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2020 (7) TMI 385
Classification of services - GTA or cargo handling service - local transportation/shifting charges collected by the Appellant which is inclusive of loading of tipper, transportation upto Railway Track Head and automated unloaded of tipper at the Railway Track Head - HELD THAT:- The contract in dispute in the instant case is essentially for the transportation of goods which incidentally involving loading of tipper/unloading of tipper at Railway Track head/Railway Siding which cannot be taxed under the category of Cargo Handling Service simply because rates for loading of tipper at Dump Yard and unloading of tipper at Railway Siding is not provided separately. The Learned Commissioner (Appeal) has erred in placing reliance on Circular No.B11/1/2002-TRU dated 01-08-2002 which does not apply to the facts of the instant case.
Further, so far as the transaction of transportation is concerned, it is no body’s case that the Appellant is a Cargo Handling Agent to attract the levy under the category of Cargo Handling Services.
Appeal allowed - decided in favor of appellant.
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2020 (7) TMI 384
Classification of services - IPR service or franchise service? - manufacture and sale of various formulations (fast moving consumer goods) - benefit of a Notification dated 10 September, 2004 - reverse charge mechanism - HELD THAT:- The amended definition of “franchisee” contains only the first condition of the definition as it stood prior to 16 June, 2005 and the other three conditions have been left out. Under the amended definition, “franchise” means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. Thus, if the condition relating to “representational right” is not satisfied the transaction would not be classified as a “franchisee’ service. “Representational right” means that a right is available with the “franchisee” to represent the franchisor and in that case the “franchisee” loses its individual identity and would be known only by the identity of the franchisor.
The Mumbai Tribunal in GLOBAL TRANSGENE LTD VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS & SERVICE TAX, AURANGABAD [2013 (8) TMI 748 - CESTAT MUMBAI] also observed that the foremost requisite for a service to qualify as a taxable ‘franchise’ service is that the “franchisee” should have been granted a representational right and that in a franchisee transaction, the “franchisee” loses its individual identity and represents the identity of the franchisor to the outside world.
There is nothing in the agreement which may indicate that the “franchisee” has lost its individual identity and is representing the identity of the franchisor to the outside world. The arrangement is clearly a typical case of a licensing transaction and is in no way similar to a ‘franchisee’ agreement as understood in the commercial world. In a ‘franchisee’ agreement, the franchisor owns IPR and allows the franchisee to set up and run the business in the name of the franchisor. The customers coming to the outlets of the franchisor believe that they are directly dealing with the franchisor - The terms of the agreements leave no manner of doubt that the agreement is not a ‘franchisee’ agreement.
Whether the services received by the Appellant can be classified as ‘IPR service’? - HELD THAT:- The definitions of IPR and intellectual property service as contained in section 65(55)(a) and section 65(55)(b) of the Act have been reproduced above. The taxable service under section 65(55)(zze) of the Act has been defined to mean any service provided or to be provided to any person by the holder of intellectual property right, in relation to intellectual property service. The agreement executed between the parties is clearly for a temporary transfer of IPR as will be seen from the Preamble and Article 2 of the Agreement. Under Article 3 of the Agreement, the licensee acknowledged that all rights, title, interest or goodwill in the IPR is and remains vested in the licensor and shall not impair the rights of the licensor in the IPR. Article 6 provides that in consideration of the rights and IPR granted by the licensor under the agreement, the licensee shall pay the licensor royalty equivalent to 5% of net sales of products in India and royalty equivalent to 8% on exports in India. It is, therefore, clear that the services have been correctly classified by the Appellant as IPR.
When the services received by the Appellant would merit classification under IPR service, the Appellant would also be entitled to abatement of Service Tax available to a holder of IPR under the notification dated 10 September, 2004 - it is not necessary to examine whether the Appellant would also be entitled to the benefit of the Notification dated 10 September, 2004 even if it is held that the service received by the Appellant would be in the nature of a ‘franchisee’ agreement, nor would it be necessary to examine whether the extended period of limitation was correctly invoked in the show cause notice.
The order passed by the Commissioner confirming the demand of service tax and imposing penalty cannot be sustained and is set aside - Appeal allowed - decided in favor of appellant.
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2020 (7) TMI 383
Reopening of assessment - rectification of mistake - error apparent on the face of record - Section 55 of the Tamil Nadu General Sales Tax Act, 1959 - exemption from payment of sales tax - Government vide G.O.Ms.No.528 Commercial Taxes and Religious Endowment Department dated 21.11.1997 - levy of penalty.
Whether the power under Section 55 of the Act could have been invoked and Section 55 of the Act gives power to rectify any error apparent on the face of the record? - HELD THAT:- The intention of the Legislature was to grant power to the Assessing Officer or the Appellate Authority or the Tribunal to rectify its orders when there is an error apparent on the face of the record. Hence, the power under Section 55 of the Act cannot be used to review an order of assessment by reopening an assessment. Such power has not been conferred on the Authority under Section 55 of the Act - In the instant case, the Assessing Officer, while passing the revised assessment orders dated 28.7.2009, reviewed the earlier assessment orders, which is impermissible in law by invoking Section 55 of the Act.
The mistake should be apparent on the face of the record. Only if all these features are available, the assessment can be reopened by invoking the power under Section 55 of the Act. Therefore, the revision of assessment dated 28.7.2009 is wholly without jurisdiction - Hence, the issue is decided in favour of the petitioners and against the Revenue.
Whether the Tribunal was right in denying the benefit of exemption, largely, by referring to the decision of the Hon’ble Supreme Court in the case of COASTAL CHEMICALS LTD. VERSUS COMMERCIAL TAX OFFICER, AP AND OTHERS (AND OTHER APPEALS) [1999 (10) TMI 599 - SUPREME COURT] and the decision of the Kerala High Court in the case of TEAKTEX PROCESSING COMPLEX LIMITED VERSUS STATE OF KERALA [2002 (10) TMI 761 - KERALA HIGH COURT]? - HELD THAT:- In view of the factual position in the decision in the case of Coastal Chemicals Limited wherein the question involved was as to whether the natural gas fell within the meaning of the word 'consumables' in Section 5B(1) of the Andhra Pradesh General Sales Tax Act, 1957, based on which, the decision was rendered, we find, on facts, that the said decision cannot be of any assistance to the case of the Revenue.
The most important aspect, which is to be noted, is that the exemption has been granted by the State Government for sale of certain items of goods to 100% EOUs in the State and the units located in Chennai Export Processing Zone. Therefore, the object of exemption is to promote exports. The Tribunal proceeded largely by examining as to what would be the meaning of the term ‘consumable’ and referred to the two decisions and held that though the carbide tip inserts lose their utility, they do not lose identity. The Tribunal should have interpreted the expression 'consumable goods’ and if the same is done, the nature of the goods supplied and whether the same gets consumed would be required to be examined.
The exemption notification has to be interpreted in a strict manner without adding any words to it. As mentioned earlier, the object of the Legislature is to promote exports. Therefore, if viewed from the purchasers’ point of view, the carbide tool becomes useless after it loses its utility. So far as the sellers are concerned, on sale of the goods and use by the purchasers, if it loses its utility, it can no longer be termed as a tool or a cutting device. Hence, viewed from the angle of both the purchasers and the sellers, the carbide tip tools are to be treated as consumable goods and are entitled to the benefit of exemption - the issue is answered in favour of the petitioners.
Revision allowed.
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2020 (7) TMI 382
Request for detention in Kerala instead of Mumbai - case of petitioners is that they are resident of Kerala - HELD THAT:- This Court is of the prima facie view that pending adjudication of this petition, the petitioner should immediately surrender before Director General of Police, Government of Kerala, Thiruvananthapuram and if the petitioners do not succeed in this petition, they shall be shifted to Mumbai - The petitioners are directed to surrender before Director General of Police, Government of Kerala, Thiruvananthapuram on 18th June, 2020 at 02:30.
List for continuation of the arguments on 24th July, 2020.
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2020 (7) TMI 381
Classification of Services - rate of tax - applicant agreed for construction work namely “Construction of Building for Office space/IT space at IT park, Mangalgiri as awarded by APIIC - composite supply of works contract - Governmental Authority/entity or not - construction work taken up by the applicant is meant for business or otherwise.
Whether APIIC which awarded construction work to the applicant would qualify for a Governmental Authority/entity or not? - HELD THAT:- Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by the GO No: 831 dated 10-SEP-1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41st Annual Reports for the years 2013-14 as made available by APIIC website, the Government of Andhra Pradesh including its nominees is having 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, we conclude that M/s APIIC is a “Government Entity” for the purpose of GST matters.
Whether the construction work in which the applicant is engaged in is meant for any business or otherwise? - HELD THAT:- As seen from the 41st Annual Report for the year 2013-14 as made available by APIIC in their website https://www.apiic.in/Annualreports.html, they are engaged in land acquisition and development and allotment of plots and sheds to various industrial ventures in the State making investments in joint venture, in associate companies , in related party companies, in subsidiary companies etc., and the income they are getting is revenue from operations like sale of land, houses, interest on hire purchase and long term borrowings etc. - It is evident from the above statement that the activities of M/s APIIC are business activities and not otherwise. Moreover, the applicant did not provide any information or documentary proof evidencing that the construction/ building is for use other than for commerce, industry, or any other business or profession to be eligible for concessional rate of 12% available under Notification No.24/2017 - CT (Rate) dated 21.09.2017.
The contract entered by the applicant is classifiable under SAC Heading No. 9954 under construction services, and it falls under entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18%.
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2020 (7) TMI 380
Liability of GST - medicines supplied to In-patients through pharmacy - medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure - HELD THAT:- Applicant renders health care services to in-patients in the form of supply of medicines, drugs, stents, implants etc being administered during the medical treatment or procedure - Primarily the health care services provided by the applicant are exempt under Sl.No. 74 Heading 9993 vide Notification No 12/2017 - Central Tax (Rate) Date: 28.06.2017.
The health care services as explained in (zg) of para 2 of Notification no. 12/2017 - Central Tax (Rate) Date: 28.06.2017, defines service by way of diagnosis, or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India. In common parlance, when one looks into the definition, 'the treatment or care' extended by hospital can be thought of devoid of medicines, relevant consumable, or implants, by no stretch of imagination. The supply of medicines and the consumables are integral part of the treatment extended to the in-patients by the hospital - the services rendered by the applicant is a composite supply as defined under section 2(30) of CGST Act, 2017 in which the principal supply is health care, being predominant and the supply of medicines, drugs, implants, stents, and other consumables, come under ancillary supplies and accordingly tax liability has to be determined under section 8 of CGST Act, 2017.
Even the Circular No.32/06/2018-GST (F.No.354/17/2018-TRU) date: 12.02.2018 released on the approval of the CGST council 25th meeting clarifies the issue on the similar lines stating that the food supplied to in-patients is part of composite supply of health care and not separately taxable, whereas other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable - the same principle is applicable to the medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure.
Thus, the supply of medicines supplied to In-patients through pharmacy are not liable to tax, being a part of the composite supply of health care services under SI.No. 74 Heading 9993 vide Notification No 12/2017 - Central Tax(Rate) Date: 28.06.2017 which are nil rated - medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure are not liable to tax.
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2020 (7) TMI 379
Governmental Authority or not - undertaking drinking water supply projects in Anantapur District, Andhra Pradesh - exemption from the GST by virtue of Entry 3 in Notification 12/2017 (Rate), dt: 28.06.2017 - requirement of remission of GST to its suppliers for any services it procures by virtue of its activities of supplying water for domestic purposes.
Governmental Authority or not - HELD THAT:- The applicant is not set up by an Act of Parliament or a State Legislature - applicant is constituted by the Government i.e., the State of Andhra Pradesh under G.O. Ms No. 344 dated: 16.09.1997 - The Board of the applicant i.e., “Sri Satya Sai Water Supply Project Board” consists of 9 Members, out of which 7 are officers /Employees of the Government of Andhra Pradesh that qualifies for 77% of Government control falling short of the designated 90% as required by the Act. Even the cost of the operation and maintenance of the water supply scheme is contributed at a ratio of 70% by the State Government, while 30% of the cost is being borne by the applicant from the water charges collected from the users - In the instant case the applicant falls short of the qualifying mark of 90% in terms of equity or control. Hence the applicant does not fit in the category of “Governmental authority”.
Thus availment of exemption for the services received by the applicant by virtue of SI.No. 3 of Notification No 12/2017 - Central Tax (Rate), dt: 28.06.2017 does not arise in this context.
Taxability of the services procured by the applicant from its Contractor M/s. Larsen & Toubro Limited, Water Supply & Distribution Business Unit, Water & Effluent Treatment IC - HELD THAT:- The Contractor is responsible for the “Operation and Maintenance” of the plant such as engaging of labour, supervisors to oversee the labour and managers for overall supervision along with amenities, tools & tackles provided for all the above personnel like vehicle, office establishment etc., while the applicant would ensure uninterrupted power supply and supply of material /spares as and when necessitated by the Contractor. Thus the services provided by the Contractor are pure services of “Operation and Maintenance” of plant devoid of any supply of material or goods in the due process. The services under question fall under SI.No. 25, Heading 9987 “Maintenance repair and installation (except construction) Services” attracting tax rate of 18% under Notification 11/2017- Central Tax (Rate) dt: 28.06.2017.
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2020 (7) TMI 378
Classification of supply - supply of goods or not - transaction of printing of content provided by the customer, on poly Vinyl Chloride banners and supply of such printed trade advertisement material - classification of such trade advertisement material if the transaction is a supply of goods - Applicability of TRU Circular No. 11/11/2017-GST dated 20.10.2017.
Whether the transaction of printing of content provided by the customer, on poly Vinyl Chloride banners and supply of such printed trade advertisement material is supply of goods? - HELD THAT:- The applicant in the instant case takes up the supply of trade advertising material by procuring the required raw materials such as poly vinyl, flex, paper, cloth printing inks etc., all by themselves based on specification provided by the client in terms of design, size and material. In-fact, the applicant transfers the title in the goods i.e., printed material on flex to the customer - From the plain reading of Section 7 of CGST Act, 2017 read with Schedule - II Sl.No. 1(a) of CGST Act, 2017, it is obvious that the applicant is transferring the title in goods to his customers in the form of trade advertising material and it constitutes supply of goods only.
Rate of tax - Classification of goods - HELD THAT:- The trade advertising materials is classifiable vide Notification No.1/2017 - Central Tax (Rate) dt: 28.06.2017 under S1.No.132 under HSN code 4911 and attracts tax rate of 12% - Further, the same has been clarified in detail vide the clarification issued under F.No.354/263/2017-TRU, Dt: 20th October, 2017 in Circular No.11/11/2017-GST.
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2020 (7) TMI 377
Classification of services - Rate of GST - Works Contract Service - construction of Millennium tower at Madhurawada, Visakhapatnam for information Technology and Communication Department, Government of Andhra Pradesh and through Nodal Agency APIIC - whether refund to be submitted in RFD-01? - Government Entity or otherwise.
Whether M/s. APIIC is a Government Authority / Entity or otherwise? - HELD THAT:- Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by the GO No: 831 dated lo-SEP-1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41st Annual Reports for the years 2013-14 as made available by APIIC website, the Government of Andhra Pradesh including its nominees is having 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, M/s APIIC is a “Government Entity” for the purpose of GST matters.
Classification of Service and rate of tax - HELD THAT:- As seen from the Agreement, the applicant agreed for construction of Millennium tower at Madhurawada, Visakhapatnam for information Technology and Communication Department, Government of Andhra Pradesh and through Nodal Agency APIIC, which includes procurement and supply of goods and services, for agreed consideration. The activity of construction includes both supply of goods and also services - The composite supply of works contract under Section 2 (119) of CGST Act, 2017 / APGST Act, 2017 is treated as supply of service in terms of Serial No.6 (a) of Schedule II of CGST Act '2017 / APGST Act, 2017 - The Government of India, vide notification No. 11/2017 - Central Tax (Rate), dated -28th June 2017 notified the rate of GST applicable on supply of services. Under this notification for heading 9954 the applicable rate of GST is 9%.
The applicant is engaged in Construction work for Millennium Tower at Plot No.16& 17 (in 4.00 Acres) at Hill No.3. Madhurawada, Visakhapatnam District through Nodal agency APIIC, which is meant for undertaking development of EMC's/IT Parks/IT SEZs/ IT Layouts, for coordinating with necessary Government agencies and provide basic infrastructure like power, water, sewerage, access roads to the doorsteps of the proposed EMCs/IT Parks/ IT SEZs/ IT Campuses. APIIC has also been nominated as Industrial Area Local Authority (IALA) in Madhurawada IT layout for undertaking provision & maintenance of Infrastructure facilities.
Whether the construction work in which the applicant is engaged in is meant for any business or otherwise? - HELD THAT:- The activities of M/s AMC are business activities and not otherwise. The applicant informed that the said construction is for accommodating Small and Medium Enterprises (SMEs) and Startups. Moreover, the applicant did not provide any information or documentary proof evidencing that the construction/ building is for use other than for commerce, industry, or any other business or profession to be eligible for concessional rate of 12% (6% CGST + 6% SGST) available under Notification No.24/2017 - CT (Rate) dated 21.09.2017.
The contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, and it falls under entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18%.
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2020 (7) TMI 376
Rate of GST - tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves - purchase of tobacco leaves form other dealers who have purchased them from farmers, for the purpose of trading - seggregation of tobacco into grades depending upon their size (width), colour /shade, length, texture of the leaf etc., and sells such graded tobacco leaf - tobacco leaves are butted and sold to other dealers - tobacco leaves re-dried without getting them threshed and sold - tobacco leaves threshed and re-dried - tobacco threshed and re-dried on job work basis at others' premises and then sells such threshed and re-dried tobacco leaves to others.
HELD THAT:- The transactions of tobacco from auction platform to the supply made to the exporter are to be interpreted in the light of the relevant notifications and to decide the rate of tax accordingly. As seen from the different stages of commodity i.e., from the leaves stage to the final product (manufactured tobacco), the green leaf plucked from the plant undergoes different types of curing to reduce the level of moisture to the maximum extent for sustainability and to continue as leaf for further process. The tobacco leaf will be entitled as a commercial commodity only drying (Curing) and normally put to trade in form of bundles. The same will be traded between the farmer and the trader and trader to trader/manufacturer and so on. As envisaged from the entries under GST, there are four different entries for tobacco, one under Schedule-I. Liable @5% (CGST 2.5% and SGST 2.5%) and the remaining heads are in Schedule- IV liable 28% - And there is an entry of tobacco leaves under Reverse charge mechanism also.
The commodity “tobacco leaves” shall be interpreted in the light of the entry 109, Schedule- I of Notification No.1/2017-Central Tax (Rate) and the entry no 3 inserted under the notification 4/2017-CGST (Rate) issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e., 2401.
As observed from the facts, i.e process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the transaction takes place in between the farmer and the trader on the auction platform. Further, as per the clarification issued by The Department TRU(Tax Research Unit)vide circular F.No.322/2/2017/Dec.2017, “Tobacco Leaves” means, leaves of tobacco as such or “broken leaves” or “Tobacco Leaves stems”. It clearly expresses that the leaves as long as they do not loose their basic character as 'leaves', shall be considered as tobacco leaves only - In the present case the applicant purchases the dried leaves on auction platform and trades the same to other dealers or exporters and further engaged in threshing and re-drying of tobacco leaves on job work basis for other traders or manufacturers.
Rate of GST on tobacco leaves (butted or re-dried) is 5% - Rate of GST will be 28% if the applicant gets the tobacco leaves threshed and re-dried.
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2020 (7) TMI 375
Constitutional validity of Section 16(2)(C) of the CGST Act, 2017 and Rule 86A of the CGST Rules, 2017 - ITC credit blocked - supplier/seller does deposit the tax collected from the purchaser, over which the bonafide purchaser has no control - HELD THAT:- List on 14.07.2020 for interim directions.
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2020 (7) TMI 374
Stay petition - commanding the petitioner to pay 20% of the demanded amount - HELD THAT:- AO / CIT(A) cannot blindly apply the Circular, as in the instant case. - Even the order do not reflect whether opportunity of hearing was given to the petitioner nor any advertance to any arguments. Such order cannot escape the scrutiny of the Court, while exercising the power of judicial review under Article 226 of the Constitution of India.
Ext.P14 impugned order is set aside and the matter is remitted to the Office of the Commissioner of Income-tax (Appeals) - I, to consider the stay applications filed and pass detailed order, after affording opportunity of hearing to the petitioner.
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2020 (7) TMI 373
Correct head of income - Determination of income from the property - business income or long term capital gain - substantial question of law - HELD THAT:- Admittedly, the properties were acquired by the assessee in the year 1992 and assessee had entered into an agreement for sale on 13-5-2002. Thereafter in the accounts up to the year 2004, the property was mentioned as an asset.
Assessee has not conducted any other activity other than holding the land as investment. It is also pertinent to mention here that the revenue has not come up with any documentary evidence to suggest that assessee had earned income from the transaction to the land in question during the year 2003-04. The Tribunal thereafter on the basis of meticulous appreciation of evidence on record has recorded a finding that assessee has rightly disclosed the income from the property as long term capital gains instead of business income. The aforesaid finding by no stretch of imagination can be believed to either perverse and arbitrary. - Decided against revenue
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2020 (7) TMI 372
Reopening of assessment - information received from INV Wing - bogus sales and commission paid on the alleged accommodation entries - application of mind of the Assessing Officer before issuing such notice or not? - HELD THAT:- Entire assessment based upon the information received is devoid of any application of mind. At this juncture, it is pertinent to mention that neither Shri Kishore Sharan Goyal nor Sai Kripa Enterprises and Balaji Enterprises are related to the assessee.
Transaction is not of unsecured loan/cash credits where the assessee has introduced its own unaccounted cash in the form of sales. Sales are supported by C Forms, VAT Nos and Sales Tax numbers of the parties, further supported by the certificates from the forest department. All these have not been examined by the Assessing Officer and had he examined these documents/evidences or made necessary enquiries, he may not have issued notice u/s 148 of the Act but for non-application of mind, the assessment was reopened.
In the case of RMG Polyvinyl Ltd [2017 (7) TMI 371 - DELHI HIGH COURT] had the occasion to consider the issue whether notice issued by the Assessing Officer to reopen assessment on the basis of information received from INV Wing could be said to be tangible material, the Hon'ble High Court held that information received from INV Wing could not be said to be tangible material per se without a further enquiry being undertaken by the Assessing Officer to establish link between tangible material and formation of reason to believe that income has escaped assessment.
Thus the assessee succeeds on both the counts - reopening is devoid of any application of mind and additions are solely based upon assumptions, conjectures and surmises. - Decided in favour of assessee.
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2020 (7) TMI 371
Deduction u/s 80P - claim denied as assessee was essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule - whether loan is a agricultural loan or a non-agricultural loan? - HELD THAT:- The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In these cases, such a detailed examination has not been conducted by the A.O. A.O. has not examined to what extent loans, if any, has been disbursed to non-members.
There is a passing statement in the assessment order that there have been disbursement of loans to non-members as well. In the light of the dictum laid down by the Full Bench of the Hon’ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not.
A.O. shall list out the instances where loans have disbursed to non-members of assessee-societies, for non-agricultural purposes etc. and accordingly conclude that the assessee’s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) - Appeal filed by the assessee is allowed for statistical purposes.
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2020 (7) TMI 370
Addition u/s 40(a)(ia) - Selection of AY - HELD THAT:- This ground raised by the Revenue does not relate to assessment year 2008-09. Ld. Counsel for the assessee informs the Bench that this ground relates to assessment year 2007-08. We have examined the assessment order and order of ld. CIT(A) and noted that there is no any discussion about addition u/s 40(a)(ia) therefore, this ground does not relate to A.Y. 2008-09, hence we dismiss ground No. 1 raised by the Revenue.
Addition claimed under the head rebate and claim - Since the customers have deducted the amount while releasing the payment, hence all such deductions have been provided in the books of account of the company as expenses under the head rebate and claim. - HELD THAT:- the Ld. A.O. has erred in disallowing the ascertained sales liability of ₹ 78,00,190/-supported by proper vouchers and details of such liability. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground of appeal raised by the revenue is dismissed.
Contribution to club, Other staff welfare Exp. and Other workers` welfare expenses - HELD THAT:- AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Therefore, we delete the following adhoc expenses sustained by the ld CIT(A) on Contribution to club, Other staff welfare and other workers` welfare expenses .
Addition on account books and periodicals - HELD THAT:- ld CIT(A) has sustained the addition @10% of subscription expenses on adhoc basis of ₹ 1,34,909/-. We nota that in assessee`s case under consideration the assessment is made by AO under section 143(3) of the Act and books of accounts of the assessee were not rejected by the assessing officer. We have already taken a view in para No.18 of this order that ad hoc disallowance should not be done by AO therefore we delete the adhoc addition sustained by CIT(A).Hence, we dismiss the appeals of Revenue and allow the cross objections filed by the assessee.
Addition on account of Gardening Expenses - HELD THAT:- The company is also an ISO 9000/OHSAS 18001 certified company which requires neat and green environmental around the factory premises and therefore, the company maintains garden, do plantation etc in the company premises for smooth and healthy environment at the work place.
Regarding expenses under the head gift to others, the ld Counsel has argued before the Bench that the gift given on account of marriages of contract workmen sons and daughter. The Entertainment expenses has incurred on customers, supplier and other business associates who visits to factory premises and take snacks, food etc. in the guest house. Regarding contribution to education and health and occupational health care expenses the ld counsel has argued that factory place is naxal affected place and no provision of medical health care and schooling of children of the employees and for this purpose the company incurs expenses under this head.Regarding guest house expensesthe assessee has argued that company is located in very remote area and fooding and lodging facilities are not available within 30 kms. of its facory, therefore, company operates a guest house for its business associates who may stay and take food. We delete the following adhoc disallowances sustained by the ld CIT(A) Gift to others, Entertainment Expenses, Contribution for education and health care expenses,Guest House expenses AND Community welfare expenses.
Deduction u/s 80-IA for its unit for a captive power plant - addition made on allocation of expenses to Power plant unit - HELD THAT:- As argued that the company maintains separate books of accounts for 80-IA plant and other plants and all the expenses related to concerned plant are booked appropriately in the books of the same plant and these books of accounts are audited by the Statutory Auditors and certified by the management of company. It has also been argued that the apportionments of certain expenses made by the learned A.O. between 80-IA and other plants is totally baseless and assumptive therefore another opportunity should be given to the assessee to explain the allocation of expenses to Power plant unit before the assessing officer. We have gone through the order of ld CIT(A) and note that there is no any infirmity in the order passed by him. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground of appeal raised by the Revenue is dismissed.
Disallowance of various expenses on ad hoc basis - HELD THAT:- AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained.
Eligible profits u/s. 80IA - HELD THAT:- As relying on M/S GODAWARI POWER & ISPAT LTD.[2013 (10) TMI 5 - CHHATTISGARH HIGH COURT] CIT(A) was right in granting part relief to the assessee but was not correct in confirming part addition considering the factum of 2 paise per unit for working out eligible profits u/s. 80IA of the Act. Consequently, the findings of the CIT(A) granting relief to the assessee are confirmed and the addition partly confirmed pertaining to the electricity duty being devoid of merits is directed to be deleted.
Allowable revenue expenses - HELD THAT:- If expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. But if it is made for running the business or working it with a view to produce the profits, it is a revenue expenditure. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. In the assessee case the following expenditure are Revenue in nature because these expenses are for running the business or working it with a view to produce the profits Installation of Isolator breakers of improved rating, Installation of two lighting transformers.Therefore, we direct the assessing officer to treat the above mentioned expenses as revenue expenditure.
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2020 (7) TMI 369
Revision u/s 263 - Matter was subject matter of appeal before CIT(A) - Allowability of provision of interest u/s. 234D under provisions of MAT - as per CIT-A provision of interest on income-tax amounting to ₹ 14.44 crores provided for withdrawal of excess refund is income-tax charged under the provisions of the Act and therefore, ought to have been added while computing the book profits under section 115JB - HELD THAT:- in the present case the AO has already analysed one aspect of the matter which was pending before the CIT(A), the matter cannot be again relooked by the ld. CIT, on any other aspect as the order of the AO would merged with the order of CIT(A) in view of the decision of CIT Vs K. Sera Sera Production Ltd [2015 (5) TMI 937 - BOMBAY HIGH COURT].
Commissioner had no power to touch upon the issues of disallowance of provision of Income tax in the impugned proceedings under Section 263 of the Act. It is evident from the above that the Commissioner is not empowered to exercise his jurisdiction on an issue which is subject matter of appeal before the CIT(A). In the present case, it is undisputed that the matter on the issues in question is pending before the CIT(A). Thus, we find that the Commissioner has no jurisdiction to consider these issues in revisionary proceedings under Section 263 of the Act in terms of clause (c) to Explanation 1 to Section 263 of the Act.
Decided in favour of assessee.
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2020 (7) TMI 368
Unexplained income - addition on account of introduction of the amount in the capital account of the assessee - HELD THAT:- Only contention of the AO in the remand report is that M/s Euro Steels had shown very low income in the assessment year 2013-14 itself is not a ground to reject the creditworthiness of M/s Euro Steels. An assessee, may or may not, earn considerable income during an assessment year but that fact itself is not determinative of the creditworthiness / financial capability of such an assessee. When the assessee and even the AO himself has called for necessary records from his counterpart / AO of the said concern, but could not find any discrepancy or fault in the same, hence, in our view, the action of the AO in rejecting the creditworthiness of M/s Euro Steels solely on the ground that its income for the year under consideration was low, cannot be held to be justified.
So far as the identity of the creditor was concerned, there was no doubt raised by the AO in this respect. M/s Euro Steels was as separate concern in which the assessee was partner and the same was duly assessed to the income tax. So far as the genuineness of the transactions was concerned, even in that respect no doubt has been raised by the AO. Admittedly, all the amounts by M/s Euro Steels has been transferred to the assessee through banking channels. CIT(A) has rejected the contentions of the assessee and upheld the additions made by the AO citing different reasons saying that the assessee could not prove the source of numerous deposits in the bank accounts of M/s Euro Steels.
CIT(A) simply noted that there was a deposit into the said account, therefore, he doubted the genuineness of the transactions, whereas, the claim of the assessee has that all the details whatever were called for, were duly furnished and that the alleged deposits in the individual bank account of Shri Rohit Kumar Jindal were through banking channels. When the assessee has proved the source of deposit and genuineness of the transactions, therefore, the assessee without being called for to prove the source of source by the AO was not supposed to furnish the further details. No doubt has been raised either by the AO or by the CIT(A) regarding the transaction so far as the receipt by the assessee from saving account of the individual is concerned.
So far as the addition was concerned, the assessee admittedly could not prove with reliable evidence the source of the said amount and the creditworthiness of the creditor and genuineness of the transaction.
Addition to the extent of ₹ 4,75,000/- is upheld whereas, the remaining part of the additions out of the total additions ₹ 1,03,10,000/- is ordered to be deleted. This ground of the appeal is accordingly partly allowed.
Unexplained unsecured loans - HELD THAT:- Since the source of deposit in the bank account of M/s Kiran Industries remained unexplained, he, therefore, held that the genuineness of the transaction is not proved. However, in our view, the fact that there was sufficient income declared by Smt. Santosh Rani to prove her creditworthiness of the amount advanced to M/s Dev Krishan Jindal & Sons HUF, is enough evidence so far as the onus on the assessee to prove the creditworthiness of the creditor is concerned. The assessee, in fact, has proved the source of source. The observation of the CIT(A) that there were other entries of the equal amount in the bank account of M/s Kiran Industries, in our view, is not relevant so far as the genuineness of the transaction and creditworthiness of the creditor in respect of the funds received by the assessee is concerned. - Decided in favour of the assessee.
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2020 (7) TMI 367
TP Adjustment - Comparable selection - HELD THAT:- Assessee company is providing customized business process outsourcing services which include voice based inbound phone support, e-mail support, on line chat and back office processing to Tracmail group of companies (Associated Enterprises) - direct the TPO/Assessing Officer to exclude Genesys from the final list of comparables as functionally dissimilar with that of assessee.
Exclusion of Excel from the final list of comparables on the ground that the company is having fluctuating margins - A company having super normal profits or highly unstable margins should not be idly considered as good comparable. Thus, in view of the decision of Baxter India [2017 (8) TMI 1557 - ITAT DELHI] we find merit in the contentions of the assessee and direct the Assessing Officer to exclude Excel from the list of comparables.
Depreciation on goodwill - HELD THAT:- ln assessee’s own case when the assessee by virtue of such amalgamation has received back the goodwill in its book, depreciation has to be allowed on goodwill. As regards the doubt raised by learned DRP that the assessee cannot claim depreciation on the entire amount of goodwill, it must be observed that the assessee has claimed goodwill on the opening WDV only and not on the entire amount. It is now fairly well settled that goodwill being an intangible asset, depreciation has to be allowed. In view of the aforesaid, we direct the Assessing Officer to allow assessee’s claim of depreciation on goodwill.
Claim of additional depreciation on goodwill subsequent to amalgamation - In the light of decision of the Co-ordinate Bench in assessee’s own case on same set of facts, we restore this issue back to the file of Assessing Officer with similar directions
Non-granting of set off of brought forward business losses - HELD THAT:- As assessee has prayed for restoration of this issue with a direction to Assessing Officer to allow assessee’s claim. The issue is restored back to Assessing Officer for reconsideration in accordance with law. Assessing Officer shall grant reasonable opportunity of hearing to the assessee in accordance with law.
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2020 (7) TMI 366
Undisclosed income on undisclosed investment in sales and profit on undisclosed sales - basis of reason to believe that there was undisclosed sales detected during the course of search operation by the office of Directorate General of Central Excise intelligence - addition u/s 69C - HELD THAT:- Assessee as per his own admission had made the undisclosed sales from undisclosed purchases. In business, there is rotation of purchase and sales. The initial investment in the purchase gets rotated throughout the year in the form of purchase and sales resulting in the total turnover. The initial investment in the undisclosed sales would constitute undisclosed investment in undisclosed sales. The A/R of the assessee during appellate proceedings could not provide any details of this undisclosed investment. Therefore, ld CIT(A) in the absence of any material on record, the entire undisclosed investment in undisclosed sales had been estimated.
CIT(A) noticed that assessee`s undisclosed sales as detected during search and seizure operations carried out by the Officers of the Directorate General of Central Excise Intelligence amounts to ₹ 2,76,07,339/- during the assessment year 2010-11. The average sales per month amounts to ₹ 23,00,611/-. The average GP on sales as disclosed in the returns is 3.90% which amounts to ₹ 89,724/-. The average purchase per month amounts to ₹ 22,10,887/-. The undisclosed investment was, therefore, estimated at ₹ 22,10,887/- (₹ 23,00,611/- -89,724/-) on undisclosed sales of ₹ 2,76,07,339/-.
CIT(A) also computed the profit on undisclosed sales of ₹ 2,76,07,339/- at the rate of 3.90% at ₹ 10,76,686/- [3.90% of ₹ 2,76,07,339]. Therefore, addition was restricted to ₹ 32,87,573/- (₹ 22,10,887/- plus ₹ 10,76,686/-) instead of ₹ 2,76,07,339/- as undisclosed income on undisclosed investment in sales and profit on undisclosed sales. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). Appeal of the revenue is dismissed.
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