TMI Tax Updates - e-Newsletter
January 4, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
TMI SMS
Highlights / Catch Notes
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GST:
Refund of IGST - export of goods - zero rated supplies - Validity of circular No.37/2018-Customs - as per the circular, a person, who has made request consciously for refund of duty draw back, is not entitled to IGST/ITC claims - Sub-Section (3) of Section 16 of the IGST Act, 2017 - Circular cannot override the provisions of law.
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Income Tax:
Addition of interest on Fixed Deposits - Interest amount did not form part of the income of the assessee as the same was liable to be used for the cost of Project by way of adjustment in the last instalment of capital subsidy and the same thus was in the nature of capital receipt being capital subsidy received from the Government of India, Ministry of Power.
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Income Tax:
Nature of expenditure towards Lease hold rent - The onetime payment of the annual rent as per the lease deed is rightly claimed by the assessee as revenue expenditure. AO was not right in holding that the payment during the year relates to land which is capital in nature.
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Income Tax:
Addition u/s 68 - The evidence is compelling that the land deal was actually done by the appellant and the on money was also paid by the appellant and only the name of M/s SMV agencies was placed. Therefore addition confirmed
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Income Tax:
Allowable expenditure - the revised price is an ascertained liability and not a contingent liability - the claim of the assessee u/s 37(1) is allowable particularly since the assessee itself has offered the cessation of liability to tax in the year of crystallization.
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Income Tax:
Disallowance of commission expenses - Though, the payment may be at the convenience of the parties or at the time of availability of funds but the booking the bills after substantial delay proves that these expenditure are not genuine. The confirmation notes and the invoices of brokerage and confirmation note do not prove that services have been rendered.
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Income Tax:
Additions towards alleged bogus purchases - CIT(A) has taken one of the possible method for estimation of profit to settle dispute between the parties and also considering nature of industry and BEP rate has scaled down profit estimated by the AO to 3% on alleged bogus purchases. - Order of CIT(A) sustained.
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Income Tax:
Validity of Assessment u/s 144C(1) - whether the draft assessment order forwarded to the assessee left unsigned - non–signing of the draft assessment order forwarded to the assessee would not be that fatal to invalidate the final assessment order - However, it is found that the same was stamped and signed.
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Customs:
Return of seized documents or not relied upon (No RUD) - Non furnishing of Reply to the Show Cause Notice - According to the petitioner they are material and relevant for preparing their reply to the said show cause notice. - 2nd respondent (Department) directed to strictly comply with the said order in letter and spirit within a period of 30 days
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Customs:
Investigative agency cannot retain the seized documents. Once its completes investigation and issuing of Show Cause Notice, it should return the same or give back photo copy to the person to who it belonged.
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Service Tax:
CENVAT Credit - Service rendered or not - recovery of service tax / credit from the Input Service Distributor (‘ISD’) - Duty demand consequent to denial of credit cannot be raised from an ISD
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Service Tax:
CENVAT Credit - an assessee cannot be compelled to avail the exemption, which in any case is conditional exemption. The revenue did not raise any objection at the time of payment of 100% service tax. It is only when the credit of the same was availed by the assessee such objection came to be raised by the Revenue. - Demand set aside.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (1) TMI 92
Evasion of GST tax liability - Prayer for not to arrest - final adjudication of tax liability has not been made as yet - petitioner submits that they have deposited a sum of ₹ 3.25 crores with the tax authorities and also undertakes to deposit an additional sum of ₹ 3 crores within seven days from date - HELD THAT:- Matter will appear for further hearing one week after vacation. In the event, petitioner deposit a sum of ₹ 3 crores as undertaken and co-operates with investigation in accordance with law and meets investigating officer once in a week and deposits his passport with the said officer, petitioner shall not be arrested in connection with this case for a period of two weeks after vacation or until further orders, whichever is earlier.
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2020 (1) TMI 91
Confiscation of goods and vehicle - section 130 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The petitioner has already paid the amount of ₹ 1,85,248/-, which is more than the amount of fine in lieu of confiscation in terms of the order of confiscation passed under section 130 of the Central Goods and Service Tax Act, 2017, the respondents are directed to forthwith release the conveyance - the petitioner shall cooperate with the respondent authorities and shall furnish the details of Crown Metals as well as other details as may be called for by the respondent authorities. Stand over to 23.01.2020.
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2020 (1) TMI 90
Refund of IGST - export of goods - zero rated supplies - Validity of circular No.37/2018-Customs - as per the circular, a person, who has made request consciously for refund of duty draw back, is not entitled to IGST/ITC claims - Sub-Section (3) of Section 16 of the IGST Act, 2017 HELD THAT:- It is not in dispute that the petitioner exported cotton through seven shipping bills and paid a sum of ₹ 4,80,355/- towards IGST. It is also not in dispute that the statute provides for refund of IGST on export of materials. The only condition is that if the export is made after payment of tax, he is entitled to get refund. According to the petitioner, he has complied with the requirements of Sub-Clauses (a) and (b) of Sub-Rule (1) of Rule 96 of CGST Rules, 2017. Accordingly, he is entitled for refund and it cannot be ignored by citing the circular. The Hon'ble Supreme Court, in a similar circumstance, in the case of Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire Industries [ 2008 (10) TMI 5 - SUPREME COURT ] held that circulars cannot prevail over the statute. Circulars are issued only to clarify the statutory provision and it cannot alter or prevail over the statutory provision. In that circumstance, it is clear that the explanation of provisions of drawback has nothing to do with the IGST refund - In view of that matter, Circular No.37/18-Customs, dated 09.10.2018 cannot have an application in the present case. The respondents are directed to refund the amount of IGST paid by the petitioner for the goods exported from India which are zero rated supplies, within a period of six weeks from the date of receipt of a copy of this order - Petition allowed.
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Income Tax
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2020 (1) TMI 89
Reopening of assessment u/s 147 - addition u/s 68 - whether there has been application of mind, or is it merely a case of change of opinion which forms the basis of the re-opening of assessment, and; whether, the objections of the petitioner have been properly dealt with, and; whether, the AO has acted on mere suspicion, or he had a good reason to believe that taxable income had escaped assessment? - HELD THAT:- AO while making the regular assessment did not undertake the scrutiny that he could have undertaken in respect of the investment into the share capital of the petitioner by M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. Though the identity of the investor M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. may have been established, neither the financial capacity/ creditworthiness of the said investor companies, nor the genuineness of the transaction was examined. Since the two investor companies M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. have been found to be promoted by an accommodation entry provider, most certainly, there was reasonable cause for belief that the monies received by the petitioner from M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. may also be part of the bogus entries provided by them and, consequently, the taxable income of the petitioner had escaped the assessment. The submission of learned counsel that the impugned notice and reasons suffer from non-application of mind, merely because the respondents have failed to take into consideration the fact that the earlier assessment was a scrutiny assessment, is neither here nor there. This is for the reason that the reasons for re-opening are detailed, and clearly bring out the justification and cause for re-opening. Moreover, when we see the original assessment order dated 07.07.2014, we find that there is absolutely no examination or discussion with regard to the genuineness of the transactions undertaken by the petitioner assessee with M/s Shail Investments Pvt. Ltd. and M/s New Delhi Credits Pvt. Ltd. during the Financial Year 2011-12. Considering the circumstances and arguments raised, we find that the order of the Assessing Officer and notice issued under Section 148 read with Section 147 is not illegal. We, therefore, do not find any merit in this petition and dismiss the same, while making it clear that the Assessing Officer shall not be influenced by our aforesaid observations while framing the re-assessment order and he shall proceed independently on the basis of the evidences and other materials brought on his record. - Decided against assessee.
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2020 (1) TMI 88
Reopening of assessment u/s 147 - whether reasons recorded and satisfaction / approval accorded is within the meaning of section 151 ? - HELD THAT:- Approval granted by the Addl. CIT, Range-3, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings issue of notice u/s. 148 of the I.T. Act, 1961 and is not in accordance with section 151 of the I.T. Act, 1961, thus, the notice issued u/s. 148 of the Act is invalid and accordingly the reopening in this is bad in law and therefore, the same is hereby quashed. - Decided in favour of assessee.
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2020 (1) TMI 87
TP Adjustment - adjustment on account of corporate guarantee fee made by the AO and confirmed by the ld. CIT (A) - HELD THAT:- Old amendment vide which Explanation to section 92B has been introduced has been held to be prospective in nature, thus not applicable to the year under assessment. Because ALP of international transactions qua corporate guarantee has been determined by the AO as well as by the CIT (A) merely by relying upon the amendment vide which Explanation to section 92B of the Act by the Finance Act, 2012 has been introduced by treating the same having retrospective effect, which is no more a valid and sustainable legal proposition. When explanation to section 92B of the Act is not applicable to the year under assessment, ALP of international transaction qua corporate guarantee cannot be determined. Furthermore, assessee company has filed the return of income declaring loss of ₹ 1,35,26,955/- as on 27.09.2011 and the flagship of the assessee company has accumulated brought forward losses to the tune of about ₹ 290 crores, there is no question of diversion of profit by the assessee company out of India. Moreover, there is not an iota of material on file to prove that the assessee company has incurred any cost in providing corporate guarantee. Consequently, addition made in this case on account of TP adjustment qua corporate guarantee fee is ordered to be deleted, hence, the appeal filed by the Revenue is hereby dismissed. Since transaction qua corporate guarantee entered into by the assessee company with its AE is held not to be an international transaction, there is no question of determining the ALP of compensation for providing corporate guarantee. CIT(A) has erred in passing the impugned order confirming the order passed by the AO to the extent of determining the ALP of corporate guarantee transaction @ 1% which is not sustainable in the eyes of law. Objections hopelessly time barred having been filed with delay of 512 days - Application filed for condonation of delay is too generic in nature and reasons given in the application for condonation of delay are not acceptable. In any case, facts as to reshuffling of staff of the company and even the Financial Controller and Finance Head have left the company have also not been explained. It is settled principle of law that the appellant/cross objector, as the case may be, is to prove the delay of every single day by giving cogent reasons. So, we hereby dismiss the application for condonation of delay and cross objections filed by the assessee company are dismissed being hopelessly time barred.
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2020 (1) TMI 86
Exemption u/s 11(1)(c) - assessee has failed to get approval of the Central Board of Direct Taxes (CBDT) for exemption u/s 11(1)(c) - HELD THAT:- From the impugned order passed by Ld. CIT(A) it is proved that the said approval has been accorded by CBDT vide letter no. E. No. 180/04/2011-ITA-1 dated 08.02.2016 which is effective for AY 2011-12 and 2012-13, the years under assessment to incur the expenses to the tune of ₹ 9,90,14,418/- and 6,08,87,282/- for AY 2011-12 and 2012-13 respectively by the assessee outside India for the purpose of International Welfare and the same has been ordered to be included in the total income of the assessee society. Since aforesaid factual position has not been controverted by Ld. DR, We find no illegality or perversity in the findings written by Ld. CIT(A) in deleting the aforesaid additions Disallowance assessee society has received foreign contribution from the Government of France within meaning of Section 2(1)(j) of FCRA without filing return qua these contributions in FC-3 to the Ministry of Home Affairs as per FCRA Guidelines - HELD THAT:- Bare perusal of the letter (supra) goes to prove that when a transaction is between Government of India and Government of any foreign country or territory, FCRA is not attracted. When undisputedly, the transaction of ₹ 9,96,35,250 /- and ₹ 9,16,98,000/- for AY 2011-12 2012-13 respectively is a grant given by French Government to the assessee society which is a joint venture of French Government and Government of India, the transaction of transferring the grants is a transaction between both the countries as specified in the letter (supra). Furthermore, vide letter dated 02.01.2014, available at page 21 of the paper book, addressed to Secretary General, Ministry of External Relations, Government of France by Shri Ramesh Bhandari, the then Foreign Secretary, it is categorically made clear that, the assessee society is established for promotion of scientific research etc. will be exempt from payment of income-tax. So, in these circumstances, we find no illegality or perversity in the findings returned by ld. CIT (A). - Decided against the Revenue
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2020 (1) TMI 85
Assessment u/s 153C - satisfaction note prepared prior to the issuance of notice to the searched person - HELD THAT:- In this case, for assessment year 2007-08, the notice u/s 153C has been issued prior to the issuance of notice u/s 153A to the searched person. The CBDT Circular No.24/2015 dated 31.12.2015 has instructed that guidelines issued by the Hon ble Apex Court in the case of Calcutta Knitwears [ 2014 (4) TMI 33 - SUPREME COURT] will also be applicable to proceedings u/s 153C and, therefore, we are afraid that the Revenue has no case in terms of the judgment of the Hon ble Apex Court in the case of CIT vs. Calcutta Knitwears (supra) and the CBDT Circular No.24/2015 dated 31.12.2015. Since, undisputedly, the satisfaction note in the case of the assessee was prepared prior to the issuance of notice to the searched person, the assessment for assessment year 2007-08 becomes null and void because the assumption of jurisdiction u/s 153C is defective. Accordingly, we have no option but to hold that the assessment framed for assessment year 2007-08 was without jurisdiction and is, therefore, unsustainable in law. Non issuance of notice u/s 153C - AY 008-09 - HELD THAT:- We note that the impugned assessment order has been passed u/s 143(3) and no notice u/s 153C has been issued although this year falls within the period of six years when counted from the date of recording of satisfaction note which is deemed date of search. The Assessing Officer should have framed the assessment u/s 153C of the Act for assessment year 2008-09 also and should have at the time of initiating the proceedings against the assessee issued notice u/s 153C of the Act which has not so be done in this case. The issuance of notice u/s 153C is mandatory and is a pre-condition if the case falls within the block period of six years. The assessment order for assessment year 2008-09 is, therefore, unsustainable in the eyes of law. Accordingly, we are left with no option but to quash the assessment for assessment year 2008-09 also. Penalty u/s 271(1)(c) - We have decided the quantum appeal for assessment year 2008-09 in favour of the assessee and have quashed the assessment, the consequential penalty imposed u/s 271(1)(c) also stands deleted
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2020 (1) TMI 84
Addition of interest on Fixed Deposits made by the assessee out of capital subsidy received from the Government of India under Rajiv Gandhi Gramin Vidyutikaran Yojana (in short RGGVY) - HELD THAT:- The interest so earned thus was received by REC as well as all the Implementing Agencies including the assessee-company for and on behalf of the Government of India, Ministry of Power and since the same was to be used for cost of the project by way of adjustment in the last instalment of capital subsidy, the REC as well as all the Implementing Agencies including the assessee-company never had any title or right in the interest so earned as they were under an obligation to use the amount of interest for cost of the Project by way of adjustment in the last instalment of capital subsidy receivable from the Government of India, Ministry of Power. It is thus not a case where the interest income was earned by the assessee-company and the same was applied to discharge any obligation after such income reached the assessee. The amount of interest in question, going by the nature of obligation as stipulated by the Government of India, Ministry of Power in the letter dated 25.09.2008 did not form part of the income of the assessee as the same was liable to be used for the cost of Project by way of adjustment in the last instalment of capital subsidy and the same thus was in the nature of capital receipt being capital subsidy received from the Government of India, Ministry of Power. The interest so earned thus was received by REC as well as all the Implementing Agencies including the assessee-company for and on behalf of the Government of India, Ministry of Power and since the same was to be used for cost of the project by way of adjustment in the last instalment of capital subsidy, the REC as well as all the Implementing Agencies including the assessee-company never had any title or right in the interest so earned as they were under an obligation to use the amount of interest for cost of the Project by way of adjustment in the last instalment of capital subsidy receivable from the Government of India, Ministry of Power. It is thus not a case where the interest income was earned by the assessee-company and the same was applied to discharge any obligation after such income reached the assessee. On the other hand, the amount of interest in question, going by the nature of obligation as stipulated by the Government of India, Ministry of Power in the letter dated 25.09.2008 did not form part of the income of the assessee as the same was liable to be used for the cost of Project by way of adjustment in the last instalment of capital subsidy and the same thus was in the nature of capital receipt being capital subsidy received from the Government of India, Ministry of Power. Keeping in view all the facts of the case in the light of judicial pronouncement as discussed above, we are of the view that the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of interest in question by treating the same as income of the assessee is not sustainable. We accordingly delete the said addition and allow this appeal of the assessee.
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2020 (1) TMI 83
Revision u/s 263 - CIT held that AO's order was erroneous and prejudicial to the revenue for lack of enquiry in respect of the claim of loss - difference between lack of inquiry and inadequate inquiry - HELD THAT:- We note how the AO enquired about the claim of STCL as an investigator as well as accepted the claim by discharging the role of an adjudicator. In such a scenario, if the Ld. Pr. CIT is not satisfied with the line of investigation or if he is of the opinion that AO misdirected himself from the real issue or if the investigation was not carried out as per his standards/depth as suggested then he ought to have conducted enquiry and recorded a factual finding to show that the AO s investigation was erroneous. Without doing so, in our opinion, Pr. CIT cannot hold the assessment order to be erroneous for the reason that AO s investigation was inadequate. When the AO has investigated as in the present case, then the Ld. Pr. CIT without recording a factual finding after enquiry cannot upset the decision of AO as erroneous when he has not himself conducted any enquiry. The revisional jurisdiction of Ld. Pr. CIT u/s. 263 cannot be used to conduct roving enquiries time and again or there will be no finality of the assessment proceeding and the Parliament would not have stipulated the condition precedents in sec. 263 of the Act to invoke the same. We find that before the order of assessment was passed, the AO had required the assessee to furnish transactional documents proving the purchase and sale of all shares held as investment during the year. On examination of the material placed before him by the appellant, the AO was satisfied that the short term capital loss was incurred by the appellant on sale of shares listed on the Bombay Stock Exchange. The appellant had filed before the AO the relevant details and also produced the time stamped contract notes issued by its broker. All the transactions were made through registered share broker at rates prevailing on the stock exchange on the relevant dates. The payment for acquisition of shares and the subsequent sale proceeds were also transacted through the appellant s regular bank account. It is noted that the listed shares were sold within a period of one year from the date of acquisition and therefore the gain/loss was short term in nature. In the facts and circumstances as discussed above therefore we find that the AO had discharged his duties as an investigator as well as that of an adjudicator and applied his mind on the issue before him and taking into consideration the explanation rendered by the appellant, the AO had taken a plausible decision to allow the claim of short term capital loss as made by the appellant in the return of income in consonance with judicial decisions In the present case while passing the assessment order, the AO did not follow a view which can be said to be unsustainable in law rather we would say that it was a plausible view taken by AO after inquiry in line with the judicial precedents cited supra. In the circumstances therefore, the jurisdictional facts as well as law for usurping the jurisdiction, being absent, we hold that the action of Ld. Pr. CIT was without jurisdiction and, therefore, all subsequent actions are 'null' in the eyes of law. We therefore quash the order of Ld. Pr. CIT impugned before us. - Decided in favour of assessee.
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2020 (1) TMI 82
TP Adjustment - adjustment of AMP expenses - TPO had used Bright Line Test as a tool to benchmark the international transaction of AMP expenditure - whether it was an international transaction or not ? - xpenditure incurred on sales and marketing team - HELD THAT:- The Hon ble High Court in Sony Ericsson [ 2015 (3) TMI 580 - DELHI HIGH COURT] had excluded similar expenditure out of the umbrella of AMP expenditure. The assessee has also booked this expenditure separately and the Assessing Officer had aggregated the same with Marketing, Advertisement and Promotion (in short MAP ) expenses and benchmarked the same, treating it to be an international transaction. We find no merit in the order of Assessing Officer/DRP/TPO in this regard and hold that the expenditure booked under the head sales and marketing team totaling to ₹ 24.13 crores, which was incurred by the assessee for spreading awareness of the products dealt in by the assessee, amongst doctors and others as part of direct selling expenditure and was incurred for the business needs of the assessee and is to be allowed as revenue expenditure. Accordingly, we direct the Assessing Officer to allow the expenditure of ₹ 24.13 crores. Expenditure booked under the head Advertising, Marketing and Promotion ( AMP ) - There is no provision either in the Act or in the Rules to justify the application of BLT for computing the arms length price and also in the absence of BLT, the existence of an international transaction vis - vis the AMP expenditure cannot exist. Further, we hold that there cannot be a quantification of adjustment for determining the AMP expenses incurred by the assessee after applying the BLT, to hold the same to be excessive and thereby an existence of international transaction between the assessee and its AE. We find no merit in exercise carrying of Assessing Officer/DRP/TPO in this regard and delete the Transfer pricing adjustment made on account of AMP expenditure. Accordingly, we delete the adjustment on account of transfer pricing analysis of AMP expenditure. Distribution segment - The RPM method identifies the price at which product purchased from the AE is resold to unrelated party; then in the case of resellers, who do not alter the tangible goods and services or use any intangible assets to add substantial value to the property or services i.e. resale is made without any value addition, then in such facts and circumstances, RPM method is to be applied as method to benchmark the international transaction undertaken. We hold so and allow the ground raised by the assessee on this issue. The Assessing Officer is directed to apply the RPM method in order to benchmark the international transaction undertaken by the assessee in the distribution segment, after allowing reasonable opportunity of hearing to the assessee. Subvention income received by its AE - The said adjustment was made by the Assessing Officer in the draft assessment order and objections were rejected by the DRP and final assessment order was passed against the assessee. The assessee has raised Ground of appeal No.7 with regard to non-inclusion of subvention income as part of operating income. Reliance of Safe Harbour Rules - subvention amount received by the assessee before us is operating in nature and the same has to be included as operating income, while computing PLI in the hands of the assessee. The assessee in the present appeal has not raised any issue about its taxability and hence, the said status is not disturbed. This Ground of appeal No.7 is allowed. Depreciation claimed on UPS, computer cables wiring etc. - @ 16% OR 15% - HELD THAT:- We direct the Assessing Officer to allow depreciation @ 16%.
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2020 (1) TMI 81
Disallowance u/s 14A - assessee has made suo moto disallowance - HELD THAT:- Assessee had offered suo-moto disallowance in its return of income, the basis of which was submitted to Ld.AO during assessment proceedings. However, Ld. AO did not consider the same and rejected the methodology adopted by the assessee to arrive at the said disallowance, having regards to the accounts of the assessee. It was incumbent on the part of Ld. AO to arrive at judicious and objective satisfaction as to why the disallowance offered / computed by the assessee was not acceptable. In para-5 of quantum assessment order, Ld. AO has merely recorded a fact of nonsatisfaction without adducing cogent reasons / elaborations as to why the methodology adopted by the assessee was not acceptable. Reliance could be placed on the recent decision of Hon ble Supreme Court in Maxopp Investment Ltd. V/s CIT [2018 (3) TMI 805 - SUPREME COURT] wherein it has categorically been held that recording of satisfaction is a pre-requisite before invoking disallowance u/s 14A r.w.r. 8D. Thus we delete the additional disallowance as made by Ld. AO in the quantum assessment order. The appeal stands allowed.
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2020 (1) TMI 80
Disallowance on account of Lease hold rent paid - Nature of expenditure - revenue or capital expenditure - HELD THAT:- The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. The expenses have been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. Since the asset created by spending the amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for several years, such expenditure should be looked upon as revenue expenditure. In the present assessee s case as well, the expenses have been looked upon as having been made for the purpose of conducting the business of the assessee. The onetime payment of the annual rent as per the lease deed is rightly claimed by the assessee as revenue expenditure. AO was not right in holding that the payment during the year relates to land which is capital in nature. In fact, the assessee is running the mall and hotel constructed on the lease land of Jaipur Development Authority which was given to Vishnu Apartments Private Ltd. In fact, the mall and hotel was constructed by the Vishnu Apartments Private Ltd. The CIT(A) also ignored this fact. Therefore, the order of the CIT(A) is set aside. The Appeal of the assessee is allowed.
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2020 (1) TMI 79
Addition u/s 68 - survey u/s 133A was conducted on the business premises of the assessee in which, certain documents were found and impounded - HELD THAT:- Land deal in question was made by the appellant. Mis SMV agencies is also a company in the same group and the entire management is made by the aforementioned two persons. There is no doubt that a substantial amount of on money was paid and these amounts are clearly written in cash in the papers referred to supra. Books of accounts and other documents of Mis SMV agencies are also prepared by the aforementioned persons and their subordinates in the appellant company. Therefore writing or entering the transaction in those books is entirely within the hands of the appellant. The evidence is compelling that the land deal was actually done by the appellant and the on money was also paid by the appellant and only the name of M/s SMV agencies was placed. Therefore addition confirmed - Decided against assessee Addition u/s 40(a)(ia) - Non deduction of TDS - CIT(A) correctly confirmed the addition made by the AO observing that these are long term leases and contracts on which TDS was to be deducted and the assessee agreed to the disallowance during the course of assessment proceedings. Addition on account of deferred market expenses - AO found that the assessee had claimed as business expenses, some amounts which it claimed to have paid to certain employees of its C F agents. The AO held that these were not business expense - CIT(A) correctly following the decision of the ITAT in assessee s own case for AY 2003-04, confirmed the addition made by the AO, as the ITAT has confirmed the similar disallowance in AY 2003-04. Disallowance towards PF and ESIC - assessee stated that the entire amounts should not be disallowed because the contributions of employers out of the above amounts are allowable deductions - CIT(A), correctly directed the AO to quantify any contributions of the employers in the aforementioned amounts and the same are to be allowed as deductions as per law.
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2020 (1) TMI 78
Allowable expenditure made towards the provision for differential price to the credit of GAIL u/s 37 - HELD THAT:- As decided in own case [ 2019 (11) TMI 1004 - ITAT HYDERABAD] liability of the assessee to pay at the revised price is an ascertained liability and not a contingent liability as held by the Revenue. The assessee was liable to pay the revised charges w.e.f. 1.12.2008 but the revised charges were not finalized though the maximum price which could be revised or increased was mentioned in the communication from GAIL DR s submissions that the price is fixed by the Govt. is also strictly not correct. From copy of the new domestic natural gas price 2014, dated 25.10.2014, it is seen that the cost of the price shall be determined in accordance with the formula given therein and it was also clarified that the cost of the price so determined under these guidelines was not to be applicable where prices have been fixed directly for a certain period of time, till the end of such period. Therefore, we are of the opinion that the claim of the assessee u/s 37(1) is allowable particularly since the assessee itself has offered the cessation of liability to tax in the year of crystallization. Therefore, the appeals of the assessee are allowed.
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2020 (1) TMI 77
TDS u/s 194H - allowability of the bank guarantee commission - addition under section 40(a)(ia) - HELD THAT:- Since the issue is no longer res Integra and has squarely been covered in assessee s own case for the earlier year by the orders of the Tribunal, while respectfully following the same we reach the conclusion that in the absence of any principal agent relationship between the bank issuing bank guarantee and the assessee, the transaction between them is not transaction between the principal and agent so as to attract the tax deduction under section 194H of the Act, and the addition made in this case under section 40(a)(ia) of the Act cannot be sustained. We accordingly allow the grounds of appeal, and direct the assessing officer to delete the addition - Decided in favour of assessee.
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2020 (1) TMI 76
Disallowance of commission expenses - commission was found to be excessive and the genuineness of the same was doubted - HELD THAT:- As before us no evidence were lead to show that the directors of the company Mr. Pankaj Jain and Mrs. Vaishali Jain are capable of obtaining such a huge orders of export of maize for assessee. Their biodata or their credentials were also not shown that they have any experience in the commodity market. There is no confirmation from the importers of the Bangladesh to show that the assessee engaged the above broker for export of maize. The assessee did not produce on its own when the renditions of the services are in doubt. The directors of the broker company to establish that they know the importers in Bangladesh or they have an experience of commodity market. Coming to the ledger account of the above broker it is apparent that the bills of Vidhyashree Buildcon were booked in the month of March when the export has taken place earlier. Though, the payment may be at the convenience of the parties or at the time of availability of funds but the booking the bills after substantial delay proves that these expenditure are not genuine. The confirmation notes and the invoices of brokerage and confirmation note do not prove that services have been rendered. We conquer with the views of the lower authorities that assessee has failed to show the genuineness of the commission payment to M/s. Vidhyashree Buildcon. Thus, we confirm the orders of the lower authorities - Decided against assessee.
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2020 (1) TMI 75
Late filing fees imposed under Sec.234E - assessee had delayed the filing of the statement of the tax deducted at source in Form No. 26Q for the third quarter for financial year 2012-13 - HELD THAT:- Hon ble High Court of Karnataka in the case of Fatehraj Singhavi Vs. Union of India [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] had concluded that the notice under Sec.200A computing the fee under Sec. 234E, to the extent the same was levied in respect of the period of tax deduction prior to 01.06.2015 was liable to be set aside Fees under Sec.234E has been levied in respect of the delay on the part of the assessee for filing her TDS return in Form 26Q for the third quarter of financial year 2012-13 i.e the period prior to 01.06.2015 (the cut of date from which the amendment enabling levy of fees under Sec. 234E was made available in Sec.200A,therefore, we are of the considered view, that in the backdrop of the aforesaid settled position of law, as per which, in the course of the processing of a statement of tax deducted at source under Sec.200A no fees under Sec.234E could be charged for the period prior to 01.06.2015, the aforesaid fees for late filing of TDS statement by the assessee cannot be sustained and is liable to be vacated. Accordingly, we set aside the late filing fee under Sec.234E of ₹ 4,600/- levied by the A.O in the case before us. Resultantly, the order of the CIT(A) is set aside and the late filing fees of ₹ 4,600/- imposed under Sec.234E is deleted - Decided in favour of assessee.
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2020 (1) TMI 74
Additions towards alleged bogus purchases - CIT(A) reduced the rate to 3% from @ 12.50% as made by the AO - Assessee sought further relief - HELD THAT:- In this case, the assessee is into the business of diamond trading. The profit element in diamond trading is around 2 to 3% depending upon nature of trade. Even, the BEP had recommended profit percentage of 2% in case of trading and 3% for manufacturers. AO, considering the nature of business of the assessee had estimated 12.50% profit, whereas the CIT(A) has scaled down estimation of profit to 3% on total alleged bogus purchase. Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. On the other hand, the assessee had also failed to file any comparable cases to support its arguments for lessor gross profit rate. Therefore,CIT(A) has taken one of the possible method for estimation of profit to settle dispute between the parties and also considering nature of industry and BEP rate has scaled down profit estimated by the AO to 3% on alleged bogus purchases. CIT(A) has rightly scaled down addition made by the AO from 12.50% to 3% profit on alleged bogus purchases. Hence, we are inclined to uphold order of the ld. CIT(A) and dismiss appeal filed by the assessee.
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2020 (1) TMI 66
Validity of Assessment u/s 144C(1) - whether the draft assessment order forwarded to the assessee left unsigned - HELD THAT:- Draft assessment order does not carry the force of a final assessment order which results in an enforceable demand against the assessee. Thus, in strict sense of the term, the draft assessment order cannot be treated as assessment order passed under section 143(3) r/w section 144C(3) or section 144C(13) of the Act. Therefore, the non signing of the draft assessment order forwarded to the assessee would not invalidate the final assessment order passed under section 143(3) r/w section 144C(13) of the Act. In any case of the matter, the report of the Assessing Officer furnished before learned DRP clearly states that the office copies of the draft assessment order has been duly stamped and signed. Therefore, non signing of the draft assessment order forwarded to the assessee would not be that fatal to invalidate the final assessment order. The decisions relied upon by the leaned Sr. Counsel are clearly distinguishable on facts In the facts of the present case, there is no dispute that the final assessment order has been duly signed and stamped by the Assessing Officer. That being the case, there cannot be any issue regarding the validity of the final assessment order. - Decided against assessee Income accrued in India - subscription revenue received by the assessee to be in the nature of royalty and bringing it to tax in India - Article 13(6) of the India UK Tax Treaty - HELD THAT:- While deciding the dispute relating to nature of subscription charges received by the assessee in assessee s own case for the assessment years 2008 09 and 2009 10, the Tribunal in the decision reported [ 2014 (7) TMI 899 - ITAT MUMBAI] has held that the amount received by the assessee is in the nature of royalty as per Article 13(3) of the Tax Treaty. The same view was reiterated by the Tribunal wile deciding identical issue in assessee s own case for the assessment year 2012 13 in DCIT v/s Reuters Transaction Services Ltd [ 2018 (8) TMI 1129 - ITAT MUMBAI] . Therefore, in our considered opinion, the issue whether the amount received by the assessee from the customers in India is in the nature of royalty stands covered against the assessee by the aforesaid decisions of the Co ordinate Bench. That being the case, we concur with the view expressed by the Revenue authorities that the amount received by the assessee from the customers in India is in the nature of royalty as per Aricle 13(3) of the India UK Tax Treaty as well as the provisions of the Act. Alternative claim made by the assessee that only the royalty income attributable to the PE can be brought to tax in India as per the provisions of section 115A r/w section 44DA of the Act r/w Article 13(6) of the India UK Tax Treaty - When the issue has been decided by the Tribunal against the assessee in the preceding assessment years more than once and no difference in facts obtaining in the impugned assessment year has been brought to our notice by the assessee. Adhering to the norms of judicial discipline, we respectfully follow the decision of the Tribunal on the issue, as referred to above, and hold that the assessee cannot take the benefit of Article 13(6) of India UK Tax Treaty. These grounds are dismissed.
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Customs
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2020 (1) TMI 72
Return of seized documents or not relied upon (No RUD) - Non furnishing of Reply to the Show Cause Notice - According to the petitioner they are material and relevant for preparing their reply to the said show cause notice. - misdeclaration of value of imported goods - time limitation for filing of reply of SCN - HELD THAT:- No writ petition can be entertained to quash a hearing of notice as it is not an order. At the same time, it should be remembered that the 2nd respondent as an investigative agency cannot retain the seized documents. Once its completes investigation and issuing of Show Cause Notice, it should return the same or give back photo copy to the person to who it belonged. As per Circular No. 394/15/88-Cus A.S dated 13.6.1996 and Circular No. 207/09/2006-CX, the 2nd respondent was required to return the documents not relied upon/considered useful from any angle to the parties concerned - The 2nd respondent however failed to do so. Despite order dated 22.12.2014 in W.P.No. 899 of 2013, barring few documents, not all the documents directed to be furnished have been supplied. Since the 2nd respondent has not fully complied with the said order, I am of the view, the 2nd respondent should be directed to strictly comply with the said order in letter and spirit within a period of 30 days of receipt of this notice - The petitioner and other notices shall thereafter file their reply to the Show Cause Notice No.F.No.VIII Dated 22.12.2011 within a period of 90 days i.e latest by 31st March, 2020. Under no circumstances any extension of time for filing the reply shall be entertained as the adjudication of the show cause proceeding has been considerably delayed by about seven years due to pendency of the present writ petition. All the defences raised in the present writ petition including the submission regarding abatement of show cause proceedings in the light of section 28 (9) Of the Customs Act, 1962 is left open to be decided by the 1st respondent - Petition disposed off.
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2020 (1) TMI 71
Imposition of penalty u/s 112 of CA - Smuggling - Gold bars - seizure was made by Police and subsequently handed over to Customs - allegation based on statements of the persons carrying gold were recorded by Customs in Custody - corroborative evidences found or not - HELD THAT:- It is undisputed fact that the gold bars under seizure are smuggled into India. None has claimed ownership of the gold. The persons from whom those were recovered are not in appeal even. Though initial seizure was made by Government Railway Police, and was handed over to Customs and Customs initiated the proceedings under the provisions of Customs Act, 1962. On the basis of statements recorded from the two persons from whom the foreign gold was recovered, the Department conducted search of different persons, examined them and recorded their statements. On inquiry from mobile service provider, it was found that there were conversation taking place between members of Jain family and the said carriers at the probable time of handing over the gold at the residence of Kamal Kumar Jain, though Conversation details is not available. Santosh Kumar Jain having his business in Birgunj, Nepal is also found to be using the address of Shri Santosh Kumar Jain in India. Ankur Kumar Jain and Saurav Kumar Jain are sons of Shri Santosh Kumar Jain - the premise of Shri Krishna Kumar Jain at Raxaul was searched and they were examined only after intervention of Hon ble High Court at Patna. In consideration of the circumstances, there is no doubt that they are involved in the present deal of smuggling. However, the Department has not been able to establish/distinguish the specific role played by the family members namely Ankur Kumar Jain and Saurav Kumar Jain. Also, the Department has not been able to establish the involvement of Shri Arjun Sah in the case and the penalty imposed upon them i.e. Shri Saurav Kumar Jain alias Raja, Shri Ankur Kumar Jain alias Vicky Jain and Shri Arjun Sah is not sustainable and accordingly ordered to be set aside with consequential relief, if any. A penalty of ₹ 5,00,000/- only on Shri Krishna Kumar Jain and Shri Santosh Kumar Jain would serve the ends of justice. Appeal allowed in part.
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2020 (1) TMI 70
Principles of natural justice - appellant submits that a copy of the Order-in-Original and show cause notice is not available with them, inasmuch as, the assessee is not producing the same - HELD THAT:- The appellant again makes a request for adjourning the matter, inasmuch as, they have not been able to procure Order-in-Original and show cause notice from their client - We do not find the said request of the learned Advocate as genuine request. On the last date of hearing, it was made clear that if the Order-in-Original and show cause notice are not produced on record, the appeal would be dismissed without any further notice to the appellant. Inspite of that, the learned Advocate has not made any efforts to place the said relevant document on record, in the absence of which the appeal cannot be decided. The difficulty, being faced by the advocate, stands expressed that the appellant is not providing the said documents to them. This fact shows that the appellant is not seriously interested in pursuing the appeal before the Tribunal. Appeal dismissed being defective.
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Service Tax
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2020 (1) TMI 73
Refund of accumulated Cenvat credit - export of various services - intermediary services - POPOS Rules - location of the intermediary service provider was in India - rule 9 of the Place of Provision Rule, 2012 - HELD THAT:- No objection was raised by the Revenue at the time of availing the credit, such objection cannot be raised at the time of deciding the refund claim in terms of provisions of Rule 5. The issue has also been considered by the Tribunal in the case of Accelya Kale Solutions Ltd. Vs. Commissioner of Central Goods Service Tax and Central Excise, Mumbai [ 2018 (8) TMI 19 - CESTAT MUMBAI ] where it was held that Rule 5 of Cenvat Credit Rules, 2004, was substituted vide Notification No. 18/2012-CE (NT) dated 17.03.2012, with effect from 01.04.2012. The said substituted rule has prescribed the formula for claiming refund of service tax by the service provider. Under such amended rule in vogue, there is no requirement of satisfying the nexus between the input services and the output service provided by the service provider. Refund allowed - appeal allowed - decided in favor of appellant.
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2020 (1) TMI 69
CENVAT Credit - Service rendered or not - recovery of service tax / credit from the Input Service Distributor ( ISD ) - foreign loan arranged by Axis Bank for the appellant was subsequently cancelled on request of the appellant - Reverse charge mechanism - liability to pay service tax under Reverse Charge Mechanism (RCM) of which credit is availed for payment of output central excise duty on final products - foreign remittance made by appellant for availing External Commercial Borrowings - HELD THAT:- No amount of service tax has been paid by appellant for which credit has been availed - the Bank has accepted the request of assessee for cancellation of loan facility. However, there is no mention that service tax amount has been refunded back to appellant. In fact, it is specifically stated that the arrangement fee collected by the Bank would not be refunded but may be adjusted when other loan facility is made available to appellant in future. Therefore, the observation made by the learned Commissioner for denial of credit that service tax amount has not been paid by appellant is purely on assumption basis. The fact that processing for loan financing has been done by the Bank is not in dispute. Therefore, the Bank has rendered the service of loan processing which has been duly received by the appellant. Had there been no rendition of service, the question of service tax levy would not have arisen. Duty demand consequent to denial of credit cannot be raised from an ISD Demand of service tax on RCM - HELD THAT:- Since the appellant has chosen not to contest the issue, the demand of ₹ 63,207/- is upheld - Penalty imposed under Section 77 is however set aside by extending the benefit of Section 80 of the Act. Appeal allowed in part.
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2020 (1) TMI 67
CENVAT Credit - Excess payment of service tax and excess availment of the credit - GTA service - abatement claim - service taxable at 25% and there is exemption of 75% - Revenue s only objection is that the appellant should have paid 25% service tax, in which case they would be entitled to credit of only that amount of tax so paid by them - HELD THAT:- The only allegation in the show cause notice was excess payment of service tax and excess availment of the credit. As such it was only this legal issue which was required to be examined and there was no question of production of any evidence etc. before the Commissioner (Appeals). The appellate authority has clearly gone wrong on the subject. It is well settled law that an assessee cannot be compelled to avail the exemption, which in any case is conditional exemption. The revenue did not raise any objection at the time of payment of 100% service tax. It is only when the credit of the same was availed by the assessee such objection came to be raised by the Revenue. In terms of the CENVAT Credit Rules, 2004, an assessee is entitled to avail the full credit of service tax PAID and not the tax payable. Inasmuch the appellant had paid 100% service tax they were entitled to credit of entire tax so paid by them. Reference can also be made to the majority decision in ASIAN COLOUR COATED ISPAT LTD. VERSUS COMMISSIONER OF C. EX., DELHI-III [ 2014 (9) TMI 974 - CESTAT NEW DELHI] where originally, there was difference of opinion between two Members and as per the majority order, it was held that even if no duty was required to be paid on the final product being exempted, the assessee having paid the duty was entitled to the credit of the same. There are no reason to deny the credit of service tax to the appellant - appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (1) TMI 68
CENVAT Credit - inputs / input services - outward freight charges - outward transportation of the goods upto the buyer s premises - place of removal - HELD THAT:- The issue is with regard to the credit availed on finished goods that have been transported and delivered from the factory to the buyer s premises. The said issue has been analyzed by the Tribunal in the case of M/s.Genau Extrusions Ltd. [2019 (7) TMI 325 - CESTAT CHENNAI] wherein the Tribunal has taken note of the decision rendered by the Hon ble Supreme Court in the case of M/s.Roofit Industries [2015 (4) TMI 857 - SUPREME COURT] as also Board s Circular No.1065/4/2018-CX dt. 08.06.2018 issued by the Board. Appellant has not produced sufficient documents to show that the freight charges have been included in the assessable value. The matter is therefore remanded to the adjudicating authority who shall consider the matter afresh after giving an opportunity of hearing to the appellant - appeal allowed by way of remand.
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