TMI Tax Updates - e-Newsletter
October 1, 2018

Case Laws in this Newsletter:

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

TMI SMS

• Input Tax Credit - GST - ITC cannot be allowed on stock transfer from the Head Office to its branches in other States at Zero Value

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Highlights / Catch Notes

• GST:

  Classification of Supply - supply of goods or services - Levy of GST - Supply of printed question papers for various examinations conducted by the Government/Government aided Educational Boards/ Councils/Universities etc - Cannot be held as supply of goods - Exempted as providing pure service to the the government.
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• GST:

  Input Tax Credit - stock transfer from the Head Office to its branches in other States at Zero Value - optical lenses and frames for spectacles and accessories. - if the value declared in such invoice is zero no input tax credit is available to the recipient.
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• GST:

  Release of seized goods with vehicle - incorrect E-way bill - Surprisingly, neither the mobile squad authority nor the appellate authority appreciated the claim of the petitioner that it is due to mistake or human error the vehicle number (particularly last two digits) are mentioned different which in the instant case are 83 in place of 38. - it is nothing but a clear cut case of harassment of the petitioner/dealer.
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• GST:

  Anti-Profiteering - benefit of reduction in the rate of GST in restaurant service - purchase of 6 Hara Bhara Kabab Sub - base price of the product increased from ₹ 130/- to ₹ 145/- when the GST was reduced from 18% to 5% - Section 171 of CGST Act, 2017. - Due to denial of ITC, the cost of the product increased - It is not a case of profiteering.
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• Income Tax:

  Deduction u/s 80IA - Even assuming that the appellant contributed technical knowhow for the purpose of generating electricity, it does so on behalf of the owner of the plant namely the SPCL. - the appellant is not the owner of the power plant and that it does only maintenance work, for which, it is given a fee. - Deduction u/s 80IA not allowed.
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• Income Tax:

  Disallowance u/s 40(a)(i) - technical on-call assistance charges paid by assessee to its AE - Revenue received by AE in view of services rendered to assessee’s customer is not taxable in India as per Article 12 (4) of India US DTAA, applicability of section 195 of the Act is not possible.
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• Income Tax:

  Claim of depreciation on leased assets i.e. milk cans - it is established by the revenue that purchase consideration was routed back, hence, the entire claim proved to be a colourable device - the claim of the assessee is devoid of any merit
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• Income Tax:

  Genuineness of claim of loss - allegation of purchase and sale of Penny stocks - The entire addition has been made on probabilities, human behaviour, the alleged unnatural fluctuation in prices of the shares etc., but not based on any evidence connecting the assessee with such allegations - No additions.
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• Income Tax:

  Revision u/s 263 - CIT proposed the valuation of closing stock by taking the average of opening stock and purchase price. - Pr. Commissioner of Income Tax-1, Bhubaneswar was not justified in disturbing the consistent method of valuation.
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• Income Tax:

  Addition u/s 145A - adjustment of closing stock of the assessee by duty and taxes etc. in the form of CENVAT - In the absence of any impact on the profitability of the assessee per se due to exclusive method of accounting followed, no addition can be made.
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• Income Tax:

  Penalty u/s 271AAA - Assessment u/s 153C - search and seizure proceedings u/s 132(1) not carried out against the assessee - the primary condition of section 271AAA remains unsatisfied - No penalty.
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• Income Tax:

  India-UK DTAA - the expression “any 12 month period” mentioned in Article 5(2)(k)(i) of the India-U.K. DTAA has to be construed to mean the previous year or financial year as per section 3 of the Act, since, the income is sought to be taxed in India.
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• Income Tax:

  Levying penalty u/s 272A(2)(k) for late filing of TDS returns - the ‘Person Responsible’ had a bonafide reason for the delay in filing TDS returns - No penalty.
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• Customs:

  Electronic sealing — Deposit in and removal of goods from Customs bonded Warehouses
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• Customs:

  Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg.
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• Customs:

  Seeks to reduce the import duty on parts/ components used in manufacturing of specified textile machinery to Nil
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• Customs:

  Under the DFIA Scheme, it is inferred that once the license is transferred to a third party legitimately, the benefits accrued under the license on the transferor terminates. - No refund.
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• Customs:

  Refund of the excess Customs duty paid - excess duty collection arisen due to typographical error in the documents provided by the importer - The assessing authority can amend an order of assessment, insofar as clerical slips/errors is concerned. On making of such correction under Section 154 of the Act, the consequential return of amount of duty of customs, would be available to an importer.
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• Customs:

  Valuation of imported goods - First quality Oryx unpolished marble slabs - rejection of declared value - Department has made out a strong case of misdeclaration against the appellant. As such, the confiscation upheld under Sections 111(d) and 111(m) of the Customs Act, 1962 is valid.
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• Customs:

  Classification of imported goods - Multimedia speakers with additional facilities such as USB, SD card and FM radio etc. - The main function it performs, which in the present case remains to be that of a speaker.
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• FEMA:

  Appointment of adjudicating authorities to hold an inquiry for the purpose of adjudication under section 13 of the said Act
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• IBC:

  Misconduct insolvency professional - misleading the stakeholders of the insolvency and bankruptcy - Disciplinary Committee has taken the action against the professional.
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• Service Tax:

  If the LAA finds that demand is time-barred, he should only set aside the demand on that ground but cannot advise assessee concerned to discharge the disputed amount through Section 73 (3) ibid - assessee cannot be said to be discharge the disputed amount through Section 73 (3) ibid.
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• Service Tax:

  Refund of Service Tax paid wrongly - It is an admitted fact by the appellant that they have collected service tax from its own members and paid the same to the Government under the category of health club and fitness center. - No refund.
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• Service Tax:

  CENVAT Credit - extended period of limitation - the appellant is a Government of India enterprise and therefore the allegation of suppression cannot be made.
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• Service Tax:

  Classification of Services - use of cranes and torex with operator, manpower and supervision, either on single use basis or on monthly or specified period basis - By no stretch of imagination can renting of cranes would fall withing the category of Business Support Service.
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• Service Tax:

  Credit of input services used for setting up a warehouse for providing the Output Service of “Storage and Warehousing Services”, was admissible - disallowance of credit of input service used for Construction of buildings is unjustified.
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• Service Tax:

  Reverse Charge Mechanism - Appellants acquired on lease, aircraft from foreign company for transportation of cargo. - the monetary consideration paid by the appellants to EAT cannot be considered as value of “Supply of Tangible Goods Service”.
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• Service Tax:

  Works Contract Service - benefit of composition scheme under Rule 3 (3) - the assessee has not exercised option before “due date of payment of tax” - denial of compensation scheme to the assessee on the said ground is not justified and improper and therefore requires to be set aside
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• Service Tax:

  Valuation - Clearing and Forwarding Agency Service - inclusion of reimbursable expenses in assessable value - only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax.
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• Service Tax:

  Settlement Of a case - the adjudication order was passed on 21-6-2017 with dated signature of the adjudicating authority, Commissioner, Service Tax, and was despatched on that day i.e. 21-6-2017. Therefore, the application for settlement filed on 23-6-2017 is not maintainable before the Settlement Commission under Section 32E(1) of the Central Excise Act, 1944.
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• Central Excise:

  Classification - Though the appellant has argued that they are manufacturing “flakes”, but, what is being manufactured is only “parings” of PET bottles. True, these “parings” eventually get converted into new PET bottles, however that will not make the final product of the appellant eligible for classification as “primary form of plastic”.
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• Central Excise:

  CENVAT Credit - fake invoices - There is nothing brought out from evidences as to how the appellants have been able to manufacture the finished products if they were not receiving the goods as per the cenvated invoices.
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• Central Excise:

  Benefit of exemption - Clearance of Cement bags marked with MRP for captive Consumption - The benefit of Sl.No.1A of the Notification will be allowable for cement captively consumed
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• VAT:

  Validity of VAT assessment after introductions of GST - Assessment after the amendment to the Constitution by virtue of which Article 246A was inserted - Notices issued.
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• VAT:

  Scope of the words “Seller” and “Dealer” - repossession of the vehicles and the sale of the repossessed vehicles by the banks / institutions - It is for the respondents now to issue an appropriate notice in case it does not agree with the contention of the petitioners.
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Articles

• NO GST ON CONTRACTUAL LIQUOR BOTTLING (PART-2)

Notifications

• Customs

• 72/2018 - dated 28-9-2018 - Cus
  Seeks to reduce the import duty on parts/ components used in manufacturing of specified textile machinery to Nil

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• 71/2018 - dated 28-9-2018 - Cus
  Seeks to further amend notification No. 25/2002-Customs, dated the 1st March, 2002.

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• 84/2018 - dated 28-9-2018 - Cus (NT)
  Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg.

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• FEMA

• F. No K-11022/ 54 /2018-Ad.ED - S.O. 4990(E) - dated 27-9-2018 - FEMA
  Appointment of adjudicating authorities to hold an inquiry for the purpose of adjudication under section 13 of the said Act

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• GST

• 13/2018 - dated 28-9-2018 - UTGST
  Central Government notifies that every electronic commerce operator, not being an agent, shall collect an amount calculated at a rate of one per cent

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• 12/2018 - dated 28-9-2018 - UTGST
  Central Government notifies that every electronic commerce operator, not being an agent, shall collect an amount calculated at a rate of half per cent

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• GST - States

• CCT/26-2/2017-2018/13/2242 - dated 21-9-2018 - Goa SGST
  Extension of time limit for submitting the declaration in FORM GST TRAN-1 under Rule 117(1A) of the Central Goods and Services Tax Rules, 2017 in certain cases.

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• 88/GST-2 - dated 21-9-2018 - Haryana SGST
  Clarifying the scope and applicability of the Haryana Government, Excise and Taxation Department notification no.47/ST-2, dated 30th June, 2017.

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• S.O. No. 66 - dated 26-9-2018 - Jharkhand SGST
  Supersession Notification No. S.O. No. 35 dated 17 April, 2018

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• S.O. No. 65 - 51/2018 - State Tax - dated 26-9-2018 - Jharkhand SGST
  Government of Jharkhand appoints the 1st day of October, 2018, as the date on which the provisions of section 52 of the Jharkhand Goods and Services Tax Act, 2017 shall come into force

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• S.O. No. 64 - 50/2018 – State Tax - dated 26-9-2018 - Jharkhand SGST
  Supersession Notification No. S.O. No. 90, dated the 06th October, 2017

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• S.O. No. 63 - 41/2018 – State Tax - dated 26-9-2018 - Jharkhand SGST
  Waiver of Late Fee Paid Under Section 47 in FORM GSTR-3B, FORM GSTR-4, FORM GSTR-6

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• 7/2018-STATE TAX - dated 13-8-2018 - Kerala SGST
  Due dates for filing FORM GSTR-3B for the months from July, 2018 to March, 2019

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• 42/2018 – State Tax - dated 4-9-2018 - Sikkim SGST
  Extension of time for filling of application in form GST-CMP-04

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• 41/2018 – State Tax - dated 4-9-2018 - Sikkim SGST
  Waiver of Late Fee Paid Under Section 47 in FORM GSTR-3B, FORM GSTR-4, FORM GSTR-6

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• 40/2018 – State Tax - dated 4-9-2018 - Sikkim SGST
  Supercession Notification No. 53/2017-State Tax, dated the 28th October, 2017

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• 39/2018 – State Tax - dated 4-9-2018 - Sikkim SGST
  Sikkim Goods and Services Tax (Eighth Amendment) Rules, 2018

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• 35/2018 – State Tax - dated 21-8-2018 - Sikkim SGST
  Amendment in Notification No. 34/2018- State Tax, dated the 10th August, 2018

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• 34/2018 – State Tax - dated 10-8-2018 - Sikkim SGST
  Extend the furnishing return in FORM GSTR-3B of the said rules for each of the months from July, 2018 to March, 2019

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• 33/2018 – State Tax - dated 10-8-2018 - Sikkim SGST
  Seeks to extend the due date for filing of FORM GSTR - 1 for taxpayers having aggregate turnover up to ₹ 1.5 crores

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• 32/2018 – State Tax - dated 10-8-2018 - Sikkim SGST
  Extend the due date for filing of FORM GSTR - 1 for taxpayers having aggregate turnover above ₹ 1.5 crores

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• 31/2018 – State Tax - dated 6-8-2018 - Sikkim SGST
  Seeks to lay down the special procedure for completing migration of taxpayers who received provisional IDs but could not complete the migration process

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• 30/2018 - State Tax - dated 30-7-2018 - Sikkim SGST
  Supersession Notification No. 25/2018-StateTax, dated the 31st May, 2018

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• 29/2018 – State Tax - dated 6-7-2018 - Sikkim SGST
  Sikkim Goods and Services Tax (Seventh Amendment) Rules, 2018

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• Income Tax

• 56/2018 - dated 26-9-2018 - IT
  U/s 10(46) of the Income-tax Act, 1961 Central Government notifies ‘Chhattisgarh State Electricity Regulatory Commission’, Raipur, a Commission constituted by the Government of Chhattisgarh, in respect of the specified income arising to that Commission

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Circulars / Instructions / Orders

• GST - States - 04/2018-GST - dated 24-9-2018
  Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117(1A) of the Chhattisgarh Goods and Services Tax Rules, 2017 in certain cases.
• GST - States - 04/2018-State Tax - dated 18-9-2018
  Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117(1A) of the West Bengal Goods and Service Tax Rules, 2017 in certain cases.
• GST - States - 04/2018-GST - dated 18-9-2018
  Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117(1A) of the Central Goods and Service Tax Rules, 2017 in certain cases.
• GST - States - 2-2/2018-EXN-H-Vig - dated 11-9-2018
  Regarding withdrawing power of Proper Officer.
• Customs - 34/2018 - dated 28-9-2018
  Electronic sealing — Deposit in and removal of goods from Customs bonded Warehouses

News

• Frequently Asked Questions on TCS under GST

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• Standard Operating Procedure on TDS under GST

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• Constitution of Group of Ministers (GoM) to examine the Modalities for Revenue Mobilisation in case of Natural Calamities and Disasters

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• RBI releases Draft Directions on Prohibition of Market Abuse

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• India and Japan sign Loan Agreement for Construction of Mumbai-Ahmedabad High Speed Rail Project (I) and Kolkata East West Metro Project (III) with Japan International Cooperation Agency (JICA)

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• Calendar for Auction of Government of India Treasury Bills for the Quarter ending December 2018

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• Issuance Calendar for Marketable Dated Securities for October 2018 - March 2019

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Case Laws:

• GST

• 2018 (9) TMI 1770

  Classification of goods - Polypropylene Leno Bags - Applicant is of the opinion that the PP Leno Bags manufactured is classifiable under Tariff Head 63053300 of the GST Tariff which is aligned to the First Schedule of the Customs Tariff Act, 1975.

  Held that:- To be included in Chapter 63, the width of the tapes, manufactured from Plastics or articles thereof of Chapter 39, used to weave the fabric should be less than or equal to 5mm and should not be impregnated, coated, covered or laminated with plastics or articles thereof, of chapter 39 - From the explanatory notes and clarification provided for determination of classification of goods it is seen that two more factors are to be considered, namely, the width of the tape used in the weaving and whether or not there is a layer/lining in these bags. The specifications of the PP Leno Bags being manufactured by the Applicant, therefore, become an important feature for determining their classification for the purpose of GST.

  To classify the product PP Leno Bags both the Explanatory Notes, as well as the clarifications in the Tariff, and the specifications as per IS 16187:2014 should be taken into consideration - Tariff head 63053300 includes the goods that are classifiable as sacks and bags, of the kind used for packing of goods, made from polyethylene or polypropylene strips and the like that qualifies as man-made textile materials. Only those PP strips and the like are considered as textile materials width of which do not exceed 5 mm [refer to Note 1(g) to Section XI of the Tariff Act] - The above-mentioned Tariff head is not applicable if the sacks made from PP woven fabric are impregnated, coated, covered or laminated with plastics or articles of plastics covered under Chapter 39 [Note 1(h) to Section XI].

  Ruling:- ‘PP Leno Bags’, if specifically made from woven Polypropylene fabric using strips or the like of width not exceeding 5 mm and without any impregnation, coating, covering, or lamination with plastics, are to be classified under Tariff Sub Heading 63053300.

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• 2018 (9) TMI 1769

  Classification of Supply - supply of goods or services - Levy of GST - Supply of printed question papers for various examinations conducted by the Government/Government aided Educational Boards/ Councils/Universities etc - Input Tax Credit on inputs used for provisioning the supply.

  Whether GST is to be charged on such supply and, if so, at what rate and under what HSN or SAC code is the GST to be charged?

  Whether credit of the GST paid on the inputs used for provisioning the supply can be availed?

  Held that:- No Notification has been issued regarding the status of supply of Question Papers. Hence, Section 7(3) of the GST Act is not relevant for consideration. The Applicant has neither been notified to be an authority under Section 7(2) of the GST Act, nor is the activity of supplying printed question papers listed in the said Schedule III. Section 7(1) along with the relevant portions of Schedules I and II clearly state that transfer of title in goods is a supply of goods and in the absence of such transfer, even in the future, is to be considered as supply of services.

  Question Papers are not the property of the Applicant - the Question Papers supplied by the Applicant to their customers are not marketable commodities in the open market and as goods they have no legitimate value to persons other than the specific customer who provides the input content. The Applicant, therefore, cannot be said to be supplying Question Papers as “goods” under the GST Act, but to be supplying the service of printing. Hence, the SAC is to be determined and not the HSN.

  Again, every transaction is a contract, but open market transactions in Question Papers as goods, being illegal, are not enforceable by law and void contracts in terms section 2(g) of the Indian Contract Act, 1872, and, therefore, beyond the ambit of the GST Act. It follows that classification under the Tariff Act, for the purpose of the GST Act, is also not applicable in such cases - The service is taxable under serial no. 27 of Notification No. 11/2017-CT (Rate) dated 28/06/2017, as amended from time to time, provided the materials being printed are goods classifiable under Chapter 48 or 49 of the Tariff Act and taxable under the GST Act. As transactions in Question Papers as goods is beyond the ambit of the GST Act, they are neither classifiable under Chapter 48 or 49 nor taxable under the GST Act. Service of printing Question Papers is not, therefore, classifiable under Heading 9989.

  Explanation (iv) to Notification No. 12/2017-CT (Rate) dated 28/06/2017, inserted vide Notification No. 14/2018-CT(Rate) dated 26/07/2018, clarifies that the Central and State Educational Boards shall be treated as Educational Institution for the limited purpose of services by way of conducting examinations. Serial No. 66(b)(iv) above, therefore, includes services provided to such Boards relating to the conduct of examinations. The Applicant is, therefore, not liable to pay tax on the service of printing question papers provided to the Educational Boards/Councils/Universities/Institutions relating to the conduct of examination.

  Input tax credit - Held that:- Since the supply of Question Papers to Educational Institutions if provided, for a particular examination is an exempt supply under Serial No. 66(b)(iv) of Notification No. 12/2017-CT (Rate) dated 28/06/2017, as amended, as applicable, the Applicant is not eligible to avail of Input Tax Credit.

  Ruling:- Service of printing Question Papers for Educational Institutions [as defined under clause 2(y) read with Explanation (iv) to Notification No. 12/2017-CT (Rate) dated 28/06/2017] for specific examination is classifiable under SAC 9992.

  Service to such Educational Institutions relating to conduct of examination, as described in 66(b)(iv) of Notification No.12/2017-CT(Rate) dated 28/06/2017, includes supply of the service of printing question papers, and is exempt under the GST Act.

  Being an exempt supply, the Applicant cannot claim credit of the GST paid on the inputs used for provisioning the service of printing question papers provided to the Boards / Educational Institutions relating to conduct of examination.

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• 2018 (9) TMI 1768

  Input Tax Credit - stock transfer from the Head Office of M/s. GKB Lens Pvt. Ltd. to its branches in other States at Zero Value - optical lenses and frames for spectacles and accessories.

  According to the Appellant “the wordings of the Ruling dated 30.05.2018 has created an impression that the recipient would be eligible for Input tax Credit if the supplier paid the tax.” Instead of those wordings the WBAAR should have declared in no uncertain terms that no input tax credit would be available for supply at Zero Value.

  Held that:- From a plain reading of law laid down under section 16 of the GST Act, it is clear that, inter alia, input tax credit is available only when the recipient is in possession of a tax invoice or debit note issued by the supplier registered under the GST Act, and in case of a supply between distinct and/or related persons, as between Head Office and Branches, the value declared in the invoice shall be deemed to be the open market value of the goods or services supplied. It is therefore clear that if the value declared in such invoice is zero no input tax credit is available to the recipient.

  The Ruling of the West Bengal Authority of Advance Ruling is modified to the extent that at the end of the second paragraph of the said ruling the following sentence will be added:- “No input tax credit, however, would be available for supply of goods / services at Zero Value.”

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• 2018 (9) TMI 1767

  Release of seized goods with vehicle - Section 129 of the CGST Act - ground for seizing the goods is that in the invoice, E-way bill and weigh slip the Truck number was mentioned being U.P.-78-DN 7983 instead of U.P.-78-DN 7938 - Petitioner contended that the mistake was due to inadvertent human error by the person who has prepared the documents including E-way bill, as the vehicle no. is mentioned by him what he has noticed in the tax invoice and further that he has mentioned the same in all other papers/documents subsequent to issuance of invoice - Held that:- Surprisingly, neither the mobile squad authority nor the appellate authority appreciated the claim of the petitioner that it is due to mistake or human error the vehicle number (particularly last two digits) are mentioned different which in the instant case are 83 in place of 38.

  This Court is unhappy with the conduct of the authorities and it is nothing but a clear cut case of harassment of the petitioner/dealer.

  The goods and vehicle are directed to be released forthwith - petition allowed.

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• 2018 (9) TMI 1766

  Vires of amended subrule [5] of Rule 89 of the Central Goods & Services Rules, 2017 which has been given retrospective effect - Held that:- Essentially, by virtue of this rule, in case of inverted tax structure of Service tax, the assessee; such as the petitioner, would not be able to claim refund of the differential service tax.

  The Government, as a subordinate legislature, cannot frame rules which deprives a person of such benefit.

  Notice returnable on 25th October 2018.

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• 2018 (9) TMI 1764

  Unable to upload Form GST TRAN–1 - Transitional credit - migration to GST Regime - Held that:- The fifth respondent is directed to forward the representation of the petitioner dated 30.07.2018 to the fourth respondent, being the Nodal Officer, within a period of one week from the date of receipt of a copy of this order - petition disposed off.

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• Income Tax

• 2018 (9) TMI 1759

  Estimation of income - net profit estimation - Held that:- CIT (A) granted substantial relief to the assessee by estimating the net profit @ 5% of the turnover and sustained addition. It is the submission of the assessee that due to wrong representation of the then counsel for the assessee, the case was not properly handled and therefore, the assessee should be given an opportunity to substantiate with evidence to the satisfaction of the Assessing Officer regarding various items of the profit and loss account and the balance sheet.

  We find the order of the CIT (A) in the instant case is not a speaking order. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the matter back to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate his case. Assessee is also hereby directed to produce the books of accounts and audit report before the AO and substantiate the various expenses claimed in the profit & loss and sundry creditors and other items shown in the balance sheet to the satisfaction of the Assessing Officer failing which the AO shall pass appropriate order as per law. Needless to say the Assessing Officer shall give due opportunity of being to the assessee.

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• 2018 (9) TMI 1758

  Disallowance u/s 40(a)(i) - technical on-call assistance charges paid by assessee to its AE - DTAA - Held that:- It is observed that assessee is providing annual maintenance in respect of equipments manufactured by AE. In respect of the same, assessee entered into an agreement with AE dated 01/04/10, whereby technical on-call advisory services are obtained from AE, in case of problems of outrage, emergency, technical support or system compromised on the basis of priority of cases.

  Under the agreement, AE is required to provide support services in case of critical/emergency issues to customers of assessee, through call centres remotely. Assessee in view of such services rendered made payments to AE, on which no TDS was deducted, as according to assessee, there is no requirement of withholding tax on such payments. It has also been submitted by Ld.Counsel that AE do not have a PE in India, and therefore is not taxable under India US DTAA.

  Provisions of India-US treaty provide for a restrictive meaning of ‘fee for included services’ vis-a-vis meaning of ‘fee for technical services’ (FTS) under the Act, in as much as, only those technical/consultancy services which are ancillary and subsidiary to application/enjoyment of right, property or information or which 'make available' technical knowledge, skill, knowhow, process etc. would be liable to tax.

  Thus, in accordance with MOU, technology will be considered to be 'made available' when the person acquiring the service is able to apply such technology on his own.

  Adverting to facts of case before us, service rendered by AE to assessee is as per agreement dated 01/04/10. According to the agreement, furnished by assessee placed at page 54-62 of paper book, services provided by AE to assessee are in nature of assistance in troubleshooting, isolating the problem and diagnosing related trouble and alarms and equipment repair services wherein the equipments will be shipped to US by assessee as and when required. It has been agreed between the parties that AE would be providing such services remotely and no on-site support services would be provided to customers of assessee.

  It appears from the above description of services rendered by AE that there is use of technical knowledge and/or skill, utilised by AE qualifies as “fee for technical services”, as defined under Explanation 2 to section 9(i)(vii) of the Act.

  As India has double taxation avoidance agreement with US, and Article 12(4) of India-USA DTAA deals with “fee for technical services”, to determine taxability of income received by AE for services rendered in India, the services rendered should satisfy the requirements under Article 12 (4), which requires technical knowledge, experience, skill etc., to be "made available" to the recipient of such services.

  On a careful perusal of the agreement dated 01/04/10 between AE and assessee, it appears that services rendered therein by AE does not satisfy the make available requirement as per article 12 (4) of the Act.

  Revenue received by AE in view of services rendered to assessee’s customer is not taxable in India as per Article 12 (4) of India US DTAA, applicability of section 195 of the Act is not possible. Therefore, we are of the considered opinion, that section 40(a) (i) disallowance is uncalled for. In the result grounds raised by assessee for the year under consideration stands allowed.

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• 2018 (9) TMI 1757

  TDS u/s 194A - disallowance u/s 40(a)(ia) - non deduction TDS on interest payment - Held that:- The assessee had paid the interest to the tune of ₹ 41,35,478/- to M/s PIPDIC without deduction of tax at source. The said entity, PIPDIC is not a statutory corporation u/s 194A(iii)(b) and not a notified institution u/s 194A(iii)(f) of the Act. Therefore, the payment of interest to PIPDIC required to be deducted u/s 194A. Since the assessee has not deducted the tax at source and remitted to Government account, the payment of interest attracts disallowance u/s 40(a)(ia) of the Act.

  The issue is settled by Hon’ble Supreme Court in the case of Palam Gas Service [2017 (5) TMI 242 - SUPREME COURT] and held that Word 'payable' occurring in section 40(a)(ia) not only covers cases where amount is yet to be paid but also those cases where amount has actually been paid. Therefore, we hold that the Ld.CIT(A) has rightly confirmed the addition - decided against assessee

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• 2018 (9) TMI 1756

  Disallowance as required u/s 14A r. w. Rule 8D - no dividend income earned by the assessee - Held that:- In this case, the Ld. AR brought to our notice that there was no dividend income earned by the assessee during the year under consideration, therefore, the question of disallowance does not arise.

  There is no dispute with regard to the fact that the assessee did not earn the dividend income. This Tribunal considered had an occasion to consider the identical issue with regard to the disallowance required to be made u/s 14A r. w. Rule 8D in the absence of dividend income in the cited case and held that no disallowance is required to be made u/s 14A in case of not earning the dividend income. This Tribunal has followed the decision of Hon’ble Madras High Court in the case of Redington India Private Limited Vs. ACIT [2017 (1) TMI 318 - MADRAS HIGH COURT]. - Decided in favour of assessee.

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• 2018 (9) TMI 1755

  Reopening of assessment - validity of issue of notice u/s 148 - Held that:- The assessee has not raised the grounds relating to the issue of notice u/s 148 either in the form 35 i.e. memo of appeal or before the CIT(A) or in a separate petition for admission of additional ground with regard to validity of issue of notice u/s 148. CIT(A) has made a passing remark with regard to the validity of initiation of proceedings u/s 147 but no ground was raised by the assessee and adjudicated by the Ld.CIT(A). Therefore, the grounds raised by the Ld.AR with regard to the issue of notice u/s 148 was neither born from the Ld.CIT(A) order nor from the appeal memo under Form 35. The assessee also did not file petition for admission of additional ground. Hence, this ground is dismissed as infructuous.

  Unexplained investment in purchase of villas from M/s Vizag Profiles Group company - Held that:- In this case, neither the searched party has given a specific statement with regard to the receipt of money from the assessee nor the AO has collected the details of date wise payments from the Vizag Profiles Ltd. Even there the AO has not ascertained in the statement with regard to the unaccounted payment made by the assessee in the statement. Though the Managing Director has given general statement or the practice of the company with regard to the acceptance of cash component of 25% to 40% , the general statements and the observations cannot be inferred adversely against the third party without the specific information and the relevant evidence. The department has no material to hold that the assessee had made the payment of ₹ 91,27,000/- to the VGP and to make the addition of ₹ 91,27,000/- as unaccounted consideration. Accordingly we set aside the orders of the lower authorities and delete the addition made by the AO and allow the appeal of the assessee on this ground.

  With regard to the difference in sale consideration in the registered sale deed the Ld.CIT(A) did not make any addition since at the end of the F.Y. the consideration recorded in sale deed, the assessee’s books are reconciled with the VGP’ s books. The department also did not place any evidence to show that the assessee has made over and above the consideration recorded in the books of account during the year. Therefore we do not see any reason to interfere with the order of the Ld.CIT(A) on this issue.

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• 2018 (9) TMI 1754

  Validity of reopening of assessment - sufficiency of reasons to believe - Held that:- The assessment is reopened within 4 years from the relevant assessment year and in the instant case, the AO has given a finding that the assessee had diverted the funds for non-business purposes by giving the loans and paying huge interest on borrowed funds and viewed that the proportionate interest required to be disallowed, hence, the AO held that there was escapement of income. Since the assessment is reopened within 4 years and the AO has given a clear reasoning for his belief, we uphold the validity of issue of notice u/s 148 and the order of the Ld.CIT(A) on this issue. The reasons recorded by the AO are sufficient to reopen the assessment. Accordingly, the appeal of the assessee on this ground is dismissed.

  Disallowance of interest u/s 36(i)(iii) @12% on amounts advanced to Lotus Associates for purchase of land - Held that:- AO has not given any finding with regard to the diversion of funds from the borrowed funds, whereas the Ld.CIT(A) has given a finding that the borrowed funds have been diverted.

  Disallowance u/s 14A, there was no finding given in the assessment order or in the appellate order with regard to the earning of income. Therefore, both the issues require detailed verification of the facts with regard to the diversion of borrowed funds and earning of dividend income - The facts regarding diversion of interest bearing funds to non-business purposes and non-earning of the dividend income are not emerging out of the orders of the lower authorities. Therefore, we are of the considered opinion that the issue needs detailed verification at the level of the AO. - Decided in favour of assessee for statistical purposes.

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• 2018 (9) TMI 1753

  Unexplained cash credit u/s 68 - explanation of source of the capital contribution, identity of the creditor and also credit worthiness - Held that:- The assessee had received the share application money, complied with the requirements of the AO in the assessment proceedings and allotted the shares to the respective shareholders. The assessee also furnished the confirmation letters containing the details of land holdings. All the share applicants are agriculturists having no taxable income, therefore, there is no case for submission of PAN details, and hence we hold that the assessee has explained the source of the capital contribution, established the identity of the creditor and also credit worthiness, hence there is no case for making addition u/s 68 in the hands of the company.

  As rightly argued by the Ld.AR, the share capital required to be made addition in the hands o fthe assessee company by virtue of proviso introduced in Finance Act, 2012 to section 68 from 2013-14 onwards, but not prior to the amendment. If the revenue is of the opinion that the share application money received by the company is bogus, the revenue is free to take appropriate action in the hands of the shareholders. But having explained the source and established the identity, the revenue is not permitted to make addition in the hands of the company. - Decided in favour of assessee

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• 2018 (9) TMI 1752

  Reopening of assessment - period of limitation - Held that:- In this case, the assessment year involved is 2008-09 and the notice u/s 148 was issued to the assessee on 10.03.2015 within the period of six years from the end of the relevant assessment year. The amendment to section 149(3) was made by Finance Act 2012 w.e.f. 01.07.2012. Prior to the amendment, the time limit for issue of notice u/s 148 in the case of representative assessee was two years. The limitation of two years was expired by March 2011. On the similar facts the ITAT, Visakhapatnam in the case of V.Pratima Rao and 5 others [2018 (6) TMI 366 - ITAT VISAKHAPATNAM] held that the amendment is not applicable for enlargement of the time limit already expired for issue of notice u/s 148.

  The period of limitation of two years was expired before the amendment came into force. Therefore since the facts are identical, respectfully following the view taken by this Tribunal in the case cited, we hold that the notice issued u/s 148 to the Gudivada Shyam Kumar Naidu, Visakhapatnam representative assessee is barred by limitation and accordingly, the notice issued u/s 148 is quashed and the consequent assessment made u/s 147 r.w.s. 143(3) dated 28.03.2016 is annulled. - Decided in favour of assessee.

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• 2018 (9) TMI 1751

  Disallowance u/s 14A r.w.r. 8D - eligibility of revised return of income filed by the assessee u/s 139(5) - Held that:- In the instant case, the revised return of income was filed within time prescribed u/s 139(5) of the 1961 Act and secondly the Courts/tribunals are consistently taking a view that in case no exempt income is received or receivable on exempt income, no disallowance u/s 14A is warranted. Thus the assessee’s action in revising its return of income in line with decision of several Courts and tribunal is held to be bonafide and we accept the revised return of income filed by the assessee u/s 139(5) on 30-03-2016 as a valid return of income. We have also noted that the tribunal in assessee’s own case in AY 2006-07 [2017 (11) TMI 1715 - ITAT MUMBAI] have also held in favour of assessee by holding that in case no exempt income was received or receivable by the assessee during the relevant previous year, then no disallowance u/s. 14A.

  Thus no disallowance u/s. 14A of the 1961 Act is warranted in the instant case as the assessee has not received any exempt income during the relevant previous year on investments - decided in favour of assessee

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• 2018 (9) TMI 1750

  AMP expenditure incurred as treated and categorized as an international transactions u/s 92B - Held that:- The judicial discipline also demands that, in case there is no change in the facts and circumstances of the case, the issue decided by the coordinate bench in assessee’s own case for earlier years on identical facts and circumstances, should be followed by the coordinate bench while deciding the similar issue for later years. Therefore, respectfully following the decision of the coordinate bench in assessee’s own case, we also hold that the transfer pricing adjustment made by the ld TPO on account of arm’s length price of alleged international transaction of AMP expenditure is unsustainable. - Decided in favour of assessee.

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• 2018 (9) TMI 1749

  Claim of depreciation on leased assets i.e. milk cans - Held that:- Admittedly, it is the assessee who had claimed depreciation, therefore, it was incumbent upon the assessee to prove with plausible evidence that it owned certain assets which had been leased and fetching rent. In the present case, enquiry made by the revenue revealed that the entity where from such assets were purchased was not having capacity to manufacture. Entire claim was found to be bogus. It is further established by the revenue that purchase consideration was routed back, hence, the entire claim proved to be a colourable device. Under these facts, the submission of the assessee is devoid of any merit. Such claim cannot be allowed. The ground Nos.4 to 6 are dismissed.

  Deferred revenue expenditure - Held that:- Such a claim cannot be entertained both in facts and in law, during the year under consideration as the fact whether such expenses were genuinely incurred were never examined in the relevant assessment year and looking to the state of affairs of the appellant company in absence of proper scrutiny and examination of such claim of expenses in the relevant assessment year, such claim cannot be accepted in the present assessment year, more so when such claim was not pressed for deduction for 1/5th of expenses in the previous assessment year. The appellant apart from furnishing break up of expenses has failed to establish admissibility of 20% of such expenses during the year under consideration, as in the then prevailing position of law the concept of deferred revenue expenses was not recognised. The claim has to be examined in view of the law as applicable in the relevant assessment year and on that count such claim fails.

  Addition in respect of interest u/s 220(2) - Held that:- In view of the CBDT circular No.334 dated 3.4.1982 and the decision of the coordinate bench in the case of M/s. Narad Investment & Trading Pvt. Ltd. Vs. DCIT [2011 (10) TMI 663 - ITAT MUMBAI], we direct the assessing officer to charge interest from the date when fresh assessment is made. This ground of the assessee’s appeal is allowed.

  Lease rent income treated as bogus - Held that:- After considering the totality of the facts and materials placed before us, we do not find any infirmity in the order passed by the CIT(A) as the assessing officer itself has considered the lease transaction as bogus and disallowed the depreciation. Under these facts, the revenue cannot now claim that the assessee has earned income from lease rent. This ground of the revenue’s appeal is dismissed.

  Exclusion of merchant banking income from the total income assessed by him - Held that:- A.O., in these circumstances with the facts and evidences on record, couild not and should not have drawn adverse inference on account of non delivery of fresh summons issued after 10 years of the end of relevant financial year. In fact, the documents on record clearly establish that such company was in existence at the relevant period of time and even assessment u/s 143(3) was completed for the same assessment year 1996-97. The Merchant banking income offered at ₹ 27 lacs being not a real and genuine income accrued to the income in terms of MOU and other evidences on record and could not be validly has been held by Hon'ble Supreme Court in the case of Bokaro Steel [1998 (12) TMI 4 - SUPREME COURT], Godhra Electricity Co. Ltd.[1997 (4) TMI 4 - SUPREME COURT] and Shoorji Vallabhdas & Co [1962 (3) TMI 6 - SUPREME COURT] as noted above. Accordingly, A.O. is directed to exclude the Merchant banking income at ₹ 27 lacs from the total income assessed by him

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• 2018 (9) TMI 1748

  Reopening of assessment - requirement of issuing notice under section 142(1) - Held that:- Assessing Officer has raised queries from time to time for making assessment, however the assessee submitted only part information particularly in respect of the sale transactions. We do not find any illegality in the assessment proceedings, which is fatal for annulling the entire assessment proceedings, particularly when a copy of the reasons recorded was already provided to the assessee and all the queries in respect of the addition in dispute have been raised during the assessment proceedings.

  No violation of the principle of the natural Justice. Whereas we find that the assessee has played game of hide and seek and accepted the undisclosed income pointed out either by the Assessing Officer or by the CIT(A) when she found herself cornered. Assessing Officer has complied the requirement of issuing notice under section 142(1) and thus, the conditions of completing the assessment under section 144 are fulfilled. In absence of any return of income filed by the assessee in response to notice under section 148 of the Act, the Assessing Officer was justified in completing the assessment under section 144 of the Act.

  Addition u/s 68 - Held that:- Where such deposits are not appearing in books of accounts and, therefore, section 68 becomes inapplicable. Here the origin of investigation is the bank account, however, before the Ld. CIT(A) the assessee has submitted complete statement of accounts of the said deposits in bank account. In aforesaid facts and circumstances, the said sum are definitely credited in books of accounts and the assessee cannot be allowed to take shelter of the precedents, which are not applicable in the facts of the instant case. In the case of Ms. Mayawati (supra), the issue involved was of certain gifts received in cash, which were taxed by the AO under section 69 of the Act, and thus, the ratio of the said decision is not applicable over the facts of the instant case. In view of the aforesaid discussing, we do not find any infirmity in the action of the Ld. CIT(A) in sustaining the addition under section 68.

  Unexplained cash deposits - Held that:- In the instant case, the Ld. CIT(A) has properly analyzed the facts in respect of the deposits appearing in the bank account and reconciled the same with the business profit and made addition of undisclosed income for the amount which could not be reconciled with the business profit . Keeping in view the above judicial position, we are of the opinion that the addition sustained by the Ld. CIT(A) is in respect of the source of income already assessed by the Assessing Officer. In view of the aforesaid discussion, the ground No. 5 raised by the assessee is dismissed.

  Addition u/s 68 - sufficient cash in hand was available with the assessee at the relevant point of time - Held that:- Counsel could not point out particular amount of the advance received, which has not been considered by the Ld. CIT(A). The Ld. counsel has made a general statement and not pointed out any specific error in the finding of the Ld. CIT(A) on this issue. In absence of any specific error in the amount of cash receipts considered by the Ld. CIT(A) for explaining the cash deposits, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly we uphold the same. The ground No. 6 of the appeal raised by the assessee is, accordingly dismissed.

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• 2018 (9) TMI 1747

  Deemed dividend addition u/s 2(22)(e) - Held that:- The company had advanced loan directly to the shareholder for purchase of capital asset [land: to comply with certain land transfer restrictions] to be used by the company. The advance was not for the personal benefit of the shareholder. So section 2(22)(e) was not applicable.

  The registry has informed that Revenue has not preferred any appeal in assessment year 2010-11 against the above extracted CIT(A)’s order followed in the impugned assessment year. The instant issue has attained finality therefore in taxpayer’s favour since the Revenue has itself accepted correctness of the CIT(A)’s order deleting the very addition in earlier assessment year. We thus reject its sole substantive grievance as well as main appeal. - Decided against revenue

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• 2018 (9) TMI 1746

  Assessment u/s 153A - rejecting the claim of the assessee of cash on hand - Held that:- addition has been made not on the basis of any incriminating material found during the course of search but it is on the basis of rejecting the claim of the assessee of cash on hand.

  A.R. has placed reliance on the decision of coordinate bench in the case of Anant Steel Pvt. Ltd. Vs. ACIT [2015 (11) TMI 1758 - ITAT INDORE] Ld. D.R. could not controvert the submissions of the assessee that no incriminating material was found. Moreover, we find that the addition is sustained merely on the basis of the presumption. We therefore, direct the A.O. to delete this addition. - Decided in favour of assessee

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• 2018 (9) TMI 1761

  Entitlement to deduction of advertisement and sales promotion expenses under Section 37(1)- addition made by the Assessing Officer by applying “Bright Line Method” - Held that:- We have examined the Assessment Order and do not find any good ground and reason given therein to treat advertisement and sales promotion expenses as a separate and independent international transaction and not to regard and treat the said activity as a function performed by the respondent-assessee, who was engaged in marketing and distribution.

  Further, while segregating/debundling and treating advertisement and sales promotion as an independent and separate international transaction, the Assessing Officer did not apportion the operating profit/income as declared and accepted in respect of the international transactions. See Sony Ericsson Mobile Communications India Pvt. Ltd. vs. Commissioner of Income Tax - III, (2015 (3) TMI 580 - DELHI HIGH COURT) and Commissioner of Income Tax vs. Whirlpool of India Ltd., (2015 (12) TMI 1188 - DELHI HIGH COURT)

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• 2018 (9) TMI 1760

  Deduction under Section 80IA - computation of taxable total income comprised and derived from establishing, operating and maintaining the power plant engaged in generation or generation and distribution of power - Held that:- The term 'generating company' can only refer to the SPCL and not the appellant, since the Assessing Officer, the First Appellate Authority and the Tribunal, after considering the scope of the agreement entered into between the appellant and the SPCL, clearly held that the appellant is not the owner of the power plant and that it does only maintenance work, for which, it is given a fee.

  Even assuming that the appellant contributed technical knowhow for the purpose of generating electricity, it does so on behalf of the owner of the plant namely the SPCL. We find that the interpretation of agreement between the appellant and the SPCL, as given by the Assessing Officer, the First Appellate Authority and the Tribunal, is perfectly legal and valid and that there is no perversity in the finding rendered by all the three Authorities. We cannot re-appreciate the factual position to arrive at a different conclusion. Thus, for all the above reasons, we find that there are no merits in this appeal. Substantial questions of law framed for consideration are answered against the assessee

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• 2018 (9) TMI 1745

  Genuineness of claim of loss - allegation of purchase and sale of Penny stocks - transactions in question is a colorable transaction - Assessment u/s 153A after search - Held that:- The assessee, in this case has supported these transactions by submitting copies of contract notes for purchase and sale of shares, daily market quotations on the date of purchase, bank statements showing payments of consideration for purchase of shares, copy of Demat Accounts etc. These evidences, have not been controverted or found to be false by the Assessing Officer. In fact no contrary evidence to prove that these documents have no evidentiary value has been collected by the AO.

  The entire addition has been made on the basis that the prices of shares have been rigged by certain individuals. No evidence is brought on record to connect the assessee with the alleged rigging of prices of shares. No evidence is brought on record to demonstrate that the assessee was involved in the rigging of shares in the stock market or was closely involved with the persons who are allegedly connected in rigging of the prices of shares. The entire addition has been made on probabilities, human behaviour, the alleged unnatural fluctuation in prices of the shares etc., but not based on any evidence connecting the assessee with such allegations. The addition have thus been made on conjectures and surmises.

  The Hon’ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959 (5) TMI 12 - SUPREME COURT] held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. - Decided in favour of assessee

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• 2018 (9) TMI 1744

  Revision u/s 263 - deviation from the method of valuation of the stock prescribed u/s 145 / 145A - CIT proposed the valuation of closing stock by taking the average of opening stock and purchase price. - Held that:- In the instant case, we find that it is not in dispute that the assessee is consistently following the same method of valuation of closing stock which was also followed in the year under consideration. The profit was deduced in accordance with the method adopted by the assessee. Therefore, in our considered view, the Pr. Commissioner of Income Tax-1, Bhubaneswar was not justified in disturbing the consistent method of valuation.

  Further, we find that there is no direction in the impugned order to value the opening stock also by adopting the same method which was suggested in the valuation of closing stock.

  As in the case of Chainrup Sampatram [1953 (10) TMI 2 - SUPREME COURT] has held that it is a misconception to think that any profit "arises out of the valuation of the closing stock" and the situs of its arising or accrual is where the valuation is made. Valuation of unsold stock at the close of an accounting period is a necessary part of the process of determining the trading results of that period, and can in no sense be regarded as the "source" of such profits.”

  Thus the impugned order passed by Pr. Commissioner of Income Tax-1, Bhubaneswar cannot be sustained - Decided in favour of assessee.

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• 2018 (9) TMI 1706

  Disallowance of corporate service charges paid to Associated Enterprises (AE) - Held that:- We restore the issue to the learned DRP for fresh adjudication keeping in view the directions of the Tribunal in the preceding assessment year. Thus, these grounds are allowed for statistical purposes.

  Disallowance of depreciation on intangibles such as material supply contracts, distribution network and brand usage - Held that:- As decided in assessee's own case after having considered the said arguments, the Tribunal followed the earlier decision of the Coordinate Bench of the Tribunal [2015 (9) TMI 286 - ITAT MUMBAI) and held that the impugned assets fall within the category of ‘business or commercial rights’ mentioned in section 32(1)(ii) of the Act. In our considered opinion, in view of the aforesaid precedents, we find no merit in the plea of the Ld. CIT-DR, which would require us to depart from the afore-stated precedents. Therefore, on this aspect the Revenue has to fail.

  Disallowance of expenditure u/s. 14A read with Rule 8D - Held that:- The fact that the assessee has not earned any exempt income by way of dividend or otherwise in the relevant previous year has not been controverted either by the Assessing Officer or by the DRP. Therefore, in the absence of any exempt income earned in the relevant previous year, no disallowance u/s. 14A read with Rule 8D could have been made. Thus, in view of the ratio laid down in the decisions cited by the learned counsel for the assessee, we delete the disallowance made by the Assessing Officer u/s. 14A read with Rule 8D. This ground is allowed.

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• 2018 (9) TMI 1743

  Addition u/s 145A - adjustment of closing stock of the assessee by duty and taxes etc. in the form of CENVAT - Held that:- While it is the case of the AO that the element of excise duty / CENVAT etc. would represent part of the closing stock of the assessee in terms of Section 145A, it is the case of the assessee, on the other hand, that Section 145A has no application to the facts of the case. It is further case of the assessee that it follows exclusive method of accounting for valuation of inventory and therefore, entire exercise would be tax neutral. We notice that Section 145A falls under the Chapter XIV – procedure for assessment. It essentially deals with method of accounting and is in the nature of machinery provision. Section 145A inter alia provides that inventory of goods shall be valued in accordance with method of accounting regularly employed by the assessee. CIT(A) has examined the issue on facts and binding judicial precedents and concluded the issue in favour of the assessee. In the absence of any impact on the profitability of the assessee per se due to exclusive method of accounting followed, we do not see any error in the conclusion drawn by the CIT(A).

  Disallowance of interest under s.14A - Held that:- We find merit in the plea of the assessee that Rule 8D(2)(ii) shall have no application in the given facts where the interest income earned outweigh the interest expenditure. In consonance with the decision of the Hon’ble Gujarat High Court in PRINCIPAL COMMISSIONER OF INCOME TAX-3 VERSUS NIRMA CREDIT AND CAPITAL PVT. LTD [2017 (9) TMI 485 - GUJARAT HIGH COURT], we decline to interfere with the conclusion drawn by the CIT(A) on the issue in favour of the assessee.

  MAT - adjustments in the book profit computed under s.115JB of the Act following the disallowance under s.14A - Held that:- We direct the AO to delete the adjustments made on account of estimated disallowance determined under s.14A of the Act while computing ‘book profit’ under u/s.115JB of the Act.

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• 2018 (9) TMI 1762

  Maintainability of appeal - monetary limit - Held that:- In these appeals the tax effect is less than ₹ 1 crore and are covered by the Circular of CBDT.

  These appeals are, accordingly, dismissed. However, it will be open to the Income-Tax Department to seek review in any of these matters, if it is pointed out that the tax effect is more than ₹ 1 Crore.

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• 2018 (9) TMI 1742

  Penalty u/s 271AAA - Assessment u/s 153C - search and seizure proceedings u/s 132(1) not carried out against the assessee - Held that:- The primary condition for initiating penalty proceeding is, a person concerned must have been subjected to a search and seizure operation under section 132(1) of the Act. Undisputedly, in the facts of the present case, no search and seizure operation under section 132(1) of the Act was carried out in case of the assessee. This fact is clearly evident from the initiation and completion of proceedings under section 153C of the Act.

  Thus, the primary condition of section 271AAA remains unsatisfied. Even otherwise also, if penalty proceedings under section 271AAA of the Act is initiated against a person who is not subjected to search action under section 132(1) the provision itself becomes unworkable as no declaration under section 132(4) of the Act is possible from any person other than the person against whom the search and seizure under section 132(1) is carried out. Thus, in such circumstances, sub–section (2) to section 271AAA of the Act cannot be given effect to. In view of the aforesaid, we agree with the learned Commissioner (Appeals) that initiation of penalty proceedings under section 271AAA of the Act in the instant case is invalid. - Decided in favour of assessee.

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• 2018 (9) TMI 1741

  Taxability of an amount as fees for technical services as per section 9(1)(vii) - assessee is a limited liability partnership firm and is a tax resident of United Kingdom (UK) - Held that:- For the purpose of being considered as a resident in India a reference has been made to the previous year. Section 4 of the Act, which is the charging section, mandates that a person shall be charged to income tax in respect of the total income of the previous year. The expression “previous year” has been defined under section 3 of the Act to mean the financial year immediately preceding the assessment year.

  As per the provisions of domestic law, the 12 month period would mean the previous year or the financial year which is the unit for which the income of a person is taxable. If the provisions of Article 5(2)(k)(i) of the India-UK DTAA is read harmoniously with the provisions of the Act referred to above, it will be fair and reasonable to conclude that the expression “any 12 month period” mentioned in Article 5(2)(k)(i) of the India-U.K. DTAA has to be construed to mean the previous year or financial year as per section 3 of the Act, since, the income is sought to be taxed in India.

  Therefore, it has to be seen whether the employees or personnel of the assessee have rendered services in India for a period aggregating to 90 days or more in financial year 2011-12 to constitute a PE. As per the chart submitted by the assessee it is claimed that the employees and personnel of the assessee were situated in India for rendering services for a period aggregating to 77 days. Since, the aforesaid factual aspect has not been verified by the Departmental Authorities as the assessee did not raise this issue before them, we are inclined to restore the issue to the Assessing Officer for adjudication keeping in view of our observations hereinabove and only after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

  The income received by the assessee will not be taxable under Article-15 of India-UK DTAA. This ground is allowed.

  Reimbursement of expenses as part of the gross receipts - Held that:- It is noted from the perusal of orders passed by the lower authorities that AO did not bring anything on record to show that whether any element of mark-up was involved in the expenses, which have been reimbursed to the assessee. However, that is even not the case of the Revenue. Under these circumstances, it cannot just be presumed that income element was involved in the reimbursement of expenses. Therefore, respectfully following the orders of the Tribunal of earlier years, these grounds are allowed and decided in favour of the assessee. AO is directed to delete the disallowance made in this regard. As a result, these grounds are allowed.

  Interest under sections 234B and 234C of the Act are not chargeable against the assessee. Grounds raised are allowed.

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• 2018 (9) TMI 1740

  Levying penalty u/s 272A(2)(k) for late filing of TDS returns - 'Person Responsible’- reasonable cause for the failure as provided u/s 273B - Held that:- In the absence of any specific order to deduct tax at source, refrained from doing so, presuming that it was being continued to be done by PCDA(WC) and it was only when ITO-TDS, issued notice to it requiring it to file TDS return vide letter dated 9.1.2014 that they come to know of the default and hence the delay. Copies of all correspondence in this regard were also placed.

  No infirmity in these facts have been pointed out to us by the Revenue. It is therefore abundantly clear that the ‘Person Responsible’ had a bonafide reason for the delay in filing TDS returns. Being required to comply with the TDS requirements and compliances for the first time and that too not being specifically intimated to do so by the authority who was earlier doing it, the ‘Person Responsible’s belief that the authority was continuing to do so was a bonafide and reasonable belief. Filing of TDS return later on, only on being required to do so by the ITO TDS, automatically resulted in delay on account of a reasonable cause. There is no merit in the contention of the CIT(Appeals) that the penalty was justified considering the huge period of delay. The assessee having duly explained the cause for the delay.

  “Person Responsible” cannot be held responsible for the delay nor can be said to have consciously disregarded the obligation cast upon him. We hold that the assessee having shown reasonable cause for the delay in filing TDS return, no penalty u/s 272A(2)(k) of the Act is leviable and the same is, therefore directed to be deleted. - Decided in favour of assessee.

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• Customs

• 2018 (9) TMI 1738

  Maintainability of Appeal - Classification of imported goods - case of Revenue is that the issue of classification is the secondary issue and the primary issue is with regard to misdeclaration made by the Respondent - Held that:- If the classification as filed by the Respondent is accepted, there could be no question of mis-declaration. The primary issue to be decided, is appropriate classification of the imported goods and only thereafter the issue of mis-declaration may arise for consideration - it is the case that rate of duty issue and not within our jurisdiction under Section 130 of the Act. The remedy, if any, is to file an appeal before the Hon'ble Supreme Court from the impugned order dated 20th March, 2018.

  Appeal disposed off as not maintainable.

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• 2018 (9) TMI 1735

  Valuation of imported goods - First quality Oryx unpolished marble slabs - rejection of declared value - Mis-declaration of description and quantity of goods - it was alleged that the description of the goods was misdeclared as unpolished marble slabs whereas the imported lot was polished slabs and also in 8 crates examined out of 47 crates, there is excess quantity ranging from 1.41% to 17.609% - Confiscation - redemption fine - penalty.

  Held that:- The appellants have imported polished marble slabs from China and Sultanate of Oman and filed different Bills of Entry. The invoices, packing list and the LOC describe the goods to be unpolished marble slabs whereas on inspection / physical examination of the goods, it was found that the impugned goods were polished marble slabs. There was misdeclaration. The price of goods which are differently described in documents cannot be held to pertain to the impugned goods - Department has made out a strong case of misdeclaration against the appellant. As such, the confiscation upheld under Sections 111(d) and 111(m) of the Customs Act, 1962 is valid.

  Rejection of declared value - value was arrived in terms of Rule 5 of the Customs Valuation Rules, 2007 making reference to NIDB data - principles of natural justice - Held that:- Though the appellants had tried to make a case of not being heard before such a decision was taken, the Department has put the appellants to a reasonable notice by way of query at the time of filing the Bills of Entry. The appellants have taken around two months time to comply with the query. Therefore it has to be held that a reasonable time and opportunity has been given to them. only at the instance of the appellant, a written show-cause notice was not issued as brought out by the learned AR - Therefore, the value has been correctly redetermined by the authorities.

  Redemption fine and penalty also upheld.

  Appeal dismissed - decided against appellant.

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• 2018 (9) TMI 1737

  Refund of Customs Duty - transfer of Duty Free Import Authorization (DFIA) Licence - petitioner sought refund of the duties paid by the transferee - Held that:- Under the DFIA Scheme, it is inferred that once the license is transferred to a third party legitimately, the benefits accrued under the license on the transferor terminates. The respondents have rightly rejected the claim of the petitioner - petition dismissed.

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• 2018 (9) TMI 1708

  Breach of the principles of natural justice - right of cross-examination of one of the prosecution witnesses denied - Smuggling - cigarette of foreign origin - Held that:- The petitioners having put in a request for cross-examination of two witnesses of the prosecution by its writing dated April 25, 2018 and the petitioners admittedly not being granted such opportunity, the impugned order stands vitiated by reason of breach of the principles of natural justice - impugned order is quashed.

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• 2018 (9) TMI 1736

  Refund of the excess Customs duty paid - finalization of the provisional assessment - excess duty collection arisen due to typographical error - Section 154 of the Customs Act, 1962 - Held that:- Section 154 of the Customs Act, 1962 deals with the situation where there is a clerical or arithmetical mistakes, in any decision or errors arising therein, from any accidental slip or omission, at the time of assessing the Bill of Entry and same can be corrected by the proper officer - The assessing authority can amend an order of assessment, insofar as clerical slips/errors is concerned. On making of such correction under Section 154 of the Act, the consequential return of amount of duty of customs, would be available to an importer.

  In the present case, there was a error, on the part of the supplier, who has inadvertently charged SEK 199450 (Rs.11,36,865/-), whereas, the actual freight incurred was only SEK 19945 (Rs.1,13,686.50). Even the supplier has admitted the mistake and they have given a credit note, for the difference involved. Appraiser, who was present in the personal hearing, before the Original Authority, has shown that the split values appearing in the invoice, and admitted that there could have been a mistake in the assessment, due to the wrong figures given by the 1st respondent, and placing on record the above, the Commissioner (Appeals) has observed that excess amount of duty, has been collected, on account of wrong freight amount, being included in CIF value.

  Admittedly, even according to the Commissioner (Appeals), excess duty collection, has arisen due to typographical error, on the part of the supplier and that therefore, Section 154 of the Act, is applicable.

  Appeal dismissed - decided against Revenue.

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• 2018 (9) TMI 1734

  Classification of imported goods - Multimedia speakers with additional facilities such as USB, SD card and FM radio etc. - whether classified under CTH 851822/851829 or under CTH 8519/8527? - Held that:- The very same issue has been decided by the Tribunal in Logic India Trading Co. vs Commissioner of Customs, Cochin [2016 (3) TMI 5 - CESTAT BANGALORE], where it was held that the multifunctional printing machines having fax facility and screening facility would continue to fall under Heading 8471 of the Customs Tariff Act as “digital printers” only inasmuch as the predominant function of the machine in question was printing.

  The main function it performs, which in the present case remains to be that of a speaker. We accordingly hold that the goods in question are properly classifiable under Chapter Heading 8518 22 00.

  Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1707

  Direction to comply with CESTAT order - provisional release of goods - Statutory right of filing an appeal sought to be curtailed - Held that:- Mandamus cannot be issued to curtail the statutory right of the respondents, in preferring an appeal under the provisions of the Customs Act. But at the same time, considering the lis between the parties, provisional release has already been directed to be made, subject to certain conditions.

  Petitioner has a right to seek for provisional release. Equally respondents have a right to prefer a statutory appeal.

  Writ appeal is disposed of with a direction to the respondents to file the statutory appeal within two weeks from today, failing which order of CESTAT, Madras, in final order No.41201 of 2018 in C/40687/2018-DB dated 13.04.2018, should be implemented.

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• Insolvency & Bankruptcy

• 2018 (9) TMI 1739

  Misconduct insolvency professional - misleading the stakeholders of the insolvency and bankruptcy - Held that:- An insolvency professional exercises the powers of Board of Directors of a corporate debtor during the period of CIRP. He conducts the entire CIRP and manages the operations of the corporate debtor during the CIRP period. His responsibilities during CIRP are detailed in the Code and relevant regulations. He has similar onerous responsibilities in liquidation of corporate debtors, and individual insolvencies and bankruptcies. These responsibilities require absolute integrity which inspire confidence and trust of the stakeholders.

  Mr. Goel mislead the stakeholders of the insolvency and bankruptcy by incorporating a LLP by name, “IBBI Insolvency Practitioners LLP”. It also misled the Board stating that name change has been approved. He has been procrastinating for the last eight months to change the name despite continuous follow up, including a show cause notice, from the Board. These actions of Mr. Goel are contravention of the provisions of clauses 1, 2, 10, 12, 14 and 24 of the Code of Conduct in the First Schedule to the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.

  ORDER - Mr. Goel has misled the stakeholders, the Board and the DC. His conduct is in violation of section 208 read with regulations 7(2)(a) and 7(2)(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 and clauses 1, 2, 10, 12, 14 and 24 of the Code of Conduct in the First Schedule for Insolvency Professionals under the said Regulations.

  Disciplinary Committee, in exercise of the powers conferred under section 220 (2) of the Code read with sub-regulations (7) and (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, hereby, issues the following directions:

  (a) Mr. Goel shall not take up any new assignment till “IBBI Insolvency Practitioners LLP” is removed from the Company / LLP Master Data of the Ministry of Corporate Affairs; and

  (b) Mr. Goel’s registration as an insolvency professional shall be suspended for three months from the date of issue of this order. This direction of suspension shall come into force on expiry of 30 days from the date of its issue.

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• Service Tax

• 2018 (9) TMI 1730

  Business Auxiliary Service - business of booking space and collection of freight for M/s. British Airways World Cargo - visa services - Circular No.137/06/2011-ST dated 20.4.2001 issued by CBEC vide File No.332/2011/2010-TRU.

  Held that:- Appellant submitted that the services are in the nature of export and therefore, in terms of Rule 3(3) of Export of Service Rules, 2005, the services are exempt. However, on being questioned, the learned counsel could not specifically reply as to whether such services are rendered only with reference to the export cargo or otherwise. He submitted that necessary details are contained in the agreements and he was not in a position to submit the agreements readily - thus, for determination of the liability of service tax of the appellant vis-à-vis the contracts and the actual nature of the work undertaken by the appellants so as to evaluate whether they can be termed as export of services.

  Visa Services - Circular No.137/06/2011-ST dated 20.4.2001 issued by CBEC vide File No.332/2011/2010-TRU - Held that:- The services rendered by the appellants insofar as visa services are concerned are squarely covered by the clarification issued by CBEC vide the Circular - the demand as far as visa services rendered by the appellants are concerned does not sustain and is liable to be set aside.

  Issuance of show-cause notice seeking to increase the quantum of penalty under Section 76 from ₹ 100/- per day to ₹ 200/- per day - Held that:- The Department was well within its rights to file an appeal before the appropriate form if it was felt that there was an error in the order - the subsequent order No.25/2008 being issued without authority of law is liable to be set aside.

  Appeal disposed off.

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• 2018 (9) TMI 1729

  Man Power Recruitment Agency and Supply Service - appellant have deputed the employees to their sister concern or units and collected deputation charges from the latter - Held that:- The scope of service tax liability in respect of the activity of staff to subsidiary / group companies is no longer res integra - The Hon’ble High Court in the case of CST Vs Arvind Mills Ltd. [2014 (4) TMI 132 - GUJARAT HIGH COURT], has held that subsidiary companies cannot be said to be client of holding company and the deputation of employees was only for and in the interest of the company; there is no relation of agency and client.

  Section 73 (3) of the Finance Act, 1994 - Held that:- In the present case, a SCN has very much been issued and the adjudication thereof has culminated in confirmation of the demand. At such a later stage, if the LAA finds that demand is time-barred, he should only set aside the demand on that ground but cannot advise assessee concerned to discharge the disputed amount through Section 73 (3) ibid - assessee cannot be said to be discharge the disputed amount through Section 73 (3) ibid.

  Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1728

  Refund of Service Tax paid wrongly - appellant claims that service tax paid by them under mistake under the category of health club and fitness center on the ground that they are not liable to pay service tax as the service has been rendered to its own members - Held that:- It is an admitted fact by the appellant that they have collected service tax from its own members and paid the same to the Government under the category of health club and fitness center.

  Hon’ble High Court of Karnataka in the case of CENTURY CLUB VERSUS COMMISSIONER OF SERVICE TAX, BANGALORE [2009 (6) TMI 414 - KARNATAKA HIGH COURT], where it was held that The moment an establishment is running “Health club and fitness centre” under Section 65(52) of the Finance Act, 1994 service tax is applicable as there is no explanation of the word “club” under Section 65(52) and its inclusive definition including the appellant club and other similarly placed clubs and therefore the club is registered under the Service Tax Department charging and collecting from its members and therefore refund claim is not tenable - the argument of the learned counsel for the appellant that the decision of the Hon’ble High court is per incuriam is not correct because the High Court has given reasons for denial of the refund.

  Appeal dismissed - decided against appellant.

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• 2018 (9) TMI 1727

  Manpower Recruitment and supply Agency services - the appellant on being pointed out paid the service tax after collecting the same from the service recipients - no intent to evade - Held that:- The appellant is a proprietary concern and he is providing the taxable service under the category of Manpower Recruitment and Supply Agency service but he was under a bona fide belief that he was not liable to pay service tax and that is why he did not take registration under the service tax and did not collect the service tax from his clients and also did not pay the service tax to the Government.

  The appellant is an illiterate person and does not have the knowledge about the service tax provisions and that his activity is liable to service tax as the said service was newly brought under the Service Tax regime - Tribunal in various cases has taken a view that after there is an honest belief founded on reasonable grounds that the assessee is not liable to pay service tax but pay the service tax if the Department intervened and demanded service tax, then in those situations, the Tribunal should take liberal view and give him the benefit under Section 80 of the Finance Act, 1994 and should drop the penalties under Sections 76, 77 & 78.

  The Tribunal in the case of Infinity Credit [2009 (3) TMI 22 - CESTAT, NEW DELHI], in identical circumstances, held that there are sufficient causes for the appellant in entertaining doubt that they were not liable to pay the service tax especially when the service tax was recently introduced and the Tribunal by invoking the provisions of Section 80 of the Finance Act, has set aside the various penalties imposed on the appellant.

  Penalties u/s 76, 77 and 78 of FA - As far as interest liability is concerned, since there is a delay in payment service tax by the assessee, consequently the assessee is liable to pay interest under Section 75 of the Finance Act and the computation of interest would be done by the adjudicating authority which the assessee will pay.

  Appeal disposed off.

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• 2018 (9) TMI 1726

  Penalty - non-payment of service tax on investigation service - tax alongwith interest paid on being pointed out - Section 73(3) of the Finance Act, 1994 - Held that:- As soon as the Department pointed out that the appellants are liable to pay service tax on Investigation Service, the appellant paid the service on investigation along with interest much before the issuance of the show-cause notice and therefore the case of the appellant is covered under Section 73(3) of the Finance Act, 1994 in respect demand on investigation service is concerned - Penalty set aside.

  Valuation - Security Agency Service - inclusion of reimbursable expenses Section 67 of the Finance Act, 1994 - Held that:- Section 67 was amended by Finance Act, 2015 to include the reimbursement of expenses for charging the service tax but the period involved in the present case is prior to the amendment and therefore during the relevant period, the appellant was not liable to pay service tax on reimbursement of expenses - The demand of service tax on reimbursement of expenses has been held to be ultra vires by the Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] - demand set aside.

  Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1725

  CENVAT Credit - extended period of limitation - Rule 9(9) of CCR, 2004 - SCN was issue for irregular availment of CENVAT credit by invoking the extended period and proposing to levy penalties under Sections 76, 77 & 78.

  Held that:- The Commissioner in the impugned order has found that the bank acted bona fidely as it was first year of Service Tax implementation and has taken a lenient view by not imposing penalties by invoking the provisions of Section 80 - further, once the Commissioner has found the conduct of the appellant bona fide and there was a reasonable cause for the act of the appellant, then extended period of limitation cannot be invoked.

  In the present case, the period involved is from 10/09/2004 to 31/03/2005 whereas show-cause notice was issued on 12/07/2006 which is beyond the normal period of one year as prescribed under law - it is also found that the appellant is a Government of India enterprise and therefore the allegation of suppression cannot be made.

  Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1724

  Works contract - construction of complex services - period from 16/06/2005 to 30/09/2006 - Held that:- The present case is squarely covered by the decisions of the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] wherein the Hon’ble Apex Court has held that works contracts are not liable to service tax prior to 01/06/2007 and in the present case, the period involved is 16/06/2005 to 30/09/2006.

  The assessee’s case is also covered by various circulars issued by the Board i.e., Circular No.B11/3/98 dt. 07/101998, DGSTS letter F.No.v/dGST/Misc.-7/98 dt. 11/02/1999 and Trade Notice No.7/98-St dt. 13/10/1998 of CCE, Mumbai wherein it was clarified that the service rendered by the subcontractor to the main contractor is not liable to service tax as the main contractor was paying the service tax on the entire work done including that of the respondent.

  Appeal dismissed - decided against Revenue.

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• 2018 (9) TMI 1723

  Classification of Services - use of cranes and torex with operator, manpower and supervision, either on single use basis or on monthly or specified period basis - whether classified under Business Support Service or Supply of Tangible Goods service?

  Held that:- Though the definition of BSS is no doubt an inclusive definition, it only means that the type of activities that would come within the fold of that category will necessarily have to be of the kith and kin or similar to the examples listed therein - Thus, for any other activity to find a fit within this definition of ‘BSS‛ such activity should pertain to the same class or category or genus as the list of examples given in the definition. This is the basic all important maxim of ejusdem generis.

  By no stretch of imagination can renting of cranes be called an activity of the same genre as the other examples listed in the definition of ‘Business Support Service‛ in Section 65 (104c) of the Act - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1732

  Maintainability of Appeal - Section 35G of the Central Excise Act, 1944 - Imposition of penalty on accepting valuation is the issue - Held that:- The Appeal as filed does not relate to valuation of excisable goods for the purpose of assessment. The valuation issue is concluded issue and accepted by the Appellant. The Appeal as being pressed only restricts itself to imposition of penalty on accepting the valuation as found by the Tribunal in the impugned order.

  The Appeal is maintainable under Section 35G of the Act before this Court - Appeal admitted to decide the issue of penalty imposed u/s 11AC of CEA.

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• 2018 (9) TMI 1731

  Imposition of Penalty - while Service tax demand upheld, the penalty was set aside following the decision of its Coordinate Bench in South City Motors Ltd. [2011 (11) TMI 408 - CESTAT, NEW DELHI] - whether penalty should be levied or not? - Held that:- There was reasonable cause for non payment of service tax making Section 80 of the Act applicable. It is not as though the confirmation of demand would ipso facto lead to penalty. In fact, Section 80 of the Act provides for non imposition of penalty, if there is a reasonable cause. This is available in ample measure in the present facts. Thus, no fault can be found with the impugned order of the Tribunal.

  The order dated 5th April 2016 of the Tribunal not imposing penalty is one on facts, no substantial question of law arises - Appeal dismissed.

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• 2018 (9) TMI 1722

  Renting of Immovable Property Service - Rents Received by the appellants after 01.06.2007 - Held that:- If the amount includes rents pertaining to the period prior to 01.06.2007, it can be easily verified by looking into the payments received by the appellants after 01.06.2007 - appellants have to be given one further chance to establish this plea raised by them - the issue is remanded to the adjudicating authority for re-consideration.

  Real Estate Agents Service - demand has been defended by the appellants saying that the transaction does not involve any activity which attracts “Real Estate Agents Service” - Held that:- The appellants have paid Income-tax on Capital Gains for the amount received from M/s. CCCL. Thus, it can be seen that it is a transfer of right/interest in property by the appellants to purchaser M/s. CCCL. The said transaction cannot in any way take the colour of “Real Estate Agents Service” - demand set aside.

  Business Auxiliary Service - sale of shares by appellants to M/s. M/s. Rattha Citadels OMR Apart Hotel Pvts Ltd. - main ground for alleging that the transaction would fall within the “Business Auxiliary Service” is that the shares of face value of ₹ 10/- has been sold by the appellants at a premium of ₹ 21.80/- per share, when the company was reeling under financial loss - Held that:- Whatever be the circumstances under which the shares were sold or the premium of the shares was fixed between the parties, the transaction of sale of share in no way can be considered as an activity promoting the business of the purchaser of the shares. It is indeed Sale of Shares and, therefore, the demand on this count cannot sustain - demand set aside.

  Input tax credit - input services used in the construction of buildings - denial on account of nexus - Held that:- This issue has been settled in the case of M/s. Sai Samhmita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] where the Hon'ble High court in the said decision held that the credit of input services used for setting up a warehouse for providing the Output Service of “Storage and Warehousing Services”, was admissible - disallowance of credit of input service used for Construction of buildings is unjustified.

  Appeal allowed in part and part matter remanded.

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• 2018 (9) TMI 1721

  Reverse Charge Mechanism - Supply of Tangible Goods Service or deemed sale - Department took the view that the foreign lessor has supplied tangible goods to appellants on lease; that lessor therefore rendered “Supply of Tangible Goods Service” as per section 65 (105) (zzzzj) of Finance Act, 1994; hence appellant as recipient of service are liable to pay service tax on reverse charge basis - Section 66A read with Rule 2 (1) (d) (iv) of Service Tax Rules, 1994 - non-inclusion of TDS amount in taxable value - wrong availment of Credit in respect of excise duty paid on motor vehicles - penalties.

  Held that:- The lease agreement between EAT and the appellant is one wherein the right of possession and control of the aircraft has been bestowed on the appellant and not retained with the lessor. This being so, the ingredients of “Supply of Tangible Goods Service” requiring exigibility to service tax by the Finance Act, 1994 are not present in this transaction. In consequence, the monetary consideration paid by the appellants to EAT cannot be considered as value of “Supply of Tangible Goods Service” and tax demanded on the same as has been done in the impugned orders. - service tax levy is not attracted.

  Reliance placed in the case of POWER MAK INDUSTRIES, POWER MAK PVT. LTD. VERSUS CCE, C&ST, HYDERABAD-I [2018 (2) TMI 1415 - CESTAT HYDERABAD], where it was held that the impugned transaction involving supply of DG sets on hire basis to various hirers is nothing but supply of tangible goods with transfer of both possession and control of the goods to the users of the goods. These transactions have been ruled as deemed sale of goods for the purpose of APVAT Act by the concerned Advance Ruling Authority. Appellants have also been discharging VAT on the hire charges under APVAT Act. Hence, this is the case of supply of tangible goods for use, with legal right of possession and effective control vesting with the hirer, required to be treated as deemed sale of goods, hence cannot be considered as supply of tangible goods for use of service for the purposes of Section 65(105) (zzzz) of the Finance Act, 1994 for the period upto 01-07-2012 or as taxable service for the purpose of Section 65B (44) of the Finance Act, 1994 after 01-07-2012.

  It was also held in the case that the terms and conditions stipulated in the agreement, lead to the conclusion that the transaction envisaged in the agreement is one of transfer of right to use which is a deemed sale under Section 2(24) of the Maharashtra Value Added Tax Act, 2002. The Finance Ministers speech and the budget instructions issued by the C.B.E. & C. also clarify that if VAT is payable on the transaction, then service tax levy is not attracted.

  The assessees activity of giving various equipments on hire does not fall under the category of Supply of tangible goods for use, hence the same is not liable to service tax w.e.f. 16.05.2008.

  Penalties in respect of non-inclusion of TDS amount in taxable value and wrong availment of cenvat credit on motor vehicles - Held that:- There is no malafide in these inadvertencies by the appellants. Hence while not interfering with these tax demands, we hold that imposition of penalties in all these tax demands are therefore an overkill and requires to be set aside.

  Appeal allowed in part.

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• 2018 (9) TMI 1720

  Security agency service - appellants had shown income by way of contract amounts received in for the years 2002-03 2003-04, 2004-05 and 2005-06 which allegedly was not declared in their statutory ST-3 returns - Department took the view that the said contract amount received and shown as income in the gross amount is nothing but charges received for security agency services rendered and provided by them - principles of natural justice.

  Held that:- In para 9.4 the authority has referred to the fact of having sent the copies of bills produced by appellants to the jurisdictional Range Superintendent; that the jurisdictional Range Superintendent made verification with M/s. Achariya Educational Public Trust; that it has been clarified by the said institution that appellants have provided services of security force and not manpower supply. There is no indication as to whether copy of the said report was provided to the appellant to offer their response and or rebuttal of the same. This being so, it is found that the basic principles of natural justice have been given the go by.

  Interests of Justice will require that the appellant is given a copy of the said verification report and also given sufficient opportunity to offer their comments / rebuttals on the same within a reasonable time - appeal allowed by way of remand.

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• 2018 (9) TMI 1719

  Valuation - inclusion in assessable value - It is alleged that in the course of providing logistics services, they incurred various expenses under heads, viz., delivery order fees, documentation fees, LCL Charges, BL Charges, etc., and besides this, they also collected ocean / air freight from the clients, which were sought to be added to the assessable value - Classification of services.

  Held that:- The Chennai Bench of CESTAT has addressed this very same dispute in Bax Global India Ltd. Vs. Commissioner of Service Tax, Chennai [2017 (9) TMI 1264 - CESTAT CHENNAI], where on the same issue, in appellant s own case, BAX GLOBAL INDIA LTD. Versus COMMISSIONER OF SERVICE TAX [2007 (10) TMI 132 - CESTAT, BANGALORE] the Tribunal held that amount collected by CHA like cartage revenue, MSIL/JWG charges, due carrier, documentation charges etc. are for services rendered by third party and the appellant initially make payment for the activities on behalf of the client and later collected the amount from the client and that these are actually reimbursable expenses and not relating to the CHA activities. Even in respect of air freight, the Tribunal held that these charges cannot be said to be related to the activities of CHA.

  Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1718

  Works Contract Service - Construction of Residential Complex Service - appellant were paying service tax under Construction of Residential Complex Service from 16.06.2005, however stopped doing so from 01.08.2006 considering the activities to be “Works Contract” based on CBEC circular dt. 1.8.2006. Assessee resumed payment of service tax under works contract w.e.f. 1.6.2007 availing the benefit of reduced liability under Works Contract (compensation scheme for payment of service tax) Rules, 2007 - demand of service tax for different periods under different heads - Composition Scheme - CENVAT Credit.

  Period up to 1.6.2007 - Held that:- As the law laid down by the judgment of the Hon’ble Apex Court in the case of L&T Ltd. [2015 (8) TMI 749 - SUPREME COURT], there will not be any service tax liability on the assessee. Appeals of the assessee on this score succeed - demand set aside.

  Period from 1.6.2007 to 1.7.2010 - Held that:- The CBEC in Circular dt.10.02.2012 reiterating its earlier circular of 29.01.2009 has clarified that for the period 1.7.2010 such services provided by the builders / developers will not be taxable - services prior to 1.7.2010 also not taxable.

  Period w.e.f. 1.7.2010 - composition scheme under the said Rule 3 (3) - Held that:- The adjudicating authority has denied the benefit of the composition scheme only on the preliminary ground that the assessee has not exercised option before “due date of payment of tax” - denial of compensation scheme to the assessee on the said ground is not justified and improper and therefore requires to be set aside - demand set aside.

  CENVAT Credit - period 1.6.2005 to 1.7.2010 - Held that:- Appellant had paid service tax - Hon’ble Apex Court in the case of Punjab Tractors Vs CCE Chandigarh [2005 (2) TMI 141 - SUPREME COURT OF INDIA] have held that when duty is paid by the assessee even on exempted goods, modvat credit availed and reversed at the time of clearance of the final product cannot be demanded - credit remains allowed.

  Input service credit - duty paying invoices - denial also on the ground that related invoices did not bear invoice number and / or date - Going by the provisions of Rule 9 (2) of CCR 2004, as also plethora of decisions of higher appellate forums on this issue, these discrepancies in the credit availing documents are very much condonable and should be considered as curable defect only - credit allowed.

  Appeal allowed in toto.

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• 2018 (9) TMI 1717

  Valuation - Clearing and Forwarding Agency Service - inclusion of reimbursable expenses in assessable value - Rule 5 of the Service Tax (Determination of Value) Rules, 2006.

  Held that:- The Hon’ble Supreme Court in the case of M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] after analyzing the scope of Rule 5 of the Service Tax (Determination of Value) Rules, 2006, has held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax.

  In the case on hand, the lower authorities have solely relied upon Rule 5 of the Service Tax Rules, 2006 to say that any expenditure or cost incurred by the service provider in the course of providing taxable service of such expenditure or cost shall be treated as consideration which shall be included in the value for the purposes of charging service tax and this was in terms of Section 67 of the Finance Act which prescribed the value of payment of service tax which is on the gross amount by the service provider - the findings of the lower authorities are clearly incorrect and same is not sustainable.

  Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1715

  Application before Settlement Commission - maintainability of adjudication order - Section 32E(1) of the Central Excise Act, 1944 - the Commissionerate had held that the adjudication order was passed prior to filing of the settlement application and accordingly, it is not maintainable under Section 32E(1) of the Central Excise Act, 1944 - Mining Services - It is alleged that the applicant was not discharging their Service Tax Liability on the Mining of Mineral, Oil or Gas Services even though they are registered for the above services - whether the settlement application is maintainable under Section 32E(1) of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994, i.e. a valid application for settlement under Section 32E(1)?

  Held that:- From the contents of Section 32E(1), it is clear that an assessee can make an application for settlement “before adjudication” - The expression “before adjudication” appearing in Section 32E of the Central Excise Act, 1944, has been explained by the Hon'ble High Court of Judicature at Hyderabad in M/S. CONCRETE CONSTRUCTIONS VERSUS THE UNION OF INDIA [2017 (5) TMI 98 - ANDHRA PRADESH HIGH COURT], where it was held that the term “before adjudication” as contained in Section 32E(1) refers to the adjudication by the competent authority bearing a date. The assessee has to file the settlement application before that date.

  In the present case, there was no adjudication pending before the authority as on 23-6-2017. The adjudication upon disposal had been dispatched on 21-6-2017. In other words, on 23-6-2017 i.e. the date on which the settlement application was received, there was no adjudication pending. Hence the question of invoking provisions of Section 32E of the Central Excise Act, 1944, does not arise - In this case, the adjudication order was passed on 21-6-2017 with dated signature of the adjudicating authority, Commissioner, Service Tax, and was despatched on that day i.e. 21-6-2017. Therefore, the application for settlement filed on 23-6-2017 is not maintainable before the Settlement Commission under Section 32E(1) of the Central Excise Act, 1944.

  The Commission finds that the case in respect of the present application has been filed after adjudication. Thus, this case does not fall within the meaning of “case” as defined in clause (c) of Section 31 of the Central Excise Act, 1944 - the present application is not maintainable and hence rejected.

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• 2018 (9) TMI 1716

  Valuation - Banking and Other Financial Services - inclusion of transaction charges in assessable value - Held that:- The matter has been addressed by the Tribunal in the case of First Securities Pvt. Ltd. Vs CST Bangalore [2007 (6) TMI 33 - CESTAT, BANGALORE] wherein it was held that value of such taxable services in respect of stock brokers will not include transaction charges and handling charges - such transaction charges cannot form part of the taxable value - demand set aside.

  CENVAT credit - input services - insurance of the employees - food charges - subscription - books / periodicals - travelling expenses - Held that:- All these credits relate to the period prior to 01.04.2011, only after which date, the definition of ‘input service’ has been made narrowed and certain exclusions also included in the definition - the issue decided in the case of CCE Nagpur Vs Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], where it was held that the definition of "input service" is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products - credit allowed.

  CENVAT credit - duty paying invoices - credit availed on the basis of debit notes raised by an associate company M/s. Cholamandalam DBS Finance Ltd. for common expenses such as car parking expenses, water and electricity expenses, coffee and stationery expenses etc. - Held that:- Hon’ble High Court of Rajasthan in the case of CCE Jaipur Vs Bharti Hexacom Ltd. [2018 (6) TMI 435 - RAJASTHAN HIGH COURT] has held that cenvat credit can be allowed even on debit notes - credit allowed.

  Appeal dismissed - decided against Revenue.

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• Central Excise

• 2018 (9) TMI 1714

  Cenvat Credit - reasonable steps before availing credit - original manufacturer of fabrics were alleged to be fictitious - endorsed invoices - Held that:- SLP dismissed.

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• 2018 (9) TMI 1713

  Classification of goods - Pet Flakes - whether classified under CETH 3907.60 or CETH 39159042 of the Central Excise Tariff Act, 1985? - eligibility for exemption under Sl.No.78 of Notification No.4/2006-CE dt. 1.3.2006.

  Held that:- The important requirement for goods to be classified in Heading 39.07 is that they should be ‘primary forms” of plastics. What are primary forms is amplified in Chapter Note 6the important requirement for goods to be classified in Heading 39.07 is that they should be ‘primary forms” of plastics. What are primary forms is amplified in Chapter Note 6 - It is thus evident that primary forms for the purpose of Chapter 39 are constituent goods which are ‘primary” in form and meant to be converted by further polymerisation or chemical synthesis into other materials of Headings 3901 to 3914.It is thus evident that primary forms for the purpose of Chapter 39 are constituent goods which are ‘primary” in form and meant to be converted by further polymerisation or chemical synthesis into other materials of Headings 3901 to 3914.

  Discernably, the appellants are not doing any chemical synthesis or polymerization processes on the PET bottles used by them as raw material. On the other hand, the process involves only putting the used PET bottles into a crusher which makes them small pieces and subjecting the resultant goods to washing and packing after which they are cleared from the factory. Though the appellant has argued that they are manufacturing ‘flakes”, but, what is being manufactured is only ‘parings” of PET bottles. True, these ‘parings” eventually get converted into new PET bottles, however that will not make the final product of the appellant eligible for classification as ‘primary form of plastic”.

  The ‘flakes” which are included as ‘primary form” in Note 6 of Chapter 39 will surely have to be a ‘primary grade material”. This is certainly not the case here.

  Appeal allowed - decided in favor of Revenue.

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• 2018 (9) TMI 1712

  CENVAT Credit - fake invoices - Department was of the view that MS Wires have not been the material supplied to the appellants and that only cenvatable invoices giving the description as 'MS Wires' were issued - invoices are dated Mar. '05, whereas, the investigation was conducted in 2006 and SCN issued only in Mar. 2010 - suppression of facts or not - invocation of extended period of limitation.

  Held that:- After such a long gap of five years, apart from the statements and these three invoices, the department has not been able to put forward any evidence to establish the allegations raised in the show-cause notice. There is no allegation that suppliers/dealers are not registered with the department. The allegation is that these dealers procure non-duty paid scrap locally and also from manufacturers by paying duty - There is no evidence put forward by the department to show that the appellants have procured such large quantities of inputs locally. Neither buyers nor transporters have been examined. There is nothing brought out from evidences as to how the appellants have been able to manufacture the finished products if they were not receiving the goods as per the cenvated invoices.

  It is settled law that statements cannot be relied upon without examining the witnesses under section 9D of the Central Excise Act. Mere statements cannot be a ground for confirming the demand in a serious charge of clandestine availment of credit.

  The Department has failed to establish case alleged in the SCN - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1711

  Benefit of N/N. 4/2007-CE, dated 01.03.2007 Sl.No.1A - Clearance of Cement bags marked with MRP for captive Consumption - Department was of the view that such cement already affixed with MRP, but not cleared for retail sale but for captive consumption will not be entitled to the benefits of the Notification

  Held that:- The assessee has diverted some of the cement bags already affixed with MRP for captive use but divergent views are expressed in respect of the rate of duty applicable for such captive consumption. The two contending Sl.Nos. of the notification are 1A and 1C. Sl.No.1A in fact, provides the concessional rates of duty for clearance of cement marked with MRP. Sl.No.1C prescribes a higher rate of duty for cement other than retail sales. In the present case, the cement bags marked with MRP have not been sold in retail.

  The identical issue has been considered by the Single Member Bench of the Tribunal in the case of M/s. Ultra Tech Ltd. [2017 (12) TMI 1299 - CESTAT MUMBAI], where it was held that On a perusal of the exemption notification the benefit of which was availed by the appellant, it would appear that the disputed rate of duty applies to goods other than those cleared in ‘packaged form’. The goods cleared in ‘packaged form’ are covered by sl. no. 1A of the said notification and benefit allowed.

  The benefit of Sl.No.1A of the Notification will be allowable for cement captively consumed - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (9) TMI 1765

  Validity of VAT assessment after introductions of GST - Assessment after the amendment to the Constitution by virtue of which Article 246A was inserted - According to the petitioners, with the amendment to the Constitution and corresponding status for Collection of Goods & Service Tax having been framed, the Value Added Tax laws would not survive.

  Notice returnable on 10.10.2018.

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• 2018 (9) TMI 1710

  Scope of the words “Seller” and “Dealer” - Notification dated 30th March, 2016 - repossession of the vehicles and the sale of the repossessed vehicles by the banks / institutions amounting tosale or not? - insertion of Entry No.82B in Schedule C to MVAT Act to levy VAT as “repossessed motor vehicles sold by the banks / financial institutions on which entry tax or as the case may be, Sales Tax has been paid at an earlier stage in the State - Held that:- At this stage, no notice has yet been issued to the petitioners seeks to assess the petitioners under Entry No.82B of the Schedule C of the MVAT Act. This in the light of the petitioner's contention that the petitioners are not the dealer nor is their activity in disposing of repossessed motor vehicles a sale under the MVAT Act. It is for the respondents now to issue an appropriate notice in case it does not agree with the contention of the petitioners. On such a notice being issued by the respondent, the petitioners would respond.

  As no proceedings have yet been commenced and no order has been passed by the Authorities under the MVAT Act on the proper interpretation of the words “Seller” and “Dealer” in the context of Entry No.82B of the Schedule C to the MVAT Act, it would only be proper that if and when the Revenue issues a notice, the petitioners will respond to the same and appropriate order thereon would be passed - If the petitioners succeed in its contention with regard to the interpretation of the words “Seller” and “Dealer” in the context of Entry No.82B, Schedule C to the MVAT Act, then the challenge to the constitutional validity would in the present facts become unnecessary.

  At this stage, the petition is premature - Petition disposed off.

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• 2018 (9) TMI 1709

  Revision of Assessment - 'C forms' from the consignees were obtained after finalization of assessment - Held that:- When the circular of the Commissioner of Commercial Taxes in Acts Cell-1/12975/2011, dated 28.02.2011, itself is in very clear terms that the Assessing Officers are empowered to accept the forms / certificates, even after passing final assessment orders and revise the assessments, the second respondent ought to have revised the subject assessment of the petitioner, by accepting the 'C forms'.

  Since the submission of 'C form' and acceptance thereon is not going to have an effect on the taxable turnover, as provided under the Act, this Court directs that the respondents, more particularly, the second respondent is to consider the representation of the petitioner, dated 27.04.2009 and accept the 'C form' and thereafter, pass appropriate orders / revised assessment orders, on merits - petition allowed.

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• Indian Laws

• 2018 (9) TMI 1733

  Aadhaar Card - right of Privacy - the main plank of challenge of petitioners is that the Aadhaar project and the Aadhaar Act infringes right to privacy - Held that:- The architecture of Aadhaar as well as the provisions of the Aadhaar Act do not create a surveillance state. This is ensured by the manner in which the Aadhaar project operates.

  During the enrollment process, minimal biometric data in the form of iris and fingerprints is collected. The Authority does not collect purpose, location or details of transaction. Thus, it is purpose blind.

  There are sufficient security measures as well - it is very difficult to create profile of a person simply on the basis of biometric and demographic information stored in CIDR.

  Aadhaar is thus held to be valid.

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