TMI Tax Updates - e-Newsletter
January 17, 2018

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Highlights / Catch Notes

• GST:

  E-WAY BILL MANDATORY FROM 01.02.2018 - Goods and Services Tax - GST
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• GST:

  TAX DEDUCTION AT SOURCE UNDER GST - Goods and Services Tax - GST
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• Income Tax:

  Penalty for delay in auditing the books of account required u/s. 44AB - due to disputes between the assessee with its earlier auditor and resignation thereof, the same (audited accounts) was filed before the AO belatedly. - the penalty is liable to be held as invalid and the same is cancelled - AT
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• Income Tax:

  TDS u/s 194H - sub- brokerge paid in connection with the services rendered in the course of business of buying and selling of units of mutual fund or in relation to transactions pertaining to mutual fund is not covered by provisions of tax at source in view of the explanation (i) to section 194H of the Act. - AT
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• Income Tax:

  Business expenditure - allow-ability u/s 37(1)- The assessee also failed to prove that they had got any benefit for becoming a guarantor of the said company. Therefore, one-time settlement charges paid to banks is not an allowable expenditure under section 37 of the Income Tax Act - Decided against assessee. - AT
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• Income Tax:

  Seeking relief u/s 119(2) - condonation of delay in filing return of income - it is impossible to disbelieve the case of the petitioner that the default was due to the circumstances beyond his control. Thus, both the conditions (i) and (ii) of clause (c) of sub­section (2) of section 119 of the said Act were fulfilled in the facts of the case. - HC
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• Income Tax:

  Garnishee Notice u/s 226(3) addressed to the Special Tahsildar, calling to pay the arrears of tax payable by the company - the demand in the impugned assessment order can remain stayed till the disposal of the appeals by the Commissioner of Income Tax (Appeals) subject to a condition. - HC
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• Income Tax:

  Liability of directors of private company in liquidation - At no time has the Petitioner been given a chance to meet the Revenue's case that it has taken steps to recover the amount from the defaulting Private Limited Company so as to meet the jurisdictional condition precedent before passing an order u/s 179(1) - matter restored before AO - HC
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• Income Tax:

  TDS liability on payment made as bakshish - the payment made as bakshish as an individual, did not exceed to threshold limit of ₹ 20,000/under Section 194C(5) - No occasion to deduct the tax at source would arise - HC
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• Income Tax:

  Eligibility to claim u/s 10B - the assessee owns nothing which could be exported - the assessee has not established that its output is an independent product or article or thing or computer software - deduction u/s 10B is not allowable - AT
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• Customs:

  Illegal import - misdeclaration of goods - enhancement of value - The details contained were vague and there was a clear attempt in mis-declaration of high value electronic items to avoid customs duty - AT
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• Customs:

  Valuation - import of goods - inclusion of expenditure on advertisement and promotion - the appellant has incurred such expanses on the expression obligation of RIL England and as a clear condition of the sale of goods for disputing them in India. - Demand confirmed by invoking extended period of limitation - AT
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• Service Tax:

  Classification of services - Banking and Other Financial Services or otherwise? - Listing out the difference between operating lease and financial lease the impugned order categorically recorded that the lease arrangements on which the respondent –assessee discharged VAT are operating leases and are not liable to service tax - - AT
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• Central Excise:

  Classification of goods - computer stationery and paper rolls - it is not merely the paper or stationery but the printing on it that gives it the worth, hence the subject item reflects more a member of Chapter 49, family compared to chapter 48. - AT
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• Central Excise:

  CENVAT credit - input services - once the expression setting up has been deleted from the scope of input service, all services used for modernization, renovation or repairs of a factory or office relating to such factory would continue to be admissible even after specific exclusion that have been provided in the amended definition of input services relating to works contract service/ construction services. - AT
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• Central Excise:

  Method of Valuation - valuation for of charging excise duty should be under Section 4A even though the goods are sold to the institutional buyer - even though the package of the goods is marked for industrial use but since the goods bore the MRP, the valuation should be done under Section 4A and not under Section 4 of the CEA, 1944. - AT
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• Central Excise:

  The appellant being a job worker, of textile and textile article falling under Chapter 54 & 55 is not required to pay Excise duty in terms of Rule 12B - AT
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• Central Excise:

  Valuation - removal of goods on transfer of right to use - Notwithstanding the clearances being shown as stock-transfer to Head office, this was only a routing on paper only, however in actuality the impugned servers were delivered in the same condition as they were removed, to the theatre owners. Possibly, appellant had followed such a tedious billing route for accounting reasons - issue of valuation decided against the assessee - AT
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• Central Excise:

  Job work - N/N. 214/86 dated 25.03.1986 - declaration/ certificate by the principle manufacturer not filed - double benefit of exemption on the same raw material is not permissible especially when the appellant has manufactured the excisable goods which have the industrial market and cleared the same without payment of duty - AT
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• Central Excise:

  Valuation - includibility - the amount which was categorized as ‘other income’ was recovered as sales tax but not paid to the sales tax department - As per the definition of transaction value in Section 4(3)(d), such amount cannot be excluded from assessable value since it has lost the colour of tax being neither paid nor payable as tax. - AT
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• Central Excise:

  Classification of goods - Ayurvedic medicinal product - the products which are based on distillates further formulation as per prescribed dosages as per formula in authoritative books as per Indian Drugs & Cosmetic Act, 1940 has been carried out. The ingredients are as per API Standards. - AT
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Articles

• E-WAY BILL MANDATORY FROM 01.02.2018
• TAX DEDUCTION AT SOURCE UNDER GST

Notifications

• Customs

• 05/2018 - dated 15-1-2018 - Cus (NT)
  Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver

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• GST - States

• 70/2017-State Tax - dated 27-12-2017 - Himachal Pradesh SGST
  The Himachal Pradesh Goods and Services Tax (Fifteenth Amendment) Rules, 2017.

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• 34/2017-State Tax - dated 8-12-2017 - Himachal Pradesh SGST
  The Himachal Pradesh Goods and Services Tax (Fourteenth Amendment) Rules, 2017.

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• EXN-F(10)-34/2017 - dated 6-12-2017 - Himachal Pradesh SGST
  CORRIGENDUM - Notification No. 34/2017-STATE TAX published in Rajpatra, Himachal Pradesh on 23rd October, 2017 vide number EXN-F(10)-34/2017 dated 9th October, 2017

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• EXN-F(10)-20/2016-Vol.I-Loose - dated 29-11-2017 - Himachal Pradesh SGST
  CORRIGENDUM - Department Notification No.55/2017-State Tax published in Rajpatra, Himachal Pradesh on 15th November, 2017

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• 51/2017-State Tax - dated 29-11-2017 - Himachal Pradesh SGST
  The Himachal Pradesh Goods and Services Tax (Thirteenth Amendment) Rules, 2017.

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• 49/2017-State Tax - dated 24-11-2017 - Himachal Pradesh SGST
  Evidences are required to be produced by the supplier of deemed export supplies for claiming refund.

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• 48/2017-State Tax - dated 20-11-2017 - Himachal Pradesh SGST
  Supply of goods by a registered person against Advance Authorisation for deemed exports.

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• 47/2017-State Tax - dated 20-11-2017 - Himachal Pradesh SGST
  The Himachal Pradesh Goods and Services Tax (Twelfth Amendment) Rules, 2017.

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• 40/2017-State Tax (Rate) - dated 20-11-2017 - Himachal Pradesh SGST
  Recommendations of the Council, is pleased to exempt the intra-State supply of taxable goods amount calculated at the rate of 0.05 per cent.,

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• 39/2017-State Tax (Rate) - dated 20-11-2017 - Himachal Pradesh SGST
  Notify the State Tax rate of 2.5 per cent on intra-State supplies of goods Food preparations put up in unit containers.

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• 36/2017-State Tax - dated 20-11-2017 - Himachal Pradesh SGST
  The Himachal Pradesh Goods and Services Tax (Eleventh Amendment) Rules, 2017.

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• EXN-F(10)-38/2017 - dated 15-11-2017 - Himachal Pradesh SGST
  Amendment in the Notification No. 8/2017-State Tax (Rate), dated the 30th June, 2017.

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• EXN-F (10)-22/2017-Loose - dated 15-11-2017 - Himachal Pradesh SGST
  Constitute the Authority for Advance Ruling

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• 66/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Recommendations of the Council, to notify the registered person who did not opt for the composition levy under section 10 the state tax on the outward supply of goods at the time of supply.

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• 65/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Electronic commerce operator who is required to collect tax at source under section 52 amount should be not exceed of ten lakh rupees in case of “special category States”.

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• 64/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Waiver the amount of late fee payable the return in FORM GSTR-3B.

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• 63/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Amendments in the Notification No. 53/2017-State Tax, dated the 15th Nov., 2017.

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• 62/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Extends the time limit for furnishing the return by an Input Service Distributor in FORM GSTR-6 .

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• 61/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Extends the time limit for furnishing the return in FORM GSTR-5A. Supplying online information and database access or retrieval services from a place outside India to a non-taxable online recipient.

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• 60/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Extends the time limit for furnishing the return by a non-resident taxable person, in FORM GSTR-5.

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• 59/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Amendments in the Notification of the No. 41/2017-State Tax, dated 15th Nov., 2017,

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• 58/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Extends the time limit for furnishing the details of outward supplies in FORM GSTR-1.

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• 57/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Recommendations of the Council, notifies the registered persons having aggregate turnover of less than 1.5 crore rupees in the preceding financial year.

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• 56/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Last date for filing of return in FORM GSTR-3B.

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• 55/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  The Himachal Pradesh Goods and Services Tax (Tenth Amendment) Rules, 2017.

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• 53/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Extends the time limit for making the declaration in FORM GST ITC-04.

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• 50/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Waiver the late fee payable FORM GSTR-3B.

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• 47/2017-State Tax (Rate) - dated 15-11-2017 - Himachal Pradesh SGST
  Amendments in the Notification No.12/2017-State Tax (Rate), dated the 30th June, 2017

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• 46/2017-State Tax (Rate) - dated 15-11-2017 - Himachal Pradesh SGST
  Amendments in the Notification No.11/2017- State Tax (Rate), dated the 30th June, 2017,

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• 45/2017-State Tax (Rate) - dated 15-11-2017 - Himachal Pradesh SGST
  2.5% concessional rates supplies to specific public funded research institute.

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• 45/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  The Himachal Pradesh Goods and Services Tax (Ninth Amendment) Rules, 2017.

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• 44/2017-State Tax (Rate) - dated 15-11-2017 - Himachal Pradesh SGST
  Amendment in the Notification No. 5/2017-State Tax (Rate), dated the 30th June, 2017.

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• 44/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Extends the time limit for making a declaration, in FORM GST ITC-01.

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• 41/2017-State Tax - dated 15-11-2017 - Himachal Pradesh SGST
  Extends the time limit for furnishing the return by a composition supplier, in FORM GSTR-4,

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• NI.-2-1552/XI-9(47)/17 - dated 24-10-2017 - Uttar Pradesh SGST
  Amendment in Notification No. KA.NI.-2-849/XI-9(47)/17 dated 30 June 2017

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• NI.-2-1551/XI-9(47)/17 - dated 24-10-2017 - Uttar Pradesh SGST
  Amendment in Notification No. NI.-2-851/XI-9(47)/17 dated 30 June 2017

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• NI.-2-1531/XI-9(42)/17 - dated 23-10-2017 - Uttar Pradesh SGST
  UTTAR PRADESH GOODS AND SERVICES TAX (SIXTH AMENDMENT) RULES, 2017

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• NI.-2-1530/XI-9(15)/17 - dated 23-10-2017 - Uttar Pradesh SGST
  Regarding section 54 and 55 of the CGST Act

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• NI.-2-1529/XI-9(15)/17 - dated 23-10-2017 - Uttar Pradesh SGST
  Amendment in Notification No. KA.NI.-2-1414/XI-9(15)/17 dated 27/09/2017

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• NI.-2-1528/XI-9(15)/17 - dated 23-10-2017 - Uttar Pradesh SGST
  Regarding state tax on outward supply of goods

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Circulars / Instructions / Orders

• GST - States - 01/2017-State Tax - dated 15-11-2017
  THE HIMACHAL PRADESH GOODS AND SERVICES TAX (REMOVAL OF DIFFICULTIES) ORDER, 2017

News

• Govt. needs to increase healthcare outlay in budget: Report

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• Signing of MoU between Department of Commerce and CII for setting-up an institutional mechanism for the development of Logistics sector in the country

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• NITI Aayog initiates the first course on Sustainable Urban Planning using Remote Sensing and GIS at IIT Kanpur’s outreach centre at Noida

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• RBI Reference Rate for US $

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• Understanding and Managing Interest Rate Risk at Banks (Viral V Acharya, Deputy Governor – January 15, 2018 – at the FIMMDA Annual Dinner, 2018 at Hotel Taj Mahal Palace, Mumbai)

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• Auction for Sale (Re-issue) of Government Stocks

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• Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

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Case Laws:

• Income Tax

• 2018 (1) TMI 734

  Unexplained cash credit - addition u/s 68 - Held that:- Amounts have been satisfactorily explained by the assessee before the AO in the remand proceedings by way of clinching supporting evidences which facts have not been assailed. The evidences relied upon and considered have not been assailed or rebutted by any contrary evidence in the present proceedings. In the circumstances, it is of the view that the occasion to raise a ground against the relief granted did not arise. Tax Authorities did not see the proceedings in continuation of the proceedings. A different man coming at a different point of time, it appears mechanically has proposed the raising of the ground. It is seen that the present appeal has been filed with the approval of the orders dated 21.07.2017 of Pr. CIT-2, Ludhiana and it is unfortunate that even the said Authority did not care to keep a control on the quality of the appeal filed. The AO, who filed the remand report, is not named. However, the remand report is extracted in the impugned order. Although, the name of the AO who has filed the present appeal is given, however the fact that there are checks and balances in place to ensure that frivolous appeals are not filed apparently are not working.

  Adequate efforts are made to inform the public that documents having financial implications like copies of Sale Deed etc. are retained even by the seller in order to avoid unnecessary harassment of tracing them to substantiate the availability of funds which is bound to be questioned by the Tax Administration.

  As a result of developmental activities of the State, the fruits of development have developed on at times on teaming masses who educationally, socially and financially were ill prepared to handle the bonanza. These incidents have suddenly attracted the ill prepared citizens in the tax net who on account of their ignorance are left battling their “gain and good fortune” in the mindless maze of the administrative requirements.

  Efforts of broadcasting of information through audio visual means etc must ensure percolation of information, awareness and education right down to the grass roots to prepare the citizens to handle their financial successes and failures as these efforts would go a long way to help the people to become tax compliant. With the said observations, the appeal of the Revenue is dismissed.

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• 2018 (1) TMI 733

  Expenditure laid out or expended wholly and exclusively for the purpose of the business or profession of the assessee u/s 37 - one-time settlement charges paid to banks - benefit for becoming a guarantor - Held that:- The assessee was carrying on profession of advocate. The assessee had given the guarantee for obtaining loan by the Company M/s India Magnetics Ltd. There is no direct/indirect nexus between the assessee’s profession and the company for which he gave his guarantee. The assessee is also unable to prove that the assessee has received any direct indirect benefit for becoming a guarantor for the above company. CIT(A) has, therefore, done good reasoned order on this account, which needs no interference.

  The assessee could not controvert the test laid down for claiming deduction u/s. 37(1), as discussed by the ld. CIT(A). The assessee also failed to prove that they had got any benefit for becoming a guarantor of the said company. Therefore, one-time settlement charges paid to banks is not an allowable expenditure under section 37 of the Income Tax Act - Decided against assessee.

  Disallowance out of expenditures claimed - Held that:- We find that the ld. Authorities below have made the disallowance on adhoc basis, that too without rejecting the books of account of the assessee. Moreover, the ld. Authorities below have failed to pin point any particular expenditure which was of disallowable nature. Therefore, adhoc disallowance made by the authorities below deserves to be deleted - Decided against revenue

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• 2018 (1) TMI 732

  Penalty u/s 271(1)(c) - concealment of long term capital gain arised on account of sale of agricultural land - as per assessee sale transaction and long term capital gain were shown in the return of income of HUF on the advice of Tax consultant - Held that:- the assessee has filed all the details of the alleged transaction of sale of agriculture land as well as various rebates and exemptions claimed which have been shown in the income tax return filed by the assessee in the capacity of his HUF. It cannot be presumed that the assessee concealed particulars of income or furnished inaccurate particulars of income because the assessee has shown transaction of sale of agriculture land in the hands of assessee’s HUF as the property in question was ancestral. We, therefore find no reason to interfere in the findings of Ld. CIT(A) deleting the penalty u/s 271(1)(c) - Decded in favour of assessee

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• 2018 (1) TMI 731

  TDS u/s 194H - disallowance of Sub-brokerage payments to sub-brokers on the transactions related to shares and securities - Held that:- On same identical facts in the case of S.J. Investment Pvt. Limited [2011 (2) TMI 1427 - ITAT MUMBAI] the coordinate ITAT Bench Mumbai held that the sub- brokerge paid in connection with the services rendered in the course of business of buying and selling of units of mutual fund or in relation to transactions pertaining to mutual fund is not covered by provisions of tax at source in view of the explanation (i) to section 194H of the Act.

  We note that there is no material to even suggest that the commission had been paid in connection with increasing the assessee volume of transactions or for doing any other activity. Therefore we hold that commission/brokerage of ₹ 10,67,725/- is not liable for deduction of tax at source (TDS). - Decided in favour of assessee

  Addition u/s 14A r.w.r 8D in respect of shares held as stock by the assessee company - Held that:- In REI Agro Ltd.(2013 (9) TMI 156 - ITAT KOLKATA) this Tribunal held that only investments which has given rise to the exempted income should be taken into consideration while computing u/s 8D(2)(ii) & 8D(2)(iii) of the Rules. The AO is directed accordingly to compute the disallowance under section 14A read with Rule 8D.

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• 2018 (1) TMI 730

  Penalty U/s.271(1)(c) - defective notice - non mention of reasons for issuing notice - Held that:- In the case under consideration, on perusal of the show cause notices issued by the Assessing Officer u/s 274 r.w.s. 271 of the IT Act, 1961, dated 30/12/2011, which is placed on record, it is seen that the Assessing Officer did not mention whether the notice is issued for concealment of income or for furnishing of inaccurate particulars of income. Therefore, as per the ratio laid down in the case of SSA’s Emerald Meadows [2016 (8) TMI 1145 - SUPREME COURT], the notice issued by the Assessing Officer is not valid and consequently, the order passed u/s 271(1)(c) is also not valid. - Decided in favour of assessee

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• 2018 (1) TMI 729

  Penalty u/s. 271B / 271(1)(b) & 271F - delay in auditing the books of account required u/s. 44AB - Held that:- Assessee started its business from the F.Y 2007-08 relevant to A.Y 2008-09 and the audit was completed on 02-09-2008 i.e within time. A.Y under consideration the assessee required to file the tax audit report by 30-09-2009. However, due to such disputes and delay, the same was filed by the assessee on 15-03- 2011 by a new auditor, M/s. B.S. Murthy & Associates, who was appointed on 20-12-2010.

  Therefore, it clearly shows that due to disputes between the assessee with its earlier auditor and resignation thereof, the same (audited accounts) was filed before the AO belatedly. On perusal of the said statement filed by the assessee before us, we find that there was delay in getting the accounts audited only in the A.Ys 2009-10 & 10-11 and there was no delay in immediate earlier previous year and subsequent years i.e. 2010-11 to 2016-17. Thus, the said delay in filing the tax audit was not intentional. There was reasonable cause in not getting the accounts audited and filing the same before the AO in time. Therefore, in such peculiar circumstances, the penalty is liable to be held as invalid and the same is cancelled. Thus, the penalty imposed by the AO and confirmed by the CIT-A is cancelled. The ground raised by the assessee in this regard is allowed.

  Penalty u/s. 271F - not filing the return of income in time required u/s. 139(1) as well as at the end of relevant A.Y - whether the delay caused in filing the return of income is reasonable or not? - Held that:- We note that the delay in filing the return of income was explained by the assessee before the authorities, which have not been considered by them in their right perspective in terms of section 273B of the Act. The said section explains no penalty shall be imposable on the person or the assessee proves that there was reasonable cause for any failure in terms of section 271F of the Act. We note that the said burden in terms of section 273B was discharged by the assessee by adducing reasonable cause for the said failure. Therefore, in our opinion by reading the section 271F and 273B of the Act conjointly no penalty is invited in the present case. Thereby, in such peculiar circumstances, we cancel the penalty - Decided in favour of assessee

  Penalty u/s. 271(1)(b) - non submissions of specific documents and evidences sought u/s. 142(1) - Held that:- We find that the assessment order dt. 29-12-2011 passed u/s. 147/143(3), wherein we noticed that there was no allegation of non compliance was made by the AO. It is observed that the assessee through his AR complied with the notice and books and other relevant documents were filed, which were examined by the AO. We find that the ld.AR has rightly pointed out that there was no allegation by the AO in not complying with the notice. - Decided in favour of assessee

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• 2018 (1) TMI 728

  TPA - upward adjustment under the head writing off of obsolete stock - Held that:- We do not find any reason, in the order of the AO/TPO, for not allowing write off of obsolete stock for this year. In other words, they have made addition without mentioning the new facts that had come to their notice while completing the assessment of the year under appeal and which were different form earlier AY's.

  CUP was not the method to determine the ALP of the disputed transaction. Lastly, we hold that destroying the obsolete stock after writing it off was an extra ordinary event.

  Thus we are of the opinion that the DRP was not justified in confirming the order of the TPO who had made upward adjustment under the head writing off of obsolete stock. GOA-2 is decided in favour of the assessee.

  Provision of market information services(MIS) provided to the AE - Held that:- TPO had held that the assessee was providing information to its AE, that it was not being compensated for such services, that he referred to the clause 11 of the DA in his support to hold that it was duty bound to provide MIS on quarterly basis, that he estimated the ALP of the said activity at 2% of the total turnover of the assessee, that the DRP reduced it to 0. 5%. In our opinion there is nothing in the DA that leads to the conclusion that the assessee was required to furnish MIS to its AE. Even if , for the sake of argument it is accepted, then the AO/DRP had not followed the valid procedure for making the adjustment. As per the provisions of chapter X of the Act, the departmental authorities are required to follow one of the methods as envisaged by Rule 10 of the Rules. They cannot make ad-hoc disallowance. While making assessment under other sections of the Act ad hoc disallowance can be made e. g. rate of GP or expenses incurred for personal use of the partners etc. But, under section 92 it is not possible. See Kodak India Pvt. Ltd. case [2016 (7) TMI 677 - BOMBAY HIGH COURT] - Decided in favour of the assessee

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• 2018 (1) TMI 727

  Unaccounted purchases - Profit determination - Held that:- Adoption of average over four years may not result in assessment of correct incomes in respect of that year. Either CIT(A) should have directed to adopt the same ratio or should have adopted a higher rate than what was declared by assessee. Since AO was not given any opportunity, the reduction by CIT(A) seems to be arbitrary. Therefore, we are unable to uphold the order of CIT(A) in adopting average rate of profit.

  As informed that the issue before the Central Excise Authorities is pending adjudication in the appellate tribunal therein. Assessee has no objection for adopting the turnovers in income tax proceedings. Therefore, accepting the turnovers as quantified by the Excise Authorities, AO is directed to adopt the same profit ratio as offered by assessee on the disclosed turnovers to the undisclosed turnover as well, in each of the assessment years. Accordingly, modifying the order of CIT(A), we direct the AO to verify the profit ratio in each of the assessment years and adopt the same ratio on the undisclosed turnover as well. The order of CIT(A) is modified to that extent.

  Entire unexplained turnover brought to tax - Held that:- Bringing to tax the entire turnover is not correct. Even the case law relied on by assessee before the Ld.CIT(A) supports the view that only profit/income can be brought to tax, not the entire turnover. Keeping that in mind, we agree with the findings of CIT(A) to the extent that the accrued turnover cannot be brought to tax. Revenue grounds are accordingly considered partly allowed

  Addition of amount paid in cash - Held that:- Why AO brought this amount to tax in all the assessment years is not understandable. We have perused the show cause notice. There is only one payment determined by the Excise Authorities and accordingly, we are of the opinion that addition of ₹ 10 Lakhs in each of the assessment years is not correct. Therefore, assessee’s grounds on this issue are allowed

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• 2018 (1) TMI 726

  TPA - adjustment towards profit attributable to the assessee company in connection with sale of intangible assets by the assessee to its AE - Held that:- The IPR was sold by the assessee to its AE in the earlier A.Ys and the ALP of the same had arisen for consideration in the A.Y 2010-11. The Coordinate Bench of the Tribunal in [2016 (8) TMI 727 - ITAT HYDERABAD] held that there is no doubt, there exists tax planning. There can be tax planning within the four corners of the taxation laws. There is enough mechanism in the existing Act and also there is DTAA - arrangement with Ireland, which will take care of the situations of tax avoidance. The revenue has not brought any cogent evidence to prove that there exists any tax avoidance. In our considered view, the action of the TPO is not justified and accordingly, the grounds raised by assessee are allowed.

  Management Consultancy Fee - Held that:- As in assessee's own case [2016 (1) TMI 451 - ITAT HYDERABAD] as per the details furnished by assessee before the TPO, the actual management fee of US$ 4,27,000 with administration charges of US$ 14000 and markup of 5%, at the exchange value as on the date of 31-03-2008, can be considered as 'service charges' for the intra group services rendered. This can be taken as ALP. Therefore, modifying the order of TPO, we determine the Management Consultancy Fee as detailed above and AO is directed to modify the order accordingly.

  Computation of exemption u/s 10AA - Held that:- We direct the AO to exclude the insurance and travelling and conveyance expenses both from the export turnover as well as the total turnover for the purpose of computation of exemption u/s 10AA of the Act.

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• 2018 (1) TMI 725

  Addition u/s.69C on account of unaccounted expenditure - source of such expenditure or part thereof - Held that:- We find that at page nos.30 to 71 of the paper book filed by the assessee is a copy of the said seized diary. Perusal of the same shows that in the seized diary in some of the pages amount is mentioned along with name of certain election publicity items like flags etc., in some places the name of person, date and amount is mentioned and at some places only name of person and amount has been mentioned. From the perusal of the same, it cannot be concluded that the figures mentioned therein were actual financial transactions. It cannot be deciphered therefrom whether the amount mentioned against election material were quotation or actual payment made.

  Similarly from the name and figure mentioned along with date or without date it is not clear whether the same are actual financial transactions or not and if they are actual financial transactions whether they represent amount received or amount paid by the assessee.

  Further, we find that the ld.DR could not controvert the finding of CIT(A) that no corroborative material was found during the course of search or even thereafter to show that the figure mentioned in the diary was actual financial transaction.There is no such presumption that the amount mentioned in seized document will be presumed the amount of actual financial transaction. - Decided against revenue

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• 2018 (1) TMI 752

  TPA - MAM selection - TNMM method application - concession granted to the assessee - addition u/s. 92 on the basis of order of TPO, who had calculated Transfer pricing on the basis of existing data available on record - Held that:- After examining the matter, we find that the entire matter has been considered at length and the department does not deny that TNMM method was being used for exporters and, therefore, the resultant concession granted to the assessee on this count is correct. It has also been noticed by the Tribunal that even otherwise the difference in the PLI was only marginal and was below 5%.

  The question of law is, therefore, answered in favour of the assessee and against the department.

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• 2018 (1) TMI 756

  Unexplained cash deposits - Held that:- It is well settled law that when the initial onus placed by explanation has been discharged by the assessee, the onus shift on the revenue to show that the amount in question constituted undisclosed income. (Mak Data P. Ltd. V/s CIT - 2013 (11) TMI 14 - SUPREME COURT)

  All the facts of the case show that sale agreement and sale deed clearly indicates that all the funds deposits in the banks are out of sale proceeds of the ancestral agriculture land of the appellant. All the document are signed by the buyer. The addition made by the assessing office is wrong in law of natural justice. - Decided in favour of assessee.

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• 2018 (1) TMI 751

  TDS u/s 194C - payments made by the Assessee to Mukadams and Transporters - Held that:- on an identical facts, the Gujarat High Court in CIT (TDS) v/s. Khedut Sahakari Khand Udyog Mandli Ltd. [2016 (7) TMI 926 - GUJARAT HIGH COURT] as held that there is no liability to deduct the tax at source on payments made to Mukadam and Transport Contractor for supply of sugarcane to sugarcane factories. There is a concurrent finding of fact recorded by the CIT(A) and the Tribunal that the payment made to the harvesting and transport contractor are on behalf of the Sugarcane farmers, is a part of the price payable to them. Further no separate deduction for payments made to the Mukadam and transport contractor was claimed by the Respondent-Assessee. - Decided against revenue

  TDS liability on payment made as bakshish - Held that:- Both the CIT(A) as well as Tribunal have found as a matter of fact that the payment made as bakshish as an individual, did not exceed to threshold limit of ₹ 20,000/under Section 194C( 5) of the Act. No occasion to deduct the tax at source would arise - Decided against revenue

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• 2018 (1) TMI 750

  Application for stay under Section 254(2A) - Held that:- It is axiomatic that the extraordinary writ jurisdiction of issuing prerogative writs would not be exercised when the conduct of the petitioner is not clean. A petitioner seeking an extra ordinary relief from the Court is not only expected to come with clean hands but so keep it, till the disposal of the petition. In the above facts we are of the view that the conduct of the petitioner during the pendency of the petition disentitles it to any relief under Article 226 of the Constitution of India. Therefore we dismiss the petition.

  Prima facie a civil contempt under Section 2 (b) of the Contempt of Courts Act 1971. Further the above communication dated 21 December 2017 (particularly the underlined portion) prima facie misrepresenting the order of the Court, interferes or tend to interfere with the due course of judicial proceedings and / or interfere with the administration of justice. Therefore, prima facie a criminal contempt under Section 2 (c) (ii) and (iii) of the Contempt of Courts Act, 1971. We thus take suo moto notice of contempt and direct the Registry to issue two notices under the Contempt of Courts Act, 1971 read with Appellate Side Rules one for Civil Contempt and the other for Criminal Contempt to Mr. Sadashiv Mokashi the Tax Recovery Officer, (Central) Pune returnable after 8 weeks on 5 March 2018 to show cause why action for civil and criminal contempt under the Contempt of Courts Act, 1971 should not be taken.

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• 2018 (1) TMI 749

  Liability of directors of private company in liquidation - condition precedent to exercise jurisdiction under Section 179 - Held that:- Admittedly, in this case no particulars of steps taken to recover the dues from the defaulting Company were communicated to the Petitioner nor indicated in the impugned order. In this case we find that except a statement that recovery proceedings against the defaulting assessee had failed, no particulars of the same are indicated, so as to enable the Petitioner to object to it on facts.

  In the above view, we set aside the impugned order dated 31st December 2015. This as the condition precedent to exercise jurisdiction under Section 179 (1) of the Act is not satisfied. At no time has the Petitioner been given a chance to meet the Revenue's case that it has taken steps to recover the amount from the defaulting Private Limited Company so as to meet the jurisdictional condition precedent before passing an order under Section 179 (1) - AO is at liberty to pass a fresh order after issuing the appropriate notice to the Petitioner indicating briefly, the steps taken by the department to recover the tax dues from the defaulting Private Limited Company and its failure to recover the same

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• 2018 (1) TMI 755

  Addition of unexplained income from undisclosed sources - Held that:- AO after having satisfied himself about the source of deposits as having been sourced from the advance received for sale of a specific agricultural land sold by the assessee, cannot thereafter have any grievance against the order passed which has relied upon his own Remand Report. Consequently, the occasion to file an appeal against the consequential relief does not arise. It is noted that the evidence relied upon has not been rebutted. The assessee in the facts of the present case, admittedly has pleaded that he only has agricultural income which has been accepted by the AO also as per page one of his order. - Decided against revenue

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• 2018 (1) TMI 748

  Disallowance of commission payments - expenditure wholly and exclusivily for busniss - Held that:- Addition are based entirely on suspicion.

  The assessee is a private party; it sources goods and commodities and trades in them in various countries in Africa. To secure contracts and also to ensure that payments are received in a timely manner and repatriated expeditiously, it utilizes the services of local agents in each country. From the angle of the Indian economy, the assessee’s efforts lead to export transactions, which in turn augment the foreign exchange resources; the assessee reports income, which is subjected to taxation.

  The commission expenditure laid out, therefore, can reasonably be linked with its business; its claim that it is laid out wholly for commercial terms is not fantastic; neither are the parties paid the amounts, bogus or dubious. In fact, they even confirmed receiving payments. By disallowing this expenditure, based on the AO’s personal understanding of how business ought to be conducted, the purpose of Section 37 was set at naught; besides, the AO virtually positioned himself in the armchair of the assessee, as regards the business conducted by it- an entirely untenable situation, that the law frowns upon. For these reasons, the court is of opinion that the concurrent findings of fact rendered by the lower appellate authorities do not call for disturbance.

  As in the case of commission expenditure, the AO’s conclusion that the sources of income towards deposits made were not disclosed or sufficiently proved, were correctly set aside by the lower authorities - Decided in favour of assessee.

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• 2018 (1) TMI 746

  Garnishee Notice u/s 226(3) addressed to the Special Tahsildar, calling to pay the arrears of tax payable by the company - Income Tax Department concern with the land acquisition proceedings or the compensation amount - According to the petitioners, the lands owned by them stand covered in the area, which is now proposed to be retained in the acquisition proceedings and the payment of compensation as awarded is in the advanced stage of being settled and probably within 30 days, the compensation amount will be paid to the Department - Held that:- This Court is of the considered view that the demand in the impugned assessment order can remain stayed till the disposal of the appeals by the Commissioner of Income Tax (Appeals) subject to a condition.

  Accordingly, W.P. is allowed and the garnishee notice dated 06.7.2016 is set aside subject to the condition that both the petitioner company and the Managing Director of the company pay 20% of the disputed tax for all the assessment years within a period of five weeks from the date of receipt of a copy of this order. If the petitioners comply with the above condition, payment of balance tax shall remain paid till the disposal of the appeals pending before the Commissioner of Income Tax (Appeals-II), Chennai. In the event the petitioners fail to comply with said condition as ordered above within the time stipulated, the Income Tax Department is entitled to initiate recovery proceedings.

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• 2018 (1) TMI 714

  Profit from sale of shares - Capital Gain or Business Income - CIT-A decided the issue in favour of the assessee holding the profits derived on sale of shares as long term or short term capital gain - Held that:- Identical issue arose in the case of the assessee firm for assessment year 2008 – 09 [2015 (3) TMI 1310 - ITAT DELHI] wherein held that CIT(A) has exhaustively and extensively dealt with the issue and after verification of all, has arrived at the conclusion about the head of income under which the income needed to be assessed. From the facts, we find that assessee had classified the shares in its balance sheet as investment. The holding period for a number of scripts exceeds 365 days. The shares were not purchased but were contributed by partners as their part of capital. In view of the above facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A) and therefore, appeal filed by Revenue is dismissed.

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• 2018 (1) TMI 713

  Validity of the reassessment proceedings - information received from the Sales Tax department that the assessee had only taken accommodation bills and not carried out any genuine purchases - Held that:- We are of the considered view that now when it was the claim of the assessee that it had made purchases from the aforesaid parties and had claimed the same as an expense while computing its income, therefore, it was for him to establish the genuineness of the same to the satisfaction of the A.O. We are of the considered view that in the backdrop of the facts emerging from the record, viz. (i). the notices sent by the A.O to the parties were returned unserved by the postal authorities; (ii). neither of the aforesaid parties were produced for examination before the A.O; and (iii). the purchase bills unlike genuine bills did not mention of the mode of delivery (transport), the veracity of the information received from the Sales Tax department that the assessee had only taken accommodation bills and not carried out any genuine purchases further stood fortified.

  We thus in the backdrop of the view taken in the case of Simit P. Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT), keeping in view the fact that the assessee had mainly purchased acids or corrugated boxes from the aforementioned parties, on which the VAT rates during the year under consideration, viz. F.Y. 2008-09 was 4% and 5%, respectively, therefore, keeping in view certain other monetary benefits which the assessee would had made from making such purchases, therefore, restrict the addition in the hands of the assessee to the extent of 6% of purchases of ₹ 29,81,640/-. We thus restrict the addition in the hands of the assessee to ₹ 1,78,900/- [i.e 6% of ₹ 29,81,640/-]. The order of the CIT(A) is thus modified to the said extent. - Decided partly in favour of assessee.

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• 2018 (1) TMI 711

  Reopening of assessment - Money addition - addition in firm’s hands - Taking right person - pre-existence of tangible material before forming reasons to believe of escapement - section 153C applicability instead reopening u/s 147 - Held that:- Section 153C(1) of the Act before its amendment by the Finance Act 2015 w.e.f. 01.06.2015 provided for its application only if any money, bullion, jewellery or other valuable article or thing or books of accounts or documents seized or requisition belonged or belonged to a third person other than the searched assessee. Learned counsel fails to indicate any such material which can be stated to be belonging to the firm assessee so as to invoke Section 153C. We reiterate that the said provision is a special one in the nature of a complete code in itself which is applicable only in the specified circumstances. We therefore hold that once the said special provision’s application is not attracted, the Assessing Officer herein had no other option but to set into motion the general provision u/s.148 of the Act after taking cognizance of Prajapatis’ statements binding the firm assessee as per the relevant provisions in partnership law. We thus reject the firm assessee’s first argument hereinabove.

  We find no reason to concur with the firm assessees’ second argument as well challenging correctness of the impugned protective assessments in light of the abovestated case law starting with G K Consultants (2014 (7) TMI 680 - ITAT DELHI) dealing with an instance wherein no substantive assessment had been finalized. We repeat that this is not the case before us as the Assessing Officer had indeed framed corresponding substantive assessments in partner assessees’ cases (supra) making the very on money additions. The said case law are accordingly distinguished. We accordingly hold that the impugned protective assessment would become substantive in case the Revenue looses its appeals in the above partners’ cases hereinbelow.

  Third argument that both the lower authorities’ action making the impugned addition in firm’s hands reduces partner assessees’ tax liability from 50% to 25% is also devoid of merits as the crucial test in such a case is to file the right assessee in whose hands such an income has to be assessed as per hon’ble apex court’s above referred judgment in Ch Atchaiah’s case (1995 (12) TMI 1 - SUPREME Court). We have already concluded that the said right person herein has to be the firm assessee only. We therefore decline Mr. Talati’s instant last argument as well -

  There is hardly any dispute that the relevant parcels of commercial as well as Lapkaman deals involve more than one co-owners. The said properties admittedly are co-owned without any demarcation of share in metes and bounds. None of the co-owners particularly in Lapkaman deals is sure as to where his corresponding share would be allotted. We therefore are of the view that it is humanly impossible in such cases that a single co-owner only collects all or a portion of the on money in question running into huge sums. We refer to Prajapatis’ search statements declaring ₹ 2crores on money as unaccounted income. The on money amount has been proportionately spread over in all these assessees’ cases. We accordingly quote reasonable preponderance of probability that the impugned on money has been proportionately received by all the co-owners to the extent of their respective shares. The assessee’s instant argument is therefore rejected. - Decided against assessee.

  Revive on money addition qua 50% share of the instant partner assessessee in Sahyog Plaza - Held that:- As we have already upheld the said addition in firm assessee’s case after concluding that the same has to be made in the said partnership firm’s hands u/s.184 of the Act. We therefore reject Revenue’s instant substantive ground.

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• 2018 (1) TMI 757

  Appeals are admitted on the following substantial questions of law:-

  “(1) Whether in the facts and the circumstances of the case, and in law, the Tribunal was justified in deleting the disallowance made by the AO on account of non-deduction of TDS without appreciation of the fact that the payments were made to labour contractor, hence the AO has rightly disallowed u/s.40(a)(ia)”?

  “(2) Whether in the facts and the circumstances of the case, and in law, the Tribunal has failed to appreciate that the assessee was under the statutory obligation as per the provision of section 194C to deduct tax at source towards the payments made to labour sub-contractor on account of labour charges”?

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• 2018 (1) TMI 710

  Estimation of net profit - rejection of books of accounts - adoption of net profit rate of 5% in the instant case - Held that:- It is an admitted fact that the assessee has maintained books of account which were duly audited and the auditors have not pointed out any defect in the books of account. There is also no qualification by the auditors regarding any defect on account of non-maintenance of stock register in a particular manner. It is also an admitted fact that the valuation of stock on a particular date cannot be correctly determined in absence of maintenance of stock resister of timber on the basis of shape, size, quality, colour, etc.. Therefore, rejection of book results under the facts and circumstances of the case is justified.

  Adoption of net profit rate of 5% in the instant case without bringing any comparable case/cases of similar nature in the same locality is also highly arbitrary under the facts and circumstances of the case. The argument of the ld. counsel for the assessee that since the purchase and sales along with quantity are matching and there is no evidence that the assessee has received anything more than whatever has been shown as sale cannot be accepted in absence of maintenance of the stock register on the basis of quality, shape, size, colour, etc.. Considering the totality of the facts of the case, we are of the considered opinion that lump sum addition of ₹ 5,00,000/- on estimate basis for possible leakage of revenue under the facts and circumstances of the case as against the estimation of net profit at 5% by the Assessing Officer and upheld by the ld. CIT(A) in the instant case will meet the ends of justice - Decided partly in favour of assessee

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• 2018 (1) TMI 709

  Validity of reopening of assessment - eligible reasons to believe - non specific reasons - Held that:- In the absence of proper recording of reasons that income chargeable to tax has escaped assessment by the reasons of failure on the part of the assessee to disclose fully and truly all necessary facts relevant to the assessment, reopening of assessment after 4 years is not a valid reopening and on the basis of the assessment framed consequent to the bad reopening, the assessment can be quashed. In the instant case, since the AO has not recorded the specific satisfaction that income chargeable to tax has escaped the assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the reopening is invalid. Therefore, the assessment framed consequent to the invalid reopening deserves to be quashed. - Decided in favour of assessee.

  Eligibility to claim u/s 10B - Held that:- The assessee is merely a (developer) or a collaborator for the Cornelius or its group and it has undertaken the services required by them for which the assesse was compensated and hence it’s business can be considered as a Research Collaborator “ rendering technical services” which is not within the scope of s. 10B . The Cornelius or its group own the entire property including the assessee’s output or it’s so called product etc as defined in the “Foreground Information, IPR” etc under clause 1.1. Thus, the assessee owns nothing which could be exported. When the assessee has not established that its output is an independent product or article or thing or computer software, it is owner of it, it has exported them and earned the impugned income, the questions whether it manufactured or produced articles or things or computer software, whether it exported them etc as required u/s10B is nowhere in the realm and hence its claim of deduction u/s 10B is not allowable - Decided against assessee.

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• 2018 (1) TMI 741

  Seeking relief u/s 119(2) - condonation of delay in filing return of income which could not be filed within the time prescribed under sub­section (1) of Section 139 - Held that:- Within few days after completion of the audit, the return was filed by the petitioner. In the impugned the order, the Board has observed that the presence of the petitioner for audit was not required. This observation is factually incorrect.

  The presence of the petitioner was necessary for answering various queries which the auditor may have. Moreover, the state of mind of the petitioner due to the tragic event has not been appreciated by the Board. Moreover, the fact that the business income of the petitioner grew during the relevant year is no ground at all to deny relief to the petitioner. What was required to be considered was whether the default in complying with the requirement was due to the circumstances beyond the control of the assessee. Even taking the findings recorded in the impugned order as correct, it is impossible to disbelieve the case of the petitioner that the default was due to the circumstances beyond his control. Thus, both the conditions (i) and (ii) of clause (c) of sub­section (2) of section 119 of the said Act were fulfilled in the facts of the case.

  Considering the findings recorded, the Board has not considered the question whether it is desirable or expedient to relax the requirement for avoiding genuine hardship. For this limited purpose, the application will have to be remanded to the Board (first respondent) for reconsideration.

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• 2018 (1) TMI 700

  Disallowance u/s 40(a)(ia) - whether section 40(a)(ia) amended by the Finance Act, 2010 with effect from 01.04.2010 is retrospective from 01.04.2005 or prospective from the date specified? - Held that:- As decided in VIRGIN CREATION case [2011 (11) TMI 348 - CALCUTTA HIGH COURT] Supreme Court in case of Allied Motors Pvt. Ltd. Vs CIT(1997 (3) TMI 9 - Supreme Court) and in case of CIT vs Alom Extrusions Ltd.(2009 (11) TMI 27 - Supreme Court) has already decided that the aforesaid provision has retrospective application. - Decided against revenue

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• 2018 (1) TMI 699

  Disallowance of interest expense u/s 40A(2)(b) - Held that:- Order of the AO suffers from factual errors. One such error would be that secured loans have been considered as having been diverted by the assessee for non business purposes. Secured loans were taken from the bank for specified business purposes and because of the rigid norm of the bank they cannot be diverted for any other purpose. This aspect has been over looked by the AO. Besides the above the AO has made disallowance on imaginary average rate of interest on borrowings and investments. CIT(A), in our view, rightly considered the action of the AO as not proper. - Decided against revenue

  Disallowance u/s 14A rule 8D(2)(iii) - CIT(A) restricted the disallowance to ₹ 15,500/- under Rule 8D(2)(iii) and deleted the disallowance on interest expenses on the basis of the finding that assessee had sufficient own funds which were more than the investments in shares which are likely to yield exempt income under Rule 8D(2)(iii)- Held that:- In the submissions made by the assessee before CIT(A) the assessee has taken a stand that there cannot be any disallowance u/s 14A of the Act because the assesee had not earned any tax free income during the previous year. This submission is not being considered in this appeal by the revenue. We make it clear that the conclusion in this appeal are confined to the grounds raised by the revenue on the factual details given by CIT(A) which remained uncontroverted . We are of the view that the disallowance on interest expenses made by CIT(A) was just and proper and calls for no interference. Consequently ground no.2 raised by the revenue is also dismissed.

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• 2018 (1) TMI 697

  Addition towards income from capital gains - real owner of land - valid transfer of asset - Held that:- Assessee was in way back in 1990. It is clear from the fact that assessee has to carry on certain obligations agreed with co-owners in between there were to the coowners. The assessee tried to pay the balance sale cancelled. It shows that assessee has never acquired ownership of the property as per the section 53A of the Transfer of Properties Act. “As per section 53A, where any property by writing signed by him or ‘transfer’ can be ascertained with reasonable certainty and transferee manner prescribed therefor by the law”. In the given case, assessee right to the assessee to claim the ownership of the property. It is ownership on the property. Ownership can be said to be acquired when ownership along with possession passed on. In the given case, assessee held the property without any title of the property. All along there are sale agreements entered into by the assessee with M/s NDL Estates Pvt. Ltd as a representative of the co-owners. As per the ownership title on the land.

  Since, assessee is not a real owner of the said property and place between coowners and M/s NDL Estates Pvt. Ltd, we can come to a conclusion that there is no transfer made by the assessee. We developments. Further, section 50C cannot be applied in the given case. Accordingly, we are in agreement with the findings of the Ld. CIT(A) and uphold the order of Ld. CIT(A). Hence, we dismiss the grounds raised by the revenue.

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• 2018 (1) TMI 739

  Addition u/s 40(a)(ia) - ITAT deleted the addition - Fee for Technical Services (FTS) - Held that:- Since the ITAT has rendered findings that the amounts paid were not Fee for Technical Services (FTS) under Explanation 7 to Section 9(2), similar treatment would arise. ITAT relied upon the interpretation given to similar provisions of various DTAAs in Cushman & Wakefield Pte. Ltd. in Re. [2008 (7) TMI 8 - AUTHORITY FOR ADVANCE RULINGS]; Dieter Eberhard Gustav v. CIT 1998 (11) TMI 663 - AUTHORITY FOR ADVANCE RULINGS etc.[1998 (11) TMI 663 - AUTHORITY FOR ADVANCE RULINGS] and held that since these were not in the nature of FTS, the deduction under Section 40(a)(ia) was not warranted. Reliance by the Revenue upon the retrospective amendment, in the opinion of this Court, is not justified, given the ruling in Director of Income Tax v. New Skies Satellite BV (2016 (2) TMI 415 - DELHI HIGH COURT).

  Disallowance under Section 36(1)(iii) - ITAT deleted the addition - Held that:- the addition was made purely on the basis that the funds were borrowed by a Director and that interest needed to be charged. This was wholly erroneous premise because the amounts were given to the Director for purely business purpose of the entity, i.e. to acquire guest house. The proposal did not materialize and eventually the money was returned. It is not Revenue’s case that the amounts were utilized by the Director for her own purpose. In these circumstances, the ITAT appropriately relied under CIT v. Bharti Televentures Ltd. (2011 (1) TMI 326 - DELHI HIGH COURT ). The finding with respect to commercial expediency, in the circumstances, does not call for interference.

  Revenue appeal dismissed.

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• 2018 (1) TMI 688

  Disallowance of bogus purchases - CIT-A restricting addition applying profit rate at the rate of 12.5% of the total bogus purchases - Held that:- Admittedly, these are bogus purchases but assessee has produced complete reconciliation of purchase and sales and also stock tally. Even the payments are by account payee cheque to this party.

  Thus even the AO has not doubted the consumption of material purchased and it means that assessee has obtained bogus bill from this party and actually purchased material from grey market at a lesser price and also to avoid VAT payment. CIT(A) correctly applied profit rate at the rate of 12.5% of bogus purchases by following the decision of Hon’ble Gujarat High Court in the case of Smith P Seth vs. CIT (2013 (10) TMI 1028 - GUJARAT HIGH COURT)- Decided against revenue

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• 2018 (1) TMI 685

  TDS u/s 194A - assessee assessed as an AOP - non deduction of tds - responsibility for paying interest to SNFL - Liability of representative assessee - Held that:- The assessee has been rightly assessed as an AOP – in which status in fact it has returned its income, qua its entire income (surplus), taxing the same at the maximum marginal rate. Further, interest to SNFL is paid by the assessee and not the individual members of its member SHGs, so that there has been, without doubt, contravention of s. 194A.

  The assessee is, however, entitled to the saving of the second proviso to s. 40(a)(ia) inasmuch as the same has been held as curative and, thus, retrospective by the Hon'ble Courts. This in fact has also been the uniform and unequivocal view of the tribunal. The said issue, accordingly, stands restored to the file of the AO for adjudication in light thereof after allowing the assessee an opportunity to present it’s case.

  There is no reference to or discussion in the order by the tribunal as to why the surplus arising to the assessee, which is a result of a systematic and organized activity, undertaken on a continuous basis, with elaborate provisions for managing the trust, is not to be regarded as a business income. The assessee’s activity is in fact akin to that of a bank. Involving the representatives of the persons needing financial assistance in the management of the trust, it thus ensures better targeting, including attending to micro level needs, besides meting out technical or other assistance, so that its activities are, rather, more comprehensive and penetrative than of a bank. Section 161(1A) is also relevant in this regard, to which again there has been no reference. The finding as to mutuality is, again, without any discussion on the essential conditions of mutuality, as well as to the precedents. We were therefore, with respect, constrained not to follow the said order and, accordingly, proceeded with our independent examination of the issues arising.

  Before parting with our order, we find that the income added by the AO, i.e., excluding disallowance u/s. 40(a)(ia), is ten times that returned. This appears to be by way of a mistake as the assessee has admittedly returned 1/10th of the surplus, so that the addition ought to be for the balance 9/10th. The AO shall look into this aspect as well, making necessary rectification/s, where required. - Decided partly in favour of assessee for statistical purposes.

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• 2018 (1) TMI 683

  Reopening of assessment - assessee has claimed the depreciation on stock exchange membership cards considering them as intangible assets - Held that:- The issue of depreciation has neither been considered by the AO nor any question was raised nor any adjudication has taken place in this regard.

  There was no occasion for the AO to form an opinion. In our view, the situation before us clearly falls within the four corners of Section 147 r.w.s.148, as the assessee has failed to disclose all the material facts necessary for assessment and therefore the case of the assessee falls within the proviso to Section 147 of the Act. In view thereof, there is no illegality or irregularity in the order passed by the AO for reopening the case

  It is beyond cavil that the block assets included intangible assets, licences, franchises or any other business or commercial rights of similar nature. The assessee in Schedule VI claimed the same investment, whereas now the assessee is claiming depreciation by treating the investment as fixed assets. It is to be analysed by the AO if the assessee was claiming it to be a fixed asset, then what was the value of acquisition at the time of acquiring the membership and how the WDV of the assets have been worked out after its acquisition and also whether the assessee after acquiring it as investment has claimed any expenditure / deduction / claim against the said acquisition or not.

  We remand the matter to the file of the AO to adjudicate after consider the following :

  i) The date of acquisition of the membership with NSE / BGSE

  ii) The consideration, if any, for which the membership was acquired

  iii) What were the rights of the members of the stock exchange as per the rules and regulations prevalent at the time of acquisition and at the time of claim of depreciation

  iv) Whether the assessee has claimed any expenditure / deduction / claim etc., on the investment made in NSE / BGSE membership cards

  v) Effect of the decisions of the Mumbai Tribunal in Pavak Securities P. Ltd (2013 (9) TMI 608 - ITAT MUMBAI) and Sino Securities P. Ltd (2011 (11) TMI 535 - ITAT MUMBAI)

  vi) Whether the rules and regulations of BGSE / NSE relevant for the impugned assessment years were similar to the rules and bye-laws of BGSE for the assessment year involved in the judgment of Techno Shares & Stocks Ltd (2006 (1) TMI 236 - ITAT of Mumbai). Appeals of the assessee are allowed for statistical purpose.

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• 2018 (1) TMI 737

  Penalty u/s 271(1)(c) - issue of interpretation of the word "payable" appearing in section 40(a)(ia) - Held that:- Some High Courts had taken the view that the expression "payable" did not include the amount paid, while others had taken the view that the expression "payable" included amounts paid during the year. As pointed out above, the Supreme Court finally resolved the controversy in Palam Gas Service case (2017 (5) TMI 242 - SUPREME COURT) by holding that the expression payable included not only the amount which remained payable at the end of the year, but also the amounts paid during the year. Consequently, in our view, when the assessee made the claim, this issue was debatable and, therefore, in so far as the deduction of TDS on amounts paid is concerned, the position is that, while it can be made the subject of disallowance, it cannot form the basis for imposing a penalty. Therefore, on this aspect, the enhancement of the penalty amount by the Commissioner of Income-tax (Appeals) is clearly not justifiable.

  The respondent-assessee having furnished all the details of its expenditure as well as income in its return, it was up to the authorities to accept his claim or to reject it. But merely because the respondent-assessee had claimed an expenditure which was not accepted by the Revenue, that by itself would not attract the penalty of section 271(1)(c). See Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT ] - Decided in favour of assessee

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• Customs

• 2018 (1) TMI 724

  Valuation - import of goods - inclusion of expenditure on advertisement and promotion - Department took the view that such expenditure is being incurred as a condition for sale of goods by RIL England and hence loaded the amount incurred to the transaction value of goods already imported during the disputed period - Held that: - The Interpretative Note of Rule 3 (2) (b) of the Customs Valuation Rules forbids loading the expenses incurred relating to marketing of the imported goods, if such expanses are incurred by the buyer on his own account even though by agreement with the seller - the appellant has incurred such expanses on the expression obligation of RIL England and as a clear condition of the sale of goods for disputing them in India. It cannot be concluded, in the facts of the present case, that the expenditure has been incurred by the appellant on their own account.

  Time limitation - Held that: - In the declaration made by the appellant before SVB the Distribution Agreement with the clause relating to the expenditure on advertising has not been produced. The lower Authorities have held that this amounts to suppression of facts - extended period rightly invoked.

  Appeal dismissed - decided against the assessee.

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• 2018 (1) TMI 723

  Illegal import - misdeclaration of goods - enhancement of value - as the goods were not properly declared for contents as well as value and accordingly, apart from proposing confiscation of the goods, enhancement of value, notice also proposed penalties on various noticees Held that: - It is a fact that the courier consignment did not contain the necessary statutory details on the pack. The details contained were vague and there was a clear attempt in mis-declaration of high value electronic items to avoid customs duty - Much after interception of cargo, the appellant came forward with invoice and other details claiming ownership of the goods. Even at that time, the appellant could not produce necessary supporting evidence with reference to booking of consignment at Hong Kong and also the reason for invoice dated 15.04.2012 not having full particulars like name etc. of the imported goods.

  Penalty on custodian - Held that: - The custodian had no prior information about any possible attempt of improper importation of goods through courier service. In any case, the impugned order did not bring out the exact violation committed by the custodian with reference to the present cargo, which will attract penalty under the provisions of Customs Act. The custodian did not file any documents containing improper particulars nor abetted any such improper importation or subsequent clearance - impugned order did not bring any act or omission on the part of the custodian in order to attract a penalty under Customs Act, 1962 - penalty set aside.

  The appeal filed by M/s. Sardana Enterprises dismissed except for reduction of fine and penalty and the appeal by M/s. Express Industry Council of India allowed.

  Appeal disposed off.

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• 2018 (1) TMI 722

  Classification of imported goods - outer RIM part of tractor trolley - classified under CTH 87169010 or under CTH 8708? - Anti Dumping duty is imposable even on CKD or SKD condition - Held that: - the goods imported were commercially known and declared in the invoice as ‘tractor trolley parts’ under Heading 8716. The principal use asserted for such Rim and disk is with the tractor trolley used mainly for agriculture related activities - The Original Authority relying on a statement of the respondent that the said rims and disks can be used in a commercial vehicle, proceeded to classify the same attracting AD duty - In the absence of any sustainable evidence there is no justification for re-classifying the product and also to reject the declared value.

  Appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 747

  Duty drawback - Rule 5 of the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - rejection on the ground that it has not been filed within the prescribed time limit or allowable period of further period of three months - Held that: - Rule 7A of the said Rules deals with power to relax, in exercise of the powers under the said rules, if the Central Government is satisfied that in relation to the export of any goods, the exporter or his authorised agent has, for reasons beyond his control, failed to comply with any of the conditions and has thus been entitled to drawback, it may be considered - the first respondent would be well within his Jurisdiction to examine the plea raised by the petitioner as to whether the reason for non compliance of the procedure under Rule 5(1) was for reasons beyond the control of the petitioner. However, this exercise has not been done by the respondent.

  The authorities while examining the application for relaxation or for condonation of delay has to be more pragmatic or in other words if it is found that claim is not a false claim or in other words, it is genuine claim, they would be liberal in condoning delay. However, if authorities were to find that claim itself is doubtful, they would be within their domain to reject the application while considering the claim for relaxation of time or for condonation of delay as is permissible under Rule 7A if the Rules, 1995.

  The matter is remanded to the first respondent for fresh consideration to decide as to whether the petitioner would be entitled for relaxation of the rigor of Rule 5(1) of the Rules and consider as to whether the petitioner's case would fall under Rule 7A of the Rules - petition allowed by way of remand.

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• 2018 (1) TMI 695

  Export of Basmati Rice - Prohibited goods - Held that: - the parameter of length on length to breadth ratio as notified in DGFT through said Notification dated 05.11.2008 would be the additional parameter for judging the consignment as Basmati and that to decide whether the verity of rice is Basmati or not the result of the test in the laboratory should be taken into consideration - the parameters laid down under the said Notification dated 05.11.2008 read with N/N. 57/2009-2014 dated 17.08.2010 have been met - there are no merits in the grounds raised by Revenue - appeal dismissed - decided against Revenue.

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• Service Tax

• 2018 (1) TMI 717

  Classification of services - nature of lease - operating lease of finance lease - Banking and Other Financial Services or otherwise? - business in operating lease with reference to motor vehicle given to the clients - Revenue entertained a view that the terms and conditions governing both types of leases, namely financial lease and operating lease are similar and as such the consideration received in such business transaction is liable to be taxed under BOFS - Held that: - The whole thrust of the distinction for financial lease and operating lease is the ownership of the asset. This aspect has been adequately analysed and covered in the impugned order with more specific reference to Accounting Standard 19 - We are in agreement with the respondent-assessee and the findings of the Commissioner regarding the treatment of Accounting Standard 19 to decide the nature of lease arrangement - the income for operating lease were shown as lease rental and the assets were depreciated in the lesser’s account as these are shown as own assets. In financial lease no depreciation is accounted for. The income shown on such arrangement is EMI received which is principal + interest.

  Listing out the difference between operating lease and financial lease the impugned order categorically recorded that the lease arrangements on which the respondent–assessee discharged VAT are operating leases and are not liable to service tax - the impugned order is legally sustainable - Appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 680

  Classification of services - activity carried out for loading and unloading at a particular place - whether classified as supply of manpower and recruitment service or works contract service? - Held that: - terms of the contract does not have character of mere supply of manpower or recruitment thereof - adjudication fails to sustain - appeal allowed.

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• 2018 (1) TMI 678

  Classification of services - Interconnectivity user charges - Revenue held that such charges are liable to service tax under ‘telecommunication service’ - Board clarification dated 12.3.2007 - Held that: - the matter stands settled that prior to the amendment carried out in the definition for “telecommunication service through Finance Act, 2007” such interconnectivity user charges cannot be charged under ‘telecommunication service’ - demand not sustainable - appeal allowed.

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• Central Excise

• 2018 (1) TMI 736

  Restoration of appeal - appeals filed were dismissed for non-prosecution on 20.02.2017 - principles of Natural Justice - clandestine manufacture and removal - Held that: - It is the case of the appellant in the grounds of appeal that the adjudicating authority as called for report from the Assistant Commissioner's Office after personal hearing was over on 27.10.2009 and without giving a copy of the said letter to them has adjudicated the proceedings which is in violation of principles of natural justice. In my considered view, the claim of the appellants is correct.

  The adjudicating authority has specifically in paragraph 11.4 recorded that loss of the diary being a factual position cannot be given to the assessee at the sage of adjudication but proceed ahead to decide the matter and demand a duty of ₹ 23,40,811/- based on octroi receipts colleted from the octroi authorities on receipt of raw materials - the various plea put in by the appellants before the authorities that such demand based upon only raw material receipt is incorrect and needs to be corroborated further.

  Appeal allowed by way of remand.

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• 2018 (1) TMI 735

  Clandestine removal - parallel/forged invoices - debits not made in the statutory records - corroborative evidences - Held that: - the First Appellate Authority has not brought on record as to the contents of the delivery challans and the loading memos which would definitely contain the names and addresses of the purchasers - It is the case of the appellant that the lower authorities have not adduced any corroborative evidences of clandestine removal, which seems to be correct, if the delivery challans were there, definitely the departmental officers would have caught hold of at least one of the purchasers (at the minimum) whose name and address would be present on the said challans.

  In the absence of any corroborative evidences charge of clandestine removal cannot be upheld.

  Appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 721

  Valuation - removal of goods on transfer of right to use - It appeared that appellant had sold some servers directly to the cinema theatres / halls under normal transaction value and in respect of remaining servers the appellant had raised stock transfer invoices - whether the impugned clearances are to be treated as stock-transfer meriting valuation under Rule 8 of the Valuation Rules or otherwise, whether they require to be construed as sale as per Rule 4 of the Valuation Rules? - Held that: - there is definitely transfer of possession of the impugned goods from the appellant to their customers partly by cash (refundable and non-refundable deposits) and partly by other valuable considerations (right to collect advertisement charges from sponsors of advertisements and receipt of pay per showamount for the QUBE products at the theatre premises. The contours of the transaction between the appellant and their customers in respect of the impugned servers therefore satisfy the definition for sale under Section 2(h) of the Central Excise Act, 1944. This being so, the valuation of such sale of the sold goods for the purposes of levy of Central Excise duty will have to be within the parameters of Section 4 of the Act read with Central Excise Valuation Rules, 2000.

  Notwithstanding the clearances being shown as stock-transfer to Head office, this was only a routing on paper only, however in actuality the impugned servers were delivered in the same condition as they were removed, to the theatre owners. Possibly, appellant had followed such a tedious billing route for accounting reasons. Nonetheless, for discharge of Central Excise duty, the removals will in no way be recognizable as stock transfer and will necessarily take on the colour of saleattracting the manner of valuation as laid down in Rule 4 of the Valuation Rules

  Penalty - Held that: - From all accounts, the issue boils down to mis-interpretation of the valuation provisions by the appellant - penalty not attracted.

  Appeal allowed in part.

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• 2018 (1) TMI 719

  Whether central excise duty can be recovered from the appellant where admittedly the appellant acted as a job worker who carried out processing activity on behalf of other persons?

  Held that: - if the job worker obtain registration then only they are required to follow the provisions for payment of duty. It is optional for the job worker whether to obtain the registration and undertake to discharge the duty liability on the job work activity. If the job worker does not opt for obtaining the registration, no Excise duty liability can be made on the job worker, in such case the principal merchant manufacturer shall be liable to pay Excise duty. As per sub-rule (6) of Rule 12B, it is provided that the job worker shall not require to maintain any record, evidencing the processes undertaken for the sole purpose of undertaking job work - In view of sub-rule (6), the demand of duty on job worker cannot be made on the appellant being a job worker as he has not obtained the registration.

  The appellant being a job worker, of textile and textile article falling under Chapter 54 & 55 is not required to pay Excise duty in terms of Rule 12B - demand set aside - appeal allowed.

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• 2018 (1) TMI 718

  Method of Valuation - transaction value or MRP based value - supplies made to institutional consumers - case of the department is that the sale made to institutional consumers is not meant for retail sale, therefore, the valuation of such goods should be done under Section 4 read with Standards of Weights and Measures (Packages Commodities), Rules, 1977 - Held that: - though the goods were sold to institutional consumer but admittedly MRP was affixed on such product. Due to this reason goods were manufactured with intention to sale in retail market that goods are intended to be sold in retail and MRP is affixed. Therefore valuation for of charging excise duty should be under Section 4A even though the goods are sold to the institutional buyer - even though the package of the goods is marked for industrial use but since the goods bore the MRP, the valuation should be done under Section 4A and not under Section 4 of the CEA, 1944.

  The valuation adopted by the appellant under Section 4A is correct and legal - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 716

  CENVAT credit of CVD paid on imported scrap - Revenue held a view that the appellants should have reversed the credit availed on imported scrap, which were cleared as such, during the year 2011-12 - Held that: - There is no verification or evidence to the effect as to how the appellant could have manufactured the Aluminium ingots other than by the accounted raw materials in their books. It is also not clear as to how a 7% waste generation is found to be not acceptable by the Original Authority. The Original Authority even questioned the fact that the appellant used all the three sources of Aluminium scrap. In case of such apprehension, it is for the Revenue to verify the facts and to establish that the imported scrap were in fact diverted. The Revenue has not even verified the type of furnace used by the appellant. It would appear that the whole burden of establishing non-clearance of imported Aluminium scrap ‘as such’ was put on the appellant - such proposition is against the basic principle of law.

  Demand on the basis of the entry of burning loss - Held that: - the Revenue did not adduce any evidence for manufacture on that date, which was cleared unaccounted clandestinely. No duty demand can be confirmed by inference.

  The present case is only based on the inferences and un-substantiated allegation and as such, the impugned order cannot be sustained - appeal allowed.

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• 2018 (1) TMI 715

  CENVAT credit - various input services which are used by the appellant during the course of setting up of the factory i.e. before commencement of the commercial production - Held that: - A plain reading of the amended provision reveals that the expression setting up and activities relating to business have been deleted from the scope of the meaning of input service.

  There cannot be any doubt that the case of the appellant would fall under the third limb i.e. services used in relation to setting up modernization, renovation or repairs of factory or office relating to such factory, as it is not the claim of the appellant that the disputed services were used by the appellant-manufacturer directly or indirectly in or in relation to the manufacture of final product or in relation to clearance of final products from the place of removal. Therefore, in the amended definition, once the expression setting up has been deleted from the scope of input service, all services used for modernization, renovation or repairs of a factory or office relating to such factory would continue to be admissible even after specific exclusion that have been provided in the amended definition of input services relating to works contract service/ construction services.

  Extended period of limitation - Held that: - There is no doubt that the issue involved in the present case is a pure question of interpretation of law and the appellant had availed credit only on the aforesaid input services and not on construction services; after disclosing all the facts in their books of accounts - extended period cannot be invoked.

  Appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 698

  100% EOU - rate of duty on DTA clearances in terms of exemption under Notification No.23/03-CE dated 31.03.2003 - Held that: - It is undisputed fact that M/s Indo Rama Synthetics (I) Ltd. has availed benefit of deemed export under said paragraphs of the Exim Policy and therefore, under said Explanation (ii) the supply received by appellant company were imported goods. Therefore, condition under Sl. No. 3 is not satisfied and therefore the benefit of exemption at Sl. No.3 is not admissible to the appellant company.

  Penalty - Held that: - Since the matter was related to interpretation of notification, therefore, there was no malafide on the part of appellants - penalty set aside - personal penalty of ₹ 1 lakh imposed on Shri V.P. Yadav also set aside.

  Appeal allowed in part.

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• 2018 (1) TMI 712

  Interest on delayed refund - Whether the appellant are entitled to interest of the refunded amount of ₹ 2,27,79,325/- from 24.04.2000 till 19.01.2004 and on the amount ofRs. 1,80,03,202/- from 24.04.2000 till 01.04.2014?

  Held that: - the appellant are entitled to interest on the pre-deposit amount after expiry of three months from the date of communication of the order-in-appeal deciding the issue in their favour i.e. from 24.04.2000 till 19.01.2004 in relation to refund amount of ₹ 2,27,79,325/- from 24.04.2000 till 01.04.2014, in relation to refund amount of ₹ 1,80,03,202/- as claimed by the Appellant - appeal allowed.

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• 2018 (1) TMI 708

  CENVAT credit - GTA Services - goods cleared on FOR destination basis - Held that: - similar issue decided in the appellant own case of M/s Ultratech Cement Limited [2018 (1) TMI 676 - CESTAT NEW DELHI], where it was held that sales by the assessee were on FOR basis and therefore the assessee had legitimately availed Cenvat credit on the service tax paid on the freight charges borne for its FOR sales - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 707

  Classification of goods - Ayurvedic medicinal product - whether classified under CETH 30049011 as medicaments of Ayurvedic system or under Chapter 33 as perfumes and toilet waters etc.? - Held that: - the overall manufacturing process product content and the marketing as seen from the product literature make it clear that these products cannot be considered as perfumes and toilet waters. In fact, three of the products contained other than simple hydro distillates in the form of soluble ashes of Ayurvedic origin - even the products which are based on distillates further formulation as per prescribed dosages as per formula in authoritative books as per Indian Drugs & Cosmetic Act, 1940 has been carried out. The ingredients are as per API Standards. - appeal allowed.

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• 2018 (1) TMI 706

  Penalties - clandestine removal - shortages in the stock of raw materials and finished goods - Held that: - the Commissioner (Appeals) has gone into the factual details to hold that penalties cannot be imposed on the respondent under the circumstances of the case - the appeal decided by the Commissioner (Appeals), based on facts, cannot be disturbed by the Tribunal - penalty rightly set aside - appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 705

  Rectification of mistake - The submissions of the Revenue are that the Tribunal has not properly appreciated the contention of the Revenue that refund claim cannot be filed prior to the date of export - Held that: - Since the Tribunal upon appreciation of the facts has arrived at the conclusion that the refund claim is permissible, such findings cannot be disturbed on the ground that same is contrary to the facts or the provisions of law - ROM application dismissed.

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• 2018 (1) TMI 704

  Valuation - includibility - Department was of the view that the amount recovered by way of sales tax and not paid to the Sales Tax department should be considered as part of the assessable value and will be liable to payment of Central Excise duty - Held that: - the amount which was categorized as ‘other income’ was recovered as sales tax but not paid to the sales tax department - As per the definition of transaction value in Section 4(3)(d), such amount cannot be excluded from assessable value since it has lost the colour of tax being neither paid nor payable as tax.

  Hon’ble Supreme Court in the case of CCE vs. Super Synotex [2014 (3) TMI 42 - SUPREME COURT] has categorically held that after 1.7.2000, unless the sales tax is actually paid to the sales tax department, no benefit towards excise duty can be given under the concept of transaction value under section 4(3)(d) and the same is includable.

  Appeal dismissed.

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• 2018 (1) TMI 703

  SSI Exemption - clubbing of clearances - dummy units - Held that: - the notification clearly stipulates that aggregate value of all clearances for home consumption by a manufacturer from one or more factory should not exceed ₹ 400 lakh in the preceding financial year - If the said manufacturer is having more than one factory, manufacturing excisable goods, then the turnover has to be taken together for reckoning SSI exemption - demand upheld.

  Time limitation - Held that: - there is no reason for the appellant to entertain a bonafide belief regarding their eligibility to SSI exemption in the face of admitted facts - extended period rightly invoked.

  Appeal dismissed.

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• 2018 (1) TMI 702

  Valuation - related party transaction - Held that: - When the goods were cleared to non-related parties and the value is available, then the same can be adopted for transactions which are purportedly tainted by relationship - it is not necessary to invoke cost construction method to arrive at the transaction value. When the goods were cleared to non-related parties and the value is available, then the same can be adopted for transactions which are purportedly tainted by relationship - matter requires de novo consideration by the original authority - appeal allowed by way of remand.

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• 2018 (1) TMI 701

  Penalty u/s 11 AC of the Central Excise Act, 1944 - CENVAT credit - Banking & Financial Services - Held that: - the issue involved was a bona-fide issue and the appellant could have been under a bona-fide belief that such credit was available to them even prior to the date on which they had availed the same. There is no evidence produced by the Revenue that said availment was with any mala-fide intention - penalty u/s 11AC not justifiable - appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 696

  Clandestine removal - goods stand confiscated by the lower authorities on the sole ground that the same were manufactured in the unregistered premises with intention to clear the same without payment of duty - Held that: - Apart from the fact that the said premises were not separately registered, I note that there is no other evidence on record to show that the goods were meant for clandestine removal - Revenue case is solely based upon the fact that the said newly acquired premises were not registered and the goods were not entered in statutory records, it cannot be held that the same were meant for clandestine removal - confiscation set aside - penalty of ₹ 10,000/- imposed upon the appellant for the technical procedural breach of non maintenance of records and non entry of the goods - appeal allowed in part.

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• 2018 (1) TMI 694

  Refund claim - power to review - Held that: - it is a well settled legal principle that a quasi- judicial authority cannot review its own order - reliance placed in the case of MADRAS RUBBER FACTORY LTD. Versus ASSISTANT COLLR. OF C. EX., MADRAS [1981 (1) TMI 68 - HIGH COURT OF MADRAS] - the impugned order passed by the lower authority is illegal and incorrect - refund allowed - appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 693

  CENVAT credit - input sent to job worker - Revenue by entertaining a view that at the time of re-credit of duty in respect of moulds and dies, the same should have been availed on the depreciated value of moulds at the rate of 2.5% quarterly - Held that: - Inasmuch as there was no requirement to make payment of any excise duty when clearing moulds and dies sent to the job workers, the confirmation of demand of duty and the denial of credit on the ground that the same should have been availed on the depreciated value, at the time of receipt back of the said moulds, cannot be upheld.

  The duty paid by the assessee was available as a credit to the job worker and on return of the same, the job worker, was under legal obligation to pay such credit availed by them and on the basis of the same, the appellant would have availed the credit. As such, the entire situation was revenue neutral.

  Appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 692

  Job work - N/N. 214/86 dated 25.03.1986 - declaration/ certificate by the principle manufacturer not filed - Held that: - the appellant wants to get the exemption under N/N. 214/86. Thus, double benefit of exemption on the same raw material is not permissible especially when the appellant has manufactured the excisable goods which have the industrial market and cleared the same without payment of duty - appeal dismissed - decided against appellant.

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• 2018 (1) TMI 691

  SSI exemption - brand name - denial on the ground that appellant are using the brand name of ‘Goldmedal’ which was owned by M/s. Bright Electrical - Held that: - reliance placed in the case of COLLECTOR OF C. EX., AHMEDABAD Versus VIKSHARA TRADING & INVEST. P. LTD. [2003 (8) TMI 49 - SUPREME COURT OF INDIA] where it was held that When as a matter of fact it is held that there was an assignment in favour of the first respondent and that fact was not in serious dispute the mere fact that the assignment was not registered could not alter the position - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 690

  Clandestine removal - penalty - Held that: - when the matter came up before the Tribunal in the first round of litigation, the appellant’s appeal was rejected on merits and penalty was reduced to ₹ 2,00,000/- - The said order of the Tribunal has admittedly not been challenged by the appellant before any Higher Appellate Forum and as such has attained finality - penalty upheld - appeal dismissed.

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• 2018 (1) TMI 689

  Clandestine removal - excess of stock - Held that: - apart from the fact that there were excess of goods in the assessee’s factory, which in any case is being assailed by the assessee, there is virtually no other evidence to show that such excess production was not recorded in RG-1 register with a madafide intention to clear the same without payment of duty - Inasmuch as in the present case, there is no evidence reflecting upon the fact that said goods were not entered in the statutory records with a malafide intention to remove the same, there are no justifiable reasons for confiscating the same or to impose penalty upon the assessee - appeal allowed in toto.

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• 2018 (1) TMI 687

  Benefit of N/N. 6/2002-CE dated 01.03.2002 as amended - upgraded Mahua Oil - Whether exemption under N/N. 6/2002-CE dated 01.03.2002 is admissible to the appellant or not? - validity of SCN.

  Held that: - the revenue has ignored the directions of its commissioner. There is not a single test report on record brought by the revenue so as to certify that the finished product of the appellant is Refind Edible Oil - under the facts and circumstances we find that the Show Cause Notice is only presumptive and accordingly, we hold that the same is not maintainable.

  Appeal allowed.

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• 2018 (1) TMI 686

  Refund of excess duty paid - unjust enrichment - Held that: - the appellants herein being a SSI Unit, and not registered with the Central Excise Department, and cannot have charged Central Excise duty from their buyers - from the facts on record and from the copy of invoice produced by way of sample, it is clear that no Central Excise duty have been charged from the buyers of goods. Thus, whatever amount the appellant collected have to be treated as cum-duty price - refund of excess duty paid along with interest under the rules allowed - appeal allowed.

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• 2018 (1) TMI 684

  CENVAT credit - job-work - It appeared to Revenue that the semi processed goods which were sent back to the principal manufacturers were exempted goods and therefore, on the value of such goods under Sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004, appellants were required to pay Service Tax, amount at prescribed rate of 8 or 10% during the relevant period.

  Held that: - the goods which were processed by the appellants on being received from the principal manufacturer, which were returned back to the principal manufacturer were not exempted goods since the same were subjected to Central Excise duty and responsibility to pay Central Excise duty on the said goods was on the principal manufacturer as per the provisions of N/N. 214/86-CE dated 25/03/1986 - the issue settled by Larger Bench decision by this Tribunal in the case of Ispat Industries Ltd. Versus Commissioner of Central Excise, Raigad [2007 (2) TMI 5 - CESTAT, MUMBAI] is squarely applicable in the present case, in respect of the confirmation of demand on account of short payment of levy - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 682

  Classification of goods - computer stationery and paper rolls - whether fall under Chapter 48 or Chapter 49 of the schedule to Central Excise Tariff Act, 1985? - Held that: - the subject item is more of a product of printing industry as the leaflets/receipts attains the usable form only after printing. To make it more elaborate, it is not merely the paper or stationery but the printing on it that gives it the worth, hence the subject item reflects more a member of Chapter 49, family compared to chapter 48.

  Clarification issued by Chief Commissioner of Customs, Central Excise and Service Tax, Lucknow vide his communication No.V(30)CCO/LKO/Tech/12/2010/705 dated 12/02/2010 and Board’s Circular No.11/91-CX. 4 dated 15.10.1991, clarified that the entry of Chapter Heading 4820 reveals that it does not cover printed sheets, used for some specified purpose.

  Appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 681

  CENVAT credit - Iron and Steel used for making technological structure of sugar factory - iron and steel used as input in construction of godowns, sheds and yards of the sugar plant - Iron and Steel used as inputs for making staging structures to facilitate operation of various machineries - Held that: - the issue herein is squarely covered in favor of the appellants in view of the rulings in the case of Mundra Port & Special Economic Zone Ltd. [2015 (5) TMI 663 - GUJARAT HIGH COURT], wherein the Larger Bench ruling of this Tribunal in Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] is distinguished and it was held that manufacturer is entitled to Cenvat credit on various items of steel and cement, etc. used in manufacture or fabrication of capital goods and repair to capital goods inside the factory of production.

  The appellants are entitled to Cenvat credit on all the items on which Cenvat credit was denied - appeal allowed.

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• 2018 (1) TMI 679

  Valuation - free supplies made by the appellant-assessee along with chargeable supplies - Held that: - the nature of business of the appellant is very different, inasmuch as they are manufacturing Catalysts for which there are only about five buyers available in the country. In the manufacture of the Catalysts some other Catalysts are also necessarily manufactured by way of a joint product or by product. It is also a unique situation, wherein the appellant cannot keep in store for long the Catalysts manufactured either main product and also as joint product or by product - It is also an admitted fact that the appellant have paid duty on the total transaction value which includes the free supplies during the period in question. Further, there is no evidence of any additional consideration received or any flow back in any manner by the appellant.

  The whole SCN is presumptive and without any substantial basis - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 677

  Whether ‘aluminium dross and skimmings’ which is a waste product arising in the course of manufacture of Aluminium products is liable to excise duty?

  Held that: - in view of CBEC Circular No.1027/15/2016-CX, dated 25.04.2016, the issue now stands settled in favor of the Appellant as it becomes abundantly clear that Aluminium dross, being a waste product produced during the manufacture of Aluminium products, cannot be subject to excise duty - Impugned Orders are liable to be set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2018 (1) TMI 744

  Notional deduction from sales price - sale of footwear - Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that it is not necessary to show the sale price separately in the invoice and that is sufficient if it is shown separately in the books of accounts?

  Held that: - the sales tax had been collected as such on the said transaction and it has to be allowed as a deduction in computing the taxable turnover - the Court held that the legal position, therefore, seems to be clear that for claiming deduction in terms of section 7(1)(b) and 7(2)(a)(ii) of the Act, all that is necessary is that there must be evidence, not necessarily only the sale memos, to indicate that apart from the sale value of the goods sold, an amount had been collected by way of sales tax as such. If such evidence is available with the dealer, and it is found by the department to be a piece of acceptable evidence, the claim must be allowed.

  Appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 742

  Tax evasion - Puducherry General Sales Tax Act, 1967 r/w Puducherry Value Added Tax Ac, 2007 - petitioner is praying to discharge him from the charges on the ground that he got retired from the partnership firm as early as on 01.10.1999 due to some personal reasons - Held that: - Admittedly, the petitioner/A2 was a partner of the firm. During the financial year 2000-2001, 2001-2002, 2002-2003 and 2003-2004 A1 firm is stated to have reported incorrect sales turnover and there were huge variance noticed between the purchase value of petroleum products and sales turn over and therefore, the authority initiated proceedings under law - the department has accepted the receipt of Form-10 filed by A1 firm intimating that on account of the fact that two existing partners have retired from 31.03.2003, the constitution has been changed from partnership to proprietory concern w.e.f. 01.04.2003, the petitioner, who was the erstwhile partner, cannot be mulcted with any liability.

  Even if it is assumed that the petitioner retired from the partnership firm from on 01.10.1999, there is absolutely nothing on record to show that it was duly intimated to the department forthwith as required under law - the tax evasions relate prior to the said communication.

  Criminal revision fails and is dismissed.

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• 2018 (1) TMI 754

  Deferment/remission of sales tax payable - “Agro-Processing (Food Processing) Units” - West Bengal Incentive Scheme, 1999 - Held that: - In the absence of any plea of promissory estoppel we cannot understand the appellant to have been vested with any right to claim deferment or remission of the tax payable by it - As the appellant did not have a right capable of enforcement in law, there is no infirmity with the rejection of the writ petition filed by the appellant before the High Curt so as to warrant any order in favor of the appellant in this appeal.

  Penalty - Held that: - imposition of penalty should be interdicted by this Court as non-payment of the tax by the appellant was on account of what we perceive to be a bonafide doubt with regard to its liability to pay tax.

  Appeal dismissed.

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• Wealth tax

• 2018 (1) TMI 720

  Valuation - yeast - whether the yeast cleared in pack from the factory appearing a marking for industrial use only and specially made for bakery industry only will be assessable under Section 4 or Section 4A of the Central Excise Act, 1944?

  Held that: - for the product which are exempted under Rule 34 of the provisions of Standard of Weights and Measures (Packaged commodities) Rules, 1977, there is no need to affix the MRP on the product.

  In the facts of the present case, the appellant is exempted from affixing MRP under Rule 34 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977. Consequently, they are not required to affix the MRP, as per the provisions of Standards of Weights and Measures, Act 1976. Accordingly, the valuation of the goods in question cannot be governed by Section 4A. Whereas it is governed by Section 4 of the Central Excise Act, 1944.

  Appeal allowed.

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• Indian Laws

• 2018 (1) TMI 753

  Natural justice - case of petitioners is that they have not been properly examined by the learned trial Court under Section 313 of the Code of Criminal Procedure and thereby the petitioners have been seriously “prejudiced” and they did not even answer the allegations levelled against them properly in the trial Court - Held that: - It is true that all the incriminating materials are required to be put in during the examination of the petitioners so that an opportunity of explaining such incriminating circumstances may be given to the accused in a criminal trial. The purpose of incorporating section 313 of the Code of Criminal procedure is primarily based on the principle of natural justice. Therefore, the impact and the importance of the examination of the accused under Section 313 of the Code of Criminal Procedure cannot be ruled out altogether.

  In order to promote the commerce through cheque, negotiable instruments the provisions of Negotiable Instruments Act have been amended. To put both the petitioners behind the bar for two years would not serve the purpose of Negotiable Instruments Act. On the contrary the petitioners should be compelled to pay the amount in respect of the cheque issued by them and on that score they may be made liable to pay some sort of fine - The sentence of conviction for two years is thus modified to one day in trial Court till the rising of the Court.

  The application under Section 482 of the Code of Criminal Procedure Code stands disposed of.

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• 2018 (1) TMI 745

  Maintainability of petition - Designation to issue cheque - applicability of Section 141(ii) of the Negotiable Instrument Act - Held that: - The present case would not fall under Section 141 (ii) of the Act, since there is no designation is mentioned in the complaint for the petitioner/2nd accused. In the complaint it is stated that the petitioner herein is an Authorized signatory of M/s. Chaya Knitting Ltd., Company. Therefore, Section 141 (ii) is not come into play - the mere averment in the complaint that the accused No.2 and 3 are Authorized Signatories and are responsible persons for the conduct and day to day affairs of the company alone is not sufficient in the absence of specific averment with regard to the position and duties of the petitioner/2nd Accused in the company and his role in regard to the issuance of cheque.

  Petition allowed.

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• 2018 (1) TMI 743

  Offence under Section 138 of the Negotiable Instruments Act - deposit of cheque by way of security - admission of additional evidence - Held that: - the Appellate Court if it thinks additional evidence is necessary, shall record its reasons and may either take such evidence itself or direct it to be taken by the trial Court - The Appellate Court allowed the said application on the application of respondent and more particularly on the basis of the observations made by the Trial Court while convicting the appellant. Thus, respondent/appellant intends to controvert the observation made by the Trial Court while convicting the respondent by adducing the purported evidence. The application was not within the spirit and scope of Section 391 of the Cr.P.C. The accused did not enter into witness box nor she intended to examine any witness after her statement under Section 313 of the Cr.P.C.

  The question of recording additional evidence cannot be allowed as a routine manner. The person who wants to lead additional evidence has to establish his case that at the relevant time, he or she did not get opportunity to lead evidence or there should be sufficient cause for leading additional evidence - In the present case, in her statement under Section 313 of Cr.P.C. specifically the accused refused to examine himself or any witness. The application is, therefore, not bonafide.

  Petition allowed.

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• 2018 (1) TMI 740

  Undated cheques - jurisdiction of Courts to decide the matter - the cheques in questions were handed over as security deposit to the complainant/opposite party - Held that: - an agreement was executed by and between the parties and the petitioners executed bank guarantee and also handed over some cheques in favour of the complainant/opposite party. Clause 10 clearly reveals that the parties had agreed that the complainant/opposite party shall have the liberty to take legal actions against the present petitioner under Section 138 of the Negotiable Instrument Act, 1881 or any other Act or law in the event of any default or non-performance on the part of the petitioners in honouring the said cheque. It is therefore apparent from the said clause that authority was given to the complainant/opposite parties to take appropriate action under Negotiable Instrument Act and the present petitioners also agreed to that effect.

  It is well settled principle of law that while exercising jurisdiction under Section 482 of the Code of Criminal Procedure, the Courts should not indulge in meticulous examination of the factual aspect thereby usurping the jurisdiction of the learned Magistrate to decide the actual state of affairs. In that view of this case simply on the basis of the fact that such cheques were undated, it cannot be said that the said cheques were issued as security and without having any existing debt or liability.

  The application appears to be premature, if not devoid of merit and accordingly the application under Section 482 of the Code of Criminal Procedure stands dismissed.

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