TMI Tax Updates - e-Newsletter
November 28, 2017

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• The advance deposit of central excise duty (PLA) constitutes actual payment of duty - deduction allowed u/s 43B - SC

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Highlights / Catch Notes

• Income Tax:

  The advance deposit of central excise duty constitutes actual payment of duty within the meaning of Section 43B and, therefore, the assessee is entitled to the benefit of deduction of the said amount - SC
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• Income Tax:

  TDS u/s 195 - Since Section 40(a)(i) as it stood in AY 2006-07 continued to discriminate in the above manner and was inconsistent with Article 24(3) of the Indo Japan DTAA or Article 26 (3) of the Indo US DTAA, the Assessee was entitled to rely on the above DTAA provisions to claim deduction of the sums paid to entities in Japan and USA. - HC
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• Income Tax:

  Penalty u/s 271(1)(c) - by deferring the declaration to the subsequent year, the assessee certainly furnished inaccurate particulars of income for the year under appeal and either avoided or deferred his tax liability - HC
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• Income Tax:

  Maintainability of appeal before CIT(A) against Levy of interest u/s 220(2) - enhanced assessment - AO directed that interest u/s 220(2) chargeable on the amount demanded u/s 156 - the order is appealable - HC
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• Income Tax:

  Preparation of the balance sheet in accordance with the statutory provision would not disentitle the assessee in submitting income tax return on the real taxable income in accordance with a method of account adopted by the assessee consistently and regularly. - HC
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• Income Tax:

  Distribution of capital assets u/s 45(4) - partnership firm - crediting revaluation surplus to partners account settling their accounts on their retirement - It is the retiring partners who have been benefitted by receiving much more than actual capital contributed by them on account of revaluation. Thus there can be no case of tax avoidance by colorable device by the firm - AT
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• Income Tax:

  Allowability of Provision towards licence fee for renewal of Excise licence fee - no payment has been made by the assessee to the Government till the due date of filing the return of income u/s 139(1) which has infringed Section 43B of the 1961 Act - expenses not allowed - AT
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• Service Tax:

  Outstanding consideration to be paid by Holding Company - effect of amendment - the debit entries made prior to 10.05.2008 and shown outstanding on that date cannot be subjected to Service Tax on reverse charge basis based on the explanation, which was introduced under Rule 6 (1) of the Service Tax Rules, 1994 w.e.f. 10.05.2008.- AT
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• Central Excise:

  High Court was not correct in applying the principle of Promissory Estoppel to grant the benefit of exemption to the industrial unit from the date of production instead of the date of the exemption notification. - SC
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Articles

• Kind of Assessment in GST

Notifications

• Customs

• 19/2017-Customs (N.T./CAA/DRI) - dated 24-11-2017 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• 18/2017-Customs (N.T./CAA/DRI) - dated 24-11-2017 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• 17/2017-Customs (N.T./CAA/DRI) - dated 24-11-2017 - Cus (NT)
  Appoints Principal Commissioner/Commissioner of Customs (Nhava Sheva-V), Jawaharlal Nehru Custom House, Raigad

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• 16/2017-Customs (N.T./CAA/DRI) - dated 24-11-2017 - Cus (NT)
  Amendment in Notification No. 53/2016-Customs (N.T.) dated 13.04.2016

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• 15/2017-Customs (N.T./CAA/DRI) - dated 24-11-2017 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• DGFT

• 40/2015-2020 - dated 27-11-2017 - FTP
  Relaxation in export policy for export of Red Sanders wood by Government of Karnataka under Sl. No. 188, Chapter 44 of Schedule 2 of ITC (HS) Classification of Export and Import 2012

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• GST - States

• ERTS(T) 65/2017/237 - dated 15-11-2017 - Meghalaya SGST
  Amendments in the Notification No. ERTS(T) 65/2017/12, dated the 29.6.2017.

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• ERTS(T) 65/2017/236 - dated 15-11-2017 - Meghalaya SGST
  Amendments in the Notification No. ERTS(T) 65/2017/11, dated 29.6.2017

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• ERTS(T) 65/2017/234 - dated 15-11-2017 - Meghalaya SGST
  Amendments in the Notification No. ERTS(T) 65/2017/4, dated 29.6.2017

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• ERTS(T) 65/2017/233 - dated 15-11-2017 - Meghalaya SGST
  Amendments in the Notification No. ERTS(T) 65/2017/5, dated 29.6.2017

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• ERTS(T) 65/2017/232 - dated 15-11-2017 - Meghalaya SGST
  Amendments in the Notification No. ERTS(T)65/2017/2, dated 29.6.2017.

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• ERTS(T) 65/2017/045 - dated 15-11-2017 - Meghalaya SGST
  2.5% concessional rate for intra-state supplies of goods as listed therein required in connection with petroleum operations like exploration.

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• ERTS(T) 65/2017/Pt I/092 - dated 9-11-2017 - Meghalaya SGST
  Amendments in the Notification No. ERTS(T) 65/2017/11, dated 29.6.2017

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• ERTS(T) 65/2017/Pt I/033 - dated 31-10-2017 - Meghalaya SGST
  Appointed proper officers for the purpose of sanction of refund of section 54 or section 55.

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• SEZ

• S.O. 3719(E) - dated 13-11-2017 - SEZ
  Central Government de-notifies an area of 4.8722 hectares, thereby making resultant area as 650.6321 hectares at Baikampady, Near Mangalore, District Dakshin Kannada in the State of Karnataka;

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• S.O. 3537(E) - dated 30-10-2017 - SEZ
  Central Government de-notifies an area of 518.22 hectares thereby making resultant area as 782.6 hectares at Atchutapuram and Rambilli Mandals, Visakhapatnam District in the State of Andhra Pradesh

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Circulars / Instructions / Orders

• GST - States - Order No. 01/2017-State Tax - dated 9-11-2017
  THE MEGHALAYA GOODS AND SERVICES TAX (REMOVAL OF DIFFICULTIES) ORDER, 2017
• Central Excise - F. No.278A/33/2016-Legal(Pt.l) - dated 22-11-2017
  Constitution of a fresh panel of Senior/Junior Standing Counsels for handling CBEC cases of Indirect taxation before the various High Courts and other fora - reg.

News

• Comments are inviting on "Know Your Customer (KYC) norms"

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• Auction for Sale (Re-issue) of Government Floating Rate Bonds

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• IES Officer -Trainees of 2016 Batch call on MOS Finance & Shipping Shri P Radhakrishnan

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• Clarification of India’s position on the acceptance of MAP and bilateral APA in cases of countries where Article 9(2) of OECD Model Tax Commentary is absent

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• Prime Minister to inaugurate Global Entrepreneurship Summit tomorrow in Hyderabad

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• RBI Reference Rate for US $

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Case Laws:

• GST

• 2017 (11) TMI 1413
  Imposition of 12% GST on sanitary napkins - code number which is applicable to a person/service provider who seeks benefit of exemption under Serial No. 3 of the N/N. 12/2017- Central Tax (Rate) - Held that: - This is an aspect for which the petitioner must first get in touch with a specialist on the subject and in case they are unable to get hold of the code, correspond with the respondent Council, who, we are sure would ensure that the requisite information is made available - petition disposed off.

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• Income Tax

• 2017 (11) TMI 1429
  Entitlement to claim deduction u/s 43B - excise duty paid in advance in the Personal Ledger Account ( PLA ) - accrual of expenses - Held that:- The self removal scheme and payment of duty under the Act and the Rules clearly shows that upon deposit in the PLA the amount of such deposit stands credited to the Revenue with the assessee having no domain over the amount(s) deposited. In C.I.T. vs. Pandavapura Sahakara Sakkare Karkhane Ltd. (1991 (9) TMI 38 - KARNATAKA High Court) and C.I.T. vs. Nizam Sugar Factory Ltd. (2001 (9) TMI 62 - ANDHRA PRADESH High Court) as had occasion to consider as to whether the amounts credited to the Molasses Storage Fund out of the sale proceeds of molasses received by the assessee constitute taxable income of the assessee. Under the scheme, the assessee had no control over the amounts deposited in the fund and the assessee was also not entitled to withdraw any amount therefrom without the approval of the authorities. Further the amount deposited could be utilized only for the purpose specified. In those circumstances, the High Court held and in our view correctly, that the deposits made, though a part of the sale proceeds of the assessee, did not constitute taxable income at the hands of the assessee. We do not see why the same analogy would not be applicable to the case in hand. The above discussions, coupled with the peculiar features of the case, noticed above i.e. consistent practice followed by the assessee and accepted by the Revenue; the decisions of the two High Courts in favour of the assessee which have attained finality in law; and no contrary view of any other High Court being brought to our notice, should lead us to the conclusion that the High Courts were justified in taking the view that the advance deposit of central excise duty constitutes actual payment of duty within the meaning of Section 43B of the Central Excise Act and, therefore, the assessee is entitled to the benefit of deduction of the said amount. - Decided in favour of assessee.

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• 2017 (11) TMI 1428
  Revision u/s 263 - AO accepted the factum of gifts without making any further inquiry - Held that:- Clearly an inquiry had been conducted by the Assessing Officer on the material aspect of the transaction. The identity of the donors, as also the genuineness of the transaction and the creditworthiness of the donors had been questioned by the Assessing Officer. As to the identity of the donors and genuineness of the transaction there is no dispute and the CIT has also not doubted the correctness of the approach for the finding reached by the Assessing Officer. The only doubt that has been created is as to the creditworthiness of the donors. In this regard we find that the Assessing Officer had questioned the donors as to the source of money from which the gifts had been made to the assessee. The donors on their part explained that the money had come to them upon sale of certain properties. Thus, the inquiry had been made by the Assessing Officer and the conclusion drawn by him is consistent with the information provided by the donors. It cannot also be lost sight of that the amount of donation is only ₹ 75,000/- for each gift. Thus, the total disputed amount is only ₹ 1,50,000/-. Thus where certain inquiry appears to have been made pertinent to the issue in hand and the conclusion drawn by the Assessing Officer was consistent that the material that came on record as a result of those inquires and the total amount itself be small, we find that in view of the judgment in the case of Krishna Capbox(2015 (3) TMI 17 - ALLAHABAD HIGH COURT), the reasoning of CIT that further inquiry should have been conducted by the Assessing Officer cannot be sustained. - Decided in favour of the assessee and against the revenue.

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• 2017 (11) TMI 1427
  TDS u/s 195 - Deduction u/s 40(a)(i) - applicability of the provisions of the Double Tax Avoidance Agreement between the Indian and Japan and India and the USA - PE in India - Held that:- It is significant that even while the Court was hearing the submissions in Herbalife HC, it permitted the present Assessee to intervene and make submissions. These submissions were noted in paragraphs 28 to 30 of the said judgment. Therefore, even in Herbalife HC [2016 (5) TMI 697 - DELHI HIGH COURT] this Court was conscious of the changes brought about by introduction of Section 40 (a) (ia) in the Act with effect from 1st April, 2005. However, even after this change, the element of discrimination continued in AY 2006-07. The distinction between sub-clauses (i) and (ia) as regards the consequence of disallowance of the sum paid to a non-resident towards purchases as a deduction on account of the failure to deduct TDS, continued. That distinction was ultimately done away with only by the amendment of sub-clause (ia) by the FA 2014 with effect from 1st April, 2015. Therefore, the assertion by the Revenue in para 4 of its written submissions that “discrimination as held by CIT v. Herbal Life [Supra] has been done away with” is true only after 1st April, 2015 and not during the relevant AY 2006-07. The contention about the situs of payment has been raised for the first time in this Court in the written submissions. It was not the case of the Revenue earlier that the payments were made outside India and not in India. It was only argued that the discrimination pointed out in Herbalife HC no longer exists whereas, as demonstrated earlier, it did even during AY 2006-07. The inevitable conclusion is, therefore, that the decision of this Court in Herbalife HC squarely applies and answers question (i) against the Revenue. Since Section 40 (a) (i) of the Act as it stood in AY 2006-07 continued to discriminate in the above manner and was inconsistent with Article 24 (3) of the Indo Japan DTAA or Article 26 (3) of the Indo US DTAA, the Assessee was entitled to rely on the above DTAA provisions to claim deduction of the sums paid to entities in Japan and USA. - Decided in favour of the Assessee Payments made by the Assessee for purchases made to non-resident entities incorporated in Thailand and Singapore - Held that:- It is plain that the Revenue had not discharged its onus of showing that the Thailand and Singapore entities had a PE in India. The AO had simply relied on the AO’s own earlier decision holding that Metal One Corporation Japan had a PE in India and on that basis held that the Thailand and Singapore entities also had a PE in India. This conclusion had no factual basis since neither entity had even an LO in India. In any event the ITAT itself subsequently set aside that decision of the AO in the case of Metal One Corporation, Japan and held that even the latter did not have a PE in India. In the circumstances, the conclusion of the ITAT in this regard cannot be faulted. Question (ii) is accordingly answered in the negative, i.e. in favour of the Assessee and against the Revenue.

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• 2017 (11) TMI 1426
  Penalty under section 271(1)(c) - non disclosure of income - addition made on account of minimum guarantee realisation - as per assessee the assessee's income was a loss for both the assessment years - Tribunal upheld the penalty as concluding that non-availability of the agreement does not mean that the nature of the transaction cannot be disclosed - Held that:- For the simple reason that the assessee could not have got away by urging that the copy of the agreement with M/s. Prakash Pictures was not available. The assessee should have been candid and honest in disclosing that the agreement with M/s. Prakash Pictures resulted in the assessee obtaining the sum of ₹ 13,70,000/-. The assessee would have received this sum in respect of the distribution right of the picture “Charas” in Bombay Territory. The assessee, in the original file, did not disclose fully and truly all the particulars of income for the relevant year. The assessee maintains that the amount was not to be realised fully, but it was inaccurate in the sense that the distributor M/s.Prakash Pictures was also assessed to tax. M/s. Prakash Pictures produced the record and which referred that the assessee before us was paid the same price of ₹ 13,70,000/-. M/s. Prakash Pictures debited this amount as the cost of acquisition of the picture. It is in these circumstances that we find that the assessee managed to thwart the tax liability as rightly held by the Tribunal. This finding of fact rendered by the Tribunal cannot be termed as perverse. The Tribunal rightly came to the conclusion that it was immaterial as to whether the agreement was available or otherwise. However, it is not possible that the agreement in writing was not available. Even if formal written agreement was not available, it certainly would have been on the basis of some prior negotiations. The assessee and M/s. Prakash Pictures are both in film making and distributing business. Hence, they ought to have known the nature of transaction despite non-availability of the agreement. Secondly, the assessee cannot depend on the other party to the transaction for making entries in his book. If the assessee had included the entire receipts in the year under consideration, he would have ended up paying tax for the present year because even after setting off the brought forward losses, as mentioned earlier, the loss would have been converted into positive income with the inclusion of the balance receipt. Further, by virtue of losses of the assessment year 1977-78 and earlier years being wiped out, the assessee could not have availed of the benefit of further unabsorbed losses during the assessment year 1978-79. Thus, the Tribunal concluded that by not including the entire receipts in the assessment year 1977-78, the assessee was able to thwart his tax liability for two years, namely, assessment year 1977-78 and 1978-79. Thus, by deferring the declaration to the subsequent year, the assessee certainly furnished inaccurate particulars of income for the year under appeal and either avoided or deferred his tax liability. - Decided against assessee.

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• 2017 (11) TMI 1425
  Disallowing the claim for bad debts written off - Held that:- The provisions of section 36(1)(vii) and 36(1)(viii) operate in different fields. Both are independent provisions as held by the hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT [2012 (2) TMI 262 - SUPREME COURT OF INDIA] . Therefore, reliance placed by the Assessing Officer on the decision in the case of the Full Bench decision of the hon'ble Kerala High Court in the case of South Indian Bank Ltd. (2009 (12) TMI 394 - KERALA HIGH COURT) which is reversed by the hon'ble apex court in the case of Catholic Syrian Bank Ltd. (supra) therefore, is misplaced and had no relevance to the facts of the case. Therefore, this issue requires remand to the Assessing Officer for examining whether the provision for bad debts is actually reduced from sundry debtors account in the balance-sheet and the provision for bad debts is debited to the profit and loss account. If these conditions are satisfied, we direct the Assessing Officer to allow the same as deduction. Disallowance of the claim made under section 36(1)(viii) - method of computation of profits of the eligible business - Held that:- It is the contention of the assessee-bank that the expenses which are directly attributed to the assessee's business have been allocated to the eligible business and common expenses and general overheads are allocated or apportioned among the eligible business and non-eligible business in proportion to the turnover of the respective businesses. The methodology adopted by the assessee-bank is in conformity with the well-accepted method. However, we remit this issue to the file of the Assessing Officer to verify the methodology adopted by the assessee is in accordance with the stated method or not. If so, to accept the same. Disallowance of premium paid which is amortised on HTM securities - Held that:- Securities of HTM category form part of stock-in-trade. It is settled proposition of law that stock-in-trade should be valued at cost or market price whichever is less. Where the assessee had paid premium at the time of acquisition of securities which are held as stock-in-trade, the same should be allowed as deduction while computing income. See Ing Vysya Bank Ltd. v. Asst. CIT [2015 (2) TMI 892 - ITAT BANGALORE] Disallowance under section 14A to 2 per cent. of the exempt income - Held that:- No disallowance under section 14A can be made in the absence of finding as to the correctness or otherwise of the computation made by the assessee. In the present year, the assessee-bank itself has offered to tax a sum of ₹ 91,69,320 which was upheld by the Commissioner of Income-tax (Appeals). Since the assessee is not in appeal, we uphold the disallowance. Accordingly, the finding of the Commissioner of Income-tax (Appeals) does not call for an interference. The ground of appeal is dismissed. Miscellaneous items disallowed - Held that:- As decided in previous AY, amounts written off represent services charges. It is undisputed fact that in the year of recovery the same were offered to tax. Therefore, we do not find any fault with the reasoning adopted by the Commissioner of Income-tax (Appeals) in allowing the same as the conditions prescribed under section 36(1)(vii) are not applicable to the present case. Therefore, this ground of appeal is also dismissed Applicability of the provisions of section 115JB - Held that:- The assessee-bank is not liable for tax under section 115JB for the year under consideration. Therefore, we do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). This ground of appeal is dismissed. Methodology of computation of deduction in respect of profits of rural branches as provided under section 36(1)(viia) - Held that:- The methodology adopted by the Assessing Officer for the purpose of computing the average aggregate advances is against the plain provisions of rules and also against the ratio of the decision of the co-ordinate Bench in the cases cited supra. However, we remit this issue back to the file of the Assessing Officer to identify the rural branches less than 10,000 population as per the last census and the average aggregate advances of such rural branches alone should be considered for the purpose of this deduction. Thus, these grounds of appeal are allowed for statistical purposes. Direct the Assessing Officer to allow fall in value of investments as a revenue loss. Accrual of income - Addition made on account of commission on locker rent received in advance - Held that:- though the amount was shown as receipt and credited to the profit and loss account, the assessee was entitled to offer income by following different method of recognition of income. No doubt, the assessee was only following the mercantile system of accounting. The only issue to be decided is whether income accrued to the assessee. As held in case of Bank of Tokyo Ltd. (1993 (5) TMI 172 - CALCUTTA HIGH COURT) that even though the assessee-bank received the entire commission for the guarantee commission no debt is actually created in favour of the assessee- bank for the entire amount. A right always remains vested in the customers to recall payment in the unexpired period in the case of earlier redemption of guarantee. Similarly even in respect of the locker rent also, the same reasoning can be applied. Therefore, having regard to the decision cited supra and also the principle of consistency, we hold that no addition is warranted in respect of the guarantee commission on letter of credit or locker rent received in advance Unrealised gains on revaluation of forward contracts - Held that:- Income is recognised only on hypothetical basis which has not accrued to the company. In the light of these facts, the issue is whether this income is liable to tax as accrued income within the meaning of section 5 of the Act. It is salutary principle that Income-tax is not leviable on hypothetical income. No income can be taxed unless otherwise accrued and realised. This issue was settled by the hon'ble Madras High Court in the case of Indian Overseas Bank v. CIT [1990 (2) TMI 43 - MADRAS High Court]. In the light of these judgments, we hold that no income can be taxed on notional basis unless and otherwise income accrued to the assessee. Depreciation cannot be disallowed on the leased assets Addition u/s 14A - Held that:- Provisions of section 14A cannot be applied without giving any finding as to how the claim of the assessee-bank that no expenditure was incurred to earn exempt income, was incorrect. Disallowance under section 40(a)(ia) - non-compliance with the TDS provisions - Held that:- No doubt, the assessee-bank is entitled for deduction of the amount which was disallowed in the earlier assessment proceedings for non-deduction of tax at source in the year of deducting tax at source. The onus always lies on the assessee to prove that the TDS provisions have been complied with during the year in which the claim was made. Therefore, we remit this issue to the file of the Assessing Officer with a direction that the assessee- bank shall furnish evidence in respect of compliance with the TDS provisions. Addition made on account of payment of gratuity and pension fund - Held that:- There is no dispute as regards the crystallisation of liability during the year under consideration. The only reason cited by the Assessing Officer for disallowance is that the assessee has not debited to the profit and loss account, the entire amount of the additional liability. Now, it is settled law that the absence of entries in the books of account or treatment in the books of account has no bearing on the allowability of actual expenditure, once it is established that the liability had crystallised and which is in the revenue in nature. This proposition of law has been reiterated in a plethora of decisions subsequently by various High Courts as well as the hon'ble apex court. Therefore, the reasoning of the Assessing Officer does not hold water. Even otherwise, these payments were subject to the provisions of section 43B. Section 43B permits deduction only in the year of payment.

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• 2017 (11) TMI 1424
  Maintainability of appeal before CIT(A) against Levy of interest u/s 220(2) - enhanced assessment - AO directed that interest u/s 220(2) chargeable on the amount demanded u/s 156 - appeal maintainable under clause (c) to Section 246(1) - Held that:- The order under Section 154 of the Act had the effect of enhancing the assessment. Such orders are appealable on all aspects decided and adjudicated. The order under Section 154 of the Act had also specifically dealt with and examined the question of interest u/s 220(2) of the Act and the date from which the interest was chargeable. The direction to charge interest was specifically given in the order under Section 154 of the Act. The claim and contention of the appellant assessee to the contrary was rejected and disallowed. The assessing officer had refused to accept the contention made by the assessee that interest would not be chargeable under Section 220(2) of the Act, until and unless there was non-payment pursuant to the order passed. This is a peculiar case wherein the question of levy of interest under Section 220(2) of the Act, which is payable on non payment, was decided, levied and imposed in the order under Section 154 of the Act. In the present case, there was a specific direction and finding in the order passed under Section 154 in respect of charging interest under Section 220(2) of the Act. Consequently, the direction for payment of interest which was contested by the appellant-assessee would be appealable under clause (c) of Section 246 (1) of the Act. - Decided in favour of assessee.

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• 2017 (11) TMI 1423
  Rejecting books of accounts of the assessee - assessee has adapted the “Project Completion Method” for purpose of accounting of its income from building development activity - Held that:- As decided in assessee's own case Under Section 145 of the Act, in a case where accounts are correct and complete but the method employed is such that in the opinion of the Income Tax Officer, the income cannot be properly deduced therefrom, the computation shall be made in such manner and on such basis as the Income-Tax Officer may determine. In our view, as stated above consistently for 30 years, the assessee was valuing the stock-in-trade at cost for the purpose of statutory balance sheet, and for the income tax return, valuation was at cost or market value whichever was lower. That practice was accepted by the Department and there was no justifiable reason for not accepting the same. Preparation of the balance sheet in accordance with the statutory provision would not disentitle the assessee in submitting income tax return on the real taxable income in accordance with a method of account adopted by the assessee consistently and regularly. That cannot be discarded by the departmental authorities on the ground that assessee was maintaining balance sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods for valuing its stock-in-trade (investments) because the Bank was required to prepare balance sheet in the prescribed form and it had no option to charge it. For the purpose of income tax as stated earlier, what is to be taxed is the real income which is to be deduced on the basis of the accounting system regularly maintained by the assessee and that was done by the assessee in the present case - Decided in favour of assessee.

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• 2017 (11) TMI 1422
  Disallowance of deduction towards belated deposit of employees contribution of Provident Fund/Employees State Insurance - Held that:- The first appellate authority confirmed the order of dis-allowance following the order passed by the Tribunal in SFO Technologies P. Ltd.[2015 (1) TMI 1241 - ITAT BANGALORE] wherein the Tribunal held that if there any sum received by the assessee from any of its employees as contribution to PF and/or ESI was not credited by the assessee to employees’ accounts in the relevant fund or funds on or before the due date as per Explanation to sec. 36(1)(va) of the I.T. Act, the assessee shall not be entitled to deduction thereof. Accordingly, the order of the CIT(A) is reversed on this issue and that of the Assessing officer is restored. - Decided against assessee.

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• 2017 (11) TMI 1421
  Eligibility of benefit of section 11(1) - huge surpluses earned was withdrawn by way of payments to the persons referred u/s 13(3) - corpus fund - Held that:- In the present case, the Assessee is not claiming any benefit Under Section 11(2) as it cannot; because in respect of this assessment year, the Assessee has not complied with the conditions laid down in Section 11(2). The Assessee, however, is entitled to claim the benefit of Section 11(1)(a). In the present case, the Assessee has applied ₹ 8 lakhs for charitable purposes in India by purchasing a building which is to be utilised as a hospital. This income, therefore, is entitled to an exemption Under Section 11(1). In addition, under Section 11(1)(a), the Assessee can accumulate 25% of its total income pertaining to the relevant assessment year and claim exemption in respect thereof. Section 11(1)(a) does not require investment of this limited accumulation in government securities. The balance income of ₹ 1,64,210.03 constitutes less than 25% of the income for Assessment Year 1970-71. Therefore, the Assessee is entitled to accumulate this income and claim exemption from income tax Under Section 11(1)(a). Any educational institution which is required to be run they have to have a surplus fund for educational activity to sustain the consistency in the efficiency and very purpose of collecting donation is to sustain activity of institution. Merely, because surplus fund it cannot be envisaged as profit, the institution has not crossed one crore limit and they are well within their prescribed limit. The income was received by the trust which is reflected in the books of accounts. In our view, the view taken by the authority is required to be reversed and it is required to be looked into the foundation of the ratio laid down by the Supreme Court in the case of Queen s Education Society (supra) where funds which has been surplus is within a corpus fund and it has been kept as reserve fund which is not in dispute and they have not crossed the limit of one crore. Depreciation claim - Held that:- In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned Counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon'ble Supreme Court in Escorts Ltd. and Anr. (1992 (10) TMI 1 - SUPREME Court) is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Section 11. The questions proposed have, thus, to be answered against the revenue and in favour of the assessee.

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• 2017 (11) TMI 1420
  Assessment of income - assessee has received the amount of Arbitration Award and has disclosed only the net profit on these receipts by applying the NP rate - Mercantile system of accounting - contingent liability - subsequent years expenses which are claimed ought not to be allowed in the relevant year - Held that:- From the record it is very clear that the assessee while submitting his credential before the AO relied on the audit report for the A.Y. 1990-91 & 1993-94 which he alleged to have not claimed expenses. However, no finding has been arrived by the AO and if we look at the average which has been applied by the AO and tribunal, the same are not consistent. In that view of the matter, we are of the opinion that while considering the statement for A.Y. 1990-91 & 1993-94, the AO ought not to have been given finding whether the expenses are claimed or not instead of deciding the issue which is not relevant and simply deducted the amount which is claimed in the income. In our considered opinion, CIT while considering the same has rightly held the profit rate and allowed the claim of the appellant as reproduced hereinabove. The tribunal has committed serious error in concluding that subsequent years expenses which are claimed ought not to be allowed in the relevant year . In view thereof, the income which has been incurred in the year 2006-07 is required to be allowed as expenses were not claimed in the earlier year. Since, no finding arrived by the AO whether the expenses are claimed or not for the A.Y. 2004-05. - Decided in favour of the assessee

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• 2017 (11) TMI 1419
  Disallowance of interest - difference of interest paid on bank loans being excessive vis-a-vis interest received on loans advanced to sister concerns - Held that:- It is the claim of the assessee that the said amount was borrowed with clear intention of acquiring shops which was leased to the lending bank itself and it is claimed that none of the borrowed funds were utilised for the purpose of advancing money to sister concerns. And second bone of contention of assessee is that its own funds and also other interest free funds available with it are more than the loan amount advanced to sister concern. The assessee has relied upon the decision of Hon’ble Bombay High Court in the case of HDFC Bank Ltd. (2016 (3) TMI 755 - BOMBAY HIGH COURT) , Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT). It is claimed by the assessee that presumption will apply that the assessee has used interest free funds available with it for advancing loans to sister concerns. It is fairly conceded and agreed by the learned counsel for the assessee that these contentions raised by the assessee need verification by the AO and matter needed to be restored to the file of the A.O for denovo adjudication of the issue on merits in accordance with law. Thus keeping in view factual matrix of the case , we are inclined to restore this issue to the file of the AO for de-novo determination of the issue on merits in accordance with law after verification and examination of all the contentions of the assessee in the light of provisions of the statute and judicial precedents. Provision towards licence fee for renewal of Excise licence fee of PLL and RS II payable to the State Excise Department - Held that:- We have observed that the provision for licence fee payable to State Government for renewal of licence was made by the assessee for the impugned assessment year while no payment has been made by the assessee to the Government till the due date of filing the return of income u/s 139(1) which has infringed Section 43B of the 1961 Act and the same cannot be allowed as an expenses for the year under consideration. Hence in view of the provisions of Section 43B these expenses claimed by the assessee towards provision for license fee cannot be allowed as no payment has been made till the due date of filing of return of income u/s 139(1) and the appellate order of the learned CIT(A) is confirmed. Hence , assessee fails on this ground Cessation of liability - licence fee payable to the State Excise Department which has been outstanding in its book of accounts as the same is not paid by the assessee to the Government - Held that:- We are in agreement that there cannot be double jeopardy and the assessee cannot be prejudiced twice once by disallowing the expenses itself in the year of incurring of the said expense and secondly by treating the same amount accumulated over a period of time by treating the same as income u/s 41(1) on account of cessation of liability . Hence , in our considered view this matter need to be restored back to the file of the A.O for denovo adjudication of the entire issue on merits in accordance with law after conducting such verification as is considered fit by the AO including status of dispute between parties

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• 2017 (11) TMI 1418
  Distribution of capital assets u/s 45(4)- partnership firm - whether the provision of section 45(4) is applicable to the firm on crediting revaluation surplus to partners account settling their accounts on their retirement or not? - Held that:- In this case, the transferor is the partners who on their retirement assign their rights in the assets of the firm and in lieu the firm pays the retiring partners the money lying in their capital a/c, meaning thereby that the firm becomes the transferee in this transaction. Hence, it is the firm and its continuing partners who have acquired the rights of the retiring partners in the assets of the firm by paying them lump sum amount on their retirement. So it cannot be said that the firm is transferring any right in capital asset to the retiring partner, rather it is the retiring partner who is transferring the rights ill capital assets in favour of continuing partners. The ITAT Mumbai in case of Sudhakar Shetty [2011 (3) TMI 1644 - ITAT MUMBAI] held that the transaction was taxable in hands of retiring partner for assignment of his rights in favour of firm and its continuing partners. Since the same event cannot result into transfer by retiring partners as well as by firm, the ITAT by holding the transaction to be transfer from retiring partner to firm impliedly held that the transactions not to be taxable in hands of firm. The purpose of 45(4) of the Act is to bring such transactions which have an effect of transfer of capital asset without the asset being actually transferred. The purpose is to tax the actual beneficiary of such transactions. In the present case, the firm or the continuing partners are not the beneficiaries as no new tangible income or asset has arisen to them, rather the firm and continuing partners have purchased the share of retiring partner by paying cash. It is the retiring partners who have been benefitted by receiving much more than actual capital contributed by them on account of revaluation. Thus there can be no case of tax avoidance by colorable device by the firm on the facts and circumstances of the assessee firm's case. Accordingly, we are of the view that the assessee firm is not liable to capital gains on the above transaction. This issue of assessee’s appeal is allowed.

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• 2017 (11) TMI 1417
  Treatment to profit arising out of purchase and sale of shares - long term capital gain/ short term capital gains OR business income - Held that:- The assessee is an old person and is regularly making investment in the shares and the number of scrips dealt is also not high. We do not find any differential fact for the year under consideration as compared to the immediate preceding assessment year for which similar activity has been held to be assessable under the head capital gain. There is also no substantial difference in the activities carried out by the assessee in individual capacity vis-à-vis in the capacity of HUF. The assessee did not utilize the borrowed funds for making investment as the entire investment is made out of own capital of the assessee. Thus Tribunal has decided exactly on identical facts in assessee’s own case for AY 2008-09 treated the profit arising out of sale and purchase of shares as capital gains. - Decided against revenue Disallowance of interest expenditure - disallowance as the share transaction is treated as business activity - Held that:- We remand this matter back to the file of the AO to examine whether the assessee has earned FDR income which has nexus with the expenditure of interest and also consider the order of Tribunal of Agra Bench in the case of Raj Kumari Agarwal (2014 (7) TMI 867 - ITAT AGRA). Accordingly, this issue of Revenue’s appeal is allowed for statistical purposes by set aside the orders of lower authorities and remanding the matter back to the file of the Assessing Officer.

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• 2017 (11) TMI 1416
  Claim of deduction towards loan processing charges - allowable business expenditure - Held that:- loan processing charges paid by the assessee was wholly and exclusively for the purpose of assessee’s business and by incurring such expenditure neither any new asset was created nor any enduring benefit has accrued to the assessee. While deciding the issue of identical nature in case of assessee’s sister concern, the Tribunal has allowed loan processing charges as revenue expenditure. - Decided in favour of assessee. Deduction of an amount towards loans sourcing fees paid to Maruti Udyog Ltd. - Held that:- The issue has been decided in favour of the assessee in preceding assessment year. In view of the aforesaid submissions of the learned Counsels appearing for the parties, we uphold the order of the learned Commissioner (Appeals) as found that the loan sourcing fees was paid to Maruti Udyog Ltd. and is amortized over the period of loan agreement. He found that only the amount which is amortizable for the current year has been debited to the Profit & Loss account. He also found that the Assessing Officer has not provided any basis why he considers the expenditure as capital in nature. Further, the learned Commissioner (Appeals) found that in assessee’s own case for assessment year 2008–09, similar deduction claimed by the assessee was allowed by the first appellate authority. Addition of sales promotion expenses - Held that:- As before the first appellate authority the assessee furnished bifurcation of the expenses claimed of ₹ 10.75 crore. As stated by the assessee, the aforesaid amount comprises of different component of services availed by the assessee which also includes sales promotions services. As per bifurcation submitted before the learned Commissioner (Appeals), the expenses incurred towards sales promotion was to the tune of ₹ 74,62,146 and on that basis, the learned Commissioner (Appeals) has directed the Assessing Officer to disallow 10% of ₹ 74,62,146. Thus, from the aforesaid facts, it is evident that the assessee has brought fresh facts before the learned Commissioner (Appeals) insofar as it relates to quantum of sales promotion expenses which was never filed before the Assessing Officer. In view of the aforesaid we are inclined to restore the issue back to the file of the Assessing Officer to verify assessee’s claim and disallow 10% out of sales promotion expenses claimed by the assessee. This ground is allowed for statistical purposes.

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• 2017 (11) TMI 1415
  Penalty imposed u/s 271(1)(c) - deduction on account of write–off of adnavce given towrds purchase of property - Held that:- As could be seen from the facts on record, out of the advance given of ₹ 30 lakh towards purchase of factory building, the assessee could recover the amount of ₹ 5 lakh only and the balance amount of ₹ 25 lakh could not be recovered in spite of best efforts. Therefore, in the return of income filed for the impugned assessment year, the assessee claimed deduction on account of write–off of the amount of ₹ 25 lakh. From the Profit & Loss account and its schedule, it is apparent that the assessee had furnished full particulars of the claim of write–off. Even, in the computation of income filed along with the return of income the assessee has appended a note, wherein he has disclosed full particulars about the facts relating to write–off of ₹ 25 lakh. The assessment order itself reveals that relying upon the note appended to the computation of income as well as Profit & Loss account the Assessing Officer has made disallowance of the write–off. The aforesaid facts clearly demonstrate that the assessee has furnished full particulars of write–off of 25 lakh. Therefore, it cannot be alleged that the assessee has furnished inaccurate particulars of income for which the Assessing Officer had ultimately imposed penalty under section 271(1)(c). Rather, it is a bonafide claim of deduction made by the assessee considering the fact that it was unable to recover the amount of ₹ 25 lakh - Decided in favour of assessee.

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• 2017 (11) TMI 1414
  Revision u/s 263 - different categories of jewellery manufactured and sold undisclosed - Held that:- Not only in the tax audit report but also in the course of assessment proceedings, the assessee had produced monthwise and carat–wise details of different categories of jewellery manufactured and sold by it. It is also a fact on record that the Assessing Officer has not only enquired into the issue but has also examined the details furnished by the assessee before completing the assessment. Therefore, observations of the learned PCIT that the Assessing Officer has not made proper enquiry and not called for necessary details is wholly unsubstantiated and baseless. Further, the learned PCIT has not stated in clear terms what prejudice was caused to the Revenue as a result of alleged inaction of the Assessing Officer in making proper enquiry. Therefore, without any specific conclusion / finding by the learned PCIT with regard to prejudice caused to the Revenue, the conditions of section 263 are not fulfilled . For the genuineness of advance received of ₹ 55 lakh from Prabodh B. Thakkar is concerned, it is noticed, the Assessing Officer in the notice issued under section 142(1) of the Act on 15th January 2014, has called upon the assessee to furnish the name and address and other details of the parties from whom advances were received along with the confirmations. In response to the notices issued by the Assessing Officer, the assessee vide letter dated 10th December 2014, has furnished the details of advances received from customers. A perusal of the party–wise details of unsecured loans / advances, received a copy of which is at Page–96 of the paper book reveals that the assessee has shown an aggregate amount of ₹ 1,30,49,675 towards advances to have been received from 80 customers. The revisional authority has not questioned the advances received from other 79 customers amounting to ₹ 75,49,675. He has picked up the advances received of ₹ 55 lakh from a single customer. Notably, as per the materials on record, it is evident that the Assessing Officer has not only made enquiry relating to the advances received from different parties but after analyzing the details furnished by the assessee has completed the assessment. Assessing Officer having made enquiry and found the assessee’s claim to be correct, the learned PCIT cannot question the decision of the Assessing Officer, merely because in his opinion the Assessing Officer should have made some more enquiry without specifying what more enquiry should have been conducted by the Assessing Officer. Reasonableness of payment to Anmol Jewellery qua section 40A(2)(b)in the course of assessment proceedings, the Assessing Officer has enquired into the issue of payment made to persons specified under section 40A(2)(b) and after applying his mind to materials brought on record has completed the assessment. Learned PCIT has held the assessment order to be erroneous and prejudicial to the interests of Revenue, since, according to him the Assessing Officer has not examined the reasonableness of such payment looking at the fair market value of the goods and services received from the concerned party. A perusal of the show cause notice under section 263 as well as the impugned order passed under section 263 does not reveal any conclusive observation / finding of the learned PCIT that the payment made by the assessee to Anmol Jewellery is not in conformity with the fair market value of the goods purchased. Nothing has been brought on record by the learned PCIT to even remotely suggest that the payment made by the assessee to Anmol Jewellery was either excessive or more than fair market value of the goods purchased. Thus, it indicates that the learned PCIT himself was not sure whether the payments made to Anmol Jewellery were not commensurate with the fair market value. That being the case, by merely observing that the Assessing Officer should have made some more enquiry to ascertain the reasonableness of payment he could not have held the assessment order to be erroneous and prejudicial to the interests of Revenue. - Assessee appeal allowed.

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• Customs

• 2017 (11) TMI 1412
  Whether the CESTAT was justified and correct in law in passing an order of remand to the CUSAA Nos. 57/2017 & 58/2017 Page 3 of 4 original adjudicating authority to first decide the issue of jurisdiction, after decision of the Supreme Court in Civil Appeal preferred against the decision of Delhi High Court in Mangli Impex Limited v. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT]? Held that: - The Tribunal will decide the appeals on merits, including the question of jurisdiction of the officers of DRI to issue the show cause notice, without being influenced by the decision of the Delhi High Court in the case of Mangli Impex Limited which has been stayed by the Supreme Court - the substantial question of law is answered in favor of the appellants - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1411
  Condonation of delay in filing appeal - delay on the ground that they did not receive the impugned order and change of address indicated was not duly followed up for dispatching the letter by Revenue - Non-compliance with the provisions of Section 153 - service of order - change of address - Held that: - the appellant in the present case is an importer. Unlike the assessee for Central Excise and Service Tax, the importers are not required to register their address etc. with the Department. In other words, there is no registered address as an assessee with the department. The declarations made in the bill of entry and thereafter any correspondence will be considered by the officers for communicating with the importer in any proceedings. In the present case, the dispatch of the impugned order to the known address of the appellant and its return have been evidenced and recorded in the written submissions of Revenue. The display in the Notice Board is evidenced in the impugned order, wherein copy was marked to the Notice Board also. While we note that the Revenue could not produce the details of the exact date of display, we also take note that we are dealing with 13 years’old case. Here, it is necessary to note that large number of communications in the form of notices, orders were sent to the various assessees by the Department. The standard legal requirements are generally adopted for dispatch of these letter by registered post or by speed post etc. The appeal has been filed after more than 12 years after issue of the impugned order. We are not convinced with the submissions made by the appellant - application dismissed - appeal also dismissed being not maintainable.

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• 2017 (11) TMI 1410
  DEPB benefit - mis-declaration of export value in shipping bills - principles of natural justice - case of appellant is that the Original Authority not adhering to the remand direction of the Tribunal while deciding the case afresh - Held that: - all the major points raised by the appellants have been dealt with by the Original Authority. None of the significant issues raised by the appellant with reference to purchase of impugned goods, documentation and legal points regarding cross-examination and reliance placed by the Revenue on various evidences collected during investigation have been left out by the Original Authority - there are no reason to interfere with the findings of the Original Authority on merits of this case. Penalty - ineligible DEPB benefit - Held that: - considering the quantum of improper benefit sought to be derived, as mentioned above, the penalty is on the higher side. Accordingly, we hold that the penalties can be reduced to ₹ 4 crores (main appellant) and ₹ 1 crore each on the other two appellants in terms of Section 114 (i) of the Customs Act, 1962. Appeal allowed in part (only as regards penalties).

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• 2017 (11) TMI 1409
  Valuation - re-determination of value by the Original Authority - mutuality of interest - Held that: - It is apparent that different brand names carry different values. It is not practicable to have a comparison of one brand with another for Customs duty purpose. Such determination will be highly subjective. As such, the Original Authority is left with only option of arriving at the correct assessable value by backward calculation, which he did. The second major point contested by the appellant is that postimportation expenditure and profit margin allowed is not correct - Held that: - While we note that the appellants contested the post-importation expenditure on the ground that the goods are fragile and some breakage is to be accounted for, we are not convinced by the said submission for the reason that the items are appropriately packed and no evidence is produced to support a particular quantum of breakage occurring during transportation. In the absence of such material evidence we cannot proceed based on simple assertion of the appellant. Appeal dismissed - decided against appellant.

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• Service Tax

• 2017 (11) TMI 1408
  CENVAT credit - input services - GTA services - auction services - insurance services - rent-a-cab services - outdoor Catering services - Club or Association services - Clearing & Forwarding (C&F) agency services -cargo handling services - insurance services - Held that: - the issue is squarely covered by the decision in the case of Commissioner, Central Excise Versus M/s Manglam Cement Ltd. [2017 (11) TMI 483 - RAJASTHAN HIGH COURT]. Scope of place of removal - Held that: - in the case cited, the Tribunal has recorded a finding that from the verification of bills, it is found that transport charges are required to be borne out by the assessee. Therefore, that issue is also required to be decided in favor of assessee. Regarding Cargo Handling Services and Insurance Service, reliance placed in the decision of Gujarat High Court in Commissioner of Central Excise and Customs vs. Ultratech Cement Ltd. [2014 (9) TMI 187 - GUJARAT HIGH COURT] and it is held that the issue is answered in favor of assessee. Regarding Rent a Cab Service, reliance placed in the decision in the case of The Commissioner of Central Excise Service Tax Bengaluru-IV, Versus Ultra Tech Cement Ltd. [2016 (7) TMI 1080 - KARNATAKA HIGH COURT], where it was held that credit is allowed. Regarding Club and association services, it is clear that it is club activities for going for a sale or any other assigned work. It will be operational, manufacturing activity. The credit on all services allowed - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 1407
  Levy of service tax - Passenger Service Fees - other taxes (international taxes) collected by the airlines as part of consideration when the tickets are issued to the passengers - Held that: - the Tribunal had occasion to examine the same issue in respect of various international airlines. As rightly pointed out by the appellants that in the case of M/s Continental Airlines Inc. Versus Commissioner of Service Tax, New Delhi [2015 (7) TMI 1079 - CESTAT NEW DELHI], where the Tribunal held against the inclusion of these charges in the taxable value for air travel service by the appellants - service tax cannot be levied. Includibility - other taxes (international taxes) collected by the airlines as part of consideration when the tickets are issued to the passengers - Held that: - while upholding the issue on merit regarding tax liability of fuel surcharge and insurance surcharge we hold that the demands are to be restricted to the normal period of limitation only - penalties set aside. Appeal allowed in part.

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• 2017 (11) TMI 1406
  Business auxiliary services - process of operating the lottery business which includes promotion, marketing and all auxiliary and incidental support services like selling, billing, collection, remitting, evaluation of prospective customers etc - Held that: - The fact that appellants are engaged in promotion and marketing of lottery of the State Governments cannot be disputed. Services in relation to promotion or marketing of a service of client is liable to tax. We are not able to accept the proposition of the appellant that the State Governments are not their client. The terms of the agreement are clear that the State Governments authorized the appellants to organize and promote the lotteries. The nature of consideration that will accrue to the appellant for their services will not by itself decide the tax liability. The consideration is determined by mutual consent in terms of the agreement. In the present case on the overall receipts by sale of lottery, the State Government gets certain percentage as their share. For organizing, promoting and marketing the lottery the appellants get the consideration (retained amount) as per the terms of the agreement - tax liability upheld. Valuation - Held that: - the provisions of Section 67 (2) are very clear to the effect that gross amount charged by the service provider should be inclusive of service tax payable, to consider such amount for backward calculation. In the absence of any evidence to the effect that the amount of consideration now taken up for tax liability is inclusive of service tax in terms of an arrangement or documentation, we note that the findings of the Original Authority is correct in this regard. Penalties - Held that: - the Original Authority has imposed penalty only under Section 76 and 77 and not under Section 78. On perusal of the impugned order, we find no reason to interfere with the findings. Appeal dismissed - decided against appellant.

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• 2017 (11) TMI 1405
  Reverse charge mechanism - IPR Services - includibility of expenditures - Rule 5 of Service Tax Valuation Rules - Held that: - The appellants are not incurring any extra cost or expense in receiving such service. If at all, the expenses are incurred by the holding company which in any case fixed the consideration for taxable service provided to the appellant. In terms of Rule 7 of Valuation Rules, it is clear that in respect of taxable services provided form outside India the value shall be actual consideration charged for the services provided - In the present case, there is no allegation that the appellants have not discharged service tax on actual consideration charged by the service provider - there is no justification to invoke Rule 5 to hold that the appellants short paid Service Tax on reverse charge basis. Outstanding consideration to be paid by Holding Company - effect of amendment - Held that: - the amendment which brought in a deeming provision for transaction between associate enterprises is applicable from the that date only - the debit entries made prior to 10.05.2008 and shown outstanding on that date cannot be subjected to Service Tax on reverse charge basis based on the explanation, which was introduced under Rule 6 (1) of the Service Tax Rules, 1994 w.e.f. 10.05.2008. Appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1404
  Valuation - construction services - exclusion of the value of the free supply materials - composite contracts - Held that: - On examining the scope of Section 67 as well as the said explanation of the N/N. 15/2004-ST., the Tribunal in the case of Bhayana Builders (P) Ltd. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] concluded that the items supplied free of costs by the recipient of service cannot be considered for addition in the value to arrive at the value for tax purposes - subject to verification of quantification of free supplied materials, based on the documents to be submitted by the appellant/assessee, such exclusion is to be considered and allowed. Penalties - Held that: - since the issue involved was with reference to multiple contracts of different nature, the case was examined and detailed order was passed by the Original Authority, accepting some of the contention of the appellant and rejecting the others - this is a fit case for waiver of penalty by invoking Section 80 - penalties set aside. Personal use of the building by the recipient of service - Held that: - similar set of facts decided in the case of KHURANA ENGINEERING LTD. Versus COMMR. OF C. EX., AHMEDABAD [2010 (11) TMI 81 - CESTAT, AHMEDABAD], where it was held that service provided by the appellant is to be treated as service provided to Govt. of India directly and end use of the residential complex by Govt. of India is covered by the definition “Personal Use” in the explanation to definition of residential complex service. Eligibility of the appellant /assessee for composition scheme - Held that: - It is clear that the facts of the present case with reference to each one of the taxable contract are to be verified regarding the period involved as well as the facts of payment of concessional duty in respect of the whole of the contract etc - matter requires remand. Appeal allowed by way of remand.

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• 2017 (11) TMI 1403
  Refund of unutilized CENVAT credit - input services - advertisement service - renting of immovable of property service for car parking - cafeteria; health and fitness service - event management service - development and supply of content service - legal consultancy service - interior design service - video production agency service - Held that: - except for health and fitness service, with regard to all other services for the subsequent period, it has been held by the authorities below that these are input services and refund claims were sanctioned. Therefore, Revenue cannot take contrary stand to deny CENVAT credit when they hold that the services in question are input services - refund allowed. Health and fitness service - Held that: - Admittedly, these services have been received by the appellant in the course of their business of providing output service, therefore for that period, the appellant is entitled to avail CENVAT credit on health and fitness service - refund allowed. Appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1402
  Refund claim - amount paid under protest - time limitation - Held that: - the challans furnished by the respondent clearly reflect that the payment was made under protest and once the payment is made under protest, the time limit under Section 11B does not apply - when the amount that the assessee has claimed is not payable to the Government, the lower authority ought to have discussed the issue on merits rather than rejecting the sole issue whether the payment is made under protest - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 1401
  Penalty u/s 76 and 78 - in a case where the assessee has paid entire amount of service tax along with interest and 25 % of service tax as penalty within 3 days of the issuance of the show cause notice, whether the proceedings can be concluded under Section 73(3) of the Finance Act, 1994 or not? - Held that: - it is a clear mandate of law that if a assessee paid entire amount of service tax alongwith interest and 25% of service tax as penalty within 30 days of the issuance of the show cause notice the proceedings shall be concluded - As appellant has compiled with the provisions, therefore, proceedings against the appellant is not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1400
  Business Auxiliary services - Banking and other financial services - deposit processing services - insurance policy processing services - accounting services - levy of service tax - Held that: - it is incorrect to hold that the activities of deposit processing, insurance policy processing and accounting services would fall within the banking and other financial services - demand set aside. However, the issuance of power plus card for purchase of fuel, in our view, being issuance of credit card or lending would fall within the ambit of banking and other financial services. On these activities, the appellants are liable to pay service tax - demand upheld. Penalty u/s 76 and 78 - Held that: - Since we have already held that the appellant is not liable to pay service tax on the above such services, except for power plus cards for purchase of fuel, we are of the view that the imposition of penalties is unwarranted and requires to be set aside. Appeal allowed in part.

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• 2017 (11) TMI 1399
  Works contract - Construction of Industrial or Commercial Complex Service - Held that: - the period involved in the case is from 10.9.2004 to 31.3.2007 - the issue being a works contract whether subject to service tax prior to 1.6.2007 has been settled by the judgment of the Hon’ble Supreme Court in the case of Commissioner Vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT], where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1398
  Business Auxiliary Services - consideration received from various banking / non-banking financial institutions for the services provided for business promotion / marketing services - extended period of limitation - Held that: - there was much confusion whether such services are taxable or not, the issue had traveled upto the Larger Bench taking and the matter reached finality in the order dated 12.9.2013 of the Larger Bench - the department yet did not issue show cause notice proximate to that decision and within the period of limitation. The proceedings initiated invoking extended period is hit by limitation - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1397
  CENVAT credit - capital goods - depreciation - Rule 4(4) of the CCR, 2004 - Held that: - this case needs to be remanded back to the original authority to verify whether the appellant has actually taken the depreciation under Section 32 of the Income Tax Act or not becuase the appellant has submitted that it is only the irregularity crept in accounting of the credit in the concerned book which was purely unintentional and the appellant has not taken the double benefit - appeal allowed by way of remand.

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• 2017 (11) TMI 1396
  Principles of natural justice - Service Tax on the reimbursement/payments received from the clients - pure agent - Held that: - the Ld. Commissioner (Appeals) has not dealt with all the issues raised by the appellants and has given no finding on various contentions raised by the appellants - The agreements submitted by the appellants in support of their contentions also do not appear to have been examined by the Ld. Commissioner (Appeals). There is no finding also on the appellants contentions that they are receiving advances at the rate of 10% of their provisional fees for incurring the expenses and the reimbursement expenditure is not fixed at the rate of 10% of their fees and that they receiving the expenses on the actual basis only. Considering that significant contentions made by the appellants in their submissions before the Ld. Commissioner (Appeals) have not been dealt at all by the first appellate authority, the matter needs to be re-examined by the Ld. Commissioner (Appeals) again - appeal allwoed by way of remand.

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• Central Excise

• 2017 (11) TMI 1395
  Doctrine of Promissory Estoppel - tax holiday - Section 5A of the Central Excise Act, 1944 - Held that: - In the present case, what was promised, i.e., exemption from the payment of central excise duty for a period of 10 years, had been fully complied with by the Union of India though the starting point of the grant of the benefit could be not from the date of commercial production but from the date of the notification making the exemption notification dated 08.07.1999 applicable to the State of Meghalaya. The promise made in the Office Memorandum dated 24.12.1997 having been implemented and no prejudice being caused to the respondent-industry, merely because the starting point of the exemption is shifted to a later date i.e., the date of the notification, we are of the view that the High Court was not correct in applying the principle of Promissory Estoppel to grant the benefit of exemption to the industrial unit from the date of production instead of the date of the exemption notification. Relief accorded to parties - Held that: - the position that would emerge is that the respondent-industrial unit would be liable to pay excise duty for the period from 14.07.1999 to 01.03.2000 and would be entitled to refund for excise duty paid for the period from 14.07.2009 to 01.03.2010 - It would, therefore, really be a question of adjustment of accounts between the Revenue and the assessee. To prevent any further litigation over issues that may arise on account of demand of interest etc., we are of the view that the ends of justice would be met by the declaration of the law as has been made hereinabove leaving the parties to continue with their respective position as on date. Appeal disposed off.

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• 2017 (11) TMI 1394
  CENVAT credit - input/capital goods - denial on the ground that the capital goods and stock were written off - case of appellant is that they have made the provision to write off the input/capital goods only in the financial books and that the input/capital goods are very much lying in the inventory at the time of making provision and are being used as and when required by the production team - Held that: - appellant has made provision to write off the value of inputs partially in their books of accounts as per the policy of the company which does not allow to make any provision to write off obsolescence stock on store and spares fully - also, the inputs for which the provisions of write off was provisionally made was subsequently used in the manufacture as per the provisions of Rule 3(5B). There was no recovery mechanism to recover the cenvat credit wrongly taken under the provisions of Rule 3(5B) and the recovery mechanism was brought into existence from 01.03.2013 vide N/N. 3/2013-CE (NT) dated 01.03.2013 - the demand of cenvat credit for the inputs for which the provision to write off has been made is not sustainable in law. Appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1393
  Clandestine production and removal - CR Strips/Sheets - whether the Learned Commissioner have rightly upheld the confiscation of alleged excess stock, cash seized and rightly imposed penalty on the partner Shri Ashok Kumar Lahoty? - Held that: - the order of confiscation of 96MT of CR Sheets is not sustainable as the capacity of VSSL to manufacture CR Sheets is not established - appellants have led cogent evidence with regard to purchase of the said sheets from other traders, which have been rejected on flimsy grounds without there being any cross verification from the sellers of the sheets. As regards confiscation of cash, the same is not sustainable as appellants had sufficient cash balance on the date of inspection in their cashbook maintained in ordinary course of business - Further, there is no finding by Revenue that the said cash related to any clandestine activity or trading. Personal penalty on the partner Mr. Ashok Kumar Lahoty - Held that: - penalty not sustainable and the same is set aside. Appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1392
  Abatement - manufacture of Pan Masala and Chewing Tobacco - denial on the ground that the appellants failed to satisfy the pre-condition of filing intimation of closure of production activities within the stipulated period - Rule 10 of Pan Masala Rules, 2008 - Held that: - Tribunal in the case of Classic Tobacco Products Vs Commissioner of Central Excise, Jaipur-II [2016 (8) TMI 487 - CESTAT NEW DELHI] has dealt with an identical issue and have observed that in as much as the Revenue sealed the machines even on two days notice, they cannot be now allowed to adopt Rule 10 for denying the abatement claim - in the case of M/s Sarla Enterprises Vs Commissioner of Central Excise, Allahabad [2016 (2) TMI 1039 - CESTAT ALLAHABAD], it was held that the non filing of advance intimation was held as not adverse to the assessee's claim - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 1391
  CENVAT credit - common input services used towards trading as well as manufacturing activity - non-maintenance of separate records - Rule 6 (3) of CCR, 2004 - Held that: - identical issue decided in the case of CST vs. Machine Tools (I) Pvt. Ltd. [2017 (8) TMI 833 - CESTAT NEW DELHI], where it was held that it is clear that no credit is available on any “input service” attributable to “trading” during the material time. When no such credit is eligible, the respondent cannot avail the benefit of cenvat credit scheme - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 1390
  Area Based exemption - N/N. 50/2003-CE dated 10.06.2003 - date of commercial production - relevant date - Held that: - the commercial production in the factory of the appellant was not commenced before the cut of date of 31.03.2010. Consequently, the appellant will not be eligible for the benefit of area based exemption under N/N. 50/2003 - duty demand justified. Natural justice - appellant has raised the point that the impugned order has been passed without hearing him - Held that: - the appellant was granted an opportunity for personal hearing on eight dates spanning the period 21.08.2014 to 28.01.2015. The show cause notice issued by the Revenue has also been served on the appellant - Revenue has taken all possible steps to put the appellant on notice regarding the proposed denial of the benefit of the notification. However, the appellant has chosen not to make use of the opportunity - principles of natural justice was duly followed. Appeal dismissed - decided against Appellant.

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• 2017 (11) TMI 1389
  SSI exemption - clubbing of clearances - dummy units - it was observed that in addition to the appellant unit, another unit in the name and style of M/s Siddhi Vinayak was also found to be operating, in the premises and manufacturing identical goods as the appellant - clandestine removal - Held that: - when it is admitted that no other records have been maintained by the appellants and the figures contained in the computer printout has been admitted to be the details of clearances entered as per the directions of the partner, we are of the view that such figures have been rightly considered to be the value of clearances by the lower Authorities - charge of clandestine removal justified. Clubbing of clearances - Held that: - In terms of the SSI exemption notification, for determining the value of clearances eligible for the concession, the values of clearances of different manufacturers from the same factory needs to be clubbed together - in spite of having separate identity in the form of partnership unit as well as proprietorship unit, M/s Siddhi Vinayak as well as M/s Riddhi Siddhi are in effect one single factory. This is confirmed from the fact that M/s Siddhi Vinayak has no separate machine for manufacture of the goods and shares the same electricity connection with M/s Riddhi Siddhi - clubbing of clearances justified. Confiscation - penalty - Held that: - the department has not seized the goods allegedly cleared clandestinely - In the absence of goods, there can be no confiscation of the same and hence, the penalty of 9 lakh imposed in this regard is set aside. Appeal allowed in part.

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• 2017 (11) TMI 1388
  Area Based Exemption - N/N. 50/2003-CE dated 10.06.2003 - Held that: - the issue has come up before the Tribunal in the assessee’s own case for the earlier period [2017 (11) TMI 1314 - CESTAT NEW DELHI], where it was held that Each division of a factory manufacturing different identifiable items or undertaking different identifiable processes will have to be considered as a unit of the factory and exemption to be allowed - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1387
  Clandestine removal - The entire allegation of clandestine removal is based on the statements of the transporters as well as the details culled out from the ledgers of the transporters - Held that: - These documents are evidently third party documents. The revenue has not produced any evidence from the assessee to support the charge of clandestine clearance. It is settled law that documents recovered from the third party cannot be used against the manufacturer to prove clandestine removal, unless they are supported by corroborative evidence - From the records of the factory no evidence has been brought on record either regarding manufacture of the finished goods or clearance of the same. The third party evidence produced by revenue for sustaining duty demand has not been corroborated by detailed investigation. The allegation of clandestine clearance cannot be sustained only on the basis of third party evidence - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1386
  Clandestine removal - clearance of unaccounted Ferro Alloys Silico Manganese in the guise of accounted clearance of large quantities of Manganese ore fines/waste - unaccounted loss of manganese ore not satisfactorily explained and alleged to have been used in the unaccounted manufacture of Silico Manganese - Held that: - Held that: - heavy reliance has been placed by the Revenue on the discrepancies in the vehicle details and nonavailability of buyers details with reference to accounted clearance of Manganese ore fines/waste. While a prima facie case can be initiated on such premise we note that duty demand on the final product requires corroborative evidence and analysis of all available evidences which should cumulatively lead to a conclusion that the goods have been manufactured and cleared clandestinely - demand withheld. Unaccounted income - Held that: - The income has been satisfactorily explained and accepted by income tax authorities. This aspect requires examination and clear finding by Original Authority - Similarly, the appreciation of evidence collected from the transporters has also not been made analytically - mater requires re-examination. Appeal allowed - part matter on remand.

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• 2017 (11) TMI 1385
  Valuation - clinker manufactured and stock transferred to the sister unit - whether valuation will have to be determined under Rule 8 or Rule 4 of the Central Excise Valuation (Determination of the Price of Excisable Goods) Rules, 2000? - Held that: - clarification has come from the Board after the amendment in Rule 8 of the Central Excise Rules vide Circular No. 975/9/2013-CX dated 25.11.2013 where it is clearly mentioned that the Rule 8 is apply even stock transfer is made to the sister concern and partly sold to the open market - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1384
  CENVAT credit - service tax paid by the contractor on asphalting of road in their factory premises and at cargo gate - Revenue is of the view that these services have no nexus with the manufacturing activity of the assessee - interest for the intervening period - Held that: - the assessee is not required to pay the interest on canteen automation service as per the decision in the case of Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] - the demand of interest is set aside. Cenvat credit - Repairs & Maintenance of Depot - Held that: - depot is the place of removal of goods and without place of removal the goods manufactured by the assessee cannot be removed. In that circumstances, the depot is the integral part of the manufacturing activity, therefore, any service availed on depot, the assessee is entitled to avail cenvat credit - credit allowed. Cenvat Credit - asphalting of road - Held that: - although the said activity is not taxable but the service provider has paid service tax and as per Rule 3 of the Cenvat Credit Rules, 2004 whatever duty/tax has been paid by the assessee, the assessee is entitled to avail cenvat credit. It is an admitted fact that in this case appellant has paid service tax to the service provider - credit allowed. Appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1383
  CENVAT credit - whether the appellant herein is required to reverse the cenvat credit availed on the capital goods which were exported after putting them to use? - Held that: - There are no provisions, in the Cenvat Credit Rules or Central Excise Rules which prohibits an export of capital goods which are put to use. In the absence of any such provision, the confirmation of the demand of reversal of cenvat credit availed on the capital goods when they were received by the appellant in their factory seem to be erroneous and unsustainable - demand set aside. Whether the capital goods removed for home consumption the duty liability arises or otherwise? - Held that: - On the basis of such documentary evidence to show that they have paid more duty than the amount which is demanded in the show-cause notice, I find that both the lower authorities were fell in error of law in coming to a conclusion that the appellant is required to pay Central Excise demand of ₹ 56,764/- with interest - demand set aside. Appeal allowed in part.

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• 2017 (11) TMI 1382
  CENVAT credit - job-work - inputs sent to the Job Workers and have not been received back in 180 days - Held that: - at the job worker’s end there is process loss. To this effect, job workers have issued a certificate certifying that inputs lost during the process has become waste - the inputs which gone to the waste and scrap generated at the job worker’s end, the appellant is not required to reverse Cenvat credit - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1381
  100% EOU - CENVAT credit of Special Additional Duty of Customs and Cess paid on the inputs - Held that: - the Tribunal in a recent decision in respect of M/s.Hindustan Zinc Ltd. Vs CCE-II [2017 (7) TMI 19 CESTAT NEW DELHI] held that assessee is eligible for credit of additional duty of customs including SAD - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 1380
  Valuation - lubricating oil cleared by the appellant and sold through depot - equated discount - Held that: - Admittedly, the discounts as well as abatement on sales tax can be given only based on actual figures supported by invoice, Chartered Accountant’s certificate and other documents. This much has been asserted by the appellant also - Regarding non-submission on earlier occasion, the appellant pleaded that he same is due to non-receipt of suitable advice - it is fit and proper for the original authority to examine these documents which are in any case relating to the relevant period only - matter on remand. Rejection of request for provisional assessment - rejection on the ground that earlier provisional assessment allowed ended in finalisation with the rejection claim of the appellant for the discounts claimed - Held that: - for the calendar year 2006 also, the assessments are to be considered provisionally and the assessments can be finalized based on the documents which the appellant promised to submit regarding the discounts and abatement on sales tax - the assessment can be finalized after taking into consideration the documents submitted by the appellant - matter on remand. Appeal allowed by way of remand.

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• 2017 (11) TMI 1379
  Penalty u/s 11AC - duty and interest paid before issuance of SCN - Held that: - even before issuance of the show cause notice, appellant had discharged the duty demand along with interest - further there was no intention to evade payment of duty - Taking note of the fact that the appellant is a public sector undertaking and also that they have paid duty demand along with interest, the imposition of penalty u/s 11AC of the Central Excise act is unjustified - appeal allowed in part.

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• 2017 (11) TMI 1378
  Valuation - includibility - freight element for the transportation of gases - Held that: - though the appellant claimed that for later period they were adopting weighted average, the ld. counsel admitted that this can be subjected to verification and on production of support evidence, abatement as eligible as per the valuation provisions can be allowed to them. We direct that such verification can be done by the jurisdictional authorities. Valuation - whether the tanker on the lorries to be treated as packing material? - Held that: - The gas tanker mounted on the lorry is part of a transport vehicle and cannot be considered as a packing material. The same is neither factually or legally tenable. Validity of SCN - time limitation - Held that: - earlier two show cause notices were issued for finalization of provisional assessment on the same issue. Accordingly, the third notice cannot be issued invoking extended period - the third notice will be restricted to the demand period within normal period of limitation, if any. Appeal allowed in part.

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• 2017 (11) TMI 1377
  Refund of the excise duty paid on steel and cement used in construction of houses, as per N/N. 32/2005-CE dated 17.8.2005 - time limitation - denial on the ground that the refund claim for the period 1.7.2005 to 30.9.2005 was filed beyond the period of 120 days - Held that: - Apex court in the case of GIRDHARI LAL AND SONS Versus BALBIR NATH MATHUR AND OTHERS [1986 (2) TMI 253 - Supreme Court of India], held that in order to avoid patent injustice or invalidation of law, strict adhering to the time limit for filing refund claims stipulated in a notification would only adversely affect the public interest and thereby defeat the very purpose of issuing N/N. 32/2005 - since the refund claim for the quarter 1.7.2005 to 30.9.2005 is beyond the time limit of one year prescribed under section 11B, refund for the period July 2005 to September 2005, rightly rejected - other refunds, being in time, is allowed - appeal allowed in part.

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• CST, VAT & Sales Tax

• 2017 (11) TMI 1376
  Suppression of facts - purchase omission - sales suppression - levy of tax and penalty u/s 27(3)(c) of the TNVAT Act, 2006 - Held that: - the petitioner wanted the respondent to accept the monthly returns. However, the respondent, construing the representation dated 31.3.2017 received on 03.4.2017, as an objection, completed the assessment. In the representation dated 31.3.2017, the petitioner sought for an adjournment only apart from mentioning that some error has crept in while filing the monthly return. Therefore, the said letter dated 31.3.2017 cannot be construed as an objection. The writ petition is disposed of with a direction to the petitioner to treat the impugned proceedings as a show cause notice and submit their objections within a period of 15 days' from the date of receipt of a copy of this order.

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