balance in the books of creditors, should not be treated as cessation of liability. We note that in the assessee’s case under consideration, the assessee had shown the closing balance of sundry creditors as on 31-03-2000 in its balance sheet and the said closing balance has been continued and carried forward as opening balance in the subsequent year i.e. as on 01-04-2000. Hence, it is clear that the assessee had not written back the same to its Profit &Loss account during the relevant year. As such, it cannot be said that the assessee had availed any benefit, as specified in (b) above, during the relevant year. Hence, the condition prescribed in section 41(1) of the Act has not been fulfilled in instant case. In instant case since the assessee has not credited the same to its Profit &Loss account for the relevant year. In such a situation, it cannot be contended that the liability of different assessment years, as mentioned in the grounds of appeal had ceased to exist. Furthermore, the above liabilities has been continued from earlier years. Hence, the addition on account of bogus creditors is wholly unjustified. Addition on account of not disclosing unsecured loan - Held that:- The said amount is not mentioned in the books of the assessee. The DR for the Revenue fairly agreed with the proposition canvassed by ld Counsel. We have heard both the parties and perused the material available on record, we note that said amount of ₹ 2,66,000/-, does not emanate from the books of accounts of the assessee. That is, the said amount does not belong to the assessee, therefore, the question of disallowance does not arise. Moreover, the AO failed to bring any evidence on record to establish that the said amount of ₹ 2,66,000/- is an unaccounted money of the assessee.Hence, we delete the addition. Disallowance u/s 40A(3) - Held that:- The books of accounts of the assessee were audited and books of accounts were not rejected by the Assessing Officer. The Assessing Officer has not taken any adverse view on the assessee’s books of accounts, so far this addition is concerned. Apart from this, the Assessing Officer has not doubted the purchase and sales made by the Assessing Officer. We note that the assessee’s claim falls under Rule 6DD(J) of the Income Tax Rules (vide old Rules). It will be pertinent to go into the intention behind introduction of provisions of section 40A(3) of the Act at this juncture. We find that the said provisions was inserted by Finance Act 1968 with the object to curbing expenditure in cash and to counter tax evasion. In the assessee’s case, there is no tax evasion, as the books of accounts were duly audited by the Chartered Accountant and AO has not rejected the books of the assessee and the payee has offered the tax. Therefore, the addition made by the Assessing Officer and confirmed by the Ld. CIT(A) needs to be deleted. Addition on account of undisclosed profit - Held that:- We note that the addition made by the Assessing Officer is purely on conjectures and surmises. The assessee has disclosed income ₹ 1.8 per tinwhereas the Assessing Officer made an addition on account of differential amount without any base and without any evidence on record. AO made this addition solely based on the statement of the assessee. We note that statement is a good evidence provided it is supported by any tangible material or corroborate evidence. We note assessee’s account are audited and not rejected by the Assessing Officer therefore to estimate the separate profit in addition to profit shown in the audited books of accounts is not tenable without any tangible material or corroborative evidence, therefore we delete the addition.
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2019 (2) TMI 782
Disallowance u/s 37(1) - expenses incurred on motor car, depreciation on motor car and business promotion - allowable busniss expenses - Held that:- Considering the personal element involved in motor car expenses, depreciation on motor car, business promotion expenses, the assessee itself has disallowed 10% out of the total expenditure claimed. AO without pointing out any shortcoming in the disallowance made by the assessee has made further disallowance of 10% by merely stating that the disallowance made by the assessee is on the lower side. The assessing officer has not provided any reason why he considers the disallowance made by the assessee to be on the lower side. In view of the aforesaid, we hold that the disallowance made by the assessing officer in addition to disallowance already made by the assessee is unsustainable. - Decided in favour of assessee.
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2019 (2) TMI 781
Disallowance u/s. 14A - Held that:- As perused the balance sheet for the year ended 31.03.2011 and found that assessee had sufficient own funds being shareholder’s funds & reserves and surplus, far more than the investments made. Therefore, the presumption is that the assessee made investments from its own funds. The Hon’ble Jurisdictional High Court in the case of CIT v. HDFC Bank Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT] held that if the assessee’s capital, profit, reserves and surplus and current account deposits were higher than the investments in the tax free securities, it would have to be presumed that the investment made by the assessee would be out of the interest free funds available with the assessee. Therefore, respectfully following the said decision, we hold that the no interest can be disallowed under Rule 8D(2)(ii) of the I.T. Rules. Disallowance under Rule 8D(2)(iii) being administrative expenses following the decision of the Coordinate Bench in the case of M/s. Pest Control India Pvt. Ltd. [2017 (10) TMI 1287 - ITAT MUMBAI], we direct the Assessing Officer to restrict the disallowance under Rule 8D(2)(iii) to the exempt income of ₹.7,32,781/- and delete the balance disallowance. Grounds raised by the assessee are partly allowed on this issue. TDS u/s 195 - Disallowance u/s. 40(a)(i) - remittance to M/s. Phora Capital Advisors in France for professional services rendered - no tax has been deducted by the assessee on such remittance - Held that:- As seen from the definition of the expression “Fees for Technical Services' appearing in the DTAA between India and U.K. that the scope and ambit of the term “Fees for Technical Services” is more restrictive than the definition of the said expression in the DTAA between India and France. The DTAA between India and UK contains a “make available” clause, for a service to constitute “Technical Service”. The interpretation of the Article on “Fees for Technical Services” appearing in the DTAA between India and France has been considered in CIT vs. ISRO Satellite Centre [2011 (10) TMI 617 - KARNATAKA HIGH COURT]. The Court finds no warrant for the restrictive interpretation placed on Clause 7 of the Protocol. The purpose of Clause 7 of the Protocol is to afford to a party to the Indo-France Convention the most beneficial of the provisions that may be available in another Convention between India and another OECD country. The AAR appears to have failed to notice that the wording of Clause 7 of the Protocol makes it self-operational. It is not in dispute that the India- France DTAA was itself notified by the Central Government by issuing a notification under Section 90 of the Act. It is also not in dispute the separate Protocol signed between India and France simultaneously forms an integral part of the Convention itself. The preamble in the Protocol, which states “the undersigned have agreed on the following provisions which shall form an integral part of the Convention”, makes this position clear. Once the DTAA has itself been notified, and contains the Protocol including para 7 thereof, there is no need for the Protocol itself to be separately notified or for the beneficial provisions in some other Convention between India and another OECD country to be separately notified to form part of the Indo- France DTAA. We hold that under the DTAA between India and France, the definition of “Fees for Technical Services” has to be given a restrictive meaning similar to that of the expression “Fees for Technical Services” appearing in the DTAA between India and U.K. Thus, reading the definition of “Fees for Technical Services” appearing in the DTAA between India and France, the advisory services rendered by Phora Capital Advisers to the Assessee do not “make available” any “technical knowledge, experience, skill, knowhow or processes” to the Assessee company since, the Assessee company would have to go back to Phora Capital Advisors even in the future for availing similar advisory services. Consequently, in the absence of the professional services provided by Phora Capital Advisors “making available” any “technical knowledge, experience, skill, knowhow, etc.” to the Assessee Company, the remittance made to them was not chargeable to tax in view of the beneficial provisions under the DTAA and no tax was deductible at source on the said remittance. In the circumstances, the remittance made to Phora Capital Advisors being not chargeable to tax in India, there was no requirement to deduct tax at source on the said remittance. Hence Assessing Officer is directed to delete the disallowance made section 40(a)(i) of the Act. Disallowance in respect of business promotion expenses - AO while completing the assessment disallowed 10% of the business promotion expenses on adhoc basis for want of supporting evidences - Held that:- We have heard the rival submissions, perused the orders of the Authorities below. On a perusal of the order of the Tribunal for the Assessment years 2008-09 & 2009-10, we find that identical issue has been decided in favour of the assessee wherein the Tribunal deleted the adhoc disallowance made towards business promotion expenses observing that the ad hoc disallowance on the basis of estimation is not justifiable, therefore, We allowed the claim of the assessee and set aside the finding of the CIT(A) on this issue.
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2019 (2) TMI 780
Reopening of assessment - addition u/s 68 - having two PAN numbers - tangible incriminating information - assessee claimed that he is middle class person who was misguided and mistrusted by his nearest person and was not having any wrong track in life - ex-parte order passed by the CIT(A) - non service of notice to the address of advocate - Held that:- The assessee had given the address of said advocate as his communication address before Revenue authorities as the assessee has claimed that he was operating from said premises of the advocate. The assessee has filed an affidavit dated 19-07-2018 to that effect explaining the sequence of events as happened during the course of hearings before learned CIT(A) leading to his non appearance, which is discussed in preceding para‟s of this order in detail. The said affidavit is placed in file. The assessee has also produced certain additional evidences and claim is made that since proper opportunity was not provided to the assessee, the issue may be restored to the file of the learned CIT(A) so that the assessee can explain its case in proper perspective with cogent evidences and thereafter learned CIT(A) can pass fresh appellate order in accordance with law on merits after considering the contentions of the assessee. It is not denied by the assessee that Shri J G Parmar was his advocate. It is the assessee who has furnished the address of the advocate Mr J G Parmar before Revenue including learned CIT(A) for communication purposes as also it is admitted by the assessee that said address of Mr J G Parmar, advocate was used by the assessee for his operations also. The Revenue cannot be faulted if the assessee has not received notices of hearing of appeal issued by learned CIT(A) and it is the assessee who is to be blamed for its woes. The learned counsel for the assessee has conceded and prayed that the issues under appeal may be restored to the file of learned CIT(A) for granting one more opportunity as high pitched assessment is framed against the assessee and the assessee owing to fault of his own advocate did not got opportunity to present its case before learned CIT(A) while otherwise it has a strong case and request is made to take liberal view in the interest of justice. The amounts are found credited in the bank account maintained by Navkar Trading Company of which the assessee has admitted to be proprietor and the onus/burden is on the assessee to explain the sources of credit in said bank account with cogent evidences to satisfy the mandate of provisions of the 1961 Act. Thus keeping in view high pitched assessment framed against the assessee, we are restoring all the issues arising in this appeal to the file of learned CIT(A) for fresh adjudication of these issues after considering contentions/ explanations of the assessee on merits in accordance with law. The assessee in the interest of justice will be allowed to file all relevant explanations/evidences to support its contentions in its defence which will be adjudicated by the learned CIT(A) on merits in accordance with law. - Decided in favour of assessee for statistical purposes.
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2019 (2) TMI 743
TDS u/s 195 - addition u/s 40(a)(ia) - treating the Notification No 56/2012 dated 31-12-2012 effective from 01-01-2013 for the deduction of tax payment to Indian Bank under the Income tax Act, 1961 as merely of a clarification in nature - Held that:- In case of CIT vs. JDS Apparels (P) Ltd. reported in (2014 (11) TMI 732 - DELHI HIGH COURT) and has held that since the bank was making the payment to the assessee after making deduction of bank charges, there was no occasion for the assessee to deduct tax at source and, further, the bank was not acting on behalf of the assessee but on the other hand was acting on behalf of the customers while processing payments through debit cards and credit cards. In the present case we further feel the said principle should be applied as HDFC would necessarily have acted as per law and it is not the case of the Revenue that the bank had not paid taxes on their income. It is not a case of loss of Revenue as such or a case where the recipient did not pay their taxes - decided against revenue. Addition made to the book profits u/s 115JB - Provision for gratuity as an ascertained liability as it based on actuarial valuation - Held that:- We find from the order of the Ld. CIT (Appeals) that he has given a categorical finding that the provision for gratuity was an ascertained liability and was based on actuarial valuation and, therefore, the addition made to the book profits u/s 115JB on this account was liable to be deleted. DR also could not point out that the observations of the Ld. CIT (Appeals) in this regard were factually incorrect. We also note that this issue is also covered by another order of the Delhi Bench of the Tribunal in the case of ACIT vs. NHPC Ltd. vide [2014 (9) TMI 1011 - ITAT DELHI]. CIT (Appeals), while allowing the assessee’s appeal, has also referred to the observations of the ITAT in this case. Accordingly, we find ourselves unable to take a view which is different from that of the CIT (Appeals) on this issue and we dismiss ground no. 2 of the department’s appeal.
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Customs
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2019 (2) TMI 779
Refund of Customs Duty - mistake in the bills of entry committed by CHA - rectification of error in the Bills of Entry - Section 154 in the Customs Act, 1962 - case of Revenue is that section 154 of the Customs Act does not apply to the mistakes committed by the importer or CHA and the officers cannot correct such mistakes - Held that:- There is no assessment in this case and no mistake has been committed clerical or arithmetical error by any officer. Admittedly, the assessee importer made a mistake by mentioning a wrong serial number of the notification and thereby paid excess duty. Their request for correction under Section 154 was correctly not accepted by the officers as plain reading of the Section does not show that the officers do not have the power to correct mistakes made by the assessee under Section 154. What relief is available to the assessee who admittedly made a mistake and paid excess duty? - Held that:- If the mistake is discovered before paying the duty the importer can go to the officer and ask him to recall the bill of entry from the system and assess the bill of entry. This is done often. However, if the assessee has missed the opportunity to get the assessment corrected because the goods have already cleared there is no scope for the officers to assess the bills of entry. In such a case, the question is whether it is open for the importer to claim refund of duty under Section 27 of the Customs Act - A plain reading of the section would show that the importer or any other person can claim refund of duty under Section 27. This refund application has to be considered by the officers and the decision taken thereon - matter on remand. The appeal is disposed of by expunging the order to correct the mistake in the bills of entry under Section 154 of the Customs Act but upholding the sanction of refund.
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2019 (2) TMI 778
Levy of Differential Customs Duty - short landing of goods imported - the transaction value remained constant - Held that:- The issue is no more res integra and considered by Hon’ble Supreme Court in Mangalore Refinery & Petrochemicals Ltd.’s case [2015 (9) TMI 245 - SUPREME COURT], where it was held that the quantity of crude oil actually received into shore tank in port in India should be basis for payment of customs duty - demand of differential duty set aside - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 777
Valuation of imported goods - loading of cost of transport of the imported goods - value to be adopted for the purposes of payment of Customs duty on the bunker, which remains in the vessels at the time of its conversion from foreign run to coastal run - applicability of Rule 9 of Customs Valuation Rules, 1988 - appellant claimed that, price declared by them has already included the elements of freight, insurance and landing charges. Held that:- The Commissioner (Appeals) had taken the view that the determination of value on the basis of Rule 9, is not justified - the valuation may be appropriately decided on the basis of Rule 7 of the Valuation Rules. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 776
Penalty u/s 112 (a) of the Customs Act, 1962 - it was alleged that goods examined by them were not exported to Bangladesh & they were liable to penalty for negligence - appellants argued that a notice is required to be given to the officers within time specified under Section 155 (2) of the Customs Act, 1962 and that no such notice was issued to the appellants - Held that:- It is observed from the Order-in-Original dated passed by the adjudicating authority that this point was specifically taken by the appellant before the adjudicating authority but Adjudicating Authority has not given any findings on this issue - also, there is nothing on record that provisions of Section 155 (2) of the Customs Act, 1962 were complied with before initiating action against the appellants. Penalty not sustainable - appeal allowed.
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2019 (2) TMI 775
Penalty u/s 112(a) and 114AA of the Customs Act - Suspension of CHA License - failure to oerform duties properly - the Department found that the appellant in connivance with the importer has not properly examined the goods as the goods were falling under e-waste or Hazardous waste - Circular No. 4/2008-Cus., dated 12-2-2008 issued by C.B.E. & C. - e-waste or Hazardous waste or not - Held that:- The appellant has carried out the inspection of the goods as per the direction of the Commissioner in the presence of the Customs Officials who have also accepted the report and has countersigned the same. Further, the said goods have also been inspected by the other Chartered Engineer whose report is almost identical and they have also not certified the impugned goods as e-waste. Further, there was no specific direction that he has to examine each and every machine regarding its functionality. The appellant after the inspection has given the report that the remaining life of the machine is more than 5 years and in the past also these kinds of machines were imported and were cleared. There is no material on record which clearly points out the intelligence on the part of the appellant to perform his duty negligently. The report submitted by the appellant was accepted by the Customs Official and it has been countersigned by them - the impugned order regarding suspension is not sustainable in law - appeal allowed - decided in favor of appellant.
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Service Tax
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2019 (2) TMI 774
Vires of Section 67 in Chapter V of the Finance Act, 1994 (Act 32 of 1994) - Valuation - inclusion of expenses and salaries paid to the Security Guards and the statutory payments like contributions to ESI and EPF in the 'gross amount' charged for valuation of 'taxable service' in computing the 'service tax' payable - case of Revenue is that the scope and extent of the 'taxable net' has been provided by the Parliament in view of the policy of the Government and cannot be questioned by the writ petitioners - Held that:- Exts.R1 and R2 in W.P.(C) No.9591/2005 are the income and expenditure account and the bill produced by the writ petitioner, which would show that the salary and other benefits paid to the security personnel and Ext.R3, which is relevant agreement with the service receiver indicates that there is no master and servant relationship between the security personnel and the clients/service receiver. In the counter-affidavit filed by respondents, it is specifically contended in para 9 that this Court was approached earlier by filing W.P.(C) Nos.20017/2004 and 17045/2004 for a direction to reimburse the service tax, if they failed to collect from their clients due to non-inclusion of such provisions for realising service tax in the agreements with the clients. The Writ Petitions were disposed of directing the respondents to consider the claim of the petitioners and pass orders as specified.
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2019 (2) TMI 773
Penalty - Failure to discharge service tax - clearing of agent - cargo handling service - GTA service - storage and warehousing service - entire liability now stands admitted by the appellant - interest liability also stands discharged - period October 2007 to June 2012 - Held that:- The appellant has argued that the mere irregularity in not depositing service tax cannot be termed as suppression of facts by the appellant. The non filing of returns, it is submitted, was not a deliberate attempt to evade tax or suppress the information. It is further submitted that the non payment of service tax at the relevant time was on account of the fact that the appellant did not receive the funds and the amount of service tax from their clients. In the above factual matrix, we are of the view that no malafide intention can be attributed to the appellant. However, no malafide intention can be attributed to the appellant. The bonafide nature of the appellant is evident from the fact that the entire amount of service tax alongwith applicable interest stands paid by the appellant even before the impugned Order of adjudication was received by them. It is appropriate to waive the penalties imposed under Section 76, 77 and 78 of the Finance Act, 1994 by taking recourse to Section 80 - demand with interest upheld - appeal allowed in part.
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2019 (2) TMI 772
Levy of service tax - construction services - service tax liability on the builders for the services provided before 01.07.2010 - Held that:- The self same issue was considered by the Bench in detailed in the case of M/s Mehta & Modi Homes [2019 (2) TMI 476 - CESTAT HYDERABAD] and as also in the case of M/s Kolla Developers & Builders [2018 (11) TMI 164 - CESTAT-Hyderabad] and held that prior to 01.07.2010 service tax liability will not arise on the builders. All the impugned orders are unsustainable - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 771
Benefit of abatement - inputs used (on which they paid VAT) while rendering services from the value of taxable services rendered - Held that:- It is not in dispute that the services rendered by them were in the nature of ‘maintenance and repair services’ and these services also included transfer of materials. Invoices produced by the learned counsel for the appellant also shows that they had paid VAT on the goods used and paid service tax on the service charges only. The nature of contracts is composite contract, which, as per the judgment of the Hon’ble Apex Court in the case of L & T Ltd [2015 (8) TMI 749 - SUPREME COURT], became chargeable to service tax only from 01.06.2007. Thus, no service tax can be charged prior to the introduction of negative list of the services on maintenance and repair activity involving both the service and the sale/ deemed transfer of property of the goods/ components. Even otherwise, when their invoices clearly indicated the goods component separately and paid VAT on them deeming them to be sold to their client, service tax cannot be charged on such sums as they do not form part of the consideration for the service. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 770
Construction services - construction of residential and commercial complex service - period 2004-05 to 2007-08 - benefit of N/N. 1/2006-ST dated 1.3.2006 - cenvat credit as well as abatement, which they have reversed on 14.12.2009 after being pointed out by the department during the course of the audit - Held that:- The learned Commissioner (Appeals) taking note of the fact that initially, the contravention was under bona fide mistake and on reversal of the cenvat credit amount, the audit para being closed and subsequent payment of service tax along with interest was not in contravention of the provisions, but to avoid litigation, set aside the penalty invoking Section 80 of the Finance Act, 1994. The only ground on which the Revenue is in appeal is that the respondent is a repeated offender. However, analysis of the facts and evidences on record discloses otherwise - appeal dismissed - decided against Revenue.
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2019 (2) TMI 769
CENVAT credit - duty paying documents bogus invoices - bogus invoices or not - service tax paid by the sub-contractor - Held that:- The invoices which are mentioned in the SCN are not relevant to the proceeding. The invoices which are now produced by the learned AR for the Revenue, being the same also enclosed by the learned CA for the appellant, but different from the ones in the show cause notice, therefore, it is prudent to remand the matter to the adjudicating authority to ascertain the fact - appeal allowed by way of remand.
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2019 (2) TMI 768
Cenvat Credit - input services - services obtained through agents - advertising service was received by the appellant directly from the provider thereof i.e. 94.3 FM for advertising its center - Commercial Training and Coaching Service is provided by the appellant - Circular No. 96/7/2007 dated 23.08.2007 - Held that:- The invoices are issued by the advertising agencies but on the appellant. The amount as charged by these agencies in the invoices is the amount charged for advertising in the print media plus amount towards service charges as advertising agency (85% + 15%). On the said 15% amount, service tax is charged by the advertising agency which is paid by the appellant. Thus the invoice itself is sufficient to prove that it is the appellant who is the service recipient qua the advertising services though the services have been received from the provider thereof by the appellant after engaging an agency for the purpose. Agencies by the definition itself are the organisation working on behalf of their client. It is the said agency which has received service in the form of business auxiliary service, an exempted service and not the appellant. Thus, it is wrongly observed by Commissioner (Appeals) that appellant has availed credit of exempted service (BAS). It is rather apparent from facts that for booking an advertisement with print media though through an agency on behalf of the appellant, it is the appellant only who is recipient for the advertising service received to promote his coaching centre i.e. to provide the output service of CTCS. Thus, the payment made by the appellant for the purpose definitely becomes an input for him for providing a Commercial Coaching and Training Service. The finding of the Commissioner Appeals for holding that impugned services are Business Auxiliary Service which are not taxable hence not eligible for taking audit is held to be an erroneous - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 767
Classification of services - supply of tangible goods service or not - rendering of radio taxi service - Held that:- The issue has been considered by this Tribunal in appellant’s own case M/S MERU CAB COMPANY PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II [2015 (11) TMI 834 - CESTAT MUMBAI], where it was held that The agreement does not any where indicate that the drivers are having the possession of the vehicle for their use, which is the most important aspect to be covered under category of services under supply of tangible goods. Distinguishing the aforesaid judgment, the learned AR for the Revenue has submitted that with the introduction of the negative list, the judgment referred to above is not applicable. We do not find merit in the contention of the learned AR for the Revenue in as much as we have examined all the statement-on-demand notices issued from time to time to the appellant, refers to the basis on which the earlier show cause notices were raised - there are no valid reason not to follow the judgment of this Tribunal in appellant’s own case referred to as above. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 766
Classification of services - Business Auxiliary Service or not - job of processing and recovery of iron and steel scrap supplied - period of dispute i.e. 01.03.2005 to 31.01.2008 - Held that:- An identical issue in respect of the appellant s other unit which carried the activity at M/s SAIL (Bhilai Steel Plant) came before the Delhi Bench of the Tribunal in the case of M/S FERRO SCRAP NIGAM LIMITED VERSUS CCE, RAIPUR [2014 (1) TMI 1049 - CESTAT NEW DELHI]. The Tribunal held that there was no liability for payment of service tax upto 16.06.2005 on such activity. Liability for the period w.e.f.16.06.2005 - benefit of N/N. 8/2005-ST dated 01.03.2005 - Held that:- The activities carried out by the appellant for BSP is in the nature of processing. It is evident from the record that the appellant was required to recover of iron steel scrap from various stages of manufacture and the collected scrap was to be returned to BSP, but the benefit was denied to the appellant by taking the view that such scrap cannot be covered by expression of raw materials or semi-finished goods . But such a view is not called for. The scrap is nothing, but a raw material for use in melting and further manufacture within the iron and steel plant - Giving due consideration to such end-use Certificate submitted by the Public Sector Undertaking, the appellant will be entitled to the benefit of N/N. 8/2005 dated 01.03.2005. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 765
Abatement under N/N. 1/2006-ST for Commercial or Industrial Construction Service - abatement under N/N. 17/2005- ST in respect of Site Formation, Excavation, Earth Moving and Demolition Services - Management, Maintenance & Repair being in the nature of works contract services - Held that:- These services are not being acceptable prior to 01.06.2007 and not being chargeable to service tax under Works Contract Service post 01.06.2007 because the demand was not made under this head - these aspects need to be considered by the original adjudicating authority after following principles of natural justice. Penalty - Cleaning services - Held that:- It is hard to hold that sweeping of roads or cleaning of drains cannot be considered as cleaning services as claimed by the appellant - the appellant has not disclosed any of the services to the Department and these came to light only by investigation by the Department and therefore having not made out any case for exemption from penalty under section 78. Appeal decided partly against assessee and part matter on remand.
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2019 (2) TMI 764
Works contract services - erection, commissioning or installation services - site formation services - services provided to DISCOMS - services provided to ONGC as sub-contractor in relation to tunnel work - GTA Service - demand of service tax - period October, 2008 to November, 2011 - Held that:- Demand in respect of the services rendered to DISCOMS, up to June, 2010 are unsustainable being retrospectively exempted, as has been upheld by the Tribunal in the case of Unitech Power Transmission Ltd [2018 (5) TMI 1130 - CESTAT HYDERABAD] - the service tax demand raised on the appellant for services rendered under erection, commissioning and works contract services for erection of transmission lines for DISCOMS is liable to be set aside - interest and penalties also set aside. Demands raised on goods transport agency - Held that:- The appellant is not contesting the same - demand upheld - penalty set aside. Demands raised on the appellant under site formation services etc., for the services rendered as sub-contractor to the main contractor - Held that:- The adjudicating authority has not recorded any findings on the submissions of the appellant that these are all rendered to and for consumption of SEZ unit or unit developer - A holistic reading of the notification 04/2004-ST needs to be done by the adjudicating authority - the appeal is remitted back to the adjudicating authority to reconsider the issue afresh. Appeal disposed off.
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2019 (2) TMI 763
Evasion of service tax - incorrect calculation of service tax - Medical Transcription Training Services under Commercial Training Coaching Services - Registrar and Transfer services for NCDEX - courier charges under banking and other financial services - Registrar Transfer Services of the commodities of NCDEX. Medical Transcription Training Services under Commercial Training Coaching Services - Held that:- Since the appellant has not contested this before us, the service tax liability confirmed under this head along with interest is upheld - demand upheld. Courier charges under Banking and other Financial Services - Held that:- This amount is charged by the appellant as Courier charge are in fact in nature of reimbursement of expenses incurred. In our view, this cost will not get covered for taxing under the category of Banking Other Financial Services, as per the law settled by Hon ble Apex Court in the case of Intercontinental Consultants Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] - demand set aside. Banking and other financial services - Registrar and Transfer services for NCDEX - Held that:- This amount is also not taxable under Banking Other Financial Services ; as per the agreement dated 07.11.2003 (page 15 onwards) appellant has been appointed as Registrar and Transfer Agents for the commodities traded on NCDEX and it cannot be considered as depository services - demand set aside. Registrar Transfer Services of the commodities of NCDEX - Held that:- The activity undertaken by the appellant for Registrar Transfer Services of the commodities of NCDEX is not included in the definition of Banking Other Financial Services - demand set aside. Appeal allowed in part.
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2019 (2) TMI 762
Demand of late fee - failure to file ST-3 returns within due time - appellants submit that they could not file the returns electronically due to system failure and they had submitted the returns manually - Held that:- Though, the appellants were not able to upload the returns electronically, they have filed the returns manually - Though, it is stated in para 10 that the appellants have not produced any evidence that they have taken the problem to the department, I find that the appellants have produced screen shots of the returns filed to the department, which bears the signature of the officer concerned. The department having acknowledged the manually filed returns, ought to have taken steps to help or assist the appellants to solve the problem. Thus, the appellants cannot be found fault in the present case for the cause of delay in filing the returns. The demand of late fee cannot be sustained for the periods from 7/2012 to 9/2012, 10/2012 to 3/2013 and 4/2013 to 9/2013 also - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 760
Port services or not - operation and management including necessary modification and augmentation of facilities at Cochin Port - renting out jetties owned by them within the Port area to various agencies and individuals and received rent from the same - Held that:- The amounts paid by IGTPL to CPT is only in respect of the right conferred on the IGTPL to carry out the port services; for provision of which the users of the port would pay a fee. In such circumstances, definitely the revenue earned by IGTPL will be taxed under the Finance Act, 1994 specifically under sub-clause (lxxxii) of Section 65. It is a percentage of that, which the IGTPL pays to CPT, in lieu of surrendering their rights to carry out and provide port services in the subject terminals. There is no port service by the CPT to IGTPL. Rental amounts collected for various depots - Held that:- License fees were found to be not classifiable under port service or taxable under the Finance Act. As to rent from immovable property the Tribunal found that the same is appropriately classified only from 01.06.2007 - appeal rejected. The relationship between IGTPL and CPT continued in the relevant year as in the prior years. The amended provision also does not bring the subject transaction between the CPT and IGTPL, within the tax net work of Finance Act 1994. We see from the order of the Tribunal that the Tribunal in the later year has followed the earlier order and the question of rental income being assessed under the Finance Act 1994 never arose in the second case. Appeal dismissed.
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Central Excise
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2019 (2) TMI 761
Condonation of delay of 407 days in filing appeals - Section 35-L(1)(b) of the Central Excise Act, 1944 - Held that:- We are not satisfied by the explanation offered for the same. The appeals are, therefore, liable to be dismissed on the ground of delay itself - there is no legal infirmity in the impugned order warranting our interference under Section 35-L(1)(b) of the Central Excise Act, 1944 - appeal dismissed on the ground of delay as well as on merits.
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2019 (2) TMI 759
Valuation - inclusion of the value of free supplied goods by the customer’s needs in assessable value - Cum duty benefit - extended period of limitation - Held that:- As regard inclusion of value of free supplied goods by the buyer is undisputedly includable in the assessable value, therefore, the demand on merit on this issue is clearly sustainable. Limitation - cum-duty price - Held that:- Tribunal dealing with the identical set of facts and legal issue in the case of Jimcon Industries [2018 (7) TMI 1503 - SUPREME COURT OF INDIA] held that in case of inclusion of cost of free supplied material, the landed cost has to be added, therefore, there is no question of cum-duty price. In the same case it was held that invocation of the extended period is correct for the reason that free supplied goods and non inclusion of value thereof was not disclosed by the appellant to the department - Therefore, the demand on this count is clearly sustainable. CENVAT Credit - duty paying invoices - endorsed invoice - Held that:- Though the invoice was issued in favour of principle on whose behalf the appellant have manufactured the excisable goods but the facts remains that such invoices were endorsed in favour of the appellant by the principle. The receipt, use of the goods of the said endorse invoice by the appellant is not under dispute. So long the goods on which Cenvat Credit was availed have been used in the manufacture of goods on behalf of principle the credit is correctly available to the appellant - the demand on the issue of Cenvat credit is set aside. Penalty imposed on the director of the company - Held that:- The issue of non-inclusion of value of free supplied goods is technical issue for which the malafide intention on part of the director cannot be attributed - in this nature of case penalizing director is not proper - the penalty imposed on director is set aside. Appeal allowed in part.
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2019 (2) TMI 758
CENVAT Credit - deemed manufacturer - deemed credit availed on the invoices issued by M/s. Shree Laxmi Textiles, M/s. S.P. Cotton Mills and M/s. Hindustan Cotton Mills - period August 2004 to September 2004 - deletion of Rule 12B of the Central Excise Rules, 2002 - Held that:- CBE &C Circular No. 345/2/2004- TRU dated 28-7-2004 have categorically clarified that the trader can discharge the duty liability on the goods, which were received by him prior to 9-7-2004. It is not clear in this case whether such goods, duty was paid on the goods invoiced to appellant, on which credit was availed were in fact received by the trader prior to 9-7-2004. If the trader issues an invoice of 18-8-2004, it has to be presumed that the Excise registration certificate issued to him was valid. If that be so, the issue needs to be considered from this angle also. Matter needs re-examination - appeal allowed by way of remand.
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2019 (2) TMI 757
CENVAT credit - input services - outward transport (GTA service) - period January 2005 to March 2008 - Held that:- The issue is no more res integra covered by the judgment of the Hon’ble Supreme Court in the case of Vasavadatta Cements Ltd. [2018 (3) TMI 993 - SUPREME COURT], where it was held that tax paid on the transportation of the final product from the place of removal upto the first point, whether it is depot or the customer, has to be allowed - credit allowed - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 756
Classification of manufactured item - Recombinant Human Erythropoietin (R-EPO) - whether classifiable under Chapter heading No.3002 or under Chapter heading No.3003? - extended period of limitation - Held that:- The detailed correspondences which undertook between the appellant and the departmental authorities on filing of the classification by the appellant, the extended period cannot be invoked by the show cause notice for demanding duty for the period February, 2001 to February, 2002 and is incorrect and hit by limitation - entire demand in the case in hand is unsustainable on limitation only - penalties also set aside - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 755
CENVAT credit - removal of Capital goods after use - Rule 3(5B) of Cenvat Credit Rules - Held that:- The appellant has availed cenvat credit of the duty paid on the capital goods in accordance with the provisions of Cenvat Credit Rules, 2004. After the capital goods were put to use, the same were cleared in the year 2011-12. While clearing the goods, the goods, the appellant has reversed the credit availed at the time of receipt of the capital goods in the factory, reducing the same @ 2.5% per quarter for the period the credit was availed. Therefore, the computation of the department is incorrect. Besides, there is no suppression of fact as the present demand relates to application of the formula prescribed under Rule 3(5B) of Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 754
Method of Valuation - Clearance of MS Ingots to other division - case of the revenue in the SCN is that the clearances effected by appellant to rerolling division should have been valued under Rule 8 of the Central Excise Valuation Rules, 2000 by arriving at cost construction basis and add to that profit margin - revenue neutrality - Held that:- It is the case of the revenue and the adjudicating authority’s findings that appellant has undervalued the goods cleared to their rerolling division. This allegation is based upon the working of the authorities from the balance sheets supplied by the appellant. In our view, the findings of the adjudicating authority are unsustainable on the face of it. If the revenue authorities are not finding fault with the assessable value on which Central Excise duty is paid, when cleared to independent buyers, the said value needs to be considered as a correct assessable value. In the case in hand, there being no dispute of the assessable value cleared to independent buyers, the same value having been considered by the appellant for the clearances made to the sister concern is correct and cannot be called out for revaluating the clearances made to sister unit. Revenue neutrality - Held that:- The clearances which were made by the appellants to the sister unit on payment of duty and sister concern is availing the CENVAT credit of such duty paid tantamount to revenue neutrality. The question of revenue neutrality would apply in its full force in favour of the appellant herein - the demand for the period by invoking extended period is unsustainable. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 753
Recovery of amount collected by appellant from their customers - Section 11D of CEA - applicability of time limitation for recovery of the amount - delay in taking up adjudication - Incentive scheme. Held that:- This was not the original demand for recovery under Sec.11D. The period in question is September, 1991 to August, 1993 and the show cause notice was issued on 27.02.1996. Thus, it cannot be said that there is inordinate delay in issuing the demand. There certainly was delay in deciding the case in the remand proceedings after the provisions of Sec.11D were amended retrospectively from 1991. Delays in adjudication either in the original or in the remand proceedings itself will not amount to delay in issuing the demand. There is no time limit prescribing within which an adjudication, after denovo proceedings has to be completed. Similarly, there is no time limit within which the appeals have to be disposed of. Such delays are certainly highly undesirable but they do not vitiate the proceedings of the adjudication nor do they override the statutory provisions of Sec.11D. It cannot be accepted that delay in taking up the adjudication proceedings denovo would vitiate the demand under Section 11D - the demand under Section 11D in the impugned order is liable to be upheld - appeal dismissed - decided against appellant.
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2019 (2) TMI 752
CENVAT Credit of service tax paid - development and annual maintenance of website - extended period of limitation - Held that:- The assessee was audited in August 2014 and thereafter the show-cause notice was issued in December 2015 which is beyond the period of limitation of one year as prescribed under the Act. Further, after the audit, no material has come to the notice of the Department which has been relied upon for issuing the show-cause notice. The show-cause notice was issued based on audit report itself. Tribunal in various cases has consistently held the extended period of limitation cannot be invoked when the show-cause notice is based on audit. Further, the appellant has shown the credit in their returns. Further, the Department has also failed to bring on record any material except saying that the suppression was detected during the audit and had it not been detected during the audit it would have gone unnoticed. This is not sufficient reason for invoking extended period of limitation. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 751
Demand of Interest - time limitation - reversal of irregularly availed CENVAT Credit in respect of Capital Goods - Held that:- It has been held by the Hon’ble Apex Court in the case of TVS Whirlpool Ltd [1999 (10) TMI 701 - SUPREME COURT OF INDIA] that the demand of interest has to be made within the normal period of limitation or 5 years as the case may be, as is applicable to the demand of duty itself - In this case, there is no allegation or evidence that there was any fraud, collusion, wilful misstatement or suppression of facts with an intention to evade payment of interest on the CENVAT credit. Therefore, the demand of interest should have been made within one year and this has not been done within this time limit - no demand can be made for the interest being time barred. Penalty u/r 15(1) of CENVAT Credit Rules, 2004 - Held that:- To attract penalty under Rule 15(1) of CENVAT Credit Rules, 2004, the person should have taken or utilized CENVAT Credit wrongly or in contravention of the provisions of the Rule - In this case, prima facie there is no evidence of taking credit wrongly by the appellant. It is different matter that the appellant has not disputed and has reversed the credit and is also not contesting reversal of CENVAT credit done by them voluntarily - this is not a case fit for imposition of penalty under Rule 15(1) of CENVAT Credit Rules, 2004. The impugned order is modified to the extent that the interest of the period beyond one year from the show cause notice is set aside and the demand of interest within one year is confirmed and the penalty under Rule 15(1) is set aside - appeal allowed in part.
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2019 (2) TMI 750
Imposition of Penalty u/r 25(1)(a) of Central Excise Rules - Default in payment of central excise duty - amount of duty not paid within 30 days from the due date as required - Rule 8 (3A) of Central Excise Rules, 2002 - Held that:- Hon’ble High Court of Gujarat in the case of Indsur Global Limited vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT] has struck down this Rule and the judgment of Hon’ble High Court of Gujarat has been stayed by Hon’ble Supreme Court. The Hon’ble High Court of Delhi in the case of Space Telelink Limited [2017 (3) TMI 1599 - DELHI HIGH COURT] held that the ratio of the judgment of Hon’ble High Court of Gujarat would still apply notwithstanding the fact that it has been stayed by Hon’ble Apex Court. It has been held that only the operation of the judgment is stayed and not the underlying basis of the judgment itself - the penalty imposed under Rule 25(1)(a) of Central Excise Rules for contravention of Rule 8(3A) is liable to be set aside. Penalty of ₹ 2,000/- imposed for availing the CENVAT Credit twice on the same invoice - Held that:- The amount involved is small but find that the penalty is equally small and commensurate with the violation of CENVAT Credit Rules, 2004 - demand upheld. Appeal allowed in part.
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2019 (2) TMI 749
SSI Exemption - use of brand name of “Gulab” - N/N. 8/2002 dated 01/03/2002 as well as 8/2003 dated 1/3/2003 - Time bar - Held that:- It is also not in dispute that this brand name was owned by M/s. Vinita Soya Products, a partnership firm in which the directors of the appellant-assessee were the partners. M/s. Vinita Soya Products have issued No Objection Certificate in favour of the appellant for use of such brand name. Inspite of such no objection certificate, it cannot be held that the brand name belongs to the appellant. The clearances made bearing the brand name of another person disentitles the appellant to the claim of small scale industry benefit during the relevant period. The N/N. 8/2002 as well as 8/2003 ibid, contain specific a clause that the benefit of SSI exemption will not be available for the goods cleared bearing the brand name of another person. The appellant is a Private Limited Company and has legal distinct status from that of the Partnership Firm which owned the brand name - there is no reason to interfere with the findings of the Adjudicating Authority that the appellant will not be entitled to the benefit of the SSI exemption. In any case, for the periods 2004-2005 to 2006-2007, the appellant themselves did not claim the SSI benefit, since in the total aggregate value of clearances in the previous financial years had exceeded the upper limit of ₹ 3 crores. Time limitation - Held that:- From record, it is seen that the appellant, who started manufacture of the products similar in 2003, did not approach the department with intimation of the same and did not take registration with the Jurisdictional Central Excise Authorities. Only in 2006, they appeared to have got in touch with the Central Excise Superintendent who issued clarification dated 28/02/2006 to the effect that they were not required to obtain Central Excise Registration - the appellant cannot be absolved of the allegation of suppression - the findings of the lower authority upheld justifying the demand of Central Excise by invoking the extended period of time limit under Section 11A. Area Based exemption - N/N. 32/1999 dated 8/7/1999 - Held that:- It is not clear whether the appellant has claimed the benefit of such Notification before the Jurisdictional Authorities. Since, this is a conditional notification, the benefit of the same is required to be claimed and duly examined by the Jurisdictional Authorities before allowing the benefit - these arguments cannot be entertained at this stage. Imposition of u/s 11AC is equal to the total duty demanded under the provisions of Section 11A - Held that:- There is no discretion involve in the levy of such penalty - the finding of the Lower Authority justifying suppression, hence, the penalty under Section 11 AC cannot be waived is upheld - the penalties imposed on the two directors, merits reduction. Penalties imposed on Shri S. B. Sharma as well as Shri P. K. Sharma both directors are reduced from ₹ 2 lakh to ₹ 50,000/- Appeal allowed in part.
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2019 (2) TMI 748
CENVAT Credit - various input services - Restaurant Services - short term accommodation services - Membership of club/association service - Tour operator services - Mandap Keeper Services - Outdoor catering services - convention services - denial on account of nexus - Held that:- It is not in dispute that all these bills raised were in the name of the appellant (a public sector undertaking) and not in the name of any individual. The actual person who stayed in the accommodation booked or enjoyed the food at the restaurant etc., could be an individual, say, an employee of the appellant firm or somebody else in relation to some business of the appellant. This should not matter as long as the services are in relation to their business. It cannot be said these services are not related to their business activity - credit allowed - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 747
Method of valuation - section 4 or 4A of CEA - free soaps supplied - the wrappers clearly indicate that they are not meant for sale - MRP indicated but scored out, clearly indicating that the price is only for information and not for sale - Held that:- CBEC Circular No.673/64/2002-CX dated 28.10.2002 held that the scored out MRP should be ignored. However, where the multi pieces are packaged into single item with MRP printed on both individual items and multi pack, if individual items have MRPs printed on them but scored out, then the MRP printed on the multipack will be taken for the purpose of valuation. In the subsequent Circular No. 813/10/2005-CX dated 25.04.2005 on the question of samples which are distributed free as a part of marketing strategy or as gifts or donations CBEC clarified that in case of free samples, the value should be determined under Rule 4 of Central Excise Valuation Rules. The Hon’ble Supreme Court in the case of Jayanti Food Processing Pvt Ltd [2007 (8) TMI 3 - SUPREME COURT] has finally put to rest any doubts regarding valuation of excisable goods which are supplied free along with some other products holding that where goods are supplied free Sec.4A of the Central Excise Act will not apply - The present case is squarely covered by this decision - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 746
CENVAT Credit - input services - the works contract for the repair or maintenance used in the factory building and the administrative building alongwith other fabrication work and civil work - Held that:- Coming to the inclusion part of the definition the pare perusal clarifies that the services used in relation to the modernisation, renovation, repair, etc. are the eligible input services. These two perusal are creating a clear distinction between what is called as repair and maintenance and what is called as construction and that these two are two separate services altogether. Apparently and admittedly the services provided by the contractor of the appellant to the appellant are the Repair and Maintenance Services though in the form of work contract for civil structure but for the purpose of repair and maintenance. The invoices as placed on record clearly mentions the same. Thus the services rendered is the work contract for the maintenance of already existing structure within the appellant’s plant wherein is carried on the manufacturing of the petroleum products (final products) by the appellant. The harmonious reading of the inclusive part of the definition and the exclusion clause mentioned at Clause (a) relating to construction service of the definition of ‘input service’, it is clear that the construction service relating to modernisation, renovation and repair of the factory continued to be within the meaning of ‘input service’ and accordingly, the service tax paid on such service is eligible to credit. Undisputedly, the appellants carried out modernisation, renovation or repair work in their factory premises as is evident from the input service invoices enclosed with the respective appeal paper book; therefore, the same are eligible to credit. The Commissioner(Appeals) has definitely committed an error while just relying upon the fact that the services provided were in the nature of work contract and he has failed to appreciate the work contract is not for construction but only for repair and maintenance. The findings are therefore liable to be set aside. The impugned order denying the cenvat credit on Repair and Maintenance Service on the ground of these being work contracts which are not input services - Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 745
Valuation - related party transaction - goods sold by the appellant to their related entity Exide Products Limited (EPL) for further sale - case of the department is that the price at which EPL has sold the goods to their customers should be adopted for discharging duty in terms of 3rd proviso to Section 4(1)(a) of the Central Excise Act - Held that:- In the present case, admittedly the appellant has sold goods to independent customers in addition to sale to EPL. The price at which the goods were sold to independent buyers was adopted as the basis for the valuation of goods sold to EPL - Proviso (iii) to Section 4(1)(a) of the Central Excise Act, 1944 however, specifically excludes from its operation cases where the goods are partly sold to un-related wholesale dealer and partly to related person. It is clear from the wording of the said proviso itself. The Commissioner in the impugned order has admitted the fact that the appellant in addition to sale of the goods to EPL has also sold the goods to unrelated buyers. There is also no dispute on the fact that the comparable price to independent customer has been adopted as the basis for discharging duty on sale to EPL - further, in the present case there is no evidence led in by the department to show that the relationship has influenced the price for the same to be rejected. Similar issue has been decided by the Tribunal in the Appellant’s own case EXIDE INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., CALCUTTA-III [2002 (2) TMI 817 - CEGAT, KOLKATA] wherein it was held that sale of goods to others buyers alongwith related party sale would not attract third proviso to Section 4(1)(a) of the Act. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 744
Parts of Electric Motors cleared to various zones of the Railways for use as spare parts - benefit of N/N. 67/86-CE dated 10/02/1986 - Department was of the view that the appellant will not be entitled to the benefit of this Notification, in respect of the parts of Electric Motors cleared to various zones of the Railways for use as spare parts - Held that:- In respect of the parts of motors cleared outside the appellant’s factory for use in various zones of the Railways, we are of the view that the benefit of N/N. 67/86 will not be available in asmuchas the benefit can be extended only to parts which are used in the factory of production as component parts. The Adjudicating Authority is directed to quantify the demand, if any, which survives within the normal time limit in respect of SCN dt. 03/08/1992 - Penalty set aside - appeal allowed in part.
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