TMI Tax Updates - e-Newsletter
October 4, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Extension of time limit for intimation of details of stock held on the date preceding the date from which the option for composition levy is exercised in FORM GST CMP-03
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GST:
APPLICATION FOR CANCELLATION OF REGISTRATION OF MIGRATED TAXPAYERS - Form GST REG-29 as amended.
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GST:
Cancellation of GST registration - who have migrated from old regime / existing law but not required to be registered under the GST can apply for cancellation till 31-10-2017
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Income Tax:
The interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1)
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Income Tax:
Scope of rectification of mistake order u/s 154 - If this procedure is not followed of issuing the notice and giving reasonable opportunity of being heard, further exercise will be non est.
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Income Tax:
Penalty u/s 221(1) can be levied for non-payment of self-assessment tax u/s 140A at the time of filing an income tax return, even if the tax has been paid by revising the return.
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Income Tax:
Disallowance u/s 40(a)(i) - non deduction of TDS - purchase of software - when software is incorporated in a CD it becomes a tangible property and the payment made for acquiring the same is not a payment by way of royalty.
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Income Tax:
Jurisdiction of AO - The PAN follows the jurisdiction. It is not the jurisdiction that follows the PAN. The effective date of transfer of jurisdiction is the date of order passed by Commissioner of Income Tax and not the transfer of PAN
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Income Tax:
Key Man Insurance Policy - once it has been sold as a life insurance policy on the keyman to the business, as long as it is in the nature of life insurance policy, whether pure life cover or term cover or a growth or guaranteed return policy, it is eligible for coverage of Section 10(10D)
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Customs:
Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver
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Customs:
Advance Authorisation scheme - the stand that there is no proof of export obligation being discharged, could not have been maintained once the petitioner was told to approach the Policy Relaxation Committee and it was empowered to relax any of the technical requirements or procedural matters - HC
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DGFT:
Various amendments have been made in Chapter-4 of Hand Book of Procedures 2015-2020.
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DGFT:
DFIA - Replenishment Authorisation - In the case of Studded Jewelry, the calculation of the quantum of gold/silver/platinum metal shall be done excluding the weight of studding.
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DGFT:
DFIA - Applicant shall be allowed to file application beyond 24 months from the date of generation of file number
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DGFT:
DFIA - request may be made to concerned Regional Authority within a period of twelve months from the date of export or six months (or additional time allowed by RBI for realization) from the date of realization of export proceeds, whichever is later.
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DGFT:
Goods imported against Advance Authorisation Scheme, which are found defective or unfit for use, may be re-exported, as per Department of Revenue guidelines. The authorisation holder has to inform the RA who has issued the authorisation before re-export of such defective goods.
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DGFT:
Advance Authorisation - Facility of Supporting Manufacturer/ Jobber/co- licensee - Provision of Para 4.35 (c) and 4.36(b) modified.
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DGFT:
Advance Authorisation - Standardisation of Adhoc Norms - In case an applicant is not able to upload any prescribed document then such documents may be submitted in physical form to the concerned authority.
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DGFT:
Maintenance of Proper Accounts and furnishing thereof - the requirement of duly verified and certified by the jurisdictional Excise Authority modified - now this power is vesting with jurisdictional Customs Authority
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DGFT:
Application for Advance Authorisation for components on "net-to-net basis with accountability clause" - Benefit extended from "Engineering Products (Product Code - C)" to "all Export Products"
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DGFT:
Fixation of Norms for Advance Authorisation - Experts may be invited from Scientific and Technological institutions as members of Norms Committee for fixation of Norms.
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DGFT:
Fixation of Norms for Advance Authorisation - Any adhoc norm fixed under para 4.06, on the basis of an application made by an exporter shall be valid for one authorisation for which such application is made and no repeat authorisations shall be issued. - Norms Committee may extend the time limit.
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DGFT:
SION H-331 for export product "Toothbrushes" - Standard Input Output Norms and the revised SION H-331 revised.
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DGFT:
Export Policy - Guar gum refined split Guar gum treated and pulverized - Authorised agencies to issue the analytical report of testing of Penta Chlorophenol (PCP).
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Indian Laws:
Dishonor of cheque - Is "an Insolvent" a immune from criminal prosecution arising out of dishonour of cheque? - Held No - HC
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Service Tax:
100% EOU - Refund of unutilized CENVAT credit - the appellant is not eligible to claim refund or cenvat credit on the input services of which there are no balances in their books of accounts
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Central Excise:
Classification of chewing tobacco and preparation containing chewing tobacco (kamam) - whether classified under 24039960 as “tobacco extracts and essence” or under 24039920? - to be classified under sub heading 240399.20
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Central Excise:
Clandestine removal - consumption of electricity - the charge of clandestine removal is to be established on examination of facts of each case and not merely on the basis of case laws.
Articles
Notifications
Customs-
93/2017 - dated
29-9-2017
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Cus (NT)
Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg
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92/2017 - dated
28-9-2017
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Cus (NT)
Defining jurisdiction of customs officers for the purpose of appeals
DGFT-
31/2015-20 - dated
29-9-2017
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FTP
Amendment in conditions for export of Guar Gum under Sl. No. 89, Chapter 13 of Schedule 2 of ITC(HS) - regarding
GST - States-
ERTS (T) 73/2017/082 - dated
21-9-2017
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Meghalaya SGST
State Level Screening Committee for Anti-profiteering under Goods and Services Tax
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J.21011/1/2017-TAX/Vol-II/Pt-II(iii) - 20/2017-State Tax (Rate) - dated
17-10-2017
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Mizoram SGST
Amendments in the Notification No. 13/2017-State Tax (Rate), dated the 7th July, 2017.
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J.21011/1/2017-TAX/Vol-II/Pt-II(ii) - 23/2017-State Tax (Rate) - dated
17-10-2017
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Mizoram SGST
Amendments in the Notification No.11/2017-State Tax (Rate), dated the 7th July, 2017 - Composite supply of works contract.
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J.21011/1/2017-TAX/Vol-II/Pt-II - 22/2017-State Tax (Rate) - dated
17-10-2017
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Mizoram SGST
Amendments in the Notification No.17/2017- State Tax (Rate), dated the 7th July, 2017.
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J.21011/1/2017-TAX/Vol-II/Part - dated
15-9-2017
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Mizoram SGST
waiver the late fee payable who failed to furnish the return in FORM GSTR-3B for the month of July, 2017 by the due date.
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J.21011/1/2017-TAX/Vol-II/Pt-II - dated
12-9-2017
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Mizoram SGST
Date for filing of GSTR-3B.
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J.21011/1/2017-TAX/Vol-I - dated
12-9-2017
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Mizoram SGST
The Mizoram Goods and Services Tax (Sixth Amendment) Rules, 2017.
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J.21011/1/2017-TAX/Vol-II/Pt-II(vi) - dated
5-9-2017
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Mizoram SGST
The Mizoram Goods and Services Tax (Fifth Amendment) Rules, 2017.
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J.21011/1/2017-TAX/Vol-II/Pt-II(v) - 18/2017-State Tax (Rate) - dated
5-9-2017
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Mizoram SGST
Amendment in the Notification No.1/2017-State Tax (Rate), dated the 7th July, 2017 - "Mineral or chemical fertilisers".
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J.21011/1/2017-TAX/Vol-II/Pt-II(i) - 21/2017-State Tax (Rate) - dated
4-9-2017
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Mizoram SGST
Amendments in the Notification No. 12/2017-State Tax (Rate), dated the 7th July, 2017,
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J. 21011/1/2017-TAX/Vol-II/Pt-II(i) - dated
14-8-2017
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Mizoram SGST
CORRIGENDUM - Notification No. 2/2017 - State Tax (Rate) issued vide No. J. 21011/1/2017-TAX(i): Dated 7.7.2017,
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J. 21011/1/2017-TAX/Vol-II/Pt-II - dated
14-8-2017
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Mizoram SGST
CORRIGENDUM - Notification No. 1/2017 State Tax (Rate) issued vide No. J. 21011/1/2017-TAX : Dated 7.7.2017.
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J. 21011/1/2017-TAX/Vol-II - dated
17-7-2017
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Mizoram SGST
CORRIGENDUM - Notification No.1/2017 State Tax (Rate) issued vide No J.21011/l/2017-TAX : Dated 7.7.2017
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (10) TMI 67
Addition on interest expenses on the late deposit of service tax and Tax Deducted at Source (TDS) - Held that:- The principle laid down by the Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd. (1998 (3) TMI 2 - SUPREME Court) is not applicable in the instant facts of the case. Thus, we hold that the Assessing Officer in the instant case has wrongly applied the principle laid down by the Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd.(supra). We also find that the Hon'ble Supreme Court in the case of Lachmandas Mathura (1997 (12) TMI 16 - SUPREME Court ) has allowed the deduction on account of interest on late deposit of sales tax u/s 37(1) of the Act. In view of the above, we conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1). Addition of unexplained freight expenditure - CIT-A deleted addition admitting fresh evidences - Held that:- All the necessary reconciliation in support of freight expenses were produced by the assessee before the AO at the time of assessment proceedings. There is clear finding of the ld. CIT(A) that no subsidiary ledger in respect to freight charges was maintained by the assessee though the AO made the addition on the basis of non-production of subsidiary ledger. In the absence of any additional evidence, we do not find any reason to interfere in the order of Ld. CIT(A). Hence, this ground of Revenue’s appeal is dismissed. Addition on interest on sundry debtors - Held that:- On the perusal of assessment order, we find that no date for the payment from the sundry debtor was brought on record. There was no information available suggesting that the assessee was entitled for interest on the outstanding amount of sundry debtors. Thus, it cannot be said that the income from interest had actually accrued to the assessee during the year under consideration. The decision for the charging the interest from the sundry debtors totally depends upon the assessee. The AO cannot sit on the arm-chair of the assessee and direct for the recovery of interest on the amount of sundry debtors which are due for payment. The assessee has to consider business expediency for charging interest from the sundry debtors which are outstanding in the books. Thus, we hold that the addition made by the AO for the interest on the amount of sundry debtors outstanding in the books of account is not sustainable. Addition on account of interest on loans and advances - Held that:- Assessee was having its own capital for ₹ 8,84,73,905/- at the end of financial year under consideration. We note that the own fund of assessee was sufficient enough to make the advance of ₹ 48,13,023/- only. In this regard, Ld. DR has not brought anything contrary to the finding of Ld. CIT(A) suggesting that the borrowed has been diverted in non-business activity. Hence, we hold that there was no diversion of interest bearing fund to the non-business activities of the assessee. Accordingly we find no reason to interfere in the finding arrived by the Ld. CIT(A) Decided against revenue.
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2017 (10) TMI 66
Unexplained cash credit under Section 68 - whether receipts by the assessee from M/s Vatika Merchants Private Limited were through banking channels? - Held that:- It is obvious from the judgment under review that before the Assessing Officer itself, M/s Vatika Merchants Private Limited had confirmed the transactions between the assessee and M/s Vatika. This was considered by the Assessing Officer and the Assessing Officer treated the receipts as unexplained cash credit for the reason that M/s National Multi Commodity Exchange of India had confirmed that M/s Vatika Merchants (supra) was expelled from the exchange long prior to the transactions in question. Further, it was also confirmed that the assessee is a non-existent client under any member of the exchange. Taking into account, these facts and the fact that the assessee had not produced any material to contradict the statement of the exchange, the Assessing Officer held the claim of generation of commodity trading profit as a sham and a bogus one. Therefore, Annexure-R series of documents now relied on would not improve the case of the assessee in any manner. In any event, the judgment contains the reasons for the conclusions of this Court and if the assessee is aggrieved by those conclusions, the remedy of the assessee is to challenge the judgment before the appellate forum.
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2017 (10) TMI 65
Unexplained investment - Sources of cash receipts which were deposited in the bank account to make FDR - assessee during the course of appellate proceeding before learned CIT(A) has explained that ₹ 12.5 lakh in cash was received during the impugned assessment year by selling the gold ornaments - Held that:- There is a CBDT instruction/guidelines no. 1916 dated 11th May, 1994 which although relates to non seizure of gold during the course of search operation u/s 132 which has duly considered Indian traditions and culture, wherein it is permitted by CBDT not to seize gold ornaments and jewellery in case of married lady to the tune of 500 gram in the course of search operations where no wealth tax returns are filed by said married lady and hence we are of the view that the explanation of the assessee of holding of the gold ornament/jewellery to the tune of 500 gram stand accepted, while the rest of the theory of selling balance of the gold /silver as put forward by the assessee stood rejected and it is held that the assessee could not substantiate the genuineness of the transaction for the balance quantity of sale of gold ornaments/silver and hence after giving credit for value of gold to the tune of 500 gms, rest of the amount shall be charged to tax in the hands of the assessee as undisclosed income . While for sale of 500 gram of the gold, the same shall be brought to tax by computing income from capital gains for which the assessee shall submit necessary details which shall be verified by the AO in accordance with law. Thus, we confirm the appellate order of learned CIT(A) with above modification wherein the assessee will get part relief as detailed above. We order accordingly. For AY 2005-06 The assessee has also received gift of ₹ 3.0 lacs in cash from Mr Abdul Kader Fakir Mohammed Rakhangi, a close relative. The cash received by the assessee from gits of ₹ 3,00,000/- also did not stood proved as no gift deed/confirmations are produced from donor by the assessee nor genuineness of the gift is proved. The said donor has claimed to have not maintained any bank account . He has claimed to have given gift of ₹ 3,00,000/- as well purchased gold of ₹ 5.62 lacs from the assessee for impugned assessment year out of his total claimed income from agriculture from sale of mangoes of ₹ 6-7.50 lacs. He does not hold any PAN and has never filed return of income .. We have already discussed about creditworthiness of said Mr Abdul Kader Fakir Mohammed Rakhangi while adverting to his purchases of gold from the assessee while adjudicating appeal for AY 2005-06 nor even genuineness of gift in cash from Mr Abdul Kader Fakir Mohammed Rakhangi is proved. It is incomprehensive that he has income of ₹ 6-7.50 lacs for the previous year relevant to assessment year 2007-08 and he has utilised ₹ 8.62 lacs in purchasing gold and giving gift to assessee
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2017 (10) TMI 64
Bogus purchases - addition u/s 69C - Held that:- AO added the entire amount of bogus purchases to the total income of the assessee and the assessee could not prove the genuineness of the purchases from the concerned parties by producing the necessary documentary evidences. The notices issued to the parties u/s 133(6) were returned unserved. CIT(A) deleted the addition to the extent of 90% of the bogus purchases. We further noticed that the AO during the assessment proceedings accepted the sales which were made out of the hawala purchases. In a case where the assessee obtains bogus bills, the purchase are generally made from grey market and the assessee saves in the form of non payment of VAT and other incidental levies. Addition has be made on percentage basis in order to cover the leakages of revenue in such cases which the ld. CIT(A) has rightly done. Therefore, order passed by the CIT(A) sustaining the addition to the extent of 10% of bogus purchases to recover the revenue leakages is correct and needed to be upheld. We, therefore, inclined to confirm the order of CIT(A) by dismissing the appeal of the assessee. Levy of penalty u/s 271A - default committed u/s 44A - Held that:- In the present case, we find that the auditor of the company have not made any adverse comments on the books of account maintained by the assessee and duly certified the books of the assessee. Under these circumstances, we are not in agreement with the conclusion drawn by the CIT(A) that the penalty u/s 271A is rightly imposed by the AO. We hold that the CIT(A) has wrongly upheld the order of the AO. Therefore, we set aside the same and direct the AO to delete the penalty. Resultantly the appeal of the assessee is allowed.
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2017 (10) TMI 63
Scope of rectification of mistake order - no reasonable opportunity of being heard to the Assessee given - Held that:- The principle of natural justice was not followed by the Assessing Officer while rectifying the original assessment order and the said fact was admitted by the CIT(A). It is not proper to improve the Assessing Officer’s defect by the CIT(A) which is not permissible under the Income-Tax statute wherein the notice has to be given to the assessee when there is an increase in tax liability on the assessee. As per Section 154(3) of the Act amendment/rectification which has effect of enhancement of an assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made unless the authority concerned gives notice to the assessee of its intention to do so. Therefore, it is obligatory under the statute to issue notice by the Assessing Officer to give a reasonable opportunity of being heard to the Assessee. This is clearly set out u/s 154 of the Income Tax Act and it has to be followed by the tax authorities at the initial stages. If this procedure is not followed of issuing the notice and giving reasonable opportunity of being heard, further exercise will be non est. Therefore, the assessment order itself becomes void ab initio. The order u/s 154/254 of the Act is set aside. In all the Assessment Years the issue is identical; hence all the appeals of the assessee are allowed.
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2017 (10) TMI 62
Penalty under Section 271(1)(c) - treatment of reducing the sales consideration in relation to assets of the Daruhera’s unit from the respective block of assets and claiming depreciation on the adjusted block of assets - Held that:- There is no closure of business of the assessee as affirmed by the Hon’ble Delhi High Court and consequently the block of the assets continue to exist, there is absolutely no infirmity in assessee’s treatment of reducing the sales consideration in relation to assets of the Daruhera’s unit from the respective block of assets and claiming depreciation on the adjusted block of assets. Keeping in view of the above stated facts and various pronouncements quoted above, we are of the view this is not a case where there is no closure of business of the assessee same has been affirmed by the Hon’ble Delhi High Court and consequently the block of the assets continue to exist, there is absolutely no infirmity in assessee’s treatment of reducing the sales consideration in relation to assets of the Daruhera’s unit from the respective block of assets and claiming depreciation on the adjusted block of assets. Hence, there is no case of penalty, therefore, Ld. CIT(A) has rightly deleted the same, which does not need any interference on our part, hence, we uphold the same and reject the ground no. 1 raised by the Revenue. Deferred allowance of 4/5th of legal and other expenses on restructuring of business - Held that:- It is settled law that no penalty is leviable in cases where a question of law is admitted in the Hon’ble High Court. Admission of question of law by the Hon’ble High Court on this issue itself shows that the claim of the assessee was legitimate and debatable. Hence, no penalty under section 271(1)(C) is leviable where the issue is debatable and a question of law is admitted by the High Court, hence, we are of the view that Ld. CIT(A) has rightly deleted the penalty on this issue, which does not need any interference on our part, hence, we uphold the same and reject the ground no. 2. Aforesaid Our view is fortified by the decision of the Hon’ble Delhi High Court in case of CIT II vs Liquid Investments and Trading Ltd (2010 (10) TMI 1021 - DELHI HIGH COURT ). Exclusion of miscellaneous income from the claim of tax deduction under section 10A and 10B - Held that:- The assessee had obtained certificates from a Chartered Accountant in Forms 56F and 56G and had thus acted on the basis of an expert advice/opinion for claiming 10A/10B deductions. That the assessee had made adequate disclosure in the audited financial statements, the notes to the computation of income filed along with the return of income. During the course of assessment proceedings, the assesseee had provided the necessary explanations and made due submissions dated 05 December 2008, which were supported by sufficient documentation and guided by judicial decisions. Keeping in view of the detail discussion as above, we are of the view that there is no case of penalty. Hence the minimum penalty imposed by the Assessing Officer was rightly cancelled, which does not need any interference on our part, hence, we uphold the same and reject the ground no. 3.
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2017 (10) TMI 61
TDS u/s 194C - freight and services charges and airport expenses without deducting TDS - Held that:- We find that payments made to Skyways Air Services Pvt. Ltd. and Indair Carriers Pvt. Ltd. and since the assessee was acting as their subagent, which fact is supported by the confirmations/TDS certificates of these two parties being lATA agents, and there being no contract between the assessee and the above lATA agents, and on the contrary, the lATA agents treating the assessee as their sub-agent, she was not required to deduct TDS u/s 194C of the Income-tax Act and consequently no disallowance u/s. 40(a)(ia) could be made. Writing the books in a form which does not reflect mere commission but enters the receipts from the exporters on one side and the payments to the lATA agents on the other side in the profit & loss account also do not come in a way to adjudicate the applicability of section 194C between the assessee and the lATA agents. What is important to be seen is whether the assessee has appointed the lATA agents as their contractors, which in this case is missing. On the contrary it is the lATA agents who have appointed the assessee as their sub agent. On the similar ground the remarks of the auditor that no tax has been deducted cannot come in a way to hold that the TDS has not been deducted on the payments made to lATA agents. That could be only partly true in the case of other payments, barring the payments to two lATA agents as the details for the same have not been furnished on the grounds of the assessee having gone out of the business and bed ridden due to acute illness. Therefore, CIT(A) has rightly gave the relief in part, hence, we uphold the same and reject the ground raised by the Revenue.
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2017 (10) TMI 60
Validity of assessment u/s 153A - proof of incriminating material found in search - Held that:- As admittedly no incriminating material relating to these assessment years or as a matter of fact for any of the assessment years were found during the course of search and accordingly, the originally assessed income, i.e., income disclosed by the assessee in the original return of income and reiterated in the return filed in response to notice u/s 153A deserves to be accepted and the same has to be reckoned as assessment of the income in terms of section 153A and no further addition can be made by the Assessing Officer over and above the returned income. Accordingly, the additions made by the AO are deleted on the ground that they are beyond the scope of assessments u/s 153A.
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2017 (10) TMI 59
Jurisdiction assumed u/s 153C - proof of satisfaction recorded by AO issuing notice u/s 153C - Held that:- The satisfaction recorded by the Officer issuing notice u/s 153C is sufficient if the Assessing Officer of the search person and third party are the same. But in the present case the same was not looked into by the CIT(A). Therefore, the order of the CIT(A) is set aside and remanded back to the file of the CIT(A) for a fresh adjudication. Needless to say, the assessee be given proper opportunity of hearing following principles of natural justice.
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2017 (10) TMI 58
Disallowance of deduction u/s 80P(2)(d) - interest income earned by the the appellant on the deposits placed with Co-operative Banks - Held that:- After carefully perusing the provisions of sub-section (4) which has been inserted by the Finance Act 2006 is not applicable in the present case. The same has been withdrawn in the case of co-operative bank and not co-operative societies. In our opinion, the assessee is entitled to deduction u/s 80P(2)(d) of the Act with respect to the income earned on the deposits made with the other co-operative banks. Thus we set aside the order of ld. CIT(A) and direct the AO to allow deduction. - Decided in favour of assessee.
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2017 (10) TMI 57
Revision u/s 263 - commission paid to the non-resident for rendering services outside India is taxable in India - Held that:- On this aspect of the matter, the Division Bench of this Tribunal in the case of DCIT vs. Welspun Corp Ltd [2017 (1) TMI 1084 - ITAT AHMEDABAD] has taken a view in favour of the assessee and has concluded that the payment of commission for services rendered in India is not taxable in the hands of the non-resident recipients of such commission. When this fact was pointed out to the ld. CIT-DR, he did not have much to say except for placing reliance on the stand taken by the learned Commissioner in the impugned order. The stand of the Commissioner in the impugned appeal is incorrect and does not meet our approval. We, therefore, hold that the Commissioner was not justified in invoking his powers under Section 263 of the Act on the basis of his understanding that commission paid to non-resident even for services rendered outside India is taxable in India. The very foundation of the impugned order is devoid of legally sustainable basis. The impugned order is thus quashed and the assessee gets the relief accordingly. - Decided in favour of assessee.
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2017 (10) TMI 56
Penalty u/s 221(1) - non-payment of self-assessment tax under section 140A at the time of filing an income tax return which has been revised subsequently - Held that:- The assessee is, in principle, covered by the scope of the penalty under section 221(1) of the Act in a case in which the though the assessee has not paid the admitted tax liability under section 140A, while filing the original return of income, the assessee subsequently pays the tax on the revised return of income, at the time of filing the revised return of income. We, therefore, answer the question referred to the special bench in affirmative and against the assessee. However, whether the penalty under section 221(1) r.w.s. 140A(1) is actually leviable on the facts of a particular case or not will depend on the facts of that case and depending on, inter alia, the factual finding as to whether or not the default of the assessee was for good and sufficient reasons- something with which we are not really concerned at this stage due to inherently limited scope of the question before the special bench. The matter shall now go back to the division bench for giving effect to our above observations and for deciding the matter afresh in the light of, inter alia, the above stated legal position. Pronounced in the open court today on the 26th day of September 2017.
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2017 (10) TMI 55
Taxability in India - existence of a business connection - P.E. in India - taxability of the income from installation, commissioning and testing activities as well as any function performed by expatriate employees of the group companies seconded to Nortel India - Held that:- Assessing Officer placed reliance on the findings of the earlier Assessment Years in the assessment orders for the assessment years under consideration in these appeals. The issue is no longer Res Integra, and stands squarely covered in favour of the Assessee, and since the High Court had held that no taxability arose under the provisions of Section 9 itself, the issue of existence of permanent establishment becomes academic. We, therefore, while respectfully following the decision of the Hon’ble Jurisdictional High Court in assessee’s own case reported in (2016 (5) TMI 373 - DELHI HIGH COURT) answer the grounds in the appeals preferred by the assessee accordingly in favour of the assessee. Taxation of Software - Held that:- We find ourselves in agreement with the submission made on behalf of the assessee that the embedded software is not royalty and the receipts on account of sale of embedded software cannot be separately brought to tax. Levy of interest under section 234B - Held that:- In view of the finding of the Hon’ble High Court in assessee’s own case reported in (2016 (5) TMI 373 - DELHI HIGH COURT) that no portion of the profits from off shore supplies was taxable in India, levy of interest becomes academic given the absence of any taxable income in India. Non-taxability under the provisions of Domestic Law itself - Held that:- Having regard to the facts and circumstances of the case in the light of the fact that for the earlier assessment years a specific finding was given by the High Court as to the non-taxability of the Assessee under the provisions of the Income Tax Act and the revenue had filed a Special Leave Petition before the Hon’ble Supreme Court which stood admitted involving similar questions, the questions relating to the limiting of benefits is only academic and does not required to be adjudicated specifically. We, therefore, find that the cross objections preferred by the Revenue are liable to be dismissed.
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2017 (10) TMI 54
Addition on account of bogus purchases - Reopening of assessment - CIT(A) deleted the addition observing that assessee has not given copy of statement and other documents by relying on which AO has made addition, thus, the opportunity to cross examination was not given by the AO - Held that:- CIT(A) relied on the decision of the Bombay High Court in case of HR Mehta [2016 (7) TMI 273 - BOMBAY HIGH COURT] and held that not giving opportunity to cross examine the deponents of the statement relied by the AO would render addition made by AO null and void. Even on merits, CIT(A) dealt with the issue threadbare and after taking into account average value addition made by the assessee in respect of each and every item of raw materials so purchased from the alleged suppliers reached to the conclusion that there is no evidence of over invoicing of purchases alleged by the AO. Detailed finding so recorded by CIT(A) are as per material on record and has not been controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings recorded by CIT(A) resulting into deletion of addition . In the result, appeal filed by revenue is dismissed.
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2017 (10) TMI 53
Payment of gas transmission charges are not subject to levy of TDS, there is no question of disallowance u/s 40(a)(ia) of the Act Education cess - whether a disallowable expenditure u/s 40(a)(ii) and not allowable expenditure u/s 37 - Held that:- The basis character of education cess as intended by the legislature is tax which is levied on the profits or gains of the business and given that such tax has already been provided in section 40(a)(ii) as not an allowable deduction, there was nothing more that was required or expected from the legislature. The levy of wealth tax, securities transaction tax and fringe benefit tax are not on the profits or gains of business or profession, hence, there was a necessity felt by the legislature and which was specifically provided for.In light of above discussions and the facts and circumstances of the case, we are of the view that ld CIT(A) has rightly disallowed the claim of education cess as an allowable deduction under section 40(a)(ii) of the Act. In the result, ground taken by the assessee is dismissed Disallowance of expenses claimed to be crystallized during the year under consideration - Held that:- Firstly, regarding amount of ₹ 9,43,693, it relates to income under the co-marketer arrangement which was booked in excess in the previous financial year and now been reversed during the current financial year. It is thus not an expense but a reversal of income excess booked earlier and now been rectified during the year under consideration. There is thus no question of disallowance of the same. The other expense relates to godown rent for which a request was made by the assessee to NAFED for waive off in the previous financial year however, the final decision of NAFED was received by the assessee during the subject financial year wherein NAFED refused to waive off the rent. Since the assessee didn’t lift the material from the godown of NAFED during the previous financial year, it was contesting its liability to pay the godown rent which was finally crystallised during the year under consideration and accordingly, the same was claimed as an allowable expenditure. Similar is the position regarding travel bill the same was finally traced and processed in December 2008. There is no dispute that all these expenses have been incurred for the purposes of the business and all are duly supported by verifiable documentation which has been produced and available on record. Further, it is not the case of the Revenue that the tax rates have changed from last year and any prejudice have been caused to the Revenue. In the entirety of facts and circumstances of the case, we set-aside the order of the lower authorities and the AO is directed to allow these expenses as an allowable expenditure Deduction against sale proceeds of mining rights - Held that:- Directions of the Coordinate Bench in AY 2009- 10 have to be read and understood as directing the AO to verify the claim of the assessee as to whether such cost are included in the overall cost of mining rights or not and where it is found to be so included, allow the claim of the assessee to claim deduction of such costs against the sale of mining rights. Such directions are therefore directions subject to necessary verification at the end of the AO. Given that, in the instant case, the AO has not verified the said expenses but the ld CIT(A) has carried the necessary verification and has come to correct conclusion that ₹ 86,08,460/- related to deep excavation and road work were related to mining operation and treated as included in sale of mining rights whereas misc. capital expenses of 87,45,400/- in absence of details cannot be treated as related to mining rights. We therefore do not see any infirmity in the order of the ld CIT(A) and the same is sustained. Disallowance of interest on loan on account of investment in Mutual Funds - Held that:- Borrowed funds in form of NCDs and cash credit facility have been utilised to an extent for the purposes of making investment in the mutual funds units and a clear nexus has thus been established between the borrowed funds and the investment in the mutual fund units. Determination of interest on such borrowed funds which have been utilised for making the investments in the mutual fund units - As gone through the findings of the ld CIT(A) and confirm his findings regarding disallowance of ₹ 683,736 for the reason that no specific source has been pointed out by the assessee for making the subject investments in the mutual fund units and it has been established that the amount so invested has been drawn out of the borrowed funds withdrawn from the cash credit account. We also confirm the findings of the ld CIT(A) regarding disallowance of ₹ 387,800 which is the actual interest charged by the HDFC bank on the cash credit account during the period Dec 2008 to March 2009 when the major investment has been made by the assessee in the mutual fund units and the funds have been withdrawn from the cash credit account. Disallowance of interest on NCD - Held that:- We find that the ld CIT(A) has worked out the interest without taking into consideration the fact that these NCDs of ₹ 60 Crores were availed on 10.12.2008 and were repaid between 11th to 15th December and NCD’s of ₹ 50 crores were availed on 29.01.2009 and were repaid on 9th February 2009. The interest disallowance has therefore to be restricted for the period NCDs were availed and repaid. The matter is accordingly set-aside to the file of the AO for the limited purposes of working out the interest on NCDs and limit the disallowance to that extent in relation to NCDs. Addition of interest - nexus between the borrowed funds and the investments in the subsidiary company - Held that:- As gone through SBH’s bank statement for 19.08.2008 available at APB 242 and find that both opening and closing balances on 19.08.2008 were negative which means that there were withdrawals in form of borrowings from the bank for the purposes of making the subject investment. Further, regarding investment of ₹ 5.24 crores which was made on 03.04.2008, the assessee has submitted that the same has resulted into a negative balance of ₹ 2.13 crore on that day in the bank account. We have gone through SBI bank statement for 03.04.2008 available at APB 219 and find that there was positive bank balance on 03.04.2008 of ₹ 3,10,91,392 prior to making investment of ₹ 5.23 Cr and after the investment, the bank balance was turned into negative figure of ₹ 2,13,02,722 which means that there were withdrawals in form of borrowings from the bank to the extent of ₹ 2,13,02,722 as per assessee’s own submissions. No infirmity in the findings of the ld CIT(A) who has rightly established the necessary nexus between the borrowed funds and the investments in the subsidiary company and has disallowed the interest of ₹ 37,65,316 on such borrowed funds.
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2017 (10) TMI 52
TPA - selection of comparable - selection criteria - study of diverse activities - Held that:- Assessee is engaged in providing analytical solutions to its AEs to lower the cost of customer acquisition, to improve brand performances, improve multi dimensional reporting, understand consumer behavior, and many other analytical services, thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparability. Disallowance u/s 37(1) for ESOP compensation expenses - Held that:- The issue now stands covered in favour of the assessee by the decision of Special Bench in the case of Biocon Limited v. DCIT [2013 (8) TMI 629 - ITAT BANGALORE]. No contrary decision of higher judicial forum on the issue of allowability of ESOP expenses has been shown to us. We note that the above decision of the Special Bench is germane and was not before the authorities below. Accordingly, we remit the issue to the file of the Assessing Officer. The Assessing Officer shall consider and quantify the amount allowable as per the decision and guideline mentioned in the decision supra.
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2017 (10) TMI 51
Net profit determination - income from the transport business of trucks - Held that:- CIT(A) has rightly held that the case of assessee required rejection of book result by invoking the provisions of section 145(3) of the Act. Consequently, the income was required to be determined by applying the net profit rate. Therefore, in the interest of justice, it was fair and reasonable to estimate the net profit by applying the rate of 3.0% on sale of tyres as adopted by the AO in earlier years as a matter of consistency and rate of 2.0% on the freight receipts. The adopted rate of 2% as the case of M/ s. Siddharth Road Carriers, Faridabad pertain to A.Y. 2005-06 and not exactly to the year under appeal as well as on the reason that the turnover of the case of assessee is almost half of M/s. Siddharth Road Carriers, Faridabad, for which the net profit margin is likely to be higher due to lesser turnover. Consequently, the income of ₹ 96,977/- in the tyres business is estimated by applying the rate of 3% on total sales of ₹ 32.32 lacs and income of 4,93,434/- is estimated by applying the net profit rate of 2% on the, total freight receipts of ₹ 246.71 lacs. Disallowance of expenses and depreciation - Held that:- When the books of account are rejected and income is computed by applying the net profit rate, the same books of accounts cannot be made the basis for making disallowance of specific expenses and the claim of various expenses including depreciation stand allowed. Hence, the addition to the extent of ₹ 5,90,411/- was rightly confirmed and the balance additions made by the AO under specific heads was rightly deleted
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2017 (10) TMI 50
Disallowance u/s 40(a)(i) - non deduction of TDS - purchase of software - payments made by the assessee for purchase of a copyrighted article being software product - whether remittance made by the assessee to IMTF, Switzerland was in the nature of payment for royalty - CIT-A held a conviction that the payment made by the assessee to the company for allowing the use of software could not be characterized as royalty - Held that:- The coordinate bench of the ITAT, Mumbai in the case of DDIT Vs. Solidworks Corporation (2017 (3) TMI 331 - ITAT MUMBAI ) concurred with the view arrived at by the High Court of Delhi in the case of Director of Income Tax Vs. Ericsson A.B. [2011 (12) TMI 91 - Delhi High Court], wherein it was held that when software is incorporated in a CD it becomes a tangible property and the payment made for acquiring the same is not a payment by way of royalty. We further find that a similar view had also been arrived at by the coordinate bench of the ITAT, Mumbai in the case of ACIT Vs. Sonata Information Technology Ltd. (2013 (9) TMI 519 - ITAT MUMBAI). We thus being of the considered view that no infirmity does emerges from the order passed by the CIT(A) Addition in respect of guarantee commission - Held that:- We are of the considered view that as the issue pertaining to the taxability of guarantee commission is covered in favour of the assessee by the earlier orders of the coordinate benches of the Tribunal in the assesses own case for AY’s 2002-03, 2005-06 and 2008-09, therefore, having no reason to take a different view, we respectfully follow the same. Expenses allocated by the Head Office (H.O) and other Branches of the assessee to its Indian Branch - Held that:- We have deliberated on the issue under consideration and find that the Tribunal in assessee's own case had held that the payments made by the assessee to its H.O, viz. Societe Generale, Singapore were neither Royalty or Fees for technical services, but were pure reimbursements for services, viz. data communication charges, Annual Miscrosoft Enterprise Software product billing and true up charges incurred etc., rendered for its Indian branch. We being of the considered view that the issue involved in the present appeal before us is squarely covered by the aforesaid order of the Tribunal, therefore, respectfully follow the same. The Ground raised by the revenue before us are dismissed. Taxability of the interest paid by the assessee to its H.O and other overseas branches on borrowings - Held that:- We have deliberated on the issue under consideration and are persuaded to be in agreement with the ld. A.R that the same is squarely covered by the order passed by the Tribunal in the assessee’s own case for AYs: 2005-06 and 2006-07 as held that the interest paid by the Indian branch/Permanent establishment of the foreign bank to its H.O and other overseas branches is not chargeable to tax. Disallowance under Sec. 14A of the expenses relatable to the interest paid by the assessee P.E to its H.O and Overseas Branches - Held that:- We are of the considered view that now when we have concluded that the interest of ₹ 15,86,609/- paid by the assessee to its H.O and other Overseas branches on borrowings is not liable to be brought to tax, therefore, as a necessary corollary, interest paid in respect of the deposits on which such interest was received would also be liable to be disallowed under Sec. 14A. We are persuaded to be in agreement with the view taken by the coordinate bench of the Tribunal while disposing of the appeal of the revenue in the assesses own case for A.Y.2001-02 as well as the order passed by the Tribunal in the case of Oman International Bank SAOG Vs. Jt.DIT (International Taxation) (2014 (1) TMI 537 - ITAT MUMBAI). The A.O shall during the course of the set aside proceedings adjudicate the issue afresh in the backdrop of the facts involved therein, though keeping in view our aforesaid observations.
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2017 (10) TMI 49
TPA - selection of comparable - selection criteria - Held that:- The assessee under the provision of software research and development services carries out R&D services for its AE for the development of software products to its CDS utilizing R&D technology of CDS only. CDS specifies R&D services to be performed; products to be developed or used; timeline for completion and specific result to be achieved. The entire conceptualizing of the marketing strategy for sales of its products and services, securing of orders of its products are done by CDS and not by the assessee. The assessee company is purely a ‘captive service provider’ and does not undertake any kind of marketing or development functions. Conceptualization of services and determination of exact scope of work, which is to be performed by the assessee, is responsibility of CDS. Even the quality control, testing of the products is all done by CDS. Now, if we analyze the functions of the assessee, which is purely R&D being a captive unit companies functionally dissimilar with that of assessee need to be deselected from final list of comparability. T.P. Adjustment on account of interest on outstanding receivables - Held that:- We direct the TPO to first of all examine the working capital adjustment worked out by the assessee vis-à-vis the comparables and then to see whether the assessee has factored the impact of the receivables on the working capital and thereby pricing/profitability vis-à-vis that of the comparables and see the impact of capital adjustment on outstanding receivables. Foreign exchange fluctuation cost - whether is operating or not? - Held that:- As regard the issue whether forex loss is to be regarded as operating cost or not, is no longer debatable issue as foreign exchange gain or loss relatable to an international transaction is always part and parcel of such underlined transaction. When an international transactions are entered into with the AE, one of whom is resident of other contracting state and the transactions are in foreign currency, then any gain or loss on account of forex is inherent item of cost or profit. For the purpose of determining the profit realized on the international transaction, all operating costs incurred for the purpose of providing the services to the AE have to be taken into account. Therefore, no question arises whether the foreign exchange gain or loss is non-operating in nature or not. Thus, we hold that forex loss or gain is operating costs or gain and accordingly, we allow this ground raised by the assessee. Director’s remuneration between STP unit and non-STP unit - Held that:- As admitted by both the parties that this matter had come for consideration before the Tribunal in the assessee’s own case in assessment year 2008-09 this matter has been remanded back to the file of the AO for fresh examination.
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2017 (10) TMI 48
Lack of jurisdiction of the Assessing Officer in passing the assessment order - stand of the Department that jurisdiction of the Assessing Officer changes when PAN is transferred - Held that:- In the present case, the jurisdiction is transferred by Commissioner of Income Tax-3, Mumbai on 19-12-2014. The copy of order transferring jurisdiction was sent to the DCIT 3(1)(1), Mumbai and to other concerned officials but not to ITO 3(1)(3) who passed assessment order in the case of assessee. If the information given in jurisdiction history details available on official website of the Department is co-related with the order of Commissioner of Income Tax-3, Mumbai, it would be clearly evident that even on 19-12-2014 the Assessing Officer who passed the assessment order had no jurisdiction over the file of assessee. Even if it is presumed that he had concurrent jurisdiction, he ceases to have jurisdiction after passing of the order by Commissioner of Income Tax-3, Mumbai on 19-12-2014, transferring the jurisdiction from Circle 3(1)(3), Mumbai to Circle 1(1), Pune. Transfer of PAN on 29-12-2014 is consequential to the order transferring jurisdiction. The PAN follows the jurisdiction. It is not the jurisdiction that follows the PAN. The effective date of transfer of jurisdiction is the date of order passed by Commissioner of Income Tax and not the transfer of PAN. Any order or decree passed by any court or quasi judicial authority without jurisdiction is a nullity. A defect of jurisdiction, whether it is pecuniary or territorial strikes at the very authority of court passing such order. The defect in jurisdiction is an incurable defect which cannot be cured by consent of both the parties to lis. In the present case the effective date of transfer of jurisdiction is 19-12-2014 i.e. the date of order by Commissioner of Income Tax-3, Mumbai transferring the jurisdiction. The assessment order passed by the Assessing Officer at Mumbai on 24-12-2014 i.e. after the date of transfer of jurisdiction, hence it suffers from lack of jurisdiction and hence, is null and void. - Decided in favour of assessee.
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2017 (10) TMI 47
Validity of assessment u/s 153C - revision u/s 263 - Held that:- As it is noticed that the assessee is challenging the validity of the assessment completed u/s 143(3) rws 153C of the Act on the ground that there was no incriminating material found during the course of search and also that the order u/s 143(3) rws 153C of the Act has been passed without recording of satisfaction by the AO of the assessee as well as the AO having jurisdiction over the searched party. Since the appeal before us is against the order u/s 263 and not against the assessment order itself, we are of the opinion that the validity of the assessment cannot be challenged in this appeal before us. As already observed that assessment order dated 31.12.2007 has already become final. Such being the position we agree with the contention of the assessee that the already settled facts cannot be disturbed by an order u/s 263 by revising a subsequent assessment order. Therefore, we allow the additional ground of appeal filed by the assessee. Claim of TDS from the rental income declared by assessee being her share of 1/3rd of the total rent from the property - assessee has joint ownership of the property - Held that:- The assessee had submitted before the CIT that the assessee has joint ownership of the property and therefore, is eligible to receive only 1/3rd of the rental income and therefore, she has offered the said income in her return of income but since the TDS can be credited only to the account of one person, the assessee has been credited with the TDS and the assessee alone has claimed the TDS for the entire rental income in her hands. The assessee has also filed before us the returns of income of all the three owners of the property, i.e. the assessee, her husband Shri Nama Nageswara Rao, individual and HUF of Nama Nageswara Rao, to demonstrate that though their respective shares of rental income has been offered by all the three parties in their respective returns of income, the TDS has been claimed only by the assessee and submitted that there is no loss caused to the Revenue by allowing the entire TDS in the hands of the assessee. We find that all these documents were also filed before the CIT. However, the CIT has directed the AO to verify these documents and redo the assessment. The CIT ought to have gone through the documents to satisfy himself as to whether there was any prejudice caused to the Revenue. In view of the same, even on merits, the order of the CIT is not sustainable. However, in view of our allowing the additional ground of appeal, the order u/s 263 is not sustainable both on the technical issues as well as on merits. - Decided in favour of assessee.
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2017 (10) TMI 46
Valid notice u/s 143 - mode of serving notice - whether posting of the notice issued under section 143(2) a day before the expiry of the prescribed limitation would be a valid service when admittedly the notice is received by the assessee after expiry of the limitation so prescribed in this behalf? - assessment barred by limitation - Held that:- The assessing authority is bound by Circular of the Central Board of Direct Taxes. The Central Board of Direct Taxes Circular No. 549 dated October 31, 1989 states in clear terms that the Assessing Officer is required to serve the notice on the assessee within the prescribed period, if a case is picked up for scrutiny. It follows that if an assessee, after furnishing the return of income does not receive a notice under section 143(2) from the Department within the aforesaid period, he can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return. Therefore, the assessee succeeds on this ground. The assessment framed by the Assessing Officer is barred by time as the requisite notice under section 143(2) was not served on the assessee within the time as prescribed by law. Respectfully following the judgment of the hon'ble Delhi High Court rendered in the case of CIT v. Bhan Textiles (2006 (9) TMI 129 - DELHI High Court ), the draft assessment order dated March 28, 2013 cannot be sustained, the same is hereby quashed being barred by time. - Decided in favour of assessee.
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2017 (10) TMI 45
Bogus purchase - survey conducted u/s. 133A - assessee did not produce stock register - CIT-A deleted the disallowance - Held that:- The assessee filed relevant details in respect of all the three parties. The CIT-A examining the same found that Pradhan Tanners is registered in VAT and as such claimed refund from VAT Authorities. The payments were made through account payee cheques. We find that all the details i.e. stock register, claim of VAT payments, ledger copy and statements u/s. 133(6) of the Act were on record available before the AO/CIT-A. But, the AO proceeded to make addition on suspicion that the assessee did not produce stock register and the receipts showing purchases from the said three parties were bogus and incorrect. We find that the CIT-A examined all the details of said three parties and found satisfied that all the transactions are duly recorded in the books and disclosed the same in the return filed after the date of survey. We further find that all the transactions with the said parties were made through account payee cheques and the same were confirmed under 133(6) of the Act proceedings by the said parties. Therefore, we find no infirmity in the impugned order of the CIT-A and it is justified Addition on account of difference found in stock - difference of stock value as found as per books maintained by the assessee and stock found physically as on the date of survey - assessee explained such difference as the production entries were not recorded upto the date of survey and it was the practice to record the same at the time of sales - Held that:- AO made the addition on account of difference between the stock found on physical verification and recorded in the regular books of account as on the date of survey, which is not justified. The assessee is running a 100% export oriented unit and no incriminating material was found to show that the assessee had suppressed sales of goods. We further find that the AO has not brought on record any material to find fault in the explanation offered by the assessee for such difference by way of reconciliation statement furnished by the assessee. We find that the assessee has been following the same method of maintaining of stocks as followed in the earlier years. We find that before the AO the assessee has provided every detail of raw materials and production thereon and practices adopted in their business, which were not accepted by the AO on the ground that different in stock found as per books and as on the date of survey. We find that the submissions of the assessee made before the AO and CIT-A were same and found reasonable and acceptable to the facts of the case. Revenue appeal dismissed.
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2017 (10) TMI 44
Penalty levied u/s 271(1)(c) - non mentioning of specific charge - Concealment of particular of income OR furnishing of inaccurate particulars of income Held that:- AO is satisfied that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. The concealment of particulars of income and filing inaccurate particulars referred in section 271(1)(c) of the Act denote different connotations. This distinction was discussed by Hon’ble Apex Court in case of Dilip N. Shroff (2007 (5) TMI 198 - SUPREME Court) and in case and in case of T. Ashok Pai (2007 (5) TMI 199 - SUPREME Court) werein held that, if two expression i.e. concealment of particular of income and furnishing of inaccurate particulars of income have to different connotations, it is imperative for the assessee, that assessee be made aware of as to which of one action is being initiated against him for levy of penalty u/s. 271(1)(c) of the Act. The assessee has placed on record copy of notice u/s 274 r.w.s. 271(1)(c) of the Act dated 26.11.2007. The notice was issued by AO on a standard format, without striking out irrelevant clause therein. The said notice referred to both limbs of section 271(1)(c) of the Act. Thus, there was no clarity in mind of AO as to which charge is being proposed/initiated against the assessee. This infirmity in the notice was sought to be demonstrated as reflection of non-application of mind by ld. AR of the assessee - Decided in favour of assessee.
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2017 (10) TMI 43
Exemption u/s 11 - Charitable purpose u/s 2(15) - registration u/s 12AA providing infrastructure facilities including handling, storage and clearance of import and export cargo of diamonds, precious, semi-precious stones, etc. - Held that:- the registration under section 12AA of the 1961 Act of the assessee cannot be cancelled by the learned Director of Income-tax (Exemption) and the same is hereby restored with effect from the date it was cancelled by the learned Director of Income-tax (Exemption) vide the impugned order of the learned Director of Income-tax (Exemption) which is under challenge before us. - Disallowance of outstanding liability of IAAI handling charges - Held that:- Contention of the assessee that it has written back the outstanding liability towards handling charges payable to IAAI in the financial year 2010-11 i.e. the assessment year 2011-12 on the grounds that IAAI has divested and transferred its operations to Mumbai International Airport Limited and hence the liability of the assessee ceased, does not inspire confidence unless positive and cogent evidence is brought on record to that effect as normally when the operations are transferred/divested, then adequate provisions are made in the agreements to preserve all rights in existing agreements which are either taken over by successor or are retained by transferor but to say that the liability has ceased just because IAAI divested its operations in favour of the Mumbai International Airport Limited cannot be accepted unless positive cogent evidence is brought on record to that effect to prove the said contention. Thus matter need to be set aside to the file of the Assessing Officer for de novo determination. Outstanding liability of Cost recovery customs - Held that:- The assessee once agreed to bear these costs, thereafter, cannot interfere with the Government of India in discharging its duties, obligation and responsibilities towards performance of the sovereign functions of the State under the Customs Act, 1962, unless it is brought on record that decision of the Government of India in deploying additional staff and officers is unconscionable or is suffering from perversity. Nothing of that sort is emanating from records and pleadings before us. These functions under the Customs Act, 1962 to be performed by the Government of India are sovereign functions of State and it is the responsibility of the Government of India to properly discharge its duties, obligations and responsibilities as mandated under the Customs Act, 1962. Further, it has now come on record that the outstanding amount payable by the assessee to the Government of India is now recovered by the Government of India through encashment of bank guarantee, the disallowance made by the Assessing Officer, thus, cannot be sustained. For limited verification of the claim of the assessee that the entire liability towards customs stood discharged, we are remitting the matter back to the file of the Assessing Officer for limited verification. Thus, the additions sustained by the learned Commissioner of Income-tax (Appeals) is ordered to be deleted, while relief granted by the learned Commissioner of Income-tax (Appeals) is hereby confirmed, subject to the limited verification by the Assessing Officer as indicated above. Principles of mutuality applicability - Held that:- Both the parties fairly agreed that this matter be restored to the file of the learned Commissioner of Income-tax (Appeals) for fresh adjudication of the issue on the merits after giving opportunity to the Assessing Officer for necessary examination, enquiry and verification of the additional claim of application of the principles of mutuality as well of evaluation of additional evidences filed by the assessee, and thereafter the submission of the Assessing Officer's remand report to the learned Commissioner of Income-tax (Appeals). As no opportunity was granted to the Assessing Officer to submit his remand report, we are inclined to set aside the issues in the appeal to the file of the learned Commissioner of Income-tax (Appeals) for fresh adjudication of the issues on the merits after granting opportunity to the Assessing Officer in terms of rule 46A(3).
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2017 (10) TMI 42
Claim of loss of transfer of security from ‘available for sale’ category to ‘held to maturity’ category by the appellant bank in accordance with direction/ circular of Reserve Bank of India.” allowed. We are in agreement with the arguments of assessee and the issue of loss on inter-transfer of securities of decided in favour of Assessee. The issue of depreciation on securities at the close of Financial Year is also decided in favour of assessee Claim of the assessee through revised return which though became belated cannot be denied as assessee was rightly entitled to the allowance in view of the decisions of Hon’ble Supreme Court in the case of United Commercial Bank [1999 (9) TMI 4 - SUPREME Court]. Broken period interest disallowance allowed. Disallowance of premium paid on account of ‘Key Man Insurance Policy’ - Held that:- What can be sold as a ‘life insurance policy’ taken by a business entity for its employee, former employee or any other person important for business of such an entity is between the insurance regulator and insurance service provider. However, once it has been sold as a life insurance policy on the keyman to the business, as long as it is in the nature of life insurance policy, whether pure life cover or term cover or a growth or guaranteed return policy, it is eligible for coverage of Section 10(10D). It is not open to us to infer the words which are not there on the statute and then proceed to give life and effect to the same. We had detailed discussions about this aspect of the matter in paragraph numbers 10 to 15 above, and, as we have held there, such an exercise is not permissible under the scheme of the Act. What IRDA regulates is issuance of life insurance policies by the insurance companies to the policyholders on the lives of its employees, former employees and key personnel but once such a policy is issued it cannot but be treated as a ‘keyman insurance cover’ as it essentially meets the requirement of Section 10(10D) because it is a “a life insurance policy taken by a person on the life of another person who is or was the employee of the firstmentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person”. The mandate of Section 10(10D) does not put any further tests, nor can we infer the same. The issue of “Key Man Insurance” is also decided in favour of Assesssee.
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Customs
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2017 (10) TMI 41
Export of non- Basmati rice - Prohibited item - Section 113 (d) and (i) of the Customs Act, 1962 - whether the test report of the RAL can form the legal basis for determining whether the consignment sought to be exported by the Respondent conformed with the standards prescribed by the DGFT for basmati rice? - Held that: - the consistent policy of the central government was to allow export of PUSA 1121 although it was a non-basmati variety. Some confusion arose from the reference to ‘PUSA 1121’ as ‘Basmati Rice’, by inserting the word ‘basmati’ either as a prefix or as a suffix to PUSA 1121. If indeed PUSA 1121 was basmati rice then clearly its export was never prohibited. However, it does appear that at one stage it was decided to call the said variety of rice ‘PUSA Basmati 1121’ and specify a slight change in grain length as explained in para 7 of the affidavit filed by DDGFT. In the circumstances, as long as the consignment of PUSA 1121 sought to be exported by the Respondent satisfied the said grain length parameters, which it in fact did, the Respondent ought to be given the benefit of doubt even if the description of the variety was shown as PUSA Basmati 1121. Confiscation set aside - appeal dismissed - decided against Revenue.
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2017 (10) TMI 40
Advance Authorisation scheme - petitioner applied for issuance of an advance authorisation for duty free import of goods into India against supplies to be made to the purchasers - the petitioner was required to export a prescribed quantity of the said products for validly redeeming the Licence - It is the specific case of the petitioner that this export criteria was met by supplying the requisite goods to the purchasers against the Order, copy of which is at Annexure A . However, due to an inadvertent error, while having issued all the other necessary supporting documents, the petitioner omitted to file the Bills of Export corresponding to the said supplies at that relevant point of time - the petitioner made an application, invited the said advance authorisation and which is conditional. Held that: - the petitioner seeks to term the lapse on its part as procedural lapse of generating Bill of Export and as per Policy Relaxation Committee what is demanded is proof of export obligation being fulfilled. This is a clear case where on one hand the petitioner accepts its lapse but terms it as procedural and on the other hand despite this lapse there is adequate proof of fulfilment of export obligation available on record. The petitioner was not being denied the benefit or relief only on the ground that they have failed to forward the Bill of Export. They have been specifically informed that the request for redemption of the advance authorisation cannot be granted because there is no proof of fulfilment of the export obligation - the petitioner having duly supplied the copies of the ARE-1 forms, it is only a further technical objection, of the said form not mentioning the advance authorisation number in the initial copies of the same but supplied later on, could have been condoned. It is not as if ARE-1s have not been filed. It is not as if ARE-1s have not been filed. It is not as if there is a doubt about the copy of ARE-1s or the authenticity or genuineness thereof. It is not anybody's case that there are no ARE-1 forms on record. Therefore, these forms were available. Therefore, the stand that there is no proof of export obligation being discharged, could not have been maintained once the petitioner was told to approach the Policy Relaxation Committee and it was empowered to relax any of the technical requirements or procedural matters. Equally, it was empowered to clarify in the facts of this case at least that the documents forwarded by the petitioner can be accepted as proof of export. Once we have held on facts that the requirement is duly fulfilled, then, we do not think that it is necessary to advert to the provisions of the SEZ Rules and particularly Rule 30 thereof. All the more when supplying goods from the domestic tariff area to SEZ is taken as equivalent to an export of goods physically from this country to abroad. Once such an act of the petitioner is taken to be an export, entitling them to the benefits of the advance authorisation and the scheme in respect thereof, then, all the conditions stipulated in that authorisation ought to be taken as fulfilled. Therefore, the Policy Relaxation Committee, as an after thought, could not have directed the petitioner to get the case regularised as per provisions of the Handbook of Procedures 2009 -2014, Vol I or the SEZ Rules. We do not think that the petitioner was required to be visited with any adverse consequences, including issuance of Show Cause Notice - petition allowed - decided in favor of petitioner.
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2017 (10) TMI 39
Return of Earnest Money Deposit - public auction - a detailed inventory list was demanded by petitioner, on non-production of which petitioner cancelled the contract and demanded return of earnest money - Held that: - the nature of transaction entered into between the petitioner, Customs Department and the Professional Auctioneers is a private contract and merely because, goods were auctioned, for and on behalf of the Customs Department, the same cannot be construed as a statutory contract so as to make the provisions amenable to the jurisdiction of this Court under Article 226 of the Constitution of India. The demand made by the petitioner is purely an afterthought, because at no particular point of time, the petitioner sought for a detailed inventory list and with full knowledge, having participated in the auction and having been declared as the highest bidder and remitted the Earnest Money Deposit, the present attempt of the petitioner is to, somehow, wriggle out of the transaction and at the same time, to get back the Earnest Money Deposit. Petition dismissed being not maintainable.
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2017 (10) TMI 38
Issuance of SCN - case of Revenue is that the petitioner was unsuccessful before this Court as the writ petition filed challenging the said order was also dismissed and as of now, the petitioner cannot insist upon issuance of show cause notice - Held that: - since the writ petition has been pending from 2005, this Court of the view that the petitioner can be granted an opportunity by submitting a reply to the notice dated 30.08.2005, in so far as it demands interest - petition disposed off.
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2017 (10) TMI 37
Grant of CHA license - Regulation 9 of the Customs House Agent Licence Regulation, 2004 - Central Board of Excise and Customs made a new Regulation for Customs House Agents in the year 2004, in short referred to as CHALR, 2004. Regulation 9 of CHALR 2004 prescribes passing of an examination, in terms of Regulation 8 of the new Regulation 2004, as a condition precedent for grant of licence under Regulation 9 of CHALR 2004 - Subsequent to the formulation of CHALR 2004, appellants denied grant of licence on the grounds inter alia that the respondent cleared the examination only under the 1984 Regulation. Held that: - Circular No.6/2013-Cus., dated 6.2.2013 makes it abundantly clear that, those who have passed the examination under 1984 Scheme, need not have to appear for examination again for CHALR, 2004 - When Government of India, have decided to delete para 8.1 and 8.2 of Circular No.9/2010-Customs, dated 8.4.2010, with an implication that Customs shall no longer insist that persons who have passed the examination under the 1984 Regulations have to additionally qualify in the subjects contained in the said circular dated 06.02.2013, contentions to the contra, made in the instant writ appeal, do not merit any consideration - denial of grant of license withheld - appeal dismissed - decided against appellant.
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2017 (10) TMI 36
Confiscation of seized Gold - penalty - Held that: - the appellant have discharged burden to establish that the Gold under seizure was legitimately possessed by them and the same was legitimately cleared through filing Bill of Entry and payment of Customs duty as required under Section 123 of the Customs Act, 1962 - SCN not sustainable - confiscation and penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 35
Violation of import condition - respondent had imported and supplied diesel oil/bunkers to various shipping vessels which were not used for fishing purposes but were detailed for taking survey for ONGC and used in the Exclusive Economic Zone (EEZ) of India - Held that: - the issue of using duty free bunkers by fishing vessels when they are used as chase boats for either seismic operations or for oil exploration activities in the EEZ, the Tribunal in the case of SAGARIKA SEA CRAFTS LTD. Versus COMMR. OF CUS., VISAKHAPATNAM [2009 (11) TMI 745 - CESTAT BANGALORE] has held that these duty free bunkers cannot be charged to customs duty even though they were procured for fishing purposes - appeal dismissed - decided against Revenue.
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Corporate Laws
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2017 (10) TMI 33
Oppression and mismanagement - sale of immovable assets validation - Held that:- It is evident that though petitioner was promoter member/director and was having 50% shareholding in the R1 company but entire decisions to sell off the movable and immovable assets of the company were taken without any information to the petitioner. It is also surprising that how sale deed of the fixed assets of the company was executed without petitioner's signature. It requires in-depth investigation. The entire act of disposing of the company's assets without any proper Board meeting, without any information, itself proves the act of oppression and mismanagement by the respondents against the petitioner. Though the sale of immovable assets which have been effected in the year 2008-2009 cannot be invalidated at this stage by this tribunal. But special audit of the company accounts from 8.9.2008 i.e. the date, when the possession of the company was returned to respondent no. 2 from the possession of Official Liquidator, by order of the Hon'ble High Court is necessary so that after getting the report of special audit, appropriate order may be passed for distribution of assets/sale proceeds between parties. On the above basis, it is proved Respondents has committed acts of oppression and mismanagement against petitioners. This petition deserves to be allowed. It also appears that special audit and Investigation into the affairs of the R-1 company is also necessary to find out every detail of sale.
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Insolvency & Bankruptcy
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2017 (10) TMI 34
Corporate Insolvency Resolution Process - Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - eligible debt - Held that:- Only after completion of the pleadings as well as arguments and when the Petition was reserved for orders, on 01.08.2017, a written submission dated 10.08.2017 it is seen had been filed on the part of the applicant in which a copy of the alleged takeover agreement dated 04.11.2016 was sought to be also included. This Tribunal is not inclined to take the said document into consideration as the same was filed subsequent to the order having been reserved and the same was not made available to the other side and thereby deprived of an opportunity to deny and counter the same. It is another matter that the respondent/'Corporate Debtor' has taken a plea that even after the alleged takeover date, the 'Corporate Debtor' claims that financial transactions have taken place between the said firm M/s J.P. Engineers and the 'Corporate Debtor' and that the said firm continues to exist even as of today. However, in the exercise of our limited jurisdiction we are not venturing into such exercise to ascertain the existence or not of the firm M/s J.P. Engineers. Finally the reconciliation statements on which great reliance has been placed, in itself shows that the parties have not yet arrived at a definitive figure which can be considered as an ascertained debt payable as in the case of say a confirmation of balance statement or acknowledgment of debt given by a Debtor to a Creditor and which payment has been defaulted by the 'Corporate Debtor, thereby giving rise to CIRP under IBC, 2016. Even otherwise, in view of the summary jurisdiction as well as limited time period enjoined by IBC, 2016 on the Tribunal to either admit or reject, parties cannot seek to convert the proceedings before this Tribunal into a civil court proceeding akin to a trial making this Tribunal to go through each and every entry as reflected in the respective account books and ascertain whether there is a 'debt' and a default has been committed warranting the initiation of CIRP
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PMLA
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2017 (10) TMI 32
Provisional attachment - offence under PMLA Act - whether grant of loan itself by the Bank cannot be termed criminal activity in respect of a scheduled offence? - Held that:- In the present cases, it is clear that in order to treat the loan proceeds obtained by the borrower from the Syndicate Bank as the proceeds of crime, as done by the ED and the Adjudicating Authority is not correct. The said money is not illicit or tainted money, nor is the Bank a party to the criminal conspiracy hatched between the manager of the Bank and the borrower. The Bank is an innocent third party who is to be treated as a victim of the crime, if at all. The money received by the appellants were pure and untainted. It was a public money. It is wholly immaterial if one of the employee is mixed up with the appellant and helped them in order to obtain the loan by virtue of mis-presentation because the fact of the matter is that the money has gone to the appellants from the pocket of the bank and it was public money. The same cannot blocked till the trial in the prosecution complaint before the Special Court is over as it may take number of years. The said proceedings are to be continued even otherwise. The complainant in the criminal case is the Bank who is victim. Had the Bank not filed a criminal complaint, perhaps the conspiracy might not have been discovered. Further if in a case like the present if the security of the Bank, is treated as proceeds of crime and is confiscated under the Act, in future, no Bank in such circumstances would make a complaint to the authorities. The trial in the prosecution complaint would take number of years. The victim cannot wait for such a long period of time, although after trial and final determination, the victim is entitled to recover the amount by selling immovable properties u/s 8(8) of the Act. The intention of the Act could not have been to affect a third person or an innocent person as is sought to be done in the instant case. If the impugned order is correct, it would be a patently absurd situation that the only substantial securities of the bank are not available for the benefit of Bank but are vested in the Central Government as proceeds of crime. Such a result does not advance the objects of the Act. There seems to be no decision in which the matter has been considered in the manner as sought to be explained here. The Bank partly relies on the case of Indian Bank Vs. Government of India and M/s Palpap Ichinichi Software International Ltd., [2012 (7) TMI 1007 - MADRAS HIGH COURT ], wherein it was held in similar circumstances that Sections 5, 8 and 9 of the Act cannot be used by the authorities to inflict injury of the victim on the crime i.e. the Bank (para 33). The Court also held that in such a case it was the duty of the ED/Adjudicating Authority to give notice to the Bank in such a case and hear the Bank and that without having done so the order would be vitiated. The impugned order is set-aside, consequently the provisional attachment also does not survive. The same is quashed. However, it is clarified that this judgement and order is limited to the legality of attachment of properties noted above under the PMLA, 2002. This judgement & order is without prejudice to the matters pending against the appellants in criminal cases before the Special Court.
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Service Tax
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2017 (10) TMI 30
Seeking Credit of pre-deposit made during the earlier round of appeal with the second round of appeal - Non-payment of service tax - case of the appellants is that substantial period of alleged non-payment of service tax overlapped between the two show cause notices - Held that: - once the Tribunal set aside the orders passed by the adjudicating authority and by its order dated 07.10.2015 remanded the proceedings for fresh consideration and disposal by the said authority, no demand survived against the agency or the Company in connection with the said proceedings. In that view of the matter, the department cannot hold on to the pre-deposit made by the noticees - It is an undisputed position that by way of pre-deposit the Company had deposited a sum of ₹ 32 lakhs before the department during the pendency of appeal before the Tribunal and the agency had deposited a sum of ₹ 43 lakhs. These amounts would have to be given credit to the appellants for the purpose of fulfillment of the pre-deposit requirement as per the present statutory provisions for maintaining their appeals before the Tribunal - The tax appeals of the appellants, agency as well as the Company, before the Tribunal are revived.
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2017 (10) TMI 29
100% EOU - Refund of an amount debited for the service tax liability on the goods exported - denial on the ground that appellant has not been able to show the nexus in respect of the following services on which credit was availed - Held that: - It is undisputed that appellant is a 100% EOU exporting the services of information technology software services to their parent concern. When such a factual position is undisputed, the services rendered by the service provider in respect of all the services as hereinabove reproduced are in relation to the provisions of export of services. As regards the other services, the said services are in respect of the service tax paid on Audio System and also on Event Management service, which in my view are in respect of the business activity of the appellant. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 28
Short payment of Service Tax - extended period of limitation - Held that: - provisions of Section 73(1) have specifically recorded that the Assistant Commissioner or Dy Commissioner has to come to a conclusion and should have a reason to believe and come to a conclusion after verification of the assessment u/s 71 can issue a show-cause notice for demanding tax by invoking extended period of limitation - the issue is now squarely covered by the judgement of the Hon’ble High Court of Allahabad in the case of Naresh Kumar & Co Pvt Ltd [2014 (5) TMI 986 - ALLAHABAD HIGH COURT], where on similar issue it was held that the Deputy Commissioner has illegally invoked the provisions of Section 73(1)(a) of the Act and exercised the power to raise the demand under Section 73(1)(a) of the Act - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 27
CENVAT credit - appellants procured various inputs and input services for fabricating/manufacturing of structures like vessels and barges etc. which were subsequently used by them for rendering the taxable output services - It is the case of the Revenue in the show-cause notice that such credit availed by the appellant is ineligible as these services and inputs are not used for rendering of taxable output services and utilisation of these amounts for discharging service tax liability is incorrect - Held that: - the issue is no more resintegra as Hon ble High Court Andhra Pradesh in the case of Sai Sahmita Storages (P) Ltd [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] were considering similar issue wherein the availment of CENVAT credit on TMT bars for construction of warehouses which were used for rendering storage and warehousing services was contested by the Revenue and it was held that assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided and credit allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 26
Classification of services - Business Auxiliary Services or Business Support Services? - services of maintenance of accounts and spot billing employing computerized data processing to Andhra Pradesh Central Power Distribution Company (APCDCL) - Held that: - the issue is no more resintegra as Division Bench of the Tribunal in the case of Phoenix IT Solutions [2011 (1) TMI 642 - CESTAT, BANGALORE] had analysed the very same services rendered by the appellant therein and came to a conclusion that the services would not fall under the category of business auxiliary services - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 25
Liability of interest and penalty - Reversal of CENVAT credit wrongly taken on the basis of Debit notes - Held that: - the taking of irregular credit in the cenvat account will be considered as a mere book entry and in absence of proof of its utilization, the interest liability cannot be fastened against the appellant - reliance placed in the case of Commissioner of Central Excise and Service Tax, LTU, Bangalore Vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT], where it was held that credit of excise duty in the register maintained for this purpose is only a book entry and before utilization of such credit, if the entry is reversed, the same amounts to not taking of cenvat credit. In absence of non-utilization of wrongly availed cenvat credit, interest and penalty cannot be confirmed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 24
Refund claim - N/N. 17/2009 dated 07.07.2009 - denial on the ground that the services on which tax has been discharged is business auxiliary services and is not mentioned in the list of services in the said Notification - Held that: - there is no dispute as to the fact, that goods have been exported and service tax liability has been discharged under reverse charge mechanism for the commission paid by appellant - the appellant had filed the refund applications under N/N. 17/2009 dated 07.07.2009 while he should have filed the refund claim under N/N. 18/2009 - If the fact of export has been established, refund is not to be denied on merely technical interpretation of procedures. The procedures prescribed in the notification are to facilitate verification of the claims. Since there is no dispute with regard to the export made or the service tax paid, the non-fulfilment of the conditions is condonable - the non-fulfilment of the conditions is only a procedural lapse and can be condoned - the appellants are eligible for refund. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 23
100% EOU - Refund of unutilized CENVAT credit - denial on the ground that appellant is not able to show records that they had in fact sufficient credit balance in cenvat credit account - whether the appellant is eligible for refund of cenvat credit of service tax paid by them on input services, utilised for rendering export of software? - Held that: - Appellant has not filed any evidence to show that they had in fact such balance carried forward in the balance sheet before the Tribunal or before the lower authorities - the appellant is not eligible to claim refund or cenvat credit on the input services of which there are no balances in their books of accounts - appeal dismissed - decided against appellant.
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2017 (10) TMI 22
Refund claim - denial on account of nexus - Rule 5 of the CENVAT credit Rule - Held that: - the eligibility of individual service as input service is required to be studied as per their actual use, within the provisions of the Cenvat Credit Rules amended as on date, where action is being proposed in terms of Rule 14 of the CCR, 2004 - in the instant case, no such proposal of demand or reversal of Cenvat Credit on ineligible input services was made either in the Show Cause Notices or at the time of personal hearing - Rule 5 does not mandate denial of refund of CENVAT credit, without following the due process for settling admissibility, prescribed under the Cenvat Credit Rules. Refund claim cannot be denied, when the conditions of the relevant notification are fulfilled - appeal dismissed - decided against Revenue.
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2017 (10) TMI 21
Refund claim - excess payment of service tax on provisional basis - rejection on the ground of time limitation - Held that: - The Commissioner (Appeal) had merely observed that the Service Tax was deposited in May, 2010. He has not examined the date of deposit of tax and the date of filing of the refund claim which were crucial issues for deciding the limitation aspect - it is appropriate that the Commissioner (Appeals) re-examines the case on facts and in law - appeal allowed by way of remand.
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Central Excise
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2017 (10) TMI 20
Job-work - cess on textiles and textile machinery manufactured in India - section 5A of the Textile Committee Act, 1963 - petitioner failed to provide details of job-work - whether the petitioners are owners of Garments or manufacturer of Garments? - Held that: - there shall be levied and collected a cess for the purposes of the TC Act, a duty of excise on all textiles and on all textile machinery manufactured in India. Sub-section (3) of section 5A says that the duty of excise levied under sub-section (1) shall be collected in accordance with the rules made in this behalf, from every manufacturer of textiles or textile machinery. Once it is conceded before us that this duty of excise levied under sub-section (1) of section 5A of the TC Act is in addition to any fees and duty leviable on textiles or textile machinery under any other law for the time being in force, then, there is no double taxation. What is running throughout the section 5A and prior sections together with the sub-sections thereof so also the Act as a whole is a common thread, namely, that this duty shall be levied and collected as a cess and as a duty of excise on all textiles and on all textile machinery manufactured in India. It is the manufacturer who shall pay to the Committee the amount of duty of excise levied under section 5A(1) within one month from the date he receives a notice of demand therefor from the Committee. The garments were manufactured by independent manufacturing organizations and these are independent establishments with their own factory sheds, machinery, labour and administrative skills and finance. The petitioners are in no way concerned with any aspect of running these independent units. These manufacturers are paid a fabrication charge for manufacturing garments, which are finalized periodically after appropriate negotiations and are in line with the market rates. The allegation was specifically denied and it was also denied that the manufacturer in this case is not a person employed as hired labour, namely, engaging in production and manufacturing of textile goods on account of the petitioners. Thus, the petitioners throughout clarified that there could be independent manufacturers of garments in the market to whom the petitioners may forward their fabric and it is not to the named or specified job worker and even otherwise this job worker is not an agent, but operating independent and on his own. There is absolutely no material referred in the Assessing Order or in the show cause notice which would enable the Assessing Officer to conclude that the petitioners can be brought within the purview of the Act and the cess can be recovered from them on the foundation that the process of manufacturing may be by independent persons, but under the control and supervision of the petitioners. A mere statement by the petitioners in their reply to the show cause notice or in the preceding correspondence that they gave specifications to the garment manufacturers to manufacture a specific garment which is capable of being then branded by the petitioners and sold under its popular name, is not enough to hold and conclude as above. That statement, without anything more, will not mean that there is such degree of supervision as is ordinarily expected and envisaged in law which would enable the authorities to conclude that it is really the petitioners including in such activities - the levy could not be imposed on petitioners. The impugned order is vitiated by total non application of mind, errors of law apparent on the face of the record and perversity, the writ petition succeeds. The impugned order cannot be sustained - petition allowed - decided in favor of petitioners.
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2017 (10) TMI 19
Permission to withdraw the petition - non leviability of Excise Duty on ‘Press-Mud’ which emerges as a waste or as a by-product during the course of manufacture of Sugar - Held that: - the petitioner assessee Company filed its objections in pursuance of the impugned Notice before the concerned Authority - an adjudication order in pursuance of the said Show Cause Notice has already been passed and an Appeal against that order is pending before the Appellate Authority, the present petition is even otherwise also infructuous and therefore the same is accordingly now permitted to be withdrawn - application of petitioner to withdraw petition allowed.
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2017 (10) TMI 18
Validity of and applicability of Rule 96 ZP (3) of the Central Excise Rules, 1944 read with Sub-Rule 4 of Rule 3 of the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 - Held that: - when the petitioner is before the Tribunal, which is the last forum for deciding questions of fact, this Court is inclined to grant liberty to the petitioner to canvas all points in the pending appeal before the Tribunal. Accordingly, the question, which was framed for consideration, is answered in the affirmative and therefore, there would not be any necessity for this Court to go into the merits of the contentions raised in this writ petition - this writ petition is disposed of giving liberty to the petitioner to canvas all points in the pending appeal before the CESTAT, which includes the validity and the correctness of the order dated 24.03.1998, as also the order dated 11.06.2003 both passed by the Commissioner of Central Excise.
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2017 (10) TMI 17
100% EOU - Refund of unutilised CENVAT credit - time limitation - the CESTAT Bangalore, relying on the judgment in Eaton’s case [2010 (12) TMI 71 - CESTAT, MUMBAI], held that the relevant date for filing the refund application under Sec.11B of the Excise Act would be the date of receipt of consideration for service rendered and not the date when the services were provided. This finding of the CESTAT is challenged in the appeals on the main plank of argument that there is a contrary decision reported in M/s. Affinity Express India Pvt. Limited vs. Commissioner of Central Excise, Pune-I [2014 (6) TMI 593 - CESTAT MUMBAI] - the point is whether M/s.Affinity’s case will have any impact on the present appeals? - Held that: - The Larger Bench of CESTAT, West Zonal Bench, Mumbai having noticed the decision of a Division Bench of Tribunal, Delhi in Bechtel India Pvt. Ltd. vs. Commissioner of Central Excise, Delhi [2013 (7) TMI 490 - CESTAT NEW DELHI] to the effect that the refund can be claimed after foreign exchange was received in India in respect of export of service, held that in view of the Division Bench decision and as no contrary decision was brought to its notice, no reference lies to the larger Bench. Thus in essence, the decision in Bechtel’s case being a decision rendered by Division Bench was approved and held to prevail over the decision in M/s.Affinity’s case relied upon by the appellant. As such, the decision in M/s.Affinity’s case will not have any impact on the present appeals. Whether CESTAT is correct in holding that the assessee is eligible to claim of refund of CENVAT credit on construction service relying on case of Infosys Ltd. [2014 (3) TMI 695 - CESTAT BANGALORE]? - Held that: - It should be noted that the appellant in the Grounds of Appeal mentioned that as against the Infosys Ltd.’s case (2 supra), the department filed appeal before the Hon’ble Apex Court and the same is pending but failed to produce copy of the Grounds of Appeal or any stay order granted by Hon’ble Apex Court staying the judgment in Infosys Ltd.’s case. It is also not known whether a final order is passed by the Apex Court in the said alleged appeal. In these circumstances, we can only uphold the decision of the CESTAT, Bangalore relying on Infosys Ltd.’s case. This point is accordingly answered against the appellant. Whether the Tribunal is correct in remanding the matter with regard to the claim of refund of CENVAT credit on other services such as courier service, repair or maintenance services, telephone service, rent-a-cab service, management consultant service, chartered accountant service etc, since the said services are not having nexus with their output services i.e Consulting Engineering Service which was exported online? - Held that: - This point is concerned, the CESTAT, Bangalore only remanded the matter to the original adjudicating authority to consider the other refund claims afresh. As such, we do not find any infirmity or irregularity therein. The appellant can put-forth its objections if any with regard to those claims and the original adjudicating authority can pass an order on merits with regard to the other claims. Accordingly this point is answered. Appeal dismissed - decided against appellant.
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2017 (10) TMI 16
CENVAT credit - reversal of credit - change in classification of product - penalty - Held that: - the penalty imposed seems to be unwarranted as the issue was regarding the classification due to change in the Tariff. It is a settled law that the penalty need not be imposed due to the dispute on classification - penalty set aside. Reversal of CENVAT credit - clearance of exempt intermediary product/by product - Neem Oil, De-oiled cake, Husk and Spent Meal - Held that: - When it is admitted and accepted that these products Neem Oil, De-oiled cake, Husk and Spent Meal arise during the course of manufacturing of fungicides and insecticides, the said products cannot be held as an exempted final product manufactured by the appellant - the law is settled by the apex court in the case of DSCL Sugar Ltd. [2015 (10) TMI 566 - SUPREME COURT], where it was categorically settled the law that waste products arising during the course of manufacture of final products cannot be covered under the definition of manufacture as per Section 2(f) of Central Excise Act, 1944 thereby laying to rest the Revenue s contention that any product that emerges during the course of manufacturing and having commercial and technological meaning of finished goods is not a manufactured product. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 15
CENVAT credit - whether the appellant herein is manufacturer of DG sets were discharging appropriate Central Excise duty and were availing the benefit of Cenvat credit of the Central Excise duty paid on inputs? - Held that: - the appellant herein could have been under bonafide impression that they have to discharge the Central Excise duty on the engines removed based upon the transaction value and has done so by reversing the said amount under the Cenvat credit, cannot be held as intention to remove the inputs by paying excess amount to enable the purchaser to avail Cenvat credit - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 14
Clandestine manufacture and removal - copper tube - Penalty - Held that: - appellant Shri Dilip Kothari, Shri Sudhir Kothari and Shri Ajay Vyas who are the proprietors of their respective proprietorship firms have in their statement recorded by the lower authorities categorically admitted that they had issued blank challans/invoices to M/s SMTPL. The said blank challans/invoices were used by the said SMTPL for clandestine removal of the manufactured goods under the guise of trading activity - there is element of collusion by these three trading firms with SMTPL with intent to evade duty - The appellants having confessed to handing over of the challans and also to the fact that they were in fact aware of the clandestine removal of the goods by the said SMTPL, we have to uphold the findings that all the three appellants herein are aware of the act that M/s SMTPL is going to remove the excisable goods clandestinely - all the three appellants are liable for imposition of penalty under Rule 26 of the Central Excise Rules 2002, the quantum of penalty reduced to ₹ 5,00,000/- each. As regards penalty imposed on Dhiran Transport Corporation, there is no rebuttal to the adjudicating authority's findings that the said Dhiran Transport Corporation had not issued any LRs for the transport of the goods clandestinely removed from SMTPL premises but have issued unauthorised unsigned slips, due to which it could not be said that the said Dhiran Transport Corporation was not aware of the unauthorised removal of the goods from SMTPL's premises - penalty upheld - quantum of penalty reduced to ₹ 2,00,000/-. Appeal allowed - decided partly in favor of appellant.
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2017 (10) TMI 13
Capacity of production - duty short paid was demanded on the same allegation of the machine being double track instead of singe track, along with penalty - whether the one packing machine in question, is a single track machine or a double track machine? - Held that: - the issue has been decided by the Hon’ble Allahabad High Court in the case of Commissioner of Central Excise Vs Dharampal & Satyapal Ltd. [2015 (10) TMI 1105 - ALLAHABAD HIGH COURT], where it was held that the machine purchased by the assessee is a single track machine, the duty payable by the assessee on the basis of a single track machine, should have been levied. The Commissioner fell in error in treating the said machine as a two track machine - appeal dismissed - decided against Revenue.
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2017 (10) TMI 12
100% EOU - Debonding of unit - non-declaration of stock - Section 11 AC of the Central Excise Act, 1944 - Held that: - Perusal of the provisions of Section 11 AC ibid reveals that the said provision can be invoked in the eventually, when the duty has not been paid due to the reason of fraud, suppression etc. Since, the onus to prove suppression etc. entirely lies with the Department, which in the present case, has not been discharged with the help of any tangible evidence, the imposition of penalty under Section 11 AC ibid cannot be sustained. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 11
Waste - dutiability - plastic waste that arises during the recovery of metal scrap - Held that: - If along with every manufactured item scrap is generated, then that scrap cannot be considered as manufactured item - the waste which gets generated in the facts of this case, is not excisable under any tariff heading, and remains un-contradicted by the Revenue in their appeals either before the adjudicating authority or before the 1st Appellate Authority or even before us - demand set aside - appeal dismissed - decided against Revenue.
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2017 (10) TMI 10
Manufacture of Steel Girder Bridge, bridge parts and span suspension bridge parts falling under First Schedule to the Central Excise Tariff Act, 1985 under Chapter sub-heading No.7308.10 - excisability/movability - case of appellant is that process involved does not amount to manufacture as they are engaged in erection, fabrication of the structures at site permanently embedded to earth - Held that: - the matter is covered by the Larger Bench decision of the Tribunal in the case of Mahindra & Mahindra Ltd. Vs. CCE, Aurangabad, Chandigarh, Kanpur & Chennai [2005 (11) TMI 103 - CESTAT, NEW DELHI] whereunder inter alia it has been held that steel structures and parts of steel structures mentioned in the parenthesis of Heading 73.08 of Central Excise Tariff illustrating parts of structures viz. bridges and bridges sections, lock gates, towers, lattice masts, roofs, roofing frameworks, towers, doors, windows and their frames and thresholds for doors, and the like articles in their movable state will be subject to excise duty under Heading 7308, notwithstanding their getting permanently fixed in the structures. Further it also held that the plates rods, angles, shapes, sections, tubes and the like prepared for use in structures of the types covered under the Heading 7308 will also be excisable goods subject to duty in their pre-assembled or disassembled state - there is no doubt that the subject process and the items in question are covered under the process of ‘manufacturing’ under Section 2(f) of the Central Excise Act, 1944 and the liability of duty of Central Excise on the subject items has to be sustained. Penalty - Held that: - as there was lack of clarity on the subject of liability of duty for the subject items during the relevant period and when there were interpretational issues involved, following the ratio of the Hon’ble Punjab & Haryana High Court’s decision in CCE Vs. Jain Ganesh Processors [2011 (3) TMI 134 - PUNJAB AND HARYANA HIGH COURT], no penalties are liable to be imposed on the appellants. Appeal allowed - decided partly in favor of appellant.
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2017 (10) TMI 9
CENVAT credit - manufacture of dutiable as well as exempt goods - non-maintenance of separate records - Rule 6 of the Credit Rules - Held that: - in assessee’s own case for the earlier period, the issue has came up before the Tribunal in Grasim Industries Ltd. Vs. CCE, Indore [2006 (9) TMI 467 - CESTAT, MUMBAI], where it was held that There is no sale of steam in transfer of steam between two divisions. Therefore, there is no sale price of steam available in such cases. Consequently, the question of reversing 8% of the sale price of steam cannot apply - appeal dismissed - decided against Revenue.
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2017 (10) TMI 8
Valuation - related party transaction - Rule 8 of the Valuation Rules - Held that: - It is not disputed that M/s. Kunal Loha Chem and M/s. Sona Wires are interconnected undertakings - Even though the two buyers are interconnected undertakings as per section 4(3)(b)(i) of Central Excise Act, merely because they are interconnected undertakings, the transaction value cannot be rejected - There is no justification for rejecting the lower transaction values to related buyers and re-determination of value by costing method - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 7
Area Based Exemption - substantial expansion of unit - N/N. 49/2003 dated 10.6.03 - whether the respondent assessee has increased the installed capacity of its plant and machinery by over 25% which is the requirement to be satisfied to be eligible for area based exemption under the category of substantial expansion? - Held that: - The increase in the installed capacity by more than 25% has been certified by the independent Chartered Engineer, Shri Rohit Oberai of M/s. Oberoi Associates, Kashipur. The same fact has also been endorsed by the Professor of Department of Paper Technology, Saharanpur as well as IIT Roorkee. The reports submitted by the technical experts reveal that such increase in installed capacity is the result of changes carried out by the respondent by way of replacement material / consumables and by installing machinery meant for improvement in quality of products. Similar issue decided in the case of COMMISSIONER OF CUS. & C. EX. Versus UTTARANCHAL IRON & ISPAT LTD. [2010 (12) TMI 491 - UTTARAKHAND HIGH COURT], where it was held that it is the factum of substantial expansion which is the determinative factor for grant of exemption. It is immaterial whether the substantial expansion is as a result of additional or new plant and machinery or by renovation /modification of existing plant and machinery. Appeal dismissed - decided against Revenue.
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2017 (10) TMI 6
Classification of goods - chewing tobacco and preparation containing chewing tobacco (kamam) - whether classified under 24039960 as “tobacco extracts and essence” or is to be classified under 24039920? - Held that: - the impugned goods are classifiable under sub heading 240399.20 as held by the lower authorities. - Hon’ble Supreme Court in the case of Dharampal Satyapal Vs. CCE New Delhi [2005 (4) TMI 66 - SUPREME COURT OF INDIA] classified the item under “tobacco and preparation of chewing tobacco” under sub heading 2404.49/2404.40, the case does not apply in the facts of present case as it was delivered in the context of the Central Excise Tariff which was different at the relevant time. Extended period of limitation - Suppression of facts - Held that: - The Commissioner (Appeals) held them guilty of suppression for not taking “initiative” and not consulting the department if they had any doubt while the appellants never stated that they had any doubt. In fact they have claimed that they were clearly of the view that their goods were classifiable where they classified them. The Commissioner (Appeals) has not mentioned anywhere as to what they suppressed which was required to be disclosed as per law. Not taking suo moto initiative has never been a valid ground for sustaining charge of suppression - The very fact that they have been paying duty as per Section 4 also goes to show that prima facie they had no intention of hoodwinking the department - demand restricted to normal period - The adjudicating authority is directed to re-quantify the demands accordingly. Penalty - Held that: - There is no justification to impose any penalty, this being a classification dispute. Appeal allowed - decided partly in favor of appellant.
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2017 (10) TMI 5
Suo moto adjustment of refund amount towards pending demand under section 11 - Held that: - similar issue decided in the case of VOLTAS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, HYDERABAD-II [2006 (5) TMI 232 - CESTAT, BANGALORE], where it was held that refund cannot be adjusted against the demands which are sub-judice and section 11 should be involved only when the demands have reached finality and should not be invoked even at the initial stage - refund to be ordered to be paid without any adjustment - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 4
Refund of excess duty paid - unjust enrichment - Held that: - it is evident that the assessee-Respondents have made an excess billing of ₹ 3,60,00,000.00 involving duty amounting to ₹ 59,32,800/-. The same was credited with the excess amount of billing in the name of their customer i.e. M/s Chattisgarh State Power Generation Company Ltd., Raipur. As the customer has not paid the amount, so there is no question of unjust enrichment - refund allowed - appeal dismissed - decided against Revenue.
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2017 (10) TMI 3
SSI exemption - clubbing of clearances - natural justice - non-production of required documents by appellants - Held that: - it appears that both the units have no independent plant and machinery and were totally inter-dependent on each other for manufacturing its product including voltage stabilizers in complete form. M/s. Powerkon System Ltd. has no electricity connection and borrow the power from M/s. Servokon System Pvt. Ltd. but without making any payment of the bill. Labour in both the units were common. Godown was also common - the department by the impugned order has clubbed the clearance of M/s Servokon Systems Pvt. Ltd. and M/s. Powerkon Systems Pvt. Ltd. by denying the exemption as per notification. In the peculiar facts and circumstances of the case, same appears reasonable. Clandestine removal - Held that: - kaccha challans were recovered. Goods were seized which were not mentioned in the stock register. In fact, there was no stock register. After making the verification and statement from the buyers and by clubbing the material the department has issued Show cause notice and demanded the duty. In the peculiar facts and circumstances of the case, same appears reasonable - demand upheld. Appeal dismissed - decided against appellant.
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2017 (10) TMI 2
Clandestine removal - consumption of electricity - the lower appellate authority relied upon the various case laws on clandestine removal and concluded with observation that the consumption of electricity appears suspicious - Held that: - the findings of the lower appellate authority is contradictory inasmuch as, he is accepting that the Department had variable data on substantial power consumption and thereafter, on the basis of various case laws, it has been held that the consumption of electricity appears suspicious - the charge of clandestine removal is to be established on examination of facts of each case and not merely on the basis of case laws. The matter is remanded to the Commissioner (Appeals) to decide afresh - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (10) TMI 1
Revision of assessment - omission to include the stock of gold in the return - KVAT - Held that: - revision of assessment pertaining to the period of which the assessee was carrying on the business on the strength of the registration granted to him, was permissible in law. Penalty - it was alleged that the learned single Judge has erroneously reduced the penalty imposed to ₹ 1 lakh - Held that: - levy of penalty should always be proportionate to the gravity of the offence committed by the assessee - Insofar as this case is concerned, though at a belated stage, the assessee himself has confessed his mistake and sought an opportunity to revise his return, though such revision could not have been allowed, still taking into account such conduct of the assessee, we feel that the learned single Judge was justified in taking the view that the penalty of double the amount of tax imposed, viz. ₹ 23,61,076/- was too disproportionate. Therefore, we do not find any reason to interfere with that relief granted by the learned single Judge also. Validity of order of assessment - Held that: - the omission in question had occurred in April, 2014. The Assessing Officer had issued notice calling upon the assessee to produce the books of accounts on 24.08.2015. The date specified for appearance was 08.09.2015. It is still thereafter that on 14.10.2015, the assessee made request for revision of their returns. In such a situation, when the request was rejected and assessment is completed, we cannot say that the Assessing Officer has committed an illegality in completing the assessment. Appeal dismissed - decided against appellant.
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Indian Laws
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2017 (10) TMI 31
Dishonor of cheque - Is "an Insolvent" a immune from criminal prosecution arising out of dishonour of cheque? - Whether the "retired partner" is liable for criminal prosecution for dishonour of cheque and whether such a plea can be considered in the quashment of the private complaint arising out of dishonour of cheque? - Held that:- The protection given under Section 29 and 31 of the Presidency Towns Insolvency Act is only in respect of debtor for a civil decree and he cannot be detained in civil detention and the civil arrest has contemplated under the Civil Procedure Code. The primary concept of the Insolvency Act gives only protection against the civil detention and civil arrest for a person for non-payment of money in the business transaction either based on the pro-note or a cheque before the amendment. But after the amendment in respect of bouncing of cheque that has been specifically declared as an offence and hence, the protection contemplated under the Section 29 and 31 of the Presidency Towns Insolvency Act does not loom large and protect the petitioner herein. Since, after the amendment as stated above dishonor of cheque has became a criminal liability and in this view of the matter though the petitioner herein be declared has "insolvent" under the "Presidency Towns Insolvency Act". However, it does not cloth him with immunity from criminal prosecution for dishonour of cheque and in this view of the matter this petition is devoid of merits and the same is dismissed.
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