TMI Tax Updates - e-Newsletter dated: October 25, 2019 - with Direct Tax, Indirect Tax and GST Updates and Updates on FTP, FEMA, IBC & Corporate Laws etc. published on TMI with Latest Case Laws

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TMI Tax Updates - e-Newsletter October 25, 2019 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Highlights / Catch Notes GST: Blocked credits or not - procurement of goods and/or services for installation of Chillers, Air Handling Unit (AHU), Lift, Escalators and Travellator, Water Treatment Plant (WTP), Sewage Treatment Plant (STP) etc. etc. - the taxes paid on procurement of goods and/or services for installation of the Installations as listed in the application are regarded as blocked credits under Section 17(5) of the CGST Act, 2017. Visit to Get Source GST: Rate of GST - constructions comprising entirely of construction of commercial space - The tax rate applicable on the supply of construction service to the land owner in lieu of transfer of development rights to the promoters portion is liable to tax at 18% of GST Visit to Get Source GST: Input tax paid on inputs relating to construction activity - Since the input tax credit is not available relating to his portion of the constructed building, the same is not available for utilization of it against the output tax payable on letting out of the same space. Visit to Get Source GST: Exemption from GST - health care service provider - Since the applicant is offering diagnostic services, they would be covered under the term “clinical establishment” - Benefit of exemption available. Visit to Get Source GST: ITC - furniture and fixture - The input tax credit of GST can be availed by the applicant on the detachable 14 mm Engineered wood with Oak top wooden flooring which is movable in nature and capitalized as “furniture” and - The input tax credit of GST is not available on the detachable sliding and stacking glass partitions Visit to Get Source GST: Classification of goods - Flavoured Milk - The instant product ‘flavoured milk’ is covered under ‘milk’ - the product merits classification under tariff heading 0402 99 90. Visit to Get Source GST: Classification of goods - rate of GST - the product conversion kit is specific to a particular engine i.e. auto rickshaw (three wheeler) - the LPG Conversion Kits are classifiable under HSN 8409 99 90 - liable to tax at 28% of GST Visit to Get Source GST: Rate of GST - HSN Code - e-campus solutions - What is leased in this case is not individual goods but all the goods involved in the set-up of an e-classroom. The moment the e-classroom comes into existence,- the individual goods lose their existence and only additional users can be attached for additional amounts. Visit to Get Source Income Tax: Agreement between the Government of the Republic of India and the Government of the Kingdom of Morocco for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes Visit to Get Source Income Tax: Correct head of Income - as the appellant-assessee did not carry out any systematic, recurring and in organised manner, any business activity nor there was any volume, frequency, continuity and regularity of transactions, and only one person was employed by him for the management and look after of the leased property, the taxing authorities had rightly held the receipts to be income from house property and income from other sources and not business income. Visit to Get Source Income Tax: Deduction u/s.10B - Manufacturing - Export of Copper Cladded Glass expoxy Laminate (CCGL) - the change or the series of changes brought about by the application of the process explained above, the commodity in the form of CCGL can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that is emerged as a result of the process - Benefit of exemption allowed. Visit to Get Source Income Tax: Assessment order under the scheme of section 144C - the final order of assessment is passed pursuant to the direction of the learned dispute resolution panel but it cannot be said that that limitations provided under section 153 applies to it. Visit to Get Source Income Tax: Revision u/s 263 - credit of TDS reflected in form No. 26AS - Once the material now cited before us was not available with the Pr. CIT, therefore, we do not find any mistake in the order passed by the PCIT. Visit to Get Source Income Tax: Revenue recognition - sale of under construction flats - AO directed to make an addition, bringing to tax by percentage completion method, the revenue out of the remaining executed agreements, if any, during the impugned assessment year. Visit to Get Source Customs: Demand of Penalty - the duty with interest and penalty (@15%) have been paid in full - the proceeding in respect of such person to whom notice is issued under sub-section (4) shall be deemed to be conclusive - the proceedings stood concluded. Visit to Get Source DGFT: Import of PET flakes made from used PET bottles etc is "Prohibited" - The import PET bottle waste/scrap was already “Prohibited" Visit to Get Source IBC: Step to be taken by the ‘Liquidator’ during the ‘Liquidation’. - the scheme must ensure maximisation of the assets of the ‘Corporate Debtor’ and balance the stakeholders such as, the ‘Financial Creditors’, ‘Operational Creditors’, ‘Secured Creditors’ and ‘Unsecured Creditors’ without any discrimination. Visit to Get Source PMLA: Condonation of delay in filing appeal - the reasons for delay in filing the appeals were beyond the control of the appellant - Section 42 of the PMLA - Money Laundering - the proviso clearly mandates the High Court not to allow the appellant to file an appeal after a further period of sixty days. Visit to Get Source Central Excise: Interest on delayed refund - the appellant is entitled to interest on refund from the date of filing the appeal (when such deposit under protest became pre-deposit under Section 35 F) till the date of grant of refund Visit to Get Source Central Excise: Levy of penalty - fraudulent availment of CENVAT Credit - It was contended that, Penalty under Rule 26(2) provision can be imposed only on a natural person. - The appellant is a partnership firm and per se is not a natural person, arguments rejected - Penalty confirmed Visit to Get Source Central Excise: CENVAT credit - Diesel oil engine - it is not a specified capital goods item - The diesel oil engine is used in various places like water treatment plants, coke oven etc. for the purpose of recycling of waste water. - Hence, the said item is eligible for Cenvat Credit as input if not eligible for credit under the category of capital goods Visit to Get Source Articles Open letter to Governor RBI over incorrect processing of DICGC claims THE PROHIBITION OF ELECTRONIC CIGARETTES Notifications DGFT 26/2015-2020 - dated 24-10-2019 - FTP Amendment in import policy condition No.2 of Chapter 39 of ITC (HS), 2017, Schedule - I (Import Policy) GST - States 42/2019- State Tax - dated 30-9-2019 - Chhattisgarh SGST Seeks to bring rules 10, 11, 12 and 26 of the CGGST (Fourth Amendment) Rules, 2019 in to force 23/2019 State Tax (Rate) - dated 30-9-2019 - Chhattisgarh SGST Seeks to amend Notification No. 04/2018-State Tax (Rate), No. F-10-3/2018/CTV(11), dated the 25th January, 2018 22/2019 State Tax (Rate) - dated 30-9-2019 - Chhattisgarh SGST Seeks to amend Notification No. 13/2017-State Tax (Rate), No. F-10-43/2017/CT/V(81), dated the 28th June, 2017 21/2019 State Tax (Rate) - dated 30-9-2019 - Chhattisgarh SGST Seeks to amend Notification No. 12/2017-State Tax (Rate), No. F-10-43/2017/CT/V(80), dated the 28th June, 2017 38/1/2017-Fin(R&C)(115) - dated 21-10-2019 - Goa SGST Goa Goods and Services Tax (Sixth Amendment) Rules, 2019 38/1/2017-Fin(R&C)(114) - dated 21-10-2019 - Goa SGST Seeks to make filing of annual return under section 44 (1) of Goa Goods and Services Tax Act, 2017 for F.Y. 2017-18 and 2018-19 optional for small taxpayers whose aggregate turnover is less than ₹ 2 crores and who have not filed the said return before the due date 38/1/2017-Fin(R&C)(113) - dated 21-10-2019 - Goa SGST Seeks to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the quarters from October, 2019 to March, 2020 95/GST-2 - dated 24-10-2019 - Haryana SGST Prescribe the due date for furnishing of return in FORM GSTR-1 for registered persons having aggregate turnover more than 1.5 crore rupees for the months of October, 2019 to March, 2020 under the HGST Act, 2017 94/GST-2 - dated 24-10-2019 - Haryana SGST Prescribe the due date for furnishing of return in FORM GSTR-3B for the months of October, 2019 to March, 2020 under the HGST Act, 2017 34997-FIN-CT1-TAX-0043/2017/FIN. - S.R.O. No. 363/2019 - dated 16-10-2019 - Orissa SGST Seeks to amend Notification No. 34981-FIN-TAX-0043/2017, dated the 16th October, 2019 34993-FIN-CT1-TAX-0034/2017/FIN. - S.R.O. No.362/2019 - dated 16-10-2019 - Orissa SGST Odisha Goods and Services Tax (Sixth Amendment) Rules, 2019 34989-FIN-CT1-TAX-0043/2017/FIN. - S.R.O. No.361/2019 - dated 16-10-2019 - Orissa SGST Seeks to make filing of annual return under section 44 (1) of Odisha Goods and Services Tax Act, 2017 for F.Y. 2017-18 and 2018-19 optional for small taxpayers whose aggregate turnover is less than ₹ 2 crores and who have not filed the said return before the due date 34985-FIN-CT1-TAX-0043/2017/FIN. - S.R.O. No.360/2019 - dated 16-10-2019 - Orissa SGST Seeks to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the quarters from October, 2019 to March, 2020 34981-FIN-CT1-TAX-0043/2017FIN. - S.R.O. No.359/2019 - dated 16-10-2019 - Orissa SGST Seeks to waive the late fees in certain cases for the month of July, 2019 for FORM GSTR-1 and GSTR-6 provided the said returns are furnished by 20.09.2019. Income Tax 84/2019 - dated 22-10-2019 - IT Agreement between the Government of the Republic of India and the Government of the Kingdom of Morocco for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes Circulars / Instructions / Orders SEBI - SEBI/HO/DDHS/DDHS/CIR/P/2019/115 - dated 22-10-2019 Framework for listing of Commercial Paper GST - States - Circular No. 10/2019 - dated 21-10-2019 SGST Dept.- Kerala Flood Cess - instructions issued GST - States - Circular No. 09/2019 - dated 21-10-2019 Action against Return Defaulters - Special Drive for Cancellation of Registration of Return Defaulters. GST - States - TRADE CIRCULAR No. 38/2019 - dated 17-10-2019 Clarification on applicability of GST exemption to the DG Shipping approved maritime courses conducted by Maritime Training Institutes of India. News DGGI, Gurugram, busts racket issuing fake GST invoices of more than ₹ 136 Crores CCI approves acquisition of 4.15% of the shareholding in Aditya Birla Capital Limited by Jomei Investments Ltd. of Combination under Section 31(1) of the Competition Act, 2002 New World Bank Project to Support Climate Resilient Agriculture for 125,000 Small holder Farmers in Odisha India ranks 63 in World Bank’s Doing Business Report Piyush Goyal Invites Swedish Business Community to Partner with Indian Industries Income Tax Department conducts search on a prominent business group in Delhi Case Laws: GST 2019 (10) TMI 1021 Blocked credits or not - Section 17(5) (d) of the CGST Act, 2017 read with Explanation to Chapter V and Chapter VI of the CGST Act, 2017 - taxes paid on procurement of goods and/or services for installation of Chillers, Air Handling Unit (AHU), Lift, Escalators and Travellator, Water Treatment Plant (WTP), Sewage Treatment Plant (STP), High Speed Diesel Yard (HSD), Mechanical Car Park (MLCP), Indoor / Outdoor Surveillance System (CCTV), D.G.Sets, Transformers, Electrical wiring and fixtures, Public Health Engineering (PHE), Fire-fighting and water management pump system, referred to as Installations - Applicant submits that although the Installations are fixed to the building/ earth, they qualify as Plant or Machinery under the CGST Act, 2017 and accordingly, the taxes paid on procurement of goods or services for such Installations should not be regarded as blocked credits in terms of Section 17(5) (d) of the CGST Act, 2017 read with Explanation to Chapter V and Chapter VI of the CGST Act, 2017. HELD THAT:- The property in question is given on rent for enjoyment of the tenant and the additional charges are charged for the maintenance - The applicant has installed Chillers, Air Handling Units, Lift, Escalator, Travellator, Water Treatment Plant, Sewage Treatment Plant, HSD Yard, Mechanical Car Park, Surveillance System, DG Sets, Transformers, Electrical Wiring and fixtures and PHE, Firefighting and water management pump system and other facilities of the building. The applicant has procured the goods and services for installation of these. The applicant has stated that he has procured goods or services or both for the purposes of additions to the said immovable property and has capitalized them in his books of accounts. Therefore, the same are covered under the expression construction of an immovable property and hence the input tax credit on the goods or services or both received by a taxable person in respect of such construction is not available - The claim of the applicant that the immovable property is a plant and hence the covered under the exception in Section 17(5)( d) is verified and it boils to the issue whether the listed items are covered under the definition of plant . The definition of Plant and Machinery is in the context of plant and machinery and includes apparatus, equipment and machinery and contextually, the word plant could include apparatus and equipments fixed to the earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports, whereas machinery would be covered separately. The exclusion clause relating to land, building and any other civil structure would be applicable to this plant and hence input tax credit is not available as it is a civil structure. The provision of facilities like transformers, sewage treatment plant, Electrical Wiring and Fixtures, Surveillance systems, D.G. Sets, Lifts, Air Handling Units etc. are sine-qua-non for a commercial mall and hence cannot be considered separate from the building or civil structure. The provision of these are either statutory for a building or defines the nature of the building as a commercial mall. Hence the input tax credit on the inward supplies of goods or services involved in the construction of immovable property which is a civil structure or building is not available to the applicant and hence blocked. Thus, the taxes paid on procurement of goods and/or services for installation of the Installations as listed in the application are regarded as blocked credits under Section 17(5) of the CGST Act, 2017. 2019 (10) TMI 1020 Rate of GST - constructions comprising entirely of construction of commercial space - rate of tax applicable both with ITC and without ITC? - HELD THAT:- The transaction of the applicant is examined and found that the applicant has entered into a joint development agreement with the landowner for developing a purely commercial property. There is a supply of development rights to the applicant by the landowner and there is a supply of construction service in the form of works contract service by the applicant to the landowner - the landowners are transferring the development rights of the land in lieu of construction service to the applicant and the applicant is providing construction services to the landowners to the extent of the value of the rights in land. The supplies of the applicant needs to be verified and on verification it is observed that the applicant is not intending to supply the constructed commercial apartments to any prospective buyers and himself capitalizing the same and intends to use it for leasing/ renting. Since no resale of the constructed portion is intended, the project is not covered under the definition of a real estate project - Since the applicant is not intending to sell any of the said commercial area, the project undertaken by the applicant cannot be covered under a Real Estate Project and hence cannot be covered under subitem (if) of item 3 of the Notification. The tax rate applicable on the supply of construction service to the land owner in lieu of transfer of development rights to the promoters portion is liable to tax at 9% under CGST and 9% KGST under entry no 3(xii) of the Notification No.11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No.3/2017-Central Tax (Rate) dated 29.03.2019. The applicant is eligible for input tax credit on the same. In the instant case can the applicant, the service provider of construction of commercial space utilise the ITC relating to the construction activity on supply of other goods and services? - HELD THAT:- The applicant is capitalizing his portion of the building as an immovable property and as per section 17(5)(d) of the CGST Act, 2017, the applicant is not eligible to claim input tax credit on the inputs and input services to the extent used for such construction. Can input tax paid on inputs relating to construction activity i.e. on construction of buildings / built up space be utilised against the output tax payable on letting out of the same space? - HELD THAT:- Since the input tax credit is not available relating to his portion of the constructed building, the same is not available for utilization of it against the output tax payable on letting out of the same space. Is providing residential accommodation as paying guest to students outside the premises of the University/ College / School campus taxable under GST? If yes, what is the rate of tax applicable? - HELD THAT:- This is not answered as the applicant has withdrawn the question. 2019 (10) TMI 1019 Exemption from GST - health care service provider - Whether applicant being a health care service provider, are exempted from tax or not? - HELD THAT:- The transaction of the applicant is examined and it is seen that the applicant has entered into a contract with the contractee (hospital) for providing diagnostic services in their premises for the patients referred to by the hospital. The patients are liable to pay charges on that account to the Hospital and the applicant has nothing to do with it. The applicant only scrutinizes whether the payment is done or not and once the payment is done to the Hospital as per their schedule of charges, they carry out the diagnostic tests on the patients. The service thus provided is to the contractee and not to the patients. The consideration is also payable by the contractee to the applicant and hence the contractee is the recipient of the services by virtue of clause (93) of section 2 of the CGST Act, 2017. Since, the contractee is liable to pay the consideration involved in the supply of services to the patients, the contractee would be deemed to the recipient of services and it does not matter whether the contractee collects the amount from the patient or not - the services by way of diagnosis for illness, deformity-, abnormality or pregnancy are covered under health care services . Whether the applicant is a clinical establishment as contemplated in Entry No.74 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017? - HELD THAT:- Since the applicant is offering diagnostic services, they would be covered under the term clinical establishment for the purposes of entry no. 74 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. The service provided by the applicant would be covered under Services by way of health care services by a clinical establishment and hence covered under entry 74 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and hence is exempted from GST. It is pertinent to note that there is no condition relating to the recipient of these services in the said entry. 2019 (10) TMI 1018 Input GST credit - detachable 14mm Engineered Wood with Oak top Wooden Flooring which is movable in nature and capitalized as furniture and fixture , and is not capitalized as immovable property - HELD THAT:- The input tax credit of GST can be availed by the applicant on the detachable 14 mm Engineered wood with Oak top wooden flooring which is movable in nature and capitalized as furniture . Input GST Credit - detachable sliding and stacking glass partition which is movable in nature and capitalized as furniture and fixture , and is not capitalizes as an immovable property - HELD THAT:- The input tax credit of GST is not available on the detachable sliding and stacking glass partitions. 2019 (10) TMI 1017 Rate of GST - sub-contract (works contract) for construction of independent residential units for weaker sections of society under Pradhan Mantri Awas Yojana - serial no. 3 of Notification No. 1/2018- Central Tax (Rate) dated 25.01.2018 - HELD THAT:- The contract of the applicant is examined and seen that the applicant has entered into the contract for construction of houses pertaining to the main contract allotted to the main contractor back to back and hence the same is also covered by sub-item (c) of item (iv) of serial no.3 of Notification No.11/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 1/2018- Central Tax (Rate) dated 25.01.2018. The sub-contract of construction of independent houses by the applicant under the main contract of construction of houses pertaining to the Pradhan Mantri Awas Yojana is covered under sub-item (c) of item (iv) of serial number 3 of Notification No. 11 /2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 1/2018 -Central Tax (Rate) dated 25.01.2018 and is liable to CGST at 6%. Similarly, the same is also liable to KGST at 6% under the Karnataka Goods and Services Tax Act, 2017. 2019 (10) TMI 1016 Classification of goods - Flavoured Milk - to be classified under HSN 0402 99 90 or under 2202 99 30 or under any other Chapter? HELD THAT:- T he headings 0401 is not relevant as it is related to milk cream that is neither concentrated nor containing sugar or other sweetening matter and does not cover the flavoured milk. Tariff heading 0403 is also not relevant as the said heading is related to fermented or acidified milk, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa and the instant product is neither fermented nor acidified. Further, the tariff headings 0405 0406 are also not relevant as they are related to butter/fats derived from milk and cheese curd respectively and does not cover the instant product. The product in question i.e. flavoured milk cannot be covered under whey and hence it is not covered under HSN 0404 10. The residual entry of heading 0404 is tariff heading 0404 9000 which is related to the products having constituents of natural milk, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included - In the instant case, the Flavoured Milk is made out of milk (pasteurized / standardized) added with sugar, colour and flavour Therefore predominant part of the product is milk and naturally contain the constituents of natural milk. The said heading does not cover flavoured products. The applicant has relied upon the description of FSSAI on Flavoured Milk . Though the said Act deals with food safety and standards, it contains, under Schedule-11, The Milk and Milk Products Order, 1992. in accordance to which, under Section 2(f) milk means milk of cow, buffalo, sheep, goat, or a mixture thereof either raw or processed in any manner and includes pasteurised, sterilized, recombined, flavoured, acidified, skimmed, toned, double toned, standardised or full cream milk - thus, Milk includes pasteurised, sterilized and flavoured milk. Therefore, the product of the applicant is covered under Milk . The flavoured milk is not a water based drink whereas the tariff heading 2202 deals with water based beverages and other non alcoholic beverages. Therefore it could be inferred that the pre-dominant part of the beverages covered under the heading 2202 is water. In the instant case the predominant constituent is milk and hence the flavoured milk does not merit classification under beverage containing milk, under tariff heading 2202 9930. but merits classification as milk, under tariff heading 0402 - Tariff heading 0402 covers milk and cream, concentrated or containing added sugar or other sweetening matter . The instant product flavoured milk is covered under milk as discussed already. Therefore the instant product merits classification under tariff heading 0402 99 90. 2019 (10) TMI 1015 Classification of goods - rate of tax - Tobacco leaves - whether the commodity in question is covered under entry no. 109 of Schedule I of Notification No. 1/2017 -Central Tax (Rate) dated 28.06.2017 or Entry No. 13 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017? HELD THAT:- The product the applicant is dealing with is undoubtedly a sun-cured country tobacco which is covered under tariff heading 2401 10 20. The commodity is not tobacco leaves which are raw, but cured tobacco and hence are covered under entry no. 13 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dared 28.06.2017 attracting a tax of 14% under the CGST Act and similarly attracting a tax of 14% under SGST Act. Applicability of Notification No.4 /2017 - Central Tax (Rate) dated 28.06.2017 - HELD THAT:- Since the goods in question are not tobacco leaves and hence are not covered under entry no. 109 of Schedule I of Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 and hence is not liable to reverse charge. Further the applicant is not purchasing the same from agriculturists and hence on this account also, he is not covered under this notification. 2019 (10) TMI 1014 Classification of goods - rate of GST - LPG Conversion Kit for Automobiles - HELD THAT:- The LPG/CNG conversion kit is an apparatus / part that provides alternate fuel into the internal combustion engines of and hence can be considered as parts of said internal combustion engines, which are parts of motor vehicles. Tariff heading 8407 covers spark-ignition reciprocating or rotary internal combustion piston engines; tariff heading 8408 covers compression-ignition internal combustion piston engines (diesel or semi-diesel engines) and tariff heading 8409 covers parts suitable for use solely or principally with the engines of heading 8407 or 8408. In the instant case the product conversion kit is specific to a particular engine i.e. auto rickshaw (three wheeler). Therefore it could be considered that the impugned kit is a part suitable for use solely or principally with engines of auto rickshaw, which falls under tariff heading 8407 or 8408. Hon ble CESTAT, Chennai in the case of TRANSENERGY LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI [ 2008 (9) TMI 130 - CESTAT CHENNAI] has held that the CNG Conversion Kits providing alternate fuel charging system to internal combustion engines are engine parts and though internal combustion engine are parts of motor vehicles of heading 8708 of the Central Excise Tariff, Heading 8409 ibid is being more specific, the kits are classifiable under heading 8409. Thus, the LPG Conversion Kits are classifiable under HSN 8409 99 90 and the same are covered under serial no.116 of Schedule IV to the Notification No.01/2017 - Central Tax (Rate) dated 28.06.2017 and hence liable to tax at 14% under the CGST Act. 2017 - Similarly the said kits are liable to tax at 14% under the KGST Act 2017 under entry no. 116 of Schedule IV of Notification (01/2017) No. FD 48 CSL 2017 dated 29.06.2017. 2019 (10) TMI 1013 Rate of GST - HSN Code - e-campus solutions supplied by the applicant - HELD THAT:- The transaction of the applicant is verified and found that the applicant has entered into contract with various organisations, especially with schools for the supply of e-campus solutions which involves various e-learning facilities. The contract also involves the annual maintenance of the entire product. The contract is for multiple years and the consideration for the contract is to be received in two instalments in each year. The sample contract is examined and found that the transfer of title in goods is happening only at the end of the contract period in all cases, except planetarium where no transfer of property in goods is happening and it is a clear case of lease (hence a service). Even where the contract is terminated within the contract period, a lump-sum amount is charged as severance amount which is related to the cost of infrastructure installed and the transfer of property happens at that time. Hence in all cases, the actual contract is for the lease of infrastructure in the project and usage and hence is a service - What is leased in this case is not individual goods but all the goods involved in the set-up of an e-classroom. The moment the e-classroom comes into existence,- the individual goods lose their existence and only additional users can be attached for additional amounts. Thus, the lease of the project is covered under item (iii) of entry 17 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 and is liable to tax at 9% CGST as the project is taxable at 9% CGST. 2019 (10) TMI 1012 Release of goods - goods are perishable and hazardous in nature - section 67(8) of CGST Act read with Rule 141 of the CGST Rules - HELD THAT:- Subject to compliance of the above provisions of law, the goods so seized may be considered for release within next one week. Petition disposed off. 2019 (10) TMI 1011 Detention of goods alongwith the vehicle - on 31.7.2019, the petitioner paid the total amount of tax, penalty and fine in lieu of confiscation amounting to ₹ 32,04,256/- by way of a challan - HELD THAT:- Issue notice, returnable on 22.10.2019. 2019 (10) TMI 1010 Maintainability of delay condonation application - assessee had filed first appeal that came to be dismissed as beyond time - HELD THAT:- The order dated 10.06.2018 suffers from an inherent defect, inasmuch as it appears to have been passed without first verifying whether any satisfaction had been reached by the proper officer as to the admissibility of the petitioner to the benefit of the compounding scheme pursuant to his application which admittedly had been filed within time alongwith necessary deposit of compounding fee. The order dated 10.06.2018 is accordingly set aside and the matter is remitted to the assessing authority to pass a fresh order of assessment in accordance with law. 2019 (10) TMI 1009 Maintainability of delay condonation application - the assessee had filed first appeal that came to be dismissed as beyond time - HELD THAT:- While the assessee claims that it had filed compounding application and therefore, could not have been subjected to tax, the supplementary counter affidavit filed by the State discloses that during the assessment year in question, the assessee filed its return of regular assessment of tax and did not opt for compounding. There is no merit in the contention that it had been wrongly subjected to tax - Petition dismissed. 2019 (10) TMI 1008 Vires of Section 17(5)(C) and (D) of the Central Goods and Services Act 2017 - double taxation - discrimination - HELD THAT:- Issue notice to the Attorney General of India, returnable on 16.12.2019 - Issue Notice to the respondents, returnable on 16.12.2019. 2019 (10) TMI 1007 Omission to consider the other grounds raised against the impugned order of assessment - constitutional validity of Section 174 of the KSGST Act - time limitation - HELD THAT:- Such a question was raised before the assessing authority and it was adjudicated therein. Therefore, the question of limitation, being one which could be considered as a question of law, can be permitted to be raised in the writ petition - Since no grounds except validity of Section 174 of KSGST Act was considered in the impugned judgment, we find it appropriate to remit the writ petition for consideration of other grounds available to the appellant, in particular the question of limitation. Appeal allowed. Income Tax 2019 (10) TMI 1005 Requisition of amount u/s 132A - Cash was seized from two persons of the Angadiya Courier Service by the police inspector - Seeking quashing the Warrant of Authorization issued by the Principal Director of Income Tax (Investigation) u/s 132A(1) - HELD THAT:- Special leave petition is, accordingly, dismissed as withdrawn. 2019 (10) TMI 1004 Reopening of assessment u/s 147 - HELD THAT:- As submitted that, after satisfying himself, the Assessing Officer had framed the assessment in the case of the firm vide order dated 25.02.2015 accepting the explanation given by the firm. As further pointed out that in this case, the reopening is based upon a search carried out at the premises of K. Star group on 17.08.2016. It was submitted that, under the circumstances, the Assessing Officer could not have assumed jurisdiction under section 147 of the Act and a notice under section 153C could have been issued, if permissible. Having regard to the submissions advanced by the learned counsel for the petitioner, issue Notice , returnable on 10th December 2019 . By way of ad-interim relief, further proceedings pursuant to the impugned notice dated 29.03.2019 issued by the respondent under section 148 of the Income Tax Act, 1961 for the Assessment Year 2012-13 are hereby stayed. Direct service is permitted. 2019 (10) TMI 1003 Assessment on the basis of seized material and documents u/s 158BB(1) - Tribunal recorded a categorical finding that Assessing Officer instead of working out undisclosed income, as per the provisions of Section 158 BD had totalled up amount mentioned in various annexures, which according to the assessee are part of the contract work done by him - HELD THAT:- Tribunal has recorded a finding in regard to the additions made by the AO which was confirmed by the CIT (Appeals), which was based only on mere assumption and not on any material recovered during search and seizure. The Tribunal had recorded a categorical finding that addition cannot be made merely on presumption that assessee had earned undisclosed income and incurred expenses outside books of account, which need no interference being finding of fact, the appeal lacks merit and is hereby dismissed . 2019 (10) TMI 1002 Correct head of Income - Income from business or income from house property or income from other sources - property acquired by the assessee and subsequently entered into an agreement with GAIL and the receipts at the hand of assessee pursuant to the agreements - HELD THAT:- In the present case, the AO found sufficient materials and changes in the year under consideration, as he after examining the relevant clauses of agreements formed an opinion that the property was taken on lease for giving it on rent to GAIL. Further, Section 2(13) defines business, which includes any trade, commerce or manufacture or adventure or concerned in the nature of trade, commerce or manufacture. In the present case no business activity was being carried out by the assessee as business is a continuous and systematic activity carried on with a view to earn profit. Further, the records of the assessee revealed that only one person was employed, which cannot go on to establish the fact that any business activity was being carried out by the appellant, and the premises was only let out to GAIL pursuant to the agreement and was thus rightly assessed by the Assessing Officer under the heading 'income from house property and income from other sources'. In a similar set of fact, the Bombay High Court in case of Mangla Homes Pvt. Ltd. vs. Income Tax Officer [ 2008 (8) TMI 522 - BOMBAY HIGH COURT] following the decision of the Apex Court in case of East India Housing and Land Development Trust Ltd. v. CIT [ 1960 (11) TMI 7 - SUPREME COURT] held that income derived by the company from shops and stalls is income received from property and falls under the specific head described in Section 9 being income from property. AO after examining all the three agreements found that the assessee did not indulge in any kind of recurring, systematic and in organized manner, business activity and having only one employee rightly assessed the receipts under the heading 'income from house property and income from other sources'. In depth and the findings recorded by the authorities below, we are of the considered opinion that as the appellant-assessee did not carry out any systematic, recurring and in organised manner, any business activity nor there was any volume, frequency, continuity and regularity of transactions, and only one person was employed by him for the management and look after of the leased property, the taxing authorities had rightly held the receipts to be income from house property and income from other sources and not business income. 2019 (10) TMI 1001 Deduction u/s.10B - Manufacturing - Export of Copper Cladded Glass expoxy Laminate (CCGL) - claim denied as assessee had not carried out any manufacturing activities qua the said product i.e. CCGL - Tribunal allowed deduction - HELD THAT:- It appears that in the case on hand, the raw material is first sent to the shearing department. The shearing machine is set for the desired size and the laminates are cut into the specified sizes as required by the customer. The laminates are, thereafter, checked for the oxidation effect. A thorough surface clearing is done to remove the oxidation. The Quality Control Department, thereafter, would verify the quality parameters like the thickness of the material, thickness of copper using Alco Meter etc.. At the end of the entire process, the final product is called as CCGL. It goes without saying that the change or the series of changes brought about by the application of the process explained above, the commodity in the form of CCGL can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that is emerged as a result of the process. We are of the view that no error, not to speak of any error of law, could be said to have been committed by the Appellate Tribunal in passing the impugned order. We would not like to disturb the order passed by the ITAT. - Decided against revenue. 2019 (10) TMI 1000 Claim of deduction u/s 80IA - profits derived from the eligible power generation business through Wind Mill unit of the appellant - HELD THAT:- We do not agree with the reasoning given by the CIT(A) that the assessee himself had offered the impugned claim of deduction for taxation rendered in the case of CIT Vs. Mahalakshmi Sugar Mills Ltd. [ 1986 (7) TMI 83 - SUPREME COURT] . CIT(A) ought to have examined the issue of taxability if the amount was not taxable by offering the same would not close the doors for the assessee to claim deduction if subsequently it is realised that the assessee was entitled for deduction u/s 80IA - restore the issue of deduction to the file of the A.O. to verify the correctness of the claim if it is found that assessee has rightly claimed deduction u/s 80IA of the Act and has been allowed in subsequent years. Assessing officer would allow deduction as claimed by the assessee u/s 80IA of the Act. This ground of the assessee s appeal is allowed for statistical purposes. Disallowance of the expenses on adhoc basis - A.O. disallowed this expenditure on adhoc basis on the basis that bills and vouchers and supporting documents were not found proper and were not made under the head of these expenses - HELD THAT:- We find merit into the contentions of the Ld. Counsel for the assessee that there is a sweeping observation by the authorities below. No specific expenses have been pointed out to demonstrate the particular expenditure was not supported with evidence. Therefore, we direct the A.O. to delete this addition. 2019 (10) TMI 999 Assessment u/s 153C - Addition u/s 68 - HELD THAT:- Assessment order reveals that the AO has carried out the entire exercise of assessment mechanically because satisfaction note recorded by AO of the assessee is diametrically opposite/different from the satisfaction note recorded by the AO of searched person. Satisfaction note recorded by the AO in case of the assessee is pertaining to some entries of Green Valley Resorts, Blooming Dates Resort and Kuber Breweries but bearing no mention of receiving any share application money from Binapani Merchandise. It appears that AO has lost sight of the provisions contained u/s 153C and has travelled beyond his jurisdiction without verifying the requirement that incriminating material has to be there to initiate the proceedings u/s 153C of the Act. Addition cannot be made on the basis of surrounding circumstances and statement recorded during the statement of Moolchand Malu and Vikas Kumar Agarwal recorded during the search proceedings as contended by ld. DR, hence the submissions made by the ld. DR and case laws relied upon are not applicable to the facts and circumstances of the case. We are of the considered view that the assessment framed u/s 153C is not sustainable in the eyes of law being without jurisdiction and also being time barred, hence hereby quashed without going into the merits of the case. - Decided in favour of assessee. 2019 (10) TMI 998 Assessment u/s 153A - proof of incrementing material exhibiting escapement of taxable income - HELD THAT:- No material was found during the course of search relating to this assessment year exhibiting escapement of taxable income or availability of undisclosed income for the purpose of assessment under section 153A of the Income Tax Act. If there is no material available, and on re-appraisal of that very material addition has been made by the AO, then such assessment order is not sustainable in the eyes of law, because, the AO has no jurisdiction to invoke section 153A in view of principle laid down by the Hon ble Delhi High Court in the case of Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] . No proceedings were pending on the date of search for this assessment. Therefore, nothing would abate for making a fresh assessment under section 153A of the Act. We have perused the comments of the AO at the time of hearing. The AO has not given any comments qua first fold of grievance shown by the assessee. His comments are related to various additions made by him with regard to unexplained income from Somnath building, agriculture income etc. Accordingly, we allow the appeal of the assessee, and quash the assessment order passed under section 153A Addition based on declaration made u/s 132(4) - HELD THAT:- If something has been inherently gone wrong, at the time of search, then during the assessment proceedings, that facts should have been ascertained by the AO. It was for the AO to call for independent witness as well as accountant of the assessee in support of the report of the investigation wing. Onus is not upon the assessee. It is the AO who has to first establish that some undisclosed expenditure was incurred by the assessee and details recorded to that were found. On the basis of simple declaration even under section 132(4) addition cannot be made. Revenue authorities have failed to carry out this inquiry, and therefore, after relying upon the decision of CIT Vs. Maulikkumar K. Shah [ 2007 (7) TMI 267 - GUJARAT HIGH COURT] and K.P.M. Nair Vs. ACIT [ 2016 (8) TMI 514 - GUJARAT HIGH COURT] we do not have any hesitation that addition is not sustainable. Assessment u/s 153A - Addition of FDRs - HELD THAT:- For the purpose of the assessment order under section 153A, addition could be made only on the basis of seized material. If the FDR is in the name of the assessee, but it was also shown as investment in the company and reflected in the balance, then it was brought to the notice of the Department. This fact ought to have been verified before making addition in the hands of the assessee. Therefore, we deem it appropriate to set aside this issue to the file of the AO for limited purpose that the ld.AO shall call for details from Kenson Motor P.Ltd. and find out whether the company has financed the purchases of this FDR and has accounted in its books of accounts. If it is found that the company has not financed it, then FDR stands in the name of two persons and to the extent share of the assessee is there, addition be made to that extent - according to the assessee, it is in the name of Shri Rajeshbhai, and therefore, the addition be restricted to 50% of ₹ 5,00,000/-. The ld.AO shall verify this fact, and re-adjudicate the issue after hearing the assessee. Undisclosed rental income - stand of the assessee is that since this is the assessment order framed under section 153A, therefore, no addition ought to be made without supporting of any seized material - HELD THAT:- No merit in the contention of the ld.counsel for the assessee, because this search was conducted on 11.10.206, and this is a regular as well as search assessment year. In this year, the AO can explore other items of income required to be assessed in the regular assessment. Though, we accept alternative contention of the assessee, because, we have already assessed ₹ 10 lakhs on account of unexplained cash available with the assessee. The AO is directed to give telescopic benefit of this ₹ 30,000/- out of ₹ 10 lakhs assessed in this year. The reason for this direction is that the AO has assessed it on account of unexplained credit in the books. This ground of appeal is partly allowed. Penalty u/s 271(1)(c) - HELD THAT:- Cash of ₹ 10 lakhs was found which has not been accounted in the books. He could not give any explanation even in the penalty proceedings. As far as the addition of ₹ 9,000/- is concerned, the assessee has shown rental income from Kenson Sales Corporation. The stand of the assessee has not been accepted by the AO. The assessee has given an explanation that he has rental income, but stand of the assessee was not accepted. This explanation was not found to be false by the AO. Therefore, on the addition of ₹ 9,000/- no penalty be imposed upon the assessee. However, the ld.AO to calculate penalty imposable upon the assessee only on addition of ₹ 10,00,000/-. The appeal of the assessee is partly allowed. Invocation of jurisdiction under section 153A - Non disclosure of agricultural income - HELD THAT:- Search was carried out on 11.12.2006. Time limit to issue notice under section 143(2) on the original return of income in the Asstt.Year 2006-07 was not expired till search has taken place. Thus, the assessment in this year has to be termed as not attained finality. It has abated, and fresh assessment under section 153A has to be passed. No doubt the AO was not possessing any incriminating material for making addition. In such situation, he could determine the taxable income according to the regular books of accounts. He has not made any addition separately, which is associated with search. It is the assessee who has shown agriculture income and rental income for the first time in response to notice under section 153A. Therefore, these issues were required to be examined while re-assessing the income for this assessment year as per section 153A Agricultural income - assessee has disclosed agriculture income, but could not substantiate that fact - This issue deserves to be set aside to the file of the AO because the AO has not called for the land holding possessed by the assessee. It is to be ascertained whether the assessee is having any agriculture land; if yes, whether it is cultivatable or barren land, after calling from the land record, the AO should determine whether the assessee has any agriculture income or not. Rental income shown by the assessee AO has not discussed this issue in detail. A perusal of the CIT(A) s order would indicate that building from which rental income is being claimed, owned by seven persons. Upto and unless actual documents exhibiting ownership of the building, and how rental income is being recognized in the hands of the assessee is ascertained, it is not advisable to make addition under section 68. Therefore, we deem it appropriate to set aside both orders to the file of the AO for re-adjudication. 2019 (10) TMI 997 Penalty u/s 271AAB - surrender of income during the search and seizure action - HELD THAT:- Tribunal in case of Shri Surajmal Bansal HUF and others including Shri Navneet Bansal Vs DCIT who is husband of the assessee, has considered the issue of levy of penalty U/s 271AAB of the Act arising from the disclosure and surrender made by the other family members of the assessee under the same search and seizure action conducted on 05/02/2015. In the case in hand, the surrender was made in respect of entries found regarding the advance in names of certain persons for land and otherwise which are identical entries as in case of other family members and particularly in the case of the husband of the assessee Shri Navneet Bansal Vs. DCIT [2019 (4) TMI 1113 - ITAT JAIPUR] decided the leviability of penalty U/s 271AAB of the Act in the identical facts and circumstances and considering this issue as common in respect of all the four appeals of the family members and the HUF. Following the earlier order of this Tribunal passed in the identical facts and circumstances of the case, penalty levied in the present appeal U/s 271AAB of the Act is deleted. - Decided in favour of assessee 2019 (10) TMI 996 Non satisfaction of pre-requisites of a speaking order by CIT-A - Shortage of fabric - HELD THAT:- A perusal of brief finding recorded by the CIT(A) would reveal that the CIT(A) has not considered any material on the record as well as arguments of the assessee pleaded in the written submissions. Thus, the impugned order cannot be branded as a speaking order. At this stage, we would like to make reference to the judgment of Roadmaster Industries of India P.Ltd. Vs. ACIT, [ 2006 (5) TMI 86 - PUNJAB AND HARYANA HIGH COURT] as considered large number of judgments at the end of Hon ble Supreme Court as well as at the end of Hon ble High Courts in order to propound why reasons are necessary in support of conclusions of any adjudicating authority. If we visualize written submissions and finding given by the ld.CIT(A), then it is apparent that such finding does not contain any adjudication on the submissions of the assessee and not sustainable. We set side finding of the ld.CIT(A) on this issue in both the three years. We restore this issue to the file of the ld.CIT(A) for re-adjudication. Disallowance of foreign travel expenses - HELD THAT:- As emerges out from the record that the expenses were incurred on travel of Smt.Sayraben Bagrecha for a trip to Hong Kong. She is not an employee. No evidence of technical, professional qualification of Smt.Sayraben was filed. Therefore, the assessee failed to establish that these expenses were incurred for the purpose of business. Considering the finding recorded by the ld.Revenue authorities, we do not find any merit in these grounds of appeal in both the years. Profit estimation - Non rejection of books of accounts - HELD THAT:- income has to be computed in accordance with the method of accountancy followed by an Assessee i.e. cash or mercantile, such method has to be followed keeping in view the Accounting Standard notified by the Central Government from time to time. Sub clause 3 provides a situation, that is, if the Assessing Officer is unable to deduce the true income. On the basis of method of accountancy followed by an Assessee than he can reject the book result and the assessee s income according to his estimation or according to his best judgment. The Assessing Officer in that case is required to point out the defects in the accounts of Assessee and required to seek explanation of the Assessee qua those defects. If the assessee failed to explain the defects than on the basis of the book result, income cannot be determined and Assessing Officer would compute the income according to his estimation keeping in view the guiding factor for estimating such income. - Both the authorities have not taken into consideration whether any justifiable reasons are there for such lowering down of the profit. Since, order of the ld.CIT(A) is totally silent on this aspect, and she has not discussed the submissions of the assessee, therefore, we deem it appropriate to set aside this issue to the file of the ld.CIT(A) for re-adjudication. 2019 (10) TMI 995 Disallowance u/s 14A - HELD THAT:- We are not convinced with the plea that Ld. AO has not recorded the requisite satisfaction before proceeding to apply Rule 8D(2)(iii). It is evident from the discussion made by Ld. AO in para 6.2 that the assessee did not furnish the basis of allocation of the expenses suo-moto disallowed by him. It was also observed that the part of salary and expenses attributed towards earning of dividend income bear no co-relation with the earning of the dividend income or the man-hours allotted to the activities resulting into the earning of dividend. Therefore, we are unable to concur with Ld. AR s argument, on this point. So far as the merits of the case are concerned, we find that this issue was restored by Tribunal to the file of learned AO in AY 2008-09 vide para wherein learned AO was directed to examine the sufficiency or correctness of suomoto disallowance made by the assessee having regards to assessee s accounts and explanations and proceed further after recording speaking reasons for non-satisfaction. We note that, in this AY, learned AO has already rejected the assessee s working. With a view to enable revenue to take consistent stand in the matter, we restore the matter back to the file of learned AO on similar lines. The learned AO is directed to reappreciate the disallowance made by the assessee and invoke Rule 8D only if not satisfied with assessee s working of disallowance. It is made clear that if the disallowance is computed in terms of Rule 8D(2)(iii) then apart from the directions of CIT(A) to exclude certain investments, those investments which have not yielded any exempt income during the year under consideration would also be excluded as per the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . Accordingly, Ground No.1 of assessee s appeal may be treated as partly allowed for statistical purposes. Capital gains u/s 50C - HELD THAT:- We find that CIT(A) has clinched the issue in correct perspective. Undisputedly, the property was not free from encumbrances. The original agreement was made in the year 2000 and there was inordinate delay on account of lack of approvals from concerned authorities and the property was subject matter of litigation. The property had negative covenants as to its use which would reduce its value. Further, the assessee had disputed the valuation before Ld. AO, but no reference was made to Valuation Officer u/s 50C(2). The factual submissions made by the assessee were not controverted by Ld. AO. Therefore, the action of Ld. AO in adopting the Stamp Duty Value could not be held to be justified. Transfer Pricing [TP] adjustment on account of Share Application Money - HELD THAT:- Re-characterization of this transaction as advance / loan by revenue authorities, in our considered opinion, was not correct approach and this transaction could not be equated with loan transactions. The Ld. DR has contended that the transactions have not been re-characterized as loan but the same has been benchmarked since certain benefits have accrued to AE by infusion of fund which must be shared with the assessee. However, we find that ALP of the transaction has been computed in similar manner as it would be computed for a loan transaction. As already noted, assessee s AE ultimately became wholly owned subsidiary of the assessee and therefore, whatever benefit would accrue to AE, the same would indirectly accrue to the assessee. Therefore, not convinced with the approach of lower authorities, we hold that no addition would be warranted on this account. To arrive at aforesaid conclusion, we draw strength from the observation of Hon ble Bombay High Court in Pr. CIT V/s Aegis Limited [ 2019 (4) TMI 858 - BOMBAY HIGH COURT] has observed that in the absence of finding that the transaction was sham, the TPO could not have treated such transaction as a loan and charge interest thereon on notional basis. Section u/s 50C applicability - sale of Nala Land at Thane, Maharashtra - HELD THAT:- We are of the opinion that Ld. CIT(A) has clinched the issue in the right perspective. The Ld. AO has ignored the fact that developer had to bear the burden of payment of unearned revenue to the Government. After adding the said burden to sale consideration received by the assessee, the aggregate would be more than reckoner value. Secondly, the matter was not referred to valuation officer since the assessee had contested the reckoner value and furnished valuation report. Thirdly, it is observed that the transaction under consideration is mere development agreement and not a transaction of outright sale of land. Therefore, the provisions of Section 50C, in our opinion, were not applicable to such transactions since there was no transfer of capital assets rather it was a case of transfer of few rights out of bundle of rights available with the assessee. Therefore, concurring with the stand of Ld. first appellate authority, we dismiss Ground No.1 of revenue s appeal. The revenue s appeal stands dismissed. 2019 (10) TMI 994 Transfer Pricing Adjustment - Trademark Royalty paid to Cadbury Schweppes Overseas Limited, London, UK (CSOL) - HELD THAT:- There being no difference in factual position in the impugned assessment year, respectfully following the consistent view of the Tribunal on identical issue in assessee s own case as referred to above, we hold that the royalty payment on trade mark to SCOL @ 1% of net sales is at arm's length, hence, no further adjustment is required. Technology Royalty paid to Cadbury Adams USA LLC (CAUSA) - HELD THAT:- Considering the submissions of the learned Sr. Counsel for the assessee that in subsequent assessment years royalty paid by the assessee @ 2.7% of sales was accepted by the Transfer Pricing Officer, the letter dated 26th April 2016, sought to be produced by the assessee as additional evidence, in our view, is of much significance since it will have a crucial bearing in determining whether CAUSA has authorised the assessee to use technical knowhow along with trademark, hence, is admitted as additional evidence. Even, without taking cognizance of the aforesaid additional evidence, the original as well as amended agreement make it abundantly clear that assessee has also availed technical knowhow from CAUSA. Departmental Authorities dont dispute the genuineness or authenticity of the amended agreement. What they are disputing is the date from which the amended agreement is effective. If the departmental authorities in the subsequent assessment years have allowed payment of royalty both for trademark and technical knowhow, there is no reason why it should not be allowed in the impugned assessment year, since, it cannot be said that the assessee was manufacturing Halls brand products without obtaining the required technical knowhow. Accordingly, we hold that payment of royalty to CAUSA is at arm s length. The ground is allowed. Technology Royalty paid to Cadbury Enterprises Pte Limited (CEPT) - HELD THAT:- Since facts as well as reasoning of lower authorities are quite similar as in the case of royalty payment made by assessee to CAUSA, applying the same analogy, we delete the impugned addition. One more reason to delete the adjustment is that the assessee has entered into two separate agreement for payment of Trademark Royalty Technical royalty and therefore, the matter would stand on a better footing. Transfer Pricing (TP) adjustment on account of service fees paid to another AE viz. CSAPL - HELD THAT:- When as per assessee s claim in the subsequent assessment years the Transfer Pricing Officer himself has allowed a part of the service charges paid by the assessee to CSAPL, though, the quantum is in dispute. If in the subsequent assessment years the Transfer Pricing Officer has accepted the fact that the assessee has availed services from CSAPL under the very same agreement, there is no reason to dispute assessee s claim of availing services in the impugned assessment year if the assessee can demonstrate such fact by furnishing proper documentary evidences. In that event, the Transfer Pricing Officer certainly cannot determine the arm's length price at nil by applying the benefit test. Therefore, on overall consideration of facts and circumstances of the case, we are inclined to restore the issue to the Assessing Officer for de novo adjudication after due opportunity of being heard to the Assessing Officer. The Assessing Officer / Transfer Pricing Officer must pass a speaking and well reasoned order dealing with all the submissions of the assessee. Accordingly, this ground is allowed for statistical purposes. Depreciation on Marketing Know-how - HELD THAT:- We find that Tribunal, in AY 2003-04, at para-17 allowed depreciation claim applying the ratio of decision of Hon ble Supreme Court rendered in M/s Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT] Similar view has been taken in subsequent years. Therefore, respectfully following the consistent view of the Tribunal on this issue in assessee s own case, we allow assessee s claim of depreciation. Disallowance u/s 14A - HELD THAT:- Upon perusal of financial statements, we find that own funds in the shape of share capital free reserves at year end stood at ₹ 46266.97 Lacs as against investment of ₹ 31228.98 Lacs. Nothing has been brought on record by Ld. AO to establish the nexus of investments with borrowed funds. In fact, opening investments stood at ₹ 26663.91 Lacs and the assessee earned profit after tax for ₹ 15094.68 Lacs during the year under consideration which is more than incremental investments. Therefore, applying the ratio of cited decisions, we hold that no interest disallowance would be justified on the facts and circumstances. So far as the disallowance of direct / indirect expenses is concerned, we are of the view that since Rule 8D was applicable to this AY, the findings given in earlier orders of Tribunal would not apply to this year and the disallowance has to be worked out in terms of the Rule 8D. AO, in draft assessment order, at para 6.4, has noted that the submissions made by assessee in defense of suo-moto disallowance could not be accepted as against the submissions of the Ld. Sr. Counsel that the requisite satisfaction was not recorded by Ld. AO before proceeding to apply Rule 8D - there was no particular method of recording satisfaction in the quantum assessment order and therefore, unable to accept this specific plea of Ld. Sr. Counsel - restore the matter of direct / indirect expense disallowance to the file of Ld. AO for re-adjudication in the light of suo-moto disallowance offered by the assessee. As held earlier, no interest disallowance would be justified, keeping in view the assessee s financial parameters. Ground No. 14 stand partly allowed. Reduction in deduction u/s 80-IC by reallocating expenditure of Baddi Unit - HELD THAT:- We agree with the submissions of the learned counsel of the assessee, as regards allocation of interest, voluntary retirement scheme and decrease in stock. As agreed by learned counsel above the fact that no VRS expenditure pertains to the employees of Baddi unit may be checked by the Assessing Officer. As regards operation/establishment expenses, we find considerable cogency in the allocation key used by the assessee for direct expenses, direct marketing cost and selling and distribution expenditure, royalty and technical fees. We approve the same subject to factual verification by the Assessing Officer. We find that the method of allocation of other overhead as mentioned above appears to be opaque. We remit the same to the Assessing Officer for verification. Matter has been restored back to the file of Ld. AO with certain observations. Since the matter is identical, we direct Ld. AO to adopt the same methodology as finally adopted for AY 2007-08 to apportion the expenditure pursuant to the directions of the Tribunal. Therefore, without delving much deeper into the issue, we restore the matter back to the file of Ld. AO on similar lines. 2019 (10) TMI 993 Penalty u/s 271(1)(c) - surrender made by the assessee in the survey proceedings prior to filing of the return of income u/s 139(1) - HELD THAT:- As per the provisions of section 271(1)(c), only when an amount is added or disallowed in computing the total income of the assessee as a result thereof shall for the purpose of clause (c) of section 271(1) be deemed to represent income in respect of which particulars have been concealed or inaccurate particulars have been furnished. Since the Explanation 5 or 5A of section 271(1)(c) cannot be pressed into service in this case, therefore, any surrender made by the assessee in the survey proceedings prior to filing of the return of income u/s 139(1) would not lead to the conclusion that disclosure of the said income in the return of income filed u/s 139(1) represents the income in respect of which inaccurate particulars have been furnished or particulars have been concealed. Penalty levied by the AO in respect of the said amount declared in the return of income filed under section 139(1) is not sustainable in law and the same is deleted. Addition it is pertinent to note that the AO has rejected the books of account by invoking the provisions of section 145(3) and thereafter estimated the income of the assessee by applying GP rate at 2% as against 1.92%. Thus to the extent of sales declared by the assessee in the books of account and in the return of income filed under section 139(1), any trading addition made after rejection of books of account by estimating the income would not attract the penalty under section 271(1)(c) and particularly in the case of the assessee when the income declared by the assessee represents GP rate at 1.92% and the AO has estimated the income by applying GP at 2%. Extent of the addition by applying GP at 2% on the declared sales, same will not be regarded as furnishing inaccurate particulars of income or concealment of particulars of income to attract the penal provision under section 271(1)(c). Accordingly, the penalty to the extent of the trading addition made in respect of the declared sales is deleted. Addition made by the AO in respect of unaccounted sales by applying GP at 2%, since it is the case of undisclosed sales by the assessee and, therefore, the addition on the said amount will fall in the category of concealment of particulars of income and consequently the penalty levied under section 271(1)(c) in respect of the addition is sustained. AO is directed to re-compute the penalty in respect of the addition on account of unaccounted sales. Salary expenditure which was originally disallowed by the AO of ₹ 24,000/- but the ld. CIT (A) has restricted the same to ₹ 4,000/-, this is only a case of non-acceptance of the claim of the assessee whereas it is not a bogus claim of salary expenditure. The assessee has claimed the salary @ ₹ 12,000/- per month whereas the CIT (A) in quantum appeal has allowed the salary @ ₹ 10,000/- per month. Therefore, in such a situation when the claim and particulars were already declared by the assessee in the return of income, then disallowance of part of the claim would not attract the penalty provision under section 271(1)(c). Miscellaneous expenditures were disallowed on estimated basis of ₹ 6,400/- as per the order of the ld. CIT (A) in quantum proceedings, therefore, the disallowance sustained on estimation basis would not amount to furnishing of inaccurate particulars of income or concealment of particulars of income. Accordingly, the penalty levied u/s 271(1)(c) in respect of the disallowance of salary and miscellaneous expenditure is deleted. The assessee has also raised a legal ground regarding the validity of initiation of penalty proceedings under section 271(1)(c) for want of specifying the limb and default of the assessee whether it is for furnishing of inaccurate particulars of income or concealment of particulars of income. Though A/R as well as the ld. D/R has seriously contested this issue, however, in view of the finding on the merits of the appeal, I do not propose to take up this issue for adjudication. Hence the same is dismissed being infructuous. Appeal of the assessee is partly allowed. 2019 (10) TMI 992 Assessment order under the scheme of section 144C - applicability of limitations provided under section 153 - HELD THAT:- AO cannot tinker or apply anything further than what was mentioned in the draft assessment order except what is directed by the learned dispute resolution panel. The provisions of principles of natural justice are ingrained in the provisions of section 144C of the act. It further says a time limit of 9 months from the end of the month when the draft order is forwarded to the assessee for passing of issue of any directions. Upon receipt of the direction the AO shall pass an order of final assessment which is in conformity with the direction of the dispute resolution panel within one month from the end of the month in which the directions are received. There is no further provision of granting any opportunity to the assessee of further hearing. Thus the above provisions are a self-contained code. In this code, the role of the assessing officer ends the movement, the objections are filed by the assessee or draft order is accepted by the assessee. Therefore, the learned assessing officer cannot make any upward adjustment to the income of the assessee after passing of the draft assessment order. He also cannot initiate any further penalties which are attached to the assessment order if same are not initiated in the draft order. The rights of the variation to the income of the assessee are solely rest with the dispute resolution panel. Therefore the dispute resolution panel has a correcting power to the draft assessment order. AO does not have any power to do so. Therefore it is apparent that on the plain reading of the above provisions for all practical purposes the role of the assessing officer comes to an and the movement he passes the draft order. He is only authorized to pass the final assessment order which is according to the directions of the learned dispute resolution panel. The above provisions also contained the separate time limits and it has its own timelines which binds the revenue as well as the assessee. The honourable Madras High Court in Sanmina SCI India private limited [ 2017 (8) TMI 663 - MADRAS HIGH COURT] has held that it is a self-contained code in itself. Thus the provisions contained therein only determine the timelines of the passing of such order and not as provided u/s 153 of the act. Thus this argument of the assessee deserves to be rejected. It may also be possible that in certain circumstances the provisions of section 263 of the income tax act also do not apply to orders passed under directions of the dispute resolution panel. Thus law has seen the assessment passed in pursuance of direction u/s 144C of the act different from the regular assessment as envisaged u/s 153 of the act. No doubt, the final order of assessment is passed pursuant to the direction of the learned dispute resolution panel but it cannot be said that that limitations provided under section 153 applies to it. As we have already held that it is a complete code in itself as held by the honourable Madras High Court, which also provides for specific limitations ,if a particular procedure adopted by the assessee, then timelines provided therein will only apply. 2019 (10) TMI 991 Disallowance of salary paid to whole time Director - HELD THAT:- In earlier Assessment Year, the services provided by the whole Time director was not discussed is not correct as the Tribunal has discussed the same in the findings. Besides the factual aspect in the present year has not changed which is established by assessee from the records. In fact, para 6.1 of the TPO s order the role and responsibilities of the Director was submitted by the assessee. The minutes of meetings were also submitted by the assessee. Therefore, the assessee demonstrated the services provided by the Whole Time Director. Thus, issue is identical in the present year as well. Hence, Ground No. 5 is allowed. Disallowance on account of allocation of expenses between exempt and non-exempt units - HELD THAT:- In the present assessment year as well the Assessing Officer/TPO/DRP could not bring any material on record or not pointed out any inaccuracy as to the method of allocation adopted by the assessee company. Thus, the issue is identical in the present year as well. Ground No. 6 is allowed. Addition on account of CSR - HELD THAT:- Insertion of Explanation 2 to section 37(1) is applicable w.e.f. 1.4.2015 and thus, the said provision will not be applicable in the present case. There is no dispute that the expenses in question are not incurred under the statutory obligation. The Assessing Officer disallowed the claim of CSR expenses without disputing the factual matrix or bringing on record any adverse material which can be seen from the Assessment Order. Thus, this disallowance does not survive Disallowance on account of difference in total receipts and Form 26AS - HELD THAT:- From the perusal of the records it is appropriate in the present Assessment Year as well to remand back this issue to the file of the Assessing Officer for proper adjudication. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice 2019 (10) TMI 990 TDS u/s 195 - assessee in default for non deduction of Tax at Source in respect of payment made by the assessee company to various non residents recipients which are in the nature of Royalty/FTS and is chargeable to tax in India as per the AO - Non deduction of Tax at Source in respect of reimbursement of expenses - HELD THAT:- Assessee company entered into an agreement with London Air Charter Centre Ltd. (UK) and Air Partner PLC (UAE) both non-resident and made payments during the relevant assessment years towards the hiring of aircraft. The payment made by assessee company to the non-resident by availing a standard facility offered by the payee i.e. non-resident company. All transactions entered into by the assessee company with the non-resident payees are of similar character and cannot classified as Royalty as held by the Assessing Officer. The payment is for chartered plane hire outside India paid to non-resident outside India. Thus, the said income does not deemed to have accrued or arise in India and hence not liable for tax in India. Therefore, there is no need to interfere with the findings of the CIT(A). Payment made for survey of aircraft and routine service - Whether payment made to White Case , the consultancy firm, is not in the nature of FTS but failing to appreciate Article 15(1) of the Indo-UK Treaty - DTAA agreement in between India and UK - HELD THAT:- As per the agreement between the assessee company and General Dynamic Aviation Services (GDAS), the latter has rendered Aircraft/Records and Condition Survey services to the assessee company. GDAS only exercises its skill and knowledge in conducting the survey of the aircraft and issues a report to the assessee company expressing its opinion on the basis of the survey. The said company does not transfer or make available the skill or knowledge required for conducting the survey and generating the report to assessee company. Thus, the concerned remittance cannot be termed as Fees for Technical Services as per the relevant DTAA and is exempt from withholding of taxes. The payments made to GDAS are towards the reports to be issued by them to the assessee company. The reports so issued do not involve any transfer of commercial interest or the right to use its experience to the assessee company. There is also no transfer of my skill or knowledge of GDAS to assessee company in the issuance of reports. The payments received is not the one for the use or the right to use experience, but is instead one for the application of experience by the non-resident payee The payments cannot be classified to be in the nature of Fees for technical services as per the Act or under Article 12 of the relevant DTAA. Therefore remittance to GDAS, USA is exempt from withholding of tax as per Article 7 of the DTAA with USA and India. Payment made for aircraft maintenance - DTAA between India and Canada - HELD THAT:- The crew services obtained by the assessee to fly aircraft as the said crew member has not rendered any knowledge, skill or know how that may enable DLF to fly the aircraft on its own in future. Therefore, the CIT(A) has rightly held that such services do not fall under the definition of make available as per clause (b) to Article 12(4) of the DTAA between India and Canada. Payment made for advertisement rights of the circlet ground - Whether cannot be characterized as Royalty but at the same time failing to appreciate that the assessee used such ground rights for finding sponsors for the India- Pakistan friendly match and such payment would fall within the precincts of section 9(i)(vi) of the Act and the Article 12 of the Indo-UAE DTAA? - HELD THAT:- The assessee company was to make payment to the said company for securing the ground rights of the matches from Board of Cricket Control of India. The assessee company made payment to Percept D Mark Gulf LLC towards publicity expenses during the year which was for securing the ground rights which enabled it to find any other sponsors for the event. Thus, the payment in this respect does not come under the purview of the definition of Royalty as provided under Section 9(1)(vi) of the Act. The payment made by the assessee company merely enabled it to find a sponsor for the event in order to share the ground. Thus, no income was received or deemed to be received in India or accrues or arises or is deemed to accrue or arise in India to the Non-Resident payee in terms of Section 5(2) read with Section 9 of the Act. There is no income chargeable to tax within the scope of total income as per Section 4 and Section 5 of the Act. Thus, tax cannot be deductible, since payee is resident of UAE and does not have PE in India. Therefore, the CIT(A) was right in deleting the said addition. Payment made as a security deposit - Whether such amount was received back by the assessee in the subsequent year, accordingly it is not an expenditure on the part of the assessee? - HELD THAT:- From the perusal of records it can be seen that the assessee company entered into an agreement with M/s Control Risk Group PTE, Singapore. The assessee company was to make payment outside India to control risk for securing the business personnel security services in IPO. Thus, the assessee company made payment during the relevant assessment years towards providing business personnel security consultancy services for IPO. Thus, income cannot be deemed to have accrued or arise in India and hence the same is not liable for tax in India as M/s Control Risk Group PTE, Singapore does not have any PE in India. Thus, the CIT(A) rightly deleted this addition. There is no need to interfere with the findings of the CIT(A). Hence, Ground is dismissed. 2019 (10) TMI 989 Addition on account of unverifiable purchases - CIT-A deleted the addition - HELD THAT:- After considering the orders of the A.O. and submission of the assessee, the ld. CIT(A) has directed to compute the income on the basis of 0.25% on total turnover and no benefit of any expenditure would be allowed. Assessee has relied in the case of Arman Fashion Pvt. Ltd. v. ITO Ward 1(1) Surat [ 2013 (6) TMI 543 - ITAT AHMEDABAD] wherein net profit was estimated at 0.5% of turnover. Special Bench in the case of Manoj Agarwal v. DCIT [ 2008 (7) TMI 446 - ITAT DELHI-A] has estimated commission income at 0.50% for giving accommodation entries by holding the CIT (A) was justified in estimating net commission at 0.355 after allowing 0.15% for expenses. Therefore, we find that the issue is covered in favour of the assessee hence, following same we are not inclined to interfere with the order of Ld. CIT (A) hence, same is upheld. This ground is dismissed. Addition of undisclosed income from interest - HELD THAT:- We find that the interest received was duly reflected in the books of accounts of Arpit Jewels (a sister concern of the assessee) which has been duly verified by the Ld. CIT (A). In view of this matter, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. This ground of appeal is therefore, dismissed. Penalty levied u/s 271(1)(c) - HELD THAT:- As decided in FORTUNE TECHNOCOMPS (P) LTD. [ 2016 (5) TMI 859 - DELHI HIGH COURT] Once the assessment order of the AO in the quantum proceedings was altered by the CIT(A) in a significant way, the very basis of initiation of the penalty proceedings was rendered non-existent. The AO could not have thereafter continued the penalty proceedings on the basis of the same notice. Also, the Court concurs with the CIT(A) and the ITAT that once the finding of the AO on bogus purchases was set aside, it could not be said that there was any concealment of facts or furnishing of inaccurate particulars by the Assessee that warranted the imposition of penalty under Section 271(1)(c) of the Act. We find that the addition was made and income was estimated. Therefore, we are of the view that the penalty cannot be levied. - Decided in favour of assessee 2019 (10) TMI 988 Disallowance of ESI PF Contribution due to delay in deposit - It was claimed that, Employees Contribution was deposited before the due date on filing of return. - HELD THAT:- We have also gone through the various documentary evidences furnished by assessee from the record. We find that the assessee while computing the total income for A.Y. 2010-11 has disallowed being ESI and PF Contribution being paid after due date but before the date of filing return of income. We find that similar addition was made in A.Y. 2009-10 and on appeal before the CIT(A), the addition/disallowance was deleted. Therefore, considering the fact that assessee claimed that the Employees Contribution was deposited before the due date on filing of return. Therefore, we direct the Assessing Officer to verify the facts about the deposits of Employees Contribution, if the same was deposited before the due date and grant relief to the assessee by following the decision of Hon ble Bombay High Court in Ghatge Patil Transporters Ltd. [ 2014 (10) TMI 402 - BOMBAY HIGH COURT] 2019 (10) TMI 987 Disallowance u/s. 14A - HELD THAT:- AO has not recorded any satisfaction as to why there shall be any expenditure for earning dividend income more so when the assessee has received 99% of its dividend income only from its group Company Reliance Industries Limited. Therefore, what could have been disallowed was only that part of expenditure attributable for earning the dividend income only out of administrative expenses. The direct expenses incurred for earning dividend income i.e. demat charges were already disallowed by the Assessing Officer. The Assessing Officer has not given any justification and satisfaction for invoking the provisions of Rule 8D but applied mechanically Assessing Officer shall find out the expenditure attributable for earning exempt income with reference to the submissions made by the assessee that it has not incurred any expenditure for earning dividend income. The assessee shall furnish the necessary details of expenditure incurred as the assessee itself admits that a very small quantum of expenditure can be attributable the general administrative expenditure and in the absence of any suomoto disallowance by the assessee. This issue is restored to the file of the assessing officer for re-quantification of disallowance only from out of general administrative expenditure where a decision making has happened for making investments. We also direct the Assessing Officer to exclude investments on which no exempt income was earned following the decision of ACIT v. Vireet Investments Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI] . We also direct the Assessing Officer to exclude investment in Foreign Companies income from which is taxable and they should be excluded while calculating the average value of investments. This ground is partly allowed. Disallowance made u/s. 35(2AB) OR 37(1) - Assessee claimed to have incurred an expenditure for in-house research facility - HELD THAT:- As observed from the Assessment Order that the assessee in the course of the assessment proceedings vide letter dated 17.01.2011 revised its claim u/s. 35(2AB) of the Act and assessee itself claimed expenditure on clinical trials u/s. 37(1) we allow the claim of the assessee that the said expenditure should be allowed u/s. 37 of the Act - identical issue arouse for the A.Y. 2007-08 and the Tribunal allowed the alternative claim of the assessee that expenditure incurred on clinical trials outside the in-house facility of the assessee is allowable as deduction u/s. 37(1). Thus, the Assessing Officer is directed to allow this expenditure u/s. 37 (1) of the Act. This Ground is allowed. Transfer pricing adjustment - determining arm s length interest chargeable in respect of interest free loan advanced - CIT(A) failed to appreciate that no interest was charged on the above referred loan since the same loan was an optionally convertible into share capital at a fair value to be determined at the time of Conversion - HELD THAT:- It is an undisputed fact that the assessee advanced optionally convertible loans to its AE i.e. RLSI. It is not in dispute that the OCL has been converted into Equity in subsequent years before the due date and before the prescribed date as agreed in the agreement. Assessee has charged no interest on OCL for the reason that RLSI was setup for developing global business opportunities in the field of pharmaceutical and bio-pharmaceutical, clinical research services and research and development activities. The assessee intended to fulfill its own objective of gaining majority control in such overseas acquisitions made through AE, for this reason assessee did not charged any interest on the investment made in its AE in the form of OCL. We also observe that as on 31.03.2011 RLSI has converted the entire loan amount outstanding in its books into paid in equity capital and this can be verified from the CPA certificate TPO while charging interest at the rate of 6% compared another AE of the assessee namely RLSBV which is a controlled transaction with that of the RLSI for benchmarking the transaction. Following the decisions of the Hon ble Bombay High Court in the case of the CIT v. Lever India Exports Ltd . [ 2017 (2) TMI 120 - BOMBAY HIGH COURT] and CIT v. Merck Ltd. [ 2016 (8) TMI 561 - BOMBAY HIGH COURT] , we hold that arm s length price cannot be determined on the basis of another controlled transaction as was done by the TPO. Therefore, respectfully following the above decisions, we hold that no interest ought to have charged on the OCL advanced to payee RLSI and thus we direct the Assessing Officer to delete the adjustment made towards interest. Interest charged on the amount paid towards subscription to share capital of AE s - HELD THAT:- The TPO has recharectersied the transaction of investment of preference shares into loan which is not permissible in view of the judgments of the Hon ble Bombay High Court in M/S. CONCENTRIX SERVICES (I) PVT. LTD. [ 2019 (10) TMI 760 - BOMBAY HIGH COURT] . Thus, respectfully following the above decisions, we direct the Assessing Officer to delete the adjustment made towards interest on subscription to share capital of AE s. Determining the arm s length price of net interest chargeable in respect of outstanding balances of the AE M/s. Reliance Genemedix [RGMX] - Non charging interest from both AE's and non-AE'S for the outstanding receivables - HELD THAT:- Assessee has not charged any interest on its receivables from non-AE's i.e. third party business transactions. Assessee has not paid any interest on payables to non-AE's. Further, we observe during the year under consideration assessee has neither charged interest on its receivable nor has paid any interest on its payables to its AE RGMX. Therefore, we observe that there is complete uniformity in the act of the assessee in not charging interest from both AE's and non-AE'S for the outstanding receivables. In such circumstances the ratios of the above decisions relied on by the assessee are squarely applicable to the facts of assessee. Thus, we hold that no interest can be charged on amounts due from AE RGMX and consequently the adjustment made by the TPO is directed to be deleted. This ground of appeal is allowed. 2019 (10) TMI 986 TP Adjustment - Comparable selection - HELD THAT:- Infosys was engaged in diversified fields and it performed various functions as against the profile of the assessee wherein it was only providing Software Development Services to the group companies of Lucent Inc. Another aspect which needs to be kept in mind is the ownership of the branded / proprietary products by Infosys Technologies Limited, as against the facts that the assessee owns no intangible product company, even if it had meagre income cannot be compared with a non product company. Such is the proposition laid down in Rampgreen Solutions Pvt. Ltd. vs. Commissioner Of Income Tax, [ 2015 (8) TMI 931 - DELHI HIGH COURT] . Accordingly, we direct the AO to exclude the concern Infosys Technology Limited from the final list of the comparables. mPhasis BFL Limited - The business model of mPhasis was different wherein it was providing onsite services to its third parties, wherein out of Software charges of ₹ 161 Crores debited to cost of Revenue, sum of ₹ 157 Crores had been incurred in foreign currency. Such fact also makes the said concern as functionally not comparable to the assessee. Though segmental details are available but the segmental are at fault as large part of expenses have been booked as an unallocable expenditure. In such facts and circumstances, we are of the view that the concern mPhasis is not functionally comparable to the assessee, hence the same is not to be included in the final list of said comparables, while benchmarking the international transactions undertaken by the assessee. - Appeal of the assessee is allowed. 2019 (10) TMI 985 Penalty levied u/s 271(1)(c) - addition on account of salary claimed by the assessee which was found to be bogus and false - HELD THAT:- Tribunal has confirmed the additions made by the AO and also observed that even after the addition made by the AO the net profit rate comes to 0.12% which is comparable to the another case which has been considered by the Coordinate Benches of this Tribunal. Hence, the said finding of the Tribunal cannot be said to be an addition based on estimation but while upholding and confirming the additions made by the AO, the Tribunal has just verified the reasonableness of the income assessed and not granted any relief to the assessee on the claim of salary expenses found to be bogus and false. Accordingly, when the assessee has claimed a bogus salary expenditure and the addition was made specifically and independently by the AO on account of disallowance of salary then the penalty levied by the AO u/s 271(1)(c) in respect of the said addition is justified and valid. The decisions relied upon by the assessee will not help the case of the assessee when the addition was based on false claim made by the assessee. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A) confirming the levy of penalty u/s 271(1)(c) of the Act. Appeal filed by the assessee is dismissed. 2019 (10) TMI 984 Disallowance of claim of expenditure incurred on improvement of property - HELD THAT:- The initial burden of proof rested on the assessee to substantiate his claim of having incurred expenditure on improvement of the property to the stated extent of ₹ 9lacs. But as is evident from the facts noted in the order of the CIT(A), the assessee failed on this count. Except for filing copies of so called invoices of the contractor through whom the work was done no other evidence was filed by the assessee. Also the so called invoices were deficient in several respects ,as pointed out by the Ld.CIT(A). There was no mention of the nature of work done for which the invoices were raised, the address on the same was also incomplete since letters issued by the department on the said address were returned back by the postal department with the comment incomplete address . No evidence regarding payment made to the contractor was filed by the assessee. CIT(A) has mentioned that it was not clear whether the bills raised served as receipts also and even if they did, they did not bear any Revenue stamp to evidence receipt of money by the contractor. Further the inquiry by the department at the address of the contractor mentioned in the bills drew a blank since the postal authorities remarked that the address was incomplete and despite the assessee being specifically asked to give complete details/address of the contractor, no information was provided by the assessee. The certificate furnished by the assessee, of the father of the contractor stating that he had been engaged in the activity of contract and had left for England in 2011, since not duly verified, we hold, serves no purpose. We therefore agree with the Ld.CIT(A) that merely making entries in the books of accounts and producing bills which are deficient in providing basic information regarding the transaction, is not sufficient for discharge of initial burden of proof on the assessee. Undoubtedly the assessee failed on all counts and parameters to establish the genuineness of its claim. - Decided against assessee 2019 (10) TMI 983 Levying penalty u/s 271(l)(c) - assessee failed to furnish the return of income - HELD THAT:- AO issued notice u/s 148 in March, 2015 and return from the very same sources of income stood already filed on 7.11.2012 wherein the TDS and self assessment tax upto the said date stood paid. It is also a fact pleaded on record that the assessee is not a habitual defaulter and this is one and only time wherein penalty u/s 271(1)(c) or any other penalty has been visited upon the assessee. When a copy of the return filed on 7.11.2012 which has been treated as non-est is compared with the assessed income as available in assessment order passed u/s 143(3)/148 of the Act, it is seen that the only addition made is addition by way of a disallowance of deduction u/s 80C of Insurance premium - in order to uphold the penalty order, the Revenue would want to argue that the explanation for filing of the return late was not on account of a bonafide inadvertent mistake. No evidence or argument to support such a prayer is on record. The fact that the late filing of return on 07.11.2012 was beyond time, hence non-est is not in dispute. The fact that the very same return from the same sources has been refilled in response to notice u/s 148 in March, 2015 is not in dispute. There is nothing on record to show that the assessee had, as opposed to an inadvertent mistake, any reason to conceal as the very same return has been refilled with no changes or additions. Thus, the arguments on behalf of the Revenue that without the issuance of notice u/s 148 in March, 2015, the assessee would not have filed its return in the peculiar facts cannot be accepted. The assessee has filed its return on 7.11.2012. It cannot be wished away. No doubt the said return is not a valid return in the eyes of law, however, it is a necessary evidence to be taken into consideration for examining the argument whether the non filing of a valid return was a case of bonafide, inadvertent mistake or deliberate act of concealment or furnishing of inaccurate particulars. AO has accepted the return from the very same sources of income and has only made the addition by way of a disallowance of deduction u/s 80C supports the consistent argument. In these facts, I find myself unable to uphold the order wherein the penalty for concealment has been levied and upheld. Accepting the explanation of the assessee who is also not a habitual defaulter, non-filing of return on time was on account of inadvertent bonafide mistake and accepting addition where the filing of appeal was more expensive is a valid explanation consistently on record. Penalty provisions are not attracted - Decided in favour of assessee 2019 (10) TMI 982 Addition u/s 68 on account of unexplained cash credits - HELD THAT:- Regarding identity of AVPL: The AVPL address is 35B, Brajadulal Street, Joraban, Kolkata, West Bengal-700006. This company assessed to tax over the years with PAN No.AAGCA2061E. The same is assessed to tax in ITO, Ward-1(3), Kolkata. The copy of the written submissions are placed in the Paper Book of the Revenue at page 15 onwards. Therefore, Shri Nemichand Jain is the director of the company. S. Sadhu Associates are the statutory auditors bearing the Membership No.061636. This company has the share capital of ₹ 32,96,000/- and it has reserves and ₹ 6,07,05,000/- as on 31.03.2010. It is a recorded transaction that Ashva Multi Trade Pvt. Ltd. received ₹ 6.55 crores as seen from the Schedule 3 of the Balance Sheet page 25 of the Paper Book. The said creditor AVPL is filing the returns with the active company in the records of Ministry of Commerce and is not struck for any default or reason. Considering the same, the above allegation that the identity of the creditor is unsustainable within the meaning of section 68 of the Act. Accordingly, the Revenue fails on this issue. Considering the huge reserves and surpluses available with the said AVPL, the creditworthiness of the AVPL also cannot be doubted. AO has not brought except stating that the company has meagre income as shown in the returns. The Assessing Officer has not brought any incriminating material to show that the creditor has not creditworthiness. As stated this company has 10 crores as reserves and surplus at the end of the March, 2010 at the relevant point of time. Regarding the genuineness of the transactions, we find that the Assessing Officer objection is that the AVPL being Kolkata Based company and its transaction with the assessee has to be suspected. In our view, such objection is unsustainable for the reason that the company with adequate reserves is assessed to tax regularly and the same is active company in the records of the Ministry of Commerce. No addition is made by the Assessing Officer for the amount of ₹ 2.5 crores in the assessment year 2009-10. Therefore, this kind of transaction with the creditor can be partly suspectable or partly unsuspectable and partly existing or partly not existing and partly genuine or partly non-genuine etc. Regarding the allegation of Kolkata based company, therefore fictitious company are accommodation entries provider etc. we find that the AVPL with so much of background as narrated above i.e. existence, identity, size reserves, punctual filing the document etc., the said company cannot be just accommodation entries provider. Shri Nemichand Jain is the director of the AVPL appeared before the authorities filing various documents clearly demonstrated the existence, genuineness, creditworthiness of the AVPL. As the huge amount of documentation was filed by the assessee. Per contra, the Assessing Officer did not gather any iota of direct evidence or indirect evidence to demonstrate that the AVPL is bogus concern or sham concern or accommodation entries provider. - Decided against revenue 2019 (10) TMI 981 Disallowance invoking the provisions of section 14A - HELD THAT:- The issue involved is covered in favour of the assessee as the assessee has not earned any exempt income. Reference in this regard may be decision of honourable Supreme Court in the case of Maxopp Investment Ltd vs CIT, New Delhi [ 2018 (3) TMI 805 - SUPREME COURT] Treatment of waiver of the amount of principal loan for working capital - HELD THAT:- If the working capital loan is used to finance working capital requirements, the bank finance used results in debit to the trading and profit loss account for the concerned trading/working goods and services. In that case waiver of bank loan will not result in capital gain rather the provision of section 41(1) will be applicable. In this view of the matter in our considered opinion it is imperative that there is a finding as to what purposes the working capital loan has been utilised. In this regard learned Counsel of the assessee has submitted that part of the working capital loan has been utilized for acquisition of capital goods. We find that in this regard there is no clear cut finding by the assessing officer. In the case of Kapurchand Shrimal [ 1968 (8) TMI 16 - SUPREME COURT] has expounded that it is the duty of the appellate authority to correct the error in the orders of the authorities below and remit the matter for reconsideration with or without direction unless prohibited by law. In the present case accordingly we remit the issue to the file of assessing officer. The assessing officer is directed to give a finding on the utilisation of the working capital loan which has been waived by the bank and thereafter decide as per law. Accordingly the issue is remitted to the file of Assessing Officer with the above direction. 2019 (10) TMI 980 Short term capital gain - market value of land u/s.50C - HELD THAT:- For the purpose of arriving out the market value of land u/s.50C, the AO asked the assessee to provide the break up of the capitalized amount including the cost of land and the assessee could not furnish any details. In the absence of such data from the revenue also, the AO could not arrive the cost of acquisition of the impugned land. Further, the AO found that the assessee has been claiming depreciation, all along, on the entire value of capitalization which included even the cost of land. AO held that there is no element of cost involved in respect of acquisition of the land and hence held that the cost of acquisition of land as Nil. Since the assessee has not given the bifurcation of assets and its value which were capitalized and also has claimed depreciation all along even on the value of acquired, we do not find any infirmity in the findings of the CIT(A) that the AO has rightly taken the value of land at Nil and treated the profit as short term capital gain and hence we dismiss corresponding grounds of the appeal of the assessee. Deduction u/s 80G - the fact remains that during the assessment proceedings itself, the assessee has produced donation receipts for ₹ 18,000/- ₹ 36,000/- paid to Amar Seva Sangam, which was eligible for deduction U/s.80G as per order dated 29.09.2003 of the CIT-II, Madurai and was valid upto 31.03.2006 and on such material it claimed deduction U/s.80G. AO refused to allow such claim as the assessee has not claimed this deduction in its return. Since the assessee has relied on the Hon ble SC decision in the case of Goetze India Ltd v CIT [ 2006 (3) TMI 75 - SUPREME COURT] we direct the AO to reconsider this claim and allow the relief, if the claim is found meritorious on other respects, as if this claim was made in the original return itself. The corresponding grounds of the assessee on this issue are treated as allowed. Taxability of lease rent received from leasing out the machinery building shed under the head income from other sources instead of taxing it under the head business - disallowance of the expenditure incurred by the assessee as contended that its intention is to carry on business only - HELD THAT:- Allowance of towards the employee cost and administrative expenses for the purpose of earning the lease rental income u/s 57(iii). In the absence of any material from the assessee to assail the findings recorded by both the lower authorities towards the quantum of employee cost and the administrative expenses as unreasonable, we uphold the lease rental income determined and dismiss the corresponding grounds of the assessee. Rejection of books of account by the AO by invoking the provisions of section 145 - sale of broken and from sale of bran, the by products arising from the processing of rice by its lessee from the leased mill, along with the receipt of processing charges and claimed huge expenditures and various heads - HELD THAT:- There should be an opening and closing stock of byproducts such as broken rice/bran at the end of every year. Since the assessee failed to produce the quantitative details of the sale of broken rice / bran, also the quantitative details of closing stock of bran and broken rice on the ground that the purchases were made by the lessee company, therefore, the AO rejected the books of account maintained by the assessee and estimated the income of the assessee. From this, it is clear that the assessee has not produced the core details which are sine qua non for determining the correct income, in such situation, the AO is bound to estimate the income and therefore AO is correct in rejecting the books of account. However, the AO held that since the assesses sold away the by products of bran and broken rice and there is no requirement for the expenses towards travel, carriage inwards etc, he treated the entire sale proceeds as income of the assessee and completed the assessment. This is not correct. The reasonable expenditure required for earning the income has also to be estimated and has to be allowed. Neither the assessee nor the revenue could assist us in determining the fair and reasonable income from this source. Since there is no cost involved on the purchase and processing of broken and bran to the assessee, however, the cost of sale and distribution is required to be considered, therefore we consider that in this line of business an assessee may at best incur about at 30 % for these purposes and on such basis determine 30% of the admitted receipts would be the reasonable expenditure that could be required for earning the impugned receipts and therefore direct the AO to allow 30% of ₹ 68,09,001 at ₹ 20,42,700/- towards reasonable expenditure which could be required for earning the impugned income from sale of broken and bran and accordingly determine the income from this source at ₹ 47,66,301/- as against ₹ 68,09,001/-. Thus, we allow the assessee s corresponding grounds of appeal to this extent. Disallowance of processing charges - HELD THAT:- Assessee filed an appeal before the Ld.CIT(A). It is clear from the order of the Ld.CIT(A) that the assessee has not furnished any details and established that its claim is in order. Therefore, the Ld.CIT(A) upheld the action of the Assessing Officer. Even before us, the assessee is not able to lay any material to dislodge the findings recorded by the lower authorities and that the decision taken by them is unreasonable. Therefore, the corresponding grounds of the assessee s appeal are dismissed. With regard to the estimated addition made towards sale of bran, it is clear from the order of the Assessing Officer that the assessee has been offering sale of broken rice and bran in all the years. The generation of bran and broken rice in the course of processing of rice is a material fact which cannot be denied. CIT(A) found from the audited accounts of PFPPL, that no sales of broken rice or bran has been shown. Therefore, the sale of bran has to be reflected in the books of the assessee. In the absence of full details, the Assessing Officer, based on the sale of bran for the previous year has added the amount of ₹ 8,51,750/- which in our opinion, is fair and reasonable. Since the AO on due examination rejected major expenditure claim of the assessee / restricted, as the case may be, under various heads during this assessment year, which we have upheld, supra, in view of that we consider that the estimated from this source is a net income. We hold that the corresponding grounds of the assessee are dismissed on this issue. 2019 (10) TMI 979 Capital gain computation - FMV determination - whether Guideline Value is not the Fair Market Value? - determination of value of lad considering the indexed cost of acquisition of 1981 - HELD THAT:- In the judgment of the Supreme Court [ 2003 (11) TMI 615 - SUPREME COURT] .while considering the issue as to whether the land purchased has been undervalued or not, the Supreme Court observed that the guideline value has relevance only in the context of section 47A of the Indian Stamp Act (as amended by T.N. Act 24 of 1967) which provides for dealing with instruments of conveyance which are undervalued. Guideline value will only afford a prima facie basis to ascertain the true or correct market value. Guideline value is not sacrosanct, but only a factor to be taken note of if at all available in respect of an area in which the property transferred lies. When the assessee relies on the Registered Valuer's report and if Assessing Officer is not satisfied about such claim then, the AO should have referred the matter to the DVO to ascertain the fair market value. Therefore, we deem it fit to remit this issue back to the AO who shall refer the matter to DVO and proceed to determine the issue in accordance with law. The assessee s corresponding grounds of the appeal are treated as allowed for statistical purpose Guarantee / security for the borrowals made by other entities given - benefit or accrue any benefits from the transfer - HELD THAT:- The assessee has pledged its property to Canara Bank as a security to the loan availed by its group concerns. No lay man can execute a deed of mortgage of his property against the loan availed by a third party/ parties, until and unless the individual has substantial interest over them. Thus, it is clear that the assessee availed loan from the Bank under the banner of group concerns by mortgaging its own property and group concerns failed to repay the loan, the bank sold the property and the entire consideration was recovered by the bank. Thus, it cannot be held that the assessee has not received any consideration directly or indirectly, which were liable to tax. As decided in CIT v. Attilli N. Rao [ 2001 (10) TMI 5 - SUPREME COURT ] it is clear that the mortgaged property sold, in discharge of the mortgage created by the assessee itself, belonging to the assessee and the price realized there-form belonged to the assessee and hence the capital gain is very much warranted on the full price [less admissible deduction]. When the law laid down by the Hon ble Supreme Court is very much available on the identical facts, the cases relied on by the assessee are held as not applicable. Otherwise also, availing loan itself is consideration and in this case, constructive benefit was very well accrued to the assessee when the loan was availed by its group concerns, which was owned partly by the assessee. Accordingly, we dismiss the corresponding grounds of the assessee. 2019 (10) TMI 978 Revision u/s 263 - credit of TDS reflected in form No. 26AS - AO has allowed the credit of TDS reflected in Form 26AS in the account of Madhukar Kapur [director of assessee company] subject to verification, the credit of TDS has not been claimed by Madhukar Kapur - PCIT was of the opinion that the assessee does not fall within an of the four categories mentioned in clause (i) of Rule 37BA(2) red with section 199(3) of the Act - HELD THAT:- From the bare reading of the above finding and the question of law and the ground urged before the ld. CIT(A), it is abundantly clear that the issue whether TDS credit in the account of Madhukar Kapur, as mentioned in Form 26AS , can be credit to the account of the assessee was not a subject matter of appeal before the ld. CIT(A). It is settled proposition of law that the finding recorded by the judicial and quasi judicial authorities are required to be read in the context of grounds urged before them and should not be read in isolation and out of the context. Thus, it is crystal clear that the subject matter of the proceedings u/s. 263 was not the subject matter of the proceedings before the ld.CIT(A) and in view thereof, the primary ground raised by the assessee is without merit and accordingly, the same is dismissed. Admittedly, there is no denial in the written submissions filed by the assessee before PCIT and before us that at the relevant time, the order was passed by the Assessing Officer, Rule 37BA was applicable. Furth3r, the assessee has failed to mention that the case of the assessee would fall in any of the ingredients mentioned in Rule 37BA, as reproduced by the ld. PCIT in para 2 of the impugned order. In view of the legal position, the opinion formed by the PCIT that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue cannot be faulted. As is clear from the assessment order, the assessee was doing job works in the name of the company and there was separate job work done by the director Shri Madhukar Kapur. Therefore, the obligation to deduct TDS of the deductor was in respect of the payment made to the assessee and also to Madhukar Kapur separately. Similarly, the other decisions are also not applicable. As mentioned herein above, recently by the decision dated 20.08.2019, Hon ble Jurisdictional High Court had held that the order of the PCIT is required to be tested based on the material and the record available at the time of examining the assessment proceedings. Once the material now cited before us was not available with the Pr. CIT, therefore, we do not find any mistake in the order passed by the PCIT. Lastly, before the PCIT, it was contended by the assessee that the matter is sub-judice before the jurisdictional High Court by way of writ petition. As during the course of arguments, the assessee had not informed about the outcome of the proceedings initiated by the assessee before the Hon ble High Court. In our view, the adverse inference is required to be drawn as nothing has been brought on record de hors the pendency of writ petition before the High Court. We do not find any merit in the submissions of the assessee. Accordingly, both the appeals of the assessee are dismissed. 2019 (10) TMI 977 Revenue recognition - sale of under construction flats - date of execution of registered document or date of delivery of possession or registration of agreements, which is relevant? - application of principles of AS-7 and AS-9 - AO observed from the details that in many cases, the assessee had received almost 90% of the agreement, still it had not offered the income for taxation on the pretext that no agreement has been made with the prospective buyer. - Assessee contended that, The Ld.CIT(A) completely misapplied himself and erred in confirming the stand taken by the assessing officer in invoking the provisions of sec. 2(47) which apply to capital asset and not to stock-in-trade. HELD THAT:- In the instant case as recorded by the AO when a prospective buyer approaches the assessee for booking the flat, allotment letter is issued to the buyer on receipt of the advance money. The appellant filed a written submission dated 26.03.2015 before the AO stating that the degree of work completed and certified by architect till 31.03.2009 is 73% and the assessee-company has recognized the revenue by applying 73% to the value of agreements executed till 31.03.2009. It was further stated before the AO that the revenue in respect of balance advances could not be recognized as passing of risks and rewards by virtue of ownership is an essential condition for revenue recognition as per AS-9, which has not been fulfilled in the instant case, as no agreement is executed and no possession have been given to the buyer. The case laws relied on by the Ld. counsel and Ld. DR have been narrated at length hereinbefore. One principle which emerges from the above case laws is the role of agreement executed. Immovable property is not conveyed by delivery of possession, but by a duly registered deed. Further, it is the date of execution of registered document, not the date of delivery of possession or the date of registration of document which is relevant. Once the executed documents are registered, the transfer will take place on the date of execution of documents and not on the date of registration of documents as held in Alapati Venkataramiah v. CIT [ 1965 (3) TMI 21 - SUPREME COURT ] As per the ingredients of AS-7 and AS-9, revenue be recognized even though legal title of the property is not transferred and possession is not given. Once seller transfers significant risks and rewards of ownership to buyer, seller thereafter acts like a contractor. Accordingly revenue recognition will have to be as in Percentage Completion Method (AS 7). We are concerned here with the execution of agreements and not with the registration of agreements. Having considered the application of principles of AS-9 in respect of sale of goods to a real estate project and the case laws relied on by both sides in the back drop of the facts of the case, we set aside the order of the Ld.CIT(A) and restore the matter to the file of the AO to make an addition, bringing to tax by percentage completion method, the revenue out of the remaining executed agreements, if any, during the impugned assessment year. The assessee is directed to file the documents/evidence in respect of agreements executed during the impugned assessment year. Needless to say, the AO would provide reasonable opportunity of being heard to the assessee before finalizing the order. Appeals are allowed for statistical purposes. 2019 (10) TMI 976 Approval granted u/s 10(23C)(vi) cancelled - funds have not been utilized for the purpose of the trust as required u/s 10(23C)(vi) - The scheme of forgery and manipulation of bank accounts and diversion of funds according to him proves beyond doubt the intention of Shri Sanjay Bansal to misuse the exemption granted u/s 10(23C)(vi) - competent authority i.e., the prescribed authority to cancel the approval granted - HELD THAT:- We donot find merit in assessee's objection that since the approval was granted earlier by the CCIT, Dehradun therefore, he is the competent authority to cancel the approval granted earlier and, therefore, DGIT (Inv.) has no authority to issue the show cause notice and, thereafter cancel the registration in view of the Notification No.20/2015 dated 5th March, 2015 Second objection that the show cause notice dated 22.11.2013 was issued by the Joint Director of Income-tax as the same has to be issued by the prescribed authority at the relevant time. Here also we do not find any merit in the argument of the ld. counsel. A perusal of the show cause notice dated 22.11.2013 shows that the Joint Director of Income-tax (Inv.) (Hqrs.) has signed the notice on behalf of the Director General of Income-tax (Inv.), Lucknow. The letter was issued from the office of the Director General of Income-tax (Inv.) and not from the office of the Joint Director of Income-tax (Inv.). Therefore, the second objection of the ld. counsel also is without any merit and the same is rejected. Third objection of that the ld. Director General of Income-tax (Inv.) could not have withdrawn the approval granted u/s 10(23C)(vi) of the IT Act with retrospective effect from assessment year 2007-08 onwards on the basis of order dated 26th March, 2015 finds no merit. The order passed by the DGIT (Inv.) is based on the numerous incriminating documents found and seized during the course of search and post search enquiries which establishes various forged documents, the manipulation of the bank accounts and the diversion of funds for personal purposes which proves beyond doubt that the trustees were misusing the benefit of exemption granted u/s 10(23C)(vi) of the IT Act. Therefore, the argument of the ld. counsel on this issue is also without any merit and accordingly the same is dismissed. So far as the argument of the ld. counsel that the Director General of Income-tax (Inv.) has passed an ex parte order without giving any proper and reasonable opportunity of presenting its case and on being heard is concerned, we find from the order of the DGIT (Inv.) that he had given number of opportunities to the assessee, however, the assessee has not availed of those opportunities. Since various incriminating documents found during the course of search and evidence gathered during post search enquiries give details of siphoning of funds by the assessee, manipulation and forgery of documents, etc., the same needs to be answered by the assessee. No doubt despite repeated opportunities granted by the DGIT (Inv.), vide letters dated 03.01.2014, 31.01.2014 and 08.07.2014, the assessee has failed to avail the opportunities granted to him. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of DGIT (Inv.) with a direction to give one final opportunity to the assessee to substantiate its case by filing the requisite details. The assessee is hereby directed to appear before the DGIT (Inv.) without seeking any adjournment under any pretext, failing which the DGIT (E) shall pass appropriate order as per law. Needless to say, the ld. DGIT (E) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. Appeal filed by the assessee is partly allowed for statistical purposes. 2019 (10) TMI 975 Bogus LTCG - addition u/s 68 - sale of shares - It was pointed out by the ld AR that the A.O. has nowhere in the assessment order referred to any material which can prove the complicity of assessee in the alleged accommodation entry operation. According to Ld. AR, the AO/CIT(A) was not justified in invoking the provisions of section 68 of the Act in regard to the sale proceeds of shares. HELD THAT:- the AO was influenced by an interim order of SEBI dated 29.03.2016, which the SEBI has withdrawn by later order dated 21.09.2017 by virtue of it all the restrictions imposed upon by the earlier order dated 29.03.2016 has been withdrawn, since SEBI could not find any infirmity in the scrips of M/s. KAFL. Action of the Ld. CIT(A)/AO cannot be accepted, since the scrip of M/s. KAFL cannot be held to be bogus; and based on the finding of fact supra which are supported by documents which have not been adversely commented upon by AO/Ld. CIT(A) we are inclined to allow all the appeals of the assessee and direct the AO to allow the claim of LTCG on sale of scrips of M/s. KAFL in respect of all the assessees. See MANISH KUMAR BAID AND MAHENDRA KUMAR BAID VERSUS ACIT, CIR-35, KOLKATA [ 2017 (10) TMI 522 - ITAT KOLKATA] - Decided in favour of assessee. 2019 (10) TMI 974 Addition u/s.68 - unexplained cash credit - HELD THAT:- Assessee is not able to discharge its burden as was cast u/s 68 of the 1961 Act . Thus, we have no hesitation in setting aside the appellate order passed by learned CIT(A) and confirm the additions to the tune of ₹ 3,13,90,000/- as were made by the AO, which addition now stood stand affirmed by us. Revenue succeeds on this issue. We order accordingly. Protective additions - Additions were made on protective basis based on statement of Director Mr. Jagdish Purohit that these accommodation entries were provided in lieu of commission income which was brought to tax by the AO as income computed @5% of amount of these accommodation entries. The assessee company is already held by us to be an entity engaged in providing bogus accommodation entries. Now coming to this addition towards commission income in lieu of providing accommodation entries. Firstly, these are estimates which certainly require some guess work but the said guess work should be an honest and fair guess work. We are not inclined to interfere in the estimation done by the AO while computing commission @5% of accommodation entry amount which was brought to tax by the AO, as in our considered view it is a reasonable and honest estimation made by the AO and cannot be said to be perverse estimation defying all cannons of commercial logics and reasoning. Secondly, the additions to the tune of ₹ 15,69,500/- were made on protective basis in the hands of the assessee and although we are confirming this addition also but at the same time we are remitting this issue back to the AO for limited verification as to the fate of this addition made on substantive basis and accordingly the AO shall decide about the sustainability of this addition of ₹ 15,69,500/-. Revenue also succeed on this ground as indicated above 2019 (10) TMI 973 Deduction u/s. 11 12 - as alleged assesssee s activities were not carried out in accordance with the object as per definition of charitable purpose for which registration was granted - assesssee s activities were not carried out in accordance with the object as per definition of charitable purpose for which registration was granted - HELD THAT:- the activities carried out by the assessee is for advancement of any other object of general public utility without any intention of the profit motive after considering the provision of the Gujarat Maritime Board Act, 1981 and fact of the case, it cannot be said that the activities carried out by the assessee are in the nature of trade commerce or business. It is observed that predominant object of the assessee is to administer control on miner ports in the State of Gujarat and there is no profit motive as demonstrated by the provision of section 73, 74 and 75 of the Gujarat Maritime Board Act, 1981. The Gujarat Maritime Board is under legal obligation to apply the income which arises directly and substantially from the business held under trust for the development of minor ports in the state of Gujarat. Further after following the decision of Hon ble Gujarat High Court in the case of AUDA [2017 (5) TMI 1468 - GUJARAT HIGH COURT] and GIDC, [2017 (7) TMI 811 - GUJARAT HIGH COURT] the fees collected by the assessee is incidental to the object and purpose of attainment of the main object for development of mining ports as enumerated in the provision of the Gujarat Maritime Board Act, 1981, therefore, we consider that activity of the assessee is for advancement of any other object of general public utility and not hit by the proviso to section 2(15) of the act, therefore, the assessee is entitled for exemption u/s. 11 - Decided in favour of assessee Understatement of income - assessing officer on the basis of audit report of the controller and auditor general of India stated that assessee has understated its income - CIT(A) has deleted the addition stating that the assessing officer has added the cumulative figure on the basis of audit paras pertaining to different years without any clarification - HELD THAT:- CIT(A) has rightly held that the impugned receipt was of commutative nature and not received during the year under consideration and the assessee was also entitled for exemption u/s. 10(20) of the Act upto 31-03-2002 - departmental representative could not contradict the finding of ld. CIT(A) therefore we do not find any substance in the appeal of the assessee of the revenue and the same is dismissed. Depreciation assets as allowed as application of income - HELD THAT:- CIT(A) has referred the decision of Hon ble Supreme Court in the case of CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. [1 992 (4) TMI 3 - SUPREME COURT ] stating that the definition of building would include Road. Therefore, we consider that Ld. CIT(A) has rightly held that capital expenditure incurred thereon is admissible to depreciation on written down value - income of the trust is required to be computed u/s. 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. Therefore, we do not find any merit in the appeal of the revenue and the same is dismissed. Not including profit in sale of assets in computing income - HELD THAT:- We do not find any substance in the ground of appeal of Revenue as ld. CIT(A) after considering the material on record has directed the assessing officer to delete the impugned addition after verification of the material fact that said profit on sale of assets has already been included in the computation of business income of the assessee. Therefore, this appeal of the Revenue is also rejected. Allowing deduction as contribution towards Pension Fund - HELD THAT:- CIT(A) has correctly allowed the appeal of the assessee after taking into consideration the fact that Gujarat Maritime Board employees Pension Trust fund was duly approved by CIT, Gandhinagar w.e.f. 28th March, 2003 and taken into consideration that contribution has been paid in compliance of the terms of appointment on respective erstwhile state government employees and in earlier years also the same contribution was allowed constantly by the department. Addition u/r 8D - HELD THAT:- CIT(A) has allowed the appeal of the assessee after taking into consideration the fact that Gujarat Maritime Board employees Pension Trust fund was duly approved by CIT, Gandhinagar w.e.f. 28th March, 2003 and taken into consideration that contribution has been paid in compliance of the terms of appointment on respective erstwhile state government employees and in earlier years also the same contribution was allowed constantly by the department. 2019 (10) TMI 972 Disallowance of Software and EDP expenses - allowable revenue expenditure - HELD THAT:- On appraisal of the above mentioned finding, we find that the Hon ble ITAT has allowed the claim of the assessee on the basis of the decision of Bombay High Court in the case of Raychem RPG Ltd. [ 2011 (7) TMI 953 - BOMBAY HIGH COURT] . Since the claim of the assessee has duly been covered by the decision of the Hon ble ITAT in the assessee s own case for the A.Y. 2008-09 [ 2017 (12) TMI 1732 - ITAT MUMBAI] therefore, in the said circumstances, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee. Disallowance of reimbursement of expenses under section 40(a)(ia) - HELD THAT:- In DEMPO CO. PVT. LTD., THE COMMISSIONER OF INCOME TAX [ 2016 (2) TMI 308 - BOMBAY HIGH COURT] The tax has to be levied and collected. The ship cannot leave the port or if allowed to leave any port in India, it must either pay or make arrangement to pay the tax. Hence, the apprehension of avoidance or evasion both are taken care of by the legislature. That is how advisedly the legislature cast the obligation to deduct tax at source on the person responsible to make payment to a non-resident in shipping business. The term non-resident means a person who is not a resident as per section 2(30) of the Income Tax Act and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily a resident within the meaning of clause (6)of section 6. The term person includes an individual, a HUF, a company, firm and every artificial juridical person not falling within any of the preceding sub-clauses of clause (31) of section 2. By section 2(23A), a foreign company is defined to mean a company which is not a domestic company. Hence, any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act not being income chargeable under the head Salaries , would have to deduct the tax thereon at the rates in force. Disallowance of payment of license charges on account of non-deduction of taxes at source u/s 195 - HELD THAT:- In view of the decision of the Hon ble Mumbai ITAT in the case of Shinhan Bank Vs. DDIT(IT) [ 2016 (7) TMI 1432 - ITAT MUMBAI] we are of the view of the assessee was not under obligation to deduct the TDS on such payment, therefore, no disallowance is liable u/s 40(a)(ia) of the Act. Accordingly, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee. Allowance of the claim of assessee in connection with the reimbursement of salary cost of related relocation expenses made on account of availing personnel services from its AEs who has been India on an assignment - HELD THAT:- We noticed that the employees who were serving in India or deputed in India had already deducted tax at source u/s 195 of the Act. The provision of TDS is not applicable on reimbursement of deputation expenses to foreign AE. The CIT(A) has relied upon the decision in the case of Burt Hill Design (P) Ltd. Vs. DDIT (IT) [ 2017 (4) TMI 49 - ITAT AHMEDABAD] . The facts are not distinguishable at this stage. No law contrary to the law relied by the Ld. Representative of the assessee has been produced before us. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Allowance of claim of assessee in connection with the payment of inspection and survey fees paid to the foreign entities M/s. Intertek Testing Services and M/s. SGS Testing Controlling Services Singapore falls within the ambit of Section 195 r.w.s. 9(1)(vii) and the Explanation to Section 9(2) - HELD THAT:- We noticed that M/s. Intertek Testing Services and M/s. SGS Testing Controlling Services Singapore do not make available any kind of technical knowledge, skill or experience or process to the appellant consist of development and transfer of any technical plan or design, hence, does not constitute FTS under the provisions of India-Singapore DTAA. Both the companies were eligible to treaty benefit. The India Singapore treaty comprises of FTS Clause with a requirement of make available i..e. Fee would be in the nature of fee for technical service only if the service make available technical knowledge, skill experience or process to the appellant. Intertek inspect the crude for various chemical and provide a report to the appellant for which certain payment was made. M/s. SGS Singapore also provide the same service. CIT(A) has described the nature of service in his order and accordingly arrived at this conclusion that the nature of service rendered by above said two companies nowhere come within the ambit of Section 195 of the Act r.w.s. 9(1)(vii) of the Act. He also relied upon the decision of the Karanataka High Court in case of De Beers India Mineral P. Ltd. [ 2012 (5) TMI 191 - KARNATAKA HIGH COURT] and Linklaters LLP [ 2019 (4) TMI 1474 - ITAT MUMBAI] . The facts are not distinguishable at this stage. Accordingly, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Decided in favour of the assessee. 2019 (10) TMI 971 Correct amount of capital gain - sale of his land - Date of Transfer of land - the assessee claims non-accrual of capital gain in-as-much as land was under dispute - Non receipt of consideration - fulfillment of condition of transfer u/s. 2(47) - HELD THAT:- Confirmation from PACL, the transferee, in the matter may be also useful in deciding the matter, and it is in fact surprising that no such was called for by the Revenue, or indeed furnished by the assessee himself. It may though be again clarified that in case of any inconsistency, the AO shall allow primacy to the conduct of the parties, particularly considering that the dispute with regard to the ownership of land; the same being sub judice, cannot be doubted. The assessee is toward this entitled to rely on the court orders claiming the ownership of the land forming part of ATS dated 04/12/2006. The AO shall take the same on record, and cause such verification as he may deem fit and proper under the circumstances, or necessary, to arrive at his satisfaction qua the fulfillment of the condition of transfer as afore-stated. The assessee is bound to cooperate in the said, set aside proceedings, offering explanation/s qua the factual or legal aspects of the matter, if any, as may be raised by the assessing authority. The AO, needless to add, shall observe the time limit as prescribed u/s. 153, i.e., w.e.f. 01/6/2016. Assessee s appeal is allowed for statistical purposes. 2019 (10) TMI 970 Bogus LTCG - addition of unexplained cash credit u/s 68 read with section 115BBE - HELD THAT:- Transaction of the assessee of deriving long term capital gains by selling shares of M/s Trinity Tradelink Ltd. was treated as bogus by the Revenue only on the basis of suspicion and probability and without finding any defect in the various documentary evidences filed by the assessee and further, the finding recorded by ld CIT (A) that the addition has been made on independent analysis of the documents, is contrary to material available on record. As on perusal of the order of assessment, we find that no independent inquiry was made with regards to alleged entry operator Sh. Vikrant Kayan. Whereas, the sole basis of making the impugned addition was statement of Sh. Vikrant Kayan, which too was recorded behind the back of assessee by DIT (Inv) Kolkata and the statement alone cannot be the conclusive evidence to nail the assessee and hence needs to be excluded for consideration as the said person has not been allowed cross examination by assessee, even though various requests were made by assessee. As such, the transaction of the assessee was duly supported by relevant documentary evidences without there being any rebuttal by lower authorities; the addition made by the Assessing Officer by treating the LTCG as bogus is unsustainable Unexplained expenditure on commission - As transaction of long term capital gains derived by the assessee as genuine and as such, further addition made by the Assessing Officer on account of alleged commission is consequential and is also liable to be deleted - Decided in favour of assessee Customs 2019 (10) TMI 969 Valuation of imported goods - rejection of transaction value - enhancement of declared value - whether the Revenue can enhance the declared value of the goods under import, without rejecting the transaction value/declared price, as provided in Section 14 of the Customs Act? - HELD THAT:- The declared transactions value can only be rejected with cogent reasons by undertaking the exercise as to on what basis the paid price was not the sole consideration, or the transactions value. Since, no such exercise is done by the Court below to reject the price declared or the transaction value in the bills of entry, the orders of Court below is erroneous and fit to be set aside. The adjudicating authority was bound to accept the transaction value declared by the appellant importer, and erred in rejecting the declared price without recording any finding for rejecting the same, as required under Section 14 of the Customs Act. Appeal allowed - decided in favor of appellant. 2019 (10) TMI 968 Demand of Penalty - payment of duty with interest before issuance of SCN - no wilful suppression of facts - HELD THAT:- Admittedly appellant have paid the differential duty with interest much before the issue of SCN. Further, subsequent to issue of SCN, appellant have also deposited penalty @ 15% on 19.07.2017 i.e. within one month of the service of the SCN - sub-section (5) read with sub-section and (6) of Section 28 of Customs Act provides that, where any duty is short levied has not been charged by reason of collusion or any wilfull mis-statement or suppression of facts by the importer, to whom a notice have been served under sub-section (4), such person may pay the duty in full or in part as may be, accepted by him and the interest payable thereon and the penalty equal to 15% of the duty specified in the notice, or the duty so accepted by that person, within thirty days of receipt of the notice and informed the proper officer of such payment in writing, the proper officer shall on recording satisfaction that the duty with interest and penalty (@15%) have been paid in full, then the proceeding in respect of such person to whom notice is issued under sub-section (4) shall be deemed to be conclusive. In view of the provisions of sub-section (5), (6) read with sub-section (4) of Section 28, the proceedings stood concluded on deposit of differential duty alongwith interest and 15% penalty - Appeal allowed - decided in favor of appellant. Corporate Laws 2019 (10) TMI 967 Execution of a sale deed in favour of the Petitioner - revival of winding up proceedings initiated against KOFL - whether a winding up petition can be dismissed solely on the ground of lack of a prosecuting creditor under Rule 101, or whether the Company Court has the power to direct the publication of an advertisement by the Liquidator of the company, especially in cases where other unsatisfied creditors still remain? HELD THAT:- It is important to bear in mind that winding up proceedings are proceedings in rem and have an impact on the rights of people, in general. Thus, it is mandatory to advertise such proceedings, so as to ensure that they receive the widest possible publicity and all relevant stakeholders have adequate notice. This implies that in a situation where the petitioning creditor fails to advertise the petition and no other creditor or contributory comes forward to prosecute it, Rule 101 should not be read in a manner that absolutely bars the continuation of a winding up petition. This is particularly so when there are unsatisfied creditors who should have been given an opportunity to prosecute the petition, but were deprived of the same due to the failure to advertise. Indeed, Rule 101 is only limited to instances where the petitioning creditor fails to advertise the petition. However, there is nothing in the language of Rules 24, 96, or 99 to indicate that only such petitioning creditor can advertise the petition. Given the absence of a specific provision mandating that the petition only be advertised by petitioning creditor, the Company Court has the discretion to direct the publishing of an advertisement to secure the interest of other creditors. In such situations, the winding up proceedings cannot be dismissed, as it would frustrate the very objective of securing the interest of all creditors. Whether the Petitioner has a right to seek the execution of a sale deed in its favour? - HELD THAT:- Solely based on an examination of factors indicating a dominant motive of the management of KOFL to benefit the Petitioner, it went on to hold that the agreement to sell constitutes a fraudulent preference. In doing so, it has failed to appreciate that the said agreement was executed on 17.02.2000, while the winding up petitions were filed on 02.07.2001, signifying that there was a gap of over sixteen months between the two events, as opposed to the six-month period contemplated under Section 531. Similarly, it failed to consider that even the transfer of possession of the subject property occurred on 06.11.2000, which was also before the six-month period preceding the filing of the winding up petition. It is evident that the agreement to sell dated 17.02.2000 cannot be termed as a fraudulent preference under Section 531. Insolvency & Bankruptcy 2019 (10) TMI 966 Maintainability of petition - initiation of CIRP - Corporate Debtor had defaulted in repaying a sum - Existence of default - HELD THAT:- There is absolutely no dispute about supply of rubber for which invoices were raised. There is also no dispute with regard to the amounts covered by invoices which were not paid and Corporate Debtor had committed default. The alleged dispute is not substantiated and it is only imaginary, illusory and not supported by any evidence - petition liable to be admitted. Petition admitted. 2019 (10) TMI 965 Maintainability of application - initiation of CIRP - Corporate debtor -step to be taken by the Liquidator during the Liquidation . The two impugned orders both dated 11.01.2018 have been challenged on the ground that the order of liquidation was passed by Adjudicating Authority without taking into consideration provisions of law and the procedure for Corporate Insolvency Resolution Process was not followed in all the cases. HELD THAT:- In both the cases, we find that the applications under Section 10 were admitted on 14.06.2017, therefore, we are not inclined to grant any further time for successful resolution and thereby not inclined to interfere with any of the orders of the liquidation. However, we are of the view that the Liquidator in both the cases required to follow the decision of this Appellate Tribunal in Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL ORS. AND SERVALAKSHMI PAPER LTD. ORS [ 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] wherein this Appellate Tribunal observed, held and directed that As the liquidation so taken up under the I B Code , the arrangement of scheme should be in consonance with the statement and object of the I B Code . Meaning thereby, the scheme must ensure maximisation of the assets of the Corporate Debtor and balance the stakeholders such as, the Financial Creditors , Operational Creditors , Secured Creditors and Unsecured Creditors without any discrimination. We vacate the Interim order passed in both the appeals and allow/ direct Resolution Professional/ Liquidator to act in terms with the direction of the aforesaid decision - appeal disposed off. 2019 (10) TMI 964 Admissibility of application - sole ground taken by the Appellant is that the Adjudicating Authority has passed the order without taking counter-statement of the Appellant - HELD THAT:- From the impugned order dated 30th April, 2019 we find that the Corporate Debtor was noticed and heard and one Mr. Naveen Kumar Murthi and Mr. G.V. Mohan Kumar, Advocates appeared on behalf of the Corporate Debtor . The other ground taken by the Appellant is that the Adjudicating Authority has failed to consider that the Corporate Debtor had made the payment. However, it is not disputed that there is a part default which is much more than Rupees One Lakh ( i.e. ₹ 9.5 Crores) and the Corporate Debtor has failed to pay - There are no reason to interfere with the impugned order. This apart the Appellant and the Directors and Officers had not handed over the assets and documents of the Corporate Debtor to the Resolution Professional . It will be open to the Resolution Professional to move appropriate application before the Adjudicating Authority including the application for initiation of action under Chapter VII of Part II of the I B Code . The appeal is dismissed with aforesaid liberty to the Resolution Professional with costs of Rupees One Lakh, which is to be paid by the Appellant to the Corporate Debtor through Resolution Professional . 2019 (10) TMI 963 Initiation of CIRP - exclusion of certain period for the purpose of counting 270 days - Section 12A of the I B Code - HELD THAT:- The Adjudicating Authority should have allowed the intervening period i.e. the period when erstwhile Resolution Professional Mr. Martin S.K. Golla stopped functioning i.e. from 8th December, 2019 to 11th January, 2019 till the subsequent Resolution Professional (present Liquidator) took charge to place the application under Section 12A before the Committee of Creditors . The impugned order dated 8th March, 2019 including the order of liquidation is set aside and 35 days excluded from the date of receipt of this order by the Resolution Professional for the purpose of counting the period of 270 days so as to ensure Successful Resolution Process in terms of Section 12A - appeal allowed. PMLA 2019 (10) TMI 962 Bail application - Compoundable offences - grant of sanction to prosecute for offences punishable u/s 276C(1) and 277 of the Income Tax Act and section 120B of I.P.C - scheduled offences - HELD THAT:- It is not in dispute that the petitioner was discharged by the Special Court, Bengaluru in 3 out of 4 complaints vide order dated 28.02.2019. however, the application seeking discharge in the 4th complaint was dismissed by the Special Court, Bengaluru, vide order dated 25.06.2019 - The petitioner had challenged the said order in Revision Petition No. 955/2019 filed before the High Court of Karnataka which granted stay of further proceedings vide order dated 20.08.2019 in the said 4th complaint case pending before the Special Court, Bengaluru. It is also not in dispute that the offences under Section 276C, 277 of the Income Tax Act alleged against the petitioner are compoundable offences and the only Scheduled Offence invoked against the petitioner is Section 120 B IPC. Bail application - entitlement for grant of bail - HELD THAT:- While dealing with the bail application, it is not in dispute that three factors have to be seen viz. i) flight risk, ii) tampering evidence iii) influencing witnesses - Regarding the flight risk, neither argued by learned Additional Solicitor General nor placed any material on record, therefore, flight risk of the petition is ruled out - Regarding tampering with the evidence, it is not in dispute that the documents relating to the present case is in the custody of the prosecuting agency, Government of India and the Court. Moreover, presently, the petitioner is not in power except he is a Member of Legislative Assembly. Therefore, in my considered view, there is no chance of the petitioner to tamper with the evidence - On the issue of influencing the prosecution witnesses, the respondent has not placed any record to establish that either the petitioner or his family members or associates ever tried to contact any of the witnesses not to disclose any information regarding money earned by him for self and family members or associates. Moreover, petitioner has been examined extensively. All the 14 witnesses have already been examined - He was arrested on 3rd September, 2019 and remained 15 days in the custody of respondent and thereafter in judicial custody. He is no more required for investigation or interrogation by the prosecution. The petitioner is entitled for bail on merits and medical grounds as well - the petitioner shall be released on bail with conditions imposed - bail application allowed. 2019 (10) TMI 961 Condonation of delay in filing appeal - appellant's case is that the reasons for delay in filing the appeals were beyond the control of the appellant - sufficient reasons or not? - Section 42 of the PMLA - Money Laundering - Provisional attachment of properties - proceeds of crime - scheduled offences - HELD THAT:- If any person is aggrieved by any decision or order of the Appellate Tribunal, he may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him. Proviso to this Section provides that if the High Court is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period of sixty days, the High Court may allow it to be filed within a further period not exceeding sixty days. Thus, the proviso clearly mandates the High Court not to allow the appellant to file an appeal after a further period of sixty days. In M/S SIMPLEX INFRASTRUCTURE LTD VERSUS UNION OF INDIA [ 2018 (12) TMI 388 - SUPREME COURT] , the Supreme Court has held that delay beyond the three months plus thirty days under Section 34 of the Arbitration Act cannot be condoned - Similarly in the matter of BENGAL CHEMISTS AND DRUGGISTS ASSOCIATION VERSUS KALYAN CHOWDHURY [ 2018 (2) TMI 487 - SUPREME COURT] , the Hon;ble Supreme Court held that limitation period of 45 days in Section 421 (3) plus additional 45 days grace period are peremptory and mandatory nature and no further time can be granted beyond this total period. Thus, this Court is of the view that the High Court cannot breach statutory mandate and cannot make the provisions of Limitation Act applicable. Consequently, the appeals filed by the appellant are held not maintainable as the same have been filed beyond the prescribed period of limitation as provided under Section 42 of the PMLA - applications for condonation of delay in filing the appeals are rejected - appeal dismissed. Service Tax 2019 (10) TMI 960 Valuation - Business Auxiliary services - inclusion of value of such pre-fixed quantum of LNG identified towards allowed loss and consumption - inclusion of such value in the assessable value on the ground that such free of cost supplies of LNG by the customers should have formed part of the consideration received by the Appellant and should be included in the taxable value for payment of service tax. Whether the value of LNG received by the Appellant free of cost is required to be included in the taxable value for the payment of service tax under the head Business Auxiliary Service ? HELD THAT:- The Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [ 2018 (2) TMI 1325 - SUPREME COURT ] examined whether the value of goods/materials supplied or provided free of cost by a service recipient and used for providing taxable service is to be included in computation of the gross amount charged by the customer for valuation of taxable service and in this context, both the unamended and the amended provisions of section 67 of the Act, were examined and held that service tax is payable on the gross amount charged which would be the amount billed by the service provider to the service receiver. In view of the aforesaid decision of the Supreme Court in Bhayana Builders, free of cost LNG supplied by the customers to the Appellant cannot be included in the value of taxable service - The Principal Commissioner, however, distinguished the aforesaid decision of the Supreme Court by making reference to the observation made by the Larger Bench of Tribunal in M/S BHAYANA BUILDERS (P) LTD. OTHERS VERSUS CST, DELHI OTHERS. [ 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) ] that the material supplied free of cost was not retained by builder but in the present case the quantity of LNG was retained by Appellant. The learned Authorized Representative of the Department has also emphasized that in this view of the matter, the Appellant would not be justified in placing reliance upon the decision of the Supreme Court in Bhayana Builders. It is not possible to accept the contention of the Department. In the first instance the Department had challenged the decision of the Larger Bench of the Tribunal before the Supreme Court and decision of the Supreme Court in Bhayana Builders does not make any reference to retention or non retention of the material supplied free of cost . It also needs to be noted that certain percentage of LNG is lost during regasification process, as is clear from the clause dealing with allowed loss and consumption . In any view of the matter, this was not the sole reason given by the Larger Bench as there are specific findings recorded by the Larger Bench in the other paragraphs of the order. Thus, the allowed loss and consumption will not form part of the consideration for the purpose of levy of service tax - the Commissioner was not justified in confirming the demand of service tax on the value of pre-determined quantum of LNG identified by the parties towards allowed loss and consumption since such free of cost supplies of LNG by the customers cannot form part of the consideration received by the Appellant. The value of such LNG cannot, therefore, be included in the taxable value for payment of service tax. Demand alongwith interest and penalty set aside - appeal allowed - decided in favor of appellant. 2019 (10) TMI 959 Refund of service tax paid - export of services - denial on the ground that there is no nexus between the input services and the output service exported by the appellant; that description of services mentioned in the invoice did not confirm to the definition of the input service contained in Rule 2(l) ibid and that some of the invoices were not submitted for ascertaining the issue. HELD THAT:- So far as establishing the nexus between input and the output service is concerned, I find that this Tribunal in the case of ACCELYA KALE SOLUTIONS LTD. VERSUS COMMISSIONER OF CGST CE MUMBAI [ 2018 (8) TMI 19 - CESTAT MUMBAI] by relying upon the letter dated 16.03.2012 of TRU has held that under Rule 5 ibid, refund of input service credit is permissible on compliance of the formula prescribed therein and not otherwise - Refund allowed on this ground. Rejection of the refund application on the ground that the description of service as per the invoice is not confirming to the category of services mentioned in Rule 2(l) ibid - HELD THAT:- It is an admitted fact on record that the authorities below have not proceeded against the appellant for denial of Cenvat benefit by taking recourse to Rule 14 ibid, which provides for recovery of Cenvat credit wrongly taken or utilised. Since, the present issue pertains to refund claim under Rule 5 ibid, it has only to be ensured that the formula prescribed in the said rule has been complied with by the claimant. Thus, rejection of refund benefit on such ground is not justified. Rejection also on the ground that the appellant did not produce the invoices for scrutiny before the original authority - HELD THAT:- The onus lies with the claimant to prove that the input services were in fact used for exportation of the output service and thus, the documents were required to be examined at the original stage. At this juncture, since the learned Advocate for the appellant submits that all the relevant documents are available with the appellant, the matter should be remanded to the original authority for verification of the documents/records to be submitted by the appellant - Matter on remand - appeal allowed in part and part matter on remand. Central Excise 2019 (10) TMI 958 Scope of impugned order - CENVAT Credit - common input used in exempt goods - Furnace Oil, which was used for generation of steam supplied to its sister concern - HELD THAT:- It is an agreed position between the parties that, the impugned order dated 26th July, 2018 of the Additional Commissioner goes beyond the remand order dated 17th July, 2015 of the Tribunal. This, in view of the fact that, it re-adjudicates the issue afresh on merits, when the remand order was only to decide the quantum final product cleared by the sister concern on payment of excise duty to determine the CENVAT Credit available. Impugned order set aside - the issue of determining the quantification of CENVAT Credit available to the Petitioner, is restored to the Respondent No.2 Additional Commissioner for fresh determination - petition disposed off. 2019 (10) TMI 957 CENVAT Credit on opting of notification benefit - disallowance of CENVAT credit that remained as balance when they opted out of the special facility of duty payment enabled by N/N. 29/2004-CE dated 9th July 2004 to avail exemption under N/N. 30/2004-CE dated 9th July 2004 - HELD THAT:- CENVAT credit is to be utilized for discharge of liability as prescribed in Central Excise Rules, 2002 and Service Tax Rules, 1994. CENVAT Credit Rules, 2004, with which we are concerned here, would, therefore, not be in breach by maintenance of a record which logs entry of burden of duty borne or inputs procured by the appellant. N/N. 30/2004-CE dated 9th July 2004 exempts the duty on the finished products of eligible manufacturers subject to credit of duty not having been taken on inputs or capital goods used for manufacture of these finished goods. As the credit in balance cannot be used and circular no. 645/36/2002-Cx dated 16th July 2002, which precedes the amendment in CENVAT Credit Rules, 2004, requires that CENVAT credit on inputs would necessarily have to be written off - Appeal dismissed. 2019 (10) TMI 956 Liability of service tax or duty of excise - whether the appellant is manufacturer or job-worker - It has been the consistent contention of the appellant that the inputs for these products were being supplied by M/s Shakti Udyog and, therefore, assembled by using the facilities at the premises and that the appellant was a mere job-worker discharging appropriate liability under Finance Act, 1994 as provider of service - HELD THAT:- The privileges as job-worker, claimed by the appellant, are available only as procedural consequences of such assumption of responsibility. Hence, under law, notwithstanding the claims of the appellant of not being in possession of the premises, of not procuring any of the raw materials or inputs or not being in control of manufacturing facility, and of merely having been a provider of labour, their liability to duty is not erased. Transfer of materials from M/s Shakti Udyog has also not taken place in accordance with the procedure prescribed for such job-worker. In these circumstances, the appellant must necessarily be considered as the manufacturer - The appellant is unable to bring on record any evidence to substantiate that the production of branded goods was only for a limited period. The liability to duty, therefore, devolves on the appellant. Imposition of penalty on Shri Pradeep Kainya - HELD THAT:- It is seen that he is the proprietor of the principal manufacturer which had merely utilized the facilities of M/s Electroclad to undertake manufacturing on their behalf. It has been held that the liability, as manufacturer, vests with M/s Electroclad and not upon the principal manufacturer to whom goods were supplied. Further, with the uncontested compliance with the tax liability under Finance Act, 1994, there is no ground to attribute any motives to Shri Pradeep Kainya - penalty set aside. Appeal allowed in part. 2019 (10) TMI 955 Interest on delayed refund - wrongful grant of refund - time limitation - unjust enrichment - duty was paid under protest - HELD THAT:- The appellant/assessee has not charged duty from the buyers of their goods, nor issued any debit notes subsequently nor have issued any supplementary bill. Thus, there is no way by which the appellant could have collected any amount subsequently. Further, it is an established legal principle that where the duty is paid under protest, there is no time limit for claim of refund - Further, in terms of instructions of CBEC dated 2.2.2002, the Adjudicating Authority was bound to refund the amount of duty deposited by the appellant under protest, which was in the nature of pre-deposit under Section 35 F. Duty paid under protest, ipso facto becomes pre-deposit under Section 35 F, on filing of appeal. Thus, the appellant is entitled to interest on refund from the date of filing the appeal (when such deposit under protest became pre-deposit under Section 35 F) till the date of grant of refund - appeal allowed - decided in favor of appellant. 2019 (10) TMI 954 Levy of penalty - It is contended that, Penalty under Rule 26(2) provision can be imposed only on a natural person. - The appellant is a partnership firm and per se is not a natural person - CENVAT credit - duty paying documents - fake invoices - fraudulent availment of CENVAT Credit based on invoices issued without actual supply of material mentioned in the invoices - imposition of penalty u/r 26 of CER - HELD THAT:- Without receiving goods or supply of goods, the appellant has received invoices and also issued cenvatable invoices, facilitating M/s Reliance Cellulose Products Limited to avail fraudulent credit. The appellants having issued excise duty invoice without delivery of goods is, therefore, liable for penalty under Sub Rule 2 of Rule 26 of Central Excise Rules, 2002. There are no grounds to interfere with the findings of the Commissioner that the appellant is liable for penalty under Rule 26(2). However, the penalty of ₹ 22.00 lakhs imposed on the appellant is on the higher side - the imposition of fine of ₹ 5.00 lakhs would meet the ends of justice. Appeal allowed in part. 2019 (10) TMI 953 CENVAT credit - inputs - capital goods - period April 1994 to December 1994, period January 1995 to June 1995 and period June 1998 to July 1999 - irregular availment of Cenvat Credit - ineligible documents. CENVAT credit - capital goods or not - Air Cooler, Air conditioner, Ventilation systems, water cooler - denial on the ground that these are not integrally connected in the production and processing of the goods - HELD THAT:- These items have been used in plant to be provided desired environment than in production in the factory. We find that air conditioner have been used in the control room where computers are installed to monitor the production - as per Rule 57Q the capital goods used for producing or processing, although is not directly used and indirectly used, the same will satisfy the requirements of Rule 57Q, therefore, the appellant is entitled to avail Cenvat Credit on Air cooler, air conditioner, ventilators and water coolers. Bulldozer and excavators - Denial on the ground that these equipments do not satisfy the explanation 1(A) of Rule 57Q nor the said items qualify as components, spare parts and accessories of the machines - HELD THAT:- The said items are specified capital goods which are used as handling equipments in the sintering plant, coal handling plant etc. for feeding various raw materials during the course of the manufacturing of final product and it is integrally connected with the manufacturing process - the said bull dozers and excavators are integral part of the plant and machinery. Therefore, appellant is entitled to apply for Cenvat Credit. Electric Tele communication signals, telephone push bottons, telecom A.V. Aids, Video Amplifier Cord, telecom parts, telephone cables and telecom cords - denial on the ground that they were not used for producing or processing any goods or bring about change in the final product - HELD THAT:- The items in question were used in control system and various production shops like blast furnace, steel melting shop, blooming and billet mills, etc. for communicating transfer of raw material and intermediate goods to the next process and also for communicating the production process data to the next stage users so that production process be carried on without interruption for manufacturing of final product - the said items in question have been integrally used by the appellant for the manufacturing process of final goods. Therefore, the same are entitled to Cenvat Credit in terms of Rule 57Q of the Central Excise Rules 1944. CTD Bars and forged blanks and GC Sheet - denial on the ground that these have been used for civil construction work therefore, they are not used for producing or processing any goods or for bringing any change in any substance for the manufacture of the final product, hence, not entitled of Cenvat Credit - HELD THAT:- This CTD Bars were used to form the bed to put sinter material, therefore, it is clear that they are used as part of capital goods and eligible for credit. The forged blanks are used as parts of various capital goods throughout the plant in the blast furnace, steel melting shop, blooming mills etc. and therefore, qualify as parts and accessories of the specified capital goods, for which direct use is not a requirement. The GE sheets were also used as structures which are part of the various capital goods in the production area, therefore, to be treated as part of capital goods. Hence Cenvat Credit cannot be denied - further, the steel items have been used in fabrication/manufacture of various plant and machinery installed inside the factory premises which ultimately contribute in manufacture of final product - the appellant is entitled to avail Cenvat Credit on the said items. Carbon Tetra Chloride, Bell Cleaning System, Cleaning chemical and floor cleaning machine - sole allegation is that said items did not contribute to manufacturing activity - HELD THAT:- The said items have been used in various production mills for removing carbon which is accumulated in the machines. The removal of carbon is essential for the manufacture of the dutiable products as it affects the quality of the goods. The floor cleaning machine is used for recovery and collection of waste in the floors and to ensure smooth and uninterrupted production activity. Further, these items are to be considered to be pollution control equipments under section 57Q of the Central Excise Rules - thus, on the said items appellant are entitled to avail Cenvat Credit. Lamp tube / sodium vapour lamp - allegation is that these are lighting equipments or spares for illuminating the factory and not used in the manufacturing process - HELD THAT:- The lighting fittings are essential as they illuminate the factory area in order to maintain continuity in manufacturing process round the clock without any hindrance, especially in darkness when natural light is not sufficient and also not available at night, in various areas of the plant - the said lighting fittings are essentially a pre-requisite for manufacture of goods therefore, entitled to Cenvat Credit in terms of Rule 57Q and Rule 57A of Central Excise Rules. Amonia Plaper/ photo chemical/ ammonia printing machine/ photocopying apparatus - It is alleged that these items were used in preparation of drawing and designing and thus does not find its use in production or processing - HELD THAT:- The ammonia paper is used for preparation of drawing and designing of final products and blue prints of various spare, components etc. which are manufactured in the various workshops within the factory of the appellant, without which the manufacture of goods is hindered. Hence, by applying the user-test principle, the said item qualify as capital goods under rule 57Q of the Excise Rules. Monoblock Concrete Sleepers and body crossing etc. - denial on the ground that they are not capital goods - HELD THAT:- The items have been used as part of transportation and material handling equipments within the factory of production and the credit has been availed in respect of those items which have been used within the factory. The use of these materials is essential for manufacture of finished goods. Thus it fall within the scope of equipment defined under Rule 57Q in as much as it has been used in or in relation to manufacture of final product. Therefore, said items are specified clearly under which are used as handling equipments in the sintering plant, coal handling plant etc. for feeding various raw materials during the course of manufacturing of final product and is it integrally connected with the manufacturing process - credit allowed. Safety and firefighting equipments, toughned glass, safety glass - denial on the ground that Safety and firefighting equipment do not bring about any change in any substance for the manufacture of the final product process - HELD THAT:- The items in question are essential in view of high temperature involved in various production areas. Therefore, it is considered to be used for production or processing final goods. The toughned glasses are used in cranes, furnace and rolling mills areas handling hot metal and semi finished goods in hot conditions. They are part of the material handling equipment and control rooms operating the machines. In view of this, the appellant is entitled to file Cenvat Credit on the said items. Bunker wide bracket / forklift truck part /rail brage, clamp plate, elastic rail. - denial on the ground that do not bring any change in any substance for manufacture of final product - HELD THAT:- The items have been used as material handling equipment for storing / mixing /transporting the raw material in ore handling plant, sintering plant, coal handling plant, steel melting shop and other workshops. Further, without the internal transport of raw material, manufacture cannot take place, hence, is entitled to avail Cenvat Credit on the above said items. Motor Vehicle parts - denied on the grounds that these parts are meant for general transportation of vehicle and does not fall under Rule 57Q - HELD THAT:- These items are used as part of ingot metal, bogie cars and fork lift trucks which are used for transportation of various raw materials within the factory and is integrally and essentially connected with manufacture of final products. Hence, qualify as capital goods under Rule 57Q. Therefore, the appellant is entitled to avail cenvat credit on the above items. Diesel oil engine - Denial on the grounds that although the said item is used in water treatment plant of the appellant, it is not a specified capital goods item - HELD THAT:- The diesel oil engine is used in various places like water treatment plants, coke oven etc. for the purpose of recycling of waste water. It is further observed that the cenvat credit was allowed on caustic soda, water treatment chemical etc. as input as it is essentially used in relation to manufacture of final product. Hence, the said item is eligible for Cenvat Credit as input if not eligible for credit under the category of capital goods - credit allowed. Drilling Machine - denial on the ground that the said machine did not fall under the specified category of Rule 57Q - HELD THAT:- The said machine is used as parts, components, etc. of various machine, shops and other engineering shop for the purpose of manufacturing of various capital goods and also used for maintenance of various capital goods in workshop. Therefore, the appellant is entitled to avail Cenvat Credit on the above said items. CENVAT CREDIT - Credit disallowed on account of invalid documents - HELD THAT:- The learned Commissioner in the impugned order has not discussed and given the finding how the documents are invalid and why the appellant is not entitled to avail Cenvat Credit on these documents. The said aspect is required to be seen by the adjudicating authority on the explanation / supportive defense produced by the appellant - Therefore, for denial of cenvat Credit of ₹ 4,30,31,449/-, we remand the matter back to the Adjudicating Authority to pass a detailed order either denying or holding appellant entitled for Cenvat Credit on the basis of documents - Matter on remand. Appeal disposed off. CST, VAT & Sales Tax 2019 (10) TMI 1006 Relevant time for calculation of interest - date from which, the simple interest at the rate of 8% per annum, in terms of Section 33(2) of the Goa Value Added Tax Act, 2005 becomes payable, on the amount refundable under the provisions of the said Act - HELD THAT:- The issue decided in the case of [ 2019 (10) TMI 951 - BOMBAY HIGH COURT ] where it was held that, Respondents are directed to pay simple interest at the rate of 8% per annum on the sanctioned refund amount. 2019 (10) TMI 952 Whether the Tribunal was legally justified to hold a view that hoisery goods were being carried through bills dated 01.10.2006 and on physical verification woollen garments were found? - HELD THAT:- The Tribunal has, in the first place, referred to the procedure that is required to be followed by the first appeal authority and, in that regard, first appeal authority did not call for a remand report. However, the Tribunal has not recorded its finding on the observations alone. In fact, the Tribunal has thereafter itself examined the issue and observed that the goods in question were woollen garments whereas the bills only reflected the same to be hoisery - On such finding, the Tribunal has concluded that the goods were not accounted for in the books of accounts of the assessee. As such, the direction issued by this Court is found to have been complied and there is no error in the order of the Tribunal, to that extent. The fact that the books of accounts of the assessee came to be accepted, may not give rise to any benefit to the assessee, in the facts of the present case, inasmuch as, that order of assessment dated 29.3.2009 came to be passed after the penalty under Section 30-A (4) of the U.P. Trade Tax Act, 1948 had been deleted by the first appeal authority on 25.4.2007. This fact and reason had been specifically mentioned by the assessing authority in the assessment order dated 29.3.2009 - Since no independent reason had been given by the assessing officer to accept the books of accounts and, in fact, he had accepted the books of accounts since penalty proceedings came to be dropped meanwhile, the rights of the parties in the penalty proceedings would continue to be determined by the further orders passed in the penalty proceedings and, to that extent as well, the order of the Tribunal does not suffer from any infirmity. Revision dismissed. 2019 (10) TMI 951 Relevant date for calculation of interest - date from which, the simple interest at the rate of 8% per annum, in terms of Section 33(2) of the Goa Value Added Tax Act, 2005 (the said Act ) becomes payable, on the amount refundable under the provisions of the said Act - HELD THAT:- Section 33(2) is a special provision which deals with payment of interest on the amount refundable . Rule 30 of the said Rules, deals with the aspect of refunds and the necessity of obtaining sanction where the amount of refund exceeds ₹ 50,000/-. Even if, as the revenue contends, that there is some marginal overlap, the clear and unambiguous provision in section 33(2) of the said Act cannot be made to yield to the provisions in Rule 30 of the said Rules, when it comes to payment of interest upon the refund amount, as sanctioned in terms of Rule 30 of the said Rules - In the present case, fortunately there is no need to give any strained meaning to the provisions in Rule 30 so as to make it conform to the provisions in section 33(2) of the said Act. The provisions in Rule 30 of the said Rules as they stand do not detract anything from section 33(2) of the said Act. In fact, both Rule 30 of the said Rules and section 33(2) of the said Act, operate in their respective fields. It is reasonable to proceed on the basis that 90 days time limit provided in section 33(2) of the said Act is the time limit within which the appropriate assessing authorities must obtain sanction in terms of Rule 30 of the said Rules. However, if for any reason such sanction is not obtained within the period of 90 days from the date of order of refund made under Section 29 of the said Act or within a period of 90 days from the date of receipt of application for refund under section 10(3) of the said Act, the appropriate assessing authority cannot avoid liability or payment of simple interest at the rate of 8% per annum on specious plea that such liability commences only from the date of expiry of 90 days from the date of sanction order under Rule 30 of the said Rules. In the present case, the Petitioner seeks interest only on the amount which has already been sanctioned by the Authorities under Rule 30 of the said Rules. Therefore, upon obtaining necessary sanction under Rule 30 of the said Rules beyond the period of 90 days from the date of the order of refund, or from the date of application for refund under Section 10(3) of the said Act, the Authorities cannot avoid payment of interest upon expiry of this period, on the specious plea that actual refund cannot be made without sanction under Rule 30 of the said Rules. The Respondents will have to pay simple interest at the rate of 8% per annum, upon the amount of ₹ 52,36,030.69 towards Interstate/Local Sales for the period between 29.6.2011, i.e. expiry of 90 days from the date of assessment order dated 29.3.2011, till 20.2.2016 i.e. the date of actual refund. Similarly, Respondents will have to pay simple interest at the rate of 8% per annum on the amount of ₹ 28,83,213.31, towards refund of Input Tax Credit/Export Sales with effect from 24.4.2009 and 18.7.2008, on proportionate basis since this is the date which corresponds to the expiry of 90 days from the date of receipt of applications dated 24.1.2008 and 18.4.2008 in terms of Section 10(3) of the said Act. Petition disposed off. 2019 (10) TMI 950 Classification of goods - Parachute Oil - Medikar - Revived Instant Starch - HELD THAT:- The issue decided in the case of M/s. Merico Ltd. vs. Commissioner, Commercial Taxes, U.P., Lucknow and other connected matters [ 2015 (3) TMI 431 - ALLAHABAD HIGH COURT ] where it was held that, ..... word Starch as used in Entry 118 of Schedule II Part A of the U.P. VAT Act, 2008 has neither been referred to as edible or inedible and therefore Revive Starch must be held to be falling within the meaning of word Starch as used in Entry 118. If it had been the intention of the Legislature to distinguish between edible and inedible Starch, the Entry 118 itself would have explicitly said so and therefore when the Legislature itself is silent a meaning or interpretation to a word used in the statute must not be given which the Legislature itself did not intend and did not say in so many words. The revision dismissed.
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