TMI Tax Updates - e-Newsletter
October 22, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Classification of goods - rate of tax - Agricultural Seedling Trays - cannot be classified as parts or accessories of agricultural machinery - Agricultural Seedling Trays made of Plastic manufactured by the Applicant are classifiable under CTH 39269099 and the applicable tax rate is 9% CGST and 9% SGST
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GST:
Input tax credit - CGST & SGST charged in respect of brokerage services for renting of immovable property - credit is allowed on brokerage services and allowed to be adjust the same against output tax payable against Renting of immovable property
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GST:
Rate of tax - Electrical Wiring Harness - The Electrical Wiring Harness manufactured by the Applicant falls under the HSN tariff item No. 85443000 - from 15.11.2()17, the rate of GST reduced from 28% to 18%
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GST:
The applicant is liable to pay GST on the sale of commercial built-up area which is under construction, as the same is a ‘supply of service’ under clause 5(b) of Schedule Il of the CGST Act, 2017. - GST is leviable even if part of the consideration had been received prior to 01.07.2017.
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GST:
Classification of supply - supply of goods or not? - job-work or not? - The Activity of building and mounting of the body on the chassis provided by the principal under FOC challan will result in supply of services under HSN 9988 and hence, should be taxed @ 18% GST.
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GST:
Classification of goods - rate of GST - Quartz powder obtained by crushing Quartz stones falls under HSN code 2806 and would attract 5% rate of tax under GST (2.5% CGST + 2.5% SGST)
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GST:
The contract for Erection, Procurement and Commissioning of Solar Power Plant falls under the ambit “Works Contract Services” (SAC 9954) and attracts 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts.
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GST:
The Event Management support services provided in Goa to a registered person in Maharashtra is governed u/s 12(7)(i) of the IGST Act - Same should be treated as interstate supply of services and IGST @ 18% is applicable.
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Income Tax:
CBDT has emphasized to its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/ undue influence. - Addition merely based on statement recorded during survey cannot sustain.
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Income Tax:
Once, the books of accounts have been rejected then no addition can be made by disallowing the expenses under/ over reporting of sales, purchases etc. Thus, the taxable income will be determined on the basis of reasonable estimate.
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Income Tax:
Reopening of assessment - The information given by DIT(Inv) can only be a basis to ignite/trigger “reason to suspect” for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion - the reasons recorded by the AO to justify reopening the assessment u/s. 147 fails.
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Income Tax:
Denial of deduction u/s 80G - Where donation has been paid by a division which was demerged from the other company and merged with assessee’s company, there is no warrant to deny the deduction in the hands of the resulting company (assessee).
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Income Tax:
Levy of penalty u/s 271E - loan given in cash - assessee had made the payment for medical treatment of his father in cash - The sources for meeting the medical expenses and post medical expenses have to considered on humane grounds and as per the requirements of the patients to save the lives - No penalty.
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Income Tax:
Disallowance being 50% of Foreign Travelling Expenses - the lower authorities has admitted the genuineness of the expenses to the tune of 50% and the balance was disallowed on ad hoc basis - we are inclined to confirm the disallowance of total foreign travelling expenses to the tune of 25%.
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Income Tax:
Penalty u/s 272A(2)(K) - late filing of e-TDS return - due to software installed by revenue for e-filing of TDS returns, initial technological glitches has caused delay in filing of quarterly statements of TDS, for which no penalty can be levied on assessee.
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Income Tax:
Deduction u/s 80IB - non issuance of completion certificate - If the Commissioner does not intimate refusal to give the occupancy certificate, then it is deemed to have been given - Deduction allowed.
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Income Tax:
GP addition for unaccounted sales - the assessee has failed to prove that he made un-accounted purchases. Therefore, his request for GP addition for unaccounted sales cannot be considered.
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Income Tax:
Disallowance of 50% of the expenses paid as commission - assessee contended that revenue may conduct independent verification from the students - On failure of assessee to provide the relevant details like father's name, postal address etc, it was not possible for the A.O. to have undertaken any such verification.
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Income Tax:
Claim of deduction @100% u/s 80IC - initial assessment year - fresh claim on undertaking substantial expansion from the year of completion of substantial expansion - Not allowed.
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Income Tax:
Charitable activity - approval u/s 10(23C)(vi) - Absence of the dissolution clause of the trust, there is a lacuna which may be misutilized in the event of dissolution of the managing committee - ITAT has rightly held that the reason for rejection by the CCIT cannot be sustained
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Income Tax:
Reopening of assessment - Applicability of section 145A - valuation of closing stock - Not open for AO to reexamine the entire issue which would be merely on the change of opinion.
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PMLA:
Offence under PMLA - Provisional Attachment Order - once the banks are secured creditors and have obtained the final decree from the court which has attained finality, the banks are bound to receive the default loan amount from Vijay Mallya and his companies.
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Service Tax:
Demand of service tax - scope of SCN - In the absence of an allegation of having provided a specific taxable service in the show cause notice and in view of the failure in the adjudication order as well, neither the show cause notice nor the consequent adjudication order could be sustained
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Service Tax:
Service Tax audit of a private agency after migration to GST - Rule 5A of the Service Tax Rules, 1994 - There was no saving of Rule 5A in such manner that fresh proceedings for audit could be initiated in exercise of powers under the said Rule.
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Central Excise:
Valuation - sister concern was captively consuming the goods - inter-connected units - Since the appellants and their sister concerns are related persons in term of clause (i) and not in terms of clause (ii), (iii) or (iv), for the purpose of valuation of goods cleared to sister concern the valuation cannot be done in terms of Rule 9
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VAT:
Validity of assessment order - Jurisdiction - Classification of product - Assessing Officer was bound by the order of determination passed by the Deputy Commissioner and could not have taken a different view unless there had been any material change.
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VAT:
Benefit of tax remission - Rules of 2006 brought about fundamental shift in the benefits available to such eligible units. The respondents therefore committed an error in not allowing the petitioner's request for change of option.
Notifications
Circulars / Instructions / Orders
Case Laws:
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GST
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2018 (10) TMI 1054
Levy of GST - freehold sale of commercial built-up space to general public - Supply of service or not - RERA Act - Function entrusted to a municipality - POT Rules. Whether the applicant is liable to pay GST on sale of commercial super built up area on behalf of MoHUA, Government of India, by considering the applicant also as the supplier of service while selling such commercial built-up space as an agent on behalf of the Government of India in the colonies under redevelopment? - Held that:- The MOU between the MoHUA & NBCC is not on Principal-to-Principal basis. It is also not on partnership /joint venture /collaboration basis. There is no mutual revenue, profit or loss sharing arrangement between the two. The applicant is not acquiring any right or interest in the project. It is not selling the commercial built-up units on its own account. The applicant is simply acting as an agent of MoHUA - Since, it is admitted by the applicant that they are constructing and selling the commercial built-up space on behalf of the Ministry of Housing and Urban Affairs (MoHUA), it is held that they are covered as “agent” in Section 2(5) of the CGST Act, 2017. From the combined reading of Sections 2(5), 2(105), 2(107), 22 and 24 of the CGST Act, 2017, it is clear that the applicant is covered in the definitions of “Agent”, “Supplier” and “Taxable Person” in respect of the said project while providing services on behalf of the Ministry of Housing and Urban Affairs. Further, the applicant is falling under the categories of persons under Section 22 and also under Section 24 requiring compulsory registration in respect of the said project - the contention of the applicant that they cannot be construed as “supplier” of service as they are selling the commercial built up space on behalf of the Ministry of Housing and Urban Affairs (MoHUA) is not acceptable. Accordingly, they are liable to pay GST under Section 9(1) of the CGST Act, 2017, being taxable person as per Section 2(107) of the said Act in respect of the said project. The sale of the commercial built-up area by the applicant on behalf of MoHUA cast a responsibility on the applicant to also collect and/or deposit GST on the taxable supply of goods or services, even, if they are acting only as an agent of the MoHUA - The contention of the applicant that they are not covered in the definition of promoter under Section 2(zk) of the Real Estate Regulation Act, 2016 does not appear to be relevant in the present case. Whether the MoHUA, Government of India, is liable to pay GST on sale of commercial built-up space, and whether it relates to any function entrusted to a municipality under Article 243W of the Constitution? - Held that:- The Ministry of Housing and Urban Affairs cannot be called Municipality under Articles 243P and 243Q of the Constitution of India - The Government of India (Allocation of Business) Rules, 1961 has allocated wide ranging functions to the Ministry of Housing and Urban Affairs. However, it cannot be said that such responsibilities relates to functions entrusted to municipalities under Article 243W and Twelfth Schedule to the Constitution of India. The services for commercial built-up space by the Ministry of Housing & Urban Affairs (MoHUA) are not covered in Twelfth Schedule r/w Article 243W of the’Constitution of India and hence not exempted from payment of GST under S. No. 4 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. Further, from 26.07.2018, the exemption is limited to services supplied by the Governmental Authorities. Also, the said services are not covered in S. No. 6 of the said Notification. Whether the applicant is liable to pay GST on sale of built-up space for which part of the consideration was received prior to 01.07.2017, and partly on or after 01.07.2017? - Held that:- The construction of commercial built-up space is a continuous supply of service and in many cases, the part of the service may be rendered in pre-GST period i.e. upto 30.06.2017 and remaining part of the service may be supplied in GST period i.e. on or after 01.07.2017. In such cases, Point of Taxation Rules, 2011 issued under Finance Act, 1994 could be referred to for determination of liability to pay Service Tax - The claim of the applicant that such sale of commercial space was exempted from payment of Service Tax under S. No. 39 of Notification No. 25/2012 - ST dated 20.06.2012 is not being examined as the same is beyond the jurisdiction of this Authority. The commercial built up space on which some amount of Service Tax had been paid or was payable shall be covered under GST wef 01.07.2017 subject to the provisions of Section 142(11) (b) of the CGST Act, 2017. Whether the applicant is liable to pay GST on consideration received under an agreement to sale of constructed units in a building which is under construction? - Held that:- The applicant is liable to pay GST on sale of commercial built-up units, as the same has been defined as ‘supply of service’ under Clause 5(b) of Schedule-II of CGST Act, 2017. Ruling:- The applicant is covered in the definitions of “Agent” under Section 2(5), “Supplier” under Section 2(105) and “Taxable Person” under Section 2(107) of the CGST Act, 2017 in respect of the said project while providing services on behalf of the Ministry of Housing and Urban Affairs. Hence, they are liable to pay GST under Section 9(1) of the CGST Act, 2017. The MoHUA, Government of India, is not exempted from payment of GST on sale of commercial built-up space, as it does not relates to any function entrusted to a municipality under Article 243W of the Constitution. Hence, the exemption under S. No. 4 of Notification No. 12/2017 - Central Tax (Rate) and parallel notifications under SGST and IGST are not admissible. The applicant is liable to pay GST on the services supplied under GST regime i.e. w.e.f 01.07.2017, even if part of the consideration had been received prior to 01.07.2017. The applicant is liable to pay GST on the sale of commercial built-up area which is under construction, as the same is a ‘supply of service’ under clause 5(b) of Schedule Il of the CGST Act, 2017.
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2018 (10) TMI 1053
Rate of tax - Electrical Wiring Harness - Whether the Electrical Wiring Harness, primarily an electrical wire with connectors at both ends, manufactured by the Applicant falls under HSN tariff item 8544 for which the rate prescribed vide Notification No. 01/2017 - Central Tax (Rate) dated 28th June 2017 read with 41/2017 - Central Tax (Rate) dated 14th November 2017 is 9%? - whether the said rate of Central tax of 9% is applicable to the above product with effect from 1st July 2017? Held that:- The Applicant is engaged in the manufacture of Electrical Wiring Harness Assembles consisting of insulated wires and cables with connectors used in brake systems and related parts for heavy vehicles such as bus, trucks and other such commercial vehicles; They have been supplying the Electrical Wiring Harness to their customers such as major automobile manufacturers and in the retail segment through their distributors - The applicant manufactures Electrical Wiring Harness which are insulated wires and cables with connectors which is used in automobile Industry and therefore it is to be seen that they are to be classified under HSN 85443000. Rate of tax - Held that:- The product in question is an Electrical Wiring Harness set falling under 85443000. Winding Wires, Coaxial cables and optical Fiber falls under Chapter Heading 854410, 854420 and 854470 respectively. Therefore, the product in question is covered under Sl.No. 161 of Schedule IV above of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 and G.O. (Ms) No. 62 dated 29.06.2017 No. Il(2)/CTR/532(d-4)/2017 and is subject to tax at the rate of 14% CGST and 14% SGST. The said Notification is amended as per Notification No. 41/2017- C.T.(Rate) dated 14th November 2017 and G.O. (Ms) No. 157, dated 14.11.2017 by which the Entry at SI.No. 161 of Schedule IV was omitted and the entry at SLNo. 395 of Schedule III was modified as 'Insulated (including enameled or anodized) wire, cable (including co-axial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors'. Thus, the ‘Electrical Wiring Harness manufactured by the Applicant, was subjected to tax @ 14% CGST and 14% SGST for the period from 01.07.2017 to 14.11.2017 and thereon, the tax rate is reduced to 9% CGST and 9% SGST. Ruling:- The Electrical Wiring Harness manufactured by the Applicant falls under the HSN tariff item No. 85443000 for which the rate prescribed is 14% CGST for the period from 01.07.2017 to 14.11.2017 and from 15.11.2()17, the rate of tax is 9% CGST under Sl.No. 395 of Schedule III of Notification No. 01/2017-C.T. (Rate) dated 28th June 2017 and 9% SGST under Sl.No. 395 of Schedule 111 of G.O. (Ms) No. 62 dated 29.06.2017 No. II(2)/CTR/532(d-4)/2017 - The rate of CGST and SGST at 9% each is applicable to the above product only with effect from 15.11.2017.
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2018 (10) TMI 1052
Application for withdrawal of advance ruling application - Whether entry 7 (i) covers canteens located in any establishment and Circular No. 28/02/2018-GST applies to canteens located in any type of establishment and liable to 5% GST vide Notification No. 11/2017-CT (Rate) as amended vide notification No. 46/2017-CT (Rate) dated 14.11.2017? The application filed by the Applicant for advance ruling is dismissed as withdrawn.
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2018 (10) TMI 1051
Classification of goods - rate of tax - Nonwoven Rice Bags - Held that:- The applicant purchases non-woven fabric roll, convert into sheets by cutting and on printing, stitch into bags which are used mainly for packing rice and food products. They have further stated that their product non woven fabric bags of various sizes falls below ₹ 1000 each. Heading 6305 covers textile sacks and bags of a kind normally used for the packing of goods for transport, storage or sale - The applicant manufactures non-woven fabric bags which is used mainly for packing rice and food products and the product made of 100% polypropylene fiber is classifiable under 63053300. Rate of tax - Held that:- The applicant has stated that their product nonwoven fabric bag falls below ₹ 1000/ Therefore, the applicable rate is 2.5% CGST as per S.No. 224 of Schedule I of Notification No. 1/2017-C.T. (Rate) dated 28.06.2017 and 2.5% SGST as per S.No. 224 of Schedule I of G.O. (Ms) No. 62 dated 29.06.2017 No. II(2)/CTR/532(d-4)/2017. Ruling:- The Non-woven fabric bags called as Rice Bags manufactured by the applicant falls under HSN 63053300. The applicable rate for the bags of value not exceeding ₹ 1000 per piece is 2.5% CGST as per S.No. 224 of Schedule I of Notification No. 1/2017-C.T. (Rate) dated 28.06.2017 and 2.5% SGST as per S.No. 224 of Schedule 1 of G.O. (Ms) No. 62 dated 29.06.2017 No. II(2)/CTR/532(d-4)/2017.
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2018 (10) TMI 1050
Input tax credit - CGST & SGST charged in respect of brokerage services for renting of immovable property - outward supply - Whether applicant are eligible to take Input Tax Credit of the CGST & SGST charged by M/S Catalyst Consulting Chennai in respect of brokerage services and adjust the same against output tax payable against Renting of immovable property? Held that:- The applicant has received an inward supply of real estate brokerage services for renting of property on a fee basis. Due to the services of Catalyst Consulting Chennai, the applicant was able to make an outward supply of renting of the property to Vantec Logistics India Private Limited. Hence, this inward supply was used in the course of the applicants business. This inward supply rendered by catalyst Consulting is not listed in any of the exceptions mentioned in Section 17 (5) of CGST Act/ SGST Act for availing the input tax credit of CGST and SGST. The applicant eligible to take credit of the CGST & SGST charged by M/S. Catalyst Consulting in the Tax invoice No. C- 007/17-18 dated 20-Dec-17 raised on the applicant for real estate brokerage services for renting of property on a fee basis rendered by Catalyst Consulting, subject to the conditions as per Section 16, 17 and 18 of CGST & SGST Act. Ruling:- The applicant is eligible to take credit of the CGST & SGST charged by M/s. Catalyst Consulting Chennai in the Tax invoice No. C-007/17-18 dated 20.12.2017 raised on the applicant for real estate brokerage services for renting of property on a fee basis rendered by Catalyst Consulting, subject to the conditions as per Section 16, 17 and 18 of CGST & SGST Act.
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2018 (10) TMI 1049
Rate of GST - Coir Pith - What is applicable GST rate for Coir Pith? - Held that:- The products in question are coir pith in raw form which is either sold as loose form or supplied by the applicant in Blocks, Briquettes form without any addition of chemicals. It is different from coir fibre. Further, the coir pith supplied by the Applicant does not undergo composting process, which would alter its composition and cannot be called as coir pith compost. Hence coir pith in its raw form whether in loose powder or compressed into blocks form are taxable at 2.5% CGST as per Sl. No 215 of Schedule I of Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 as amended and at 2.5% SGST as per Sl.No. 215 of Schedule I of G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017. Ruling:- Coir pith in its raw form whether in loose powder or compressed into blocks form without any addition of chemicals supplied by the applicant are taxable at 2.5% CGST as per Sl No 215 of Schedule 1 of Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 as amended and at 2.5% SGST.
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2018 (10) TMI 1048
Classification of goods - rate of tax - Agricultural Seedling Trays - Applicant claims that the goods are to be classifiable under Tariff heading 8201 Chapter 82 falls under Section XV of Customs Tariff which covers Base Metals an articles of Base Metals . Held that:- A combined reading of section and chapter notes and description of goods covered under Tariff heading 8201 reveals that the goods covered under this Section XV have to be made of base metals or should be articles of base metals. Base metals as per Section Note above do not include plastics . Further, chapter 82 covering Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal should necessarily have a blade, working edge, working surface or other working part of base metal or others - The product in question is Seedling Trays made of fully of plastic i.e. polypropylene and hence it cannot be classified under chapter 82 or anywhere under Section XV and accordingly it cannot be classified under 8201 as Hand tools, such as spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry. The trays are sold to end users who are farmers and also small dealers who make the sale to farmers. These trays are also compatible to various rice transplantation machinery in terms of the dimension of the seedlings mat grown, spacing between each seedling etc. The trays help in growing and transporting the seedlings in an organized, labor-saving manner so that the seedling mats grown can be fed into the machines or planted as such by hand. However, the tray itself is not a part of any machine or used with any machine or electronically driven nor is it an accessory of any agricultural machinery. Rice planting machinery do not need these seedling trays to function and hence cannot be classified as parts or accessories of agricultural machinery. The subject goods are rightly classified under CTH 39269099 as articles of plastics not elsewhere specified. SL no 111 of Schedule III of Notification No 01/2017-C.T. (Rate) dated 28.06.2017 as amended and SL no 111 of Schedule III of of G.O. (Ms) No. 62 dated 29.06.2017 no. II (2)/CTR/532(d-4)/2017 covers Other articles of plastics and articles of other materials of headings 3901 to 3914 [other than bangles of plastic, plastic beads and feeding bottles] at 9% CGST and 9% SGST. Ruling:- Agricultural Seedling Trays made of Plastic manufactured by the Applicant are classifiable under CTH 39269099 and the applicable tax rate is 9% CGST as per Sl. No. 111 of Schedule 111 of Notification No 01/2017-C.T. (Rate) dated 28.06.2017 as amended and is 9% SGST as per Sl No. 111 of Schedule III of G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended.
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2018 (10) TMI 1047
Place of supply of service - Levy of IGST - Event Management support services - services are procured from the supplier within the state of Goa - inter-state or intra-state supply of services - recipient of services. Whether our Event Management support services provided in Goa to a registered person in Maharashtra is governed u/s 12(7)(i) of the IGST Act, 2017? Held that:- The applicant has provided services of event management to Gallani Enterprises who is registered in Mumbai and as per the provision of section 12(7)(i) the place of supply of services in case of registered person shall be the location of recipient of such service and IGST is applicable on such transactions. Ruling:- The Event Management support services provided in Goa to a registered person in Maharashtra is governed u/s 12(7)(i) of the IGST Act - Same should be treated as interstate supply of services and IGST @ 18% is applicable.
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2018 (10) TMI 1046
Classification of Supply - rate of tax - EPC contract for set up of solar power generating system - composite supply of solar power generating system - eligibility of solar modules to be classified as principal supply - Turnkey EPC Contract in which the Applicant is required to undertake all activities, civil or otherwise - Other EPC Contract in which the Applicant is required undertakes all activities of turnkey projects except civil work - Supply Contract - Balance of Plant Supply Contract. Whether EPC contract for set up of solar power generating system be considered as a composite supply with PV modules being the principal supply and be taxed at a rate of 5% (i.e. tax rate applicable on the P. V. modules)? Held that:- The Hon. Supreme Court in the case of TTG. INDUSTRIES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, RAIPUR [2004 (5) TMI 77 - SUPREME COURT OF INDIA], while holding the machines as immovable property took into account facts such that the machines could not be shifted without first dismantling it and then re-erecting it as another site. It was also sought to distinguish as to how a concrete base meant just to prevent wobbling of the machine would not place the machine in the category of ‘immovable property’ as something attached to the earth - Based on submission made by applicants, instant case is a single composite turnkey EPC contract of design, engineer, procure, transport, deliver, develop, erect, install, test and commission of project, as there is a single lump sum price for the entire contract. Hence the said EPC contract cannot be split in two separate contracts one of supply of goods and another that of services and taxed accordingly. The Solar Power Plant is a big project and has a permanent location as it is meant for onward sale of power to the consumer. Contract between an EPC contractor and the counter-party is entered into on the premise that the plant would continue to be situated at the place of construction. Such plant would therefore have an inherent element of permanency. The output of the project i.e. Electricity, would be available to an identifiable segment of consumer. Thus this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the plant elsewhere at frequent intervals. The Solar Power Plant cannot be shifted to any other place without dismantling the same. Further it is a tailor made system as per technical specification which cannot be sold as it is to the other person. Solar Power Plant includes civil work such as development of site, structure foundation, building cable trenches, civil work relating to invertors and control buildings, store rooms, canopies and such other civil structure and related activities as set out in Scope of work and the Technical Specifications. Civil structure cannot be dismantled and moved. Instant case is a single composite turnkey EPC contract of design, engineer, procure, transport, deliver, develop, erect, install, test and commission of project. Contracts of these kind are entered on premise to procure a functional Solar Power Plant as per specification of the owner for which there is a single lump sum price for the entire contract. Hence for convenience of contractor the said EPC contract cannot be split in two separate contracts one for supply of goods and another for supply of services and taxed accordingly. The impugned transaction for EPC Contract for the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and commissioning is a “works contract” in terms of clause (119) of section 2 of the GST Act. Since the impugned transaction for EPC Contract for the Solar Power Plant is a works contract under section 2(119) as supply of services hence question of principal supply does not arise and so GST tax rate of Solar power Generating System under notification No 01/2017-CT (Rate) dated 28.06.2017, at S. No. 234, under HSN Classification 84, 85 and 94 is not applicable. Ruling:- The scope of work in respect of “Turnkey Composite EPC Contract” includes designing, planning civil works, procurement of good, erection, testing and commissioning. Accordingly, “Turnkey EPC Contract” is not covered under Entry 234 of Schedule I of the Notification no. 1/2017 - Integrated Tax (Rate), Entry 234 of Schedule I of the Notification no. 1/2017 - Central Tax (Rate) both dated 28 June, 2017 and Entry 234 of Schedule I of the Notification no 1/2017 - State Tax (Rate) dated 29 June, 2017. The contract for Erection, Procurement and Commissioning of Solar Power Plant falls under the ambit “Works Contract Services” (SAC 9954) of Notification no. 11/2017 Central Tax (Rate) dated 28 June, 2017 and attracts 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts.
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2018 (10) TMI 1045
Classification of goods - rate of GST - Ramming Mass used in lining of induction furnace - crushed quartz stones used in lining of furnace through claimed as not containing Boric Acid - applicant presently is paying GST @ 18% on Ramming Mass manufactured and supplied by them and classifying them under HSN 3816 - whether impugned goods classified under CETH 2506 or under CETH 3816? Held that:- The issue was deliberated in the Conference where, two heads of classification viz., CETH 2506 and 3816 were discussed in case of the product Ramming Mass of the kind obtained by crushing/ grinding and mixing of quartz and quartzite minerals of different sizes and where no external binders are added to such mixture - It was noted that explanatory notes to the HSN of Heading 3816 covers certain preparations (e.g. for furnace linings), with an added refractor binder - Many of the products of this heading also contain non-refractory binders such as hydraulic binding agents, therefore, to qualify for classification under heading 3816, refractory binder is required to be added to such powdered (grained quartz/ quartzite mixture. Since no refractory binder is added to the impugned product, the same is not covered under heading 3816. The issue is decided in the case of COLLECTOR OF C. EX., BHUBANESWAR VERSUS MAYUR CHEMICAL INDUSTRIES [1990 (1) TMI 234 - CEGAT, NEW DELHI], where it was held that the product should be classified under sub-heading 3801.90 for the relevant period and would be classifiable under 3816.00 after 1st March, 1988. Quartz powder obtained by crushing Quartz stones fall under HSN code 2806 and attracts 5% rate of tax under GST. Ruling:- Ramming Mass which is a Refractory Material, is classifiable under HSN code 3816 and would attract 18% rate of tax under GST (9% CGST + 9% SGST). Quartz powder obtained by crushing Quartz stones falls under HSN code 2806 and would attract 5% rate of tax under GST (2.5% CGST + 2.5% SGST)
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2018 (10) TMI 1044
Classification of supply - supply of goods or not? - job-work or not? - As per the application it is mentioned that, the chassis ownership is not transferred and hence it should be classified under job work. Whether the activity of building and mounting of the body on the chassis by the Applicant will result in supply of goods under HSN 8707 or supply of services under HSN 9988? Held that:- GST law does not distinguish between raw material, finished goods and semi-finished goods. It talks about input and Capital goods. Even, semi-finished goods or intermediates are goods and in turn Input by the principal or the job worker - the argument of the applicant that they use their own material, hence, they should not be treated as job worker is not tenable under the provision of law. Bus body builder builds body on chassis provided by the principal for body building, and charges fabrication charges (including certain material that was consumed during the process of job-work) - fabrication of body on chassis provided by the principal (not on account of body builder), the supply would merit classification as service, and 18% GST as applicable will be charged accordingly. Ruling:- The Activity of building and mounting of the body on the chassis provided by the principal under FOC challan will result in supply of services under HSN 9988 and hence, should be taxed @ 18% GST.
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2018 (10) TMI 1043
Permission to file revised declaration in Form TRAN1 for the left over CENVAT Credit - time limit for filing revised Form GST TRAN1 - vires of Rules117 and 120A of the Central Goods and Service Tax Act, 2017. Petitioners would contend that the TRAN1 declaration was filed within time and attempt was also made before the last date, i.e. 27.12.2017, to correct a pure typographical error. However, the system did not accept such correction. Held that:- The extended time for making declaration, which was extended upto 27.12.2017, would take within its fold, any typographical or such other corrections, which may be noted in the declaration already filed. Even otherwise, the case of the petitioners would, perhaps, fall within the situation of the assessee being unable to file correct declaration due to technical glitches on the official portal, for which purpose, the Commissioners are authorized to grant extension upto 31.03.2019. Notice returnable on 30.10.2018.
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Income Tax
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2018 (10) TMI 1042
Reopening of assessment - Applicability of section 145A - valuation of closing stock - as per AO unutilized CENVAT credit should have been included in the closing stock which would alter the assessee's profit for the year under consideration - Notice beyond the period of four years - Held that:- The documents on record would however show that the entire issue of assessee's treatment of such unutilized CENVAT credit while computing the valuation for the closing stock had come up for minute scrutiny during the original assessment proceedings. AO was conscious of the methodology adopted by the assessee. He had raised multiple queries which we have reproduced. The assessee had replied to such queries. The replies of the assessee have already been reproduced. It was only after such scrutiny that AO had passed the order of assessment, in which, after recording detailed reasons, he made limited disallowance in relation to the unutilized CENVAT credit. We are informed that even this disallowance is a subject matter at the ends of the assessee. With this aspect we are however not directly concerned. Not open for AO to reexamine the entire issue which would be merely on the change of opinion. It is wellsettled as held by the Supreme Court in case of CIT Vs. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA]. Even post 01.04.1989, amendments in section 147, the concept of change of opinion prevented the Assessing Officer to reopen the assessment still holds good. This quite apart, the impugned notice has been issued beyond a period of four years from the end of relevant assessment year. Clearly, there was no failure on the part of the assessee to disclose truly and fully all material facts necessary for assessments. AO referred to the material which was already on record during the course of assessment - Decided in favour of assessee.
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2018 (10) TMI 1041
Disallowance u/s 14A r.w.r 8D - Expenses incurred on earning exempt income or not - Held that:- Tribunal has correctly assessed the materials on record and found that no interest bearing funds were diverted for making tax free income. He pointed out that all the investments were of the past years and no fresh investments during the current year were made. See MAXOPP INVESTMENT LTD. VERSUS COMMISSIONER OF INCOME TAX, NEW DELHI AND PRINCIPAL COMMISSIONER OF INCOME TAX-I VS. D.B. CORP LTD. [2018 (3) TMI 805 - SUPREME COURT OF INDIA]
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2018 (10) TMI 1040
Extension of "Due Date" of filing of Income Tax Return of Tax Audit Cases - one hand, though the date has been extended for filing Income Tax Return of Tax Audit Cases but on the other hand, levy of interest under Section 234-A has not been amended - Held that:- Once the date of filing of Income Tax Return has been extended, there is no justification for not extending the date and charging of penal interest for filing Income Tax Return within time. Sri Asit Kumar Chaturvedi, learned Senior Counsel assisted by Sri Anand Dwivedi, learned Counsel for the Union of India (respondent no.1) and Sri Alok Mathur, learned Counsel for respondents no.2 and 3 pray for and are granted four weeks' time to file counter affidavit. Rejoinder affidavit, if any, may be filed within two weeks' thereafter. List thereafter.
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2018 (10) TMI 1039
Charitable activity - approval u/s 10(23C)(vi) - Absence of the dissolution clause of the trust, there is a lacuna which may be misutilized in the event of dissolution of the managing committee - ITAT allowed claim - Held that:- The Tribunal while allowing the appeal has taken into consideration the aims and objectives of the society and that there is no dispute regarding genuineness of the activities of the society. The reliance was placed upon the assessment order passed under Section 143 (3) of the Act for the assessment year 2012-13. There were categorical findings by the Assessing Officer that the object of the society was educational and it was existing only for educational purposes. The Tribunal has rightly held that the reason for rejection by the CCIT cannot be sustained as the benefit which may or may not accrue under Section 13(3) of the Act, does not have any effect on the genuineness of the activities of the trust. The eventuality relied upon by the CCIT is based on surmises without there being any definite basis that any misutilisation would occur for sure in future. The order passed is in consonance with provisions of Section 10(23C)(vi) of the Act - decided against revenue.
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2018 (10) TMI 1038
Disallowance of 50% of the expenses paid as commission - allowable busniss expenditure u/s 37 - business consideration for the amount paid not proved - Held that:- The appellant claimed that she had paid commission for referring the students to her. The details of the students sent abroad was withheld on the ground that hard disc of the computer had crushed. No account was produced to substantiate that the record was being kept as to how much commission was paid to each of the persons, especially when the commission was paid on last day of the year. Inspite of the opportunities provided by the CIT(A) also the assessee was able to produce only 21 persons out of 43 who had received the commission. The recipients of commission, who appeared in the proceedings, were not able to give detail even of a single student which they had referred to the appellant. The deduction of TDS and payment made by cheque in itself would not be sufficient for claiming the deduction when even prima-facie business consideration for the amount paid was not proved. The contention of learned counsel for the appellant that the authorities could have done independent verification from the students, cannot be accepted. On failure of assessee to provide the relevant details like father's name, postal address etc, it was not possible for the A.O. to have undertaken any such verification. The contention of learned counsel for the appellant that the authorities could have done independent verification from the students, cannot be accepted. On failure of assessee to provide the relevant details like father's name, postal address etc, it was not possible for the A.O. to have undertaken any such verification. - decided against assessee.
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2018 (10) TMI 1037
Disallowance u/s 14A - no exempt income earned - Held that:- In Cheminvest Ltd's case [2015 (9) TMI 238 - DELHI HIGH COURT] it was reiterated that Section 14A of the Act envisages that there should be an actual receipt of income, which is not includable in the total income during the relevant previous year for purpose of disallowing any expenditure under Section 14A of the Act in relation to said income. Examining the factual matrix, it may be noticed that the Tribunal while relying upon the judgment of this Court in Commissioner of Income Tax v. Lakhani Marketing Inc.[2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT] had held that Section 14A of the Act cannot be resorted to in the year in which no exempt income had been earned. However, the revenue relied upon the CBDT Circular dated 11.2.2014 to contend that Section 14A of the Act can be invoked even in the year in which no exempt income had been earned. Accordingly, the Tribunal had dismissed the appeal of the revenue holding that unless and until there is receipt of exempted income for the concerned assessment year, Section 14A of the Act is not attracted. - decided in favour of assessee.
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2018 (10) TMI 1036
Addition being undervaluation of closing stock - assessee had followed exclusive method of accounting - applicability of Section 145A - it is a case of the Revenue that the element of excise duty/CENVAT etc. would represent part of the closing stock of the assessee in terms of Section 145A but it is the case of the assessee on the other hand that Section 145A has no application to the facts of the case - Held that:- Referring to case of the assessee that assessee follows exclusive method of accounting for valuation of inventory and therefore, entire exercise would be tax neutral 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 method of accounting followed, we do not see any error in the conclusion drawn by the CIT(A). - decided against revenue. Addition u/s 40(a)(ia) on account of non deduction of TDS - reimbursement of expenditure - Held that:- In the absence of any income element in the payment made, the obligation to deduct tax at source on such payment do not arise and consequently, provisions of Section 40(a)(ia) of the Act do not come into play in view of the decision in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. [2014 (4) TMI 235 - GUJARAT HIGH COURT]. The law that a mere reimbursement does not require to deduction [2014 (4) TMI 235 - GUJARAT HIGH COURT] - decided against revenue Addition towards amortization of lease hold land - claim of the assessee was not accepted by the AO on the ground that there is no provision of claim of the amount written off/amortized against the lease hold land in the Income Tax Act - Held that:- Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time and hence it is nothing else than depreciation. The allowability of costs towards amortization of lease hold land is in question. Having heard the rival submissions on the issue, we find that the CIT(A) has rightly appreciated the facts in perspective and concluding the issue in favour of the assessee in the light of decision of Hon’ble Gujarat High Court in the case of DCIT vs. Sun Pharmaceuticals Industries Ltd. [2009 (3) TMI 587 - GUJARAT HIGH COURT]. Denial of deduction u/s 80G - Revenue has denied the deduction on the ground that only one of the division of Adani Engery Ltd. got merged with the assessee company - Held that:- The Adani Energy Ltd. continued to exist as a separate entity. We do not see any rational in such line of reasoning. Where donation has been paid by a division which was demerged from the other company and merged with assessee’s company, there is no warrant to deny the deduction in the hands of the resulting company (assessee). It shall however be open to the AO to verify as to whether the demerged company (Adani Energy Ltd.) has already claimed deduction or not. Where the assessee proves to the satisfaction of the AO that no deduction has been claimed under s.80G of the Act by the demerged company towards the amount in question, the AO shall allow the deduction in the hands of the assessee company after verifying the receipts etc. in accordance with law. Disallowances of preliminary expenses claimed under s.35D - Held that:- In view of the issue being covered in favour of the assessee by the order of the co-ordinate bench for earlier year [2016 (1) TMI 940 - ITAT AHMEDABAD], we find merit in the claim of the aforesaid amount under s.35D of the Act. The assessment order is thus directed to be modified in respect of the aforesaid issue. Eligibility of depreciation of goodwill arising on demerger - Held that:- Where the AO has readjusted the quantum of depreciation in the subsequent assessment year, the assessee is within its legitimate rights to be granted depreciation in AY 2009-10 as per the figures worked by the AO himself. We do not see any perceptible reason for not admitting such claim of the assessee. We also find bonafides in the plea of the assessee for raising new claim on account of depreciation by way of additional ground at this belated stage. The order for the AY 2012-13 was passed on 29.03.2015. By virtue of this order, the assessee came to know about the revision in the claim of depreciation concerning AY 2012-13. By that time, the order of the CIT(A) dated 13.12.2013 was already passed. Therefore, the assessee was incapacitated to put forward such new claim towards depreciation on goodwill amounting to ₹ 5,57,63,315/- for which relevant facts are duly available on record in the light of the decision of Hon’ble Supreme court in the case of Goetze (India) Ltd. vs. CIT [2006 (3) TMI 75 - SUPREME COURT] & NTPC vs. CIT [1996 (12) TMI 7 - SUPREME COURT]. - Decided in favour of assessee. Disallowance in respect of employees’ contribution to Provident Fund - Held that:- In view of the decision of in the case of CIT vs. GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT], the issue is decided against the assessee. Addition u/s 14A - Held that:- We find that the CIT(A) has deleted the disallowance of interest expenditure after taking account the interest free capital available at the disposal of the assessee by way of own funds as well as set off available on account of interest income available at the disposal of the assessee. We find that the action of the CIT(A) is on sound footing in tune with binding judicial precedents including the decision in Nirma Credit Capital Pvt. Ltd. (2017 (9) TMI 485 - GUJARAT HIGH COURT). Thus, the action of the CIT(A) cannot be assailed on this score. The CIT(A) on the other hand upheld the disallowance of administrative expenditure as quantified in terms of rule 8D(2)(iii) of the Rules. The assessee has failed to provide any justification for interference with the order of the CIT(A).
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2018 (10) TMI 1035
Denial of the CIT(A) to admit the appeal - refusing to condone the delay in filing appeal before the CIT(A) - Held that:- The assessee has provided justification for such delay. The assessee has taken consistent position that its business venture has closed down and the possession of the premises have been taken by the lender bank on 14.07.2010. The power supply was also disconnected much earlier. The assessee has underlined his precarious financial position giving rise to such alleged lapse. It is the case of the assessee that respective orders of assessment and penalty presently appealed against were not made privy to the assessee. The assessee has obtained the certified copy of the respective orders from the AO belatedly on 07.04.2015 and when this date of receipt/service of order is taken into account, there is no delay in filing the appeal. Delay condoned - Matter restored before CIT(A).
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2018 (10) TMI 1034
Undisclosed investment in money lending business - Assessee is an individual having only source of income from agriculture - Held that:- As far as the addition on unaccounted investment is concerned the assessee had sufficient accumulated funds, opening bank balance as well as income earned during the year which could justify the source of the cash deposited on various dates and also to explain the source of alleged unaccounted investment of ₹ 4,65,024/- and in our view the same needs to be deleted. As regards the interest income addition is concerned, we do not find any reason to interfere in the findings of the lower authorities as no plausible reasons have been given by the Ld. Counsel for the assessee for giving such short term advances which are ranging from 1 month to 6 month without changing any interest and therefore the addition for alleged interest income of ₹ 55,083/- needs to be confirmed. - Decided partly in favour of assessee
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2018 (10) TMI 1033
GP addition for unaccounted sales - claim of deduction of unaccounted purchases from the unaccounted sales also - amount received by the assessee in cash - the assessee’s representative has submitted that there are certain purchases and sales which are not recorded in the books of account - Held that:- The assessee after receiving the payments from the prospective buyers, repays the same to the suppliers. The assessee is not able to explain the details of unexplained purchases, quantity of the purchases and also the details of unaccounted sales and source for the unrecorded purchases. Under these facts and circumstances of the case, we are of the opinion that the assessee has failed to prove that he made un-accounted purchases. Therefore, his request for GP addition for unaccounted sales cannot be considered. In view of the above, this appeal filed by the assessee is dismissed.
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2018 (10) TMI 1032
Addition u/s 68 - sale proceeds of shares of Kailash Auto Finance Limited (KAFL) treating the same as income from undisclosed sources - addition on account of the commission allegedly paid by the assessee for obtaining the entries for making such bogus claim of long term capital gain by treating the same as unexplained expenditure - claim of exemption u/s 10(38) denied - Held that:- Similar issues involving identical facts had come up for consideration before the Division Bench of this Tribunal in the case of Manish Kumar Baid and Mahendra Kumar Baid [2017 (10) TMI 522 - ITAT KOLKATA] wherein held SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee's name is not reflected at all. Hence the allegation that the assessee and/or Ashita Stock Broking Ltd. getting involved in price rigging of KAFL shares fails. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act. AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. Tribunal also allowed the consequential relief to the assessee by deleting the additions made by the A.O. u/s 69C holding that the transactions giving rise to long term capital gain being genuine, there was no question of paying any commission for obtaining the alleged accommodation entries. Since the issues involved in the present cases as well as the material facts relevant thereto are similar to the cases of Shri Manish Kumar Baid and Mahendra Kumar Baid (supra) respectfully follow the order passed by division bench of this Tribunal and delete the additions made u/s 68 and 69C - Decided in favour of the assessee.
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2018 (10) TMI 1031
Denial of claim of deduction u/s 80IB - non issuance of completion certificate - deemed certificate - Held that:- As rightly observed by the Tribunal, though the assessee has completed the project by 31.03.2008 and had requested the local authorities for issuance of completion certificate since there was no provision under the GHMC Act of 1985 for issuance of completion certificate, the same was not furnished by the assessee. However, as per section 455 of the GHMC Act and sub section (2) thereof, no person shall occupy or permit to be occupied any such building, or use or permit to be used the building or part thereof affected by any work, until: (a) Permission has been received from the Commissioner in this behalf ; or (b) The Commissioner has failed for twenty-one days after receipt of the notice of completion to intimate his refusal of the said permission. If the Commissioner does not intimate refusal to give the occupancy certificate, then it is deemed to have been given. In these circumstances also, we hold that the assessee is eligible for deduction u/s 80IB(10) as the relevant A.Y before us i.e. A.Y 2007-08 which is subsequent to the initial A.Y of the claim and the Tribunal has already allowed the deduction in the earlier A.Ys. - Decided in favour of assessee.
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2018 (10) TMI 1030
Addition u/s 36(1)(iii) - Held that:- After perusing the record before us including balance sheet and loan & advances, we observe that assessee’s own funds in the form of share capital and reserves are ₹ 2.81 crores whereas the advances to the staff were only to the tune of ₹ 57.58lacs and therefore there is no justification for the AO to make the addition u/s 36(1)(iii) of the Act as no disallowance is required to be made on this count. Case of the assessee is squarely covered by the decisions in the case of HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT) and Reliance Utilities & Power Ltd (2009 (1) TMI 4 - BOMBAY HIGH COURT). - Decided in favour of assessee.
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2018 (10) TMI 1029
Penalty u/s 272A(2)(K) - late filing of e-TDS return - circumstances & bonafide of the deductor for late filing - technological glitches due to software installation - Held that:- In the facts prevalent for us admittedly, there has been no delay in depositing the TDS to government Treasury. However delay occurred in filing of quarterly TDS returns. It is an admitted position that during financial year 2010-11, there was a switchover of filing of TDS return in paper forms to e-filing, by way of Amendment in Rules. Assessee has also submitted to have faced problems in e-filing of TDS returns for relevant period. As observed in case of HMT Ltd vs. CIT [2004 (8) TMI 50 - PUNJAB AND HARYANA HIGH COURT] as taken note of this change at various occasions which constituted hardships to assessee. It has been consistently observed for relevant period by various authorities, that due to software installed by revenue for e-filing of TDS returns, initial technological glitches has caused delay in filing of quarterly statements of TDS, for which no penalty can be levied on assessee. In present facts, assessee has also submitted to have faced similar difficulties due to which delay occurred. Thus no penalty for late filing of TDS returns. - Decided in favour of assessee.
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2018 (10) TMI 1028
Denial of deduction claimed u/s 80P(2) - appellant is a Co-Operative Bank or not? - assessee was registered under Souhardha Sahakari Act as co-operative but the assessee claimed it to be co-operative society registered under Karnataka Souhardha Sahakari Act 1977 for claiming deduction u/s 80P - Held that:- Having carefully examined the orders of the authorities below in the light of the Tribunal order in the case of Udaya Souharda Credit Co-operative Society Limited [2018 (8) TMI 1063 - ITAT BANGALORE], we find that though argument was not raised earlier but it goes to the root of the case as it is to be ascertained whether the assessee is entitled for deduction u/s 80P and in the similar circumstance, the Tribunal has restored the matter back to the file of the AO in the case above. We set aside the order of the CIT(A) and restore the matter to the file of the AO to re-adjudicate the claim of the assessee in the light of aforesaid order of the Tribunal to ascertain as to whether the assessee is entitled for deduction u/s 80P or not before going on merit. - Decided in favour of assessee for statistical purposes.
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2018 (10) TMI 1027
Reopening of assessment - regular scrutiny assessment u/s. 143(3) completed followed by reopening of assessment - reasons recorded by the AO before proposing to reopen the assessment - unexpalined exports - borrowed knowledge by AO - non independent application of mind - Held that:- AO based on the information given by the DIT (Inv.) clearly reveals that assessee had exported 55.936 MT iron ore to its sister concern M/s. S. K. Resources Ltd., Hongkong for a total consideration of ₹ 13,90,97,755/-. This fact is not a new information since we note from the original assessment order dated 15.03.2013 passed u/s. 143(3) of the Act for the year under consideration wherein these facts are discernible from para 3.2 wherein the AO has noted in his words “the facts of this case are that the assessee firm deals in export of iron ore and other minerals. It has made total sales of ₹ 13,90,97,755/-. This total sale is in respect of iron ore only and the whole of the sales have been made to the sister concern M/s. S. K. Resources Ltd., 2601, Metropoly Tower, Hongkong." Thereafter, the AO noted from the information given by the DIT(Inv) that the assessee had sold the iron ore through its associated enterprises to the end users at China for a higher price (prevailing price at China on the date of shipment) and thus, he concluded that there is profit shifting from India to China. This conclusion based on the aforesaid information is fundamentally flawed for the reason that DIT(Inv) has first of all given the FOB rate of iron ore prevailing in India which has been compared with the market rate prevailing at China. AO has simply gulped the information from DIT(Inv) to form a conclusion about escapement of income is itself flawed and cannot pass the test of ‘reason to believe’ as laid by judicial precedents as discussed above. From the aforesaid reasons it is evident that other than the vague information given by DIT (inv) there is no other material the AO collected after preliminary enquiry which could have enabled him at the time of recording reasons to come to a conscious independent conclusion that “income of the assessee has escaped assessment”. The information given by DIT(Inv) can only be a basis to ignite/trigger “reason to suspect” for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion to an extent which can form the belief in his mind that income chargeable to tax has escaped assessment. No quantification of income escaping assessment has been spelt out by the AO in the reasons recorded for justifying reopening u/s. 147 of the Act. - decided in favour of assessee
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2018 (10) TMI 1026
Unexplained Gift - addition of sum credited to the Capital Account, which is a gift from her husband - application of Rule 29 of the Appellate Tribunal Rules, 1963 seeking to admit additional evidence in the form of gift deed and acknowledgements of ITR filed by husband of the assessee, who the assessee claims in the donor of the gift - Held that:- Taking into account the facts and circumstances of the case on this issue, where the addition of ₹ 8 lakhs has been made and sustained for want of filing of required details / supporting documents to prove the gift by the assessee, the interest of substantial justice would be served by admitting the additional evidence in the form of documents, i.e. copies of gift deed dt.19.2.2014 and IT Returns for Assessment Year 2014-15 & 2015-16, since they are necessary and relevant and could go to the root of the matter for proper adjudication of this issue. We admit the additional evidence as laid out above - restore the matter to the file of AO. Disallowance of payment of Advance Tax - Held that:- On an appreciation of the facts on record, as find that NIL Advance Tax was paid by the assessee in the year under consideration, as is reflected in the assessee's Income Tax Return for Assessment Year 2015-16. Therefore, find merit in the Assessing Officer’s view that no Advance Tax of ₹ 1 lac was paid by the assessee in the year under consideration as shown in her Capital Account for the year ending 31.3.2015. Further, also find that the assessee has actually paid only Self Assessment Tax of ₹ 1 lac vide Axis Bank Cheque on 1.5.2015 which would be reflected in the assessee's Capital Account for the next financial year. - Decided against assessee. Charging of interest u/s.234A, 234B & 234D - Held that:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala [2001 (10) TMI 4 - SUPREME COURT] and we therefore uphold the action of the Assessing Officer in charging the said interest in the case on hand.
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2018 (10) TMI 1025
Disallowance being 50% of Foreign Travelling Expenses - no evidence substantiating the claim was furnished - Held that:- Assessee before us has not filed any documentary evidence justifying the Foreign Travel Expenses. On perusal of the order of authorities below we note that it has been admitted by the AO that the documentary evidence were furnished by the assessee in haphazard manner. Therefore, the disallowance was made to the tune of 50% of the total travelling expenses. We note that the lower authorities has admitted the genuineness of the expenses to the tune of 50% and the balance was disallowed on ad hoc basis. After considering the facts in totality, we are inclined to confirm the disallowance of total foreign travelling expenses to the tune of 25%. Disallowing the Domestic Travelling Expenses - Held that:- On perusal of the order of authorities below we note that it has been admitted by the AO that the documentary evidence were furnished by the assessee in haphazard manner. Therefore, the disallowance was made to the tune of 75% of the total travelling expenses. We note that the lower authorities has admitted the genuineness of the expenses to the tune of 75% and the balance was disallowed on ad hoc basis. After considering the facts in totality, we are inclined to confirm the disallowance of total foreign travelling expenses to the tune of 25% i.e. ₹ 1,56,370/- only. Disallowance of depreciation on motor car - Held that:- The assessee fairly agreed that the issue can be decided against the assessee in view of non availability of supporting documentary evidence. Thus, the ground of appeal of the assessee is dismissed. Addition u/s 68 - Held that:- We find that the loan confirmation as well as the bank statement was not produced by the assessee before the lower authorities. Therefore, in the interest of justice and fair play we are inclined to restore this issue to the file of AO for fresh adjudication in accordance with the provisions of the law. DR did not raise any abjection if the matter is restored back to the AO. Hence we are inclined to restore this issue to the file of AO with the direction to adjudicate the same afresh in accordance with the provision of law. It is needless to mention that the assessee shall cooperate in the assessment proceedings.
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2018 (10) TMI 1024
Disallowance on account of difference in physical stock vis-à-vis books of accounts - addition based on statement recorded u/s 133A - Held that:- The statement recorded u/s 133A of the act has no evidentiary value. Therefore, no addition can be made on the basis of statement. Therefore, we do not take any shelter from the statement u/s 133A for deciding the issue on hand. We also note that in the absence of any documentary evidence, the addition cannot stand merely on the basis of statement recorded during survey proceedings. CBDT has emphasized to its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/ undue influence. Keeping in view the guidelines issued by the CBDT from time to time regarding the statements obtained during search and survey operation, it is undisputedly clear that the lower authorities have not collected any other evidence to prove the impugned under valuation of stock other than the statement.- Decided in favour of assessee. Disallowance on account of unaccounted stock in gold ornaments - Held that:- In the instant case, the issue relates whether the unaccounted stock as observed by the AO during the survey operation represents the unaccounted income of the assessee. As such, there was a survey operation on the premises of the assessee where difference in the quantity of stock was observed by the survey team, which was added to the total income of the assessee as unaccounted income. However, we note that none of the lower authorities has pointed out any defect in the purchase or sales shown in the books of accounts. Thus, we note that the purchase and sales has been duly accepted by the lower authorities which were disclosed in the audited financial statement. We find forces in the alternate contention of the assessee that at the most the net profit can be added to the total income of the assessee on account of mismatch in the stock of gold ornament. There was no discrepancy pointed out by the lower authority in the purchase/sales of the gold ornaments reported in the audited financial statement. Therefore, in such circumstances the amount of net profit can be added to the total income of the assessee on account of difference in the stock of gold ornaments - assessee has shown its net profit in its books of accounts @9.95%. Thus, we direct the AO to make the addition of the net profit amounting to ₹ 16,67,895/- to the total income of the assessee. Rejection of books of accounts u/s 145(3) and estimating the GP@ 5% - books of accounts were duly audited u/s 44AB - Held that:- We note that the stock register was duly maintained by the assessee as the AO has worked out the difference between the physical stock and book stock at the time of survey. Therefore, the allegation of the AO that the assessee is not maintaining any stock register is contrary to the facts available on record. We also note that the sales and purchases have been duly accepted by the lower authorities and there was no whisper either less reporting/ under reporting of purchase and sales. Therefore, in our considered view books of accounts cannot be rejected. We also note that the AO in the instant case has made the addition on account of difference in the stock of gold ornaments as well as by estimating the profit @5% after rejecting the books of accounts. Once, the books of accounts have been rejected then no addition can be made by disallowing the expenses under/ over reporting of sales, purchases etc. Thus, the taxable income will be determined on the basis of reasonable estimate. In this regard, we find support and guidance from the judgment of INDWELL CONSTRUCTIONS VERSUS COMMISSIONER OF INCOME-TAX [1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT]. However, in the case before us we have reversed the order of authorities below for rejecting the books of accounts. Therefore, the ground of appeal of the assessee is allowed.
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2018 (10) TMI 1023
Penalty u/s 271D - assessee had received the loans in cash in contravention to the provisions of section 269SS - Held that:- In the instant case, the assessee had accepted the loans which were directly paid in the bank account on 28.02.2011 and the cheque issued to M/s Rallis India Ltd. was cleared on 04.03.2011 for an amount of ₹ 22,94,453/-. The AO/JCIT has not given any finding with regard to the availability of sufficient balances in the bank account to meet the cheques issued to Rallis India Ltd., during the intervening period from 28.02.2011 to 04.03.2011. The above observation establishes that the assessee had accepted the loans, otherwise than by account payee cheque to meet the dues payable to Rallis India Ltd. on 28.02.2011 due to business exigencies. Therefore, there is no reason to suspect the business exigency and pressing need of the assessee as explained by the assessee during the course of assessment proceedings. Therefore, we are of the considered opinion that the assessee had accepted the loan on 28.02.2011 due to business exigencies. The AO has neither doubted the genuineness of the transaction nor disputed the source of the creditors. Therefore, we hold that there is sufficient and reasonable case for accepting the loans of ₹ 10,00,000/- otherwise than by crossed cheque. Hence we hold that the assessee’s case is covered u/s 273B for not imposing penalty u/s 271D of the Act. Accordingly, the order of the lower authorities is set aside and the appeal of the assessee is allowed. Levy of penalty u/s 271E - assessee had made the payment for medical treatment of his father in cash - eligibility of exemption u/s 40A(3)r.w. Rule 6D - reasonable cause to make the payment - Held that:- The amounts were used for the purpose of meeting the medical emergency expenses. There is no reason to disbelieve the submission of the assessee when the person was hospitalized and undergoing the treatment. The contention of the AO that the amount should have been paid by way of cheque on the same day or by way of bank draft on the next day is farfetched and unacceptable. The medical emergency has to be attended keeping in view of the prevailing circumstances. The sources for meeting the medical expenses and post medical expenses have to considered on humane grounds and as per the requirements of the patients to save the lives. Therefore, we hold that there is sufficient and reasonable cause for repayment of the loan otherwise than by crossed cheque and the case is covered by exceptions provided u/s 273B of the Act for not levying penalty u/s 271E the act. - decided in favour of assessee
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2018 (10) TMI 1022
Disallowance of expenses incurred prior to the commencement of commercial operation - allowable busniss expenses u/s 37 - whether the assessee has commenced its business commercially or not? - Held that:- As per the AO the business did not commence during the previous year, therefore, no expense incurred by the assessee can be allowed in the year under consideration. The view taken by the AO was subsequently confirmed by the CIT(A). From the preceding discussion, we find that the business of the assessee was setup during the year under consideration. This submission of the assessee has not been challenged by any of the lower authority. Therefore, we can draw a conclusion that the business of the assessee was setup in the year under consideration meaning thereby, it was ready for commercial operation. We also note that in the immediate succeeding assessment year the assessee has shown in its books of accounts the income from the business. Therefore, we hold that the business of the assessee was set up during the year. Accordingly the assessee was eligible for deduction of the expenses incurred by it during the year under consideration. In the case in hand, we note that the assessee has recruited the employees and incurred the salary expenses therefore, the ratio laid down in the preceding orders are squarely applicable to the facts of the case in hand. Therefore, respectfully following the same we reverse the order of authorities below. - Decided in favour of assessee.
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2018 (10) TMI 1021
Jurisdictional fact for invoking jurisdiction u/s. 158BD - lack of necessary satisfaction - undisclosed income in issue belongs to an assessee other than the searched assessee - Held that:- AO lacks jurisdiction to initiate and pass orders in consequence to sec. 158BD of the Act, therefore, the impugned orders passed by the AO are null in the eyes of law and are, therefore, quashed - Additional ground challenging validity of the impugned sec. 158BD assessment proceedings framed in the instant case Sec. 158BD proceedings under challenge are quashed accordingly. See M/s S.K.S. Mercantile Pvt. Ltd. vs. ACIT [2018 (7) TMI 1088 - ITAT KOLKATA] - Decided in favour of assessee.
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2018 (10) TMI 1020
Disallowing expenses on account of payment of HUDCO loans - Held that:- As during the course of hearing, it is stated that assessee had made payment of interest in subsequent years. This fact is not controverted by the revenue. We therefore, set aside the order of Ld. CIT(A) and restore the issue to A.O. for verification of payment of interest. The A.O. would also to compute the interest related to the financial year under appeal. The A.O. would allow the interest paid by the assessee on the loan amount related to the year under appeal. Disallowance of expenses in respect of provision for interest on SRF funds provided by the Government of M.P. - Held that:- The contention of the assessee is that the provision is allowable deduction. We are of the view that the provision would be allowable if the same is on a reasonable and scientific basis. However, considering totality of the facts, we restore this issue to the A.O. to verify whether the assessee had paid any interest in subsequent years on this amount and decide accordingly. Addition of bad debt written off - Held that:- We set aside the order of Ld. CIT(A) and restore the issue to the A.O. to verify whether the assessee had actually written off the bad debts and decide the issue afresh. Addition in respect of provision for Police Welfare Community Hall - Held that:- We find that the Ld. CIT(A) has given finding on fact that the decision relate to earlier year. However, we are of the view that the earlier decision taken in earlier year and the work executed in another year would be sufficient to allow expenditure in the year when it was actually incurred. We therefore restore this issue to the assessing officer to verify whether any expenditure was incurred in the nature of revenue expenditure and decide accordingly. Allowability of provision of cost or run expenditure - Held that:- CIT(A) disallowed this provision on the ground that it does not relate to the year under appeal. Considering the totality of the facts, we deem it proper and restore this issue to the file of the A.O. to verify whether any expenditure related to this year was incurred in the nature of escalation of cost and decide accordingly. Disallowance of contingency expenses - Held that:- CIT(A) disallowed this claim on the ground that in earlier year, no such corporation was made for contingency expenses. As stated by the assessee that this expenditure was earlier borne by the Government of M.P. and the Government of M.P. directed the assessee corporation to bear this expenditure. It is contended that this expenditure relate to execution of work. We are of the view that any expenditure related to execution of work as carried out by the assessee would be allowable expenditure. However, this fact is required to be verified whether such expenditure made for the execution of work? We therefore, restore this issue to the file of the A.O. to decide it afresh. Addition on account of provision of Gratuity Fund - Held that:- CIT(A) has given finding on facts that the amount was paid to LIC on account of gratuity on 29.9.2008 before the due date of filing of the return. This fact is not controverted by the revenue, therefore, we do not see any reason to interfere with the finding of the Ld. CIT(A) and the same hereby affirmed and the appeal is dismissed. Interest earned on fixed deposits not to be taxed as the same is the income of Government of Madhya Pradesh - Held that:- In the present case, the assessee has been disclosing such income earlier till the assessment year 2009-10. It is the case of the assessee that in the light of the letters of the Government of Madhya Pradesh interest income was accrued on the fixed deposits cannot be said to be the income of the assessee, more particularly, in the light of the judgement of Gujarat Power Corporation Limited Vs. ITO [2012 (11) TMI 181 - GUJARAT HIGH COURT]. There is no dispute with regard to the fact that as per the terms of the letters dated 23.3.2010 & 30.8.2010, the assessee is required to spend interest income as per the direction of the Government of Madhya Pradesh. The revenue has not placed any contrary binding precedent, therefore, respectfully following the judgement of the Hon'ble Gujarat High Court, we direct the A.O. to delete the addition.
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2018 (10) TMI 1019
Penalty u/s 271(1)(c) - disallowance of deduction u/s.10B - furnishing inaccurate particulars of income - Held that:- The assessee during the assessment proceedings has furnished all the details with regard to the deduction claimed u/s 10B of the Act. Thus, there was neither any concealment of income nor furnished inaccurate particulars of income in the income tax return. Thus, there is no question of levying the penalty u/s 271(1)(c). We have heard the rival contentions and perused the materials available on record. The instant case relates to the excessive deduction claimed by the assessee u/s 10B of the Act. Accordingly, the penalty was levied by the AO on account of furnishing inaccurate particulars of income. There is no dispute that the deduction was claimed by the assessee u/s 10B of the Act on the basis of audit report obtained in Form 56G which is placed on record. Thus, in our considered view the assessee should not suffer on account of penalty by the mistake committed by the auditor. We note that the penalty cannot be levied if any error has been committed by the auditor by giving a certificate specifying the wrong amount of deduction u/s 10B of the Act. Thus, we direct the AO to delete the penalty levied by him u/s 271(1)(c). No reason to interfere in the order of Ld CIT(A). Hence, the ground of appeal of the Revenue is dismissed.
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2018 (10) TMI 1001
Claim of deduction @100% u/s 80IC - initial assessment year - fresh claim on undertaking substantial expansion from the year of completion of substantial expansion - Held that:- The Apex Court in Commissioner of Income Tax vs. M/s Classic Binding Industries [2018 (8) TMI 1209 - SUPREME COURT OF INDIA] dealing with the issue whether the assessee who had availed deductions at the rate of 100% for first five years on the ground that they had set up a manufacturing unit as prescribed under sub section (2) of Section 80IC of the Act can start claiming deduction at the rate of 100% again for the next five years as they had undertaken substantial expansion during the period mentioned in sub section (2) thereof. The answer was given in the negative. The matter is no longer res integra. - decided in favour of revenue.
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Customs
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2018 (10) TMI 1017
Classification of imported goods - determination of rate of IGST - Assessment of the Bills of Entry - Assessment under particular head and not under the head which the petitioner had proposed to classify the goods - Held that:- The petitioner should be given an opportunity to contest such decision. Therefore, unless a speaking order is passed, the petitioner would not be in a position to contest the levy of IGST under SI.No.453. There will be a direction to the second respondent to issue a show-cause notice and afford an opportunity of personal hearing to the petitioner and pass a speaking order on merits - petition allowed by way of remand.
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2018 (10) TMI 1016
Demand of custom duty - import of Rynaxypyr Tech which consist of compound namely Chlorantraniliprole - change in classification claimed by the appellant under chapter heading 2933 39 90 to chapter heading 380891 - Whether the product imported by the appellant Rynaxypyr is classifiable under chapter 29 as separately defined chemicals or under chapter 38 as pesticides? Held that:- The Hon ble Apex Court in the case of UNION OF INDIA VERSUS PESTICIDES MFG. FORMULATORS ASSOCIATION OF INDIA [2002 (10) TMI 95 - SUPREME COURT OF INDIA] has examined all aspect before coming to the decision. It is seen that Hon ble Apex Court has examined the rules of interpretation, the chapter notes chapter heading and HSN notes in the said case - it was held in the said case that the amendments to Chapter 38 in 1996 and 1997 served to exclude TGP or insecticides etc. in bulk forms from Chapter 38. Thus when Hon ble Apex Court describes a compound as mixture, it does not result in any error. There are no grounds to deviate from the decision of the Hon ble Apex Court in case of Pesticide MFG. Formulators Association of India - Appeal dismissed.
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Corporate Laws
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2018 (10) TMI 1018
Legality of transfer of shares - change of designation of Petitioner from Managing Director to Executive Director - legality of BOD meeting - Held that:- The Respondents themselves through Respondent No.2 filed Form 32 on the basis of meeting dated 25.09.2011 changing the designation of Petitioner from Managing Director to Executive Director. There is yet another Form 32 submitted by Respondent No.2 purporting to state that the Petitioner was Director and was now being designated as Executive Director. This form is based on some meeting dated 15.11.2011. The Minutes record that the Petitioner – Ayoli Abdulla, who has been Managing Director, his designation needs to be changed from Managing Director to Director, w.e.f. 15.11.2011. This would be against the Minutes dated 25.09.2011 (Annexure A9 – Page 207) where Respondent No.4 had been designated by these three as Managing Director w.e.f. 25.09.2011. If the Respondents were treating the original Petitioner, still as Managing Director or Director, admittedly they never gave any Notice of any such meetings to the original Petitioner. They blow hot and cold in the same breath. In the face of these documents put up by them, Respondents also claim that as Petitioner transferred all his shares on 27.04.2011, he ceased to be Director in view of Articles of Association and no Notice was required to be given to him. Reading of these various minutes and the forms submitted at the hands of Respondent No.2 and the case put up by Respondents shows that the documents are not beyond suspicion. It is the case of the original Petitioner that after coercing him to sign the forms, the Respondents with the help of Respondent No.2 went on submitting Forms to the ROC and it was only when in the Civil Suit, the Respondent No.4 filed Affidavit that he came to know about what Respondents were up to. Coming to the question of coercion of the original Petitioner, we have purposely referred to the Company Petition and Reply of the Respondents which was filed in NCLT, in some details and we have purposely reproduced portions from the Affidavit of Respondent No.4 which he had filed in the Civil Suit and we find by referring to these details that the pleadings themselves (including what the Respondents have claimed), disclosed that the Petitioner was coerced to sign the transfer forms. Had it been a normal execution of forms, there would not have been so many questionable acts on record. It is not the case of Respondents that Petitioner transferred the shares for any consideration. There is no good reason for him to simply give up his control as Managing Director. There is substance in the claim of Petitioner that due to valuable property involved in Civil Suit, Respondents tried to take over. We discard defence that silence of Petitioner after 27.04.2011 till filing of Petition should be held against him regarding claim of co-ercion. There is substance in what Petitioner has argued that although he was co-erced to sign the forms, he did not react immediately as he was rest assured that without his involvement no Board Meeting could be held. The Respondents are changing stands even where some time they say there was General Body Meeting of Meezan Group where shareholders of different companies of alleged Meezan Group had assembled and sometime they referred to Board Meeting of Respondent No.1 Company. We have already mentioned there is no material to show that there was any validly called Board Meeting on 27.04.2011. For such reasons, we do not find that there is any error in the Impugned Judgement and Order passed by NCLT. The NCLT has rightly allowed the Company Petition and set aside the transfers purportedly made to Respondent No.4 and further transfers they made inter se themselves. The NCLT rightly restored the original Petitioner as Managing Director and the further directions it has given to ROC for ignoring the findings done under the digital signature of Respondent No.2. We do not wish to interfere.
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FEMA
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2018 (10) TMI 1015
Penalty on the co-appellant on the charge of violation of Section 3(b), 3(d) and 3(c) of FEMA - Held that:- It is stated on behalf of the appellants that ED without conducting any independent inquiry has simply on the basis of few documents sent by DRI issued a show cause notice to the appellants for alleged under-valuation of furniture imported from China during the year 2006-07 and thereby alleging violation of the provisions of section 3(b), 3(d) and 3(c) of the Foreign Exchange Management Act, 1999 (“the Act”) read with Section 42(1) of the Act. The show cause notice relied solely on the DRI case which had been settled and closed by the Settlement Commission in 2009 itself. Initiation of proceedings is incorrect when the issue has already been settled by the Settlement Commission. This is against the statutory mandate laid down under provisions of Section 127J of the Customs Act, 1962 which stipulates that no matter covered by such orders shall be reopened in any proceedings under this Act or under any other law for the time being in force. Appeal allowed.
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PMLA
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2018 (10) TMI 1014
Attachment orders - PMLA proceedings - main contention of the appellant is that the appellant has no connection or related to Syed Mobin and his wife, Aisha Naheed his property was wrongly attached under suspicion, therefore, both the orders should be quashed. Held that:- The appellant submits that his property was attached merely on the basis of that the appellant and Aisha Naheed were carrying on partnership business under the name of M/s. Premier Plastic Industries by virtue of partnership deed dated 25.08.1989, till 31.03.1998. She has already retired from the partnership business and deed of retirement was executed between the parties on 31.03.1998 and by virtue of said retirement deed, the appellant became the absolute owner and proprietor of said M/s. Premier Plastic Industries. There was no justification whatsoever to attach his property. Additional arguments are made on his behalf that the main accused Syed Mobin has already been discharged in the schedule offence by the Judgement dated 1st April, 2017 where no appeal has been filed by the State and similarly he and his wife have also been discharged by the Special Court (Lokayukta) and Principal Sessions Judge at Kalaburagi in the PMLA complaint being Special Case no. 58/2016 by Judgement dated 1.8.2018. There is no challenge on behalf of the respondent for passing of two Judgements acquitting the main accused Syed Mobin and his wife in PMLA proceedings. Provisional attachment order quashed. The properties attached are released forthwith.
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2018 (10) TMI 1013
Offence under PMLA - no appeal against the acquittal order was filed by the State - Held that:- Both the husband and wife were also arrayed as respondent in the PMLA complaint which was pending before the Court of III Addl. District and Sessions Judge, D.K., Mangaluru, who by Order dated 10th August, 2018, has allowed the application filed by them under Section 227 of the Criminal Procedure Code and both were discharged from the offence punishable under Section 3, read with Section 4 of the Prevention of Money Laundering Act, 2002. Thus, there is no need to go into the merit of the case. Once the main accused in the schedule offence as well as the complaint under the PMLA has been discharged and the said final judgement has not been challenged by the respondent in the higher court, the appeals are liable to be allowed. Both the appeals are accordingly allowed. The impugned order dated 22.09.2016 with regard to the above mentioned two appeals are set-aside. Consequently, the provisional attachment order is also quashed. The properties attached are released forthwith.
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2018 (10) TMI 1012
Offence under PMLA - Provisional Attachment Order - SARFESI act - whether the banks should wait till the trial is over or recover the amount by enforcing the decree forthwith once decree is become final? - Held that:- In the case of Attorney General of India and Ors. [1994 (5) TMI 235 - SUPREME COURT] while dealing with the matter under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act has defined the illegally acquired properties and held that such properties are earned and acquired in ways illegal and corrupt, at the cost of the people and the state, hence these properties must justly go back where they belong. In the present case as the money belongs to the Appellant bank it is public money. In view of settled law on the subject the appellant bank is the rightful claimant who have already obtained decree against the borrower from DRT under the SARFAESI Act and has a priority rights to recover the loans amount forthwith. The Respondent No.1 is not having any lien over the said properties as the Appellant banks are now the Legal transferee of said properties. The Respondent No. 1 may not retain the said property till the trial is over. They have no legal title and the property is to be returned to the persons lawfully entitled to recover the debts as they are the victim. Being a victim party u/s 8(8) of the Act, second proviso which is incorporated very recently in April, 2018, the banks are entitled to dispose of the properties if they are victim and sufferer due to non-return of loan amount by the borrowers. There is no nexus whatsoever between the alleged crime and the banks who are merely the secured creditor and were not aware that the borrowers would avoid returning the loan-amount. Prima facie, no case of money-laundering is made out against banks. The banks have priority rights on assets of the secured creditors to recover the loan amount/debts by sale of assets over which security interest is created. As far as the appeal is concerned, the same will be considered on the next date of hearing. At present, this Tribunal is only concerned with the interim order as prayed by the appellants. In view of facts and nature of the present case, that once the banks are secured creditors and have obtained the final decree from the court which has attained finality, the banks are bound to receive the default loan amount from Vijay Mallya and his companies. He was/is the active person of the companies. The loans amount has to be paid by the borrowers. It is a banks money. It must come to the banks. These are public sector banks. The decretal amount is recoverable in law being pubic money. Thus, till the next date of hearing, Vijay Mallya is restrained not to deal with and alter the status of the movable and immovable properties as per Schedule A to C and Schedule-A and shall not create third party interest in any manner directly or indirectly till the next date. The respondent no.1 shall also maintain the status quo with regard to the properties, the details of which are mentioned in the impugned orders in both appeals till the next date.
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2018 (10) TMI 1011
Offence under PMLA - attachment order of mortgaged property - PMLA enactment as subsequent to the SARFAESI Act - properties in question have been mortgaged with the appellants much prior to commission of alleged offences - Held that:- The properties in question have been mortgaged with the appellants much prior to commission of alleged offences. The main allegation against the SSIL and Shri G. EswaraRao is that around a sum of ₹ 5,30,55,500/- have been paid to Respondent no.4 Company by Respondent no.2 Company in February, 2009 as share application money against which no shares were allotted as such the properties of Respondent no.4 has been termed as proceeds of crime and the property in question in the present appeals have been attached as value thereof. The properties in question which are already under mortgaged and under personal guarantee with the appellants cannot be attached as value thereof. Since right of appellantshave already been created over the questioned properties after being mortgaged and under personal guarantee of said properties with them. It is further gathered from the materials on record that the appellants have already initiated proceedings under SARFAESI Act against the properties of Respondent no. 4 Company and Shri G. EswaraRao due to nonpayment of loan advanced by the appellants. In view of the aforesaid reasons we are of the view that the appellants who are mortgagees of the properties in question which were purchased before sanctioning the loan, no case of money laundering is made out so far as these properties in question are concerned. The appellants have priority of right to recover the loan amount/debts. In the given facts and circumstances of the case, the Provisional Attachment in the present matter is bad and against the law. In the circumstances the allegation of money laundering, prima facie, so far as present appellants and properties are involved in these appeals are concerned, we find that the impugned order is not sustainable under law, for the purpose of attachment under the PMLA, 2002. We have not gone into other legal issues such as retrospective application of provisions of PMLA. We set aside the impugned order passed by Adjudicating Authority. The mortgaged properties attached so far as properties concerned in these appeals, are released from attachment forthwith.
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Service Tax
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2018 (10) TMI 1008
Service Tax audit of a private agency - Rule 5A of the Service Tax Rules, 1994 - Held that:- Subsection (2) of Section 174 is a Saving Clause and it inter alia provides that the amendment of the Finance Act, 1994 to the extent mentioned in Subsection (1) of Section 173, shall not revive anything not in force or existing at the time of such amendment or repeal. There was no saving of Rule 5A in such manner that fresh proceedings for audit could be initiated in exercise of powers under the said Rule. We, therefore, have serious doubts whether, with the aid of Rule 5A of the Service Tax Rules, 1994, the CAG can carry out compulsory Service Tax audit of private agencies like the petitioner. Issue Notice, returnable on 28.11.2018.
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2018 (10) TMI 1007
Short payment of service tax - Management Consultant Services - Demand of service tax of ₹ 23,44,07,478/- no service provider and service receiver relationship - Held that:- The contribution received from non-governmental agencies was not in respect of any specific service rendered to the organization from whom the money was received and the money received had no relation with the number of people to be recruited by such organization - there is no service provider and service receiver relationship between the appellant and the organizations from whom contribution of ₹ 2.31 crore (approximate) was received by the appellant - the demand of service tax of ₹ 23,44,07,478/- alongwith interest and equal penalty set aside. Demand of Service Tax of ₹ 30,21,221/- - consideration received for rendering services to SEZ Units - Section 51 of SEZ Act, 2005 - Held that:- In view of Section 51 of SEZ Act, 2005 the provisions of SEZ Act have affect not withstanding anything inconsistent therewith contained in any other law for the time being in force - as per clause (e) of Sub-section (1) to of Section 26 of SEZ Act, 2005, every developer and entrepreneur is entitled to exemption from service tax under Chapter V of Finance Act, 1994 on taxable services provided to developer or units to carry on the authorized operations in Special Economic Zone - demand of ₹ 30 lakhs (approximate) is not sustainable. Demand of Service Tax of ₹ 5,61,455/- - on the basis of difference in the income reflected in balance sheet with that reflected in ST-3 returns, the said amount of ₹ 54,51,017/- was treated as consideration without identifying whether the same was received for rendering any service - Held that:- Through the Final Order passed by this Tribunal in the case of Shubham Electricals [2015 (6) TMI 786 - CESTAT NEW DELHI]. This Tribunal in Para-11 of the said order has observed as follows: “Neither the show cause notice dated 21/10/2011 nor the impugned adjudication order dated 18/01/2013 record any assertion/conclusion whatsoever as to which particular or specific taxable services the appellant had provided. In the absence of an allegation of having provided a specific taxable service in the show cause notice and in view of the failure in the adjudication order as well, neither the show cause notice nor the consequent adjudication order could be sustained - demand do not sustain. Demand of Service Tax of ₹ 3,30,011/- - appellant had rendered service to International Financial Corporation - Held that:- The issue of leviability of service tax on services rendered to International Financial Corporation is no more res integra - service tax is not leviable on services rendered to International Financial Corporation - demand set aside. Appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (10) TMI 1006
Valuation - sister concern was captively consuming the goods - inter-connected units - related person - applicability of Rule 9 or Rule 10 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000? Held that:- There appears to be no dispute that the supplier and recipients are inter-connected undertakings and hence are related in terms of clause (i) of said sub-section and not clauses (ii), (iii) and (iv) - Since the appellants and their sister concerns are related persons in term of clause (i) and not in terms of clause (ii), (iii) or (iv), for the purpose of valuation of goods cleared to sister concern the valuation cannot be done in terms of Rule 9 as the said rule is applicable only in cases where the units are held to be related person in terms of (ii), (iii) or (iv). Hon’ble Supreme Court has in case Commr. Of C. Ex., Aurangabad Versus Goodyear South Asia Tyres Pvt. Ltd [2015 (8) TMI 61 - SUPREME COURT], where it was held that Once we come to the conclusion that Rule 8 is not applicable in the case of the respondent, it is Rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule. In view of the specific decisions of the Hon’ble Supreme Court on the issue, the decision of Commissioner (Appeal) cannot be sustained - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1005
Demand of Central Excise duty - Income surrendered to the Income Tax Department - Held that:- Tribunal in the case of CCE, LUDHIANA VERSUS THAKUR STEEL & AGRO INDUSTRIES [2018 (5) TMI 1780 - CESTAT CHANDIGARH], examined the issue and held that as Revenue has not come up with any evidence to show that the appellant were engaged in the activity of under valuation and manufacturing of the goods and the case has been made out only on the income surrendered to the Income Tax Department in that circumstances, central excise duty cannot be demanded as Central Excise duty is payable on goods manufactured by the assessee. Admittedly, no evidence has been produced by the Revenue how the goods were manufactured, how the inputs were procured, how the final goods were sold by the appellants - demand not sustainable - penalty also not sustainable. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (10) TMI 1004
Validity of assessment order - Jurisdiction - Classification of product - Godrej Nupur Mehendi - GVAT Act - classified under the residuary entry 87 of Schedule II to the Gujarat Value Added Tax Act, 2003 or would be covered under Entry 34 of of ScheduleI to the VAT Act? Held that:- The Assessing Officer; distinguished it by recording that the petitioners product is used more as a hairdye or as a hairtonic, and whereas, consideration before the Commissioner of the product, it is stated to be used as Mehendi on hands and feet - In our opinion, the Assessing Officer committed serious error in discarding the determination order passed by the Commissioner. Section 80 of the VAT Act pertains to determination of disputed questions. Subsection [1] of Section 80 authorizes the Commissioner to pass an order determining the question inter alia as to whether any tax is payable in respect of any particular sale or purchase or if tax is payable, the rate thereof. Once such a determination order is passed by the Commissioner, it would bind the parties before the Commissioner, which would include the assessee who might have urged the Commissioner to make the determination and necessarily the Department; unless of course either side has chosen to dispute such order in terms of appeal or revision provisions made under the Act. The Division Bench of this Court in the case of West Coast Waterbase Private Limited Anr. vs. State of Gujarat Anr., [2016 (8) TMI 1077 - GUJARAT HIGH COURT], after referring to various judgments, held that the Assessing Officer was bound by the order of determination passed by the Deputy Commissioner and could not have taken a different view unless there had been any material change. Petition allowed.
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2018 (10) TMI 1003
Benefit of tax remission - sales tax benefit to new industry, setting up its manufacturing unit in Kutch district - Notification dated 09.11.2001 - exemption scheme or the tax deferment scheme - switch over to the sales tax remission scheme - rejection of request for Change of option. Held that:- The said Scheme envisaged sales tax incentives. The eligible unit could either opt for tax exemption in which case, on the raw material and the inputs purchased by the unit, no tax would be payable and upon sale of the petitioner's product, no sales tax would be payable. The other option was tax deferment, in which, the eligible unit would be allowed to collect sales tax otherwise payable to the Government upon the sales of the intermidiatory or final products but would not be required to deposit such tax with the Government revenue immediately. The same would be deposited at a later point of time in installments. Third scenario under the scheme was in case of a unit having eligible investment in excess of ₹ 100 crores. Such a unit could opt for a composite scheme of sales tax exemption and deferment in parts. Clause 4.4 of the Scheme provided that the option would have to be exercised by unit at the time of making the application for the benefits. However, such option could be changed once before the certificate is issued by the Sales Tax Department. This clause thus clearly envisaged one time change of option before the certificate is issued by the Sales Tax department - In case of the petitioner, final eligibility certificate was not issued till the VAT Act was introduced making major changes in existing exemption schemes. The certificate issued by the department was a provisional eligibility certificate granting exemption upto a limit of 25% of the eligible investment of the petitioner. In terms of Clause 4.4 of the said Scheme, therefore, the choice of the petitioner to change the option was not yet lost. In absence of any clear provision providing that a unit enjoying tax exemption under the earlier scheme would automatically come within the fold of tax remission benefits under the Rules, there is no reason to presume that no option could be exercised. Further, if the legislature desired that there would be no further options of either of the two classes of units, language used would have been more explicit providing that the units availing tax deferment under the earlier law shall not be allowed to change the option - In a case where, as held by us earlier, when the choice for changing the option for the petitioner [in terms of clause 4.4 of the scheme] had not yet been closed since final eligibility certificate was not yet issued, the introduction of the Rules of 2006 would not eliminate such option. We may recall, the Rules of 2006 brought about fundamental shift in the benefits available to such eligible units. The respondents therefore committed an error in not allowing the petitioner's request for change of option. The respondent shall allow the petitioners to switch over to the sales tax remission scheme in terms of Chapter IV of the Rules of 2006 from the date of the application and issue eligibility certificate and entitlement certificate accordingly and further work out the benefits and pass necessary orders in terms thereof - petition disposed off.
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2018 (10) TMI 1002
Validity of assessment orders - TNVAT Act - principles of natural justice - factum of conduct of the personal hearing is disputed by the petitioner - Held that:- From the dates of proceedings, it would be seen that notice issued on 20.03.2018 culminated in an order on 28.03.2018. When the objection was filed 20.03.2018, it is highly improbable for the respondent to fix the date for personal hearing and passing orders within weeks time. Therefore, the contention of the petitioner that an opportunity of personal hearing was not given to him appears to be probable. This Court in very many cases categorically held that an opportunity of personal hearing must be adhered while passing assessment orders.The Commissioner of Commercial Taxes has also issued instructions to the assessing authorities based on the recommendation of the Justice Sri Ramanujam Committee whereas it is mandated that whether the dealer asked for personal hearing or not it shall be afforded to them by the assessing authority. Wthout affording an opportunity, the impugned order is passed, which amounts to violation of principles of natural justice - the matter is remanded back to the respondent for fresh consideration - petition allowed by way of remand.
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Indian Laws
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2018 (10) TMI 1010
Dishonor of cheque due to insufficiency of funds - Section 138 of the Negotiable Instruments Act - Clause (a) of sub-Rule (6) of Rule 3 of Order XXXVIII of C.P.C. - Held that:- The defendant has admitted their liability in no uncertain terms - After accepting their liability in no uncertain terms, at least vide 3 plaint documents, which have been alluded to supra, the defendant after receiving summons in the summary suit on 01.03.2017 has not entered appearance within 10 days and taken recourse to sub-rule (5) of Rule 3 of Order XXXVII of C.P.C. - Therefore, the plaintiff is certainly entitled to a judgment forthwith under Clause (a) of sub-Rule (6) of Rule 3 of Order XXXVIII of C.P.C. Whether there is a contract between parties to lis regarding rate of interest in the light of Section 34 of C.P.C.? - Held that:- As there is a contract between the parties, wherein the parties have agreed to pay interest at the rate of 0.375% per week, which according to the learned counsel for plaintiff translates to 18% p.a., plaintiff is entitled to get interest at 18% per annum, though 24% per annum has been prayed for in the prayer paragraph. Considering the trajectory of the suit and considering the fact that the sole defendant has not chosen to enter appearance and has compelled the plaintiff to carry the matter to its logical end by pursuing this suit for over 1½ years (to be noted plaint was presented on 25.01.2017), I am of the view that the plaintiff is entitled to costs - Suit is decreed with costs as prayed for.
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2018 (10) TMI 1009
Liability of a partner for acts of the firm - loan taken by partnership firm unpaid - recovery proceedings by bank - contention for the petitioner is that till date the entire repayment has been made by the petitioner only, the other partner and his legal heirs have not made any payment - partners jointly and severally liable for the acts of the firm - Held that:- It has not been disputed that the loan was taken by the partnership firm. Petitioner and Jai Singh were partners. The liability of the partners is co-extensive. The repayment of loan to the respondent No.3-bank cannot be stalled on the ground that there is dispute between the partners and that one of the partner is not discharging his share of liability. It is between the partners to settle their dispute inter-se. In case of a partnership firm, it cannot be contended by one of the partner that his liability is restricted according to his share and he will not discharge rest of the liability. The argument raised is against the provisions of Section 25 of Indian Partnership Act, 1932. As per Section 25 of the Indian Partnership Act, 1932, every partner is jointly and severally liable for the acts of the firm. The petitioner is liable to clear the liability of the firm. The right of the bank while making recovery is not affected by the individual share percentage of each partner in the firm, it is something into the partners. Thus the contention of the petitioner that on discharge of half of the liability, his share of property may be released by the respondent No.3-bank, deserves rejection. The alleged dispute between the partners is being used as a tool to deprive the respondent No.3- bank from recovering the outstanding dues. The property mortgaged was in joint ownership yet the endeavour is to get partial mortgaged property released. Petition dismissed.
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