TMI Tax Updates - e-Newsletter
February 20, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Release of seized goods alongwith the vehicle - E-way Bill found with expired validity - Since the appellant has made minor procedural laps as required to follow under rule 138(10) therefore a penalty of Rs One thousand only (Rs- 1000/- IGST Act ) in each case is imposed on the tax paye - Addl. Commissioner
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GST:
Release of seized goods alongwith the vehicle - contravention of Rule 138 of CGST and HPGST Rules 2017 - minor error in the e-way bill in entering distance - typographical error - appeal of the appellant is accepted - Addl. Commissioner
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GST:
Input Tax Credit (ITC) - Interpretation of statute - meaning of word 'lapse' in Notification No. 20/2018-Central Tax (Rate) - the proviso seeks to lapse only such input tax credit which is the subject matter of principal notification, i.e. accumulated credit on account of inverted duty structure in respect of notified goods - AAR
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GST:
Delegation of powers u/s GST - Section 5(3) of the Act specifically confers power upon the Commissioner to delegate his functions - The power u/s 69 can be exercised by the authority upon whom the power is delegated provided the delegatee has reasons to believe that the assessee has committed offence under Section 132 of the Act. Therefore, the condition precedent, i.e. 'reasonable belief', for the purpose of exercise of power u/s 69 remains the same. - HC
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Income Tax:
Offence punishable u/s 276CC - willfull default or not in filing a return pursuant to the notices issued u/s 153A - The respondent had already indicated his difficulty in doing so in view of the family disputes and had requested for inspection and copies of all documents seized during the raid - Default cannot be held as willful - HC
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Income Tax:
Addition u/s 68 - old outstanding sundry credit balances - the expression “any previous year” to mean as not referring to all the previous years, but, the previous year in relation to the assessment year concerned. - HC
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Income Tax:
Deduction u/s 10B - manufacturing activity or not - export of handicraft items of dried parts of plants - apart from cleaning and grading, the assessee had taken further processing; that what is purchased as raw material and what is exported as a product for export are totally different items - Benefit of exemption cannot be denied - HC
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Income Tax:
Exemption u/s 10(23A) to Bar Council - After formation of the new State of Chhattisgarh, pursuant to the Act of 2000, the erstwhile Bar Council came to be separated as two different Bar Councils - No separate order u/s 10(23A) is required in the present case - HC
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Income Tax:
Additions made on the basis of loose papers found and impounded from the premises of the assessee - Presumption u/s 292C - CIT(A) applying the telescoping reduced the addition giving partial relief to the assessee - ITAT confirmed the order of CIT(A) - Tribunal has given cogent reasons and arrived at conclusion on the basis of the materials and the fact found on record - HC
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Income Tax:
Deduction u/s 80IA - Whether process of converting raw Urad into Urad Dhal was a manufacturing activity ? - the process of converting raw Urad into Urad Dhal is a manufacturing activity undertaken by the Assessee - HC
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Income Tax:
Action on the complaint of the petitioner sent through speed post - Request for necessary investigation may be done against private respondents - Writ of Mandamus - Petition dismissed with cost - HC
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Income Tax:
Prosecution u/s 276C and 277 - Petitioner’s case deserves to be considered by the respondents in the light of the liberalised policy since the petitioner’s application was entertained after the new guideline came into force. - HC
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Income Tax:
Reopening of assessment u/s 147 - if in the course of such reassessment, the 2nd respondent assessing officer finds any other reasons for justifying reopening of the assessment on some other point, he may do so. Such exercise cannot be stifled under Article 226 of the Constitution of India. - HC
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Income Tax:
Higher depreciation on internal road laid for approach to windmills - when the roads in question are integral part of the installation work of the wind-mill, the same is eligible for depreciation applicable on the wind-mill. - AT
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Income Tax:
Validity of reopening of assessment - action of AO in completing the assessment without providing a copy of reasons recorded u/s 148(2) - The requirement of supply of reasons u/s 148 of the Act when the assessee has specifically requested for the same after complying with the notice u/s 148 is sine qua non and goes to the root of the jurisdiction of the AO. - AT
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Income Tax:
Deduction u/s. 80IA - the assessee shall not be entitled for benefit of deduction u/s. 80IA(4) of the Act with respect to the profit earned by supplying and erection of water treatment system / water supply project / Fluoride Removal Unit and Arsenic Removal Units as it is not a developer but only engaged in the task as works contractor. - AT
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Income Tax:
Levy of penalty u/s 271(1)(c) - forex loss was claimed as revenue expenditure - inadvertent claim of expenditure would not, ipso facto, amount to concealment of income or furnishing of inaccurate particulars of income to levy penalty u/ 271(1)(c) - AT
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Customs:
Penalty u/s 112(b)(i) of the Customs Act - smuggling - Chinese crackers - The entire case of the Revenue is based upon the retracted statements of the co noticees. It is well established law that the statements of the co-noticees, unless corroborated in material particulars by independent evidence, do not constitute the legal evidence. - AT
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Customs:
Import of Poppy Seeds - There has been a remarkable shift in the new policy, however, what is hurting the writ-applicant is the policy of 'first-come-first-serve'. This, according to the writ-applicant, is violative of Article 14 of the Constitution of India. - Needless to mention at this stage that it is the prerogative of the respondents to frame a policy. However, such policy must be transparent, fair and reasonable.
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Corporate Law:
Oppression and Mismanagement - siphoning of funds - The act of the appellant is certainly a negligent act but there is no material on record to infer that he has acted fraudulently and colluded with the directors of the company in relation to affairs of the company or he has misused his position as statutory auditor of the company - the findings of the NCLT are not sustainable in law as well as in facts. - AT
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Indian Laws:
Charging higher for SMS - participants in the HSHS contest were required to pay ₹ 2.40 per SMS message to Airtel, which was higher than the normal rate for SMSes - Whether an unfair trade practice has been committed by the Appellants in the conduct of the HSHS contest, in terms of Section 2(1)(r)(3) of the 1986 Act? - Held No - SC
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Service Tax:
Levy of Service tax - Validity of order of CESTAT - a function which has to be left to the assessing authorities had been undertaken by the learned CESTAT in a manner, which is, impermissible in law, more so, when such an exercise was not attempted even by the Commissioner of Central Excise - HC
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Service Tax:
Demand of service tax - case of petitioner is that there is not only delay of six months from conclusion of the argument till pronouncement of order but because of this delay gross errors have occurred in the order which has caused severe prejudice to the Petitioner - matter restored for re-adjudication - HC
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Service Tax:
Invocation of Extended period of Limitation - presence of two views as whether the service provided by the respondent is Management or Business Consultancy or not - It is not the case of the appellant (revenue) that there was either fraud perpetrated by the respondent or there has been any collusion or willful mis-statement of facts before the revenue. - No demand - HC
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Central Excise:
Validity of Show Cause notice (SCN) issued - erroneous refund granted - If the exercise of jurisdiction u/s 11A of the Act was to be hooked or hinged upon the provisions of Section 35E of the Act, that would frustrate the very provisions of Section 11A of the Act, in our opinion. Section 11A of the Act does not refer or make it subject to any other provisions of Chapter VIA of the Act providing for Appeal or revisional powers to the higher Authority under the said Act. - HC
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Central Excise:
Classification of goods - Maize Starch Powder (MSP) - the impugned order relying upon the report of the Departmental Chemical Examiner who had given his personal opinion without any empirical tests or study of manufacturing process cannot be sustained. - AT
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Central Excise:
Clandestine removal - shortages of the finished goods - discrepancies in the RG-1 Register with the production slips - there is no corroborative evidence in the shape of procurement of raw materials, transportation of goods and copy of the sale receipt etc. - No demand can be made - AT
Notifications
GST - States-
S.O. 86 - dated
17-2-2020
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Bihar SGST
Amendment Notification S.O. No. 177, dated the 21st September, 2017
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S.O. 85 - dated
12-2-2020
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Bihar SGST
Governor of Bihar authorises Commissioner of State Tax for decisions or orders passed by the officers of State Tax subordinate to the Commissioner as the Revisional Authority
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S.O. 84 - dated
12-2-2020
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Bihar SGST
Amendment in Notification S.O. 385, dated the 14th October, 2019
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S.O. 83 - dated
27-1-2020
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Bihar SGST
Amendment in Notification S.O. No. 173, dated the 21st September, 2017
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16/2019-State Tax - dated
6-1-2020
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Delhi SGST
Delhi Goods and Services Tax (Second Amendment) Rules, 2019
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03/2019–State Tax - dated
20-12-2019
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Delhi SGST
Delhi Goods and Services Tax (Amendment) Rules, 2019
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56/2019 – State Tax - dated
10-2-2020
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Jharkhand SGST
Jharkhand Goods and Services Tax (Seventh Amendment) Rules, 2019.
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03/2020 - No. FD 03 CSL 2020 - dated
27-1-2020
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Karnataka SGST
Notification of class of Registered persons, whose aggregate turnover in a financial year exceeds one hundred crore rupees, required to issue e-invoice as per sub Rule (4) of Rule 48
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4-I/2019 - No. FD 47 CSL 2017 - dated
21-1-2020
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Karnataka SGST
Karnataka Goods and Services Tax (Amendment) Rules, 2020
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4-H/2019 - No. FD 47 CSL 2017 - dated
10-1-2020
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Karnataka SGST
Karnataka Goods and Services Tax (Ninth Amendment) Rules, 2019
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REMOVAL OF DIFFICULTIES ORDER NO. 10/2019 - dated
3-1-2020
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Karnataka SGST
Karnataka Goods and Services Tax (Tenth Removal of Difficulties) Order, 2019
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26/2019 - No. FD 47 CSL 2017 - dated
3-1-2020
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Karnataka SGST
Amendment in Notification (02/2018) No. FD 47 CSL 2017, dated the 23rd January, 2018
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25/2019 - No. FD 47 CSL 2017 - dated
30-12-2019
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Karnataka SGST
Government of Karnataka appoints the 22nd day of October, 2019, as the date on which the provisions of Section 13 of the Karnataka Goods and Services Tax (Amendment) Act, 2019, shall come into force.
Income Tax-
12/2020 - dated
17-2-2020
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IT
Income tax Amendment (6th Amendment), Rules, 2020.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (2) TMI 853
Cancellation of registration of petitioner - CGST Act - business not conducted at the Place of Business mentioned in the registration profile - HELD THAT:- The impugned order dated 1 January 2020 cancelling the registration of the Petitioner is set aside and the proceedings are restored to the stage of issuance of show cause notice. The Petitioner will appear before the State Tax Officer as on the date specified by the State Tax Officer.
Petition disposed off.
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2020 (2) TMI 858
Release of seized goods alongwith the vehicle - E-way Bill found with expired validity - compliance with section 67 of HP GST Act, 2017 and Section 129 of CGST/HPGST, Act, 2017 - willful default or any attempt to evade tax, present or not - HELD THAT:- In the instant appeal cases the goods were consigned from Thelkoloi, Odisha to Anni, Kullu, Himachal Pradesh and travelled a distance of around 2000 kilometers. The goods were accompanied by proper documents transshipped into another vehicle at Chandigarh and the vehicle no. was updated by the appellant and e-way bill was valid at the time of transshipment of the vehicle on 20.11.2018 The validity of the e-way bill expired on midnight of 20.11 2018 and the vehicle was inspected and detained by the respondent at early morning on 21.11.2018. The vehicle was stationary and parked by the road side and driver was called on telephonically and proceedings were initiated u/s 129(1) for expiry of validity of e-way bill. There was no discrepancies either with regard to other documents accompanied the consignment or with the quantity of goods being transported.
Rule 138(10) says that validity of e-way bill may be extended within 8 hours from the time of its expiry but in the instant cases the vehicle was practically apprehended in almost 08 to 09 hours of the expiry of the e-way bill, prima facie it appears that, the appellant has been not given reasonable opportunity to update the Part-A of e-way bill. It was noted that Part-B of the e-way bill was duly filled which puts to rest on any doubts about the intention of the appellant to evade tax.
The non-furnishing of information in Part-B 01 of FORM GST EWB-01 amounts to the e-way bill becoming the not a valid document. It appears that e-way bill is invalid only if Part-B of E-way bill is not filled or a considerable time to update the Part -A of e-way bill has gone by - Similarly, the para no. 5 of the circular says in case a consignment of goods is accompanied with an invoice or any other specify document and also an e-way bill, proceeding u/s 129 of the GST Act may not be initiated. Therefore, imposition of tax/ penalty by the respondent is harsh and unsustainable.
Since the appellant has made minor procedural laps as required to follow under rule 138(10) therefore a penalty of Rs One thousand only (Rs- 1000/- IGST Act ) in each case is imposed on the tax payer under section 125 under the CGST/ HPGST Act 2017 in accordance to CBIC Circular No. 64/38/2018-GST, dated 14th Sep 2018 and the State Circular no. dated 13th March 2019 and may be recovered accordingly - appeal allowed.
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2020 (2) TMI 857
Release of seized goods alongwith the vehicle - contravention of Rule 138 of CGST and HPGST Rules 2017 - minor error in the e-way bill in entering distance - typographical error - invocation of section 129 (1) of Acts as well - HELD THAT:- It is revealed that due to a typographic error while generating E-way bill, the petitioner mentioned approx distance between Puducherry to Himachal Pradesh as 20 Kilometers instead of 2000 Kilometers. As a result, a validity of one day has been calculated by the E-way bill portal instead of twenty days and the E-way bill subsequently got expired on the very next day i.e on 08.09.2018. The consignment was intercepted on dated 15th Sep, 2018 and thereby a tax/penalty has been imposed under section 129 of HPGST/CGST Act, 2019 for contravention of Rule 138.
The petitioner has placed reliance on the judgment of SABITHA RIYAZ VERSUS THE UNION OF INDIA AND OTHERS. [2018 (11) TMI 213 - KERALA HIGH COURT] wherein Hon'ble Kerala High Court directed the State GST officials to consider release of goods in view of the CBIC Circular No. 64/38/2018-GST, dated 14th sep 2018 since the discrepancy in the E-way Bill was due to a typographical error.
GST Council vide circular No 64/38/2018 dated 14th September, 2018 and State government vide circular No DT 13.03.2019 effective w.e.f 14.09.2018, in para 5 provides that in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated in case of minor mistakes like Error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the e-way bill or Error in the address of the consignee to the extent that the locality and other details of the consignee are correct.
The mistake in entering distance in E-way bill is a typographic error and may be treated as a minor one. Therefore, the appeal of the appellant is accepted and the order of the Assistant Commissioner State Taxes & Excise-Cum proper officer Baddi Circle-II is set aside.
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2020 (2) TMI 852
Delegation of powers u/s GST - delegation of powers by Commissioner of State Tax to the Special Commissioner of State Tax and the Additional Commissioners of State Tax - Legality and validity of the Notification No.EST/1/Jurisdiction/B.2168 dated 5th July 2017 - HELD THAT:- The delegation is the act of making or commissioning a delegate. It generally means parting of powers by the person who grants the delegation and conferring of an authority to do things which otherwise that person would have to do himself. Delegation is defined in the Black’s Law Dictionary as “the act of entrusting another with the authority by empowering another to act as an agent or representative”. In P.Ramanatha Aiyar’s, The Law Lexicon, “delegation is the act of making or commissioning a delegate. Delegation generally means parting of powers by the person who grants the delegation, but it also means conferring of an authority to do things which otherwise that person would have to do himself”.
In the impugned notification it has been stated that the functions delegated shall be under the overall supervision of the Commissioner. When the Commissioner stated that his functions were delegated subject to his overall supervision, it did not mean or should not be construed as if he reserved to himself the right to intervene to impose his own decision upon his delegate. The words in the last part of the impugned notification would mean that the Commissioner could control the exercise administratively as to the kinds of cases in which the delegate could take action.
Once the powers are delegated for the purpose of Section 69 of the Act, the subjective satisfaction, or rather, the reasonable belief should be that of the delegated authority
The principle is: devolving power is permitted in the cases where the nature, scope, and purpose of the power in legislation means that it is unlikely that the Parliament intended that the power is to be exercised personally, and the only practical way the power can be exercised is by the officers who are responsible to the person (who has the power by legislation).
This is also known as the principle of agency – where the agent is acting in the principal’s name.
In the case on hand, Section 5(3) of the Act specifically confers power upon the Commissioner to delegate his functions.
The power under Section 69 of the Act can be exercised by the authority upon whom the power is delegated provided the delegatee has reasons to believe that the assessee has committed offence under Section 132 of the Act. Therefore, the condition precedent, i.e. 'reasonable belief', for the purpose of exercise of power under Section 69 of the Act remains the same.
Application dismissed.
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2020 (2) TMI 854
Input Tax Credit (ITC) - Interpretation of statute - meaning of word 'lapse' in Notification No. 20/2018-Central Tax (Rate) - Whether the meaning of word 'lapse' in Notification No. 20/2018-Central Tax (Rate) would mean lapse for refund or lapse for utilization of input tax credit for payment of output tax liability? - HELD THAT:- The refund is not available to accumulated input tax credit due to inverted duty structure in respect of specified inputs which remain unutilized. The inverted duty structure means rate of tax on inputs being higher than the rate of tax on the output supplies of such goods. Also vide notification dated 26-7-2018 proviso to Notification No. 5/2017-Central Tax (Rate), dated 28-6-2017 was inserted vide which applicability of notification dated 28-6-2017 was rescinded to the extent of input tax credit accumulated on supplies received on or after the 1st day of August, 2018, in respect of goods mentioned at Serial Numbers 1, 2, 3, 4, 5, 6, 6A, 6B, 6C and 7 supra.
The notifications had been issued under clause (ii) of the proviso to subsection (3) of Section 54 of the Act. Section 54 of the Act provides for refund of accumulated credit on inputs on account of inverted duty structure, i.e., GST rate on inputs being higher than the GST rates on finished goods. However, proviso (ii) to Section 54(3) provides that in respect of notified goods, the refund of such accumulated input tax credit shall not be allowed. Notification No. 5/2017-Central Tax (Rate), dated 28-6-2017 has been issued in terms of this provision and it inter alia prescribes that refund of accumulated ITC on account of inverted duty structure shall not be allowed in respect of goods - the proviso has to be read with the principal part of the notification. A comprehensive reading of amended notification makes it clear that the proviso seeks to lapse only such input tax credit which is the subject matter of principal notification, i.e. accumulated credit on account of inverted duty structure in respect of notified goods. Thus in terms of amended notification, the input tax credit on account of inverted duty structure lying in balance after payment of GST for the month of July (on purchases made on or before the 31st July, 2018) shall lapse.
We observe that the proviso has to be read with the principal part of the notification. A comprehensive reading of amended notification makes it clear that the proviso seeks to lapse only such input tax credit which is the subject matter of principal notification, i.e. accumulated credit on account of inverted duty structure in respect of notified goods. Thus in terms of amended notification, the input tax credit on account of inverted duty structure lying in balance after payment of GST for the month of July (on purchases made on or before the 31st July, 2018) shall lapse.
The said notifications are exclusively dealt with the refund of accumulated input tax credit on account of inverted duty structure Only. When a requisite notification has been issued under a particular section, the provisions of said section spring into operation and an assessee, who is covered by the provisions of that section, is entitled to seek benefits thereunder.
Notification No. 20/2018-Central Tax (Rate) dated 26-7-2018 deals with refund of inverted duty structure only.
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Income Tax
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2020 (2) TMI 851
Offence punishable u/s 276CC - willfull default or not in filing a return pursuant to the notices issued u/s 153A - HELD THAT:- The respondent had sent a letter (Ex.PW-2/1) dated 12.09.2009, requesting for copies of the seized material. The noting on the said material indicates that the respondent was asked to pay a sum of ₹500/- to the PRO Income Tax Department, CR Building, New Delhi. Admittedly, the respondent had paid the said amount and communicated the same by a letter dated 18.08.2009 (Ex.PW-2/2). It appears from the noting that copies of certain documents (VA-1 to VA-17) were provided to the representatives of the respondent.
Not disputed that copies of all material/ documents seized during the search and seizure operations were not provided to the respondent. Admittedly, the respondent was also not provided the copy of the panchnama in respect of the documents seized from the premises occupied by his brother. More importantly, it is not disputed that that the respondent had sent several letters, including letters dated 27.04.2010 (Ex. DW-1/D) and 20.05.2010 (Ex. DW-1/C), seeking copies of the documents for the purpose of filing the returns. But copies of all the documents seized had not been provided to the respondent.
Contention that the respondent was further required to specify the document which was required by him for filing the return, to rebut the presumption of culpable mental state, is unpersuasive. The returns for the relevant assessment year had already been filed in due course. The respondent was now called upon to once again file the return pursuant to the allegedly incriminating material seized during the search and seizure operations. Plainly, in the circumstances, it would be necessary for the respondent to examine all material documents seized during the search and seizure operations before filing the return. The respondent had already indicated his difficulty in doing so in view of the family disputes and had requested for inspection and copies of all documents seized during the raid.
Appellate court had concluded that the respondent’s failure to file the return at the material time could not be considered as willful. This Court finds no fault with the trial court’s view. Undeniably, it is a plausible one and, therefore, warrants no interference by this Court.
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2020 (2) TMI 831
Deduction u/s 54G with respect to the long term capital gain earned by the assessee on the sale of its godown situated in Bangalore, an urban area and which has been relocated in a non urban area - assessee sold an explosive godown/property at Bangalore and invested in a property located in a non urban area i.e in the outskirts of Sivakasi town - whether property sold at Bangalore was only a depot/godown/storage place and not an industrial undertaking - ITAT allowed the claim noted that the assessee shifted its godown storing hazardous products to a non urban area and that the activity carried on in the godown being storage and repacking, which is severable from the other activities of the industrial establishment and held that the assessee is entitled to claim exemption of capital gains as per the provisions of Section 54G - HELD THAT:- SLP dismissed.
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2020 (2) TMI 850
Addition u/s 68 - old outstanding sundry credit balances - HELD THAT:- From the plain reading of the provisions of Section 68 of the IT Act, it does appear that where any sum is found to be credited in the books of Account maintained for any previous year and there is no proper explanation for such credit, the sum so credited can be charged to the income tax as the income of the assessee of “that previous year”.
In the present case, the material on record indicates that the Assessing Officer has relied upon the credits for the financial year 2006-07. However, the sum so credited, in terms of such credit, is sought to be brought to tax as the income of the appellant-assessee, for the assessment year 2009-10, which means for the previous year 2008- 09, in terms of the definition under Section 3 of the IT Act. Dr. Daniel is justified in submitting that this is not permissible.
M/s Bhor Industries Limited Vs. Commissioner of Income Tax, Bombay [1961 (1) TMI 10 - SUPREME COURT] the Hon'ble Apex Court in the context of provisions of the Merged States (Taxation Concessions) Order (1949) has interpreted the expression “any previous year” to mean as not referring to all the previous years, but, the previous year in relation to the assessment year concerned. Again, this decisions also, to some extent, supports the contentions of Dr. Daniel.
The crucial phrase in Section 68 of the IT Act, which provides that the sum so credited in the books and which is not sufficiently explained, may be charged to the income tax as income of the assessee of “that previous year” also lends support to the contentions of Dr. Daniel - Decided in favour of the appellant-assessee and against the respondent-Revenue.
Disallowance made of labour charges on an adhoc basis - HELD THAT:- Assessing Officer, the Commissioner (Appeals) as well as the ITAT have recorded concurrent findings of facts. The contention that no opportunity was afforded to the assessee is not correct. The order of the Assessing Officer clearly indicates that opportunity to explain the cash payments to the tune of ₹2.65 crores was afforded to the assessee. It is only after taking into consideration the explanation offered and further, looking to the position of the preceding year, which was not even contested, the Assessing Officer has made disallowance only to the extent of 10% of ₹2.65 crores. In these circumstances, we do not think that the substantial questions of law, as framed, on this issue of disallowance are required to be answered in favour of the appellant-assessee.
This is not a matter where the disallowance is based on mere suspicion. Further, it is only accepting the principle that commercial expediency has to be judged from the view of businessman, that these Authorities have made disallowance of only 10%, in the present case. There is neither any unreasonability nor any perversity in the approach or the findings of these authorities so as to warrant interference. - Decided against assessee
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2020 (2) TMI 849
Income from insurance business - Taxable income of the assessee Company as assessed u/s 44 read with the First Schedule - Profits and Gains of Insurance Business declared by the assessee - CIT (Appeals) issued the direction which reads as that the net income in the non-technical shareholders’ account of the appellant was ₹ 1,31,04,000/- and, after contribution to the policyholders’ fund at ₹ 9,22,41,000/-, the net loss from insurance business of the appellant was ₹ 7,91,37,000/-. The AO is directed to assess the income of the appellant at this amount -
HELD THAT:- Direction issued by the CIT (Appeals) in paragraph 4.3 of its order could not have been issued, since with the issuance of the said direction, the power of the Assessing Officer to discharge his function of carrying out the assessment stands denuded.
Merely because profits of life insurance business are liable to be computed in terms of Section 44 read with Rules contained in the First Schedule, it does not follow that the Assessing Officer is denuded of his authority to carry out scrutiny while making the assessment.
Even to arrive at a conclusion whether, inter alia, Rule 2 of the first Schedule has been complied with by the assessee, the Assessing Officer would have to look into the books maintained by the assessee and he is not bound to swallow the facts and figures placed before him by the assessee with a claim that the profits of life insurance business have been computed in terms of Rule 2 and the other Rules of the First Schedule.
Answer the aforesaid question in favour of the revenue. Learned counsel for the respondent has also sought to urge that the CIT (Appeals) could not have remaded the matter back to the Assessing Officer and he was bound to carry out the assessment on his own. However, we find that the assessee did not prefer an appeal against that part of the order passed by the CIT (Appeals) before the Tribunal and also did not prefer any cross objections to that effect before the Tribunal. We are, therefore, not inclined to interfere with the direction of remanding the proceedings to the Assessing Officer.
We, while, answering the question in favour of the revenue, direct that the Assessing Officer shall proceed to compute the profits from life insurance business strictly in terms of Section 44 read with the Rules contained in the First Schedule of the Income Tax Act.
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2020 (2) TMI 848
Deduction under Section 10B - manufacturing activity or not - export of handicraft items of dried parts of plants - HELD THAT:- The issue has already been decided against the Revenue in the Appeals related to other assessment years of the same Assessee in M/S. DECO DE TREND [2013 (8) TMI 14 - MADRAS HIGH COURT] held that process which the assessee had undertaken satisfies the test of manufacture to qualify for relief under Section 10B - apart from cleaning and grading, the assessee had taken further processing; that what is purchased as raw material and what is exported as a product for export are totally different items. The process that the assessee had undertaken clearly points out the irreversible nature of the final end product from a raw material purchased - Decided against Revenue.
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2020 (2) TMI 847
Addition to income declared - Taxability as income in the hands of assessee - surplus earned from functioning of PDS on behalf of Government - concession component received by the assessee Government company in the course of implementing government projects of PDS concession component received by the assessee Government company in the course of implementing government projects of PDS - HELD THAT:- CIT(A) is justified in deleting the addition made by the Assessing Officer by stating that surplus earned from functioning of PDS on behalf of Government cannot be taxed in the hand of the assessee. In view of the above stated facts and findings we uphold the order of the Ld.CIT(A).
The various other decisions relied on by assessee in the paper book also supports its case. The submission of the ld. counsel for the assessee that in subsequent years, since subsidy receipt has been accepted by the Revenue, although u/s 143(1), and no action u/s 147 or 263 has been taken could not be controverted by the ld. DR. We, therefore, are of the considered opinion that the concession component received by the assessee Government company in the course of implementing government projects of PDS as its agent, the surplus of which, if any, was refundable or adjustable in future was not income of the assessee.
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2020 (2) TMI 836
Reopening of assessment u/s 147 - withdrawing the exemption granted u/s.54B of the Act on the ground that the property was brought not in the name of the assessee but in the name of different persons - HELD THAT:- Assessing Officer recorded a finding that second assessment was based on the same fact of materials available on record. There is no reference to any fresh tangible material brought on record. It is amply clear from the assessment order that the Assessing Officer had made observation ‘’subsequently on perusal of the records showed that the assessee had claimed an exemption u/s.54B towards purchase of agricultural land under different names’’.
This goes to show that reopening is based on the same set of facts which are available with the Assessing Officer at the time of making original assessment. Assessing Officer allowed exemption u/s.54B of the Act after considering the material available on record and took plausible view. Therefore we can safely conclude that reopening of assessment is only based on change of opinion on the same set of facts which are available with the Assessing Officer at the time of framing the original assessment order
As relying on M/S. KELVINATOR OF INDIA LIMITED [2010 (1) TMI 11 - SUPREME COURT] we hold that reopening the assessment is bad in law. Accordingly, we squash the reassessment proceedings and allow the appeal of the assessee.
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2020 (2) TMI 846
Exemption u/s 10(23A) to Bar Council - exemption certificate in favour of the Chhattisgarh State Bar Council was produced - exemption which was considered and allowed, granting exemption from '2006-07' onwards - Department pointing out that, as per the scheme of statute, unless there was a specific order granting exemption in terms of Section 10(23A) of the Act of 1961, no relief could be extended - HELD THAT:- During the course of hearing, it is virtually conceded that there is no dispute with regard to the genesis of the case; particularly, as to the formation of the new State of Chhattisgarh, after having the same carved out from the erstwhile undivided State of Madhya Pradesh. It is also a fact conceded that there has to be only one Bar Council for the entire State as per the scheme of the Advocates Act and that the Bar Council of the undivided State was granted exemption in terms of Section 10(23A) of the Act of 1961.
After formation of the new State of Chhattisgarh, pursuant to the Act of 2000, the erstwhile Bar Council came to be separated as two different Bar Councils. Needless to say that a formal application had to be submitted by the Chhattisgarh State Bar Council for continuing to enjoy the benefit of exemption, but that is only a technical and procedural formality, insofar as the formation of new State and formation of the new State Bar Council is a statutory consequence. This being the position, this Court is of the firm view that the analysis made by the learned Single Judge with regard to the course pursued by the Department and declaration of eligibility of the Chhattisgarh State Bar Council to get exemption in terms of Section 10(23A) of the Act of 1961 are not liable to be interdicted in any manner.
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2020 (2) TMI 845
Additions made on the basis of loose papers found and impounded from the premises of the assessee - Presumption u/s 292C - CIT(A) applying the telescoping reduced the addition giving partial relief to the assessee - ITAT confirmed the order of CIT(A) - HELD THAT:- There is nothing on record to come to the conclusion that the Tribunal has ignored the material which is required to be considered or has taken into consideration the material which is not relevant. Moreover, it is not the case of the Revenue that the Tribunal has arrived at the aforesaid finding of fact without any evidence. Therefore, the application of Section 100 of the Indian Evidence Act cannot be said to be ignored by the Tribunal, as canvassed by the Revenue.
In the facts of the case, the Tribunal has considered in detail in respect of each of the additions deleted by the CIT(A) and after analysing the material, the Tribunal has confirmed the order passed by the CIT(A). As such there are concurrent finding of fact as stated hereinabove, it cannot be said that the order of the Tribunal is perverse in upholding the order passed by the CIT(A) deleting the additions made by the Assessing Officer on the basis of loose papers found and impounded from the premises of the assessee. The Tribunal has also upheld the inference drawn by the CIT(A) under Section 292C of the Act, 1961 so as to sustain the additions made by the CIT(A).
Tribunal has given cogent reasons and arrived at conclusion on the basis of the materials and the fact found on record, which cannot be interfered in absence of any material on record to show the contrary fact on record. - Decided against Revenue.
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2020 (2) TMI 835
Non commencement of business - disallowance of business loss on the ground that business was not actually started on commercial basis - income from credit report is not shown - HELD THAT:- AO has not disputed these aspects. He is only drawing adverse inference that the assessee has not able to submit credit report to any customer during the period and has not shown any income therefrom - when the business has been set up and operation duly commenced after due approval of RBI, the Assessing Officer cannot deny the aspect of commencement of business only on the ground that income from credit report is not shown - there is no law that in business duly incurred business expenditure cannot be allowed if little income has been earned - CIT(A) has very elaborately considered his aspect. and held that business has been set up the assessee had duly shown that capital, regulatory permission, available infrastructure, employees are all available and in place. Assessing Officer is incorrect that the assessee has adopted colorable device. - Decided in favour of assessee.
Disallowance of payment to related party u/s. 40A(2)(b) - HELD THAT:- This aspect that the said party is not related party u/s. 40A(2)(b) was never submitted by the assessee before the Assessing Officer. In fact when the Assessing Officer issued a questionnaire in this regard, the assessee has only explained the business exigency of expenditure.
It had never explained that the said party is not falling under section 40A(2)(b). CIT(A)’s factual finding that the assessee was not holding specific stake in the said party and hence it was not falling u/s. 40A(2)(b) has not been examined by the Assessing Officer - remit this issue to the file of the Assessing Officer for factual verification. Accordingly the issue stands remitted.
Disallowance of bonus u/s. 43B - HELD THAT:- CIT(A) has given factual finding that impugned payment have been done before the due date. This has not been disputed by the Revenue.
CIT(A) is correct in holding that the Assessing Officer is not justified in sitting in the shoes of businessman and deciding whether the assessee’s employees are deserving bonus or not. In our considered opinion there is no infirmity in the order of learned CIT(A) in this regard. Hence, we uphold the same.
Addition of share capital u/s. 68 - assessee is not giving financials and share capital is routed through Mauritius - HELD THAT:- It is settled law that powers and duty of learned CIT(A) are co-terminus with that of the Assessing Officer. If the Assessing Officer has failed to issue notices which are crucial, it was incumbent upon learned CIT(A) to himself ask for the financial and give findings about the same. We find that in absence of financial statement, only RBI approval alone cannot be said to have fully proved creditworthiness of the party. It is settled law that the Income Tax Officer is entitled to make necessary examination, which is considered necessary under the provisions of Income Tax law. Furthermore KAPURCHAND SHRIMAL VERSUS COMMISSIONER OF INCOME-TAX, AP [1981 (8) TMI 2 - SUPREME COURT] has expounded that it is the duty of the appellate authority to correct the error in the order of the authority below and remit the matter for reconsideration with or without direction unless prohibited by law. Accordingly, in the interest of justice, we remit this issue to the file of the Assessing Officer.
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2020 (2) TMI 834
Penalty u/s 271(l)(c) - defective notice - non specification of charge - Assessee concealed his income from proprietary concern in which name the assessee has opened two bank accounts and made addition on maximum peak credit in both the accounts - HELD THAT:- There is no dispute that the AO during the assessment on the basis of AIR information noted that the assessee was maintaining bank accounts with HDFC Bank Ltd in the name of proprietary concern Krishna Enterprises. The income from Krishna Enterprises was not disclosed by assessee in the income offered for taxation. The AO added peak credit of both the bank accounts. The AO while passing the assessment order initiated penalty for concealing the particulars of income and furnishing inaccurate particulars of income. However, while levying the penalty, the AO levied penalty only for concealment of income.
In reply to the show cause notice the assessee explained that due to oversight the assessee could not disclosed the bank account. However, the AO while levying penalty not accepted the explanation furnished by assessee. The AO recorded that the assessee has not disclosed the transaction in the bank statement of his proprietory concern. The AO nowhere recorded that the assessee was with some other name or running more than one proprietorship.
We noted that the AO, failed to discharge his onus as he was not sure at the initiation of penalty under section 271(1)(c) for which specific charge of penalty has been initiated by the AO. Even while levying the penalty also, the AO simply relied on the Explanation 1to s. 271(1)(c). Therefore, in our opinion, the basis of levy of penalty itself is not correct.
Basis of levy of penalty itself is not correct. Thus, we direct the assessing officer to delete the penalty. In the result the appeal of the assessee is allowed.
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2020 (2) TMI 833
Revision u/s 263 - provision towards warranty was wrongly allowed by the AO - provision for warranty allowed based on past figures of claims against provisions made and hence said claim of provision towards warranty was wrongly allowed by the AO - HELD THAT:- We find the method adopted for making claim for provision for warranties as fair and reasonable and in our considered view the AO did formed an proper opinion after making due enquiries and verification while allowing claim of deduction of provisions for warranties for the impugned ay while framing scrutiny assessment , as also it is observed that it was a recurring issue for AO which is arising every year after year as it framed scrutiny assessment against assessee for preceding ay’s also for ay: 2010-11 to 2012-13 and in those years also the assessee made claim for deduction towards provision for warranties which was allowed by the AO in scrutiny assessment and Revenue finally accepted those orders so far as claim for deduction towards provision for warranties is concerned and it could not be shown that these orders for ay: 2010-11 to 2012-13 were interfered by Revenue by invoking provisions of Section 147 or Section 263 or any other provisions of the 1961 Act. It is settled proposition now that claim for deduction towards provisions for warranties made on the basis of past experience based on statistical data by adopting scientific method to fulfill contractual obligation arising out of concluded contracts of sale/services is an ascertained liability .
Reference is drawn to decision of Hon’ble Supreme Court in the case of Rotork Controls India Private Limited v. CIT [2009 (5) TMI 16 - SUPREME COURT] . Under these circumstances based on totality of facts and circumstances of the instant case before us, we are inclined to quash the revisionary order dated 30.03.2019 passed by learned PCIT u/s.263 of the Act and hold that the assessment order dated 27.02.2017 passed by AO was not erroneous in so far as prejudicial to the interest of Revenue. We order accordingly.
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2020 (2) TMI 844
Deduction u/s 80IA - Whether process of converting raw Urad into Urad Dhal was a manufacturing activity ? - HELD THAT:- As relying on M/S. MUTHURAMALINGAM MODERN RICE MILL [2019 (3) TMI 1104 - MADRAS HIGH COURT] Tribunal was justified in holding that the process of converting raw Urad into Urad Dhal is a manufacturing activity undertaken by the Assessee and therefore, the Assessee was entitled to deduction under Section 80IA of the Act. - Decided in favour of assessee
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2020 (2) TMI 832
Deduction u/s 80P - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT:- CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety.
The 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 of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to 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 Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative 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 of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon’ble jurisdictional High Court 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. Appeals filed by the assessee are partly allowed for statistical purposes.
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2020 (2) TMI 830
Notice u/s. 143(2) - Non issuing mandatory notice u/s 143(2) on the second revised return of income - HELD THAT:- AO has assumed valid jurisdiction in this case by issue of proper notice u/s. 143(2) of the Act within the time contemplated by law. The original return u/s. 139(1) of the Act has not been treated as non est and the revised return is only for the purpose of certain errors and mistakes in the original return. In such circumstances, there is no requirement of law to issue a notice u/s. 143(2) of the Act with reference to revised return. We derive support for the aforesaid conclusions from the decision of Vinod Kumar Khatri v. DCIT [2015 (11) TMI 1140 - DELHI HIGH COURT] . We are therefore of the view that there is no merit in grounds No.1 & 2 raised by the assessee and accordingly the said grounds are dismissed.
Nature of receipt - subsidy grant from the State Govt. - revenue or capital receipt - HELD THAT:- The admitted factual position as it emanates from the order of AO and the CIT(Appeals) is that the assessee did not file a copy of the scheme under which subsidy was received by assessee. In the absence of details of the scheme, it is not possible to decide the question, whether the subsidy is capital or revenue in nature. Since the burden was on the assessee to show that the subsidy received was capital receipt not chargeable to tax and since the assessee failed to do so, we uphold the order of CIT(Appeals) on this issue and dismiss grounds 4 & 5.
Rejection of the claim of assessee for grant of weighted deduction u/s. 35(2AB) - HELD THAT:- As we have already mentioned that the approval for grant of recognition to the prescribed authority was made by the assessee only on 12.5.2011 and not at any time during the relevant previous year. We are of the view that the order of CIT(Appeals) should be upheld on this basis. We may also mention a similar claim has been made by the assessee in AY 2011- 12 which is also being decided in this common order and in that year the assessee would be entitled to the benefit of deduction u/s. 35(2AB) as the approval was received on 12.5.2011 during the previous year relevant to AY 2011-12. We will discuss this issue while deciding the relevant ground of appeal for AY 2011-12. As far as AY 2010-11 is concerned, we are of the view that there is no merit in grounds No.6 to 10 and consequently they are dismissed.
Deduction u/s. 80IA of the Act in respect of income derived from power generation out of 4 windmill units - allocation of proportionate expenses relating to windmills on the basis of turnover, particularly when the assessee had not maintained separate books of accounts in respect of windmills - HELD THAT:- Revenue has not disputed the fact that neither the operating & maintenance expenses, employee cost and other finance & administrative expenses nor the claim of depreciation, is attributable to the windmill unit and this finding of fact remains uncontroverted. The question of allocation of expenses therefore will not arise for consideration at all. We therefore find no merit in ground No.1.
Higher depreciation on internal road laid for approach to windmills - HELD THAT:- These grounds are related to the profits of the windmill unit for which deduction u/s. 80IA was claimed by assessee. It is not in dispute before us that identical issue was raised by revenue in assessee’s own case for AYs 2008-09 & 2009-10 find that the road in question are not the proper roads constructed for the purpose of transportation or any other use, but these are operating condition for generation of power. Accordingly, when the roads in question are integral part of the installation work of the wind-mill, the same is eligible for depreciation applicable on the wind-mill. In view of the above facts and circumstances of the case, we do not find any reason to interfere with the impugned order of the CIT(A)
Brought forward (notionally) the losses of the earlier years in respect of the eligible business to set it off against the income of the current year in terms of the provisions of Section 80IA(5) - HELD THAT:- It is not in dispute before us that in AY 2008-09 in assessee’s own case similar issue had come up for consideration and this Tribunal held that the brought forward losses of the earlier years need not be set off against the income of the current year on which deduction u/s. 80IA of the Act was to be allowed to the assessee.
Addition made towards notional interest on interest free loan given to the Associated Enterprise - HELD THAT:- Special Bench of ITAT Kolkata in the case of Instrumentariam Corporation Ltd. v. ADIT (IT) [2016 (7) TMI 760 - ITAT KOLKATA] held that interest-free loans are subject to the provisions of section 92 of the Act and the ALP of such transaction have to be determined. We are of the view that the conclusion of the CIT(Appeals) that the provisions of section 92 of the Act were not attracted, cannot be sustained. We, however, remand the question of determination of ALP to the AO/TPO, who shall in accordance with the provisions of section 92 refer the question of determination of ALP interest to the TPO, only with regard to rate of interest to be adopted in adopted in determining the ALP of the interest payment.
Claim for deduction u/s. 10B - HELD THAT:- Assessee’s declaration for opting out of provisions of section 10B for AYs 2008-09, 2009-10 & 2010-11 was not mentioned in Form 3CD filed before the AO. In our view, this is purely a technical objection. The Assessee has given declaration opting out of the provisions of Sec.10B of the Act for the relevant AYs and copies of those declarations are placed relating to appeal for AY 2011-12. Once the assessee opts out of provisions of section 10B for a particular year, then the losses/unabsorbed depreciation in that year will not be considered while allowing deduction u/s. 10B of the Act for the eligible period when deduction is claimed in a subsequent AY. In view of the above legal position, we find no merit in the ground No.8 raised by the revenue. Accordingly the same is dismissed.
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2020 (2) TMI 843
Addition u/s 37 - HELD THAT:- Appeal be admitted on the following substantial questions of law :
A. Whether on the facts and in the circumstances of the case and in law, Tribunal was right in upholding the orders of the lower authorities and disallowing the amount of ₹ 87,61,920.65 paid to Al Azhar Trading Company, Dubai and ₹ 1,78,676.00 paid to Kirloskar Middle East FZE (KMEF) by invoking the provisions of Explanation 1 to Section 37 of the Income Tax Act, 1961 ?.
B. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the payment of ₹ 87,61,920.65 paid to Al Azhar Trading Company, Dubai and ₹ 1,78,676.00 paid to Kirloskar Middle East FZE (KMEF) was an illicit payment prohibited under the provisions of Indian Law, without coming to any specific finding as to which provision/statute of Indian law the appellant had violated ?.
C. Whether on the facts and in the circumstances of the case and in law, the findings of the Tribunal are perverse on the basis of the facts on record ?.
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2020 (2) TMI 842
Action on the complaint of the petitioner sent through speed post - Request for necessary investigation may be done against private respondents - Writ of Mandamus - HELD THAT:- Shri Dhan Prakash Budhraja, who has sworned the affidavit in the present petition, has neither stated in the writ petition in respect of filing of earlier petitions nor brought to the notice of this Court. He said that when the present petition was taken up for argument or when the arguments were advanced by Shri Dinesh Kumar Singh, Advocate for the petitioner, the said facts were brought to notice of this Court by Shri Manish Misra, learned counsel for the opposite party. So, the same act is nothing but amount to suppression of material facts on the part of the petitioner.
It is settled law that one should approach the court with clean heart and clean mind to get a relief and one who does not come with clean heart and clean mind, dis-entitles himself from getting any relief from the Court. From what has been mentioned above, it is clear that the petitioner has filed this writ petition with oblique motives and has not presented the correct facts just to gain undue advantage. Such type of practice should always be discouraged and is highly deprecated. They belong to the category of persons who not only attempt, but succeed in polluting the course of justice.
"Fraud" as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud."
Thus, keeping in view the above said facts, the present writ petition is liable to be dismissed on the ground of concealment of facts in respect of the filing of the earlier writ petitions.
In addition to the above said facts, the prayer as made by the petitioner in the present writ petition for issue of writ of mandamus to the opposite party no. 1 i.e The Commissioner Income Tax (Investigation), Lucknow, cannot be granted because for issue of writ of mandamus the first essential requirement is that the authority against whom writ of mandamus is sought, has got the legal duty, to issue writ of mandamus and further the person/petitioner who has sought for writ of mandamus should have approached the authority concerned after making request, the petitioner/person who made request should have approached the said authority to pay heed in regard to the request which was made by him and if the said authority is to act upon only the cause of action on the part of person who approached for issue of writ of mandamus under Article 226 of Constitution of India.
"Mandamus" is a Latin word. Literally, it means a "command" or an "order" which directs a person or authority to whom it is addressed to perform the public duty imposed on him or on it.
A writ of mandamus is an extraordinary remedy. It is not a writ of right. It is intended to supply deficiency in law and is thus a discretionary remedy. A court may refuse to issue mandamus unless it is shown that there is clear right of the applicant or statutory or common-law duty of the respondent and there is no alternative remedy available to the applicant. Like any other discretion, however, discretion to issue mandamus also must be exercised fairly reasonably and on well-established legal principles.
Applicant approaching a writ court must show that he himself has legal right which can be enforced. If he is not directly or substantially affected, he cannot maintain a petition of mandamus. (See Charanjit Lal Chowdhury v. Union of India, 1950 (12) TMI 17 - SUPREME COURT]
The second requirement for a writ of mandamus is that the opposite party must have a legal duty to be performed. A legal duty must have been imposed on the authority by the constitution, a statute or by common law and the performance of that duty should be imperative, not discretionary or optional. There must be in the applicant a right to compel the performance of some duty cast on the opponent. (See State of MP. v. G. C. Mandawar [1954 (5) TMI 28 - SUPREME COURT]
For the foregoing reasons, we hereby dismiss the writ petition with a cost of ₹ 50,000/- which should be deposited by the petitioner Shri Dhan Prakash Budhraja within a period of four weeks from today before the Senior Registrar of this Court and the amount so deposited shall be sent to the Legal Service Authority of the State of U.P.
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2020 (2) TMI 841
Disallowance of depreciation - HELD THAT:- We admit this appeal on the first question of law as proposed, but with little modification - “Whether the Appellate Tribunal has erred in law and on facts in upholding the decision of the CIT (A) in deleting the addition of the amount of disallowance of depreciation of ₹ 20,58,80,087/- for acquiring the license of application software?”
Disallowance of interest expense - HELD THAT:- Tribunal has placed reliance on the decision of the Supreme Court in the case of CORE HEALTH CARE LTD. [2008 (2) TMI 8 - SUPREME COURT] has taken the view that the interest paid in respect of the borrowings for acquisition of capital assets is allowable under Section 36(1)(iii) of the Act regardless of the fact that the capital assets acquired were not put to use in the concerned financial year in question. We dismiss this appeal so far as the second question of law, as proposed by the Revenue,
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2020 (2) TMI 840
Prosecution u/s 276C and 277 - Reopening of assessment - petitioner had willfully and deliberately failed to file returns of income without reflecting the investment in the form of bank balance in a foreign bank account, thereby, attempted to evade tax - application for compounding the offence under Section 279 filled - HELD THAT:- As per Section 279(1A) of the Income Tax Act, 1961, a person shall not be proceeded against for an offence under Section 276C and Section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under clause (iii) of sub- section (1) of section 271 has been reduced or waived by an order under section 273A. This aspect ought to have been kept in mind. In this case, the penalty was reduced by Commissioner of Income Tax (Appeals).
These factors should also kept in mind by the respondents.
Respondents shall also consider the age of the petitioner and his status in society while deciding the case of the petitioner. The fact that petitioner has been subjected to the prosecution from 2011 is itself also an adequate punishment. This factor also should be kept in mind by the respondents while disposing the case. If the petitioner has no other cases against him, the respondents shall consider compounding application for compounding the offence favourably in favour of the petitioner subject to payment of appropriate compounding fees by the petitioner. I am therefore of the view that the impugned order is liable to be quashed and the application filed by the petitioner should be re-examined by the respondents in the light of the liberalised policy of Central Board of Direct Taxes in its clarification dated 14.06.2019, Section 279(1A) and other facts mentioned herein.
Petitioner’s case deserves to be considered by the respondents in the light of the liberalised policy since the petitioner’s application was entertained after the new guideline came into force. Also for the same reason, it cannot be construed that the respondents committed contempt of this court since the order did not specify the same.
The respondents shall pass appropriate orders within a period of three months from the date of receipt of a copy of this order in the light of the observation contained herein. Needless to state, petitioner shall also be heard in person or through authorised representatives/legal representatives.
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2020 (2) TMI 829
Validity of reopening of assessment - action of AO in completing the assessment without providing a copy of reasons recorded u/s 148(2) - HELD THAT:- The requirement of supply of reasons u/s 148 of the Act when the assessee has specifically requested for the same after complying with the notice u/s 148 is sine qua non and goes to the root of the jurisdiction of the AO. In our opinion, the assessment framed without supplying reasons recorded u/s 148 deprives the assessee from filing the objections to the said reopening. Therefore the assessment framed by the AO without supplying reasons is without jurisdiction and cannot be sustained. The case of the assessee is squarely covered by the decision of hon’ble jurisdictional High Court in the case of CIT vs. M/s IDBI Ltd. [2016 (10) TMI 166 - BOMBAY HIGH COURT] - The appeal of the assessee is allowed on legal issues.
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2020 (2) TMI 828
Condonation of delay - assessee has not filed the appeal electronically within the time before the appellate Commissioner - assessee had already filed the appeal in paper form - HELD THAT:- Assessee had already filed the appeal in paper form, however only the e-filing of appeal has not been done by the assessee and according to us, the same is only a technical consideration. In this respect, we rely upon the judgement of RANI KUSUM VERSUS KANCHAN DEVI & ORS. [2005 (8) TMI 709 - SUPREME COURT] wherein has reiterated that if in a given circumstances, the technical consideration and substantial Justice are pitted against each other, then in that eventuality the cause of substantial Justice deserves to be preferred and cannot be overshadowed or negatived by such technical considerations.
Apart from above we have also noticed that in case titled Gurinder Singh Dhillon Vrs. ITO [2017 (4) TMI 1359 - ITAT DELHI] had restored the matter to the file of Ld. CIT(A) under identical circumstances with a direction do decide appeal afresh on merit, after condoning the delay, if any.
Since in the present case, we find that appeal in the paper form was already with CIT(A), therefore in that eventuality the Ld. CIT(A) ought not to have dismissed the appeal solely on the ground that the assessee has not filed the appeal electronically within the time before the appellate Commissioner.
We remit this matter back to the file of CIT(A) with a direction to consider the appeal filed by the assessee after condoning the delay and matter to be heard on merits after giving proper opportunity to the assessee. - Decided in favour of assessee for statistical purposes.
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2020 (2) TMI 839
Reopening of assessment u/s 147 - Period of limitation u/s 149 - jurisdiction of income tax officer to issue notice - rejection of the objection of the petitioner - HELD THAT:- It cannot be said that the notice issued under Section 148 of the Income Tax Act, 1961 was without jurisdiction. However, if an order is passed by the assessing officer under Section 147 of the Income Tax Act, 1961 contrary to the well-settled principles of law or despite true and full disclosure of all material facts necessary for the assessment, such order would be liable to be quashed.
At the same time, if in the course of such reassessment, the 2nd respondent assessing officer finds any other reasons for justifying reopening of the assessment on some other point, he may do so. Such exercise cannot be stifled under Article 226 of the Constitution of India.
Otherwise, the Court would be rendering the Explanation III of the Income Tax Act, 1961, redundant which is not intended. At the same time, confirmation of tax in the course of re-assessment under Section 147 of the Income Tax Act, 1961 has to again satisfy the well-settled principles of law i.e only if there was a failure on the part of the assessee to truly and fully disclose, all material facts that was required at the time of original assessment.
No merits in interfering with the reassessment procedure hitherto undertaken by the 2nd respondent assessing officer. At the same time, it is made clear that while passing orders under Section 147 of the Income Tax Act, 1961, the 2nd respondent assessing officer will have to pass an appropriate order on merits considering the decision of the Hon'ble Supreme Court rendered in Commissioner of Income Tax and Another Vs. M/s. Yokogawa India Ltd. [2011 (8) TMI 845 - KARNATAKA HIGH COURT] and the other well-settled principles of law. It is made clear that the order to be passed cannot be based on change of opinion if there was true and full disclosure by the Petitioner at the time of filing of the return.
Writ Petition disposed by directing the Petitioner to participate in the adjudicatory mechanism before the concerned Respondent. The respondent shall pass appropriate orders after considering the submission of the Petitioner and after taking note of the decisions of the Hon'ble Supreme Court.
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2020 (2) TMI 838
Benefit of Section 80P - petitioner is seeking for prayer to treat it as Co-operative on par with Co-operative registered under the Karnataka Cooperative Societies Act, 1959 - HELD THAT:- Identical issue had come-up in M/S. SWABHIMANI SOUHARDA CREDIT CO. OPERATIVE LTD [2020 (1) TMI 831 - KARNATAKA HIGH COURT] - The respondents to pass fresh assessment order treating the petitioner as Co-operative Society and extending the benefit under Section 80P
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2020 (2) TMI 837
Deemed profit in Section 44AD - profit earned by the appellant is more than the percentage of profit - appellant, submits Subsection 5 thereof was not applicable to the assessment of the assessee’s income for the subject assessment year - Whether assessee was not required to maintain audited books of account in respect of the transaction -, the appellant is aggrieved for non-admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963
HELD THAT:- Same should be borne in mind by the learned tribunal in deciding the matter afresh as we propose to direct. Part of the impugned order dated 24th August, 2018 which relates to the questions formulated in paragraph 7 of the petition is set aside with a direction upon the tribunal to reconsider the matter afresh, deciding the applicability of Section 44AD particularly sub-Section 5 thereof, by admitting additional evidence as prayed for under Rule 29 of the said Rules, 1963 and also dealing with the questions of law and facts raised in paragraph 7 of the petition by a reasoned order within six months of communication of this order.
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2020 (2) TMI 827
Deduction u/s. 80IA - Fluoride Removal Unit and Arsenic Removal Units - assessee engaged in the business of developing, operating and maintaining community water system and contamination removal water system - HELD THAT:- Explanation to section 80IA(4) makes it clear that infrastructure facility means a water supply project, water treatment system, irrigation project, sanitation and sewage system or solid waste management system. From the above, it is abundantly clear that the assessee shall be entitled for deduction u/s. 80IA(4) with respect to operating and maintaining of the water treatment system / water supply project. It is also clear that the assessee is not a developer but only operating and maintaining the water treatment system / water supply project.
The contract work entrusted to the assessee for procurement and supply of water treatment system / water supply project will obviously not fall under the ambit of section 80IA (4) which the Ld. CIT (A) had also made it clear in his order by disallowing the deduction for supplying Fluoride Removal Unit and Arsenic Removal Units and it is appropriate. For procuring, supplying and erecting water treatment plant by virtue of job contract, the assessee will not be entitled for deduction U/s. 80IA(4) of the Act unless he is a developer and from the facts of the case it is apparent that the assessee is not a developer.
Accordingly, we hereby hold that:-
(i) The assessee shall be entitled for the benefit of deduction u/s. 80IA(4) of the Act with respect to the profit earned out of operating and maintaining water treatment system / water supply project;
(ii) However, the assessee shall not be entitled for benefit of deduction u/s. 80IA(4) of the Act with respect to the profit earned by supplying and erection of water treatment system / water supply project / Fluoride Removal Unit and Arsenic Removal Units as it is not a developer but only engaged in the task as works contractor.
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2020 (2) TMI 826
Capital gain computation - addition on account of reducing the cost of acquisition FMV as on 01.04.1981 - what is the FMV of a property purchased in 1972 as on 1.4.1981 would be ? - HELD THAT:- It can only be ascertained on the basis of some scientifically estimate formula. There are various methods provided under different enactments i.e. rent capitalization method, trend in the market, or what is the potential value on the strength of comparative sale instance. The ld.Registered valuer has adopted method on the basis of comparative sale instance. He thereafter made little adjustment considering peculiar facts of the land.
This is an opinion of the expert, and contrary to this nothing has been collected by the Revenue. There is no justification to reject this study merely under the reasoning that a single instance which is little closure to the date of transaction is to be taken into consideration. To our mind, this approach is not justifiable hence we set aside the finding of the Revenue authorities on this issue, and direct the AO to compute capital gain by adopting the land rate of ₹ 150 per sq.meter as on 1.4.1981. He would thereafter give benefit of indexation on the alleged value of ₹ 8,24,000/-.
Enhancment of the acquisition cost - Addition of ₹ 20 lakhs as assessee has given this piece of land on rent to “PPP” - AO has not justified in rejecting contentions of the assessee. It is pertinent to note that “PPP” has shown gains from business or profession at ₹ 13,31,916/-. It has shown short term capital gain on sale of shed under section 50. Its tax liability has been worked out at ₹ 5,93,419/-. Contrary to this, the assessee would show long term capital gain on sale of this shed. The assessee has disclosed sale value of the land at ₹ 7,92,00,000/-. Hardly inclusion of ₹ 20 lakhs or exclusion would make any difference to the assessee who is filing return of more than ₹ 7.76 crores. To our mind, sum of ₹ 20 lakhs was very small amount in comparison to ₹ 7.92 corees, and the assessee would not involve in manipulation of this small amount, when such huge sale consideration is available. Modus operandi at the end of the assessee could be construed, had there been a bigger allocation made by the assessee for reducing the tax liability. All these factors are to be weighed while appreciating the stand of the assessee vis-à-vis reasoning given by the AO. He has not given any concrete reasons, rather simply disbelieved the version of the assessee. Therefore, we do not find force in the reasoning of the AO. We direct the AO to delete the addition of alleged ₹ 20 lakhs, and consider this amount as improvement cost of the capital asset whose sale has given rise to the capital gain. Appeal of the assessee is allowed.
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2020 (2) TMI 825
Disallowance of interest expenditure on the loan raised and utilized for the purpose of purchasing stock in trade - addition u/s 37 - HELD THAT:- With regard to disallowance of interest expenditure, it is not in dispute that the business operation of the assessee for construction of NH5 was not commenced and it is only in a preparatory stage. For the assessment years 2010-11, 2011-12 and 2012-13, an identical issue came before this Tribunal as found that since the business has not commenced, the assessee cannot claim the expenditure U/s.37 of the Act. Since, the facts are similar to that of the assessment years 2010-11, 2011-12 and 2012-13, this Tribunal is of the considered opinion that the claim of expenditure towards interest cannot be allowed as revenue expenditure. Therefore the order of both the authorities below is confirmed.
Disallowance u/s.14A - Admittedly the assessee had not earned any exempt income in the year under consideration. The Madras High Court in the case of M/s. Redington (India) Ltd. [2017 (1) TMI 318 - MADRAS HIGH COURT] found that unless there was an exempted income, there cannot be any disallowance U/s.14A of the Act. In view of the judgment of the Madras High Court in M/s. Redington (India) Ltd., this Tribunal is of the considered opinion that there cannot be any disallowance. The judgment referred by the CIT(A) is not relevant to the facts of the present case. The judgment of Madras High Court is binding on all authorities in the State of Tamil Nadu and Pondicherry including this Tribunal. Therefore this disallowance made by the Assessing Officer U/s.14A of the Act is deleted.
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2020 (2) TMI 798
Reopening of assessment - HELD THAT:- We reserved the judgment on 30th October, 2019. We have not been able to pronounce the same on account of the heavy workload. In the meantime, the period of limitation for the completing the reassessment will expire on 31st December, 2019. In these circumstances, the petitionerprays that the reassessment order that may be passed may not be enforced till the pronouncement of the judgment.
In our view, the prayer is reasonable. We accordingly allow the same. Though the reassessment order may be passed but shall not be given effect to till the pronouncement of judgment.
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2020 (2) TMI 824
Levy of penalty u/s 271(1)(c) - forex loss was claimed as revenue expenditure - HELD THAT:- It is true that the assessee has claimed forex loss as revenue expenditure. It is equally true that once the Assessing Officer has disallowed the same, the assessee did not agitate the matter before the first appellant authority which is evident from the order of the ld. CIT(A) – 35, New Delhi dated 04.10.2017 wherein we can find grounds relating to foreign exchange loss of ₹ 21.22 crores was never pressed by the assessee and the same were dismissed.
Going deep into the facts of the case, we find that the appellant company is operating with no employees and is under liquidation with no business operations. It is has sold its entire business vide agreement dated 31.07.2012 w.e.f 01.04.2012. All the employees of the assessee got transferred and it is managed by a liquidator. We find that the assessee had disclosed ECB to the tax auditor. However, while preparing the return of income, due to inadvertent unintentional error, forex loss was claimed as revenue expenditure.
In our humble opinion, inadvertent claim of expenditure would not, ipso facto, amount to concealment of income or furnishing of inaccurate particulars of income to levy penalty u/ 271(1)(c) - See Reliance Petro Products [2010 (3) TMI 80 - SUPREME COURT] and the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd [2012 (9) TMI 775 - SUPREME COURT] - Decided in favour of assessee.
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Customs
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2020 (2) TMI 823
Benefit under EPCG license - inaction on the part of the respondents in not issuing a letter / certificate clarifying whether M/s. Electrotherm (India) Limited located within the jurisdiction of the respondent No.3 has utilised the invalidation letter or not - HELD THAT:- Prima facie, it appears from the contents of the letter that the matter is under consideration. However, we direct the Additional Director General of Foreign Trade to expedite the matter and furnish the necessary information asked for by the writ applicant at the earliest. Application disposed off.
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2020 (2) TMI 822
Direction to the Respondents to finally assess the Petitioner’s Bills of Entry - Release of Bank Guarantee and Bonds - gross delay in making the final assessment - HELD THAT:- The learned Counsel for the Petitioner states that he is satisfied with this statement and prays that the order be passed after giving due hearing. Needless to state that the order will be passed as per the Rules and the law.
Petition disposed off.
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2020 (2) TMI 821
Penalty u/s 112(b)(i) of the Customs Act - smuggling - Chinese crackers - demand based on statements of the co noticees - retraction of statements - HELD THAT:- Apart from the statement of Shri Harish Goyal , there is virtually no other evidence to establish that the appellant was, in any case, associated with the import of the goods in question, neither the bill of entry was filed by him - The entire case of the Revenue is based upon the retracted statements of the co noticees. It is well established law that the statements of the co-noticees, unless corroborated in material particulars by independent evidence, do not constitute the legal evidence.
There are no justification for imposition of penalty upon the appellant - appeal allowed - decided in favor of appellant.
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2020 (2) TMI 856
Import of Poppy Seeds - prohibited goods or not - validity of guidelines dated 13th September 2019 for the registration of the sales contract for the import of the poppy seeds from Turkey to India issued vide Public Notice No.PS-11-2019 - HELD THAT:- We take notice of the fact that the guidelines dated 25th June 2019 issued by the Central Bureau of Narcotics to regulate the import into India of the poppy seeds was the subject matter of challenge before the Bombay High Court in the case of Chailbihari Trading Private Limited and another v. Union of India and another [2019 (8) TMI 1387 - BOMBAY HIGH COURT] - the Bombay High Court took the view that there is a power to regulate and a power to impose quantitative restrictions, and in the absence of challenge to the exercise of such power, the guidelines in the form of policy cannot be declared as ultra vires the provisions of the Constitution of India. The Bombay High took the view that the guidelines are a step towards implementing a policy that had been in place past couple of years but, was in furtherance of a policy to promote the larger public interest.
Although we are not inclined to strike down the guidelines in the form of a policy as ultra vires the provisions of the Constitution of India, yet we remind the Union of India of the observations made by the Delhi High Court in DEVKI GLOBAL CAPITAL PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (9) TMI 1321 - DELHI HIGH COURT].
After the decision of the Bombay High Court referred to above, the policy came to be amended with effect from 13th September 2019. We have already given a fair idea as regards the fine points of distinction between the old policy and the new policy. There has been a remarkable shift in the new policy, however, what is hurting the writ-applicant is the policy of 'first-come-first-serve'. This, according to the writ-applicant, is violative of Article 14 of the Constitution of India.
Needless to mention at this stage that it is the prerogative of the respondents to frame a policy. However, such policy must be transparent, fair and reasonable. We suggest that the Union should consider framing a policy which provides for a fair chance to every applicant in procuring the importable quantity irrespective of the date of their application. Such process must be transparent and fair. The process can be made more transparent if the list of successful candidates is uploaded on the website of the respondent no.2 as was being done before the policy dated 25th June 2019.
Adopting a methodology of first-come-first-serve has inherent flaws and anybody having access to the power corridor at some level is likely to secure unfair advantage at the cost of the other applicants who may not have similar access. In such circumstances, it is suggested that the respondents should device a better mechanism/policy for the allotment of quota so as to make the process much more competitive, transparent, fair and reasonable.
Application disposed off.
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Corporate Laws
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2020 (2) TMI 820
Oppression and Mismanagement - siphoning of funds - alteration of shareholder's composition - HELD THAT:- The interim order having already passed, no further order is required to be passed and the impugned order dated 23rd August, 2019 passed by the Tribunal stands substituted by the interim order already passed by this Appellate Tribunal. The said interim order shall continue till the pendency of the petition under Sections 241-242 of the Companies Act, 2013 - So far as the impugned order dated 27th September, 2019 is concerned, the Tribunal has merely issued notice under Section 45 of the Arbitration & Conciliation Act, 1996.
The impugned order dated 27th September, 2019 need not be interfered with - Tribunal is required to decide the Interlocutory Applications filed under Section 45 after hearing the parties without being influenced by the order passed by the Tribunal or this Appellate Tribunal.
The question does not arise at this stage and may be raised and decided by the Tribunal at appropriate stage - appeal disposed off.
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2020 (2) TMI 819
Oppression and Mismanagement - siphoning of funds - allegation that shares are not listed at Pune Stock Exchange, Siphoning of investors money, Company has not issued financial statement after 1995, Company changes registered office frequently - HELD THAT:- t is clear that in the terms of provisions of Section 62(1) of the Companies Act, 1956 the persons who are authorised to issue or prospectus of the public/persons to subscribe for shares in/or debentures of the company shall be liable to pay compensation to every person who subscribes any shares in/or debentures of the company on the faith of prospectus for any loss or damage. It is also found that the company came out with Initial Public Offer and issued prospectus to raise public funds on 10.10.1996. Thereafter the team of directors has completely changed. The initial promoters of the company are not
We have carefully examined the balance sheets and financial statements for the financial year 2014-15 and 2015-16 which shows that the company has not carried out any business. We have also found that the respondent company has not filed any statements before the ROC since its incorporation. However, the ROC has not taken any action against the company and its directors. We have also seen that the directors have siphoned the money between 1996 to 2004. However, the inspection was ordered on 20th March, 2017 and the report submitted on 10.5.2018 and supplementary report on 13.8.2018 and the Inspecting Officer is unable to trace out real culprits i.e. the then directors.
NCLT has passed the order against the appellant under 2nd proviso to sub- Section (5) of 140 of the Act which came into force on 1.6.2016. However, the appellant issued report for the FY 2014-15 and 2015-16 i.e. prior to the provision came into force. Therefore, NCLT cannot invoke jurisdiction retrospectively - The appellant was appointed on 12.3.2014 as statutory auditor of the Respondent No.2 company. The appellant issued audit report for the Financial Year 2014-15 and 2015-16 on 5.9.2015 and 05.09.2016 respectively. The appellant has issued the audit report for the FY 2015-16 on 5.9.2016 before that the 2nd proviso to sub-section (5) of Section 140 of the Act came into force with effect from 1.6.2016. Hence NCLT can exercise the powers in above referred provision.
The act of the appellant is certainly a negligent act but there is no material on record to infer that he has acted fraudulently and colluded with the directors of the company in relation to affairs of the company or he has misused his position as statutory auditor of the company - the findings of the NCLT are not sustainable in law as well as in facts.
Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2020 (2) TMI 817
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT:- On perusal of the records it is found that having failed to get the outstanding payments from the respondent, the applicant was compelled to issue demand notice under section 8 of I & B Code on 06.06.2018. Record also shows that the respondent has not raised any reply/dispute against the demand notice so issued by the applicant within the stipulated time limit.
This adjudicating authority is of the considered view that operational debt is due to the Applicant and it fulfilled the requirement of IB Code. That, Applicant is an Operational Creditor within the meaning of section 5 sub-section 20 of the Code - From the material on record, petitioner is able to establish that there exists debt as well as occurrence of default and the amount claimed by operational creditor is payable in law by the corporate debtor as the same is not barred by any law of limitation and/or any other law for the time being in force.
It is a fit case to initiate Insolvency Resolution Process by admitting the Application under section 9(5)(1) of the Code - petition admitted - moratorium declared.
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2020 (2) TMI 816
Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- As claimed by the applicants as on date, the Corporate Debtor is liable to pay a sum of ₹ 7,69,417/-, as per Part IV of Form 5, to the applicants - The Applicants have filed an affidavit under section 9(3)(b) dated 29.01.2019 affirming that no notice of dispute has been given by the Corporate debtor relating to dispute of the unpaid operational debt.
The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application - The date of default as per Form V occurred from November 2018, hence the debt is not time barred and the application is filed within the period of limitation.
The present application is complete and the Applicant is entitled to claim its dues, which remain uncontroverted by the Corporate Debtor, establishing the default in payment of the operational debt beyond doubt. The present application is admitted, in terms of section 9 (5) of IBC, 2016.
Application admitted - moratorium declared.
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Service Tax
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2020 (2) TMI 815
Levy of Service tax - Whether the tribunal was correct in accepting the contention of the respondent BSNL that service tax is leviable on the actual receipts and not the gross receipts? - HELD THAT:- Section 35C of the Central Excise Act, 1944 confers jurisdiction upon the Appellate Tribunal to pass such orders which are indicated therein, including orders confirming, modifying or annulling the decision or order appealed against. However, Section 35C of the Act of 1944, does not confer any jurisdiction upon the learned Tribunal to carryout assessment of the tax liability and records its own conclusion on that behalf. Thus, a function which has to be left to the assessing authorities had been undertaken by the learned CESTAT in a manner, which is, impermissible in law, more so, when such an exercise was not attempted even by the Commissioner of Central Excise. Moreover, no justification whatsoever has been offered in the impugned order dated 13- 12-2018 as to the reason why the appeal preferred by the appellant herein was rejected.
The impugned order dated 13-12-2018 is held to be unsustainable in the eye of law and the same is accordingly, set aside - Appeal allowed - decided in favor of appellant.
Revenue permitted to issue fresh SCN - Such demand, if any, raised by the appellant, shall clearly specify and exclude the “non-taxable” services from the gross receipt and also indicate the period as well as the particulars of the SSA to which the same relates to.
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2020 (2) TMI 814
Maintainability of appeal - appropriate forum - Section 35L(1)(b) of the Central Excise Act, 1944 - principles of natural justice - time limitation - HELD THAT:- There are no proper reasons have been given in support of its finding. It has also not taken into account, the certificate dated 4th December, 2018 of the Metro Railway certifying the nature of service rendered by the appellant.
Time Limitation - HELD THAT:- The question of limitation is a mixed question of law and fact. The appellant has pleaded that the respondents had knowledge of the transactions relying on their earlier show cause notice dated 17th September, 2004 on the self-same issue, relied upon in the subject show cause notice dated 27th March, 2007. Thus, everything was to their knowledge. There was no suppression of any fact. That question and any other factual issue with regard to the suppression of facts ought to have been gone into in detail by the learned tribunal.
When the impugned order of the tribunal is challenged on the above ground that it was passed in breach of the principles of natural justice and in ignorance of the law of limitation, then, it cannot be said that the appeal has a relation to classification of goods, its valuation or the rate of duty. It is neither directly nor indirectly related to these questions - Since, mixed questions of facts and law are involved, it would be proper to remand the entire matter to the tribunal for re-consideration and re-determination.
Appeal allowed by way of remand.
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2020 (2) TMI 813
Demand of service tax - time limitation - Section 73 of FA - case of petitioner is that there is not only delay of six months from conclusion of the argument till pronouncement of order but because of this delay gross errors have occurred in the order which has caused severe prejudice to the Petitioner - HELD THAT:- The factum of delay of six months in passing the order after the hearing was concluded is not in dispute - The Division Bench of this Court in the case of SHIVSAGAR VEG. RESTAURANT VERSUS ASSTT. COMMISSIONER OF INCOME-TAX, MUMBAI [2008 (11) TMI 64 - HIGH COURT BOMBAY] had observed that the delay by the Adjudicating Authority in rendering its order nine months after the conclusion of the hearing has caused prejudice to the Petitioner as it has not considered the evidence produced in respect of return of goods within 180 days.
The impugned order dated 12 July 2019 passed by the Respondent No.2 is quashed and set aside. The proceedings are restored to the file of Respondent No. 2 - Petition allowed by way of remand.
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2020 (2) TMI 812
Invocation of Extended period of Limitation - presence of two views as whether the service provided by the respondent is Management or Business Consultancy or not - HELD THAT:- The services rendered by the respondent would fall within the definition of Section 65(105(r) of the Act inasmuch as the services rendered by the respondent is a business consultancy service which would partake its character from the definition as per definition clause. Since respondent is engaged in providing service either directly or indirectly in connection with the management of any organization or business, said activity would fall within the four corners of ‘management or business consultancy service’. Hence, it is taxable service as per the provisions of the Act. It is because of this activity carried out by the respondent, Tribunal has rightly held that the definition is to be construed as inclusive definition and any service provided in connection with the management or business consultancy is liable to tax.
Invocation of extended period of limitation when respondent is a Government organization - Whether under the facts and circumstances of the case, the CESTAT is right in restricting the demand only for normal period without discussion and finding with regard to culpability of the respondent? - HELD THAT:- The SCN which came to be issued to respondent - assessee was based on intelligence input gathered by the officers of the appellant-revenue that there has been evasion of payment of service tax on the taxable services rendered by respondent - assessee. It is not the case of the appellant that there was either fraud perpetrated by the respondent or there has been any collusion or willful mis-statement of facts before the revenue. In the absence of any of these ingredients present, we are of the considered view that invoking of extended period of limitation would not arise.
The Tribunal is just and correct and question of applying the extended period of limitation as provided in the proviso to Sub-section (1) of Section 73 of the Act would not arise in the facts and circumstances of this case and demand raised for the restricted normal period as prescribed under Sub-section (1) of Section 73 of the Act is proper - Appeal dismissed - decided against Revenue.
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Central Excise
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2020 (2) TMI 810
Classification of goods - Maize Starch Powder (MSP, for short) (Thin boiled starch), MSP (very thin boiled starch), MSP Regular (Pharma), MSP Regular (Textiles) and MSP Regular (Food) - whether classified under Tariff heading No.35051090 of the Central Excise Tariff, 1985 or under Chapter Sub- Heading No.11081200 of the First Schedule to the Central Excise Tariff Act, 1985? - Benefit of N/N. 3/2007-C.E. dated 01/03/2007 - period from December-2007 to May-2008.
HELD THAT:- The issue is squarely covered by a precedent decision of the Tribunal in the appellant’s own case RIDDHI SIDDHI GLUCO BIOLS LTD. VERSUS COMMR. OF C. EX., BELGAUM [2011 (4) TMI 970 - CESTAT, BANGALORE] wherein it was held that the impugned order relying upon the report of the Departmental Chemical Examiner who had given his personal opinion without any empirical tests or study of manufacturing process cannot be sustained.
Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 811
Validity of show cause notice (SCN) issued - Recall of Order - erroneous refund granted - invocation of Section 11A - Whether section 35E has overriding effect over section 11A - power of revision by the higher authority - HELD THAT:- There are no merit in the contention raised by the learned counsel for the Assessee Companies that without the intervention of the higher Authorities under Section 35E of the Act, the Adjudicating Authority himself could not issue the impugned show cause notice under Section 11A of the Act.
On a bare reading of the Scheme of Central Excise Act, 1944 in Chapter II dealing with levy of collection of Duty comprising from Section 3 to 12, we find that the said Chapter contains the provisions relating to charging provisions, Valuation, Assessment and Penalty etc. Section 11A in the said Chapter II pertaining to levy in collection of Duty provides for recovery of Duties not levied or not paid or short levied or short paid by the Assessees or or erroneously refunded to be recalled by the Adjudicating Authority and after issuance of appropriate notice, the proceedings under Section 11A can be decided by the Authority concerned.
The suo motu power of the Principal Commissioner of Central Excise or Committee of Chief Commissioners, with effect from the amended provisions of Finance Act, 2005 dated 13.5.2005 deals with the revisional powers conferred upon such Committee to call upon and examine the record of any proceedings in which a lower Authority, as an Adjudicating Authority, has passed any decision or order under the said Act for the purpose of satisfying the said higher Authority as to the legality or propriety of such decision or order and such higher Authority, by an appropriate order, direct the lower Authority to pass appropriate orders in accordance with the directions given in such orders passed under Section 35E of the Act.
If the exercise of jurisdiction under Section 11A of the Act was to be hooked or hinged upon the provisions of Section 35E of the Act, that would frustrate the very provisions of Section 11A of the Act, in our opinion. Section 11A of the Act does not refer or make it subject to any other provisions of Chapter VIA of the Act providing for Appeal or revisional powers to the higher Authority under the said Act. Therefore, to make an exercise of power under Section 11A of the Act, dependent upon the outcome of an order of higher Authority will render the provisions nugatory. Therefore, to contend on that basis that the impugned Show Cause Notice could not have been issued by the Authority and they should be held without jurisdiction is a preposterous contention and the same cannot be accepted.
The learned Single Judge was perfectly justified in relegating the Petitioner/ Assessee before the Authority concerned, who issued the impugned show cause notices where the Assessee had to avail the opportunity to show cause before the Authority concerned that the refund in question was not erroneously made earlier so as to justify a recall or refund back to the Department under Section 11A of the Act - Without showing cause before the Authority concerned himself and directly approaching the Writ Court invoking extraordinary jurisdiction under Article 226 of the Constitution of India, in our opinion, is nothing, but an abuse of process of law. The Constitutional Courts, in the absence of proper factual foundation and findings, should not be flooded with premature Writ Petitions and such practice on the part of the Assessees deserves to be strongly put down with the iron hands of justice.
Appeal dismissed.
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2020 (2) TMI 809
Clandestine removal - shortage of stock - sugar - HELD THAT:- The appellant had taken a categorical stand that the stock of sugar got damaged due to seepage from the roof which plea stands rejected by the Lower Authorities as an afterthought.
Apart from the shortages, there is no evidence of removal of the goods in a clandestine manner. The clandestine allegations are required to be established by the Revenue by production of sufficient evidences. The discrepancies in the stock cannot be taken as a ground for upholding the allegations of clandestine removal.
In the present case, there is no admission of any clandestine removal by the appellant. Further, there is no evidence of transportation of the goods, receipt of the goods by the customers or receipt of the consideration by the appellant. In such a scenario, the confirmation of demand of duty cannot be upheld - appeal allowed - decided in favor of appellant.
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2020 (2) TMI 808
Clandestine removal - shortages of the finished goods - discrepancies in the RG-1 Register with the production slips - HELD THAT:- Commissioner (Appeals) set aside the impugned order by appreciating the assessee’s plea that the differences in stock between RG-1 and notebook has occurred due to different types of methods of calculation adopted i.e. ‘light standard’ method and ‘sectional weight’ method. He further observed that there is no corroborative evidence in the shape of procurement of raw materials, transportation of goods and copy of the sale receipt etc.
Reliance placed in Tribunal decision in the case of RA CASTINGS PVT. LTD. VERSUS COMMISSIONER OF C. EX., MEERUT-I [2008 (6) TMI 197 - CESTAT NEW DELHI] where it was observed that there is absolutely no evidence of manufacture and removal of the excisable goods.
As against the findings of Commissioner (Appeals), Revenue has not drawn our attention to any other factor so as to upset the findings of the Appellate Authority - there are no infirmity in the impugned order - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2020 (2) TMI 807
Levy of entry tax - Section 9(4) of the Entry Tax - purchase of cement - HELD THAT:- The Special Leave Petitions need not be interfered with - SLP dismissed.
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Indian Laws
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2020 (2) TMI 806
Validity of Arbitral Award - waiver of penal interest on land rent and interest - sub-lease of project land - termination of various agreements - Section 37 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- With respect to the amount awarded towards Interest and Penal Interest under the award, the same has been modified by consent of parties, as a prudent commercial decision - The Appellants were directed to file an Affidavit of Undertaking before this Court, with respect to the obligations to be discharged as per the Consent Terms set out hereinabove.
In the event of any default in payment of the amounts by Appellants, the entire amount awarded as per the award dated 20.01.2015, would become enforceable. However, prior to enforcement, a window of 2 months would be granted to the Appellants to make provision for compliance. On the expiry of the aforesaid period of 2 months, the entire decree would become executable forthwith.
M/s Good Living Infrastructure Pvt. Ltd. is bound by the unconditional undertaking submitted on Affidavit before this Court. Any default by M/s Good Living Infrastructure Pvt. Ltd. would be treated as a breach of the undertaking submitted to this Court.
Appeal disposed off.
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2020 (2) TMI 805
Dishonor of Cheque - insufficiency of funds - section 138 of NI Act - invocation of jurisdiction under Section 156(3) of Cr.P.C. - HELD THAT:- The provisions of Section 138 of N.I. Act may be attracted, because the cheque, which was given by the petitioner-accused no.1 to opposite party no.2-complainant, was returned as there was insufficient fund. In addition to the same, if on the basis of the factual matrix prima facie it is satisfied that the petitioner-accused no.1 had tried to deceive opposite party no.2-complainant in the entire transaction, then in that case criminal proceeding can also be initiated against the accused persons.
In the present case, this is not proper stage where the proceeding so initiated has to be quashed either in exercise of power under Section 226 of the Constitution of India or even under Section 482 Cr.P.C. Rather, the Magistrate is well justified in directing the police authority to register the complaint petition as FIR under Section 156(3) Cr.P.C. and cause investigation into the matter.
It is made clear that an accusation of commission of offence under Section 138 of N.I. Act cannot preclude the complainant to initiate a proceedings against accused persons under Sections 418, 420 read with Section 34 of IPC if ingredients of such offence are attracted. As such, the case under the N.I. Act can only be initiated by filing complaint, but in a case under the IPC, such a condition is not necessary. But in the case at hand when opposite party no.2-complainant lodged an FIR in the concerned police station, the same was not registered, therefore, there was no other way open to opposite party no.2-complainant than to approach the Magistrate by filing complaint case, who, in turn directed the police to register the complaint as FIR under Section 156(3) of Cr.P.C. and conduct investigation - impugned order is correct and is upheld.
Petition dismissed.
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2020 (2) TMI 804
Maintainability of FIR registered - disproportionate assets or not - excess value of property shown - contention of the petitioners is that the sale price realized is One Crore, there is no justification to reduce the same by a sum of ₹ 27.50 lakhs - HELD THAT:- This Court concludes that the F.I.R. is registered without application of mind by the respondents, in a mechanical and whimsical manner. It is evident that the respondents did not provide any prima facie material to sustain a charge under Section 109 of I.P.C., and Section 13 (1) (e) of the Prevention of Corruption Act and the F.I.R. is unsustainable on its very face even without considering the evidence of the petitioners. By omission to conduct a preliminary enquiry, the respondents have simply acted upon the unverified Source Information contrary to the mandatory rules of the C.B.I. Manual. On this F.I.R., if any investigation is now proceeded with, it will be a futile, meaningless and vexatious exercise.
This Court finds that the F.I.R. is liable to be quashed and is hereby quashed - Petition allowed - decided in favor of petitioner.
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2020 (2) TMI 803
Permission for withdrawal of the writ petition - HELD THAT:- As prayed, writ petition is dismissed as withdrawn.
Petition dismissed.
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2020 (2) TMI 802
Permission for withdrawal of the writ petition - HELD THAT:- As prayed, writ petition is dismissed as withdrawn.
Petition dismissed.
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2020 (2) TMI 855
Charging higher for SMS - participants in the HSHS contest were required to pay ₹ 2.40 per SMS message to Airtel, which was higher than the normal rate for SMSes - Whether an unfair trade practice has been committed by the Appellants in the conduct of the HSHS contest, in terms of Section 2(1)(r)(3) of the 1986 Act?
HELD THAT:- The National Commission had no basis to hold that the Appellants had admitted that the prize money for the HSHS contest was distributed out of the revenue collected from the SMSes sent in pursuance of the contest. It is true that the Appellants had not specifically denied that the prize money was paid out of the increased SMS charges. However, they had clarified in their submissions that Airtel was merely a sponsor/advertiser of the program, and the commercial arrangement between the parties was that Airtel would pay sponsorship charges, whereas Star India would be independently liable for paying the prize money out of its pocket regardless of the revenue earned by Airtel - apart from the aforementioned facts, there is no other cogent material on record upon which the National Commission could have placed reliance to render the finding of ‘unfair trade practice’ under Section 2(1)(r)(3) (a) of the 1986 Act.
There exists a servicescum-sponsorship agreement between the Appellants, which contains the specific details of the commercial arrangement between them. They did not produce the same before the National Commission, claiming that the said agreement contained a confidentiality clause, and could only be produced in accordance with law if required. The Appellants’ case is that they would have offered to produce the agreement if the National Commission had given a specific direction to that effect. However, no such direction was rendered at any point during the proceedings before the National Commission. Even the complainant did not, throughout the course of the proceedings, seek a direction to the Appellants to produce the servicescum-sponsorship agreement.
Thus, it is evident that Star India was liable to pay the prize money irrespective of the profits earned by Airtel. It is needless to say that the sponsorship money paid by Airtel would come from various sources of revenue, which includes the money earned from the tariff rates for the HSHS contest. Similarly, Star India may have had many sources of revenue from which the prize money could have been paid. This is a part and parcel of the ordinary business dealings of the Appellants, and the complainant has failed to establish any direct linkage between the increased SMS tariff rates and the prize money so as to show that the prize money was deceptively recovered in the guise of increased SMS rates charged to the participants.
The complainant has clearly failed to discharge the burden to prove that the prize money was paid out of SMS revenue, and its averments on this aspect appear to be based on pure conjecture and surmise. There is no basis to conclude that the prize money for the HSHS contest was paid directly out of the SMS revenue earned by Airtel, or that Airtel and Star India had colluded to increase the SMS rates so as to finance the prize money and share the SMS revenue, and the finding of the commission of an “unfair trade practice” rendered by the National Commission on this basis is liable to be set aside.
The finding of the commission of an unfair trade practice under Section 2(1)(r)(3)(a) in the impugned judgement is bad in law - Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 801
Permission for withdrawal of petition - case of petitioner is that inadvertently by mistake he has not mentioned all the relevant material facts in this writ petition, particularly with respect to the earlier writ petitions filed by the petitioner on the similar facts and circumstances - HELD THAT:- The writ petition is dismissed as withdrawn with with liberty to pursue the pending writ petition.
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2020 (2) TMI 800
Permission for withdrawal of petition - case of petitioner is that inadvertently by mistake he has not mentioned all the relevant material facts in this writ petition, particularly with respect to the earlier writ petitions filed by the petitioner on the similar facts and circumstances - HELD THAT:- The writ petition is dismissed as withdrawn with with liberty to pursue the pending writ petition.
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2020 (2) TMI 799
Maintainability of petition - petitioner has not disclosed the earlier writ petition filed by him - It is also submitted that necessary parties such as Lucknow Development Authority and U.P. Avas Evam Vikas Parishad have not been impleaded in the writ petition - HELD THAT:- The grievance of the petitioner appears to be against Lucknow Development Authority as well as Uttar Pradesh Awas Evam Vikas Parishad who have not been impleaded in the writ petition. Moreover, the petitioner has not disclosed his credentials as well as the cause of action accrued to him to maintain the writ petition.
The writ petition is not maintainable and is dismissed.
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2020 (2) TMI 818
Maintainability of SLP - HELD THAT:- The issues though relatable to Section 9A of the Industrial Disputes Act, 1947 would have a vital bearing on payments to be made ultimately to the petitioner as a pilot and are pending in this Court.
It is open for Air India to take this up as a defence in the application that is filed by the petitioner before the NCLT. The NCLT order, therefore, is set aside and the NCLT will now go into the Section 9 application filed by the petitioner afresh, after considering objections by the respondent.
SLP disposed off.
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