TMI Tax Updates - e-Newsletter
January 7, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Levy of penalty - Principles of natural justice - notice was not served on the person on whom penalty was levied, but on the driver of vehicle - there has been more than a technical infringement of the statutory provision as no hearing whatsoever was granted to the petitioner - matter remanded back.
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GST:
Classification of goods - HDPE woven fabric coated with HDPE melt - The sample produced by the Appellant was seen with the naked eye to be completely coated on both sides by plastic material and thus the laminated HDPE woven fabric in the instant case is not a textile material and does not merit classification under HSN 5903.
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Income Tax:
Exemption u/s 11 and 12 - Since sub section 2 of section115 BBC allows religious and charitable institution to receive anonymous donations, the case of the assessee is squarely covered by sub section 2 of section 115BBC of the Act
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Income Tax:
Reopening of assessment u/s 147 - Bogus software purchase - Assessing Officer has accepted the net profit as per the books of account and merely on surmises and conjectures, treated the purchase of software as bogus yet allowing depreciation on software which is evident from the fixed assets schedule - Additions deleted.
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Income Tax:
Penalty u/s. 271AAB - no search has been initiated u/s 132 but was conduced on different assessee - nowhere in the Assessment Orders, it has been mentioned that search was initiated in assessee’s case - the penalty proceedings initiated u/s. 271AAB as against the provisions of statute.
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Income Tax:
Deduction u/s. 54 - the question of deposit of unutilised capital gain will come up for consideration only when the capital gain is not utilised in construction of house property and when it is so utilised for construction of house property, then there is no need to make a deposit in the specified bank account
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Income Tax:
Addition u/ 68 and 69 - identity and creditworthiness of the share applicants and the genuineness of the transaction - Merely because the assessee was successful in completing the paperwork very meticulously or bringing into existence certain documents, the statutory obligation of the authorities does not get absolved - Additions confirmed.
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Income Tax:
Revision u/s 263 - The explanation, as inserted by Finance Act 2015 in Section 263, would come into play only if the primary conditions i.e. order being erroneous and prejudicial to interest of revenue, were fulfilled
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Income Tax:
Validity of CBDT circular - binding nature - The right that has enured to the parties in 2009 cannot be modified by a Clarification issued by the Board, three years thereafter. It appears to me quite possible that the long silence of the Board followed by the sudden Clarification issued in 2013 might itself be inspired by challenges similar to the one before me now, perhaps, even the present one.
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Income Tax:
Though the provisions of the Income Tax Act do not provide for the issuance of a show cause notice in all cases, in matters such as the present, where the Assessing Authority has formulated a specific issue based upon his understanding of a transaction, it is incumbent upon him to reveal his mind to the assessee, in order that the assessee is put to notice of the proposed basis of assessment and can reply/respond to the same. This not having been done, the impugned orders are set aside.
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Income Tax:
Interest on borrowing for setting up of the Argon Gas Plan - revenue or capital expenditure - respondent had obtained a long term captive source of the raw material by purchase of right from Texmaco. However, at the same time the raw material was required to be won, gotten and brought to the surface and as such, cannot be said to be a stock in trade - Interest expenditure cannot be held as revenue in nature.
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Customs:
Interest on delayed refund of SAD - As per the order, the period of delay to mere 7 days whereas as per the appellant the actual delay has been from 857 days to 399 days as detailed in the statement annexed with the appeal - The appellant is entitled to interest as per the statement of interest filed along with appeal papers
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Customs:
Conversion of shipping bills - conversion of free shipping bills to EPCG shipping bill. - the request for conversion of the shipping bill cannot be disallowed by pressing into the application of time limit prescribed by the Board in its circular dated 23.9.2010.
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Customs:
Refund - The said order dated 8.9.2014 was received by the petitioner on 29.9.2014 - Therefore, within one year therefrom, the refund claim was made on 9.9.2015. Though the actual date of application is 8.8.2015 but the receipt stamp indicates the date of 9.9.2015 and accordingly, it was said to have filed within the time limit prescribed.
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Corporate Law:
Vires of the proviso to Section 167(1)(a) of the Companies Act - Disqualification for appointment of Director - The exclusion of Directors from vacating their posts in the defaulting company while doing so in all other companies where they hold Directorship has been done in order to prevent the anomalous situation wherein the post of Director in a company remains vacant in perpetuity owing to automatic application of Section 167(1)(a) to all newly appointed Directors. - Constitutional validity sustained.
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Indian Laws:
Restriction on cash withdrawal from the PMC bank - Legality and validity of directives issued by the RBI - The RBI has acted fairly, justly and reasonably in revising the limits on withdrawal from time to time. When the first limit of ₹ 1,000/- was placed, the RBI was aware of the hardship and difficulty of depositors. In a timely manner, it has stepped in to enhance the limit and which is now enhanced as aforenoted.
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Service Tax:
Repairs and maintenance service - Composite service or not - In any annual maintenance contract, the spare parts etc., which have been used in the course of maintenance service are definitely considered to be sold and when sales tax has been paid on the value of such goods, simultaneously, one cannot charge them to service tax.
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Service Tax:
All these show cause notices are speaking about the records from 01.04.2009 to 31.03.2010 which apparently and admittedly is not the period of demand in any of these show cause notices. The show cause notices are opined to be vague. - SCN of 2014 could rely upon the contents of the SCN of the year 2012 but later also a no detail except reliance upon SCN of 2008 which is not permissible - Resultantly, all four SCNs here are silent providing any basis to proceed against the appellant.
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Central Excise:
Valuation - Receipt of additional consideration - Duty amount of ₹ 5.92 Crores paid by the buyer towards import duty has effected the sale value of goods -subsequent denial of benefit of EPCG Scheme to the buyer - matter remanded back in view of provisions of transaction value u/s 4
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Central Excise:
CENVAT credit - duty paying invoices - when there is no dispute on the receipt of input service and its utilization, credit cannot be denied merely on the basis of wrong address of the appellant in the invoice/Bill of Entry - credit allowed.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (1) TMI 179
Classification of goods - HDPE woven fabric coated with HDPE melt - whether classified under either of HSN 6306/6301/5903 of the Tariff Act or not? - challenge to AAR decision - WBAAR pronounced its advance ruling stating that HDPE woven fabric coated with HDPE melt is not a textile fabric and tarpaulins made from the said laminated fabric is not classified under either of HSN 6306/6301/5903 of the Tariff Act. HELD THAT:- As the principal characteristic of tarpaulin is water proofing. unless the HDPE woven fabric is laminated it cannot be used to make tarpaulin. The process of lamination cannot be ignored or treated in isolation. It is an integral and vital process in manufacturing tarpaulin from HDPE, woven fabric - in view or Note 1(h) to Section XI of the GST Tariff Act mentioned above, the tarpaulins of HDPE woven fabric. laminated as per specification of IS 7903:2017, being expressly excluded, do not merit classification under Chapter 63. The question as to whether the product can be classified under HSN 5903, Note 2 to Chapter 59 is relevant which excludes products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of colour (Chapter 39) - The sample produced by the Appellant was seen with the naked eye to be completely coated on both sides by plastic material and thus the laminated HDPE woven fabric in the instant case is not a textile material and does not merit classification under HSN 5903. The ruling pronounced by the WBAAR upheld - appeal dismissed.
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2020 (1) TMI 175
Reopening of GST portal for uploading the GST TRAN-1 - benefit of extended period for filing/revising Form GST TRAN-1 - HELD THAT:- The issue involved herein is no more res integra in view of the order of this Court in M/S ASIAD PAINTS LIMITED, VERTIV ENERGY PVT. LTD., M/S. WEIWO COMMUNICATION PVT. LTD. AND ORS. VERSUS UNION OF INDIA, GOODS AND SERVICE TAX NETWORK, THE COMMISSIONER OF COMMERCIAL TAXES (GST) , THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES [ 2019 (12) TMI 464 - KARNATAKA HIGH COURT] , whereby this Court has extended the period to file/revise the Form GST TRAN-1 by the registered persons by 31.12.2019 - Hence, the petitioner is entitled to avail the extended period for filing/revising Form GST TRAN-1 as aforesaid. Petition disposed off.
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2020 (1) TMI 174
Grant of regular bail - offence punishable under Sections 174 and 175 of the Indian Penal Code and under Section 132(1)(b) of the GST Act - HELD THAT:- Considering the nature of the allegations made against the applicant in the First Information Report, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail. The applicant is ordered to be released on regular bail in connection on executing a personal bond of ₹ 10,000/- with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions imposed - application allowed.
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2020 (1) TMI 172
Validity of order of seizure - Rule 139(2) of the CGST Rules, 2017 - It is submitted by the counsel for the respondents, who appear on advance notice, that at this stage enquiry is going on - HELD THAT:- Counsel for the petitioner states that petitioners are ready to join the enquiry as and when called by the IO. Counsel for the petitioners submits that petitioners will produce all the documents necessary for the purpose of enquiry. List on 27.3.2020.
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2020 (1) TMI 170
Levy of penalty - Principles of natural justice - service of notice - notice was not served on the person on whom penalty was levied, but on the driver of vehicle - as a result opportunity of hearing could not be availed off - Imposition of penalty u/s 129(3) of the West Bengal Goods and Services Tax Act, 2017 - HELD THAT:- The notice for imposition of penalty requires to be served upon the person on whom the penalty is to be imposed. Furthermore, an opportunity of hearing has to be granted. In the event, such hearing is not granted, the same would definitely amount to violation of principles of natural justice. Audi alterem partem no person should be judged without a fair hearing is the minimum necessity that is required to be followed as per the above provision - when the respondent authorities had in their possession documents such as invoice and challan that showed as to who was the owner of the goods, it was incumbent upon them to serve a copy of the notice upon the owner of the goods. It is trite law that the Circular issued by the Central Board of Indirect Tax and Customs is only binding upon the authorities and not upon the assessee. I have to mention here that the Circular and the Form are not complying with the mandatory provision of giving notice to the person who is the owner of the goods and upon whom the imposition of penalty is to be made - in the present case, the petitioner-company is having its registered office at Siliguri, Darjeeling District. Therefore, the reason for non-service of the notice by the Assistant Commissioner of State Goods and Service Tax, Siliguri upon the petitioner-company that was located within 15 kms. remains unexplained. Thus, it is clear that in the present case, there has been more than a technical infringement of the statutory provision as no hearing whatsoever was granted to the petitioner. Having not been granted an opportunity of hearing, the petitioner was unable to put his case before the concerned authority. Surprisingly, the notice in FORM GST MOV-07 was served upon the driver but the order passed in FORM GST MOV-09 was served upon the driver and the petitioner-company. The notice required to be served under Section 129 (3) has not been served properly. Accordingly, there has been a clear violation of the principles of natural justice - the impugned order is set aside - the Assistant Commissioner of State Tax, Goods and Services Tax directed to issue a fresh notice upon the petitioner, and thereafter, grant an opportunity of hearing and pass a reasoned order.
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Income Tax
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2020 (1) TMI 178
Interest on borrowing for setting up of the Argon Gas Plan - revenue or capital expenditure - ITAT holding that interest paid on borrowings, capitalized in the books of account for setting up of Argon Gas Plant as a revenue expenditure - HELD THAT:- In R.B. Seth Moolchand Suganchand [ 1972 (9) TMI 8 - SUPREME COURT] the assessee was granted a lease of certain areas for mining of Mica for twenty years. The mines were earlier worked out by other companies for a period of fifteen years. The question was whether the expenditure for acquiring the leasehold rights were on revenue or a capital account. The Hon'ble Supreme Court held that the lease was a long term lease and it conferred right to excavate mica, that is to remove it, grade it and pay royalty to the government in accordance with the quality of mica extracted and thus, was a revenue expenditure. On behalf of the assessee it was contended that the expenditure was for getting a specific quantity of mica in the mines which was assessee's stock in trade. On behalf of the Revenue, it was contended that the amount of lease was a capital expenditure in as much as the pillars of mica (before it is mined) cannot be said to be stock in trade. Accepting the claim made on behalf of the Revenue, the expenditure was held to be capital expenditure. ITAT could not have held that because the mine continued to belong to the Government (in fact the mineral rights would always belong to the Government) and the observation that the facts speak for themselves are insufficient to interfere with the concurrent finding of fact properly recorded by the AO and the CIT (Appeals). We find that the respondent had obtained a long term captive source of the raw material by purchase of right from Texmaco. However, at the same time the raw material was required to be won, gotten and brought to the surface and as such, cannot be said to be a stock in trade as held by the Hon'ble Supreme Court in the case of R.B. Seth Moolchand Suganchand. Consequently, the substantial question of law framed at serial no. II is answered in the negative and in favour of the appellant.
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2020 (1) TMI 173
Assessment completed in violation of principles of natural justice - Exemption u/s 11 denied - HELD THAT:- There is really no necessity to examine the relevant provisions of law or the merits of the claims of the petitioners since there is a more fundamental aspect of the matter that appeals, the gross violation of the principles of natural justice. Apart from the fact that the two orders of assessment are entirely identical, word to word, except for the differences in the figures in the computation, there is nothing in the order itself to indicate that the petitioners have been put to notice of the proposals for assessment prior to finalization thereof and this aspect of the matter is really not disputed or contested by the revenue. The stand of the Assessing Authority as revealed from a perusal of the impugned orders is that the donations by the two individuals to VRF have been received back by them through MRF by way of a circular transaction which amounts to money laundering. However, such a conclusion has to be arrived at only after soliciting an explanation for the proposed assessment from the petitioners as well as a proper consideration of the explanations furnished as well as materials filed, if any, by the petitioners. Though the provisions of the Income Tax Act do not provide for the issuance of a show cause notice in all cases, in matters such as the present, where the Assessing Authority has formulated a specific issue based upon his understanding of a transaction, it is incumbent upon him to reveal his mind to the assessee, in order that the assessee is put to notice of the proposed basis of assessment and can reply/respond to the same. This not having been done, the impugned orders are set aside. The impugned orders of assessment in both Writ Petitions shall be treated as show cause notices and the petitioners will appear before the Assessing Officer on Tuesday, the 07th January, 2020 at 10.30 a.m. without expecting any further notice in this regard along with a written reply as well as materials in support of their stand, if any. Consciously refrain from adverting to the merits of the impugned assessments in the light of my conclusion that the assessments have been completed in violation of principles of natural justice and all contentions are left open to be appreciated and adjudicated upon de novo and by way of speaking orders. Let this exercise be carried out and completed within a period of six weeks from 07.01.2020.
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2020 (1) TMI 168
Scope of amendment to section 144C - retrospective or prospective in nature - validity of CBDT circular - binding nature - Assumption of jurisdiction by the Assessing Authority u/s 144C - Reference to DRP - Deduction under Chapter VI-A and Section 10B disallowed - HELD THAT:- It is for the Court to declare what a particular provision of the Statute states and not go by what the Executive has or has not stated. He also relies on a decision of the Division Bench of the Gujarat High Court in Commissioner of Income Tax, Vadodara 2 V. C-Sam (India) (P.) Ltd. [ 2017 (8) TMI 291 - GUJARAT HIGH COURT] which states that the procedure set out under Section 144C is a mandatory procedure and thus, in any case where the said procedure has not been complied with by the Assessing Authority, such assessment would be liable to be set aside. Thus, according to him, reference to Section 144C by the Assessing Authority in the present case is proper. As far as Chapter VIA deductions are concerned, learned Senior Counsel for the petitioner points out that the issue relating to deduction under Section 80IA stands covered by a decision of the learned Single Judge of this Court in the case of this very assessee that has attained finality. Thus the question of deduction under Section 80IA has been decided in favour of the assessee. Going by the purport of Section 80 IB, on the admitted facts as to the date of commercial production, there could be no denial of the relief. The procedure inserted is substantive, in that it offers a new scheme of assessment to a distinct class of assessees, that is, those assessee whose assessments involve the issues of Transfer Pricing and determination of Arms Length Price. The provisions of Section 144C do not, thus merely prescribe procedure but a substantive exercise in assessment. Where there is a change in the form of assessment itself, such change is not a mere deviation in procedure but a substantive shift in the manner of framing an assessment. A substantive right has enured to the parties by virtue of the introduction of Section 144C, that, bearing in mind the settled position that the law applicable on the first day of assessment year be reckoned as the applicable law for assessment for that year, leads one to the inescapable conclusion that the provisions of Section 144C can be held to be applicable only prospectively, from AY 2011-12 only. The right that has enured to the parties in 2009 cannot be modified by a Clarification issued by the Board, three years thereafter. It appears to me quite possible that the long silence of the Board followed by the sudden Clarification issued in 2013 might itself be inspired by challenges similar to the one before me now, perhaps, even the present one. Though the Clarificatory Circular has not been challenged, in the light of the detailed discussion as above, I am of the view that this Circular will not bind the Assessing Officer, particularly when it does not lay down the correct position of law
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2020 (1) TMI 163
Disallowance of interest - nexus between interest paid on borrowings utilized for interest yielding advances - HELD THAT:- The business of the assessee was already set-up since the assessee had already reflected income from real estate business during AY 2008-09. The perusal of assessee s financial statements for year under consideration would show that the assessee has obtained unsecured loans of ₹ 583.56 Lacs which has substantially been advanced to directors others (to the extent of ₹ 185.45 Lacs) and to make-up for the accumulated losses of ₹ 317.31 Lacs incurred by the assessee over the years. The assessee do not have any other source of fund except Share capital of ₹ 1 Lac. Therefore, there was complete nexus between the borrowings and lending made by the assessee. This being the case, the interest expenditure having direct nexus with interest income was clearly allowable to the assessee. Applicability of head of income - Interest income received - HELD THAT:- We find that Ld. CIT(A) was correct in directing Ld.AO to assess the interest income as business income and allow interest expenditure against the same to the extent as specified in the impugned order. The ground stand dismissed to that extent. We find that factual matrix would require our indulgence only to the extent of interest on tax refund of ₹ 7.77 Lacs earned by the assessee which is a part of overall interest income of ₹ 144.41 Lacs. The said interest income, undisputedly, could not be held to be business income for the assessee rather it was assessable as Income from Other Sources. Therefore, we direct Ld.AO to modify order giving effect dated 27/11/2015 accordingly. The ground stand partly allowed to that extent. Proportionate disallowance u/s 36(1)(iii) - The issue as well as factual matrix being identical as in AY 2011-12 and since we have decided the issue on merits in AY 2011-12, taking the same, we confirm the stand of CIT(A) in directing AO to accept interest income as business income. The interest on tax refund, if any, would be assessable as Income from other sources. No indulgence would be required against proportionate disallowance u/s 36(1)(iii) as confirmed by Ld. CIT(A).
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2020 (1) TMI 162
Revision u/s 263 - exercise of revisional power in a situation where two views are possible - HELD THAT:- Hon ble Supreme Court in CIT v/s Amitabh Bachchan [ 2016 (5) TMI 493 - SUPREME COURT] held that so long as the view taken by the AO is a possible view, the same ought not to be interfered with by the Commissioner u/s 263 merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. 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. However, the said explanation would come into play only if the primary conditions i.e. order being erroneous and prejudicial to interest of revenue, were fulfilled. Applying the above principles to the case in hand, we find that a view was already taken by Ld. AO in the issues which from subject matter of revision u/s 263 and the said view could not be held to be illegal or unsustainable in law, in any manner and therefore, the exercise of jurisdiction u/s 263 would be invalid in such a case. If Ld. AO adopted one of the possible views, the Ld. Pr.CIT, in our considered opinion, would be ousted to exercise jurisdiction u/s 263. Therefore, by quashing the impugned order, we allow assessee s appeal.
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2020 (1) TMI 161
Addition of unexplained cash credits u/s 68 - purchase of fixed assets followed payment by way of share capital subscription - HELD THAT:- Revenue is fair enough in not disputing the clinching factual aspects of addition of the corresponding fixed assets. Nor there is any evidence that the assessee s assets do not exist as per physical verification. We are of the view in this factual backdrop that both the lower authorities have erred in law and on facts in treating the above purchase of fixed assets followed payment by way of share capital subscription as an instance of unexplained cash credits u/s. 68 of the Act. This tribunal s co-ordinate bench s decision in Income Tax Officer Ward-5(3) vs. M/s Bhagwat Marcom Pvt. Ltd. [ 2019 (8) TMI 649 - ITAT KOLKATA] has taken into consideration the entire case law to conclude that such an instance not involving any cash credits pursuing cannot be treated as unexplained u/s 68.B oth the learned authorities have erred in law and on facts in treating the sum in issue as unexplained cash credits. The same is directed to be deleted. Disallowing of depreciation claim on account of fixed assets - Disallowance includes disallowance of depreciation on account of addition to shad and building and addition to plant and machinery - HELD THAT:- The assessee fails to pin-point any irregularity in the above depreciation chart indicating the correct figure of ₹3,88,15,062/- as against that claim of ₹4,49,88,165/-. We accordingly uphold the impugned depreciation disallowance therefore. The assessee s second substantive ground is rejected
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2020 (1) TMI 160
Penalty u/s 271(1)(c) - vagueness in the notice u/s 274 - HELD THAT:- Notice issued U/s 274 of the Act and consequent impugned penalty order dated 24/06/2019 is quite vague and does not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated and/or imposed i.e. whether for concealment of particulars of income or furnishing inaccurate particulars of income. - Decided in favour of assessee.
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2020 (1) TMI 159
TCS u/s 206C(1) in respect of scrap sale - assessee treated in default for non-deduction of tax, passed order U/s 201(1)/201(1A) - HELD THAT:- As in the case of Shri Azizbhai A. Lada Vs ITO [ 2018 (1) TMI 1554 - ITAT AHMEDABAD] wherein trading of scrap was not held to be liable to deduction of tax U/s 206C(1) - No merit in the order of the A.O. treating the assessee in default for non-deduction of tax U/s 206C(1) of the Act in respect of scrap sales affected by him during the year under consideration Levy of penalty u/s 271CA of the Act for default in collecting tax at source u/s 206CA - HELD THAT:- Assessee has nowhere substantiated its claim for not liable to deduct the tax on the plea of sale of such scrap to the manufacturer/ processor of articles or things for the purpose of generation of power and not for trading purposes. Further the assessee has not filed Form No. 27 to the Chief Commissioner or Commissioner in terms of Section 201(1)/201(1A) of section 206C of the Act. It was not the case of the assessee that he was selling the scrap generated out of ship trading. Thus the nature of scrap business was not fully substantiated by the assessee so as to bring it out of mischief of section 206C(1) of the Act. - Restore the matter back to the file of the AO for deciding the issue afresh in the light of judicial pronouncement discussed hereinabove and also assessee is required to file the nature of scrap sold by him whether it is to be utilized by manufacturer or producer of articles and not for trading purposes. Both the appeals of the assessee are allowed for statistical purposes.
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2020 (1) TMI 158
Addition u/ 68 and 69 - no satisfaction as to the identity and creditworthiness of the share applicants and the genuineness of the transaction - HELD THAT:- No clarification to the doubts in the mind of the learned Assessing Officer as to the genuineness of the identity and creditworthiness of the share applicants or genuineness of the transaction. Unless and until satisfactory answers are obtained to these questions, it would be difficult to reach a positive conclusion as to the identity and creditworthiness of the share applicants and the genuineness of the transaction. Merely because the assessee was successful in completing the paperwork very meticulously or bringing into existence certain documents, the statutory obligation of the authorities does not get absolved merely because the assessee produced certain documents. It is incumbent on the authorities to verify the genuineness of such documents also in the light of the attending circumstances. Having regard to the facts and circumstances of the case we are not satisfied in this case that the Ld. CIT(A) appreciated the facts and circumstances in their proper perspective before reaching the impugned conclusions basing on the document as produced by the assessee. We accordingly find it difficult to sustain the findings of the Ld. CIT(A). Consequently, the impugned order is set aside and the order of the learned Assessing Officer is restored. - Decided in favour of revenue
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2020 (1) TMI 157
Reopening of assessment u/s 147 - bogus software purchase - HELD THAT:- A perusal of the assessment order framed u/s 143(3) r.w.s 147 of the Act shows that entire assessment order is devoid of any reference to the statement of Shri S.K. Gupta. It is not known as to what question Shri S.K. Gupta said that M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet Ltd. were providing accommodation bills. Further, we find that the entire transactions have been done through A/c payee cheques and it is not the case of the Revenue that the appellant has purchased the accommodation bills by making payments through cheques and receiving cash through back door. It is pertinent to mention here that search operations at the premises of Shri S.K. Gupta were conducted on 12.12.2006 and original assessment order was framed u/s 143(3) of the Act vide order dated 10.07.2008. This means that the Assessing Officer had sufficient time to gather information relating to search conducted at the premises of Shri S.K. Gupta and yet the Assessing Officer accepted the transactions without making any enquiry. In our considered opinion, reasons for reopening the assessment are nothing but change of opinion which is not permissible as per the ratio laid down by the Hon'ble Supreme Court in the case of Kelvinator of India Ltd [ 2010 (1) TMI 11 - SUPREME COURT] as no new tangible material was in possession of the Assessing Officer. Therefore, notice u/s 148 of the Act is bad in law and assessment framed pursuant to the notice is also bad in law. The notice issued u/s 148 of the Act is bad in law and hence the same is set aside. The assessment so framed is quashed. Merits of the case the assessee has purchased software from M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet Ltd. The ld. DR vehemently stated that after the completion of assessment of these two companies, the Assessing Officer came to know that these two companies were providing accommodation bills and the assessee is one of the beneficiaries. However, we find that during the course of assessment proceedings also, the assessee filed confirmations from these two companies relating to the transactions done with them. The Assessing Officer did not even confront the assessee with his findings given in the case of these two companies nor did he make any enquiry in respect of the confirmations filed by the two companies. The assessee is into the business of call centre services and the nature of business activities is such that it requires latest and upgraded software. If the assessee did not purchase any new upgraded software and has only taken accommodation bills, then we fail to understand how the assessee generated revenue of ₹ 5.33 crores in F.Y. 2004-05 which jumped to ₹ 12.45 crores during the year under consideration. There is not even an iota of evidence produced on record by the Assessing Officer to demonstrate that even the sales of call centre services are bogus. Assessing Officer has accepted the net profit as per the books of account and merely on surmises and conjectures, treated the purchase of software as bogus yet allowing depreciation on software which is evident from the fixed assets schedule at page 8 of the paper book. In our considered view, since there is no demonstrative evidence brought on record to justify that the software purchase is bogus, we do not find any merit in the additions made by the Assessing Officer and accordingly, we direct the Assessing Officer to delete the impugned additions. - Decided in favour of assessee.
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2020 (1) TMI 156
Deduction u/s. 54 - Denial of claim as assessee failed to comply with the requirements of section 54(2) i.e., not depositing the unutilized capital gain in a designated bank account within the due date prescribed u/s.139 - assessee failed to comply with the requirements of section 54(2) Capital gain utilized in purchasing the new asset within a period of two years from the date of transfer - HELD THAT:- It is not disputed that the assessee did not deposit the unutilized long term capital gain in the designated bank account as per section 54(2) of the Act. Nevertheless, he has completed the purchase of a new asset within a period of two years from the date of transfer. In such circumstances, courts have taken a view that there is no requirement to satisfy the condition u/.s 54(2) Decision in the case of CIT v. K. Ramachandra Rao [ 2015 (4) TMI 620 - KARNATAKA HIGH COURT] also supports the plea of the assessee. The Hon'ble High Court took the view that the question of deposit of unutilised capital gain will come up for consideration only when the capital gain is not utilised in construction of house property and when it is so utilised for construction of house property, then there is no need to make a deposit in the specified bank account. The decisions rendered in the context of section 54F of the Act will also apply to section 54 of the Act, because both the sections are in pari materia the same, on the aspect of deposit of unutilized capital gain in specified bank account. In view of the aforesaid decisions of the Hon'ble Karnataka High Court, we are of the view that the assessee is entitled to deduction u/s. 54 - Decided in favour of assessee.
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2020 (1) TMI 155
Penalty u/s. 271(1)(c) - non specifying specific limb of section. 271(1)(c) for violation of which Assessing Officer intents to impose penalty by striking off the inappropriate words in the show cause notice - HELD THAT:- AO did not strike off and specify the charge/limb for which he is proposing to initiate the penalty proceedings. In the assessment order Assessing Officer records that the penalty proceedings are initiated for furnishing inaccurate particulars and for concealment of income. However, in the penalty order passed U/s. 271(1)(c) of the Act the Assessing Officer records that it is a fit case for levy of penalty u/s. 271(1)(c) of the Act for furnished inaccurate particulars of income leading to concealment of income. Thus we hold that the notice issued by the AO U/s. 274 r.w.s 271(1)(c) of the Act is on account of non-application of mind and therefore the penalty proceedings initiated are bad in law. Thus, we direct the Assessing Officer to delete the penalty levied u/s. 271(1)(c) of the Act for both these appeals for the A.Y. 2013-14 and A.Y.2014-15. Penalty u/s. 271AAB - no search has been initiated u/s. 132 - HELD THAT:- As perused the Assessment Orders for the A.Y. 2013-14 and A.Y. 2014-15 and found that search and seizure operation was conducted u/s. 132 of the Act on 11.11.2014 on M/s. Geochem Laboratories Pvt. Ltd., based on which the assessments were framed in assessee s case and nowhere in the Assessment Orders passed for the A.Y. 2013-14 and A.Y.2014-15 u/s.153C of the Act, it has been mentioned that search was initiated in assessee s case. We also observed that penalty proceedings were initiated u/s. 271(1)(c) of the Act for the A.Y. 2013-14 and A.Y. 2014-15 in assessee case. Therefore levy of penalty u/s.271AAB the first and foremost condition to be satisfied is that search u/s. 132 of the Act should have been initiated on the assessee for invoking the provisions of section 271AAB of the Act and levying penalty under this provision. Similar view has been taken by various Tribunals as referred to above. In the case before us since there was no search and seizure operation initiated u/s. 132 of the Act, the penalty proceedings initiated u/s. 271AAB as against the provisions of statute. Thus, we quash the penalty order passed u/s. 271AAB - Decided in favour of assessee.
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2020 (1) TMI 154
Addition on account of Employees Provident Fund and Employee State Insurance Corporation - Claim was rejected by the Ld. AO on the ground that that the same was not paid on or before prescribed due date - HELD THAT:- AO, added the same as it is not allowable under section 43B of the Income Tax Act, 1961. The same was further confirmed by the Ld. CIT(a) the issue is already been decided against the assessee in terms of the ratio laid down passed by the Hon ble Jurisdictional High Court in the case of Gujarat State Road Transport Corporation (GSRTC) [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] . Hence, we find no merit in this ground of appeal preferred by the assessee. The same, thus, dismissed. Disallowance of depreciation of building given on lease - HELD THAT:- As decided in UNIVERSAL PLAST LTD. AND GUNTUR MERCHANTS COTTON PRESS CO. LTD. VERSUS COMMISSIONER OF INCOME-TAX [ 1999 (3) TMI 15 - SUPREME COURT] no irregularities in the order passed by the authorities below in not allowing such income of rent received by the appellant as income from business or profession and in not allowing the depreciation claimed by the assessee upon the categorizing the said income as income from house property. So as to, warrant interference hence we confirm the same. Assesse s appeal is thus found to be devoid of any merit and hence dismissed. Upward adjustment u/s 92CA(3) in respect of the international transactions of the appellant pertaining to payment of managements fees - HELD THAT:- Under the mutual agreement procedure the 70% actual expenses incurred under the management fees was allowed for Assessment Years 2007-08, 2008-09, and 2009-10 in respect of the case of the assessee itself. Advanced pricing agreement has been recognized as the highest body under the income tax authority being the CBDT and in view of the allowability of expenses made by the APA as mentioned hereinabove we are of the view that the management expenses cannot, at all be said to be nearly as the case sought to be made out by the revenue before us. In that view of the matter taking into consideration the advanced pricing agreement which was applied in respect of Assessment Years 2015-16, 2016- 17, 2017-18 and 2018-19, we are of the considered opinion to allow 1.5% of the operating revenue of on the identical facts and circumstances available before us taking into consideration the increasing ratio of the allowability of the expenses incurred by the assessee. It is on record that for Assessment Years 2015-16 to 2017-18 the disallowance was of 2% only wearers, in 2018-19 it has increased to 3%. Since the assessment proceeding before us is for the year 2011-12 March before the consideration of the year under APA in our considered view 1.5% disallowance will be appropriate for the case of the assessee before us .Further that the learned and departmental representative failed to bring any country document which shows that the fact is otherwise than that has been dealt with by the advanced pricing agreement while determining the allowability of expenses of the appellant company. Since the assessee has claimed the expenses to the tune of ₹ 2,31,35,833/- and after applying 2% of the operating revenue of manufacturing segment which is worked out at ₹ 2,20,88,379/-, hence we disallow ₹ 10,47,454/- lakh against the assessee in respect of the operating revenue of manufacturing segment. In the result assesses appeal is partly allowed.
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2020 (1) TMI 153
Exemption u/s 11 and 12 - assessee has transferred the lands to the members of the Society, hence, the assessee has clearly violated the provisions of section 13(1)(c) - HELD THAT:- In the instant case, during the previous year, relevant to the A.Y. 2007-08, the assessee had transferred the lands to G.Jojappa, Y.Bala Reddy, M.Marreddy and others for a consideration less than the market consideration or for no consideration. The transfer of lands was mainly done due to the impression that Govt. of Andhra Pradesh was intending to bring a legislation, prohibiting the Christian churches to transfer the land without the approval of Govt.of Andhra Pradesh. At the same time, the Society was intending to start Engineering College for which the Society was searching the funds. For procurement of funds for engineering college the society planned to sell it s lands. Due to the impression given by the Govt. of Andhra Pradesh that the churches would be barred from selling the immovable properties, the Society had transferred the lands to the members of the Society to preempt the legislation, so that it can procure the funds without any difficulty. Though the Society had transferred the lands to the members of the Society, the lands were in possession of the Society and the Society did not receive any amount from the purchasers of the land which was evidenced from the order as well as the appellate order. As seen from the orders of the lower authorities, the purchasers were not in a position to make the payment even for stamp duty charges, hence the Society had to incur the stamp duty charges for registering the properties in the names of the purchasers. The assets continued to be held by the Society. It is apparent from the orders of the lower authorities and from the facts that though the lands were transferred in the name of G.Jojappa and others, they were holding the lands as custodians, but not as the owners. Subsequently, the lands were gifted back to the Society or the sale proceeds of the lands were directly deposited in the Society s account. The assets were removed from the Balance Sheet only in 2011-12 when the assets were sold. Till such time, the assets were continued to be held by the assessee society. From the above facts, we understand the contention of the Ld.AR that in the instant case, substance over form prevails is correct. Apart from the above, though the lands were sold in 2011-12, the department did not tax the capital gains in the hands of the transferors. In fact, the AO had accepted the contention of Y.Raghunadha Rao, one of the purchasers that no investment need to be taxed in his hands and the AO also had accepted the fact that the transaction was arrangement to hold the properties of the society in the hands of the purchasers as the custodian. On consideration of the entire issue, it appears that there is no diversion of income or violation of section 13(1) and no benefit was derived by the members of the society. Anonymous Donations receipts - HELD THAT:- In the instant case, the assessee had received anonymous donations without any specific purpose. There is no specific direction as far as the sum of ₹ 2,10,52,000/- is concerned. Therefore, as rightly held by the Ld.CIT(A), the donations received by the assessee society are covered by sub section 2 of section115BBC of the Act. Further, the Ld.CIT(A) has given a finding that there was no misappropriation of funds by the members of the Society. The assessee has sold the lands, received the consideration over and above the registered document, which was deposited in the bank account without any diversion or misappropriation of funds. Similarly, the assessee had received anonymous amounts from various intending buyers. Since the priests did not support the contention, the amount was treated as anonymous donations. The said amount was deposited in the bank and the AO did not give any finding that the funds were misappropriated. Since sub section 2 of section115 BBC allows religious and charitable institution to receive anonymous donations, the case of the assessee is squarely covered by sub section 2 of section 115BBC of the Act and we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. Accordingly, appeal of the revenue is dismissed.
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2020 (1) TMI 151
Unexplained cash credits u/s 68 - HELD THAT:- We notice from a perusal of the assessment order although the Assessing Officer s show-cause notice proposed the said purchases to be treated as bogus, he neither asked for proof of genuineness of assessee s opening stock nor did he issue section 131 or 133(6) process on the assessee s supplier to this effect. His assessment order nowhere holds that either of the two components i.e. opening stock and purchases are not correct. The very factual position has continued in the CIT(A) s above extracted lower appellate discussion as well. We hold in this factual backdrop that the assessee duly proved its saree stock during the relevant previous year amounting to ₹ 1,36,77,207/- as per its books of accounts including fabric stock of ₹ 1,03,87,762/-. The survey authorities had sought to physically verify the assessee s stock of sarees on 18.01.2012. They could not find any such stock item at its premises. The only inference that could be drawn in such circumstances is of clandestine sales by disposing off sarees/fabrics out of books only forming source of the impugned cash deposits. We thus direct assessment of the impugned bank deposits @8% only. This former issue is partly accepted in assessee s favour. Disallowance of interest paid to the bank - HELD THAT;- We find no merit to sustain the impugned disallowance. The fact remains that the assessee has advanced interest-bearing funds to its sister concerns only. This is not the Revenue s case that the same lacks the element of commercial expediency between two sister concerns as per hon ble apex court s landmark decision in S.A. Builders Ltd. v. CIT [ 2006 (12) TMI 82 - SUPREME COURT] Hero Cycles Ltd. vs. CIT [ 2015 (11) TMI 1314 - SUPREME COURT] . We draw support therefrom to conclude that the assessee s act of advancing interest bearing funds to its sister concern involved commercial expediency and therefore, the impugned pro rata interest disallowance cannot be sustained. The same stands deleted.
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2020 (1) TMI 149
Bogus long term capital gains - HELD THAT:- AO had brought on record, certain incriminating information clearly stipulates that transactions entered by the assessee with Ms. Leena Surana are bogus. It is for the assessee to explain the true nature of the transaction, as she was within exclusive knowledge of the facts which the assessee had failed to do so even before the ld. CIT(A). The findings of the ld. CIT(A) remains unconverted. Thus, we do not find any reason to interfere with the orders of the lower authorities. - Decided against assessee.
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2020 (1) TMI 148
TDS u/s 194C - non-deduction of TDS while making deposit to transporter providers on declaration of PAN Number which came into effect from 1.10.2009 - Addition u/s 40(a)(ia) - HELD THAT:- Amendment has been inserted by Finance Act, 2015 to sub-section(6) of Section 194C of the Act, which has been held as effective w.e.f. 1.6.2015, which disentitle the assessee from benefit of first limb of sub-section (6) of section 194C of the Act as the legislature in its wisdom added words where such contractor owns ten or less goods carriage at any time during the previous year and furnishes a declaration to that effect along with . The purpose of insertion of said provisions of sub-section(6) to section 194C was that the legislature in its wisdom wanted to give relaxation of this provision only in a case where the contractor owns ten or less goods carriage at any time during the previous year and furnishes a declaration to that effect alongwith his Permanent Account Number, to the person paying or crediting such sum on which TDS u/s.194C was required to be made. The present case under consideration is pertaining to payment of amount to contractor by the assessee relates to assessment year 2011-12 and I am unable to agree with the contention of ld D.R. that the amended sub-section(6) of Section 194C can be placed into service against the assessee for assessment year 2012-12 as it is ample clear from the Finance Act, 2015 that said amended provisions has been given effect from 1.6.2015 which falls within the ambit of financial year 2015-16. Therefore, hold that the basis taken by the AO and conclusion drawn by the CIT(A)in his order cannot be held as sustainable and justified and thus, dismiss the same - AO is directed to delete the addition - Sole ground of the assessee is allowed.
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2020 (1) TMI 147
Capital gain computation - sale of closing stock - provisions of Section 50C applicability - stock was lying with the assessee on the date of sale of other fixed assets - as contended that assets were sold on going concern, slump sale basis and no consideration was assigned towards sale of closing stock - HELD THAT:- In the absence of any application by the assessee to consider the additional evidence and in fact no evidence was filed before us except by making bald assertion before us. Further, this contention militate against the very statement of the assessee that closing stock was sold as part of the immovable assets. There is yet another reason to confirm the addition, even assuming that no specific consideration was assigned to the sale of closing stock, provisions of Section 50C of the Act are attracted on the sale of fixed assets. Thus, the addition is required to be confirmed even under the provisions of Section 50C of the Act, in the light of the fact that the sale consideration received exactly matches with the guideline value prescribed for stamp duty purpose in respect of fixed assets. Therefore, we do not find any reason to interfere with the orders of the lower authorities and we dismiss the appeal filed by the assessee. Levy of penalty u/s.271 (1) (c) in respect of addition made on account of undisclosed sale value of the closing stock - HELD THAT:- Perusal of the order of Assessing Officer as well as ld. CIT(A), the addition was made considering sale value apportioned to various assets. Admittedly, no sale consideration was apportioned towards sale of the closing stock and the closing stock was not physically available with the assessee and the closing stock was admittedly transferred to the buyer. These admitted material facts led to addition. The only contention made by the assessee is that this was sold as part of sale of assets, which is not supported by any evidence. The Tribunal had recorded a finding that his statement is not supported by any evidence on record. The Hon ble Rajasthan High Court in the case of Badri Prasad Om Prakash vs. CIT [ 1985 (10) TMI 24 - RAJASTHAN HIGH COURT] had held that wherever the assessee had failed to rebut the factual position on the basis of which addition was made, the levy of penalty u/s.271(1) (c) of the Act was justified. Thus, it is clear case of concealment and Assessing Officer had rightly levied penalty u/s.271 (1) (c) of the Act. The contention of the assessee that in show cause notice, the Assessing Officer had not struck off the relevant limb has no relevance, since he had filed explanation in response to show cause, which means that assessee very well understood the show cause notice, and therefore the ratio of the decision of Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] cannot be applied as the assessee understood the show cause and filed explanation. Recently, the Hon ble Jurisdictional High Court in the case of Amtex Software Solutions Pvt. Ltd vs. ACIT [ 2019 (6) TMI 1182 - MADRAS HIGH COURT] had reiterated the same ratio. Hence, we do not find any merits in the appeal filed by the assessee
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2020 (1) TMI 144
Revision u/s 263 - Reopening of assessment u/s 147 - denying deduction under section 10B of the Act pertaining to functional genomics division and other miscellaneous disallowances made - HELD THAT:- On perusal of impugned orders for assessment years under consideration, it is observed that Ld.CIT records assessee developed software i.e Vector NTI advance. However, Ld.CIT observes that there is no mention in export of the software outside India. It appears that because the service agreement does not mention any export of software outside India, Ld.CIT held order passed by Ld.AO to be erroneous and prejudicial to interest of revenue. There is no denial on behalf of Ld.CIT that assessee is not involved in development of software tools. However, according to Ld.CIT, exemption should be denied because assessee is exporting results of research and development carried out by Bioinformatics division. We deem it necessary to extract observations of DRP for assessment year 2010-11, wherein reference to Circular 1 of 2013 issued by CBDT has been made, which clarifies that even if any research and development in any field is done in process of providing notified services, in particular, services of engineering and design, the same will be covered under aforesaid CBDT notification which will be eligible for 10A/10B benefit. Although assessee conducts research and development activities, but the same is only a process step to provide final output to its parent company. Also observed that what is developed by assessee under this segment is a customised electronic data created through various research and development. No doubt, invoices placed in paper book mentions Research and Development charges cannot impliedly mean that activities carried on by assessee under Bio-informatics segment does not amount manufacture computer software. A co-joint reading of definition of computer software and the CBDT Circular No.1/2013 what comes to our understanding is that assessee is developing a customised software in the form of bio-infirmatics tools using platforms like C++, Java which is used to analyse gene sequence, protein sequence in Silicon Valley owning, gene expression profiling, pathways development etc, This is what AO intend from what he mentioned in para 10 of assessment order, specifically referred to by Ld. CIT DR. In our opinion Ld.AO was satisfied upon verification of documents placed by assessee at the time of reassessment proceedings. He called upon various details to verify claim of assessee under both segments. And then allowed deduction under section 10B of the Act, restricting claim only to the extent of Bioinformatics segment. Thus, we are of the opinion, that view taken by Ld.AO is a possible view. It is well settled proposition that merely because, Ld.CIT has taken different view, assessment order cannot be termed as erroneous and prejudicial. For section 263 to be initiated both conditions of assessment order being erroneous as well as prejudicial to the interest of revenue must be jointly satisfied. In the facts of the present case, having regards to evidences filed by assessee as analysed by Ld.AO, view adopted by Ld.AO is one of the possible views and therefore cannot be treated as erroneous. As both conditions are not satisfied in present case, we are unable to uphold proceedings under section 263 In the present facts of the case, Ld.CIT has not analysed activities carried on by assessee under Bioinformatics division having regards to documents filed by assessee and Circular referred and relied upon by assessee, as well as considered DRP order for assessment year 2010-11, on which reliance has been placed by Ld.AR. We are hold revision proceedings under section 263 to be bad in law and the same is quashed and set-aside. - Decided in favour of assessee.
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2020 (1) TMI 140
Penalty u/s 271(1)(c) - mere failure of the A.O to tick the relevant box in the show cause notice - HELD THAT:- According to us, the issues raised in this Appeal are fully covered, not only by order dated GOA COASTAL RESORTS AND RECREATION PVT. LTD. [ 2020 (1) TMI 93 - BOMBAY HIGH COURT] but, further, by the decision of this Court in the case of Commissioner of Income Tax-11 Vs. Shri Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] and Principal Commissioner of Income Tax Vs. New Era Sova Mine [ 2019 (7) TMI 1002 - BOMBAY HIGH COURT] .- Decided against revenue
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Customs
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2020 (1) TMI 177
Permission to travel abroad - Applicant-respondent was enlarged on bail and was restricted from travelling abroad - ground adduced by the respondent, was that he had two minor children, who were studying in the United Arab Emirates (UAE) and that, owing to his being detained in India, the studies of the children were being seriously affected, as well as business was being affected - HELD THAT:- The facts of the case do not warrant any interference with the directions, of the learned CMM, permitting the respondent to travel abroad, as upheld by the learned ASJ - The address of the respondent, during his stay abroad, has been furnished by the respondent and respondent is also being represented by his counsel, whose details have also been provided to the DRI. Moreover, the learned CMM while dismissing the application for cancellation of bail vide order dated 25th September, 2019, notes that the Deputy Director of the DRI, categorically stated, before the Court that the respondent was not required anymore for the purpose of investigation, and that requisite examination of the respondent had already been conducted. The learned ASJ in the impugned order dated 26th November, 2019, takes note of the same. Moreover, the learned ASJ notes that the counsel for the petitioner had made a statement that since the detailed Show Cause Notice dated 26th September, 2019 was issued and served on the respondent, he was not required for further investigations in the present matter. The respondent is permitted to travel abroad for a period of two months, which will commence from the date when he departs. For this purpose, DRI is directed to return the passport of the respondent, to him within a period of one week from today - The respondent shall ensure that he will appear before the Indian Embassy at Dubai every 10 days. No default, by the respondent, in this regard, shall be condoned and any default, in this regard, will result in this order standing vacated and ceasing to apply.
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2020 (1) TMI 176
Refund of amount deposited with the Customs Authorities - time limitation for claiming refund - Section 27 of the Customs Act - HELD THAT:- In the instant case, it is true that Appellate Commissioner rendered its decision in favour of petitioner on 4.12.2013 and one can say that the petitioner was entitled to seek refund based thereupon. However, it deserves to be noted that the appeal challenging the said order was preferred by the Department before the CESTAT and CESTAT rendered its decision on 8.9.2014. The said order dated 8.9.2014 was received by the petitioner, as per say of petitioner and it has not been disputed, on 29.9.2014 - Therefore, within one year therefrom, the refund claim was made on 9.9.2015. Though the actual date of application is 8.8.2015 but the receipt stamp indicates the date of 9.9.2015 and accordingly, it was said to have filed within the time limit prescribed. When the petitioner s claim that it was not liable to pay duty on the quantum mentioned in the bill of landing as the actual quantity landed was lesser than the quantity mentioned in the bill of landing, was justified and upheld the difference in duty levied, was required to be refunded, the quantity which actual landed, was the duty on quantity laded and therefore, the petitioner's contention was upheld by the Appellate Commissioner under it's order dated 4.12.2013 and confirmed by the CESTAT under its order dated 8.,09.2014. Therefore, there was no justified reason whatsoever for denying the refund to the petitioner. The petitioner is entitled to receive refund as per his claim contained in his application dated 8.8.2015 in accordance with law and the same shall be granted to the petitioner within a period of four (4) months from the date of receipt of writ of this Court - Petition allowed.
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2020 (1) TMI 165
Conversion of shipping bills - conversion of free shipping bills under scheme Code 00 to Export Promotion Capital Goods Scheme (EPCG) under scheme Code 11 - conversion denied in terms of Circular No. 36/2010 dated 23.09.2010 - the contention of the Respondent Department is that the departmental officers are bound by the Circular issued by the Department - HELD THAT:- The sanctity of such Circulars was examined by the Hon ble Supreme Court in the case of BENGAL IRON CORPORATION VERSUS COMMERCIAL TAX OFFICER [ 1993 (4) TMI 277 - SUPREME COURT ], where it was held that Law is what is declared by this Court and the High Court - to wit, it is for this Court and the High Court to declare what does a particular provision of statute say, and not for the executive. Of course, the Parliament/Legislature never speaks or explains what does a provision enacted by it mean. An identical issue has come up for consideration before the coordinate bench of this Tribunal in case of M/s Indian Oil Corporation Limited vs. Commissioner of Customs [ 2019 (11) TMI 1338 - CESTAT CHENNAI ] where it was held that the request for conversion of the shipping bill cannot be disallowed by pressing into the application of time limit prescribed by the Board in its circular dated 23.9.2010. The impugned order cannot be sustained and is being set aside - The appeal is allowed by way of remand to the original adjudicating authority for conversion of free shipping bills to EPCG shipping bill.
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2020 (1) TMI 164
Interest on delayed refund of SAD - Circular No. 6/2008-Cus. dated 28/04/2008 - grant of interest was denied on the ground that there is no provision for payment of interest in the N/N. 102/2007 - HELD THAT:- The Commissioner (Appeals) has accepted that the appellant is eligible for interest for delay in payment of refund in view of the statutory provision but he has wrongly considered the date of filing the claim as 6th June 2017 which was only the date of submitting the copy of the Tribunal s Final Order with a request for early sanction of the refund due with eligible interest. In fact this has resulted in reducing the period of delay to mere 7 days whereas as per the appellant the actual delay has been from 857 days to 399 days as detailed in the statement annexed with the appeal. This issue of interest has been settled by the Apex Court in the case of RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. [ 2011 (10) TMI 16 - SUPREME COURT] wherein the Apex Court in para 14-15 has held that the assessee is entitled to interest after the expiry of three months from the date of making the application though the judgment of the Apex Court in the context of Section 11BB which is parimateria to Section 27A of the Customs Act having identical provisions. The appellant is entitled to interest of 43,091.42 as per the statement of interest filed along with appeal papers - appeal allowed - decided in favor of appellant.
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2020 (1) TMI 146
Valuation of imported goods - old and used worn clothing - enhancement of value - quantum of redemption fine and penalty - HELD THAT:- The enhancement of value has been ordered by the First Appellate Authority on the basis of concurrence given by the importer for such enhancement. There is no challenge to the order of confiscation, but Revenue is challenging the quantum of redemption fine and penalty, which stand reduced by the learned Commissioner(Appeals). The learned Commissioner(Appeals) has ordered reduction of redemption fine and personal penalty on the basis of ratio laid down by the Tribunal in the case of Omex International Vs. Commissioner of Customs, New Delhi M/S. OMEX INTERNATIONAL VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [ 2015 (4) TMI 112 - CESTAT NEW DELHI (LB)] . The Tribunal has taken the view that redemption fine of 10% and penalty of 5% of the value of the imported goods, would be appropriate in case of import violating Exim Policy Provisions. There are no reason to interfere with the findings of the learned Commissioner(Appeals) on the basis of such decision - appeal dismissed - decided against Revenue.
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Corporate Laws
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2020 (1) TMI 169
Vires of the proviso to Section 167(1)(a) of the Companies Act - Disqualification for appointment of Director - case of petitioner is that petitioner's rights have not been in any manner affected by the insertion of the proviso in as much as the petitioner is not a Director in any company and has not had to vacate his office by virtue of the proviso inserted in Section 167(1)(a) of the Companies Act by the Companies (Amendment) Act 2017 - HELD THAT:- As per Section 167(1)(a) of the 2013 Act, the office of the Director is to become vacant if a Director incurs any disqualification as provided for under Section 164. However, such all-encompassing provision existed in the 1956 Act with each of the grounds for vacation being listed individually. It is important to note that liability under Section 274(1)(g) was not a ground for a Director to vacate his post in any company. Before the impugned proviso was inserted in the Companies Act 2013, Directors of a company who had defaulted under Section 164(2) would have to vacate their post as Director of the defaulting company only. This was leading to a situation where any person who became a Director of a company which had defaulted under Section 164(2) automatically attracted Section 167(1). Thus, no person could be appointed as a Director in those companies which had defaulted under Section 164(2). Section 274(1)(g) of the Companies Act 1956 was made to protect investors rights and to ensure that Directors of companies act vigilantly in preventing any misfeasance or discrepancy which may affect investors and the public. It is thus held that the underlying object of Section 274(1)(g) is facilitating good corporate governance and it cannot be declared unconstitutional without considering the purpose that the provision serves - the legislative intent behind the inclusion of the proviso to Section 167(1)(a) is also to ensure good governance and inculcate a sense of security in investors through transparent disclosures and control over erring Directors. The filing of returns and disclosures regarding the finances of the company are vital to ensure greater transparency and accountability to the public which is the need of the hour in today's corporate set up. These measures are extremely necessary in the interest of fair trade and ensuring justice. Additionally, a great deal of responsibility is borne by the Directors of a company to ensure that the company acts in accordance with laws and upholds the principles of transparency and probity - A Director must not derelict his duties as a Director and must exercise all due diligence necessarily to ensure that the company abides by laws and regulations. A Director, irrespective of the nature of Directorship, by virtue of the fact that he holds the position of Directorship cannot claim immunity for the defaults of the company in the filing of returns or the business of the company, and therefore cannot be made to vacate his post in other companies. This Court can take judicial notice of the fact that people invest their hard earned money in companies in which there are persons of repute holding the position of a Director. The Director therefore cannot absolve himself of the misdeeds of the company after holding a position in the company - There is thus a rational nexus between the amendment and the object for which the amendment was brought about in the Companies Act 2013. The contention of the petitioner that the proviso to Section 167(1)(a) is irrational, manifestly arbitrary and unreasonable, and thus must be declared as ultra vires Article 14 of the Constitution of India cannot be accepted. The exclusion of Directors from vacating their posts in the defaulting company while doing so in all other companies where they hold Directorship has been done in order to prevent the anomalous situation wherein the post of Director in a company remains vacant in perpetuity owing to automatic application of Section 167(1)(a) to all newly appointed Directors. Secondly, the underlying object behind the proviso to Section 167(1)(a) is seen to be the same as that of Section 164(2) both of which exist in the interest of transparency and probity in governance. Owing to these justifications, the Court thus holds that the proviso to Section 167(1)(a) is neither manifestly arbitrary nor does it offend any of the fundamental rights guaranteed under Part III of the Constitution of India. Petition dismissed.
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Insolvency & Bankruptcy
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2020 (1) TMI 150
Maintainability of application - initiation of CIRP - amicable settlement - breach of terms of settlement - default of post dated cheques - Appellate Tribunal directed the Appellant to file affidavit on behalf of the Promoter of the Corporate Debtor giving undertaking that the post-dated cheques will be encashed on presentation and they will not be defaulted - HELD THAT:- In the light of decision of Hon ble Supreme Court in Swiss Ribbons Pvt. Ltd. Anr. Vs. Union of India Ors. , [2019 (1) TMI 1508 - SUPREME COURT] and in exercise of power conferred under Rule 11 of NCLAT Rules, 2016, we set aside impugned order dated 3rd September, 2019 passed by the Adjudicating Authority initiating Corporate Insolvency Resolution Process against M/s Jagtar Singh and Sons Hydraulics Private Limited conditionally, subject to the compliance of the Terms of Settlement by the end of August, 2020. Terms of Settlement as recorded by the Hon ble Mediator should be treated to be order and direction of this Appellate Tribunal to be complied by all the parties including the Promoters of M/s Jagtar Singh and Sons Hydraulics Private Limited (Corporate Debtor); Parvinder Singh, Authorized Representative; Intec Capital Ltd. And Interim Resolution Professional. In the present, whole process practically stands suspended for compliance of the Terms of Settlement. The Corporate Insolvency Resolution Process can be revived by the Petitioner in case of breach of Terms of Settlement or default of any post-dated cheque. On completion of compliance of terms and conditions, the application under Section 7 will be deemed to have been withdrawn by Intec Capital Ltd. , otherwise the order setting aside the impugned order dated 3rd September, 2019 shall stand recalled and the Corporate Insolvency Resolution Process will continue - appeal disposed off.
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Service Tax
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2020 (1) TMI 167
Distribution of CENVAT Credit - reverse charge mechanism - ISD distributed credit of Service Tax paid including paid under the reverse charge basis on various input services - Rule 7A of CENVAT Credit Rules, 2004 - time limitation - HELD THAT:- The invoices issued by Delicious Trade Links Private Limited, credit for which is disputed by the Revenue Department, forms part of ISD invoice dated 31/08/2005 and parallel proceedings i.e. double demand. In the present facts, the Department had conducted an audit of the Appellant unit (pre- 2006) and scrutinized the ER 1 return filed for the month of August 2005 wherein the Appellant had availed CENVAT credit in respect of the said invoices issued by Delicious Trade Links Private Limited, and this fact is also recorded in Show Cause notice dated 06/09/2006. Time Limitation - HELD THAT:- In this case the entire facts were within the knowledge of the Revenue Department and there is no suppression of material facts from the Department. On the contrary the relevant facts and information were known to the Revenue Department by the ER 1 filed and during course of its audit specifically concerning CENVAT credit. Despite this, the Revenue Department issued the subsequent Show Cause notice which led to duplicity of demand and these proceedings - demand is for longer period and is thus hit by limitation. Appeal allowed.
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2020 (1) TMI 166
Vague show cause notices (SCN) - Non-payment of services tax - reverse charge mechanism - Lease rent income - R D Income - Commission on sale - Know How fee - Professional Consultancy Expenses - Analytical testing Charges - Advertisement expenses - Bank Charges - Clinical trial Lab Consumables - Legal Expenses - Marketing Sales Promotion Expenses - Marketing and Research Overseas - Meeting Conference - Royalty expenses - Training Development Expenses - cases of appellant is that there is no classification of the taxable services given in the later 4 SCNs, later 4 SCNs are entirely based on balance-sheet figures without any investigation being conducted, there are case laws which suggests that show cause notices based only on balance sheet figures cannot stand in law, Place of provision of service rules have not been quoted in the later 4 show cause notices and that Negative list provisions have not been quoted in the show-cause-notices. - case of Revenue is that Appellant failed to provide the relevant evidence despite demand from the department. HELD THAT:- The burden was on the Revenue to prove the alleged shortcoming after the records of Appellant along with their C.A. certificate was already produced before the adjudicating authority. In the given circumstances, neglecting those evidences and without referring to any other evidence proving short payment on part of Appellant, confirmation of demand is not sustainable. The same is to be set aside. There is also a plea that a show cause notice dated 20.10.2008 cannot be referred to as the previous show cause notice for proposing the demand in impugned four show cause notices, appellants had submitted that no elaborate basis of charge was given in any of the subsequent show cause notices except making a reference to the previous show cause notice of 20.10.2008 - HELD THAT:- No scrutiny of record was done nor any document was examined. The demand is alleged to have been mechanically raised by simply ascertaining that the difference between the tax payable on balance sheet figures of income/expenditure and the tax paid as per ST-3 Returns is alleged to have been evaded that too by suppression of facts. Perusal of four of these show cause notices shows that nothing has precisely been discussed in the show cause notice for the impugned period. All these show cause notices are speaking about the records from 01.04.2009 to 31.03.2010 which apparently and admittedly is not the period of demand in any of these show cause notices. The show cause notices are opined to be vague. Though the department has laid emphasis upon the Finance Act 2012, Section 73 thereof, but we are of the opinion that the said legal provisions for treating a subsequent show cause notice as continuation of the previous show cause notice where issue remains same, came only in the year 2012. The same cannot be made applicable retrospectively. Thus, each show cause notice had to be self contained, including all the details and basis for arriving at the allegation of short/non-payment of service as already observed above. Thus two of the SCNs are out of the scope of this provision. SCN of 2014 could rely upon the contents of the SCN of the year 2012 but later also a no detail except reliance upon SCN of 2008 which is not permissible - Resultantly, all four SCNs here are silent providing any basis to proceed against the appellant. The adjudicating authority below has concluded the erroneous findings. Not only this, the judicial indiscipline on the part of the authority is very much apparent - the demand and penalties/interest is set aside not only on the merits thereof but also for the show cause notice being not maintainable - the appeal of the assessee stands allowed and the appeal of the department stands dismissed.
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2020 (1) TMI 145
Repairs and maintenance service - Composite service or not - inclusion of value of the materials used in rendering Repairs and Maintenance Service - appellant discharged service tax on service portion and paid sales tax on material component - Department was of the view that the being composite contract the entire value including the material component has to be taken for the purpose of determining the taxable value of services - demand of differential duty along wit interest and penalty - HELD THAT:- In SAFETY RETREADING COMPANY (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SALEM, M/S TYRESOLES INDIA PRIVATE LMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, GOA AND M/S LAXMI TYRES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2017 (1) TMI 1110 - SUPREME COURT] the issue has been decided, where the Hon ble Apex Court took the view that the spare parts/materials used for repairs and maintenance cannot be said to have been not sold to the customers. In any annual maintenance contract, the spare parts etc., which have been used in the course of maintenance service are definitely considered to be sold and when sales tax has been paid on the value of such goods, simultaneously, one cannot charge them to service tax. In the present case, the demand raised herein is on the value of materials, on which VAT has already been discharged. The demand do not sustain - appeal allowed - decided in favor of appellant.
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2020 (1) TMI 142
Nature of transaction - sale or service - Business Auxiliary Service or not - Returns not filed by assessee - contradiction of SCN - it is alleged that the service was classifiable under Commission Agent Service - time limitation - HELD THAT:- An identical issue has been considered and decided by the Co-ordinate Ahmedabad Bench of the Tribunal in the case of M/S AIA ENGINEERING LTD. VERSUS THE COMMISSIONER, ST. - AHMEDABAD [ 2014 (12) TMI 241 - CESTAT AHMEDABAD] where it was held that this activity of the appellant cannot be considered as a Business Auxiliary Services and liable for Service tax under the Finance Act, 1994. It is also the settled position of law that the applicability of Sales Tax and Service Tax are mutually exclusive, as settled by the Hon ble Supreme Court in the case of IMAGIC CREATIVE PVT. LTD. VERSUS COMMISSIONER OF COMMERCIAL TAXES ORS. [ 2008 (1) TMI 2 - SUPREME COURT] . Merely because exemption is availed under the Sales Tax Act, the transaction does not cease to be a sales transaction. In the present case, the State Sales Tax Authorities have considered the impugned sale transactions and also passed assessment orders, which are also placed on record. Apart from this, there is no documentary evidence placed on record to suggest that the appellant did not undertake any sale transaction or rather, only provided services as alleged. The declaration in Form E-1, which is issued by the supplier directly to the beneficiary, is placed on record and that the issuance of Form-C by the beneficiary/customer to the State Department is also on record. Transaction declared as sale and not service - Demand do not sustain - appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (1) TMI 152
CENVAT credit - duty paying invoices - Department had observed that the appellant had availed CENVAT credit on BOEs not addressed to their registered premises and on photocopies of Bills of Entry which were also not addressed to their registered premises - HELD THAT:- The denial of CENVAT credit on account of wrong address of the recipient in the invoice/Bill of Entry cannot be a ground to deny credit in view of various decisions relied upon by the appellant - the ratio of the decision relied upon i.e., NOVOZYMES SOUTH ASIA PVT. LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE, Final Order No. 27076/2013 [ 2013 (12) TMI 1474 - CESTAT BANGALORE ] and ITW INDIA LTD. VERSUS COMMR. OF C. EX., CUSTOMS SERVICE TAX, HYDERABAD-I [ 2013 (12) TMI 1618 - CESTAT BANGALORE ] is that when there is no dispute on the receipt of input service and its utilization, credit cannot be denied merely on the basis of wrong address of the appellant in the invoice/Bill of Entry - credit allowed. Denial of CENVAT credit on the basis of attested copies of Bill of Entry - HELD THAT:- It is found that credit has wrongly been denied on the ground that photocopies is not a proper document for claiming the CENVAT credit under Rule 9(1)(b) of CCR - reliance can be placed in the case of M/S BALKRISHNA INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I [ 2016 (1) TMI 383 - CESTAT NEW DELHI ] - credit allowed. Credit allowed - appeal allowed - decided in favor of appellant.
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2020 (1) TMI 143
Demand of duty - imposition of penalty invoking Rule 8(3A) of Central Excise Rules, 2002 - HELD THAT:- The issue regarding demand of duty and imposition of penalty invoking Rule 8(3A) of Central Excise Rules, 2002 has been decided by the Hon ble High Court of Gujarat as well as Hon ble High Court of Delhi. The Hon ble High Court of Gujarat in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] has declared the said rule ultra-virus - The said order has been seen by the Hon ble Apex Court, however, in terms of the decision of Hon ble High Court of Delhi in the case of PRINCIPAL COMMISSIONER OF C. EX., DELHI-I VERSUS SPACE TELELINK LTD. [ 2017 (3) TMI 1599 - DELHI HIGH COURT] . The decision of Hon ble High Court of Gujarat in the case of Indsur Global Ltd is binding. The aforesaid demand and interest is set aside. However, the penalty imposed is reduced to ₹ 5000/-only under Rule 27 of the Central Excise Rules, 2002 - appeal allowed in part.
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2020 (1) TMI 141
Valuation - Receipt of additional consideration - Duty amount of ₹ 5.92 Crores paid by the buyer towards import duty has effected the sale value of goods - manufacture of FRP tanks supplied as Capital Goods to the user holding EPCG Authorization - subsequent denial of benefit of EPCG Scheme to the buyer - recovery alongwith interest and penalty - Rule 6 of the Central Excise Valuation Rules, 2000 - HELD THAT:- The issue involved has been settled by the Hon ble Apex Court in case of COMMISSIONER OF CENTRAL EXCISE, NAGPUR-I VERSUS M/S. INDORAMA SYNTHETICS (I) LTD. [ 2015 (8) TMI 947 - SUPREME COURT ] where it was held that Commissioner has rightly come to the conclusion with regard to the fact that additional monetary consideration, in addition to the price being paid for the goods, i.e. transfer of advance import licence in favour of the seller by the buyer enabling the seller of the goods to effect duty free import of the raw materials and bringing down the cost of production/procurement, is a consideration, the monetary value of which has to be considered under the provisions of the Rules, i.e. Rule 6 thereof. Though Commissioner has in impugned order, upheld the demand to the extent of price differential between the goods supplied by availing the benefit of EPCG License and those supplied without availing the same, the reason for limiting to the price differential is not explicit when investigations show that respondents have additional consideration much higher than the price differential. After the amendments made in Section 4 of Central Excise Act, 1944 by the Finance Act, 2000, the concept of transaction value has been introduced. Every transaction has to be examined separately and uniquely, and the assessable value determined accordingly. In the case were additional consideration has been received against a particular supply then the exact quantum of additional consideration received to be added to the transaction value of that supply. Commissioner has given the benefit of Section 11A(2B) to the Respondents for not imposing any penalties etc. - since the respondents have not paid the amount of duty required to be paid with interest, benefit of Section 11A(2B) could not have been extended to the respondents. Thus issue in respect of penal proceedings in terms of Section 11AC read with Rule 26 of Central Excise Rules, 2002 needs to be considered afresh. The matter needs to be considered afresh by the adjudicating authority - appeal allowed by way of remand.
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Indian Laws
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2020 (1) TMI 171
Legality and validity of directives issued by the Chief General Manager, Reserve Bank of India, Mumbai dated 23rd, 24th, 26th September, 2019 and 3rd and 14th October, 2019 - withdrawal of restrictions imposed in exercise of its power conferred under Section 35A of the Banking Regulation Act, 1949 - restriction on withdrawal of amount from Bank - HELD THAT:- The overriding power of the RBI under section 35A enables it to record a satisfaction and to take measures so as to prevent the affairs of the bank being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company. We think that on the basis of the available material, the RBI was rightly satisfied that such protective measures are indeed necessary and therefore, it must issue the directions. Further, it has been stated by the RBI in its affidavit that upto 78% of the depositors could withdraw their entire deposits despite these protective measures. We do not think that we can, in writ jurisdiction, substitute the opinion or satisfaction of the RBI with our order or direction, much less to the contrary. We possess no experience and expertise in financial and fiscal matters. In matters of banking practices and the business of banking and its regulation, we must leave everything to the wisdom of the RBI. In fact, the presumption is that it will prevent the acts conducted in a manner prejudicial to the interest of depositors. We do not think that any proof to the contrary has been placed before us and on the sketchy materials in the form of averments and allegations, which are sweeping and general, we can not set aside the impugned directives. The RBI has deliberately not stepped in earlier or has stepped in belatedly in order not to protect the public interest or the interest of the depositors or the banking company, but allowed some of the officials, managing the affairs of the P MC Bank, to get away We do not think that the RBI can be faulted for issuing the directions as are impugned in these petitions. We also cannot interfere with the limits placed by the RBI on the withdrawal. In fact, the RBI has acted fairly, justly and reasonably in revising the limits on withdrawal from time to time. When the first limit of ₹ 1,000/- was placed, the RBI was aware of the hardship and difficulty of depositors. In a timely manner, it has stepped in to enhance the limit and which is now enhanced as aforenoted. The aspects covered by the RBI regarding medical emergencies and education are such that in appropriate cases, depending upon the facts brought before the Administrator, he can allow the withdrawal up to specific limits - We do not think that the petitioners, styling themselves aggrieved investors and depositors, can complain. Each of these petitions have no merit and they deserve to be dismissed - no interference is permissible with the impugned directions of the RBI as they are based on the pre-requisites or the pre-satisfaction in terms of section 35A of the Act of 1949. Petition dismissed.
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