TMI Tax Updates - e-Newsletter
November 22, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Profiteering - 'Bathing Bar' and 'Instant Drink Powder 50 Gms. - Since the reduction in the base prices of these products is more than the additional ITC eligible thereon, the allegation of profiteering is not established.
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GST:
Classification of services - catering services provided by the Applicant under B2B Model and B2C Model - the activity of the applicant would fall under clause (i) of Notification No. 11/2017 as amended
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Income Tax:
Denial of exemption u/s. 11 - all kinds of acquiring knowledge may not come within the term “education” - The assessee cannot be considered to be an educational trust within the meaning of section 2(15) of the Act. Therefore, it is not entitled for exemption u/s. 11 of the Act.
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Income Tax:
Amenity charges received - taxable under the head ‘Income from other sources’ OR ‘Income from house property’ declared by the assessee - CIT(A) was right in confirming the action of the AO in assessing amenity charges under the head ‘Income from other sources’.
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Income Tax:
Nature of receipt - Payment received by the assessee for exercising its voting rights in a company - relinquishing a right - it ought to be treated as a capital receipt and not a revenue receipt.
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Income Tax:
Determination of character of income - LTCG or Business income - commercial intention - assessee, in essence, has sold the land by dividing into pieces of land - gain arising on sale of land cannot be regarded as ‘business income’
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Income Tax:
Once penalty U/s 271AAA of I.T. Act has been levied in respect of undisclosed income, the AO was in error of law prescribed U/s 271AAA(3) of I.T. Act, in imposing further penalty U/s 271(1)(c) of I.T. Act in respect of the same undisclosed income.
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Customs:
Restricted import or free import - the marbles imported by the appellants are freely importable as they have been imported from Sri Lanka.
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Customs:
Refund of Export duty - It was the responsibility of the assessing officer to correctly assess the export duty payable and he made a mistake. The customs officers are well within their powers to correct these mistakes under Sec.154 of the Customs Act - refund allowed.
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Service Tax:
Valuation - Construction of Residential Complex Service - inclusion of amount collected by the appellant as Interest Free Maintenance Security in assessable value - demand of service tax on External Development Charges - Demand set aside.
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Service Tax:
Renting of immovable property service - appellants were getting vacant land on lease of 90 years for industrial purpose and while letting the land they used to collect some lump-sum amount - demand set aside.
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Service Tax:
If the service is rendered prior to 01.05.2006, no liability of service tax will fall on the Institute, even if payment is received after this date since it has been clarified by the CBEC in Circular dated 01.11.2006 that IIM cannot be considered as Commercial Concern.
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Central Excise:
Clandestine removal - Apart from the computer print outs, there is no other evidence produced by the Revenue on record - demand set aside.
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Central Excise:
CENVAT Credit - input service - GTA - place of removal - the service tax paid on the freight by the assessee for transportation of goods from the factory to the selling agent’s place during the relevant period, is available as Cenvat Credit.
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Central Excise:
Excisability - by-products viz. Fatty Acid, Waxes, Spent Earth - assessee is eligible for exemption under the said Notification as the by-product is not a manufactured goods and is a waste
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Central Excise:
Valuation - place of removal - The transaction value in the present case is the value at which the Silicon Manganese has been sold by the appellant at its factory gate, while transferring the unsold portion thereon to the Depot. Apparently and admittedly, the excise duty has been paid by the appellant at the said value. - Demand set aside.
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Central Excise:
Clandestine manufacture and removal - the appellant had indulged in suppression of quantity of MS bars manufactured by them therefore the contention of appellant that the show cause notice is time barred is not sustainable.
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Central Excise:
Area based exemption - relevant date for commencement of commercial production - The only non-existence of the DM/RO plant will not prove that the products has not been manufactured by the appellant on or before 31.10.2010.
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Central Excise:
CENVAT Credit - fake invoices - The result of the investigations conducted by the Revenue does not advance their case inasmuch as all the deponents have repeatedly contended that the raw materials were received by them and were put to use - credit cannot be denied.
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Central Excise:
Since the case involved blatant misuse of the trust placed by Revenue on the assessee and the appellants have cleared the goods without preparing invoices, the imposition of penalties are fully justified.
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Central Excise:
Excisability/movability - manufacture of storage tanks - no finished goods has been fabricated by the appellant in their factory, in these circumstances, as the fabrication has done at site which become immovable property, therefore, no duty is payable by the appellant as the same is not excisable
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Central Excise:
Intermediate goods - brass billets/rods - the product which emerged after extrusion process is wire in coil form and no any other intermediate product emerged in the course of manufacture of wire. - there is no question of demanding duty.
Articles
Notifications
Circulars / Instructions / Orders
Case Laws:
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GST
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2018 (11) TMI 1012
Classification of services - catering services provided by the Applicant under B2B Model and B2C Model - whether classified as canteen/restaurant services or under the head outdoor catering services? - rate of tax - whether the activities of the applicant would fall under Sr. No. 7, Headings 9963 (iv) or (v) of the N/N. 11 /2017-Central Tax (Rate) dated 28th June, 2017? Held that:- The services supplied by the applicant in normal course does not appear to be covered under clause (v) of the N/N. 11 /2017-Central Tax (Rate) dated 28th June, 2017. From a reading of clause (v) before and after the amendment it is seen that the word 'outdoor catering' does not find a mention post the amendment. Hence it can be inferred that the said clause post the amendment made considers outdoor catering as a Supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature. The applicant has clearly stated that they are providing services only to industries and corporates and for their employees - the clients of the applicant are providing space, etc. to the applicant for supply of catering services and the services are supplied by the applicant at the clients' premises. The service being provided by the applicant would be covered under Serial No. 7 Heading 9963(i) or (iv)of Notification No. 11/2017 dated 28.06.2017 as the applicant can be said to be providing the services of a canteen, but as to the applicant falls under Sr. No.(i) or (iv) of the said Notification would depend on whether the canteen has the facility of is air conditioning or central air-heating in any part of the establishment, at any time during the year, as the applicant has not clarified the same anywhere. The said clause (i) has been amended by Notification No. 16/2017 - The amendment has also done away with the condition of "Supply, provided by a restaurant, eating joint including mess, canteen, neither having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year and therefore the services of the applicant, in view of amendment vide Notification No. 46/2017 dated 14.11 2017 would fall under Serial no. 7(i) of this amended Notification. Thus, the activity of the applicant would fall under clause (i) of Notification No. 11/2017 as amended and with effect from 14.11.2017 i.e the date on which Notification No. 46/2017- Central Tax(Rate) came into effect. Ruling:- The activity undertaken by the applicant in the subject case would be classified as canteen services under Entry. No 7(i) or (iv) of Notification No. 11/2017 dated 28th June 2017 depending on whether their canteen has the facility of air air-conditioning or central air-heating in any part of the establishment, at any time during the year. However as per amended Notification No. 46/2017- Central Tax (Rate) dated-14th November 2017, their service would fall under Sr. No. 7(i) of this amended Notification.
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2018 (11) TMI 1011
Profiteering - benefit of reduction of tax - it was alleged that Respondent had not passed on the benefit of reduction in the rate of tax, when she had bought 'Bathing Bar' and 'Instant Drink Powder 50 Gms. - contravention of the provisions of Section 171 of CGST Act, 2017 or not. Held that:- The actual pre-GST tax rate on the above products was not 27% (12.5%Excise Duty + 14.5% VAT), as had been mentioned by the Applicant No.1 in her applications, but it was 14.5% (Nil Central Excise Duty+ 14.5% VAT) in the case of “Bathing Bar” and 16.5 % (2% Central Excise Duty + 14.5% VAT) in the case of “Instant Drink Powder 50 Gms.” It is also revealed that the Respondent was procuring both the above products on interstate basis from their sole vendors and this tax liability had increased by 3.5% post GST from 14.5% to 18% w.eJ 01.07.2017 and therefore, he had suffered loss on the supply of both the products in question - the base price of these products had been reduced by the Respondent to maintain the same MRP (Pre GST MRP) inspite of the increase in the tax rate of both the above products. The anti-profiteering provisions contained in Section 171 (1) of the CGST Tax Act, 2017 are not attracted in the present case. Since the reduction in the base prices of these products is more than the additional ITC eligible thereon, the allegation of profiteering is not established - Respondent has not contravened the provisions of Section 171 (1) of the CGST Act, 2017 - application dismissed.
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Income Tax
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2018 (11) TMI 1010
Disallowance u/s 14A - disallowance exceeding the exempt income itself - Held that:- Delay condoned. The Special Leave Petition is dismissed.
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2018 (11) TMI 1009
Approval u/s 80G - eligibility for grant of exemption u/s 10(23C)(vi) - not maintaining the books of accounts in regular course - assessee is a creation of an Act of the State legislature, known as Pacific Medical University, Udaipur Act, 2014 - Held that:- We are of the considered opinion that the Tribunal has committed no error of law in concluding that the Commissioner(Exemption) has wrongly rejected assessee’s applications on the ground of not maintaining the books of accounts in regular course. A perusal of the orders dated 28.1.2016 and 28.07.2016 passed by the Commissioner u/s 80G and 10(23C)(vi)reveals that he has given much credence to the statements of Mr. D.K. Gupta and Dr. Rohilla Gorac which reveals that he has simply stated that the books of accounts of Tirupati Balaji Medical Stores and M/s Venkteshwar Enterprises, who used to sell medicines in the Hospital, have been maintained in their Office, while also informing that for the donations received towards corpus in the financial year 2014-15 and 2015-16 neither any receipts have been issued, nor have they received any letter from the donors, who had sent their contribution towards the corpus. Even if the said statement is taken to be at its face value, the same is not sufficient to infer that the assessee has not maintained books of accounts in regular course. Given the fact that the respondent assessee is a separate assessee having a separate Permanent Account Number, the statement made with regard to Medical stores at the hospital are not relevant and the same cannot be taken into consideration for the purpose of ascertaining the fact whether the books of accounts of the respondent – assessee have been maintained properly and in regular course. Similarly, the discrepancy arising from the statement of Dr. Rohilla Gorach; record of bio-attendance; and consequent difference in number of doctors actually worked and payments made as per the books, has been satisfactorily explained by the assessee. Similar has been the issue regarding document AS/4, which was found from Ms. Mayuri Jain, P.A. to Mr. Rahul Aggarwal, the Chairman of the respondent assessee. The Commissioner has wrongly rejected the request of opportunity of cross-examination of Ms. Mayuri Jain on the ground that such request of crossexamination of witness was not made before the Dy. Director of Income Tax. In absence of the requisite cross-examination, her statement cannot form a basis of arriving at a conclusion against the respondent. - Decided against revenue
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2018 (11) TMI 1008
Deemed dividend addition u/s 2(22)(e) - assessee contended that amount given not for the benefit of person but for the benefit of the Company - Held that:- Company has given official imprest amount of ₹ 1,35,000/- to the assessee for incurring certain expenses in connection with seeking professional work for the Company. Therefore, explanation of assessee is substantiated that it was an ordinary business transaction and that small imprest amount was given to the assessee to incur expenditure on behalf of the Company. Therefore, provisions of Section 2(22)(e) would not be attracted in this case. Considering all it is clear that all the amounts in question have not been given to the assessee for his personal benefit but these amounts have been given for the benefit of the Company. These were ordinary business transactions and as such, would not attract the provisions of Section 2(22)(e). We, accordingly, set aside the Orders of the authorities below and delete the above additions. Appeal of Assessee is partly allowed.
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2018 (11) TMI 1007
Reopening of assessment - addition towards Income from house property - reasons to believe - Held that:- The condition precedent to the invocation of the jurisdiction is clearly absent since there is not even an averment to the effect that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Hon’ble Supreme Court in the case of CIT vs Kelvinator of India Ltd (2010 (1) TMI 11 - SUPREME COURT OF INDIA) held that the power to re-assess cannot be exercised on the basis of mere change of opinion, i.e. if all facts are available on record and a particular opinion is formed, then merely because there is change of opinion on the part of the AO notice u/s 147 / 148 of the Act is not permissible Reopening of assessment is bad in law as the AO has reopened the assessment on change of opinion without there being any fresh material which suggests escapement of income and also there is no allegation by the AO that there is a failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. Hence, we quash the re-assessment proceedings and consequent addition made by the AO towards income from house property. - decided in favour of assessee.
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2018 (11) TMI 1006
Unexplained credit and consequential interest on such excess unexplained credit - Held that:- AO made a request to Andhra Bank Manager for confirmation of bank loan and as per the reply received from the bank, there was outstanding of only ₹ 2,95,55,466/- receivable by the bank from the assessee as against the dues shown by the assessee payable to the bank of ₹ 5,90,99,428/- as per the books of the assessee and on this basis, regarding the balance amount of ₹ 2,95,43,962/-, addition was made by the AO as unexplained credit and consequential interest on such excess unexplained credit. CIT(A) has decided the issue on the basis of subsequent confirmation letters received from the bank as per which the outstanding amount as per bank tallied with the outstanding amount as per assessee’s books being payable to the bank. CIT(A) has not obtained remand report from the AO in respect of these additional evidences furnished before him for the first time. Hence, we feel it proper to set aside the order of CIT(A) and restore the matter back to his file for fresh decision after obtaining remand report from the AO - Appeal filed by the revenue stands allowed for statistical purposes.
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2018 (11) TMI 1005
Nature of income - Severance compensation received - AO held that the compensation in question is taxable as income - whether compensation in question can also be taxed as capital gains u/s 45 - contentions of the assessee rejected that the compensation in question is a capital receipt and hence cannot be regarded as income under the inclusive definition of the term “income” under the “ Act” - whether the ITAT can examine the issue whether the receipt in question is taxable u/s 28(ii)(a) or alternatively u/s 45 or under any other section of the Act either considered or not considered by AO, when the AO has based his assessment ultimately on Section 56(2)(vii)? - Held that:- AO in this case has examined various provisions of the Act under which he was of the opinion that the receipt in question is taxable. He sought to protect the interest of revenue and to assess the receipt in question under the head “income from business “ as well as under the head “income from capital gains”. After holding that the receipt in question is taxable under those heads, he ultimately held that the receipt is taxable under the head “income from other sources” for the reasons as given in his order. The law, in our view, does not place limitations as to the manner in which the AO proposed to tax particular receipt. To protect the interest of revenue, in our view, it is open for the assessing officer to bring to tax receipt under various sections when he is in doubt. Alternative/Multiple reasoning by the assessing authority while arriving at a conclusion that the receipt in taxable is permissible. We are of the considered opinion that we have the power to examine the action of the Assessing Officer in holding that, the receipt in question can also be brought to tax u/s 28(ii)(a) of the Act and u/s 45 of the Act. There is no bar under the statute to the powers of the Tribunal to remand the matter back to the file of the Assessing Officer or to the file of the ld. CIT(A) with or without directions. It is not the case of the Assessing Officer that the assessee is managing the whole of the affairs of GI. Its his case that the assessee has a significant role which is of some substance or worth in the affairs of the company because of his special rights by virtue of the share holder agreement and hence it is a case where the assessee is managing substantially the whole of the affairs of the Indian company. This aspect has to be examined by the CIT(A). To come to an appropriate conclusion on the matter, further enquiries may have to be conducted with P&G Group as well as with the assessee, as to why the assessee was only paid the entire severance compensation of ₹ 200 Crores. The assessee submitted in the written arguments that he is exclusively paid this compensation and no other person in the group has any right for the compensation. The facts thrown up during the course of negotiations between the groups may throw light on this issue. It has also to be brought on record as to what were the existing rights and privileges of the assessee, as on the date of entering into the share holder agreement which were retained by him till the date of termination of these rights. CIT(A), as passed a cryptic order, we set aside this issue to the file CIT(A), for fresh adjudication, in accordance with law after giving the assessee adequate opportunity of being heard. While doing so, the CIT(A) may, if he thinks fir or necessary call for a remand report, so as to bring all the facts of the issue on record. Appeal of the assessee is allowed for statistical purposes.
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2018 (11) TMI 1004
Amenity charges received - taxable under the head ‘Income from other sources’ OR ‘Income from house property’ declared by the assessee - Held that:- We find that the co-ordinate bench has considered similar issue and after considering relevant facts has held that amenity charges received is assessable under the head, ‘Income from other sources’. ITAT has also considered the alternative plea of the assessee insofar as treating the amenity charges as advance and held that there is no merit in the claim of the assessee that these are advances received as the said charges have been received in pursuance to an agreement and hence, the AO was right in assessing amenity charges under the head, ‘Income from other sources’. CIT(A) was right in confirming the action of the AO in assessing amenity charges under the head ‘Income from other sources’. Disallowance of total expenses claimed under the head, ‘Administrative & other expenses’ - Held that:- In this year, the AO has disallowed similar expenses without there being any change in facts. The assessee ought to incur expenses even though there is no business activity to maintain corporate status of the assessee like audit fees, postage expenses, telephone charges and other day today expenses. Since the expenditure incurred by the assessee are in the nature of general administrative expenses, which are required to be incurred even though there is no business activity, we are of the considered view that there is no reason for the AO to disallow the said expenses, when he has allowed similar expenses in the past. We delete addition made by the AO towards disallowance of total expenses claimed by the assessee under the head ‘Administrative & other expenses’ including depreciation, legal and professional fees and direct him to allow business loss as claimed by the assessee. Appeal filed by the assessee partly allowed.
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2018 (11) TMI 1003
Addition u/s 68 - Held that:- Addition was made u/s.68 though there is no reference to that section in the assessment order. In the course of remand proceedings, the assessee has furnished all the relevant details and documents examination of the same, the AO is of the opinion that the credit liabilities disclosed in the accounts are genuine. The provisions of section 68 cannot be applied to sundry creditors and the assessee cannot be applied to sundry creditors and the assessee cannot be asked to prove the 3 ingredients of cash credits in respect of sundry creditors. The sundry credits have arisen out of transactions with the assessee of supply of goods or services and unless the AO proves that the goods or services were never supplied, he cannot make an addition on account sundry creditors. Keeping the above in view and the report of the AO, the addition on account of sundry creditors is deleted. TDS u/s 40(i)(a) - TDS deposited in the account of Central Government before the due date of furnishing of return of income u/s.139(1) - Held that:- On a perusal of the TDS certificate filed by ld A.R. of the assessee during the course of hearing, we find that TDS of ₹ 10,707/- was deducted out of the total payment of ₹ 10,70,713/- and the related TDS was deposited in the account of Central Government on 29.9.2012 i.e. before the due date of furnishing of return of income u/s.139(1) of the Act. The said TDS certificate is generated from the site of Income Tax Department. Assessee made a statement at bar that this TDS certificate was filed before the lower authorities was not disputed by D.R. Hence, we find that addition made by the CIT(A) was on wrong appreciation of facts and, therefore, we set aside the order of the CIT(A) and delete the addition of ₹ 10,40,713/ and allow this ground of cross objection of the assessee. Payments by the firm to the partners were in violation of section 40A(3) - Held that:- We find that there is no payment in cash by the firm to the partners. Rather, the undisputed facts are that the partners’ capital account was credited by the amount of expenditure paid by the partners on behalf o the firm. Thus, there is no payment to a particular person in excess of ₹ 20,000/- in violation of section 40A(3) of the Act. Thus, we find that the disallowance was made without bringing the necessary facts on record for which the onus was on the revenue. We, therefore, find that the disallowance made by the CIT(A) by invoking the provisions of section 40A(3) is unsustainable.
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2018 (11) TMI 1002
Levy of Penalty u/s 271(1)(c) where penalty u/s 271AAA levied on the same amount - amount which was offered by the Assessee as current liability on account of advances received - Undisclosed income referred to in Section 271AAA(1) - Held that:- A valid presumption can legitimately arrived at, that the same income, which is assessed in the hands of the assessee in one year and has been accepted by the assessee, will not be offered by the assessee in any subsequent year. Subsequent conduct of NHPL, is not recognizing any income under Project completion Method, in any subsequent year, despite substantial lapse of time imparts validity to this presumption. Thus, the character of the income assessed in the Assessment Orders, changed from protective additions (at the time of Assessment Order) to substantive additions at the time when penalty orders were passed by the AO because the NHPL has accepted the additions by not filing the appeals. As the character of the additions, at the time of penalty orders U/s 271AAA of I.T. Act had already undergone change from protective additions to substantive additions, the contentions raised by the Ld. Counsel for NHPL has no merit. We are of the view that both the assessees, NHPL and NDPL have failed to comply with Section 271AAA(2)(i) and Section 271AAA(2)(ii). In addition, NHPL has also failed to comply with Section 271AAA(2)(iii). It is readily inferred from perusal of Section 271AAA of I.T. Act that the three requirements U/s 271AAA(2), i.e., Sections 271AAA(2)(i), 271AAA(2)(ii), 271AAA(2)(iii) of I.T. Act are cumulatively required to be fulfilled by an Assessee, to escape penalty U/s 271AAA(1) of I.T. Act. Thus, both the assessees, NHPL and NDPL are hit by Section 271AAA(1) of I.T. Act. However, once penalty U/s 271AAA of I.T. Act has been levied in respect of undisclosed income, the AO was in error of law prescribed U/s 271AAA(3), in imposing further penalty U/s 271(1)(c) in respect of the same undisclosed income. U/s 271AAA(3) of I.T. Act, there is clear embargo on the AO for imposing penalty U/s 271(1)(c) in respect of undisclosed income referred to in Section 271AAA(1). As far as penalty U/s 271(1)(c) in the case of NHPL for A.Y. 2012-13 in respect of undisclosed income of ₹ 63,00,000/- is concerned, the Ld. CIT(A) has given detailed reasoning for confirming this penalty. The relevant portion of the order of the CIT(A) has already been reproduced in earlier part of this order, and we have noticed that the order of the CIT(A) derives support from the precedents in the cases of MAK Data P. Ltd. v. CIT (2013 (11) TMI 14 - SUPREME COURT), CIT v MAK Data P Ltd. [. [2013 (1) TMI 574 - DELHI HIGH COURT], CIT v Acrotech Ltd. [2013 (9) TMI 901 - DELHI HIGH COURT]. Assessee did not bring any material for our consideration to warrant any interference with order of Ld. CIT(A) as far as her decision to confirm the penalty U/s 271(1)(c) of I.T. Act in the case of NHPL for A.Y. 2012-13 in respect of undisclosed income of ₹ 63,00,000/- is concerned.
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2018 (11) TMI 1001
Assessment u/s 153A - Unexplained cash credits u/s 68 - proof of incriminating material find in search - Held that:- Both the lower authorities have heard in law in initiating section 153A proceedings against these two assessee since no regular assessment was pending against them u/s 153A(1) 2nd Proviso of the Act. Their returns filed within due date(s) already form part of record before us whereas the search took place on 08.03.2016. We make it clear that section 158BB of the Act does not apply since it formed part of the block assessment proceedings no more applicable after 01.06.2003. We therefore quash these two impugned assessments to be not sustainable in the eyes of law. The assessees’ other identical substantive grounds challenging correctness of section 68 addition of unexplained share capital on merits are rendered infructuous. These two appeals are allowed in favour of assessee.
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2018 (11) TMI 1000
Determination of character of income - Income from sale of plot of land - LTCG or Business income - commercial intention - Held that:- The assessee could not find any single buyer for sale of entire piece of land. The assessee essentially has not carried out any development work as alleged except necessary basic requirements like leveling, approach road from pucca roads and other statutory requirements necessary for plotting of said land as per directions of the authority for sale of individual plots. The assessee, in essence, has sold the land by dividing into pieces of land and profit therefrom has been offered as capital gain in sync with the declared position in the regard. As reiterated before the CIT(A) that land in question (Kalhar land & Sola land) before its sale was declared as capital asset in the balance sheet inception. Thus, the intention of the assessee to hold the assets as capital assets was evident from the treatment given in the books of accounts. The assessee made para-wise rebuttal of the observations of the AO to plead that the land held by the assessee for a very long period of time before its sale could not be regarded as trading asset for its taxability under the head ‘business income’. CIT(A) after taking into account various submissions made on behalf of the assessee as reproduced in the appellate order, correctly agreed with the claim of the assessee that gain arising on sale of land cannot be regarded as ‘business income’ as against the claim of the assessee for its taxability under the head ‘capital gains’. - Decided in favour of assessee. Deduction claim under s.54F - CIT(A) found merit in the claim of the assessee that construction of the residential house on the land was complete and is supported by electricity bills, property tax etc. - Held that:- CIT(A) inter alia noted that the assessee has demonstrated and substantiated the completion of the house construction with reference to receipt of AMC for property tax. The cost of construction is made out of the capital gain deposit scheme where the assessee deposited ₹ 20 Lakhs and the evidences were found by the CIT(A) to establish direct link between withdrawals and the payment made for construction etc. The Revenue could not rebut the findings of the CIT(A) reproduced in the preceding paragraphs in this regard. Therefore, we do not see any intangible reason to disturb the action for the CIT(A). - Decided against revenue
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2018 (11) TMI 999
Rejection of books of accounts - estimation of income - CIT(A) adopted 8% of net profit rate as against 10% adopted by the A.O. - Addition on account of unexplained creditor - Held that:- Unsecured loans need not necessary be used only for the purpose of purchase as one cannot deny the possibility that the unsecured loans can be used for purchase of other assets, making investment or loans and advances but if the impugned credit comes into the books of accounts then it needs to be explained about their identity, genuineness and creditworthiness. Similar is the fact of sundry creditors which are for purchase of goods or capital assets or services. The onus to prove their genuineness completely lies on the assessee. In the instant case during the assessment proceedings assessee did not cooperate with the Assessing authority and all the queries of the A.O remain unanswered. CIT(A) did not adjudicate these two issues of unexplained sundry creditors and unexplained unsecured loans by grossly taking a view that the profits are estimated as such no other addition is called for. The issues of identity, genuineness and creditworthiness of the sundry creditors at ₹ 60,42,964/- and unexplained unsecured loan of ₹ 9,48,000/- (Rs. 6,48,000/- from M/s. Amit Construction and ₹ 3,00,000/- from Shri Sheikh Allabaksh) needs to be set aside to the file of CIT(A) for afresh adjudication and if necessary a remand report may be called from the AO for verifying the facts and thereafter CIT(A) should decide as to whether the alleged amount of sundry creditors and unsecured loans are to be treated as unexplained or explained and decide accordingly. - Decided in favour of revenue for statistical purpose.
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2018 (11) TMI 998
Claim of deduction u/s 80IA - whether assessee is not developing the infrastructure with its own funds but is developing with the funds provided by the Govt. - Tribunal has been consistently holding that the assessee is eligible for deduction u/s 80IA - Held that:- Since this is the 5th year of the assessee’s claim of deduction u/s 80IA and the AO has followed the order of his predecessors in the assessee’ own case in the earlier A.Ys and the ITAT has decided the issue in favour of the assessee in the earlier A.Ys which have been followed by the CIT (A) for the relevant A.Y, no reason to interfere with the order of the CIT (A). - decided against revenue
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2018 (11) TMI 997
Bogus purchases - estimation of income - Held that:- It is quite just and fair to estimate the probable inflation in cost of purchase to artificially reduce probable profits for the purposes of taxation. The CIT(A) has made such estimations at 20% of the value of alleged bogus purchases. Keeping in mind the total absence of direct evidences to support the purchases, we are of the opinion that such estimations are quite low. The assessee is engaged in construction activity where the profits vary widely and are not generally comparable. Taking guidance from the decision of the Hon’ble Gujarat High Court in the case of Vijay Proteins Ltd.[2015 (1) TMI 828 - GUJARAT HIGH COURT] and Sanjay Oil Cake Industries (2008 (3) TMI 323 - GUJARAT HIGH COURT) the fair estimate in our view would be 25% of the alleged bogus transactions, profits to which extent is deemed to be suppressed. Therefore, we consider it expedient to modify the estimation made by the CIT(A) to 25% in place of 20%. - Appeal of the Revenue is partly allowed
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2018 (11) TMI 996
Addition u/s 68 - unaccounted money through this transaction or accommodated either M/s Pranav sports or Ahuja’s to bring a unaccounted money to circulation through this transaction - Held that:- The total amount received by the assessee under these 2 transactions, namely, the forfeiture of the advance amount and the sale consideration received from Ahujas is exactly the same as the value of the property that was originally agreed by the parties. This situation justifies the stand taken by the revenue. We are unable to agree with the revenue that this amount of ₹ 2.5 crores has to be taxed in the hands of the assessee or her husband. There is no denial of the fact that out of this ₹ 2.5 crores assessee got ₹ 1.25 crores and her husband got the balance of ₹ 1.25 crores. At no point of time the revenue thought it fit to look into the inconsistency that having accepted the same transaction in the hands of the husband, they’re disputing it in the case of the wife. If we accept the contention of the assessee, it would lead to the inference that either M/s Pranav sports are Ahuja’s that have brought the unaccounted money into circulation. In any event it cannot be said that the assessee had no clue about it. The conclusions drawn by the authorities below, however, are basing on the material that was collected behind the back of the assessee and it is not the case of the Revenue that copies thereof was furnished to the assessee and the assessee was given an opportunity of being heard. There appears violation of principle of natural justice - matter requires verification at the end of the AO after providing the copies of the material which they want to make a basis for their conclusions to the assessee and the assessee is at liberty put forth all have contentions, and, therefore, it is a fit case to set aside the impugned order and to remand the matter to the file of the Assessing Officer to furnish the material that was collected by them and intended to be the basis for any conclusions to be reached to the assessee and to pass orders after affording a reasonable opportunity to the assessee to put forth her case effectively. Appeals allowed for statistical purposes.
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2018 (11) TMI 995
Denial of exemption u/s. 11 - discharging of liability taken over from the Corporate College of Arts and Science - assessee is not a regular college, providing systematic education to the students - when the assessee is conducting coaching classes for various examinations conducted by the Board of Examination, University etc., whether such activities of the assessee could be treated as ‘education’ within the meaning of sec. 2(15) - Held that:- In the case of Sole Trustee, Loka Shikshana Trust vs. CIT [1975 (8) TMI 1 - SUPREME COURT] the Supreme Court had an occasion to consider this issue and Apex Court found that all kinds of acquiring knowledge may not come within the term “education”. The assessee cannot be considered to be an educational trust within the meaning of section 2(15) of the Act. Therefore, it is not entitled for exemption u/s. 11 of the Act. Accordingly, the order of the CIT(A) is confirmed on the reasons as above. Since the approval u/s. 12A was granted, exemption u/s. 11 of the Act is to be granted automatically - Held that:- As held by various Courts, the AO has the liberty to grant or refuse exemption u/s. 11 at the time of making assessment for each assessment year in accordance with law. In the assessment year under consideration, the Assessing Officer came to the conclusion that the activities carried on by the assessee are not charitable in nature, hence, he denied exemption u/s. 11 of the Act. Hence, we do not find any merit in the argument of the Ld. AR. This ground of appeal of the assessee is dismissed. Without prejudice to the earlier findings, we find that the assessee has paid interest to the Trustees on the amount of contribution made by 19 members at ₹ 10000/- each at 15% per month. Hence, the assessee is hit by the provisions of section 13(1)(c)(ii) of the I.T. Act. From this point of view also, the appeal of the assessee is dismissed. Non consideration of certain decisions relied upon by the assessee by the Assessing Officer and relying on some decisions against the assessee. Since we have held that the activities carried on by the assessee is not charitable in nature and the assessee is not entitled to exemption u/s. 11 of the Act, the assessee cannot have any grievance at this stage. This ground of appeal of the assessee is dismissed. When the assessee was treated as not entitled to exemption u/s. 11 of the Act, the income of assessee is to assessed at maximum marginal rate as applicable to AOP u/s. 164/165 of the Act. This ground of appeal of the assessee is rejected.
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2018 (11) TMI 994
Expenditure in respect of roadwork at Khudiramnagar under the head “repair and maintenance” - nature of expenditure - revenue or capital expenditure - Held that:- A.O. has not disputed this facts mentioned herein in his assessment order. The A.O. held that the expenditure is a capital expenditure and not allowable as a deduction. He also held that the township is owned and maintained by Haldia Riverside Estate Limited, a subsidiary of the assessee (herein after referred to as HREL) and not by the assessee and as HREL is responsible for providing housing facility and maintaining the township, the expenditure incurred towards construction of approach road in Khudiramnagar from the township to the assessee's factory should have been borne by HREL. Aggrieved the assessee carried in appeal before the ld. First Appellate Authority. CIT(A) allowed this ground of the assessee by relying on the judgment of the Hon’ble Apex Court in the case of LH Sugar Factory & Oil Mills Pvt. Ltd. vs. CIT (1980 (8) TMI 1 - SUPREME COURT) wherein such expenditure was held to be categorized as revenue expenditure. Disallowance of loss on account of Exchange Rate Fluctuations - Held that:- We reject the submission of the Appellant in these appeals that the increase in liability on account of the fluctuation in the rate of foreign exchange remaining on the last day of the financial year is notional or contingent and, therefore, cannot be allowed as a deduction. Disallowance paid to United Bank of India - Held that:- CIT(A) allowed this expenditure on the ground that this annual payment is towards trusteeship fees to the trustees of debenture holder i.e. United Bank of India and is not an expense on issue of debentures and also for the reason that this payment has been allowed in both the earlier and later Assessment Years as well. D/R, could not controvert this factual finding of the ld. CIT(A). Under these circumstances, we uphold this finding of the ld. CIT(A) and dismiss this ground of the revenue. Disallowance of land development charge - Held that:- CIT-A correctly deleted this disallowance on the ground that this expenditure is for the green belt being maintained by the assessee and has been allowed by Assessing Officer in earlier an later Assessment Years. Disallowance being freight charges - Held that:- The question of disallowance of freight expenses in connection with the stock transfer does not arise. This freight expense has direct connection with the business of the assessee. For other freight expenses, the reason given by the AO for the disallowance is not tenable as the AO has not pointed out any reasonable reasons for the same. There is no doubt that the assessee had made short recovery from the customers but the reasons for the same were duly explained by the assessee. Accordingly the Ld. CIT(A) has given the relief to the assessee and on this point of view Ld. DR has not brought anything on record contrary to the findings of the Ld CIT(A). In view of above, we find no infirmity in the order of Ld CIT(A) and we uphold the same. Hence, this ground of Revenue's appeal is dismissed
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2018 (11) TMI 993
Disallowance of of labour expenditure - labour contractors were not having complete knowledge of the contract - circumstantial evidence produced to indicate that it has incurred these expenditure for completing the work - Held that:- The only circumstances with the AO is that proprietorship concern of the labour contractors were in the names of ladies and actual work were being looked after by their husbands, hence, they are not having knowledge of their business. To our mind these circumstances, ought not to be looked into in isolation for disbelieving the claim of the assessee. Receipts have already suffered tax in the hands of the recipients. Work has been done. There are no doubt with regard to the contracts obtained from AUDA or AMC and completion of work. Thus, actual expenditure must have been incurred on such work. Can the claim of the assessee be belied simply for the reasons that some of the labour contractors were not having complete knowledge of the contract which is being looked after by their husband ? To our mind, the Revenue authorities have failed to appreciate actual circumstances of the dispute. Considering the above details, we allow this ground of appeal and delete the impugned disallowance. - Decided in favour of assessee. Disallowance of depreciation - whether depreciation is to be granted at the rate of 15% or 40%? - Revenue authorities have disallowed the claim by holding that the assessee has been claiming additional depreciation which is available to an assessee engaged in the manufacturing activity - Held that:- Case of the assessee is, whether depreciation on the vehicles and instruments used for construction business will be allowed at 40% or 15%, whereas the Revenue authorities have considered this issue, whether the assessee is entitled for additional depreciation or not. Considering the above facts, we deem it appropriate to set aside this issue to the file of the AO for examination. AO shall consider the claim of the assessee, whether it is entitled for higher rate of deprecation or not. AO shall look into the order of the ITAT in the case of Rakesh Jain (supra) . This ground of appeal is allowed for statistical purpose.
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2018 (11) TMI 992
Penalty levied u/s 271 AAA - assessee does not specify the manner of earning income and also fails to substantiate the same - whether the assessee has specified the ‘manner’ and ‘substantiated’ it or not? - Held that:- Assessee has disclosed income in the return of income which were disclosed in statement U/s 132 (4) of the act. Copies of the statement are submitted before us where the total disclosure of the firm was ₹ 15.40 Crores, which has been bifurcated amongst the family member, and assessee is one of them. There is no dispute that assessee has already deposited tax thereon. Assessee has to disclose the manner of earning income i.e. how it has been earned and further to substantiate it means ‘to prove it by the assessee has disclosed income in the return of income which were disclosed in statement U/s 132 (4). Copies of the statement are submitted before us where the total disclosure of the firm was ₹ 15.40 Crores, which has been bifurcated amongst the family member, and assessee is one of them. There is no dispute that assessee has already deposited tax thereon. Now the only issue remains that whether the assessee has specified the ‘manner’ and ‘substantiated’ it or not. Assessee has to disclose the manner of earning income i.e. how it has been earned and further to substantiate it means ‘to prove it by the production of necessary evidence’’. We are also of the opinion that assessee has disclosed the manner of funding of the income from sale of artwork, paintings, and sculptures in her business and cash generated wherefrom. In view of this, it is apparent that assessee has disclosed the manner of earning of cash from the business of sale of artwork. She has also given source of cash generated in her hand that is the business of proprietary concern run by her form “Gallaerie Nvya.” Hence, we are of the opinion that assessee has given the manner of earning cash on hand of ₹ 1.34 crores and substantiated the same. For both the above-undisclosed income, assessee has disclosed the manner and stated that both are the business income of the assessee from the artwork/ paintings and Sculpture business . She has also shown how the same has been earned .Hence, it cannot be said that disclosure of these two income can be said to be disclosed with some ‘Specificity’. Therefore on this two undisclosed income the assessee is eligible for pardon u/s 271AAA (2) and hence, penalty u/s 271AAA cannot be levied. Now we come to the third item of the undisclosed income earned by the assessee in the form of undisclosed jewelry added as unexplained assets of the assessee of ₹ 96 lakhs. The assessee has merely stated that this jewelry has been received by her from the various family members and from investors. It was further stated that the family members of the assessee were also continuously acquiring jewelry as per their financial capabilities. Therefore according to the family status, age, tradition in the family, economic status of the assessee, jewelry held since marriage, gifted to her by other family members and married status of the assessee, she disclosed the unaccounted income to the tune of ₹ 9555637/–. Assessee neither gave the names of the persons who gifted her jewelry and she could not show sources of such excess jewelry found. In view of this, we are of the view that assessee has failed to disclose the manner of the earning of undisclosed income and failed to substantiate the same further. Hence, on the undisclosed income of ₹ 96 lakhs on account of unexplained jewelry, assessee is correctly held to be liable for payment of penalty at the rate of @ 10 percent on the undisclosed income. We uphold levy of penalty under section 271AAA on undisclosed income found during the course of such of ₹ 96 lakhs on unexplained jewelry. We also direct AO to delete the penalty with respect to the disclosure of ₹ 3 crores on account of undervaluation of the closing stock of artwork/ paintings/ sculptures etc. and cash of ₹ 1.34 crores found during the search, for which the manner of earning was disclosed and substantiated. Further on plain look at penalty order, AO has levied penalty of ₹ 30 lakhs stating that since in this case the penalty under section 271 (1)(c) is being imposed on substantive basis on the same issue, therefore, he held that penalty under section 271AAA would be on protective basis. We do not find any provision under the act to levy penalty under this section in the manner ld AO has envisaged. According to the provisions of section 271AAA (3) of the act provides that no penalty under the provisions of section 271 (1)(c) shall be imposed upon the assessee in respect of the undisclosed income referred to in subsection 1 of that section. Therefore, if the penalty has already been levied under section 271AAA, no further penalty on it can be levied u/s 271 (1) (c) of the act. Penalty u/s 271AAA and 271 (1) (c) are mutually exclusive. Even on this ground, too penalty of ₹ 30 lakhs levied by the AO on protective basis is unsustainable. Penalty of ₹ 23 lakhs initiated and levied by the learned CIT – A is otherwise unsustainable in law as only the assessing officer is authorized to levy it. CIT A is not an ‘assessing officer’ as defined u/s 2 (7A). Therefore, according to us the penalty initiated by the learned commissioner appeals and levied by him of ₹ 23 lakhs is not sustainable, as he is not authorized to levy the same. If authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorized under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to perform an action on any particular issue, then it is that authority alone who should do that action. We delete the penalty on the undisclosed income of ₹ 3 crores on account of undervaluation of closing stock of artwork, paintings, and sculptures, on cash found of ₹ 1.34 crores, and uphold penalty on unexplained jewelry of ₹ 96 lakhs. - Appeal filled by assessee partly allowed.
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2018 (11) TMI 991
TDS u/s 195 - Disallowance on account of commission payment in foreign currency - withholding of tax - proof of payments having tax implications in India - Held that:- As decided in assessee's own case uphold well reasoning findings of the learned CIT(A) that the commission payments made to the non-resident agents did not have any taxability in India, even under the provisions of the domestic law i.e. Section 9. Once we come to the conclusion that the income embedded in these payments did not have any tax implications in India, no fault can be found in not deducting tax at source from these payments or, for that purpose, even not approaching the Assessing Officer for order under section 195. In our considered view, the assessee, for the detailed reasons set our above, did not have tax withholding liability from these payments. Assessee is engaged in manufacturing of steel billets, wire rods, bright bars etc. They have been exporting these products to foreign countries. They have certain agents who have procured orders outside India and the assessees have paid commission on such orders. Therefore, respectfully following order of the ITAT in the case of Welspun Corporation Ltd. (2017 (1) TMI 1084 - ITAT AHMEDABAD) as well as orders in the assessee’s own case, we are of the view that no interference is called for in the order of the ld.CIT(A) - decided in favour of assessee.
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2018 (11) TMI 990
Transfer pricing - Income on account of the alleged difference in arm’s length price of exports made by the appellant to its associated enterprises - benchmarking analysis - Most Appropriate Method - Held that:- Tribunal [2018 (5) TMI 581 - ITAT DELHI] has remanded back the issue to the file of the TPO, directing to accept assessee’s contention of foreign AE to be a tested party in the event assessee is able to provide complete financials of GDM Dubai along with complete financials of relevant comparables required to benchmark the international transaction. Tribunal further directed that the TPO shall then consider the foreign AE to be tested party and then verify whether the Foreign AE could be considered as least complex with minimum adjustments and for which comparables are available easily on public domain. It can be seen that in this year assessee submitted that all three AEs had incurred losses in their audited financial statement for the relevant period before. As per the direction of the Tribunal for A.Ys. 2003-04, 2005-06 and 2006-07, the foreign AE can be considered as a tested party. TPO in the event assessee is able to provide complete financials of foreign AE along with complete financials of relevant comparables required to benchmark the international transaction. We further direct the TPO to consider the foreign AE to be tested party and then verify whether the Foreign AE could be considered as least complex with minimum adjustments and for which comparables are available easily on public domain. Thus, we are remanding back this issue to the file of A.O/TPO. Transfer Pricing addition in respect of interest on loan given to foreign A.E - Held that:- The contention of the Ld. AR are accepted that where the transaction was of lending money in foreign currency to its foreign subsidiaries the comparable transactions, therefore, was of foreign currency lent by unrelated parties. The financial position and credit rating of the subsidiaries will be broadly the same as the holding company. In such a situation, domestic prime lending rate would have no applicability and the international rate fixed being EURIBOR + 200 points was properly taken by the assessee. Therefore, the TPO’s treatment of benchmarking the aforesaid transaction @ 17.26% by applying the yield rate on corporate bonds as well as the DRP directing the TPO to apply the Prime Lending Rate (‘PLR’) prescribed by RBI @ 13.25% to benchmark the transaction, both were not correct. Deduction u/s 10B to be allowed without setting off the losses of other units - Held that:- issue of claiming deduction u/s 10B of the Act in respect of eligible unit without setting off losses of other units stands settled in favour of the assessee by the decision of Supreme Court in the case of CIT vs Yokogawa India Ltd.: [2016 (12) TMI 881 - SUPREME COURT], wherein, it has been held that, the state of deduction for section 10A would be while computing across total income of eligible undertaking under Chapter IV of the Act and not at the state of computation of total income under Chapter VI of Act, i.e. before setting off losses of other units. Reduction of deduction u/s 10B on account of scrap sale - Held that:- Scrap sales are sales made by assessee’s existing exports business only and the Revenue was not able to point out any other business from which such sales were made. The decisions relied by the Ld. AR are applicable in the present case.In the present case in fact, scrap sales are sales made by assessee’s existing exports business only. There is the direct nexus between the profits and gains derived from the assessee from export business and therefore, it satisfies the requirements of Section 10B of the Act. Thus, the Assessing Officer was not correct in disallowing this claim of the assessee. Disallowance of royalty/technical know-how - Held that:- In the present assessment year as well the assessee made payment on account of royalty/ technical know-how and claimed deduction for the same. From the perusal of the agreements, it can be seen that the assessee acquired merely right to draw upon technical knowledge of foreign companies for a limited purpose of carrying on its business, and that foreign companies did not part with any of their assets absolutely for ever or for a limited period of time, that they continued to have the right to use their knowledge and, even after agreements had run their course, their rights in this behalf was not lost, that assessee had not, therefore, acquired any asset or advantage of an enduring nature for benefit of its business and that payments were, therefore, revenue in nature and were deductible. This position remains identical to that of earlier Assessment years wherein the Tribunal decided this issue in favour of the assessee Disallowance u/s. 14A - Held that:- In fact, the assessee in its return of income has not determined any administrative expenditure incurred in relation to those investments, which would earn tax-free income. The assessee has also not determined or allocated any expenditure on account of interest in relation to the average investment of ₹ 157,63,33,630/-. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for re-computation of disallowance under Section 14A of the Act as per the law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Disallowance of FCCB issue expenses - Held that:- The bond-holders also had an option of converting their FCCB’s into equity shares anytime on or after 31.07.2007 until 11.06.2012. The assessee incurred expenses of ₹ 10,33,76,854 on issue of FCCB’s and claimed the same as deduction in the return of income. These facts were not disputed by the Revenue at any point of time. The said expenditure, in accordance with the provisions of Section 78 of the Companies Act, 1956, was debited to Securities Premium account and not charged to P&L account by the assessee. Accordingly, the same was claimed as deduction in the return of income as a separate line item. The Hon’ble Delhi High Court in the case of CIT vs. Havells India Limited [2012 (5) TMI 449 - DELHI HIGH COURT] had held that expenditure incurred on issue of debentures is to be allowed as revenue expenditure despite indications to effect that debentures are to be converted in near future into equity shares. Thus, the issue is squarely covered by the Hon’ble Delhi High Court decision. Disallowance of redemption premium amortised in respect of FCCB - Held that:- At the end of the relevant assessment year, the FCCB were in the nature of debt and conversion thereof into equity, was solely at the option of the bond-holder. Accordingly, as a prudent businessman, the assessee was required to ascertain the future liability and create provisions in respect thereof. The Ld. AR reliance upon the decision of Supreme Court in the case of Taparia Tools Limited vs JCIT [2015 (3) TMI 853 - SUPREME COURT] is very much applicable in the present case. The Apex Court further held that, one time upfront discounted interest payment in respect of 5 years debentures was to be allowed as deduction in year of payment itself. The Apex Court also held that a different treatment towards interest in books of accounts could not be a factor which would deprive assessee from claiming entire expenditure as a deduction. Further, the Courts in various decisions have also held that, premium on redemption of FCCB can be amortized over the life of FCCB and be claimed as deduction in the return of income. Thus, the Assessing Officer was not correct in disallowing the same. Transaction of payment of share application which does not fall within the purview of term international transaction under Section 92B - Held that:- In the present case, transaction of payment of share application does not fall within the purview of term international transaction under Section 92B as there is no direct bearing on the profits, income, losses or assets of the enterprise and, therefore, it is outside the ambit of ‘international transaction’ to which ALP adjustment can be made. Thus, the issue is squarely covered in favour of the assessee and the DRP rightly directed the AO that no interests need to be charged on share application money pending with its foreign subsidiaries. - decided against revenue.
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2018 (11) TMI 989
Penalty u/s 271(1)(c) - Provisions for doubtful debts claimed - Held that:- In the instant case, the assessee has claimed the deduction which is not eligible as per the provision of section 36(2) of the Act. Thus, we note that the Hon’ble Delhi High Court in the case of Zoom Communication Pvt. Ltd. [2010 (5) TMI 34 - DELHI HIGH COURT] after considering the judgment of Hon’ble Supreme Court in the case of Reliance Petroproduct Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] has decided the issue against the assessee. The assessee has furnished inaccurate particulars of income and accordingly liable for penalty under Section 271(1)(C). Disallowance on Foreign Exchange Fluctuation Loss - Held that:- We note that the Hon’ble ITAT in the own case of the assessee [2018 (6) TMI 1535 - ITAT AHMEDABAD] has set aside the proceedings for fresh adjudication to the AO as per the provision of the law. Revenue authorities have failed to examine the issue by keeping in mind taxation of gains in earlier and subsequent years on the same loans, and failed to record any specific finding as to how in such circumstances the loss could be denied, we deem it appropriate to set aside this issue to the file of the AO for re-adjudication. Penalty on Penalty expenses - Held that:- It is fact on record that the penalties are not allowable for the deduction. But the assessee has claimed the deduction for the same despite the fact that these are not allowable for the deduction. Thus we confirm the penalty in view of the judgment of the Hon’ble Delhi High Court in the case of Zoom Communication Pvt. Ltd [2010 (5) TMI 34 - DELHI HIGH COURT] on account of inaccurate particulars of income furnished in the income tax return. Accordingly we hold that the assessee is liable for penalty under Section 271(1)© of the Act. Deemed dividend under Section 2(22)(e) - Held that:- Considering the current account and number of transactions, and since the Hon’ble High Court has upheld the finding of the Tribunal in earlier years that these are not loans, which could be brought in the ambit of section 2(22)(e) of the Act for the purpose of treating it as deemed dividend, we respectfully following the order of the ITAT in the assessment year 2006-07 as well as judgment of the Hon’ble High Court in earlier years, are of the view that advance given to M/s.Bhadra Raj Holdings P.Ltd. cannot be treated as deemed dividend. We allow this ground of appeal. Deduction under Section 80(G) - Held that:- Once the quantum addition has been deleted then in our considered view the question of levying the penalty does not arise. Hence, the ground of appeal of the assessee is allowed. Transfer pricing addition - Held that:- We note that the quantum addition on interest of loan has been deleted by the Hon’ble ITAT in the own case of the assessee [2018 (6) TMI 1535 - ITAT AHMEDABAD] in the case before us the addition was confirmed on account of allocation of insurance expanses, which was incurred by the AE of the assessee. Thus, the amount of insurance expense claimed by the assessee represents the reimbursement of the expenses to its AE which were duly disclosed in the income tax return. Therefore, we hold that there was no concealment of income or furnishing inaccurate particulars of income. We also note that the case law relied by the ld DR does not applicable to the instant facts. In that case, the adjustment was made in upward direction on account of the sale price whereas in the case before us it relates to the reimbursement of the expenses claimed by the assessee. Thus, we do not find any infirmity in the order of ld CIT(A). Hence, the ground of appeal of the Revenue is dismissed. Misc. Expenses return - Held that:- It is a burden akin to that in a civil case where the determination is made upon preponderance of probabilities. It is also not necessary that any positive material should be produced by the assessee in order to discharge this burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings, irrespective of whether it is produced by him or by the revenue. If it can be said on a preponderance of probabilities that the failure to return the total assessed income has not arisen on account of any fraud or any gross or willful neglect on the part of the assessee, the legal fiction enacted in the Explanation cannot arise and the revenue must fail in its attempt to impose penalty upon the assessee. Disallowances of depreciation - addition was made on account of rate applied by the assessee for charging the depreciation on the assets - Held that:- We find support and guidance from the judgment of Lala Harbhagwan Das & Memorial & Dr. Prem Hospital (P.) Ltd. Vs. CIT [2013 (12) TMI 1674 - ITAT DELHI] held that where higher depreciation was wrongly claimed under bona fide belief in respect of nature of equipment and its professional use, no penalty would be leviable. We do not want to disturb the finding of ld. CIT-A. Hence the ground of appeal of the Revenue is dismissed. Disallowances u/s. 14A - Held that:- Hon’ble Supreme Court in the case of Reliance Petro Products Ltd.[2010 (3) TMI 80 - SUPREME COURT] has held that no penalty will be levied in case the addition is made on account of disallowance made u/s 14A of the Act. Disallowance u/s 40(a)(i) - Held that:- These are simply reimbursement of administrative expenses incurred by Dr.Henk Pluim outside India. They did not involve any element of income and TDS was not required to be deducted. As far as second party is concerned, the AO failed to bring any material on record to justify the administrative expenses required to be incurred for availing services of Dr.Henk. It is totally in the domain of the businessman and the AO cannot dictate terms how much salary and other expenses are necessary for availing the services. This disallowance made by the AO is not sustainable. CIT(A) ought to have not confirmed disallowance made by the AO. We allow this ground of appeal and delete addition. We hold that once the quantum addition has been deleted then the penalty under Section 271(1)(C) will not survive. Disallowance u/s 10B - Held that:- Addition was deleted by the Hon’ble ITAT in the own case we direct the AO to allow the claim of the assessee under section 10B in accordance with our directions contained in order for the assessment year 2006-07. Accordingly, we allow the grounds of appeals of the assessee
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2018 (11) TMI 988
Unexplained cash credit U/s 68 r.w.s. 115BBE - bogus long term capital gain - Bogus share transactions - Held that:- Assessing Officer has not brought any material on record to controvert the fact duly established by the supporting evidence of purchase bills, payment of consideration through bank, dematerialization of shares in the DEMAT account, allotment of the shares amalgamated new entity in lieu of the earlier two companies of equal number of shares. Sale of shares from the DEMAT account through stock exchange and at the prevailing price as on the date of sale and further payment of STT on the transaction of sale has been duly established. Assessing Officer has not brought any material on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account. Therefore, in absence of any evidence, it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. - Decided in favour of assessee. Unexplained commission expenses U/s 69C - Held that:- This is a consequential issue to the addition made by the Assessing Officer U/s 68 of the Act treating long term capital gain as accommodation entries for bogus claim of exempt income and consequently the Assessing Officer has also made an addition on account of expenditure being unexplained commission expenses on such transaction of accommodation entries.Hence there is no basis left for the addition as possible commission paid to brokers/intermediaries to arrange for the accommodation entry. Accordingly, the addition is deleted. - Decided in favour of assessee
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2018 (11) TMI 960
Claim of deduction u/s 10B - whether mere processing of the iron ore in a plant and machinery located outside the bonded area will not disentitle the assessee from deduction where the iron ore was excavated from the mining area belonging to an export oriented unit - location of the ‘SESA Plant’ outside the EOU and customs bonded area - Held that:- Delay condoned. The Special Leave Petition is dismissed.
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Customs
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2018 (11) TMI 987
Refund of Export duty - shipping bill which was assessed was not challenged - rejection of refund on the ground that shipping bills filed by the appellants reached finality and since there is no appeal against such order, refund claims are not maintainable - Held that:- The issue regarding the refund claims filed on the ground that the shipping bill which was assessed was not challenged on similar issue came before the Bench in the case of CCCE & ST, Guntur vs. Ashapura Minechem Limited [2018 (9) TMI 764 - CESTAT HYDERABAD], where it was held that If the assessment is taken to be final, the calculation of the duty is certainly wrong because the rate of duty on iron ore with Fe content less than 62% was only ₹ 50/MT and not ₹ 300/MT. It was the responsibility of the assessing officer to correctly assess the export duty payable and he made a mistake. The customs officers are well within their powers to correct these mistakes under Sec.154 of the Customs Act. Thus, the adjudicating authority has correctly sanctioned the refund since the shipping bill was assessed and export duty paid subject to output of the Dy. Chief Chemist’s report, has to be held as being provisional when the duty was paid and subsequently finalized which resulted in refund - the orders of both the lower authorities are correct - refund allowed - appeal dismissed - decided against Revenue.
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2018 (11) TMI 986
Restricted import or free import - import of Marble Slabs from Sri Lanka declaring a value of less than US dollars 50 per square metre - Confiscation - redemption fine - penalty - Held that:- The Commissioner (Appeals) has dismissed the public notice issued by the DGFT without assigning any reasons. The Commissioner (Appeals) being a quasi judicial Authority cannot dismiss any notification issued by the DGFT - Whenever, more than one notification is available, to an importer, it is for the importer to choose which notification he would like to operate in provided if he meets the necessary conditions for that notification. In this case, the appellant is evidently eligible for the Public Notice permitting free import of goods from the SAARC countries and this has been wrongly denied by the First Appellate Authority - the marbles imported by the appellants are freely importable as they have been imported from Sri Lanka. Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2018 (11) TMI 1014
Corporate Insolvency Resolution Process - adherence to form and manner of the application to be the one as prescribed - Held that:- It is evident from the record that the application has been filed on the Performa prescribed under Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub section 2 of Section 7 is complete. The name of the IRP has been proposed and there are no disciplinary proceedings pending against the proposed Interim Resolution Professional. As a sequel to the above discussion, this petition is admitted and Mr. Pawan Kumar Garg with the address 25 - A, J - Pocket, Sheikh Sarai - II, New Delhi-110017 and Mobile No. 9873981462 and having registration number IBBI/IPA-001/IP-P00608/2017-18/11069 is appointed as the Interim Resolution Professional. In pursuance of Section 13(2) of the Code, we direct that Interim Insolvency Resolution Professional shall immediately make public announcement with regard to admission of this application under Section 7 of the Code.
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2018 (11) TMI 1013
Corporate Insolvency Resolution Process - delay in repayment of outstanding financial debt - Held that:- In the case on hand, it is seen that respondent corporate debtor has availed the loan and committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. Accordingly, it is seen that the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt. As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present application is admitted. In pursuance of Section 13(2) of the Code, we direct that public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by the IBBI Regulations) with regard to admission of this application under Section 7 of the Insolvency & Bankruptcy Code, 2016.
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Service Tax
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2018 (11) TMI 984
Valuation - Construction of Residential Complex Service - inclusion of amount collected by the appellant as Interest Free Maintenance Security in assessable value - demand of service tax on External Development Charges. Inclusion of the amount collected by the appellant as IFMS - whether fall under the category of Management Maintenance and Repair Services or otherwise? - Held that:- The amount is refundable in case of termination of the ownership agreement and if no such termination has taken place till date, the amount would not be refunded. As long as the provisions for refund of the said amount in the agreement itself is there, it has to be considered that the said amount is refundable and was towards security deposits and was not for the purpose of providing any services, so as to levy tax on the same - reliance placed in the case of CCE ST, Jaipur vs. Sand Dunes Construction Pvt. Ltd. [2018 (7) TMI 1383 - CESTAT NEW DELHI], where it was held that the security deposits collected by the Builder for providing maintenance to immovable property services would not be taxable under the category of Management Maintenance or Repairs Services - demand set aside. Special services provided by Builder - demand of service tax on External Development Charges‟ - Circular No.334/1/2010-TRU dated 26/02/2010 - Held that:- Being a part of the State Government, the payment made to the Development Authority are required to be considered as having been made to State Governments - Admittedly Ghaziabad Development Authority has been constituted under Uttar Pradesh Urban Planning and Development Act, 1973 and money collected by the appellant stands paid to them for obtaining the facilities. As such nothing stand collected by the appellant from their customers for providing any taxable service - demand not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 983
Business Auxiliary Service or not - Taxability - incentive received on appreciable performance - demand under the taxable category of BAS in absence of three parties: service provider, service receiver and targeted audience - value of service is fixed under an option provided under the Rules - section 67 of the Chapter V of Finance Act, 1994 - liability of service tax in absence of the relationship of service provider and service receiver - Difference of opinion. Held that:- In view of difference of opinion, matter should be referred to Larger Bench - We direct the Registry to place the records before Hon’ble President for constitution of Larger Bench.
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2018 (11) TMI 982
Short payment of service tax - It appeared to Revenue from scrutiny of some invoices that appellant had been charging over and above service charges from 2003 onwards - case of appellant is that they have not collected service tax in most of the cases - Held that:- The appellant should be given one more opportunity to produce all the relevant documents in support of the claim made before this Bench that their actual receipts and payments are in fact much lower than the tax liability worked upon in consequence - appeal allowed by way of remand.
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2018 (11) TMI 981
Manpower Recruitment or Supply Agency Service - appellant had received payments during the period after 01.05.2006 towards participation fees as well as recruitment fees for the placement services, but did not pay service tax thereon - Held that:- The CBEC has clarified vide Circular dated 21.08.2003 that levy of service tax on a particular service comes into force on a given date and no tax will be chargeable if the service is rendered before that date. Accordingly, if the service is rendered prior to 01.05.2006, no liability of service tax will fall on the Institute, even if payment is received after this date since it has been clarified by the CBEC in Circular dated 01.11.2006 that IIM cannot be considered as Commercial Concern. For the amounts received after 01.05.2006, which are corelatable to the services rendered by the Institute prior to such date no service tax liability can be fastened on the appellant. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 980
Maintenance or Repair Services - Revenue’s appeal is on the ground that the first appellate authority has not considered the issue in the right perspective as the appellant had maintenance and repair contract from their clients M/s RINL - principles of natural justice - Held that:- Since both sides contend that the First Appellate Authority made error in calculations and we find incorrect recording that there were no maintenance contracts, we find that this is a fit case to be remanded back to the first appellate authority to reconsider the documents and pass a fresh order - appeal allowed by way of remand.
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2018 (11) TMI 979
Club or Association Membership Services - entrance fees - appellant is an association of persons engaged in providing club facilities and are registered under the taxable service of health club and fitness center from 25/07/2003 - principles of mutuality - Held that:- The appellants were registered under the category of health club and fitness centre as per the statement of the Secretary in 2003 itself and has been paying the service tax on all the facilities viz. monthly subscription towards badminton, cards, billiards, health club, squash, swimming pool, table tennis, tennis and library. Though the appellants are claiming the refund of the said service tax paid on these facilities to its members on the same principle of mutuality of interest. - decided in favor of appellant. With regard to other services provided by the club where the club is charging the service tax from its members and is paying the same, the demand on other services except membership fee service, the appellants are liable to pay service tax. Appeal allowed in part.
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2018 (11) TMI 978
Refund of Service tax paid - rejection on the ground of time limitation - relevant date for the purpose of deciding the time limit for consideration of refund claim - Held that:- This issue is no more Ras integra and has been settled by the Larger Bench in the case of Span Infotech [2018 (2) TMI 946 - CESTAT BANGALORE], where it was held that In respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis. In the present case also, the appellants are engaged in ‘export of service’ and they have received the FIRC on different dates and thereafter, they filed the refund claim and the original authority has mis-interpreted the provisions of the Notification and held that the refund claims are barred by limitation - all the three cases are remanded to the original authority for passing the de novo order regarding the refund claim - appeal allowed by way of remand.
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2018 (11) TMI 977
Renting of immovable property service - appellants were getting vacant land on lease of 90 years for industrial purpose and while letting the land they used to collect some lump-sum amount - demand of service tax of ₹ 84,22,72,200/- - Held that:- The vacant land was given as industrial plots for the purpose of industrial units by State Government Industrial Development Corporation for lease of more than 30 years and that the above stated service tax was confirmed on one time upfront amount, in the form of lump-sum amount and therefore, the benefit of provision of Section 104 ibid is admissible to the appellant - demand alongwith interest and penalty set aside - appeal allowed. Service Tax on rent collected on vacant land/plot - period from 01.04.2010 to 31.03.2012 - Held that:- The consideration received by the appellant in respect of said service for the period from 01.07.2010 to 31.03.2012 was admissible for benefit of cum duty value - the service tax payable by the appellant on renting of vacant land needs to be recalculated - matter on remand. Service Tax on renting of infrastructural facilities - extended period of limitation - Held that:- The issue needs to be examined on the basis of facts and provisions of law. Further, the cum duty benefit also need to be extended to the appellant - the levy was charged w.e.f. 01.06.2007 though the notification was issued on 22.06.2010. Therefore, there cannot be any malafide intention for evasion of duty from 01.06.2007 to 22.06.2010. Therefore, extended period of limitation for the period from 01.06.2007 to 22.06.2010 is not applicable in the present case - matter remanded back to the Original Authority with a direction to recalculate service tax leviable for the period from 23.06.2010 to 31.03.2012 by taking into consideration the provision under Section (zzzz) - matter on remand. Business Auxiliary Service - Demand of service tax on Centage charges - Held that:- It is appropriate to remand this matter to the Original authority with direction to examine whether the work undertaken for supervision of construction by the appellant is in respect of such work which is wholly funded by Central or State Government and if the said construction work is wholly sponsored by Central or State Government then the transaction is within Government and no service tax is leviable - matter on remand. Appeal allowed in part and part matter on remand.
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2018 (11) TMI 976
Interest on CENVAT Credit reversed - case of appellant is that they have had not utilized the same - Held that:- The records as verified by the Commissioner put so other wise. The Learned Counsel for the appellant also agrees that the disputed amount had been utilized therefore interest is liable to be paid on the disputed amount. Penalty u/s 78 - Held that:- It is not in dispute that the appellant had wrongly availed CENVAT credit and utilized the same and thereby evaded payment of service tax and this was noticed only in audit records by the Departmental Officers therefore penalty is liable to be imposed under Section 78 - however, the quantum of penalty reduced to 50%. Appeal allowed in part.
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Central Excise
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2018 (11) TMI 975
Application for early hearing - Held that:- Let the appeal be listed in the month of February, 2019 before the appropriate Bench - application disposed off.
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2018 (11) TMI 974
Disallowance of CENVAT Credit wrongly availed - “one to one correlation” between inputs and final product - usage of stock on “first in first out” basis - Held that:- It is required to be noted that as such on scrutiny of the month wise account for the year 201011 the stock of the inputs declared by the assessee and considering the material on record, it is observed that stock of inputs declared as on 14.3.2011 did not tally. Therefore, the on the stocks of inputs which did not tally, the authority is justified in rejecting the claim of the CENVAT Tax Credit. There cannot be any dispute that manufacturer shall be entitled to the CENVAT Tax Credit on the stock of inputs. The authorities below have not committed any error in rejecting the CENVAT Tax Credit - appeal dismissed - decided against appellant.
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2018 (11) TMI 973
Clandestine removal - misutilization of exemption available to them in terms of Notification No.56/2002 - no manufacture of copper ingots, only fake documents issued - entire case of the Revenue is based upon the said four pages purportedly retrieved from the computer - Held that:- The evidentiary value of such computer print outs is to be appreciated in terms of sub-section 2 of section 36B, which provides that the computer should be used regularly to store or process information and during the period in question there was regularly supply to the computer in the ordinary course of the said activities. Apart from the computer print outs, there is no other evidence produced by the Revenue on record - It is well established law and does not require the support of any precedent decision to observe that the allegations of clandestine removal are serious allegations and are required to be confirmed on the basis of positive and affirmative evidences - Inasmuch as nothing has been shown in the present case by the Revenue, there are no reasons to confirm the demand - the demand of ₹ 19,88,803/- along with interest and imposition of penalty is set aside. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 972
CENVAT Credit - input service - outward transportation of goods - place of removal - Held that:- The premises of the consignment/selling agents are places of removal as envisaged in the Act and consequently the service tax paid on the freight by the assessee for transportation of goods from the factory to the selling agent’s place during the relevant period, is available as Cenvat Credit in terms of the Cenvat Credit Rules, 2004, as an input service - credit allowed - appeal dismissed - decided against Revenue.
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2018 (11) TMI 971
Area based exemption - relevant date for commencement of commercial production to avail the benefit of notification - N/N. 50/2003-CE dated 10th June - It has been held by the adjudicating authority that there was no DM/RO plant in the factory before 31.10.2003, which is one of the essential ingredient for the manufacture of the cosmetic products manufactured and cleared bythe appellant - whether or not the appellant commenced commercial production on or before 31st March, 2010, so as to avail the benefit of notification? Held that:- As the time limit for availing the notification the appellant was approaching fast the appellant decided to use distilled water for the purpose of manufacture of lotion and boosting shampoo. The department has not disputed the use of the distilled water for the manufacture of the above products - It has been affirmed by the Chemist of the unit that DM/RO plant is meant to produce distilled water required for the manufacture of their final product. The Appellant has used the distilled water for the manufacture of said product which cannot be disputed by the department. The only non-existence of the DM/RO plant will not prove that the products has not been manufactured by the appellant on or before 31.10.2010. The other ground taken by the department is that the Drugs Licence which is required for thepurpose of manufacture of the cosmetic products has been issued on 30.3.2010 and therefore, the appellant could not have manufactured the said product before obtaining the same from the competent authority. We have seen drug licence, it is issued by the competent authority on 30.3.2010 before commencement of last date as contained in the Notification No. 50/2003. The product which are being manufactured by the appellant is not the one which required the complex manufacturing process and in order to avail area based exemption before the expiry of the date they could manage to manufacture the goods before the last of the notification. The condition only prescribes that commencement of the production should start on or before 31.10.2010. It nowhere prescribes clearance of the goods before 31.10.2010, that is last date contained in the notification. Even if the appellant manufactured products before 31.10.2010, it cannot said with certainly that they not manufactured the goods before that date. The appellant has relied upon the various decisions about the excisability and marketability of the product. Excisability is to be decided on the point of manufacturing of the sale where marketability is altogether different event. The excise duty is required to be paid on the manufacture of the goods however, the payment of duty has been deferred to the marketing thereof. The department has not verified all these submissions made by the appellant and concluded that the manufacturing activity has not started before 31.3.2010, which is not correct on the part of the Revenue - The due verification was required to be done by the Revenue before proceeding with denial of exemption notification raising against the appellant - there is no evidence to the effect that these activities were not undertaken by the appellant. The appellant has started commencement of the production before 31.10.2010 and therefore, eligible for area based exemption - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 970
Clandestine manufacture and removal - it appeared to Revenue that appellant had suppressed manufacture and clearances of 4316.645 MT of MS bars and the same was not reflected in ER-1 return - time limitation - Held that:- On the basis of data retrieved by Government Examiner of Questioned Documents from the electronic devices recovered, it is established that the appellant had indulged in suppression of quantity of MS bars manufactured by them therefore the contention of appellant that the show cause notice is time barred is not sustainable. The appellant has not strongly contested on the other aspects of manufacture such as consumption of raw material, consumption of electricity, transportation of goods and availability of customers to whom such goods were cleared, therefore the appellants have not made out any case to interfere with the impugned order - impugned order upheld - appeal dismissed - decided against appellant.
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2018 (11) TMI 969
Valuation - place of removal - Whether the appellants have paid the duty at the time of removal from the factory with intention to resort to under valuation of excisable goods and with intent to evade the payment of respected cenvat duty for the respective period in dispute? Held that:- The place of removal is not merely confined to the factory/ the place of manufacture but also includes a warehouse and even a Depot provided no duty at the time of shifting was paid and that the goods are sold after their clearance from the factory but from the place from where such goods are removed - For the present case, it is apparent and admitted fact that before removing goods from the appellants factory in Raipur to their Depot in Nagpur the appellants have paid the Excise Duty. In the given scenario the definition of transaction value acquires importance for the adjudication of the above question. It becomes clear that the value is a normal price that is the price at which such goods are ordinarily sold by the assessee to a buyer where the buyer is not the related persons and the price is the sole consideration - the differentiating fact of the present case is that the appellants are not removing the entire manufactured Silicon Manganese to their Deport rather they are selling the major portion thereof from the factory itself and the remaining is being transferred to the Depot to be sold to the further buyers. The bare perusal makes it clear that Rule 7 is invokable only in the case where the goods are not sold by the manufacturer/ assessee from the factory, which basically is the place of removal. It is in that case only that the transaction value has to be considered as the value at which the manufactured product is sold from the Depot to its buyer. That too, at or about the same time - the Silicon Manganese is simultaneously sold from the factory/place of manufacture itself that too the major portion of the manufacture and it is only the part produced which has been shifted to Depot for further sale to the buyers. The Department has wrongly invoked Rule 7 of Valuation Rules. The transaction value in the present case is the value at which the Silicon Manganese has been sold by the appellant at its factory gate, while transferring the unsold portion thereon to the Depot. Apparently and admittedly, the excise duty has been paid by the appellant at the said value. The question of alleged short payment does not at all arise. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 968
Intermediate goods - brass billets/rods - whether the intermediate goods i.e. brass billets/ rods is liable to excise duty or not? - benefit of N/N. 67/95-CE dated 16.03.1995 - Time Limitation - Held that:- In the facts of the present case, firstly, the so called intermediate product is not in coil form and also the product does not have uniform solid cross section along their whole length in the shape of circles, ovals, rectangles. The extruded product in the present case is having uneven cross section and therefore, there is no emergence of rods during the course of manufacture of wire. As per definition of wire given in the Chapter 74, the wire should always be in coil form. In the present case, after extrusion, the product gets converted into coil form. Hence, the product which emerged after extrusion process is wire in coil form and no any other intermediate product emerged in the course of manufacture of wire. The product on which the lower authorities have demanded duty does not emerge as an intermediate product during the course of manufacture of brass wire. Therefore, there is no question of demanding duty. Exemption under N/N. 67/95-CE dated 16.03.1995 in respect of the intermediate goods brass billets/rods - Held that:- In the present case, the goods manufactured by the appellant are cleared under exemption and no Cenvat credit on the inputs used in the said manufactured goods was availed, the obligation as per Rule 6(1) has been discharged by the appellant. Therefore, on the intermediate product i.e. brass billets/ rods, the Notification No. 67/95-CE dated 16.03.1995, in the appellant’s case is clearly available to them. Time limitation - Held that:- The emergence of intermediate product, if any, was in view of the department and was not suppressed by the appellant. The appellant having filed the classification list and declaration wherein they have claimed the exemption and from the declaration, it can be easily found out that what is the goods manufactured and therefore, if any intermediate product emerged, can be known by the departmental officers - there is no reason to allege suppression of facts on the part of the appellant - demand is hit by limitation for the extended period. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 967
CENVAT Credit - inputs/capital goods - cement and various structural articles used by the appellant - construction of foundation of machinery - Held that:- The decision in the case of Vandana Global [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] relied solely to admissibility of credit on angles, joists, beams, channels, bars, flats, etc. which go into fabrication of construction for support of the capital goods. The High Court of Chhattisgarh observed that the credit on such items would be admissible. Similar logic was followed by Hon’ble High Court of Gujarat in the case of Mundra Ports and Special Economic Zone [2015 (5) TMI 663 - GUJARAT HIGH COURT] while allowing credit on cement and steel used in the construction of jetties. Jetty is used to provide port service and under that circumstance, it is a capital good directly used for the provision of services. The Show Cause Notice essentially charges that these goods are used for construction and therefore, cannot be considered as capital goods. The claim of the credit needs to be tested as per the user test prescribed in the decision of the Hon’ble Apex Court in the case of Jawahar Mills [2001 (7) TMI 118 - SUPREME COURT OF INDIA] - the issue is remanded to original adjudicating authorities to examine the exact use of the goods and test the admissibility of credit. Appeal allowed by way of remand.
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2018 (11) TMI 966
Excisability/movability - manufacture of storage tanks - Held that:- In this case the appellant is a fabricator of various kinds of tanks, reactors etc. and all works has been executed by the appellant at the site of the client and these tanks, reactors have been embedded to earth which becomes immovable property, therefore, all these tanks/reactors are not excisable as they cannot be removed as such. Admittedly, no finished goods has been fabricated by the appellant in their factory, in these circumstances, as the fabrication has done at site which become immovable property, therefore, no duty is payable by the appellant as the same is not excisable - demand set aside. Demand of service tax - erection and commissioning services or not - appellant has executed the work along with material - Held that:- The appellant has executed the work along with material and the same has been admitted by the Revenue. In these circumstances, the activity merits classification made work under the category of “works contract service” - demand under the category of erection and commissioning is not sustainable - The appellant has not recovered any service tax from their client, accordingly no service tax has been retained by the appellant, therefore, is not payable by the appellant to the Department. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 965
Excisability - by-products viz. Fatty Acid, Waxes, Spent Earth - final product exempt from payment of duty - Held that:- This issue is no more res integra and has been settled by the Larger Bench of the Delhi Tribunal of the CESTAT in the case of M/s. Ricela Health Foods Ltd. Vs. CCE, Chandigarh, Allahabad [2018 (2) TMI 1395 - CESTAT NEW DELHI], where it was held that the assessee is eligible for exemption under the said Notification as the by-product is not a manufactured goods and is a waste - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 964
Valuation - includibility of VAT in assessabla value - Revenue was of the view that the VAT liability discharged by utilizing the investment subsidy granted in form 37B cannot be considered as VAT actually paid, for the purpose of Section 4 of the Central Excise Act, 1944 - Held that:- Identical issue decided in the case of SHREE CEMENT LTD. SHREE JAIPUR CEMENT LTD. VERSUS CCE, ALWAR [2018 (1) TMI 915 - CESTAT NEW DELHI], where it was held that There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 963
Extended period of limitation - penalty - Clandestine removal - parallel invoices - Evidence in the shape of the invoices was recovered from the dealers and was confirmed by the buyers - Held that:- In the instant case it was not a Revenue neutral situation and therefore, extended period and provisions of Section 11C can be rightly invoked. Since the case involved blatant misuse of the trust placed by Revenue on the assessee and the appellants have cleared the goods without preparing invoices, the imposition of penalties on the main appellant as well as Sh. Pradeep Harsora and Mangalam Drugs & Organics Ltd. is fully justified. Penalty u/s 11AC - benefit of reduced penalty - Held that:- The option of paying 25% of penalty along with full duty and interest within 30 days is extended to the appellant. Appeal allowed in part.
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2018 (11) TMI 962
Concessional rate of duty under N/N. 6/2002 dated 01.03.2002 as amended - manufacture of PP Medicines - the basic reason for denial of benefit and confirmation of duty is that the disposition report contains row at the bottom having signature with date 20.07.2005 - Held that:- Commissioner (Appeals) has decided the said report solely on the ground that the column in the bottom shows date of 20.07.2005 whereas the actual report is claimed to have been made on 29.05.2007. The defense of the appellant is that the said proforma was made as a result of efforts of a team to draft the standards operating procedure for such disposition. The draft finalized by the said team contains a row in the bottom which shows the date when the said proforma for making the disposition report was approved. It has been argued that in all the disposition report said date and signature at the bottom would appear, as a part of the profroma, not as part of the report. We find significant force in the arguments of the appellants as can be seen from the standards operating procedure report submitted by them as Annexure-F to the appeal. However, it is seen that the said report and the said argument was not submitted before the lower authorities. Though prima facie, we find substance in the argument of the appellant, however, since it is new fact brought on record, we deem it proper to set aside the impugned order and remand the matter to the original authority to reconsider after taking into account. Appeal allowed by way of remand.
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2018 (11) TMI 961
CENVAT Credit - fake invoices - non-receipt of inputs - the entire case of the Revenue rests upon the missing quality control reports - Held that:- Undisputedly the statements of the Quality Control Engineer, appellants’ director as also of various dealers recorded during the course of investigations are exculpatory statements and there is no admission of non receipt of raw material by any of the deponents. Merely because some of the inspection reports are missing from the records, does not lead to inevitable conclusion that the raw materials were not received by the appellants. The appellants have also given explanation to the missing freight documents by contending that in some cases the raw material was received on FOR basis and the freight payments were made by the dealers, whereas in some cases the freight may be paid by the director himself from his own pocket. The onus to establish the allegation is upon the Revenue and is required to be discharged by production of positive and tangible evidences. The missing quality control reports may lead to some doubt requiring further verification and investigation, which the Revenue has indeed done - The result of the investigations conducted by the Revenue does not advance their case inasmuch as all the deponents have repeatedly contended that the raw materials were received by them and were put to use. The entire case of the Revenue is based upon assumption and presumption and there is no evidence to substantiate their allegation that the raw materials were not received by the assessee - The said issue stands considered by the Tribunal in the number of cases and it stands held that the Revenue is required to prove beyond doubt non receipt of the inputs - Appeal allowed - decided in favor of appellant.
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Indian Laws
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2018 (11) TMI 985
Waiver of condition of deposit - Section 21 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 - Held that:- The pre-amendment provisions of Section 21 of the Act 1993 required the appellant to deposit 75% of the decreetal sum which the DRAT had the discretion to waive or reduce, depending upon the facts and circumstances of the individual case. The said Section came to be amended by substitution of certain expressions by Act 44 of 2016 w.e.f. 01.09.2016. By such amendment, the quantum of the amount of pre-deposit has been reduced to 50% in place of 75%; and the power of DRAT to waive has been restricted to the extent of 25% - the contention of the petitioner that the amendment is prospective in effect, is not acceptable. In the present case, the amendment has only trimmed the requirements of pre-deposit and waiver and else, the substratum of Section 21 is retained. In fact, in the principal provision, where earlier the requirement was of deposit to the extent of 75%, has been reduced to that of 50% and correlated with that, the power of the Appellate Tribunal to waive the condition of pre-deposit has been restricted to 25%. The amendment in question, for its nature and for the reasons indicated above, in our view, is required to be taken as retrospective in operation and applicable to all appeals to be filed before the DRAT. The Writ Petitions being devoid of merits, are dismissed.
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