TMI Tax Updates - e-Newsletter
December 12, 2019

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Amendments to Prohibition of Benami Property Transactions Act can be applied against the transactions carried out prior to 1.11.2016 also

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• CENVAT Credit - the moment, inputs are intended to be used as fuel, such inputs go outside the ken of Rule 6(2) and Rule 6(1) applies - SC

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Articles

1. Taxability of warranty services in the hands of the Indian service provider

   By: Shilpi Jain

News

1. Benefit of FTAs to Small Exporters

2. Indian Export Policy

3. National Logistics Policy

4. Tax Exemptions to Startups

5. E-Commerce Business Model

6. Fraud by E - Commerce Companies

Notifications

Customs

1. 45/2019 - dated 10-12-2019 - ADD

Seeks to impose anti-dumping duty on imports of Clear float glass originating in or exported from Pakistan, Saudi Arabia and UAE in pursuance of Final findings of Designated Authority in sunset review of notification No. 48/2014-Customs (ADD) dated 11.12.2014

2. 89/2019 - dated 10-12-2019 - Cus (NT)

Appointing the date for enforcing section 88 (b) of the Finance (No. 2) Act, 2019 to bring out the changes in the First Schedule to the Customs Tariff Act, 1975.

FEMA

3. FEMA 23(R)/(2)/2019-RB - dated 3-12-2019 - FEMA

Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2019

GST - States

4. ERTS (T) 4/2019/490 - 56/2019 - State Tax - dated 14-11-2019 - Meghalaya SGST

Seeks to amend the Meghalaya Goods and Services Tax (Seventh amendment 2019) in the MGST Rules, 2017

5. ERTS (T) 4/2019/453 - 49/2019 - State Tax - dated 9-10-2019 - Meghalaya SGST

Meghalaya Goods and Services Tax (Sixth Amendment) Rules, 2019

6. ERTS (T) 4/2019/452 - 47/2019 - State Tax - dated 9-10-2019 - Meghalaya SGST

Seeks to make filing of annual return under section 44 (1) of SGST Act for F.Y. 2017-18 and 2018-19 optional for small taxpayers whose aggregate turnover is less than ₹ 2 crores and who have not filed the said return before the due date

7. ERTS (T) 4/2019/451 - 46/2019 - State Tax - dated 9-10-2019 - Meghalaya SGST

Seeks to prescribe the due date for furnishing of return in FORM GSTR-1 for registered persons having aggregate turnover more than 1.5 crore rupees for the months of October, 2019 to March, 2020.

8. ERTS (T) 4/2019/450 - 45/2019 - State Tax - dated 9-10-2019 - Meghalaya SGST

Seeks to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the quarters from October, 2019 to March, 2020.

9. ERTS (T) 4/2019/449 - 44/2019 - State Tax - dated 9-10-2019 - Meghalaya SGST

Seeks to prescribe the due date for furnishing of return in FORM GSTR-3B for the months of October, 2019 to March, 2020

10. ERTS (T) 4/2019/425 - 43/2019 - State Tax - dated 30-9-2019 - Meghalaya SGST

Seeks to amend notification No 14/2019- State Tax issued vide No. ERTS(T)4/2019/44, dated 7.3.2019 so as to exclude manufacturers of aerated waters from the purview of composition scheme.

11. ERTS (T) 4/2019/359 - 42/2019 - State Tax - dated 24-9-2019 - Meghalaya SGST

Seeks to bring rules 10, 11, 12 and 26 of the SGST (Fourth Amendment) Rules, 2019 in to force.

12. Order No. 08/2019-State Tax - dated 22-11-2019 - West Bengal SGST

West Bengal Goods and Services Tax (Eighth Removal of Difficulties) Order, 2019

Indian Laws

13. S.O. 4419(E) - dated 10-12-2019 - Indian Law

Central Government appoints the 9 day of January, 2020, as the date on which the provisions of Part I of Chapter IV of the Finance Act, 2019 (7 of 2019), shall come into force

14. G.S.R. 901(E) - dated 10-12-2019 - Indian Law

Indian Stamp (Collection of StampDuty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019

Circulars / Instructions / Orders

SEZ

1. Instruction No.103 - dated 11-12-2019

Clarification on DoC’s Instruction no. 98 regarding review of lease period in case of developer, co-developer and units in Special Economic Zones

SEBI

2. CFD/DIL1/CIR/P/2019/0000000154 - dated 11-12-2019

Filing of Offer Documents under Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018

3. SEBI/HO/IMD/DF2/CIR/P/2019/152 - dated 10-12-2019

Review of investment norms for mutual funds for investment in Debt and Money Market Instruments

Highlights / Catch Notes

GST

• Court Rules Against Denying GST TRAN-1 Credit Due to Upload Errors; Revenue's Inaction Cannot Justify Resistance.

  Case-Laws - HC : Extension of time for filing of GST TRAN-1 - Since Revenue has not acted upon the law whereby CENVAT credit can be denied but is otherwise resisting claim for availing the credit on omission by error on uploaded GST TRAN -1 form, the resistance cannot be sustained.
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• Authorities Order Price Cut or Refund After Rs. 3.45 Crore Profiteering in Flat Sales Investigation.

  Case-Laws - NAPA : Profiteering - purchase of flats in the Respondent’s project - Respondent has profiteered by an amount of ₹ 3,45,22,974/- during the period of investigation. - Direction for reduction in price / refund issued.
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Income Tax

• Benami Property Act 2016: Confiscation Rules Apply to Transactions Before November 1, 2016.

  Case-Laws - HC : Prohibition of Benami Property Transactions Act - Scope of amended Act of 2016 - whether the provisions of the Act of 1988 providing for confiscation of properties found to be 'Benami' could be applied in respect of the transactions carried out prior to 01.11.2016? - Held Yes
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• Taxpayer Contest Over Flat Purchase Below Market Value Deemed Negligible Under Income Tax Act Section 56(2)(vii)(b)(ii.

  Case-Laws - AT : Addition made u/s. 56(2)(vii)(b)(ii) - Purchase of flat below Fair Market value - adequate consideration - the difference between sale consideration shown by the assessee at ₹ 90 lacs and fair market value estimated by the DVO at ₹ 98,40,000/- which was less than 10% and hence, the same is liable to be ignored.
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• High Court Reinstates Penalty u/s 158 BFA (2) of Income Tax Act, Overruling Tribunal's Limitation-Based Decision.

  Case-Laws - AT : Imposition of penalty u/s 158 BFA (2) of the Income Tax Act, 1961 - Period of limitation - HC confirmed the addition by reversing the order of ITAT - AO passed the order dated 3.8.2007 - Penalty order passed as on 15.5.2011, is barred by limitation.
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• Section 153 Explanation: Extension of Limitation Period for AO References to Valuation Officer u/s 142A(1) Only.

  Case-Laws - AT : Validity of assessment - period of limitation - Explanation 1 sub-clause (iv) of section 153 provides an extension from the above two years where the AO makes a reference to the Valuation Officer u/s 142A(1) and does not talk about the extension of time if the reference is made u/s 55A or u/s 50C
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• Taxpayer Not in Default for Using Lower TDS Rate on Payments Exceeding Certificate Limit u/s 197.

  Case-Laws - AT : Short deduction of tax at source over and above the amount specified in the lower TDS certificate - scope of certificate issued u/s 197 - if the assessee continues to deduct tax at the rate specified in the certificate, even, in respect of payment made over and above the sum specified in the certificate, it cannot be treated as assessee in default for short deduction of tax.
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• Payments for Technical Services Without TDS Not Disallowed u/s 40(a)(ia); Penalties Possible for Missing Forms 15CA/15CB.

  Case-Laws - AT : TDS u/s 195 - disallowance u/s 40(a)(ia) - FTS - at the best, for the failure of the assessee for furnishing Form 15CA and 15CB, the Assessing Officer may initiate penalty proceeding u/s 271I - However, there cannot be any disallowance u/s 40(a)(ia) of the Act.
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• Income Tax Officer's Notices Deemed Invalid Due to Jurisdictional Error; ACIT Holds Authority Since May 20, 2011.

  Case-Laws - AT : Jurisdiction of AO - Selection of case for scrutiny - ACIT, Panvel acquired jurisdiction over assessee w.e.f. 20.05.2011, therefore, notices under section 143(2) issued by ITO, Panvel were invalid, leading to the impugned order becoming null & void
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• Section 254(2) of Income Tax Act: Limited Power to Correct Apparent Errors, Not for Reviewing or Revising Decisions.

  Case-Laws - AT : Rectification of mistake - The scope and ambit of the power which could be exercised u/s 254(2) is circumscribed and restricted within the ambit of the power vested by the said section. Such a power is neither a power of review nor is akin to the power of revision but is only a power to rectify a mistake apparent on the face of the record.
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Service Tax

• Rule 7C Justifies Late Fee for Delayed Service Tax Returns, Violating Section 70 of Finance Act.

  Case-Laws - AT : Imposition of late fee under Rule 7C of Service Tax Rules - delay in filing of returns - there is definite violation of above quoted provisions and also of Section 70 of the Finance Act - Rule 7 (C) of Service Tax Rules, 1944 as rightly been invoked which makes an assessee liable to pay late fee due to said violation.
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• Internal Material Movement in Factories Not Subject to Service Tax Under Cargo Handling Services.

  Case-Laws - AT : Classification of services - Material movement of goods within the factory premises do not qualify as cargo and any such handling or shifting of material does not amount to cargo handling and therefore is not chargeable to service tax under Cargo Handling Service
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• Refund Granted for Service Tax on Rail Transport of Spices Classified as Exempt Food Stuffs.

  Case-Laws - AT : Refund of service tax - service tax for transportation of goods by rail paid inadvertently - the ‘food stuff’ could be any substance that is used as food or to make food and therefore, the spices/masale can be termed as ‘food stuffs’ and falls within the exemption notification as aforesaid. - Refund allowed.
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Central Excise

• CENVAT Credit: Fuel Inputs Exempt from Rule 6(2) Restrictions, Allowing Independent Application of Rule 6(1.

  Case-Laws - SC : CENVAT Credit - input - fuel - the exception to sub-rule (1) which is contained in sub-rule (2) itself contains an exception, namely, inputs intended to be used as fuel. This being the case, the moment it is found that inputs are intended to be used as fuel, such inputs go outside the ken of sub-rule (2) of Rule 6. When this happens, the exception contained in sub-rule (2) does not come into effect at all as a result of which sub-rule (1) must be applied on its own terms.
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• CENVAT Credit Rule 6: No Credit for Non-Manufactured By-Products like Bagasse and Pressmud During Production.

  Case-Laws - AT : CENVAT Credit - waste/residue/by-product/ refuse - there has to be a manufacturing activity for invoking the aforesaid Rule - ‘bagasse/pressmud’ which emerges as a waste/by-product, falls outside the scope of Rule 6 ibid.
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VAT

• Continuous Exemption Cycles: Challenges in Tax Administration When Assessee Produces Multiple Goods with Staggered Start Dates.

  Case-Laws - HC : Benefit of exemption - it can become a never ending story if production of different type of goods for which production was commenced by the Assessee is entitled to exemption for different periods of five years from the commencement of production of those products.
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Case Laws:

• GST

• 2019 (12) TMI 463
  Classification of goods - confectionery products like cakes, rusks etc. - whether the products are classifiable under HSN 1601 or HSB 1905? - HELD THAT:- Baked food preparations of flour are classifiable under HSN 1905, which includes bread, pastries, cakes, biscuits and other bakers wares . Explanatory Notes to HSN, Third Edition, published by the World Customs Organization (hereinafter EN) clarifies that the heading 1905 includes all bakers wares. Any food preparation that involves baking as the method of cooking should, therefore, be included under HSN 1905. EN further elaborates on the commonly used ingredients of such products. They include inter alia flour and meat - Food preparations, containing more than 20% by weight of sausage, meat, meat offal, fish etc. are included in Chapter 16 (Chapter Note 2 to Chapter 16). According to Chapter Note 2 to Chapter 16 and EN, Chapter 16 the weight of meat to be considered at the stage when it is presented to the customer as foodstuff and not at the ingredient level before preparation of the food. In the present context, the products that survive as bakers wares if the chicken meat is removed cannot be labelled food preparations based on meat. Chicken meat is used as a filling in most of the products where bread or baked flour is used as the base. It appears from the description of cooking annexed to the Application that bread or other baked product, prepared from dough of flour, and the filling containing chicken meat are cooked separately. The baked products (sandwich, puff, patty, burger etc.) as distinct food preparations will survive even if the chicken meat is excluded from the filling. They are, therefore, not food preparations based on chicken meat. Such bakers wares cannot, therefore, be classified under HSN 1601. Chicken meat is used as a filling in most of the above products where bread or baked flour is used as the base. The baked product (sandwich, puff, patty, burger etc.) as distinct food preparations will survive even if the chicken meat is excluded from the filling. They are, therefore, not food preparations based on chicken meat. Such bakers wares cannot, therefore, be classified under HSN 1601 - A few of the Applicant s products would not survive as food preparation if the chicken meat were removed. Such products may be classified under HSN 1601, provided they contain more than 20% by weight of meat.

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• 2019 (12) TMI 462
  Extension of time for filing of GST TRAN 1 - vires of rule 117 in Central Goods and Service Tax Rules, 2017 and rule 117 in West Bengal GST Rules, 2017 - transition to GST regime - HELD THAT:- Section 140 in CGST Act, 2017 requires a condition precedent to be fulfilled for being entitled to take amount of CENVAT credit of eligible duties carried forward as mentioned in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such a manner as may be prescribed. Inserted by notification 3rd proviso in sub-rule (2) of rule 7, Service Tax Rules, 1994 required return for the period from 1st April, 2017 to 30th June, 2017 to be submitted by 15th August, 2017. Also inserted by notification rule 7B carries proviso that revised return for period from 1st April, 2017 to 30th June, 2017 shall be submitted within a period of 45 days from the date of submission of the return under rule 7. Notification dated 9th October, 2019 on extension of time to file GST TRAN 1 form till 31st December, 2019, vires challenge is not pressed by Mr. Raghavan - the petitioner stands entitled to file revised GST TRAN 1 form up to 31st December, 2019. Since Revenue has not acted upon the law whereby CENVAT credit can be denied but is otherwise resisting claim for availing the credit on omission by error on uploaded GST TRAN -1 form, the resistance cannot be sustained. Petition disposed off.

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• 2019 (12) TMI 461
  Profiteering - purchase of flats in the Respondent s project - allegation that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in price after implementation of GST w.e.f. 01.07.2017 and had charged GST on the pre-GST full amount of instalments - contravention of provisions of Section 171 of the of the CGST Act, 2017. HELD THAT:- It was established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 had been contravened by the Respondent as he had profiteered an amount of Rs. 3.45,22.974/- which includes GST @12% as applicable on the base profiteered amount of Rs. 3,08,24,084/- from the 243 residential units for the period w.e.f. 01.07.2017 to 31,10.2018 as per Annexure- 15 of the Report Accordingly, the above amounts shall be paid to the above Applicants and the other eligible house buyers by the Respondent along with interest @18% from the date from which these amounts were realized from him till he was paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which shall be recovered by the concerned Commissioner CGST/SGST and paid to the eligible house buyers. It is clear that the Respondent has profiteered by an amount of Rs. 3,45,22,974/- during the period of investigation. Therefore, in view of the facts, the Authority under Rule 133 (3) (a) of the CGST Rules, 2017, orders that the Respondent shall reduce/refund the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. As far as the final computation of the additional ITC that will be available to the Respondent is concerned, the same cannot be determined at this stage, as the construction of the project is yet to be completed - any additional benefit of ITC, which may accrue to the Respondent subsequently, shall also be passed on by him to all eligible buyers. In case this additional benefit is not passed on to the Applicant No. 1 to 10 or other eligible buyers, they shall be at liberty to approach the Andhra Pradesh State Level Screening Committee for initiating fresh proceedings under the provisions of Section 171 of the above Act against the Respondent. The concerned jurisdictional CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC was passed on to the eligible house buyers in future. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the Section - SCN be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off.

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• Income Tax

• 2019 (12) TMI 460
  Settlement Commission disposing of the proceedings as having abated - petitioners had taken a stand that the abatement proceedings are not valid and cannot apply so harshly as to terminate their proceedings for no fault of theirs - HELD THAT:- While allowing the Special Civil Applications, the High Court had revived the proceedings and directed the Settlement Commission to dispose of the proceedings in accordance with law. Having considered the entirety of the matter, in our view, no reason is made out to interfere. We, therefore, dismiss the special leave petitions leaving all the questions of law open to be agitated and considered in the pending matter. Pending applications, if any, stand disposed of accordingly.

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• 2019 (12) TMI 459
  Addition u/s 40(a) - payment made to a party residing outside India towards interest etc - HELD THAT:- In the present case, the assessee had the specific exemption from the Ministry of Finance and therefore, was entitled not to deduct any tax at source from the interest payment made by it to M/s. London Forfaiting Asia Ltd., from which assessee took the Foreign Currency Loan in question and therefore, Section 40(a) of the Act could not attract to the present case at all. Even though the foreign currency loan in question was utilised by the assessee to repay the loan of one M/s.Raghava Enterprises P. Limited, which was admittedly taken from M/s. Raghava Enterprises Limited towards its working capital requirement, the purpose of Section 10(15)(f) of the Act, for the industrial development stood satisfied in the present case. The words in the said provision quoted above are not for industrial development , but the words having regard to the need for industrial development in India , which are wider in nature. These words employed in Section 10(15)(f) are wide enough to cover within its ambit and scope even the indirect utilisation of the funds for industrial development in India. Therefore, even if the loan taken as working capital loan from M/s. Raghava Enterprises Limited earlier and employed by the assessee for such industrial development and the foreign currency loan in question was utilised to repay the loan to M/s. Raghava Enterprises Private Limited, the exemption given by the Ministry of Finance in favour of the Assessee cannot be said to have been lost by such facts. It is not the case of the Revenue before us, that the exemption given to the assessee vide Letter dated 23.09.1997 stood revoked or withdrawn on any such contingency at any point of time. Assessee was entitled to exemption and was under no obligation to deduct any tax at source on such interest payment made on Foreign Currency Loan to M/s. London Forfaiting Asia Ltd., Therefore, the additions with reference to Section 40(a) made in the name of the Assessee, were rightly deleted by the two appellate authorities in the present case.

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• 2019 (12) TMI 458
  Deduction u/s 80IA - initial assessment year - HELD THAT:- Sub-Section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that Sub-Section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. The term initial assessment year would mean the first year opted for by the assessee for claiming deduction u/s 80IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. AO are, therefore, directed to allow deduction u/s 80IA in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80IA shall also not be pursued to the extent it relates to interpreting initial assessment year as mentioned in Sub-Section (5) of that section for which the Standing Counsel/DRs be suitably instructed. The above be brought to the notice of all Assessing Officers concerned.

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• 2019 (12) TMI 456
  TP Adjustment - determination of the ALP under the machinery of computation under the methods as given in Rule 10B - definition of `transaction as given in rule 10A(d) - whether the transactions of the assessee in Production and Distribution segments can be construed as closely linked transactions ? - HELD THAT:- Transactions of Production and Distribution segments cannot be clubbed because it is neither a case of package deal nor the two sets of transactions are structured in such a manner that the assessee has no option to accept one and reject the other nor they are so inextricably linked that one cannot survive without other. In fact, in all the earlier years, the assessee was exclusively in the trading of components and the manufacturing activity started at the fag end of the preceding year only. Instantly, we are dealing with a situation in which the assessee is trying to club the transaction of Production of finished goods with Trading of spare parts, which is a step further away from technical know-how in the process of manufacturing. In view of the foregoing discussion, it is held that the authorities below were fully justified in holding that the Manufacturing segment cannot be aggregated with the Distribution segment and both need to be benchmarked independent of each other. We, therefore, accord our imprimatur to the view canvassed by the TPO in rejecting the aggregation approach adopted by the assessee. Once it is held that the international transaction of the Production segment is required to be benchmarked separately, then the next question is the determination of the ALP. The ld. AR candidly admitted that if the aggregation is not to be done, then there is no flaw in the computation of the ALP and the consequential transfer pricing addition in the final assessment order. We, therefore, uphold the transfer pricing addition in the international transaction of Production segment.

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• 2019 (12) TMI 455
  Reopening of assessment - Exemption u/s 10(38) - sale of Long term shares - AO held that the assessee had manipulated the sale of shares within a short span of time in collusion with the borkers in order to earn tax free exempt LTCG and the assessee has not proved the genuiness of transactions - HELD THAT:- Since, the assessee has taken a plea that the reasons recorded for reopening is not given to the assessee, we restore the matter to the Assessing Officer to intimate the reasons for reopening the assessment and thereafter comply in accordance with the Hon ble Supreme Court s decision in the case of GKN DRIVESHAFTS (INDIA) LTD. VERSUS INCOME-TAX OFFICER AND OTHERS [ 2002 (11) TMI 7 - SUPREME COURT] . The Assessing Officer shall require the assessee to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. The assessee shall comply with the Assessing Officer s requirements as per law - the assessee s appeal is treated as partly allowed for statistical purposes.

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• 2019 (12) TMI 454
  Addition on account of shortage in margin money - assessee has to pay margin money @ 7% of the value of transactions as per trading rules. - AO worked out peak credit of trading activity - Ld CIT(A) took the view that the AO was not correct in allowing deduction of Rs. 19,03,141/- against the margin money deposit computed on peak credit - Accordingly he directed the AO to enhance the addition. HELD THAT:- The assessee did not produce any document/evidence to show that he did not make any margin money deposit as computed by the AO. The assessee has furnished Ledger account copy in the name of the assessee as available in the books of M/s Prasiddhi Multi Commodities - it cannot be comprehended that why the assessee could not procure a certificate from the broker with regard to the query raised by the AO. The enhancement made by Ld CIT(A) is not justified, as the reasoning/basis of enhancement was only presumption entertained by the ld CIT(A) - the enhancement made by Ld CIT(A) is deleted - However, since the assessee has failed to furnish any material/evidence to controvert the addition made by the AO in the assessment order, the Ld CIT(A) was justified in confirming the said addition. Appeal of assessee allowed in part.

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• 2019 (12) TMI 453
  Rectification u/s 154 - Deduction u/s 80P(2)(d) - assessment order passed u/s 143(3) - HELD THAT:- The assessee challenged the rectification petition filed by the assessee by filing appeal before CIT(A). With regard to the first mistake stated as item (a) in the preceding paragraph, the first appellate authority directed the AO to rectify the mistake regarding the quantum of addition made in the computation of statement. With regard to the second mistake stated as item (b) in the preceding paragraph, the Ld CIT(A) held that the same is debatable in nature and hence the same would fall outside purview of sec.154 of the Act. Accordingly, the Ld CIT(A) allowed the appeal of the assessee in part. The assessee is aggrieved by the decision rendered by Ld CIT(A) on the second issue. It is pertinent to note that the assessee did not prefer separate appeal against the original assessment order passed u/s 143(3) - A.R appearing before me submitted that the grounds of appeal raised before Ld CIT(A) were related to both the orders passed u/s 143(3) as well as u/s 154 of the Act. As noticed earlier, the Ld CIT(A) has considered only the order passed by the AO u/s 154 of the Act. Accordingly he has directed the AO to rectify the mistake with regard to the quantum of addition. With regard to the claim for deduction u/s 80P(2)(d) of the Act, the Ld CIT(A) has held that the said claim is debatable in nature. There is no infirmity in the order passed by Ld CIT(A), as the second issue is debatable in nature and hence the same would fall outside the purview of sec.154 of the Act. Accordingly, I confirm the order passed by Ld CIT(A) - Appeal of the assessee is dismissed.

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• 2019 (12) TMI 452
  Eligibility of deduction u/s 80P - CIT(A) passed order u/s 154 wherein the claim of deduction u/s 80P of the I.T.Act was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2016 (4) TMI 826 - KERALA HIGH COURT] - HELD THAT:- Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. In view of the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. AO shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Cooperative Banks and other Banks , the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business instead of `income from other sources . However, as regards the grant of deduction u/s 80P on such interest income, the Assessing Officer shall follow the law laid down in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. It is ordered accordingly.

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• 2019 (12) TMI 451
  Addition made u/s. 56(2)(vii)(b)(ii) - Purchase of flat below Fair Market value - adequate consideration - Addition on account of difference of margin between the value as given by the assessee and the Departmental Valuer - HELD THAT:- From the facts, it is apparent that the assessee has disputed the addition to be made as mentioned in the show cause notice issued by the AO u/s. 56(2)(vii)(b) of the Act by stating that the purchase consideration paid by her was as per prevailing market rate at that time. However, the AO has not referred the matter to the DVO for the determination of the fair market value of the flat purchased as required under the relevant provisions of the Act. Accordingly the AO has been directed during the appellate proceedings to make such reference to the DVO to meet the principle of natural justice. The DVO, after considering the objections of the assessee and other evidences produced before him by the assessee, has determined the fair market value of the said flat at Rs. 98,40,000/-. Ld. CIT(A) has observed that there was no justification for further altering the FMV determined by the DVO and further objections raised by the assessee were rejected. Accordingly under the facts of the case the addition made by the AO was confirmed to the extent of Rs. 8,40,000/- and the balance addition was deleted by the Ld. CIT(A) against which the assessee is in appeal before the Tribunal. In the case of Rahul Constructions vs. DCIT [ 2012 (1) TMI 229 - ITAT PUNE ] passed in ITA No. 1543/Pn/2007 (AY 2004-05) wherein the Tribunal has adjudicated and decided the similar issue in favour of the assessee, where it was held that the margin between the value as given by the assessee and the Departmental Valuer was less than 10 percent and the difference is liable to be ignored and the addition made by the lower authorities on this count cannot be sustained and accordingly, the same was deleted. In the case in hand, the difference between sale consideration shown by the assessee at Rs. 90 lacs and fair market value estimated by the DVO at Rs. 98,40,000/- which was less than 10% and hence, the same is liable to be ignored and, therefore, the addition confirmed by the Ld. CIT(A) is not tenable and needs to be deleted - the addition in dispute is hereby deleted. Appeal of the assessee allowed in part.

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• 2019 (12) TMI 450
  Bogus purchase - CIT- A restricting the disallowance to 5% of the purchases as against entire purchases disallowed as non-genuine - HELD THAT:- On a careful perusal of the order of the Ld.CIT(A) and the reasons given therein, we do not find any infirmity in the order passed by the Ld.CIT(A). None of the findings and observations of the Ld.CIT(A) have been rebutted with evidences by the revenue and thus we do not see any infirmity in the order passed by the Ld.CIT(A) in sustaining the addition/disallowance to the extent of 5% of the purchases for the A.Y.2009-10 A.Y. 2010-11. Grounds raised by the Revenue are dismissed.

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• 2019 (12) TMI 449
  Bogus purchases - NP @5% of the turnover, as per the provisions of section 44AF - HELD THAT:- None of the findings and observations of the Ld.CIT(A) have been rebutted with evidences by the revenue and thus we do not see any infirmity in the order passed by the Ld.CIT(A) in restricting the disallowance to the extent of 5% of the Net Profit purchases. Grounds raised by the revenue are dismissed.

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• 2019 (12) TMI 448
  Revision u/s 263 - addition on account of surrender by the assessee its claim of exemption u/s 10(38) - A.O. only disallowed the exemption claimed u/s 10(38) but did not treat income from other sources as undisclosed income u/s 68 and chargeable to tax u/s 115BBE - Pr. CIT, the investment made in the transaction would have been taxed as unexplained investment, which was required to be added u/s 68 of the Act and chargeable to tax u/s 115BBE - HELD THAT:- The law is well settled that power conferred u/s 263 can be exercised where the order is erroneous, so far it is prejudicial to the interest of the revenue. Therefore, there has to be satisfaction of two conditions, firstly, the assessment order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the revenue. In the present case, Pr. CIT revised assessment on the ground that the A.O. has not carried out any investigation regarding the transactions of sale and purchase of shares of company namely M/s. Turba Tek Engineers. The case of the assessee that the transaction is effected through stock exchange, all related evidences have been filed. There is no adverse material regarding transactions carried out by the assessee. There is no specific finding/statement of any third party against the assessee. It is also stated that name of the assessee nowhere figures in any of the statement. Under these facts, Ld. Pr. CIT was not justified in invoking the provisions of section 263. Since the A.O. has treated the transaction as long term capital gain, therefore, in light of the judgement of DG HOUSING PROJECTS LTD [ 2012 (3) TMI 227 - DELHI HIGH COURT] Pr. CIT should have brought some material rebutting the view adopted by the A.O., which has not been done. The issue is simply restored to the A.O. for making enquiry. For this reason, action of the CIT cannot be sustained. Hence, grounds raised in the appeal are allowed. The impugned order is quashed. Appeal filed by the assessee is allowed.

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• 2019 (12) TMI 447
  Penalty u/s 271(1)(c) - whether the penalty proceedings was initiated for furnishing of inaccurate particulars of income or concealment of income ? - Defective notice - HELD THAT:- Bare perusal of the notices issued u/s 274 read with section 271(1)(c) of the Act, extracted above, in order to initiate the penalty proceedings against the assessee go to prove that the AO himself was not aware / sure as to whether he is issuing notice to initiate the penalty proceedings either for concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee rather issued vague and ambiguous notice by incorporating both the limbs of section 271(1)(c). When the charge is to be framed against any person so as to move the penal provisions against him/her, he/she is required to be specifically made aware of the charges to be leveled against him/her. Following the decisions rendered in the cases of CIT vs. Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] , CIT vs. SSA s Emerala Meadows [ 2016 (8) TMI 1145 - SC ORDER] and Pr. CIT vs. Sahara India Life Insurance Company Ltd [ 2019 (8) TMI 409 - DELHI HIGH COURT] we are of the considered view that when the notices issued by the AO are bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. - Decided in favour of assessee.

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• 2019 (12) TMI 446
  Revision u/s 263 - Treatment of receipts from NRDA - Capital receipt or revenue receipt - HELD THAT:- Enquiries were made by the AO during the course of the assessment proceedings. The first query letter dated 21.04.2015 contained 47 points and the said query letter is placed. A detailed reply was filed vide reply dated 01.07.2015 and the same is placed. The second query letter is dated 21.09.2015 which is placed at page 364 of the PB and the reply has placed at page 361 of the PB dated 08.10.2015 in which the assessee specifically explained the treatment of receipts from NRDA and pointed out that the nature of receipts has already been explained in not on business activities. By another reply dated 30.10.2015 which is placed assessee explained that the financial assistance received from NRDA is in the nature of capital receipt and cannot be considered as Revenue receipt. It was specifically explained that financial assistance if received for creation of an asset is not taxable being capital receipt. It was pointed out that any receipt which is intrinsically connected with construction of assessee s plant would be capital receipt. A further reply was filed on 19.02.2016 giving the details of capital work in progress and treatment of amounts received from NRDA this reply is placed at pages 299 to 302 of the PB. Considering these plethora of evidences it cannot be said that no enquiry was made by the AO during the course of the assessment proceedings. There remains nothing for the PCIT to assume jurisdiction u/s 263 of the Act to say that assessment order is not only erroneous but prejudicial to the interest of the Revenue. We are of the considered view that the PCIT has wrongly assumed the jurisdiction u/s 263 of the Act. Hence, his order for both the assessment years under consideration deserves to be set aside. We, accordingly, set aside the order of the PCIT and restore that of the AO. - Decided in favour of assessee.

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• 2019 (12) TMI 445
  Penalty u/s 271(1)(c) - non-striking off of the irrelevant clause in the notice - addition u/s 68 being sum of money introduced in foreign bank account in HSBC Bank, Geneva - HELD THAT:- Hon ble Supreme Court in the case of Dilip N. Shroff [ 2007 (5) TMI 198 - SUPREME COURT] the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present case, considering the observations of the Assessing Officer in the assessment order alongside his action of non-striking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of non-application of mind - Decided in favour of assessee.

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• 2019 (12) TMI 444
  Imposition of penalty u/s 158 BFA (2) of the Income Tax Act, 1961 - Period of limitation - HC confirmed the addition by reversing the order of ITAT - HELD THAT:- Assessment order under section 158BC(c) read with section 158BD of the Act was passed by the learned Assessing Officer on 10/6/2002; that the Ld. CIT(A) confirmed the additions made by the learned Assessing Officer by order dated 14/11/2002; that the Tribunal reversed the orders of the 1st appellate authority and a deleted the additions made by the learned Assessing Officer by order dated 03/08/2007; that the Hon ble High Court restored the additions made by the learned Assessing Officer while reversing the order of the Tribunal, by order dated 29/11/2010; and that the impugned penalty order under section 158BFA(2) of the Act was passed by the learned Assessing Officer on 15/5/2011. Facts narrated above are identical to the facts involved in the case of Cellphone Credit [2019 (5) TMI 1500 - ITAT DELHI] and Intel Invofin (supra) wherein the Tribunal while placing reliance on the decision in the case of Aravind Kumar Jain (supra) held that the penalty order that was passed on 19/5/2011 as against the order of the Tribunal on 12/10/2006 was barred by limitation in terms of provisions under section 158BFA(3)(c) of the Act. The penalty levied by the learned Assessing Officer under section 158BFA(2) of the Act cannot be sustained because the assessee does not seem to have any intention to conceal the capital gain further the purpose of taxation and in fact had disclosed such investment in its financial statements and also had filed the return of income, of course with some delay - the levy of penalty is not automatic. Penalty do not sustain and is deleted - appeal of assessee allowed.

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• 2019 (12) TMI 443
  Validity of assessment - assessment order passed under section 143(3) - period of limitation - provision u/s 153(1) for extension of time limit to cover the time taken for obtaining the valuation report u/s 50C(2) - reference has been made under section 55A - HELD THAT:- Assessment has to be completed within two years from the end of the assessment year in which the income was first assessable or one year from the end of the financial year in which return or revised return related to the assessment year commencing on first day of April, 1980 or any earlier assessment year is filed under sub- section (4) or sub-section (5) of section 139 whichever is later. Explanation 1 sub-clause (iv) of section 153 provides an extension from the above two years where the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and does not talk about the extension of time if the reference is made under section 55A or section 50C of the Act. Therefore, in the present case the assessment order was to be passed on or before March 31, 2016 whereas the same has been passed on May 19, 2016 and therefore, the assessment order is barred by limitation and hence, the grounds of appeal of the assessee are accepted. In a nutshell the appeal of the assessee is allowed.

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• 2019 (12) TMI 442
  Short deduction of tax at source over and above the amount specified in the lower TDS certificate - scope of certificate issued u/s 197 - interest levied on such amount u/s 201(1A) of the Act - Whether for deducting tax at lower rate on the payments exceeding the amounts specified in the certificates issued in form no.13, r/w section 197(2) and rule 28AA, the assessee can be treated as assessee in default for short deduction of tax? - HELD THAT:- There is no dispute that in terms with section 197(2) of the Act r/w rule 28AA, the Assessing Officer had issued certificates in respect of three parties permitting deduction of tax at source at lower rate. It is a fact on record, in these certificates issued in Form no.13, the Assessing Officer has specified the payment which is subject to deduction of tax at lower rate - Admittedly, the assessee has deducted tax at the rates specified in the certificates issued in Form no.13, for the entire payment made to the concerned parties during the year under consideration even in respect of payments made in excess of amount specified in Form no.13. The specific contention of the assessee is, as per section 197 of the Act, the certificate to be issued by the Assessing Officer under sub section (2) is person specific and not income specific - It is observed, the Tribunal, Kolkata Bench, in M/S. TWENTY FIRST CENTURY SECURITIES LTD. VERSUS I.T.O. WARD-59 (4) (TDS) KOLKATA [ 2017 (2) TMI 509 - ITAT KOLKATA] , after interpreting the provisions of section 197 of the Act as well as rule 28AA has held that neither under section 197 of the Act nor in rule 28AA, there is reference to any income to be specified in the certificate to be issued for deduction of tax at lower rate. The Tribunal has held that the statutory provisions providing for deduction of tax at source at lower rate is person specific and cannot be extended to the amounts specified by the recipients of the payment while making application for grant of certificate in Form no.13, in terms of section 197 of the Act. Thus, the Tribunal has ultimately held that in such circumstances, if the assessee continues to deduct tax at the rate specified in the certificate, even, in respect of payment made over and above the sum specified in the certificate, it cannot be treated as assessee in default for short deduction of tax. The assessee cannot be treated as assessee in default for short deduction of tax - Appeal allowed.

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• 2019 (12) TMI 441
  TDS u/s 195 - disallowance u/s 40(a)(ia) - fees for technical services - failure of the assessee to file certificates in Form 15CA and 15CB - as per assessee no technology involved, the provisions of Section 9(1)(vii) would not apply to the above said services - HELD THAT:- CIT(Appeals), after examining the services rendered by the non-residents, found that the non-residents who rendered services do not have any permanent establishment in India. CIT(Appeals) also found that there was no business connection within the meaning of Section 9(1)(i). Therefore, the CIT(Appeals) found that Section 9(1)(i) of the Act has no application to this case and payments received by the non-residents cannot be assessed as their business income in India under Section 9(1)(i) CIT(Appeals) is not correct in saying that the services rendered by the non-residents are technical services. Since the services rendered are not technical services, this Tribunal is of the considered opinion that the payment received by the non-residents from the assessee is not taxable in India. In IMP Power Ltd. [ 2006 (1) TMI 171 - ITAT BOMBAY-E] found that even legal fees paid in U.K. is not taxable in India. Hence, there cannot be any disallowance. Therefore, the assessee is not liable to deduct tax as required under Section 195. The Apex Court has also examined this issue in Transmission Corporation of A.P. Ltd. v. CIT [ 1999 (8) TMI 2 - SUPREME COURT] and found that when the payment made to non-resident is not taxable in India, it is not necessary to deduct tax under Section 195 of the Act. Therefore, there cannot be any disallowance under Section 40(a)(ia) of the Act We are unable to uphold the orders of the CIT(Appeals) in respect of the payment made to non-residents who are in USA and UK. In respect of payments made to non-residents at Germany and Spain, we confirm the order of the AO not on the ground on which the CIT(Appeals) deleted the disallowance but on the ground that such payments made by the assessee to non-residents at Germany and Spain are not liable for taxation in India. In other words, the non-residents in Germany and Spain also not rendered any technical service. Hence, the assessee is not required to deduct tax under Section 195 of the Act. Assessee has not filed certificates in Form 15CA and 15CB as required - We have carefully gone through the provisions of Section 195 of the Act. Section 195(6) of the Act says that the person responsible for paying to a non-resident any sum whether or not chargeable under the provisions of Income-tax Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed. Rule 37BB of the Income-tax Rules provides for furnishing such information in Form 15CA and 15CB. Sub-section (6) of Section 195 of the Act does not require the assessee to deduct tax. What is required is furnishing information in the specified form, namely, Form 15CA and 15CB. However, subsection (1) of Section 195 of the Act requires the assessee to deduct tax at the time of credit of such income to the account of the payee. The Apex Court in Transmission Corporation of A.P. Ltd. [ 1999 (8) TMI 2 - SUPREME COURT] examined this issue and while interpreting Section 195(1) of the Act held that the taxpayer in India is liable to deduct tax in case the payment made to non-resident is liable for taxation in India. Therefore, the assessee is required to deduct tax under Section 195(1) of the Act. Provided the non-resident recipient is liable to pay tax. The violation of Section 195(6) of the Act and failure to file certificates in Form 15CA and 15CB is punishable separately under Section 271I of the Act. Therefore, at the best, for the failure of the assessee for furnishing Form 15CA and 15CB, the Assessing Officer may initiate penalty proceeding under Section 271I of the Act. However, there cannot be any disallowance under Section 40(a)(ia) of the Act. In other words, Section 195(6) of the Act, which requires the assessee to furnish information, does not require the assessee to deduct tax at the time of payment. Therefore, the question of disallowance under Section 40(a)(ia) of the Act does not arise for consideration. Payment made to the non-residents at UK, USA, Germany and Spain cannot be disallowed. Accordingly, the order of the CIT(Appeals) in respect of payment made to the non-residents at USA and UK is set aside and the disallowance made by the Assessing Officer is deleted.

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• 2019 (12) TMI 440
  TP Adjustment - TPO in determining the Arm s Length Price (ALP) in respect of payment for E-Connectivity services availed by the assessee from its Associated Enterprises (AE) at NIL - HELD THAT:- Whole purpose of having a centralized IT-set up within the group was to avoid duplication of efforts and to make the arrangement administratively convenient and cost effective. Accordingly, we hold that the said services are such that an independent enterprise in comparable uncontrolled circumstances would have been willing to pay for the activity if performed for it by an independent enterprise. We find that the cost has been allocated by the AE to the Indian entity (i.e assessee herein) by applying Indirect Charge Method based on the Usage. AR stated that each DSM group entity availing the services from the AE will give the AE the projected number of users for each service and based on that the AE will determine the per user cost. The total cost is accumulated with respect to each service and per user cost is calculated by dividing the total cost by number of budgeted users. The invoices raised by the AE on the assessee in this regard also goes to prove that the same are on cost to cost without any mark up. All these facts are confirmed by the AE vide separate letter dated 21.10.2014 filed before the lower authorities. Payment of e-connectivity charges forms part of the cost base (i.e operating cost in both marketing support services and distribution activity) and the entire operating costs had been recovered with arm s length margin from the AE. Hence there is no reason to determine the ALP of the said international transaction at NIL by the ld TPO which has been wrongly upheld by the DRP. TPO had determined the ALP of payment for e-connectivity charges at NIL without resorting to any of the methods prescribed in the statute. Once a reference is received by the TPO u/s.92CA(1) from the ld. AO, TPO is required to determine the ALP of the international transaction as per the provisions contained in Section 92C and 92CA read with relevant rules thereon. From the conjoint reading of the relevant sections and the relevant rules, we find that the duty of the ld. TPO is restricted only to the determination of the arm s length price of an international transaction between two related parties by applying any of the methods prescribed u/s.92C read with rule 10B of the rules. Thus, there is no provision made in the statute empowering TPO for determining the ALP on a particular international transaction at NIL without resorting to any of the methods prescribed. TPO in determining the ALP of payment for e-connectivity charges at NIL without resorting to any of the methods prescribed under the statute deserves to be dismissed. We have no hesitation in directing the TPO/ ld AO to accept the claim of payment for e-connectivity charges in the sum to be at Arm s Length. Accordingly, the grounds raised by the assessee are allowed.

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• 2019 (12) TMI 439
  Revision u/s 263 - HELD THAT:- AO was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. AO is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. AO should protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. AO is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the AO becomes erroneous when an enquiry has not been made before accepting the genuineness of the claim which resulted in loss of revenue. In the present case, the main object of the assessee is to offer relief to the poor. However, the assessee is running kuri business. Hence, it is a profit making activity and not incidental to the attainment of the objects of the Trust. By applying income from kuri business for charitable purposes, the assessee cannot say that its prime object is to give relief to the poor. In our opinion, the CIT(E) is justified in setting aside the assessment order as erroneous and prejudicial to the interests of the Revenue with a direction to the Assessing Officer to redo the same after giving sufficient opportunity of being heard to the assessee. Appeals of the assessee is dismissed.

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• 2019 (12) TMI 438
  Jurisdiction of AO - Selection of case for scrutiny - Validity of assessment and challenging the notice issued u/s 143(2) - Jurisdiction as transferred u/s 127 of Act before CIT-Central Circle-Thane - HELD THAT:- In accordance with said transfer order, the DCIT-CC- Thane initiated assessment proceedings for AY 2008-09. However, subsequently ITO Ward-2, Panvel initiated assessment proceedings for AY 2009-10 before obtaining an order u/s 127 of the Act decentralizing the change of the assessee. Delhi High Court in the case of Valvoline Cuminus Ltd vs DCIT [ 2008 (5) TMI 20 - HIGH COURT OF DELHI] to submit that once the proper officer exercised the jurisdiction, the subsequent notice by an officer not so authorized is invalid. We are of the view that notice issued under section 143(2) of the Act is without jurisdiction. As regards to the one argument of the DR that the returned filed by the assessee was with ITO Ward-2, Panvel is of no consequence because under e-filing system for filing of return, the automatic return will go to the territorial ITO of the assessee and not to the proper jurisdiction where the case is transferred under section 127. Hence, this argument will not stand. This issue of the assessee s appeal is allowed. Once, the issue on jurisdiction is decided in favour of assessee and notice under section 143(2) is quashed, consequential assessment will not stand. Hence, we quash the assessment order and allow the appeal of the assessee. Notice issued u/s 143(2) as without jurisdiction and void ab-initio - HELD THAT:- An order under section 127(2) of the Act was passed on 09/05/2011 by office of Commissioner of Income Tax-(Central), Pune Transferring jurisdiction of the appellant s case from DCIT, CC-1, Thane to ITO ward 2, Panvel, whereas the ITO ward 2, Panvel had issued notice u/s 143(2) much earlier on 20.08.2010 and 27.09.2010 i.e. even before the transfer order is passed. Therefore, said notices were without jurisdiction. Further, it was pointed out that at the same point of time, assessee received notice under section 143(2) of the Act from the Central Circle, Thane for AY 2008-09. The notice for AY 2008-09 were issued in accordance with jurisdiction vested due to centralization of the assessee s case. This tantamount to concurrent jurisdiction which is impressible under law. Thus, the notice for AY 2009-10 were invalid. We noted the facts that on a combined reading of notice and order under section 127 of the Act it is clear that ACIT, Panvel acquired jurisdiction over assessee w.e.f. 20.05.2011, therefore, notices under section 143(2) issued by ITO, Panvel were invalid, leading to the impugned order becoming null void. On the issue of applicability of section 124(3) similar are the arguments as in AY 2009-10, which we have decided in favour of the assessee above. Hence, this assessment is also bad in law and declared as null and void.

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• 2019 (12) TMI 437
  Rectification of mistake - error apparent on the face of record - time limit for making such rectification - disallowance u/s 40A(3) of the Act - HELD THAT:- From the provisions of Sec.254(2) it is clear that Tribunal may at any time within six months from the end of the month, in which the order was passed, with a view to rectify any mistake apparent from the record, amend any order passed by it and shall make such amendment in appropriate cases. Further, makes it amply clear that a mistake apparent from the record is rectifiable. In order to attract the application of section 254(2), a mistake must exist and the same must be apparent from the record. The scope for rectification of the order is very limited and depends upon the mistake apparent from record. The Tribunal can only rectify its mistakes apparent from the record and the provision of rectification does not permit the Tribunal to review its earlier order. There is wide difference between rectification and review. Rectification implies correction of error and removal of defect or imperfection and while exercising power rectification, the court can not exercise the power of review or revision - The scope and ambit of the power which could be exercised under section 254(2) of the Income Tax Act 1961 is circumscribed and restricted within the ambit of the power vested by the said section. Such a power is neither a power of review nor is akin to the power of revision but is only a power to rectify a mistake apparent on the face of the record. Rectification implies the correction of an error or a removal of defects or imperfections. It implies an error, mistake or defect which after rectification is made right. Error apparent on the face of record exists or not - HELD THAT:- In the present case, there are no infirmity, impropriety and illegality in the order passed by the Ld. CIT(A), therefore, it does not require to be interfered with. It is trite to say that mistake must be apparent from record, which in the instant case does not appear - Appeal of Revenue dismissed.

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• 2019 (12) TMI 436
  Addition u/s 40A(3) - expenditure in excess of Rs. 20,000/- are paid in cash - HELD THAT:- Considering Rule 6DD(e)(i) of the Income Tax Rules, 1962, and when the payment was made by cash exceeding Rs. 20,000/-, it was permissible if the same was paid for purchase of agricultural produces. If there are entries in the books of accounts and payment is shown to have been made to farmers and when receipts were also produced but the assessee could not produce the farmers/list of farmers for which a reasonable explanation was also given, no addition could be made u/s.40A(3) of the Act. Respectfully following the aforesaid decision, we hold that the disallowance made u/s.40A(3) of the Act deserves to be deleted and the same is hereby deleted. Disallowance of interest expenses u/s.36(1)(iii) - assessee submitted that he has utilised part of the loan amounts for speculative and share trading business but a major part is used for his other business particulars like maize trading, and liquor retails - HELD THAT:- The issue raised by the Assessee with regard to borrowed funds not having been used for speculative business and the fact that there was income from speculative business and therefore even otherwise the deduction should have been allowed while computing income from speculation business, has not been considered by CIT(A) and since facts need to be examined in this regard, the matter should be remanded to the AO. We direct accordingly.

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• 2019 (12) TMI 435
  Addition on account of bad debts - bad debts u/s 36(1)(vii) - non-recoverable outstanding balance from the concern namely Parag Fans Cooling Systems Pvt. Ltd. (in short PFCSPL) - HELD THAT:- Though it was not necessary for the assessee to establish that the debts, in fact, have become irrecoverable. Still the assessee has placed necessary material on record to show that the outstanding debts were not irrecoverable. However, the fact needs to be verified as to whether the alleged amount was offered as revenue in the preceding years and also whether the amount has been written off in the account of the assessee. In the ledger account placed in Assessee has shown outstanding debts and no entry seems to have been passed for crediting the amount with the bad debts claimed. We, therefore, deem it fit and proper to remit the matter to the file of the AO for carrying out necessary verification with the assistance of assessee as well as the related documents in order to satisfy that the alleged amount was shown as revenue in the preceding years and the ledger account has been actually written off in the books of account of assessee by way of crediting the debtor s accounts and debiting the bad debts accounts. Disallowance of excise duty payable - whether the demand raised by the department of Customs: Central Excise Service Tax for the earlier years can be claimed as an expenditure by the assessee for the year in which the liability to pay such demand is crystallized ? - HELD THAT:- Assessee has rightly booked expenditure of excise duty payable which crystalized during the year under appeal. Before parting of we would like to mention one more fact which is not in dispute that subsequently the assessee succeeded in the appeal before the CESTAT and total demand was deleted. The assessee got refund which was paid by it and the same has been offered for tax in the return of income for A.Y. 2018-19 and for the remaining amount the claim was reversed in the excise records. Therefore, the entire amount which was claimed as expenditure during the assessment year 2012-13 has been brought to tax F.Y. 2018-19. We, therefore, in the given facts and circumstances of the case are of considered view that the assessee has rightly claimed the excise duty payable as expenditure which is raised on account of demand pertaining to earlier years. Disallowance on account of provisions of warranty - HELD THAT:- On the basis of the historic data and past experience it was anticipated that 3 to 4% of the pumps manufactured during the financial year, comes back for repairing or servicing. In order to meet such expenses provisions is created under the head warranty in each year and the actual expenses incurred during the year are adjusted against the provision. Any amount left is credited back as income. During the year under appeal, AO on examining the records observed that during the year against the provisions of warranty no actual expense was incurred or paid during the year. AO considered the nature of the warranty as contingent liability. The assessee was also unable to prove with documents about the basis of such provision in absence of the information for the exact no. of pumps manufactured during the year for which warranty is made. Fair to both the parties deem it fit and proper to remit the limited issue of examining the provision of warranty expenses to the file of the AO for afresh adjudication on merits in accordance with the provision of law after giving due and reasonable opportunity of hearing to the assessee.

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• 2019 (12) TMI 434
  Reopening of assessment u/s 147 - assessee has claimed deduction u/s 80IA of the Act in respect of Carbon Emission Reduction Certificates (CERs) sales which is not eligible for the deduction u/s 80IA - HELD THAT:- Income by way of transfer of carbon credit has been given a special treatment as chargeable to tax @ 10% and not as part of the normal business income of the assessee. The said amendment is prospective in nature and therefore, cannot be applied to the assessment years under consideration. In view of the above discussion as well as fact and circumstances of the case, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue. The only addition made by the AO in the reassessment proceedings has been deleted by the ld. CIT(A) which we have upheld in our findings on the merits of the issue in the Revenue-s appeals.

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• 2019 (12) TMI 433
  Disallowance u/s 14A read with Rule 8D - HELD THAT:- Undisputedly, the assessee has taken the advance of Euro 20,00,000 equivalent to Rs. 11,25,00,000/- from Natural Energy Corporation GmbH against consultancy services and not for investment in mutual funds nor any interest has been paid to Natural Energy Corporation GmbH, there is no question of any direct nexus between exchange fluctuation loss claimed by the assessee with the exempt income earned during the years under assessment. When business advances taken by the assessee company from Natural Energy Corporation GmbH for providing consultancy services though admittedly invested in mutual funds, the same cannot be treated to have been received for the purpose of investment in mutual funds. Meaning thereby, there is no proximate nexus between the advances received and investment made in the mutual funds yielding tax exempt income and in these circumstances, foreign exchange loss suffered by the assessee cannot be disallowed u/s 14A. Moreover, copy of account of Natural Energy Corporation GmbH for AY 2010-11, available at page 25 of the paper book, is duly showing debit of exchange fluctuation gain to advance and corresponding credit to exchange fluctuation gain. Even otherwise, there is no dispute that the assessee is continuously following the mercantile method of accounting and thereby consistently providing exchange fluctuation loss or gain in its account in the year in which the same has been incurred. Hon ble Apex Court in Woodward Governor India (P.) Ltd. [ 2007 (4) TMI 118 - DELHI HIGH COURT] we are of the considered view that loss suffered by the assessee on account of foreign exchange rate fluctuation as on date of balance sheet is an item of expenditure u/s 37(1) of the Act and is not liable to be disallowed u/s 14A of the Act. So, the loss suffered by the assessee on account of fluctuation in the rate of foreign exchange is a revenue loss and not a capital loss as held by ld. CIT (A) in AY 2008-09 and contended by ld. DR for the Revenue. Claim of foreign exchange fluctuation loss - revenue loss OR capital loss - Similarly, there is no direct nexus between the entire business advances having been invested by the assessee company in the mutual fund which generated exempt income, exchange fluctuation loss claimed by the assessee with the exempt income and as such, the same cannot be disallowed under Rule 8D(2)(i) of the Act. Consequently, aforesaid question no.1 framed is answered in favour of the assessee and question no.2 is determined against the Revenue.

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• Benami Property

• 2019 (12) TMI 457
  Prohibition of Benami Property Transactions Act - Scope of amended Act of 2016 - whether the provisions of the Act of 1988 providing for confiscation of properties found to be Benami could be applied in respect of the transactions carried out prior to 01.11.2016? - HELD THAT:- As inserted by way of the amendment Act of 2016 w.e.f. 01.11.2016. A plain reading of both these provisions makes it evident that Sub Section 2 would be applicable upon any Benami Transactions made prior to 01.11.2016 and Sub Section 3 would be applicable upon only those properties or Benami Transactions made on or after the commencement of the Amendment Act, 2016 i.e. 01.11.2016. This again leads us to draw a safe inference that the proceedings under the Act of 1988 could very well be initiated against a person who has entered into a Benami transaction irrespective of the date when the amendment act came into force. So far as Chapter IV particularly Section 24 is concerned, the same is only a procedural law or procedural provision inserted in the original Act of 1988 by way of amendment w.e.f. 01.11.2016. Plain reading of the impugned order Annexure P-1 shows that the petitioners have in fact been given a fair and reasonable opportunity of hearing before the same was passed. Reading the impugned order Annexure P-1 that is the order of provisional attachment, it reveals that petitioners have given an extensive explanation to the show cause notice which was duly considered by the Initiating Officer and taking into consideration the explanation and statements made by the petitioners the Provisional order of attachment has been issued. So far as Annexure P-1 is concerned, the same is purely in accordance with the provisions of Section 24 of the Act of 1988. So also Annexure P-2 again is a proceeding drawn strictly in accordance with the said provisions and as such the two orders cannot be said to have been passed without jurisdiction or authority of law. The proceedings drawn is only to determine whether the property standing in the name of the petitioners are a Benami property or not? - The final adjudication is yet to be done. Petitioners have been called upon in the said proceedings and it is only pending the final adjudication of whether the properties in the name of the petitioners are Benami Properties or not, the authorities concerned as a matter of precaution passed an order of provisional attachment until the dispute is finally resolved. The provisions Sub Section 3 of Section 1 and read it along with other amendments which have been brought in the Act of 1988 vide Amendment Act of 2016, this Court is compelled to reach to the conclusion that proceedings drawn against the petitioners in the given factual matrix of the case cannot be found fault with. It can also not to be said that provisions of the Amended Act of 2016 could not have been made applicable in respect of properties which were acquired prior to 01.11.2016. The whole Act of 1988 as it stands today inclusive of the amended provisions brought into force from 01.11.2016 onwards applies irrespective of the period of purchase of the alleged Benami property. Amended Act of 2016 does not have an existence by itself. Without the provisions of the Act of 1988, the amended provisions of 2016 has no relevance and the amended Provisions are only laying down the proceedings to be adopted in a proceeding drawn under the Act of 1988 and the penalties to be imposed in each of the cases taking into consideration the period of purchase of Benami property.

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• Customs

• 2019 (12) TMI 432
  Principles of natural justice - smuggling - Whether the appellant is right that the order passed by the CESTAT is contrary to law as it does not examine and discuss the contentions and issues of facts and law as raised and had arisen for consideration? - Non-prosecution of petition. HELD THAT:- None appears for the petitioner even on the second call - SLP is dismissed for non-prosecution.

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• Insolvency & Bankruptcy

• 2019 (12) TMI 431
  Withdrawal of the insolvency proceedings - HELD THAT:- In the Judgement of Swiss Ribbons, Hon ble Supreme Court (in para 81) [ 2019 (1) TMI 1508 - SUPREME COURT ] referred to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Regulations in short) and dealing with Regulation 30-A, relating to withdrawal of Application the Hon ble Supreme Court referred to its earlier Judgement in the matter of Brilliant Alloys Private Limited versus S. Rajagopal Ors . reported in 2018 SCC OnLine SC 3154 to observe that Regulation 30-A(1) was not mandatory but that it was directory. The question, however, remains that the Hon ble Supreme Court has in the above para 82 left discretion with the Adjudicating Authority to allow or disallow an Application for withdrawal or settlement. The last sentence of the paragraph states that this will be decided after hearing of the parties concerned and considering all relevant factors on the facts of each case. Thus, Adjudicating Authority has to consider all relevant factors on facts of each case and to take a decision. When the Appellant - Mr. Jai Kishan Gupta was contacted, he showed some other functional office of the Corporate Debtor where again no address of the office was found. The Adjudicating Authority did not write in so many words but exercised its discretion to hear the Financial Creditor who had already filed claims. Considering facts of the matter, we do not interfere. There are no fault with the Impugned Orders passed. Adjudicating Authority did not accept or reject the withdrawal Application - decision taken by COC in rejecting the request for withdrawal has not been challenged before the Adjudicating Authority - appeal dismissed.

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• PMLA

• 2019 (12) TMI 428
  Grant of anticipatory bail - money laundering - proceeds of crime - allegation of possession of pecuniary resources or property disproportionate to his known source of income for which he could not satisfactorily account - HELD THAT:- It is evident that Dr. Pradeep Kumar, Rajendra Kumar, Nandlal HUF, Shyamal Chakravarty, Dharmendra Kumar Dhiraj, Naresh Kumar Kejriwal, Inderlal Kejriwal and Sitaram Pathak are knowingly involved in acquisition, concealment and transfer of proceeds of crime and are knowing involved in projection of tainted properties as untainted - That, the complaint under section 45 read with section 44 of the PMLA for commission of offence under section 3, punishable under section 4 of the PMLA was also duly filed on 03.11.2018 before the Hon ble Court of Special Judge, CBIcum under PMLA at Ranchi against the six accused persons viz. Dr. Pradeep Kumar (A-1), Rajendra Kumar(A-2), Nand Lal HUF (A-3), Shyamal Chakravarty (A-4) Dharmendra Kumar Dhiraj (A-5) and Naresh Kumar Kejriwal (A-6) wherein cognizance has already been taken by the Hon ble Special Court for the offence under section 3, punishable under section 4 of the PMLA and the same is pending for trial before the Hon ble Special Court. It is no doubt true that the complaint has been made by the respondent only in pursuant to the scheduled offence. In a given case, the complaint may emanate from a registration of a case involving scheduled offence. But the fate of the investigation in the said scheduled offence cannot have bearing to the proceedings under the Prevention of Money Laundering Act, 2002. Section 2(u) of the Act merely speaks of a criminal activity relating to a scheduled offence. Therefore, we are concerned with the criminal activity qua a scheduled offence. Going through the averments made in the complaint petition and submissions advanced on their behalves and also the judgments relied upon by them and considering the fact that cognizance has already been taken against the petitioner in this case, at this stage, the document which have been relied by the petitioner and the filed by the petitioner for quashing of order dated 10.09.2013 passed in R.C. Case No. 01(A) of 2011- R, whereby cognizance of the offence punishable under Section 109 of the Indian Penal Code and under Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988 taken against the petitioner, whereby the Cr.M.P. was allowed and cognizance order dated 10.09.2013 was quashed, cannot be relied upon. Petition dismissed.

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• Service Tax

• 2019 (12) TMI 420
  Refund of service tax - service tax for transportation of goods by rail paid inadvertently - reverse charge mechanism - HELD THAT:- Clause (i) of Serial No. 20 of Notification No. 25/2012-ST dated 20/06/2012 exempts the services provided by way of transportation by rail from one place in India to another of Food Stuff including flowers, tea, coffee, jiggery, sugar, milk products, edible oil, excluding alcoholic beverages. The definition of Foodstuff has not provided anywhere in the Finance Act, 1994. The word food stuff which has been used of in Clause (i) of Serial No. 20 of the aforesaid notification is inclusive and not exhaustive . It is general principle of interpretation that the word includes or including when used, enlarges the meaning of the expression defined so as to comprehend not only such as things as they signify according to their natural import but also those things which the clause declares that they was included - the food stuff could be any substance that is used as food or to make food and therefore, the spices/masale can be termed as food stuffs and falls within the exemption notification as aforesaid. Amount deposited by the Appellant wrongly under different head - HELD THAT:- It is clear that the amount of service tax for transportation of goods by rail has been wrongly paid by the appellant therefore paying service tax under wrong accounting code or under wrong head cannot be a valid reason for denying the valid refund claim of the service tax erroneously paid by the appellant. The Appellants are entitled for the refund claimed by them - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 419
  Classification of services - Cargo Handling Service or not - shifting of material within factory premises - extended period of limitation - HELD THAT:- As far as shifting of material within the factory from one place to another is concerned, it is now well settled and is no longer res-integra that such movement of material within the factory does not amount to cargo handling and is not leviable to service tax under Cargo Handling Service - This issue has been settled by Hon ble Apex Court in the case of Signode India Limited [ 2017 (3) TMI 934 - SUPREME COURT ], where it was held that It is nobody s case before us that the appellant is a cargo handling agency. All activity undertaken by the appellant, though related to packing activity, is at a stage when the goods are yet to clear the factory gate as manufactured goods for onward transportation. Cargo Handling Service pre supposes that the material being handled is cargo. Cargo means goods transported by a vessel, airplane or vehicle . Material movement of goods within the factory premises do not qualify as cargo and any such handling or shifting of material does not amount to cargo handling and therefore is not chargeable to service tax under Cargo Handling Service - the demand confirmed by the impugned order with respect to cargo handling services needs to be set aside along with interest and corresponding penalties. Management, Maintenance or Repair Service - non-payment of service tax - HELD THAT:- The first appellate authority has not recorded any findings and therefore it is deemed appropriate to remand the matter back to him for the limited purpose of recording his findings on this demand. Appeal allowed in part and part matter on remand.

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• 2019 (12) TMI 418
  Imposition of late fee under Rule 7C of Service Tax Rules - delay in filing of returns - Banking and financial services - courier agency service - HELD THAT:- It is a statutory mandate for the returns to be filed at a specific time and that the late filing thereof invites the penalty of late fee, the relevant provision need to be looked into for the purpose is Section 68 (1) of Finance Act, 1994. It requires every person providing service to any person to pay service tax at the rate specified in Section 66 ibid in such manner and within such period as may be prescribed. - Since apparently and admittedly, the service tax returns for the period April 2014 to March, 2015 were not filed in accordance of the above discussed provision, there is definite violation of above quoted provisions and also of Section 70 of the Finance Act - Rule 7 (C) of Service Tax Rules, 1944 as rightly been invoked which makes an assessee liable to pay late fee due to said violation. Appeal dismissed - decided against appellant.

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• Central Excise

• 2019 (12) TMI 430
  CENVAT Credit - input - fuel - Restriction / Reversal of credit under rule 6 - Scope and interpretation of rule 6(1) and rule 6(2) - Low Sulphur Heavy Stock - case of assessee is that they are entitled to claim CENVAT credit on the input, that is, LSHS even though fertilizer is exempt from excise duty - HELD THAT:- When Rule 6(1) says that the CENVAT Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, it relies upon the definition of inputs contained in these Rules which certainly include LSHS and steam and electricity that are produced in the manufacturing process utilizing LSHS. The exception that is contained in sub-rule (2) refers to all inputs except inputs intended to be used as fuel which then results in the manufacture of final products which are both chargeable to duty as well as exempted goods. What is clear is that the exception to sub-rule (1) which is contained in sub-rule (2) itself contains an exception, namely, inputs intended to be used as fuel. This being the case, the moment it is found that inputs are intended to be used as fuel, such inputs go outside the ken of sub-rule (2) of Rule 6. When this happens, the exception contained in sub-rule (2) does not come into effect at all as a result of which sub-rule (1) must be applied on its own terms. Even after independently applying our minds to Rule 6 as it stood, the interpretation of this Court contained in CCE v. Gujarat Narmada Fertilizers Co. Ltd., [ 2009 (8) TMI 15 - SUPREME COURT] is correct. Appeal allowed - decided in favor of revenue.

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• 2019 (12) TMI 429
  Permission for withdrawal of appeal - Clandestine removal - Principles of Natural justice - CESTAT rejected the appeal without appreciating the facts and evidence before it - HELD THAT:- SLP disposed of as withdrawn.

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• 2019 (12) TMI 424
  CENVAT Credit - input services - services of outward transportation - denial of credit on the ground that these services have been availed beyond the factory premises and therefore, the said services are not covered under the main or the inclusive part of the input service - HELD THAT:- The issue involved in the case is no longer res integra - The apex Court in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [ 2018 (2) TMI 117 - SUPREME COURT] has held that Cenvat Credit on goods transport agency service availed for transport of goods from place of removal to buyer s premises was not admissible to the respondent. Appeal dismissed - decided against appellant.

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• 2019 (12) TMI 421
  CENVAT Credit - waste/residue/by-product/ refuse - pressmud - exempt goods - non-maintenance of separate records - whether after amendment in the year 2015, Rule 6 of Cenvat Credit Rules, 2004 is applicable in case of removal of pressmud generated during the manufacturing of sugar as the assessee is not maintaining separate accounts? - January, 2016 to March, 2017. HELD THAT:- There is no manufacturing process involved in pressmud s production. Bagasse, pressmud and composed fertilizer is not goods but merely a waste or byproduct therefore Rule 6 of the Cenvat Rules shall have no application in the present case and they are bound to come into existence during the crushing of the sugarcane and are an unavoidable agricultural waste. The amendment dated 1.3.2015 in Rule 6 CCR has wrongly been relied upon by both the authorities below in coming to the conclusion that the assessee is liable to reverse the Cenvat Credit availed by them - As per Rule 6(1) ibid read with Explanation-1, non-excisable goods which are manufactured by the manufacturer in his factory will get covered under Rule 6(1) and those goods which were not manufactured, like pressmud in these appeals, will not be covered under Rule 6 despite being non-excisable goods because pressmud is not being manufactured in the factory but it emerged as agricultural waste or residue. It is seen that Rule 6(1) was amended in order to include the inputs used in relation to the manufacture of exempted goods. As such it can be seen that the same relates to the manufacture and it can safely be concluded that there has to be a manufacturing activity for invoking the aforesaid Rule - bagasse/pressmud which emerges as a waste/by-product, falls outside the scope of Rule 6 ibid. Even after amendment to Rule 6 ibid, pressmud which emerges as a waste/ by product, falls outside the scope of the said Rule - Appeal of assessee allowed.

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• CST, VAT & Sales Tax

• 2019 (12) TMI 427
  Levy of purchase tax - timber in log - timber in chiran - rate of tax - whether taxable at 16 % during period 01.02.2000 to 31.03.2000? - revisionist submitted that neither tax can be levied twice i.e. one as purchase tax and the other on its sale nor the rate of tax can be enhanced to 16% instead of 15 % - scope of Section 2(e1) of UP Trade Tax Act - HELD THAT:- No new commercial commodity come into existence which could be said to be a different commodity. Wooden log (timber) will remain wooden log (timber) in its original character even after cutting the same into sizes. Section 2 (e-1) of the UP Trade Tax Act shows that the process of cutting is not being included within the definition of manufacturing. Thus the process of cutting the wood from different sizes and converting the wood log into plank, no new commercial commodity comes into existence. Timber remain timber and after cutting the timber it does not loose its original identity of timber and it does not undergo any physical/commercial or any kind of change. The identity of timber remains same. Thus the process of cutting and converting timber for log does not come under the definition of manufacturing as provided under Section 2 (e-1) of the UP Trade Tax Act. Thus, the position of law, which emerges, is that after processing, some new commercial commodity must come into existence which may be identified differently from its original - In the case in hand, timber logs were purchased and the same were sliced converting into veneer (chiran) and the same were sold by cutting the wood log converting into veneer (chiran), no new commercial commodity come into existence. The Tribunal was not justified in confirming imposition of tax at the time of purchase of timber (as purchase tax), which has not been challenged by the revisionist and has accepted even in the best judgement assessment, by which its turnover was enhanced, the veneer (chiran), which has been obtained after cutting wood log into small sizes and have been sold, cannot be taxed again - the process of cutting and converting timber from wood log does not come under the definition of Manufacturing as provided under section 2(e- 1) of the Act. Revision allowed.

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• 2019 (12) TMI 426
  Exemption under N/N. G.O.Ms.No.53/99/F2 dated 10.08.1999 - time limit for period of exemption - case of Revenue is that the Assessee was entitled to exemption under the Notification only for a period of five years from the commencement of its production with effect from 25.05.1996 and it could not get the extended period of exemption from 06.11.1997 when it commenced production of another type of product viz., Toilet Soaps , whereas the commencement of production of Detergent Cakes by the Assessee was started on 25.05.1996 itself. HELD THAT:- Notification of exemption grants exemption to all industries in respect of goods manufactured by them for a period of 5 years if the location of the industry is in Pondicherry and Yanam regions - There is no dispute that the industry of the petitioner was set up within the Union Territory of Pondicherry and therefore that was entitled to the exemption as per the Notification, for a period of five years. However, it is not exemption commodity wise , but it is to all goods manufactured by the industry set up in Pondicherry for a period of 5 years. Admittedly, the petitioner had availed exemption in respect of Detergent Cakes for a period of five years from 1996 to 2001, but merely because it commenced production of Toilet Soaps in the year 1997, it cannot get 5 years exemption for Toilet Soaps for the next five years upto the year 2002. After 2001, the Assessee was not entitled to avail any exemption in respect of any of the goods manufactured by it. The learned Tribunal has rightly held that it can become a never ending story if production of different type of goods for which production was commenced by the Assessee is entitled to exemption for different periods of five years from the commencement of production of those products. There are no question of law much less a substantial question of law to be framed in this revision - revision dismissed.

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• 2019 (12) TMI 425
  Levy of penalty u/s 12(5)(iii) of the T.N.G.S.T. Act - sale of REP licences by the assessee during the assessment period - Assessment Year 1992-93 - HELD THAT:- The imposition of penalty or deletion thereof is essentially a question of discretion and therefore the final fact finding body i.e., the Tribunal constituted under the provisions of the TNGST Act, and unless the findings for setting aside or imposition of penalty are found to be perverse, no question of law arises for consideration for this Court in its revisional jurisdiction. Unless the ingredients for invoking the penal provisions are satisfied and there are clear findings by the assessing authority about mens rea or lack of bonafides on the part of the assessee in applying such provisions, the discretion employed by the Tribunal to delete the penalty cannot be held to be perverse. Prior to Assessment Year 1992-93, the judgment of this Court did not permit imposition of penalty in such cases, but from Assessment Year 1992-93 onwards, the judgment did not make it compulsory to impose penalty. Therefore, the argument of Revenue to that effect is misconceived. Since admittedly in the period of assessment of Assessment Year 1992-93 itself, the High Courts were seized of the controversy about the REP licences itself being treated as goods or not , the non disclosure of the sale transactions in the returns, even though such transactions were part of the Books of Accounts maintained in the regular course of business by the Assessee, it cannot be said that the penal provisions of Section 12(5)(iii) of the Act stood automatically attracted - Penalty not levied - petition dismissed - decided against Revenue.

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• 2019 (12) TMI 423
  Levy of sales tax / vat - inter-state or intra-state sale? - sales of Heavy Earth Moving Equipments by the Respondent- Assessee - TNGST Act - HELD THAT:- There is no merit in the present Writ Petition filed by the Revenue and the concurrent findings of the Appellate Authorities below are based on relevant materials and in the absence of any contra evidence available on record, no contrary view can be taken. In view of the same, the Writ Petition is liable to be dismissed and accordingly, it is dismissed.

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• Indian Laws

• 2019 (12) TMI 422
  Seizure of passport - Smuggling - recovery of contraband item from petition - offence under Section 20(b)(ii)(C) and Section 23 read with Section 28 of the Narcotics Drugs and Psychotropic Substances Act, 1985 - HELD THAT:- The appeal preferred by respondent no.1 was dismissed by this Court by an order dated 25.11.2019. Consequently, there is now no impediment in the petitioner being permitted to exit this country. Respondent no.1 is directed to return the petitioner s passport forthwith. The petitioner may undertake all formalities for exiting the country in accordance with law. Respondent no. 2 (FRRO) shall process the petitioner s application without any delay - it is not necessary to consider the petitioner s request for modification of the category of the visa granted to him, as he is now required to leave this country. Petition disposed off.

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