TMI Tax Updates - e-Newsletter
October 23, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Input tax credit - Whether input GST credit can be availed by the applicant on the inputs i.e. Electrical Works, Pumps, Pumping systems and tanks, Lighting system, Physical security system and Fire System? - HELD No - the items do not have independent existence and are part and parcel of the entire building, a building with infrastructure.
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GST:
Levy of GST - online educational journals and periodicals are supplied to the Educational Institutions other than to preschool and higher secondary school or equivalent - Not eligible for benefit of exemption from GST.
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GST:
Supply of services - supply of OIDAR services to customers in India - The burden of proving that the a unregistered person located in the taxable territory has received OIDAR services for the purposes other than for business, commerce, industry or profession lies on the applicant.
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GST:
Exemption from GST - Sale of unbranded Rice - The manufacturers can hold the registered brand name while selling the rice under unregistered brand after following all the other conditions prescribed. However, if they sell in the registered brand name, they would not be eligible for exemption.
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GST:
Classification of supply - The applicant is supplying items of food as a part of service and since the provision of eating in the premises is provided or the customers may take the same away from the applicant’s place, the transactions under question are covered under the amended provision of Entry 7(i) - liable to GST @5% without ITC
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GST:
Proceedings before the National Anti-profiteering Authority - The litigant is entitled to be heard by all members who are the ultimate decision-makers so the litigant can try to convince each member of the adjudicating Authority. Therefore oral hearing is clearly contemplated and the argument of the Respondent that since all the record was before the Authority, there is no illegality in the fourth member in signing the order, is not correct.
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GST:
Profiteering - Respondent had increased the price of the flat after the introduction of GST - benefit of Input Tax Credit (ITC) not passed on - the Respondent has benefited from the additional benefit of ITC to the extent of 2.23% (6.55%-4.32%) and profiteered an amount of Rs, 5,06,78,069/including the GST from his customers.
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Income Tax:
Education expenses - the expenses incurred by the assessee company on the education of its director who was pursuing a management course, can safely be held to have been incurred wholly and exclusively for the purpose of its business.
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Income Tax:
Even in the event of addition being made u/s. 68 in the set aside proceedings, the assessee should be given the benefit of set off of current year’s business loss against the addition u/s. 68 of the Act.
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Income Tax:
Taxation of succession fee - value of any benefit or perquisite in the hands of Directors - the assessee has no obligation to make any payment towards success fee paid to Barclays, hence, it cannot be held that the assessee got any benefit from the success fee paid by the TMPPL as observed by the CIT(A) - No additions.
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Income Tax:
Income accrued in India - Referral fees has been received by the assessee on account of the referral made by assessee for the potential rendering of services by HSCI to the prospective client so referred - there is no element of managerial, technical or consultancy function discharged by assessee - Not taxable as FTS u/s 9(1)(vii)
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Income Tax:
Genuinity of transaction of purchase of trademark - it is outside the domain of the AO to question the necessity of incurring an expenditure - intangible assets such as trademark, goodwill are also qualifies for depreciation at prescribed rates.
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Income Tax:
The peak credit is applied where the assessee can correlate the deposits viz a viz withdrawal from the bank. As the assessee failed to establish the correlation between the deposit of cheques as well as cheques withdrawn from the bank. Therefore we are reluctant to apply the peak credit theory in the given facts and circumstances.
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Customs:
Over-Valuation - Import of Coal of Indonesian Origin - Even though the custom officers possess the said power, they do not become police officials within the meaning of Section 25 of the Evidence Act and it was held that the confessional statements made by the accused persons to custom officers would be admissible in evidence against them. - Section 166A is not an independent island on which any investigating/inquiring authority can jump on without taking recourse to Section 154/155
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Customs:
Refund of differential duty - assessment order not challenged - there are no option but to hold that the appeals are not sustainable and need to be rejected.
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Service Tax:
Refund of service tax - SEZ unit - The Notification provides that claim for refund shall be filed within one year from the end of the month, in which actual payment of service tax was made by the SEZ unit. The said clause provides discretion to the Central Excise officers for extending the period of limitation - Refund to be allowed.
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Central Excise:
Process amounting to manufacture - classification - placing of the vegetables cuisine, rice, roti, salad etc. on a tray and placing the leaflets bearing the logo as well as the name of “Ambassador Sky Chef” in the cutlery pack placed on the tray - Revenue failed to prove the same as manufacture - Demand set aside.
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Central Excise:
Maintainability of appeal - a new legal issue raised, that the appellant was a Partnership Firm and the same was dissolved by Dissolution Deed dated 09.03.2007, accordingly no proceeding could have been continued against the dissolved Partnership Firm. - The fresh issue raised is indeed a question of law which can be raised at any stage of litigation.
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VAT:
Condonation of delay in filing of an Appeal - Even if the possession being taken by the bank u/s 13(4) of the SARFAESI Act, there is no bar, therefore, for the appellant-writ petitioner to file an IA in the pending proceedings, u/s 17 of the SARFAESI Act, before the Debts Recovery Tribunal seeking release of the books of accounts, if any, lying within the factory premises - Petition dismissed.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (10) TMI 876
Input tax credit - Whether input GST credit can be availed by the applicant on the inputs i.e. Electrical Works, Pumps, Pumping systems and tanks, Lighting system, Physical security system and Fire System? - HELD THAT:- Since the applicant is in the business of providing rental commercial space, it is not disputed that the goods or services or both obtained by the applicant are in the course or furtherance of business. Subject to the conditions and restrictions as may be prescribed, they are entitled to take input tax credit on the tax charged on any supply of goods or services or both which are used or intended to be used in the course or furtherance of business as per sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017. The term construction includes re-construction, renovation, additions or alternations or repairs to the extent of capitalization to the said immovable property. The applicant has admitted that the works of electrical, structural, lighting, physical security and fire-fighting works are in the nature of works contract services and argued that they qualify as eligible credit under section 16 of the CGST Act. 2017. Section 17(5)(c) clearly states that no input tax credit would be available on the tax paid on Works contract services when supplied for construction of an immovable -property (other than plant and machinery) except where it is an input service for further supply of works contract services. It is clear that the items are fixed to the earth by foundation or structural support and are intended to be used for making an outward supply of provision of rental services and hence are covered under the definition subject to the exclusions - It is pertinent to note that the items do not have independent existence and are part and parcel of the entire building, a building with infrastructure. It is also seen from the intend of the applicant what is given on rental is the Space with all infrastructure and once these immovable properties come into existence, they get merged into the Common building space with modern infrastructure and facilities and hence are excluded from the definition of plant and machinery as applicable to section 17(5) of the CGST Act.
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2019 (10) TMI 875
Levy of GST - activity of technical testing and analysis - Whether the activity of technical testing and analysis carried out by the applicant is liable to Goods and Services Tax under the provisions of CGST Act and KGST Act? - HELD THAT:- The activity of the applicant is examined and found that the applicant is supplying services and the same is covered under the definition of supply as envisaged in Section 7(1) of the CGST Act and KGST Act and there is a supply of services for consideration in the course or furtherance of business. Scope of supply - Where the material for testing and analysis is sent from outside India to the applicant and on which the applicant carries out testing and analysis and issues certificate based thereon to the person not residing in India, whether it can be said that there is no supply by KBRPL involved in terms of Section 7 of the CGST Act read with KGST Act, 2017? - HELD THAT:- Since the activity of the applicant is treated as a supply it is immaterial from where the applicant is receiving goods and to whom he is supplying the services and in what form the consideration is received, so long as there is a supply of services and he receives consideration for the same and that supply is in the course or in furtherance of business. Hence the services provided by the applicant by receiving the goods from outside India and sending the report outside India is a supply of services. Where the customer providing the material is not residing in India and sends material from outside India to the applicant in India, for carrying out testing and analysis and issuance of certificate thereafter, such an activity if held to be supply in term of Section 7 of the CGST Act read with KGST Act, 2017, and where payments are received in convertible foreign currency, whether Invoice in terms of Section 31 of the CGST Act read with KGST Act, 2017, can be issued without charging Goods and Services Tax therein? - HELD THAT:- It is clear from section 31 (2) of the CGST Act, 2017 that a registered person supplying taxable service shall issue a tax invoice, unless exempted by the Government by notification, Hence the applicant is required to issue an Invoice as required under section 31(2) of the CGST Act for the supplies made. Whether the services of technical testing and analysis provided by the applicant to customers located outside India can be regarded as export of services as per section 2(6) of the Integrated Goods and Services Tax, 2017? - HELD THAT:- To determine the whether the transaction is an export of services the issue of place of supply must be determined and this authority is not authorised to decide on the issue of place of supply and hence no ruling is given on this account.
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2019 (10) TMI 874
Exemption from GST - supply of services in the nature of subscription to the J-Gate by the educational institution - N/N. 2/2018- Central Tax (Rate) - HELD THAT:- The nature of the activity undertaken by the applicant relates to compilation of a certain prepared data at one place. They are not involved in the creation of the journals. In respect of the metadata they are only the gateway to the journals. In this context what the applicant supplies is educational material/information already prepared by someone else. They act only as a platform for supply of information or as an aggregator of information in case of metadata. Instead, the transaction of supply of information by the applicant is more appropriately covered under the Heading 9984, Telecommunications, broadcasting and information supply services , under the Group 99843 and Service Accounting Code of 998431, the description of which is online text based information such as online books, newspapers, periodicals,, directories and the like . The explanatory notes to the scheme of classification of services refers. The articles are covered under the items and the like and hence the SAC applicable for the providing access to the portal is 998431. This service is liable to tax at 9% CGST under the entry no.22 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The transaction is liable to tax at 9% under the KGST Act as it is covered by entry no. 22 of Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017.
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2019 (10) TMI 873
Levy of GST - benefit of exemption from GST - online educational journals and periodicals are supplied to the Educational Institutions other than to preschool and higher secondary school or equivalent - N/N. 2/2018 - Central Tax (Rate) dated 25.01.2018. - Input tax credit. HELD THAT:- The transaction of the applicant is covered under the Heading 9984 Telecommunications, broadcasting and information supply services under the Group 99843 and Service Accounting Code of 998631, the description of which is online text based information such as online books, newspapers, periodicals,, directories and the like . The articles are covered under the items and the like and hence the SAC applicable for the providing access to the portal is 998431. This service is liable to tax at 9% CGST under the entry no.22 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The transaction is liable to tax at 9% under the KGST Act as it is covered by entry no. 22 of Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017. Since, the transaction is not exempt and tax is liable to be discharged, the input tax credit on the inward supplies of goods are not restricted or made ineligible under section 17 of the CGST Act. Hence the ineligibility provisions of Section 17(1) and 17(2) are not applicable to the pertinent case of the applicant.
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2019 (10) TMI 872
Supply of services - supply of OIDAR services to customers in India - non-taxable online recipient - HELD THAT:- The charge of tax on the supply of OIDAR services to a non-taxable online recipient would be on the service provider. In case of supply of any service by a person located in a non-taxable territory to any person other than non-taxable online recipient, the liability to pay tax rests on the person located in the taxable territory under reverse charge basis under Notification No. 10/2017-Central Tax (Rate) dated 28.06.2017 and such person is liable for registration compulsorily under Section 24(iii) of the CGST Act, 2017. The burden of proving that the a unregistered person located in the taxable territory has received OIDAR services for the purposes other than for business, commerce, industry or profession lies on the applicant.
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2019 (10) TMI 871
Whether Entry No. 80 in Schedule II to the Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017 (as amended) is applicable for import as well as supply of Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS) attracting a levy of Integrated Tax at the rate of 12% or Entry No.453 to Schedule III attracting a levy of Integrated Tax at the rate of 18%? HELD THAT:- It is also undisputed that the PRS is a reagent and this reagent is not used for diagnostic purposes. The reagents used for diagnostic purposes are covered under HSN 3822 0011 to 3822 0019 and reagents used other than for diagnostic purposes are classified under 3822 00 90. The applicant also agrees that the goods in question is Prepared laboratory reagents without a backing, other than those of heading 3002 or 3006 and is used exclusively for a specified analytical calibrating and referencing purposes and classifiable under HSN 3822 00 90. The description of the entry 80 reads all diagnostic kits and reagents means all diagnostic kits and all diagnostic reagents. The principle of ejusdem generis is applicable and reagents of the class of diagnostic reagents are covered under the entry no.80 of Schedule II of the said Notification. The contention of the applicant that there are two classes of goods covered under the said description, All diagnostic kits and reagents cannot be accepted for the reason that the words diagnostic is not just applicable to kits but also reagents . Hence it is very clear that commodities of HSN code 38220011, 38220012 and 38220019 which are for medical diagnosis are covered under the entry no. 80 of the Schedule II of the said Notification and not all laboratory reagents. The applicant also agreed that the goods he is dealing is not a diagnostic reagent but a laboratory reagent. The Prepared Laboratory Reagents or Pharmaceutical Reference standards (HSN 3822 00 90) which are not diagnostic reagents are not covered under Entry No.80 of Schedule II of Notification No. 1/2017 - Integrated Tax (Rate) dated 28.06.2017 and is covered under entry no.453 of Schedule III of Notification No. 1/2017 -Integrated Tax (Rate) dated 28.06.2017 and attracts IGST at 18%.
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2019 (10) TMI 870
Exemption from GST - de-registration of registered brand to sell goods - As a manufacturer of rice, can the applicant sell Rice under Registered Brand with 5% GST and also in Unregistered Brand with affidavit disclaimer under GST exempted category? - N/N. 1/2017 - Central Tax (Rate) dated 28.06.2017. As a manufacturer of rice, can the applicant sell Rice under Registered Brand with 5% GST and also in Unregistered Brand with affidavit disclaimer under GST exempted category? - HELD THAT:- If he is selling the goods in another brand name which is not registered, then he has to file necessary documents and also clearly follow the conditions prescribed for claiming the exemption. The applicant can possess the registered brand name while selling goods in unregistered brand, but to claim exemption he must not sell using the registered brand name. Is it compulsory to de-register the registered brand to sell goods in unregistered brand with nil rate of tax under GST? - HELD THAT:- The manufacturers can hold the registered brand name while selling the rice under unregistered brand after following all the other conditions prescribed. However, if they sell in the registered brand name, they would not be eligible for exemption. Whether sale of rice is exempt, if applicant forgo the actionable claim on brand name after de-registration? - HELD THAT:- When the person de-registered the registered brand name and sells the rice in the unregistered brand name, he shall voluntarily forego his actionable claim or enforceable right on such brand name. Further, he has to file an affidavit to that effect with the jurisdictional Commissioner of Central Tax or State Tax and on each such unit containers, clearly print in indelible ink, both in English and the local language, that in respect of the such brand name he has foregone his actionable claim or enforceable right voluntarily then such sale of rice is exempted from GST.
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2019 (10) TMI 869
Rate of tax - construction service rendered to NCBS - works contract service - whether the NCBS is covered under any one of the categories Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity? - HELD THAT:- The Government of India has agreed to fund the institute and the institute was to function as an autonomous unit under the aegis of TIFR. Hence it is clear that NCBS is neither set up by an Act of Parliament or State Legislature nor is established by any Government. Further the council which administers this institute has only four members appointed by the Government and hence the government does not have more than 90% control over it. One more important point to note is that this institute is not established to carry out a function entrusted by the Government. Hence, for all these reasons, NCBS is not covered under the definition of a Government Entity as per the clause (x) of paragraph 4 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The service supplied by the applicant is not covered under clause (vi) of Serial No.3 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time and hence is not taxable at 6% CGST and 6% KGST. And it is taxable at 9% CGST and 9% KGST under the residual item no. (xii) of Serial No.3 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time.
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2019 (10) TMI 868
Liability of GST - Reverse charge mechanism - Whether the Applicant is liable to discharge GST under reverse charge, for the contribution made towards NMET and DMF, in light of SI No. 5 of the Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017? HELD THAT:- The Government has provided the land on lease to the applicant to carry out the mining activity and in turn the applicant pays royalty along with the amounts paid to the District Mineral Foundation of the district and to the National Mineral Exploration Trust as specified by the Government. Applicant made these payments under the statutory requirements of the Mines and Minerals (Development and Regulation) Act, 1957 On perusal of the sections related to DMF and NMET, it is seen that both these payments are payable by a lessee in addition to the royalty and both the calculations are made on the basis of royalty - the value of the taxable supply of service not only includes the amount of royalty paid to the Government but it also includes the amount paid to the District Mineral Foundation of the district and to the National Mineral Exploration Trust as these payments are made under the statutory requirements of the Mines and Minerals (Development and Regulation) Act, 1957 which is taxable under GST. Taxes on the payment of royalty - payment made to District Mineral Foundation of the district and to the National Mineral Exploration Trust under reverse charge - HELD THAT:- Section 9(3) of the GST Act,2017 says, the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. Since the Government (Central/state) has provided the land to the applicant on lease to carry out the mining activity , the Government(Central/state) becomes the supplier of the service and the applicant (business entity) is the recipient of the service. Therefore, as per the Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017 applicant is liable pay GST on the payment made to the District Mineral Foundation of the district and payment made to the National Mineral Exploration Trust on reverse charge basis.
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2019 (10) TMI 867
Rate of GST - Classification of goods - Debarked Eucalyptus Wood - Debarked Acacia Wood - Casuarina Wood - Subabul Wood - The commodity in question is poles of wood of length 4 to 5 feet and may or may not contain bark and these are covered under Chapter 44 of the Customs Tariff - whether they are covered under HSN 4401 or 4403? - HELD THAT:- The goods in question is a wood in the rough, whether or not stripped of bark and hence is covered under the Heading 4403. Since they are split they cannot be covered under Heading 4404. he goods in question are covered by the heading 4403 and hence are covered under entry no. 134 of Schedule III to the Notification No.01/2017 - Central Tax (Rate) dated 28.06.2017 and liable to tax at 9% under the CGST Act, 2017 - Similarly, the same are covered under entry no. 134 of Schedule III to Notification (01/2017) FD 48 CSL 2017 dated 29.06.2017 and liable to tax at 9% under the Karnataka Goods and Services Tax Act, 2017 - The IGST Rate applicable on the inter-State supplies of these goods is 18% under entry no. 134 of Notification No. 01/2017 - Integrated Tax (Rate) dated 28.06.2017.
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2019 (10) TMI 866
Classification of supply - composite supply or not - supply of ice creams, chocolates, ice cream cakes, and pizza cakes in an IBACO outlet - principal supply is the supply of goods namely the ice cream and other products while the services supplied namely the air conditioned place, place to sit, the service of mixing various ice creams being naturally bundled in the ordinary course of business - serial no. 6(b) of schedule II of CGST Act and serial no. 6(b) of Schedule II of Karnataka GST Act - Whether the said supply will be classified under chapter 9963 and chargeable to 5% GST rate in accordance with serial no. (ii) of N/N. 46/2017 dated 14.11.2017 - Central Tax (Rate) read with serial no. 7(iv) of N/N.11/2017 dated 28.06.2017 and similar notification under KGST Act? HELD THAT:- The transaction of the applicant is examined and found that the applicant is supplying ice cream and other items of food which are made to order along with certain services. Hence the applicant is supplying both services and goods and they are naturally bundled - Since the supplies made by the applicant in IBACO outlets involve both supplies of goods and services, with one of them as principal supply, the same has to be considered as a composite supply. The composite supply of goods being food or any other article for human consumption or any drink, where supply or service is for a consideration, then such composite supply shall be treated as a supply of services. Since the applicant is supplying ice creams, which are items for human consumption, by way of or as part of any service or in any other manner, the composite supply has to be treated as a supply of services. The applicant is supplying items of food as a part of service and since the provision of eating in the premises is provided or the customers may take the same away from the applicant s place, the transactions under question are covered under the amended provision of Entry 7(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification No.46/2017 - Central Tax (Rate) dated 14.11.2017 and attracts a tax of 2.5% without any input tax credit.
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2019 (10) TMI 865
Classification of services - Whether the royalty paid in respect of Mining Lease can be classified as Licensing services for Right to use minerals including its exploration and evaluation falling under the heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods involving transfer of title in goods? - statutory contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per MMDR Act, 1957 - supply or not - reverse charge mechanism. HELD THAT:- The payment of royalty is for license given to extract minerals and the amount of royalty paid is based on the quantum of mineral extracted. Hence it is covered under Service Accounting Code 997337 -Licensing services for the right to use minerals including its exploration and evaluation, as it is a license to extract mineral ore and also the right to use such minerals extracted. Since the services covered under the license to extract mineral ore and also the right to use such minerals extracted is not covered under any of the sub-entries (i) to (v) of Serial No. 17, it needs to be seen whether the same is covered under entry no. (vi) of Serial No. 17 attracting the tax rate which is same as that applicable on the supply of like goods involving transfer of title in goods or under the Serial No. 35 which is related to the other miscellaneous services including services nowhere else classified. Whether the license to extract mineral ore and also the right to use such minerals extracted is a leasing or rental service, it is clear that what is supplied by the Government is the lease of the right to extract and use mineral ores and that is not covered by any specific entries in the serial no. 17 of the Notification and hence falls under the residual entry? - HELD THAT:- Upto the amendment of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 by the Notification No. 27/2018 - Central Tax (Rate) dated 31.12.2018, the tax rate for the above service was fixed at the rate of tax which was applicable on supply of like goods involving transfer of title in goods. In this case there was a transfer of title in goods involved in the activities of the applicant and that was of the extracted mineral ore on which the royalty was paid and hence the tax rate applicable on the service is the same rate of tax as applicable on the mineral ore - The applicant, therefore, is in receipt of supply of service on account of leasing of land by the government. Since the transaction of the applicant is not leasing of goods but license to extract and use mineral ore which involved the leasing of land, the transaction is covered under the residual entry (viii) of Serial Number 17 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by the Notification No. 27/2018 - Central Tax (Rate) dated 31.12.2018 and is taxable at 9% CGST. Reverse charge mechanism - statutory contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per MMDR Act, 1957 - HELD THAT:- Since the transaction is between the State Government and the applicant and the services are supplied by the State government to the applicant which is a business entity, and the transaction being a supply not covered under the exceptions, the applicant being the recipient of such service shall have to pay tax on the said supply under reverse charge mechanism as per Notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017. Valuation of taxable supply - HELD THAT:- Plain reading of Section 15 of the CGST / SGST Act along with Rule 27, shows that any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient is includible. Further, in section 15(2) of the CGST Act, it is clearly seen that any amount of any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than the GST related Acts are includible in the value of supply. There is no doubt that the amount payable to DMF and NMET are on account of supply made and are directly linked to the royalty payable and also computed as a fixed percentage of royalty. The service is a single service, there are no separate service providers for royalty, DMF and NMET and in all cases the Government which has provided the license to mine mineral ore and permitted the use of such mineral ore mined would be the person who has provided the service.
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2019 (10) TMI 864
Proceedings before the National Anti-profiteering Authority - section 171 of the Goods and Services Tax Act - main contention of the Petitioner is of violation of the principles of natural justice - HELD THAT:- The presence of a member of the Authority during the hearing is not a formality. Multi-member panels are constituted so a decision through discussion and exchange of opinions takes place. The litigant is entitled to be heard by all members who are the ultimate decision-makers so the litigant can try to convince each member of the adjudicating Authority. Therefore oral hearing is clearly contemplated and the argument of the Respondent that since all the record was before the Authority, there is no illegality in the fourth member in signing the order, is not correct. If the scheme itself provides for hearing by all members, not giving hearing itself will cause prejudice. Therefore the argument of the Respondents that there is no prejudice, also cannot be accepted. The issues that come up before the Anti-Profiteering Authority are complex. The Act and Rules provide no appeal. The Authority can impose a penalty and can cancel the registration. The term profiteering, under the Act and Rules, is used in a pejorative sense. Such a finding can severely dent the business reputation. The Authority is newly established. Therefore, as a guidance to this Authority, highlighting the importance of fair decision-making is necessary. The impugned order passed by the National Anti-Profiteering Authority is set aside - the proceedings before the National Anti-Profiteering Authority Respondent No.2. stand restored.
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2019 (10) TMI 863
Profiteering - Respondent had increased the price of the flat after the introduction of GST - benefit of Input Tax Credit (ITC) not passed on - contravention of provisions of Section 171 (1) of the CGST Act - HELD THAT:- It has been established that the methodology adopted by the DGAP while computing the percentage ratio of CENVAT/ITC to the turnovers for the pre-GST and the post-GST periods is correct and accordingly it is held that the Respondent has benefited from the additional benefit of ITC to the extent of 2.23% (6.55%-4.32%) and profiteered an amount of Rs, 5,06,78,069/including the GST from his customers. This Authority determines the profiteered amount as ₹ 5,06,78,069/- in terms of Rule 133 (1) of the CGST Rules, 2017 and directs the Respondent to pass on the benefit of ₹ 58,450/- to the Applicant No. 1 and ₹ 5,06,19,619/- to the rest 1060 flat buyers as per Annexure-17 of the DGAP Report, along with interest @18% per annum to all the 1061 recipients from the dates from which the above amount was collected by him from them till the payment is made, in terms of Rule 133 (3) (b) of the above Rules, within a period of 3 months from the date of this order. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 further orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him Penalty - HELD THAT:- The Respondent has denied benefit of ITC to his customers and resorted to profiteering in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus committed an offence under section 171 (3A) of the Act and therefore, he is liable for imposition of penalty under the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain as to why the penalty prescribed under Section 171(3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off.
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Income Tax
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2019 (10) TMI 862
Issuance of certificate u/s 197 (1) - rate of deduction of tax at source has been raised from 1% to 4% - Petitioner claims that the sudden rise of the rate at which the TDS is to be deducted is arbitrary and no reasons for the same have been communicated to the Petitioner, much less any hearing has been granted to the Petitioner - HELD THAT:- While deciding Jiangdong Fittings Equipment Co. Ltd v. Deputy Commissioner of Income Tax Ors. [ 2019 (9) TMI 1040 - DELHI HIGH COURT] we have held, after taking note of the earlier decisions in Bently Nevada LLC v. Income Tax Officer, Ward-1(1)(2), International Taxation Another [ 2019 (7) TMI 1503 - DELHI HIGH COURT] of this Court and the decision of the Bombay High Court in Tata Teleservices (Maharashtra) Ltd v. Deputy Commissioner of Income Tax (TDS) [ 2018 (2) TMI 192 - BOMBAY HIGH COURT] that Section 197 (1) does not require the Assessing Officer to grant personal hearing to the assessee prior to the issuance of the certificate. All that is required is that the Assessing Officer should have good reasons to issue the certificate under Section 197 (1) of the Act and the said reasons should be communicated to the assessee. As Senior Standing Counsel, on instructions, states that the standard operating procedure has now been formulated to provide that whenever there is an upward revision of the rate of deduction at source while issuing the certificate under Section 197(1) of the Act, the asseseee would be communicated the reasons for the same. We dispose of this petition with a direction to the Respondents to provide to the Petitioner, within one week, the reasons recorded for issuance of the impugned certificate fixing the rate of deduction of TDS at 4%.
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2019 (10) TMI 861
Validity of reopening of assessment - as per assessee re-opening notice was issued in the name of dead person - HELD THAT:- We note that the impugned reopening notice is addressed as Shobha Jagdish Ahuja, Legal Heir Jagdish M Ahuja, 402, Shravan, Plot No.542, 13th Road, Khar (W) Mumbai . Therefore it cannot be said that the notice has been issued in the name of a dead person. In fact it is issued to the Petitioner as the legal heir of the dead person the late Mrs.Shobha Jagdish Ahuja. Thus there is no substance in this submission. We note that for an earlier Assessment Year namely 2010-2011 a similar issue had arisen and the Petitioner had filed a Writ Petition - Commissioner of Income Tax (Appeals)-34 having his office at Earnest House, Nariman Point, Mumbai had instructed his Advocate to state before this Court that if a hard copy of the appeal is filed by Petitioner, the same would be accepted by Commissioner of Income Tax (Appeals) and adjudicated upon. This has become necessary in view of the fact that the Petitioner claims that he is not the legal heir of late Mrs.Shobha Jagdish Ahuja and therefore, is in no position to obtain heir-ship certificate which would enable to e-file his appeal before Commissioner of Income tax (Appeals).
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2019 (10) TMI 860
Unexplained investment - C.I.T.(A) sustaining the addition on account of purchase of Bonds/Debentures as unexplained investment - HELD THAT:- CIT(A) has passed a speaking order on merits. Assessee has brought no material on record to prove that the aforesaid investment amounting to ₹ 20 Lac was not made by the assessee (or made out of explained sources of income/wealth); despite the opportunities available to the assessee before Assessing Officer (during assessment proceedings, or during appellate proceedings before the CIT(A) and or now in ITAT). Perusal of materials on record including the aforesaid assessment order dated 31.03.2016, the aforesaid impugned appellate order of the learned CIT(A), and the aforesaid written submissions filed from the assessee s side; that no convincing case has been made to persuade as to take a view different from the view taken by the learned CIT(A). Therefore, we decline to interfere with the aforesaid impugned appellate order dated 23.12.2016 of the learned CIT(A); and dismiss this appeal filed by the assessee.
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2019 (10) TMI 859
Deduction u/s 80IC - whether the assessee is entitled for deduction u/s 80IC @ 100% for 6th to 10th assessment years from the year of the manufacturing as claimed by the assessee, on the ground that for the purpose of substantial expansion initial assessment years would be separate? - HELD THAT:- We find that Hon ble Supreme Court in the case of Aarham Softronics [ 2019 (2) TMI 1285 - SUPREME COURT] has held in case of substantial expansion, the said previous year would become initial assessment year and from that assessment year the assessee shall be entitled to hundred percent deduction of the profit and gains - CIT(A) on the issue in dispute is set aside and the Assessing Officer is directed to allow the deduction under section 80IC of the Act to the assessee s. Disallowance u/s 14A - assessee has challenged the disallowance only on the ground that statutory precondition of invoking Rule 8D has not been satisfied by the AO - HELD THAT:- We find that the Assessing Officer has properly recorded the dissatisfaction on the claim of assessee of expenses of ₹ 2000 per month incurred for earning dividend income No error in the order of the learned CIT(A) in upholding the disallowance under section 14A of the Act read with Rule 8D of the Income Tax Rules. The ground of the appeal of the assessee is accordingly dismissed.
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2019 (10) TMI 858
Receipts from sale of software be treated as royalty or not - income accrued in India - DTAA - HELD THAT:- Right to use granted through licensing of a software does not fall within the meaning of Royalty as provided for in the domestic law or the DTAA. Any consideration for the same is not taxable as Royally under section 9(1)(vi) or the relevant DTAA. What has been transferred by the appellant is neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. The right that is transferred is not a right to use the copyright but is only limited, to the right to use the copyrighted material and the same does not give rise to any royalty income. Regarding the applicability of amendment in Section 9(1)(vi) brought out by Finance Act, 2012, we find that this issue of applicability has been examined in the case of DIT Vs New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] as observed that the only manner in which change in position of the provisions of the treaty can be relevant only if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. The Hon ble High Court s observation is relevant to the instant case with regard to the amendment to the Act even though the judgment was given in the case of determination of royalty of payment of transponder fee, it adequately dealt with the issue of Section 9(1)(vi). From the above judgment, it can be concluded that the amendment in the DTAA unilaterally cannot be enforced, hence, the provisions of Section 9(1)(vi) are not applicable to the instant case. The contention of the Assessing Officer cannot be upheld. - Decided against revenue
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2019 (10) TMI 857
Validity of the reassessment proceedings in absence of proper approval given u/s 151 - HELD THAT:- A perusal of the copy of approval given u/s 151 shows that the Addl. CIT, while giving approval has simply mentioned: Yes. I am satisfied that it is a fit case for reopening of assessment u/s 148. Similarly, the PCIT, while giving approval has also simply mentioned: I am satisfied that it is a fit case for issue of notice u/s 148 of the IT Act. From the above, it is clear that none of the supervisory authorities have applied their mind. In the instant case, both the superior authorities have merely given their approval in a mechanical manner without independent application of mind, therefore, respectfully following the decision of the jurisdictional High Court in the case of N.C. Cables [ 2017 (1) TMI 1036 - DELHI HIGH COURT] I hold that the reassessment proceedings are bad in law. Appeal filed by the assessee is allowed.
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2019 (10) TMI 856
TP Adjustment - comparable selection - functional similarity - HELD THAT:- Assessee, in the instant case, is engaged in the provision of information technology (IT) enabled back office support service in the nature of customized proprietary research and analytic support to Copal group. The assessee in the year under consideration has entered into international transaction to the tune on account of provision of Information Technology Enabled Services thus companies functionally dissimilar with that of assessee need to be deselected.
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2019 (10) TMI 855
Expenditure of licence fee - revenue or capital expenditure - payment was made for limited license to use the technical information and regulatory approvals provided by the OLL - HELD THAT:- It is only in the case of the assessee acquiring the ownership of such know-how, the expenditure would fall in the domain of capital, lest the expenditure would be allowable Revenue deduction. Exclusiveness is otherwise of the license only impacts the company to position of the assessee in the market but does not result in creation of new profit earning apparatus. In CIT v. Modi Revlon (P) Ltd [ 2012 (9) TMI 48 - DELHI HIGH COURT] held that if ownership of know-how remains with the licensor, the royalty paid towards use of such know-how shall be allowable revenue expenditure notwithstanding that the licensee had an exclusive license. We are also not in agreement with the findings of the assessing officer that since the assessee had entered into the agreement to be in force for a period of 15 years, they had obtained a benefit of enduring nature in view of class 16.1 and 18.2 of the agreement where under the assessee is under an obligation to discontinue the use of technical information and regulatory approvals immediately in the event of termination of the agreement as stated therein. The benefit enjoyed by the assessee is co-terminus with the enforcement of the agreement. What is relevant to be seen here is whether the assessee held the rights under the agreements in perpetuity or at least further agreed period of 15 years in continuity or such an agreement had met with a premature termination and such a fact strengthens the argument of the assessee that no endurable benefit had accrue to the assessee under such an agreement. Technical information and the marketing approvals of a product provided by the licensor only facilitates greater acceptable of the products of the assessee leading to higher profitability in the existing business of distribution and marketing of products carried on by it, without addition to the profit earning apparatus and on this premise we return a finding that the length of advantage in terms of time derived by the assessee has no bearing on the question to decide the nature of expenditure incurred by the assessee by way of licence fee. No benefit of enduring nature had accrued to the assessee under the agreement dated 30/06/2012 entered into by the assessee with OLL and OTL and the licence fee paid by the assessee under such an agreement is in the nature of Revenue expenditure, which is allowable. With this view of the matter, we allow the appeal of the assessee.
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2019 (10) TMI 854
Rectification of mistake u/s 254 - 1st fold of contention of the Revenue that the ITAT has not provided sufficient opportunity for the additional ground raised by the assessee - HELD THAT:- On perusal of the application filed by the assessee for filing the additional ground of appeal dated 04.06.2019, we note that the copy of the additional ground was also forwarded to the departmental representative. DR was present on the date of filing the additional ground of appeal as well as on the date of hearing i.e. 06.06.2019 and 11.06.2019 respectively. Moreover, there was no objection raised by the learned departmental representative on the date of hearing seeking time for the preparation of the case on the additional ground of appeal. It is inferred that there was consent of the learned departmental representative at the time of hearing of the appeal and no objection of whatsoever was raised for seeking the adjournment. In the impugned case was the stay granted matter and the assessee in the stay order was directed not to seek any adjournment without just cause. Had there been any objection from the side of the revenue on day of hearing of the case, the learned DR was to move an application for the same. But we find that there was no such application moved by the revenue. Appeal filed by the assessee was adjudicated on technical ground raised by the assessee holding that there was no satisfaction recorded by the AO before initiating the proceedings u/s 153C - such issue was raised by the assessee in ground No. 3 as well as additional ground of appeal filed in the letter dated 4 June 2019. Thus, it is clear that the grievance of the revenue that there was not provided sufficient opportunity to the revenue does not appear to be correct in the given facts and circumstances. We hold that there is no mistake apparent from the record in the order of the ITAT on account of non-granting of the opportunity to the revenue. Initiating the proceedings u/s 153C - ITAT in his order [ 2019 (7) TMI 1525 - ITAT AHMEDABAD ] after considering the materials available on record including the information obtained under RTI decided the appeal of the assessee. Moreover, we note that there was the circular No. 24/2015 issued by the CBDT dated 31 December 2015 requiring the AO to record the satisfaction under the provisions of section 153C of the Act even if the AO of such person and the other person is one and the same Moreover, we note that the revenue has not pointed out any specific defect in the order passed by the ITAT. As we have already held that, the scope of the rectification under section 254(2) of the Act is very limited to the extent of mistake apparent from record for which 2 views are not possible. Thus we hold that the ITAT has taken a conscious decision after due application of mind. Thus the order of the tribunal does not suffer from any infirmity which is apparent from record. In view of the above discussions and finding, we are of the view of that there is no merit in the Misc. Application filed by the Revenue, which is accordingly dismissed.
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2019 (10) TMI 853
Addition of gift - addition u/s 68 - HELD THAT:- Regarding these three gifts, assessee could not establish the credit worthiness of the transaction and it is by now a settled position of law that the assessee has to establish identity and creditworthiness of the donor as well as genuineness of the transaction. Regarding Abbubakar, deposit of ₹ 2.20 lakhs in question could not be properly explained even by Abbubakar in course of statement recorded by the AO u/s 131 and it is also noted by the AO that this deposit is not on account of conversion of dollars whereas other deposits of very smaller amount were on account of conversion of dollars. When the deposit of ₹ 2.20 Lacs in the bank account of Abubaker could not be explained by Mr. Abubaker and such deposit is not on account of dollar conversion as other deposits, it has to be accepted that the creditworthiness of the donor and genuineness of the transaction is not established and under these facts, we find no infirmity in the order of CIT (A) on this issue. Regarding gift from P.V. Gangadharan, it is true that he could not be located because of his death but it is also true that P.V Gangadharan was not related to the assessee in any manner. Merely because money has come through banking channels, genuineness of the transaction is not established, even if we accept that identity and credit worthiness is established. Gift to unrelated person is not a normal human behavior. No relationship with Gangadharan has been pointed out whether blood relationship or friendship or any other relationship. Similarly, in respect of Oswal Pinto, even correct address could not be brought on record by the assessee. This is also not shown that Oswal Pinto is related with assessee in any manner whether blood relationship, friendship or any other relationship. Hence, on this issue, regarding these three gifts, we find no reason to interfere with the order of the CIT(A). Additions of each being loan from Maxim Lobo and Madhukmar - AO came to conclusion that genuineness of the transaction was not proved by the assessee. He made addition of this amount also. It is by now settled position of law that in respect of addition u/s 68 in respect of cash credit, the assessee has to establish three ingredients i.e. identity of the creditor, credit worthiness of the creditor and genuineness of the transaction. Regarding loan from Madhukumar, he has in fact denied about any loan to assessee and he was an employee with assessee only with a monthly salary of ₹ 2000 per month. Regarding Maxim Lobo, assessee could not provide even correct address. Hence, we are satisfied that the assessee could not establish identity of both these creditors and their credit worthiness and genuineness of the transaction and hence, on this issue also, we find no reason to interfere with the order of the CIT(A) Additions each in respect of two blank cheques each from A.H. Timbers and Jyothi Apparels - HELD THAT:- As submission was brought to the knowledge of the assessee by the AO and the AO stated in the assessment order that in spite of this, assessee did not have anything to say by filing reconciliation or rebut the evidence given by him in the form party s own statement. In the synopsis filed before us also, it is stated by the ld. AR of the assessee that these advances were given by the assessee out of pigmy collections made by the assessee from various parties and hence, source of these two advances by the assessee is explained. Regarding source of advances, general statement is made that the same is out of pigmy collections from various parties without giving even any one name of such parties and hence, on this issue also, we find no reason to interfere with the order of the CIT(A). Addition being advance to M/s.Kumble Associates - no confirmation has been brought on record from M/s Kumble Associates in support of the contention of the assessee that this cheque was given by them without any loan given by the assessee to him or any other person. Hence, we find no reason to interfere with the order of the CIT(A) on this issue also. Addition in respect of deposit in KSRTC - HELD THAT:- This submission of the assessee is not acceptable because father-in-law of assessee, Raghuram Hegde and never stated at any time during the course of his statement recorded on 12/4/2001 and 4/5/2001 that he had made said payment on behalf of his son-in-law. No evidence has been brought on record before us in support of this contention that this amount was deposited by the father-in-law of the assessee with KSRTC and on refund of that amount from KSRTC, this was gifted by his father-in-law to the assessee. In absence of any evidence in support of this contention, we find no reason to interfere with the order of the CIT(A) on this issue also. Addition in respect of insufficient drawings - HELD THAT:- As stated by the assessee before AO that his monthly expenditure is ₹ 3,000 to ₹ 5,000 per month and he was meeting the same out of his drawings only and not from any other source. Regarding expenses towards house warming, it was submitted that by assessee before the AO that only a few family members were invited and the total expenses were about ₹ 15,000/- although it was noted that as per the statement of assessee s wife, minimum 100 persons including relatives and friends had been invited for function. AO estimated the expenses of the assessee at ₹ 6,500/- p.m. for entire block period. In this manner, he worked out expenses of ₹ 7,99,500/-. Total drawing shown by the assessee and his wife is ₹ 2,65,353/- and shortage of ₹ 5,34,147/- was added. We find that the assessee himself has admitted before AO that his monthly expenses are around ₹ 3,000 to ₹ 5,000/- per month and the AO has estimated such monthly expenses at ₹ 6,500/- per month and computed total expenses during block period of 123 months at ₹ 7,99,500/- without making any separate addition in respect of house warming party. As per details of club expenses noted by the AO at page 25 of the assessment order, such club expenses are ₹ 31,944/- during October 1998 to March 1999 and in addition to that, telephone expenses of about ₹ 1500/- p.m. during February 1996 to May 1999 as per details noted by the AO at page 25 of the assessment order. Under these facts, estimation of monthly household expenses of ₹ 6500/- per month during block period is not excessive/unreasonable and hence, on this issue also, we find no reason to interfere with the order of the CIT(A).
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2019 (10) TMI 847
Revision u/s 263 - HELD THAT:- We are of the considered view that now when the assessment order passed by the A.O under Sec. 143(3) r.w.s 144C(3), dated 25.05.2015 is in itself found to be non-est in the eyes of law, therefore, the Pr. CIT-2, Mumbai could not have revised the same in exercise of the powers vested with him u/s 263 of the Act. We are of the considered view that the order passed by the Pr. CIT under Sec. 263, dated 24.10.2017 cannot be sustained on two counts viz. (i) that, the order of revision u/s 263 has been passed by the Pr. CIT in the name of M/s Satyam Computers Services, i.e a company which was non-existent on the date of passing of the order; and (ii) that, the Pr. CIT in exercise of his power u/s 263 was divested on his jurisdiction of revising an assessment order which in itself was non-est in the eyes of law. We thus on the basis of our aforesaid observations quash the order passed by the Pr. CIT under Sec.263 of the Act, dated 24.10.2017, on the ground of invalid assumption of jurisdiction on his part. As we have quashed the order passed by the Pr. CIT-2, Mumbai, under Sec.263 of the Act, for want of jurisdiction, therefore, we refrain from adverting to the merits of the issues therein involved, which thus are left open. The appeal of the assessee is partly allowed
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2019 (10) TMI 846
Capital gain contribution - Reference to DVO - Difference between the value determined by the DVO and the value declared by the assessee - non rejection of books of accounts - HELD THAT:- Assessing Officer while passing the order for assessment year 2010-11 has himself accepted the value determined by the DVO and has made proportionate addition for assessment year 2010-11. Therefore, when the Ld.CIT(A), following the report of the DVO has reduced the disallowance, the Revenue should not have any grievance. Accordingly, the grounds raised by the Revenue are dismissed. Coming to the grievance of the assessee, it is an admitted fact that the books of account of the assessee have not been rejected before referring the matter to the DVO for determination of the cost of construction. The Hon'ble Supreme Court in the case of Sargam Cinema [ 2009 (10) TMI 569 - SC ORDER] has held that an assessing authority cannot refer any matter to the DVO without rejecting the books of account. Since, in the instant case, it is an admitted fact that the books of account of the assessee are not rejected and the assessee has maintained all bills and vouchers which are not found to be false or untrue, therefore, without rejecting the books of account of the assessee, the Assessing Officer could not have referred the matter to the DVO for determination of the cost of construction and thereby making addition on the basis of such difference. Even otherwise also, it is an admitted fact that the difference between the cost of construction declared by the assessee at ₹ 85.22 crores as against the value determined by the DVO of ₹ 82.68 crores is only 2.54 crores which is less than 3% of the total cost of construction declared by the assessee. Thus, the difference being less than 3% is very insignificant. We find the Hon'ble Delhi High Court in the case of CIT vs. Ambience Developers and Infrastructure (P) Ltd., [ 2012 (8) TMI 157 - DELHI HIGH COURT] has held that for insignificant difference between cost of construction as per books of account and that estimated by the DVO, addition on the basis of DVO s report is not justified. Since, in the instant case, the assessee has maintained the books of account supported by bills and vouchers for the construction of the mall and hotel, which was not rejected by the Assessing Officer before sending the matter to the DVO for determination of the cost of construction and since the difference in the value declared by the assessee and the value determined by the DVO is also very insignificant being less than 3% of the total cost of construction declared by the assessee, therefore CIT(A) was not justified in sustaining the addition - Decided in favour of assessee.
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2019 (10) TMI 845
TPA - Advertising and Marketing Promotion (AMP) Expenditure Adjustment - Whether AMP expenditure incurred by the assessee during the year is an international transaction? - can the value of the AMP transaction be extended or expanded beyond the amount received as reimbursement under the MDF agreement? - HELD THAT:- For any transaction of AMP entered into between the assessee and another enterprise which is not an AE u/s 92A of the Act, this understanding or arrangement has to be shown to exist. If the assessee denies having any such arrangement or understanding with its AE or when there is no apparent material on record to show that there exists any agreement, arrangement or action in concert between the two related parties, the onus rests on the Revenue to demonstrate the same before it can apply the provisions of Chapter X on the AMP expenditure. In the present case, the only ground on which the Ld. TPO and the Ld. DRP have concluded that the AMP expenditure constitutes an international transaction is the excessive quantum of expenditure which is stated to be much above the bright line of the average AMP spend of the comparable companies. This approach, to our mind, is contrary to law and untenable. A perusal of the terms of the MDF agreement shows that the reimbursement of a portion of the advertising and marketing expenditure incurred by the assessee by its AE is on a preapproval basis and under an annual budget decided solely by the AE. The nature of reimbursement received is a form of assistance or subsidy and does not arise on account of any service rendered by the assessee. There is no obligation on the AE to approve any particular item of expenditure. It is solely on its own volition that the AE determines the activity it wants to finance/reimburse/assist. Therefore, it is not possible to infer the existence of an international transaction beyond what has been reimbursed. The arrangement and understanding were limited to the amounts agreed to be paid as assistance under the MDF Agreement. The amounts incurred as AMP expenditure by the appellant under the MDF Agreement have already been received as reimbursement/assistance and have indisputably been disclosed as an international transaction in Form 3CEB and form part of the transfer pricing study conducted under Rule 10D. The AMP expenditure which is outside the ambit of reimbursement received under the MDF Agreement, has been incurred by the appellant on its own volition as per its own requirements and without any interference of the AE and have been paid to third parties. We hold that the scope and value of international transaction cannot be expanded beyond the reimbursements received under MDF agreement to cover the entire gamut of AMP expenditure incurred by the assessee during the year. Whether Bright Line Test a valid test that can be used by the TPO to determine the existence of an international transaction and also for the determination of its arm s length value? - bright line approach is untenable in law either as a way to determine the existence of an international transaction or as a method to determine the ALP of an international transaction pertaining to AMP. No international transaction can be presumed to exist merely on the basis of bright line of expenditure incurred by comparable companies. If TNMM has been adopted at segmental/entity level, then can individual component of AMP be segregated? - In the present facts, we find that the TPO has subjected various international transactions of the assessee to TNMM analyses under various segments and made transfer pricing adjustments on the basis of external comparables chosen by him. Several of these comparable companies included/excluded by him form subject matter of the present appeals. It implies that the TPO has applied his mind on the suitability of TNMM and made adjustments. Having adopted TNMM in a considered manner, it is not open for him to take up AMP as a separate transaction and subject to the same to a Cost Plus type of benchmarking because the entire AMP expenditure forms part of the operating expenditure that has been taken into account while computing the profit level indicator (net profit margin). Brand building exercise equivalent to incurring AMP expenditure - it would be erroneous to treat any and all AMP expenditure as being a brand building exercise. There is no basis to presume that there is a positive correlation between AMP expenditure and brand-value. Brand value is a far more complex concept than mere AMP expenditure. Brand is an intangible asset that encapsulates the reputation of an entity and a reputation is built over a long period of time primarily on the basis of trust it invokes. Year to year AMP expenditure may vary due to market conditions, but the brand value does not get altered in proportion to expenditure. AMP function itself is a complex activity involves several nuanced aspects of marketing management targeted towards increasing sales. Such an exercise is sometimes premised on product promotion and sometimes brand messaging and occasionally for brand familiarization. But the core of brand value is not determined by the quantum of expenditure incurred but the overall level of trust inspired in the minds of the consumers. If the Indian distributor has been deprived of the opportunity of recovering its investment in AMP, it could be a valid reason for a transfer pricing adjustment because third parties would not agree to a premature termination of this kind without demanding compensation. Therefore, the question of compensating the taxpayer for any loss suffered due to excess AMP spend would arise only at the time of such premature termination and not during the pendency of the distributorship arrangement. Thus, in case of a routine distributor, disallowance/adjustment on account of AMP spend on the mere assumption that the supplier may terminate the agreement in the future is not sustainable. A taxpayer cannot be penalized on the presumption of a future event (which may not even occur) while ignoring the present facts and circumstances. It is also worthwhile to note that in the present case, the assessee has not paid any trade-mark or brand royalty to its AE for having used its brand. Whether it is permissible for the TPO to make a substantive and protective assessment on the same issue using two alternative approaches? - It is settled law that protective addition along with substantive addition of an item of income can be made only when the identity of the real owner of the income is unclear. See MSD PHARMACEUTICALS PRIVATE LIMITED VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX SPECIAL RANGE 6, NEW DELHI [ 2017 (11) TMI 1783 - ITAT NEW DELHI] Adjustment in respect of transactions undertaken by the appellant with its AEs in Class II segment - As underlying difference between the transfer price and arm s length price does not exceed 5% of the latter and thus, the case is squarely covered by the proviso to section 92C (2) of the Act. - HELD THAT:- In view of the details submitted by the assessee which have not been disputed or controverted by the Ld. CIT(DR), it is apparent that by applying the permissible 5% margin under the second Proviso to Section 92C(2), no adjustment is warranted. Accordingly, this ground is allowed and the adjustment made by the Ld. CIT (A) is directed to be deleted. Excluding certain comparables while benchmarking international transactions under Class I Manufacturing and Class II Distribution Segment - HELD THAT:- The Assessee is engaged in manufacturing of consumer electronics, home appliances colour monitors (known as Class IManufacturing segment) which includes the import of raw materials, import of spare parts, export of finished goods, purchase of samples and purchase of sales promotion material thus companies functionally dissimilar with that of assessee need to be deselected. Lower the level of RPT, more accurate the result is likely to be. However, if sufficient number of comparables is not available due to paucity of data or comparables, the RPT threshold may have to be relaxed upwards for reasons of practicality. However, in situations where sufficient numbers of comparables are available by applying a lower threshold, the same should be preferred as the results are likely to be more accurate. The same view has been expressed by the coordinate Bench in the case of Motorola Solutions India Pvt. Ltd [ 2014 (10) TMI 358 - ITAT DELHI] . We accordingly hold that since in the given situation sufficient numbers of comparables are available even by following the lower level of threshold of 15%, the same should be followed. Deferred revenue expenditure - AO held that the benefit of expenditure on recruitment and training of employees is not restricted to one year and accordingly has to be apportioned over 6 years - HELD THAT:- The said issue is covered by decision of Hon ble Delhi High Court in Assessee s own case for AY 1999-2000, 2002-03 and AY 2003-04 wherein the Delhi High Court affirmed the decision of this Hon ble Tribunal allowing the deduction of expenditure incurred on recruitment and training of employees. The Ld. Counsel submitted that the Ld. AO erred in treating it as a deferred revenue expenditure on the assumption that recruitment expenses will result in long term benefit. He failed to appreciate that such expenditure was revenue in nature, incurred for the purpose of business and therefore allowable under section 37(1) of the Act Depreciation on UPS - classifying them to be plant and machinery OR computers - @ 15 % OR 60% - HELD THAT:- We are in agreement with the Ld. Counsel of the Appellant that this issue is no longer res integra as this Tribunal has already taken a view that for depreciation purposes, UPS falls under the category of Computers being a computer peripheral. The law in this regard has been settled by various decisions, particularly the decision of the Hon ble Jurisdictional High Court in the case of CIT v. BSES Rajdhani [ 2010 (8) TMI 58 - DELHI HIGH COURT] Allowable revenue expenditure - training and recruitment expenditure is fully allowable as revenue expenditure in the year in which it is incurred. There being no enduring benefit it cannot be treated as capital expenditure or deferred revenue expenditure. Allowability of loss recognized under accounting standards under marked to market (MTM) guidelines in respect of forward forex contract which are open and unexpired on the last date of the balance sheet on account of restatement of amounts payable and receivable in foreign exchange confirmed Disallowance u/s 40(a)(i)/(ia) - assessee has reversed the provision created in the previous year - HELD THAT:- Section 40(a)(i) or (ia) has no application as there is no expense which has been incurred. The allowability of the reversal of the provision is a deduction that is claimed on the basis of alignment of the books of accounts with the taxable income. Therefore, the reasoning of the Ld. AO that as no tax has been deducted and deposited the said reversal of provision should not be allowed to be reduced from taxable income is on completely wrong footing because claim of the assessee pertains to reversal of excess provision created in preceding year for which vendors were not identifiable, and thus the question of deducting tax on the same does not arise. AO and the DRP have erred in not appreciating that in the preceding year at the time of creation of the said provision, the same was already suo-moto added back to the income under the head Profits and Gains of business or Profession, for the reason that it is not allowable under the Act. Therefore, in the current year, on the reversal of the said amount, the same should be allowed to be reduced in computing the total income else it would lead to double taxation of the same. The decision of the coordinate Bench in the case of Johnson Matthey India Pvt. Ltd. [2013 (8) TMI 830 - ITAT DELHI] cited by the appellant is applicable to the present facts - we allow this ground and direct the AO to allow this deduction.
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2019 (10) TMI 844
Disallowance of motor vehicle expenses - allowable revenue expenses u/s 37(1) - HELD THAT:- Unable to persuade ourselves to accept the view taken by the lower authorities, that as Shri Uday Singh, director of the assessee company in whose name the aforesaid motor car was registered also happened to be a director in two other companies, therefore, the aforesaid claim of depreciation, interest expenditure, and vehicle expenses pertaining to the said car were liable to be disallowed on the said count too. In our considered view, the fact that somebody other than the assessee is also benefited by the expenditure incurred by the assessee cannot come in the way of allowability of the said expenditure, if it otherwise satisfies the test of commercial expediency. Apart there from, the view taken by the A.O that the personal expenses pertaining to the aforesaid motor car cannot be ruled out, we are afraid cannot be accepted. As the case before us is that of a company, therefore, in our considered view there can be no question of any personal expenses - We vacate the disallowance of motor vehicle expenses made by the A.O. Disallowance of education expenses - HELD THAT:- As observed by the authorities below, that as Shri Uday Singh was a director of three different companies (including the assessee company), therefore, it could safely be concluded that the expenditure incurred on his education was not wholly and exclusively for the purpose of the business of the assessee company. Apart there from, it was observed by them, that the assessee had also not been able to support its claim by showing any real connection between the expenditure so incurred and the business of the assessee company. As such, the A.O had disallowed the aforesaid claim of expense raised by the assessee u/s 37(1) of the Act. We have given a thoughtful consideration to the aforesaid issue before us, and are unable to subscribe to the view taken by the lower authorities. Admittedly, a perusal of the facts borne from the records reveals that Shri Uday Singh, director of the assessee company had gone for a management programme/course at Harward Business School. The expense therein involved were borne by the assessee company. In our considered view, the expenses incurred by the assessee company on the education of its director viz. Mr. Uday Singh, who was pursuing a management course, can safely be held to have been incurred wholly and exclusively for the purpose of its business. As observed by us hereinabove, merely for the reason that the aforesaid higher education of the director of the assessee company viz. Mr. Uday Singh would also benefit the two other companies in which too he was a director, in our considered view, cannot form a basis for dislodging the said claim of expenditure incurred by the assessee company. We thus not finding favour with the disallowance of the education expenses by the A.O, which thereafter had been sustained by the CIT(A), delete the same.
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2019 (10) TMI 843
Reopening of assessment u/s 147 - contravention of the provision of sec. 40A (3) - Joint Commissioner, without applying his mind - HELD THAT:- Joint Commissioner who has given approval for such reopening has simply mentioned: Yes, it is a fit case for issue of notice u/s 148 of the Act, 1961. A perusal of the approval given by the Joint CIT shows that he has not applied his mind properly and has in a mechanical manner written: Yes, it is a fit case for issue of notice u/s 148 of the Act, 1961. Reassessment proceedings initiated by the Assessing Officer are not as per law and has to be quashed. As find the reopening was made on the ground that the transaction of the assessee with M/s Uflex Ltd. and M/s Montage Enterprises are not verifiable and, hence, income above ₹ 1 lakh has escaped assessment. A perusal of the assessment order shows that no such addition has been made, but, the addition has been made u/s 40A(3) on account of cash payments and no addition on the very basis on which the assessment was reopened has been made. It has been held in various decisions that when the assessment is reopened on a particular issue and no such addition has been made on that very issue, then, the Assessing Officer cannot make other additions which might have come to his notice during the course of completion of such reassessment. He has to issue separate notice. Since, in the instant case, the Assessing Officer has not made any addition for which the case was reopened, therefore, he lacks the jurisdiction to assess such other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of such proceedings. Therefore, on this ground also, the addition made by the Assessing Officer and sustained by the CIT(A) is not justified - Appeal filed by the assessee is allowed.
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2019 (10) TMI 842
Unexplained cash credit u/s 68 - HELD THAT:- We are of the view that u/s. 68 of the Act, it is only the credit entry appearing in the books of account of an assessee for the relevant previous year, that can be treated as unexplained cash credit in the absence of proper explanation by the assessee. Therefore, the opening balances cannot be added u/s. 68. Closure of business of assessee in June, 2015 was a sufficient cause for non-production of evidence before the AO and therefore the CIT(Appeals) ought to have admitted additional evidence in terms of Rule 46A(1)(c) of the Rules. The same reason would hold good for the assessee s claim with regard to discrepancies in the closing balance of sundry creditors as shown by the assessee in the books of account. The additional evidence sought to be filed by the assessee ought to have been admitted for adjudication by the CIT(Appeals). Set aside the order of CIT(Appeals) and remand the issue to the AO for fresh consideration with regard to the issue of addition u/s. 68 AO will consider the additional evidence filed by the assessee before the CIT(Appeals) and after giving opportunity of being heard to the assessee, decide the addition u/s. 68 afresh in accordance with the law. As far as the refusal of the AO to allow set off of current year business loss against income added u/s. 68 of the Act by relying on the provisions of section 115BBE(2) which was inserted by the Finance Act, 2016 w.e.f. 1.4.2017, it is not in dispute before us that the CBDT in Circular No.11 of 2019 dated 19.6.2019 clarified that the amendment sought to be relied upon by the AO is applicable only prospectively and therefore not applicable to AY 2015-16. Hence even in the event of addition being made u/s. 68 in the set aside proceedings, the assessee should be given the benefit of set off of current year s business loss against the addition u/s. 68 of the Act.
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2019 (10) TMI 841
Allowability of Education Cess - HELD THAT:- As in CHAMBAL FERTILISERS AND CHEMICALS LTD., PR. COMMISSIONER OF INCOME TAX, KOTA. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] observed therein that in the CBDT circular where word Cess is deleted and therefore, the Tribunal has committed an error in not accepting the contention of the assessee. Apart from the Supreme Court decision referred that assessment year is independent and word Cess has been rightly interpreted by the Supreme Court that the Cess is not tax - we allow these additional grounds raised before us in respect of the allowability of deduction regarding Education Cess paid by the assessee. Disallowance of provision for warranty - HELD THAT:- The assessee s own case for assessment year 2011-12 the Tribunal has given catetorical findings stating that the policy adopted by the company was not found erroneous by the authorities in any forum and therefore, it is wrong to infer that the assessee does not have a policy and the contractual obligation to make the payment in principle and the quantification is also not found erroneous and unscientific by the authorities. It was also observed by the Tribunal that unutilized provision is carried forward to the subsequent years by maintaining the opening and closing balances. Without bringing any evidence on record, the allegation of the Assessing Officer and the CIT(A) that the warranty expenses are not claimable was held to be incorrect. The assessee has maintained this method in principle over the years and they are not disturbed conclusively and hence, these provisions were allowed as claimed by the assessee Administrative Service Charges allowability - HELD THAT:- Admittedly, the issue arising before us is identical to the issue before the Tribunal in Tata Johnson Controls Automotive Ltd. Vs. DCIT [ 2016 (4) TMI 963 - ITAT PUNE] and following the same parity of reasoning, we hold that the said expenditure is to be allowed in entirety in the hands of assessee being paid in accordance with the terms of the Agreement agreed upon between the parties and for the purpose of carrying on the business of assessee more efficiently. It may be pointed out herein that the assessee had initially entered into an Agreement with TACO in 1997 and the said expenditure had been allowed in the hands of assessee from year to year. However, the assessee renewed the Agreement in 2006 and the expenditure for the first time was not allowed in the hands of assessee in assessment year 2006-07. We find no merit in the orders of authorities below in this regard and accordingly, we modify the order of CIT(A) and direct the Assessing Officer to allow the expenditure in entirety in the hands of assessee
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2019 (10) TMI 840
Addition on account of income from sale of investment - assessee is into insurance business - HELD THAT:- We are of the considered view that investment made by the assessee are part and parcel of insurance business and the assessee has rightly treated the income from sale of investment as part of business of insurance. Moreover, in 2005-06, the Revenue itself has decided this issue in favour of the assessee by holding that profit and loss arising from the sale of investment is not chargeable to tax separately. In other words, it is beyond the purview of section 44 of the Act. Consequently, we are of the considered view that AO/CIT(A) have erred in making addition on account of income from sale of investment and as such are ordered to be deleted. Fringe Benefit Tax (FBT) provisions applicability - HELD THAT:- FBT provisions is not sustainable on the ground that in Rule 2 of Schedule 1 of the Act, there is no mandate to make any such addition on the income of life insurance business. Moreover, any adjustment in the provisions of section 28 to 43B of the Act is not required to be added/reduced from the income of the assessee from life insurance business. So, in view of the matter, addition made by the AO and confirmed by CIT (A) for AYs 2007-08, 2008-09 2009- 10 respectively is not sustainable, hence ordered to be deleted. Exemption u/s 10(34) - HELD THAT:- In respect of dividend income earned; that due to inadvertence, the assessee could not claim this exemption in the income tax return filed during the year under assessment. Keeping in view the fact that the appellate authorities can allow the ground even if the claim for relief/exemption has not been made part of the original or revised return. Even otherwise, to decide the controversy once for all and to stop the multiplicity of the proceedings, the assessee is entitled to raise the additional ground because the issue in controversy has also been decided in favour of the assessee by the Tribunal in AY 2006-07.
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2019 (10) TMI 839
Unexplained investment u/s 68 - Search proceedings - CIT(A), ITAT and HC concurrently deleted the amounts brought to tax under Section 68 holding that the relevant enquiry based upon the materials furnished by the assessee had not been made HELD THAT:- Special Leave Petition is dismissed on the ground of delay as well as low tax effect.
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2019 (10) TMI 838
Reopening of assessment u/s 147 - crux of the petitioner's objection to the notice of reopening of assessment was that there is no income chargeable to tax which had escaped assessment - liability to pay capital gain tax on the proceeds of sale of shares - HC do not find that the Assessing Officer had dealt with the contention of the petitioner that the petitioner is in a position to establish that the shares in question were held by Savoy Finance for a period in excess of one year and therefore, there was no liability to pay capital gain tax on the proceeds of sale of shares - HELD THAT:- SLP dismissed.
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2019 (10) TMI 837
Bogus LTCG - addition u/s. 68 - exempt u/s. 10(38) - HELD THAT:- Purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains which was not accepted by the A.O. and the gains were treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. It is clear from the above that the facts of the case of the assessee are similar with the facts of the cases discussed supra in para 6 wherein the co-ordinate bench of the Tribunal has deleted the addition and allowed the claim of LTCG and accepted the scrips of M/s. SESL and M/s. SRKIL are not bogus. We, therefore, set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital gain as bogus and to allow the same and so, delete the consequential addition. Addition on account of unexplained expenditure incurred for earning the LTCG u/s. 69C - assessee s claim of LTCG, the consequential expenses incurred by the assessee in this regard is also allowed.
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2019 (10) TMI 836
Addition u/s 41 - proof of remission or cessation of a trading liability - HELD THAT:- In the case before us the CIT(A) had rightly observed that in the absence of any evidence to conclude that there was a final remission or cessation of a trading liability or any part of it, therefore, the provisions of Sec.41(1) could not have been invoked by the A.O. As regards the adverse inferences drawn by the A.O in respect of the genuineness of the transactions under consideration, we are of the considered view, that as the respective amounts had not been credited in the books of account of the assessee during the year under consideration, therefore, for the said reason itself the provisions of Sec.68 were clearly ousted and no addition of the said amount could have been made in the hands of the assessee under the said statutory provision during the year under consideration. We thus not finding any infirmity in the order of the CIT(A), to the extent he had vacated the addition made by the A.O u/ss. 41(1)/68 of the Act, therefore, uphold the same Disallowance of the interest on service tax - deduction u/s 37(1) disallowed - HELD THAT:- CIT(A) did not find favour with the view taken by the A.O, and observed, that as the payment of interest was compensatory in nature, therefore, the same was rightly claimed as a deduction u/s 37 by the assessee. We have given a thoughtful consideration to the issue before us and are unable to persuade ourselves to subscribe to the view taken by the A.O. We find that Sec.75 of the Finance Act, 1994, which envisages levy of interest on late service tax payment is compensatory in nature and cannot be characterised as a levy of penalty. Levy of penalty under the Service Tax Act is contemplated in Sec.76 of the Finance Act, 1994. Accordingly, as the payment of interest on late service tax payment by the assessee is found to be compensatory in nature, therefore, the same in our considered view could not have been held as not allowable as a deduction under Sec.37(1) of the Act. We thus finding no infirmity in the order of the CIT(A), who in our considered view had rightly vacated the disallowance of the interest on late service tax payment made by the A.O, uphold his order to the said extent.
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2019 (10) TMI 835
Rectification of mistake - allowance of deduction u/s 80IC on substantial expansion undertaken by the assessee - HELD THAT:- The issue in the impugned appeal is covered by the decision of in the case of Pr.CIT, Shimla vs. M/s Aarham Softronics [ 2019 (2) TMI 1285 - SUPREME COURT] wherein, it has been held that even a new undertaking which has claimed deduction of its eligible profits @ 100% thereof for the first five years is entitled to claim deduction @ 100% of its profits thereafter on account of substantial expansion undertaken by it. Since the decision of the Apex court in Classic Binding [ 2018 (8) TMI 1209 - SUPREME COURT] stands overruled, this in itself constitutes a mistake apparent from record. A binding decision is always retrospective and the decision overruled was never the law of the land. When a court decides a matter it only interprets law and applies it to the facts of the case. If the interpretation of law is found to be contrary in the light of judicial pronouncement rendered subsequently, it discloses a mistake apparent from record. Hence, a mistake apparent on record has occurred in the order [ 2018 (12) TMI 193 - ITAT CHANDIGARH] of this Tribunal. Hence, this is a fit case for recalling the said common order and for fresh hearing, which we hereby do.
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2019 (10) TMI 834
Treating the share trading loss as speculation loss by invoking Explanation to section 73 - allocation of expenses as attributable to deemed speculation activity as against the total expenses claimed in the sum - HELD THAT:- The derivative transactions shall not be treated as speculative transaction only for the purpose of section 43(5) of the Act and not otherwise. The same cannot be extended to provisions of Section 73 of the Act. Share trading loss incurred by the assessee in is speculative in nature and to this extent, we uphold the action of the ld AO. DR placed reliance on the decision of Hon ble Calcutta High Court in the case of CIT vs Parkview Properties P Ltd [ 2003 (1) TMI 69 - CALCUTTA HIGH COURT] wherein as been held that the speculation loss could be set off against speculative profits for the purpose of section 73 of the Act, which is what is done by the assessee also in the instant case by setting off the derivative profit with share trading loss. Hence the decision of Hon ble Calcutta High Court supra actually supports the view of the assessee and our decision rendered hereinabove. In view of the aforesaid observations with regard to the restrictive applicability of provisions of section 43(5)(d) of the Act as detailed supra and respectfully following the judicial precedent relied supra, we hold that the assessee is entitled for setting off the derivative profit with the share trading loss. Hence there is no need for making separate disallowance of share trading loss of ₹ 6,98,422/-. Accordingly, we reverse the treatment of the ld AO in allowing the carry forward of share trading loss to subsequent years. Similarly we find from the aforesaid table that the assessee had incurred loss on account of jobbing and arbitrage transactions in the sum of ₹ 10,77,588/-. This falls under section 43(5)(c) of the Act wherein the said transaction was not considered as speculative transaction. However, the same would apply only for section 43(5) and cannot be extended to section 73 of the Act as held hereinabove. Accordingly, we hold that the said loss on account of jobbing also would have to be set off against derivative profit. Expenses incurred by the assessee which were apportioned towards speculation activity on turnover ratio - assessee had carried on composite business of derivative trading and share trading. AO had not considered the turnover figures for derivative business and had considered only the turnover of share trading business, which had resulted in absurdity by apportioning 99.64% of total expenses only towards speculation activities. We direct the AO to recompute the apportionment of expenditure by considering the income of derivative transactions, jobbing transactions and share trading transactions alone by considering them in absolute figures i.e ignoring the negative signs (losses). AO is directed to make disallowance as per the aforesaid directions.
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2019 (10) TMI 833
Taxation of succession fee - value of any benefit or perquisite in the hands of Directors - AR argued that success fee was deducted at source from the funds of the shareholders, hence, no benefit whatsoever received by the share holders and no need to tax the same u/s 2(24)(iv) - HELD THAT:- there was no legal liability of shareholders to make the payment. The AO did not furnish any material to show that the assessee had engaged the Barclays and the company made the payment on behalf of the assessee to derive the benefit directly or indirectly. Directors or shareholders are permitted to appoint their own consultant who will not have any say in the success fee. In view of this clause also, the contention of AO that the success fee was the obligation of the assessee is incorrect. As mentioned in the share purchase agreement (SPA), cost of transfer of shares should be borne by the assessee. Accordingly, the expenses in relation to the negotiation, finalization and execution of SPA have to be borne by the shareholders including the assessee. The success fee was for engaging the services of Barclays as per EL dated 05.07.2013 and the share purchase agreement was entered on 04.11.2013, much ahead of SPA, hence, the success fee cannot be treated as the expenditure incurred in connection with the SPA. - it cannot be held that the assessee got any benefit from the success fee paid by the TMPPL as observed by the CIT(A). Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the revenue s ground on this issue. Success fee is to be paid only on the completion of the transaction - The AO rejected the contention of the assessee stating that the obligation of the assessee arose on the date of agreement dated 05/07/2013 when the assessee was a director of the company and holding substantial stake in the company, hence rejected the argument of the assessee. As per the discussion made in the preceding paragraphs we have held that the there was no benefit derived by the assessee and once it is held that the assessee did not derive any benefit the issue becomes infructuous. However, it is also a fact that the assessee ceased to be director /shareholder by the time the invoice was raised and the payment was made. The new directors taken the decision to make the payment. Hence it is incorrect to apply the provisions of section 2(24) (iv) in the case of the assessee. Payment of success fee is the obligation of the company since the agreement was entered into by the assessee company and the Barclays, hence we hold that no personal benefit derived by the assessee and we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld.
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2019 (10) TMI 832
Disallowance of written off amount treated as bad debts in books of accounts being compensation paid to distributor and expenses for business needs and exigency of the appellant - HELD THAT:- As agreed that if the recipient of the above sum fails to adhere to the any of the terms and conditions of the contract he should be liable to pay the assessee-liquidated damages of INR 260,000 along with 24% interest p.a. on the above amount. This clearly shows that the above party was one of the distributor of the Bihar region of the assessee. The above liability for payment has arisen during the year, as the agreement is dated 6th day of February 2010. In view of this though above sum is not a bad debt but the compensation paid by the assessee, which has accrued during the year as a liability on the assessee and it has been paid. It is also not the case of the AO that above sum is paid for infraction of any of the laws. In view of the above facts, the above expenditure has been wholly and exclusively incurred by the assessee for the purposes of the business and therefore it is allowable u/s 37 (1) - CIT-A has not considered the above aspect and confirmed the disallowance. In view of this, we reverse the order of the learned CIT capital and direct the learned assessing officer to grant deduction of the above sum to the assessee. Disallowance of advertisement expenses - HELD THAT:- It is not the claim of the lower authorities that the assessee has incurred the advertisement and sales promotion expenditure not for the purposes of the business of such expenditure are in genuine. The only claim of the learned assessing officer is that the assessee has incurred huge expenditure and therefore it has resulted into enduring benefit. No such enduring benefit has been defined by the revenue authorities. The claim of the assessee is that these are the routine expenditure incurred by the assessee and therefore they cannot be disallowed. In view of the decision of the coordinate bench in assessee s own case for earlier years, we reverse the order of the lower authorities and direct the learned assessing officer to delete the disallowance Disallowance of travelling and conveyance expenses - disallowance by holding that 25% of the total expenses are disallowable in absence of the details filed - HELD THAT:- These expenses have mostly been incurred through impressed account of the various staff. Therefore looking at to the nature of the business of the assessee as well as the smallness of the amount and when the complete details are available in the Ledger account itself in the form of narration of those expenditure, it is not proper for the lower authority to disallow the above expenditure on ad hoc basis. Identically is the fact with respect to local conveyance expenditure for which the details are furnished by the assessee. In view of this we reverse, the order of the lower authorities so far is with respect to disallowances of 25% of the total expenditure disallowed out of entertainment as well as the local conveyance expenditure. With respect to the disallowance even before us no information is provided and therefore the disallowance to that extent is confirmed. Accordingly ground number 2 (3) of the appeal is partly allowed. Disallowance of direct and indirect expenditure - HELD THAT:- Merely because the expenditure are on the higher side this year compared to the earlier years, when there is no defect pointed out in the details submitted by the assessee and further the explanation given by the assessee was not found to be false, there is no provision in the income tax act which authorizes the lower authorities to disallow the expenditure by applying a fixed percentage without finding that any of the expenditure has been incurred for non-business purposes. CIT-A has also held that the genuineness of the expenditure has to be established. However, he did not find any instances that any of the expenditure incurred by the assessee is not genuine. Merely making an assertion that tremendous increase under almost each had a fixed expenditure leads to establish non-genuineness only. Such a sweeping finding of the CIT- A is not sustainable in view of absence of any finding by the lower authorities that assessee has incurred non-genuine expenditure of any instance. The explanation given by the assessee has not at all been examined by the learned CIT- A to give such a categorical finding about the genuineness of these expenditure. In view of this we reverse the finding of the lower authorities and direct AO to delete the disallowance of various direct and indirect expenditure incurred by the assessee.
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2019 (10) TMI 831
TP Adjustment - adjustment made on account of corporate guarantee given by the assessee on behalf of its AE by accepting 1% guarantee fee charged by the assessee to be at arm s length - HELD THAT:- This Tribunal in assessee s own case for A.Yrs.2011-12 and 2012-13 [ 2019 (5) TMI 337 - ITAT MUMBAI] respectively had adjudicated the very same issue wherein by following the decision of Hon ble Jurisdictional High Court, in the case of Everest Kanto Cylinders [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] this Tribunal directed the ld. AO to determine the ALP of corporate guarantee commission at 0.5%. However, for the year under consideration, the assessee had actually charged 1% guarantee fee from its AE which is more than 0.5% fixed by this Tribunal in assessee s own case for earlier years, we hold that charging of 1% is guarantee fee from its AE should be accepted to be at arm s length, which has been rightly done by the ld. CIT(A) in the instant case. Accordingly, we do not find any infirmity in the order of the ld. CIT(A) in this regard. Accordingly, the ground Nos. 1-3 raised by the revenue are dismissed.
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2019 (10) TMI 830
Income accrued in India - Reimbursement of expenses incurred by the Appellant on behalf of HSBC Electronic Data Processing India Private Limited (HDP) as taxable in the hands of the Appellant - HELD THAT:- HSCI had paid a referral fee to assessee for introducing ABB to HSCI. Briefly, ABB Switzerland wanted to increase its equity stake in ABB Ltd. India through a voluntary offer and hence needed the services of a merchant banker in India. As per Section 9 of the Act, income earned by a non-resident is taxable in India if, inter-alia, the non-resident has a business connection in India and the income arises through or from the business connection; or it is in the nature of royalty or Fees for Technical Services . Factually speaking, in relation to earning of the said referral fees, the assessee did not carry any activity in India. Referral fees has been received by the assessee on account of the referral made by assessee for the potential rendering of services by HSCI to the prospective client so referred. In the activity carried out by assessee (for which it has earned referral fee from HSCI), there is no element of managerial, technical or consultancy function discharged by assessee. In fact, the services are nothing but commercial services. Accordingly, the referral fees received from HSCI cannot be construed as Fees for Technical Services under Explanation 2 to Section 9(1)(vii) of the Act and, therefore, not subject to tax under Section 9(1)(vii) of the Act. Since neither Section 9(1)(i) or Sections 9(1)(vi) and 9(1)(vii) of the Act bring this income within the scope of the taxing provisions, the referral fees received by the assessee from HSCI cannot be deemed to accrue or arise in India under Section 9 of the Act. Hence, such income is not taxable within the provisions of the DTAA in light of the interpretation given as per Memorandum of Understanding concerning Fees for Technical Services in Article 12 of India-USA DTAA. In view of the above discussion, we direct the Assessing Officer to delete the said addition sustained by the CIT(A), and assessee succeeds on this Ground of appeal. Protection fee received from HSBC Asset Management India Pvt Ltd (AMIN) as Fees for Technical Services - HELD THAT:- We find that services provided by the assessee do not make available any technical knowledge, experience, skill know-how or processes to AMIN within the meaning of Article 13 of the DTAA. Accordingly, the same would not qualify as Fees for Technical Services under Article 13 of the DTAA. Further, given that the services have been provided by the assessee in connection with the business carried on by the assessee in UK, the same are to be treated in the nature of business profits. In this regard, Article 7 of the DTAA provides that business profits earned by an enterprise of UK are taxable in India, only if such enterprise has a PE in India as defined in Article 5 of the DTAA. In the present case, since the assessee does not have a PE in lndia, the protection fee received by the assessee from AMIN is not taxable in India as per the provisions of Article 7 of the DTAA. Hence, we direct the Assessing Officer to delete the said addition - Decided in favour of assessee.
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2019 (10) TMI 829
Unaccounted cash credit u/s 68 - HELD THAT:- Neither the assessee had discharged the obligation that was cast upon it to substantiate the identity of the subscribers, their credit-worthiness, and also the genuineness of the transaction of receipt of share application money from the aforesaid six share applicants, as per the mandate of law, nor the lower authorities had in discharge of their statutory obligation carried out the necessary verifications. As a matter of fact, we find that the lower authorities had not put up any serious effort to verify the authenticity of the documents which were filed by the share applicants and/or the assessee with them. The matter in all fairness requires to be revisited by the A.O. We thus restore the matter to the file of the A.O, who shall after making necessary verifications as regards the identity of the applicant companies, their creditworthiness, and also the genuineness of the transactions of receipt of share application money by the assessee company from the aforementioned six applicant companies re-adjudicate the matter afresh. A.O in the course of the set aside proceedings shall remain at a liberty to make necessary verifications, as he may deem fit. Needless to say, the assessee in the course of the set aside proceedings will be afforded a reasonable opportunity of being heard, and would be at a liberty to substantiate the authenticity of the transaction of receipt of share application money from the aforesaid six share applicants by placing on record fresh material. Appeal of the revenue is allowed for statistical purposes.
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2019 (10) TMI 828
Genuinity of transaction of purchase of trademark - allowable transaction - claim for depreciation on trademark - HELD THAT:- The law is settled to the extent that it is outside the domain of the AO to question the necessity of incurring an expenditure. Thus the reasons assigned by the Assessing Officer that the transaction for purchase of trademark are not genuine cannot stand test of the law. It is an settled principle of law that intangible assets such as trademark, goodwill are also qualifies for depreciation at prescribed rates. Therefore we do not concur with the views of the lower authorities in disallowing the claim for depreciation on trademark. Accordingly, we set aside the orders of the lower authorities and allow the grounds of appeal filed by the assessee.
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2019 (10) TMI 827
Validity of the assessment framed u/s 147 made on the dead person - whether the notice under section 143(2) under the Act was issued before the death of the assessee? - HELD THAT:- The statutory notice under section 143(2) was issued before the death of the assessee. It is the settled law that the proceedings under section 143(3) of the Act cannot become fatal if the notice was issued under section 143(2) of the Act on the live person at that relevant time but died subsequently. Regarding this, we find support and guidance from the order of Hon ble ITAT in the case of Shri Ishwar Bhai-Magan Bhai Desai Vs. ITO [ 2018 (4) TMI 1209 - ITAT AHMEDABAD] Thus we hold that the proceedings under section 143(3) of the Act cannot become invalid in the given facts and circumstances. Addition on account of income from undisclosed sources - addition on account of income from undisclosed sources - HELD THAT:- Assessee failed to furnish the details of the parties who have deposited the cheque in his bank account. Similarly, the assessee also failed to furnish the details of the party to whom he issued the cheques. Thus in the absence of sufficient documentary evidence about the details of the parties, it is not possible to ascertain the nature of the transactions. Accordingly, we are not impressed with the argument of the assessee. The peak credit is applied where the assessee can correlate the deposits viz a viz withdrawal from the bank. As the assessee failed to establish the correlation between the deposit of cheques as well as cheques withdrawn from the bank. Therefore we are reluctant to apply the peak credit theory in the given facts and circumstances. No reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the assessee is dismissed.
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Customs
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2019 (10) TMI 852
Over-Valuation - Coal of Indonesian Origin - Offence punishable under Section 135 of the Customs Act, 1962 - legality and validity of commencement of the investigation against the petitioner - issuance of the Letter of Rogatory by the Magistrate - provisions of Section 166-A of the Code of Criminal Procedure, 1973 - period from October 2010 to March 2016. Whether it was permissible for the Magistrate to issue such a Letter of Rogatory without following the procedure mandates by sub-section (2) of Section 155 and whether the letter of Rogatory was issued on initiation of a valid investigation under Chapter XII of Cr.P.C.? HELD THAT:- Though the Customs Act, 1962 classifies the offence punishable thereunder as cognizable/non-cognizable, it do not lay down any set of procedure for dealing with the information received by the Custom Officer for proceeding under the provisions of the Act. It also do not define the term cognizable/non-cognizable and in absence of such a definition, the terms take the meaning assigned in the Code of Criminal Procedure. In absence of any set of procedure for commencing the so-called investigation in words of the learned senior counsel Shri Maninder Singh, though the statute applies the phrase inquiry for commencing conducting and culminating a valid investigation into the distinct classes of offences, the position that would therefore emerge is to resort to sub-section (2) of Section 4 in relation to an investigation into an offence under the special statute and in absentia of any provision setting out the modalities for commencing, conduct and culmination of investigation. In absence of any overriding provision in the Customs Act, stipulating any contrary procedure, relating to an information received and the manner in which the Custom Officer, who for limited purpose posses the power of a police officer, by virtue of Section 4(2) of the Code, the respective provisions in the Code relating to dealing with the information requiring an inquiry/investigation into the offences classified as cognizable/non-cognizable shall necessarily follow. In ILLIAS VERSUS COLLECTOR OF CUSTOMS, MADRAS [ 1968 (10) TMI 48 - SUPREME COURT] , the Constitution Bench has held that the custom authorities have been invested with many powers akin to that of a police officer in matter relating to arrest, investigation and search which was not there in the earlier Customs Act. Even though the custom officers possess the said power, they do not become police officials within the meaning of Section 25 of the Evidence Act and it was held that the confessional statements made by the accused persons to custom officers would be admissible in evidence against them. Since we are of the express opinion that Section 166A is not an independent island on which any investigating/inquiring authority can jump on without taking recourse to Section 154/155, we hold and declare that the action of the respondents in giving effect to the letter of Rogatory issued by the learned Metropolitan Magistrate, Mumbai in relation to the import of coal of Indonesian origin cannot be sustained and it deserves to be quashed and set aside. Petition allowed.
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2019 (10) TMI 851
Demand of Customs Duty - mis-declaration of contents - export of 1250 printed acrylic blankets - shipping bill in question has not been used to discharge liability arising from advance licence in question - HELD THAT:- In the present appeals, the Appellant has discharged export obligation without using disputed shipping bills. The Customs duty cannot be demanded on imported raw material as export obligation stands discharged and redemption certificate stands issued by Competent Authority - Appeal allowed.
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2019 (10) TMI 826
Auction sale - demand of customs duty prior to removing these goods out of the Special Economic Zone and into the Domestic Tariff Area - HELD THAT:- The customs duty could have been levied at the time of removal of the goods from the SEZ only if customs duty was chargeable on these goods at the time of their import into the SEZ, although such import duty into SEZ may be exempted in view of other provision of the Special Economic Zone Act, 2005. In view of the provisions namely Section 26(1) a and 30(a) and in view of what has been held by the Division Bench of the Gujarat High Court in the judgment in M/s Adani Power Limited Vs. Union of India, [ 2015 (11) TMI 1466 - GUJARAT HIGH COURT ], this Court is constrained to hold that since no duty was leviable upon the goods while entering the Special Economic Zone, the same when being removed as scrap are not chargeable to any customs duty as it consisted of scrap machine parts. The machine parts which were scrap on the date of their removal, even when new were exempt from customs duty under Section 26(1)(a) of the Special Economic Zone Act, 2005 as they were taken into the Special Economic Zone (imported) to carry on the authorized operations of the Company (in liquidation). The amount realised as customs duty by respondent no. 2 from the auction purchaser M/s Shree Ganesh Trading Company, was therefore wholly unwarranted, cannot be sustained and is hereby, set aside - Respondent no. 2 is directed to refund the amount realised as customs duty from the applicant, M/s Ganesh Trading Company - decided in favor of respondent.
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2019 (10) TMI 825
Import of MGH I Air Pistol Cal. 4.5 (Make match guns by Cesare Morini) as Post Parcel through the Postal Appraising Department - freely importable item or not - renowned shooter - N/N. 21/2008, as against Sl.No.582 - HELD THAT:- The appellant is a shooter and is a member of National Rifle Association of India and is also a member of Thrissur Rifle Association. Further as per the invoice dt. 12/09/2017, it is clearly mentioned in the description that the air pistol is having the power less than 7.5 joules and bore less than 4.5 mm / 0.177. Further, in view of the Arms Rule, a weapon having this description is freely importable and does not require any licence. Moreover, if any licence is required under the Arms Act, the same can be obtained after getting the weapon from the Customs Department. Confiscation of the weapon is unwarranted in view of the description given about the weapon in the invoice produced by the appellant. Both the authorities have not properly considered the invoice which is the document vide which the appellant has purchased the said weapon - the impugned order confiscating the weapon is unsustainable in law - Appeal allowed - decided in favor of appellant.
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2019 (10) TMI 824
Seizure of goods - smuggling - gold - prohibited goods or not - confiscation - redemption fine - penalty - HELD THAT:- The present case has not arisen as a baggage dispute otherwise this Tribunal would have no jurisdiction in deciding the matter. The seizure was made within the country on suspicion of the gold being smuggled. The gold was not seized as a baggage but it was seized as foreign marked gold with respect to which the possessor of the gold was responsible to prove under Section 123 that it is not smuggled. The appellant could not discharge the responsibility. In fact the gold was smuggled as it was not declared by the appellant while bringing into India. There is sufficient reason in the appeal showing that the appellant was returning to India after a period of 16 years and was ignorant of legal provisions. From the facts recorded in the Order-in-Original, it appears that during investigation, the appellant has fully disclosed the nature of the gold and has produced whatever documents were available with her showing its purchase in USA. There is nothing on record to show that she was trying to mislead the investigating authorities. Section 125 allows redemption in lieu of confiscation in all cases on payment of fine. If the goods are prohibited, the redemption may be allowed but if the goods are not prohibited, such redemption shall be allowed. There is no case where the redemption cannot be allowed at all under this Section. The facts and circumstances of each case need to be taken into account while allowing redemption of prohibited goods. Goods are allowed to be redeemed - Redemption fine upheld - penalty also upheld - appeal disposed off.
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2019 (10) TMI 823
Refund of differential duty - assessment order not challenged - revision of transaction value due to reckoning of dispatch earnings - earning dispatch earnings from their overseas suppliers for clearing the goods well in time and thereby freeing vessel - HELD THAT:- As it is now settled by the Larger Bench of the Hon ble Apex Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] that no refund can be sanctioned without challenging the assessment order whether such assessment is done prior to the amendment to Section 17 of the Customs Act where the assessment had to be done by the officers post such amendment where the assessment is done under self assessment scheme, there are no option but to hold that the appeals are not sustainable and need to be rejected. Appeal dismissed - decided against appellant.
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2019 (10) TMI 822
Maintainability of appeal - non-compliance with the mandatory pre-deposit within time limit for filing an appeal - time limit under section 128 of the Customs Act, 1962 - HELD THAT:- Hon ble High Court of Gujarat in the case of RAMESH VASANTBHAI BHOJANI VERSUS UNION OF INDIA 2 [ 2017 (5) TMI 444 - GUJARAT HIGH COURT] has drawn a distinction between Section 128 and 129E and held that the date of filing of appeal under Section 128 is different from the date of making the mandatory pre-deposit without which the appeal cannot be entertained as per Section 129E. The appeal has been filed within the condonable time limit on 10.07.2017 - matter remanded to the First Appellate Authority to decide the appeal on merits - appeal allowed by way of remand.
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Insolvency & Bankruptcy
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2019 (10) TMI 821
Maintainability of application - initiation of CIRP - Non-performing asset - section 7 of The Insolvency and Bankruptcy Code, 2016 read with Rule 4 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- On perusal of the records it is found that, from time to time, at the instance of the respondent, the applicant bank had enhanced and rescheduled such facilities. That, due to non-payment of the debts account of the corporate debtor was classified as Non-Performing Assets on 31st March, 2013. The plea of limitation taken by the corporate debtor is not maintainable in view of the fact that before expiry of three years period, the corporate debtor acknowledged the debts. Moreover, objection raised by the corporate debtor that the petitioner cannot be permitted to pursue two parallel proceedings is unfounded. The pendency of proceedings before any other fora as mentioned in the Code much less before the Arbitrator would not cause any impediment with regard to initiation of corporate insolvency resolution process because under Section 7 of the Code pendency of such proceedings is no bar to the admission of the petition and initiation of corporate insolvency resolution process. In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the Corporate Debtor committed default in paying the financial debt to the Applicant - On perusal of record, it is held that there is existence of default and that the application under Section 7(2) of the Code is also complete in all respect. The petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted - petition admitted - moratorium declared.
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2019 (10) TMI 820
Maintainability of application - initiation of CIRP - application is filed under Section 9 of I and B Code - whether the applicant is an Operational Creditor? - HELD THAT:- Admittedly, the applicant is procuring Timex Watches from the respondent from time to time for selling online i.e. the provision of goods is being made by the respondent for which payment is to be made by the applicant. The applicant s claim is that there is outstanding amount due from the respondent as on 31.03.2017 of ₹ 12,73,235/- including amount of credit notes of ₹ 10,61,623/- and debit note raised by the applicant against the return of watches of ₹ 1,45,977/-. The applicant has not proved that an operational debt is owed to it and that it is an operational creditor. Therefore, the application under Section 9 of the Code filed for initiating CIRP against Timex India Group Limited is rejected - The compliance of the other requirements of Section 9 of the Code are not being further examined. Application rejected.
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Service Tax
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2019 (10) TMI 819
Negative list services or exempt services - appellant was providing services to one M/s Gati Ltd. who are courier service provider - scope of service - HELD THAT:- Admittedly period involved in the present appeal is covered by the negative list regime having been introduced on 01/07/2012. The appellant has not been able to show that services provided by them to M/s Gati Ltd. fall either under the negative list or were exempted in terms of the Mega Notification No.25/2012. As such, we find ourselves in agreement with the findings of the lower authorities. The lower authorities while confirming the demand have not extended the benefit of small scale exemption provided by Notification No.33/2012-ST. As such, for the said purpose, we deem it fit to set aside the impugned order and remand the matter to Original Adjudicating Authority for re-quantification of demand, if any, after allowing threshold exemption as available to the assessee in terms of the said Notification No.33/2012-ST. Penalty - HELD THAT:- The appellant being a small scale delivery boy may be entertaining a belief that the services provided by him are not taxable. Further, the said services were not taxable for the earlier period and as such appellant may not be aware of the introduction of the new regime of negative list era - In the absence of any positive evidence showing any mala fide on the part of the assessee, the penalty imposed upon him is not justified and the same is accordingly set aside. Appeal allowed in part and part matter on remand.
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2019 (10) TMI 818
CENVAT credit - input services - Deposit Insurance - Credit Guarantee Corporation for insuring deposits - contrary disputes - HELD THAT:- As there are contrary disputes on the issue, therefore, it would be in the interest of justice to refer the matter to the Larger Bench of this Tribunal to decide the issue. Registry is directed to place the papers before the Hon ble President to constitute a Larger Bench to decide the issue.
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2019 (10) TMI 817
CENVAT credit - duty paying invoices - fake/bogus invoices - service tax duly deposited - HELD THAT:- The assessee is entitled to the Cenvat Credit of duty Paid by the input service provider and if the input service provider has actually deposited the Service Tax, the same would be available as a credit to the service recipient. Revenue has disputed the fact of payment of service tax by M/s STPL on the ground that they were not found to be in existence at the time of investigations conducted by the Revenue. Inasmuch as in the miscellaneous application the appellant has produced evidences for deposit of service tax by M/s STPL, we are of the view that the said fact requires verification at the end of the Adjudicating Authority - matter remanded to the Original Adjudicating Authority for de-novo decision. Appeal allowed by way of remand.
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2019 (10) TMI 816
Refund of service tax - tax paid on input services used for various operations of the SEZ unit - rejection of refund claim on the ground of Letter of approval of list of services required for authorized operations was received after the period of refund i.e. on 07.07.2011, non-production of documentary evidence to substantiate receipt and use of specified services within the SEZ area and on the ground of time limitation. Letter of approval of list of services was received by the appellant on 07.07.2011 - HELD THAT:- Notification dated 01.03.2011 at para 2(b) provides that for the purpose of claiming exemption, the Developer or Unit of SEZ shall obtain a list of taxable services as are required for the authorized operations approved by the Approval Committee. The said clause nowhere specified that the Letter of Approval has to be obtained before filing of the refund applications - Since the fact is not under dispute that the appellant is governed under the SEZ Scheme and procuring the services on the basis of Letter of Approval issued by the competent authority i.e. Approval Committee, denial of refund benefit on the ground of non-submission of Letter of Approval prior to the date of refund claim should not be considered as legal and proper - the denial of refund benefit on this ground is not sustainable. Denial of refund benefit on the ground of non-submission of documentary evidence to substantiate the receipt and use of specified services - HELD THAT:- On perusal of the original and the impugned orders, I do not find that the authorities below have specifically alleged regarding non-compliance of the said conditions by the appellant. Since the appellant had submitted the information as prescribed under Table (B), denial of refund benefit on the alleged ground of non-submission of documents cannot also be sustained. Time Limitation - HELD THAT:- The Notification dated 01.03.2011 at para 3(e) provides that claim for refund shall be filed within one year from the end of the month, in which actual payment of service tax was made by the SEZ unit. The said clause provides discretion to the Central Excise officers for extending the period of limitation - In this case, though the refund application was not filed within the stipulated time, but the empowered authorities under statute have not extended the time limit for entertaining the refund application. Since the fact of use of input services for the purpose of SEZ operations was not alleged or denied by the department, as per the conditions of notification, the appellant should be entitled for the refund benefit. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (10) TMI 850
Maintainability of appeal - appropriate forum - the revenue has filed the present appeal under Section35G of the Central Excise Act, 1994 assailing the final order dated 16.12.2015 passed by the CESTAT, whereby penalty imposed upon respondent-Director was set aside - HELD THAT:- The appeal has to be filed before the Hon'ble Supreme Court under Section 35 L of the Act. Present appeal dismissed.
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2019 (10) TMI 849
Clandestine removal - Pan Masala Gutka (PMG) - unaccounted raw material and finished goods - it is alleged that the receipts of various packing material and finished goods were not recorded in their records and therefore the goods found at factory in Dashrath, Baroda and Godown situated at Jasubhai Fulabhai Godown at N.H. No. 8, Dashrath, Baroda were seized - demand of ₹ 1,38,93,527/- made on the basis of trial run conducted by the officers - HELD THAT:- The Appellant has challenged the trial run on the ground that the same was conducted arbitrarily and wrongly by the officers. Further the statements were retracted by way of affidavit and cross examinations - it is found that during investigation the persons whose statements were recorded had retracted their statements. During cross examination the employees and the director Shri R.M. Dhariwal has stated that the statements were recorded under threat, coercion and duress. In such case, only on the basis of statements and trial run to ascertain the consumption of PLR, demand cannot be made. On the basis of average consumption of Printed laminated, a packing material arrived on the basis of disputed trial run, it cannot be alleged that the Appellant has manufactured PMGs and the same in turn were removed clandestinely. Only on the basis of alleged average consumption of PLR, the charge of clandestine removal cannot be made. Only from PLR, PMG cannot be produced, it is a mere packing material. The show cause notice has not shown any unaccounted receipt or excess consumption of main raw materials i.e. Supari, Tobacco, Katha, kimam, perfume, menthol which are main raw materials for manufacture of PMG. The packing material would come into picture, only once raw material is consumed and the finished goods are produced - thus, on the basis of receipt of PLR (packing material) or trial run which is also even disputed, it cannot be concluded that the Appellant has manufactured unaccounted PMG and cleared the same without payment of duty. Cross-examination - the adjudicating authority has held that the cross examination should not have been allowed - HELD THAT:- The grant of cross examination is valuable right of the assessee and request for same cannot be brushed aside by merely denying the same. In the present case the cross examinations of employees and the officers were allowed by the predecessor of the adjudicating authority and hence the same had to be considered - the statements given by the employees accepting clandestine removal stands retracted by them. In such case there is no reason to rely upon such statements to allege clandestine removal. Duty demand of ₹ 10,32,064.92 - demand has been made on the ground that 19669.351 Kgs of Plastic Laminated roll was found from the godown of the Appellant - HELD THAT:- There is no evidence that the Appellant were to clear such PLR without payment of duty from their factory. Ultimately the said roll after release was consumed in the manufacture by the Appellant. In that case only on the limited ground that the PLR was found at godown of Appellant, the duty demand cannot be made as the goods were not intended to be removed without payment of duty nor there is any evidence to allege so. Confiscation of goods worth ₹ 29,12,368.93 - HELD THAT:- The goods were raw material/ packing material except 2 gms PMG pouches which were lying in factory in strips form. As far as the raw material and packing material is concerned, the same were legally acquired and there is no case for seizure/ confiscation of same. In respect of finished goods, we find that the PNG were in strip form awaiting packing in inner cartoon and then corrugated boxes - there are no reason to seize/ confiscate the goods when the goods did not reach RG-1 Stage nor there was any preparation on part of assessee to remove the same clandestinely. Demand of ₹ 5,43,750/- has been confirmed on records of Sarco Roadlines - HELD THAT:- No evidence has been adduced to show as to who from the Appellant concern consigned the goods and what is the origin of goods. In such case merely on the basis of transporter s record, it cannot be concluded that the goods were cleared clandestinely by the Appellant - demand not sustainable. Confiscation of goods seized from M/s Jivan Agencies, Raipur and M/s Vinayak Agencies, Jodhpur - goods has been seized on the ground that the same did not have any identification marks - HELD THAT:- No evidence to show that the said goods were consigned by Appellant unit. Further we find that there are glaring inconsistencies in the statements of Shri Gautam Zabak, Partner of M/s Jivan Agencies. In one of his statement 28.11.94, he stated that the goods were received from Appellant Unit, Baroda and in next statement he stated that the goods were received from Pune Unit. Thus the statements of Shri Zabak were contradictory and without investigation and corroboration, it cannot be said that the Appellant had cleared the seized goods. Further Shri Zabak also retracted his statement. In such case, there are no reason to sustain the confiscation of seized goods. The demands, penalties and confiscation ordered by the adjudicating authority is not sustainable - appeal allowed - decided in favor of appellant.
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2019 (10) TMI 848
Short reversal of CENVAT Credit - manufacture and sale of dutiable goods and Trading which is an exempted service - Rule 6(3A) of the CCR, 2004 - HELD THAT:- The impugned order is not sustainable in law and therefore, the same is set aside by allowing the appeals on merits. Non-filing of intimation - HELD THAT:- Non-filing of intimation is only a procedural lapse and does not amount to suppression of fact for which the benefit provided under Rule 6(3)(ii) read with Rule 6(3A) of CCR cannot be denied. Extended period of limitation - HELD THAT:- There is no suppression of material fact on the part of the appellant with intention to evade payment of duty and non-filing of intimation is only a procedural lapse and does not amount to suppression of fact for which benefit under Rule 6(3)(ii) read with Rule 6(3A) cannot be denied. Appeal allowed - decided in favor of appellant.
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2019 (10) TMI 815
CENVAT Credit - common input/ input services used for manufacture of electricity which is an exempted product - non-maintenance of separate records - Rule 6 of CCR 2004 - HELD THAT:- In the present case, the electricity was generated by use of the waste products and therefore Rule 6 of the CCR is not applicable in view of the judgment of the Hon ble Apex Court in the case of UNION OF INDIA OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [ 2014 (5) TMI 253 - SUPREME COURT] - Further it is found that coal ash / Dolo char is a residual waste arising out of the burning of coal which cannot be said to be a manufacture of final product. Both the authorities have ignored the amendment introduced w.e.f. 01/04/2016 by addition of Rule 6(3AA) which permits the assessee to reverse / pay proportionate CENVAT credit relating to common input or attributable to input services and in the present case, the appellant is making use of this sub-rule and has paid the amount of ₹ 11,23,096/- along with applicable interest of ₹ 4,86,007/- vide various challans enclosed which according to me, satisfied the requirement of Rule 6(3A). Consequently, the demand of 6% of the value of electricity sold to the GESCOM is not sustainable in law. Appeal allowed - decided in favor of appellant.
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2019 (10) TMI 814
CENVAT credit - input services - repairs and maintenance service of DG sets during the warranty period, provided outside the factory - September 2014 to July 2015 - HELD THAT:- It is not in dispute that the service of repair and maintenance of DG sets was provided during the warranty period and outside the factory premises i.e. premises of customers - The issue of eligibility of CENVAT Credit of the service tax paid on such repairs and maintenance service has been considered by the Tribunal in series of judgments including in the case of M/s Carrier Airconditioning Refrigeration Ltd [ 2016 (3) TMI 124 - CESTAT NEW DELHI ] and credit was held to be admissible. Appeal allowed - decided in favor of appellant.
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2019 (10) TMI 813
Process amounting to manufacture - classification - placing of the vegetables cuisine, rice, roti, salad etc. on a tray and placing the leaflets bearing the logo as well as the name of Ambassador Sky Chef in the cutlery pack placed on the tray - whether classifiable under Heading 2108.99 upto 28.02.2005 and under Tariff Item 2106 9099 thereafter or not? - HELD THAT:- The issue decided in the case of TAJ SATS AIR CATERING LTD. VERSUS CCE, DELHI-II [ 2016 (3) TMI 777 - CESTAT NEW DELHI ], where it was held that The Central Excise duty was said to be demanded on the full value of the final complete food tray as served to the passengers on board the aircraft. There is nothing in the impugned order which will substantiate and support the claim of the Revenue on the taxability of such complete food tray on whole value. There are no reason to deviate from the observation of the Tribunal in the aforesaid case which has been consistently followed - appeal allowed - decided in favor of appellant.
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2019 (10) TMI 812
CENVAT Credit - input service - GTA Services - place of removal - job-work - Rule 2(l) of Cenvat Credit Rules, 2004 - appellant being manufacturer of Biscuit on job work basis on behalf of M/s Parle Products Pvt. Ltd - the goods are cleared to the depot of principle and excise duty is paid on MRP based valuation in terms of Section 4A of Central Excise Act, 1944 - Difference of opinion. HELD THAT:- In view of various contrary judgments not only in the Division Bench of this Tribunal but also by Hon ble High Courts of Rajasthan and Allahabad, there is no consistency on the legal position for availment of cenvat credit on outward GTA in case of goods manufactured and cleared to principles at their depot particularly in the set of facts of present case - Therefore, to arrive at consistent view, the matter needs to be considered by Larger Bench of This Tribunal. The issue needed to be decided is: Whether in facts and circumstances the appellant is entitled for the cenvat credit on outward GTA service which is used for transportation of goods from job worker premise to the depot of principle when the valuation was adopted under Section 4A by applying the Notification No. 36/2001-CE (NT)? The Registry is directed to place this matter before Hon ble President of this Tribunal for constituting a Larger Bench.
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2019 (10) TMI 811
Maintainability of appeal - appropriate forum - question of law or fact or both - a new legal issue raised, that the appellant was a Partnership Firm and the same was dissolved by Dissolution Deed dated 09.03.2007, accordingly no proceeding could have been continued against the dissolved Partnership Firm. - HELD THAT:- The fresh issue raised by the Ld. Counsel is indeed a question of law which can be raised at any stage of litigation. However, the question of law raised by the appellant is mixed question of law and facts and particularly this issue has not been raised by the appellant before lower authorities nor has been considered the same. We are of the view that since, the question of law is mixed of the facts and law the same needs to be considered by the lower authority. Accordingly, we remand the matter to the adjudicating authority to pass a fresh order after considering the new defense raised by the appellant. Appeal disposed off by way of remand.
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2019 (10) TMI 810
Valuation - retail sale - supplies of pharmaceuticals made for institutional buyers who are running hospitals and where the pharmaceuticals are intended for consumption in the hospitals and not for retail sale - Applicability of assessment under section 4A of the Central Excise Act, 1944 - HELD THAT:- There is no merit in Revenue s allegation that such medicaments which are intended for consumption by the institutional buyers and not intended for retail sale are liable to be assessed under section 4A. Appeal dismissed.
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CST, VAT & Sales Tax
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2019 (10) TMI 809
Classification of an item - mirror glass sheets - unclassified item or not - Whether, in the facts and circumstances of the case, the Tribunal was justified in taxing the mirror glass sheet being sold by the revisionist either as toilet requisite or by treating them to be different from ordinary glass sheet and therefore falling within the purview of Entry-39 of the Notification dated 20.5.1976? HELD THAT:- In the facts of the present case, it is found that the fundamental aspect, whether a commodity glass/mirror sheets, dealt with by the assessee, were toilet requisite had been decided in the negative i.e. in favour of the assessee and against the revenue in the earlier assessment year. That decision of the Tribunal was confirmed by this Court in the year 2014. Without that decision having been reversed, there is no occasion to allow the matter to be agitated any further. Revision allowed.
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2019 (10) TMI 808
Classification of the item - Levy of Entry Tax - import of electronic goods, computer goods, generators, telecommunication parts, SMPS Power Plant, electrical goods, telecom equipment and SIM cards etc. for the purpose of business - Whether the equipment in question which has been held to be an electronic equipment would be covered by item no. 5 machinery and spare parts of machinery of Schedule referred in Section 4(1) of the U.P. Tax on Entry of Goods Act? HELD THAT:- Even if the Tribunal were to find that one or more machinery of value ₹ 10 lac or more was imported by the assessee, yet, it would have to further examine the objection raised by the assessee that the same would stand excluded by virtue of separate entries under the VAT Act providing for separate treatment of such machinery under that Act. In other words, even if one of the electronic machinery say ('x') imported is found to have been imported by the assessee which is of value ₹ 10 lac or more, the Tribunal would have to further examine whether such electronic machinery ('x') was taxable as machinery under the VAT Act or as any other commodity falling under a separate schedule entry under the VAT Act. If the conclusion to be drawn by the Tribunal be that such machinery ('x') was taxable under a separate schedule entry under the VAT Act, it would be further required to examine whether on such distinction under the VAT Act, the commodity would continue to remain taxable as machinery under the Entry Tax Act or it would cease to be taxable on that reasoning. At present, though the Tribunal has touched this issue but its findings are not reasoned. The issue that has been canvased by the assessee in the present revision, has not been squarely dealt with. In any case, since the matter is proposed to be remitted to the Tribunal, the same may be re-adjudicated. Inasmuch as, at present, order passed by the Tribunal does not appear to have dealt with the aforesaid issue, the question of law framed by this court, cannot be answered at this stage - matter is remitted to the Tribunal to pass a fresh order, preferably, within a period of four months in accordance with law after hearing the parties on the strength of evidence existing on record - Revision allowed by way of remand.
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2019 (10) TMI 807
Condonation of delay in filing of an Appeal - stay of recovery proceedings - Petitioner contended that, since the books of accounts and all other forms were lying in the factory, which was sealed on possession being taken of the factory by the 4th respondent-Bank under Section 13(4) of the SARFAESI Act, they are not in a position to challenge the assessment order - Re-opening of ex-parte assessment - principles of natural justice - HELD THAT:- While it is not known whether the books of accounts and other documents, which the appellant-writ petitioner seeks release of, are still lying within the factory premises which has been sealed by the 4th respondent-Bank, such a request can, undoubtedly, be made to the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, since possession being taken by the fourth respondent of the factory premises, under Section 13(4) of the SARFAESI Act, would include all movables and immoveable lying within the factory premises, including the books of accounts. There is no bar, therefore, for the appellant-writ petitioner to file an IA in the pending proceedings, under Section 17 of the SARFAESI Act, before the Debts Recovery Tribunal seeking release of the books of accounts, if any, lying within the factory premises. It is not even known whether the books of accounts, which the appellant-writ petitioner claims are located in the factory, are, in fact, located within the factory or not. Even if they are, it is still a matter of conjecture whether the appellant-writ petitioner s appeal would be entertained under Section 31 of the Uttarakhand VAT Act, after a lapse of more than a year - Further the scope of interference, in an intra-Court appeal, is extremely limited and, save cases where the order under appeal suffers from a patent illegality, no interference is called for. We see no reason, therefore, to interfere with the order under appeal. Appeal dismissed.
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Indian Laws
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2019 (10) TMI 806
Service of notice - Dishonor of Cheque - offence punishable under Section 138 of N.I.Act - whether the cause of action has arisen as the notice sent by the respondent/accused to the accused/applicant was returned due to his unavailability? - HELD THAT:- Admittedly, the notice under Section 138 of N.I. Act was sent to the applicant/accused through registered post on his correct address. It is well settled that once notice has been sent by registered post with acknowledgment, it must be presumed that the service is made effective. In the case of V. Raja Kumari vs P. Subbarama Naidu Anr, [ 2004 (11) TMI 515 - SUPREME COURT ] , the Hon'ble Apex Court has held that statutory notice under Section 138 of the Act sent to the correct address of the drawer has been served has to be decided during trial and the complaint ought not to be dismissed at the threshold on the purported ground that there was no proper service of notice. It has been further argued on behalf of the applicant that the cheque had got dishonored for reason Kindly contact drawer/drawee bank and pleasen. and not for the fund insufficient. Now the onus to prove this was upon the applicant and he can summon the bank record to show that at the relevant time period when the cheque in question was presented, he had sufficient balance in his account and therefore, the reason for dishonour of cheque in question is to be adjudicated after recording the evidence of the parties - It is also pertinent to note that in the instant case, the complainant has already discharged his burden by producing the impugned cheques, which he alleges to have been issued by the applicant/accused in his favour bearing a signature, hence, initial presumption of the said cheque having been issued in favour of the complainant is already there which needs to be rebutted by the accused. The Court finds that the impugned order which is being challenged by the learned counsel for the applicant does not suffer from any lacuna at this stage and, therefore, this Court does not find any force in the arguments of the learned counsel for the applicant - petition dismissed.
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2019 (10) TMI 805
Recovery of unpaid loan amount - account of the petitioner was declared as Non Performing Assets - SARFAESI Act - HELD THAT:- The petitioner has already filed an appeal under Section 17 of the Act before the Debts Recovery Tribunal. Meanwhile, a recovery citation dated 06.08.2019 has been issued by the Tehsildar, Haridwar against the petitioner, which the petitioner has now challenged before this Court - In view of this Court, the same is liable to be challenged by the petitioner before the Debts Recovery Tribunal itself and nothing can be done by this Court in the writ petition. Petition dismissed.
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