TMI Tax Updates - e-Newsletter
January 19, 2019
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Undisclosed investments - Additions based on balance-sheet submitted to the Bank for obtaining loan - there is absolutely no error in law on the AO relying on the same and adding on an undisclosed income on the basis of the unexplained investment in the unaccounted purchases.
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Income Tax:
Disallowance of commission paid - the payments were made by an agent and there was no evidence to suggest that the assessee had made any illegal commission payment to Iraqi government.
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Income Tax:
LTCG - the claim of exemption u/s 54F which was made in the assessment proceedings cannot be given to the assessee as the property has been purchased by the father of the assessee and not the assessee.
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Income Tax:
Charitable activity u/s 2(15) - exemption u/s 10(23C)(iv) - benefit of section 11 - activities of the assessee also include providing of services such as accommodation, food and beverages, etc., for payment of charges - These activities could not be treated in the nature of trade or commerce.
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Income Tax:
TDS u/s 195 - Disallowing assessee’s export commission payments on account of non-deduction of TDS thereby invoking sec. 40(a)(i) - Since there is no tax liability in India on such income, there is not TDS liability u/s 195
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Income Tax:
LTCG - The assessee is not entitled to claim of deduction u/s 54B/ 54F as the assessee has failed to deposit the unutilized amount of capital gains in the capital gains scheme account by the date of filing of return of income.
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Income Tax:
Penalty u/s 271D - Taking cash loans in violation of Section 269SS - To meet the financial requirements of repayment, for which the lenders were hard pressing, the assessee had to borrow money from unorganized finance sector in cash - No penalty.
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Income Tax:
Status of the assessee - Association of persons OR firm - ITAT affirmed the status of the assessee as AOP - The registration as a firm, inclusive of all the entities carrying on business in common, being not established by the assessee.
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Income Tax:
When the assessee invests money in a property with an intention to hold it or enjoys the property and sells it for profit thereafter, then it is a case of capital appreciation and the profit derived there from is taxable under the head ‘capital gains’
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Income Tax:
Reopening of assessment is not to review the assessment order passed under Section 143(3). Therefore, no reopening is permissible on mere change of opinion.
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Customs:
Valuation of imported goods - Cold Rolled Grain Oriented Electrical Steel Sheet - the provisions of Section 17(5) have not been complied with by the department and thus, the declared value cannot be enhanced arbitrarily
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Customs:
Valuation - determination of assessable value of export goods - The export goods namely, Iron Ore Fines, be assessed to duty, adopting the criteria of ‘Dry Weight’
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IBC:
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (VOLUNTARY LIQUIDATION PROCESS) (AMENDMENT) REGULATIONS, 2019
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IBC:
Corporate insolvency resolution process - period of limitation for filing an application - This claim was made initially in the year 2014 but was rejected - Therefore, the present application cannot be stated to be barred by limitation and on the other hand we find there is continuous cause of action.
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PMLA:
Offence under PMLA - provisional attachment order - The present case is a classic example as to how the public money has been swindled by these groups and individuals.
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Service Tax:
Any activity undertaken between DTA and EOU units cannot be considered as services rendered to any outsider, in fact it would amount to self service.
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Service Tax:
Failure to discharge service tax - amount collected but not paid to the Government - The appellant had continuously failed to discharge the Service Tax even though they had collected the Service Tax amount from their customers - extended period of limitation is applicable and penalty confirmed
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Service Tax:
CENVAT Credit - Merely because the branch offices were not registered, hence, Cenvat credit availed on input services used for providing output services cannot be denied to the appellant when the centralized billing and accounting system was undertaken.
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Central Excise:
CENVAT Credit - input - Linear Alkyl Benzene (LAB) - unless and until the Department was able to prove that in the final product the LAB was not used/utilized at all, the Department was not justified in holding that the assessee wrongly availed the Cenvat Credit on LAB.
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Central Excise:
Classification of the goods - Branded Chewing Tobacco - the classification determined by both the sides are on assumptions and presumptions. -the benefit of doubt goes in favor of the appellant - To be classified as BCT under heading 24039910 of CETA
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Central Excise:
The provisions of the statute does not offer room for any ambiguity that restoration of credit in the CENVAT credit account must be compensated with interest even if such restoration is ordered beyond three months from the date of claim for such restoration.
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Central Excise:
Excisability/marketability - Revenue could not establish through evidences that the structures which came into existence at the site of thermal power station, are movable in nature or could be dismantled and hence marketable - Demand set aside.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2019 (1) TMI 891
Undisclosed investments - Additions based on balance-sheet submitted to the Bank for obtaining loan - Block assessment u/s 158BC - Block Period - undisclosed income detected under four separate heads of under-invoicing, undisclosed sales, investments in unaccounted purchases, and interest income - AO found that the undisclosed income was in excess of the undisclosed investments - Held that:- We have already found that there is lack of material insofar as the prior years of the block period, but the same has been held to be inconsequential, in so far as the A.O being conferred with the power to make assessment in the best of his judgment. The AO was perfectly justified in carrying out an assessment on the best of judgment, making estimations on the basis of the materials recovered. In the instant case a block period of 6 years. There is also no presumption insofar as the suppression having occurred only in the year in which the search was conducted. If at all, the presumption is otherwise insofar as the special procedure prescribed under Chapter XIV-B to assess undisclosed income for a block period, comprising of assessment years prior to the date of search, on the basis of the materials recovered at the search and other other evidences available before the AO relatable to such material. At the risk of repetition, it has to be noticed that the block assessment prescribed under Chapter XIV-B also confers power on the AO to make assessment on the best of judgment. Question Nos.(i) and (ii) are answered in favour of the Revenue and against the assessee. We hence set aside the order of the Tribunal and the first appellate authority and confirm the under-invoicing of sale bills at ₹ 90,50,924/-. Undisclosed purchases - There is no claim by the assessee that the Bank did not eventually grant the loan and even if it was so, it was incumbent upon the assessee to establish that the balance-sheet was not prepared in accordance with law and not based on the actual stock retained in the assessee's premises. The fact that there was a lesser stock at the end of the year only raises a presumption that the excess stock as disclosed in the balance-sheet and profit and loss account filed before the Bank was sold off in the intervening period. In such circumstances, there is absolutely no error in law on the AO relying on the same and adding on an undisclosed income on the basis of the unexplained investment in the unaccounted purchases. We, hence, answer question No.(iii) against the assessee and in favour of the Revenue. We also find that the reliance placed on the balance-sheet and profit and loss account as obtained from the Bank in pursuance of the enquiry conducted after the search was a material relatable to the suppression established on search. On the question of estimation made by the AO at the rate of ₹ 5 lakhs per year, we find the same to be unreasonable. As we have found, the unaccounted purchases would have been sold in the intervening period. Hence, in the very same assessment year in which the purchases were made, the sale has to be presumed and the profit on such sale has to be treated as undisclosed income of the assessee. We direct the AO to add gross profit at 10% to the unaccounted purchases and make addition of profit alone being ₹ 2,86,630/- especially since the unaccounted purchases has already been added on as an undisclosed income. We, hence, answer question No.(iv) partly in favour of the assessee and partly in favour of the Revenue. On the undisclosed interest income, we find that there is absolutely no basis for the AO to have taken the figures from the rough book and converted it into lakhs. We do not think, there is any basis for the additions made. We, hence, answer question No.(v) in favour of the assessee and against the Revenue and confirm the deletion of the undisclosed interest income made by the AO. Gifts and loans disclosed in the block returns of the Director - On question No.(vi) raised, we find on the aspects in which it was held in favour of the Revenue that the Tribunal had egregiously erred and acted in a perverse manner. We, hence, confirm the addition made by the AO. We also reduce from the total, NRE gifts and loans as disclosed from the block returns of the Directors, coming to ₹ 15,19,000/-. The appeal would stand partly allowed.
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2019 (1) TMI 890
Entitled for deduction u/s. 54F - residential house purchased beyond the two years prescribed limit u/s. 54F(1) - assessee should have purchased a new house on or after 9th Nov, 2011 on or before 8th Nov, 2014, however, the assessee has purchased residential house property on 16th Sep, 2015 which was beyond the two years prescribed limit u/s. 54F(1) - Held that:- In the case of the assessee also the property in question could not be purchased because of unavoidable circumstances as the first party seller of the property was expired before execution of the sale deed because of legal proceedings related to the clearance of tile of the property there was delay in execution of final sale deed as elaborated supra in this order. We consider that the assessee has only invested an amount of ₹ 30 lacs as explained above in this order within the stipulated period prescribed in the provision of section 54F of the act, therefore, we restrict the deduction u/s. 54F of the act to the amount of ₹ 30 lacs as final agreement could not be executed because of unavoidable circumstances in the form of pending legal proceedings due to sudden demise of the first party seller of the property. Accordingly the appeal of the assessee is partly allowed. Disallowance of claim of depreciation & business expenses - Held that:- We have heard the rival contention on this issue and find that it is very clear that the assessee has only earned from stitching during the year under consideration and assessee has failed to substantiate its claim with relevant supporting material therefore, we do not find any error in the decision of the Ld.CIT(A). Accordingly the appeal of the assessee on this issue is dismissed.
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2019 (1) TMI 889
Estimation of income - rejecting the books of account and resorting to estimation of income - AO estimated the income at 5% of the cost of goods put to sale also confirmed by CIT-A - Held that:- We find that this issue is covered in favour of the assessee by various decisions of the Tribunal wherein we have upheld the estimation of income at 3% of the cost of goods put to sale. As relying on SRI VENKATESWARA WINES VERSUS THE INCOME TAX OFFICER, WARD 10 (4) , HYDERABAD. [2015 (11) TMI 1746 - ITAT HYDERABAD] AO is directed to estimate the net profit at 3% of the cost of goods put to sale. The assessee’s appeal is accordingly allowed. Seeking deduction of the remuneration and the interest paid to the partners from the interest which is estimated @ 3% of the cost of the goods put to sale - Held that:- In all the cases where we have estimated the income @ 3% of the cost of the goods put to sale; the contention of the respective assessee has been considered to hold that the net income of the assessee from business is 3% of the cost of the goods put to sale. Thus, the estimation itself takes care of the expenses such as remuneration and interest paid to the partners of the assessee-firm. Therefore, we find no reason to interfere with the order of the CIT (A) on this issue.
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2019 (1) TMI 888
Commission paid to foreign agents - allowable business expenses - evidence on record to show that such foreign agent had worked on behalf of the Assessee in procuring sales - Held that:- The entire issue is based on an appreciation of evidence on record. The CIT(A) and the Tribunal on facts came to the conclusion that the commission paid to the foreign agents was for having worked on behalf of the Assessee in procuring sales. No question of law arises. Loss claimed by the Assessee upon sale of shares - AO noticed that Assessee had purchased the shares at ₹ 30 Crores but sold the same for an amount as low as ₹ 30 lakhs - Held that:- CIT(A) and the Tribunal, found that there was no colourable device employed by Assessee in the process. The Tribunal noted that before sale of shares, the Assessee had obtained the valuation report of an independent valuer, who had shown the value as 'Nil'. The Company concerned was a sick undertaking and was before BIFR. Inter alia on such ground, Tribunal dismissed Revenue's Appeal and confirmed the decision of the CIT(A).
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2019 (1) TMI 887
MAT - Addition being provision for wealth tax, while computing the Book profits u/S. 115JB - Held that:- The legislature has advisedly not included wealth tax in this clause. By no interpretative process, the wealth tax can be included in clause (a). The Revenue, further made a vague attempt to bring this item in clause (c) noted above. Clause (c) would include the amount set aside for provisions made for meeting liabilities other than ascertained liabilities. For applicability of this clause, therefore, fundamental facts would have to be brought on record which in the present case, the Revenue has not done. In fact, the entire thrust of the Revenue's argument at the outset appears to be on clause (a) which refers to the income tax which according to the Revenue would also include wealth tax. This question, therefore, is not required to be entertained. Addition being gain on extinguishment of debentures / bonds treated as income u/s 41(1) - Held that:- In the present case, the Revenue has not established these basic facts. In other words, it is not even the case of the Revenue that in the process of issuing the bonds, the assessee had claimed deduction of any trading liability in any year. Any extinguishment of such liability would not give rise to applicability of sub-section (1) to Section 41 of the Act. Also notice that the decision of this Court in the case of Mahindra and Mahindera Ltd [2003 (1) TMI 71 - BOMBAY HIGH COURT] came to be confirmed by the Supreme Court in the case of Commissioner Vs. Mahindra Mahindra Ltd [2018 (5) TMI 358 - SUPREME COURT]. It was reiterated that for applicability of Section 41(1) of the Act, it is a sine qua non that there should be an allowance or deduction claimed by the Assessee in any assessment year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the Assessee is liable to pay tax Under Section 41 of the IT Act. This question, therefore, does not require any consideration. Commission / surcharge paid to State Oil Marketing Organization ( SOMO ), an Iraqi Government Agency - disallowance - Volcker Committee report (India being a member state of the UN) which was prepared after due diligence and investigation of documents as well as personnel interviews - Revenue argues that the assessee had paid illegal commission for purchase of such oil and therefore, such expenditure was not allowable - Held that:- CIT(A) in detail order while reversing the disallowance made by the Assessing Officer, observed that there was no evidence that the assessee had paid any such illegal commission. He noted that except for the Volcker Committee Report, there was no other evidence for making such addition. He noted that even in the said report, there is no finding that the assessee had made illegal payment. It appears that the payments were made by an agent and there was no evidence to suggest that the assessee had made any illegal commission payment to Iraqi government. The Tribunal confirmed this view of the CIT(A). The entire issue is thus based on appreciation of materials on record and is a factual issue. No question of law arises.
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2019 (1) TMI 886
Addition u/s 68 - Held that:- As per Section 68 of the Act, if the explanation offered by the assessee regarding nature and source of sum credited in his books of account is not found satisfactory by the AO, the said sum can be charged to income tax. The explanations offered were not found satisfactory by all the three authorities below. The findings recorded by the Tribunal is based on material on record and after appreciating the evidence adduced. The order of the Tribunal does not call for any interference by this Court.
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2019 (1) TMI 885
Bogus purchases - Held that:- In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation, in our considered opinion, on the facts and circumstances of the case, 12.5 % disallowance out of the bogus purchases meets the end of justice. Assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. We find considerable cogency in the submission of the learned counsel of the assessee, as otherwise it will be double jeopardy to the assessee. Disallowance in this case be restricted to 12.5 % of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions.Assessee fairly accepted this proposition. Appeal filed by the assessee stands partly allowed.
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2019 (1) TMI 884
TPA - Comparable selection - assessee is involved in two different activities of manufacture and sale - Held that:- Assessee is into manufacture of compressors and also sale of compressors and both the activities are different and therefore, they require different set of comparables. Therefore, we deem it fit and proper to remit the issue to the file of AO/TPO for fresh analysis and fresh determination of ALP in accordance with law. Assessee shall be allowed to raise any contentions on account of comparables and also the method to be adopted for determination of the ALP. Grounds are thus considered as allowed for statistical purposes.
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2019 (1) TMI 883
Addition of extra income reflected in the AIR - amount received by assessee on behalf of the society which was duly reflected in accounts of the society - Held that:- As observed that the impugned amount of ₹ 90 lakhs generated from the original transactions was belonged to the society and not the assessee. The assessee was only authorized to collect the amount on behalf of the society and therefore, it was not the income of the assessee. CIT(A) also made a logical conclusion that when the assessee had received an amount from ₹ 179 lakhs at the time of booking of shop no. 7 by the said Vanitaben Dilipkumar in the preceding years i. e. ₹ 1 crore in F. Y. 2008-09, ₹ 78 lakhs in F. Y. 2009-10 and ₹ 1. 00 lakh in F. Y. 2012-13, the same was not treated as income of the assessee in the respective years, then how the receipt of ₹ 90 lakhs could be taxed in the year of receipt i. e. A. Y. 2013-14 respectively. CIT(A) has analyzed all materials viz. books of accounts of the assessee, receipts collected by the assessee towards sale of various units on behalf of the society in the preceding years, details development fees along with TDS collected from the society, relevant clauses of development agreement entered into by the assessee and the society, while arriving at the conclusion. There is no material placed before us, which compel us to deviate from the finding of the ld. CIT(A). Therefore, considering well reasoned order of the ld. CIT(A), we do not find merit in the appeal of the Revenue. Order of the ld. CIT(A) is upheld, and the ground of appeal of the Revenue is rejected.
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2019 (1) TMI 882
Reopening of assessment - claim of 54F denied - Held that:- Approval given by the Ld. Pr. CIT in this case is very much on the record and there is no infirmity. With regard to tangible material, it is noted that the AO had issued query letters in response to which the then AR had filed sale deeds and bank statements from where the AO noted the mistake of an extra ‘zero’ which he discussed in the body of his order. It is only after examining the tangible material that the AO has dropped the proceedings against the daughter of the assessee and has taken action u/s. 147/148 against the assessee. Hence, CIT(A) has rightly dismissed this ground, which does not need any interference on my part, therefore, we uphold the same and reject the ground raised by the assessee. Plot has been registered in the name of Ram Baksh who is father of the assessee. Similarly, the sale deed has been executed by Ram Bakh and his son Sita Ram. From these documents, it is clear that the ownership in the property was of Ram Bakh and in the sale deed only the name of the assessee is there as second party. In the Affidavit of Assessee’s father has claimed that impugned property (Plot) belonged to HUF and got mutated in the names of assessee and his father. Hence, the claim of 54F which was made in the assessment proceedings cannot be given to the assessee as the property has been purchased by Ram Baksh the father of the assessee and not the assessee. AO was rightly directed to rework the capital gains accordingly, which does not need any interference on my part, hence, uphold the action of the CIT(A) and reject the ground raised by the assessee. As regards sustaining of addition of ₹ 1,00,000/- is concerned, it is noted that the only issue which stands out is the opening cash in hand as seen from the Cash Flow Statement is of ₹ 3,50,088/- out of which the assessee has claimed to have deposited initial cash in bank of ₹ 1,60,000/- and assessee did not have any satisfactory explanation with regard to source of ₹ 1,00,000/- out of opening cash of ₹ 3,55,088/-. It is an admitted fact that assessee is a pure agriculturist and not having any other income. AO was rightly directed to sustain the addition of ₹ 1,00,000/- and delete the balance, which does not need any interference on my part, hence, uphold the action of the Ld. CIT(A) and reject the ground raised by the assessee. The case laws cited by the Ld. Counsel for the assessee do not support the case of the assessee being distinguished on facts. - Appeal of the Assessee is dismissed.
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2019 (1) TMI 881
Exemption u/s. 54EC - investment in REC Bonds is made beyond the stipulated time - no opportunity of explanation to the assessee given - Held that:- We note that the assessee has duly issued the cheque for the investment in accordance with the act. The delay of the bank in clearing the amount is a meager delay of only four days. This delay is attributable to the banking channel and, hence, in our considered opinion, adverse inference cannot be drawn against the assessee on the technical ground of delay of merely four days in clearance of the cheque. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee.
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2019 (1) TMI 880
Charitable activity u/s 2(15) - exemption u/s 10(23C)(iv) - benefit of section 11 - activities of the assessee also include providing of services such as accommodation, food and beverages, etc., for payment of charges - Held that:- Admittedly there is no funding from government or any other outside bodies to sustain activities of promotion of cultural and intellectual activities and, therefore, the assessee had to be totally self supporting and self financing and for this purpose, in order to achieve its main objective, it had to charge and earn receipts from members so that the activities could be carried out. Admittedly, the assessee is disseminating knowledge to general public on subjects ranging from art, dance, urban development means etc. through conferences, lectures etc. As further pointed out before AO that even while charging the members, there was no commercial motive in fixing the rates. The rates were nowhere near the commercial rates and were generally fixed to recover the cost and cost of activities to run the centre. These activities could not be treated in the nature of trade or commerce. As regards hostel accommodation, there were number of rooms and guidelines for hiring of the accommodation and also there were restrictions. It was also pointed out that, as could be seen from the list of programmes, the assessee conducted very large number of programmes during the year which covered discussions, music, dances, exhibitions and also certain special programmes such as festivals during the course of the year. These programmes were published through the newspapers and website. Further e-mails were sent to members as well as non-members. Periodical articles also appeared in the various newspapers highlighting some of the special programmes conducted by the centre. As regards DIT(E)’s objection with regard to the membership of the centre, the assessee had pointed out before the AO itself that individual membership was open to all persons of India or foreign origin. Tribunal in assessee’s own case for assessment year 2011-12, while deciding the issue of allowing benefit of section 11 and 12 read with section 2(15) of the IT Act, following the decision of the Tribunal for assessment year 2009-10, has decided the issue in favour of the assessee.
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2019 (1) TMI 879
TPA - MAM selection - Held that:- Tribunal in assessee’s own case vide its orders dated 17.01.2017 for AY 2008-09 and 2009-10 respectively to re-compute ALP of international transaction of import of finished goods entered into by assessee with its AE i.e. Alfa Group of entities by following resale price method(RPM). While arriving at aforesaid decision, we are guided by the decision of Radhasoami Satsang v. CIT [1991 (11) TMI 2 - SUPREME COURT] that rule of consistency need to be followed. Thus, ground of appeal No. 1 is allowed for statistical purposes. We order accordingly. TDS U/S 194H - addition u/s 40(a)(ia) on account of non- deduction of Income-tax at source(TDS) - Held that:- We set aside the issue to the file of the AO for fresh consideration of the issue in accordance with law , with similar directions as were given by the tribunal for AY 2009-10 in assessee’s own case as detailed above . While arriving at aforesaid decision, we are guided by the decision of Hon’ble Supreme Court in the case of Radhasoami Satsang v. CIT [1991 (11) TMI 2 - SUPREME COURT] that rule of consistency need to be followed.
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2019 (1) TMI 878
Revision u/s 263 - setting aside the assessment order u/s. 153A and directing the AO to make a fresh assessment order - bogus purchases - Held that:- We find that the assessee, during the course of assessment proceedings, had supplied the party-wise details of purchases and a copy of the same has been placed in the paper-book. Upon perusal of the same, it could be gathered that the during impugned AY, the assessee had not made any purchase from M/s Realstone Exports Limited as wrongly noted by Ld. Pr.CIT. The said fact is also evidenced from the information provided by Audit wing & extracted wherein we find that the purchases from this entity are stated to be made during AY 2010-11 and not in 2009-10. Therefore, the assessment order, at least to that extent could not be termed as erroneous and prejudicial to the interest of the revenue from any angle and therefore, jurisdiction u/s 263, in this regard, could not be held to be valid. Regarding purchases made from other entity, AR has submitted that since complete details thereof were submitted during the course of assessment proceedings which were accepted by Ld. AO with due application of mind and therefore, proceedings u/s 263 were bad. We find that no discussion, whatsoever, on this aspect has been made in the assessment order. Nothing on record suggest that AO, during assessment proceedings, made further investigation, to verify the genuineness of the purchases made by the assessee from the aforesaid entity. This being the case, the submissions made by Ld. AR, in this regard, could not be accepted. The Ld. AR has relied on the case of Raja Bahadur Motilal (P) Ltd Vs ITO [1990 (3) TMI 60 - BOMBAY HIGH COURT] for the same. However, we find that this decision has been rendered in the context of reassessment proceedings u/s 147 and therefore, do not apply to the case in hand. No opportunity of being heard was provided to the assessee in violation of principle of natural justice - Held that:- We find that a show-cause notice was issued to the assessee and the same was duly replied to by the assessee wherein the assessee agitated the proposed proceedings and demanded further details from Ld. Pr.CIT without demonstrating as to how the figures were not matching. This being the case, we do not find any force in this argument raised by Ld. AR. We hold that the revisional jurisdiction u/s 263 invoked by Ld. Pr.CIT with respect to alleged bogus purchases made by assessee from M/s. Utkantha Trading Pvt. Ltd. were valid in law whereas the direction to verify the purchases made from M/s. Realstone Exports Ltd. were bad in law. The impugned order stand modified to that extent. The assessee’s appeal stands partly allowed in terms of our above order.
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2019 (1) TMI 877
Disallowance of interest paid to its partners - addition u/s 14A - Held that:- Following the decision of the Coordinate Bench in case of Quality Industries (2016 (10) TMI 56 - ITAT PUNE), payment of interest to the partners towards the use of the partner’s capital as per the provisions of the partnership deed is held not subject to disallowance under Section 14A read with Rule 8D(ii) of the Act. However, in respect of disallowance under Rule 8D(iii), no specific ground or plea has been taken by the ld AR on behalf of the assessee, hence the same is confirmed. Appeal filed by the assessee is partly allowed.
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2019 (1) TMI 876
TDS u/s 195 - Disallowing assessee’s export commission payments on account of non-deduction of TDS thereby invoking sec. 40(a)(i) - Held that:- We uphold well reasoning findings of the learned CIT(A) that the commission payments made to the non resident agents did not have any taxability in India, even under the provisions of the domestic law i.e. Section 9. Once we come to the conclusion that the income embedded in these payments did not have any tax implications in India, no fault can be found in not deducting tax at source from these payments or, for that purpose, even not approaching the Assessing Officer for order under section 195. The assessee, for the detailed reasons set our above, did not have tax withholding liability from these payments. As held in the case of GE India Technology Centre Pvt Ltd Vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA], payer is bound to withhold tax from the foreign remittance only if the sum paid is assessable to tax in India. The assessee cannot, therefore, be faulted for not approaching the Assessing Officer under section 195 either. As regards the withdrawal of the CBDT circular holding that the commission payments to non resident agents are not taxable in India, nothing really turns on the circular, as de hors the aforesaid circular, we have adjudicated upon the taxability of the commission agent's income in India in terms of the provisions of the Income Tax Act as also the relevant tax treaty provisions. Addition u/s 14A - Held that:- CIT(A) has relied upon as a catena of case law in restricting the impugned disallowance to the extent of exempt income only. In Joint Investments Pvt. Ltd. vs. CIT (2015 (3) TMI 155 - DELHI HIGH COURT) has already settled the issue in assessee’s favour that such disallowance cannot exceed the relevant corresponding exempt income figure. We therefore reject Revenue’s instant third substantive ground as well for this precise alone. Disallowing assessee’s provision for liquidated damaged - Held that:- Revenue’s grievance that assessee’s liquidated damages are in the nature of penal liability not allowable as expenditure incurred wholly and exclusively for the purpose of its business. She fails to dispute the clinching fact the impugned liquidated damages are in the nature of contractual liability only than arising from violation of any penal provision. The assessee had made the impugned provision as per its contractual liability on account of non compliance / non-fulfilment of its business obligations to only its customer parties. We therefore find no merit in Revenue’s instant last substantive ground. Long Term Capital Gains addition in respect of sale of its land - Held that:- Assessee had initially declared cost of acquisition to be @ ₹40.1 per square yard fallowed by its revised return claiming the very value @ ₹60/- per square yard based on a registered valuer’s report. The CIT(A) has admittedly gone by its former valuation. He has applied estoppel in principle other ways. We find no merit to concur with the CIT(A)’s above stated reasoning. More particularly in view of the fact that a registered valuer had duly supported assessee’s case in enhancing the cost of acquisition from ₹40/- per square yard to ₹ 60/- per square yard. We take into account all these peculiarities involved in this case to apply thumb rule to estimate assessee’s cost of acquisition to be ₹48/- per square yard in the given facts and circumstances. It is made clear that we have invoked thumb rule to terminate the instant lis at this stage itself than sending it for a long drawn process of valuation. We further direct that our instant estimation shall not be treated as a precedent in any other case. The assessee’s former substantive ground in its cross objection is partly accepted in above terms.
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2019 (1) TMI 875
Computation of income from long term capital gains in the hands of the assessee - denial of exemption u/s 54B - agriculture land - reinvestment in another agricultural land within a period of two years, but failure to deposit in the capital gains scheme account - Held that:- In Humayun Suleman Merchant Vs. CCIT [2016 (11) TMI 606 - BOMBAY HIGH COURT] turn relies on the decision of CIT Vs. Rajesh Kumar Jalan (2006 (8) TMI 126 - GAUHATI HIGH COURT) which laid down the proposition that amounts subject to capital gains on sale of capital asset for the purpose of exemption, had to be utilized before the date of filing the return of income and since the same was not utilized for the purpose of investment in construction of the new house nor was deposited in the capital gains scheme account; hence, the assessee was held to be not entitled to the claim of deduction under section 54F of the Act. It may be pointed out that in the aforesaid case, the said deduction was restricted to the investment in the new asset at ₹ 35 lakhs. Relevant findings of the Hon’ble High Court are reproduced by the CIT(A) the appellate order which are being referred to but not being reproduced for the sake of brevity. The said proposition laid down in the case of Shri Vilas Balram Patil [2017 (12) TMI 1656 - ITAT PUNE] the claim of deduction under section 54 of the Act was denied to the assessee as he had not deposited the amount in the capital gains scheme account by the due date of filing the return of income. Thus hold that the assessee is not entitled to claim of deduction under section 54B of the Act as the assessee has failed to deposit the unutilized amount of capital gains in the capital gains scheme account by the date of filing of return of income. Since this issue is settled by the Hon’ble jurisdictional High Court, hence, the matter is being decided ex parte the assessee. Grounds of appeal raised by the assessee are thus dismissed.
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2019 (1) TMI 874
Assessment u/s 153A - incriminating material found during the course of search and seizure - addition u/s 68 and 14A - non providing opportunity to cross-examine - Held that:- In the case on hand, the assessee filed its original return of income on 31/08/2008. The time limit for issual of notice u/s 143(2) of the Act, was 30/09/2009. The search and seizure operation was conducted in this case on 18/02/2013. The statutory period for issual of notice u/s 143(2) of the Act, in the case of the Assessment Years had expired prior to the date of search operation. Hence the assessment for the impugned Assessment Year has not abated. Thus the additions in question are not based on any incriminating material found during the course of search. On the legal position we find that the only addition made is of share application received u/s 68 of the Act and addition of commission paid allegedly for the share application money and finally a disallowance u/s 14A of the Act. No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have admittedly been retracted and the Assessing Officer has not based the additions on these statements. When copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. Hon’ble Supreme Court in the case of Kishinchand Chellaram vs. CIT(1980 (9) TMI 3 - SUPREME COURT) had held that opportunity of cross-examination must be provided to the assessee. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be a chain was given/confronted to the assessee. The alleged statements were supposedly recorded from directors of these companies which formed this alleged chain are also not brought on record. Only a general statement has been made that the investigation wing had recorded some statements. There is no evidence whatsoever that cash has been routed from the assessee company or that any cash was deposited by the assessee company. There is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company. No opportunity to cross-examine any these parties was provided to the assessee. - Decided in favour of assessee.
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2019 (1) TMI 868
Claim of deduction as interest - amount credited to decommissioning Reserve fund - assessee collected decommissioning costs from its customers - Assessee had to account for 12% interest on such decommissioning charges collected by it - Held that:- We are in agreement with the view of the Tribunal. As noted, the assessee was under directives of the Government of India to collect and create decommissioning reserves which would be utilized for decommissioning of the plant at the end of its useful life. The amount so collected from the customers would be in the possession of the assessee and would be utilized for the purpose of its business. The Government of India, therefore, required the assessee to account for the interest which was also specified at 12% p.a. on said funds. The interest expenditure was claimed by the assessee by way of deduction. This interest expenditure was clearly business expenditure. The situation is akin to the assessee borrowing from the market, utilizing such borrowed funds for the purpose of business and paying interest to the creditors. No question of law arises
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2019 (1) TMI 867
Sale of agricultural land - 'capital gain tax' for sale of the land - Held that:- AO could not bring any adverse material on record. It was also noticed that the Assessee was one of three co-owners of the property. Nothing was brought on record to suggest that any one of the other co-owners, had been taxed under the head 'capital gain tax' for sale of the land. The Tribunal also relied on the fact that the land is shown as an agricultural land in the Revenue record. The Tribunal, therefore, held that the land was agricultural land. We find that the Tribunal came to the conclusion that the land in question was agricultural land. Importantly, it was shown as agricultural land in the revenue record and revenue was collected on such basis. There were fruits bearing trees on the land. There was irrigation facility available in the form of tubewells. The Division Bench of this Court in CIT v/s. Minguel Chandra Pais & Another [2005 (3) TMI 46 - BOMBAY HIGH COURT] had occasion to consider a question as to when a certain land can be categorized as agricultural land. The facts of the present case would also fall within such tests. No question of law arises.
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2019 (1) TMI 866
Reopening of assessment - reasons to believe - Held that:- The entire issue is a scrutinized issue. The Assessing Officer not only noticed the claim of the assessee during scrutiny assessment, prima facie not being satisfied, raised multiple queries during such assessment why the claim should not be disallowed. The assessee replied to the such queries and claimed the benefit of DTAA between the two countries. AO accepted such claim making specific mention in the order of assessment holding that the assessee is entitled to the benefit of DTAA since the assessee was carrying on bonafide banking activities in Mauritius. AO now desires to re-examine the issue on the ground that the assessee does not carry on bonafide the banking activities in Mauritius. This would be based on mere change of opinion and would be impressible as held by the series of judgments of the various Courts. Reference in this regard may made to the decision in the case of CIT Vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] in which it was held that even after the amendment in Section 147 of the Act with effect from 1.4.1989, the principle of change of opinion would continue to apply. There is nothing in the reasons recorded to suggest that there was any failure on the part of the assessee to disclose truly and fully all material facts which led to the income chargeable to tax escaping assessment. In fact, the perusal of the reasons would show that the Assessing Officer was merely proceeding on the material already on record. - Decided in favour of assessee.
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2019 (1) TMI 865
Reopening of assessment - petitioner's claim for benefit of deduction u/s 80IB(10) - reopening beyond the period of four years - basis of the impugned notice is the Government approved Valuer's Certificate - assessment is completed by scrutiny under Section 143(3) - Held that:- It is a settled position in law that when an assessment is completed by scrutiny under Section 143(3) then a reopening notice beyond a period of four years is barred, unless there is a failure to disclose fully and truly all material facts necessary for assessment. This is in fact the mandate of the first provisio to Section 147. It is settled position of law that reopening of assessment is not to review the assessment order passed under Section 143(3). Therefore, no reopening is permissible on mere change of opinion. In the present facts, we note the reopening notice is issued beyond a period of four years from the end of the assessment year 2011-12 in respect of assessment completed under Section 143(3) of the Act. The basis of the impugned notice is the Government approved Valuer's Certificate dated 24th March, 2014. We note that this very certificate was a subject of consideration while passing the assessment order dated 25th March, 2014 under Section 143(3). The reason do not state that the above certificate dated 24th March, 2014 came to the notice of the AO after passing the Assessment Order dated 25th March, 2014. Thus, there is no failure to disclose all material facts truly and fully on the part of the petitioner during regular assessment proceedings. Thus, on the above ground itself, the impugned notice is bad. In the assessment order dated 25th March, 2014 under Section 143(3), the above certificate dated 24th March, 2014 was considered before passing the order. The impugned notice is an attempt to reopen an assessment completed under Section 143(3) of the Act based on the change of opinion. - Decided in favour of assessee.
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2019 (1) TMI 864
TDS u/s 194C or 194J - nature of services rendered by ONGC for which charges are paid come - Held that:- The activity carried by M/s. ONGC Ltd. was in the nature of installation work and could not be considered as fees for technical services. Besides, reliance was placed upon the CBDT Circular No.681/94, dated 3rd March, 1994 to the effect that repairs, renovation and installation of plant and machinery are in the nature of contract for work and income tax will have to be deducted from such payment under Section 194C of the Act. Being aggrieved, the Revenue filed further appeal to the Tribunal. By the impugned order dated 16th October, 2015, the Tribunal upheld the view of the CIT(A) and dismissed the Revenue's appeal. It is not disputed before us that the CBDT Circular No.681/94 dated 3rd March, 1994 is applicable to the present facts. The question as proposed by the Revenue does not give rise to any substantial question of law as the tax has been properly deducted at source under Section 194C of the Act in terms of the CBDT Circular No.681/94 dated 3rd March, 1994. Thus, not entertained. Both the CIT(A) and the Tribunal have concurrently come to the conclusion that the services rendered are not in the nature of technical services, therefore, not covered by Section 194J as contended by the Revenue. In the absence of these findings of the CIT(A) and the Tribunal being shown to be perverse, the question as proposed does not give rise to any substantial question of law. Thus, not entertained.
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2019 (1) TMI 863
Condonation of delay - explanation to the delay which is of 507 days - Held that:- Nevertheless when the delay is substantial, at least a proper explanation for the bulk of the period should be necessary. In the present case, principally, the explanation of the applicant, as noted above is that the ex-employee who received the order of the Tribunal put it in his drawer and left the company without intimating anybody. It was only about a month before filing of the appeal when his substitute new employee found the papers from the drawer. For multiple reasons, this explanation does not inspire confidence. We had inquired with the learned counsel for the applicant why the ex-employee had not filed affidavit. It was stated that he was a part time employee and now having left the service was not traceable. Mrs. Jaya Patel, the director of the company states that she came to know about the Tribunal's order on 30.5.2018. It is also stated, as noted earlier, that the new employee Mr. Naidu was the first one to to tumble upon the order lying in the drawer of the previous employee. The applicant has filed affidavit of said Mr. Naidu who states that he had found the order of the Tribunal on 8.8.2018 and showed the same to Mrs. Jaya Patel who was surprised to see it as she was not shown the same earlier. We also notice that on 26.10.2016 when the Tribunal heard the appeal, it was the husband of the director of the company who was present before the Tribunal and who even going by the account of the deponent, was heard by the Tribunal on appeal despite his reluctance. If that is so, nothing prevented the appellant company and its officials from making inquiries with the Tribunal through their Tax Practitioner to find out the outcome of the appeal. Appeal diminished.
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2019 (1) TMI 862
Reopening of assessment - eligibility of reasons to believe - correct facts not recorded in the reason - Held that:- The reasons to believe that income chargeable to tax has escaped Assessment must be on correct facts. If the facts, as recorded in the reasons are not correct and the assessee points out the same in its objections, then the order on objection must deal with it and prima facie, establish that the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion of the Assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the Revenue. Even in cases where the return of income has been accepted by processing under Section 143(1) reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed u/s 143(1) does not give the AO a carte blanc to issue a reopening notice. The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts, must be satisfied by the Assessing Officer so as to have jurisdiction to issue the reopening notice. In the present case, the AO has proceeded on fundamentally wrong facts to come to the reasonable belief conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by the Petitioner, the AO in its order disposing off the objection does not deal with factual position asserted by the Petitioner. Thus, it would safe to conclude that the Revenue does not dispute the facts stated by the Petitioner - impugned notice is without jurisdiction - Decided in favour of assessee.
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2019 (1) TMI 861
Assessment u/s 153A - Capital gain of sale of the land - assessee had purchased the property with an intention of reselling the same for profit - Held that:- The assessee was an employee with Syndicate Bank. He purchased a land measuring 2800 sq.ft., in the year 2001. He put up a construction of 12 apartments, out of which 8 apartments were sold and 4 apartments were retained for himself. The profits made out of sale of 8 apartments were offered as ‘short-term capital gains’ and the profits made on sale of the land was offered as ‘longterm capital gains’, after claiming exemption to an extent of ₹ 22,50,171/-. The Tribunal on considering the material on record, was of the view that since the assessee sold the flats for profit in the subsequent period, the said transaction does not tantamount to adventure in the nature of trade. When the assessee invests money in a property with an intention to hold it or enjoys the property and sells it for profit thereafter, then it is a case of capital appreciation and the profit derived there from is taxable under the head ‘capital gains’. Judgment of the Hon'ble Supreme Court in the case of G.VENKATASWAMY NAIDU VS. CO. VS. COMMISSIONER OF INCOME TAX [1958 (11) TMI 5 - SUPREME COURT] was followed. No substantial question of law
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2019 (1) TMI 860
Addition u/s 68 - whether the expression “genuineness” in the context of the present case has been examined and decided by way of judicial pronouncements? - Held that:- The question of “genuineness” arises in the present case in somewhat a peculiar situation for the Revenue does not dispute payment of ₹ 67.50 crores to the assessee by M/s Unitech Limited on the ground of identity, creditworthiness and even transfer of money. “Genuineness” is disputed for the reason that the explanation given by the assessee for receipt of the amount, i.e. agreement to sell for land at Taluka Khanpur, District Raigad, State of Maharashtra was rejected for a number of reasons, including sham and bogus backdated agreement to sell, failure to produce the executants, difference between the value indicated and circle rate of the land and the factum that half the value of the alleged transaction was paid in advance. Question would arise whether an addition under Section 68 would be justified and as per the statute, even if the nature and character of the transaction propounded by the assessee is discarded and disbelieved, albeit the transaction otherwise in the form of transfer of money is found to be correct and not doubted.
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2019 (1) TMI 859
Status of the assessee - Association of persons OR firm - ITAT affirmed the status of the assessee as AOP - Block assessment u/s 158BC - Held that:- There was no partnership deed filed, which was duly registered for at least four entities constituted with effect from 01.04.1996. The A.O. had called for the details of the link between the said four entities and the four others constituted as a partnership. The assessee had failed to produce any such evidence. The registration as a firm, inclusive of all the entities carrying on business in common, being not established by the assessee, the compelling evidence as recovered under the survey and seizure would commend us also to find that the status of the assessee is one of Association of Persons. We do not think any question of law arises from the said aspect, since the lower authorities had found such status on the strength of the evidence recovered and on the basis of facts. We, hence, decline to answer the said question raised in the appeal of the assessee and uphold the order of the Tribunal affirming the finding of the lower authorities. Unexplained cash credit u/s 68 - Held that:- Having found the list of creditors in the insolvency petition to have no bearing insofar the assessment proceedings under the I.T.Act, we are of the opinion that the remand order is erroneous. The insolvency proceeding eventually was concluded with a composition scheme. We also have found that the Tribunal itself on the basis of the facts found the deletion of the cash credits by the first appellate authority to be bad. In such circumstances, we answer the questions raised herein above both in the appeals of the assessee and the Revenue in favour of the Revenue and against the assessee. We restore the assessment order with respect to the addition of cash credits under Section 68. Interest on gold deposits - Held that:- The books of accounts failed to stand the test of verification, especially with reference to the direct and indirect evidence in the possession of the Revenue in respect of the business/financial transactions of the assessee. The business expenditure whatever there be, stood already claimed and allowed in the regular assessments and hence there could be no further claim of expenditure by way of interest paid on deposits. True, the Tribunal found that the C.I.T.'s (Appeal) order was not speaking. However, when the Tribunal had gone into the evidences, as revealed from the survey and search, which it was competent to do, as the last fact finding authority, we are of the opinion that there was no warrant for a further remand to the A.O. C.I.T.(Appeals) having found the books of accounts to be genuine without any discussion thereon, the order has to be set aside. However, the Tribunal having looked into the facts and found the books of accounts to be not worthy of acceptance, especially in the context of the compelling evidences available by way of materials recovered in survey and search, there was no question of any further consideration by the A.O. Fixed deposit receipts found in the two banks, in bogus names was also telescoped and the A.O. in the subject assessment years had made addition only to the extent of ₹ 27.22 lakhs. This is not liable to be interfered with. Hence, we restore the regular assessments made against the assessee for the years 1995-96 and 1996-97 finding the deletion of the various additions and the direction to accept the books of accounts as genuine, made by the C.I.T.(Appeals), to be erroneous and the remand order made by the Tribunal, to the A.O. and the C.I.T. (Appeals) to be not justified in the light of the facts having been elaborately gone into by the Tribunal and the assessments found to be valid in law.
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2019 (1) TMI 858
Application of stay - applicability of ALP - Held that:- As decided in Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. And Others [1984 (11) TMI 63 - SUPREME COURT] it is apparent that the same arises out of a matter pertaining to indirect taxation. The parameters that are required to be considered by the courts and Tribunals while granting stay and thereby staying the recovery of the revenue is set out. In the instant case it is not in dispute that the matter is otherwise and is one concerning a direct tax. Be that as it may, the criteria as set out by the Hon ble Apex Court, could also be made applicable in matters arising out of direct taxes. Hence, the Appellate Tribunal was not only required to exercise its discretion but the exercise of the discretion ought to be judicious after taking into account the relevant factors and the exercise of discretionary power on irrelevant consideration, would render the order injudicious and unsustainable as stated supra. The Appellate Tribunal has proceeded to pass the impugned order contrary to the material on record. In that view of the matter, the order is rendered a non-speaking order and stands vitiated by non application of mind. In view of the above conclusion, the writ petition is partly allowed. The order dated 02.11.2018 is set aside. The writ petition is allowed subject to the petitioner depositing a sum equal to the 40% of the demand within a period of four weeks from today.
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2019 (1) TMI 857
Penalty u/s 271(1)(c) - fees paid by the assessee to SEBI disallowed u/s 37(1) - Held that:- For AY 2009-10, wherein the tribunal held that the aforesaid payment of ₹ 2,05,00,000/- paid by the assessee to SEBI under the consent order is not infraction of law and is not hit by Explanation 1 to section 37(1) and the said expenses were held to be an allowable business expenditure. Order of the tribunal was later rectified by an order dated 18.12.2017 passed in miscellaneous application. Once the whole basis of addition itself as made by the AO in quantum has been deleted by the tribunal and expenses were held to be business, we do not find any reason and merit in the penalty being levied by the AO u/s 271(1)(c) on this ground and which was later confirmed by learned CIT(A) on the aforesaid amount of ₹ 2,05,00,000/-. We have also observed that CIT(A) by following the aforesaid order of tribunal against quantum assessment , correctly deleted the penalty. - Revenue fails in this appeal.
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2019 (1) TMI 856
Reopening of assessment - Claim of rebate u/s. 88E - Review in the garb of re-assessment - Held that:- It is undisputed fact that the assessee was assessed u/s 143(3) and the reassessment proceedings were initiated beyond 4 years from the end of relevant AY. Pre-conditions to invoke the reassessment proceedings u/s 147 was that the AO had reasons to believe that certain income escaped assessment and such escapement has occurred due to failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. So far as the formation of reasons is concerned, it is undisputed fact that no tangible material came into the possession of AO which suggested any escapement of income against the assessee & the belief was based on same set of material which was available before Ld. AO during original assessment proceedings. It is trite law that AO has the power to re-assess but no power to review. Review in the garb of re-assessment was not permissible. The revenue is unable to point out any tangible material suggesting escapement of income, which came into the notice of AO subsequent to completion of assessment proceedings. Specific question as to allocation of expenses were raised against the assessee during original assessment proceedings which were duly addressed by the assessee with supporting details / workings. This is further fortified by the fact that the adjustment of speculation loss was incorporate during rectification proceedings upon being pointed out by the assessee himself. These facts have already been noted by first appellate authority which could not be controverted by revenue in any manner. No hesitation in upholding that the reassessment proceedings were bad in law and the lower authorities could not be permitted to review the already concluded matter. So far as the merits of the case are concerned, we find that the assessee had already allocated the expenditure between share trading activity and brokerage business on a reasonable basis. It emanates from the records that the assessee had allocated administrative expenditure aggregating to ₹ 24.67 Crores i.e. ₹ 2.63 Crores against trading in shares and ₹ 22.03 Crores against derivative trading as against the estimation of ₹ 15 crores made by AO and therefore, the same was factually incorrect. CIT(A) has already provided relief to the assessee on merits and we concur with the same. - Decided against revenue
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2019 (1) TMI 855
Addition u/s 68 - sale proceeds of shares as income from undisclosed sources - rejecting the assessee’s claim of Long Term Capital Gains (LTCG) on sale of those shares - Held that:- We note that at Para -18 of the assessment order AO mentions about the role of brokers in allowing entry operators to register their bogus companies as their client and also certain admission made by some brokers about their involvement in so called Jama kharchi companies. In the said para some names of few brokers and Jama Kharchi operators have been mentioned. However, we note that the name of assessee’s broker, M/s. Guiness Securities Ltd., through whom the assessee sold his shares, does not appear at all in that report. We note that M/ s Guiness Securities Ltd was not named in the assessment order / D.I. report as a broker who was involved in price rigging of penny stocks. On the other hand, we note that M/s. Guiness Securities Ltd is a SEBI registered stock broking company having registration no. INB 011146033 and also is a member of Bombay Stock Exchange having membership no. 3027; Neither during the time of execution of the contract in FY 2013-14 nor even today, this stock-broking company was suspended by SEBI or BSE on any charge of irregularities like price rigging etc as alleged by the AO. We note that AO failed to bring on record any material to connect the assessee to any of the alleged entry operators/ brokers who are a part of this so called price rigging group or LTCG Generator Group. We note that in an identical/similar case, wherein the AO made addition of the LTCG claim made on sale of M/s. KAFL scrips on similar reasoning based on the SEBI interim report, investigation report of the Wing of the Department and certain statements recorded by the Department in the case of Sanjiv Shroff Vs. ACIT [2019 (1) TMI 213 - ITAT KOLKATA] it is also a matter of record that the assessee furnished all evidences in the from of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act. AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. - Decided in favour of the assessee.
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2019 (1) TMI 854
Reopening of assessment - client code modification - eligibility of reasons to believe - Held that:- It was not at all a reason to believe envisaged u/s 147 of the Act, at best the same can be considered as reason to suspect only. In the recording the Assessing Officer has admitted that client code modification is legally permissible in case of mistake. Further the recording states the assessee M/s. Prashant Agencies Pvt. Ltd. has suffered a loss of ₹ 2,07,040/- in a transaction in which client code modification was involved. Similarly in the case of M/s. PPN Properties Private Limited recording states that the assessee has suffered a loss of ₹ 2,47,312/- in a transaction in which client code modification was involved. However, there is no material on record to show that prima-facie the said client code modification was because of some malafide reason and the assessee has received cash in lieu of payment made for loss of ₹ 2,07,040/- in the case of M/s. Prashant Agencies Pvt. Ltd. and ₹ 2,47,312/- in the case of M/s. PPN Properties Private Limited. Thus, the above recording does not satisfy requirement of law which is mandatory for assuming jurisdiction to reopen the assessment. My above view is supported by decision of Coronation Agro Industries Limited Vs. DCIT [2017 (1) TMI 904 - BOMBAY HIGH COURT]. Therefore, the reassessment orders passed pursuant to the above recording are hereby quashed and ground of appeals of the assessee is allowed.
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2019 (1) TMI 853
Penalty u/s 271(1)(c) - deduction u/s 54F - Held that:- Coming to examine the case under explanation 1 to 271(1)(c), we have to examine whether the case in question falls within the other two limbs viz. clause (A) and (B) and effect thereof. Clause (A) applies when an assessee fails to furnish explanation or when an explanation is found to be false. Clause (B) applies to cases where explanation is offered but the assessee is not able to substantiate the explanation. In such cases, we have to examine two conditions: (1) Whether the assessee has been able to show that his explanation was bona fide; (2) whether the assessee had furnished and disclosed facts and material relating to computation of his income. Onus of establishing that the assessee satisfies the two conditions is on the assessee. Both the conditions have to be satisfied. The assessee satisfies the twin conditions, penalty is not be imposed. As far as the explanation to the section 271(1)(c) is concerned, the assessee has stated all the facts and there is no allegation that she has not furnished the full facts and materials. She had stated that she had reasonable grounds to hold the view that she was entitled to deduction under section 54F, as she had done everything under her control and invested the consideration for a residential house. Although the explanation could not be substantiated, the explanation could not be said to be lacking in bona fide. It is also seen that the assessee had filed return for the assessment year 09-10 in July 2009 whereas the house was to be reconstructed within the outer limit by January 2011. Thus, the assessee cannot be accused of furnishing inaccurate particulars of income as at the time of filing return of income she had no idea that the house she was investing in will not get completed within the stipulated time - On the facts of the case, a case of furnishing of inaccurate particulars of income is not made out - Decided against revenue.
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2019 (1) TMI 852
TPA - Comparable selection - Exclusion of Infosys Ltd. - Held that:- Exclusion of Infosys Ltd. on the basis of functional comparability which is not decided by the Tribunal. Be that as it may but since this is not a finding of the Tribunal in the impugned Tribunal order that Infosys Ltd. should be included in the list of comparables, there cannot be any grievance of the assessee in respect of non-deciding of this issue i.e. regarding exclusion of Infosys Ltd. For the assessee, the decision of CIT (A) still stands that Infosys Ltd. stands excluded from the list of comparables. The revenue has not filed any M. P. for decision on that aspect i.e. exclusion of Infosys Ltd. and hence, in our considered opinion, the present M.P. of assessee is academic and therefore, no decision on this is called for.
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2019 (1) TMI 851
Disallowance of interest income earned on fixed deposits with nationalised banks and received from Income tax Department u/s 244A - Held that:- Hon’ble jurisdictional High Court in the case of CIT Vs. State Bank of India [2016 (7) TMI 516 - GUJARAT HIGH COURT] has held that interest earned from investment made in nationalized bank by a cooperative society engaged in providing credit facilities to its members, is not deductible under section 80P(2)(a)(i). In recent past the Tribunal in number of decisions has taken a consistent view on this issue by following above judgment of the Hon’ble jurisdictional High Court. In this view of the matter, we do not incline to disturb the orders of the Revenue on this issue, which we uphold. However, any expenditure incurred by the assessee for earning such income could be allowed to it. AO has to determine the net interest income earned by the assessee on such investment with bank, and only thereafter that income has to be excluded from the admissibility of deduction under section 80P(2) of the Act. Earning of interest income u/s 244A since this income is not attributable to the activities of the assessee-society, the same is not an eligible income for exemption. AO has rightly made this addition. As regards charging of interest under section 234A and 234B are concerned, they being mandatory provisions, levy of interest is consequential.
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2019 (1) TMI 850
Undisclosed on-money payment for purchase of immovable property - request of the assessee of providing opportunity of cross examination with the sellers who have stated to have received on-money - Held that:- Assessee is aggrieved with the addition for unaccounted investment of ₹ 7,00,000/- and ₹ 1,02,45,000/- for the alleged on-money payment for the purchase of land from Shri Abdul Wahid Khan and Shri Jhanak Singh for Assessment Year 2008-09 and 2011-12 respectively. The common facts are that the assessee purchased immoveable property from Shri Abdul Wahid Khan and Shri Jhanak Singh. Both these persons stated on oath before the A.O that they have received the on-money in cash at ₹ 7,00,000/- and ₹ 1,02,45,000/- over and above the consideration mentioned in the registered sale deed at ₹ 8,40,000/- and ₹ 44,55,000/- respectively. During the course of appearing it has been prayed by the assessee that no opportunity of cross examination was provided to the assessee with Shri Abdul Wahid Khan and Shri Jhanak Singh. Revenue has not raised any objection to this request. We in the interest of justice are of the view that assessee deserves to be given an opportunity to cross examine both the sellers with whom she transacted to purchase immovable property. Unexplained investment in jewellery - Held that:- In view the CBDT Instruction No.1916 dated 11.5.1994 gave the benefit of 800 gram of gold jewellery treating it to be belong to the assessee, her husband and two sons comprising of 500 gram for lady assessee, 100 gram each for three males. Now the assessee is in appeal challenging the remaining amount of addition for 1227 grams of gold jewellery. The assessee pleaded casually submitted that the assessee belongs to a rich family and such acquisition of gold jewellery are quite reasonable in such families. We are not inclined to give any benefit to this contention of the assessee as it was not supported by any facts, evidences or any other details which could prove the source of the unexplained gold jewellery. We therefore in the given facts and circumstances of the case are of the considered view that the CIT(A) has rightly sustained the addition of unexplained gold jewellery of 1127 grams and the same needs to be confirmed. In the result Ground No.1 raised by the assessee stands dismissed. Addition for unexplained cash amount - Held that:- This cash amount was found in the bank locker which was treated as unexplained by both the lower authorities. We are of the view that looking to the Indian customs and accumulation of Streedhan of the assessee for past many years which is normally saved by the Indian ladies, as well as looking to the smallness of the amount and the fact that the assessee is regularly filing income tax return, we find no justification in the addition of ₹ 64,815/- confirmed by both the lower authorities. We accordingly delete the addition of ₹ 64,815/- for the alleged unexplained investment and allow Ground No.2 raised by the assessee.
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2019 (1) TMI 849
Disallowance of the claim of provisions for liquidated damages - Disallowance of the claim of provisions as per Schedule 18, treating the same as not ascertained liabilities - Held that:- Assessee company is maintaining its account in mercantile system. It is also not in dispute that the assessee company is a Government of India undertaking and its accounts are audited by statutory auditor and Controller & Auditor General (C&AG). It is also not in dispute that assessee has claimed that the liability which has accrued though to be discharged at a future date has to be deducted while working out the profit and gains of the business being ascertained liability. When the business liability of the assessee company for making provisions of ₹ 327,22,64,000/- is not disputed and account of the assessee company are audited by statutory auditor and C&AG, the deduction cannot be disallowed merely on the ground that the liability has to be quantified and discharged at a future date. So, in view of the matter, this issue is required to be set aside to the AO to decide afresh in the light of the decision rendered by the Hon’ble Supreme Court in Bharat Earth Movers (2000 (8) TMI 4 - SUPREME COURT). So, grounds determined in favour of the assessee company for statistical purposes. Eligible for deduction u/s 80O - Held that:- When the claim of the assessee u/s 80-O is duly certified by statutory auditor and has been perused by the AO, the AO has erred in estimating the expenditure so as to compute the deduction u/s 80-O of the Act. In these circumstances, this issue is also set aside to the AO to decide afresh after providing an opportunity of being heard to the assessee by identifying the expenditure on actual basis for deduction against the gross receipts for the purpose of section 80-O of the Act. Assessee is also directed to furnish relatable details to the AO to decide the issue in controversy. So, grounds determined in favour of the assessee for statistical purposes. Deduction u/s 80HHC computation - AO also reduced 90% of the receipts by way of lease rental and other operation income including other receipts and interest income to compute the deduction u/s 80HHC of the Act and AO has also set off carry forward business losses for the computation of business profit for the purpose of deduction u/s 80HHC - Held that:- So far as question of including the sale of scrap, surplus stores and sales-tax from total turnover is concerned, this issue has already been settled in favour of the assessee by the coordinate Bench of the Tribunal in in AY 1991-92 [2017 (11) TMI 1144 - ITAT DELHI] onwards in assessee’s own case, wherein the coordinate Bench of the Tribunal directed the AO to recompute the deduction excluding the sale of scrap, surplus stores and sales-tax from total turnover. So, in view of the matter, sale of scrap, surplus stores and sales-tax are ordered to be excluded from the total turnover and AO to recompute the deduction accordingly. So far as question of deduction of profit of 90% on account of lease rental, other operational income, other receipts and interest income by AO/CIT(A) is concerned, it is undisputed fact that partial relief in this regard has been given to the assessee on same items by ld. CIT (A) in AY 2004-05, copy of order is available. So, we are of the considered view that when there is no change in the facts and circumstances of the case, the AO is directed to decide this issue afresh by following the decision rendered by the CIT (A) in AY 2004-05 by following the rule of consistency by providing an opportunity of being heard to the assessee. Deduction claimed by the assessee u/s 80IA as against claimed deduction calculating the profit after setting off brought forward losses - allowed the deduction @ 30% of the resulting profits - AO estimated the deduction of carry forward losses to reduce the claim on assumptive basis - Held that:- Undisputedly, profits of the assessee company from the eligible projects from the previous years have not been considered. No doubt, there was overall business losses in the assessee company but eligible projects u/s 80IA gained the profits from the projects. It is also not in dispute that in AY 2001-02, assessee company was entitled for deduction u/s 80IA which was not given as there was loss under the head ‘business’ or ‘profession’. It appears that AO has only considered the loss of AY 2001-02 but has not considered the profit of the project computed u/s 80IA in respect of AY 2001-02. So, we are of the considered view that AO is to recompute the claim of the assessee u/s 80IA keeping in view the actual figures as per audited accounts of the assessee. Disallowance of claim of the assessee on account of village development and other social welfare expenses on the ground that these expenses are beyond its objectives - Held that:- When the Corporate Social Responsibility (CSR) is recognised activities of the companies, all these expenses are allowable expenses. Prior to Finance (No.2) Act of 2014 from 01.04.2015, all these expenses incurred on CSR were allowable for deduction irrespective of the qualification contained for allowability of the business expenditure in section 37(1) of the Act. Moreover, such expenses have been allowed by the CIT (A) itself in assessee’s own case for AYs 2004- 05 and 2005-06. So, the AO is directed to allow these expenses as deduction by following the rule of consistency as similar expenses have already been allowed by the Revenue itself in AYs 2004-05 and 2005-06. Additions in respect of interest on line of credit extended to APSEB which was not received - Held that:- CIT (A) has also not dealt with the issue and disposed of the ground by stating that this ground is academic in nature. So, in these circumstances, we are of the considered view that this issue is required to be set aside to AO to decide afresh in the light of the decision taken by the Revenue in earlier years. So, ground determined in favour of the assessee for statistical purposes. Disallowance of the assessee u/s 80G - Held that:- When incurrence of expenditure made by the assessee by way of donation to carry out the welfare activities for Nethrajothi and Visually Impaired Women Association is not in dispute, the same are allowable expenses u/s 37(1) of the Act. So, we order to allow the amount of ₹ 2,500/- and ₹ 5,000/- incurred by the assessee company on Nethrajothi and Visually Impaired Women Association respectively.
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2019 (1) TMI 848
Transfer Pricing Adjustment - AMP expenditure - Held that:- For the purposes of clause (f) of sub-section (1) of section 92C, the other method for determination of the arm's length price in relation to an international transaction [or a specified domestic transaction] shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts. The aforesaid Rule provides that that “Other Method” shall be any method which takes into account the price which had been charged or paid for the same or similar uncontrolled transaction with or between non-associated enterprises under similar circumstances. Comparison of the AMP over sales ratio of the assessee with the AMP ratio of Pepsi Co Group on a worldwide basis was nothing but a distorted version of the BLT. In view of the above discussion, we hold that in none of the years impugned before us, the AMP adjustment made by the TPO/Assessing Officer can be sustained and accordingly, same is directed to be deleted. Addition on account of IPA Subsidy received by the Appellant during the subject assessment year from the Government of West Bengal under the West Bengal Incentive Scheme, 2004. - revenue or capital receipt - Held that:- Hon'ble Supreme Court in the case of CIT vs. Chaphalkar Brothers [2017 (12) TMI 816 - SUPREME COURT] held that subsidiary scheme of the State Government to encourage development of multiple theatre complexes is capital in nature and not revenue's receipts there also subsidy was in the form of exemption from payment of entertainment due for the period of three years. Merely because here in this case the quantification of subsidy was based on reimbursement of sales tax, it does not meant that it is a revenue receipt. This view now is well supported by the various decisions as noted above that character of subsidy in the hands of the assessee is the determinative factor having regard to the purpose for which subsidy was given. Accordingly, we hold that the subsidy received by the assessee from the subsidy received under the West Bengal Incentive Scheme of 2004 is capital in nature and cannot be taxed as revenue receipts. Thus, this issue is decided in favour of the assessee.
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2019 (1) TMI 847
Penalty u/s 271D - violation of the provisions of section 269SS in respect of cash loans received by the assessee - Held that:- We find that the assessee specifically submitted before the AO during the course of penalty proceedings, which fact has also been captured in the penalty order, that its business was inoperative for the last 7 years and it had already borrowed loans from Shree Suvarna Sahakari Bank Ltd. and many private money lenders since last 10 years. To meet the financial requirements of repayment, for which the lenders were hard pressing, the assessee had to borrow money from unorganized finance sector in cash, which led to the imposition of the instant penalty. Further, the assessee had a bank liability of about ₹ 50 crore against mortgage of assets of about ₹ 5 crore only, which fact has not been falsified. The submissions made by the assessee in this regard have not been controverted by the AO or the ld. CIT(A) in any manner. When this fact is seen in the light of return filed by the assessee declaring loss of ₹ 4.35 lakhs, it clearly emerges that the loans were taken by the assessee in cash in violation of provisions of section 269SS to meet the financial liabilities. This in our considered opinion constitutes a reasonable cause warranting non-imposition of penalty u/s.271D of the Act in terms of section 273B of the Act. - Decided in favour of assessee.
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2019 (1) TMI 846
Demand u/s 201(1A) - Assessee has denied having received any such show cause notice - Held that:- . In assessee’s appeal before CIT(A), the assessee had taken a ground of appeal to the effect that the AO erred on facts and in law in passing order without giving any opportunity of being heard to the assessee, against the principles of natural law of justice. However, this ground was dismissed by the Ld. CIT(A), merely on the basis of show cause notice mentioned by the AO aforesaid order dated 26.12.2012, despite assessee’s contention that no such show cause notice was served on the assessee. We find that the assessee has denied receiving any such show cause notice from the AO and as there is nothing on record to show that the show cause notice issued by the AO was served on the assessee. In view of the above, we direct the AO to pass a fresh order, after giving reasonable opportunity of being heard to the assessee - Appeal of the assessee is partly allowed for statistical purposes.
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2019 (1) TMI 845
TPA - Addition on account of corporate guarantee - application of CUP method for benchmarking the transactions relating to corporate guarantee - Held that:- We are of the considered view that in order to benchmark the international transactions qua corporate guarantee appropriate comparable data needs to be adopted and benchmarking made in this case on the basis of bank quotes is not sustainable, hence, the TP adjustment made by the TPO/DRP is not sustainable in the eyes of law. We are also not agreed with the contentions raised by the ld. AR for the taxpayer that providing corporate guarantee in case of its loan to its AE is not an international transaction and this issue has been rightly decided by the JTPO/DRP by treating the provision of corporate guarantee as international transaction. We are not inclined to agree with the contentions raised by the taxpayer that since no benefit has been passed on to its AE, there is no need to compensate the taxpayer because in a business transaction there is no concept of free lunch. Because without providing corporate guarantee by the taxpayer no loan would have been given to the AE; that the taxpayer has taken the risk on behalf of its AE which would not have been taken by any third party without consideration and that keeping in view the high risk involved in giving loan by any lender to the AE, the cost needs to be charged from the AE and as such, the commission received by the taxpayer for providing corporate guarantee has to be at arm’s length. However, the amount received by the taxpayer on account of commission charged for providing corporate guarantee to its AE needs to be at arm’s length price in view of the ratio of the order passed by the coordinate Bench of the Tribunal in Glenmark Pharmaceuticals Ltd. (2013 (11) TMI 1583 - ITAT MUMBAI) Transfer pricing adjustment qua SDT of payment of interest - since the rate of interest paid by the taxpayer to its related party is lower than the rate of interest paid by it to the third party lender the transaction of payment of interest by the taxpayer to its related party was at arm’s length - Held that:- When internal CUP was available and the complete data has been supplied for comparable study to the TPO/DRP, the same was required to be applied by providing an opportunity of being heard to the taxpayer. But the TPO has not preferred to make any comment on the rejection of plea of applying internal CUP raised by the taxpayer. Consequently, transfer pricing made by the TPO in respect of SDT payment of interest is not sustainable. When opportunity of being heard is not provided to the taxpayer that as to why internal CUP is not applied by the TPO, the issue is required to be set aside to the TPO to decide afresh after providing an opportunity of being heard to the taxpayer.
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2019 (1) TMI 844
Addition in the sale of property for the purpose of computing the capital gain - FMV determination - Held that:- Once FMV was to be determined by the DVO under section 50C(2) then he has to follow procedure contemplated under the Wealth-tax Act. His opinion was not final, but subject to appeal. His opinion is an estimated guess work determining the value of a property at a particular point of time. If variation between FMV claimed by the assessee vis-ŕ-vis determined by the DVO is less than 10%, then there is no need to accept FMV determined by the DVO. Value disclosed by the assessee could also be stated to be true value representing FMV. In such situation no addition ought to be made. In the present case, variation is only 2.55% which is less than 10%. FMV adopted by the assessee in the sale deed itself does not require to be replaced, with the help of deeming fiction under section 50C(2). This ground of appeal and delete addition from the full sale consideration for the purpose of computing capital gain in the hands of the assessee. - Appeal of the assessee is allowed.
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Customs
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2019 (1) TMI 838
Waiver of Penalty imposed on CHA - whether the respondent was not required to verify and ascertain the address and details of the importers? - smuggling - over-valuation of goods - Regulation 13 of the Customs House Agent Regulation, 2004 - Held that:- The reference to the verification of antecedents and correctness of Importer Exporter Code (IEC) Number and the identity of the concerned exporter/importer, in the opinion of this Court is to be read in the context of the CHA s duty as a mere agent rather than as a Revenue official who is empowered to investigate and enquire into the veracity of the statement made orally or in a document. If one interprets Regulation 13(o) reasonably in the light of what the CHA is expected to do, in the normal course, the duty cast is merely to satisfy itself as to whether the importer or exporter in fact is reflected in the list of the authorized exporters or importers and possesses the Importer Exporter Code (IEC) Number. There is nothing in the Regulations nor in the Customs Act which can cast such a higher responsibility as are sought to be urged by the Revenue. In the absence of any indication that the CHA concerned was complicit in the facts of a particular case, it cannot ordinarily be held liable. The judgment of the Andhra Pradesh High Court in Commissioner of Customs Central Excise v. H.B. Cargo Services [2011 (3) TMI 816 - ANDHRA PRADESH HIGH COURT], does not apply to the facts of present case, as in that case, the facts reflected in paras 5 and 9 facially show that the CHA played an active role - this Court is of the opinion that the decision in H.B. Cargo Services does not apply in the present case. Appeal dismissed - decided against appellant.
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2019 (1) TMI 837
Refund of excess duty paid - N/N. 172/89-Cus., dated 29-5-1989 - Classification of imported goods - Epoxy stator coil for their power plant - classified under CTH 8503 or under CTH 8544.11? - Held that:- Though originally at the first round, the petitioner failed to succeed, the fact remains that after remand by the Apex Court, the CESTAT by order in M/S. KARNATAKA POWER CORPORATION LTD. VERSUS CC, CHENNAI [2016 (3) TMI 296 - CESTAT CHENNAI], found the classification issue in favour of the petitioner by specifically holding that the goods imported under the Bills of entry are epoxy stator coils classifiable under 8503 and not under 8544. Therefore, the Tribunal allowed the appeal with consequential relief. There is no dispute that the above said order of the Tribunal has become final, as no further appeal is filed by the Revenue against the said order. When such being the position, more particularly, when the classification issue has reached its finality in favour of the petitioner, there is no justification on the part of the respondents in keeping the refund claim of the petitioner pending all these years. The writ petition is disposed of with a direction to the respondents to pass orders on the refund claim filed by the petitioner, based on the order already passed by the CESTAT as well as the notification issued by the Revenue in Notification No. 172/89-Cus., dated 29-5-1989.
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2019 (1) TMI 836
Misdeclaration of imported goods - hot/cold rolled stainless steel, coils/sheets grade 304 - confiscation - penalty - Held that:- We have perused the certificate dated 17.09.2009 issued by overseas supplier of goods and also End-use certificate dated 15.01.2010 issued by the Jurisdictional Range Superintendent. Both the certificates confirmed to the fact that the goods imported by the appellant were scrap items only and used for melting purpose in the induction furnace, for further manufacture of the final products. We also find that the department had not sought for any assistance from the technical expert in the field to ascertain whether goods in question were scrap or some other articles, which were not usable for melting purpose. However, decision with regard to nature of the goods cannot be ascertained by eye estimate and an expert opinion is required for ascertaining such facts. Thus we are of the view that customs examination report, without obtaining the expert opinion, cannot be the reason to determine the nature of goods and that mere agreement by the appellant or his employee with the contents of such examination report cannot be considered as conclusive proof in support of claim of revenue regarding confiscation of goods, payment of fine and penalty. Redemption fine and penalty not imposable - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 835
Imposition of penalty under Section 112(b) of the Customs Act, 1962 - Held that:- In absence of finding on liability of goods for confiscation, Section 112 of the Act cannot be invoked for imposition of penalty - In the present case, the situation is entirely different in as much as, there was proposal in the show-cause notice both for confiscation of goods and for imposition of penalty, which were confirmed by the adjudicating authority through a reasoned and speaking order. The provisions of Section 112(b) of the Act for imposition of penalty on the appellant rightly invoked - appeal dismissed - decided against appellant.
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2019 (1) TMI 834
Valuation of imported goods - Cold Rolled Grain Oriented Electrical Steel Sheet, Grade M-4 and Grade M-5 - rejection of declared value - enhancement of value based on the contemporaneous imports - Held that:- It is evident from the available records that no consent letter was given by the respondent for assessment of the subject Bills of Entry at enhanced value. Thus, under such circumstances, the proper assessing officer was under statutory obligation to pass of speaking order on the reassessment done, which is contrary to the self assessment done by the importer - Admittedly, in this case, the provisions of Section 17(5) have not been complied with by the department and thus, the declared value cannot be enhanced arbitrarily - appeal dismissed - decided against Revenue.
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2019 (1) TMI 833
Valuation - determination of assessable value of export goods - Iron Ore Fines - Held that:- Tribunal had already decided the issue of determination of duty of export goods, namely, Iron Ore Fines, and observed that for the period after 1-1-2009, the said goods be assessed to duty adopting the FOB Price, in the case of M/S. SESA GOA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, BHUBANESWAR-I [2014 (4) TMI 658 - CESTAT KOLKATA] - Following the same, the said issue is decided in favor of the Revenue and against the Respondent. Whether duty be calculated on ‘Wet Weight’ basis, under which the Assessee/Respondent agreed to supply the goods to the overseas purchaser or on the transaction value of the goods on ‘Dry Weight’ basis for the period after 13-6-2008? - Held that:- The export goods namely, Iron Ore Fines, be assessed to duty, adopting the criteria of ‘Dry Weight’, as agreed to between the Assessee/Respondent and the overseas purchasers - this issue is decided in favour of the assessee and against the Revenue. Decided partly in favor of Revenue.
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Corporate Laws
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2019 (1) TMI 873
Increase in authorized share capital - failure to submit the e-From 5 - Held that:- Considering the reason furnished for not filing the such e-form 5 for the years 2010, 2012 and 2013 and also the submissions made by the petitioner it is observed that the Petitioner company itself admitted its fault for deliberately / intentionally not filing the required e-form 5 within the stipulated time limit vide its contention that various other forms were filed during the said period in spite of the fact that e-form 5 was also very much in operation / existence till 31.03.2014 for filing the same pursuant to the increase in the share capital by the Petitioner Company. There is no dispute that the authorized share capital was increased when the provisions of the Companies Act, 1956 were in vogue and the petitioner was required to deposit fee along with documents / form in terms of the Rules, as in place then but the fact remains and also conceded by Mr. Chopra that the petitioner had filed the e-Form only in the year 2014 after the Rules of 2014 were framed. If that be so, the fee as payable under the said Rules (of 2014), need to be deposited by the petitioner, as it is clear from the reading of the Rules that it is the fee, as applicable at the time of actual filing of the documents / Forms, which were due to be filed under the Companies Act, 1956 shall be payable. So it is the fee as in vogue on the date of filing of the documents / forms that shall be payable. We agree with the stand taken by the respondents in the counter affidavit.
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2019 (1) TMI 871
Sale of movable and immovable property of the company in liquidation - possession of the immovable property to the auction purchaser - Held that:- The Official Liquidator has prayed through this application that since the property is being sold @ ₹ 28,10,00,000/- after receiving the offers from the intending buyers and even after the inter-se bid and the creditors who are also arrayed as respondents No.1 to 5 have raised no objection in this regard, therefore, the sale in favour of the highest bidder be confirmed and he may be allowed to hand over possession of the immovable property to the auction purchaser after receipt of the balance sale proceeds as per terms and conditions of the sale and also to execute requisite document in favour of the successful bidder. After hearing the Official Liquidator and the counsel appearing on behalf of the secured creditors, the application deserves to be allowed because there is no allegation of any kind of malafide of process of bid from any quarter and the amount of bid is much more than the reserved price. Consequently, the application is hereby allowed and sale in favour of the highest bidder i.e. M/s Tynor Orthotics Pvt. Ltd. is hereby confirmed. Official Liquidator is also allowed to hand over the possession of the immovable property to the auction purchaser but after the receipt of the balance sale proceeds from it as per the applicable terms and conditions of the sale and also to execute the requisite documents in favour of auction purchaser. Since the auction purchaser is also present in Court and has submitted through its counsel that they would deposit the remaining balance amount with the Official Liquidator, the Official Liquidator is directed to complete the process within a period of 15 days from the receipt of certified copy of this order.
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2019 (1) TMI 870
Oppression and mismanagement - transmission of shares of shares - Held that:- We are not satisfied with the version of learned counsel for the appellant that these shares were transferred as per arranged arrived at between 2nd appellant and 2nd respondent. No proof for such arrangement has been produced before this Tribunal. Further 2nd appellant has not produced the transfer forms by which these shares were transferred and further the appellants have stated in their reply before the NCLT that the shares were purchased as contemplated under law. Further there is no averment or documentary evidence to show that any consideration was paid by 2nd appellant for the shares in question. Therefore, we see no illegality in the impugned order passed by the NCLT on this issue. We also observe that the shares have been directly transmitted in the name of 4th appellant without adopting proper procedure. We are in agreement with the directions given by NCLT on this issue to enter the names of all the legal heirs of the deceased Thampi Krishna equally including 4th appellant. No notice was served to the Respondent or any other shareholders. Further the appellants have not placed the Notice or the Minutes of such a Meeting thereby confirming that no General Meeting took place. Learned counsel further stated that Form 32 filed by the Company does not have any Board Resolution, but merely the consent of 2nd appellant to act as the Managing Director. Further the Board Resolution filed with Form 23 was signed by 2nd appellant himself, thereby violating the provisions of Section 300 of Act,1956 which prohibits an interested director from participating or voting in a meeting in which he is interested. We have heard the parties on this issue. We observe that No notice was issued to Respondent and shareholders for General Meeting for approval of 2nd appellant as Chairman. Further no minutes have been placed of such a meeting. Therefore, there is no illegality on this issue in the impugned order. In view of the aforegoing discussions and observations the appeal is set aside. Interim order passed, if any, is vacated. The impugned order dated 18.4.2017 is upheld.
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2019 (1) TMI 869
Approval of the scheme of arrangement - Held that:- The arrangement is only for transfer of money from general reserve to the credit of profit and loss account. Since the amount is accumulated in the general reserve over the years, it is thought fit to transfer this amount to the profit and loss account by means of an arrangement after re-classification and amount lying debit side in the profit and loss account will be written off. Now, the transfer of certain amount to the general reserve whenever dividend is declared is not made compulsory under the provisions of the Companies Act, 2013. It is only optional. The transfer of funds from general reserve to the profit and loss account can be by way of arrangement between the company and its members. The arrangement is a broad term and the proposed transfer is well within four corners of arrangement. So the same can be approved. The petitioner-company filed a memo dated November 14, 2018 along with no objection issued by the BSE and NSE. However, as per letter issued by the BSE, the petitioner-company after approval by the Tribunal has to comply with the directions issued by the BSE in the letter dated August 1, 2016. In the light of my above discussions, the arrangement can be approved subject to compliance with directions issued by the BSE in the letter dated August 1, 2016. Further the scheme is not opposed to public policy and no objection received from shareholders or creditors. Therefore, the scheme of arrangement can be approved.
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Insolvency & Bankruptcy
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2019 (1) TMI 843
Corporate Insolvency Resolution Process - existence of dispute - Held that:- Demand notice under Section 8(1) dated 7th February, 2017 was issued earlier, referring to the invoices issued on 13th April, 2014, 2nd June, 2015, 30th September, 2015 and 23rd June, 2016, relating to which two months’ time was granted by subsequent notice dated 5th May, 2017. The application under Section 9 was filed on 31st March, 2017 i.e. much prior to the period of 60 days’ time granted by notice dated on 5th May, 2017. From the aforesaid fact, we find that the Respondent since 27th June, 2016 raised dispute about ineligibility of banker whose bank guarantee was given by the Appellant and which was not in accordance with the agreement. There is nothing on the record that the Appellant, thereafter, took correctional measure and communicated it to the ‘Corporate Debtor’. From the aforesaid facts, it appears that there is existence of dispute since 2016 and the Appellant also granted time to the Respondent 60 days by their notice dated 5th May, 2017, but application under Section 9 was filed prior to the said period. For the reason aforesaid, no interference is called for against the impugned order. The appeal is accordingly dismissed.
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2019 (1) TMI 842
Corporate insolvency process - default in payment of dues - settlement of claim - Held that:- From the ‘Settlement Deed’ filed it appears that e-stamp was purchased on 30th October, 2018 at 01:41 PM and the settlement was reached on 1st November, 2018. Thus, it is clear that the parties have reached for settlement much prior to the date of admission of application on 13th November, 2018. From the aforesaid fact, it is clear that there was no default of payment on the part of the appellant as on 13th November, 2018 and thereby no occasion for the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench, Chandigarh to admit the application under Section 7. Order (s) passed by Ld. Adjudicating Authority appointing ‘Interim Resolution Professional’, declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the 1st Respondent under Section 7 of the I&B Code is dismissed.
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2019 (1) TMI 841
Corporate Insolvency Resolution Process - Held that:- From bare perusal of amended sub-section (4) of Section 30 particularly proviso therein, it will be apparent that though amended subsection (4) of Section 30 came into force from 6th June, 2018, it is applicable to all ‘Resolution Plans’ which were not approved by the ‘Committee of Creditors’ or by the Adjudicating Authority. In the present case, as we find that the ‘Resolution Plan’ has not been approved by the Adjudicating Authority and with the assent of more than 72% of the voting shares, the ‘Committee of Creditors’ wanted to approve the plan, and in absence of any allegation that the sole ‘Resolution Applicant’ is ineligible under Section 29A of the ‘I&B Code’, we hold that the Adjudicating Authority rightly asked the ‘Resolution Professional’ to place the matter before the ‘Committee of Creditors’ in terms of amended subsection (4) of Section 30 for its consideration in accordance with the said provision. We affirm the impugned order dated 11th June, 2018. We exclude the period of pendency of this appeal i.e. from 9th July, 2018 till the date of this judgment, apart from the exclusion of period already allowed by the Adjudicating Authority for the purpose of counting the period of 270 days. The ‘Committee of Creditors’ are directed to consider the ‘Resolution Plan’ in question, whereinafter the ‘Resolution Professional’ will place the matter before the Adjudicating Authority for order under Section 31 of the ‘I&B Code’ on an early date.
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2019 (1) TMI 840
Corporate insolvency resolution process - period of limitation for filing an application - Held that:- In the present case, the right to apply under Section 9 of the I&B Code accrued to the respondent since 1st December, 2016 when the I&B Code came into force. Therefore, we find that for triggering the application under Section 9, the application is within the time limit. So far as the claim is concerned, it is for the ‘Interim Resolution Professional / Resolution Professional’ to decide the claim, which may be corrected by the Adjudicating Authority if so required, and in appropriate case, he may decide whether the claim is time barred or not. In the present case, it is not the case of the appellant that there is no debt payable in the eyes of the law. In this case an amount of ₹ 1,99,27,145/- was payable together with interest @ 18% per annum as claimed by the respondent. This claim was made initially in the year 2014 when the company petition was filed, which was disposed of due to certain defects in the earlier application on 1st August, 2017. Therefore, the present application cannot be stated to be barred by limitation and on the other hand we find there is continuous cause of action.
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2019 (1) TMI 839
Corporate insolvency resolution process against the corporate debtor - outstanding debt - Application barred by limitation - Held that:- Instant application has been filed on February 26, 2018 which is within three years reckoning from December 1, 2016 and the amendment by which the Limitation Act has been applicable to the I and B Code, was brought into force on June 6, 2018 which operates prospectively. Therefore, keeping in view the facts and circumstances of the case and the legal position stated above, it is held that the instant application is not barred by limitation, the plea taken by counsel for the corporate debtor that the application is suffering from delay and laches is devoid of merits and stands rejected. The operational creditor has fulfilled all the requirements of law for admission of the application. This Bench is satisfied that the corporate debtor has committed default in making payment of the outstanding debt claimed by the operational creditor. Therefore, petition is admitted and the commencement of the corporate insolvency resolution process is ordered which ordinarily shall get completed within 180 days, reckoning from the day this order is passed.
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PMLA
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2019 (1) TMI 832
Offence under PMLA - provisional attachment order - criminal proceedings already pending against accused parties - Held that:- Appellants are bona-fide purchasers and they have not done anything against law. Furthermore, the Appellants are not involved in any crime or money laundering and the Appellants are law abiding citizens running an organization in the field of textile business, with the family business being there for more than 85 years. No case of money laundering against the appellants is made out. The prosecution complaint under PML Act, 2002 was filed by the respondent against Ramesh Pothy with mala-fide intention and after thought on the date of passing the provisional attachment order. It is of the opinion that complaint filed against Ramesh Pothy is not sustainable and is filed after-thought as the IO has failed to trace the amount paid by the appellant to the family members of Late Sridhar. In order to save its skin, the complaint against the Ramesh Pothy has been filed. This is because of the reasons that the appellants are not directly or indirectly involved in the money laundering. They have no direct link or nexus with deceased who has now passed away. The appellants have no objection if criminal proceedings already pending against accused parties may continue as per law. The appellants despite of above are agreeable to deposit a sum of ₹ 6,47,25,000/- as value assessed by the ED in the Investigation Report with the respondent (without prejudice) in order to secure the entire value of the property filed by the ED in the reason to believe. The figure mentioned by the hearing officer in the impugned order is fanciful and accepted as per the case of ED in subsequent pleadings. The real figures are mentioned in the reason-to-believe on the basis of which the provisional attachment order was passed. The said figures could not have been changed. The appellant is directed to deposit a sum of ₹ 6,47,25,000/- with the respondent without prejudice within the period of six weeks from today as security amount. In case the final orders are passed against the accused, the said amount shall be kept by the ED. In case, the prosecution complaint filed by the ED under PMLAS is dismissed, the entire amount shall be returned to the appellant with interest accrued thereon. Once the said amount is deposited, the property shall be released forthwith. In the light of above, all the appeals filed by the Appellants are allowed and the impugned order dated 29.12.2016 is set aside qua against the Appellants so as the provisional attachment order.
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2019 (1) TMI 831
Offence under PMLA - Provisional Attachment Order - current status of the property attached - Held that:- The documents would show that the appellant and her family members were residing in the said house. No useful purpose would be served if the said property is lying vacant for number of years when the trial against her husband is concluded, but on the other hand, the appellant is prepared to deposit the reasonable use and accommodation charges for residing in the said property. The respondent on the date of taking the possession was fully aware that the appeal is coming up for hearing for consideration on 14.8.2018, however, the possession was taken prior to the hearing of the admission of the appeal. The appellant has only come to know about the same on 13.8.2018. As far as movable properties are concerned, the IO and the counsel was unable to provide the details of the valuation of said properties. We are of the view that the value of the same are reasonably offered by the respective appellants no. 2 and 3 as well as Dhanik Lal Mandal, except the value of the movable property as per the suggestion of the appellant. The proposal given by the learned counsel with regard to one of the movable properties and other properties is allowed. The said properties are released accordingly subject to the deposit of amount suggested by the appellant with the respondent within a period of eight weeks with the respondent. With regard to immovable property is concerned where the appellant Smt. Rajanti Devi and her family members are residing, the value of the said property as per respondent is ₹ 15,31,729/-. We direct that Smt. Rajanti Devi shall deposit a sum of ₹ 3,000/- (Rupees three thousand only) as use and accommodation charges every month on 7th day of calendar month with the respondent. As far as arrears from the date of impugned order i.e. from July to December, 2018 is concerned, the same shall be deposited by the appellant within eight weeks from today.
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2019 (1) TMI 830
Offence under PMLA - provisional attachment order - Held that:- It is nothing less than a case of daylight robbery by the Sandesara Group of companies, including Sterling Biotech Limited and their respective owners. As mentioned, large number of properties have been mortgaged with the above mentioned banks and financial institutions, who are admittedly the secured creditors of the said amount. Some of them are public sector banks. The money due must go to the banks so that the banks should run the system in smooth manner. At present, no-one is known when they would return back and when the extradition proceedings are initiated against them and who will pass the orders thereon. Trial may take number of years. Therefore, blocking the process to receive the loan cannot be stopped as suggested by the ED. The present case is a classic example as to how the public money has been swindled by these groups and individuals. No one knows when enquired why they have left the country and how they have managed to flee recently in pending investigation by various agencies, no one is aware whether they will ever return to home country and pay their debts, every one appearing is clueless on this question. Thus, the submission of ED can be accepted that unless the trial of accused parties is over, mortgage properties against the loan amount should not be dealt with. The borrowers will celebrate the said order if their properties to be kept in safe heaven for couple of decades In the light of above, till the next date of hearing, operation of the impugned order with regard to the mortgaged properties shall remain stayed. However, the Provisional Attachment Order dated 29th May, 2018 shall continue. With regard to the other properties status quo shall be maintained by all the parties. It is directed that CIRF process under the Insolvency Code shall continue.
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Service Tax
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2019 (1) TMI 826
Non-payment of service tax - services received from abroad in respect of Management Consultancy Services - Export Sales Commission - GTA services - Held that:- It is also undisputed that the returns were filed by the appellant with the authorities indicate such debits made towards service tax liability on GTA services. As was the law during the relevant period i.e. upto 18.04.2006, service tax liability on GTA services needs to be discharged by the service recipient. A clarity as to whether the said service tax has to be discharged by debit in CENVAT Credit account or by cash was made by an explanation inserted on 18.04.2006 - As regards the amount of tax liability post 18.04.2006, which the appellant assessee should have paid through PLA or cash, we do find that appellant has been keeping the department informed about the discharge of tax liability in their returns. It cannot be said that appellant had suppressed or misstated any information or evaded tax. Having debited the amount in CENVAT Credit, the intention of the assessee is very clear that he wanted to discharge the service tax. This being the factual position, we hold that the demand of service tax liability under GTA services post 18.04.2006 is hit by limitation. Management Consultancy Services and Export Sales Commission - Held that:- It is a well settled law that prior to 18.04.2006, no service tax liability arises on the recipient of services in India as provisions of Section 66A were brought into statute w.e.f. 18.4.2006. In view of this, the demands raised on the appellant for the period pre 18.04.2006 is unsustainable and liable to be set aside - For the demand of the tax liability post 18.4.2006, it is seen from the records that appellant is a manufacturer of various excisable products and have availed the expert knowledge of Management Consultancy and paid export sales commission to various agents for marketing their goods abroad. These two services are directly related to the manufacture and clearance of the products, hence appellant can avail the CENVAT Credit of the service tax paid on these services, even under reverse charge mechanism - the demand of service tax liability for the period post 18.4.2006, we hold that it is hit by limitation but at the same time we hold that the demand for service tax liability if any within the period of limitation from the date of issuance of show cause notice is liable to be discharged with interest and appellant is liable to avail the credit of tax amount - Since the issue involved in this case was purely of interpretation, we hold that no penalty is leviable on appellant. Any activity undertaken between DTA and EOU units cannot be considered as services rendered to any outsider, in fact it would amount to self service. We find that the adjudicating authority was correct in coming to such a conclusion and we do not find any reason to interfere in reasoned findings given by him to drop the demands raised on this account. In short, Revenue s appeal is devoid of merits and stands rejected. Appeal dismissed - decided against Revenue.
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2019 (1) TMI 825
Failure to discharge service tax - amount collected but not paid to the Government - recovery alongwith interest and penalty - extended period of limitation - Held that:- The appellant had neither disputed liability of Service Tax on supply of the Tangible Goods Service nor refuted the allegations that the Service Tax amount has been collected from the customers, as is evident from the invoices enclosed with the appeal memorandum. Only reason cited for non-payment of Service Tax, though collected, was due to financial difficulties. The appellant had continuously failed to discharge the Service Tax from October-2010 to March-2014 even though they had collected the Service Tax amount from their customers - extended period of limitation is applicable and penalty confirmed - appeal dismissed - decided against appellant.
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2019 (1) TMI 824
CENVAT Credit - input services were consumed at Head Office Kanjurmarg office - denial of credit on the ground that the branch offices were not registered - Held that:- The taxable services were provided from the branch offices and the input services on which credit have been availed at their Kanjurmarg offices had been utilized in providing the taxable output service. However, detailed verification of records necessary. Merely because the branch offices were not registered, hence, Cenvat credit availed on input services used for providing output services cannot be denied to the appellant when the centralized billing and accounting system was undertaken from the Kanjurmarg office. The impugned order is set aside and the appeal is allowed by way of remand to the adjudicating authority to verify the claim of the appellant - appeal allowed by way of remand.
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2019 (1) TMI 823
Classification of services - Renting of immovable property service or not? - appellant rented its property to State Bank of India on lease basis against receipt of monetary consideration - Held that:- There are contrary findings in context with the issue by the adjudicating / appellate authority inasmuch as the appellant had vehemently contested that it did not receive any amount from SBI towards rent for letting out the property. Thus for ascertaining the factual aspect, the matter should go back to the original authority for a fresh fact finding with respect to rent amount received by the appellant - appeal allowed by way of remand.
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Central Excise
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2019 (1) TMI 822
Condonation of delay of 203 days in filing the appeal - appeal could not be filed due to restructuring of the respondent in view of introduction of Goods and Services Tax regime - Held that:- In the present facts, it is found that because of the introduction of GST regime, the entire department has to be restructured. Thus, even though approval had been taken on 21st June, 2017 to challenge the impugned order dated 17th March, 2017 before this Court, the same could not be done by the Commissioner of Service Tax, as the reorganisation became effective from 1st July, 2017. It is only thereafter that the applicant started the process and filed the accompanying Appeal. The delay is sufficiently explained and is rightly condoned - Notice of Motion is allowed.
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2019 (1) TMI 821
Wrongful availment of CENVAT Credit - input - Linear Alkyl Benzene (LAB) - It was alleged that LAB was not at all utilized as input in the final product, and therefore, the assessee wrongly availed the Cenvat credit of duty paid on such input i.e. LAB - Held that:- It is required to be noted that as such the matter was remanded to the learned Commissioner (Appeals) for the very purpose by specifically observing that the onus is on the Department to prove that the assessee wrongly availed the Cenvat Credit on the tax paid on LAB, which was used in the input of the final product, and therefore, unless and until the Department was able to prove that in the final product the LAB was not used/utilized at all, the Department was not justified in holding that the assessee wrongly availed the Cenvat Credit on LAB. So far as some of the statement is concerned, which are relied upon by the original adjudicating authority while passing the impugned order, the Learned Commissioner (Appeals) specifically observed that they are restricted statement, and therefore, the same could not have been relied upon. Appeal dismissed - decided against appellant-Revenue.
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2019 (1) TMI 820
Valuation - manufacture of Branded Chewing Tobacco - classification of the goods - enhancement of rate of tax - change of duty structure - Rule 6 of Chewing Tobacco Rules - case of Revenue is that the appellant is not manufacturing JST and their product is only BCT - Held that:- Admittedly, in this case, no sample was drawn to find out the composition of the product, in that circumstance, the classification determined by both the sides are on assumptions and presumptions. Although the appellant filed declaration on 2.3.2015 and changed their classification from BCT to JST. The said declaration was rejected by the adjudicating on 4.3.2015, which has been accepted by the appellant and started paying duty on BCT of their product from 1.3.2015. In that circumstance, the benefit of doubt goes in favor of the appellant. The order of the adjudicating authority was reviewed only after introduction of Notification No. 25/15-CE dt.30.4.2015 wherein the duty on JST was enhanced and prior to that period, the duty paid by the appellant on BCT was accepted by the Revenue has not objected the classification during the period 1.3.2015 to 30.4.2015 as BCT. Further, no declaration was filed by the appellant, therefore, the change of classification from 30.4.2015 is not acceptable, if the said notification would not have come into force, in that circumstance, the order of the adjudicating authority would not have reviewed. The classification of the product is as BCT under heading 24039910 of CETA, therefore, the duty against the appellant is not sustainable - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 819
Interest on delayed refund - section 11BB of Central Excise Act, 1944 - Refund/restoration of CENVAT credit - Held that:- Though availment of CENVAT credit, in accordance with the Rules, does not require any permission, the restoration of reversed credit cannot but be with approval of the competent authority. The procedure under section 11B of Central Excise Act, 1944 is brought into play for this limited purpose of authorizing the restoration. Mere reference in the provisions of law pertaining to refund will not enable such debit entries to be adorned with the mantle of duty. It is amply clear from section 11B of Central Excise Act, 1944 that the provisions were legislated for grant of refund of incorrectly debited entries in the account current. Consequently, the interest liability under section 11BB of Central Excise Act, 1944 will arise only on refund of duty paid by such debits in account current. Further, Central Excise Act, 1944 crystalizes liability of duty on excisable goods whereas liability under rule 6 of CENVAT Credit Rules, 2004 devolves on those that were not excisable. Therefore, the mechanics of erasing of ineligible credit on inputs cannot, by any stretch, constitute duty for appellant to claim the privileges attendant on payment of duty. The provisions of the statute does not offer room for any ambiguity that restoration of credit in the CENVAT credit account must be compensated with interest even if such restoration is ordered beyond three months from the date of claim for such restoration - appeal dismissed - decided against appellant.
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2019 (1) TMI 818
Rectification of mistake - case of applicant is that there is no reference to the circular of Central Board of Excise & Customs advising the valuation to be adopted and is silent on the plea that adjustments should precede computation of interest - Held that:- The computation of duty liability requires valuation prescribed in law that is binding on all functionaries under the control of Central Board of Excise & Customs. Likewise, the computation of interest is also to be determined in accordance with law. In disposing of the appeals, we did not find it necessary to reiterate the obvious that the lower authority should follow the provisions of law - application not entertained and is rejected.
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2019 (1) TMI 817
Method of Valuation - Section 4 or 4A of CEA - relays manufactured and cleared - N/N. 9/2002-CE dated 1/3/2002 and 8/2003-CE dated 1/3/2003 - request of cross examination denied - whether the relays manufactured and cleared by the appellant are to be assessed under Section 4 of the Central Excise Act, 1944 as claimed by the appellants or under Section 4A as claimed by the revenue? - penalty under Section 11AC - extended period of limitation. Held that:- The issue in respect of manner of assessment of “Relays” sold in the manner as have been cleared by the Appellants is no longer res-integra. Tribunal has in case of Schneider Electrical India (P) Ltd vs Commissioner Central Excise Nashik [2014 (1) TMI 1642 - CESTAT MUMBAI], where it was held that the appellants are required to affix MRP on the impugned goods. It is an admitted fact the appellants were using the brand name on their goods which did not belonged to them but was owned by someone else - the benefit of exemption under Notification No 9/2002-CE dated 1/3/2002 and 8/2003-CE dated 1/3/2003 has been correctly denied to the appellants. Cross-examination of witnesses - Held that:- The purpose of cross examination is to give opportunity to the person against whom the case has been made out to challenge the evidences produced against him by way of such depositions made and relied upon by the revenue. The purpose of cross examination is not for the acceptance of the evidence by the accusing department (revenue) but to provide opportunity to the accused to test the correctness of depositions made against him and bring out the truth - The view of Commissioner stating that because the depositions made by the sub dealers is acceptable to him, cannot be ground for denying the opportunity of cross examination to the appellants - In case the person whose cross examination is sought is not available or cannot be made available, Commissioner should inform the appellant and also make a specific mention of the same in the order that he will issue. Extended period of limitation - penalty - Held that:- Since issue of limitation has not been adjudged by either the adjudicating authority or Commissioner (Appeal), the matter needs to be remanded back to the adjudicating authority for consideration of the issue on limitation - Since the matter in respect of determination of extended period of limitation is being remanded to the original authority the issue in respect of imposition of penalty under Section 11AC is also remanded to the same authority. Appeal allowed by way of remand.
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2019 (1) TMI 816
Excisability/marketability - Process amounting to manufacture - fabrication of structures from steel pipes, plates, angles, channels, beams etc. - Held that:- It is not the case of the Revenue that the structures have been fabricated by MSEB at some other site and supplied to BHEL for setting up and erection of the thermal power station. Evidences that have been brought on record and accepted by the adjudicating Commissioner reveal that the structures came into existence at site itself after fabrication of the angles, channels, beams and embedded to earth, which are used for setting up of the thermal power plant and part and Parcel of the said thermal plant and do not have separate existence as such, so that it could be removed and used elsewhere as 'structurals' - Besides, as per entry 7308.50, all goods fabricated at site of work for use in construction work at site attracts nil rate of duty. Thus, Revenue could not establish through evidences that the structures which came into existence at the site of thermal power station, are movable in nature or could be dismantled and hence marketable - appeal dismissed - decided against Revenue.
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2019 (1) TMI 815
CENVAT Credit - input/capital goods - M.S. Angles, Bars, Sheets, Beams etc. - scope of SCN - Held that:- The learned Commissioner (Appeals) has discussed the issue entirely in a different manner inasmuch as the appellant had categorically denied that the disputed goods were not used for laying foundation or making structural support of the capital goods - the matter should go back to the original adjudicating authority for proper fact finding regarding nature of use of the disputed goods by the appellant in its factory premises - appeal allowed by way of remand.
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2019 (1) TMI 814
CENVAT Credit - reversal of credit with penalty - requirement to issue SCN imposing penalty - sub-section (6) of Section 11(A) of CEA - input services - environment and pollution control - tour operator and architect - design engineering services - Held that:- It is an admitted fact on record that out of the CENVAT demand of ₹ 14,62,89/-, the appellant had reversed ₹ 8,68,069/- and the said amount had also been appropriated in the adjudication order. Further, as per the requirement of Section 11A(6) of the Act, the appellant also paid penalty @ 1% of the amount of CENVAT credit reversed by it. Since the appellant had already paid the penalty as per the mandate of sub-section (6) of Section 11(A), there was no requirement of issuance of any show cause notice with regard to the amount of CENVAT credit reversed by the appellant - penalty set aside. CENVAT Credit - input services - environment and pollution control service - Held that:- Tribunal in the case of ESAB India Ltd. [] has extended the CENVAT benefit on such service, holding that prevention of pollution within the factory premises is a statutory requirement and credit of service tax paid on such service should be available to the manufacturer - credit allowed. CENVAT Credit - input services - Tour Operator Service - Held that:- The impugned order that such service was availed by the appellant for sending its dealers to outside country on pleasure trip. Since such service is not specifically finding place in the definition of 'input service' under Rule 2(1) ibid, denial of CENVAT credit benefit on Tour Operator Service by the authorities below, is proper and justified - credit not allowed. CENVAT Credit - input services - architect service - Held that:- Architect service has been specifically defined under the Finance Act and works contract/construction service have also been separately defined therein. Since architect service is distinct service and such service is not specifically included in the exclusion part of the definition of 'input service', denial of CENVAT credit on such service is not legal and proper - credit allowed. Appeal allowed in part.
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CST, VAT & Sales Tax
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2019 (1) TMI 813
Refund of the excess input tax credits - grievance of the petitioner before this Court is that the said applications have not been considered so far - principles of natural justice - Held that:- This Court at this stage is not expressing any view as to whether the petitioner is entitled for refund of the excess input tax credit or not, since it is for the first respondent to consider such claim and pass orders on merits and in accordance with law - as the said applications filed as early as on 10.04.2018 were not considered by the first respondent so far, all these writ petitions are disposed of only with a direction to the first respondent to consider those applications and pass orders on the same on merits - petition allowed by way of remand.
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2019 (1) TMI 812
Principles of natural justice - validity of revised assessment - TNVAT Act - main grievance of the petitioner before this Court is that the Assessing Officer did not give an opportunity of personal hearing to the petitioner before concluding the assessment, even though this Court has specifically directed the Assessing Officer to give such opportunity - Held that:- It is seen that the very same petitioner has already filed a writ petition before this Court in the case of STERLING AND WILSON PVT. LTD. VERSUS THE ASSISTANT COMMISSIONER (CT), THE APPELLATE DEPUTY COMMISSIONER (CT) [2016 (2) TMI 1209 - MADRAS HIGH COURT] challenging the order of assessment dated 08.07.2015 passed in respect of the very same assessment year 2013-2014. This Court, by order dated 18.02.2016, disposed the said writ petition, by setting aside the said order of assessment dated 08.07.2015 and remitting the matter back to the Assessing Officer for fresh consideration. The matter is remitted back to the Assessing Officer to re-do the assessment, after giving due opportunity of hearing to the petitioner - petition allowed by way of remand.
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2019 (1) TMI 811
Refund of the pre-deposit amount - appeal was allowed and the assessment periods in question were remitted for reconsideration in a fresh assessment by the OHA/FAA - Held that:- The Court is of the opinion that the principles spelt out in Suvidhe [1996 (8) TMI 521 - SUPREME COURT], as applied in MRF [2018 (8) TMI 995 - DELHI HIGH COURT], squarely apply to the present case - The respondents are hereby directed to ascertain and calculate the amounts which the petitioner is entitled to along with interest, as applicable under the Delhi VAT Act, from the date of decision of the OHA/FAA and refund these amounts to the petitioner, within eight weeks from today - petition allowed.
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Wealth tax
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2019 (1) TMI 810
Concealment of wealth and the penalty imposed accordingly - valuation of property for wealth tax assessment - valuation report of the registered Valuer estimating the value of the property as on 1st April, 1981 rejected - Held that:- Assessee had declared the two immovable properties in the wealth tax return has also offered valuation of such properties. This was based on the valuation report of the registered Valuer estimating the value of the property as on 1st April, 1981. The Wealth Tax Officer did not accept this valuation which was partially sustained in appeal. The Commissioner adopted the standards of the sale of the property in the near vicinity at the same time. It was under such circumstances that the Tribunal did not think it fit to confirm the penalty. We are broadly in agreement in view of the Tribunal.
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Indian Laws
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2019 (1) TMI 872
Arbitration and Conciliation - Petition filed for restraining the respondent from invoking/encashing the performance bank guarantee - effect of declaration of moratorium - interim orders effect - Held that:- Considering the aim and object of the provisions of the Code, it is clear that provisions of declaration of moratorium under the Code, have been enacted for the benefit of corporate debtor to protect it from debt recovery action, endangering, diminishing, dissipating or having adverse impact on the assets of corporate debtor in any manner and the purpose of moratorium includes the protection of assets of the corporate debtor during insolvency resolution process and facilitating orderly completion of the process envisaged during the insolvency resolution process and ensuring the company to continue. In present case, respondent is undisputedly a corporate debtor, as defined in Section 3(8) of the Code, in the proceedings before Appellate Tribunal. But interim order dated 15.10.2018 passed by Appellate Tribunal is not an order passed under Section 14 of the Code. It is explicit from the interim order dated 15.10.2018 passed by the Appellate Tribunal that though moratorium has not been declared with respect to respondent Company, but the interim directions are identical to the provisions of Section 14 of the Code. Therefore, the principle that declaration of moratorium will not cause to stay the proceedings beneficial to corporate debtor, are also applicable in the present case. Interim order prohibits the proceedings against IL&FS (respondent herein) and its 348 Group Companies, which restrains any kind of recovery from the respondent herein, but not the proceedings beneficial to IL&FS, entitling it for recovering any amount from other parties. Sine die adjournment of present case would run contrary to the interest of respondent Company herein, as it would amount the interim stay against the interest of respondent Company. From the combined reading of interim directions contained in order dated 15.10.2018, it is evident that stay has been ordered against the proceedings having adverse effect on the financial resources of IL&FS (respondent herein), therefore, interim order dated 15.10.2018 will not be applicable in present proceedings, for the reasons, as discussed above, as sine die adjournment of present proceedings will have adverse effect on the interest of respondent Company. Therefore, present application is dismissed. It is made clear that observations made in this application shall be confined only for the purpose of adjudication of the issues raised in this application and would not amount, at any cost, an expression of view on merit in favour of either party with respect to issues involved in the main petition under Section 9 of the Arbitration and Conciliation Act. Claims and counter claims in the main petition are to be adjudicated on its own merits, independent of any observations made in present
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2019 (1) TMI 829
Benefit of the amnesty scheme - failure to declare the gold in possession - Rule 126-I(16) of the Gold Control Rules, 1962 (Corresponding to Section 74 of the Gold Control Act, 1968) - Held that:- The statement of objects and reasons makes it clear that over 22 years, the results achieved under the Act have not been encouraging and the desired objectives for which the Act has been introduced have failed. Following the advice of experts, who have examined issues related to the Act, the objects and reasons goes on further to state that this Act has proved to be a regressive measure which has caused considerable dissatisfaction in the minds of the public and hardship and harassment to artisans and small self-employed goldsmiths - the repeal simpliciter, in the present case, does not attract the provisions of Section 6 of the General Clauses Act as a contrary intention is very clearly expressed in the statement of objects and reasons to the 1990 repeal Act. This Court noticed that, in a parallel instance of simpliciter repeal, Parliament realized the grave injustice and injury that had been caused to heirs of LRs of victims of accidents if their petitions were rejected only on the ground of limitation. This being the case, this Court found that a different intention had been expressed and, therefore, Section 6A of the General Clauses Act would not in that situation apply. The show cause notice dated 1-6-1971, which is the subject matter of this appeal, no longer survives - appeal disposed off.
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2019 (1) TMI 828
Conviction of the appellant - Section 21(c) read with Section 29 of the NDPS Act, 1985 - reliability on statements - Section 67 of the NDPS Act - Held that:- In the present case it is accepted that apart from the aforesaid statements of co-accused there is no material suggesting involvement of the appellant in the crime in question. We are thus left with only one piece of material that is the confessional statements of the co-accused as stated above. On the touchstone of law laid down by this Court such a confessional statement of a co-accused cannot by itself be taken as a substantive piece of evidence against another co-accused and can at best be used or utilized in order to lend assurance to the Court. In the absence of any substantive evidence it would be inappropriate to base the conviction of the appellant purely on the statements of co-accused. The appellant is therefore entitled to be acquitted of the charges leveled against him - the orders of conviction and sentence set aside - appeal allowed.
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2019 (1) TMI 827
Maintainability of application - filing of securitization application before DRT without losing physical possession - Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - whether on issuance of notice under Section 13(4) of the 2002 Act, the borrower or any other person aggrieved of the action initiated there under can take recourse to Section 17 of the 2002 Act by filing an application thereunder without losing symbolic or physical possession of the secured asset? Held that:- The issue involved in the present writ petitions is no longer res integra. The Supreme Court in M/s Hindon Forge Pvt. Limited’s case [2018 (11) TMI 498 - SUPREME COURT OF INDIA], against the judgment rendered by the Full Bench of the Allahabad High Court had adjudicated similar proposition - it was held that a securitization application under Section 17(1) of the 2002 Act is maintainable only when actual/physical possession is taken by the secured creditor or the borrower loses actual/physical possession of the secured assets. Further, once the right to approach DRT matures and securitization application under Section 17(1) is filed by the borrower, it is open to the DRT to deal with the same on merits and pass appropriate orders in accordance with law. The remedy available under Section 17(1) of the Act challenging proceedings under Section 13(4) of the 2002 Act would be available without losing symbolic or physical possession - the borrower or any other aggrieved person would be entitled to invoke the jurisdiction of the DRT under Section 17(1) of the 2002 Act on issuance of notice under Section 13(4) of the said Act. Petition allowed - The matter is remitted to the DRT to decide the application under Section 17 of the 2002 Act afresh on merits in accordance with law.
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