TMI Tax Updates - e-Newsletter
January 17, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

• GST:

  Classification of supply of electricity - the supply of utility services and electricity supply are separate supplies - The provision of electric supply by way of DG set forms part of the utility services taxable at 18% whereas the supply of electricity by way of grid is exempt from GST.
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• GST:

  Refund of TDS - TDS were deducted by the 2nd respondent herein u/s 51 of CGST/SGST Act but the petitioner was not extended credit against the above, by the respondents herein inspite of repeated reminders - Authorities directed to take decision in 3 weeks.
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• Income Tax:

  Penalty u/s 271B - assessee submitted the audited financial statements but failed to furnish report of audited accounts (audit report) as required u/s 44AB - When the specific provision contained in the statute is unambiguous in this respect, we cannot hold otherwise based on any circular of the Department. - Levy of penalty confirmed.
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• Income Tax:

  Loan agreement was found during the course of search in the case of another person, which is handed-over to the A.O. of the assessee and addition is made only on that basis. Therefore, there was no justification for the A.O. to have been initiated proceedings u/s 147/148 - The correct course of action would have been to proceed against the assessee u/s 153C.
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• Income Tax:

  House Rent Allowance (HRA) - Computation of salary - Benefit of exemption u/s 10(13A) - 'performance bonus' does not form part of 'salary' as defined in clause (h) of Rule 2A for the purposes of Section 10(13A)
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• Income Tax:

  Ad hoc addition of 10% under transfer pricing adjustment - the adjustment of 10% so upheld by the DRP was without following any of the prescribed methods U/s 92C(1) of the Act nor has any benchmarking been adopted in determination of the ALP - entire addition deleted.
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• Income Tax:

  Penalty imposed u/s 271AAA - in the penultimate paragraph of the assessment order the Assessing Officer has initiated proceedings for imposition of penalty under section 271AAA - contention of the learned Authorised Representative that no separate penalty proceeding has been initiated against certain additions is without any basis.
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• Income Tax:

  Rate of tax to be charged on the interest on refund u/s. 244A - India-USA DTAA - AO directed to follow the decision in the case of Clough Engineering Ltd. and Credit Agricole Indosuez
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• Income Tax:

  Penalty u/s 271(1)(c) - AO directed to call for record of the alleged agricultural land and find out whether it was an agricultural land not falling within the ambit of expression “capital asset” provided in Section 2(14) of the Income-tax Act. In case it is found that it was not a capital asset, then the assessee will not be visited with penalty
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• Income Tax:

  Expenditure incurred and payment of rent pertaining to information centers - in the interest of justice, to cover up the possible leakage of revenue the addition confirmed by the CIT(A) i.e. 30% of the total claim of the assessee is reduced to 15% and the AO is directed to recalculate the disallowance accordingly.
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• Income Tax:

  Exemption u/s.11 - Subscription to the chits is nothing but the investment which is not one of the prescribed mode of investment u/s.11(5). Therefore it is a clear case of violation of provisions of Section 11(5), hence assessee trust is not entitled for exemption u/s. 11 - AO directed to restrict the taxable income to the extent of violation of Section 11(5)
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• Customs:

  Benefit of SFIS Scheme - The PIC, no doubt, was entitled to interpret the policy. Under the guise of such interpretation, however, the PIC had no authority, however, to reword the policy, or import, into the policy, conditions and restrictions which were not to be found therein.
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• Customs:

  Classification of imported goods - clarion brand speakers - The classification has been correctly made by the Appellant under Heading 851822 and 851829
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• Customs:

  Classification of imported goods - imports of fuel pump unit assembly - the fuel injecting pumps are neither an accessory not the spare part of the engine of a motor vehicle. These pumps are classifiable only under heading 8413, the parts of these pumps are classifiable only under heading 841391.
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• Indian Laws:

  Dishonor of Cheque - insufficiency of funds - the presumption of innocence available to the accused under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law.
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• Service Tax:

  Since the effective control and possession of the equipments were not transferred to the appellant-assessee, as per the statutory mandates, such use of the equipment belonging to M/s BHEL cannot not be leviable to service tax under the category of “ Supply of Tangible Goods Service”.
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• Service Tax:

  Refund claim - unjust enrichment - the Chartered Accountant’s Certificate has categorically certified that the burden has not been passed on to another. These documents show that VAT has been collected. There is no collection of service tax - All these facts establish that the burden of tax has not been passed on to another - Refund allowed.
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• Central Excise:

  CENVAT Credit - transportation and Toll charges - the appellant is mandatory required to clear the sludge from their factory and for clearance of the said sludge, the appellant availed transportation services which are like transportation charges paid for procurement of inputs by the appellant for manufacture of their final product - Credit allowed.
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• Central Excise:

  Classification of goods - ‘dolochar’, also known as ‘coal char’ - dolochar arising in the course of sponge iron manufacture cannot be said to be manufactured product but is a waste item on which duty demand cannot be sustained.
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• Central Excise:

  If the credit can be taken immediately at the end of the month, it can be taken after end the year or at the end of 2 years for that matter; the only restriction placed even under the Rule 4 (1) of the CENVAT Rules, 2004 is that credit cannot be taken before the receipt of inputs.
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Articles

• Before filing appeals and reply to other notices – check validity of document like notices, orders, letter etc. if valid document is not found in search document- can be regarded as non est.
• TAXABILITY OF CHEQUE BOUNCING CHARGES UNDER GST

Notifications

• Customs

• 05/2020 - dated 16-1-2020 - Cus (NT)
  Exchange Rates Notification No.05/2020-Custom (NT) dated 16.01.2020

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• 4/2020-Customs (N.T./CAA/EXTENSION/DRI) - dated 14-1-2020 - Cus (NT)
  Appointment of CAA by DGRI

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• GST - States

• LG-01-16/2019-8872/LEG - dated 15-1-2020 - Bihar SGST
  Bihar Goods and Services Tax (Amendment) Act, 2019

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• 01/2020 - State Tax - dated 1-1-2020 - Chhattisgarh SGST
  State Government appoints the 1st day of January, 2020, as the date on which the provisions of sections 3 to 21, except section 3, section 8, section 11 and sections 14 to 20 of the Chhattisgarh Goods and Services Tax (Amendment) Ordinance, 2019 (No. 4 of 2019), shall come into force.

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• 72/2019 - State Tax - dated 27-12-2019 - Chhattisgarh SGST
  Seeks to notify the class of registered person required to issue invoice having QR Code.

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• 71/2019 - State Tax - dated 27-12-2019 - Chhattisgarh SGST
  State Tax Notify provisions of Rule 46 of CGST Rules, 2017

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• 70/2019 - State Tax - dated 27-12-2019 - Chhattisgarh SGST
  Seeks to notify the class of registered person required to issue e-invoice

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• 69/2019 - State Tax - dated 27-12-2019 - Chhattisgarh SGST
  Seeks to notify the common portal for the purpose of e-invoice

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• 68/2019 - State Tax - dated 27-12-2019 - Chhattisgarh SGST
  Chhattisgarh Goods and Services Tax (Eighth Amendment) Rules, 2019

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• CCT/26-2/2018-19/50/2577 - dated 7-1-2020 - Goa SGST
  Seeks to amend Notification No. CCT/26-2/ /2018-19/48/1771, dated 11th October, 2019

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• 38/1/2017-Fin(R&C)(27/2019-Rate) - dated 1-1-2020 - Goa SGST
  Seeks to amend Notification No. 38/1/2017-Fin(R&C)(1/2017-Rate) dated the 30th June, 2017

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• 38/1/2017-Fin(R&C)(123) - dated 1-1-2020 - Goa SGST
  Seeks to notify the class of registered person required to issue invoice having QR Code.

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• 38/1/2017-Fin(R&C)(122) - dated 1-1-2020 - Goa SGST
  State Tax Notify provisions of Rule 46 of GGST Rules, 2017

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• 38/1/2017-Fin(R&C)(121) - dated 1-1-2020 - Goa SGST
  Seeks to notify the class of registered person required to issue e-invoice.

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• 38/1/2017-Fin(R&C)(120) - dated 1-1-2020 - Goa SGST
  Seeks to notify the common portal for the purpose of e-invoice.

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• 38/1/2017-Fin(R&C)(119) - dated 1-1-2020 - Goa SGST
  Goa Goods and Services Tax (Eighth Amendment) Rules, 2019

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• 06/GST-2 - dated 14-1-2020 - Haryana SGST
  Removal of Difficulty Order under section 172 to extend the last date for furnishing of annual return/reconciliation statement in FORM GSTR-9/FORM GSTR-9C for FY 2017-18 till 31st January, 2020 under the HGST Act, 2017.

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• 04/GST-2 - dated 14-1-2020 - Haryana SGST
  Notification to waive late fees for non- filing of FORM GSTR-1 from July, 2017 to November 2019 under the HGST Act, 2017

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• Insolvency and Bankruptcy

• IBBI/2019-20/GN/REG054 - dated 15-1-2020 - IBC
  Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Amendment) Regulations, 2020

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• G.S.R. 31 (E) - dated 9-1-2020 - IBC
  Insolvency and Bankruptcy Board of India (Salary, Allowances and other Terms and Conditions of Service of Chairperson and members) Amendment Rules, 2020

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Circulars / Instructions / Orders

• GST - States - Circular No. 01/2020 (State) - dated 10-1-2020
  Restriction in availment of input tax credit in terms of subrule (4) of rule 36 of APGST Rules, 2017
• Customs - 03/2020 - dated 15-1-2020
  Implementation of PGA e-SANCHIT– Paperless Processing under SWIFT-Uploading of Licenses/Permits/Certificates/Other Authorizations (LPCOs) by PGAs

News

• World Bank and Government of India Sign $88 million loan agreement for the implementation of Assam Inland Water Transport Project

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• 15th Finance Commission to hold meetings with stakeholders of the State of Goa

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• India and Bangladesh hold Commerce Secretary level meeting in New Delhi

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• The Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017

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• 1ST Session of India-Norway Dialogue on Trade & Investment Held in New Delhi

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Case Laws:

• GST

• 2020 (1) TMI 633
  100% EOU - Classification of supply - supply of goods or supply of services - supply of electricity - supply of utilities/leasing - separate supplies or composite supplies? - input tax credit - HELD THAT:- Sale or consumption of electricity is a State subject mentioned at Serial No. 53 of List II of Seventh Schedule to the Constitution of India under Article 246 of the Indian Constitution. This position has not been altered by the 101st Constitution Amendment Act, 2016 and therefore, electricity remains outside the purview of the GST - The Notification No. 2/2017-Central Tax (Rate), dated 28th June, 2017 pertains to goods, the intra-State supply of which is exempted under the GST Act. The Entry No. 104 of this notification is regarding Electrical Energy, This suggests that Electrical Energy is a goods and not a service. There is also no doubt that electricity and electrical energy are one and the same thing - It is therefore, clear that electricity is a goods and not a service. Whether supply of electricity via DG sets is a goods or service? - HELD THAT:- The DG set belongs to the Agilent Technologies, the maintenance charges are also borne by the Agilent Technologies, the expenses record pertaining to the DG set is also maintained by Agilent Technologies. Therefore, the authority has no hesitation in concluding that the provision of electricity supply/ power back-up via DG set is in the form of a service and not goods - the electrical supply is liable to GST to the extent it is supplied through DG set. Whether the supply of electricity and supply of utilities/leasing are separate supplies or composite supplies? - HELD THAT:- In the instant case, the supply is made by a taxable person and the number of supplies are also multiple. But as discussed earlier, the supply of electricity to the extent of it being supplied through grid is exempt from GST and, therefore, the condition of two or more taxable supplies is not satisfied. Further, the supply of utilities and supply of electricity are neither naturally bundled together nor are they supplied in conjunction with each other. Also, neither of the two supplies i.e. utility services and electricity supply can be termed as a principal supply and the other one being a natural ancillary - the supply of utility services and electricity supply are separate supplies. The provision of electric supply by way of DG set forms part of the utility services taxable at 18% whereas the supply of electricity by way of grid is exempt from GST. Input tax credit charged on renting services and electricity supply - HELD THAT:- Regarding input tax credit with respect to electricity supply, it is observed that since the grid supplied electricity is exempt from GST, the issue of credit availability does not arise - As regards, the tax on supply of electricity through DG set, the Authority is of the opinion that the applicant is entitled to credit of input tax paid with respect to tax paid on availing the said service.

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• 2020 (1) TMI 632
  Refund of TDS - TDS were deducted by the 2nd respondent herein u/s 51 of CGST/SGST Act but the petitioner was not extended credit against the above, by the respondents herein inspite of repeated reminders - HELD THAT:- It is ordered in the interest of justice that in case the petitioner has filed requisite application for grant of refund before the 1st respondent and the same is pending consideration, then the said authority will take the said plea for consideration after affording a reasonable opportunity of being heard to the petitioner through his authorised representative or counsel, if any, will take a considered decision thereon in accordance with law, without much delay preferable within a period of three weeks from the date of production of the certified copy of the judgment. Petition disposed off.

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• 2020 (1) TMI 631
  Release of seized goods and vehicle - Section 130 of CGST Act - HELD THAT:- The impugned order passed under Section 130 of the Act dated 19th July, 2019 shall be recalled and fresh proceedings shall be initiated in accordance with law and a fresh order shall be passed after giving an opportunity of hearing to the writ applicants - The goods and the conveyance came to be detained and seized way back on 9 th July, 2019. Till this date, the goods and the conveyance is in the possession of the GST Authorities. As we are directing the authorities to initiate fresh proceedings with regard to confiscation, we direct the writ applicants to deposit an amount of ₹ 4,15,800/- towards the tax and penalty as determined under Section 129 of the Act. On deposit of such amount, the goods and the conveyance shall be released forthwith subject to the final outcome of the confiscation proceedings. Application disposed off.

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• Income Tax

• 2020 (1) TMI 630
  Bogus forfeiture of shares - amount invested in the forfeited shares - Short Term Capital Loss - HELD THAT:- SLP Dismissed.

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• 2020 (1) TMI 629
  Reopening of assessment u/s 147 - undisclosed share application amounts - substantial cash transactions - HELD THAT:- SLP dismissed.

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• 2020 (1) TMI 628
  TDS on Leave Travel Concession - assessee in default - HELD THAT:- The employees of the appellant had undertaken journeys to the designated places in India via foreign countries. The instances of such travel are tabulated in the tabulation placed on record which shows that travel was undertaken to Port Blair via Malaysia, Singapore, Port Blair via Bangkok, Malaysia, Rameswaram via Mauritius, Madurai via Dubai, Thailand, Port Blair via Europe etc. Obviously, such journeys did not qualify towards LTC claim, since under the LTC scheme, the journeys have to be undertaken within India and by the shortest route. The amounts received by the employees of the appellant-assessee towards reimbursement of LTC claims are therefore not liable to exemption and, consequently, the appellant is liable to deduct tax at source in respect of payments made by it to its employees. Since the appellant had not deducted tax on the entire amount paid and deducted tax only in respect of part of the amount paid as per its own understanding, the finding that the appellant was an assessee in default, in our view, is completely justified. Tribunal was also correct in its view that it was the primary obligation of the appellant being the deductor, to establish that the recipients had disclosed the amounts received by them towards LTC claims as part of their taxable income and paid tax thereon. The appellant has been afforded the opportunity to make good their claims premised upon the proviso to Section 201(1) - No substantial question of law

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• 2020 (1) TMI 627
  Reopening of assessment u/s 147 - non response to notice by petitioner - HELD THAT:- The notice under Section 148 (1) was issued to the Petitioner as early as on 27.03.2019, he did not respond to that notice for over six months nor he invoked the jurisdiction of this Court to challenge the notice on the ground of jurisdiction. He responded to the notice for the first time on 04.10.2019. The conduct of the Petitioner in not filing the return, he was obligated to, in response to the notice under Section 148 (1) and disregarding the notice under Section 148 of the Act, in our view, disentitles the Petitioner to grant of any relief in the present proceedings. The Supreme Court in GKN Driveshafts (India Ltd.) v. Income Tax Officer [ 2002 (11) TMI 7 - SUPREME COURT ] has clarified that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file a return and if he so desire, to seek reasons for issuing notices. We therefore dismiss this petition and leave it to the Petitioner to pursue all his pleas in his statutory appeal before CIT (A) against the impugned assessment order.

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• 2020 (1) TMI 626
  Reopening of assessment u/s 147 - as per petitioner while passing the assessment order, the AO has not dealt with various submissions of the petitioner - HELD THAT:- There may be merit in this submission of the petitioner, however, we do not wish to examine the same any further at this stage, considering the fact that the petitioner has statutory right of the appeal to assail the re -assessment order before the CIT (A) and, if necessary even before the ITAT. Though, it is open to the petitioner to press this petition, to independently assail the notice under Section 148 irrespective of the fact that the assessment order has been passed, Mr. Balbir Singh, on instruction states that the appellant would be satisfied, if the appellant is permitted to raise all its pleas before the CIT (A), including in relation to the validity of the notice issued u/s 148 which may be decided on merits. He submits that in the meantime, the demand that may be raised by the petitioner in pursuance of the re-assessment order dated 27.12.2019, be not given effect to. We are inclined to accept the submission of the Mr. Singh looking into the overall facts and circumstances of the case. We accordingly dispose of this petition with liberty to the petitioner to avail of its statutory right of appeal in respect of the re-assessment order dated 27.12.2019 before the CIT (A). Demand, if any, raised in consequence of the said re-assessment order shall however not be enforced till the decision of the appeal by the CIT (A).

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• 2020 (1) TMI 625
  Write off the loan and claim the same as bad debts - Assessee had advanced interest bearing loans to its subsidiary company who became loss making company - HELD THAT:- Assessee had advanced loans to its subsidiary company. The loan was interest bearing. Assessee claimed that the subsidiary company became loss making company and the Assessee took a decision to write off the loan and claim the same as bad debts. The said claim has been denied by the Assessing Officer on two counts (i) that the Respondent- Assessee was not in the business of giving loans and, therefore, conditions of section 36(2) were not satisfied and (ii) that the claim of the Assessee of loan becoming bad debts was not genuine as the Assessee was knowing that the loan was not recoverable. The Commissioner of Income Tax (Appeals) confirmed the decision of the Assessing Officer, however, the Tribunal held in favour of the Respondent- Assessee holding that the claim of the Assessee was allowable. The decision of the Supreme Court in the case of S.A.Builders Ltd. v. Commissioner of Income Tax (Appeals), Chandigarh ( 2006 (12) TMI 82 - SUPREME COURT) holds the field on the issue of the assessee not being in the business of giving loans. The decision of the Madras High Court in the case of Commissioner of Income Tax v. Y.Ramakrishna Sons Ltd. ( 2009 (12) TMI 100 - MADRAS HIGH COURT ) relied upon by the Tribunal deals with genuineness of the claim of loan being a bad debt. In the decision decision of this Court in the case of Commissioner of Income-tax v. Star Chemicals (Bombay) (P) Ltd. ( 2008 (2) TMI 399 - BOMBAY HIGH COURT) and in the decision of the Supreme Court in the case of T.R.F. Ltd. v. Commissioner of Income-tax [ 2010 (2) TMI 211 - SUPREME COURT] , it is laid down that after the amendment of 1 April 1989, it is not necessary for the Assessee to establish that the debt has, in fact, become irrecoverable and if the Assessee writes off the same as bad debts, it would serve the purpose.

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• 2020 (1) TMI 624
  Penalty u/s 271B - assessee submitted the audited financial statements but failed to furnish report of audited accounts (audit report) as required u/s 44AB - HELD THAT:- the appellant had furnished only the Annual Report depicting the audited financial statement along with copy of the receipts and distribution statements. It is also evident that the appellant had furnished a Certificate issued by the Joint Director (Audit) of the Co-operative Department. - He has not furnished the report of audit in the prescribed form, Form 3CA, as required under the second proviso (as it stood then) to Section 44AB read with the requirements under Rule 6G(1) of the Income Tax Rules. When the second proviso carves out an exemption from the general provisions of Section 44AB, the stipulations therein need to be strictly adhered and the mere fact that the audit of the assessee was conducted under the provisions of the Co-operative Societies Act, would not be sufficient for such compliance. Furnishing of the report of audit in the prescribed form accompanied with a further report by an Accountant in the prescribed form, is a mandatory requirement for proper compliance. Since the appellant had failed to show any 'reasonable cause', coming within the purview of Section 273B, the imposition of penalty under Section 271B cannot be interfered with. Reliance on the circular of CBDT - it is contended that, the audited report need not be attached along with the returns or furnished separately at any time before or after the due date; but it need only to be retained by the assessee and produced if it is called for by the Income Tax Authority during any proceedings under the Act. The Circular says that no penalty under Section 271B shall be initiated or levied for not furnishing the tax audit report before the due date. Therefore the imposition of penalty under Section 271B cannot be sustained, is the contention. - We are not persuaded to accept the above contention in view of the mandatory provisions contained in Section 44AB, which insists on furnishing of the audit report in the prescribed form before the due date stipulated, along with a further report of an Accountant. When the specific provision contained in the statute is unambiguous in this respect, we cannot hold otherwise based on any circular of the Department. Hence the above contention cannot be accepted. Further, learned Standing Counsel appearing for the respondents contended that, the penalty proceedings in this case was initiated on the allegation that the appellant had failed to obtain a proper audit report within the date stipulated in the relevant provision. - Decided against assessee.

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• 2020 (1) TMI 623
  Stay petition - HELD THAT:- As petitioner has already deposited a sum of ₹ 2.96 crores, it is appropriate to direct the petitioner to pay a sum of ₹ 1 Crore in three monthly installments before 31st March 2020. On such payment, the order passed by the Assistant Commissioner of Income Tax stands stayed till the disposal of the appeal. Further, the Income Tax Appellate Tribunal is directed to expedite the hearings.

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• 2020 (1) TMI 622
  Validity of reopening of assessment - as argued Notice u/s 148 was not served on petitioner - HELD THAT:- It is noticed that Mr.G.S.Selvan appeared on behalf of the petitioner and filed his authorisation. Therefore, the contention of the petitioner that the notice u/s 148 was not served on petitioner cannot be countenanced. As per Section 292BB it shall be deemed that any notice under any provision of this Act, which is required to be served upon the assessee, has been duly served upon the assessee in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act. Notice to an authorised representatives of an assessee is a notice to the assessee. In any event, the petitioner has an alternative remedy to file an appeal before the Appellate Commissioner under Section 246 against the impugned order. Hence, without going into the merits of the case, this writ petition is disposed by giving liberty to the petitioner to file an appeal under Section 246 of the Income Tax Act, 1961, within 30 days from the date of receipt of a copy of this order and the Appellate Commissioner is directed to dispose the appeal in accordance with law within a period of three months thereafter.

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• 2020 (1) TMI 621
  Addition u/s 14A r.w.r. 8D - HELD THAT:- There is no dispute as to the quantum of the dividend earned during the year and it is ₹ 37,13,348/-. In Joint Investments Private Limited [ 2015 (3) TMI 155 - DELHI HIGH COURT] Hon ble jurisdictional High Court held that where the assessee declared tax-exempt income and voluntarily disallowed a certain expenditure under section 14A, in the absence of any reason why the assessee s claim for disallowance u/s 14A had to be rejected, learned Assessing Officer was not justified in computing the disallowance - no stretch of imagination can section 14A of the Act read with Rule 8D of the Rules be interpreted so as to mean that the entire tax exempt income is to be disallowed, the window for disallowance is indicated in section 14A and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income , and this proportion are portion of the tax exempt income surely cannot swallow the entire amount. In assessee s own case, a coordinate Bench of this Tribunal held that the disallowance in any case cannot exceed the exempt income. Ld. DR does not dispute this proportion of law as laid down by the Hon ble High Court and in a number of decisions by the coordinate benches of this Tribunal. We, therefore, while respectfully following the same answer the issue in favour of the assessee Disallowance under section 14A of the Act read with Rule 8D of the Rules under section 115JB - In Vireet Investment (P) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] the Special Bench dealt with this aspect at length and held that the computation under clause (f) of explanation 1 to section 115 JB (2) is to be made without resorting to the computation as contemplated under section 14A of the Act read with Rule 8D of the Rules. There is no dispute on this proposition. We therefore, while respectfully following the said decision answer the issue in favour of the assessee Disallowance on account of provision for leave encashment and provision for gratuity while computing the profits under section 115 JB - HELD THAT:- This issue is covered by the view taken by the Tribunal in the earlier assessment years like 2002-03, 2003-04 and 2005-06. We, therefore, while respectfully following the same, while upholding the findings of the Ld. CIT(A) in respect of the provision for leave encashment, remand the issue relating to the verification of the actuarial valuation in respect of gratuity, to the file of the learned Assessing Officer. Disallowance on account of unfurnished expenses of Tropicana Beverage Manager - HELD THAT:- The details of such income and expenditure are shown. On a perusal of the details we are of the considered opinion that the sum of ₹ 12,30,17,600/-does not relate to the amalgamation expenses and on the other hand they represent the expenses incurred by the assessee on behalf of Tropicana Beverages and were disclosed in the profit and loss account. We, therefore, do not find any perversity in the findings of the Ld. CIT(A) and, accordingly, decline to interfere with the same on this aspect. Ground No. 4 of Revenue is accordingly dismissed. Disallowance of excess depreciation on computer peripherals - HELD THAT:- We uphold the contention of the assessee that UPS, printer and projector form part of the computer peripherals and direct the Assessing Officer to recomputed the depreciation in respect of these 3 items at 60%. Disallowance of depreciation on the non-compete fees paid by the assessee - HELD THAT:- Reasoning given by the Assessing Officer to disallow this claim is that the issue hinges around the interpretation of the phrase business or commercial rights of similar nature used in clause (ii) of section 32, and a careful reference to the language of the provisions in section 32 makes it clear that all the specific awards that a preceding general words business or commercial rights of similar nature are related to a class of rights which are intellectual property rights whereas the alleged payment is for non-compete fee. Further, according to the learned Assessing Officer the right to non-compete acquired by the assessee is only a right in personam and therefore the assessee is not entitled to claim depreciation on the non-compete fee. AO does not refer to any change of circumstances from the earlier years so as to deviate from the view that was taken for earlier years. We therefore do not find anything illegality or irregularity in the Ld. CIT(A) following the view taken for the earlier years under identical circumstances. Disallowance of depreciation on account of merger with the Tropicana Beverages Company under normal computation - HELD THAT:- CIT(A) considered the original tax audit report and the revised tax audit report and directed the Assessing Officer to verify from the records and allow depreciation as per the tax audit report that was filed pursuant to the merger of Tropicana Beverages Company with the assessee. We do not find any reason for grievance of the Revenue on this aspect, because the Ld. CIT(A) did not delete addition and on the other hand she rectified the apparent mistake committed by the learned Assessing Officer. We therefore decline to interfere with the findings of the Ld. CIT(A) and dismiss ground No. 7.

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• 2020 (1) TMI 620
  Reopening of assessment us 147 - addition u/s 68 - proceedings u/s 153A have been initiated against assessee - HELD THAT:- It is an admitted fact that in the present case the agreement in question was found during the course of search in the case of Shri Naresh Sabharwal and proceedings u/s 153A have been initiated against him. Therefore, the agreement in question have been transferred by A.O. of the person searched to the A.O. of the assessee for the purpose of taking remedial action in the matter. It is well settled Law that in the case of assessment made on assessee consequent to the search in another case, A.O. is bound to issue notice under section 153C and thereafter proceed to assess the income under section 153C and if A.O. had proceeded with re-assessment under section 147/148 and passed the Order under section 143(3)/148 the same would be illegal and arbitrary and without jurisdiction. It is clear that loan agreement was found during the course of search in the case of Shri Naresh Sabharwal which is handed-over to the A.O. of the assessee and addition is made only on that basis. Therefore, there was no justification for the A.O. to have been initiated proceedings under section 147/148. The correct course of action would have been to proceed against the assessee under section 153C. Therefore, initiation of re-assessment proceedings under section 147/148 is wholly invalid, void and bad in Law. Since the correct procedure have not been adopted by the A.O. and there is no justification to initiate the re-assessment proceedings against the assessee, we set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stands deleted. Appeal of Assessee allowed.

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• 2020 (1) TMI 619
  Exemption u/s 10(34) without disallowing any expenditure u/s 14A - HELD THAT:- Neither any change of circumstances nor any decision of any higher forum is brought to our notice by the Revenue. Hence while respectfully following the above consistent view taken by the Tribunal in assessee s own case for the earlier assessment years [ 2019 (4) TMI 1769 - ITAT DELHI] we allow ground of assessee s appeal and direct the Assessing Officer to allow exemption to the assessee under section 10(34) of the Act without disallowing any expenditure under section 14A of the Act. Addition on account of income from sale of investment to be deleted as relying on own case [ 2018 (1) TMI 845 - ITAT DELHI] Provision of bad debts - HELD THAT:- As relying on own case [ 2018 (1) TMI 845 - ITAT DELHI] wherein examined the contention of the learned DR that the assessee himself added back the royalty while computing the shareholders income. This implies that the assessee has accepted the view of the Revenue that the income in the shareholders a/c has to be computed under the normal provisions of the computation of income in Income Tax Act. Royalty paid by the assessee in our view cannot be regarded to be an expense relating to the life insurance business. There is nothing wrong caused to the Revenue as Royalty cannot be regarded to be liability incurred for life insurance business. We therefore set aside order of CIT(A) on this issue and delete the enhancement made by CIT(A).

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• 2020 (1) TMI 618
  TP Adjustment in the Manufacturing segment - selection of MAM - PLI working - working capital adjustment - comparable selection - HELD THAT:- No dispute on the application of the TNMM as the most appropriate method and aggregation of the four sets of international transactions under the Manufacturing segment, which have been accepted by the TPO. Working out of the assessee s own PLI - assessee is aggrieved by the adoption of operating profit after depreciation - HELD THAT:- Operating profit of the assessee and that of the comparables should be calculated after depreciation since depreciation is an integral part of the operating cost. It is further held that no adjustment can be allowed if there is difference just on account of the amount of depreciation or percentage of depreciation to a certain base. An adjustment can be allowed in the computation of profit of the comparables only if there is difference in the rates of depreciation as charged by the assessee and comparables on the same assets. Foreign exchange loss - non-operating V/S operating loss - HELD THAT:- We find that the in B.C. MANAGEMENT SERVICES PVT. LTD. [ 2017 (12) TMI 255 - DELHI HIGH COURT] has held that foreign exchange fluctuation in relation to trading transactions, prior to Safe Harbour Rules from 2013, should be treated as an operating item. In view of the above, it is held that the amount of foreign gain/loss arising out of the revenue transactions should be considered as an item of operating revenue/cost, both for the assessee as well as the comparables. Transfer pricing addition in respect of the whole segment rather than restricting it only to the international transactions - HELD THAT:- This issue is no more res integra in view of several judgments rendered by various higher forums including the Hon ble jurisdictional High Court holding that the transfer pricing adjustment should be restricted only to the international transactions and not the entity level transactions. The Hon ble jurisdictional High Court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. [ 2017 (6) TMI 1240 - BOMBAY HIGH COURT] has held that the transfer pricing adjustment made at entity level should be restricted to the international transactions only. Also see M/S. THYSSEN KRUPP INDUSTRIES INDIA PVT. LTD. [ 2015 (12) TMI 1076 - BOMBAY HIGH COURT] - We, therefore, direct to restrict the transfer pricing addition only in respect of transactions with Associated Enterprises. Working capital adjustment - HELD THAT:- As observed from the direction given by the Dispute Resolution Panel (DRP) on page 68 para 2.19.8 that the AO was directed : `to examine the computation of working capital adjustment worked out by the assessee and adopt correct operating margin of the comparable companies after working capital adjustment. There is no cross appeal by the Revenue so as to challenge the said finding of the DRP. When the matter came up before the AO/TPO, no effect was given to such direction. We, therefore, direct the AO/TPO to give effect to the direction given by the DRP in this regard and allow working capital adjustment as per its recommendation. Comparable selection - Assessee in the Manufacturing segment is involved in the manufacture of Resistors like high voltage resistors, low voltage resistors, power resistors etc. and Capacitors like film capacitors, trimmer capacitors and power capacitors used in various electronic applications/products, thus companies functionally dissimilar with that of assessee need to be deselected from final list. TP Adjustment of IT Enable services/ back office services - HELD THAT:- AR expressed his inability to produce the relevant agreement in terms of which the I.T. support services were rendered. It goes without saying that unless the true nature of services rendered by the assessee is precisely found out, the comparability of other companies cannot be conclusively decided. In view of the fact that the relevant agreement is not available on record, we deem it fit to set-aside the impugned order on this score and remit the matter to the file of AO/TPO. We order accordingly and direct the AO/TPO to first ascertain the precise nature of services rendered by the assessee under the I.T. support services and then examine the comparability or otherwise of the companies challenged in this segment, namely, Informed Technologies India Ltd., Infosys BPO Ltd., B N R Udyog Ltd. (Medical Transcription segment), Accentia Technologies Ltd., Jeevan Softech and R Systems. The ld. AR fairly agreed to it. Calculation of deduction u/s.10A and 10B - AO recomputed the assessee s claim of deduction u/s.10A after allowing set off of the brought forward losses - HELD THAT:- We find that this issue is no more res integra in view of the judgment of the Hon ble Supreme Court in CIT vs. Yokogawa India Ltd. [ 2016 (12) TMI 881 - SUPREME COURT] in which it has been held that the deduction should be allowed qua the eligible undertaking standing on its own without reference to other eligible or non-eligible units or undertakings. To put it simply, the profits of the eligible units should be considered on standalone basis. Similar view has been reiterated by the Hon ble Supreme Court in CIT Vs. J.P. Morgan Services India Pvt. Ltd. [ 2017 (5) TMI 640 - SC ORDER] . In view of the direct precedent, we allow the assessee s claim on this issue.

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• 2020 (1) TMI 617
  House Rent Allowance (HRA) - Computation of salary - Benefit of exemption u/s 10(13A) - authorities below treated the performance bonus received by the appellant to be part of the salary for the purpose of determining qualifying amount in arriving at the exemption allowable u/s 10(13 A) - HELD THAT:- We note that the decision of the Hon'ble Kerala High Court in the case of CIT v. B.Ghosal [ 1980 (2) TMI 57 - KERALA HIGH COURT ] is on identical facts wherein on exact same set of facts the Court had held that 'performance bonus' does not form part of 'salary' as defined in clause (h) of Rule 2A for the purposes of Section 10(13A) of the Income tax Act, 1961. Considering the facts narrated above, we note that total rent paid by the assessee during the year is to the tune of ₹ 8,20,000/-. The basic salary for the purpose of computation of house rent disallowance is ₹ 3,00,000/- (10% of ₹ 30,00,000/- being basic salary). Therefore, excess of rent paid over 10% of salary comes at ₹ 5,20,000/- (₹ 8,20,000/- - ₹ 3,00,000/-). Therefore, assessee is entitled for house rent allowance at ₹ 5,20,000/- u/s 10(13A) of the Act. Assessing Officer is directed to allow the exemption of HRA at ₹ 5,20,000/-. Appeal of the assessee is allowed.

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• 2020 (1) TMI 616
  TP Adjustment - Comparable selection - HELD THAT:- As compared to the software development services income of assessee companies functionally dissimilar with that of assessee need to be deselected from final list. Foreign exchange loss - HELD THAT:- When a query was raised to the learned Authorised Representative with Respect to disclosure of loss in the Balance Sheet., the learned Authorised Representative demonstrated with copy of Balance Sheet, but there is no clarity on foreign Exchange loss claim. Therefore we considering the facts and submissions and the disclosure, Restore this disputed issue to the file of learned CIT (Appeals) to adjudicate afresh and allow this ground of appeal of Revenue for statistical purposes. Working Capital Adjustment - HELD THAT:- Transfer pricing order on Working Capital Adjustment, we find that the TPO has computed it at 5.97% but has not given any basis for restricting the adjustment to 1.71%. In various cases relating to transfer pricing adjustment, this Tribunal has been directing to give Working Capital Adjustment on actual basis and the TPO having arrived at 5.97%, ought to have adopted the same instead of restricting it to 1.71%. in view of the same, we deem it proper to remand this issue to the file of the TPO/A.O. for working out the ALP after giving adjustment of working capital as per the calculation of the A.O. in annexure D annexed to the transfer pricing order. This ground of appeal is accordingly allowed.

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• 2020 (1) TMI 615
  Ad hoc addition of 10% under transfer pricing adjustment - addition has been made by the TPO not in respect of any expenditure having been incurred but with respect to income derived by the assessee, part of which was distributed among the RPs according to their respective entitlements as worked out on the basis of their subscribers - HELD THAT:- We found that while upholding 10% of addition in respect of the amount distributed, the DRP have clearly observed that the TPO was not justified in making addition to the extent of 50%. DRP held that consumer numbers represent a key parameter for deciding the amount or placement charges and in the facts and circumstances of the case held that allocation made by the assessee with respect to the total placement charges received is fair and proper. After this finding being recorded by the DRP, there is no justification even for upholding 10% of the addition, in so far as the assessee has distributed income on the basis of actual subscribers being commanded by the RPs. DRP has categorically observed that the assessee has performed more functions that include making efforts to consolidate the RPs presenting their position and negotiating with the broadcasters for RPs. DRP has further categorically rejected the findings of the TPO that just because each RP individually represents mere 5% to 7% of the subscriber base which is not in a position to negotiate individually with the broadcasters. Finding of the TPO for the RPs should be allowed just 50% of the amount attributable to its subscriber base has been rejected by the DRP. DRP has held that by way of this transaction, the assessee was given an authority by the RPs to negotiate with the broadcasters for the placement charges for the entire group. The DRP acknowledges the fact that clubbing of such rights with one person ensured better charges for the entire group. And that the assessee itself has been benefitted from such pooling. Furthermore, the DRP has not categorically held that other than giving such rights of negotiation to the assessee, no other risks are transferred to the assessee nor there is any deployment of capital on behalf of the RPs. DRP has held that it is a transaction of rendering of services of marketing of the channel placement rights with the broadcasters and arms length consideration is to be received by the assessee with respect of functions performed in rendering these services,. After giving all these findings by the DRP, there is no justification for upholding any ad hoc addition of 10%. From the record we further found that the adjustment of 10% so upheld by the DRP was without following any of the prescribed methods U/s 92C(1) of the Act nor has any benchmarking been adopted in determination of the ALP. The Hon ble Jurisdictional High Court in the case of CIT Vs Lever India Exports Limited [ 2017 (2) TMI 120 - BOMBAY HIGH COURT] have held that the ad hoc determination of ALP de-hors Section 92C of the Act cannot be sustained, rendering the entire transfer pricing adjustment unsustainable in law. We do not find any merit in the action of the DRP for upholding ad hoc addition of 10% under transfer pricing adjustment. - Decided in favour of assessee.

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• 2020 (1) TMI 614
  Disallowance u/s 14A - Suomoto disallowance made by the assessee - HELD THAT:- As in assessee's own case for the A.Y. 2011-12 AO did not point out in clear terms as to why the suomoto disallowance made by the assessee is not correct with reference to the books of accounts of the assessee. AO all along stated in the assessment order that only partial application of Rule 8D has been applied by the assessee and he has not pointed the incorrectness of the suomoto disallowance made by the assessee or as to why this is not adequate disallowance u/s. 14A of the Act to meet the expenses attributable for earning dividend income. In the circumstances, respectfully following the said decision, we direct the Assessing Officer to restrict the disallowance u/s. 14A of the Act only to the suomoto disallowance already made by the assessee and delete the balance disallowance.

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• 2020 (1) TMI 613
  Penalty u/s 271(1)(c) - disallowing assessee s claim of deduction u/s 10A - assessment u/s 153A - HELD THAT:- Assessing Officer has already initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. That being the case, the argument of the learned Authorised Representative that the Assessing Officer has not initiated penalty proceedings under section 271(1)(c) of the Act on the basis of the specific reasoning of learned Commissioner (Appeals) on which a part disallowance under section 10A of the Act was made, in our view, is hyper technical and superfluous. Therefore, it does not merit consideration. Allegation of the Assessing Officer that no manufacturing activity was carried on by the assessee was found to be baseless as learned Commissioner (Appeals) has specifically stated that the assessee furnished clearance from the Customs and Central Excise Department, bills of establishment, proper invoices, foreign remittance through banking channels with the approval of the Reserve Bank of India and machineries installed in the SEZ unit. He has also specifically recorded a finding of fact that no incriminating documents were found and seized to disprove assessee s claim that it was carrying on manufacturing and export activities from the SEZ unit. Thus, the facts narrated above clearly indicate that the addition/disallowance sustained by learned Commissioner (Appeals) on account of deduction claimed under section 10A of the Act is not due to any inaccurate particulars furnished by the assessee but on a purely presumptive basis. That being the case, in our considered opinion, the assessee cannot be accused of furnishing inaccurate particulars of income so as to be visited with penalty under section 271(1)(c) of the Act. In the course of hearing, it was brought to our notice by learned Authorised Representative that under identical facts and circumstances, learned Commissioner (Appeals) has deleted the penalty imposed under section 271(1)(c) of the Act in the assessment year 2005 06. Thus, considering the overall facts and circumstances of the case, we are of the view that the penalty imposed under section 271(1)(c) deserves to be deleted - Decided in favour of assessee Penalty imposed u/s 271AAA - contention of AR that in the assessment order AO has not initiated proceedings u/s 271AAA in respect of addition made towards unexplained expenditure and excess stock - HELD THAT:- As regards the legal issue raised while completing the assessment, in the penultimate paragraph of the assessment order the Assessing Officer has initiated proceedings for imposition of penalty under section 271AAA - contention of the learned Authorised Representative that no separate penalty proceeding has been initiated against certain additions is without any basis. As regards the claim of the assessee that proceedings under section 271AAA, can be initiated only if there is undisclosed income in the specified previous year, on going through the facts on record it is very much evident that the Assessing Officer has made additions under various heads on account of undisclosed income. Further, learned Commissioner (Appeals) while dealing with the aforesaid aspect has passed a very well reasoned order negating assessee s claim. We do not find any reason to interfere with the decision of learned Commissioner (Appeals) on the issue. Therefore, we do not find any merit in the grounds above Additions on the basis of which penalty u/s 271AAA was imposed were on account of unexplained expenditure, excess stock and salary paid in cash - Though, the assessee before learned Commissioner (Appeals) and also before the Tribunal made an attempt to impress upon the fact that the transaction with M/s. Manav Jewelers, is genuine, however, none of the appellate authorities found the claim of the assessee acceptable. In fact, the Tribunal while dealing with the issue has held that the evidence on record is sufficient to hold that the entity with whom the assessee has entered into such transaction is a paper entity created by the assessee to inflate the turnover. The Tribunal also held that the assessee has miserably failed to prove that the transaction with such entities is genuine. In view of such concurrent finding of fact by the appellate authorities including the Tribunal, assessee s claim that the transaction with M/s. Manav Jewelers, cannot be accepted. On a perusal of the assessment order passed in case of Proprietor of M/s. Manav Jewelers, we are convinced that the Assessing Officer has not accepted the transaction to be genuine. Merely because the said entity has filed a return of income showing certain income, the Assessing Officer has passed the assessment order on that basis. However, the assessment order so passed cannot grant authenticity to the activity carried on by the said entity with the assessee. Therefore, to that extent, we are of the view that imposition of penalty under section 271AAA of the Act in respect of addition of ₹ . 42,05,000, has to be sustained. As regards the excess stock the Tribunal has found that the difference is not huge, hence, has directed for addition of gross profit rate. Similarly, as regards the salary paid in cash, the addition has been made purely on the basis of statement recorded from third parties without confronting them to the assessee or allowing the assessee an opportunity of cross examination. Further, it is noticed that though identical addition was made by the Assessing Officer in assessment years 2005 06, 2006 07 and 2008 09, however, penalty proceedings under section 271(1)(c) was not initiated against such additions though penalty under the said provisions was imposed on some other additions. Thus, after considering overall facts and circumstances of the case, we direct the Assessing Officer to impose penalty u/s 271AAA of the Act, only on the amount of ₹ 42,05,000, and delete the balance penalty. - Decided partly in favour of assessee.

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• 2020 (1) TMI 612
  Rate of tax to be charged on the interest on refund u/s. 244A - India-USA DTAA - CIT(A) held that scope of the definition of interest as per Article 11(4) of India USA DTAA does not cover interest granted u/s. 244A and held that asset on which the interest income accrued viz TDS is not a debt claim or government bond or security - HELD THAT:- We restore this issue to the file of the Assessing Officer to adopt the tax rate as specified in India USA DTAA in the light of the decision of the Hon ble Special Bench in the case of ACIT v. Clough Engineering Ltd ( 2011 (5) TMI 562 - ITAT, DELHI ) and the decision of the Hon'ble Jurisdictional High Court in the case of the DIT(IT) v. Credit Agricole Indosuez [ 2015 (6) TMI 974 - BOMBAY HIGH COURT ] Charging of interest u/s.234B - HELD THAT:- It is not in dispute that for the relevant assessment year i.e. A.Y. 2012-13 as per the provisions of the section 209 of the Act advance tax was not payable by the assessee being a non-resident company. We find that the Hon'ble Jurisdictional High Court in the case of the DIT (IT) v. NGC Network Asia LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT ] held that when a duty is cast on payer to deduct and pay tax at source, on payer s failure to do so interest u/s. 234B cannot be imposed on payee assessee - We direct the Assessing Officer to delete the interest levied u/s. 234B of the Act. Gain arising from roleover of foreign exchange contracts is assessable as capital gains/losses - See assessee own case [ 2019 (7) TMI 1560 - ITAT MUMBAI]

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• 2020 (1) TMI 611
  Taxability of receipts towards sale of software products - 'sale of copyrighted article' OR 'transfer of copyright right' - whether nature of royalty under the provisions of section 9(l)(vi) of the Act as well as Article 12(3) of the Double Taxation Avoidance Agreement ( DTAA ) between India and USA? - HELD THAT:- Tribunal in assessee own case [ 2017 (3) TMI 331 - ITAT MUMBAI] have held that receipts from sale of Shrink-wrap software is not liable to tax in India accordingly, AO was directed to delete the addition so made on account of receipts for sale of Shrink-wrap software. Facts and circumstances in both the years under consideration are parimateria, therefore, respectfully following the order of the Tribunal in assessee s own case, we do not find any justification for taxing the receipt as taxable as royalty

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• 2020 (1) TMI 610
  Exemption u/s 11 - Depreciation to assessee trust - HELD THAT:- We note that sub-section (6) to section 11 was inserted by the Finance (no. 2) Act, 2014, w.e.f. 01.04.2015, which states that if acquisition of assets had been claimed as application, then depreciation is not allowable. We note that the said sub-section(6) of section 11 is applicable w.e.f. 01.04.2015 but in assessee`s case under consideration the assessment year is 2012-13, therefore amended section 11(6) does not apply to the assessee. Hence, the decision of the jurisdictional High Court of Calcutta in CIT vs. Siliguri Regulated Market Committee [ 2014 (8) TMI 686 - CALCUTTA HIGH COURT] will hold good, wherein it was held that the claim of depreciation is to be allowed even if the cost of the asset is treated as application. As regards whether the inserted sub-section (6) could have retrospective application, judicial decisions have held that it cannot be interpreted so. This section is not retrospective in effect which is evident from the amendment itself. Capital gain on sale of cars to be qualified for exemption u/s. 11(1A) - HELD THAT:- The consideration received was deducted from block of assets which is apparent from the details of depreciation as per Tax Audit Report which depreciation was claimed on the reduced value after deducting ₹ 8,40,000/-. Needless to repeat, sale consideration of a depreciable asset is to be reduced from the block of asset which is part of the process of the computation of depreciation. The assessee duly reduced the said sale consideration from the block of assets which is not in dispute. In view of the above the amount of ₹ 8,40,000/- separately added as income has rightly been deleted by ld CIT(A). Claim of depreciation is to be allowed even if the cost of the asset is treated as application. We note that section 11 (1A) is on the utilization of the net consideration, therefore the capital gains qualify for exemption u/s 11 (1A) of the Act A dministrative and establishment expenses allowance in computation for determination of quantum of accumulation u/s. 11(1)(a) - HELD THAT:- Advertisement expenses claimed by assessee is normal and expected for a school to advertise about its features so that general public may know about it. Payment of audit fees is statutory obligation. Conveyance expenses is incurred, for teachers / staff, and administrative workers. Other expenses are incidental expenses. License Fees is necessary for the school to function. Professional charges are incurred as considered necessary by the school. Expenses of the society are incurred so that the school may run and function properly. These expenses are necessary to achieve the objective of the assessee trust. That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue is dismissed. Allowing to set off of earlier loss against the principles that loss is negative profit and when profit is exempted, loss is also exempted - HELD THAT:- CIT(A) did not direct the AO to allow setoff. As per ld CIT(A) the issue for set off will not arise; for the revised assessed income upon giving effect to his appeal order, because as per the return of income furnished by the appellant, the income was to the tune of Rs. Nil. However, after going through the judicial precedents, as noted above, it clear that such claim for set off is allowable to the assessee trust, therefore, we direct the AO to allow the set off benefit to the assessee trust. Loss from the business of running school bus and loss from running of hostel qualified for exemption u/s. 11(4A) - HELD THAT:- We note that assessee trust is providing school bus service to the students and also providing hostel facility for students on payment basis. The main objective of the school is to impart education. However, AO was of the view that activity of running school bus and providing hostel facility is not directly and proximately connected with the objective of imparting education. These services are provided against fees therefore AO noted that nature of such incidental activity is business, therefore he made addition to the total income of the assessee trust. We note that assessing officer has himself stated in his order that these are pure business activities but pertaining to attainment of the objective of the trust. Hence, it is abundantly clear from the order of the AO that school bus service and hostel service is pertaining to attainment of the objective of the trust. School bus service is only used to drop and pick up the students. Similarly, hostel facility is provided to the needy students. These services are part and parcel of the school and cannot be termed as business and hence the provision of section 11(4)/ (4A) of the Act is not attracted in this instant case. The main objective of the school is to impart education. The activity of running school bus and providing hostel facility is directly and proximately connected with the objective of imparting education. These are incidental activities for attainment of the objective of the assessee trust. We note that school bus and hostel activities are incidental to the attainment of objectives of the trust, hence, we do not find any infirmity in the order of CIT(A)in deleting the addition - Decided in favour of assessee.

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• 2020 (1) TMI 609
  Penalty u/s 271(1)(c) - unexplained assets in the shape of sale consideration representing alleged undisclosed income - Capital gain on sale of land - HELD THAT:- In the present case, assessee admitted that, along with his co-owners, a land was sold. The evidence exhibiting the sale of land was found. The evidence exhibiting receipt of cash over and above the sale consideration stated in the sale deed was found when confronted to the assessee in the statement recorded u/s 132(4) then he has admitted the undisclosed income received as sale consideration in cash and not disclosed in the regular return as well as accounted for in the books of accounts. There was ample evidence found during the course of search exhibiting the fact that income was not disclosed by the assessee in his regular books of accounts as well as in the return. The case of the assessee falls within the mischief of Explanation 5A. End of the assessee to say that no asset, money, jewellery or bullion representing the alleged undisclosed income was found during the course of search. Therefore, with regard to first fold of contentions, we do not find any merits in the contentions of the learned Counsel for the assessee. It is rejected. As far as second fold of contentions is concerned, it is pertinent to observe that even if the assessee has filed the return of income and declared certain income, but the penalty proceeding is an independent proceeding. If on account of any legal or factual ground, assessee is able to absolve himself from levy of penalty, then all such rights are available in the penalty proceedings. The contention of the assessee is that agricultural land sold by him along with co-owners was not a capital asset and no capital gain tax was imposable upon the assessee. It is a different matter that he has paid the capital gain tax but that admission cannot be accepted even for visiting the assessee with penalty. In the penalty proceedings, he wants to take an independent stand that since no capital gain tax is leviable; therefore, no penalty is imposable. This is an independent plea. It ought to have been examined and ought to have been adjudicated. This plea has been specifically raised in the note appended to the return as well as in the submissions before the learned CIT(A) (extracted supra). Considering the above, we deem it appropriate to set aside this aspect to the file of the learned Assessing Officer. The leaned Assessing Officer shall call for record of the alleged agricultural land and find out whether it was an agricultural land not falling within the ambit of expression capital asset provided in Section 2(14) of the Income-tax Act. In case it is found that it was not a capital asset, then the assessee will not be visited with penalty; however, this should not be construed as a direction. - Appeal of the assessee is partly allowed for statistical purposes.

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• 2020 (1) TMI 608
  Penalty u/s 271(1)(c) - defective notice - HELD THAT:- Notice issued by the AO u/s 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT [ 2007 (5) TMI 198 - SUPREME COURT] has also noticed that where the AO issues notice u/s 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. - Decided in favour of assessee.

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• 2020 (1) TMI 607
  TP Adjustment - providing of Corporate Guarantee (CG) To Associated Enterprise (AE)- HELD THAT:- As decided in own case [ 2018 (11) TMI 864 - ITAT MUMBAI ] we restrict the rate of impugned additions to 0.50% as against 2.25% taken by the lower authorities. This ground stand partly allowed. The Ld. AO is directed to modify the final assessment order to that extent. As regards the difference from the preceding year, as submitted by the learned counsel of the assessee that there was withdrawal of the corporate guarantee, we are in agreement with the observation of the authorities below that this contention of the assessee cannot be accepted because the corporate guarantee has been given to LMI and, in turn, it has been communicated to the banks in the Dubai. As rightly noted, any withdrawal of the corporate guarantee would be effective only when the withdrawal of the corporate guarantee is communicated to the banks. In this regard assessee had accepted that banks were informed about the withdrawal of the corporate guarantee on 7/8/2013 which is after the date of the previous year under consideration. Therefore authorities below are quite correct in holding that in the eyes of law corporate guarantee was in existence and could be validly invoked against the assessee. The above view is also corroborated by the fact that the balance sheet of the assessee as on 31/3/2013 mentioned the corporate guarantees on behalf of subsidiaries under the head contingent liabilities and commitments . Furthermore, even information to the RBI for the aforesaid withdrawal was communicated in the next financial year in the month of August. Adjustment to Interest on Loan given to AE - HELD THAT:- As decided in own case [ 2018 (11) TMI 864 - ITAT MUMBAI ] assessee has advanced loan pursuant to loan agreements / arrangements to its AE and was entitled to certain rate of interest. These loan transactions as entered into by the assessee with the AE squarely falls within the ambit of Section 92(1) / 92B as an international transactions as accepted by the assessee in its TP study and the statutory provisions mandates that the income from such transactions is to be computed on the principle of arm's length price irrespective of the fact that no such income has actually accrued to the assessee. This being so, the argument of principles of commercial expediency or notional income or revenue neutrality as raised before us fails since as long as the transaction is an international transaction within the framework of law, the computation of income there-from has to be on the basis of arm's length principle. Disallowance of Interest under section 36(1)(iii) - HELD THAT:- In assessee s own case ITAT for assessment year 2009 10 to assessment year 2012 13 has held that no disallowance in this regard is warranted as the interest free loan advanced to the subsidiaries was out of commercial expediency. Furthermore, the tribunal had also held that assessee s interest free funds to grant loans were sufficient and in this regard it had placed reliance upon Hon ble Bombay High Court decision in the case of CIT vs HDFC bank [ 2014 (8) TMI 119 - BOMBAY HIGH COURT ] . Disallowance u/s14A read with Rule 8D and also section 115JB adjustment in this regard - assessee contended that since the assessee has not earned any exempt income disallowance under section 14A is not warranted - HELD THAT:- We find that since the assessee has not earned any exempt income disallowance in this regard is not warranted Disallowance with regard to computation u/s 115JB - As held by Hon ble Special Bench of the ITAT in the case of ACIT vs. Vireet Investments Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI] for computation of book profit provisions of section 14A cannot be imported into clause f of the explanation to section 115 JA - We are of the considered opinion that for computation of book profit under section 115JB disallowance under section 14A cannot be accounted

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• 2020 (1) TMI 606
  Shortfall in royalty charged by the assessee from its AE - A.O/TPO working out the royalty @3% on the entire sales of the AE - HELD THAT:- As claimed, the royalty was consistently being received by the assessee on the manufacturing sales-exports of its AE, viz. M/s Zodiac Clothing Company, UAE LLC. On the basis of our aforesaid deliberations, we are of the considered view that on a conjoint reading of the agreement dated 04.04.2008 (which is a renewal of the earlier agreement dated 09.11.2002) and the letter of understanding dated 02.01.2003, the royalty /fees for technical know-how was to be received by the assessee only on the manufacturing sales (export) of ₹ 46,71,99,283/-[i.e AED 3,79,66,396/-]. Accordingly, we direct the A.O/TPO to delete the TP adjustment of ₹ 68,63,889/- that was made in the hands of the assessee on account of royalty shortfall in respect of its international transaction of provision of technical assistance and advisory services to its AE, viz. M/s Zodiac Clothing Company, UAE LLC. Adopting the gross margin rate of 26.98% (trading segment-AE) - adjustment towards shortfall of the amount recoverable by the assessee on account of supply of samples to its AE - HELD THAT:- No feasible comparison could have been made between the mark-up of 7.5% on cost of samples (after recovering salvage value) and the segmental profitability of trading segment of 26.98% i.e gross profit on cost, for determining the ALP of the aforesaid transaction. Apart from that, we find that the TPO had erroneously compared the margins of the controlled transaction i.e mark-up of 7.5% on cost of samples (fabrics) charged to A.E with the segmental profitability of the trading segment of 26.98% (average) of the AE segment. Aforesaid comparability analysis carried out by the TPO, wherein he has compared the margins of controlled transactions is fundamentally incorrect and defeats the very purpose of determining the arm s length price. In fact, the TPO was obligated to have made a comparison between controlled transactions and uncontrolled transactions i.e margins from transactions with AE and margins from transactions with third parties i.e non-AE s, which we find he had failed to do. Adjustment made by the A.O/TPO towards shortfall of the amount recoverable by the assessee on account of supply of samples to its AE cannot be sustained and is liable to be vacated. We thus in terms of our aforesaid observations direct the A.O/TPO to delete the addition of ₹ 10,16,356/-. The Ground of appeal No. 3 is allowed. Disallowance u/s 14A - claim of the ld. A.R that as the assessee had sufficient own funds which would justify the investments made in the exempt income yielding assets, therefore, no disallowance of any part of the correlating interest expenditure was called for - HELD THAT:- claim of the ld. A.R is principally fortified by the order of the Hon ble High Court of Bombay in the case of CIT Vs HDFC Bank Ltd. . [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] as observed that where the assesse's capital, profit reserves, surplus and current account deposits were higher than the investment in tax-free securities, it would have to be presumed that investment made by the assessee would be out of the interest-free funds available with assessee and no disallowance would be warranted u/s 14A. Although we are principally in agreement with the aforesaid claim of the ld. A.R, however, in the absence of the facts and figures in support of the said claim, we refrain from adjudicating the same. Accordingly, we restore the issue to the file of the A.O, who shall after verifying the veracity of the aforesaid claim of the assessee, therein readjudicate the same. Ground allowed for statistical purpose.

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• 2020 (1) TMI 605
  Penalty u/s 271(1)(c) - exemption u/s.11 - Undisclosed donation - HELD THAT:- Assessee has disclosed the entire receipt of donations. However the AO found that it is not a voluntary donation but anonymous donation. The fact that the assessee has disclosed the entire donation and claimed exemption U/s.11 of the Act is not in dispute. When the assessee has disclosed the entire receipt and the expenditure and claimed the same as exempted u/s.11 of the Act, merely because the assessee could not furnish the details of the persons from whom the donations was received, cannot be a reason for concluding that the assessee concealed any part of income or furnished inaccurate particulars. Making a statutory claim u/s.11 of the Act cannot be construed as furnishing inaccurate particulars. Also carefully gone through the judgment of the Apex Court in the case of CIT Vs. M/s. Reliance Petro Products Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT ] . In the case before the Apex Court, the assessee claimed certain amount as expenditure, however the Assessing Officer disallowed the claim of the assessee and also levied penalty. The Apex Court found that when the assessee claims certain amount as expenditure, merely because the assessee could not furnish the entire details, it cannot be said that there was concealment of income or furnishing inaccurate particulars. In view of the judgment of the Apex Court in the case of Reliance Petro Products Pvt. Ltd., mere claim of exemption U/s.11 of the Act, in respect of the so called donations received by the assessee cannot be a reason for levy of penalty U/s.271(1)(c) - Decided in favour of assessee

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• 2020 (1) TMI 604
  Expenditure incurred and payment of rent pertaining to information centers - CIT(A) partly deleted the addition made by the AO on the total expenditure claimed by the assessee after restricting to 30% - HELD THAT:- Establishment of information centers, incurring of expenditure towards rent and salary is not in dispute, however, entire claim of the assessee cannot be allowed in absence of supporting documents, bills and vouchers etc., therefore, the addition is necessary and obvious on failure of assessee in producing the relevant documentary evidence in support of his claim - CIT(A) has confirmed 30% of the amount of claim of assessee which is excessive and seems to be unreasonable, therefore, we hold that in the interest of justice, to cover up the possible leakage of revenue the addition confirmed by the CIT(A) i.e. 30% of the total claim of the assessee is reduced to 15% and the AO is directed to recalculate the disallowance accordingly. Unexplained investment - HELD THAT:- Although the department has two documents in their hands for making addition in the hands of the assessee but without any other corroborative and substantive evidence. At the same time, as we have already observed that both the documents as relied on by the authorities below, contains mentioning of payment of ₹ 70 lakhs but it has been stated therein that ₹ 70 lakhs has been paid afterwards and there is no positive evidence or material to establish that on which date or by whom this payment was made by the assessee or on behalf of the assessee to the seller (IPSAR). Therefore, in absence of such substantive evidence, we are compelled to hold that there was no over and above payment of ₹ 70 lakhs by the assessee to the seller. In this situation, when Dr. J.K.Mishra, Director of IPSAR (seller) in his statement before the AO categorically denied having received the amount of ₹ 70 lakhs over and above and there is no action against the seller by the department in this regard disbelieving his statement, thus, the socalled receivable of over and above money is denied having received the impugned amount. Hence, the action of AO loses its legs to stand on the platform of justified and reasonable cause for making addition. We have no hesitation to hold that neither the AO nor the CIT(A) by way of corroborative and cogent evidence could not establish and substantiate that the assessee has made payment of. ₹ 70 lakhs over and above consideration of ₹ 4,95,00,000/- as has been shown in the registered sale deed. Therefore, no addition in this regard is called for and, thus, we direct the AO to delete the entire addition. - Decided in favour of assessee.

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• 2020 (1) TMI 603
  Bogus purchases - CIT(A) sustaining the addition to the tune of 8% of alleged disputed purchase by applying the G.P ratio of 8% - HELD THAT:- Hon ble Supreme Court in the case of M/s. Oden Builders P. Ltd. [ 2019 (8) TMI 1072 - SUPREME COURT] find that in the present case since the entire addition has been made based on an information gathered from the Investigation Wing of the Department and admittedly since the statements were recorded behind back of the assessee and the AO has made the addition without giving any opportunity to cross examine according to me cannot be the basis of an addition, when the fact is that assessee has produced all the relevant documents like purchase bills, VAT registration of the sellers, C.S.T, bank transaction details etc., which are available in the paper book, therefore the addition is not warranted and cannot be sustained. Therefore, allow both the appeal(s) of assessee and direct the AO to delete the addition(s) made by the AO and confirmed by the ld. CIT(A). - Decided in favour of assessee.

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• 2020 (1) TMI 602
  Exemption u/s.11 - assessee had violated the provisions of Section 11(5) of the Act as it invested surplus funds other than in the mode prescribed under the Act as assessee had subscribed to chits and also transferred the fund to a private trust - HELD THAT:- Admittedly, assessee trust is duly registered u/s.12AA - It is mandatory in order to avail exemption u/s.11, the funds of the trust should be invested in one of the modes prescribed u/s. 11(5). During the previous year relevant to assessment year under consideration, the assessee trust had subscribed to chit with Sree Gokulam Chit and Finance Co. Ltd. Undisputedly, investment in chit is not one of the prescribed mode of investments. Therefore we need to examine the transaction from point of view of the activities of the assessee trust. The explanation of the assessee that subscription to the chits was made in order to mobilize the resource to meet repayment of loans availed from same party, has no bearing on the issue. The transaction of subscription to the chits is independent of the earlier transaction of loans borrowed and there is nothing on record to show that the both transactions are interconnected. Subscription to the chits is nothing but the investment which is not one of the prescribed mode of investment u/s.11(5). Therefore it is a clear case of violation of provisions of Section 11(5) of the Act, hence assessee trust is not entitled for exemption u/s.11 of the Act. As regards to the contention that only that part of income which is in violation of Section 11(5) of the Act alone should be taxed but not entire tax cannot be accepted deserves consideration in view of Section 11(3) of the Act which provides so. Therefore we direct the Assessing Officer to restrict the taxable income to the extent of violation of Section 11(5) of the Act. Appeal filed by the Revenue is partly allowed.

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• 2020 (1) TMI 601
  TDS u/s 194H - discount allowed by the Appellant to the Prepaid Distributors - No deduction of tds - assessee in default u/s.201 - relationship between the Appellant and the Prepaid Distributor is of Principal to Principal ( P2P ) and not Principal to Agent ( P2A ) - HELD THAT:- In the case of Vodafone Essar Gujarat Ltd vs ACIT, TDS Circle, Ahmedabad [ 2015 (7) TMI 474 - ITAT AHMEDABAD ] has considered an almost identical issue and decided the issue in favour of the assessee as held The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS - the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent thus, the order passed by the authorities holding that Section 194H of the Act is attracted to the facts of the case is unsustainable. - The matter is remitted back to the assessing authority only to find out how the books are maintained and how the sale price and the sale discount is treated and whether the sale discount is reflected in their books - If the accounts are not reflected Section 194H of the Act is not attracted. - Decided in favour of assessee.

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• 2020 (1) TMI 573
  Rectification u/s 254 - reference to non-taxability of the amount as equipment royalty although the same is referred to in the extracted order of the earlier year - HELD THAT:- After the rectification, the relevant para No. 9 of the order shall now be read as under:- As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assessee‟s own case, we do not find any merit in the action of the lower authorities for treating the receipt as fees for technical services despite the concept of make available‟ clause contained in article 13(4)(c) of the treaty or as equipment royalty. Accordingly, the A.O. is directed to delete the addition so made and Ground No. 5, 6 and 7 of the appeals are allowed. Except the above, there is no change in the Tribunal order.

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• Customs

• 2020 (1) TMI 600
  Jurisdiction - powers of the Appellate Court while dealing with an appeal against an order of acquittal - case of forgery - offence u/s 138 of NI Act - acquittal of accused of offence under Section 5 of the Imports and Exports (Control) 1947 - HELD THAT:- According to P.W.-3, the export, however, was made after the expiry of period fixed by the competent authority. The period, what P.W-3 is referring to, is the period prior to granting of third extension. In this case, the appropriate authority had commenced investigation and filed a complaint in view of non compliance with export obligations by accused. Accused, however, had applied for an extension, which extension was granted after the complaint was filed and investigation was commenced. P.W-3 also has stated that he had discussed the matter in the office of the Chief Controller of Imports and Exports, New Delhi, and during the course of discussion, he came to know that period of completing export obligations was extended upto 17-8-1992 - Keeping this in mind, the Trial Court has acquitted accused. Ms Anandpara is correct in submitting that there can be no perversity in the order passed by the Trial Court. There is an acquittal and therefore, there is double presumption in favour of accused. Firstly, the presumption of innocence available to the accused under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless they are proved guilty by a competent court of law. Secondly, accused having secured their acquittal, the presumption of their innocence is further reinforced, reaffirmed and strengthened by the trial court. For acquitting accused, the Trial Court rightly observed that the prosecution had failed to prove its case. The opinion of the Trial Court cannot be held to be illegal or improper or contrary to law. The order of acquittal need not be interfered with - Appeal dismissed.

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• 2020 (1) TMI 599
  Inaction of the Respondent authority of not releasing the imported goods - import of Areca Nuts from Sri Lanka within the period from 1 March 2003 to 18 March 2003 - clearance of goods for home consumption - section 47 of the Customs Act, 1962 - HELD THAT:- There is no dispute that in the normal circumstances, the Petitioner's goods will be entitled to be cleared under section 47 of the Act. What is being put forth by the Respondent is pendency of appeal. We have not been shown any statutory provision that pendency of appeal by itself would amount to a stay or mere pendency of appeal without even moving any application for stay would mean that the authorities need not to take any steps under section 47 of the Act - In the present case, the Respondent has not even filed an application for stay in the pending appeal. The fact that the assertion of the Petitioner that the Respondent has not filed any application for stay was noted by us in the order passed on 26 November 2019 itself. Yet, no application for stay has been moved by the Respondent. The Petitioner is entitled to direction to the Respondent to take steps as per section 47 of the Act for clearance of the goods - the Respondent are directed to take necessary steps as envisaged under section 47 of the Act for clearance of the goods in question within a period of six weeks from today - petition allowed.

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• 2020 (1) TMI 598
  Benefit of SFIS Scheme - FTP 2004-2009 - interpretation of provisions of FTP - rejection of Refund of duty - HELD THAT:- Para 3.6.4.2 of the FTP 2004-2009 is clear and unequivocal in its terms. All Service Providers, who provided service enlisted in Appendix 10 of the FTP, and who have a total free foreign exchange earning of at least ₹10 Lakhs in the preceding financial year, qualified for the benefits of the SFIS. Significantly, the clause talks that all such service providers, shall qualify for the benefits of the SFIS Scheme. Etymologically, the expression shall denotes a mandate, and the Supreme Court has, in various decisions, held so - It is also well-settled that beneficial fiscal statute sought to be liberally construed, and provisions which confer tax benefits, conditional to obligations to be fulfilled by the beneficiary, should be so construed as to advance the benefit, rather than deny the same, subject, of course, to fulfilment of the requisite obligation. It cannot be forgotten that export promotions schemes are intended to benefit exporters, who, through the export, earn valuable foreign exchange. It is precisely for this reason that, minimum free foreign exchange has been stipulated as one of the pre-conditions for being entitled to the benefits of SFIS . It would do complete disservice to the intent to clause 3.6.4.2 of the SFIS , therefore, to restrict the benefit thereof, to entities which fulfill the two conditions stipulated therein, viz. of providing of a service/services listed in Appendix-10 of the FTP and of earning free foreign exchange of at least ₹ 10 lakhs in the preceding financial year, to the benefits of the said Scheme. The decision of the said PIC is, therefore, on the fact of it, unsustainable in law - The PIC, no doubt, was entitled to interpret the policy. Under the guise of such interpretation, however, the PIC had no authority, however, to reword the policy, or import, into the policy, conditions and restrictions which were not to be found therein. What the PIC has effectively done is to dovetail para 3.6.4.1 of the FTP 2004-2009 into para 3.6.4.2 thereof. Such an exercise is totally untenable in law. The claim of the appellant, if accepted, would result to substituting para 3.6.4.2, in the FTP 2004-2009, with para 3.12.2 of the FTP 20092014. Needless to say, this can never be allowed. Respondent No. 1, clearly, was entitled to the benefits of the SFIS, under the FTP 2004-2009 - the rejection of refund claim also could not sustain - petition allowed.

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• 2020 (1) TMI 597
  Classification of imported goods - clarion brand speakers - whether classifiable under Customs Tariff Heading No. 851822/851829 or under under Chapter Heading 8519/8527? - benefit of N/N. 49/2008-CX(NT) Dated 24.12.2008 at Sl. No. 90, 94 and 96 - HELD THAT:- The issue in dispute is in these appeals are regarding classification of the goods imported by the Appellant No. 1 which has been described has Multi Media Speaker classifiable under Customs Tariff Heading No. 8518200 dated 16.04.2013 and thereafter under Heading 85198990, 8527990 and 85272900. The DRI has, however, not accepted the classification declared by the Appellant and came to the conclusion that the imported goods are rightly classified under Chapter Heading 85198100 leviable to CVD in terms of Section 4A of Central Excise Act, 1944 of MRP/RSP basis that attracted the provisions of legal methodology Act, 2009. The issue regarding classification of Multi Medial Speaker stands decided in case of COMMR. OF CUSTOMS (PORT) , KOLKATA VERSUS M/S. SANTOSH RADIO PRODUCTS [ 2018 (5) TMI 1956 - CESTAT KOLKATA] where it was held that Similar goods have been classified as sought by the respondent under 8518 in the case of LOGIC INDIA TRADING CO VERSUS COMMISSIONER OF CUSTOMS [ 2016 (3) TMI 5 - CESTAT BANGALORE] . The classification has been correctly made by the Appellant under Heading 851822 and 851829 - There is no question of invocation of provisions of Section 4A of the Central Excise Act for levy of CVD on the basis of MRP/RSP, accordingly, the impugned order filed by the Appellant importer is set aside - penalty also do not sustain. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 596
  Revocation of CHA licence - forfeiture of security deposit - undervaluation of imported goods - HELD THAT:- The penalty of revocation imposed against the appellant is disproportionately harsh in the context of the alleged quantum of undervaluation. The delay on the part of the licensing authority in proceeding against the licensee for more than 10 years and, that too, for this minor dereliction, if any, does not appear warranted. The allegation against the importer was that of undervaluation. There is no allegation of the appellant having been involved in the process of negotiations, or dealings, with the shipper. There is no evidence, except the statement said to have been recorded from a former Director of the appellant-company, that the antecedents were not verified. While the Director would not have been concerned with such verification, there is no evidence on record that such obligation under regulation 11(n) of Customs Broker Licensing Regulations, 2013 had not been undertaken by an employee of the licensee - the role of the appellant in the alleged undervaluation is not evident. In these circumstances, the findings of the enquiry officer do not appear to have any basis. The conclusion arrived at by the licensing authority that verification of antecedents would have led to detection of the undervaluation does not appear to be founded on logic. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 595
  Classification of imported goods - imports of fuel pump unit assembly - whether classified under the tariff item 8409-91-99 of first schedule to Customs Tariff Act, 1975 or otherwise? - Department noticed that the appellant has wrongly classified the goods and that Rule 126 of General Rules of Interpretation (GIR) of harmonized system for classification of goods have not been followed - benefit of N//N. 85/2004-CUS dated 31.08.2004 - time limitation. HELD THAT:- No doubt, the fuel pump unit assembly of the appellant is meant to be used with the spark ignition internal combustion engine but admittedly it is such part which is rather a pump. It is the admission of the appellant that the impugned goods are responsible for pumping fuel into cylinders of an engine of two-wheelers while offering, control over the amount of fuel pumped into the engine and the power generator. Thus admittedly, this part of engine is a pump. Pumps are, specifically, classified under sub-heading 8413 - A conjoint reading of description of goods for tariff item 8413 and 8409 makes it abundantly clear that all pumps meant for fuel lubricating or cooling medium for internal combustion piston engines are classified under 841330 and all other pumps for internal combustion piston engines for other than lubricating or cooling medium are classified under 84133090 - Thus, the tariff Act itself gives a clear cut distinction between a good which is merely a part or the part which can, specifically, be classified as a pump. Principles of classification of parts of machines of chapter 84, as contained in section note 2 to section 16 of the Customs Tariff - HELD THAT:- It becomes clearer that the items which are specifically included in CTH 8413 are clearly excluded from CTH 8409 irrespective they are used solely or principally with the engines of heading 8407 and 8408 - the fuel injecting pumps are neither an accessory not the spare part of the engine of a motor vehicle. These pumps are classifiable only under heading 8413, the parts of these pumps are classifiable only under heading 841391. Benefit of N/N. 85/2004-CUS dated 31.08.2004 - HELD THAT:- Notification 85 of 2004 has no such entry which includes items of chapter 8413. We are of the firm opinion that the appellant has wrongly availed the benefit of exemption of 50% BCD of the products imported by him by wrongly classifying them as the parts solely and exclusively used with the engines ignoring the specific entry for classification of pumps. There is no denial that the goods which are classified by him as parts are actually meant to function as pumps. Time Limitation - HELD THAT:- The appellant has wrongly classified his goods classifiable under CTH 831330 intentionally under Customs Tariff Heading of 840991 with an intend to wrongly avail the benefit of exemption of 50% of BCD. It is worth taking a note of the fact that the bill of entry was filed under self-assessment regime and the importer need to be doubly sure that what they are claiming is legally correct - classifying the product under a wrong entry continuously for as many as more than 50 bills of entry cannot be an act of ignorance - the department has committed no error while invoking the extended period of limitation and, therefore, the show cause notice cannot be held to be barred by time. Appeal dismissed - decided against appellant.

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• Corporate Laws

• 2020 (1) TMI 594
  Declaration of consent terms - commencement of winding up proceedings - whether the applicant has pleaded and proved that the consent terms arrived at between the applicant and the respondent in the Comm. Admiralty Suit on 24th October, 2016 after commencement of the winding up proceedings was in the ordinary course of business and was in the best interest of the respondent company in liquidation or not? - HELD THAT:- Under Section 441(2) of the Companies Act, 1956, the winding up of the respondent shall be deemed to have commenced on the date of presentation of the petition for winding up i.e. 28th August, 2014 - It is admitted position that the consent terms between the applicant and the respondent in the said Comm. Admiralty Suit No. 15 of 2016 were filed only on 24th October, 2016. There is no dispute that this Court had already appointed official liquidator as provisional liquidator of the respondent on 5th May, 2017 and had appointed the official liquidator of the respondent on 4th December, 2018. It is not in dispute that the respondent had made payment of ₹ 4,07,99,612/- to the applicant under the said consent terms during the period between 10th October, 2016 and 14th June, 2017. The applicant does not dispute that under Section 441(2) of the Companies Act, 1956, the winding up of the respondent company shall be deemed to commence on the date of presentation of the petition for winding up i.e. 28th August, 2014. The applicant does not dispute that all the payments received by the applicant from the respondent under the said consent terms dated 24th October, 2016 were received after the date of commencement of the winding up proceedings against the respondent company in liquidation. The applicant also does not dispute that the payment of ₹ 49,97,357 and ₹ 50,00,059/- were received by the applicant on 12th May, 2017 and 14th May, 2017 respectively after the appointment of the official liquidator as the provisional liquidator of this Court i.e. on 5th May, 2017. Consent terms itself were filed after commencement of winding up proceedings. Section 536 (2) of the Companies Act, 1956 provides that any disposition of the property made after commencement of winding up shall unless the Court otherwise orders be void. This Court rejected the contention of the applicant that the official liquidator must plead and prove that the transaction was fraudulent before it can be treated as void under Section 536(2) of the Companies Act, 1956. It is held by this Court that Section 536 treats the transfer after commencement of winding up void unless the Court otherwise directs. The official liquidator is not required to file any application seeking a declaration that the transfer is void. The question of any burden cast on the liquidator cannot possible arise. The applicant who seeks validation of the transaction carried out after the date of commencement of winding up proceedings in view of Section 441(2) of the Companies Act, 1956 has to not only plead but also has to prove that such transactions were carried out in ordinary course of business and were in the benefit of the company in liquidation. A perusal of the averments made in the company application filed by the applicant seeking validation of the consent terms does not indicate that there is sufficient pleadings of the applicant in this regard. Be that as it may, the applicant has not proved before this Court that the said consent terms arrived at between the applicant and the respondent were in ordinary course of business and were for the benefit of the respondent company in liquidation. The applicant has failed to plead sufficiently and to prove that the consent terms entered into between parties were for the benefit and interest of the respondent. Various transactions carried out by the applicant with the respondent company in liquidation post the date of commencement of the winding up proceedings and thereafter filing consent terms with the respondent post the date of such commencement and winding up proceeding were not in ordinary course of business and the same were not in the interest of and for the benefit of the respondent company in liquidation. The applicant has thus not made out any case for validation of the transactions and the consent terms under Section 536(2) of the Companies Act, 1956. Applicant has failed to discharge the burden. In my view, the official liquidator has made out a case for declaration of the entire transactions as null and void as prayed. Application disposed off.

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• Insolvency & Bankruptcy

• 2020 (1) TMI 593
  Winding up petition - Order and direction against the Prothonotary Senior Master of this Court to encash the bank guarantee and to receive the funds in his account - whether the bank guarantee furnished by the respondent pursuant to an order passed by this Court on 5th April, 2017 could be encashed or not in view of the order passed by the National Company Law Tribunal under section 14(1) of the Insolvency Bankruptcy Code, 2016 and thereafter if encashed, the applicant could apply for release of the amount lying with the office of the learned Prothonotary Senior Master of this Court or not? HELD THAT:- It is not in dispute that in this company application the applicant had prayed for an order and direction against the learned Prothonotary Senior Master of this Court to encash the bank guarantee and to receive the funds in his account vide prayer clause (a) of the company application. By prayer clause (b), the applicant has applied for an order and direction against the learned Prothonotary Senior Master of this Court to encash the bank guarantee and to release the said sum of ₹ 38,53,000/- to the applicant from the date of passing of this order on this company application - Under section 126 of the Indian Contract Act, 1872, it is provided that the person who gives the guarantee is called surety . Under section 14(3)(b) of the Insolvency Bankruptcy Code, 2016, it is provided that the provision to sub section 1 of section 14 shall not apply to a surety in a contract of guarantee to a corporate debtor. It is thus clear that the respondent was a surety in a contract of guarantee given to the corporate debtor for carrying out the acts set out in section 14(1) of the Insolvency Bankruptcy Code, 2016. The order passed by this Court on 6th September, 2019 in this company application allowing prayer clause (a) thereof directing the learned Prothonotary Senior Master of this Court to encash the bank guarantee has attained finality, there is no bar against the applicant from seeking release of the said amount encashed by the learned Prothonotary Senior Master of this Court lying deposited with the office of the learned Prothonotary Senior Master of this Court under section 14(1) of the Insolvency Bankruptcy Code, 2016. This company application thus cannot be considered as an application for execution of the arbitral award. This company application filed by the applicant for seeking an order of release of the amount encashed by the learned Prothonotary Senior Master of this Court pursuant to the order passed by this Court which order had attained finality is not an application for execution of the arbitral award against any of the assets of the respondent company. The bar prescribed under section 14(1) of the Insolvency Bankruptcy Code, 2016 thus even otherwise would not apply to this application - The company application thus filed by the applicant for the reliefs sought therein is maintainable. The Learned Prothonotary Senior Master of this Court is directed to release the amount already realized upon encashment of the bank guarantee to the applicant within one week from the date of the applicant furnishing an undertaking to the effect that if the respondent succeeds in the arbitration petition filed by the respondent under section 34 of the Arbitration Conciliation Act, 1996 impugning the arbitral award dated 22nd March, 2019 and if the applicant is directed to return the said amount, the applicant would return the amount with interest at such rate which this Court may direct.

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• 2020 (1) TMI 592
  Maintainability of application - initiation of CIRP - Section 9 of Insolvency and Bankruptcy Code, 2016 - period of limitation for claiming outstanding dues - HELD THAT:- The Insolvency and Bankruptcy Code was enacted only on 2016. Till such time we failed to understand as to why the petitioner has not made any attempt to claim the amount due and payable to it. The petitioner has not stated whether there is any pre-existing dispute between the petitioner and the respondent. Hence, when the documents filed before us are not reasonably proved whether the authorised signatory is backed by Board Resolution to sign this balance of confirmation is not proved. No facts, details and transactions during the period are also enclosed. It is settled position of law that the provisions of Code cannot be invoked for recovery of outstanding alleged amount - The Hon'ble Supreme Court in the case of Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT ] has, inter alia, held that IBC, 2016 is not intended to be a substitute to a recovery forum. Petition dismissed.

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• 2020 (1) TMI 591
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - existence of debt and dispute - HELD THAT:- Admittedly, the Corporate Debtor had made payments at steps. There was no payment of some amounts, as neither draft red-herring prospectus was filed with SEBI, nor the IPO offerings were made - Since these milestones were not achieved, no invoices were also raised by the Petitioner by 15.09.2015 i.e., on completion of 12 month's period. Further, since the IPO was not issued within 12 month's period, the Petitioner should have raised invoice on the basis of 'standard hourly rate' as provided in clause 2.3 to a maximum of the fixed fee. However, no such invoice was raised. The operational creditor has also not clearly placed on record any documentary proof that clearly states the amounts due and payable confirmed in writing by the Corporate Debtor with regard to the alleged dues - The email correspondence among many such communications, much before the issuance of demand notice U/s. 8 of IBC, 2016 dated 24.3.2018 indicates that there existed substantial dispute between the parties with regard to fulfilment of obligations under the Agreement entered into on 15.09.2014. This Adjudicating Authority is of the view that there was pre-existing dispute between the parties and, accordingly, deems it fit not to admit the present application in terms of Section 9(5)(ii)(d) of IB Code, 2016 - Application dismissed.

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• Service Tax

• 2020 (1) TMI 590
  Non-payment of service tax - GTA services or not - appellants were allegedly availing the services of Goods Transport Agency for transporting iron ore by road in a goods carriage - extended period of limitation - HELD THAT:- The appellants have availed the transport services for transporting their minerals from transport owners/operators - Further, in the present case, the Revenue has not been able to establish that the consignment note was issued by Goods Transport Agency. Though, the Commissioner (A) in the impugned order has mentioned that consignment note was issued - If we see the definition of Goods Transport Agency , it clearly shows that the services must be provided by a person in relation to transport of goods by road and issues consignment note, by whatever name called whereas in the present case, we find that no consignment note was issued. In the case of South Eastern Coalfields Ltd. [ 2016 (8) TMI 677 - CESTAT NEW DELHI ], after considering the definition of Goods Transport Agency as provided in Section 65(50b) and after considering the various decisions given by the Tribunal, has allowed the appeal of the assessee by holding that the tax liability under Goods Transport Agency service cannot be sustained. Time limitation - HELD THAT:- The extended period has wrongly been invoked in the present case because the appellant has not suppressed the material fact from the Department as the Department was aware of all the information and moreover, the issue was highly contentious and there were contrary decisions during the relevant time and the appellant had a bona fide belief that they are not liable to pay Service Tax as they have engaged the truck operators for carrying their goods by road. Appeal is allowed on merits as well as on limitation.

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• 2020 (1) TMI 589
  Recovery of service tax - Supply of Tangible Goods Service - services provided as Lessee - CENVAT Credit - HELD THAT:- We do not find that the Revenue has specifically alleged or pointed out any discrepancies in the observations recorded in the original order. Since upon proper analysis and verification the documentary evidences, the Ld.Adjudicating Authority has dropped the proposed duty demand on the assessee appellant, we are of the view that at this juncture, we cannot re-appreciate the arithmetical accuracy of the proposed demand of recovery, which has been adequately dealt with by the Ld.Adjudicating Authority. Thus, we do not find any infirmity in the impugned order, so far as the Ld.Adjudicating Authority has dropped the proposed demand of ₹ 65,86,87,931/-. CENVAT Credit - HELD THAT:- The Ld. Adjudicating authority had referred to the sample copy of the invoices and also the Certificate furnished by the independent Practising Chartered Accountant. Since such observations recorded by the Ld. Adjudicating Authority were based on the available records, we also feel that the findings recorded in the impugned order cannot also be disturbed by taking a contrary view - Hence, we are of the opinion that dropping of proposed cenvat demand of ₹ 27,62,90,512/- in the impugned order is in inconformity with the statutory provisions. The terms of the contract clearly suggest that the equipments are to be used for execution of assigned task, wherein effective control and possession are retained by M/s BHEL. Since the effective control and possession of the equipments were not transferred to the appellant-assessee, as per the statutory mandates, such use of the equipment belonging to M/s BHEL cannot not be leviable to service tax under the category of Supply of Tangible Goods Service . The service tax demand confirmed in the original order under the taxable category of Tangible Goods Service , will not stand for judicial scrutiny - Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 588
  Reverse charge mechanism - reimbursements received towards the services of the manpower and other miscellaneous costs incurred on behalf of the Overseas Group Company - levy of service tax - HELD THAT:- Identical issue decided in appellant own case M/s Lucy Electric India Pvt. Ltd., M/s Lucy Electricals Pvt ltd. Vs C.C.E S.T., Vadodara-II [2019 (9) TMI 749 - CESTAT AHMEDABAD] where it was held that Since the appellant are not receiving any service, on the contrary, they are providing services to overseas group companies, the provision of Section 66A and Rule made there under is absolutely not applicable, therefore, the demand is also not maintainable. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 587
  Refund claim - Completion of Finishing Services - service tax was paid but the said activity does not attract levy of service tax - refund was rejected on the ground of unjust enrichment - HELD THAT:- It is undisputed fact that the appellants are traders and this being so, it is not possible for them to collect service tax by issue of invoices. Further, the Chartered Accountant s certified to the effect that they have not passed on the burden of service tax, interest or the penalties to their customers. The Hon ble High Court in the case of M/S. SHOPPERS STOP LTD. VERSUS THE COMMISSIONER OF CUSTOMS (EXPORTS), CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL [2017 (7) TMI 11 - MADRAS HIGH COURT] had held that such certificate of Chartered Accountant cannot be the sole evidence for concluding that the burden of tax has not been passed on - In the present case, the Chartered Accountant s Certificate has categorically certified that the burden has not been passed on to another. These documents show that VAT has been collected. There is no collection of service tax - All these facts establish that the burden of tax has not been passed on to another. The conclusion arrived at by the authorities below that the appellant has not passed the test of unjust enrichment cannot sustain - refund allowed - appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 586
  Imposition of penalty - wrongful classification of service - failure to pay service tax - allegation that the service provided by the appellant is covered under Manpower Recruitment and Supply Agency Services and not cleaning services - HELD THAT:- It is a well settled principle that contract executed between the parties would determine the nature of work and there is no whisper of supply of manpower in the said contract dated 27-7-2005 and 1-6-2006. It was agreed that appellant was to provide service of maintenance, gardening, housekeeping and those specified in Annexure-A. A cursory reading of the entire contract would reveal that Annexure-A provided the detail nature of work to be carried out and its gist remain confined to cleaning work of various types in the educational Institute of D.Y. Patil Pratishthan which are also listed in Annexure-A. Primarily the issue is not concerning bundle of services provided by the appellant which is also found absent in the show cause notice but the same is concerned with provision for manpower engagement to provide cleaning service or else supply of manpower service - Going by the work contract, it is apparently clear that appellant was providing cleaning service through manpower engaged under its control and supervision and not supplied manpower to the service receiver to undertake cleaning service under the control and supervision of the service receiver. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2020 (1) TMI 585
  Application for withdrawal of appeal - Denial of exemption under Notification No.23/2003-CE dated 31.03.2003 - HELD THAT:- The application for withdrawal of this appeal is allowed - The appeal is dismissed as withdrawn.

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• 2020 (1) TMI 584
  Review of review order - dropping of proceedings against the assessee - HELD THAT:- From the orders, it appears that after the matter was remanded to the Assessing Officer (AO) to enable the assessee to cross examine the witnesses, the prime witness Mr. Mamraj Singh Negi, Manager, TEPL retracted the statement with regard to receiving only invoices without any goods from BIPL and SMI and the assessee availing credit against those invoices. He further stated that the goods corresponding to the bills were always received and there was no case where the goods covered by the invoices were not received. The AO also verified the fact that every transaction amongst them was a recorded transaction and the payments were made through banking channel i.e. by way of cheque from the ledger and bank statements. The AO found that the noticee had maintained detailed account of every transaction and payments made by TEPL to the BIPL and SMI were in cheques only. It appears that the genuineness of transaction was in question on the basis of the complaint made by the petitioner. However, the fact that the transactions were not genuine has not been established since Mr. Mamraj Negi, Manager, TEPL retracted on his earlier statement in support of the complaint - That being in position, the grievance raised by the petitioner in the present petition, is not merited. Petition dismissed.

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• 2020 (1) TMI 583
  CENVAT Credit - input service distribution - Credit has been denied to the appellant which has been distributed by the Input Service Distributor (ISD) - whether Cenvat Credit can be denied to the appellant who has received the Cenvat Credit on distribution by ISD and the availment of Cenvat Credit has not been disputed at the end of the ISD? - HELD THAT:- The said issue has been examined by this Tribunal in the case of M/S HENKEL ANAND INDIA PVT LTD VERSUS COMMISSIONER OF CE ST, GURGAON-I [ 2020 (1) TMI 369 - CESTAT CHANDIGARH] where it was held that Admittedly, the distribution of the Cenvat credit has not been disputed, therefore, the appellant is entitled to avail Cenvat credit on this ground only. The admissibility of Cenvat Credit by the appellant cannot be disputed at this stage - appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 582
  CENVAT Credit - input services - transportation and Toll charges - transportation of sludge and waste cleared from their factory for manufacture of their final product - HELD THAT:- In terms of Rule 2(l) of Cenvat Credit Rules, 2004 the Cenvat credit is disallowed for finished goods to be cleared to the place of buyer beyond the place of removal. In this case, there is no buyer of this sludge cleared by the appellant. Moreover, the same is required to be dumped in terms of the Rajasthan State Pollution Control Board s direction to run their factory - Therefore, the appellant is mandatory required to clear the sludge from their factory and for clearance of the said sludge, the appellant availed transportation services which are like transportation charges paid for procurement of inputs by the appellant for manufacture of their final product. The appellant is entitled to avail Cenvat credit on transportation/Toll charges in question and the facts of the case of Ultra Tech Cement Ltd. [2018 (2) TMI 117 - SUPREME COURT] are not applicable to the facts of the case as in the said case Hon ble Apex Court came to examine the issue of transportation of goods beyond the place of removal up to the place of buyer. Credit allowed - appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 581
  Classification of goods - dolochar , also known as coal char - excisability - whether classifiable under chapter heading 2619 or otherwise? - HELD THAT:- The co-ordinate Bench of the Tribunal at Bangalore in the case of COMMR. OF C. EX. CUS., BELGAUM VERSUS BELLARY STEELS AND ALLOYS LTD. [ 2017 (5) TMI 1710 - CESTAT BANGALORE] while dealing with the demand raised by the Department on dolachar under heading 2619 has held that the product is akin to coal and accordingly is to be classified under 2701.00. Further, various co-ordinate Benches of the Tribunal have also held that dolochar arising in the course of sponge iron manufacture cannot be said to be manufactured product but is a waste item on which duty demand cannot be sustained. Extended period of limitation - HELD THAT:- The clarification provided by the Central Excise Department vide letter dated 26.08.2015 held that merely because dolochar is sold it cannot be said to be excisable. In view thereof, there cannot be any suppression. Therefore, the case of the appellants succeeds both on merits and on limitation. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 580
  Benefit of N/N. 29/2004-CE dated 9th July 2019 and N/N. 30/2004-CE dated 9th July 2019 - partial exemption in respect of goods cleared for exports - availment of CENVAT credit barred - appellants have taken the credit of benefits after a gap of 2 years alleging that the credit has to be taken immediately after the end of the quarter and not after 2 years - circular 845/3/2007-CX dated 1.2.2007 - retrospective or prospective effect of the circular - HELD THAT:- The appellants have availed credit of inputs immediately after the circular 845/3/2007- CE dated 1.2.2007 by CBEC; the circular clarified that where the textile manufacturer/processor uses common inputs in a continuous manner and where it is not practicable to separate to store the inputs and to maintain records credit should not be taken initially but proportionate credit can be taken at the end of the month - The department attempts to interpret this circular to be prospective only. Such argument is not fair. The initial wordings of the circular itself say that different representations have been received from the Trade and they have been examined; even a plain reading of the circular one gets understanding the circular is trying to clarify a situation which was already existing; it does not in any way create situation and clarify for future. Another objection raised by the department is that the credit was taken belatedly in 2007; as clarified by the Board s circular in the year 2004 the appellants were not eligible to avail credit and the admissibility of the credit were both notifications are availed was clarified only in 2007 it is not understood as to how the appellants could have taken credit before 2007; moreover we are in total agreement with the appellant s contention that if the credit can be taken immediately at the end of the month, it can be taken after end the year or at the end of 2 years for that matter; the only restriction placed even under the Rule 4 (1) of the CENVAT Rules, 2004 is that credit cannot be taken before the receipt of inputs. This being the case taking credit after 2 years is not barred either by CENVAT Credit Rules or by the Circulars. Scope of SCN - HELD THAT:- The only point that remains is to see whether the inputs on which credit has been taken have been actually received in the factory of the appellant ; whether they are accompanied by a duty paying document specified therein - this fundamental issue have not been challenged in the show cause notice. There is no infirmity in the action taken by the appellant - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (1) TMI 579
  Concessional rate of tax - business of petroleum products - sale to power generating undertakings in the joint sector - sale of furnace oil, lubricant etc. as industrial raw material/component parts sold to industrial units for use in production. Sale to power generating undertakings in the joint sector - HELD THAT:- It was held by the Tribunal in T.A.No.9/2012, in respect of the said assessment year that, the assessee fulfilled the requirements of the notification, i.e., SRO 319/2005, which succeeded SRO No.1091/ 1999 and that as such, concessional rate of tax could not be denied to the assessee. The Revenue took up the matter in revision. S.T.Rev.No.1/2014 was dismissed by order dated 18.1.2017 stating that there is no ground warranting interference with the impugned order in revision. Though it appears from the order in S.T.Revision that it was on the concession made by the Senior Government Pleader that the revision was rejected, the rejection of the revision amounts to upholding of the order of the Tribunal. Therefore, the Tribunal was justified in having followed its own decision in T.A.No.9/2012 - it cannot be said that the Appellate Tribunal has erroneously decided or failed to decide any question of law. The challenge on that ground therefore must fail. Sale of furnace oil, lubricant etc. as industrial raw material/component parts sold to industrial units for use in production - Use of goods for which concessional rate is claimed as raw material - HELD THAT:- In the absence of any provision which obliges the purchaser to give any information to the vendor as to the purpose for which the goods are being purchased, it would be for the Revenue to proceed against the purchaser in case they have a contention that the product purchased is not consumed for the production of the end material, but is only used as fuel - If the purchaser misrepresents or subsequently uses the raw material for some other purpose, this Court held that the legislative wrath would fall on the purchasing dealer and that appropriate action would therefore have to follow as against him. In the instant case as well, it is the specific case that the sale was made on the basis of the declaration furnished by the purchasing dealer. In the above view of the matter, the finding by the Tribunal to the effect that the petitioner cannot be held to be disentitled to the concessional rate of tax as claimed by him on the basis of a declaration provided by the purchasing dealer cannot be found to be perverse or an incorrect decision. Petition dismissed.

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• 2020 (1) TMI 578
  Waiver of penalty - wilful non-disclosure of turnover - petitioner has not responded to the notice - HELD THAT:- The impugned attachment order is against the present petitioner/appellant M/s.Supreme Dyechem Pvt ltd., represented by its Director Mr.Mohan Prasath J, who is related to Mr.G.Jayabal, Sole Proprietor, M/s.Supreme Chemical Industries, who are father and son. Therefore, the learned Single Judge has disposed of the present writ petition filed by the petitioner / appellant company with certain directions to deposit certain amounts under the garnishee proceedings initiated against the present appellant company. The garnishee proceedings now cannot sustain and the penalty in question itself has been set aside and matter stands remanded to the Assessing Authority. - the present writ appeal is disposed of as rendered infructuous.

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• 2020 (1) TMI 577
  Maintainability of petition - availability of alternative remedy - Best judgement assessment - enhancement of turnover - failure to file audit report - HELD THAT:- The present Writ Appeal is an exceptional case and deserves to be allowed, not because the assessing authority could not invoke his powers under Section 22(4) of the Act for the reason of not filing of the audit report, but because of the manner in which the 'best judgment assessment' has been passed by the assessing authority on 04.06.2018 for the assessment period 2016-17. The consequence of not getting his accounts audited even though his turnover is over Rupees One Crore and not submitting the audit report with the return or turnover is provided under explanation (2) to Section 63A itself viz., imposition of penalty of ₹ 10,000/-, that too after giving a reasonable opportunity of hearing to the assessee concerned - Firstly, we find that no separate opportunity of hearing also was given by the assessing authority before passing the order imposing for penalty of ₹ 10,000/- in the impugned assessment order dated 04.06.2018. Be that as it may. Since the assessee has paid the said amount of penalty to the assessing authority vide communication dated 29.03.2019 along with a demand draft, which is placed on record, we are not inclined to quash the penalty on the said ground. The 'Best Judgment Assessment' power given to the assessing authroity does not empower such assessing authority to pass 'Worst Judgment Assessment'. Though no strict yardstick can be prescribed either in Rules or otherwise, as to what will be the 'Best Judgment Assessment' in the facts and circumstances of the case, but such assessment orders when passed by the assessing authority has to reflect a due application of mind by the assessing authority to the relevant facts of the case. Without any material on record, such arbitrary additions to the declared turnover by the Assessee is not the intent and purport of Section 22(4) of the Act, which empowers the authority, which has been quoted by the assessing authority in the impugned assessment order, to pass any order as he thinks fit. Since in the present case, we found that the yardstick adopted by the learned assessing authority was shockingly arbitrary, we have chosen to interfere in the present case. However, we make it clear that it is not a general proposition of law that we are laying down - we are constrained to invoke our extraordinary writ jurisdiction in the present case under Article 226 of the Constitution of India and strike down the impugned 'best judgment assessment' order passed by the learned assessing authority on 04.06.2018. The matter remanded back to the learned assessing authority to pass fresh assessment order after giving reasonable opportunity of hearing to the assessee, within a period of six months from the date of receipt of a copy of this order - petition allowed by way of remand.

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• 2020 (1) TMI 576
  Condonation of delay of about more than 5 years - reasonable opportunity of being heard was given to the Respondent before the First Appellate Authority - requirement with the pre-deposit - Gujarat VAT Act - HELD THAT:- As can be seen from the impugned order passed by the Tribunal, there is not even a whisper therein with regard to condonation of delay - From the submissions made by the learned Government representative before the Tribunal, it is evident that no submission has been made as regards the condonation of delay. It therefore, appears that the delay was probably condoned prior to the second appeal being taken up for hearing before the Tribunal. Question regarding condonation of delay therefore, cannot be said to arise out of the impugned order of the Tribunal. Whether the Learned Tribunal erred in not appreciating the fact that though reasonable opportunity of being heard was given to the Respondent before the First Appellate Authority, despite which the Learned Tribunal remanded the matter back to the First Appellate Authority? - HELD THAT:- The Tribunal has accepted the submission advanced by the learned advocate for the respondent and found that the amount of ₹ 6,25,000/- deposited by the respondent towards pre-deposit which comes to approximately 50% of the tax amount, is sufficient pre-deposit and has allowed the appeal and directed the first appellate authority to hear the appeal preferred before it on merits. The quantum of amount of pre-deposit as directed by the Tribunal, on the facts of the present case, appears to be quite adequate. Under the circumstances, no question of law, much less, a substantial question of law can be stated to arise out of the impugned order passed by the Tribunal - Appeal dismissed.

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• 2020 (1) TMI 575
  Condonation of delay in filing appeal - contention of petitioners is that the copy of the order of assessing authority was served upon the petitioner on 11.01.2018 and the appeal has to be filed beyond the period of three months from the date of receiving of copy of the order on 14.06.2018 - power of appellate authority to condone delay - HELD THAT:- The appeal was not filed by the petitioner within the stipulated period for the reason that the owner/proprietor of the firm was ill in between 07.04.2018 to 13.06.2018 - In support of ailment, the petitioner has produced the copies of the medical certificate issued by the Senior Medical Practitioner namely Dr. Sanjeev Kumar Sharma, MS, MCH (Neuro). The ailment which has been mentioned in the certificate prima facie appears to be the ailment which could take some time for recovery. The matter is remanded before the first appellate authority (respondent no.1) with a direction to consider and adjudicate upon the appeal filed by the petitioner on merits without raising any objection on the limitation, after notice and opportunity of hearing to all concerned - Petition allowed by way of remand.

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• Indian Laws

• 2020 (1) TMI 574
  Dishonor of Cheque - insufficiency of funds - legally enforceable debt or other liability or not - rebuttal of presumption - section 139 of NI Act - HELD THAT:- The standard of proof for rebutting the presumption is that of preponderance of probabilities and not beyond reasonable doubt. To rebut the presumption, it is open for the accused to rely on evidence led by him or accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely. It is not necessary for the accused to come in the witness box in support of his defence because Section 139 imposed an evidentiary burden and not a persuasive burden. The subject matter of the entire dispute is the MOU. Strangely, complainant is relying on the amounts payable based on the MOU but chooses not to produce the MOU. In the cross examination, complainant admits that he executed the said MOU dated 3rd September 1996 for selling 2000 shares, which were with him, including shares of his wife, son, friend Mr. Dolare and his wife. At the same time, for reasons I am unable to fathom, complainant says he is not inclined to produce the MOU in these proceedings because he has produced it in a civil suit, which had already been filed. The Trial Court after considering the evidence and the documents and the facts and circumstances of the case, dismissed the complaint on the basis that there is no legally enforceable debt or other liability. The reason why the Escrow agent arrangement, as mentioned in paragraph 2 of the MOU, was arrived at was to only safeguard the interest of both the parties. It should not happen that accused make the payments but complainant does not resign from the company and hand over the original share certificates together with duly filled and signed share transfer forms. It should also not happen that complainant would submit or hand over the letter of resignation together with original share certificates and the share transfer forms duly filled and signed to accused but accused do not make the payments. This protective mechanism was created to protect the interest of both the parties. As per the impugned judgment and in my view also, complainant would have been entitled to receive the amounts only if he had fulfilled his side of the obligations - The situation would have been different if the resignation letter and the shares with the share transfer forms had been handed over to accused and to prove that complainant should have called the Escrow agent Mr. Sarangdhar as his witness. But for reasons best known to complainant, Mr. Sarangdhar was not called to testify. It is settled law that if the material witness is not called to testify, it would result in prejudice to others. There is an acquittal and therefore, there is double presumption in favour of the accused - Firstly, the presumption of innocence available to the accused under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, the accused having secured acquittal, the presumption of their innocence is further reinforced, reaffirmed and strengthened by the Trial Court. For acquitting accused, the Trial Court observed that the prosecution had failed to prove its case. The opinion of the Trial Court cannot be held to be illegal or improper or contrary to law - The orders of acquittal cannot be interfered with - appeal dismissed.

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