TMI Tax Updates - e-Newsletter
October 28, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
GST will be payable by the refinery only on the net quantity of superior kerosene oil (SKO) retained for the manufacture of Linear Alkyl Benzene (LAB).
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Income Tax:
Payment for IUC Charges is not chargeable to tax in India in the hands of the non-resident recipients and hence TDS was not deductible as per provisions of section 195 of the Act.
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Income Tax:
Google India has been provided access to the IPR, Google Brand features, secret process embedded in Adwords Programme as tool of the trade for generation of income. Therefore the payment made by the appellant to Google Ireland is royalty and not the business profit and therefore chargeable to tax in India.
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Income Tax:
The deposit made in the bank account of the trust represents unaccounted income of the assessee, as the same was not disclosed by the these assessees in their respective returns - additions confirmed.
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Income Tax:
TDS - it is not possible to accept the contention that reimbursement of salary coupled with other reimbursement of international and domestic travel is reimbursements of expenses simplicitor escaping withholding tax liability.
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Income Tax:
TDS u/s 194C OR 194J - AO has merely compared the appointment letter in case of Honorary Consultants and independent professional doctors and brought out differences to hold that the independent professional doctors are employees.
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Customs:
In the garb of high seas sellers of imported goods, the appellants used M/s. Chanakya Impex, and became beneficiary of fraud of use of advance licence of M/s. Chanakya Impex - penalties confirmed
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Corporate Law:
Relaxation of additional fees and extension of last date of filing of AOC-4 XBRL E-Forms using Ind AS under the Companies Act, 2013 - reg. - Circular
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Indian Laws:
Complaint cases under Section 138 of the NI Act for amicable settlement through mediation - To facilitate this process, there can be no possible exclusion of external third party assistance to the parties, say that of neutral mediators or conciliators. - HC
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Service Tax:
Service tax or VAT? - whether the transaction being transfer of rights and privilege of export of ‘Sugar quota’ by the respondent assessee on receipt of consideration, whether the same is a service or goods? - Held as sale of goods.
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Central Excise:
Rectified spirit which is not used for human consumption is nothing but Ethyl Alcohol and is finding place in Tariff Item No.22072000
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Central Excise:
Whether awarding of bonus to the appellant for timely completion of the project shall be dutiable under the CEA, 1944? - Held No
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VAT:
Conditions for availing ITC - Section 9(2)(g) of the Delhi Value Added Tax, 2004 is ultra virus - Section 48 (5) of the MVAT Act is not an exact replica of Section 9 (2) (g) of the DVAT Act - HC
Articles
Notifications
GST - States-
38/1/2017-Fin(R&C)(29/2017-Rate)/B/2426 - dated
26-9-2017
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Goa SGST
Amendments in the Government Notification No. 38/1/2017-Fin(R&C)(5/2017-Rate) dated 30th June, 2017
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38/1/2017-Fin(R&C)(28/2017-Rate)/B/2427 - dated
26-9-2017
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Goa SGST
Amendments in the Government Notification No. 38/1/2017-Fin(R&C)(2/2017-Rate) dated 30th June, 2017.
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38/1/2017-Fin(R&C)(27/2017-Rate)/B/2428 - dated
26-9-2017
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Goa SGST
Amendments in the Government Notification No. 38/1/2017-Fin(R&C)(1/2017-Rate) dated 30th June, 2017,
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38/1/2017-Fin(R&C)(26/2017-Rate)/A/2431 - dated
26-9-2017
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Goa SGST
Exempts intra state supply of heavy water and nuclear fuels. Department of Atomic Energy to the Nuclear Power Corporation of India Ltd. from the whole of the State tax leviable.
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38/1/2017-Fin(R&C)(25/2017-Rate)/A/2430 - dated
26-9-2017
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Goa SGST
Amendments in the Government Notification No. 38/1/2017-Fin(R&C)(12/2017-Rate) dated 30th June, 2017.
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38/1/2017-Fin(R&C) (24/2017-Rate)/A/2429 - dated
26-9-2017
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Goa SGST
Amendments in Government Notification No. 38/1/2017-Fin(R&C)(11/2017-Rate) dated 30th June, 2017,
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33/2017-State Tax (Rate) - dated
13-10-2017
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Gujarat SGST
Amendments in the Notification No. (GHN-34)GST-2017/S.9(3)(2)-TH Dated the 30th June, 2017, Notification No.13/2017- State Tax (Rate), - Reverse Charge On Services to RBI.
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32/2017-State Tax(Rate) - dated
13-10-2017
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Gujarat SGST
Amendments in the Notification, No.(GHN-41)GST-2017/S.11(1)(7)-TH, Dated the 30th June, 2017, Notification No.12/2017- State Tax (Rate)- Exemption On Services By GOVT Entity.
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(GHN-101)/GST-2017/S.6(1)(1)-39/2017-State Tax - dated
13-10-2017
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Gujarat SGST
Policy Cross Empowerment State Tax Officer
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (10) TMI 1100
Revision u/s 263 - AO upheld the assessee’s contention with regard to applicability of Section 10B to its unit - Section 263 was invoked primarily on the ground that the approval did not conform to the CBDT’s circular dated 09.03.2009 (F.No.178/19/2008) - Held that:- The invocation of Section 263 in the opinion of this Court cannot be faulted. As to whether in fact there was no necessity for a further ratification, in the light of the appellant’s contention that a general or a specific circular, which delegated the powers of the Board of Approvals, applied after the issuance of the 09.03.2009 circular, is however kept open for consideration. In case such contention is urged by the appellant before the Income Tax authorities, the same shall be considered on its own merits.
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2017 (10) TMI 1099
Lifting of the attachment of one of the three bank accounts of the Petitioner that have been frozen to recover the disputed amount - Held that:- This Court is of the view that of the three bank accounts of the Petitioner that remain frozen, the Petitioner should be allowed to operate at least one. It is pointed out by Mr. Syali, the learned Senior Counsel appearing for the Petitioner, that the only account where the Petitioner has a cash credit facility is its Account No. 01812100000354 with Kotak Mahindra Bank Limited, Sector 18 Branch, Noida. It is accordingly directed that the Petitioner will be forthwith permitted to operate the Account No. 01812100000354 with Kotak Mahindra Bank Limited, Sector 18 Branch, Noida without prejudice to the rights and contentions of the Revenue and subject to further orders that may be passed in the present petition. The Assistant Commissioner of Income Tax, Central Circle (8) will forthwith issue written instructions to the Manager of Kotak Mahindra Bank Limited, Sector 18 Branch, Noida to permit the Petitioner to operate Account No. 01812100000354 .
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2017 (10) TMI 1098
Revision u/s 263 - assessment order framed by the AO u/s. 143(3) is erroneous and prejudicial to the interest of the Revenue for not referring the property to the DVO u/s. 50C(2) and also failed to initiate penalty proceedings u/s. 271(1)(c) of the Act against the assessee for furnishing inaccurate particulars of income - Held that:- CIT cannot be agitated by the assessment order, wherein no reference was made to the DVO u/s. 50C(2) of the Act because the Assessing Officer has adopted the value/sale consideration of the sale of gala at Bhiwandi as determined by the Stamp Duty Valuation Authorities at ₹ 32,27,381/-. The CIT cannot ask for revision in the price for the reason that in any eventuality the AO has to adopt either Stamp Duty Valuation or the value estimated by the DVO u/s 50C(2) of the Act, which is lower price. It means that the assessment order is neither prejudicial or nor erroneous. Secondly, whether the CIT u/s. 263 of the Act can direct the Assessing Officer to initiate penalty proceedings u/s. 271(1)(c) of the Act, this issue is clearly covered by the decisions of Hon’ble Gujarat High Court in the case of CIT vs. Parmanand M Patel (2005 (7) TMI 72 - GUJARAT High Court) and Sterling Construction and Investments vs. ACIT(Inv) (2015 (4) TMI 838 - BOMBAY HIGH COURT) as held the inherent indication under section 271(1) of the Act makes it clear that the Commissioner does not have any powers to direct either of the authorities, the Assessing Officer or the appellate authority, to initiate and levy penalty. The section requires the Assessing Officer or the appellate authority to be satisfied in the course of ‘any proceedings’. This means, any proceedings before either of the specified authorities. The Commissioner cannot create proceedings. If he is not permitted to direct the appellate authority (and this is an accepted position) he cannot be permitted to substitute jurisdiction/powers of only the Assessing Officer by his satisfaction by creating proceedings where none exist-assessment having already been completed. - Decided in favour of assessee.
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2017 (10) TMI 1097
Validity of reopening under section 147 - reasons to believe - Bogus gifts received - Held that:- In the assessment proceedings of M/s Ashok Mahindru & Sons, which is the material relied upon by the Assessing Officer in his ‘reasons recorded’, there is no reference or whisper about the donor in the case of the assessee, i.e., Shri Rajiv Gupta or there is any mention about the assessee. Hence we are of the considered opinion that in the present case there is no rational and intelligible nexus between the said material as referred by the Assessing Officer in the ‘reasons recorded’ for the formation of ‘reason to believe’ for income escaping assessment. It appears that reopening has been done simply as a pretence to make further enquiry about the genuineness of the gift and such pretence for making roving and fishing enquiry cannot clothe the Assessing Officer with the jurisdiction to reopen assessment in terms of section 147. Thus, we hold that there is no live-link nexus between the material referred to by the Assessing Officer and the formation of his belief that simply because gift has been received from an un-related person, it automatically becomes bogus or non-genuine. Hence, we are of the opinion that the ‘reasons’ as recorded by the Assessing Officer cannot be reckoned as ‘reason to believe’ that the gift received by the assessee is an income chargeable to tax which has escaped assessment. - Decided in favour of assessee.
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2017 (10) TMI 1096
Revision u/s 263 - assessing officer has not made any reference with regard to the verification of TDS certificates and the claim of depreciation of asset, claimed by assessee with respect to superstructure of multiplex cinema - Held that:- The perusal of the assessment order reveals that the assessing officer has not raised any query with regard to the nature of asset, lease hold period of building of Multiplex Theater. Further, the assessee claimed credit of TDS of ₹ 2,54,69,821/-, the assessing officer has not made any inquiry nor verified the TDS certificates and the books of account. The assessee has not offered the advertisement income to tax. The assessee claimed deduction of portion on ticket amount as entertainment tax without offering it to income by treating it as capital receipt. The assessing officer allowed the payment as revenue expenditure without examining the scheme of subsidy of Maharashtra Government for entertainment tax vis a vis its taxablity. The assessing officer impliedly allowed the relief to the assessee without making any discussion on the issues. In the present case the assessing officer mechanically accepted the claim with regards to the depreciation on fixed asset/ Multiplex Building and on the issue of TDS certificate, if the corresponding income was offered to tax as no reconciliation was made. Further the assessing officer without calling and examining the scheme of Government of Maharashtra on entertainment tax treated the entertainment tax same as revenue receipt. In the present case the order sought to be revived reflects that it was passed in mechanical way and without application of mind by assessing officer. Thus, in view of the forgoing reasons the assessment order was passed without making requisite inquiries will satisfy the condition of the order being erroneous and prejudicial to the interest of revenue - Decided against assessee.
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2017 (10) TMI 1095
Disallowance u/s 14A invoking Rule 8D - Held that:- On perusal of the dissatisfaction recorded by the Assessing Officer, we find that in addition to the issue of investment in mutual funds during the year under consideration, he has also referred use of resources and expenditure related to maintain, switching in and out of the funds. In our opinion, by making one factual mistake, other facts for recording the dissatisfaction required in terms of section 14A of the Act cannot be ignored. Accordingly, we reject the contention of the learned counsel challenging the prerequisite of recording the satisfaction under section 14A of the Act. We agree with the contention that disallowance under section 14A of the Act cannot exceed the exempt income earned by the assessee during the year under consideration, in view of the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd, (2015 (9) TMI 238 - DELHI HIGH COURT) we restrict the disallowance under section 14A of the Act to ₹ 6,62,660/-.
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2017 (10) TMI 1094
Unexplained funds - Held that:- If at any point of time no incoming fund is available, to explain the outgoing of fund, in that case addition could have been possible to make as unexplained investment under section 69A of the Act, otherwise the only addition could have been made was for total incoming of fund under section 68 of the Act. Though we understand that assessee has not cooperated and avoided the proceedings before the Assessing Officer, still it is the duty of the first appellate authority to assess the income as per the provisions of the Act. We are of the considered opinion that even in the situation of the failure of the assessee to explain the name and address of the persons from whom the funds received and to whom the funds given, additions cannot be sustained both for incoming of funds and outgoing of the funds. The contention of the assessee that cheque numbers and daily opening balances appearing in the diaries/lose papers have also been added, need to be examined thoroughly. In the interest of substantial Justice, we feel it appropriate to restore the matter to the file of the Assessing Officer for quantification of the additions in the case of the assessee in view of our observations made above. The assessee shall be afforded reasonable opportunity of being heard. Accordingly, grounds related to the addition of ₹ 126,28,85,990/- are allowed partly for statistical purposes. Assessment u/s 68 - Held that:- The assessee has not discharged its onus laid down under section 68 of the Act of explaining the nature and source of the entries either before the lower authorities or before us. The assessee has not furnished any confirmation from the parties as well as not provided there complete addresses. In view of the failure of the assessee to discharge its onus, we do not find any error in the finding of the learned CIT-(A) in confirming the additions
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2017 (10) TMI 1093
Validity of assumption of jurisdiction to reassess u/s 147 - Held that:- Assessing Officer has not addressed the relevant issue in the original assessment order nor formed any opinion nor took any express decision thereupon. Moreover, we observe that the reassessment proceedings in the instant case got triggered on the basis of findings recorded by the Ld. AO in the assessment proceedings for the subsequent year i.e., AY 2011-12, vis a vis issue in dispute. This in our opinion would constitute to a material relevant for assumption of jurisdiction u/s 147. Support in this regard can safely be drawn from the decision of Hon’ble Bombay High Court in the case of Multiscreen Media Pvt. Ltd. vs. UOI (2010 (2) TMI 269 - BOMBAY HIGH COURT) wherein it is held that reassessment proceedings on the basis of subsequent assessment is valid.Proviso to section 147 is not applicable in the instant case since action u/s 147 has been initiated by issuance of notice u/s 148 dated 31st March, 2014 i.e., before expiry of 4 years from the end of the relevant assessment year. TDS u/s 194J - Disallowance u/s 40(a)(ia) - relationship between appellant and its distributors - Held that:- Section 194J was inserted with effect from July 1, 1995, till the assessment year in question that is the assessment year 2005-06 both the Revenue and the assessee proceeded on the footing that section 194J was not applicable to the payment of transaction charges and accordingly, during the period from 1995 to 2005 neither the assessee has deducted tax at source while crediting the transaction charges to the account of the stock exchange nor the Revenue has raised any objection or initiated any proceedings for not deducting the tax at source. In these circumstances, if both the parties for nearly a decade proceeded on the footing that section 194J is not attracted, then in the assessment year in question, no fault can be found with the assessee in not deducting the tax at source under section 194J of the Act and consequently, no action could be taken under section 40(a)(ia) . Appellant had a reasonable / bonafide cause for not deducting TDS on payment of discounts to the distributors / franchises of its repaid products. This is accordingly not a fit case for making disallowance of an expense by invoking penal provisions of section 40(a)(ia). Nature of payment - IUC charges between BSNL and Cable & Wireless UK - Held that:- Payment of IUC Charges is not “Fee for Technical Services” or “Royalty” within the meaning of its definition as per section 9(1)(vi) and 9(1)(vii) of the Act. Moreover, a perusal of sample agreement for payment of IUC charges between BSNL and Cable & Wireless UK in the instant case also clearly shows that a standard facility for availing interconnectivity services while roaming was availed by the appellant in the instant case. This does not require any human intervention. Thus we hold that payment for IUC Charges is not chargeable to tax in India in the hands of the non-resident recipients and hence TDS was not deductible as per provisions of section 195 of the Act. Therefore, we reverse the order of the Ld CIT(A) on this issue and decide the same in favour of the assessee
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2017 (10) TMI 1092
Revision u/s 263 - taxability of one time membership entrance fees - no enquiry has been made by the Assessing Officer on this issue and this issue has not been examined by him - Held that:- From the notice issued under section 143(2) and the reply submitted by the assessee, we noted that it is not a case of no enquiry but a case where the AO has made the enquiry and has taken a decision not to treat one time membership fees received as revenue receipt. On this basis it cannot be said that there is an error in the order of the AO. In our opinion the assessee cannot direct the AO as how should he draft the assessment order and what should be included while passing the assessment order. A perusal of the order passed by the CIT indicated that the assessment order passed by the Assessing Officer was cancelled on the ground that the Assessing Officer has not made proper enquiry and verification in respect of the issue as discussed above. This, in our considered opinion, cannot be sufficient ground for cancelling the assessment. While making the assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be touchstone of assessment order passed by him. No cogent material or evidence was brought to our knowledge by the Ld. DR which may prove that view taken by the Assessing Officer in the case of the assessee was unsustainable in law. Therefore, we are of the view that the order passed by the CIT is illegal and without jurisdiction. - Decided in favour of assessee.
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2017 (10) TMI 1091
Exemption under section 11 denied - whether the payment of rent/ lease rent paid to the related party is reasonable or excessive? - Held that:- Though, the assessee within four years from the execution of lease deed increased the rent from ₹ 5.00 lacks to ₹ 25.00 lacks per month. There is no dispute about the status of trustee in assessee trust and the Directors in the lesser company. The assessee has placed on record the copy of valuation report about the rental value of the leased asset dated 10.01.2014 and certified that this document was filed before lower authorities. In the valuation report the monthly rental value is assessed as ₹ 32,31,367/-. The area of leased land is in this report is referred only 10 acre, however in the reply before assessing officer the area of land was claimed as 16.93 acre (page 8 para II of AO order). The assessing officer has not given any finding on this document. Similarly, the assessing officer has not brought any evidence on record about any valuation of comparable property. Similarly, the ld. Commissioner (Appeals) has not made any comment on the valuation report furnished by the assessee. In our view this documentary evidence furnished by assessee is not controverted by assessing officer by bringing any incriminating evidence on record. Thus in our view in absence of any incriminating evidence the payment of rent to the related party during the year under consideration is reasonable one. The assessee during the course of his submission filed a copy of the order lf ld CIT(A)-9 New Delhi dated 18.02.206, showing that the rent paid by the assessee was duly shown by Vidya Education Investment Pvt Ltd.(VEIPL) and was assessed by the revenue. The perusal of this order reveals that VEIPL has shown to have let out the land with superstructure to the assessee. VEIPL has offered the rent received from the assessee to tax. In our opinion in absence of any material the rent paid by the assessee to the related party during the year is reasonable one. With these observation the grounds of appeal raised by the assessee is allowed.
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2017 (10) TMI 1090
Google Adword program functions and work - Royalty payment - Use of Intellectual Property through ITES agreement - amount payable by the Appellant to Google Ireland for the subject assessment years - whether the 'distribution rights' are 'Intellectual Property rights' covered by 'similar property' and the distribution fee payable is in relation to transfer of distribution rights? - Held that:- Google is having a targeted geography wise, region wise, gener wise, class wise data base tools. With the use of these tools there will be an increase of the CTR (Click Through Rate). For that purposes the expertise and the data base of the Google is essential. With the help of these strategies, the targets can be fixed by the advertiser with the help of Google Adword and the target can be fixed like where it is to be displayed (tablet, desktop, mobile, ipad etc.,) search network country, state, city, postal code ad schedule of the day, hour and the day of display. The Google analytics optimize the impression, based on the user behavior and this needs to be a major conversation and campaign, which results into return for investment. There are various other features of the Adword program which shows that the program is having embedded tools to display the advertisement of the advertiser to the targeted consumers. On the basis of above, in our view the agreement between the assessee and the Google Ireland was not in the nature of providing the space for advertisement and display the advertisement to the consumers. As per our understanding if the agreement was merely for sale and marketing for providing the space for advertisement, then in that eventuality, it should be treated as an agreement akin to an agreement for advertisement in newspaper / television If we look into the submission made by the learned AR, it is clear that the advertiser, selects some key words and on the basis of key words, the advertisement is displayed on the website or along with the search result as and when the customer selects the key words relatable to the advertisement. The module as suggested does not merely work by providing the space in the Google search engine, but it works only with the help of various patented tools and software. As we have analyzed detailed functioning of Adword program, it is clear that with the help of the search tool/software / data base, the Google is able to identify the targeted consumer/person as per the requirement of the advertiser. If only service rendered by the assessee was for providing the space then there is no occasion of either directing/ channelizing the targeted consumers to the advertisement of the advertiser. In our view truncated search results are displayed keeping in mind the commercial needs of the advertisers. As per the agreement dt.12.12.2005, the primary responsibility is on the Appellant to provide after or before sale services, after having access to user data, IPRS, secret formula, process, software and confidential information of Google Ireland, in its own capacity under the agreement dt.12.12.2005 and not under the agreement dt.01.04.2004. The appellant, for the purposes of managing its own affairs can afford to provide these services to the advertiser through the route of agreement dt.01.04.2004, but the rendition of services by the appellant to the advertisers in India are obligations under the agreement dt.12.12.2005 and not under the agreement dt.01.04.2004. The substance of the agreements is to be given precedence over the form of the agreements. Clause 6 of the service agreement dt.01/4/2004 provides for confidential information, access and use of confidential information and further provides not to disclose confidential information, ownership and return of confidential information and injunctive relief. In our view without exercising its right under this agreement, (1.4.2004) the obligation of the Appellant under the agreement dated 12/12/2005 and under the appel lant-advertiser agreements cannot be discharged. Therefore the AO was right in relying on this agreement dated 1/4/2004 for the purposes of bringing the case under Royal ty, as per the provisions of section 9(1)(vi) of the Act read with DTAA. As per clause 8 of the agreement dt.12.12.2005 mentioned herein above, the distributor is under an obligation to maintain the user data and therefore is having access to such data. The said user data is being used by the appellant for discharging its obligation towards the advertisers and the claim of the assessee is wrong that it does not have the access to the user data. There is no sale of space, as concluded hereinabove rather it is a continuous targeted advertisement campaign to the targeted and focused consumer in a particular language to a particular region with the help of digital data and other information with respect to the person browsing the search engine or visiting the website. Further, the argument of selling the space is not available to the assessee and we are of the opinion that it is not merely selling the space but it is rendering the services by making available the technology permitted by the Google to the appellant and permitting the same to be used by advertiser. For purpose of targeted focused advertisement campaign by using the gateway of Google India / assessee. Thus the activities clearly fall within the ambit of ‘Royalty’ as mentioned in Income Tax Act and under DTAA. In our view though Appellant claimed to be separately earning revenue from ITES segment, under a separate outsourcing service agreement with Google Ireland which is independent of the distribution of advertising space to the advertisers in India, we are not in agreement with the same. Under the advertisement distribution agreement, it is the prime responsibility of the Appellant to give post and prior sales service for resolving the issues of the advertisers, and to ensure due compliances of applicable laws. All these functions are to be discharged by the Appellant through it ITES segment. Further inputs from ITES are always required in the business model of Appellant, without which there cannot be any targeted marketing for advertisements and promotion of sales of advertisers. Therefore, the services rendered under ITES agreement cannot be divorced with the activities undertaken by the assessee under the distribution agreement. Both the agreements are connected with naval chord with each other. The assessee was duty-bound to provide as per the distribution agreement various ITES services, which the assessee had wrongly claimed to have been provided not under the distribution agreement, but under the service agreement. This is only a design / structure prepared by the assessee to avoid the payment of taxes. The appellant cannot be compensated by the GIL for rendering the services to itself or for rendering the services which the appellant is required to render under the distribution agreement. The use of intellectual property is embedded in the Google Adwords programme which is necessary to be used by the appellant for rendering the services prior or post sales of the advisement space under the distribution agreement or service agreement. The payment made by the Appellant to GIL also falls within the four corners of royalty as defined under the provisions of ACT as well as under the DTAA. In the present case the Google India has been provided access to the IPR, Google Brand features, secret process embedded in Adwords Programme as tool of the trade for generation of income. Therefore the payment made by the appellant to Google Ireland is royalty and not the business profit and therefore chargeable to tax in India. Grant of distribution rights involves transfer of rights in process - vesting of power in the appellant, clearly demonstrate give the appellant in India right to access the portal / Google Adword program at any point of time. Limitation for initiation of proceedings under 201 - Held that:- The assessee / payer in the eyes of law whether making payment to resident or non-resident under the provisions of section 201, constitutes one class only. Accordingly, the same period of limitation is required to be applied equally for payee i.e Resident or non-resident, Law abhor vacuum and uncertainty. There is no classification given under section 201. Section 201(1) only talks about person who is required to deduct any sum for the payment made. Therefore, borrowing the same reasoning of the special bench, whereby it held that the same period of limitation should be applied to resident as well as non-resident, we are of the considered view that limitation for initiation of proceedings for nonresident payee should be 6 years instead of no-limitation.as is the limitation for resident-payee. In view of the above ground No.12 in assessment year 2007-08 deserves to be dismissed and accordingly we dismiss the same. Withholding of tax - sec 195 applicability - Held that:- The scope and ambit of Section 195(2) is clear and unambiguous, which mandates the AO to decide whether any payment( Royalty ) paid by the appellant to GIL is chargeable to Tax on cash / receipt basis or not. However, to trigger 195(2), the payer (assessee) was duty-bound to make an application with the AO. Unless an application is made to the AO, there would not be any occasion for him to determine the chargeability of payment of royalty to tax by referring to DTAA or under the ACT. Therefore, the finding given by the Hon’ble Supreme Court GE India Technology Centre P. Ltd (2010 (9) TMI 7 - SUPREME COURT OF INDIA ) does not come to the rescue of the assessee. The applicability of DTAA cannot be suo-moto be determined by AO without there being any application under section 195( 2) of the Act for the purposes of deducting the Tax at source. SEE Transmission Corporation of AP Ltd. v. CIT [1999 (8) TMI 2 - SUPREME Court] wherein held conclusions that the assessee who made the payments to the three non-residents was under obligation to deduct tax at source under section 195 of the Act in respect of the sums paid to them under the contracts entered into ; and (ii) the obligation of the respondent-assessee to deduct tax under section 195 is limited only to the appropriate proportion of income chargeable under the Act, are correct. Assessee appeal dismissed.
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2017 (10) TMI 1089
Unexplained immovable properties - unaccounted production and sale of products, suppressing of profits , generating unaccounted income, ploughing back their unaccounted income into the books by way of manoeuvring bogus/artificial share transactions and also claiming benefit of tax at a lower rate - Assessment proceedings u/s 153A - CIT(A) deleted the addition on account of investment holding that the payments for the properties in question are made by cheque and these were paid by family members in whose returns of income the said properties are reflected Held that:- In the back drop of the assessee being non co-operative through out assessment proceedings as the assessee neither filed return of income in pursuant to notice u/s 153A nor participated in the assessment proceedings u/s 153A. The assessee has also not filed complete evidences to support its contentions before learned CIT(A) and in remand report proceedings before AO thereby crippling AO to do complete enquiry/verification as is required with respect to these immovable properties and its sources leading to adverse comments by the AO in remand report which remained un-complied with as of now as the learned CIT(A) just accepted the contentions of the assessee without satisfying the adverse comments by the AO which were valid observations of the AO in the context of search assessment as also seized material during search operations u/s 132. The assessee is also not appearing before the tribunal in second round of litigation despite several notices. Revenue has filed this appeal as it is aggrieved by learned CIT(A) granting relief to the assessee. The learned CIT-DR has vehemently objected to learned CIT(A) allowing the relief to the assessee without complying with all the adverse finding of the AO in remand report proceedings. Thus with the above background, the appellate order of learned CIT(A) cannot be sustained in the eyes of law and is set aside and matter is once again restored back to the file of learned CIT(A) for fresh adjudication on merits in accordance with law. The assessee be given proper and adequate opportunity of being heard by the learned CIT(A) in denovo proceedings and all relevant evidences and explanations be admitted in the interest of justice. The learned CIT(A) shall also consider ratio of decision of Hon’ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation(Nhava Sheva) Limited (2015 (5) TMI 656 - BOMBAY HIGH COURT ) before adjudicating appeal de-novo in set aside proceedings.
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2017 (10) TMI 1088
Reopening of assessment - denial of natural justice - assessee neither offered any income with reference to the trust nor disclosed any details to the effect that the appellant was a beneficiary of the said trust - Held that:- So far as, the contention of the ld. Counsel for the assessee that there is violation of principal of natural justice and reasonable opportunity was not provided to the assessee by the Assessing Officer, are concerned, we are not in agreement with this assertion of the ld. Counsel because the assessee was duly provided with the reasons of reopening of assessment and English translated copy of the documents. In view of the above, we find no substance in the assertion of the assessee that the reopening of assessment was bad, without following the due process of law or violation of principle of natural justice, more specifically when sanction was granted by the Additional Commissioner after considering the facts and due application of process of law. The Assessing Officer vide letter dated 13/5/2009 provided the reasons for reopening of the assessment wherein it was specified that a tax-evasion petition (TEP) has been received from CBDT. As per the information contained in the said TEP the assessee is a beneficiary of Ambrunova Trust and Merlyn Management SA. In the return of income the assessee neither offered any income with reference to the trust nor disclosed any details to the effect that the appellant was a beneficiary of the said trust. The Assessing Officer, from the, summary of the trust account in LTG Bank, found credit balance of US $ 24,06,604 as on 31/12/2001 (Rs.11,60,99,390/- @ 48.242 per USD) interest accrued of USD 13500 (equivalent to ₹ 6,51,267/-) was credited to the said account. As the same was not reflected in the return of income thus, the Assessing Officer correctly presumed that income has escaped assessment. So far as the contention of the assessee that enough opportunity was not provided to the assessee is concerned we find no merit in this assertion as is evident from para-28 (pg-14) of the order of the ld. CIT(A) wherein un-controverted finding is that the assessee chose not to use the same when it was provided . Therefore, from this angle also the assessee is having no case. The totality of the facts clearly indicates that the Assessing Officer rightly assumed jurisdiction to reopen the assessment. Thus, this ground of the assessee in the respective appeal is dismissed. Addition on account of alleged undisclosed income - argument advanced by assessee is that the addition was made by the AO without appreciating the fact that the alleged trust was discretionary trust and neither the amount was accrued/credited nor the name of the assessee appeared as beneficiary of Ambrunova Trust - Held that:- Liechtenstein jurisdiction qualifies as an off shore financial centre due to a very modest tax regime, high standard of secrecy laws and further foreign investors had the opportunity to establish companies or trust with “HOST trust reg.” in the principality of Liechtenstein to enjoy the advantages of off-shore financial centre. As per the report Indian Investigating Agencies came across a number of cases where individual or entities from India were detected using banking channels of Liechtenstein to hide their illegal income or stash funds and it was only possible when India became signatory to a world-wide convention formulated by OECD an international policy advisory body which formulated global tax standards to fight tax evasion and concealment of illicit funds. It also provided option to undertake automatic exchange of information. It is a common knowledge that discretionary trusts are created for the benefit of particular persons and those persons need not necessarily control the affairs of the trust. Still the fact remains that they are the sole beneficiaries of the trust. Thus totality of facts clearly indicate that the deposit made in the bank account of the trust represents unaccounted income of the assessee, as the same was not disclosed by the these assessees in their respective returns in India, consequently, the addition was rightly made by the Assessing Officer and confirmed by the ld. CIT(A). - Decided against assessee.
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2017 (10) TMI 1087
Allowability of expenditure prior to commencement of the business - Held that:- This Tribunal in the case of Thermal Powertech Corporation India Ltd. vs. DCIT [2017 (5) TMI 903 - ITAT HYDERABAD] held that the preoperative expenditure was to be capitalized to the assets and Assessee was eligible for depreciation on the value of assets. Therefore in the given facts of the case, we hold that Assessee has only setup the business but has not commenced the business, therefore, the claim of revenue expenditure is not allowable as the provisions of Sec. 28 of the IT Act does not apply. The Hon'ble jurisdictional High Court in the case of CIT Vs. Rasi Cement Ltd.[1998 (4) TMI 132 - ANDHRA PRADESH High Court] has answered similar questions involved in favour of the Revenue as held that such interest has to be separately treated as income from other sources and cannot be taken as part of the capital structure. interest earned on surplus funds deposited in banks during installation of company, prior to commencement of business, has to be brought to tax as ‘income from other sources’ u/s. 57. - Decided against assessee. Since it has been held that the assessee has not commenced its business, we direct the AO to capitalize the expenditure and direct him to allow depreciation thereon after commencement of its business. Nature of income - earning interest income on the temporary parking of equity funds - business income OR income from other sources - Held that:- We have already directed while dealing with Ground No.5 that the expenditure incurred by the assessee be capitalized and depreciation thereon is to be allowed. The treatment to be given to the interest earned on temporary parking of equity funds has actually not been considered by the authorities below. This is a legal ground and can be raised at any point of time as held by the Hon'ble Supreme Court in the case of Hon'ble Supreme Court in the case of NTPC Ltd. (1996 (12) TMI 7 - SUPREME Court). In view of the same, we deem it fit and proper to admit the additional ground of appeal and remand the issue to the file of the AO for consideration in accordance with the law. The assessee is also directed to produce the additional evidence in support of such ground.
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2017 (10) TMI 1086
TPA - determination of the ALP under the CUP method or TNMM - international transaction - Held that:- Sub-clause (i) deals with the computation of the net operating profit margin realised by the enterprise from an international transaction in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base. Sub-clause (ii) provides that the net operating profit margin realised by a comparable uncontrolled transaction should be computed having regard to the same base as that taken in sub-clause (i) for the assessee. In the formula for calculating the profit margin under rule 10B(1)(e) under sub-clauses (i) and (ii), there can be any denominator, such as, costs incurred or sales effected or assets employed or to be employed. However, the numerator is uniform, which is, net operating margin. In fact, the numerator is ‘operating profit’ and not the ‘net profit’. Whereas, operating profit is the excess of operating revenue over the operating costs, net profit is the excess of revenue over all costs, both operating and non-operating. Coming back to the decision of the TPO, it is found that he proceeded to compute the ALP by considering that one Mr. Paul Solgan, the Executive Vice President, was seconded to the assessee in another year. His cost per day was worked out. 120% and 80% of such cost was attributed as the cost per day of Sr. VP and Assistant VP to work out the total cost at ₹ 1,54,60,875, which was increased by the arm’s length margin of comparables at 12.89% for determining the arm’s length price at ₹ 1,74,53,782/-. As the assessee actually paid a sum of ₹ 3,76,54,642/-, the TPO proposed transfer pricing adjustment of ₹ 2,02,00,860/-. It is obvious that the methodology adopted by the TPO for determining under the TNMM does not conform to the method prescribed under rule 10B(1)(e) and hence cannot be approved. We are confronted with a situation in which the action of the CIT(A) in deleting the transfer pricing addition cannot be upheld and equally the view of the TPO in applying the TNMM also cannot be approved for the reasons assigned supra, albeit his exercise of rejecting the assessee’s determination of ALP is correct. Under such circumstances, we are of the considered opinion that the ends of justice would adequately meet if, the impugned order is set aside and matter is restored to the file of the AO/TPO with a direction to determine the ALP of the international transaction afresh as per law after allowing a reasonable opportunity of being heard to the assessee.
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2017 (10) TMI 1085
Interest earned on unutilized amount lying with RSMML - Held that:- We have given our thoughtful consideration to this submission of the Ld. Counsel for the assessee has per Section 57 of the Act. As per section 57 of the Act income chargeable under the head “Income from the other sources” shall be computed after making the deductions of expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income. Therefore, the assessee is required to demonstrate for the purpose of claiming deduction of expenditure that such expenditure was wholly and exclusively incurred or expended for earning such income. The assessee is required to prove nexus between the expenditure and the income so earned. Under these facts, we deem it proper and in the interest of justice to restore this issue to the file of the Assessing officer for verification of the claim of the assessee that it had incurred expenditure for earning income which has been taxed by the AO under the head income from the other sources. Ground no. 2 of the assessee’s appeal is allowed for statistical purpose. Addition on account of disallowance of CSR expenses - whether for provisioning of certain expenses under the contract is allowable expenditure? - Held that:- A provision for expenditure is allowable if the assessee proves that such expenditure is required to be laid down on the basis of past experience and deduced scientifically. There is no dispute with regard to the fact that no expenditure is made during the year under appeal. The assessee has also not stated past history or the past experience. Therefore, there is no basis available for arriving at the figure of expenditure so claimed under these facts; we are unable to accept the contentions of the Ld. Counsel for the assessee. Hence, the finding of the Ld. CIT(A) is hereby affirmed on this issue. This Ground of the assessee’s appeal is dismissed. Disallowed amortization of expenses - Held that:- There is no dispute with regard to the fact that the assessee neither acquired title over the mines nor the rights into any fixed assets by making expenditure. The assessee has acquired absolute rights for mining lignite this is essentially for 30 years without any impediment. The moot question is whether such expenditure is for acquiring any capital asset or merely some business rights. It is not the case of acquiring fixed assets for enduring benefit but the assessee would have enduring business rights in respect of mining the lignite. Admittedly, the expenditure has been incurred through RSMML it is not clear whether the RSMML has also claimed such expenditure in the absence of same, we deem it proper to restore this issue to the file of the Assessing Officer for decision afresh. The AO would verify whether the RSMML has made any claim on the same expenditure which the assessee has claimed and ascertain the outcome of such claim whether such expenditure has been allowed. Then, the AO would decide in accordance with the law and the case laws as cited by the assessee. Thus, this ground of the assessee’s appeal is allowed for statistical purpose. Depreciation claim in respect of intangible asset in the nature of business rights - Held that:- As per the assessee what it has acquired is an intangible asset and therefore is entitled for depreciation. In our considered view, the assessee is required to demonstrate that it has acquired knowhow, patents, copyrights, trademarks, license, franchisee or any other business or commercial rights of similar nature being intangible assets. In the case in hand, it is contended that assessee has allotted shares of ₹ 10.20 crores to RSMML without any financial obligation on it in lieu of it having obtained the mining lease, for the mines, transferred such mining lease, surface rights and other rights in relation thereto for the development, operation and management of mines in favour of the assessee and to contribute its local knowledge, technical knowledge and other expartise in relation to the mines as referred in clause 2 to 3 of the JV Agreement dated 27/12/2006. The assessee has not demonstrated as what knowledge was transferred to the assessee, in the absence of the same it cannot be inferred with certainty that what the assessee has acquired would fall under the clause 32(1)(ii) and how such knowledge is used for the purpose of business of the assessee. Therefore, in the interest of justice we set aside the order of the authorities below and restore this issue to the file of the AO to decide this issue afresh. After giving opportunity to the assessee the AO would verify the nature of the rights and knowhow acquired by the assessee. In case the AO finds that by virtue of the agreement the assessee has acquired knowhow or any other business of commercial rights or similar nature, he would allowed the depreciation as claimed by the assessee. This ground of assessee’s appeal is allowed for statistical purposes. Disallowance of land tax - disallowance by the assessee due to non-payment u/s 43B - Held that:- Since, the land tax is allowable u/s 43B of the Act. Therefore, we do not see any reason to interfere into the finding of the Ld. CIT(A) same is hereby affirmed. This ground of Revenue’s appeal is dismissed. Allowing deduction in respect of mine closure expenses - Held that:- The mines closure liability is a ascertained liability notwithstanding principle as well as the mercantile system of accounting, the liability is applicable in principle under section 37 of the Act.
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2017 (10) TMI 1084
Claim of deduction u/s 54 - AO disallowed the claim on the basis of report of the Tehsildar and Inspector obtained by the Assessing Officer during the assessment proceedings stating that it was an agricultural land and at the time of inspection, it was an open land - AO observed that the electricity connection and LPG connection cannot be taken as a conclusive evidence and he also observed that no evidence with regard to construction or improvement was furnished - Held that:- The electric connection and the LPG connection in assessee’s name and her sons name respectively also establish that there was a construction on this land and which was being utilized as residence. The ration cards were also on this address. The Aaadhar card of the assessee as well as her husband was also of this address. PAN was also allotted on this address. Even the income tax notices issued by the Assessing Officer were served on this address. The property was on rent for ₹ 35,000/- per month for certain period for which necessary evidence is placed, which is a rent agreement. A certificate from the Chairman of the Municipal Committee, Parshad of the Municipal Committee and neighbours of the assessee were also filed. The ld. CIT(A) has granted relief to the assessee after considering all these evidences and he has also observed that even if the property sold is taken as an agricultural land then also the assessee is entitled for benefit U/s 54F of the Act. In the light of these findings and observations of the ld. CIT(A), we hold that the ld. CIT(A) has rightly deleted the addition. - Decided against revenue Claim of expenses incurred on sale of property - Held that:- We hold that the assessee has paid brokerage expenses of ₹ 8.00 lacs, which approximately 2% of the sale consideration, which appears to be reasonable. This brokerage was paid to three persons and the payments were made by cheques which are verifiable from the bank statement of the assessee. Considering all these facts, we find no fault in the order of the ld. CIT(A) and we sustain the same on this ground. Accordingly, this ground of revenue’s appeal stands dismissed. Deduction of construction and improvement of property - Held that:- The assessee has submitted a valuation report. The ld. CIT(A) has granted relief to the assessee after considering all the relevant facts and circumstances of the case, therefore, we find no fault in the order of the ld. CIT(A) and we sustain the same. - Decided against revenue
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2017 (10) TMI 1083
Disallowing the claim of exemption u/s 54F - amount spent within the extended period of time - non submission bills of the construction of the property - Held that:- As regards the bills relating to construction of property, the assessee has submitted the valuation report of the approved valuer in which no defect has been pointed out and also the AO has not referred the matter to the DVO. In such circumstances, the report of the registered valuer has to be considered as final and therefore the allegation of the AO becomes ineffective. Moreover, the controversy of not depositing money under capital Gain Account gets resolved once having spent the amount under Section 54F of the Act within the extended period of time - Decided against revenue
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2017 (10) TMI 1082
Penalty u/s 271(l)(c) - unexplained source of source - Held that:- The penalty order is woefully silent on the issue as to how this satisfaction of concealment was arrived at. The quantum addition on which the penalty has been imposed pertains to an addition of ₹ 2 lakhs only sustained by the Ld. CIT (A) out of a total addition of ₹ 10 lakhs. It is also noteworthy that this addition was sustained on the ground that the assessee had failed to prove the source of source but how this has resulted in concealment of income/furnishing of inaccurate particulars of income is not discernible from the penalty order. CIT (A) has also not examined the issue in detail but has simply confirmed the penalty by relying on the findings of the AO and the confirmation of the addition by the Ld. CIT (A) in the quantum proceedings. Thus, there is no finding by the authorities below on the issue as to how the ‘concealment’ has come to be established so as to warrant imposition of penalty. Thus, it is apparent that the penalty has been imposed as an automatic outcome of the confirmation of the quantum addition. Considering the entirety of the circumstances, in our view the impugned disallowance does not invite the provisions of Section 271(1)(c) of the Act - Decided in favour of assessee.
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2017 (10) TMI 1081
TDS u/s 194J - non deduction of tds on certain expenditure incurred for the purpose of carrying out its own work from sister concern - payments made to M/s Jindal Power Ltd in view of the various debit notes issued for salary and travelling of the personnel deputed by them to serve the assessee company which is a task carried out by that company - contention of the assessee is that the memorandum and articles of Association of the assessee as well as the company does not provide that they are engaged in the business of manpower services - Held that:- According to us, such an argument is not germane to the concept of tax deduction at source. According to the provisions of section 194C of the income tax act any payment made for the work carried out is subject to tax deduction at source under section 194C of the income tax act. Further, according to provisions of section 194J of the income tax act any payment made for fees for technical services is also subject to tax deduction at source. Therefore, the argument of the assessee that memorandum of Association of the recipient company does not cover the clause of the manpower supply does not help the case of the assessee. In any case the recipient of income is engaged in the provision of services in power sector which is part of the object of that company and same is also the business of the assessee company. The bills are with respect to the Senator Travels private limited which have been reimbursed by the assessee company to that company. In view of this, it is apparent that when the persons deputed by the Jindal Power Ltd to the assessee company were of the level of executive and going up to the level of Executive Director, it cannot be said to be the reimbursement of salary expenditure when it is coupled with several expenditure of domestic and international travelling for the business of the company. Further, it is also important that all these persons were throughout working for the company as well as with Jindal power Ltd. In view of this, it is apparent that those persons were working for the projects of the company and Jindal Power Ltd has been paid by the assessee as remuneration for getting work done from Jindal Power Ltd. Therefore, according to us, the Ld. CIT (A) has correctly adjudicated that tax is required to be deducted under section 194J of the income tax act, as it is a fees for technical services paid by the assessee to Jindal power Ltd, in the form of reimbursement of salary as well as travelling expenses. There is no reference about the quality of staff that is required to be provided, what are the terms and conditions of the deputation would be there, where this staff would be deployed etc. Even otherwise this letter, which is claimed to be an agreement, is after incurring of the cost by that company. Therefore, it is apparent that there is no understanding between the parties about this reimbursement. Further in some of the employees there is sharing of the cost where as in some of the employees there is no share of cost to Jindal Power limited. In view of this it cannot be said that it is a pure reimbursement of expenses which does not require TDS. The assessee also could not establish that what kind of staff it has of its own to execute the kind of work it is earning revenue for. It has earned the revenue of ₹ 190942881/- for the year where the total cost of salary reimbursed is ₹ 30866545/- which is almost 20 % of the work billing. Hence in absence of the facts that how the work are executed by the assessee whether it fully by the staff on loan or it has its own staff also, it is not possible to accept the contention that reimbursement of salary coupled with other reimbursement of international and domestic travel is reimbursements of expenses simplicitor escaping withholding tax liability. The next contention of the assessee that all these expenses have already been paid and therefore the tax requirement deduction applies only in case of payment outstanding at the end of the year and not whatever has been paid during the year does not stand in view of the decision in the case of Palam Gas Services v. CIT [2017 (5) TMI 242 - SUPREME COURT] as concluded that section 40(a)(ia) covered not only those cases where the amounts were payable but also where it was paid. Thus we confirm the finding of the Ld. CIT (A) that the disallowance under section 40 a (ia) has been correctly made as the tax should have been deducted under chapter XVII-B of the income tax act on payments made by the assessee to Jindal Power Ltd. - Decided against assessee. Assessee in default when the assessee has paid certain expenditure to the recipient of the income and when the recipient of income has paid tax on that particular income - Held that:- No difficulty in accepting the argument of the Ld. authorized representative that if the tax has been paid by the recipient of the income on the income in holding the transactions and no disallowance should be made in the hands of the assessee. In view of this we set aside this issue back to the file of the Ld. assessing officer to allow the benefit of the 2nd proviso to the section 40 a (ia) and if the assessee is able to satisfy the AO that the recipient of the income has offered the income in its return of income on furnishing the section 139 of the income tax, incorporated such income in its return of income, has paid the due tax thereon and he furnishes requisite certificate as prescribed therein that no disallowance be made. Therefore, if the assessee would like to have the benefit of this particular proviso by furnishing requisite certificate is an mentioned in the provisions of section 201 of the income tax act, the appellant may furnish to the ld AO same within 60 days of the order and the Ld. assessing officer may consider the claim of the assessee in accordance with the law. - Decided partly in favour of assessee.
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2017 (10) TMI 1080
Nature of income - income earned from the Department store - assessable as ‘business income’ or ‘income from house property’ - Held that:- The assessee was not actually selling the goods or that it was undertaking a set of organised activities in support of the counter holders who were executing the sale and purchase of goods, would not distract from the fact that the receipts from the counter holders were business receipts liable to be assessed under the head ‘income from business’. Thus the lower authorities have erred in assessing the income earned by the assessee from running of Departmental store as ‘income from house property’ as against the claim of the assessee of treating it as ‘business income’. Thus, on this aspect, assessee succeeds. Disallowance of the rent paid to LIC of India - Held that:- The claim of the assessee before the lower authorities has been that the liability crystallized during the previous year relevant to the assessment year under consideration and is thus an allowable deduction while computing the income earned for the assessment year under consideration. On this aspect, we find no clear finding by either of the lower authorities and, therefore, we remand this issue to the file of the Assessing Officer who shall examine the plea of the assessee of the liability having crystallized during the year under consideration. Treating income from sale of units of Mutual Fund - Income from other sources OR claim of capital loss made by appellant - Held that:- We deem it fit and proper to restore the matter back to the file of the Assessing Officer to be adjudicated afresh in accordance with the law since no clinching findings have been recorded on the pleas raised by the assessee. Therefore, on this aspect also, assessee succeeds for statistical purposes.
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2017 (10) TMI 1079
Rejecting claim of relief U/s 54F - claim of exemption raised by an assessee u/s 54F in a belated ‘return of income’ filed in compliance to a notice issued u/s 148 - Held that:- Section 54F, neither provides as a pre-condition the requirement of filing of the ‘return of income’ by the assessee within the stipulated time period, nor places any embargo as regards claim of such exemption in a case the ‘return of income’ filed by the assessee involves some delay. We thus in the backdrop of our aforesaid observations are of the considered view that now when the assessee had raised the claim u/s 54F in the ‘return of income’ filed by her in compliance to notice u/s 148, therefore, it was obligatory on the part of the A.O to have deliberated on the entitlement of the assessee towards claim of exemption u/s 54F, on merits. We do not find ourselves to be in agreement with the observations of the A.O that the claim towards exemption u/s 54F raised by the assessee in her ‘return of income’ was liable to be scrapped solely for the reason that the filing of such ‘return of income’ involved some delay. As we observe that as the assessee had during the course of the hearing of the appeal submitted complete details as regards his entitlement towards claim of exemption u/s 54F, which we find had been reproduced by the CIT(A) in his order dated. 29.03.2013, therefore, the A.O is directed to verify the genuineness and veracity of the claim of the assessee in the backdrop of the said facts and figures provided by the assessee. That in case the facts and figures provided by the assessee are found to be in order, then claim of exemption u/s 54F, as raised by the assessee shall be allowed. Needless to say, the A.O shall during the course of the set aside proceedings afford an opportunity of being heard to the assessee to substantiate his aforesaid claim. The Ground of appeal no. 1 raised by the assessee is allowed for statistical purposes.
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2017 (10) TMI 1078
TDS u/s 194C OR 194J - TDS on maintenance of specialized machines in hospitals for skilled professionals/ technical engineers - short deduction of tds - Held that:- The expenditure on account of AMC of medical equipments etc., is not in the nature of fee for professional and technical services as construed u/s 194J of the Act and hence, not liable to deduct TDS u/s 194J of the Act. The assessee has deducted TDS u/s 194C of the Act in regard to payments on AMC of medical equipments and machines etc. Accordingly, we find no infirmity in the order of CIT(A) on this issue and hence, the same is confirmed. This issue of revenue’s appeal is dismissed. Income from sale of Scraps being old equipment and machineries - attract provisions of tax collection at sources under section 206C - Held that:- We find from the facts of the case that the assessee is neither engaged in manufacturing or processing or industrial activity nor generate scrap rather its activities relates to medical facilities to the public. The word ‘scrap’ itself in ordinary parlance presupposes manufacture, processing or industrial activity. In running a medical hospital question of generation of scrap is inconceivable. Therefore provisions of s.206C of the Act, ‘Prima Facie’ are not applicable to the assessee. AO is merely harbouring wrong notion that what is sold out by the assessee is scrap having zero value and such items are not usable. But, assessee is neither a trader nor a manufacturer generating or dealing in resale of scrap generated as waste material or unusable. Secondly, the assessee has sold the product under buy back and useable items i.e. hospital equipments and machinery. In view of the above, we find no infirmity in the order of CIT(A) and hence, the same is affirmed. - Decided against revenue Payments in the nature of Honorium - TDS purview of 192 OR under section 194J - Held that:- The assessee being a hospital, it is expected to maintain its image the reputation and image and this expectation of the hospital cannot be construed as exercising control and supervision over the doctors in their professional activities and thereby cannot lead to the conclusion that an employee-employer' relationship exists. We also find that the AO has merely compared the appointment letter in case of Honorary Consultants and independent professional doctors and brought out differences to hold that the independent professional doctors are employees. In doing so, he has overlooked the similarities in the two which essentially is necessary to draw the point that both are professionals. He chose to ignore assessee's submissions on the comparison between the assessee's employees entitled to provident fund, different categories of leave, gratuity, HRA, etc. benefits which the independent doctors were not entitled to. Apart from the above, we are of the opinion that the real intention of the parties in the present case is appointment of consultants and not to create employer-employee relationship and accordingly TDS is liable to be deducted u/s 194J of the Act. Another aspect in this matter is that the fact that the TDS is liable to be deducted u/s. 194J of the Act on payment to the independent professional doctors, the AO has ignored the excess of TDS amount deducted u/s. 194J in certain cases, in comparison with the TDS liability determined u/s 192 of the Act, thereby raising a demand u/s 201(1). Further, these doctors have filed their return of income and declared the receipts from the assessee hospital and have paid taxes thereon. Accordingly, interest u/s. 201(1A) is not chargeable
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2017 (10) TMI 1077
Income from house property - Held that:- FMV of the properties under construction and property/shop used by assessee for business purpose admittedly cannot be determined u/s 23(1). AO is thus directed to exclude the ALV of the two properties which were under construction and also the property which was used by the assessee for his own business/profession purposes. Regarding one property which was already on rent, the Assessing Officer should take the actual rent received by the assessee and cannot resort to any determination of ALV on some hypothetical market rate. ALV in such cases has to be taken as per clause (b) of section 23(1). Lastly, with regard to the properties which were vacant, we agree with the contention of the Assessing Officer that ALV should have been shown in the terms of section 23(1)(a). However, if the properties were lying vacant and there is no material brought on record by the Assessing Officer for determining the fair market rent, then AO can take municipal ratable value of lease flats/shops for the purpose of determining the ALV. This principle has been upheld by the Full Bench of Hon'ble Delhi High Court in the case of ACIT vs. Moni Kumar Subba [2011 (3) TMI 497 - DELHI HIGH COURT]. Thus, AO is directed to compute the ALV of the vacant flats/shops as per municipal ratable value in terms of ratio laid down by the Hon'ble Delhi High Court with this direction the appeal treated as partly allowed. Addition on account of marriage expenditure added u/s 69C - Held that:- AO has simply made an estimate of ₹ 25 lakhs simply on the ground that the assessee comes from affluent family and has big stature. Before the Learned CIT (Appeals) the entire break up and source of expenditure has been given, which has been accepted by him at ₹ 21,71,130/-. Once that is so, then there was no point to presume that marriage expenditure would be ₹ 25 lakhs only and therefore, balance amount should be confirmed. There is no enquiry or material information on record to remotely suggest that marriage expenses shown must have been more. Such a reasoning of lower authorities is devoid of any logic and accordingly, we delete the addition of ₹ 3,28,830/-. Addition towards household expenditure - Held that:- It is seen that the Assessing Officer has made an addition of ₹ 10 lacs on estimate basis mainly on the ground that the family of assessee consists of wife and four children and therefore, the household expenditure should be at ₹ 10 lacs. Before the Learned CIT (Appeals), the assessee submitted that the expenditure of the family members shown were ₹ 7,59,723/- and assessee since was living in joint family set up, therefore, contribution by other members should be taken into consideration. We find that both the authorities have resorted to estimate only. The assessee had stated that he is living in a joint family set up and the entire expenditure shown for the entire joint family was at ₹ 7,59,723/-. However the amount of house hold expenditure declared at ₹ 7,59,723/- appears to be on a lower side looking to the fact that over all family members in a joint family setup would be more. Thus, under the facts and circumstances of the case, addition of ₹ 3 lakhs over and above the sum of ₹ 7,59,723/- as disclosed by the assessee would be sufficient and reasonable. Accordingly, addition of ₹ 3,00,000 is sustained and the assessee gets a part relief on this score. We find that there is a specific finding by the Assessing Officer that the assessee has failed to demonstrate that expenditure incurred was for the purpose of earning interest income from DLF Commercial Complex. The payment of commission and brokerage is no way can be linked to earning of such interest income.
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2017 (10) TMI 1076
Addition of the amounts written off as unrecoverable from different parties - Held that:- As regards the two remaining parties Nandlal Arvind and Co and Shrenikbhai Sheth Mehsana, no specific objections are raised by the Assessing Officer as also the CIT(A). To this extent, therefore, the claim for deduction is virtually uncontested and must be allowed. As regards the write off of the amount in respect of M/s Contacts, there is nothing on the record to show as to on what considerations the amount was advanced to the said concern. It is, therefore, not possible to come to a conclusion that the said amount was advanced in the course of business which is a sine qua non for deductibility of the said amount as bad debt. However, so far as debits on account of interest charged on the said amount are concerned, as long as assessee can demonstrate that these interest debits, at the time of corresponding credit to interest income, were offered to tax, the assessee will be fully entitled to claim deduction in respect of the write off an income which never fructified. On this aspect of the matter, deem it fit and proper to remit the matter to the file of the Assessing Officer with a direction to allow deduction in respect of writing off interest debited to the account of M/s Contacts, in case the assessee can demonstrate that the corresponding interest income was indeed offered to tax in the earlier years.
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Customs
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2017 (10) TMI 1075
Misdeclaration of import - Imports were made by M/s. Chanakya Impex as a pretended high seas buyer of the goods while bills of lading were in the name of M/s Sun Impex, M/s Kanakratna Steel and M/s Reliance Stainless Steel - it was also alleged that M/s. Chanakya Impex was using its advance licence to unduly benefit the present appellants without payment of duty and to channelizing such imported goods to them ultimately. Held that: - In the garb of high seas sellers of imported goods, the appellants M/s. Sun Impex, Kanakratna Steels and Reliance Stainless Steel, they used M/s. Chanakya Impex, and became beneficiary of fraud of use of advance licence of M/s. Chanakya Impex to clear their imports. They all had arrangement to transport the imported goods to their destination and M/s. Chanakya Impex had also pecuniary interest in the fraud. The appellants being facilitators and perpetuators of the fraud were abettors of the breach of law. Appellants have no defence at all to refute any of the allegations of Revenue in their grounds of appeal while Revenue proved its call on all counts with cogent and credible evidence. Appeal dismissed - decided against appellant.
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2017 (10) TMI 1074
ADD - classification to attract levy - Appellant's grievance is that the goods imported by appellant declared as Styrene Butadience Co Polymer was classified under CTH 40021100 and such goods were provisionally cleared - Revenue's only grievance today is that antidumping duty having been imposed in terms of N/N. 100/04-Cus dated 26.09.2004, in consequence of the Sunset Review by the designated authority, in terms of his final findings dated 2nd June, 1999, antidumping duty was levied on the above said goods. Held that: - There is no whisper of any reason in the show-cause notice to disturb the classification claimed by the appellant. Therefore, the classification of the imported declared by the appellant under CTH 40021100 remained untouched by this order. Anti-dumping notification indicates that the goods falling under customs heading Nos. 3903 and 4002 of the first schedule to the Customs Tariff Act, 1975 were subject to levy of anti-dumping duty. Accordingly, levy was confined to the goods of heading 4002.19 since anti dumping investigation was confined to the goods covered by heading 4002.19. Therefore there cannot be any mis-conception about the product under consideration. Revenue's submission that the appellant did not plead as above before the learned adjudicating authority is untenable as a litigant can raise question of law at any stage of proceeding till conclusion thereof. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1073
Refund of excess CVD paid - rejection on the ground that the appellant has not challenged the assessment of the bill of entry - Held that: - the non-filing of the appeal against the assessed bill of entry does not deprive the appellant to file its claim for refund under Section 27 of the Customs Act, 1962 and which claim will fall under clause (ii) of sub-section (1) of Section 27 - appellant is entitled for the refund claim - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1072
Benefit of N/N. 158/95-Cus - the appellants failed to re-export the re-imported goods - Held that: - in the N/N. 158/95-Cus stringent conditions have been laid down as safeguards to prevent misuse of facility of re-export of re-imported goods two conditions have to be complied at the time of re-import and other two conditions (No. 2 and 3) have to be complied at the time of re-export. Hence, the question of compliance with the conditions of the aforesaid notification needs to be examined in that context. Non-declaration of consignment as re-export consignment - Held that: - on the shipping documents there is no such declaration. The document that has been presented by the appellant in their support is the examination order of the bill of entry 3736870 dt. 08.06.2011 under which goods were re-imported. But documents for export do not declare re-export after re-import. Admittedly, such a declaration would have engendered examination to be done in presence of the Dy./Asstt. Commissioner. Hence, the finding of the Ld. Commissioner that shipping bill did not have any declaration regarding re-export of re-imported goods is also correct. Examination of goods in the presence of proper officer - Held that: - Examination of such a consignment done in the presence of officer of lower rank not only defeats the purpose of this notification but also renders the requirement of satisfaction of Assistant Commissioner as regards identity of re-export goods as redundant. It is clear that the examination at the higher level has been mandated by the notification to thwart the misuse of the notification and non-compliance with the same is bound to result in denial of the benefit of the notification. The condition No. 3 is a mandatory condition of the N/N. 158/95-Cus dt. 14.11.1995 and hence its non-observance is fatal to the appellants plea, particularly in the accentuating circumstances of this case when there was no escorting of the goods by the Preventive Officer from the factory to CFS, and when the declaration about re-export after re-import was not made by the appellants. Appeal dismissed - decided against appellant.
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2017 (10) TMI 1071
Valuation - rejection of declared value - The value was enhanced on the ground that appellant had declared different prices for the goods having the same description - Held that: - we do not find any cogent ground for rejecting the transaction value. The only doubt raised by department is that for same description of goods different prices have been declared. This has been explained by the appellant by giving technical write up and analysis report, Moreover, the declared value of subsequent imports having been accepted by department, we find no grounds to uphold the rejection of transaction value and enhancement - the enhancement is unjustified - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1070
Refund of SAD - N/N. 102/2007-Cus. dated 14.09.2007 - denial on the ground that the VAT/Sales Tax applicable on the products so sold by the assessee was nil/zero and as such it cannot be said the appropriate tax was paid on the subsequent sale so as to entitle the appellants for refund of SAD - Held that: - the appellants would be entitled to the refund of SAD paid at the time of import of the goods, on their subsequent sale, even if the vat or sales tax rate was ‘NIL’ - reliance placed in the appellant's own case M/s. Kubota Agriculturall Machinery India Pvt. Ltd. And M/s. Acer India Pvt. Ltd. Versus Commissioner of Customs, Chennai-IV [2017 (6) TMI 565 - CESTAT CHENNAI] - Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1069
Refund of SAD - N/N. 102/2007-Cus. dt. 14.09.2007 - denial on the ground that since they have claimed Sales Tax/VAT exemption notification for sale of goods in U.P. State, condition No.2 (d) of the notification is not fulfilled - Held that: - for the purposes of Condition No.2 (d) of the N/N. 102/2007 Sales Tax has been paid at appropriate rate for the purpose of condition No.2 (d) and Nil rate of Sales Tax/ VAT, CST is to be considered as appropriate duty - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (10) TMI 1068
Winding up petition - Held that:- It is apparent that the business of the respondent company has been carried on fraudulently, deceptively and with malafide intentions, and therefore, the fit case to lift the corporate veil of the respondent company. As per the affidavit dated 14.02.2012 filed in this Court by Shri V.K.Sharma, CMD of JVG group Companies in CP 265/1998, it was stated by him that all the properties of the respondent companies have been acquired with the funds of petitioner only and actually owned by it and the name of the respondent company has been used as a corporate personality as a cloak for committing fraud upon the innocent depositors/ investors/ creditors of the respondent company. Shri V.K.Sharma the ex-managing director of JVG group of Companies vide his affidavit dated 14.02.2012 also stated that all the land properties in different JVG group Company were purchased out of funds of petitioner and he has no objection if the properties of all the JVG group companies are sold and the investors of all the JVG group companies are paid. He further stated that all the creditors/investors of different JVG group companies may be treated as the investors of JVG Finance Limited. Since, the petitioner is a bonafide creditor of the respondent company and since despite notice the respondent company could not repay, so considering the overall circumstances the respondent company is ordered to be wound up under the provision of Section 433(e) and (f) read with Section 439(b) of the Companies Act, 1956. Ordered accordingly.
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2017 (10) TMI 1067
Default in filing the annual returns and consequent disqualification of the Directors to rectify the defect - Held that:- In the light of the fact that a defaulting company is allowed to rectify the defect by filing the returns which have not been filed earlier, the natural corollary of the same would be that the designated/competent authority is required to take the same into consideration. As the filing has to be done through e-platform, the same cannot be done unless access is provided to. The authorized individual/Director has to file the same, which obviously requires providing access by the authorities. In the light of the above discussion, there shall be a direction to respondent No.1 to restore DIN Numbers 00057433 and 00129701 of petitioners 2 and 3 insofar as petitioner No.1-Company, so as to enable them to submit annual returns of petitioner No.1 Company for the years 2011-12 to 2015-16 and further financial statements for the years 2012-13 to 2015-16 in compliance with Rule 14 of the afore-stated Rules read with Form DIR-8, Form DIR-9 and Form DIR-10.
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Insolvency & Bankruptcy
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2017 (10) TMI 1066
Corporate insolvency procedure - ‘whether there is an existing dispute between the parties before the issuance of notice under Section 8 of the Code?’ and ‘whether the dispute is substantial or it is merely an illusory defence raised by the Corporate Debtor to defeat the process?’ - Held that:- The licensor has been held entitled to recover possession of such premises from the licensee, on the expiry of the period of licensee, by making an application to the Competent authority. In accordance with sub section 2 of Section 24 if a licensee fails to deliver possession of residential premises on the expiry of the period of licensee and continues in possession of the licensed premises then he is liable to pay damages at double the rate of the licence fee or charge of the premises fixed under the agreement of licence. On the one hand there is a serious dispute whether the Corporate Debtor-respondent has vacated the premises comprised of basement, second, third and fourth floor of the licensed premises on 11.04.2016 or it has retained possession of the whole till November, 2016. The property in dispute is commercial in character which is an admitted fact. Therefore, there is a serious dispute with regard to the application of Section 24 to the commercial premises because Section 24 applies only to residential premises as expressly provided. The parties have agreed to abide by the provisions of Section 24 but the Operational Creditor has not invoked any such provision by moving appropriate application before the Competent authority under the Rent Act. Moreover, these disputes have been in existence as the details of dispute are placed on record which date back to 13.01.2017 (Annexure-14), a notice sent by the Operational Creditor to the Corporate Debtor which was duly replied on 06.02.2017 (Annexure-15). There are again notices dated 16.03.2017 and 31.03.2017 (Annexure-16 & 17). Eventually a demand notice dated 03.04.2017 was sent (Annexure-18) which was also replied by the Corporate Debtor on 18.04.2017 which is a notice of dispute sent to the Operational Creditor. Thus on legal submission it is not possible to conclude that Section 24 of the Rent Act would be applicable as it is to apply only to residential premises. On facts also, the issue of oral agreement in January/February as reflected in e-mails; and then vacation of a substantial part of leased premises would need further investigation. We cannot conclude that there is no dispute. Therefore, we are unable to persuade ourselves to accept the contention that the defence raised by the Corporate Debtor is illusory and moonshine. There in fact exists a real and serious dispute which may have to be resolved at an appropriate forum. Thus this application fails and the same is dismissed.
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2017 (10) TMI 1065
Corporate Insolvency Resolution Process - Insolvency Professional appointment - in the absence of clear majority of 75 percent of voting share whether one name of Insolvency Professional can be approved? - Held that:- Dead lock has to be removed by approving the name of Mr. Rajendra M. Ganatra, whose consent is placed on record. A Professional who is familiar with the nature of business and knowledge of handling the Resolution Process is to be selected that too based upon the recommendation of the highest percentage of the Creditors. The term “voting share” is duly defined in section 5(28) of The Code which says, “means the share of the voting rights of a single financial creditor in the committee of creditors which is based on the proportion of the financial debt owed to such financial creditor in relation to the financial debt owed by the corporate debtor”. A co-joint reading of section 5(28) and section 22(2) thus result into a meaningful solution which is workable and suitable for the insolvency process. As a result, in our opinion, a viable solution is to give the preference to the decision taken by the largest percentage in voting rights of the Financial Creditor(s). Resultantly, the Miscellaneous Application is allowed and appointment of Mr. Rajendra M. Ganatra as Insolvency Professional is hereby approved.
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Service Tax
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2017 (10) TMI 1061
Maintainability of petition - Levy of service tax - dwelling houses constructed by the appellant company - residential complex or individual houses? - Held that: - The law is well settled that when factual findings are to be assailed where, effective alternative statutory appellate remedy is available, the same cannot be by-passed by invoking the extraordinary jurisdiction of the High Court under Article 226 of the Constitution of India. The reasoning given by the learned Judge, only on the ground of maintainability to dismiss the writ petition with the liberty to the appellant / assessee to approach the CESTAT, is fully justifiable - appeal dismissed being not maintainable.
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2017 (10) TMI 1060
Maintainability of petition - alternative remedy of appeal - the petitioner has by-passed the appellate remedy and filed writ petition on the only ground that the impugned order has been passed in violation of the principles of the natural justice without affording an opportunity of personal hearing to the petitioner - Held that: - when the petitioner has filed the appeal giving a particular address, they are entitled for notice being served on the said address and since, the intimation did not reach them, they did not appear for the personal hearing and therefore, the respondents have proceeded exparte - This Court is of the view that the petitioner should be afforded an opportunity of personal hearing by issuance of notice to the present address at Armenian Street and the appellate authority shall hear the petitioner in person - petition allowed by way of remand.
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2017 (10) TMI 1059
Arrest of vessel - there is some surreptitious move by the defendant herein to see that vessel may travel further and the suit will become infructuous - Held that: - The Port Officer and the Customs Authorities at Dahej are directed to arrest the vessel Bahrain Vision at present lying at Port of Dahej within the territorial waters of India and to keep the vessel under arrest until further orders of this Court. It is further ordered that the Port Officer and the Customs Officer at Dahej shall render all assistance to the plaintiff or its representative in effecting the warrant of arrest on the vessel Bahrain Vision.
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2017 (10) TMI 1058
Refund of unutilized CENVAT credit - Rule 5 of CCR, 2004 - denial on the premise that the services in question on which Cenvat Credit availed by the appellant are not input service as per Rule 2(l) of the CCR, 2004 - Held that: - at the time of availment of Cenvat Credit, it has not been disputed to the appellant that these are not input services on which they have availed Cenvat Credit. Only at the time of filing of refund claim under Rule 5 of the Cenvat Credit Rules, 2004, it has been disputed. As at the time of availment of Cenvat Credit, it has not been disputed, therefore, the refund claim can’t be denied merely on the ground that of services in question were not input services as held by this Tribunal in the case of EXL Service. Com (India) Pvt. Ltd. Versus Commissioner of Central Excise, Noida [2017 (8) TMI 1002-CESTAT ALLAHABAD]. Refund allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1057
Maintenance and repair service - demand of service tax has been confirmed on the ground that appellant has collected service tax and did not deposit the same with the Government treasury - Held that: - Although, the taxable turnover falls within the exemption limit of ₹ 4 lakhs during the impugned period but the appellant has collected service tax from the service recipient. In that circumstances, the appellant cannot retain the said amount with them, therefore, the appellant are required to pay the amount of service tax collected by them alongwith interest. It cannot be said that appellant was under bonafide belief that they are not required to pay service tax. Therefore equivalent amount of penalty is confirmed u/s 78 of the FA, 1994. Appeal dismissed - decided against appellant.
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2017 (10) TMI 1056
CENVAT credit - commission paid to sale agent for sale of the goods - denial on the ground that such commission agents are not engaged in the activity of sales promotion - Held that: - reliance placed in the case of Essar Steel India Ltd. [2016 (4) TMI 232 - CESTAT AHMEDABAD] wherein it has been held that the assessee is entitled to avail Cenvat credit for commission paid to the commission agent who effected the sale of goods manufactured by the appellant - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1055
Service tax or VAT? - whether the transaction being transfer of rights and privilege of export of ‘Sugar quota’ by the respondent assessee on receipt of consideration, whether the same is a service or goods? - Held that: - in view of the ruling of Hon’ble Supreme Court in the case of Vikas Sales Corporation, [2008 (5) TMI 43 - SUPREME COURT], where it was held that DEPB, like REP licence qualifies as `goods' and its sale is eligible to tax, we hold that the transaction in question regarding sale of rights and privilege of export of sugar quota is sale of goods and no service is involved - appeal dismissed - decided against Revenue.
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2017 (10) TMI 1054
Penalties u/s 77 and 78 - service tax with interest paid before issuance of SCN - Held that: - in terms of Section 73(3) of the Finance Act, 1994, the proceedings against the appellant case should not have been initiated - penalty set aside - appeal allowed.
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2017 (10) TMI 1053
GTA Service - N/N. 34/2004-ST dated 3.12.2004 - whether the goods transported by the GTA, exclusively for the appellant, would fall within the meaning of “individual consignment” or “consignments”? - Held that: - the issue stands settled in favour of the Revenue by the judgment reported in the case of Subramania Siva Cooperative Sugar Mills Ltd. [2014 (11) TMI 925 - MADRAS HIGH COURT], where it was held that where the transportation is for a single consignee, the transaction will fall under the second clause - demand upheld. Penalty u/s 76 and 78 - Held that: - the issue being interpretational one and having travelled upto the Hon’ble High Court, we find that the appellant has put forward reasonable cause for non-payment of service tax. Thus, invoking section 80 of the Finance Act, 1994, the penalties imposed u/s 76 and 78 are unwarranted. Appeal allowed in part.
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2017 (10) TMI 1048
Tour operator service - Department took the view that the vehicles operated by the appellants are covered by permits issued b the Transport authorities under the Motor Vehicles Act and the point to point services operated by them would be liable to be classified under the category of "tour operator service" - Time limitation - Held that: - There is no allegation that appellant had collected service tax from their customers but had not paid the same to the exchequer. It is also a fact that the issue of taxability in respect of stage carriages/contract carriages and tour operators was mired in confusion during impugned period and only after the judgment of the Hon'ble Madras High Court in Secretary, Federation of Bus Operators Association of Tamil Nadu Vs UOI 2001 (134) ELT 618 (Mad.) wherein the matter had been settled - extended period not invoked. Penalties imposed on the appellant under Sections 76 and 78 of the Finance Act, 1994 are also set aside.
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Central Excise
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2017 (10) TMI 1052
Maintainability of appeal - substantial question of law - reversal of credit alongwith interest - Held that: - A finding of fact recorded by the Appellate Tribunal is that not only that there was reversal of credit, but the respondent paid interest of ₹ 4,71,189/. On this ground, the order of the Commissioner imposing penalty has been set aside. Today, the learned counsel for the appellant is not in a position to substantiate the challenge by the appellant to the factual finding - no substantial question of law arises - appeal dismissed being not maintainable.
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2017 (10) TMI 1051
CENVAT credit - reasonale care taken before availing credit - Held that: - This finding of fact which was recorded in Commissioner of Central Excise, Customs and Service Tax Vs. Juhi Alloys [2014 (1) TMI 1475 - ALLAHABAD HIGH COURT] by this Court has been agreed by both the counsels that it will apply equally to the case of respondent also - it was held in that case that The goods were demonstrated to have travelled to the premises of the assessee under the cover of Form 31 issued by the Trade Tax Department, and the ledger account as well as the statutory records establish the receipt of the goods. In such a situation, it would be impractical to require the assessee to go behind the records maintained by the first stage dealer - appeal dismissed.
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2017 (10) TMI 1050
CENVAT credit - outward transportation service - denial on the ground that as the appellant is delivering goods at specified rates and paying duty under Section 4A, therefore on outward transportation they are not entitled to avail CENVAT credit - Held that: - the issue has already been settled by the Hon’ble Karnataka High Court in the case of Madras Cements Ltd. [2015 (7) TMI 1001 - KARNATAKA HIGH COURT] wherein it has been held that although goods have been sold at specified rates but if goods are delivered as per the agreement at the place of buyer, the assessee is entitled to avail CENVAT credit on outward transportation service - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1049
Clandestine removal of raw material and finished goods - - Held that: - When goods were noticed by investigation as cleared clandestinely, respondent failed to explain whether clearance thereof was made paying duty. There was difference in quantity as shown on record and as physically available during inventory. Using same invoices more than once, clearances were made and that was corroborated from the seized invoice book (sr. no. 34). The materials so seized brought out oblique motive of appellant in absence of rebuttal - Shri Khimji Kataria deposed that there was no sale but invoices were prepared for adjustment. This proved existence of parallel invoices which were prepared for clandestine clearances. Hon’ble Supreme Court in the case of Union of India Versus Rajasthan Spinning & Weaving Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA] has held that duty evasion should meet penalty and such evasion should also face duty demand invoking extended period of five years. Appeal allowed - decided in favor of Revenue.
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2017 (10) TMI 1047
Condonation of delay of 135 days in filing the appeal - case of appellant is that the appeal could not be filed before the Tribunal in time because the impugned order was not traceable - Held that: - the Commissioner (A) by relying upon the decision of the Supreme Court in the case of Singh Enterprises vs. CCE [2007 (12) TMI 11 - SUPREME COURT OF INDIA], has held that the Commissioner (A) has no powers to condone the delay beyond 30 days - delay cannot be condoned - appeal dismissed - decided against appellant.
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2017 (10) TMI 1046
Valuation - CTD/TMT bars and MS round - job-work - non-inclusion of actual cost of raw materials - main point that has been raised by the department is that the Commissioner (Appeals) has erred in holding that the show cause notice dated 3.1.2007 issued is barred by limitation for the reason that the earlier show cause notice was issued for the very same period - Held that: - though the period covered is the same, the issue raised in both the show cause notices are different. The Commissioner (Appeals) ought to have considered and given a finding on the merits of the case instead of being carried away by the fact that the second show cause notice have been issued for the very same period - Further, merely because the show cause notice is for the very same period, it cannot be said that the second show cause notice is barred by limitation. It must be shown that the facts alleged in subsequent show cause notice was well within the knowledge of department - there is sufficient ground for remanding the matter for reconsideration by the Commissioner (Appeals) - appeal allowed by way of remand.
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2017 (10) TMI 1045
Extended period of limitation - SSI Exemption - evasion of duty - suppression of value - during the period 2005-06, the appellant availed SSI exemption and their sales turn over crossed the SSI exemption limit. It is a fact on record that in 2005, a search was conducted at the factory premises of the appellant and all relevant records have been scrutinized and it was found that appellant has crossed SSI exemption limit - Held that: - extended period of limitation is not invokable as it was in the knowledge of the Revenue on 10.6.06 that the appellant has crossed the SSI exemption limit but no action was taken within time against the appellant and no further inquiry was conducted after 10.6.2006 to issue the show cause notice - extended period of limitation is not invokable and the impugned demands against the appellants are not sustainable - penalties also set aside. In similar set of facts in the case of Amway India Enterprises Pvt. Ltd. vs CCE, New Delhi [2017 (3) TMI 616 - CESTAT NEW DELHI], Tribunal has held that since the modus operandi adopted by the appellant for selling its products were known to the Department and based on the information/documents furnished by the appellant in 2005, the show cause proceedings were initiated by the Department on 12.03.2009, seeking confirmation of service tax demand under 'Franchise Service' for the period October' 2003 to March' 2007, we are of the considered view that the proceedings are barred by limitation of time. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1044
CENVAT credit - fake invoices - allegation has been made out against the appellants on the basis of the statements of the registered/ dealers of the supplier of the goods wherein it has been stated that the registered dealers were issuing the invoices for availment of inadmissible cenvat credit without accompanying the goods - Held that: - I gone through the statement of the registered dealers / supplier. In their statements, they never stated that they have not supplied goods to the appellant. The registered of the supplier have been given a general statements that they are indulged in the activity of issuing invoices without accompanying the goods - on the basis of the statements of the registered dealers who has given a general statement, it cannot be alleged that the appellants have not received the goods. Owner of vehicle - Held that: - There is no specific instance shown by the scrap dealer that the particular vehicle has been scrapped on the day. Further, the scrap dealer in his statement, has stated that he has seen the receipt of the vehicle and the statement of Shri. Ramesh Chander Gupta (the seller of the vehicle) and signed the statement given by Shri. Ramesh Chander Gupta and the receipt of the vehicle for sale on 14.10.2011, on going through the receipt, I find that there is not signature of Shri Kuldeep Singh. Therefore the statement given by Shri Kuldeep Singh is not admissible but is doubtful to alleged that same has been taken by the Department to implicate the appellants in this case. The statements of seller of the vehicle and the buyer of vehicle cannot be the piece of evidence to implicate the appellant in this case to deny cenvat credit - the cenvat credit cannot be denied to the appellants in the absence of any concrete evidence against the appellants. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1043
CENVAT credit - duty paying documents - Rule 9(1) of CCR, 2004 - Held that: - Cenvat credit is entitled to be availed by the appellant for the invoices/debit notes issued in the name of the Head Office by the service provider. The service availed prior to 10/09/2004 and the invoice/debit note issued after 10/09/2004 - Held that: - the issue has been decided in the case of IDEA MOBILE COMMUNICATIONS LTD. Versus COMMISSIONER OF C. EX., MEERUT [2011 (11) TMI 423 - CESTAT, NEW DELHI], where it was held that The Commissioner’s finding that during the period prior to 10-9-2004, in terms of Service Tax Credit Rules, 2002, the Cenvat credit was available only in respect of those input services which were of the same category as that of output service is factually incorrect as these rules had been amended w.e.f. 14-5-2003 by N/N. 5/2003-S.T. so as to permit Cenvat credit even in respect of those input services which were not falling in the same category as that of output service. CENVAT credit - it was alleged that invoices had been issued prior to 10-9-2004 and in terms of the provisions of Rule 3(1) of Cenvat Credit Rules, 2004, the Cenvat credit in respect of such invoices cannot be allowed - Rule 11(1) of CCR, 2004 - Held that: - there was not question of the appellant having earned any service tax credit during the period prior to 10-9-2004 - the appellant is entitled to avail Cenvat credit for the services availed prior to 10/09/2004. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1042
CENVAT credit - manufacture of exempted and dutiable goods - non-maintenance of separate set of books - Rule 6(3) of the CCR, 2004 - Held that: - the appellant is availing proportionate credit on input/input services used in manufacturing of dutiable final goods. In that circumstance, when the appellant is availing proportionate credit on input/input services used in the manufacture of dutiable goods, the question of reversal of Cenvat credit does not arise - credit remains allowed. Penalty - CENVAT credit - malafide intent - Held that: - appellant has paid demand along with interest and since the sister unit was otherwise entitled to avail Cenvat credit on the said invoice. In that circumstance, the intent of the appellant to avail Cenvat credit with mala-fide is missing - penalty not imposed. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1041
Valuation - pan masala or gutka - duty based on the capacity of packing machines installed in their factory - applicability of Rule 8 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Held that: - similar issue decided in the case of Commissioner of Central Excise Kanpur Versus M/s. Trimurty Fragrances (P) Ltd. [2015 (11) TMI 320 - ALLAHABAD HIGH COURT], where it was held that Even if the machine manufactures in a particular month pan masala or pan masala with tobacoo pouches of 50.0 and ₹ 1.00, its deemed production would still be 37,44,000 pouches on which duty would be leviable. The proviso to Rule 8 would not be applicable nor can there be a supposition that there would be deemed to be an addition in the number of operating packing machines for the month in question on the strength that a new retail sale price has come into existence on an existing manufacturing machine. The appellant is not liable to pay duty, as demanded in the impugned orders from the appellants in terms of Rule 8 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, which is not attracted to the facts of the case. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1040
CENVAT credit - penalty - wrongful availment of CENVAT credit - non-payment of service tax on immovable property - scope of SCN - Held that: - Only demand raised in the show cause notice on account of denial of Cenvat credit of ₹ 4,55,181/-. In fact, appellant has availed Cenvat credit of ₹ 4,20,283/-, therefore, the show cause notice is defective asking the appellant to reverse the Cenvat credit to the tune of ₹ 4,55,181/- - there is no demand of service tax has been raised in the show cause notice, therefore, service tax cannot be demanded from the appellant. As there is no demand of service tax, therefore, no penalty is imposable on the appellant. For the amount of ₹ 4,20,283/- the sole reason for denial of Cenvat credit is that the appellant is not entitled to avail Cenvat credit on the photocopy of the invoices issued by the service provider - As the original invoices are in the record of the head office. In that circumstances, the Cenvat credit cannot be denied to the appellant as it is not disputed that the appellant has not received the services and not paid the service tax - credit allowed. Appeal allowed.
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2017 (10) TMI 1039
Refund claim - closure of machinery - Pan Masala - proviso 4 to Rule 9 of Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 - Held that: - Admittedly, in this case, the respondent has permanently discontinued the manufacturing of Pan Masala having RSP ₹ 3/- per pouch on 9th October, 2013 and paid duty for whole of the month. In terms of the said Rule, the respondent is required to pay duty on pro-rata basis and since they have paid excess duty, they are entitled for refund - appeal dismissed - decided against Revenue.
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2017 (10) TMI 1038
Refund claim - input services - clearing and forwarding service - construction service - Rule 5 of CCR - Held that: - the Tribunal in appellant’s own case [2017 (8) TMI 513 - CESTAT MUMBAI] allowed them credit of the service tax paid on clearing and forwarding service and for construction service used for maintenance and repair - refund allowed. However, the appellant are not entitled to get refund in respect of the services availed prior to the period for which they have claimed the refund. Appeal allowed in part.
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2017 (10) TMI 1037
Clandestine removal - shortage of stock - validity of relied upon documents - Held that: - As the invoices recovered from the factory premises of the appellant were not relied upon in the SCN and no panchnama was drawn and relied upon by the authorities below to allege shortages, in the absence of documents, the allegation of clandestine removable is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1036
Whether Ethyl Alcohol and rectified spirit are two different commodities or one and the same commodity? Held that: - the Hon'ble Supreme Court in the case of State of Uttar Pradesh Vs Modi Distillery and others [1995 (8) TMI 300 - SUPREME COURT], has held that Ethyl Alcohol and rectified spirit are one and the same - rectified spirit which is not used for human consumption is nothing but Ethyl Alcohol and is finding place in Tariff Item No.22072000 - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1035
CENVAT credit - returned goods - Rule 16(2) of the CER, 2002 - Held that: - no process has been carried out by the appellant on returned goods - the appellant is required to reverse Cenvat credit in terms of Rule 16(2) of the Central Excise Rules, 2002 as no process has been undertaken by the appellant. Extended period of limitation - Held that: - the clearance by the appellant as scrap of these returned goods was in the knowledge of the Department - extended period of limitation is not invokable. The matters are remanded back to the Adjudicating Authority for correct quantification of the demand - appeal allowed by way of remand.
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2017 (10) TMI 1034
Refund of the interest recovered by the revenue - interest paid for late payment of duty for the month of July, 2010 to September, 2010 - denial of refund on the ground that the interest was payable in respect of duty late deposited for the month of July, 2010 to September, 2010 as per provisions of Rule 9 of “Chewing Tobacco and Un-manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - Held that: - without issuance of the show cause notice, demand of duty cannot be confirmed against the appellant and consequently be recovered from the appellant - In case when demand is not sustainable question of payment of interest does not arise. In this case demand of interest has been confirmed against the appellant for delayed payment without issuance of the show cause notice. Therefore, demand of interest is not sustainable. Consequently, the interest recovered from the appellant is to be refunded - adjustment of demand of interest is not permissible - refund of interest allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1033
CENVAT credit - capital goods and inputs used in captive mines - Held that: - the Hon’ble Supreme Court of India in their ruling in the case of Vikram Cement v/s Commissioner of Central Excise, Indore [2006 (1) TMI 130 - SUPREME COURT OF INDIA] have overruled their ruling in the case of J.K. Udaipur Udyog Ltd. [2004 (9) TMI 101 - SUPREME COURT OF INDIA] and held that The schemes of Modvat and Cenvat credit are not different - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1032
Penalty u/r 26 of CER, 2002 - it was alleged that the appellant is involved in the purchasing of clandestinely removed goods supplied by M/s. MITC Rolling Mills Pvt. Ltd. - Held that: - The clandestinely removed goods were admittedly received by the appellant therefore the appellant was aware about the clandestine nature of the goods. Hence he has aided and abeted to evasion of duty made by M/s. MITC Rolling Mills Pvt. Ltd. - penalty upheld, however the quantum of penalty reduced - appeal allowed in part.
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2017 (10) TMI 1031
100% EOU - de-bonding of unit - Revenue entertained a view that the appellant/assessee did not discharge the full duty liability in respect of goods lying in stock as well as work in progress stock as on the date of de-bonding - N/N. 23/2003-CE - Held that: - though excise duty is liable on the goods manufactured or produced in India, the payment of such duty is mandated only at the time of their clearance from the factory. We do not find any justification, with legal basis, to confirm and demand Central Excise duty on any goods which are yet to reach a finished stage for entry in the RG-1 or before their actual clearance from the manufacturing unit. We could not get any legal basis for such confirmation of duty in the impugned order. The appellant/assessee categorically asserted that the work in progress stock has been manufactured using indigenous cotton on which no excise duty or any other duty benefit has been availed. No other imported or indigenous consumables were used in the manufacture, on which custom or excise duty is forgone. On this factual basis, we find no justification to confirm any duty liability on work in progress stock in terms of Section 3 (1) or the proviso of the said section of the Act. Appeal allowed - decided in favor of appellant-assessee.
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2017 (10) TMI 1030
Area Based Exemption - N/N. 50/2003 dated 10.06.2003 - Extended period of limitation - non-intimation of labelling process to the jurisdictional officer - Held that: - the goods have been manufactured in Himachal Pradesh and labelling was done in the godown in terms of statutory requirement, before marketing. The appellants apparently could not have gained anything by having labelling in godown and there by intending to evade duty on a product, which is manufactured at Himachal Pradesh, eligible for area based exemption - the lower authorities have failed to substantiate the ground for invoking extended period - appeal allowed on the ground of limitation.
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2017 (10) TMI 1029
Valuation - related party transaction - case of Revenue is that the respondent failed to produce sufficient documentary evidence to establish that they are not associate or interconnected company of M/s Shri Ram Cable Pvt. Ltd. - Held that: - When the revenue proceeded to treat the persons as related parties on certain evidence, the non-availability of such evidence for later period will certainly change the liability. No other evidence was brought in to show that two parties are related entities for the purpose of Central Excise Valuation - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD Versus XEROGRAPHIC LTD. [2006 (3) TMI 308 - SUPREME COURT], where it was held that the evidences in the present case do not satisfy the criteria to deal the transactions as related party transaction. Appeal dismissed - decided against Revenue.
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2017 (10) TMI 1028
Retention of sales tax amount collected from customers - tax concession allowed by Entitlement Certificate dated 1.12.2006 - whether the appellant is liable to pay duty on the amount retained as Sales Tax collected from the customers as per the Entitlement Certificate issued by the Haryana Vat Department or not? - Held that: - the issue came up before the Hon’ble Apex Court in the case of Maruti Suzuki India Limited [2014 (9) TMI 229 - SUPREME COURT] wherein the Hon’ble Apex Court held that the amount retained on account of sales tax as per the Entitlement Certificate is to be added in the assessable value - demand upheld. Extended period of limitation - Held that: - the extended period is not invokable as the issue whether the appellant is liable to pay duty on the amount retained by them collected on account of sales tax from their customers as per Entitlement Certificate issued by the Haryana Vat department was in dispute and the same has been settled in 2014 - extended period not invoked. As the appellant has not collected any duty on the amount of sales tax retained by them, the appellant is entitled to cum duty benefit. Appeal allowed in part.
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2017 (10) TMI 1027
N/N. 67/95-CE, dated 16/03/1995 - proprotionate credit in respect of Rectified Spirit (RS), Ethyl Alcohol (ENA), Power Alcohol, Absolute Alcohol, Bagasse, Press Mud, Electricity & Bio compost - Captive Consumption of Molasses - Manufacturing of Rectified Spirit and ENA - According to Revenue, Rectified Spirit and ENA are non-excisable goods with effect from 1.3.2005 and therefore, the appellants are not eligible to avail benefit of exemption N/N. 67/95-CE on Molasses captively used in the manufacture of Rectified Spirit and ENA - Held that: - Similar matter again came before the Tribunal and in the case of Rajshree Sugars & Chemicals Ltd. V/s CCE, Puducherry [2014 (11) TMI 919 - CESTAT CHENNAI], and therein it was held that benefit under N/N. 67/95-CE is available provided the assessee discharges the obligation of reversal of cenvat credit availed on duty paid on molasses used for manufacture of Rectified Spirit and denatured Spirit as required under Rule 6 (1) of CCR,2004. Thus, the department’s contention that Rectified Spirit (RS) and Extra Neutral Alcohol (ENA) are not excisable is of no consequence in the light of the Tribunal’s decision in case of Rajshree Sugars & Chemicals Ltd. The assessee appellant would be entitled to the benefit of exemption under N/N. 67/95 CE (supra); if from the records of the appellant it is confirmed that they reversed or paid the Cenvat credit pertaining to the inputs in the products not chargeable to any duty or where products were exempted or were ‘non excisable’ - matter is remanded to the original adjudicating authority to verify the fact of reversal or payment of Cenvat credit pertaining to inputs in the products not chargeable to any duty or where they are exempted or ‘non-excisable’ - matter on remand. CENVAT credit - demand of ₹ 48,48,388/- mainly on the reason that this amount of Cenvat credit pertains to the inputs and input services used in the manufacture of exempted goods namely, electricity, press mud, bagasse - Held that: - adjudicating authority has not thoroughly examined the submissions of the appellant that subject cenvat credit had already been reversed in case of confirmation of recovery of demand of Cenvat Credit amounting to ₹ 48,48,388/-. Therefore, in case of this demand also, the matter needs denovo adjudication by the Original Adjudicating Authority - matter on remand. Appeal allowed by way of remand.
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2017 (10) TMI 1026
Clandestine removal - tobacco - Held that: - The factual position reveals that the appellant have been paying duty on such preparation from unit 1. Hence, 3990 kgs of lime mixed tobacco is, liable to payment of excise duty and since the same has been seized in non registered premises, confiscation of the same ordered by the lower authorities is required to be upheld along with option to redemption by payment of redemption fine. Demand of excise duty amounting to ₹ 4,57,367/- on 1335000 pouches cleared from Bagol factory - Held that: - It stands admitted by the proprietor categorically in his statement that 8110 kgs of lime mixed tobacco were manufactured in unit 2 (farmhouse) and the same was cleared to unit 1 and subsequently packed in 1335000 pouches each of 6 gms at Bagol factory and the same was cleared without payment of duty. Such demand have been upheld on the basis of the inculpatory statement by both Shri Lakshmilal Chaplot as well as Shri Bhavesh Chaplot. The demand of duty raised is liable to be upheld along with interest as well as penalty of equal amount under section 11AC. The imposition of personal penalty of ₹ 10000-/- on Shri Bhavesh Chaplot is also required to be upheld under Rule 26 of the Central Excise Rules 2002. Appeal dismissed - decided against appellant.
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2017 (10) TMI 1025
CENVAT credit - case of appellant is that their being no proof or allegation for clearance of the raw materials from their factory, the denial of credit is not justified - Held that: - The Hon'ble Apex Court in the case of Central Excise Vs Maruti Suzuki India Ltd. [2015 (8) TMI 493 - SUPREME COURT] has rejected the Revenue's appeal on the ground that such shortages of inputs are due to accounting error and there being no physical shortage with any allegation of clandestine removal, the credit cannot be disallowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1024
Classification of goods - Control Panels - Held that: - The period involved is February 2002 to October 2006 - The Tribunal in their own case COMMISSIONER OF CUSTOMS, CHENNAI Versus MAK CONTROLS & SYSTEMS (P) LTD. [2006 (12) TMI 332 - CESTAT, CHENNAI], has held that Ground Power Unit is classifiable under 8803 in terms of Note 3 of Section XVII - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 1023
Whether awarding of bonus to the appellant for timely completion of the project shall be dutiable under the CEA, 1944? - Held that: - The award of bonus is being related to service, that is not taxable under the Central Excise Act, 1944 and is beyond the purview of the said law - appeal allowed.
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2017 (10) TMI 1022
Clandestine removal - shortages and excesses of stock/finished goods - Held that: - the Adjudicating Authority failed to exercise powers vested in him for the purpose of ensuring the attendance of witnesses in spite of all the powers of ensuring attendance of witnesses as are provided in the Code of Civil Procedure, 1908 are vested in the Adjudicating Authority - It is further matter of fact on record that the respondents have manufactured final products, out of the raw materials alleged to be not received, and removed the finished products on payment of duty and further filed tax returns for the same, and such returns are not questioned by the Revenue. Also, the Revenue have failed to establish the source of raw material, in the absence of non-receipt of inputs on which Cenvat credit was taken, leads to the conclusion that the entire case of Revenue is on the basis of presumptions - Further, there is no allegation that the payments made by account payee cheques to the suppliers have been received back by the respondent. Appeal dismissed - decided against Revenue.
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2017 (10) TMI 1021
Change of opinion - Whether Show Cause Notice was rightly issued on the same set of facts and disclosures made to the revenue, for change of opinion, and whether the demand raised against the appellant is sustainable? Held that: - It is evident from the record that the appellant after fabricating the machinery had installed the same in their old units, at Sector 57, Noida and thereafter under proper permission which was granted after due verification by the Central Excise Authority, shifted the machinery to the new plant at Greater Noida without payment of duty as permissible under the scheme of the Act and the Rules - the finished products of both the units, the Unit, Sector 57, Noida & the new Unit at Udyog Vihar Industrial Area, Greater Noida are excisable. Thus, if any duty is paid by the Unit-I on removal of machinery, fabricated in their premises, the credit for the same is available to the new Unit under the same management. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (10) TMI 1020
Constitutional validity of Section 9 (2) (g) of the Delhi Value Added Tax, 2004 - Articles 14 and 19 (1) (g) of the Constitution of India - failure to deposit VAT collected from its buyers, which included SCT - it was alleged that ITC availed by SCT on the purchases did not match with the sale details filed by the vendor. Held that: - there is a singular failure by the legislature to make a distinction between purchasing dealers who have bona fide transacted with the selling dealer by taking all precautions as required by the DVAT Act and those that have not. Therefore, there was need to restrict the denial of ITC only to the selling dealers who had failed to deposit the tax collected by them and not punish bona fide purchasing dealers. The latter cannot be expected to do the impossible. It is trite that a law that is not capable of honest compliance will fail in achieving its objective. If it seeks to visit disobedience with disproportionate consequences to a bona fide purchasing dealer, it will become vulnerable to invalidation on the touchstone of Article 14 of the Constitution. The purchasing dealer is being asked to do the impossible, i.e. to anticipate the selling dealer who will not deposit with the Government the tax collected by him from those purchasing dealer and therefore avoid transacting with such selling dealers. Alternatively, what Section 9 (2) (g) of the DVAT Act requires the purchasing dealer to do is that after transacting with the selling dealer, somehow ensure that the selling dealer does in fact deposit the tax collected from the purchasing dealer and if the selling dealer fails to do so, undergo the risk of being denied the ITC. Indeed Section 9 (2) (g) of the DVAT Act places an onerous burden on a bonafide purchasing dealer - All this points to a failure to make a correct classification on a rational basis so that the denial of ITC is not visited upon a bonafide purchasing dealer. This failure to make a reasonable classification, does attract invalidation under Article 14 of the Constitution, as pointed out rightly by learned counsel for the Petitioners. It can straightway be seen that Section 48 (5) of the MVAT Act is not an exact replica of Section 9 (2) (g) of the DVAT Act. For instance, Section 48 (5) of the MVAT Act requires the selling dealer to have “actually paid” the tax collected by him with the Government for the purposes of the purchasing dealer availing ITC, whereas Section 9 (2) (g) of the DVAT Act requires the selling dealer to either “deposit” the tax collected or lawfully adjust it against his output tax apart from correctly reflecting the sale in his returns. In the present case, the conditions imposed for the grant of ITC are spelt out in Sections 9 (1) and (2) of the DVAT Act and have been adverted to earlier. The claim of the purchasing dealer in the present case is not that it should be granted that ITC de hors the conditions. Their positive case is that each of them, as a purchasing dealer, has complied the conditions as stipulated in Section 9 and therefore, cannot be denied ITC because only selling dealer had failed to fulfil the conditions thereunder. More importantly, the Court finds that there is no provision in the MVAT Act similar to Section 40A of the DVAT Act. Section 40A of the DVAT Act takes care of a situation where the selling dealer and the purchasing dealer act in collusion with a view to defrauding the Revenue. Whether Section 9 (2) (g) of the DVAT Act, requires to be struck down as violative of Article 14 or can be saved from invalidity by any known interpretational device? - Held that: - the expression “dealer or class of dealers” occurring in Section 9 (2) (g) of the DVAT Act should be interpreted as not including a purchasing dealer who has bona fide entered into purchase transactions with validly registered selling dealers who have issued tax invoices in accordance with Section 50 of the Act where there is no mismatch of the transactions in Annexures 2A and 2B. Unless the expression “dealer or class of dealers” in Section 9 (2) (g) is “read down” in the above manner, the entire provision would have to be held to be violative of Article 14 of the Constitution - the default assessment orders of tax, interest and penalty issued under Sections 32 and 33 of the DVAT Act, and the orders of the OHA and Appellate Tribunal insofar as they create and affirm demands created against the Petitioner purchasing dealers by invoking Section 9 (2) (g) of the DVAT Act for the default of the selling dealer, and which have been challenged in each of the petitions, are hereby set aside. Petition allowed.
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2017 (10) TMI 1019
Rectification of error - rejection on the ground that the petitions do not involved any error apparent on the face of the record - TNVAT Act - Held that: - the tax paid by them has been realised by the respondent on 20.01.2014. For the assessment year 2014-2015, though the petitioner has requested for copies of the import documents, the respondent has not furnished the same and has rejected the petition filed under Section 84 of the Tamil Nadu Value Added Tax Act stating that there is no error apparent on the face of the record. The power conferred on the respondent under Section 84(1) of the Act is a power to rectify any error apparent on the face of the record. The statute does not state that such power can be exercised only to correct arithmetical or clerical errors. The language employed in Section 84 of the Act would confer power on the authority to review its decision, if there is error apparent on the face of the record. The respondent should have passed a speaking order as to why he was convinced that there is no error apparent on the face of the record. It is not enough to refer to Section 84 and state that there is no error apparent on the face of the record - matter is remanded to the respondent for fresh consideration - petition allowed by way of remand.
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2017 (10) TMI 1018
Levy of purchase tax - The stand of the Department is that since the petitioner is not liable to pay tax on sales of treated Rubber wood by virtue of the exemption order, the petitioner cannot have the benefit of S.R.O.No.9/2007 - whether the petitioner is entitled for the benefit of exemption of purchase tax payable under S.5A of Kerala General Sales Tax Act, 1963? - Held that: - The petitioner themselves are the manufacturer. They are exempted from payment of sales tax. All manufacturers, who are liable to pay tax either under KGST Act or Central Sales Tax are eligible for exemption. Nobody has a case that the petitioner is not liable to pay tax but for the exemption given to them. Granting an exemption itself would show that the petitioner is liable to pay tax. Non-payment of tax itself will not make the manufacturer ineligible for the benefit of S.R.O.No.9/2007. Since the petitioner is liable to pay sales tax, though they need not pay tax by virtue of exemption, certainly, they would be entitled for the benefit of S.R.O.No.9/2007 - petition allowed.
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Indian Laws
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2017 (10) TMI 1064
Deemed status of proceedings before the Recovery officer - Section 5 of the Limitation Act, 1963 invoked to condone the prescribed period of 30 days, under Section 30(1) of the Recovery of Debts and Bankruptcy Act, 1993 preferring an appeal before the Tribunal, against an order of the Recovery officer - Held that:- The RDB Act is a special law. The proceedings are before a statutory Tribunal. The scheme of the Act manifestly provides that the Legislature has provided for application of the Limitation Act to original proceedings before the Tribunal under Section 19 only. The appellate tribunal has been conferred the power to condone delay beyond 45 days under Section 20(3) of the Act. The proceedings before the Recovery officer are not before a Tribunal. Section 24 is limited in its application to proceedings before the Tribunal originating under Section 19 only. The exclusion of any provision for extension of time by the Tribunal in preferring an appeal under Section 30 of the Act makes it manifest that the legislative intent for exclusion was express. The application of Section 5 of the Limitation Act by resort to Section 29(2) of the Limitation Act, 1963 therefore does not arise. The prescribed period of 30 days under Section 30(1) of the RDB Act for preferring an appeal against the order of the Recovery officer therefore cannot be condoned by application of Section 5 of the Limitation Act.
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2017 (10) TMI 1063
Complaint cases under Section 138 of the NI Act for amicable settlement through mediation - procedure to be followed upon settlement and the legal implications of breach of the mediation settlement - Settlement of disputes outside the Court - Binding the parties to a settlement agreement - Held that:- Section 320 of the Cr.P.C. enumerates and draws a distinction between offences as compoundable, either between the parties or with the leave of the court. This provision clearly permits and recognizes the settlement of specified criminal offences. Settlement of the issue(s) is inherent in this provision envisaging compounding. The settlement can obviously be only by a voluntary process inter se the parties. To facilitate this process, there can be no possible exclusion of external third party assistance to the parties, say that of neutral mediators or conciliators. Therefore, even though an express statutory provision enabling the criminal court to refer the complainant and accused persons to alternate dispute redressal mechanisms has not been specifically provided by the Legislature, however, the Cr.P.C. does permit and recognize settlement without stipulating or restricting the process by which it may be reached. There is thus no bar to utilizing the alternate dispute mechanisms including arbitration, mediation, conciliation (recognized under Section 89 of CPC) for the purposes of settling disputes which are the subject matter of offences covered under Section 320 of the Cr.P.C. It is quite apparent that proceedings under Section 138 of the NI Act have a special character. They arise from a civil dispute relating to dishonouring to a cheque but may result in a criminal consequence. Even though the statute is punitive in nature, however, its spirit, intendment and object is to provide compensation and ensure restitution as well which aspects must received priority over punishment. The proceedings under Section 138 of the NI Act are therefore, distinct from other criminal cases. It is well settled that they are really in the nature of a civil wrong which has been given criminal overtones. There is no legal prohibition upon a criminal court seized of such complaint, to whom a mediated settlement is reported, from adopting the above procedure. Application of the above enunciation of law to a mediation arising out of a criminal case manifests that a settlement agreement would require to be in writing and signed by the parties or their counsels. The same has to be placed before the court which has to be satisfied that the agreement was lawful and consent of the parties was voluntary and not obtained because of any force, pressure or undue influence. Therefore, the court would record the statement of the parties or their authorized agents on oath affirming the settlement, its voluntariness and their undertaking to abide by it in the manner followed by the civil court when considering a settlement placed before it under Order XXIII Rule 3 of the CPC. The court would thereafter pass an appropriate order accepting the agreement, incorporating the terms of the settlement regarding payment under Section 147 of the NI Act and the undertakings of the parties. The court taking on record the settlement stands empowered to make the consequential and further direction to the respondent to pay the money in terms of the mediated settlement and also direct that the parties would remain bound by the terms thereof. In having so proceeded, there is a satisfaction of the voluntariness and legality of the terms of the settlement of the court and acceptance of the terms thereof as well as a specific order in terms thereof. Consequently, the amount payable under the settlement, would become an amount payable under an order of the criminal court. So far as the disputes beyond the subject matter of the litigation is concerned, upon the settlement receiving imprimatur of the court, such settlement would remain binding upon the parties and if so ordered, would be subject to the orders of the court. In the event that a criminal court passes order accepting the mediated settlement between the parties and directs the accused to make payment in terms thereof, the settlement amount becomes payable under the order of the court. Such order having been passed in proceedings under Section 138 of the NI Act, would be an order under Section 147 of the NI Act and Section 320 of the Cr.P.C. In proceedings where settlement is permitted under Section 320 of the Cr.P.C., it would be an order thereunder. Where proceedings are disposed on settlement terms by the High Court, it would be an order passed in exercise of jurisdiction under Section 482 of the Cr.P.C. Upon breach of such order and nonpayment of the agreed amounts, the same may be recoverable in terms of Section 431 read with Section 421 Cr.P.C. In addition, if the party has tendered an undertaking to abide by the terms of the agreement, which stands accepted by the court, in the event of breach of the undertaking, action and consequences under the Contempt of Courts Act could also follow.
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2017 (10) TMI 1062
Bidding procedures - directions in respect of the award of a tender by the Union Ministry of Defence (hereafter “MoD”) for the acquisition of 606 Material Handing Cranes (MHC) - Whether the bid is to be evaluated on the basis of “Cost to User” or “Cost to State”? - Held that:- Vectra refutes this logic of the MoD, and in defence has relied on the Defence Procurement Policy 2013. The DPP 2013 stipulates that bids should be evaluated as per the “Cost to State” basis wherein Taxes and Duties are excluded in the bid. As to this aspect, the court notices that the RFP was silent on this aspect. This meant that the MoD had the discretion to adopt either method. Vectra’s logic is merited; however, this Court has to be alive to the fact that it is not called upon to decide which method to adopt, but to merely decide, whether the method adopted by the MoD was illegal or unreasonable. That the MoD had used the “Cost to User” in the past, per se is no ground to brand as unjustified the choice exercised in the facts of this case. The MoD’s citing Clause 77 of DPP 2013 shows that it was clearly inapplicable to the present matter since the RFP acquisitions and the commercial bid was made prior to implementation of the DPP 2013. Whether the custom duty amount, could be reevaluated after Vectra’s explanations and clarifications? - Held that:- Judicial precedents as well as contractual clauses clearly and affirmatively suggest that State Authorities have considerable latitude in evaluating tenders on their own basis. In the present matter, the customs duty mentioned by Vectra is to be taken on the face of it, as part of bid, and the Court cannot scrutinize its correctness, or the accuracy of the second respondent’s bid, quoting different rates of duty. The clarification issued by the MOD gives further credence to its submissions. It is evident that Customs Duty is included as part of the bid and the exemption is on a fixed amount. The selection of Respondent No.2 as L1, is prima facie on the basis, that it submitted a lower bid (inclusive taxes and duties) and this fact was admitted by Vectra. Therefore, even if the bid was to be reevaluated in arguendo, Vectra’s submissions are unsustainable. Whether the result of the bid evaluation and the declaration of Respondent No.2 as L1 is arbitrary? - Held that:- Since the “Cost to User” evaluation has not been held to be arbitrary, along with the premise that Custom Duty could be evaluated as part of the bid, it is established that declaring the second Respondent L1 was not arbitrary or unfair.
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