TMI Tax Updates - e-Newsletter
November 9, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Input tax credit - credit of GST paid on goods and services used for construction of Tie-in pipelines, from the FSRU (vessel) to the National grid - scope of the term 'factory' and 'premise' - the FSRU, the place in question, can be considered as building, or establishment - Credit to be allowed - Order of AAR modified.
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GST:
Levy of GST - Place of supply - the question posed by the Appellant i.e. whether the GST is applicable on the Investment Advisory and Management Fees collected from the overseas Investors, is beyond the jurisdiction of the Advance Ruling, and hence cannot be decided by the Advance Ruling Authority.
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GST:
Seeking advance ruling by suppressing vital facts - Matter was already under investigation by the DGGI - There is a premeditated and a conscious action on the part of the applicant-respondent to undermine the process of the Advance Ruling and an attempt to use it to satisfy their own ends. We therefore hold that the order of the AAR is void ab-initio as it was vitiated by the process of suppression of material facts.
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GST:
Jurisdiction - Illegal import - the initial seizure of areca nuts and the trucks by the Assam Police cannot be said to be without authority. But in view of the subsequent disclosures that these areca nuts were smuggled and transported by the trucks, the Customs authorities under the Customs Act, 1962 would now be the proper authorities to investigate the alleged offences
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GST:
Jurisdiction - Illegal import - the police authorities would have no jurisdiction and power to investigate as regards violation of the provisions of the taxation laws as the same are governed by the provisions of the CGST Act, 2017 or AGST Act, 2017 under which there are separate investigative agencies.
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Income Tax:
Anonymous donation - The ITRs and the letters from the donors stating that the donation has been given for the trust for conference, and towards the corpus fund. Hence, they cannot be treated as anonymous donations within the provisions of the Act liable to be taxed u/s 115BBC(1) of the Act.
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Income Tax:
Adhoc disallowance of 5% of Various expenses - Merely because cash payment has been made is not an indicator that the transaction is non-genuine or bogus or the cash payment has not been made for purposes of business.
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Income Tax:
Levy of penalty u/s 271B and 271F - Late filing of tax audit report and income tax return - The plea of the assessee that it was an inadvertent default, on account of the tax consultant being busy with GST returns and the assessee not being able to adequately follow up with him since he was away in New Zealand, appears to be a reasonable cause - No penalty.
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Income Tax:
Diminution of value and depreciation of closing stock - if the market value of the closing stock is more than the cost, as profit cannot be brought to tax on notional basis. - The items were in fact sold in the subsequent year at a price less than 10% of the cost. It could not be said that valuation of obsolete item made by assessee was not proper.
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Income Tax:
Difference in job work income shown in the profit & loss account and income as per form no.26AS - It is settled position of the law that no addition can be made on the basis of receipts shown in the ITS alone, unless the AO is able to show with evidence that such income forms part of the income of the assessee.
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Income Tax:
TP Adjustment - ALP - transaction on corporate guarantee - When the guarantee has been given by two concerns and on similar terms and conditions arising out of the same transaction, two different and contradictory stands cannot be taken by the Revenue
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Income Tax:
Charging of interest under section 234C - search had taken place on 31/03/2011 and the surrender of the income has been made on that very day, therefore, it is not a case of deferment of the income, as the liability to pay the advance tax in the case of the assessee arose only at the moment the income was surrendered by the assessee, i.e., as on 31st March, and not prior to that - the interest u/s 234C cannot be levied.
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Income Tax:
Addition on account of Excessive sugarcane price paid - Difference in price paid to members as well as non-members of Sahakari Sakhar Karkhana - The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure.
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Income Tax:
Reopening of assessment u/s 147 - a plain reading of clause (ca) of Explanation 2 of Section 147 makes it clear that it cannot be gainsaid that Section 133C survey cannot be the basis for a Section 148 notice regarding escaped assessment (escaped assessment within the meaning of Section 147 of IT Act).
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Customs:
100% EOU - Concessional rate of duty - In terms of Notification 52/2003, there is no provision for obtaining permission - the Appellants submission that non obtaining of the permission does not take away the applicability of notification allowing a concessional rate of duty, is acceptable.
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Indian Laws:
Dishonor of cheque - alleged procurement of cheque by coercion - even if such defence is tested on the touchstone of the evidence led on record by respective parties, same deserves outright rejection - accused has not been able to rebut the statutory presumption under Ss.118 and 139 of the Act.
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Indian Laws:
Jurisdiction to handle Road traffic offences - a prosecution, if otherwise maintainable, would lie both under the IPC and the MV Act, since both the statutes operate with full vigour, in their own independent spheres. Even assuming that some of the provisions of the MV Act and IPC are overlapping, it cannot be said that the offences under both the statutes are incompatible.
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Service Tax:
Classification of services - The logic given by the adjudicating authority in the above mentioned paragraphs justifying the classification of the activity under the ‘Business Support Service’ is not legally tenable as providing expert man power on cost recovery basis does not fall under any of the inclusive category of ‘Business Support Service’.
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Service Tax:
Refund of KKC - Scope of SCN - the Commissioner in the impugned order has gone beyond the OIO and has examined the eligibility of KKC for CENVAT credit which is beyond the OIO and therefore cannot be sustained.
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Service Tax:
Classification of services - It is for the respondents to carry out maintenance of these outfits and facilities and respondent can remove these outfits without assigning any reasons. The effective control of the outfits also thus remains with respondents and there is only right to use such outfits and facilities. The activity is more akin to supply of Tangible Goods Service.
Articles
Notifications
Central Sales Tax-
S.O. 4024 (E) - dated
7-11-2019
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CST
Central Government specifies M/s Go Airlines (India) Ltd. having its registered office at C/o Britannia Industries Limited, A-33, Lawrence Road Industrial Area, New Delhi – 110035 and TATA SIA Airlines Limited (Vistara) having its registered office at Jeevan Bharti Tower 1, 10th Floor, 124 Connaught Circus, New Delhi – 110001
Customs-
81/2019 - dated
7-11-2019
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Cus (NT)
Exchange Rates Notification No.81/2019-Custom (NT) dated 07.11.2019
GST - States-
G.O.Ms.No.462 - dated
6-11-2019
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Andhra Pradesh SGST
Seeks to amend Notification No. G.O.Ms.No.254, Dated 20.03.2019
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G.O.Ms.No.461 - dated
6-11-2019
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Andhra Pradesh SGST
Appoints the 24th day of September, 2019, as the date on which the provisions of rules (ix), (x), (xi) and (xxv) of the Andhra Pradesh Goods and Services Tax (Fourth Amendment) Rules, 2019 , shall come into force
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G.O.Ms.No.460 - dated
6-11-2019
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Andhra Pradesh SGST
Categorization of certain activities relating to alcoholic liquor for human consumption as neither supply of goods nor supply of services
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G.O.Ms.No.459 - dated
6-11-2019
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Andhra Pradesh SGST
Seeks to amend Notification No. G.O.Ms.No.286, dated 29.04.2019
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G.O.Ms.No.458 - dated
6-11-2019
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Andhra Pradesh SGST
Seeks to amend Notification No. G.O.Ms.No.91, dated 19.02.2018
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G.O.Ms.No.457 - dated
6-11-2019
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Andhra Pradesh SGST
Seeks to amend Notification No. G.O.MS.NO. 256, dated 29.06.2017
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G.O.Ms.No.456 - dated
6-11-2019
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Andhra Pradesh SGST
Seeks to amend Notification No. G.O.Ms.No.588, dated 12.12.2017
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G.O.Ms.No.455 - dated
6-11-2019
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Andhra Pradesh SGST
Seeks to amend Notification No. G.O.Ms.NO.259, dated 29.6.2017
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (11) TMI 396
Jurisdiction - Illegal import - powers of police officers - applicability of GST ACt or Customs Act - seizures - release of the seized goods - Power, scope and jurisdiction of the police in investigating offences which may be covered by more than one statute or by special statute - business of sale and supply of arecanuts (betel nuts)
Whether the state police has power to investigate and effect seizure of goods for alleged forgery of documents in connection with certain transactions which can be relatable either to taxation statutes or Customs Act?
HELD THAT:- Since the Police initially intercepted and seized the trucks suspecting evasion of tax under the GST regime, and as the Central Goods and Services Act, 2017 and the corresponding State law i.e. the Assam Goods and Services Tax Act, 2017 are also comprehensive and self-contained Acts, these coercive actions could have been done by the authorities under the CGST Act or the AGST Act. The AGST Act empowers the proper officer not below the rank of Joint Commissioner to authorise any officer of State Tax to inspect, search, seize, and arrest persons as provided under Chapter XIV of the State Act.
This Court is of the view that though the Customs Act or the Central Goods and Services Act, 2017 or the Assam Goods and Services Act, 2017 are self-contained Acts under which forgery or producing false documents are also offences, it cannot be said that the provisions of Indian Penal Code cannot be applicable as there is nothing under the Customs Act or the AGST Act that the provisions of the IPC cannot be invoked. There will be a bar only in respect of offences that are specifically mentioned in the special acts.
Applicability of procedural law as contained in the Code of Criminal Procedure - HELD THAT:- Section 4(2) CrPC provides that all offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions of the CrPC, but shall be subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences. Section 5 of the CrPC further provides that nothing contained in the Code shall, in the absence of a specific provision to the contrary, affect any special or local law for the time being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force - What Sections 4 and 5 provide is that the Code shall continue to be applicable to special laws also, subject to the procedure prescribed under the special laws and if any special procedure is laid down under the special laws, such procedure would not be affected by the provisions of CrPC.
Thus, the provisions of CrPC would continue to be applicable to proceedings under Customs Act or CGST Act/AGST Act, subject to the special procedure provided therein. However, this has no relation to the applicability of the provisions of IPC for offences committed under the said Code.
This Court would hold that the Assam Police would have jurisdiction to investigate certain offences under the Indian Penal Code, if made out, even if these may be also offences under the CGST Act, 2017 or AGST Act or the Customs Act,1962 - However, as provided under Section 26 of the General Clauses Act, no one will be liable to be punished twice for the same offence.
Whether the Police can conduct a roving enquiry? - HELD THAT:- The principal offence seems to be illegal activity of smuggling covered by the Customs Act, 1962 and the offence of forgery of documents as alleged is a part of the larger illegal activity of smuggling. It is, therefore, apparent that if the petitioners are accused of forging documents, these are ancillary acts to accomplish the main illegal activity of smuggling areca nuts. It can, therefore, be said that the principal criminal activity engaged by the petitioners is smuggling of areca nuts from a foreign country, to accomplish which they also committed certain other offences like forgery of documents. Forgery of documents is thus an ancillary act to the principal act of smuggling areca nuts. In such an event, the customs authorities would be primarily responsible for investigation and prosecution of the petitioners.
It would be appropriate for the police to hand over the investigation to the customs authorities as they cannot continue the investigation as far as the allegation of smuggling against the petitioners is concerned. Similarly, for the same reasons, the police authorities would have no jurisdiction and power to investigate as regards violation of the provisions of the taxation laws as the same are governed by the provisions of the CGST Act, 2017 or AGST Act, 2017 under which there are separate investigative agencies.
In the present case, unless the investigation already undertaken throws up new leads to other offences under the Penal Code as mentioned above, the Police ought not conduct a roving enquiry, otherwise, it would be susceptible to the charge of misuse of the criminal investigating power. As provided under Sections 154 and 155 of the Code of Criminal Procedure Code, the criminal justice system can be set into motion by the police on getting information as to cognisable/non cognisable offence and proceed accordingly, and not otherwise.
This Court is accordingly, of the view that even if the different statutes permit independent and separate investigations, if such investigations involve coercive actions similar to as contemplated under the CrPC, the investigations ought to be undertaken simultaneously, otherwise, there would be a distinct possibility of infraction of the precious rights of an accused as guaranteed under Article 14, 21 and 22.
This Court would hold that the initial seizure of areca nuts and the trucks by the Assam Police cannot be said to be without authority. But in view of the subsequent disclosures that these areca nuts were smuggled and transported by the trucks, the Customs authorities under the Customs Act, 1962 would now be the proper authorities to investigate the alleged offences and accordingly the police should hand over the seized areca nuts and the trucks to the Customs authorities for further investigation. If the Customs authorities need the help and assistance of the police, nothing prevents them from doing so.
Petition disposed off.
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2019 (11) TMI 399
Input tax credit - credit of GST paid on goods and services used for construction of Tie-in pipelines, from the FSRU to the National grid - scope of the term 'factory' and 'premise' - exclusion clause to cover FSRU which is a vessel, within the meaning of a factory - exclusion clause of explanation to Section 17(5) of CGST Act - challenge to AAR decision.
Whether FSRU, where the re-gasification of the LNG is carried out for delivery to the National grid, will be construed as factory or otherwise?
In case the same is held as factory, whether the tie-in pipeline which is to be laid can be construed to be the pipeline laid out side the factory premises or otherwise?
HELD THAT:- It is a matter of fact that the factory has not been defined anywhere in the CGST Act. Therefore, we proceed to explore the meaning of factory as understood in the ordinary parlance. Accordingly, we will resort to the meaning provided to the term ‘factory’ in the various dictionaries. In this way, we concur with the contention put forth by the Appellant in so much as they have advocated for the adoption of the meaning of the factory as understood in the common parlance, for which they have relied upon the meaning of the term factory provided in the various dictionaries. - As regards the AAR interpretation of the term factory, wherein they have adopted the definition provided under the Factories Act, 1948 in absence of the definition of the impugned term ‘factory’, it is opined that Hon’ble Supreme Court, vide its judgment in the case of MSCO PVT. LTD. VERSUS UNION OF INDIA AND OTHERS [1984 (10) TMI 44 - SUPREME COURT], which has been cited and relied upon by the Appellant in their defense, has abundantly clarified against the adoption of the definition or meaning of any term, which has not been defined under a particular statute with which the impugned matter is concerned, from another statute containing the definition or meaning of that very term.
The AAR interpretation of the term ‘factory’, on the basis of the definition provided under the Factories Act, 1948 is contrary to the afore said Supreme Court ruling, and hence not tenable.
On perusal of the dictionary meaning of the term ‘Building’, it is abundantly clear that any structure with the walls and roofs would be considered as Building. Further, in the definition, there is no such constraint that such structure should be situated on the land only. Thus, by looking at the photographs of Floating Storage Re-gasification Unit (‘FSRU’), submitted by the Appellant, where this re-gasification of the LNS is carried out by the Appellant, may very well be considered as the building as there are enough structures with walls and roofs, which have been built on this processing unit, which c l early indicates that the FSRU encompasses many buildings, where the regasification of the LNG is carried out for delivery of the same to the National grid with the aid of the tie-in pipelines under question - Thus, on perusal of the dictionary meaning of the term ‘establishment’, it is crystal clear that the establishment is a place from where any organization operates. Here also, there is no such restriction that such place should be located on the land only. It may be any where including the water bodies, such as sea, oceans etc.
Thus, it is clearly established that the FSRU, the place in question, can be considered as building, or establishment. Further, there is no dispute, by the Appellant, over the activities, carried out at the FSRU, where the re-gasification of the LNG is taking place, being in the nature of the manufacturing activity. Therefore, we would not go into the details of the activities carried out at the FSRU, as the same is accepted as manufacturing activities.
The FSRU, where the re-gasification of LNG is carried out for delivery to the National Grid through the tie-in pipeline proposed to be connecting the FSRU to the National Grid, can be rightly considered as factory - Once it has been established that the premises of the FSRU can be justly considered as factory premises, then there is no doubt that the tie-in pipeline, to be laid by the Appellant, which will join the FSRU to the National Grid, will be considered as pipeline laid outside the factory premises, and accordingly attract the applicability of the subject exclusion clause i.e. exclusion clause (iii) of the explanation to section 17(5)(c) and section 17(5)(d) of the CGST Act, 2017.
The ruling pronounced by the Advance Ruling Authority is modified in so far the observation of the facts and legal provisions are concerned and pass the order by holding that the Appellant is not entitled to avail the ITC of GST paid on goods and services used for construction of Tie-in pipelines, from the FSRU to the National grid as per the provision laid out in section 17(5)(c) and 17(5)(d) of the CGST Act, 2017.
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2019 (11) TMI 398
Levy of GST - Place of supply - Advisory & Management Fees received in Indian Currency from Domestic Contributors located in India for the Services rendered by the Appellant - Advisory & Management Fees received in Foreign Currency from Overseas Contributors located outside India for the Services rendered by the Appellant - scope of Person Liable to make the Payment - AAR has held that the GST is leviable on the Investment Advisory and Management Fees collected from both the Domestic as well as the Overseas Investors, as the said services of Investment Advisory and Management services have been rendered to the AIF (Alternate Investment Fund), and not to the Domestic or Overseas Investors - challenge to AAR decision.
HELD THAT:- To decide the taxability of the above said Investment Advisory and Management Fees, it is imperative to determine the place of supply in respect of the impugned overseas transactions. Further, on perusal of the provisions under Section 97(2), reproduced herein above, it is adequately clear that question on determination of the 'place of supply' has been excluded from the above mentioned specific and exhaustive set of questions, in respect of which advance ruling can be sought under the CGST Act. This clearly indicates that we cannot pass any ruling in respect of the question which involves the determination of the place of supply of the goods or services or both.
It can decisively be concluded that the question posed by the Appellant i.e. whether the GST is applicable on the Investment Advisory and Management Fees collected from the overseas Investors, is beyond the jurisdiction of the Advance Ruling, and hence cannot be decided by the Advance Ruling Authority.
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2019 (11) TMI 397
Seeking advance ruling by suppressing vital facts - Matter was already under investigation by the DGGI - Classification of supply - Franchise agreement - investigations were inter-alia involving the very same issue of classification of activities of franchisees for subjecting the same to the levy of GST
HELD THAT:- Sec. 98(2) provides that the application shall not be admitted where the question raised is already pending under any of the provisions of this act. The term ‘any of the provisions of this act’ includes investigations proceeding under section 67. It is clear from the record submitted by the DGGI that proceedings was pending against KOTI (Kamat Ourtimes Ice-cream Ltd), and the issue taken up in the proceedings related to the classification of the activities ‘ice-cream sold from the natural outlets’ - whether the supplier of goods would be charged at the rate of 18 % under HSN 2105 by availing ITC or whether the activity should be classified as supply of service under SAC -996331 at the rate of 5 % without ITC.
The investigations proceedings were approved on 15.01.2019 and the search was conducted on 5.2.2019. The statement of the Director of KOTI u/s 70 was recorded on 5.2.2019, and the statement of M/s Srinivas Kamath (Wholetime Director of KOTI) was recorded on 11.2.2019. The application for advance ruling was filed on 25.2.2019 by the applicant respondent at the behest of KOTI. It becomes clear from the above that there was a deliberate intention on the part of KOTI as well as its applicant-respondent to obtain a decision clandestinely without revealing the issue of investigation being initiated against KOTI on the very same issue that was raised before the ARA.
It cannot be a mere coincidence that the applicant-respondent made an application for advance ruling on 25.2.2019 immediately following the initiation of proceedings against KOTI on 5.2.2019. Having seen the sort of control exercised on the operations of the applicant-respondent by KOTI, it also is apparent that applicant-respondent was aware of the DGGI proceedings against KOTI and therefore it filed an application and moreover, kept the fact away from the advance ruling authority. This amounts to nothing but suppression of facts and therefore the advance ruling is void as it is obtained by suppressing the vital fact that proceedings were initiated by DGGI against KOTI and were pending as on the date of filing of advance ruling application.
There was a deliberate intention on the part of KOTI as well as its applicant-respondent to obtain a decision clandestinely without revealing the issue of investigation being initiated against KOTI on the very same issue that was raised before the ARA.
The applicant-respondent has attempted to show the technical errors in filing of the appeal but when the facts of the case are seen it is very clear that there is a premeditated and a conscious action on the part of the applicant-respondent to undermine the process of the Advance Ruling and an attempt to use it to satisfy their own ends. We therefore hold that the order of the AAR is void ab-initio as it was vitiated by the process of suppression of material facts.
The order passed by the ARA is declared void ab-initio as it was vitiated by the process of suppression of material facts - appeal allowed.
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Income Tax
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2019 (11) TMI 368
Assessment framed on a non-existent company - scheme of amalgamation conceived - HELD THAT:- Assessment per se has been framed by the ld. AO in the instant case in the hands of amalgamating company which had ceased to exist with effect from 01/10/2012 onwards pursuant to the scheme of merger approved by the Hon’ble Bombay High Court. We hold that no assessment could be framed on a non-existent entity. This issue is now well settled by the recent decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. [2019 (7) TMI 1449 - SUPREME COURT]
AO was wrong in framing the assessment in the hands of the non-existent entity i.e Churu Trading Company Pvt. Ltd. and accordingly, the entire assessment framed thereon, had to be declared as null and void ab initio . - Decided in favour of assessee.
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2019 (11) TMI 367
PE in India - Income accrued in India - non-compete fee money received independently by the assessee pursuant to an independent agreement, which was admittedly entered into after the sale of shares in SIPL - Income taxable in India - there is no business connection or PE in India for the assessee - HELD THAT:- Claim of the assessee seeking treaty benefit should not be entertained as assessee had not made any claim by way of valid return by placing reliance on the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd. [2006 (3) TMI 75 - SUPREME COURT] had categorically observed that the said restriction is applicable only to the Assessing Officer and not to the appellate authorities. Moreover, we find that the decision of the Hon’ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] had categorically held that any claim eligible to the assessee shall be made at any point in time which had been rightly appreciated by the ld. CIT(A) while entertaining the claim of the assessee in the instant case before us.
Moreover, we find that though the claim of exemption from tax pursuant to Article 7 of DTAA was made by the assessee during the course of assessment proceedings, we find that the ld AO had duly adjudicated the same on merits in the assessment order itself and hence there is no question of said claim of assessee getting rejected for not claiming the same by way of a valid return. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we do not find any infirmity in the said action of the ld. CIT(A) and accordingly, the grounds 1 – 3 raised by the revenue are dismissed.
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2019 (11) TMI 366
Capital gain computation - adoption of fair market value of the impugned land - HELD THAT:- We have held that the valuation report furnished by the assessee was rightly rejected by the AO and at the same time, we have also held that the fair market value as on 1.4.1981 determined by the AO on the basis of sub-registrar rates was also not correct.
There should not be any dispute that the industrial land located outside municipal limits, far away from the developed areas would certainly command lower rate. Further the market rate of a plot/land is dependent upon various factors. We have noticed earlier that, even between the plots/land having same characteristics, the bigger plot/land would command low rates than the smaller plot/land.
Size of the plot/land, location, access to main road, availability of other amenities etc. would also determine the market rates.
Both the parties could bring on record any comparable sale instances of similarly placed land. Hence, we have no other option, but to estimate the probable fair market value of the land as on 1.4.1981 on the basis of available material. The valuer has adopted the rate of ₹ 33.19 per sq.ft. on the basis of sale instances of developed housing sites located within the municipal limits. Further, the impugned land is located within 2.50 kms of municipal limits.
These factors could be taken as a guidance, in the facts and circumstances of the case, particularly in the absence of any other sale instances for land of identical nature. There should not be any dispute that an industrial land would command higher rate than an agricultural land. Hence, on a conspectus of the matter, we are of the view that this controversy may be put to rest by adopting the fair market value of impugned land at 1/3rd value of rate determined by the approved valuer, i.e., at ₹ 11/- per sq.ft. Accordingly, we set aside the order passed by CIT(A) and direct the AO to determine the fair market value of impugned land by adopting the rate of ₹ 11/- per sq.ft - Appeal of the assessee is partly allowed.
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2019 (11) TMI 365
Assessment u/s 153A - HELD THAT:- As the addition is involved in the appeal of the assessee as well as in the appeal of the learned assessing officer are not made on the basis of any incriminating material found during the course of search, all these 3 additions deserves to be deleted. Accordingly, we allow ground number 1 of the appeal of the assessee holding that no incriminating document was found during the course of search and therefore not all these additions made by the learned assessing officer could be made in the hands of the assessee.
Addition made in the hands of the assessee as no incriminating material found during the course of search, the treatment of the long-term capital gain as income from other sources also deserves to be allowed in favour of the assessee for the reasons given by us while adjudicating ground number 1 of the appeal of the assessee. Accordingly, Ground no 2 is also allowed.
Penalty u/s 271 (1) (c) - HELD THAT:- Disclosure made by the assessee under the head short-term capital gain on sale of shares whereas the learned assessing officer treated the same as income from other sources, the above addition has already been deleted in the quantum of appeal of the assessee for assessment year 2005 – 06 as the addition was not made on the basis of the incriminating material found during the course of search, the penalty on this issue now do not survive. Accordingly ground number 1 of the appeal of the assessee challenging the levy of the penalty u/s 271 (1) (C) of the act is allowed.
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2019 (11) TMI 364
Addition on account of Excessive sugarcane price paid - Difference in price paid to members as well as non-members of Sahakari Sakhar Karkhana - sale of sugar at Concessional price - HELD THAT:-The extant issue of deduction for payment of excessive price for purchase of sugarcane, raised in most of the appeals under consideration, is squarely covered by the aforesaid judgment of the Hon’ble Supreme Court. Respectfully following the precedent, we set-aside the impugned orders on this score and remit the matter to the file of the respective A.Os. for deciding it afresh as per law in consonance with the articulation of law by the Hon’ble Supreme Court in SHRI SATPUDA TAPI PARISAR SSK LIMITED [2010 (1) TMI 117 - SUPREME COURT] - AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2)
Similar is the position in so far as sale of sugar at concessional rate to members below the cost price is concerned in as much as the income to that extent which was earned by the assessee from its normal business operations shall be passed on to the members in the form of sale of sugar at a rate lower than its cost price.
CIT(A) in the instant batch of appeals has confirmed the addition towards the difference between the Levy price and the concessional price (upto 5 kg. per member per month) and to the extent of difference between the Market price of sugar and Concessional price (over and above 5kg. per member per month). In this process, the assessees got taxed even for the potential profit to the extent of difference between the cost price and market/levy price, as the case may be. Ergo, we hold that such a straightway difference between the market/levy price and the concessional price of sugar cannot be construed as appropriation of profit leading to addition as has been extantly done.
The impugned orders to this extent are set aside and the matters are restored to the file of the respective AOs for first ascertaining the cost price of sugar to each assessee and then make addition on this issue by treating it is as a case of appropriation of profit only to the extent of the concessional sale price which is below the cost price. However, it is clarified that in determining cost price of sugar to the factory, not only all the direct costs but all the indirect costs should also be taken into consideration. All items of debit to the Trading and Profit and loss account would constitute cost base. - Appeal is allowed for statistical purposes.
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2019 (11) TMI 363
Addition being sale of sugar at concessional rate to Members/Non-members - HELD THAT:- Similar is the position in so far as sale of sugar at concessional rate to members below the cost price is concerned in as much as the income to that extent which was earned by the assessee from its normal business operations shall be passed on to the members in the form of sale of sugar at a rate lower than its cost price.
CIT(A) in the instant batch of appeals has confirmed the addition towards the difference between the Levy price and the concessional price (upto 5 kg. per member per month) and to the extent of difference between the Market price of sugar and Concessional price (over and above 5kg. per member per month). In this process, the assessees got taxed even for the potential profit to the extent of difference between the cost price and market/levy price, as the case may be.
Ergo, we hold that such a straightway difference between the market/levy price and the concessional price of sugar cannot be construed as appropriation of profit leading to addition as has been extantly done. The impugned orders to this extent are set aside and the matters are restored to the file of the respective AOs for first ascertaining the cost price of sugar to each assessee and then make addition on this issue by treating it is as a case of appropriation of profit only to the extent of the concessional sale price which is below the cost price. It is clarified that in determining cost price of sugar to the factory, not only all the direct costs but all the indirect costs should also be taken into consideration. In other words, all items of debit to the Trading and Profit and loss account would constitute cost base. Needless to say, the assessee will be allowed reasonable opportunity of hearing in such fresh proceedings on this issue.
Initiation of re-assessment proceedings - HELD THAT:- There is no doubt that the original assessment in this case was completed u/s.143(3) on 05-11-2009. However, within a period of less than 4 years from the end of the relevant assessment year, the AO initiated re-assessment proceedings on the ground that the sugar supplied to members free of cost was liable to be considered as ‘Appropriation of income’. We have gone through the original assessment order which is only one paged order. There is no discussion whatsoever on the issue much less the formation of any opinion on it. The declared revised loss of ₹ 2.11 crore was accepted by the AO in the assessment completed u/s.143(3).It is clear that the contention of the assessee about the change of opinion by the AO through the re-assessment proceedings, is unwarranted in asmuchas the AO did not examine this issue in the original assessment proceedings and there was no question of formation of any opinion at the first instance. On a specific query, the ld. AR could not point out any material indicating the examination of this issue by the AO in the course of original assessment proceedings. We, therefore, hold that the ld. CIT(A) was right in upholding the initiation of re-assessment proceedings in the given circumstances by relying on the relevant precedent and the germane position of law. This ground is, therefore, dismissed.
Addition on account of Excessive Sugarcane Price paid to Members/Non-Members - HELD THAT:- The extant issue of deduction for payment of excessive price for purchase of sugarcane, raised in most of the appeals under consideration, is squarely covered by the aforesaid judgment of the Hon’ble Supreme Court. Respectfully following the precedent, we set-aside the impugned orders on this score and remit the matter to the file of the respective A.Os. for deciding it afresh as per law in consonance with the articulation of law by the Hon’ble Supreme Court in SHRI SATPUDA TAPI PARISAR SSK LIMITED [2010 (1) TMI 117 - SUPREME COURT] - AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2)
Similar is the position in so far as sale of sugar at concessional rate to members below the cost price is concerned in as much as the income to that extent which was earned by the assessee from its normal business operations shall be passed on to the members in the form of sale of sugar at a rate lower than its cost price.
Unexplained agricultural income - HELD THAT:- The entire premise of the assessee about the genuineness of agricultural income is based on offering of ₹ 7.38 lakh as agricultural income. When called upon to furnish the evidence of sale of agricultural produce and agricultural expenses, the assessee failed to furnish the same before the Assessing Officer. This position continued even at the First Appellate stage. There is no change in the circumstances in sofaras the appeal before the Tribunal is concerned. Here again, the assessee could not place on record any evidence to show the sale of agricultural produce or incurring of agricultural expenses - we are not inclined to tinker with the findings returned in the first appeal in restricting the agricultural income to ₹ 4.00 lakh thereby making addition of ₹ 3,83,063/-.
Deduction u/s.80P(2)(c), 80P(2)(d) and not allowing the set off of carry forward losses properly - HELD THAT:- It is seen that the ld. CIT(A) has discussed these issues and remitted the matter to the file of AO for proper verification. Since the ld. CIT(A) has no power to remit the matter to the file of AO for fresh examination, the ld. AR submitted that the assessee would be satisfied if such a direction is given by the Tribunal. We, therefore, set-aside the impugned order on the above score and remit the matter to the file of AO for examining the assessee’s claim in respect of allowing deduction u/s.80P(2)(c) and 80P(2)(d) and set off of carry forward losses as per law after allowing reasonable opportunity of hearing to the assessee.
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2019 (11) TMI 362
Addition on account of Excessive sugarcane price paid - Difference in price paid to members as well as non-members of Sahakari Sakhar Karkhana - sale of sugar at Concessional price - HELD THAT:- The extant issue of deduction for payment of excessive price for purchase of sugarcane, raised in most of the appeals under consideration, is squarely covered by the aforesaid judgment of the Hon’ble Supreme Court. Respectfully following the precedent, we set-aside the impugned orders on this score and remit the matter to the file of the respective A.Os. for deciding it afresh as per law in consonance with the articulation of law by the Hon’ble Supreme Court in SHRI SATPUDA TAPI PARISAR SSK LIMITED [2010 (1) TMI 117 - SUPREME COURT] - AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2)
Similar is the position in so far as sale of sugar at concessional rate to members below the cost price is concerned in as much as the income to that extent which was earned by the assessee from its normal business operations shall be passed on to the members in the form of sale of sugar at a rate lower than its cost price.
CIT(A) in the instant batch of appeals has confirmed the addition towards the difference between the Levy price and the concessional price (upto 5 kg. per member per month) and to the extent of difference between the Market price of sugar and Concessional price (over and above 5kg. per member per month). In this process, the assessees got taxed even for the potential profit to the extent of difference between the cost price and market/levy price, as the case may be. Ergo, we hold that such a straightway difference between the market/levy price and the concessional price of sugar cannot be construed as appropriation of profit leading to addition as has been extantly done.
The impugned orders to this extent are set aside and the matters are restored to the file of the respective AOs for first ascertaining the cost price of sugar to each assessee and then make addition on this issue by treating it is as a case of appropriation of profit only to the extent of the concessional sale price which is below the cost price. However, it is clarified that in determining cost price of sugar to the factory, not only all the direct costs but all the indirect costs should also be taken into consideration. All items of debit to the Trading and Profit and loss account would constitute cost base. - Appeal is allowed for statistical purposes.
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2019 (11) TMI 361
Rectification of mistake - Charging of interest u/s 234B and 234C - HELD THAT:- Whether interest under sections 234B and 234C of the Act is to be charged, or not, has been considered by the Tribunal in the case of the ‘Radha Mohan Purshottam Das Agarwal’ Group, consisting of nine appeals, on facts exactly similar, mutatis mutandis, to those present in the case of the assessee presently under appeal and the Tribunal has decided the issue in favour of the assessees
Following this view taken we set aside the order of the ld. CIT(A), and direct the Assessing Officer to compute the interest u/s 234B in accordance with the law, if at all it is leviable, only till the date when the assessee made an application to the Department for the adjustment of the cash seized towards the income tax liability.
To that extent, we find there is a mistake apparent on record in the order of the Assessing Officer while computing the interest u/s 234B of the Act.
Charging of interest under section 234C - search had taken place on 31/03/2011 and the surrender of the income has been made on that very day, therefore, it is not a case of deferment of the income, as the liability to pay the advance tax in the case of the assessee arose only at the moment the income was surrendered by the assessee, i.e., as on 31st March, and not prior to that. Since the liability to pay the advance tax has arisen on 31st March therefore, it cannot be regarded to be a case of deferment of income tax. Therefore, the interest u/s 234C cannot be levied and there has been a mistake apparent on record in the order of the Assessing Officer while levying the interest u/s 234C of the Act. Appeal of the assessee is partly allowed.
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2019 (11) TMI 395
Carry forward of unabsorbed depreciation - limitation of six years - HELD THAT:- Delay condoned. As the identical matter has already been dismissed by this Court, hence this special leave petition is also dismissed.
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2019 (11) TMI 394
Penalty u/s 271(1)(c) - as alleged no satisfaction was recorded with reference to concealment of income or furnishing inaccurate particulars of income - HELD THAT:- Payment was made through account payee cheques and subjected to TDS. The assessee also explained that these persons have offered the commission income to tax in their returns of income. The assessee also produced the confirmations of these persons along with the returns of income before the AO in the penalty proceedings.
Once the assessee has brought all relevant evidences on record to show that the commission paid by the assessee which was surrendered as bogus was not actually bogus but a genuine payment, then the AO instead of going by the surrender made by the assessee ought to have conducted an enquiry to verify the correctness of the documentary evidences filed by the assessee and genuineness of the claim.
Since the assessee surrendered this amount and paid the tax, therefore, the explanation of the assessee is relevant only to the limited extent of considering the same as reasonable and bonafide explanation under section 273B - Even otherwise, when the surrender is not based on any incriminating material but it is only based on the statement recorded during the survey, therefore, the evidentiary value of the statement recorded under section 133A in the absence of corroborating evidence cannot be a conclusive basis for holding the assessee liable for the penalty proceedings under section 271(1)(c) of the IT Act.
Once the assessee has brought all relevant documentary evidences in support of the genuineness of the claim, then in the absence of any contrary finding by the AO, the said explanation would be regarded as bonafide and reasonable explanation under section 273B of the IT Act. Consequently, no penalty under section 271(1)(c) - Decided in favour of assessee.
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2019 (11) TMI 360
TP Adjustment - proportionate difference for purpose of calculation of +/- 5% benefit as against the actual difference between the Arms Length Price determined and amount shown in the books of accounts - HELD THAT:- After passing of the second rectification order, the final TP adjustment as per the Assessing Officer comes to ₹ 4,10,82,596/- which is 3.86% of the operating cost of the manufacturing segment. Therefore, the adjustment in international transactions being less than 5% of the total international transactions is deemed to be at ALP as per second proviso to sub-section (2) of section 92 of the IT Act. We, therefore, do not find any infirmity in the order of the CIT(A) in directing the A.O./TPO to delete the addition. The ground raised by the Revenue, in our opinion, is without any merit.
The various decisions relied on by the ld. counsel also support its case that TP adjustment made under TNMM is not warranted when the value of the international transaction of purchase of raw material and the proportionate arm’s length operating cost falls within the +/- 5% arm’s length range. We further find that the TPO in the instant case has passed rectification order twice i.e., the first one on 19th August, 2014 and the second one on 12th March, 2015 and finally reduced the TP adjustment from 11,09,72,200/- to ₹ 4,10,82,956/-. We, therefore, find merit in the argument of the appeal filed by the Revenue should be dismissed being infructuous since the variation between the ALP so determined and the price at which the international transaction has actually been undertaken does not exceed 5%. The grounds raised by the Revenue are accordingly dismissed.
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2019 (11) TMI 359
Capital gain computation - cost of acquisition of shares of BSE Ltd. - whether shall be the original cost of acquisition of membership card in terms of Section 55(2)(ab) even though assessee has claimed depreciation on the cost of membership card in the earlier years? - HELD THAT:- Since, majority view now is that the cost of acquisition of shares of BSE Ltd. shall be the original cost of acquisition of Membership called in term of section 55(2)(ab) of the Act and period of holding of shares of BSE Ltd will be period for which the person was a member of the recognised stock exchange in India immediately prior to such de-mutualisation or corporatisation shall also be included in the period of holding of shares i.e. period of shares of BSE Ltd shall be reckoned from the date of original members of the BSE and not from the date of allotment of shares in BSE Ltd. This conformity order is accordingly passed.
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2019 (11) TMI 358
Disallowance u/s 14A read with rule 8D - HELD THAT:- Overdraft account balance before outflow of the fund for investment was ₹ 11.99 crores and after outflow, it was increased to ₹ 14.99 crores and thus investment of ₹ 3 crores, was made out of interest-bearing overdraft account. This finding of the fact has not been rebutted by the assessee before us. When there is a direct evidence that investment has been made out of borrowed fund, there is no requirement to refer to the presumption that investment was made out of interest free funds generated or available with the company. In view of the finding that investment was made out of borrowed funds, the learned CIT(A) computed the disallowance under Rule 8D
Hon’ble Delhi High Court in the case of Joint Investment Private Limited [2015 (3) TMI 155 - DELHI HIGH COURT] he restricted the disallowance to the amount of exempted dividend income of ₹ 7,50,000/-. In view of clear finding that investment in the shares was made out of borrowed funds, the request of the assessee to remit the matter back to the Assessing Officer for deciding in view of the assessment for assessment year 2013-14 is rejected.
CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the finding of the learned CIT(A) on the issue in dispute. The ground of the appeal of the assessee is accordingly dismissed.
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2019 (11) TMI 357
TP Adjustment - addition made on account of ALP transaction on corporate guarantee - HELD THAT:- Sanction letter issued by the Bank of Baroda, London which is also placed on record by the assessee also reveals that the corporate guarantee was to be given in accordance with the applicable R.B.I. guidelines and it further stipulated that no guarantee commission was payable by Ganesh Shipping Inc. Panama it to the guarantors. It is thus seen that the guarantee has been given in terms of sanction letter issued by Bank of Baroda and the non-charging of guarantee commission is also as per the conditions stipulated by the Bank. It is also a fact that the corporate guarantee has been given by the assessee as well as B.G. Shirke Construction Technology Pvt. Ltd., and no addition on account of guarantee commission has been made in the hands of B.G. Shirke Construction Technology Pvt. Ltd. It is only in the hands of the assessee that the addition has been made by the AO.
When the guarantee has been given by two concerns and on similar terms and conditions arising out of the same transaction, two different and contradictory stands cannot be taken by the Revenue i.e., no addition is made on account of guarantee commission in the case of B.G. Shirke Construction Technology Pvt. Ltd., and addition is made only in the hands of the assessee. Since the non-charging of guarantee commission is pursuant to the conditions stipulated by the sanctioning Bank, we are of the view that no addition on account of non-receipt of guarantee commission is called for in the present case. - Decided in favour of assessee.
Amount earned on interest as income from other sources and therefore held by the AO to be as income earned from non-tonnage activity and accordingly taxable at normal income - HELD THAT:- Interest received from the bank. It is assessee’s contention that assessee had availed loan from Bank of India for purchase of vessel “Maha Padmaja” and as per the terms and conditions, the assessee was required to maintain a minimum balance of 0.186 mln USD throughout the tenure of the loan. On such balance maintained by the assessee it had earned interest. It is also a fact that assessee had paid interest of ₹ 6,42,99,091/- on loan for purchase of vessels and which has been claimed as expenditure in the Profit and Loss account. It is a fact that if the interest paid and earned are considered in totality, the assessee has paid net interest. Assessee was required to maintain the deposits as per the sanction terms of the bank and in view of the facts cited hereinabove, we are of the view that AO was not justified in considering the interest to be non tonnage activity. We therefore set aside the order of AO and direct the AO to consider it as income from shipping business and thus, the grounds of assessee are partly allowed.
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2019 (11) TMI 356
Revision u/s 263 - Capital gain on sale of land - jurisdiction with the AO to make an inquiry on the issue of assessability of capital gain on sale of agriculture land - HELD THAT:- We have gone through the record carefully. Jurisdiction in the AO for passing the impugned order on the present issue was being infused by the order of the ld.Commissioner passed under section 263. Once that order was set side, then there is no issue remained to be inquired at the end of the AO. Power to pass fresh assessment order under section 143(3) r.w.s. 263 with the AO on this issue has been extinguished. Therefore, we do not find any merit in ground no.1 to 8 of the Revenue; they are rejected.
Difference in job work income shown in the profit & loss account and income as per form no.26AS - HELD THAT:- No justification to interfere in the order of the ld.CIT(A) on this issue, because, for the differential amount shown in the ITS statement and the profit and loss account, the assessee has furnished all details before the AO, viz. copy of sales and purchase accounts, ledger account of all three parties, copy of job work. AO simply ignored all these details, and without issuing show cause notice on this issue, or even without making any inquiries with the vendors, made the impugned addition. From the impugned order, it emerges out that the assessee has explained with supporting evidences the reason for difference in two statements as netting of income from the job work; and that the entire job work income shown in ITS was reflected in the books of accounts. There is nothing before the AO to make the addition and he simply proceeded on the premise that the assessee failed to provide complete details relating to purchases. It is settled position of the law that no addition can be made on the basis of receipts shown in the ITS alone, unless the AO is able to show with evidence that such income forms part of the income of the assessee. The assessee cannot be expected to prove negative, rather, it is for the Revenue to prove that the assessee has understated its income, and for that matter, received undisclosed income.
CIT(A) has considered the issue in right perspective, and rightly deleted the impugned addition. We uphold his order on this issue, and reject this ground of appeal.
Deleting the addition u/s 50C by CIT-A - no merit in this ground. Accordingly, this ground stands rejected.
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2019 (11) TMI 355
Assessment u/s 153A - Suppression of receipts - assessee claimed before us that though as per agreement the minimum guarantee amount has been prescribed, however as the picture was flop and collection of the film was not upto the satisfaction of the distributor/second party, therefore, second party paid only ₹ 70,72,478.06/- and deducted the balance amount as rebate and discount as per mutual understanding - HELD THAT:- The observation of the CIT(A) based on no documents or material, as the assessee has claimed that the parties to the agreement have mutually agreed for receiving the amount lower than the minimum guarantee amount and therefore, question of filing any legal claim against the distributor for recovery of the remaining amount ₹ 37,27,522/- does not arise. Both the authorities below sidelined the e-mail confirmation from the second party and held that the said confirmation has no evidentiary value as it is only a self serving document.
The confirmation from the second party was the best source to find out the exact figure which the assessee has received and which in the instant case the second party has replied by the sending email and there is nothing on record that the AO has ever tried to summon the second party in order to confirm the veracity of transaction and/or email.
No doubt legal agreement has its own value and the legal actions depends upon the agreement/MOU, however, there is no bar to side line and/or amend and/or novation of agreement by way of written or otherwise orally for reaching to the just conclusion of the ultimate object(s) of the agreement, which in the instant case appears to be held orally. Even there is nothing on record to suggest that the assessee has received any other amount except ₹ 70,72,478/- out of ₹ 1,08,00,000/- and therefore, we are unable to find any substantive material to sustain the addition of ₹ 37,27,522/-, consequently the addition under challenge is liable to be deleted, hence stands deleted. Appeal filed by the Assessee stands allowed.
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2019 (11) TMI 354
Disallowance of interest u/s 36(1)(iii) on a proportionate basis - preliminary argument made by AR is that no disallowance of interest could be made on the funds borrowed in the earlier years and lying in opening balance as on 1.4.2009 when the said borrowings and utilization thereon were accepted as meant for business purposes in earlier years - HELD THAT:- In the instant case, even after framing the assessment for the AY 2010-11 wherein the interest was disallowed in respect of borrowings made in earlier years, the revenue had not resorted to reopen the earlier years or revise the assessments for the earlier years in the manner known to law. We are equally afraid as to whether the ld DR would advance the same argument in the issue of reopening of assessments for those earlier years where return has been processed u/s 143(1) after due application of mind by the AOs’ at that relevant point of time.
Hence we are not inclined to accept the arguments of the ld DR in this regard. We find that the ld AR submitted that the amounts advanced to Neeta M Mehta alone had increased during the year. We find that with regard to amounts advanced to all other parties except Neeta M Mehta, the closing balance had only reduced when compared to the opening balance and hence there cannot be any disallowance of interest on the opening balance of loans advanced to parties - See VIRENDRA R. GANDHI VERSUS A.C.I.T [2014 (11) TMI 1081 - GUJARAT HIGH COURT]
With regard to loan given to Neeta M Mehta during the year, we find that during the year , the assessee had advanced only a sum to the said party and we find that assessee is having sufficient own funds during the year in the form of current year profits before depreciation to the tune of ₹ 4.24 crores. Hence it could be reasonably presumed that the amounts to Neeta M Mehta were advanced interest free out of own funds available with the assessee in the form of current year profits itself. Hence there cannot be any disallowance of interest u/s 36(1)(iii) on a proportionate basis even for the same. We direct the ld AO to delete the disallowance of interest u/s 36(1)(iii) - Decided in favour of assessee
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2019 (11) TMI 393
Reopening of assessment u/s 148 - recording of reasons and furnishing of the same to assessee - HELD THAT:- Assessee had sought the reasons from the AO and were never furnished to the assessee, he has pointed to the letter written by the assessee to the AO which is placed in paper book. Before me, Revenue has not placed any material on record to demonstrate that the reasons recorded for reopening the assessment was furnished to the assessee. In the present case it is thus clear that despite the request by the assessee, the Assessing Officer has completed the assessment without furnishing the reasons recorded for reopening of assessment. Furnishing the reasons recorded for reopening of the assessment is mandatory condition as held in the case of GKN Driveshafts (India) Ltd. Vs. ITO [2002 (11) TMI 7 - SUPREME COURT] wherein laid down the principle that recorded reasons must be furnished to the assessee when the assessee seeks the reasons. Hon’ble Bombay High Court in the case of CIT Vs. Trend Electronics [2015 (9) TMI 1119 - BOMBAY HIGH COURT] after considering the decision of CIT Vs. Videsh Sanchar Nigam Ltd. [2011 (7) TMI 715 - BOMBAY HIGH COURT] has held that recorded reasons as laid down by the Apex Court must be furnished to the assessee when sought for so as to enable the assessee to object to the same before the AO. It has further held that the recording of reasons and furnishing of the same has to be strictly complied with as it is a jurisdictional issue and in the absence of reasons being furnished when sought for would make an order passed on reassessment bad in law. Revenue has not placed any contrary binding decision in its support.
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2019 (11) TMI 353
Diminution of value and depreciation of closing stock - valuation of obsolete stock - disallowing depreciation on closing stock holding that the depreciation on the closing stock is not eligible deduction - HELD THAT:- CIT vs. Indian Sugar & Gen. Industry Export Import [2012 (4) TMI 281 - DELHI HIGH COURT] while considering the question of law whether the finding of Income-Tax Appellate Tribunal was right in accepting the NRV as declared by respondent/assessee and was right in not adopting the cost price for computation of closing stock held that the assessee could have adopted the NRV method for valuation of closing stock and whether it is mandatory to value the cost on cost basis, it was held that Hon’ble Apex Court in various decisions and observation that closing stock can be valued on cost price or market price, if the market price is less than the cost. However, the said principle does not apply, if the market value of the closing stock is more than the cost, as profit cannot be brought to tax on notional basis.
The Hon’ble Bombay High Court in Alfa Laval (India) Ltd. [2003 (9) TMI 43 - BOMBAY HIGH COURT] also held that when assessee is valued the closing stock on obsolete items at 10% of the cost. Auditor’s report justifying the valuation. The items were in fact sold in the subsequent year at a price less than 10% of the cost. It could not be said that valuation of obsolete item made by assessee was not proper. In view of the aforesaid discussion, we affirm the order of ld. CIT(A).
Addition in book profit under section 115JB - HELD THAT:- We find that we have affirmed the finding of ld. CIT(A) in deleting the addition. Therefore, the addition which was consequential to the addition of subject matter of Ground No.1. Therefore, this ground of appeal is also dismissed.
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2019 (11) TMI 346
Excess cane price paid by the assessees to sugarcane suppliers, i.e. the price over and above the Statutory Minimum Price (SMP) fixed by State Government for purchase of cane - HELD THAT:- AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure.
At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2) as has been held in TASGAON TALUKA S.S.K. LTD. [2019 (3) TMI 321 - SUPREME COURT] Needless to say, the assessee will be allowed a reasonable opportunity of hearing by the AO in such fresh determination of the issue.
It is noted that in some of the appeals, the assessees have raised an alternate ground for allowing deduction u/s.80P in respect of the addition.
ARs, in some of the cases, which were represented by them, were fair enough not to press such ground as it is only an alternate ground and having become infructuous in view of the restoration of the matter to the AO. No argument was advanced in support of such ground in other cases, even where the ld. ARs participated in proceedings before the Tribunal. Therefore, the said alternate ground in all such cases is dismissed.
Sale of sugar to members of a cooperative society at concessional price - HELD THAT:- CIT(A) in the instant batch of appeals has confirmed the addition towards the difference between the Levy price and the concessional price (upto 5 kg. per member per month) and to the extent of difference between the Market price of sugar and Concessional price (over and above 5kg. per member per month). In this process, the assessees got taxed even for the potential profit to the extent of difference between the cost price and market/levy price, as the case may be. Ergo, we hold that such a straightway difference between the market/levy price and the concessional price of sugar cannot be construed as appropriation of profit leading to addition as has been extantly done. The impugned orders to this extent are set aside and the matters are restored to the file of the respective AOs for first ascertaining the cost price of sugar to each assessee and then make addition on this issue by treating it is as a case of appropriation of profit only to the extent of the concessional sale price which is below the cost price. However, it is clarified that in determining cost price of sugar to the factory, not only all the direct costs but all the indirect costs should also be taken into consideration. In other words, all items of debit to the Trading and Profit and loss account would constitute cost base. Needless to say, the assessee will be allowed reasonable opportunity of hearing in such fresh proceedings on this issue.
Disallowance of contribution to Vasantdada Sugar Institute (VSI) - AO observed that the assessee made provision for Vasantdada Sugar Institute (VSI) contribution and claimed weighted deduction at 125% u/s.35(1)(ii) - HELD THAT:- It is found that the ld. CIT(A) has determined this issue in favour of the assessee. No material has been placed on record to show that this order of the Tribunal has been reversed or modified in any manner by the Hon’ble High Court. Respectfully following the precedent, we decide this issue in favour of the assessee.
Disallowance of contribution towards Sakhar Sangh - HELD THAT:- We do not find any infirmity in the directions given by the Commissioner of Income Tax (Appeals) in allowing the claim of assessee u/s. 35(1) subject to verification. We further observe that in view of directions given by the Commissioner of Income Tax (Appeals) the ground raised by the assessee assailing disallowance and adding back of contribution on account of Sakhar Sangh is misconceived.
Computation of deduction allowable u/s.43B (schedule to the audit report in form 3CD) - HELD THAT:- We have also given considerable thought to the orders of the Ld. CIT(Appeals) as well as the Assessing Officer. We are of considered view that this issue needs verification regarding computation of income and Tax Audit Report regarding working of disallowance and also classification on quantum. Thus, in view of the facts and circumstances, we set aside the order of the Ld. CIT(Appeals) and remit the matter back to the file of Assessing Officer for verification and for determination of quantum in compliance with the principle of natural justice. Thus, this part of the ground raised by the assessee is allowed for statistical purposes.
Addition on account of interest received - HELD THAT:- We have also given considerable thought to the orders of the Ld. CIT(Appeals) as well as the AO. We are of considered view that this issue needs verification regarding credit of TDS as well as whether the interest income has been offered to tax or not. Thus, in view of the facts and circumstances, we set aside the order of the Ld. CIT(Appeals) and remit the matter back to the file of AO for verification and for determination of quantum in compliance with the principle of natural justice. Thus, this part of the ground raised by the assessee is allowed for statistical purposes.
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2019 (11) TMI 352
Levy of penalty u/s 271B and 271F - Late filing of tax audit report and income tax return - assessee pointed out that defaults were inadvertent and beyond the control of the assessee since the taxation matters of the assessee were being looked after by tax consultants and tax auditors, who due to heavy rush of return had failed to file ITR by the due date alongwith tax audit report u/s 44AB - HELD THAT:- Levy of penalty for delayed filing of tax audit report and income tax return. Undoubtedly the Revenue could not find any fault in the income returned by the assessee for the impugned year, despite subjecting it to scrutiny assessment. What emerges from the same is that the non filing of tax audit report and of the return of income by the specified due date was definitely not intentional with the purpose of not disclosing any income for taxation. The plea of the assessee therefore that it was an inadvertent default, on account of the tax consultant being busy with GST returns and the assessee not being able to adequately follow up with him since he was away in New Zealand, appears to be a reasonable cause.
In view of the same we hold that no penalty u/s 271B and 271F was leviable in the present case and direct deletion of both. Appeals of the assessee are allowed.
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2019 (11) TMI 351
Long-term Capital Gains on sale of Equity Shares - Exemption u/s.10(38) - Period of holding - Whether the transaction of purchase of shares by the assessee is to be considered as investment or stock in trade? - HELD THAT:- No evidence was filed to show that the contention of the assessee is only to hold the shares as capital asset not as stock in trade. The Circular No.6/2016 dated 29.02.2016 specifically states that where the assessee itself opts to treat the shares as a stock in trade irrespective of the period of holding listed the shares, the income arising from the transfer of such shares could be treated as a business income.
In the present case, though the assessee disputes the treatment given in the books of accounts but admittedly fact remains that the shares were shown as a part of stock in trade and therefore the Circular No.6/2016 dated 29.02.2016 issued by the CBDT cannot come to the rescue of the assessee.
Is settled position of the law that the intention at the time of acquisition of shares is the determinative factor to decide whether the shares are held on stock in trade or investment account. In the present case, there is a prima facie evidence on record to show that the shares are held as stock in trade on purchase of shares was debited to P&L A/c.
This would prima facie prove the intention on the part of the assessee that the shares are held on trading account. Nothing is brought on record in rebuttal of this evidence. We have no option but to hold that the investments in shares were held in trading account and the surplus arising on sale of such shares is liable to tax as business income. - Decided against assessee.
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2019 (11) TMI 369
Reopening of assessment u/s 147 - Deputy Commissioner's jurisdiction to issue notices - HELD THAT:- Perusal of the last portion of the communication shows that the petitioner's right has not been affected. What has been stated is that the petitioner would be afforded adequate opportunity to explain his case. Therefore, one has to draw an inference that it is not an order and it is only a communication wherein it is specifically stated that during the course of reassessment proceedings, the petitioner has an opportunity to explain his version.
The contention of the petitioner that objections stated in para-21.2 have not been appraised by the concerned authority. If it is not considered, it is an advantage to the petitioner in future to take the contention that his grievance/objections have not been addressed, which would be non-application of mind, and on that ground itself further proceedings will be treated as void.
The present petition is premature. Accordingly, the writ petition stands dismissed as premature reserving liberty to the petitioner to pursue the Deputy Commissioner of Income-tax in terms of annexure-C and appraise all his contentions. In the event of making a detailed explanation along with the documents before the Deputy Commissioner of Income-tax pursuant to the communication dated February 28, 2019, the Deputy Commissioner of Income-tax, Bengaluru is hereby directed to consider each and every contention to be raised by the petitioner and pass speaking order after due consideration of each contention, in accordance with law.
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2019 (11) TMI 392
Addition on account of donations - whether anonymous donations are subjected to tax as per the provisions of Section 115BBC - whether the donation received by the assessee can be treated as anonymous donation? - HELD THAT:- Conditions and prerequisite for addition u/s 68 and 115BBC of the Act are different. For the purpose of addition u/s 68 of the Act, the assessee has to prove the identity, genuineness and creditworthiness of the person from whom the monies had been received whereas for the purpose of Section 115BBC of the Act, the Act clearly defines that a donation can be treated as anonymous where a person receiving such contribution does not maintain the record of the identity indicating name and address.
In the instant case, there is no dispute about the name and address of the parties who have given the donation. The ITRs and the letters from the donors stating that the donation has been given for the trust for conference, and towards the corpus fund. Hence, they cannot be treated as anonymous donations within the provisions of the Act liable to be taxed u/s 115BBC(1) of the Act.
Disallowance of the claim of depreciation - Revenue has disallowed the claim on the grounds that the amount utilized for acquiring the assets have already been claimed and allowed u/s 11(1) - HELD THAT:- Hon’ble Supreme Court in the case of Rajasthan and Gujarat Charitable Foundation Pune [2017 (12) TMI 1067 - SUPREME COURT] held that income of a Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income-tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. - Decided in favour of the assessee.
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2019 (11) TMI 350
Adhoc disallowance of 5% of the manufacturing expenses, building repair, hamali expenses, machinery expenses and transportation expenses - 10% of car running, insurance and depreciations claim as well as telephone and miscellaneous expenses have also been disallowed - HELD THAT:- There is no specific finding recorded by the AO in terms of any of these expenses having not been incurred for the purpose of business or bogus in nature. The disallowance of expenses have thus been made in the routine manner without pointing out any specific defects in the vouchers or the fact that where the payments have been made in cash, such expenses are not incurred for the purposes of business.
Mere incurrence of expenditure in cash by itself cannot be a ground for denial of genuine claim of the assessee. There are business necessities which warrant the assessee to incur the expenditure in cash, a fact which has been recognized by the legislature and adequate safeguards have been put in place by way of section 40A(3).
Though lately there is a policy shift towards digital and cashless transactions which no doubt is a welcome step in the right direction, at the same time, there are certain business exigencies which warrant cash payments. Merely because cash payment has been made is not an indicator that the transaction is non-genuine or bogus or the cash payment has not been made for purposes of business.
Where in particular facts and circumstances of the case, AO is of the view that there are suspicious cash payments, in such a situation, he should carry out further examination and investigation in the matter and should come out with specific and conclusive findings. However, in the instant case, we donot see any specific finding recorded by the Assessing officer. Further, on perusal of the ledger accounts produced by the ld. AR, it is observed that though there are cash payments, at the same time, there are also payments made by cheque and entries towards expenses which have been claimed as subsequently paid by cheque. Therefore, observation of the AO that payments have been made in cash doesn’t apply as far as these transactions are concerned. We therefore find that in absence of any specific findings by the Assessing Officer, there is no basis for disallowance of expenses on an adhoc basis which cannot be sustained in the eyes of law. Hence, the disallowance so confirmed by the ld. CIT(A) is hereby directed to be deleted - Appeal of the assessee is allowed.
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Customs
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2019 (11) TMI 389
100% EOU - Concessional rate of duty - removal of goods in contravention of Section 72(1)(a) and Section 72(1) (d) of the Customs Act, 1962 and without the permission of the Development Commissioner SEEPZ, Mumbai and without execution of the Bond - benefit of N/N. 52/2003-Customs dated 31.03.2003 - whether the appellants were right in clearing the lathes imported vide Notification No.53/97-Cus. Dated 03.06.97 to the domestic tariff area without permission of the Development Commissioner on the grounds that they were surplus in terms of Para 6.16 of the Import Export Policy? - rate of depreciation to be applied in terms of the Notification No.57/2003-Cus dated 31.03.2003 or in terms of the Exim Policy?
HELD THAT:- The Appellants have cleared the goods to DTA or EPCG holders during the period August to September 2003. During this period notification No.53/97 was not in currency. Notification No.52/2003 was only operational. Therefore the same requires to be considered. This notification does not contain any condition 5 or 5a as in the case of notification 53/97 as per which the unit required to take permission from the Development Commissioner and the Assistant Commissioner as the case may be. It is not the case of the department that the Appellant has not fulfilled the export obligation in terms of the Exim Policy. This claim of the Appellant is not controverted by the department. Therefore, the Appellants are entitled to clear the used capital goods in terms of the policy as well as the customs notification.
In terms of Notification 52/2003, there is no provision for obtaining permission. Even if such a provision exist in the policy or custom notifications , it would not be the intent of the same to deny a substantial right of the appellants citing procedural infractions like non obtaining a permission or non filing of a Bill of Entry - thus, the Appellants submission that non obtaining of the permission does not take away the applicability of notification allowing a concessional rate of duty, is acceptable.
Rate of depreciation - HELD THAT:- The Appellants need to apply the depreciation in terms of notification No.52/2003 which was in force at the time of clearances - For this reason, the matter requires to go back to the original authority for computing the applicable duty after allowing the applicable rate of depreciation in terms of notification No.52/2003.
The appeals are partly allowed by way of remand to the original authority to arrive at duty payable by the appellants after extending the benefit of concessional rate of duty under notification 52/2003 and the rates of depreciation contained therein - penalties set aside.
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2019 (11) TMI 391
Attachment of Petitioner’s bank accounts - facts on which petitioner bank account is freezed, is not mentioned - allegation of evasion of Customs Duty - HELD THAT:- The non-disclosure of facts which have led to the freezing of bank accounts of the Petitioner including the pertinent fact that he is accused of evasion of Customs Duty to the tune of ₹ 60 Crores and that he was arrested are extremely relevant and material.
In view of the suppression of the relevant facts and circumstances by the Petitioner, we are not inclined to exercise the jurisdiction in this case - Petition dismissed.
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2019 (11) TMI 388
Restoration of appeal - appeal dismissed on on monetary limits - HELD THAT:- The appeal has been dismissed by wrongly applying the revised circular on monetary limits. Hence, it is required to restore the appeal to the files of the Tribunal which we hereby do - ROA application allowed.
Classification of imported goods - Mono Pottasium Phosphate - HELD THAT:- The Tribunal has held in the cases of VARDHAMAN FERTILIZERS & SEEDS PVT LTD., ANIKA INTERNATIONAL RR SHAH VERSUS COMMISSIONER OF CUSTOMS PUNE [2016 (11) TMI 2 - CESTAT MUMBAI], COMMISSIONER OF CUSTOMS (IMPORT) NHAVA SHEVA VERSUS SOLUFEED PLANT PRODUCT & SERVICES PVT. LTD., RICHFIELD FERTILIZERS LIMITED, MAHAFEED SPECIALTY FERTILIZERS (INDIA) PVT. LTD. AND TATA CHEMICALS LIMITED [2018 (4) TMI 1346 - CESTAT MUMBAI], COMMISSIONER OF CUSTOMS (IMPORT) , NHAVA SHEVA VERSUS DEEPAK AGRO SOLUTIONS LTD. [2018 (3) TMI 1256 - CESTAT MUMBAI], COMMISSIONER OF CENTRAL EXCISE, THANE-I VERSUS TINCO CHEMICALS [2019 (4) TMI 468 - CESTAT MUMBAI] that the said goods merit classification under sub-heading 3105.06.
Appeal dismissed - decided against Revenue.
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2019 (11) TMI 390
Suppression of actual transaction value - misdeclaration of the actual description of goods - Import of Zinc Ash, Zinc Skimming and Zinc Dross from US, Canada and Dubai and other countries from 2002 to 2006 - Section 127B of the Customs Act, 1962 - jurisdiction and authority to transfer the case to Additional Bench, Mumbai.
HELD THAT:- A subjective satisfaction was arrived at by the Settlement Commission as stated in paragraph 6 of the order passed under Section 127C by the Settlement Commission of the admission of an application preferred under Section 127B of the Customs Act. Moreover, by now final order has also been passed by the Settlement Commission under Section 127D of the Customs Act. The final order has not yet been challenged by the Union of India meaning thereby to the final order passed by the Settlement Commission remain intact and as it is.
We are not quashing and setting aside the order of admission passed by the Settlement Commission for the reasons as stated hereinabove. Moreover, there is nothing like “automatic cancellation of the order under Section 127D of the Customs Act”. It ought to be kept in mind that unless the final order is challenged by the Union of India passed by the Settlement Commission under Section 127D, such order remain intact and as it is.
Thus, there is no separate existence of the order under Section 127C and a final order under Section 127D of the Customs Act is already passed and that too the said order remains valid from 29th February, 2008 onwards because the final order under Section 127D was passed more than a decade ago and the same has not been quashed and set aside by any competent court because there exists no challenge to the final order of the Settlement Commission - petition dismissed.
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Service Tax
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2019 (11) TMI 386
Classification of services - Business Support services or not - Amounts received from the subsidiary companies for providing expert manpower to them for discharging certain functions - Establishment Expenses - Administrative Expenses - sharing of expenses - Department entertained a view that the reimbursement of the Administrative and other expenses received by the Appellant from the subsidiary companies is covered under the category of ‘Business Support Services’.
HELD THAT:- It is a matter of record that the appellant had been deputing certain employees to the subsidiary companies namely, M/s. REC Power Distribution Co.Ltd. and M/s. REC Transmission Power Co. Ltd. It is found from the record of the appeal that there has been reimbursement of the expenses incurred by the Appellant towards its employees been working with the two subsidiary companies of the appellant on a deputation basis. The recovery of administrative and establishment expenditures has been recorded under books of accounts under the head of ‘Establishment Expenses’ and ‘Administrative Expenses’.
It can be seen from the above definition that ‘Business Support Service’ covers certain specific activities in its inclusive definition. Only if such specific activities are carried out by a Service provider, it would be classifiable under ‘Business Support Service’.
From a perusal of the activity undertaken by the Appellant, it is seen that the Appellant had only sent certain number of employees to its subsidiary companies on cost recovery basis. It would not be covered by any activity contemplated in the definition of ‘Business Support Service’. Payment of certain amount towards establishment and administrative expenditure for providing certain employees to the subsidiary companies is in the nature of sharing of expenses between two companies and would not fall under any category of taxable service.
The logic given by the adjudicating authority in the above mentioned paragraphs justifying the classification of the activity under the ‘Business Support Service’ is not legally tenable as providing expert man power on cost recovery basis does not fall under any of the inclusive category of ‘Business Support Service’.
Since the Show cause notice issued has demanded Service Tax under the category of ‘Business Support Service’ and the CBEC has already clarified that such an activity is classifiable under ‘Manpower Recruitment or Supply Agency’ service as provided under Section 65(105)(k) of the Act, the demand of Service Tax, is not sustainable and, deserves to be set aside.
Time limitation - HELD THAT:- Since the demand itself is not sustainable on merits, we refrain from discussing the other aspects like demand being time barred.
Appeal allowed - decided in favor of appellant.
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2019 (11) TMI 385
Valuation - Site formation and clearance, excavation, earthmoving and demolition service and survey and exploration of mineral service - inclusion of the value of free supply of the explosives in the taxable value for calculation of service tax - Whether service tax confirmed by the Commissioner (Appeals) on the value of free supply of the explosives by J.K. White Cement to the appellant is includable in the assessable value of the taxable service or not? - period from September 2004 to May 2007.
HELD THAT:- The issue at hand has already been decided by Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT] wherein it has been held that for levy of the service tax as per the provision of Section 67 of the Act the gross amount charged by the service provider from the service recipient means the amount which is billed by the service provider on the service recipient in the invoice and, therefore, the free supplies provided by service recipient to the service provider cannot form part of the taxable value of service.
The value of the free supplies of the explosives by the service recipient to the appellant is not includable in the taxable value - Appeal allowed - decided in favor of appellant.
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2019 (11) TMI 384
Refund of unutilized and accumulated CENVAT credit of Service Tax paid - various input services availed by them which were used in providing output services exported without payment of Service Tax - Rule 5 of CCR, 2004 and Notification No.27/2012-CE (NT) dated 18.06.2012 - denial of refund claim on the ground of non-registration - denial also on the ground that copy of input invoice not available, ineligible input credit taken, address mentioned in the invoices is not in ST-2 and CENVAT debit towards refund claim is not done to the extent of ₹ 15,40,950/-..
Denial of refund on the ground of non-registration - HELD THAT:- The denial of CENVAT credit on the ground of non-registration is not sustainable in law in view of the decision of Hon’ble Karnataka High Court in the case of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX [2011 (9) TMI 450 - KARNATAKA HIGH COURT]. The said decision has been consistently followed by the Tribunal in many decisions - the denial of refund on this basis is set aside.
Refund of KKC - Scope of SCN - HELD THAT:- The KKC is eligible for CENVAT credit. Further, the Original Authority has not disputed the eligibility of KKC but the Original Authority has only rejected the refund on the ground that the appellant has not debited the same in the ST-3 Returns which is factually incorrect finding in view of the ST-3 Returns produced before me wherein it is clearly debited by the appellant - Further, the Commissioner in the impugned order has gone beyond the OIO and has examined the eligibility of KKC for CENVAT credit which is beyond the OIO and therefore cannot be sustained.
The impugned order rejecting the refund is not sustainable in law - Appeal allowed - decided in favor of appellant.
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2019 (11) TMI 383
Commercial or Industrial Construction Services - Sub-contractor - composite contract - suppression of facts or not - extended period of limitation - HELD THAT:- The period involved as per operative part of the order is from 10.09.2004 to 31.03.2008. On perusal of records it is seen that the period involved as per the transactions in SCN is from 10.09.2004 to November, 2007.
Demand under CICS for the period prior to 01.06.2007 - HELD THAT:- Undisputedly, the contracts are composite in nature which has been brought out from the evidences placed before us. Though cement and steel was supplied free, other goods viz-wood, sand, consumables were used for execution of the piling works. The appellant has paid VAT and filed VAT returns for the very same work orders for which certificate is issued by the Commercial Tax Officer. Further, a certificate issued by Chartered Accountant is also produced to show that apart from steel and cement other materials have also been used - On perusal of this certificate, it is found that the appellant has used consumables to the amount of ₹ 38,01,188/- in financial year 2004-05 and ₹ 26,62,871/- in 2005-06. There is also purchases of brick, wood and other items which have been used for executing the work orders. Thus, it is established that the contracts are composite in nature.
The decision in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] would apply to the period prior to 01.06.2007 and therefore the demand cannot sustain.
For the period after 01.06.2007 the decision of the Tribunal in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI [2018 (9) TMI 1149 - CESTAT CHENNAI] as followed in M/S. P. BALAKRISHNAN VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, TIRUNELVELI [2019 (3) TMI 955 - CESTAT CHENNAI] would assist the appellant - Applying these decisions, the entire demand cannot sustain.
Thus, the demand do not sustain - appeal allowed - decided in favor of appellant.
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2019 (11) TMI 382
Classification of services - Services under the dealership agreement - respondent herein entered into dealership agreement in the nature of “rental outlet dealership agreement” and were collecting charges in the name of service station license fee from their dealers towards various outfits and facilities installed/provided in retail outlet premises - whether classified under the category of ‘Supply of tangible property service’ or would fall under the category of business support services? - Circular No. 334/1/2008-TRU-dated 29.02.2008 - extended period of limitation.
HELD THAT:- It is brought out from the facts that the respondent has been paying service tax on the licence fee charges collected by them under the category of supply of tangible goods services. These services became taxable with effect from 16.05.2008. The present show-cause notice has been issued proposing to demand service tax on the very same licence fee charges under the category of business support services which were introduced with effect from 01.05.2006. The department has been accepting the tax under supply of tangible goods services for a very long time.
Further on analysing the definition of business support service in Section 65 (104c) of the Finance Act, it can be seen that the infrastructural support services are for running an office - In the present case the facilities are provided mainly for storage and supply of the products. Both the dealer and the respondent are acting independently within the terms of the agreement. From the agreement ii is clear that there is no service provided by the respondent in the transaction in the nature of business support service.
The Board in Circular No. 334/1/2008-TRU-dated 29.02.2008 has clarified the scope and nature of supply of Tangible Goods Service. A transaction which allows another person to use the goods without transferring legal right of possession or effective control is brought into the levy of service tax under this category when machinery, equipment etc. though fixed to earth is allowed to be used by another without transfer of possession and effective control, the activity would be taxable as service under supply of tangible goods service - From the agreement, the right to possession of the outfits remains with the respondents. It is for the respondents to carry out maintenance of these outfits and facilities and respondent can remove these outfits without assigning any reasons. The effective control of the outfits also thus remains with respondents and there is only right to use such outfits and facilities. The activity is more akin to supply of Tangible Goods Service.
Extended period of limitation - HELD THAT:- From the various proceedings initiated on the license fee charges it can be seen that department has been entertaining different views. Thus evidently being an interpretational issue the invocation of extended period cannot sustain - SCN fails on the ground of limitation.
Appeal dismissed - decided against Revenue.
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2019 (11) TMI 381
CENVAT credit - input services - renting of immovable property hired for their office premises - the appellant has rented the premises, part of which has gone as an input service to their own company and part of which is charged to sister companies because sister companies are not paying any rent - HELD THAT:- There is no Rule under CENVAT Credit Rules 2004 under which against the same invoice part credit can be allowed and part denied if only part of input or input service is used towards the final product or service.
The appeal needs to be allowed only on the ground that there is no scope in the CENVAT Credit Rules 2004 to partly allow and partly disallow credit on the same invoice - appeal allowed - decided in favor of appellant.
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2019 (11) TMI 380
Restoration of application for condonation of delay - the application for condonation of delay filed by the appellant was dismissed for non prosecution - appellant has deposited almost 40% of the service tax demanded - HELD THAT:- Considering that the appellant has deposited almost 40% of the service tax demanded which is reasonable, the recovery of the remaining amount of service tax demand is stayed and the matter is remanded to the first appellate authority to consider the matter on merits and pass a reasoned order, after following the principles of natural justice.
The application for condonation of delay is allowed - The application for stay of recovery of unpaid amount of service tax , interest and penalties is allowed - The matter is remanded to the first appellate authority for a decision on merits.
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Central Excise
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2019 (11) TMI 379
Time limitation - maintainability of appeal - appeal dismissed on the ground of time bar - CENVAT credit - HELD THAT:- As per Section 35 of the CEA, 1944, an appeal to the Commissioner (A) is required to be filed within 60 days from the date of receipt of the order by the person who is aggrieved by such order. Further, proviso to Section 35 provides that the Commissioner (A) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of 60 days, allow it to be presented within a further period of 30 days.
In the present case, the appeal was filed beyond the prescribed period of 60 days. The delay of approximately 27 days in filing the appeal was within the condonable power of the Commissioner (A).
The delay of approximately 27 days in filing the appeal before the Commissioner (A) is condoned - case remanded back to the Commissioner (A) with a direction to decide the case on merits - appeal allowed by way of remand.
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2019 (11) TMI 378
CENVAT credit - inputs and capital goods - MS Angles, MS Channels, etc., used for fabricating and installing the capital goods - HELD THAT:- In the case of SAI SAMHITA STORAGES P. LTD. VERSUS CC. & CE., VISAKHAPATNAM-II [2010 (4) TMI 484 - CESTAT, BANGALORE] this Tribunal has held that Cenvat credit is available on such goods used in fabricating capital goods and the decision was upheld by the jurisdictional High Court of Andhra Pradesh in COMMR. OF C. EX., VISAKHAPATNAM-II VERSUS SAI SAHMITA STORAGES (P) LTD. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT].
The appellant is entitled to the Cenvat credit - Appeal allowed - decided in favor of appellant.
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2019 (11) TMI 377
Disallowance of deduction on account of discounts - non-furnishing of necessary evidence to establish that the discounts have been passed on to the buyers - deductions by way of discounts given to buyers disallowed, alleging that the respondents have not furnished necessary documents to show that the discounts have been passed on to the buyers - finalisation of accounts - demand of differential duty - HELD THAT:- The original authority has given the details of the documents submitted by the respondents. Each time when the authority has requested for further documents, respondents have responded to the same and furnished all relevant documents. In addition to the verification by original authority, scrutiny by the Assistant Director of Cost also has been done. The Commissioner (Appeals) after going through such documents has reached a conclusion that the discounts are eligible and there is sufficient evidence to establish that the discounts have been passed on to the buyer.
The only dispute thereafter which remains is with regard to the quantification of the discounts - For this, the Commissioner (Appeals) has relied upon the Cost Accountant certificate to determine the quantity of the discounts on average/equalisation basis.
The Commissioner (Appeals) has correctly held that the discounts were very much known to the parties before the supply. Further, discounts are passed on to the customers and hence are eligible for deduction - Having gone through the voluminous records submitted by the appellants and having come to the conclusion that discounts are admissible, then quantification of the same can be on the basis of equalisation formula - there is no infirmity in the order of the Commissioner (Appeals) - appeal dismissed - decided against Revenue.
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2019 (11) TMI 376
Default in making payment within stipulated dates - bar on utilization of cENVAT credit - Department was of the view that the assessee having failed to make payment within the prescribed date has violated the provisions of Rule 8 (3A) of Central Excise Rules 2002 - HELD THAT:- In the present case, there is no evidence to show that appellant deliberately defaulted the payment during the disputed period - The short payment due to any clerical or calculation mistake cannot be viewed as default under Rule 8 (3A) of CENVAT Credit Rules 2002. If not yet paid, the excess paid duty shall be adjusted to the short paid cess.
The demand of duty, interest or penalties cannot sustain - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (11) TMI 387
Deduction under Section 3F (2)(b)(i) of U.P. Trade Tax Act, 1948 - goods brought inside the State of U.P. by way of inter-State purchase for execution of works contract - Whether the reasoning and findings given by the Tribunal for confirming rejection of claim of deduction under Section 3F (2)(b)(i) of U.P. Trade Tax Act, 1948 in respect of goods brought inside the State of U.P. by way of inter-State purchase for execution of works contract, is sustainable in law?
HELD THAT:- Insofar as the applicability of Sections 3, 4 and 5 of the Central Act to such contracts is concerned, the issue has been dealt with and decided by an earlier decision of this Court in M/s Comfort Systems Vs. Commissioner Commercial Tax, U.P. [2019 (2) TMI 924 - ALLAHABAD HIGH COURT] where it was held that - The order of the Tribunal cannot be sustained, inasmuch as, the Tribunal has clearly applied the exact opposite rule. Therefore, the matter is remitted to the Tribunal.
Since the matter is being sent back to the Tribunal, no further observation is required to be made, as to the merits of the claim or as to the other finding recorded by the Tribunal that the goods had been purchased by the assessee, independent of the four works contract awarded to it or that there were two sales. That issue would remain to be re-agitated before the Tribunal on the strength of evidence existing on record.
Revision allowed by way of remand.
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2019 (11) TMI 375
Refund along with interest - Delhi Vat Act - HELD THAT:- We direct the concerned respondent authority to decide the claims of the petitioner for refund with interest in accordance with law, rules, regulations, Government policy and keeping in mind the evidences on record, as early as possible and practicable preferably within a period of eight weeks from today.
Petition disposed off.
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2019 (11) TMI 374
Entry tax - Adjustment of entry tax not paid with the VAT paid - sale of motor vehicles - Entry tax not paid - "C" declaration form under the provisions of Section 8(4) of the Central Sales Tax Act, 1956 - whether the petitioner, though not paid the entry tax, is entitled to adjust the same on the VAT paid by them at the rate of 14.5%? - HELD THAT:- There is no dispute to the fact that the VAT liability is 14.5% and the entry tax liability is 12.5%. The question as to whether the adjustment can be made even though such entry tax was not paid, has already been considered by this Court in KASI AND SETHU VERSUS DEPUTY COMMERCIAL TAX OFFICER (DG-CTO), KUMBAKONAM AND ANOTHER [2002 (12) TMI 573 - MADRAS HIGH COURT], wherein the learned Single Judge after allowing the writ petition and quashing the impugned proceedings therein, granted liberty to the first respondent therein to set off the general sales tax already paid by the petitioner as against the entry tax payable for the vehicles concerned and to issue appropriate orders.
Therefore, this Court is of the view that by applying Kasi and Sethu case, the Assessing Officer has to make adjustment towards the liability of the entry tax at the rate out of the amount already paid by the petitioner towards VAT - When such adjustment has to be made only after making correlation exercise, since the vehicles involved in this case is numbering 141, needless to say that the petitioner has to place all the material documents before the Assessing Officer to redo the exercise based on the materials so placed.
The matter is remitted back to the Assessing Officer to redo the assessment after making necessary correlation in the light of the observation made in Kasi and Sethu case - petition allowed by way of remand.
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2019 (11) TMI 373
Validity of assessment order - Re-assessment/revision of assessment - benefit of concessional rate of tax - the petitioner received pre-assessment notices dated 06.12.2006 proposing to bring to tax the very same transactions at regular rate, thus denying the petitioner the benefit of concessional rate of tax - change of opinion - whether the authorities of the State Commercial Taxes Department are empowered to initiate proceedings for re-assessment/revision of assessment - scope and width of such powers.
HELD THAT:- The issue is covered within the scope of Section 16 of U.P. Trade Act, 1948 where it has been stated the provisions for assessmnet of escaped turnover.
In the present case, it is the provisions of sub-Section 1(b) that would be attracted, insofar as we are concerned with re-assessment of turnover at a higher rate than what was initially applied. Section 16 provides for assessment of escaped turnover 'for any reason'. The language utilised is wide and grants unrestricted powers to an assessing authority to bring to tax turnover that has in his opinion escaped assessment for any reason whatsoever.
Thus, the statutory provision for initiating proceedings for assessment of escaped turnover permits an Assessing Authority under the TNGST Act to initiate proceedings for re-assessment merely if, in his opinion, turnover liable to be brought to tax, has escaped assessment.
Concessional rate of tax - Fibre Glass Reinforced Plastic Products - TNGST Act - rate of sales tax chargeable - HELD THAT:- There appears to have been an inspection at the petitioners’ premises on 22.05.2006 and based on a statement recorded therein, a notice dated 22.05.2006 for revision of assessment was issued by the Enforcement Officers. The notice alleged that the inspection of the business premises revealed contravention of the provisions of the Act insofar as the sales in respect of which concessional rate was sought were not so eligible to the same and ought to have been taxed under regular rate.
The conclusion of the Assessing Authority to the effect that section 3(5) would apply to 'capital goods' alone is clearly incorrect and does not appear to have any basis. Capital goods being machinery as well as parts, accessories and tools thereof fall within the ambit of clause (3) of the Eighth schedule and consequently within the beneficial sweep of section 3(5) as well.
There is no dispute in this case that the purchaser is an industrial consumer and is not a trader/retailer. Being a manufacturer, the petitioners’ case is that the FGRP supplied has been used by the purchasers in their manufacturing activity. This argument has been specifically raised by the petitioner in reply dated 11.01.2007 more than once and has not been controverted or denied by the Assessing Officer. It is hence uncontroverted that the ultimate consumer in this case is a manufacturer. Thus, in summation, the commodities in question fall within the cover of the Eighth schedule and have been purchased for use in the activity of manufacturing by the purchaser. The provisions of section 3(5) are thus applicable on all fours in this case.
The objections of the Assessing Officer to the effect that the averments in Form XVII declaration would have to be proved by a selling dealer, is clearly misplaced and does not stand to reason.
The orders of assessment are quashed on merits - Petition allowed.
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Indian Laws
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2019 (11) TMI 372
Appointment of an arbitrator - illegal detention of container - termination of contract - Section 34 of the Arbitration and Conciliation Act - HELD THAT:- The learned Arbitrator and the Courts below have recorded the concurrent findings that the appellant Contractor has failed in carrying out the work as per the terms and conditions of the contract and the learned Arbitrator has rightly allowed the detention and forfeiture of the equipments of the contractor and disallowed the counter claim No.4 of the appellant. Similarly, the counter claim No.5 which was for the damages for the alleged detention and use of hand trolleys has been rejected and thus, the counter claim Nos.4 and 5 have been rightly disallowed by the learned Arbitrator.
There are no reason warranting interference with the award passed by the Arbitrator and the impugned judgment and this appeal is liable to be dismissed.
Appeal dismissed.
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2019 (11) TMI 371
Appointment of an Arbitrator on behalf of Respondent No. 1, Doordarshan, in an international commercial arbitration - Section 11 of the Arbitration & Conciliation Act, 1996 - HELD THAT:- Disputes arose between the parties, which led to the invocation of the arbitration clause on 14.01.2019 by the Petitioner – Company. The Petitioner – Company nominated its arbitrator on 28.02.2019 in terms of the agreement. However, Respondent No. 1 – Doordarshan failed to nominate an arbitrator. Consequently, the Petitioner – Company has filed the present Application under Section 11 of the Arbitration & Conciliation Act, 1996 seeking appointment of an Arbitrator by the Court on behalf of Respondent No. 1 – Doordarshan.
Even though the arbitration agreement provides for a Three member arbitral tribunal, the Counsel for all the parties at the time of hearing, requested for the appointment of a Sole Arbitrator in modification of the arbitration clause stipulating a threemember tribunal, to adjudicate the disputes.
Accordingly, with the consent of the Counsel for the parties, we appoint Mr. Justice (Retd.) A. M. Sapre, Former Judge, Supreme Court of India as the Sole Arbitrator subject to the declarations being made under Section 12 of the Arbitration and Conciliation Act, 1996 with respect to independence and impartiality, and the ability to devote sufficient time to complete the arbitration within the period of 12 months. The learned Arbitrator is requested to complete the proceedings within the timelimit specified under Section 29A.
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2019 (11) TMI 348
Contempt application - power of levy advertisement tax post GST - learned counsel for the respondent Nos.2, 3 and 4-Municipal Corporation seeks time for further instructions in the matter - HELD THAT:- Put up on Tuesday, i.e., on 05.11.2019.
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2019 (11) TMI 370
Dishonor of cheque - alleged procurement of cheque by coercion - offence punishable under Section 138 of Negotiable Instruments Act - rebuttal of Statutory presumption - HELD THAT:- In the case at hand, probable defence with regard to procurement of cheque by creating Police pressure appears to have been taken very casually because, if statement of the accused recorded under S.313 CrPC is read in its entirety, it is/was none of the case of the accused that he issued cheque under Police pressure, but even if such defence is tested on the touchstone of the evidence led on record by respective parties, same deserves outright rejection.
In the case at hand, careful perusal of the complaint filed by complainant under S.138 clearly suggests that she set up a case that she paid ₹ 2.00 Lakh to Brahmi Devi in lieu of agreement to sell but when she failed to execute the sale deed, affidavits came to be sworn in by Brahmi Devi, Pawan Kumar and Ram Rattan, to the effect that they would pay ₹ 2.00 Lakh to the complainant. No suggestion worth the name ever came to be put to the complainant in her cross-examination that the cheque was issued under the pressure of the Police and accused had never executed affidavit undertaking therein to pay sum of ₹ 2.00 Lakh.
In the case at hand, accused has not been able to rebut the statutory presumption under Ss.118 and 139 of the Act in favour of holder of cheque i.e. complainant and as such, there appears to be no illegality or infirmity in the judgments/order of conviction and sentence passed by learned Courts below. All the ingredients of S.138 of the Act stand duly proved in the case at hand, as such, this Court finds no occasion to interfere with the judgments/order of conviction and sentence recorded by learned Courts below, as such, same deserve to be upheld.
The petition at hand is dismissed being devoid of merit.
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2019 (11) TMI 347
Anticipatory bail - siphoning of funds - it is alleged that alleged that the funds from Bhushan Steel Ltd. and Bhushan Energy Ltd. were siphoned off through a complex web of companies - HELD THAT:- This Court finds no reason why the petitioner’s application would not be given the consideration it deserves. However, given the peculiar facts and circumstances of this case; considering that the petitioner (Shri Brij Bhushan) is 82 years of age and was not been arrested during the span of investigation and considering that Smt. Ritu Singal is aged 47 years and is woman and a part of the family, which allegedly control the companies, this Court is of the view that it would be apposite that the petitioners not be arrested immediately.
The petitioners shall appear before the trial court on the date fixed, that is. 14.10.2019 and are liberty to apply for a regular bail. In the event, the trial court declines their applications, the said order would not be given effect to for a period of seven days, thereafter, and during this period, the petitioners would not be arrested. This would enable the petitioners to avail any other remedies as available in law.
Bail application disposed off.
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2019 (11) TMI 349
Jurisdiction to handle Road traffic offences - Whether the Gauhati High Court was justified in issuing directions that road traffic offences shall be dealt with only under the provisions of the Motor Vehicles Act, 1988 (MV Act), and in holding that in cases of road traffic or motor vehicle offences, prosecution under the provisions of Indian Penal Code,1860 (IPC) is without sanction of law, and recourse to the provisions of the IPC would be unsustainable in law?
HELD THAT:- There is no conflict between the provisions of the IPC and the MV Act. Both the statutes operate in entirely different spheres. The offences provided under both the statutes are separate and distinct from each other. The penal consequences provided under both the statutes are also independent and distinct from each other - The ingredients of offences under the both statutes, are different, and an offender can be tried and punished independently under both statutes. The principle that the special law should prevail over the general law, has no application in cases of prosecution of offenders in road accidents under the IPC and M.V. Act.
It is pertinent to mention that there is no provision under the M.V. Act which separately deals with offences causing death, or grievous hurt, or hurt by a motor vehicle in cases of motor vehicle accidents. Chapter XIII of the M.V. Act is silent about the act of rash and negligent driving resulting in death, or hurt, or grievous hurt, to persons nor does it prescribe any separate punishment for the same; whereas Sections 279, 304 Part II, 304A, 337 and 338 of the IPC have been specifically framed to deal with such offences - It is well settled that an act or an omission can constitute an offence under the IPC and at the same time, be an offence under any other law. The finding of the High Court that the prosecution of offenders under two statutes i.e. the M.V. Act and the IPC, is unsustainable and contrary to law, is therefore, set aside.
A similar issue arose in the case of TS BALIAH VERSUS TS RANGACHARI, INCOME-TAX OFFICER, CENTRAL CIRCLE VI, MADRAS [1968 (12) TMI 1 - SUPREME COURT], wherein the appellant was prosecuted both under Section 177 of the IPC, and Section 52 of the Income Tax Act, 1922. This Court held that the section provides that where an act or omission constitutes an offence under two enactments, the offender may be prosecuted and punished under either or both the enactments but shall not be liable to be punished twice for the same offence.
Similarly, in THE STATE OF MAHARASHTRA VERSUS SAYYED HASSAN SAYYED SUBHAN & ORS. [2018 (9) TMI 1803 - SUPREME COURT], the accused was prosecuted under Sections 26 and 30 of the Food and Safety Standards Act, 2006 as well as Sections 188, 272, 273 and 328 of the IPC for transportation and sale of prohibited gutka/pan masala. The High Court held that Section 55 of the Food and Safety Standards Act, 2006 being a specific provision made in a special enactment, Section 188 of the IPC was inapplicable.
Thus, the legislative intent of the MV Act, and in particular Chapter XIII of the MV Act, was not to override or supersede the provisions of the IPC in so far as convictions of offenders in motor vehicle accidents are concerned. Offences under Chapter XIII of the MV Act, cannot abrogate the applicability of the provisions under Sections 297, 304, 304A, 337 and 338 of the IPC. The offences do not overlap, and therefore, the maxim of “generalia specialibus nonderogant” is inapplicable, and could not have been invoked. The offences prescribed under the IPC are independent of the offences prescribed under the M.V. Act. It cannot be said that prosecution of road traffic/motor vehicle offenders under the IPC would offend Section 5 of the IPC, as held by the High Court, in so far as punishment for offences nder the M.V. Act is concerned.
This Court has time and again emphasised on the need to strictly punish offenders responsible for causing motor vehicle accidents. With rapidly increasing motorisation, India is facing an increasing burden of road traffic injuries and fatalities. The financial loss, emotional and social trauma caused to a family on losing a bread winner, or any other member of the family, or incapacitation of the victim cannot be quantified.
We thus hold that a prosecution, if otherwise maintainable, would lie both under the IPC and the MV Act, since both the statutes operate with full vigour, in their own independent spheres. Even assuming that some of the provisions of the MV Act and IPC are overlapping, it cannot be said that the offences under both the statutes are incompatible.
We set aside the directions issued by the Gauhati High Court to the States of Assam, Nagaland, Meghalaya, Manipur, Tripura, Mizoram and Arunachal Pradesh to issue appropriate instructions to their subordinate officers to prosecute offenders in motor vehicle accidents only under the provisions of the Motor Vehicles Act,1988 and not the IPC - Criminals Appeals are allowed
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