TMI Tax Updates - e-Newsletter
January 16, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
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GST:
Detention order - non-compliance of the mandate under the provisions of Section 129(4) of the Act - The Proper Officer realizing the lacuna, has proceeded to pass the rectification order after taking into consideration the objections - Hence, no malafides can be attributed to the same.
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Income Tax:
Disallowance u/s 14A(1) - where shares were held as stock-in-trade and therefore it becomes business activity of assessee - these were not investments made by assessee in order to fall within the ambit of Rule 8D (iii) -
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Income Tax:
Nature of payment - Business expenditure or appropriation of funds - claim for deduction being the contribution to Co-operative Education Fund - National Co-operative Union of India - Payment made out of profit of earlier years - Not allowed as deduction u/s 37(1)
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Income Tax:
Assessment u/s 153A - addition u/s 68 - since the surrender was made under pressure which was immediately retracted, and except the aforesaid, no adverse material has been found from the premises of the appellant, as such, such statement cannot be made the basis for the assessment.
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Income Tax:
TDS u/s 195 - payments made to non-residents for professional fees - assessee was having option of choosing more favourable provisions of the DTAAs.
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Income Tax:
Gain arising on the sale of land - to be taxed as ‘business income’ or not - specific verification needs to be conducted to verify whether actual intention of the assessee was to procure the land for investment or to sale it at higher profit - matter remanded back.
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Income Tax:
Nature of income - business income or income from other sources - the assessee has been carrying on the business of money lending in a systematic manner without having the registration with RBI as NBFC. Merely, the fact that the assessee is not registered with RBI AS NBFC, cannot lead to draw an inference that the assessee is not carrying out the business activity.
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Income Tax:
Deduction u/s 80-IB(10) - out of both the projects only 8 flats were sold to persons who were relatives - principle of proportionate disallowance to be applied - AO directed to restrict the disallowance to 1.9% of the claim made by the assessee u/s 80-IB(10) of the Act.
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Income Tax:
Penalty u/s 271(1)(c) - Disallowance u/s 14A - the assessee has not furnished any particulars of income, which are incorrect. The issue remains is merely computation of the disallowance - No penalty.
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Income Tax:
Penalty u/s 271(1)(c) - Once the vendor and vendee have accepted the receipt and the payment of unaccounted money, subsequent retraction has no relevance and it is a valid piece of evidence.
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Customs:
Valuation of imported goods - Since Section 14 of the Act mandates that the value of the goods is to be considered on the basis of the price actually paid or payable for the goods, when sold for export to India, the negotiated price offered by the overseas supplier should be considered as the transaction value.
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Customs:
Classification of imported goods - RO-6.5L Mineral Enrichment System (Reverse Osmosis water purifier) - the classification of the impugned goods are held to be under CTH 84212120 as household type filters
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Customs:
Valuation of imported goods - wooden furniture - noticing excess weight at the time of physical verification of the import by the Customs authorities could not in any manner change the transaction value disclosed in the proforma invoices, which has not been disputed by the Revenue.
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Customs:
Classification of imported item - Liquid Crystal Devices (LCGs) cut to special shapes - Merely because they were used as parts in dashboards of motorcycle, the could not be classified under Heading 8714.
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Central Excise:
Removal of scrap of old and used moulds under job work challans - Mere lack of sending an intimation is a procedure which is mere directry. Denying the substantial benefit to the appellant on merely a procedural lapse is unjustified on the part of the adjudicating authority below.
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Central Excise:
100% EOU - CENVAT Credit - removal of inputs to job-worker - Since the raw material/inputs were removed by the appellant for further manufacture of the finished goods, the case of the appellant falls under the purview of sub-rule (5)(a) of Rule 4 of the Rules.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (1) TMI 680
Filing of TRAN-I Form - input tax credit - Section 140(3) of the Central Goods and Service Tax Act, 2017 - Held that:- The petitioner has asserted that substantial credit was available to it on the transactions which it conducted prior to 30.03.2017, for which the law entitled it to credit, it appears to the Court that the authorities have so far not looked into the merits of the claim for input credit but rather rejected his entire entitlement itself on the ground that the credit reflected in the electronic ledger does not show any figure - The conundrum which the Court is presented with here is that if the petitioner were to obtain a screenshot of the figures it had filled just before it actually uploaded TRAN-I, the Revenue would have then contended that those figures were inchoate as the document would not have been final and was merely at the stage of preparation. The Court is of the opinion that the respondents should disclose as to what was actually filled in the TRAN-I Form [whether for the first time or the second time when it was uploaded], by the petitioner in this case and the basis of its assertion that no credit was available to it, having regard to the fact that the petitioner claims credit on the basis of real transactions in real goods. List on 13th March, 2019.
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2019 (1) TMI 679
Detention of goods - Part-B of the E-Way bill was not updated - Held that:- The petitioner shall pay one time tax liability of ₹ 1,61,032.78 under the CGST Act and ₹ 1,61,032.78 under the SGST Act before the second respondent within a period of four days from today - On receipt of such payment, the detained goods shall be released forthwith.
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2019 (1) TMI 678
Detention order - non-compliance of the mandate under the provisions of Section 129(4) of the Act - Held that:- From a plain reading of the order, it is apparent that the contention raised by the learned counsel for the petitioner, that no opportunity has been afforded under Section 129 (4) of the CGST Act stands falsified - it is apparent that the alleged owners have waived the right of hearing and have consented, levy of tax and penalty and have undertaken to pay as per the provisions of Section 129(1)(a) of the CGST Act. The Proper Officer realizing the lacuna, has proceeded to pass the rectification order after taking into consideration the objections and hence, the same is nothing but an attempt by the Proper Officer to ensure that the objections filed and contention raised by the petitioner are considered in the proper perspective and in the manner required under the Act. Hence, no malafides can be attributed to the same - this Court is of the opinion that the points raised by the petitioner does not survive for consideration. The matter requires adjudication of facts, which are seriously disputed by the parties - petition dismissed.
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2019 (1) TMI 677
Principles of Natural Justice - right to appeal denied on the ground that no such Appellate Forum has been notified by the State of Himachal Pradesh - Held that:- The aggrieved party cannot be left remedy less merely because the State Government has not notified the Appellate Forum - The petitioner may, if so advised, file an appeal within one week from the date the Appellate Forum is notified. Till such time, no coercive action be taken against the petitioner. It is clarified that we have not expressed any views on merits. - petition disposed off.
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Income Tax
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2019 (1) TMI 697
Assessment u/s 153A - addition u/s 68 - statement recorded in search - surrender was made under pressure which was immediately retracted - Held that:- No incriminating material has been found as a result of search. In so far as the statement of Shri. I.C. Jindal is concerned, it is submitted that such statement is not incriminating qua the assessee and in any case, such statement was recorded under duress and same has also been retracted immediately after the search, as such, such statement cannot be made the basis of making the addition. The statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. Further in respect of the Mr. Assem Kumar Gupta, as has been submitted hereinabove, in his statement there is no allegation whatsoever qua the assessee and further his statement is factually incorrect and also his statement was also recorded in the forced circumstances and lastly despite the specific requested he has not been confronted for the cross examination. In fact, on the basis of the independent enquiry conducted by the learned AO, aforesaid broker has confirmed the factum of sale and purchase of the shares, in such circumstances, the statement of Shri. Aseem Kumar Gupta is of no much credence, more so when he has also not been confronted for the cross examination of the assessee, despite specific request. It is settled law that where addition of undisclosed income was made on basis of mere statement under section 132(4) which was not corroborated by any material evidence, neither such statement would be a conclusive evidence, nor any addition could be made. In the instant case, since the surrender was made under pressure which was immediately retracted, and except the aforesaid, no adverse material has been found from the premises of the appellant, as such, such statement cannot be made the basis for the assessment. - Decided in favour of assessee.
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2019 (1) TMI 696
Assessment u/s 153A - addition u/s 68 - absence of incriminating documents - Held that:- The only ground of the Assessing Officer is that these are accommodation entries, however the Assessing Officer has not pointed out any discrepancy in the documentary evidence filed by the assessee either in the bank account statement or in the financial statement of the loan creditors. Once the loan creditors have accepted the transactions and which is also established from the relevant record then the said documentary evidence cannot be rejected merely on the basis of the statement recorded U/s 132(4) of the Act, which is also not an admission on the part of the assessee. Statement recorded U/s 132(4) of the Act cannot be considered as an incriminating material found and seized during the search. Accordingly, in view of documentary evidence produced by the assessee which established the fact of transaction of loan taken by the assessee, their identity, capacity and genuineness being routed through the banking channel at the time of receipt as well as repayment of the loan alongwith payment of interest which was subjected to TDS, we do not find any error or illegality in the finding of the CIT(A) qua this issue, hence, we uphold the same. - Decided in favour of assessee.
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2019 (1) TMI 695
Validity of assessment made u/s 153C - non recording of satisfaction by the AO of the searched person to transfer the incriminating material and to take up the assessment of such other person, i.e. the assessee - reasons for issue of notice u/s 153C not signed - Held that:- The satisfaction not only should be recorded but also should be written in detail with valid reasons and it should not be vague. In the instant case, there is no dispute that the department could not establish that the AO of the searched person has recorded satisfaction before issue of notice u/s 153C of the Act. Therefore, following ASSTT. COMMISSIONER OF INCOME TAX & ANOTHER VERSUS PEPSI FOODS PVT. LTD. [2017 (12) TMI 588 - SUPREME COURT] we hold that the notice issued u/s 153C is unsustainable. From the perusal of the order sheet both for the A. Y. 2007-08 and 2008-09, it is evident that though the reasons for issue of notice u/s 153C was typed on plain paper, it was not signed by the officer who has recorded the satisfaction and it was also undated. Similarly, the direction for issue of notice u/s 153C was also remained unsigned and undated. The order sheet is a manually maintained record and not a digital document which does not require signature. An order or endorsement required to be dated and duly signed by the officer who is recording the reasons being satisfied that the case is fit case for taking action u/s 153C. An order, without having signature of the person, who recorded the satisfaction or issued the direction for taking action loses its relevance and to be treated as invalid. An order without signature is not an order for execution or for implementation. In the instant case, there is no dispute that the AO of the searched person has not recorded the reasons and order sheet of the AO of the assessee though reasons are typed, it remained unsigned. The direction for issue of notice u/s 153C was also unsigned. We have already decided that unsigned order sheet looses its relevance and it would be construed as non recording of reasons. The reasons typed also are very vague without any valid reason. Therefore, notice issued u/s 153C held to be invalid. - Decided in favour of assessee.
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2019 (1) TMI 694
Entitled to claim deduction u/s 80IB (10) - whether Form No. 10CCB has to file along with return of income or can be filed during the course of assessment proceedings? - Held that:- This issue has been decided by the coordinate bench of the Jaipur Tribunal in the case of Khetan Tiles Private Ltd. ( 2017 (8) TMI 607 - ITAT JAIPUR) by considering the decision of the Hon'ble Supreme Court in the case of CIT Vs. G.M. Knitting Industries (P) Ltd. [2015 (11) TMI 397 - SUPREME COURT] and has observed that even though necessary certificate in Form No. 10CCB along with return of income had not been filed, but same was filed before final order of the assessment was made, the assessee was entitled to claim deduction under section 80IB (10) of the Act. - Decided against revenue
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2019 (1) TMI 693
Gain arising on the sale of land - to be taxed as ‘business income’ - intention of the assessee to procure the land for investment or to sale it at higher profit - physical proof regarding the agricultural nature of the land - Held that:- Transaction in sale of land as business transaction, is only on intention of the assessee not to keep the land as investment but to acquire the same, clear encumbrances and sell the same at higher profit which therefore, is business motive of the assessee. It is also asserted by the CIT(Appeal) that the land sold to Manhar Resort Pvt. Ltd and therefore, the land was not in the nature of investment but for business motive transaction. Nothing in coming out from the order of CIT(Appeal) wherein he has brought out any specific reasons regarding statement made in the order. There is no enquiry or factual verification done by the Ld. CIT(Appeal) to ascertain the nature and character of land and whether it could be called as agricultural land in terms of continuous agricultural activities, if at all undertaken. Similarly, the Ld. AR of the assessee submitted that even at present the land is used for agricultural purposes and all throughout, they have shown it as investment in their books of account and agricultural income is also shown in the return of income. We had put a question to the AR whether they have any physical proof regarding the agricultural nature of the land and that as on date whether still it is agricultural land. To which, Ld. AR stated as instructed by the assessee, it is still agricultural land and there is no construction of resort or anything like that on the said land. We find that the power of the Ld. CIT(Appeal) is coterminous with that of the AO. CIT(Appeal) should have called for Inspector’s report after sending Inspector for spot verification and taking details about the land. It should come out from facts on record that continuously agricultural activities were carried on the said land and if revenue is having doubt it should bring evidences on record. Similarly specific verification needs to be conducted to verify whether actual intention of the assessee was to procure the land for investment or to sale it at higher profit. These things are not clear from the order of CIT(Appeal). Therefore, the issue requires detailed verification - restore the matter to the file of Assessing Officer to make detailed verification and re-adjudicate the matter after providing reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes.
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2019 (1) TMI 692
TDS u/s 195 - payments made to non-residents for professional fees - disallowance u/s 40(a)(i) - payment has been made to various limited liability partnership firms - withholding tax - DTAA - Held that:- In absence of not making available, the technical knowledge to the assessee, in view of the Article 13 of the respective DTAAs, the payment for services cannot be held as fee for technical services under the provisions of the respective DTAAs. We do not find any error in the order of the Ld. CIT(A) on this issue. CIT(A) has further observed that Article 13 of DTAAs provisions defining Fee for Technical Services being more favourable to the assessee as compared to the provisions of section 9(1)(vii) of the Act which has defined Fee for Technical Services, and thus the assessee was having option of choosing more favourable provisions of the DTAAs. CIT(A) is in accordance with the established legal position on the issue . CIT(A) in view of the decision of Van Oord ACZ India (P) Ltd versus CIT (2010 (3) TMI 167 - DELHI HIGH COURT) has held that the sum payable to the nonresidents was not chargeable to income tax in their hands and thus the assessee was not liable for deduction of tax at source on such payment under the provisions of section 195 and no disallowance under section 40(a)(i) could be made. Order of the Ld. CIT(A) on the issue in dispute is well reasoned - Decided against revenue Addition to interest paid for delayed deposit of service tax - claim not allowable u/s 37(1) - Held that:- The interest paid on service tax is not penal in nature but compensatory in nature and thus it cannot be disallowed under provisions of section 37(1) of the Act. Further, disallowance of interest for delayed payment of Income-tax has been specifically mentioned under section 40(a)(ii) of the Act, whereas no such interest on service tax has been specified for disallowance. Accordingly, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned - Decided against revenue
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2019 (1) TMI 691
Assessment u/s 153C - proof of incriminating material found during the course of search and seizure - addition u/s 68 and 14A - no opportunity of cross-examination to assessee given - Held that:- In the case on hand, the assessee filed its original return of income on 31/08/2008. The time limit for issue of notice u/s 143(2) of the Act, was 30/09/2009. The search and seizure operation was conducted in this case on 18/02/2013. The statutory period for issue of notice u/s 143(2) of the Act, in the case of the Assessment Years had expired prior to the date of search operation. Hence the assessment for the impugned Assessment Year has not abated. Additions in question are not based on any incriminating material found during the course of search. Only addition made is of share application received u/s 68 of the Act and addition of commission paid allegedly for the share application money and finally a disallowance u/s 14A of the Act. No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have admittedly been retracted and the Assessing Officer has not based the additions on these statements. Even otherwise, when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. Assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. The Hon’ble Supreme Court in the case of Kishinchand Chellaram vs. CIT (1980 (9) TMI 3 - SUPREME COURT) had held that opportunity of cross-examination must be provided to the assessee. It is well settled that a statement recorded during the course of survey operation cannot be used as an evidence under the Act. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be a chain was given/confronted to the assessee. The alleged statements were supposedly recorded from directors of these companies which formed this alleged chain are also not brought on record. Only a general statement has been made that the investigation wing had recorded some statements. There is no evidence whatsoever that cash has been routed from the assessee company or that any cash was deposited by the assessee company. There is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company - none of these material gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act - Decided in favour of assessee.
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2019 (1) TMI 690
Nature of payment - Business expenditure or appropriation of funds - claim for deduction being the contribution to Co-operative Education Fund - National Co-operative Union of India - Held that:- As decided in assessee’s own for AY 2010-11 [2015 (1) TMI 485 - ITAT HYDERABAD] the amount contributed by assessee to the National cooperative Union, New Delhi, is appropriation from the net profits. There is a right to receive the income independent of accrual and receipt of income by the assessee before third party could lay claim to any part of it. Since income reached assessee before it reached third party, there is no diversion. As already stated, there is no payment in the year of losses. Therefore, payment u/s 63(1)(b) is only an appropriation of profit. Moreover, this amount paid during the year is also not out of the profits of their year but profits of earlier year. Therefore, on that count also amount cannot be allowed as deduction during the year. For these reasons, we uphold the order of the authorities and reject assessee’s grounds on the issue. Disallowance of an amount towards depreciation of HTM Securities - Held that:- In assessee’s own case for AY 2006-07, deleted the disallowance made on account HTM securities depreciation It is stated that marking to market the entire portfolio eliminates the incentive for imprudent financial decision. It is also stated that it would encourage trading in securities held in hitherto classified "permanent" category. The objection of making a market in long-term debt will thus be achieved if all the securities without any differentiation are marked to market. Thus, it can be seen that even the securities winch are held in permanent are supposed to be dealt is to trade in the securities and hence undoubtedly, they are the stock-in-trade for the assessee, when we hold that there is no distinction between the three categories of securities, obviously the assessee can provide for depreciation in all the securities on the same footing. Accordingly, the disallowance is deleted
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2019 (1) TMI 689
Disallowance u/s 14A(1) - exempt income was earned from shares held as “trading assets” or “stock in trade” - argument on behalf of the assessee that the investments in securities made by the banking concern are part of the business of banking and therefore the expenses incurred for the purpose of such investment is the business investment - Held that:- Though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14 A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company. As decided in assessee's own case [2018 (12) TMI 50 - ITAT DELHI] Present assessee before us is also a Bank, where shares were held as stock-in-trade and therefore it becomes business activity of assessee. In our opinion specific observation Hon’ble Supreme Court in the case of Maxopp Investment vs CIT (2018 (3) TMI 805 - SUPREME COURT OF INDIA are squarely applicable to facts of present case. We allow this ground raised by assessee and hold that these were not investments made by assessee in order to fall within the ambit of Rule 8D (iii) - Decided against revenue. Transfer from inter branch block accounts to reserve through profit and loss account - Held that:- As in assessee's own case [2012 (5) TMI 437 - ITAT, NEW DELHI] Transaction between the head office of the assessee and its branch in India was a transaction between the principal and principal. In law, there cannot be a valid transaction of sale between the branch and its head office. As it is ultimately based on a proposition that no person can enter into contract with one self. Debiting or crediting one's account cannot alter the legal position. When that primary requirement is absent, the question of bringing the sums in question to tax under Section 41(1) may not be legally permissible to the Revenue. - Decided in favor of assessee. Loss on revaluation of investment held in HTM category - Held that:- As in assessee's own case [2012 (5) TMI 437 - ITAT, NEW DELHI] wherein after considering the case law on this aspect including the decision of the Hon’ble Apex Court in the case of UCO Bank vs. CIT [1999 (9) TMI 4 - SUPREME COURT] and the Master Circular of the RBI on the aspect of valuation of investments applicable to all banks prescribed in case of acquisition cost of securities classified under HTM category. Depreciation on investment held in AFS and HFT categories - Held that:- It is a verifiable fact with reference to the sales of securities, if any, that took place during the year or earlier or subsequent years. Such an exercise has not been undertaken by the learned assessing officer but merely basing on the figures reflected in the balance sheet which was prepared in accordance with the RBI guidelines, AO reached a conclusion that there was an escapement of income due to the preparation of the balance sheet in a particular way, as prescribed by the RBI. If we appreciate the facts of this case in the light of the decision of UCO Bank vs. CIT [1999 (9) TMI 4 - SUPREME COURT] it is clear that since the assessee has been maintaining its accounts on mercantile system, they are entitled to show his real income by taking into account market value of such investments in arriving at real taxable income. All the aspects argued by the Ld. DR were considered by the Hon’ble Apex Court in the case of UCO Bank vs. CIT [1999 (9) TMI 4 - SUPREME COURT] and were held in favour of the assessee Loss on shifting of securities from AFS/HFT categories to HTM category - Held that:- It is not the case of the revenue that the facts of this case are not similar to the facts of the case for any earlier years. It shall be kept in mind that the bank will never hold the assets merely for dividends or further appreciation of the value of the asset and all the three types of assets namely, held to maturity, available for sale and held for trading of the investments to maintain the statutory liquidity requirement. No difference of facts on this score and hold that the decision of the Bangalore Tribunal in the case of State Bank of Mysore[2009 (5) TMI 610 - ITAT BANGALORE] is very much applicable to the facts of this case also. While respectfully following the directions referred to above, we are of the considered opinion that the loss arising on shifting of securities from AFS/HFT categories to HTM category is allowable. Disallowance of contribution made to PNB Employees Pension Fund Trust - legitimate business expenditure - Held that:- Similar issue in the assessment year 2005-06, the issue was decided in favour of the assessee wherein it was held that similar expenses were allowed in earlier years in the assessments made under section 143 (3) of the Act and the decision of DCIT verses Ranbaxy laboratories Ltd (2009 (6) TMI 126 - ITAT DELHI-I]) wherein the allowability of expenses towards provision for Pension Fund were held to be allowable expenses and section 43B has no application, is applicable. The fact that the assessee had actually contributed/paid the amount to pension fund makes the case of the assessee even stronger. Disallowance of deduction u/s 36(1)(viii) - assessee bank did not make any claim u/s 36(1)(viii) in the original return of income filed on 26/9/2008, but this claim was made only in the revised return filed subsequently - Held that:- CIT(A) held that inasmuch as the AO was not satisfied with the method followed by the assessee bank that they had not correctly calculated the deduction under section 36(1)(viii) and the AO was of the view that the assessee bank had claimed profit attributable to eligible business and computed the same on proportionate basis, based on the total fund deployed method, CIT(A) directed the assessee to furnish the correct computation of eligible deduction under section 36(1)(viii) before the Ld. AO within 30 days and the AO shall verify the same to grant deduction. No illegality or irregularity in this direction given by the Ld. CIT(A). As a matter of fact CIT(A) treated this claim of the assessee as allowable and remanded matter for the limited purpose of submission of the current computation under section 36(1)(viii) of the Act. We, therefore, uphold the directions of the Ld. CIT(A) and dismiss this ground of appeal. Profit on sale of NPAs - Held that:- We are convinced with the alternative submission on behalf of the assessee that whether the assessee was left with any tax paid versus against the NPAs or not, needs verification at the end of the AO after affording an opportunity to the assessee to put forth their case and to submit the details if any, on this aspect. For this purpose we set aside the issue and remand it to the file of the Ld. AO. This ground is, therefore, allowed for statistical purpose.
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2019 (1) TMI 688
Income from other sources - share premium collected is above fair market value and thereby liable to tax in pursuance to section 56(2)(viib) by adopting Rule 11UA(a) - Determination of fair market value - note of the guidelines issued by research committee of The Institute of Chartered Accountants of India (ICAI) - Basis of Valuation - following of DCF method - Held that:- As decided in Vodafone M-Pesa case [2018 (3) TMI 530 - BOMBAY HIGH COURT] AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a final determination from an independent valuer to confront the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. Hence we set aside the order of CIT (A) and restore the matter to AO for a fresh decision in the light of this judgment of Hon’ble Bombay High Court. The AO should scrutinize the valuation report and he should determine a fresh valuation either by himself or by calling a final determination from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. AO can scrutinize the valuation report and the if the AO is not satisfied with the explanation of the assessee, he has to record the reasons and basis for not accepting the valuation report submitted by the assessee and only thereafter, he can go for own valuation or to obtain the fresh valuation report from an independent valuer and confront the same to the assessee.For scrutinizing the valuation report, the facts and data available on the date of valuation only has to be considered and actual result of future cannot be a basis to decide about reliability of the projections The primary onus to prove the correctness of the valuation Report is on the assessee as he has special knowledge and he is privy to the facts of the company and only he has opted for this method. Hence, he has to satisfy about the correctness of the projections, Discounting factor and Terminal value etc. with the help of Empirical data or industry norm if any and/or Scientific Data, Scientific Method, scientific study and applicable Guidelines regarding DCF Method of Valuation. - Appeal of the assessee is allowed for statistical purposes.
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2019 (1) TMI 687
Addition of unexplained jewellery on the basis of notings made on loose papers - description of items found at the time of search did not match with the items declared in Wealth-tax returns/VDIS - Held that:- So long as the total gold jewellery in weight found at the time of search matches with the earlier declarations made by the assessee in his Wealth-tax returns and VDIS, there can be no question of making any addition simply on the ground that the description of items in the list declared under Wealth-tax returns/VDIS is different from those actually found. If such is a position, then an inference has to be drawn that the items initially declared in Wealth-tax returns/VDIS were converted into the items of jewellery found at the time of search. A contrary stand can be taken only if the authorities demonstrate that the jewellery items given in the Wealth-tax returns/VDIS were over and above the items of gold jewellery disputed. We are confronted with a situation in which total jewellery found at the time of search as per the panchnamas tallies with the gold jewellery declarations by the assessee and his family members in Wealth-tax returns/VDIS, save and except the additional income offered by the assessee in his return for the A.Y. 2006-07. In such a scenario, there can be no question of making any addition in respect of gold jewellery. Addition on protective basis - assessee claimed that out of total marriage expenses, a sum of ₹ 17,50,000/- was borne by Mr. Om Prakash Agarwal, Jalgaon, father of Trupti Agarwal, the daughter-in-law of the assessee - addition confirmed as assessee could not furnish any details/evidence of said expenses having been incurred by Mr. Om Prakash Agarwal - Held that:- In the assessment completed u/s.153C on 30-12-2008 in the hands of Om Prakash Agarwal, a copy of which has been placed on record, the AO accepted that sum of ₹ 17,50,000/- was withdrawn by Mr. Om Prakash Agarwal from his bank account, which was given to the assessee as his share of marriage expenses. Since the explanation of Mr. Om Prakash Agarwal has been accepted in his assessment completed u/s.153C, there can be no rationale in sustaining the addition of ₹ 17,50,000/- on protective basis in the hands of the assessee. We, therefore, order to delete the addition. Treatment to sale proceeds received on sale of shares - 'Income from other sources’ - Held that:- PIL is a penny stock company and the assessee obtained only accommodation entries in the garb of short term gain from transfer of shares of PIL, for which an appropriate addition has rightly been made and upheld by the authorities below. We, therefore, countenance the impugned order on this score. Addition on account of commission paid by the assessee for arranging deal of sale of shares of PIL - Held that:- As the transactions of purchase and sale of shares of PIL were only accommodation entries provided by the brokers. Such accommodation entries are obviously provided against certain commission. Considering the entirety of facts and circumstances of the instant case, we are of the considered opinion that it would be just and fair if the rate of commission is restricted to 2% as against 6% upheld in the first appeal. Disallowance of interest - assessee diverted interest bearing borrowed funds for non-business purposes without charging any interest - Held that:- As AR claimed that some of the advances were given during the course of business, which were in the nature of sundry debtors and not advances. Since such details were not before the authorities below, in our considered opinion, it would be in the fitness of things if the impugned order on this score is set-aside and the matter is restored to the file of AO. We order accordingly and direct him to examine the assessee’s claim of having charged interest in respect of certain advances included in the table drawn and thereafter proceed to calculate the amount of interest not allowable as per law. Addition u/s 68 - held that:- As the assessee failed to prove the capacity of the donors and also the genuineness of the transactions, not only before the authorities below but the Tribunal as well. Under the given circumstances, we do not find any reason to deviate from the impugned order. Addition on account of excess stock and additional excess stock - Held that:- It is seen that stock of ₹ 20,18,702/- was found at the time of survey which figure was calculated by reducing the amount of gross profit @ 23.45% from the tag price. As against this, the value of stock as per books of account was only ₹ 17,30,760/-. Since excess stock was found at the time of survey, the addition to that extent was required to be made. The contention of the assessee that higher gross profit was declared and such excess stock was shown in terms of the higher gross profit cannot be countenanced as the excess stock is required to be separately disclosed as income. We, therefore, approve the addition of ₹ 2,87,944/-. 42. As regards the remaining addition of ₹ 1,17,466/-, we hold that the same cannot be sustained because it represents nothing but difference in the tag price of excess stock as reduced by the cost price of such excess stock. It goes without saying that an addition can be made only for the amount of costs incurred on producing the stock and not the potential profit included in the tag price. We, therefore, sustain the addition of ₹ 2,87,944/- and delete the addition of ₹ 1,17,466/-.
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2019 (1) TMI 686
Assessment u/s 153C r.w.s. 153A - rejecting the books of accounts by invoking the provisions of section 145(3) - Held that:- A search and seizure operation were carried out at the premises of Shri Vinod Sharma on 30.05.2008 at Bhopal and various incriminating materials relating to the assessee were also found which resulted in issuance of notice u/s 153C of the Act. Assessee also declared an amount of ₹ 4 lakhs for Assessment Year 2008-09 for not recording the transactions in the books of accounts. Various other loose papers were seized which contained transactions through bank as well as cash for which satisfactory reply was not given by the assessee during the course of assessment proceedings. After going through the relevant records there seems no dispute to the fact that during the course of search various incriminating material/documents were found and the assessee was unable to explain/correlate them with the entries in the regular books of accounts and therefore in this given facts and circumstances, we find no infirmity in the action of the Ld.A.O rejecting the books of accounts by invoking the provisions of section 145(3) of the Act. We find that the assessee has nowhere given specific reply for each of the loose paper as well as the entries mentioned therein which have been reproduced by the Ld.A.O in the impugned assessment order referring to 42 entries. Undoubtedly the assessee has not disclosed the total business receipts in the regular books of accounts and when the assessee himself was unable to explain the entries there remains no option before the lower authorities except to estimate the income. In our considered view when the book results have been rejected and profits have been estimated on the estimated gross receipts then it will not be justified to apply the same net profit rate as has been declared by the assessee because the turnover taken by both the lower authorities is different from the one shown by the assessee. As the assessee has failed to discharge its onus to explain the entries appearing in the loose papers, estimation of receipts and net profit has rightly been carried out but we in order to be fair to both the parties, we decide to estimate the receipt at two times of the alleged bank transactions and compute the net profit @8% and in case the net profit declared by the assessee is more than the estimate net profit @8%, then no addition shall be made for that particular assessment year. On application of our above view of computing gross receipts at two times of the unexplained bank transactions and application of net profit rate @8% only the addition of ₹ 16,518/-, 14,29,754/- and ₹ 7,38,003/- needs to be sustained for Assessment Year 2006-07, 2007-08 and 2008-09 respectively - Decided in favour of assessee partly Treating the agriculture income as income from undisclosed - Held that:- The assessee has filed necessary evidence to show that there exists an ancestral parental land measuring approximate 10 acres at Masan Gaon, Harda which is the part of the Hindu Undivided Family. This land is regularly cultivated. Agricultural produce is sold which is duly evidenced by Rin Pustika giving details of various items sold. We are satisfied with the submissions made by the assessee that the alleged agricultural income is share of the assessee out of the net profit from sale of agricultural produce after deducting all incidental expenses which is being distributed to the members of the Hindu Undivided Family. We accordingly set aside the findings of both the lower authorities and direct the A.O to treat the income as agricultural income. - Decided in favour of assessee. Addition of unexplained investment for purchase of agriculture land at Gram Kal Kheda measuring 0.809 acre. - Held that:- Denying the assessee’s claim for the mere reason that cash withdrawal was on 29.3.2008 whereas it was allegedly paid on 28.3.2008 will not be justified and fair in the interest of justice as one cannot ignore the possibility that all the sellers of the land being farmers may have received the cash on 29.3.2008, as submitted by the Ld. Counsel for the assessee that after the registry formalities were completed cash was handed over to the farmers on 29.3.2008. We therefore in the given facts and circumstances of the case find no justification in the finding of the lower authorities sustaining the addition of ₹ 5 lakhs for unexplained cash investment and accordingly direct the Ld.A.O to delete the addition of ₹ 5 lakhs for the unexplained investment in purchase of agriculture land at Gram Kal Kheda. - Decided in favour of assessee. Unexplained cash investment towards purchase of land at Mindori - Held that:- Material fact seems to have escaped the kind attention of the Co-ordinate Bench because the alleged sale letter has been signed by two of the proposed sellers namely Shri Vijit Raj Patni and Shri Hukum Chand and one of the buyer Shri Vinod Sharma which makes it amply clear that a transaction certainly took place wherein cash advance of ₹ 44,00,000/- was paid to four co-owners by the two buyers along with issuing four cheques of ₹ 1,50,000/- each. As the Income Tax Appellate Tribunal is the last fact finding body, we respectfully decline to follow the finding of the Tribunal in this issue relating to addition of unexplained cash investment of ₹ 34.50 lakhs as the facts discernable from records clearly shows that there was cash advance of ₹ 44 lakhs given jointly by Shri Vinod Sharma and Shri Harish Patel and we further hold that the alleged sale letter is not a dump document as it contains details of cheque issued by the assessee and the other buyer Shri Vinod Sharma given to the four co-owners of the land and the same were returned back on account of cancellation of the deal. We accordingly confirm the addition of ₹ 22,00,000/- and partly allow Ground raised by the assessee
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2019 (1) TMI 685
Claim of rental income of the assessee - correct head of income - income from business or profession OR income from house property - Held that:- All the activity speaks that the assessee was in the business activity. The assessee was maintaining the office and also the paying the salary to its employee and also incurring the other expenses such as traveling and other administrative expenses etc. The assessee temporarily letting out the premises to Broker India P. Ltd. by virtue of leave and license agreement dated 17.04.2009. The property was given on leave and licence basis till the approval of the real estate project. The memorandum and Articles of Association permits letting and leasing of property which is the business of the appellant company. CIT(A) has relied upon the case decided titled as Chennai Properties & Investment Ltd. V. CIT (2015 (5) TMI 46 - SUPREME COURT). It also came into notice that in the earlier assessment order u/s 143(3) the revenue has accepted the rent as business income. The facts are not distinguishable at this stage also. There is no other distinguishable material on record to which it can be assumed that the income of the assessee on letting out the property falls within the purview of house property. Taking into account we are of the view that the finding of the CIT(A) is quite correct and in accordance with law which is not liable to be interfere with at this appellate stage. Accordingly, these issues are being decided in favour of the assessee
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2019 (1) TMI 684
Penalty levied u/s 271AAA - surrender of ₹ 8,00,00,000/- being difference in valuation of stock - Held that:- The assessee surrendered ₹ 8 Cr as business income as is evident from the extract of statement dt. 22/12/2010. The surrendered amount was declared in the return of income u/s 153A as business income. The Assessing Officer accepted the surrendered amount as business income as declared by the assessee in the return of income and levied the income tax on it accordingly. He accepted the manner in which this additional income of ₹ 8 crore was derived as explained during the search and did not raise any objection. These facts clearly mentioned in the Assessment Order as well as in the order of the CIT(A) and are not disputed by the DR. After the surrender, the statement was closed without any further query. The CIT(A) has given a detailed findings in the order. As regards the SSA International Ltd. (2018 (6) TMI 65 - ITAT DELHI) during the search proceedings, assessee therein expressed his inability to explain the discrepancy in the stock whereas the assessee has explained the documents found during the search. As regards the other case laws referred by the Ld. DR , the facts are distinguishable as the conditions prescribed in Section 271 AAA was not fulfilled by the assessees’ therein whereas the assessee in the present case explained all the relevant documents and the Assessing Officer accepted the explanation given by the assessee. - decided against revenue
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2019 (1) TMI 683
Stay of disputed outstanding demand - Held that:- As submitted by the assessee that the assessee is not in a position to make any further payment of the disputed outstanding tax and the assessee will be satisfied if early hearing is granted by rejecting this stay petition but in that case, the revenue should be directed for not taking any coercive measures for recovery till the end of the week in which the hearing is fixed. DR of the revenue had no objection regarding granting of early hearing by rejecting the stay petition. As considered the rival submissions and in view of the facts discussed above, we reject the stay petition and grant early hearing. The hearing of the appeal is fixed on 10.12.2018 and the revenue is directed that no coercive measures for recovery should be adopted by the revenue till 14.12.2018. Since the date of hearing was pronounced in open court, no notice of hearing is required to be issued. Stay petition filed by the assessee is dismissed.
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2019 (1) TMI 682
Treating the gain on sale of land as Capital Gain - whether the land was purchased as business asset or for investment as capital asset? - Held that:- Joint Venture does not contain any contract to transfer for consideration, any immovable property. The Joint Venture Agreement in the present case does not fall within the category of documents of which registration is compulsory u/s. 17 of the Registration Act, 1908. Hence, the second reasoning given by the Revenue to discard Joint Venture Agreement holds no water. The assessee has discharged his onus by furnishing Joint Venture Agreement reflecting his intention at the time of purchase of land. A Joint Venture Agreement placed on record shows the intention of the assessee to develop the land and sell the same after plotting. Since, the entire chunk of land was sold in a short span of two months time from the date of purchase that explains the reason for not seeking any approvals from Government authority for plotting etc. or carrying out any other development activity on the land. Thus, from the perusal of documents on record we find merit in the submissions of the assessee that the land was purchased by the assessee with the intention to exploit it commercially and to hold it as business asset. Since, we have held the land as business asset, the provisions of section 50C does not get attracted. Addition on account of cash deposit in the bank - Held that:- CIT (Appeals) accepted the explanation of assessee to the extent of gifts ₹ 20,00,000/- received by the assessee from his sons and after adjusting the same restricted the addition to ₹ 6,00,000/-. Before us the assessee has not been able to controvert the findings of Commissioner of Income Tax (Appeals). Hence, we do not find any reason to interfere with the findings of Commissioner of Income Tax (Appeals) on this ground. - Appeal of assessee partly allowed.
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2019 (1) TMI 681
Reopening of assessment - addition u/s 68 - status of the investing companies - Held that:- We find from the facts of the case that the assessee has filed the relevant pages of inventory listing the documents during the course of search us/ 132 for establishing the fact that the documents mentioned above have been seized and are in the possession of the assessing officer. The above documents are enough to establish the credibility and the genuineness of the transactions. So far as present status of the investing companies is concerned, the assessee has filed data of Company Master Data from the website of Ministry of Corporate Affairs (MCA). Such data are in respect of investing company Alka Diamond Industries Ltd. The state of the investing company as on 25.10.2017 is active. Therefore, the company is still in existence and active. The master data also discloses that Balance sheet up to 31.03.2016 has been filed in respect of each of the companies mentioned above. Therefore, there cannot be any doubt about the identity of the company. The amounts have been received from investing company have Come through banking channel which are duly reflected in the Balance sheet of the assessee company. Therefore, there cannot be any doubt about the genuineness of the transaction. So far as credit worthiness is concerned the investing company is regularly assessed to income tax and they are disclosing substantial income. Even these transactions are disclosed in the audited accounts filed along with the return of income. As the facts are identical to AY 2007-08 and the reason recorded by CIT(A) while deleting the addition in AY 2007-08 are also exactly identical. In such circumstances, we have already confirmed the order of CIT(A) deleting the addition and hence, following the earlier years order as decided above, we delete the addition. - Decided in favour of assessee
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2019 (1) TMI 676
TP adjustment - 3% of the amount of guarantee given by the assessee on behalf of AE - Held that:- As decided in COMMISSIONER OF INCOME-TAX VERSUS GLENMARK PHARMACEUTICALS LTD. [2017 (2) TMI 1305 - BOMBAY HIGH COURT] We note that the impugned order of the Tribunal while allowing the assessee's appeal holding that the arm's length price of corporate guarantee cannot be determined on the basis of comparison with the bank guarantee and relied upon the decision of Everest Kento Cylinders Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT]. No substantial question of law. Weighted deduction u/s 35(2AB) on whole R D expenditure - setting aside the issue of allocation of R D expenses to Baddi unit for computation of deduction u/S 80-IC to the record of Assessing Officer for finding out whether R D expenditure incurred has any direct nexus to Baddi unit when both these issues are interlinked? - as per ITAT withdrawal of the weighted deduction under Section 35(2AB) is not justified and also noted that merely because the respondent had allocated R D expenditure on pro rata basis to its Himachal Pradesh unit, it would not operate a bar to raise a claim subsequently, if otherwise it is correct in law - Tribunal set aside the issue of allocation of R D expenses to the unit in Himachal Pradesh i.e Baddi for computing deduction under Section 80IC of the Act to the Assessing Officer - Held that:- We find that the grievance of the Revenue is not justified. All that the impugned order of the Tribunal did was to follow the binding decision of this Court in Zandu Pharmaceuticals Works Lt. [2012 (9) TMI 620 - BOMBAY HIGH COURT]. No substantial question of law.
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2019 (1) TMI 675
Penalty u/s 271(1)(c) - unaccounted payment towards the sale of vacant land - Held that:-Unaccounted payment towards the sale of vacant land at ₹ 27. 15 lakhs in the ratio of 15:85 for vacant land and agricultural land. Though the payment was towards the exempt land as well as the vacant site, the payment of unaccounted money was passed on to the assessee towards the sale of agricultural land and the vacant site, which is established from the statements recorded from both the vendor and the vendee. Once the vendor and vendee have accepted the receipt and the payment of unaccounted money, subsequent retraction has no relevance and it is a valid piece of evidence. It is admitted fact that after completion of the search also, the assessee has admitted the additional income towards receipt of sale of land and taken the credit for application of income towards the investments. Therefore, we are unable to accept the contention of the CIT(A) that without bifurcation of the exact amount, the receipt of on-money does not lead to concealment. Similarly, the observation of the CIT(A) that no material was found during the course of search also is not acceptable, since, both the parties have agreed the payment and receipt of unaccounted money and the assessee has explained the application of unaccounted money towards the source for investment made to various other properties as observed from the recitals of the penalty order. Hence, we hold that this is a clear case of concealment of income which attracts penalty u/s 271(1)(c) and we have no hesitation to uphold the order of the AO. AO has levied the penalty on concealment of income of ₹ 1,61,71,166/- which was the addition enhanced by the Ld. CIT(A) in its appellate order. Since the Tribunal has adopted the correct method for appropriation of on money towards the sale of vacant land at ₹ 27. 15 lakhs, we uphold the imposition of penalty on the concealed income of ₹ 27. 15 lakhs against the levy of penalty on concealed income of ₹ 1. 61 lakhs. Accordingly we set aside the order of the Ld. CIT(A) and confirm the penalty to the extent of addition of ₹ 27. 15 lakhs and direct the AO to revise the penalty. - Decided partly in favour of revenue.
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2019 (1) TMI 674
Disallowance u/s 14A r.w.r 8D - Held that:- In the present case assessee himself when confronted has stated that it has incurred expenditure for earning exempt income but could only give a pro rate allocation. Based on the changing stand of assessee ld AO was satisfied that claim of the assessee originally that it has not incurred any expenditure for earning exempt income is correct. Accordingly, the ground No. 2 of the appeal of the assessee is dismissed holding that the ld Assessing Officer has correctly recorded the satisfaction with respect to the correctness of the claim of the assessee and invoking the provisions of Rule 8D of the Income Tax Rules, 1962 for working out disallowance u/s 14A of the Act. On careful perusal of the certificate of the Chartered Accountant, there is certain reference to the records of the company; however no such records were mentioned as to what was examined and how it was examined by the Chartered Accountant for working out the disallowance. It is also true that Hon'ble Delhi High Court in ACB INDIA LIMITED (FORMERLY M/S ARYAN COAL BENEFICATIONS (P) LTD. [2015 (4) TMI 224 - DELHI HIGH COURT] has held that while working disallowance u/s 14A read with Rule 8D, only those investment which has resulted into exempt income during the year are required to be considered. Addition u/s 14A computation - Held that:- AO is directed to decide the issue of disallowance u/s 14A read with Rule 8D afresh in accordance with law. In view of above facts and decision of Honourable Delhi High court in ACB Investments P Ltd [2015 (4) TMI 224 - DELHI HIGH COURT] it is further held that the ld Assessing Officer is directed to examine the certificate issued by a Chartered Accountant working out disallowance u/s 14A. If the ld Assessing Officer finds the disallowance worked out by the assessee as per that certificate as correct then disallowance u/s 14A may be restricted to that extent. If the same is found to be incorrect the ld Assessing Officer may decide the issue of the disallowance afresh in accordance with the law. Penalty u/s 271(1)(c) - Disallowance u/s 14A - Held that:- The fact shows that in assessee’s own case for assessment year 2011 – 12, the learned CIT(A) has held that no disallowance under section 14 A can be made. Further, the issue before us is squarely covered by the decision of the Hon’ble Delhi High Court in CIT vs. Liquid Investments dated 5/10/2010, where the Hon’ble High Court has held that issue of disallowance under section 14A of the Income Tax Act was a debatable issue. Even otherwise in the case of the assessee itself for the same assessment year we have held that the disallowance offered by the assessee is on estimated basis and the learned AO has merely applied the provisions of rule 8D of the Income Tax Rules 1962. In assessee’s own case in AY 2011-12, CIT (A) has deleted the disallowance u/s 14A of the act. Thus, it shows that the assessee has not furnished any particulars of income, which are incorrect. The issue remains is merely computation of the disallowance. Therefore, we do not find any infirmity in the order of the learned CIT(A) in deleting the above penalty.
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2019 (1) TMI 673
Deduction u/s 80-IB(10) - residential township with commercial area - integrated township - combination of two projects - size of flats exceeding prescribed limit of 1500 sq. ft. - allotment of more than one residential unit to an individual - Held that:- Poorvi” and “Triveni” have to be considered as separate housing projects for the purpose of the grant of deduction u/s 80-IB(10) of the Act. CIT(A) as well as the Assessing Officer were not justified in denying the deduction u/s 80-IB(10) of the Act, on the ground that the housing projects are part of a larger infrastructural and township projects and when the entire township project is taken together, the conditions laid down u/s 80-IB(1)(d) of the Act are violated. This is not correct. When the housing projects “Poorvi” and “Triveni” are taken separately, there is no finding by the revenue that the condition specified u/s 80-IB(10)(d) of the Act are violated. Hence we decide this issue in favour of the assessee. Project where deduction u/s 80-IB(10) is claimed, no separate signed profit and loss account was furnished - Held that:- Deduction u/s 80-IB(10) of the Act, cannot be disallowed on the ground that separate books of account were not maintained by the assessee and on the ground that signed profit and loss accounts, project-wise, were not submitted. This issue is decided in favour of the assessee. Under the scheme of the Act, no more than one residential unit can be allotted any individual and the assessee had not filed the details in this regard - Held that:- as per the details filed by the assessee it is clear that out of both the projects only 8 flats were sold to persons who were relatives. This fact is not disputed by the Assessing Officer or the ld. D/R before us. Under these circumstances the question is whether deduction can be denied for the profits earned on entire housing projects or it can be denied proportionately. As decided in case of Viswas Promoters Pvt. Ltd [2012 (11) TMI 1117 - MADRAS HIGH COURT] principle of proportionate disallowance was approved. No contrary judgment is brought to our notice. Hence we hold that the Assessing Officer could at best disallowed at 1.9% of the claim made by the assessee u/s 80-IB(10) of the Act, as out of the total of 224 flats of Poorvi and 234 flats of Triveni, only 8 flats were sold to the same individual or their relatives. The Assessing Officer is directed accordingly. Also find force in the arguments of the assessee that the deduction cannot be denied on the same facts for a particular Assessment Year, when similar deduction was granted u/s 80-IB(10) of the Act for the earlier Assessment Years. The basis on which deduction was granted in the earlier years could not have been disturbed in the subsequent years as the principle of consistency applies and the revenue has to brought out any new facts on record. In view of the above discussion, we direct the Assessing Officer to restrict the disallowance to 1.9% of the claim made by the assessee u/s 80-IB(10) of the Act. Disallowance u/s 40(a)(ia) - CIT(A) held that ADDA was not registered u/s 12A of the Act and hence was not entitled to the benefits of Section 11. The assessee has produced before us the registration granted to ADDA u/s 12A - This fact was not before the ld. CIT(A) - we set aside this issue to the file of the Assessing Officer for considering the issue afresh, in accordance with law, in view of the second proviso to Section 40(a)(ia)
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2019 (1) TMI 672
Nature of income - business income or income from other sources - Non carrying of business operations - set off the business loss against the income from other sources denied - business of trading in shares, stocks, debentures, bonds, fixed and other deposits including finance of short and long term deposits etc. - claim of business expenditure - Held that:- The stand of the assessee was accepted by the revenue in all the years as discussed above either the interest income was accepted as business income or the business loss was allowed to set off against the interest income. There was no material change in the facts and circumstances in the year under consideration. Therefore, in our considered view, the Revenue cannot take a different stand in the subsequent year. We also note that the assessee has been carrying on the business of money lending in a systematic manner without having the registration with RBI as NBFC. Merely, the fact that the assessee is not registered with RBI AS NBFC, cannot lead to draw an inference that the assessee is not carrying out the business activity. The registration with RBI as NBFC and business activity of the assessee, both are different aspects and cannot be applied for holding that the assessee is not engaged in the business activity. we also note that the assessee has been carrying on the business of money lending in a systematic manner without having the registration with RBI as NBFC. Merely, the fact that the assessee is not registered with RBI AS NBFC, cannot lead to draw an inference that the assessee is not carrying out the business activity. The registration with RBI as NBFC and business activity of the assessee, both are different aspects and cannot be applied for holding that the assessee is not engaged in the business activity. The genuineness of the expenses claimed by the assessee have not been doubted by the authorities below. Moreover, there is no issue regarding the genuineness/reasonableness of the expenses claimed by the assessee arising from the order of authorities below. Therefore, we are not inclined to adjudicate the same. In view of above, we are of the view that the interest income of the assessee should have been treated as income from business and profession. Therefore, we set aside the order of ld. CIT(A) and direct the AO to treat the interest income of the assessee as income under the head business and profession. Disallowance u/s 14A - Held that:- We direct the AO to restrict the disallowance u/s 14A r.w.r. 8D of the Act to the extent of Dividend Income. In view of above the ground of appeal of the assessee is partly allowed.
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Customs
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2019 (1) TMI 671
Classification of imported item - Liquid Crystal Devices cut to special shapes - whether Liquid Crystal Devices cut to special shapes are covered under heading 9013 as claimed by the Appellant or under heading 8714 as per the department? - Held that:- These LCDs can be used for other purposes also viz. computer monitors, television, instrument panels, video games, clocks, watches etc. and therefore those are not suitable to be used solely or principally with the articles of Chapter 87 and therefore it can t be classified under CTH 8714. Merely because they were used as parts in dashboards of motorcycle, the could not be classified under Heading 8714. It cannot be disputed that LCDs are specifically provided in tariff item 9013. Only conditions is that such LCDs should not constitute articles provided more specifically in other headings. The LCD imported by the Appellant did not constitute such article which is more specifically provided in other headings. The only reason for including the goods under Chapter Heading 8714 is that LCDs were to be used in the motorcycles. The tariff entry 8714 does not pertains to LCD but parts and accessories of vehicles of heading 8711 to 8713. In nowhere include LCD or the dash board of Motorcycle specifically. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 670
Valuation of imported goods - wooden furniture - loading of invoice price on prorata basis to the extent of excess weight found on physical verification of the goods - Held that:- Undisputedly the appellant had imported wooden furniture of different varieties meant to be used in bedrooms and hall etc. While importing the said goods, the appellant had declared the classification of the product, under Chapter 94036000 and 94032090 of CTA, 1975 which are assessable to duty as unit not by weight. Therefore, noticing excess weight at the time of physical verification of the import by the Customs authorities, in our view, could not in any manner change the transaction value disclosed in the proforma invoices, which has not been disputed by the Revenue. Loading the invoice price prorata basis to the extent of excess weight of the furniture noticed during the physical examination is unsustainable - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 669
Classification of imported goods - Pura Fresh Delux - RO-6.5L Mineral Enrichment System (Reverse Osmosis water purifier) - whether classified under CTH 84212190 or under CTH 89212120? - benefit of N/N. 06/2006-CE Sr. No. 8B - Held that:- The same products imported earlier had been examined by this Tribunal in the appellant’s own case WHIRLPOOL OF INDIA LTD. VERSUS COMMR. OF CUS. (IMPORT), NHAVA SHEVA [2014 (6) TMI 192 - CESTAT MUMBAI] and the classification of the impugned goods are held to be under CTH 84212120 as household type filters - benefit of notification cannot be denied - appeal dismissed - decided against appellant.
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2019 (1) TMI 668
Import of restricted item - rough marble blocks - import without any specific license - Valuation - rejection of declared value based on contemporaneous imports - confiscation - redemption fine - penalty - Held that:- The fact is not under dispute that rough marble blocks imported by the appellant was restricted and permitted for import subject to observance of the import licensing procedures prescribed by the DGFT. In this case, the appellant had not followed any procedure laid down in the Notification dated 31.3.2010 read with the FTP 2009-2014. Thus, such imported goods was liable for confiscation and had appropriately been confiscated by the original authority. Redemption fine - penalty - Held that:- The original authority has not considered the aspect of margin of profit expected to be earned in normal course of trade in respect of such imported consignment. Further, in respect of the same goods imported earlier by some other importer, viz., Guru Kripa Marbles, the Tribunal has reduced the quantum of redemption fine and penalty, holding that the same should be calculated based on the formula laid down by Section 125 of the Act - the prayer of the appellant can be considered to the limited extent of reduction of the quantum of fine and penalty imposed on it. The impugned order is modified, to the extent of reducing the quantum of redemption fine and penalty to ₹ 14,00,000/- and ₹ 3,50,000/- respectively - appeal disposed off.
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2019 (1) TMI 667
Valuation of imported goods - enhancement of declared value - determination of transaction value - Rule 4 and Rule 5 of the Customs Valuation Rules, 2007 read with Section 14 of the Customs Act, 1962 - Held that:- Since in terms of the permission granted by the jurisdictional Commissioner vide order dated 18.11.2009, the appellant had filed the Bill of Entry and other import documents, the value declared for the purpose of assessment should be considered, in absence of any plausible evidence that the declared price is not true transaction value and over and above the agreed price, the appellant had paid more consideration through the mode, other than the banking channel - Since Section 14 of the Act mandates that the value of the goods is to be considered on the basis of the price actually paid or payable for the goods, when sold for export to India, the negotiated price offered by the overseas supplier should be considered as the transaction value. Appeal allowed - decided in favor of appellant.
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Service Tax
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2019 (1) TMI 666
Principles of natural justice - benefit of discharging 25% of the penalty imposed under Section 78 of the Finance Act, 1994 wrongly extended - Held that:- There is no merit in the contention of the learned AR for the Revenue that the appellant would be precluded from raising additional arguments in their defense in the denovo proceedings and the present remand proceedings should put a restriction only to the issues raised earlier in their defense - Since we remand the matter to the adjudicating authority, all issues should be examined afresh - appeal allowed by way of remand.
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Central Excise
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2019 (1) TMI 665
CENVAT Credit - time limitation - N/N. 11/95-C.E. (NT) dated 16.03.1995 - Whether the differential duty paid after 16.03.1995 for clearances of excisable goods (components) made before 16.03.1995 will be available as credit to the manufacture of final products (Chassis) in terms of Rule 57E of CEA 44 (OR) whether in view of the Rule 57F(4A) the said credit will be barred? Held that:- In terms of Rule 57F(4A) which commence with a non obstante clause, any credit excise duty lying unutilized on 16.03.1995 with the manufacturer of tractors or motor vehicles shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods. The assessee's contention is that the credit which accrue to them in August 1995 was much after the date fixed in Rule 57F(4A) of the Rules and therefore, the same will not lapse. However, one important factor which the assessee has lost sight is that this credit which was earned by the assessee was on account of the payment of CVD as demanded by the Madras Customs in respect of the imports made by the assessee (inputs) and admittedly these imports were prior to 16.03.1995. Therefore, the Commissioner was fully justified in holding that had the assessee has correctly paid the CVD at the time of import and availed MODVAT credit, this amount would have lapsed as per Rule 57F(4A) of the Rules. The first respondent rightly rejected the assessee's case - the substantial questions are answered against the appellant.
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2019 (1) TMI 664
Maintainability of appeal - non-compliance with the requirement of pre-deposit - Section 35F of the Central Excise Act, 1944 - Held that:- The challenge to the vires of the amended provision becomes academic and it is no longer necessary to assess the propriety of the orders impugned, both in the regular appeals and in the writ petitions, by which the Appellate Tribunal dismissed the appeals without going into the merits thereof - The order of adjudication of July 11, 2014 pertaining to AI Champdany Industries Limited, the order dated October 14, 2014 pertaining to RDB Textiles Ltd. and order dated March 17, 2015 pertaining to Mahadeo Jute & Industries Limited, all passed by the adjudicating authority, will stand set aside.
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2019 (1) TMI 663
Clandestine removal - removal of scrap of old and used moulds under job work challans - Not. No. 67/95 and Not. No. 214/86-CE - whether or not waste and scrap of CI moulds generated during the course of manufacture of final products can be converted into fresh CI moulds for being used in the factory of appellant itself without payment of duty within the framework of N/N. 67/95 dated 16.03.1995? - time limitation. Held that:- It is clear from the Notification that the capital goods produced in the factory of consumption are exempted. The view that captively consumed capital goods cannot be treated in the excluded category of final product mentioned in the above said proviso would generally negate exemption specifically given under serial No. (i) to captively consumed capital goods. Above all, the aforesaid exemption appears to have been extended so as to avoid multiple stages of taxation and taking credit in regard to goods manufacture and utilised in the same factory. The Notification shall be applicable only to the goods in respect of which the suppliers of raw materials or semi finished goods give an undertaking to Commissioner or Central Excise Office having jurisdiction over the factory of the job worker - The allegations against the appellant have been confirmed only for want of such undertaking - Held that:- Central Board of Excise & Customs clearly says that merely procedural lapses be not allowed to defeat the modvat credit benefit, if substantive conditions about payment of duty and user of goods in manufacture of end product in factory are fulfilled - In view of the admitted facts, there is sufficient compliance by the appellant qua the substantial liability as laid in the Notification relied upon is concerned. Mere lack of sending an intimation is a procedure which is mere directry. Denying the substantial benefit to the appellant on merely a procedural lapse is unjustified on the part of the adjudicating authority below. Time Limitation - Held that:- It is the onus of the Department to prove that assessee had deliberately avoided payment of duty which is payable in accordance of law - the appellant was not liable to make the payment of duty in view of the exemption vide Notification No. 67/95 qua the capital goods consumed in captive use after being reprocessed. Resultantly, there appears no alleged mensrea on the part of the appellant to evade duty - demand is time barred. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 662
Rectification of mistake - case of appellant is that they averred that the impugned order had exceeded the proposal in the show cause notice to decide on classification and that this submission had not been dealt with by the Tribunal - Held that:- It would appear that the Tribunal in its order upheld the demand as computed by the two lower authorities in the absence of any justification on the part of the appellant that there should be a contrary finding. The question of having exceeded the jurisdiction in re-classifying the goods, which the first appellate authority is alleged to have done, does not alter the confirmation of demand of duty which is the prime purpose of the adjudication proceedings. The Tribunal has, in its order, arrived at its own conclusion on the classifiability of the goods which, in effect, upheld the order of the original authority and also the latter order of the first appellate authority. Therefore there is no scope for rectification of the order of the Tribunal. ROM Application dismissed.
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2019 (1) TMI 661
Valuation - depression of value of the product to the extent of the value of the Advance Licenses surrendered by the customers - deemed export benefits - issue of Advance Intermediate License - Held that:- The issue is alraedy decided by Hon'ble Supreme Court in the case of COMMISSIONER OF C. EX., BHUBANESHWAR-II VERSUS IFGL REFRACTORIES LTD. [2005 (8) TMI 112 - SUPREME COURT OF INDIA], where it was held that In pursuance of the Contract of Sale, there is directly a flow of additional consideration from the buyer to seller. The value thereof has to be added to the price - appeal dismissed - decided in favor of Revenue.
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2019 (1) TMI 660
100% EOU - CENVAT Credit - removal of inputs to job-worker - specific permission granted earlier was withdrawn - applicability of sub-rule (5) of Rule 3 of the CENVAT Credit Rules, 2004 - Held that:- Sub-rule (5) of Rule 3 deals with the situation of payment of equal amount of CENVAT credit availed in respect of inputs, when the same were removed ‘as such’ from the factory of the manufacturer. Sub-rule (5a) of Rule 4 allowed a manufacturer to retain the CENVAT credit in respect of inputs removed as such or after it partially processed, when the same are sent to a job-worker for further processing. The said sub-rule mandates that the inputs or the resultant product manufactured therefrom have to be received back by the manufacturer within 180 days of their being sent from the factory. In the present case, it is undisputed fact that the appellant had removed the raw materials from the bonded warehouse to its job-worker, namely, M/s. Svizera Labs Pvt Ltd for manufacture of finished excisable goods under sub-contracting basis. Since the raw material/inputs were removed by the appellant for further manufacture of the finished goods, the case of the appellant falls under the purview of sub-rule (5)(a) of Rule 4 of the Rules. The permission letter for removal of raw material withdrawn subsequently by the department with effect from 29/01/2007 cannot be the ground to deny the CENVAT benefit inasmuch as availment of CENVAT credit is permissible on the basis of receipt of inputs in the factory. Appeal allowed - decided in favor of appellant.
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