TMI Tax Updates - e-Newsletter
October 15, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Highlights / Catch Notes
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GST:
Exemption from GST - The role of the applicant starts only after the supply of goods/services are rendered by MCGM and hence it cannot be said that they are rendering service by way of any activity in relation to any function entrusted to a Municipality under article 243 W of the Constitution - the supply in the subject case is in the nature of pure services - Provisions of benefit of exemption not applicable.
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GST:
Classification of supply - supply of services or not - The Applicant is not in the business of providing insurance coverage. - The recovery of 50% of Parental Health Insurance Premium from employees does not amounts to “supply of service” u/s 7.
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GST:
Supply of Works Contract or not - Composite Contract - the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system do not qualify as a supply of works contract under Section 2(119) of the CGST Act.
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GST:
Detention of conveyance - after detaining the vehicle, no physical verification report has been submitted by the concerned officer and uploaded in the common portal, though required in accordance with the instructions issued by the Board. - respondents are directed to forthwith release the conveyance in question together with the goods contained therein.
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GST:
Failure to file Form GST TRAN-1 - carry forward of Input Tax Credit - technical glitches - Revenue directed to either open the Portal to enable the petitioner to again file the Form GST TRAN-1electronically or in the alternative accept the Form GST TRAN-1 presented manually, on or before 31.08.2019.
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Income Tax:
Deduction u/s 80-IB(10) - When the book result discloses the profit at 50%, the Revenue cannot doubt that the profit was exorbitant or improbable one - The profit generated by the assessee-firm is supported by the books of account maintained in the regular course of business activity.
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Income Tax:
Disallowance of deduction claimed u/s 80-IB(10) - When the third party individuals are partners in the assessee-firm apart from the children of the land owners, the contention of the Revenue that the land in question was transferred to the partnership firm at a guideline value in order to increase the profit of the assessee-firm so as to claim deduction u/s 80-IB(10) has no merit at all.
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Income Tax:
Addition of interest expenses claimed u/s 57 - All the details were before the CIT(Appeals) but instead of pin pointing any concrete diversion of interest bearing funds; CIT(Appeals) only assumed that some funds might have been used by the assessee for some other purposes - Additions deleted.
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Income Tax:
Nature of Incentive received - the incentive given by the Government to the assessee for exploring the new market is a capital receipt, hence it cannot be treated as income either under Section 2(24) or 28
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Income Tax:
Addition on account of commission paid and on account of salary - Assessee has inflated the expenses just to reduce the taxable income - additions confirmed.
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Customs:
Classification of imported goods - Melamine ware viz Kitchenware and Tableware - the goods were appropriately classifiable under heading 392410 and not under heading 392490.
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Customs:
Valuation of imported goods - import of content of Digi Beta Tape through Courier - by not including the value of the License Fee or Guarantee paid by them relating to import of the Digi Beta Cam, with the movies on them they have misdeclared the said goods in terms of the value and have rendered them liable for confiscation.
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Customs:
Duty Drawback - classification of goods in the drawback schedule - export of PV Suitings along with woven fabrics of synthetic staple fibre - The goods have been misdeclared by describing them in a manner to avail excess drawback, the goods were liable for confiscation - levy of penalty confirmed
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Customs:
The Commissioner had limited scope in the remand proceedings and could not have put the appellants in more precarious position then what was held against them in the earlier proceedings specifically when revenue had not filed any appeal against the earlier order.
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Customs:
Baggage Rules - illegal exports or not - packet containing 193 posters of Maldives Airlines - Revenue failed to prove that the said baggage is not a bona fide baggage and is in violation of the Baggage Rules - No penalty.
Articles
Notifications
GST - States-
S.O. No. 72 - 13/2019 – State Tax (Rate) - dated
4-10-2019
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Jharkhand SGST
Seeks to amend Notification No. 12/2017- State Tax (Rate), dated the 29th June, 2017
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S.O. No. 71 - 12/2019 – State Tax (Rate) - dated
4-10-2019
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Jharkhand SGST
Amendment in Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017
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S.O. No- 70 - dated
27-9-2019
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Jharkhand SGST
Corrigendum - Notification No. 03/2019-State Tax (Rate), Dated the 26th April, 2019
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33482 - FIN-CT1-TAX- 0064/2017 - dated
30-9-2019
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Orissa SGST
Seeks to amend Notification No. 25994-FINCT I-TAX-0064-2017, dated the 5th September, 2017
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33422 - FIN-CT1-TAX- 0043/2017 - dated
30-9-2019
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Orissa SGST
Seeks to amend Notification No. 8241-FIN-TAX-0043/2017 dated the 7th March, 2019
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33418 - FIN-CT1-TAX- 0043/2017 - dated
30-9-2019
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Orissa SGST
Exempt SGST on supply of goods to FAO for execution of specified Projects
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33414 - FIN-CT1-TAX- 0043/2017 - dated
30-9-2019
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Orissa SGST
Seeks to amend Notification No. 8229-FIN-CTI-TAX-0043-2017 dated the 7th March, 2019
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33410 - FIN-CT1-TAX- 0043/2017 - dated
30-9-2019
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Orissa SGST
Seeks to amend Notification No. 40950-FIN-TAX-0043/2017 dated the 31st December, 2018
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33406 - FIN-CT1-TAX- 0043/2017 - dated
30-9-2019
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Orissa SGST
Seeks to amend Notification No. 19837-FIN-TAX-0022/2017 dated the 29th June, 2017
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33402 - FIN-CT1-TAX- 0043/2017 - dated
30-9-2019
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Orissa SGST
Seeks to amend Notification No. 19833-FlN-CTl-TAX-0022-2017, dated the 29th June, 2017
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (10) TMI 483
Exemption from GST - work for Operating Citizen Facilitation Centre (CFC) at various Locations of MCGM on per transaction/ receipt basis - Sr. No.3 3A of amended NN/N. 12/2017 - Central (Rate) as on 31st Dec, 2018 - HELD THAT:- From a perusal of the contract submitted by the applicant, we do not agree with the applicant that the supply by them to MCGM is a composite supply of service. The contract very clearly states that the agreement between Mr. Anil Katoch of M/s. VFS Global Services Private Limited and Shri Sitaram Kunte, Municipal Commissioner, is for the work of Operating Citizen Facilitation Centres Collection Centres at various Locations of MCGM for 5 years on per transactions basis at ₹ 29.45 per transaction for pilot period of two months and thereafter for five years. The contract nowhere specifies separately for supply of goods, namely, computers, other consumables, etc. - Therefore the computers, other consumables, etc are being used by the applicant on their own account and that too for the purpose of providing services for the work of Operating Citizen Facilitation Centres / Collection Centres at various Locations of MCGM. Thus, their supply is of services only and are in the nature of pure services. However we agree to their submission that their role starts only after MCGM has provided services to citizens for which periodical bills/invoices are issued by MCGM. The role of the applicant starts only after the supply of goods/services are rendered by MCGM and hence it cannot be said that they are rendering service by way of any activity in relation to any function entrusted to a Municipality under article 243 W of the Constitution. Applicability of Sr.No. 3A of the Notification to their activity - HELD THAT:- Since we have found that the supply in the subject case is in the nature of pure services, in such a case provisions of Sr. No. 3A will not be applicable.
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2019 (10) TMI 482
Classification of supply - supply of services or not - recovery of 50% of Parental Health Insurance Premium from employees - Section 7 of the Central Goods and Service Tax Act, 2017? - HELD THAT:- The documents of insurance scheme submitted on record that the applicant provides Mediclaim cover to their employees parents. There are four types of category of scheme wherein sum insured amount for family floater is at ₹ 300000/-and premium amount is fixed as per the number of parents involved therein. The applicant will bear 50% amount for maximum 2 members only and rest of money will be paid by respective employee. It is cashless Mediclaim insurance policy for the lock-in period of 3 years. The mediclaim insurance policy is made from The Oriental Insurance Company Ltd . The Applicant is not in the business of providing insurance coverage. Secondly, to provide parental insurance cover, is not a mandatory requirement under any law for the time being in force and therefore, non-providing parental insurance coverage would not affect its business by any means. Therefore, activity of recovery of 50% of the cost of insurance premium cannot be treated as an activity done in the course of business or for the furtherance of business. The recovery of 50% of Parental Health Insurance Premium from employees does not amounts to supply of service under Section 7 of the Central Goods and Service Tax Act, 2017.
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2019 (10) TMI 481
Supply of Works Contract or not - Composite Contract - contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system - rate of tax - Sr. no. 3(v) of N/N. 11/2017-C. T. (Rate), as amended w.e.f. 25.1.2018? - HELD THAT:- From a perusal of the Agreement submitted by the applicant, it is found that even though the contract is for Supply, installation, testing, and commissioning, etc., of Uninterrupted Power Supply System for Signalling, Telecommunication and Automatic Fare Collection System for the Mass Rapid Transport System of DMRC there is a provision for separate consideration for supply of goods and services. Even though the applicant has bifurcated the work into supply of goods from their Maharashtra GST registered premises and supply of services from their New Delhi GST registered office and accordingly raising separate invoices on DMRC for supply of goods and supply of services, we find that the contract has been entered into, by the applicant s Maharashtra office and not by their New Delhi GST registered office - Thus we are taking up the contract as one contract for which agreement has been entered into, by DMRC and the applicant situated in Maharashtra. Works Contract or Composite Supply? - HELD THAT:- The applicant first despatches the goods to DMRC under an Invoice and E-Way Bill. Thus the title in property of the said goods are transferred as soon as the delivery is completed. It is only thereafter that installation, etc takes place. We agree with the applicant s contention that the contract for supply of UPS system to DMRC does not qualify as a works contract under Section 2(119) of the CGST Act since the installed UPS system cannot be said to result in the emergence of an immovable property - Hence Works contract will be treated as service and tax would be charged accordingly. In the subject case UPS is not as immovable property as it can be dismantled and moved to a different location without any damage - it is found from the submissions and agreement that the contract is considering a clear demarcation of goods services to be provided by the applicant. Now we have to decide whether the supplies are naturally bundled in conjunction with each other as required by the definition of composite supply. In the contract submitted by the applicant the major part of the contract is supply of goods. i.e. UPS Units, etc. These goods are delivered to the client by the applicant and such goods that are supplied are used by the applicant to provide services of installation, testing and commissioning of the substations. Without these goods the services cannot be supplied by the applicant and therefore, the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus there is a composite supply in the subject case. The principal supply in this case is a supply of goods and therefore the GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading - The principal goods in the subject case is UPS units which are most important for the applicant to render supply as per the contract. Thus, the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system do not qualify as a supply of works contract under Section 2(119) of the CGST Act.
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2019 (10) TMI 480
Detention of conveyance - no report of physical verification in Form GST MOV-04 has been served upon the petitioner till date - case of petitioner is that without preparing a report of physical verification in Form GST MOV-03 and Form GST MOVPage 04, the officer concerned has straightaway issued an order of detention in Form GST MOV-06. HELD THAT:- Having regard to the fact that the person in charge of the conveyance had produced the e-way bill as well as the invoice, the only ground on which the conveyance could have been detained was in case any discrepancies were found in the inspection of the goods and conveyance - However, in the facts of the present case after detaining the vehicle, no physical verification report has been submitted by the concerned officer and uploaded in the common portal, though required in accordance with the instructions issued by the Board. Under the circumstances, the order of detention under section 129 of the CGST Act, prima facie, is not sustainable. Issue rule, returnable on 24.10.2019.
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2019 (10) TMI 479
Direction to release the consignments against a security to be furnished by the petitioner - HELD THAT:- Taking note of the detention orders passed and finding that the detention was on account of irregularities in the e-way bills that were submitted at the time of transportation, I direct the 3rd respondent to release the consignment of goods covered by Exts.P9 and P10 detention notices on the petitioner furnishing a bank guarantee for the tax and penalty amounts in respect of the said consignments. Petition disposed off.
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2019 (10) TMI 478
Failure to follow the procedure as contemplated under sub-rule(3) of rule 92 of CGST Rules, 2017 on the part of proper officer - HELD THAT:- Issue notice, returnable on 16.10.2019.
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2019 (10) TMI 477
Failure to file Form GST TRAN-1 - carry forward of Input Tax Credit - technical glitches - whether the respondents can be directed to either open the portal to enable the petitioner to now file FORM GST TRAN-1 electronically or to permit the petitioner to submit manually, the typed Form GST TRAN-1 for acceptance by the respondents? HELD THAT:- It is beneficial to refer to the decision of the High Court of Delhi in UNINAV DEVELOPERS PVT. LTD., V. UNION OF INDIA OTHERS [ 2019 (8) TMI 85 - DELHI HIGH COURT ] wherein the facts are as follows: - On account of technical glitches, the petitioner therein was unable to claim CENVAT credit in Form TRAN-1; and, the petitioner could not file TRAN-1 electronically due to technical glitches of GST Portal; and, when the matter was placed before ITGRC, it concluded that the present case falls under the category of B2, that is, Cases in which TRAN-1 filing attempted for the first time or revision was attempted but no error/no valid error reported. - Thus, in the absence of evidence, the re-filing of the form by the petitioner was not allowed. The petitioner therein contended that the petitioner was unable to connect to the portal to submit the return in the first place and that the portal reflected the message error occurred in submission . Thus, the petitioner s request merits consideration. The Writ Petition is disposed of directing the respondents to either open the Portal to enable the petitioner to again file the Form GST TRAN-1electronically or in the alternative accept the Form GST TRAN-1 presented manually, on or before 31.08.2019. It is needless to say that thereafter the petitioner s claim shall be processed in accordance with law.
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Income Tax
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2019 (10) TMI 476
Reopening on the basis of the statement of a tainted person - notice clearly beyond a period of four years - As emphatically argued that in the case of the petitioner, there was a search pursuant to which proceedings under section 153A came to be initiated and assessment came to be made under section 143(3) read with section 153A of the Act. HELD THAT:- As submitted that once an assessment is made under section 153A of the Act, it is not permissible for the Assessing Officer to reopen such assessment under section 147 of the Act. In support of such submission, reliance was placed upon the decision of Ramballabh Gupta v. Assistant Commissioner of Income Tax Inspector Indore, [ 2005 (8) TMI 99 - MADHYA PRADESH HIGH COURT] as held that the only fetter put on the power of the Assessing Officer in taking recourse to section 148 is that it cannot be issued in relation to those six assessment years, as defined in section 153A of the Act. Having regard to the submissions advanced by the learned counsel for the petitioner, issue Notice, returnable on 18.11.2019. By way of ad-interim relief, further proceedings pursuant to the impugned notice dated 28.03.2019 issued under section 148 of the Act for the assessment year 2013-14 are hereby stayed.
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2019 (10) TMI 475
Extension of time for payment of tax to Income Tax Department - Petitioner Goa Cricket Association is affiliated to the Board for Control of Cricket in India (BCCI) and receives funds from the BCCI to carry out its activites which would obviously include paying tax dues under the income tax laws - HELD THAT:- Petitioner was incapacitated, for reasons beyond its control and power to make the necessary payments by 07.04.2017. Not only equities, on the principle of law that a person should not be visited with civil consequence nor should be denuded valuable rights which have accrued for no fault of the person concerned, leads us to dispose of the Petition directing that if on behalf of the Petitioner the BCCI tenders by filling up the challan and tenders ₹ 14,03,58,150/- together with interest as contemplated by the tax law for late payment, the said sum would be received by the Respondents to the credit of the Petitioner and would be in satisfaction of the tax payment certificates dated 09.03.2017 for the assement years 2006- 07 till 2012-13. The declaratory order coupled with the mandamus would endure for a period of 180 days from today, meaning thereby the Petitioner has to work it out with BCCI for BCCI to act on behalf of the Petitioner within 180 days. If payment is not transmitted by the BCCI to the Respondents within 180 days from today, the declaration and mandamus issued shall be non-enforceable by the Petitioner.
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2019 (10) TMI 474
Reopening of assessment u/s 147 - Validity of reason to believe - HELD THAT:- Impugned order of the Tribunal as well as the CIT(A) have found on facts that there was no failure on the part of the respondent assessee to disclose all facts truly and fully as necessary for the assessment. In fact, that is evident from the reasons recorded in the reopening notice dated 22nd March, 2013. Reasons recorded in support of the reopening notice dated 23rd March, 2013 even does not allege that there is any failure on the part of the respondent to disclose truly and fully all material particulars necessary for assessment. Nor does the reading of the reasons as a whole indicate the same. Therefore, on the basis of the above facts, it was found that the reopening notice is without jurisdiction and hit by the first proviso to Section 147 of the Act. The CIT(A) as well as the Tribunal in support of the impugned order correctly placed reliance upon the decision of this Court in the case of Nirmal Bang Securities Vs. Asstt. Commissioner of Income Tax, [ 2016 (1) TMI 947 - BOMBAY HIGH COURT] - No substantial question of law
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2019 (10) TMI 473
Reopening of assessment - rejecting objections against reopening without passing speaking orders - HELD THAT:- Respondent, while rejecting the objections raised by the petitioner, has not passed a speaking order and on the other hand, rejected the same with a single line observation. Considering the fact that the order dated 09.10.2018 rejecting the objections is not a speaking order, this Court is inclined to remit the matter back to the respondent for passing a speaking order, however, by not expressing any view on the merits of the claim made by the respective parties including the limitation issue. Accordingly, this Writ Petition is allowed in part and the impugned order dated 09.10.2018 alone is set aside and the matter is remitted back to the Assessing Officer to pass a speaking order on the objections filed by the petitioner against the reasons for reopening
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2019 (10) TMI 472
Deduction u/s.35AD - denial of deduction as absence of statutory certificates of classification for star rating which is mandatory as per the provision of section 35AD - HELD THAT:- In the case on hand, the Central Government has approved the proposal of the assessee for Three Star Hotel project and therefore, the interpretation made by the tribunal considering the fact of the case is just and legal. The law laid down in the case of Ceebros Hotels Pvt. Ltd. [ 2018 (12) TMI 333 - MADRAS HIGH COURT] is squarely applicable to the facts of the case on hand. Considering all the petitioner is approved for Three Star hotel project, it cannot be said that the tribunal has committed any error which requires interference of this Court. No substantial question of law involved.
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2019 (10) TMI 471
Penalty u/s 271(1)(c) - non specification of charge - HELD THAT:- A.O has wrongly initiated the penalty proceedings by not specifying the charge for levy of penalty i.e. whether the penalty proceedings has been initiated for concealing particulars of income or for furnishing the inaccurate particulars of income. Assessing Officer has made proper satisfaction on record in the assessment order for initiating penalty proceedings but in the notice issue u/s 274 r.w.s. 271(1)(c) of the Act, Ld. A.O remained silent by not specifying as for which charge the penalty proceedings have been initiated. See SHRI VARAD MEHTA VERSUS DCIT 1 (1) , BHOPAL [ 2018 (12) TMI 1091 - ITAT INDORE] - Decided in favour of assessee.
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2019 (10) TMI 470
Deduction u/s 80IB - denial under the head Duty Drawback, VKGUY and FPS Premium , being amount received from Central Government and chargeable to tax under the head Profit and gains of business or profession under section 28 (iiib)/(iiid) of Income tax Act - HELD THAT:- As decided in own case [ 2017 (3) TMI 482 - ITAT JAIPUR] DEPB is an incentive. It is given under Duty Exemption Remission Scheme. Essentially, it is an export incentive. No doubt, the object behind DEPB is to neutralize the incidence of customs duty payment on the import content of export product. This neutralization is provided for by credit to customs duty against export product. Hon'ble Supreme Court has held that the duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80IA/80IB of the Act. - Decided against assessee Denying deduction u/s 80IB - business profit, noticed in form of discrepancy in quantity/valuation of business stock in survey, derived by the assessee from eligible business and disclosed under other head of income at the insistence of Survey Team - HELD THAT:- Under the double entry system of accounting, where any unaccounted stock is brought in the books of accounts, the stock account is increased by value of unaccounted stock and corresponding entry is passed whereby investment in such unaccounted stock is credited to the profit/loss account. In the instant case, it is not clear how the assessee has passed the double entry in its books of accounts and how the same has been considered for claiming deduction under section 80IB of the Act in absence of working of deduction under section 80IB of the Act on record. Further, we find that there is no specific finding recorded by the CIT(A) in this regard though the assessee has raised this ground before the CIT(A). We are accordingly constrained to set-aside the matter to the file of the CIT(A) to examine the same afresh after providing reasonable opportunity to the assessee. - Decided in favour of assessee for statistical purposes.
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2019 (10) TMI 469
Disallowance of deduction claimed u/s 80-IB(10) - claim of the assessee rejected on the ground that the profit on sale of the land was suppressed - AO as well as the CIT(Appeals) found that the market value of the land was fixed at a very lower rate since the children of the owners of the land were partners in the assessee-firm - HELD THAT:- It is an admitted fact that the assessee-partnership firm is maintaining books of account. No defect was pointed out either by the AO or by the CIT(Appeals) in the books maintained in the regular course of business activity. AO found that the cost of the land which was said to be taken from Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran for joint development by the assessee-partnership firm was valued at guideline value. The market value was not paid to Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. It is a well settled principle of law that market value of the land is not a constant or fixed price. It may fluctuate depending upon various factors such as area of the land, location of the land, infrastructure facility available around the land, access to the public road, etc. The State Registration Department, after considering all these facts, fixed the value which is known as guideline value to guide the Sub- Registrar to determine the market value. The guideline value may not always reflect the market value. Sometimes, the guideline value may be less or it may be more depending upon the area and location of the property. When the assessee entered into a joint development agreement for transfer of part of the land to the partnership firm at a particular price, this cannot be said that the value determined for transfer of part of land or the entire land is a device to increase the profit of the assessee-firm. AO as well as the CIT(Appeals) found that the market value of the land was fixed at a very lower rate since the children of the owners of the land were partners in the assessee-firm. There may be a justification for making allegation like this when the children of the land owners alone are partners. In this case, apart from the children of the owners, there are other partners who are not related to the land owners at all. The other partners may not cooperate with the land owners to purchase the land or to take the land on joint development so as to reduce the profit of the firm. Moreover, the land owners also may not transfer the land for a price less than the market value since the third party partners who are in the assessee-firm indirectly get the benefit. When the third party individuals are partners in the assessee-firm apart from the children of the land owners, this Tribunal is of the considered opinion that the contention of the Revenue that the land in question was transferred to the partnership firm at a guideline value in order to increase the profit of the assessee-firm so as to claim deduction u/s 80-IB(10) has no merit at all. Moreover, the contention of the Ld. D.R. that the land was transferred at the guideline value so as to shift the profit to the partnership firm is not supported by any material. Profit is more than 50% - As observed earlier, the assessee is maintaining books of account in the regular course of business activity and the land was taken by way of joint development agreement and the Revenue authorities have not doubted the books of account maintained in the regular course of business. When the book result discloses the profit at 50%, the Revenue cannot doubt that the profit was exorbitant or improbable one. The profit generated by the assessee-firm is supported by the books of account maintained in the regular course of business activity, therefore, the Revenue authorities have no justification to doubt the percentage of profit. Children of the land owners, namely, Shri Prem Chandrasekaran and Shri Akil Chandrasekaran are partners in the firm with 35% of stake. Therefore, naturally they are eligible for 35% of the profit of the firm. 65% of the profit would go to the other partners who are not in any way related to the land owners, namely, Shri V. Chandrasekaran and Smt. Saraswathi Chandrasekaran. The land owners may not prefer to give 65% of the shares to the third parties who are not connected with them. In such circumstances, this Tribunal is of the considered opinion that there is no arrangement as projected by the Ld. D.R. to shift the profit to the partnership firm so as to claim a higher rate of deduction under Section 80-IB(10) of the Act. This Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of both the authorities below are set aside and the Assessing Officer is directed to allow deduction under Section 80-IB(10) of the Act as claimed.- Decided in favour of assessee.
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2019 (10) TMI 468
Revision u/s 263 - claim for deduction under section 36(1)(vii) - scope of amendment - diversified views - HELD THAT:- The Finance Act, 1997 made amendment w.r.e.f. 01.04.1992 in the proviso to section 36(1)(vii) as also the substitution (w.r.e.f. 01.04.1992) of section 36(2)(v) has been necessitated in order to bring the provisions regarding allowance of bad debt of the financial institutions and corporations to which section 36(1)(viia) is applicable at par with the provisions regarding allowance of bad debts of the banks to which section 36(1)(viia) is applicable. These amendments are operative retrospectively for and from AY 1992-93. It may be mentioned here that by an amendment of section 36(1)(viia) by the Finance (No. 2) Act, 1991, the applicability of the provisions of section 36(1)(viia) has been expanded, for and from AY 1992-93, to public financial institutions, state financial corporations and state industrial investment corporations. The scope and effect of the aforesaid amendments have been elaborated by the CBDT Circular No. 763 dated 18.02.1998. As per it, clause (vii) of sub-section (1) of section 36 of the Act, provides for a deduction of the amount of any debt or part thereof which is written off as irrecoverable in the accounts of an assessee in the previous year. Clause (viia) of the same section provides for a deduction in respect of any provision for bad and doubtful debts made by a bank. To preclude the possibility of a double deduction of the same amount being claimed in the case of a bank, a proviso was added to clause (vii) by the Finance Act, 1985 and it was provided that in the case of a bank to which clause (viia) applies, the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision of bad and doubtful debts account made under that clause. Simultaneously, clause (v) was added to sub-section (2) of section 36 which provided that no deduction for bad debt shall be allowed unless the bank has debited the amount of such debt or part thereof in that previous year to the provision for bad and doubtful debts account made under clause (viia) of sub-section (1). When two views are possible and one view has been adopted by the AO. That view alone would not be sufficient to exercise powers u/s 263 by the Commissioner. Respectfully following the ratio laid down in Max India Ltd [ 2007 (11) TMI 12 - SUPREME COURT] , Greenworld Corporation [ 2009 (5) TMI 14 - SUPREME COURT] and Gokuldas Exports [ 2008 (7) TMI 595 - KARNATAKA HIGH COURT] we set aside the order u/s 263 passed by the Pr. CIT for AY 1997-98. - Decided in favour of assessee.
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2019 (10) TMI 467
Addition of interest expenses claimed u/s 57 - diversion of funds - HELD THAT:- The expression wholly refers to quantum of expenditure and exclusively refers to the object and purpose of expenditure. Though these expressions are not used in section 57 but the overall meaning of section 57 is also to the same effect that, the expenditure ought to be incurred for earning income which is assessable under the head income from other sources . If the logic of CIT (Appeals) is accepted, then, in each and every case, expenditure would be allowed only, when there is resultant income. In other words, there cannot be any loss in any activity which results income from other sources . All the details were before the CIT(Appeals) but instead of pin pointing any concrete diversion of interest bearing funds; CIT(Appeals) only assumed that some funds might have been used by the assessee for some other purposes. The department has been consistently accepting the claim in earlier years and in subsequent years. It appears that in the beginning, assessee has more income under the head income from other sources as than the interest expenditure, but in Assessment Year 2006-07, 2007-08 and 2009-10, the interest expenditure was more than income, in spite of that loss under the head income from other source was allowed by AO in scrutiny assessment. Thus considering the past history and stand of the revenue itself, we are of the view the AO has erred in making the disallowance. CIT (Appeals) also failed to appreciate that total expenditure is to be allowed which is incurred wholly and exclusively for earning income. It cannot be restricted in proportion of income. We allow the ground of appeal raised by assessee and consequently reject the ground raised by the revenue.
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2019 (10) TMI 466
Disallowance u/s 14A read with rule 8 D - non recording of proper satisfaction - HELD THAT:- Assessee has specifically stated that it has not incurred any expenditure to earn exempt income. The assessee further submitted before the AO the details of each and every expenditure out of ₹ 1118354/- which has been debited in the books of account. The nature of expenditure shown by the assessee in the income and expenditure clearly shows that the major expenditure is of donation of ₹ 801000/- and deprecation of ₹ 1,99,694/-. All other expenditure in the form of insurance, books, audit fees, subscription and telephone etc , each of them being less than ₹ 20000/- was claimed. AO without pointing out any instance of expenditure incurred by the assessee with regard to books of account of the assessee, adopted the disallowance computation u/r 8D of the IT Rules. Ld AO could not show that any of the expenditure is incurred for earning exempt income. Claim of the assessee that he has not incurred any expenditure for earning exempt income is correct. AO did not dispute this fact but applied the provisions of Rule 8D of the Income Tax Rules, 1962. Satisfaction is not the proper satisfaction recorded by the ld AO for invoking Rule 8D. Further, the ld CIT (A) also did not appreciate this argument in proper perspective and erroneously held that ld AO has correctly recorded the satisfaction. Further ld CIT (A) has also confirmed the addition merely because the assessee has accepted the order of the ld CIT (A) for earlier years. According to us merely on this basis, disallowance cannot be confirmed in this year. There may be innumerable reasons with the assessee to not to agitate an issue in one year but to agitate it in another year. Merely that cannot be a ground to confirm the disallowance. Accordingly, we direct the ld AO to delete the disallowance u/s 14A of the Act read with Rule 8D - Decided in favour of assesee.
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2019 (10) TMI 465
Stay of demand - early hearing seeked - HELD THAT:- Keeping in view the entire facts and circumstances of this Stay Petition, we are inclined to reject Stay Petition filed by the assessee. However, we are granting early hearing of the appeal for ay: 2014-15 which will be listed for hearing before the Division Bench of the tribunal on 09.10.2019. We clarify that we have not commented on the merits of the issue in this appeal filed by the assessee . We would also like to place a condition for grant of early hearing of the appeal that the assessee will not seek adjournment when the appeal will be listed before the regular Bench for hearing of the appeal unless there are genuine and bona-fide reasons for seeking adjournments.
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2019 (10) TMI 464
Disallowance of cost of construction of the building on the leasehold land - HELD THAT:- We have gone through the judgment of Madras High Court in TVS Lean Logistics Ltd. [ 2007 (6) TMI 44 - HIGH COURT, MADRAS] after considering Explanation 1 to Section 32(1) of the Act and the judgments of Apex Court in Nasiruddin v. Sita Ram Agarwal [ 2003 (1) TMI 693 - SUPREME COURT] and Raghunath Rai Bareja v. Punjab National Bank [ 2006 (12) TMI 479 - SUPREME COURT] found that similar expenditure is revenue in nature Incentive received from the Government for exploring new market - capital receipt or revenue receipt - HELD THAT:- As decided in own case [ 2016 (7) TMI 951 - ITAT CHENNAI] t he Government of India provided the incentive for exploring the new markets across the globe. Exploring a new market for a specified area would naturally expand the market area of the assessee. The incentive given to the assessee is not for running the business profitably but for expanding the market area. Tribunal is of the considered opinion that the incentive given by the Government to the assessee for exploring the new market is a capital receipt, hence it cannot be treated as income either under Section 2(24) or 28 - we are unable to uphold the order of the lower authority. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted - Appeals filed by the Revenue stand dismissed.
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2019 (10) TMI 463
Addition on account of commission paid and on account of salary - Allowable revenue expenditure - HELD THAT:- Since the assessee failed to produce relevant evidences and also failed to produce such persons for examination before the AO, therefore, the onus upon assessee to prove genuine commission was payable have not been discharged by the assessee. Merely because assessee dedycted TDS would not justified that expenses have been incurred wholly and exclusively for the purpose of business. Thus, commission payable has been rightly disallowed by the authorities below. The assessee in respect of the salary paid has failed to provide complete details before AO as well as failed to produce attendance register and the receipts given by the employees against payment of salary. The Ld. CIT(A) has already given sufficient benefit to the assessee. The assessee has parted with the substantial gross commission to others and has earned net profit at a meager figure. The assessee could not justify fall in the profit rate in assessment year under appeal to the satisfaction of the authorities below. No prudent person who has earned commission in crore would pay such an amount to others to earn only ₹ 8.78 lakhs. The history of the assessee noted above clearly show that assessee failed to produce any documentary evidences before the authorities below to justify the commission payable and salary to the above extent. In absence of production of such persons for examination before the AO also cast doubt in the explanation of the assessee that expenses have been incurred wholly and exclusively for the purpose of business of the assessee. Assessee has inflated the expenses just to reduce the taxable income. No interference is required in the matter. Therefore, confirm the order of Ld. CIT(A) and dismissed the appeal of assessee.
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2019 (10) TMI 462
Bogus LTCG - Unexplained credit u/s.68 - sham transaction of purchase and sale of bogus shares - HELD THAT:- Since, the right to exemption must be established by those who seek it , the onus therefore lies on the respective assessee . In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion. In these cases, it is seen from the orders of the Ld.CIT(A), supra, that the respective assessee has not placed relevant material and proved the genuineness of the impugned transactions. Although, an appeal against the above orders have been filed before this tribunal, even before us also, the respective assessee has not challenged the findings recorded by the lower authorities with relevant material and hence we dismiss these appeals. - Decided against assessee.
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2019 (10) TMI 453
Levy of penalty u/s 271(1)(c) - Defective notice - non specification of charge - HELD THAT:- A.O. issued show cause notice for levy of penalty in which A.O. has mentioned both the limbs of section 271(1)(c) of the Act that assessee has concealed the particulars of income or furnished inaccurate particulars of such income. The issue of the notice is bad in law as it did not specify under which limb of Section 271(1)(c) of the I.T. Act, penalty proceedings have been initiated whether for concealment of particulars of income or furnishing of inaccurate particulars of income. See M/S SSA'S EMERALD MEADOWS [ 2016 (8) TMI 1145 - SC ORDER] - Decided in favour of assessee.
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Customs
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2019 (10) TMI 461
Charging Event - levy of definitive countervailing duty - Notification dated 7th September, 2017 - Goods cleared from warehouse - section 15(1)(b) of the Customs Act - HELD THAT:- Issue Notice returnable on 13th November, 2019 - By way of ad-interim relief, further proceedings pursuant to the impugned show cause notice dated 13.9.2019 (Annexure-G to the petition) are hereby stayed.
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2019 (10) TMI 460
Classification of imported goods - Melamine ware viz Kitchenware and Tableware - whether classified under CTH 39249090 or classifiable under CTH 39241090? - benefit of N/N. 46/2011-Cus - extended period of limitation - HELD THAT:- From the scheme of the tariff entries it is quite evident that Tableware and Kitchenware, have been specifically mentioned and classified under heading 392410. While other household articles and hygienic or toilet articles, of plastics, have been grouped together and put under heading 392490, under description of others. It is general principle of classification that specific entry should be preferred over the general entry. From the description of the goods given on the Bill of Entry and the invoices relating to the import describing the goods as Pickle Set , Butter Dish , Short Tumbler , Spoon , Casserole Bowl etc., we are convinced that the goods were appropriately classifiable under heading 392410 and not under heading 392490 as claimed by the appellant From the plain reading of the notification it is evident that the said exemption is available only in respect of the goods classifiable under tariff heading 392490 and not under heading 392410. Hence the order of Commissioner denying the benefit of exemption under this notification cannot be faulted with. Extended period of limitation - HELD THAT:- By giving the correct description on the documents relating to import clearance appellants have discharge the burden of making correct declaration on the Bill of Entry. Hence any error in classification or the exemption claimed on Bill of Entry cannot be misdeclaration with the intention to evade payment of duty for the purpose of invoking extended period of limitation. Hence demand made by invoking extended period of limitation needs to be set aside. Since we have upheld that the benefit of exemption under Notification No 46/2011-Cus was not admissible to the appellant and demand could not have been made by invoking the extended period of limitation as provided for by Section 28(4), the demand which falls within the normal period of limitation needs to be upheld - Only after determining the duty demandable and recoverable within the normal period of limitation, demand of interest under Section 28AA can be made or quantified. While setting aside the demand of interest made under Section 28AA, we make it clear that the interest will be payable in terms of Section 28AA on the redetermined demand. The fact that the goods correspond to declaration in respect of the description and value is sufficient to take the imported goods away from the application of these two clauses. Hence the order holding goods liable for confiscation and imposition of penalty under Section 112(a) cannot be sustained - Since we have held that appellant had not made any misdeclaration with intent to evade payment of duty, we are setting aside the penalty imposed under Section 114A of Customs Act, 1962. Matter remanded back to Commissioner for redetermination and re-quantification of the demand which can be made by denying the exemption under Notification No 46/201-Cus to the appellants within the normal period as provided by Section 28(1) - appeal allowed by way of remand.
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2019 (10) TMI 459
Valuation of imported goods - import of content of Digi Beta Tape through Courier - inclusion of license fees/ royalty payable in assessable value - Revenue was of the view that these amounts paid by the appellants to the foreign production houses were to be added to the assessable value - Rule 10(1)(c) of Customs Valuation Rules. HELD THAT:- There can be no dispute about the fact that all the payments made by the buyer to the seller as condition of sale of goods except the payments towards right to reproduce will form the part of the assessable value to be determined for the purpose of payment of Customs duty. On perusal of agreement, it is found that the payments made by the appellants are towards the distribution rights and are clearly payable as condition of sale of the said goods. All the three agreements clearly lay down that entire payment of the License Fee or Guarantee shall be made by the Distributor to the licensor at the time of Notice for Initial Delivery , and only on the receipt of the entire payments, the process of the supply of the initial materials in terms of the said agreement shall commence - In view of Interpretative Note 2 to Rule 10(1)(c), reproduced above such amounts paid towards distribution rights are to be included in the assessable value of the imported goods if they are charged as condition of sale of the goods. The issue of inclusion of the License Fee in terms of Distributor Agreement, had been settled by the Apex Court in the decision in case of ASSOCIATED CEMENT COMPANIES LTD. VERSUS CC [ 2001 (1) TMI 248 - SUPREME COURT] . Thus, there are no merits in the submissions made by the Appellant that at the relevant time there was any confusion prevailing with regards to inclusion of such value - Hence by not including the value of the License Fee or Guarantee paid by them under the agreements referred above relating to import of the Digi Beta Cam, with the movies on them they have misdeclared the said goods in terms of the value and have rendered them liable for confiscation under Section 111(m) of Customs Act, 1962 - Since the goods have been held liable for confiscation under Section 111, the appellant for their act of misdeclaration are liable to penalty in terms of Section 112(a) of the Customs Act,1962 - redemption fine also upheld. Appeal dismissed - decided against appellant.
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2019 (10) TMI 458
Duty Drawback - classification of goods in the drawback schedule - export of goods - PV Suitings along with woven fabrics of synthetic staple fibre containing 85% or more by weight of synthetic staple fibre - whether the goods exported by the appellant will fall under Sl No 551202A of the Drawback Schedule or under 551502A? HELD THAT:- From the plain reading of the two entries, it is quite evident that for the goods to fall under heading No 551202A, they should contain by weight 85% or more of synthetic staple fibres, and for classification under 551502A they should contain 85% or more of manmade staple fibre. Chapter Note 1 to Chapter 54 of the Schedule to Customs Tariff Act, 1975 - the manmade fibres include both artificial and synthetic fibres. However for the classification purpose distinction has been made artificial fibres and synthetic fibres . Hence the above referred entries of Drawback Schedule when use the phrases synthetic staple fibre and manmade fibre , they definitely refer to the distinction between the synthetic and artificial fibres. Confiscation - redemption fine - HELD THAT:- Since the goods have been held liable for confiscation under Section 113(h)(i) of the Customs Act, 1962, penalty under Section 114 of the Customs Act, 1962 is justifiable. From plain reading of the section 114 reproduced below, it is evident that penalty under the said section is impossible in respect of the goods held liable for confiscation and it has nothing to do with the actual confiscation of the goods. The goods have been misdeclared by describing them in a manner to avail excess drawback, the goods were liable for confiscation and hence the appellants who were responsible for making such incorrect declaration liable to penalty. Confiscation and redemption fine set aside - other parts upheld - appeal allowed in part.
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2019 (10) TMI 457
Fraudulent imports - 224 MT of HDPE of Korean Origin goods - High Seas Sale - it was alleged that the Licence and Deec book against which the goods had been cleared was not issued by the ADGFT Jaipur and was fraudulently manipulated by the appellants - cross-examination of witnesses - Confiscation - redemption fine - HELD THAT:- Admittedly the matter has been readjudicated by the Commissioner in remand proceedings. While remanding the matter CESTAT has directed for cross examination of three persons who had given the statements under Section 108. Commissioner has in impugned order as directed allowed the cross examination of the persons as directed. However Shri Jayesh Tanna refused to appear for cross examination and submitted through the counsel that since he was co-noticee in the matter he should not be cross examined and asked to give evidence against himself. The Commissioner had limited scope in the remand proceedings and could not have put the appellants in more precarious position then what was held against them in the earlier proceedings specifically when revenue had not filed any appeal against the earlier order. The penalty imposed under section 112 (a) reduced to ₹ 20 lakhs and 10 lakhs respectively - other part of demand upheld - appeal allowed in part.
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2019 (10) TMI 456
Seizure of consignment - Baggage Rules - illegal exports or not - packet containing 193 posters of Maldives Airlines - imposition of penalty u/s 117 of CA - HELD THAT:- The packet containing 193 posters of Maldives Airlines was being handed over to Rasheed who was flying to Maldives and this quantity is not a prohibited quantity and moreover the value of the same was only 19,300 - Further the learned AR did not convince me that the said baggage is not a bona fide baggage and is in violation of the Baggage Rules. He has not been able to point out which Rule has been violated in the present case - Moreover, nothing has been brought on record against the appellant so as to involve him in the illegal export. There are no justification for imposing the penalty of ₹ 5,000/- on the appellant under Section 117 of the Customs Act - penalty set aside - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2019 (10) TMI 455
Taking over possession of asset of Corporate Debtor - HELD THAT:- Though it appears that the custody of the asset lying with R5 basing on the Assignment Agreement aforementioned through R6, which earlier taken over the possession of this asset from the Corporate Debtor under SARFAESI proceedings, it is evident till date ownership of the asset lying with the Corporate Debtor, whereby, this asset is still to be considered as the asset of the Corporate Debtor but not either as the asset of R6 or as the asset of R5 - Since the proceedings taken out under SARFAESI will not have any bearing on the CIRP initiated under the Code unless the title of the property of the Corporate Debtor has been fully conveyed either to the Financial Creditor or to the third party as stated under the SARFAESI Act, though part consideration has been passed between the parties, it will not become an impediment to the RP to take the custody and control of the assets as contemplated under Sec.25 (2) of the IBC. It is directed to deliver the possession and custodial control over the asset of the Corporate Debtor to the RP within 10 days hereof - application allowed. Production of the records of the Corporate Debtor from the erstwhile Directors - HELD THAT:- The RP is unable to trace out records of the Corporate Debtor from the Suspended Directors till date. On there being no undertaking from these Respondents to provide records of the Company to the RP, this RP is entitled to seek assistance from the Chief Metropolitan Magistrate/Chief Judicial Magistrate/District Collector as contemplated under Section 19(2) r/w 429 of the Companies Act, 2013 for availing the required documents from these Suspended Directors. This Bench hereby directs R1 to R4 to provide the required documents to the RP within 10 days hereof, failing which, this Bench hereby requests the District Collector of Madurai to provide assistance to the RP take custody of the records sought by the RP as well as any other assistance that is essential in discharging his functions as RP in the CIRP period as contemplated under Section 19(2) of IBC r/w 429 of the Companies Act, 2013 - Application allowed.
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2019 (10) TMI 454
Maintainability of application - initiation of CIRP - Corporate Debtor committed default towards arrears of rent - existence of dispute or not? - HELD THAT:- It is settled position of law that proceedings under provisions of Code are summary in nature and disputed questions fact and law cannot be gone into under it - In the instant case, the terms and conditions as per the Lease Deed in question are not complied with by the Petitioner, especially with regard statutory permission, occupancy Certificate etc., to claim any rent under the Deed. Therefore, whether the Petitioner is entitled to claim rents on the leased property itself is in dispute and the Respondent has also raised prior dispute. Therefore, proceedings initiated by the Petitioner under the Code are misconceived and the Petitioner also failed to make out any case that the outstanding amount is free from dispute and the claimed amount is also varying and not correlated as detailed supra. Therefore, the petition is liable to be dismissed. Petition dismissed.
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