TMI Tax Updates - e-Newsletter
January 6, 2020

Case Laws in this Newsletter:

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

Highlights / Catch Notes

• GST:

  Agricultural produce or not - Benefit of exemption - services by way of handling the imported raw whole yellow peas - The spirit of the legislature was intended to boost the agricultural sector of the home country and not that of a foreign land - The primary market in the instant case being located in foreign shores does not conform to the definition as stated above.
  Visit to Get Source

  ---

• GST:

  Classification of supply - supply of goods or not - job of printing of content provided by the customer on polyvinyl chloride banners and supplying such printed trade advertisement material - it is clear beyond doubt that what the Appellant supplies is nothing but service.
  Visit to Get Source

  ---

• GST:

  Profiteering - purchase of flat - Respondent directed to refund / repay both the profiteered amount @2.61% of the taxable amount (base price) and the GST on the said profiteered amount.
  Visit to Get Source

  ---

• Income Tax:

  Capital gain computation - ancestral property devolved and jointly owned with other co-owners - fair market value (FMV) of the immovable property as on 01.04.1981 - Action of the Revenue is seriously marred by multiple and intrinsic legal infirmities and violation of principles of natural justice.
  Visit to Get Source

  ---

• Income Tax:

  Characterizing subscription revenue received - Indian–United Kingdom Tax Treaty - PE in India - not only the subscription fee is in the nature of royalty but the provision of Article–13(6) of the Tax Treaty would not be applicable to the assessee
  Visit to Get Source

  ---

• Income Tax:

  Reassessment u/s 147 - MAT - Computation u/s 115JB - Deduction on account of gain on sale of agriculture land (rural) out of “book profit” - the assumption of jurisdiction u/s 147 by issuance of notice u/s 148 cannot be sustained and held as invalid in eyes of law.
  Visit to Get Source

  ---

• Income Tax:

  Exempt u/s. 10(5) - Non-deduction of tax (TDS) on LTC/LFC in the cases where employees have travelled abroad - the claim of the assessee for exemption is without legal basis and assessee has failed to prove that how such foreign travel expenses would come within ambit of section 10(5)
  Visit to Get Source

  ---

• Income Tax:

  MAT Computation u/s 115JB - deduction of agriculture income - income from tea growing & manufacturing business - Amount of 40% of the revised composite income as per computation of income by the AO allowed to be deducted u/s 115JB
  Visit to Get Source

  ---

• Customs:

  Import of prohibited goods - Betel nuts - The goods in question are yet raw, as an unfinished product, meant to be transported to another State for it to be processed and packaged, whereafter, only, eventually sold in an open market and if the goods are actually unsafe food then it is not the provision of the Customs Act which can be invoked, for not falling within its purview - seizure memo quahsed.
  Visit to Get Source

  ---

• Corporate Law:

  Appointment of Directors in contravention of provisions of law - The Registrar of Companies, Hyderabad calculated fine basing on the minimum prescribed under section 165(6) of the Companies Act, 2013 - since no prosecution is launched against applicant and the present application is filed for compounding of the violation on his own. Therefore, the Tribunal can take a lenient view in imposing compounding fee of ₹ 2,000 per day
  Visit to Get Source

  ---

• IBC:

  Maintainability of application - initiation of CIRP - failure to to make repayment - the limitation will start from the date of accrual of right. The accrual of right is also to be noticed from the date of confirmation or acknowledgment of the debt and to be read along with Section 18 of the Limitation Act, 1963.
  Visit to Get Source

  ---

• IBC:

  Duties of Resolution Professional - Disciplinary Action - non-disclosure to his IPA - During CIRP, it is the utmost responsibility of an IP to run the company of CD as a going concern and conduct the entire CIRP in a transparent manner without creating additional insolvency resolution process costs.
  Visit to Get Source

  ---

• Service Tax:

  Extended period of limitation - works contract service - A sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub-contractor in pursuance of the contract. - The element of suppression, fraud, etc. are not made out against the assessee and as such, the extended period of limitation is not available to the Revenue.
  Visit to Get Source

  ---

• Service Tax:

  Refund of service tax - time limitation - Though it has been recorded by the adjudicating authorities below that the Notification have to be strictly read and no alteration, addition and even deletion is permissible to the language therein, but still has ignored/ deleted such portion of the Notification, which simultaneously empowers the authorities to condone the delay, if any, is found.
  Visit to Get Source

  ---

• Central Excise:

  Department has failed to follow the judicial discipline - Despite the issue being clearly and properly adjudicated and clarified time and again with respect to the by-products/ waste products emerging during the process of manufacture of final product, the confirmation of demand in such cases still under Rule 6 of CCR is opined to be an act of judicial indiscipline on the part of adjudicating authorities.
  Visit to Get Source

  ---

• Central Excise:

  Process amounting to manufacture or not - appellant purchases lead ingots (purity of 99.5% or grade ‘B’) and thereafter remove the same either without processing as such or after increasing the purity to 99.9% - the impugned order suffers from mistake of law and fact. Further, there is no test report on record in support of allegation of revenue - Demand set aside.
  Visit to Get Source

  ---

• Central Excise:

  Interest on delayed refund - wrongful adjustment of refund amount against amounts allegedly due under the CGST Act - decisions pertaining to the transitional provisions are decisions under the CGST Act which the officers are fully competent to take but this Tribunal is not competent to decide appeals against
  Visit to Get Source

  ---

• Central Excise:

  Service or not - liability of service tax or VAT - handling/ logistic charges recovered from the customers for providing service of safe handling and cleaning of cars till the delivery to the customers - any consideration received for supply of goods would not be covered within the scope of section 66 of the Finance Act.
  Visit to Get Source

  ---

Articles

• GST: Valuation in case of supply to a distinct person as decided in the case of M/s. Specsmakers Opticians Pvt Ltd.
• CBIC notifies certain sections in the Finance (No.2) Act, 2019 pertaining to CGST & IGST Act, effective from 1st January 2020
• THE RIGHTS OF REGISTERED PERSONS CANNOT BE SUBJUGATED TO THE POOR AND INEFFICNENT SOFTWARE SYSTEM ADOPTED BY DEPARTMENT

Notifications

• Customs

• 1/2020-Customs (N.T./CAA/EXTENSION/DRI) - dated 2-1-2020 - Cus (NT)
  Appointment of CAA by DGRI

  ---

• GST - States

• 01/GST-2 - dated 1-1-2020 - Haryana SGST
  Regarding notification for bringing into effect the provisions of HGST (Amendment) Act, 2019 under the HGST Act, 2017.

  ---

• 113/GST-2 - dated 31-12-2019 - Haryana SGST
  Amendment of notification no. 48/ST-2, dated 30.06.2017 under the HGST Act, 2017

  ---

• 112/GST-2 - dated 31-12-2019 - Haryana SGST
  Amendment of notification no. 47/ST-2, dated 30.06.2017 under the HGST Act, 2017.

  ---

• 50/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Seeks to amend Notification No. 21/2019- State Tax, dated the 28th June, 2019

  ---

• 49/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Jharkhand Goods and Services Tax (Sixth Amendment) Rules, 2019

  ---

• 47/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Seeks to make filing of annual return under section 44 (1) of JGST Act for F.Y. 2017-18 and 2018-19 optional for small taxpayers whose aggregate turnover is less than ₹ 2 crores and who have not filed the said return before the due date

  ---

• 46/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Seeks to prescribe the due date for furnishing of return in FORM GSTR-1 for registered persons having aggregate turnover more than 1.5 crore rupees for the months of October, 2019 to March, 2020

  ---

• 45/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Seeks to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the quarters from October, 2019 to March, 2020

  ---

• 44/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Seeks to prescribe the due date for furnishing of return in FORM GSTR-3B for the months of October, 2019 to March, 2020

  ---

• 43/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Seeks to Notification No. 14/2019-State Tax , dated the 26th April, 2019

  ---

• 42/2019 – State Tax - dated 27-12-2019 - Jharkhand SGST
  Seeks to bring rules 10, 11, 12 and 26 of the JGST (Fourth Amendment) Rules, 2019 in to force.

  ---

• 24/2019 – State Tax (Rate) - dated 1-11-2019 - Jharkhand SGST
  Amendment in Notification No. 07/2019- State Tax (Rate), dated the 7th May, 2019

  ---

• F.1-11(91)-TAX/GST/2019(Part) - dated 24-12-2019 - Tripura SGST
  Seeks to notify the common portal for the purpose of e-invoice.

  ---

• F.1-11(91)-TAX/GST/2019(Part) - dated 24-12-2019 - Tripura SGST
  Seeks to notify the class of registered person required to issue e-invoice

  ---

• F.1-11(91)-TAX/GST/2019(Part) - dated 24-12-2019 - Tripura SGST
  Seeks to give effect to the provisions of rule 46 of the TSGST Rules, 2017

  ---

• F.1-11(91)-TAX/GST/2019(Part) - dated 24-12-2019 - Tripura SGST
  Seeks to notify the class of registered person required to issue invoice having QR Code.

  ---

• Order No. 10/2019-State Tax - dated 31-12-2019 - West Bengal SGST
  West Bengal Goods and Services Tax (Tenth Removal of Difficulties) Order, 2019

  ---

• 75/2019-State Tax - dated 31-12-2019 - West Bengal SGST
  Seeks to carry out changes in the WBGST Rules, 2017 [WBGST(9th Amend) Rules, 2019]

  ---

• 74/2019-State Tax - dated 31-12-2019 - West Bengal SGST
  Seeks to waive late fees for non- filing of FORM GSTR-1 from July, 2017 to November, 2019

  ---

Case Laws:

• GST

• 2020 (1) TMI 139
  Agricultural produce or not - raw whole yellow peas - services by way of handling the imported raw whole yellow peas - whether the service exempt under Sl. No. 54(e) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (corresponding State Notification No. 1136 FT dated 28.06.2017), as amended from time to time - challenge to AAR decision - HELD THAT:- There is no dispute that raw whole yellow peas are agricultural produce covered under serial no. 45 of the Rate Notification and are exempted goods. However, this particular consignment of raw whole yellow peas was harvested in foreign land and the concerned primary market or the farmers' market is located in that foreign land - it is observed from a combined reading of entry number 54 of the Exemption Notification and definition 2(d) of the Exemption Notification that all services and processes are excluded beyond the primary market. The term primary market in common parlance refers to farmers market like mandi or arhat being a place where the farmers directly sell their product to the buyers like wholesalers. millers. food processing units, etc. The spirit of the legislature was intended to boost the agricultural sector of the home country and not that of a foreign land - The primary market in the instant case being located in foreign shores does not conform to the definition as stated above. Further there is no evidence that the grains have not undergone any type of treatment before leaving the foreign country from where they have been imported into India. There are no infirmity in the ruling pronounced by the WBAAR - appeal fails.

  ---

• 2020 (1) TMI 138
  Classification of supply - supply of goods or not - job of printing of content provided by the customer on polyvinyl chloride banners and supplying such printed trade advertisement material - para 5 of CBIC Circular No. 11/11/2017-GST dated 20.10.2017 - classification of trade advertisement material under GST Tariff - challenge to AAR decision. HELD THAT:- On reading paragraphs 4 and 5 of Circular No. 11/11/2017-GST dated 20.10.2017 it can be concluded that items mentioned in para 4 have no secondary use other than carrying the printed content whereas the articles mentioned in para 5 have secondary usage. Though wallpaper displays designs printed or embossed on its body, it has another use that of protecting the wall. In the instant case the PVC sheet does not have any other usage other than displaying the advertisement content. In the present case, the Appellant prints the content provided by the recipient on the base of PVC, paper, etc., where it provides both the printing ink and the base material. There cannot be any doubt that the content that is printed on the base material is owned by the customers of the Appellant only and the Appellant has no right of usage on the content. The Appellant produced at the time of hearing a few samples of their products, for example, advertising materials for Hero Glamour motorbikes, Hyundai Venue car, Vivel Cool Mint soap and Brides India . The said advertisement materials carry specific messages meant for customers and the contents are very specific to the product for which the advertisements are made. The advertisement meant for Hyundai cannot be used by Hero or any other company. Thus the content is exclusively the property of the client who entrusts the job to the Appellant and the usage right of the content remains with the client or the Appellant - thus, in the instant case, which is a composite supply. supply of service is predominant and the case or the Appellant is more akin to the case represented in paragraph 4 of Circular No. 11/11/2017- GST dated 20.10.2017. The Appellant argued that the product description in their invoice is mentioned as Printing and Supply of Trade Advertisement Material HSN # 4911 , because what they supply are primarily goods - it is clear beyond doubt that what the Appellant supplies is nothing but service. Hence, we find no basis in the argument of the Appellant that it supplies goods only. The ruling pronounced by the WBAAR upheld - appeal fails.

  ---

• 2020 (1) TMI 137
  Filing of GST TRAN-1 Form - transitional credit - Section 140 (3) of CGST Act - HELD THAT:- The review petitioners placed reliance upon the judgment in M/S. MALIKA VEETIL AGENCIES VERSUS THE STATE TAX OFFICER SGST DEPARTMENT, PUNALUR, THE NODAL OFFICER FOR STATE GST STATE GOODS AND SERVICE TAXES, TAX TOWER, KILLIPPALAM, THIRUVANANTHAPURAM, THE NODAL OFFICER/DEPUTY COMMISSIONER CENTRAL GST AND CENTRAL EXCISE, KOCHI, THE COMMISSIONER OF STATE TAX STATE GOODS AND SERVICE TAXES, TAX TOWER, KILLIPPALAM, THIRUVANANTHAPURAM AND UNION OF INDIA THROUGH ITS SECRETARY (REVENUE) , MINISTRY OF FINANCE, NEW DELHI [ 2019 (2) TMI 916 - KERALA HIGH COURT] where this Court left the decision of the Nodal Officer concerned to decide whether delay in uploading details was attributable to the writ petitioners or not - The writ petitioners have no objections in giving similar directions. The review petitions are allowed holding that the directions in the said judgment would govern this matter as well - review petitions allowed.

  ---

• 2020 (1) TMI 136
  Profiteering - purchase of flat - allegation that benefit of Input Tax Credit (ITC) by way of commensurate reduction in price w.e.f. 01.07.2017 not passed on - contravention of Section 171 of the CGST Act, 2017 - penalty - HELD THAT:- Perusal of the ledgers proves that the Respondent has given them rebate/discount and not passed on the full benefit of ITC as there is no such entry in their account statements. Granting of rebates/discounts is the most prevalent practice followed in the construction industry to increase sales and hence the above rebate cannot be equated with the passing on of the benefit of ITC. The Respondent has also not produced any reliable or cogent evidence either before the DGAP or this Authority in support of his contention that he has passed on the benefit of ITC by submitting the details of the entries made in his books of account or cheques issued to the buyers or the copies of the tax invoices/demand letters or the acknowledgements made by his customers of having received the benefit of ITC due to implementation of the GST - the Respondent has only claimed to have passed on the discount/rebate on account of GST which cannot amount to passing on the benefit of ITC as per the provisions of Section 171 (1) of the CGST Act, 2017. Therefore, the above claim of the Respondent is frivolous and hence, the same cannot be accepted. Thus, no benefit of ITC has yet been passed on to him by the Respondent. Accordingly, the Applicant No. 1 is entitled to an amount of ₹ 1,91,662/- including the GST as benefit of ITC along with interest @18% from the date from which the above amount was realised by the Respondents from him and that any amount passed on by the Respondent as a discount can t be treated as passing of the benefit of ITC. It is established that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has profiteered an amount of ₹ 2,10,57,462/- which includes 12% GST on the base profiteered amount of ₹ 1,88,01,305/-. The Respondent has also realized an additional amount to the tune of ₹ 1,91,662/- from the Applicant No. 1 which includes both the profiteered amount @2.61% of the taxable amount (base price) and the GST on the said profiteered amount. Accordingly, the above amounts shall be paid to the above Applicant and the other eligible house buyers by the Respondent along with interest @18% from the date from which these amounts were realised from them till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, within a period of 3 months from the date of passing of this order. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project Fusion Homes in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section - Accordingly, a SCN be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.

  ---

• Income Tax

• 2020 (1) TMI 135
  Quantum of disallowance u/s 14A r.w.r 8D - HELD THAT:- Delay condoned. The special leave petition is dismissed.

  ---

• 2020 (1) TMI 134
  Notifying the petitioner u/s 10(46) - Benefit of exemption - Board in respect of filing specified income arising to that Board - Board under Section 10(46) of the Act with retrospective effect from 01.06.2011 - HELD THAT:- There is no legal impediment for respondent No.1 CBDT to consider/reconsider the application dated 30.11.2018 to extend the benefit of the Notification dated 09.04.2019 retrospectively with effect from 01.06.2011 since the nature of the petitioner Board remains the same even for the earlier years. Hence, respondent No.1 is directed to reconsider the application dated 30.11.2018 (Annexure J) submitted by the petitioner and take a decision in accordance with law by passing a speaking order inasmuch as extending the benefit of the Notification dated 09.04.2019 retrospectively with effect from 01.06.2011. Such compliance shall be made in an expedite manner, in any event, not later than eight weeks from the date of receipt of certified copy of the order.

  ---

• 2020 (1) TMI 133
  Interest income received by the assessee on the delayed payments from customers and suppliers - 'Business Income' OR 'Income from Other Sources' - HELD THAT:- Assessee has referred to the judgments of this Court in case titled as Phatela Cotgin Industries Pvt. Ltd. vs. Commissioner of Income Tax [ 2007 (5) TMI 226 - PUNJAB AND HARYANA HIGH COURT ] wherein it was held that in such a case where there is provision in the contract for interest on the delayed payment of outstanding balance, any delayed payment and interest thereon would be constituted as income from business and not income from other sources. Revenue has argued that actually in that case, an appeal could not be carried to the Supreme Court because of lower tax effect. However, he has not been able to cite any judgment to show or give any reason why the proposition laid down by the Bench in that case could not be followed. In the circumstances, we hold question No.1 against the Revenue and in favour of the Assessee. Deduction u/s 80IC - whether process undertaken by the assessee is a manufacturing activity? - metamorphosis of yarn into thread is manufacturing OR process - HELD THAT:- It is not disputed that the yarn which has been used by the Assessee cannot be utilized, for instance for threading purpose. Resultantly, it falls within the definition of manufacturing. Question No.2 is answered against the Revenue and in favour of the Assessee.

  ---

• 2020 (1) TMI 132
  Exparte order of the ITAT - contention of the petitioner that owing to the defective notice, the petitioner was unable to appear before the Hon ble ITAT - Misc.Petitio was filed to recall the said order and the same came to be dismissed for the delay caused in filing the petition - HELD THAT:- This court is of the considered view that there is considerable force in the submission of the learned counsel for the revenue in view of the miscellaneous petition being dismissed as time barred. This court deems it appropriate to set aside the same in view of the law declared by this court in the case of M/s. Karuturi Global Ltd., [2019 (7) TMI 939 - KARNATAKA HIGH COURT] where in, it is held that the remedy available to the assessee to seek for condonation of delay beyond the statutory period of limitation is only under Article 226 and 227 of Constitution of India. In the circumstances, where the Tribunal has dismissed the appeal as time barred, the writ jurisdiction is the appropriate remedy available to the petitioner. This court finds it appropriate to condone the delay in filing the miscellaneous petition and remand the matter to the ITAT to reconsider the matter on merits

  ---

• 2020 (1) TMI 131
  Addition u/s 40(a)(ia) - Non deduction of TDS - HELD THAT:- D.R. could not controvert the situation that payment to Shri K.C.Swain has been made in a small amount which is less than ₹ 20,000/- in a day and there is no contract or sub-contract between the assessee and Shri K.C.Swain. It is also not in dispute that the amount has been paid by the assessee as per the requirement of use of machine hire charges. The AO has not examined and verified the contention and explanation of the assessee, thus, the same is restored to the file of the AO for re-adjudication. Consequently, Ground No.2 of the assessee is allowed for statistical purposes. Addition u/s 40A - cash payments exceeding permissible limits - HELD THAT:- In the present case, the contention of the assessee is that the said payments were paid to truck owners and sub-contractors during the odd hours for meeting the urgent and business necessity, as the payments were required to be paid to the labourers. We also note that the assessee was doing the business in the remote area and specially the amounts were paid for making labour charges and for making certain purchases, where, it is very difficult to make payment through banking channels. In this situation, the provision attached to sub-section (3) of section 40A is to rescue the assessee from the rigour of disallowance under section 40A(3) of the Act. Keeping in view the totality of facts and circumstances and nature of work undertaking by the assessee, the disallowance restricted by the CIT(A) of ₹ 4,24,045/- cannot be held as sustainable. We accordingly, direct the AO to delete the same. Addition u/s 68 - unexplained cash credit - HELD THAT:- When the assessee has furnished his bank accounts , PAN No. and proof of address, it cannot be presumed that the identity and creditworthiness has not been proved. The onus shifted on the AO to contradict explanation of the assessee but there is no exercise by the AO in this regard for dismissing explanation and corroborative evidence by the assessee. Once there is proof of taking and repaying the loan, the addition in this regard is not called for.

  ---

• 2020 (1) TMI 130
  Claim of deduction u/s 10A - restricting the claim of deduction u/s 10A - HELD THAT:- As decided in own case [ 2017 (10) TMI 1384 - ITAT PUNE] where the Department has failed to prove that there existed an arrangement between assessee and its associated enterprises to earn more than ordinary, there is no merit in the aforesaid curtailment of deduction under section 10A - Decided against revenue

  ---

• 2020 (1) TMI 129
  Revision u/s 263 - addition u/s 68 - Unverified unsecured loans taken - HELD THAT:- An Explanation-2 has been inserted by Finance Act 2015 in Section 263 with effect from 01/06/2015 to declare that order shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of appropriate authority-(1) the order was passed without making inquiries or verifications which should have been made; (ii) the order is passed allowing any relief without inquiring into the claim; (iii) the order is not in accordance with any direction or instructions etc. issued by the Board u/s 119; or (iv) the order was not in accordance with binding judicial precedent. Applying the stated principles to the factual matrix and after going through the replies submitted by the assessee during the course of regular assessment proceedings, we concur with the submissions of Ld. CIT-DR that it was a case of lack of inquiry and there was no application of mind by Ld. AO on the issues which formed subject matter of revisional jurisdiction u/s 263. Therefore, we do not find any illegality in the action of Ld. Pr.CIT in exercising the said jurisdiction. Final directions of Ld. Pr.CIT to be erroneous to some extent. It is noted that there was blanket set-aside of the quantum assessment order overlooking the fact that the addition of ₹ 7.50 Lacs as made by Ld.AO in the quantum assessment order had already attained finality and there would be no occasion to revisit the same in revisional jurisdiction since the quantum assessment order could not be said to be prejudicial to the interest of the revenue, to that extent. AO is directed not to delve into the verification of loan of ₹ 7.50 Lacs stated to be obtained from M/s Reiva Sarees. Proceeding further, we are of the considered opinion that it was incumbent on the part of Ld. Pr.CIT to appreciate the assessee s submissions in the correct perspective. Pr. CIT, in the show-cause notice, has observed that unsecured loans obtained from certain entities remained to be verified. However, the loan obtained from Anuj Gems (wrongly referred to as Anju Gems) was only a brought forward loan which was repaid by the assessee during the year. Therefore, there could be no occasion to consider the same from the point of view of addition u/s 68. Therefore, Ld.AO directed to restrict the verification with respect to remaining two entities viz. Dharam Oberoi Diyas Productions Private Limited. We direct so. Provisions of Sec.2(22)(e) would not be applicable against loans obtained from M/s Suchitra Homes Entertainment (I) Pvt. Ltd. since the confirmation on record would show that the said loans were merely brought forward loans and there were no fresh receipts of loans during the year. Therefore, the order could not be termed as erroneous or prejudicial to revenue to that extent. Accordingly, this issue would not form part of revisional assessment proceedings. So far as excess of grant of TDS is concerned, it would suffice to direct Ld. AO to grant due TDS credit as per law in revisional assessment proceedings since as per assessee s submissions, the assessee, in fact, has been granted short TDS credit. Applicability of Sec.43B on professional tax is factual one. The Ld. AO is directed to verify the same during revisional assessment proceedings.The directions issued by Ld. Pr.CIT stand modified to that extent.

  ---

• 2020 (1) TMI 128
  TP Adjustment - MAM selection - RPM OR TNMM - HELD THAT:- From the TP analysis made by the taxpayer, we are of the considered view that it is proved on file that the taxpayer is a pure distributor/ trader which resale the goods after purchasing from its AE without any value addition. Reasons for rejection of RPM applied by the taxpayer given by the ld. TPO are generic in nature. When apparently there is no value addition to the goods purchased and resold by the taxpayer, RPM is the MAM. Not an iota of evidence is there on the file if the taxpayer has made any value addition to the goods purchased from the AE before the reselling the same to the third party or has created any intangible in favour of AE. TPO/DRP/AO have erred in applying the TNMM as the MAM in case of taxpayer who is a pure distributor of goods purchased from its AE and resell the same to third party without any value addition. So, TPO/AO are directed to apply the TNMM as the MAM to benchmark the international transactions undertaken by the taxpayer qua its trading segment by providing an opportunity of being heard to the taxpayer. So, Ground No.3.2 is determined in favour of the taxpayer. Adjustment to the entire income of the taxpayer and not confined to the addition of the international transactions as mandated by law - HELD THAT:- In view of the settled principle of law that transfer pricing adjustment is required to be restricted to the amount of international transactions only and not to the entire income of the taxpayer, the TPO is directed to make the adjustment accordingly. - Decided in favour of assessee

  ---

• 2020 (1) TMI 127
  TP Adjustment - delayed payment of outstanding receivables from AE - working capital adjustments - HELD THAT:- Undisputedly impact of working capital of tested party vis-a-vis its comparables has been factored in the profitability of the taxpayer which is otherwise less than working capital adjusted of margin of comparable, there is no need to impute the interest on outstanding receivables from AE. When assessee is a debt free company imputation of interest on account of blocked funds that is delay in making payment of outstanding receivables from AE is not warranted. Moreover, when undisputedly the taxpayer has earned higher operating profit to operating cost (OP/OC), margin as compared to comparable companies further proposed addition falls within +/- 3% range allowed under the Indian Transfer Pricing Regulation. As relying on KUSUM HEALTH CARE PVT. LTD. [ 2017 (4) TMI 1254 - DELHI HIGH COURT] we are of the considered view that when the taxpayer has already taken into account the impact of outstanding receivables on profitability while making working capital adjustments of the taxpayer vis-a-vis its comparables which is less than the working capital adjusted margin of the comparables any further adjustment on account of delayed payment of outstanding receivables from AE would distort the entire picture of re-characterization the transactions. In other words, transactions as to outstanding receivables cannot be re-characterized as loan deemed to be advanced by the taxpayer to its AE. We are of the considered view that AO/DRP have erred in making addition on account of interest on outstanding receivables from AE, hence ordered to be deleted. - Decided in favour of assessee.

  ---

• 2020 (1) TMI 126
  Penalty u/s 271(1)(c) - Deduction u/s 80IC for some higher amount than the entitlement of the assessee - HELD THAT:- Fact remains that the assessee had furnished all the details of income and expenditure in its return, which details in themselves were not found to be inaccurate by the learned Assessing Officer and therefore the Ld. CIT(A) held that the same cannot be viewed as concealment on the part of the assessee nor is a case of filing of inaccurate particulars. Insofar as this factual observation of the Ld. CIT(A) is concerned, the Revenue cannot dispute the same. Alongwith the original return of income the assessee had furnished all the details of income which includes the audited P L Account, balance sheet of but the unit as well as the company as a whole, certificate in form No. 10 CCB issued by a Chartered Accountant which includes the particulars of income from sublicensing. There is no dispute that the assessee furnished all these material particulars along with the original return of income. When the facts remain like this, the question is whether it is permissible for the assessing officer to draw an inference that the assessee tried to conceal the income by showing higher amount of deduction under section 80 IC of the Act. As decided in RELIANCE PETROPRODUCTS PVT. LTD. [ 2010 (3) TMI 80 - SUPREME COURT] by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars and that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. The Hon ble Apex Court further observed that there can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. - Decided in favour of assessee

  ---

• 2020 (1) TMI 125
  Capital gain computation - claimed that the said property was an ancestral property devolved and jointly owned with other co-owners - assessee adopted the fair market value (FMV) of the immovable property as on 01.04.1981 and substituted the same as cost of acquisition - reference can be made u/s.142A of the Act to the Valuation Officer for estimating the full value of consideration of the property for the purpose of computation of capital gains u/s 48 - Revenue in substituting FMV of capital asset as on 01.04.1981 determined by the Registered Valuer appointed by the assessee with the FMV determined by the DVO on a reference made by AO concerning land sold during the year - HELD THAT:- Section 55A(a) is not applicable on facts as the AO did not demonstrate any cogent reason to enable him to form an opinion towards variance/over valuation in the FMV of land in question. Section 55A(b)(i) of the Act concerns a situation where the FMV of the assets exceeds the value of asset claimed by the assessee. In the instant case, the FMV is sought to be lowered by AO than what is claimed by the assessee. Therefore, Section 55A(b)(i) of the Act is not relevant in the facts of the case. We now advert to Section 55A(b)(ii) of the Act which enables the AO to take recourse to Section 55A of the Act only on fulfillment of prescribed parameter therein i.e. nature of asset and other relevant circumstances AO has not pointed out existence of any such valid circumstance which could empower him under s.55A of the Act. The AO has merely issued reference to DVO under s.142A of the Act without any background or reasons and the Valuation Officer, in turn, has acted in a perfunctory manner and travelled beyond the jurisdiction mandate conferred within the sweep of Section 142A of the Act and has passed an order under s.55A of the Act without any reference therein. It does not require to underscore that a DVO derives its authority in law which flows from the mandate as delegated by the AO. The Valuation Officer cannot exercise the power of valuation independent of such mandate. Where an express mandate was given under s.142A of the Act, the Valuation Officer could not have travelled in the arena of Section 55A of the Act to determine the FMV. However, as noted earlier, the AO himself has not chosen to exercise powers under s.55A of the Act and therefore, we do not require to delineate any further on this aspect. AO could not invoke powers vested u/s 142A of the Act either in the given facts of the case. The RV has adopted reverse calculation of indexation which method has been approved by the co-ordinate bench in some cases as noted above. The AO has failed to bring on record any adversities in applicability of such method but has simply adopted the FMV determined by the Valuation Officer on the strength of some comparable instances under a different provision without any mandate. On facts too, the assessee has claimed that the case of the assessee is not comparable with such instances having regard to the different nature of land and different complexities. The AO has also failed to observe the principles of natural justice while confronting the findings of the DVO in as much as the copy of order of the DVO was also not provided at the time of hearing. Action of the Revenue is seriously marred by multiple and intrinsic legal infirmities and violation of principles of natural justice. The assessee, on the other hand, has discharged its primary onus to support the FMV as on 01.04.1981. Thus, in our view, the jurisdictional defect in issuing firstly unlawful reference under s.142A of the Act and secondly, adopting FMV as per the valuation order passed under a wholly different Section i.e. 55A of the Act in gross contradiction of mandate is prima facie not curable. Coupled with this, the valuation report of RV could not be successfully demonstrated to be unworthy of acceptance. We thus set aside the order of the CIT(A) and direct the AO to restore the claim of the assessee. - Decided in favour of assessee.

  ---

• 2020 (1) TMI 124
  Characterizing subscription revenue received by the appellant in the nature of royalty or fee for technical services under the Act and under the Indian United Kingdom Tax Treaty - PE in India - nature and character of subscription revenue received by the assessee from the customers in India - HELD THAT:- The assessee failed to bring on record any evidence to prove that the finding of facts recorded by the ITAT for earlier year [ 2020 (1) TMI 66 - ITAT MUMBAI] is incorrect. Therefore considering the facts and circumstances and also respectfully following the decision of the ITAT in assessee s own case for earlier years, we are of the considered view that subscription charges received by the assessee from the customers in India is in the nature of royalty. We further are of the opinion that once the receipt in question has been decided as royalty in nature, then there is no need to go in to the question of assessee having PE in India. Article 13(6) can be pressed into service only in the case when the existence of PE of non-resident is not in dispute. In this case the assessee has contended before the lower authorities that it does not have any PE in India and under these facts and circumstances the provisions of Article 13(6) cannot be invoked in the case when the receipt is found as royalty. 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. Thus we hold that not only the subscription fee is in the nature of royalty but the provision of Article 13(6) of the Tax Treaty would not be applicable to the assessee. Accordingly, the grounds are dismissed.

  ---

• 2020 (1) TMI 123
  Reassessment u/s 147 - MAT - Computation u/s 115JB - Deduction on account of gain on sale of agriculture land (rural) out of book profit - HELD THAT:- We find that similar issue regarding exclusion of gains on sale of agriculture land for the purposes of computing the book profits u/s 115JB has been dealt with by the Coordinate Bench in assessee s own case for the subsequent assessment year i.e, A.Y. 2014-15 and after examining the matter at length, the matter has been decided in favour of the Revenue and against the assessee company. The said decision of the Coordinate Bench has since been affirmed by the Hon ble Rajasthan High Court [2019 (9) TMI 101 - RAJASTHAN HIGH COURT] - Decided against assessee Reopening of assessment proceedings u/s 147 - income earned by the assessee company through sale of agriculture land - where there is no new material brought on record by the Assessing subsequent to completion of original proceedings u/s 143(3) ? - HELD THAT:- In the instant case, the original assessment proceedings were completed vide order u/s 143(3) dated 29.02.2016 and therefore, the provisions of section 263 could have been invoked by the ld CIT by 31.03.2018. However, instead of invoking the revisionary jurisdiction u/s 263 by ld. CIT, the Assessing officer has assumed the jurisdiction u/s 147 of the Act by issuance of notice dated 28.02.2017. Interestingly, for such assumption of jurisdiction, the ld CIT has accorded the approval u/s 151 of the Act. It is therefore a case where matter was referred to the ld CIT for seeking his approval and the ld CIT instead of holding that the matter falls under section 263 and not under section 148 has given the approval u/s 151 of the Act which shows non-application of mind and mechanical grant of approval. Therefore, in the instant case, the assumption of jurisdiction u/s 147 by issuance of notice u/s 148 cannot be sustained and held as invalid in eyes of law. We therefore find force in the contention of the ld AR that there is a distinction between power to review and power to reassess and the AO doesn t have power to review his own order and such power is enshrined under section 263 of the Act and bestowed on the ld CIT which cannot be ceded to the Assessing officer. For assumption of jurisdiction, in the reasons so recorded, the Assessing officer has also stated that assessee has failed to fully and truly disclose all material facts necessary for the assessment. What material facts have not been disclosed by the assessee company have not been spelt out by the Assessing officer and as we have noted above, the Assessing officer has himself stated that the assessee has credited capital gain on sale of agricultural land in its profit/loss account and the same have been reduced while working out book profits u/s 115JB of the Act. Therefore, we find that all primary facts have been duly disclosed by the assessee company and it is for the Assessing officer to draw correct legal inference therefrom. Further, we find that while alleging such failure on the part of the assessee company, the Assessing officer has apparently drawn reference to the proviso to section 147 of the Act which is not applicable in the instant case as the notice u/s 148 dated 28.02.2017 has been issued within four years from the end of impugned assessment year A.Y 2013-14. Thus, the proviso to section 147 and the condition so specified therein cannot be invoked to assume jurisdiction u/s 147 of the Act. Basic requirement for assumption of jurisdiction u/s 147 is not satisfied in the instant case and consequent reassessment proceedings deserve to be set-aside and the ground so taken by the assessee company in its cross-objection is thus decided in favour of the assessee company and against the Revenue.

  ---

• 2020 (1) TMI 122
  Revision u/s 263 by CIT - Write-Off of capital work in progress claimed as deduction by the assessee while computing income under normal provisions of the Act - HELD THAT:- All the expenditure incurred relating to import in counter components were written-off by debiting to profit and loss account and crediting capital work in progress in the books of accounts of the assessee company. Accordingly, deduction was claimed for the same in the return of income under normal provisions of the Act. From the list of expenses incurred it could be seen that some items would certainly carry enduring benefit to the assessee in the capital field in as much as those items could be certainly utilised by the assessee in its regular course of business or in the alternative would have clear saleable value thereon. Hence, it cannot be said that since the advertisement campaign plan was dropped by the assessee after import of certain items as listed above, the items do not have any value at all for the assessee company warranting its write-off. But at the same time some of the items listed would also have to be absorbed as revenue expenditure as one time cost in respect of abondoned project which requires to be charged off as revenue. Hence, we hold that the finding of the ld. CIT that the entire expenditure would be treated as capital loss is incorrect. We hold that some part of these expenses would be capital in nature and part would be revenue in nature. Since the ld. AO has been directed to frame the assessment afresh pursuant to the directions of the 263 order by the ld. CIT, the assessee would be at liberty to make out its case before the ld. AO in the light of the aforesaid directions. Provision for Doubtful Debts - HELD THAT:- We find from the schedule-14 of the financial statements as on 31/03/2007 of the assessee company, which is enclosed in page 8 of the paper book, the assessee has debited a sum of ₹ 16,07,000/- towards provision for doubtful debts (net) and sum of ₹ 4,70,000/- towards bad debts and advances written off. This clearly goes to prove that a sum of ₹ 16,07,149/- purely represents only provision for doubtful debts and not write-off of bad debts in the books of accounts of the assessee by corresponding credit to concerned debtor s account. We also find that the very same sum (i.e provision for doubtful debts) has already been added back by the assessee voluntarily in the return of income while computing income under normal provisions of the Act which goes to strengthen our finding that this sum represents only provision for doubtful debts and not bad debts actually written off in the books. Hence, the applicability of provision of Clause (i) of Explanation 1 to Section 115JB(2) of the Act would directly come into operation wherein this amount requires to be added back while computing book profits u/s.115JB of the Act. Hence, we do not find any infirmity in the action of the ld. CIT invoking revisionary jurisdiction in respect of this issue. Provision for obsolescence / Slow Moving Stock - HELD THAT:- We find that assessee had reduced the value of inventories by using the accounting terminology provision towards obsolescence / slow moving stock . In other words, we find that the value of closing stock of inventories had been duly reduced by the provision amount of obsolescence / slow moving stock to the extent of ₹ 3,42,82,000/- in the books itself. It is not mere provision for obsolescence as understood by the ld. CIT. It is effectively reducing the value of stock which tantamount to write off of the same. Hence, the same would not fall within the ambit of Clause (i) of Explanation -1 to Section 115JB(2) of the Act. It is also pertinent to note that very same sum of ₹ 3,42,82,000/- has been allowed as deduction i.e in the form of reduced value of closing stock of inventories by the ld. AO while computing income under normal provisions of the Act. Hence, the action of the ld. CIT in invoking revisionary jurisdiction u/s.263 of the Act in respect of this issue is dismissed.

  ---

• 2020 (1) TMI 121
  Disallowance u/s 14A - HELD THAT:- The CIT(Appeals) placing his reliance on the judgment of Madras High Court in Redington (India) Ltd. v. Addl. CIT [ 2017 (1) TMI 318 - MADRAS HIGH COURT] , has deleted the addition made by the Assessing Officer. This Tribunal is of the considered opinion that when the CIT(Appeals) has placed his reliance on the judgment of Madras High Court, which is binding on all the authorities in State, there is no error in the order of the CIT(Appeals). Even in respect of investments made in subsidiary company, there was no exempt income earned by the assessee. therefore, there is no question of any addition / disallowance with regard to expenditure. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance of bad debt - grievance of the Revenue is that this amount was due from Ministry of External Affairs, therefore, it cannot be written off - HELD THAT:- Income-tax Act does not say that the amount due from Government cannot be written off. What is to be seen is whether the assessee has written off the amount as irrecoverable. It is not in dispute that the assessee has in fact written off the above said amount due from Ministry of External Affairs. Therefore, this Tribunal is of the considered opinion that the claim of the assessee has to be allowed. In case, it was recovered subsequently, the same has to be taken as income of the assessee in the year in which it was recovered, subject to the above observation. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Leave encashment disallowed - AO as well as the CIT(Appeals) disallowed the provision for leave encashment on the basis of the judgment of Calcutta High Court in Exide Industries Ltd. v. Union of India [ 2007 (6) TMI 175 - CALCUTTA HIGH COURT] - HELD THAT:- Assessing Officer found that the stay was granted on 27.06.2007 by the Calcutta High Court and subsequent development was not available. The fact remains that the judgment of Calcutta High Court was stayed by the Apex Court and the appeal / SLP filed before the Apex Court is still pending. Therefore, for all practical purposes, it has to be construed that Section 43B(f) of the Act continued to be in the statute book. Since, admittedly, leave encashment was not paid by the assessee, the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

  ---

• 2020 (1) TMI 120
  Bogus capital introduction - income from other sources u/s 69 - assessee has not filed any linkage/proof that withdrawal made last year remained and was utilized during the year for deposit in the capital account and thereby confirming the addition - whether the assessee has reasonably explained the source of capital introduction during the year or not? - HELD THAT:- There is no dispute that the withdrawals have been made by the assessee in the preceding financial year as well as current financial year from her capital account. Even the AO has also not disputed that these withdrawals have been made by the assessee from her capital account. Regarding the availability of cash so withdrawn at the time of reintroduction of capital during the year, the AO has raised an apprehension that withdrawals might have been utilized for some other purposes and it cannot be retained by the assessee in anticipation of proposed capital introduction during the year under consideration. Assessee has submitted that being an old lady, she had kept the amount so withdrawn with her for emergency requirement, the same was not utilized elsewhere, was available with her at the beginning of the financial year and was used for reintroduction of capital and has also submitted an affidavit in support of her contentions. The finding of the authorities below is in the realm of suspicion and conjectures as the source of capital introduction has been reasonably explained by the assessee as out of her withdrawals from her capital account in the latter half of immediate past financial year which were available at the beginning of the financial year as well as from the current financial year withdrawals and the addition so made by the Assessing officer is hereby directed to be deleted. - Decided in favour of assessee.

  ---

• 2020 (1) TMI 119
  Deemed interest on the loans and advances given to the associate concern - Accrual of income - HELD THAT:- As decided in own case [ 2017 (11) TMI 1747 - ITAT AHMEDABAD] In assessment year and subsequent years, assessee has stopped charging interest and accounting it in the income on accrual basis. This is not a sound accounting policy as at outset it should have been recognized the same as income on accrual basis and thereafter would have given the deduction of claim of bad debt which the assessee failed in these years. Further, when we visualize this situation as a whole traveling from three assessment years, then, it is observed that interest income was recognized on accrual basis and thereafter claimed as a bad debt of its non-realization, this has been allowed by ld. CIT(A). If we remit the issue to the file to assessing officer in subsequent years by holding that income is to be recognized on accrual basis and thereafter, it is to be claimed as bad debt whether allowable or not, then, to our mind, it will be an academic and futile exercise because in reality asssessee has not received any interest income from its sister concern. It is to be recognized that in all the aforesaid three years the income from interest on accrual basis remained unrecoverable which was allowed as a bad debt. Thus, in order to avoid multiplicity of the proceedings, we allow the appeal of the assessee Disallowance on account of unpaid service tax of earlier years by erroneously invoking the provisions of section 43B - HELD THAT:- Before ld. A.O. in response to the notice, assessee submitted in its reply letter dated 29th October, 2016 in which it did not object to the addition of ₹ 31,622/- and even before ld.CIT(A) and as no details have been furnished in support of its contention. Therefore, this ground of appeal of the assessee is dismissed.

  ---

• 2020 (1) TMI 118
  Non-deduction of tax (TDS) on LTC/LFC in the cases where employees have travelled abroad - Claim of exemption u/s. 10(5) - demand raised u/s. 201 and 201(1A) - HELD THAT:- After perusal of the provision of section 10(5) of the act, we observed that the said provision was introduced in order to motivate the employees and also encourage tourism in India, and therefore, the reimbursement on LTC/LFC was exempted but there was not any such provision which provide exemption to the employees for travelling abroad to get benefit of LTC by virtue of section 10(5) of the act. We consider that on identical facts and similar issues have been adjudicated by the ITAT Lucknow in the case of State Bank of India V. DCIT [ 2016 (3) TMI 282 - ITAT LUCKNOW] We consider that assessee is not entitled for exemption u/s. 10(5) of the act, therefore, we do not find any merit in the appeal of the assessee. We observed that the claim of the assessee for exemption is without legal basis and assessee has failed to prove that how such foreign travel expenses would come within ambit of section 10(5) of the act. After taking into consideration the above judicial views and detailed finding of ld. CIT(A), we are of the view that the decision of ld. CIT(A) is justified and no interference is required. Therefore, the appeal of the assessee is dismissed.

  ---

• 2020 (1) TMI 117
  MAT Computation u/s 115JB - deduction of agriculture income - income from tea growing manufacturing business - CIT(A) confirming the action of ld. A.O. who computed book profit u/s 115JB by deducting the exempt income u/s 10(1) - HELD THAT:- As perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the only ground in appeal for the year, is in the AO determining book profits u/s. 115JB by incorrectly deducting exempt agricultural income u/s. 10(1) of the I. T. Act at ₹ 1,19,74,638/-, as against ₹ 2,08,86,160/- correctly deductible. We note that exempt agricultural income u/s. 10(1) is a sum of ₹ 2,08,86,160/-, as worked out in the order by the AO, while computing taxable income as per normal income tax provisions, [₹ 3,48,10,266/- being the revised composite income less ₹ 1,39,24,106 being forty percent income chargeable to tax under I. T. Act as per Rule 8]. Therefore, we direct the Assessing Officer to take agricultural income u/s 10(1) at ₹ 2,08,89,160/- to compute book profit u/s 115JB of the Act. - Appeal of assessee allowed.

  ---

• 2020 (1) TMI 116
  Approval u/s 80G - Exemption u/s 11 - whether no significant activity has been started by the assessee appellant as per objects of the trust? - HELD THAT:- In the case in hand, the ld. CIT (E) has not found that the activities carried out by the assessee trust are not as per the objects but it was noticed that no significant activity has been started by the assessee trust. Even otherwise, as per the statement made at bar by the ld. Counsel that the assessee trust has already started its activity, then the said objection of the ld. CIT (E) is also complied with by the assessee. As regards the requirement of the order granting registration under section 12AA to be annexed with the application for approval under section 80G(5) when the assessee has applied on the same date and the registration was granted by the ld. CIT (E) under section 12AA at the time of refusal of the approval under section 80G, then the said condition as provided under rule 11AA stands satisfied as the order of granting approval under section 12AA was already with the ld. CIT (E) at the time of passing the impugned order. The purpose and requirement of accompanying the order granting registration under section 12AA is to make available such order for verification and consideration of the competent authority at the time of considering the application for grant of approval under section 80G(5). Hence once the order of granting registration under section 12AA was already with the learned CIT (E), then the condition provided under rule 11AA is satisfied. Merely because the assessee could not undertake much activity within the short span of time, the ld. CIT (E) should not have refused the claim of approval under section 80G(5) of the Act. When there is no adverse fact found against the assessee and the assessee has claimed to have already started the activity, the matter is required to be considered afresh by the ld. CIT (E) after verification of the activities carried out by the assessee. Hence the matter is set aside to the record of the ld. CIT (E) for passing a fresh order in the light of the above observation. - Appeal of assessee allowed for statistical purposes.

  ---

• 2020 (1) TMI 115
  Revision u/s 263 - TDS u/s 195 in respect of the demurrage charges - HELD THAT:- The implicit view taken by the A.O while framing the assessment under Sec.143(3) r.w.s. 144C(3), dated 25.01.2017, that in the absence of any obligation cast upon the assessee to deduct tax at source under Sec. 195 in respect of the demurrage charges the said amount could not have been disallowed under Sec.40(a)(i) of the Act, is found to be in conformity with the judgment of the Full Bench of the Hon ble High Court of Bombay in the case of V.S. Dempo Co. Pvt. Ltd. [ 2016 (2) TMI 308 - BOMBAY HIGH COURT ] which was available at the time of framing of the aforesaid assessment. Accordingly, finding no infirmity in the view taken by the A.O, we set aside the order passed by the Pr. CIT under Sec. 263, dated 14.03.2018 and restore the order passed by the A.O under Sec. 143(3) r.w.s 144C(3), dated 25.01.2017. - Decided in favour of assessee.

  ---

• 2020 (1) TMI 93
  Penalty u/s 271(1)(c) - no proper recording of satisfaction - HELD THAT:- Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the AO that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner. Besides, we note that the Division Bench of this Court in Samson [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] as in New Era Sova Mine [ 2019 (7) TMI 1002 - BOMBAY HIGH COURT] has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings - No substantial questions of law

  ---

• Customs

• 2020 (1) TMI 114
  Interpretation of statute - meaning of the expression reason to believe and liable to confiscation under Section 110 of the Customs Act, 1962 - inter-state transfer - Import of prohibited goods - Betel nuts - Confiscation - belief of the officer seizing the goods of forming an opinion in terms of the statutory expression reason to believe of such goods being liable to confiscation - Record reveals that petitioners application for release of the goods stood rejected for the reason that the prescribed authority had got the seized sample of the product tested from the laboratories which was classified as unsafe food. HELD THAT:- The goods as per invoice (page 25-29) originated from the State of Assam on 1st of February, 2019. They were to be transported to the State of Karnataka. Both the places are in India not in any specified/notified area under the Act but are the National Highways in the State of Bihar. On 6th of February, 2019, Inspector/S.O., Customs (P), Forbesganj seized the said goods and the vehicle by assigning the reasons reproduced supra. After drawing samples, vide punchnama dated 6th of February, 2019, Annexure-A to the counter affidavit, they were sent to the laboratory for analysis - The customs authorities sent the samples for analysis to two laboratories. The Expert as per the report used the word suspect . Based thereupon, petitioners request for release of the seized goods was rejected. The Single Judge have heavily relied upon the contents of the affidavit filed by the Revenue, wherein it stood averred that the Areca Nuts of Indian origin are normally oval in shape and it is this which made the Customs Officer forms a reasonable belief that cut dried Areca were illegally smuggled into India. As we have already observed that supplementation of reasons is impermissible in law, more so in the attending facts - the learned Singe Judge to have been swayed with five notifications/circulars/memorandum placed on record by the Revenue. And not having gone into the relevancy of each one of them, without assigning any reason with regard thereto, germane to the issue, by presuming the same to be ipso facto applicable, the learned Judge concluded the Department to have lawfully seized the goods and the vehicle. The goods in question are yet raw, as an unfinished product, meant to be transported to another State for it to be processed and packaged, whereafter, only, eventually sold in an open market and if the goods are actually unsafe food then it is not the provision of the Customs Act which can be invoked, for not falling within its purview - the writ petitioners prayer of quashing the seizure memo dated 6th of February, 2019, as also all consequential actions seizing the goods and vehicle in question are allowed, for such action to be without any basis having no mandate of law. Petition allowed.

  ---

• 2020 (1) TMI 113
  Import of prohibited goods - Betel nuts - Confiscation - Interpretation of statute - meaning of the expression reason to believe and liable to confiscation under Section 110 of the Customs Act, 1962 - inter-state transfer - belief of the officer seizing the goods of forming an opinion in terms of the statutory expression reason to believe of such goods being liable to confiscation - Record reveals that petitioners application for release of the goods stood rejected for the reason that the prescribed authority had got the seized sample of the product tested from the laboratories which was classified as unsafe food. HELD THAT:- The goods as per invoice (page 25-29) originated from the State of Assam on 1st of February, 2019. They were to be transported to the State of Karnataka. Both the places are in India not in any specified/notified area under the Act but are the National Highways in the State of Bihar. On 6th of February, 2019, Inspector/S.O., Customs (P), Forbesganj seized the said goods and the vehicle by assigning the reasons reproduced supra. After drawing samples, vide punchnama dated 6th of February, 2019, Annexure-A to the counter affidavit, they were sent to the laboratory for analysis - The customs authorities sent the samples for analysis to two laboratories. The Expert as per the report used the word suspect . Based thereupon, petitioners request for release of the seized goods was rejected. The Single Judge have heavily relied upon the contents of the affidavit filed by the Revenue, wherein it stood averred that the Areca Nuts of Indian origin are normally oval in shape and it is this which made the Customs Officer forms a reasonable belief that cut dried Areca were illegally smuggled into India. As we have already observed that supplementation of reasons is impermissible in law, more so in the attending facts - the learned Singe Judge to have been swayed with five notifications/circulars/memorandum placed on record by the Revenue. And not having gone into the relevancy of each one of them, without assigning any reason with regard thereto, germane to the issue, by presuming the same to be ipso facto applicable, the learned Judge concluded the Department to have lawfully seized the goods and the vehicle. The goods in question are yet raw, as an unfinished product, meant to be transported to another State for it to be processed and packaged, whereafter, only, eventually sold in an open market and if the goods are actually unsafe food then it is not the provision of the Customs Act which can be invoked, for not falling within its purview - the writ petitioners prayer of quashing the seizure memo dated 6th of February, 2019, as also all consequential actions seizing the goods and vehicle in question are allowed, for such action to be without any basis having no mandate of law. Petition allowed.

  ---

• 2020 (1) TMI 112
  Maintainability of appeal - appeal was dismissed for non-compliance with the requirement of mandatory pre-deposit of 7.5% of the amount of refund - section 129 E of the Customs Act 1962 - HELD THAT:- It is observed that the factum of the appellant s account to have been seized by the DRI officers was brought to the notice of Commissioner (A). A request of the appellant has also been acknowledged by the Commissioner to have been made before him praying for release of the seized account. The order under challenge is silent about the said request. However, has simply dismissed the appeal for want of mandatory pre deposit on 7.5 % of the amount involved. The said silence on part of the Commissioner (A) is held unreasonable. Keeping in view that the said amount stands paid as of now, i.e. even prior to filing of the impugned appeal. Also keeping in view that procedural lapse may not be the cause for denying the substantial relief especially when the lapse is reasonably explained, it is deemed appropriate that an opportunity of being heard on merits be given to appellant. The order of Commissioner (A) is recalled remanding the matter back to him directing for taking a decision of the merits of the case - appeal allowed by way of remand.

  ---

• Corporate Laws

• 2020 (1) TMI 111
  Grant of Interest - Sanction of financial facilities by the first Respondent to the Petitioner - main focus of the arguments of the learned counsel for the Official Liquidator was on the grant of interest at the rate of 12% per annum by the Arbitral Tribunal - HELD THAT:- The contention of the learned counsel for the Official Liquidator was that interest is payable at a rate not exceeding 4% per annum up to the date of winding up order as per Rule 156. In order to test this contention, it is necessary to closely examine Rule 156. Upon examining Rule 156, it is clear that it applies if interest is not reserved or agreed for . By implication, it does not apply if interest is agreed upon in the contract out of which the debt arises. In this case, it is the admitted position that the debt arises out of the extension of financial facilities to the Petitioner by the first Respondent and that the relevant loan agreements specify a rate of interest and a rate of penal interest. Therefore, Rule 156 is clearly inapplicable. Moreover, Rule 156 also refers to the right of a creditor to prove for interest at a rate not exceeding 4% per annum up to that date from the time when the debt or sum was payable . This clearly indicates that even in cases where a rate of interest is not specified in the contract in question, Rule 156 only applies to creditors who participate in the winding up and submit their claims for adjudication by the Official Liquidator - Therefore, the contention of the learned counsel for the Official Liquidator with regard to the applicability of Rule 156 up to the date of the winding up order is rejected. The conclusions of the other High Courts, in the judgments cited by the learned counsel for the Official Liquidator, with regard to the applicability of Rules 156 and 179 to secured creditors who stand outside the winding up. The text of the said Rules provide unambiguous evidence of the intention to apply the said Rules only where contractual interest is not specified, in the case of Rule 156, and with regard to both Rules 156 and 179, only where the creditor concerned, whether secured or unsecured, submits a claim for adjudication by the Official Liquidator - the contention of the learned counsel for the Official Liquidator to the effect that interest should not have been awarded at a rate exceeding 4% per annum for the period subsequent to the date of the winding up order is also untenable. Consequently, both the grounds of challenge to the Award are rejected. The first Respondent is entitled to recover the amounts awarded only from the sale proceeds of the Hypothecated Assets, as described in the schedule to the Modified Hypothecation Deed read with the relevant Forms 8 and 13, after also ensuring that permissible expenses of the Official Liquidator in relation to the Hypothecated Assets and the amounts due as per the pari passu charge of the workmen in respect of the workmen's portion of the said security are paid from such sale proceeds. However, if the sale proceeds of these assets are insufficient to realise the amount awarded, whether in respect of principal or interest, the claims of the first Respondent would be required to be decided in accordance with Section 529, 529-A and other applicable provisions of the Companies Act and, in such event, Rule 179 would apply. The relevant facts and documents with regard to the sale price of the Hypothecated Assets, the workmen's dues , the workmen's portion in the Hypothecated Assets, etc. are unavailable - These aspects would be required to be considered while dealing with execution proceedings relating to the Award and no definitive conclusions can be recorded herein. The Petition to set aside the Arbitral Award is dismissed.

  ---

• 2020 (1) TMI 110
  Appointment of Directors in contravention of provisions of law - Compounding for violation of provisions of section 165 of the Companies Act, 2013 - case of petitioner is that on August 1, 2018 he resigned as director from M/s. Yashoda Special Metals P. Ltd., and submitted his resignation to the company. With this resignation, he was director in 19 companies only. He was eligible to be appointed as director in one more company as provided under section 165 of the Companies Act, 2013 - According to the applicant, M/s. Yashoda Special Metals P. Ltd., failed to file Form DIR-12 with the Registrar of Companies, Hyderabad informing the resignation of the petitioner as director. HELD THAT:- In this case, there is no dispute that Form DIR-12 was filed on April 13, 2019. However, Form MGT-7 was also filed beyond the date of filing Form DIR-12. The company should have informed Registrar of Companies by filing Form DIR-12 on or before September 1, 2018. So, the delay to be calculated from September 1, 2018. Because time was available for the company to file Form DIR-12 on or before September 1, 2018. So, delay to be calculated from September 1, 2018 but not from August 6, 2018 the date on which petitioner became director in M/s. Wanton Builders P. Ltd. So, the period from August 6, 2018 to August 31, 2018 is to be excluded and delay to be calculated from September 1, 2018 to April 12, 2019 exclusively the date on which Form DIR-12 was filed. The applicant is seeking compounding of violation of provisions of section 165 of the Companies Act, 2013. The Registrar of Companies, Hyderabad calculated fine basing on the minimum prescribed under section 165(6) of the Companies Act, 2013 - since no prosecution is launched against applicant and the present application is filed for compounding of the violation on his own. Therefore, the Tribunal can take a lenient view in imposing compounding fee of ₹ 2,000 per day which is just and reasonable in the circumstances of the case. As the compounding fee has been remitted by the applicant, the offence stated in the application is compounded.

  ---

• 2020 (1) TMI 109
  Maintainability of application - Directions for dispensing with/ convening the respective meetings of shareholders, secured creditors and unsecured creditors of the Applicant Companies, in connection with the proposed Scheme of Amalgamation contemplated between the Applicant Companies - HELD THAT:- The Company does not have any Preference Shareholders, thus there is no requirement of convening any meeting of Preference Shareholders. In respect of Secured Creditors, it is represented that all the Secured Creditors of the Transferee Company representing 100% in value of the Transferee Company have given their consents by way of affidavits to the scheme and thus, the Transferee Company seeks dispensation of holding the meeting of the secured creditors. With respect to equity shareholders and Unsecured Creditors, the Transferee Company seeks necessary directions for convening and holding the meetings of Equity shareholders and Unsecured Creditors for the purpose of obtaining their approval to the Scheme, since no consents are obtained from Equity shareholders and Unsecured Creditors - A copy of Memorandum and Article of Association of all four Transferor companies and Transferee Company has been placed on record. A copy of the scheme of Amalgamation as stated supra has been placed for record. The Appointed date of the scheme is 1st April, 2019. The certificates of statutory auditors of all four Transferor Companies and Transferee Company certifying the Accounting Treatment as required under Section 133 of the Companies Act are placed for record. The Board of Directors of the Transferor Company Nos. 1, 3 and 4, and Transferee Company in its Board Meeting held on 16th May, 2019 and the Transferor Company No. 2 in its Board Meeting held on 17th May, 2019 have approved the proposed scheme of amalgamation and copies of the resolution(s) are placed on record - All the Transferor Companies and Transferee Company have submitted that no investigation proceedings have been instituted or are pending under Sections 235 to 251 of the Companies Act, 1956 or under Sections 210 to 226 of the Companies Act, 2013 against any of the Company. Further, the Transferor Companies and Transferee Company have also submitted that the scheme is not otherwise opposed to public policy or interest of the members of the respective Applicant Companies. The directions are issued with respect to calling, convening and holding of the meeting of the shareholders, secured creditors and unsecured creditors or dispensing with the same as well as issue of notices including publications - All the directions are to be complied with strictly in accordance with the applicable rules including forms and formats contained in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 as well as the provisions of the Companies Act, 2013 by all the Applicants. Application allowed.

  ---

• 2020 (1) TMI 108
  Liquidation of Corporate Debtor - CIRP process was initiated - no resolution received - HELD THAT:- Since no Resolution Plan is received by this Authority under Sub-section (6) of Section 30 of the I B Code, 2016, before the expiry of the Corporate Insolvency Resolution Process period of 180 days, the Corporate Debtor has to be ordered for Liquidation - It is noted that IRP is not willing to be appointed as the Official liquidator and thus COC left at this authority to appoint the Official Liquidator. This Authority hereby orders for liquidation of the Corporate Debtor viz., M/s. Vibha Overseas Exim Private Limited which shall be conducted in the manner as laid down in Chapter III of part II of the I B Code, 2016.

  ---

• 2020 (1) TMI 107
  Winding up of respondent company - recovery of outstanding dues - issuance of demand notice, demanding to pay the outstanding amount and also complied with the provisions of the Code by filing prescribed application under the Code - it is contended that the respondent's company should be deemed to be unable to pay its debt within section 434 read with section 433(e) and (f) of the Companies Act, 1956 and it should be wind up and the corporate insolvency resolution process should be initiated - HELD THAT:- Admittedly, the petitioners have approached various authorities to seek recovery of salary, gratuities, etc. They have also obtained some orders from those authorities. Therefore, it is not in dispute that the petitioner approaches this Adjudicating Authority in order to recover the alleged outstanding amount arises out of non-payment salary, gratuity, reimbursement of office imprest, reimbursement of fuel expenses and encashment of earned leave, etc. It is also to be noted that the respondent denied even engagement some of the petitioners in the company. Therefore, the petitioners have not established the alleged outstanding amount arises and various facts. It is settled position of law that the provisions of the Code cannot be invoked for recovery of outstanding alleged amount - The hon'ble Supreme Court in the case of Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT] has inter alia, held that the IBC, 2016 is not intended to be substitute to a recovery forum. The petitioners not only failed to establish their claims beyond dispute but also failed to prove that the respondent-company is insolvent. And mere pendency of cases would not ipso facto prove that the company is insolvent. Moreover, it is stated by the respondent that several of cases have been settled and thus the company cannot be justified to put under the corporate insolvency resolution process (CIRP) as urged by the petitioners - the petitioner failed to make out any case so as to initiate corporate insolvency resolution process as prayed for and thus the instant company petition is liable to be dismissed by granting liberty to the petitioners to pursue other remedies available to them under any other law to recover the alleged claims made in the company petition. Petition dismissed.

  ---

• Insolvency & Bankruptcy

• 2020 (1) TMI 106
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - time limitation - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- For counting the period of limitation in filing the application under Section 7, we find that Part II of Third Division of Schedule of Limitation Act, 1963 i.e. Article 137 is applicable - It is clear that the limitation will start from the date of accrual of right. The accrual of right is also to be noticed from the date of confirmation or acknowledgment of the debt and to be read along with Section 18 of the Limitation Act, 1963. The application under Section 7 is not barred by limitation and the Adjudicating Authority has rightly admitted the application under Section 7 - application admitted - appeal dismissed.

  ---

• 2020 (1) TMI 105
  Maintainability of application - Settlement agreement - default in the payment in terms of the settlement - operational creditor agrees to settle the claim subject to clearing of all post-dated cheques and receipt of settlement amount as per the repayment schedule - HELD THAT:- Both parties state that they will be bound by this settlement. In exercise of inherent powers under Rule 11 of the NCLAT Rules, 2016, we allow the settlement and set aside the Impugned Order dated 18th September, 2019 passed by Adjudicating Authority (NCLT) Jaipur (Court No.1) - Company Petition filed by Mrs. Kanchan Ostwal against MEC Shot Blasting Equipment Private Limited is disposed of as withdrawn. The Appellant as well as shareholders, Directors of the Corporate Debtor will be bound by the terms of settlement. In case there is default in the payment in terms of the settlement, it will be open for the Operational Creditor to move this Appellate Tribunal for recall of this Order and to revive the CIRP process against the Corporate Debtor. The Operational Creditor may also file Application for initiation of the contempt proceedings against the defaulting Appellant, Directors/Director and shareholders. The Impugned Order admitting Section 9 Application and order (s) passed by Ld. Adjudicating Authority appointing Interim Resolution Professional , declaring moratorium and all other order(s) passed by Adjudicating Authority pursuant to impugned order and action taken by the Resolution Professional are set aside - application preferred by the Respondent under Section 9 of the I B Code is disposed of as withdrawn.

  ---

• 2020 (1) TMI 104
  Admissibility of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - default of debt or not - Section 7 of Insolvency and Bankruptcy Code, 2016, R/w Rule 4 of Insolvency Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 - HELD THAT:- Hon'ble Apex Court held in Innoventive Industries Ltd. v. ICICI Bank [ 2017 (9) TMI 58 - SUPREME COURT ] that The moment the Adjudicating Authority is satisfied that a default has occurred, the application must he admitted unless it is incomplete, in which case it may give notice to the Applicant to rectify the defect within 7 days of receipt of notice from the Adjudicating Authority . The Corporate Debtor admitted the default. The present petition is well within the Limitation. The Petition is in order. The petition is complete and therefore deserves to be admitted - petition admitted - moratorium declared.

  ---

• 2020 (1) TMI 103
  Duties of Resolution Professional - Disciplinary Action - non-disclosure to his IPA - filing of application by RP for avoidance of transactions in accordance with Chapter III of the Code - allegation is that the RP abdicated his authority in favour of the Committee of Creditors (CoC) and allowed the CoC to usurp his authority - CIRP process - HELD THAT:- Since the RP has not been able to provide any satisfactory justification for not acting in adherence to the provisions of the Code and the Circular, his act of non-disclosure to his IPA about taking services from BDO Restructuring Advisory India LLP (of which RP was a partner) is in violation of Section 208(2)(a) of the Code and Regulation 7(2)(a) and 7(2)(h) of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016, read with clause 12, 13 and 14 of the Code of Conduct as given in the First Schedule of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016. In view of admission by RP of having charged lender's legal counsel (CAM) fee of ₹ 12,09,90,185/- from IRPC and specifically for the services rendered prior to the Insolvency Commencement date (i.e. period from 17th June 2017 to 25th July 2017) of CD, RP has contravened Section 208 (2) (a) of the Code and also Regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with Clause 3 and 5 of the Code of Conduct as given in the First Schedule of the IBBI (Insolvency Professionals) Regulations, 2016. The role of IP is vital to the efficient operation of the insolvency and bankruptcy resolution process. A well-functioning system of resolution driven by a competent IP plays a significant role in cementing together the interests of the CD with those of the creditors. It is for this reason that the need of specialized professionals to complete the resolution processes has been unequivocally emphasized - The Code also requires an IP to play a catalytic role in CIRP which requires a right combination of experts acting under the overall supervision of the IP. He is the backbone of the resolution process under the Code and success thereof hinges on the conduct and competence demonstrated by him. Also, a CD undergoing CIRP is a representation of interests of several stakeholders who pin their hopes on the outcome of CIRP. During CIRP, it is the utmost responsibility of an IP to run the company of CD as a going concern and conduct the entire CIRP in a transparent manner without creating additional insolvency resolution process costs. Thus, Mr Mahender Kumar Khandelwal has displayed utter misunderstanding of the provisions of the Code and Regulations made thereunder. He has, therefore, contravened provisions of Sections 5(13) and 208(2)(a) of the Code, Regulation 33 and 34 of IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016; and Regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 3, 5, 12, 13 and 14 of the Code of Conduct under the said Regulations. The DC hereby imposes on Mr Mahender Kumar Khandelwal a monetary penalty of ₹ 29,24,167/- [which is ten percent of the RP Fee (₹ 2,92,41,667 X 10 percent) forming part of IRPC] and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the 'Insolvency and Bankruptcy Board of India' within 30 days of the issue of this Order - It is a fact that the CD has unduly suffered, the Creditors has been unduly benefitted and the RP has deliberately allowed such unlawful gain and loss (i.e. payment of ₹ 12,09,90,185/- to legal counsel of CoC forming part of IRPC) in contravention of the provisions of the Code and Regulations. Therefore, the DC directs the RP to make good the loss by securing reimbursement as minuted in the minutes of 19th Meeting of CoC (Resolution No. 7) held on 10th October, 2018 and produce evidence to the Board of deposit of amount of ₹ 12,09,90,185/- in the account of CD within 30 days of issue of this order. Mr Mahender Kumar Khandelwal shall not accept any new assignment either as IRP or RP till produces evidence to the Board of deposit of ₹ 12,09,90,185/- (Twelve Crores Nine Lacs Ninety Thousand One Hundred and Eighty Five only) in CD's Account. SCN disposed off.

  ---

• Service Tax

• 2020 (1) TMI 102
  Extended period of limitation - validity of SCN - works contract service - works order received from the main contractor, and as per the terms of the contract, the main contractor has discharged the service tax liability - liability of appellant to discharge service tax - HELD THAT:- The issue as regards the liability of sub-contractor, where the main contractor has discharged the service tax liability, being the bone of contention, there were divergent views taken by the different benches of this Tribunal. Finally, the said issue, referred to the Larger Bench, in the case of Milenge Developers Pvt. Ltd. [ 2019 (6) TMI 518 - CESTAT NEW DELHI ] was got decided in the year 2019, where it was held that A sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub-contractor in pursuance of the contract. Invocation of extended period of limitation - HELD THAT:- The element of suppression, fraud, etc. are not made out against the assessee and as such, the extended period of limitation is not available to the Revenue. Appeal allowed - decided in favor of appellant.

  ---

• 2020 (1) TMI 101
  Refund of CENVAT Credit - common input services used for taxable as well as exempt services - they have availed CENVAT credit in proportion to the taxable services rendered - Rule 5 of CENVAT Credit Rules 2004 read with Notification No. 5/2006-CE(NT) dated 14.03.2006 - HELD THAT:- It is a well settled principle that availment of CENVAT credit, its utilisation and its refund are different aspects dealt with under CCR 2004. Rule 5 of CENVAT Credit Rules 2004 provides for refund of CENVAT Credit in respect of goods/services exported out of India. Nowhere in this rule 5, is there a provision to determine whether availment of CENVAT Credit in the first place is correct or otherwise. There is a separate provision for recovery of irregularly availed CENVAT credit under Rule 14 of CENVAT Credit Rules 2004. There are also provisions for recovery of interest as well as imposition of penalties if any CENVAT Credit is irregularly availed - thus, the rejection of refund of CENVAT Credit partly on the ground that the input services are not eligible for CENVAT Credit at all is not correct in law. As far as the appellant s assertion that the formula given in Notification No. 5/2006-CE(NT) dated 14.03.2006 for determining the maximum refund has been wrongly applied by the lower authorities is concerned, we find that this needs factual verification in each case. For this limited purpose of calculation we remand the matter to the original authority - The third issue raised by the appellant that they have not availed CENVAT credit in respect of the exempted services which they have exported also gets subsumed and taken care of in this calculation - appeal allowed by way of remand.

  ---

• 2020 (1) TMI 98
  Refund of service tax - time limitation - relevant period for claiming refund - whether the period of one year has to reckon from the date of actual payment of service tax made by the SEZ Unit - HELD THAT:- That there is no denial for appellant to be a SEZ unit nor there is denial of applicability of Notification No. 12/2013-ST dated 1st July, 2013. This Notification provides exemption to the services provided in SEZ Unit or developer of SEZ for authorized operations - Since part of the refund has been sanctioned it becomes clear that the services received in SEZ Unit were for the authorized operations. Time limitation - Sub-clause (iii) (e) of Clause (3) of the notification - HELD THAT:- The bare perusal of the clause makes it clear that the relevant date from which is to reckon the period of limitation is the end of the month in which the SEZ Unit paid the Service Tax. It is the case of the appellant that from the date of the payment of service tax by him his refund claim is well within the period of limitation. From the order under challenge, it is clear that date of invoice to the ISD of appellant SEZ is taken as the starting point for the period of limitation - The date of payment of Service Tax is, however, not available on the record. It is not possible for us to verify as to whether the date of invoice and date of payment of service tax are same or not - it is deemed appropriate that the matter be remanded back to the original adjudicating authority to verify as to what is the date on which the appellant, the SEZ Unit made the payment of service tax and then to adjudicate as to whether the impugned claims are within the time limit or not. It is further observed from the aforesaid Clause that for the refund claims which could not be filed within one year of the relevant date, the Assistant Commissioner /Dy. Commissioner of Central Excise, as the case may be, are vested with the power to condone the said delay to such extended period as they deem fit. The Original Adjudicating Authority herein has miserably been silent about its power of condonation - Though it has been recorded by the adjudicating authorities below that the Notification have to be strictly read and no alteration, addition and even deletion is permissible to the language therein, but still has ignored/ deleted such portion of the Notification, which simultaneously empowers the authorities to condone the delay, if any, is found. The same is held as not appreciable but unreasonable on part of the adjudicating authority below. The findings in the order under challenge that discretion of adjudicating authority cannot be scrutinized about its reasonableness by the appellate authority are also held to be wrong - the matter remanded to original adjudicating authority with directions to take a fresh call about the time barred issue - appeal allowed by way of remand.

  ---

• Central Excise

• 2020 (1) TMI 100
  CENVAT Credit - clearance of spent acid (Sulfuric Acid) during the period from May, 2010 to March, 2011 - common inputs used for taxable as well as exempt goods - non-maintenance of separate records - violation of Rule 6 of Cenvat Credit Rules, 2004 - HELD THAT:- The issue involved herein is no more res integra, as it stands decided by the Hon ble Apex Court in the case of UNION OF INDIA OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [ 2014 (5) TMI 253 - SUPREME COURT] and also in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS GAS AUTHORITY OF INDIA LTD. [ 2007 (11) TMI 276 - SUPREME COURT] , wherein the Hon ble Apex Court has distinguished between the final products and the by-products - After examining in detail the manufacturing process in both these cases, the Hon ble Apex Court has clarified that rigor of Rule 6 is applicable only in the case of two final products being manufactured by the assessee and not in the case of one final product and another waste product or the by-product being produced. It was clarified that so long as Sulfuric Acid in the former case and lean gas in the later case are obtained as by-product and not as final product Rule 57 CC / Rule 6 C of Cenvat Credit Rules, 2004 will not be applicable. Precondition for applicability of Rule 6 (1) is that there should be manufacture of exempted goods which can be clearly inferred from a bare perusal of Rule 6 (1). The obligation for reversal of credit can arise only in case of manufacture of dutiable final product and manufacture of exempted products, and in case the exempted goods are not manufactured there is no substantive liability for reversal of credit. Keeping in view the certificate of registration as produced by the appellant recording it to be registered manufacturer of detergent, soaps and cakes only, where spent Acid is a compulsive products as acid slurry, I am of the opinion that Department has failed to follow the judicial discipline - Despite the issue being clearly and properly adjudicated and clarified time and again with respect to the by-products/ waste products emerging during the process of manufacture of final product, the confirmation of demand in such cases still under Rule 6 of CCR is opined to be an act of judicial indiscipline on the part of adjudicating authorities. Appeal allowed - decided in favor of appellant.

  ---

• 2020 (1) TMI 99
  Process amounting to manufacture or not - appellant purchases lead ingots (purity of 99.5% or grade B ) and thereafter remove the same either without processing as such or after increasing the purity to 99.9% - allegation of Revenue is that the increase of purity from 99.5% to 99.9% amounts to manufacture and accordingly the product of the appellant are dutiable - HELD THAT:- The learned Commissioner (Appeals) have erroneously observed that lead with 99.9% purity is classified under a separate entry which is not so, as is evident. Thus, the impugned order suffers from mistake of law and fact. Further, there is no test report on record in support of allegation of revenue. The demand raised by the authority below is misconceived - Appeal allowed - decided in favor of appellant.

  ---

• 2020 (1) TMI 97
  Interest on delayed refund - wrongful adjustment of refund amount against amounts allegedly due under the CGST Act - section 79(1)(a) of the CGST Act, 2017. Demand of interest on refund - HELD THAT:- There is no specific finding either in the Order-in-Original or in the Order-in- Appeal as to whether the appellant is entitled to the interest on refund under section 11BB or otherwise with the reasons. Therefore, it is a fit case to be remanded to the original authority for this purpose only. Appropriation of the amount towards amounts allegedly due under CGST Act - HELD THAT:- This Tribunal has no jurisdiction over any decision under the CGST Act. Transitional provisions for transfer of CENVAT credit and refund of duty, etc., from the excise or service tax to the GST have been made under the CGST Act and not under the Excise Act or Service Tax Act. Therefore, decisions pertaining to the transitional provisions are decisions under the CGST Act which the officers are fully competent to take but this Tribunal is not competent to decide appeals against - Further, this adjustment is contested by the appellant on the ground that the amount was not due under the realm of CGST Act. A decision as to whether the amounts are due or otherwise falls under the CGST Act which can also not be decided by this Tribunal. Under the CGST Act, there is a provision for GST Appellate Tribunal to hear appeals against such decisions. Without passing any remark on the appropriation of the amount towards amounts said to be under the CGST Act, the matter remanded to the original authority for limited purposes of giving specific finding on the admissibility of the interest on the amount of interest claimed by the appellant - appeal allowed by way of remand.

  ---

• 2020 (1) TMI 96
  Nature of transaction - service or not - liability of service tax or VAT - handling/ logistic charges recovered from the customers for providing service of safe handling and cleaning of cars till the delivery to the customers - allegation that Appellant had not paid service tax from 1 July 2010 to 31 July 2015, even though the handling/ logistic charges are covered under the taxable service - non-consideration of decision in the case of AUTOMOTIVE MANUFACTURERS PRIVATE LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, NAGPUR [ 2015 (2) TMI 972 - CESTAT MUMBAI] which is claimed by appellant to be squarely applicable to the present case - whether the Appellant is required to pay VAT under the provision of the VAT Act towards the collection handling/logistic charges or whether the Appellant is required to pay service tax under the Finance Act? HELD THAT:- Section 2 (36) of the VAT Act defines a sale price means the amount paid or payable to a dealer as consideration for the sale of any goods, less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any statutory levy or any sum charged for anything done by the dealer in respect of the goods or services rendered at the time of or before the delivery thereof, except the tax imposed under this Act. A Division Bench of the Mumbai Tribunal in AUTOMOTIVE MANUFACTURERS PRIVATE LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, NAGPUR [ 2015 (2) TMI 972 - CESTAT MUMBAI] examined whether handling charges collected by the Appellant therein for bringing parts and components from the warehouse/ depot of Maruti Udyog Ltd to the service station could be subjected to service tax. It was observed that service tax could not be levied on such charges since they form part of the value of goods sold - The Tribunal also held that handling charges were incurred in connection with the procurement of the goods and are included in the value of goods sold and VAT liability has to be discharged by including the cost of the handling charges. Thus, any consideration received for supply of goods would not be covered within the scope of section 66 of the Finance Act. On a consideration of the factual position before the Mumbai Tribunal in Automative Manufacturers and the present Appeal, it would be seen that they are basically the same. Thus, the decision of the Tribunal in Automative Manufacturers (P.) Ltd would conclude the controversy in favour of the Appellant. Automative Manufacturers (P) Ltd. were collecting handling for the parts procured from the warehouse, while the Appellant is charging handling cost for the charges incurred in bringing the vehicles from the warehouse to the showroom. The sale invoices in both the cases include in the said charges. What needs to be noted is that though the Appellant had specifically referred to the decision of the Tribunal in Automative Manufacturers Ltd, both before the Joint Commissioner as also before the Commissioner (Appeals), yet neither the Joint Commissioner nor the Commissioner (Appeals) have made any reference to this decision. This decision, which has a great bearing on the controversy, should have been noticed and in case, the Joint Commissioner or the Commissioner (Appeals) thought that it was not applicable, should have distinguished. However, these decisions have not even been considered by the Joint Commissioner or the Commissioner (Appeals). Appeal allowed - decided in favor of appellant.

  ---

• 2020 (1) TMI 95
  CENVAT credit - common input services were utilized for trading and manufacturing - reversal of proportionate credit in relation to input services utilized for trading - Sub-rule (3) of Rule 6 of Cenvat Credit Rules - period from April, 2015 to September, 2015 - HELD THAT:- This Tribunal in M/S AGRIMAS CHEMICALS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA-II [ 2019 (8) TMI 1253 - CESTAT ALLAHABAD] held that demand against the appellant was not sustainable the period from April, 2011 to March, 2015. Appeal allowed - decided in favor of appellant.

  ---

• CST, VAT & Sales Tax

• 2020 (1) TMI 94
  Validity of assessment order - Classification of goods - entry of unmanufactured tobacco into the local area - whether the commodity falling under Sl.No.11 of the Notification dated 30.03.2002 issued by the Government of Karnataka in exercise of the powers conferred by Sub-Section (1) of Section 3 of the Act or not - Karnataka Tax on Entry of Goods Act, 1979 - Circular of the Commissioner of Commercial Taxes dated 10.02.2006. HELD THAT:- Whether the unmanufactured tobacco involved herein, comes within the ambit of Section 2(A)(1), requires to be examined by the Appellate Authority constituted under the provisions of the Act and not under the writ jurisdiction. The statute prescribes the machinery i.e., hierarchy of authorities to examine such issues, circumventing the said provisions, under the guise of challenging the Circular of the Commissioner dated 10.02.2016, which has no relevancy to the subject matter, the petitioner has invoked writ jurisdiction which cannot be entertained. The petitioner has to exhaust the alternative and efficacious statutory remedy available under the Act. The writ petition stands disposed of with liberty to the petitioner to avail the statutory remedy available under the Act. If such an appeal is filed within a period of two weeks from the date of receipt of certified copy of the order, the Appellate Authority shall consider the same on merits without objecting to the period of limitation.

  ---