TMI Tax Updates - e-Newsletter
February 27, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Attachment of bank accounts - input tax credit - considering the amount paid by reversing input tax credit, the interest of the Revenue is sufficiently secured. Therefore, the provisional attachment of the above referred bank accounts of the petitioner is no longer justified.
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Income Tax:
TDS u/s 194C OR 194J - Payments made towards call centre expenses - the contract between the assessee and these two entities was in the nature of a 'works contract' and therefore the deduction of TDS u/s 194C was correctly done by the assessee.
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Income Tax:
TDS u/s 192 OR 194J - payment to Hospital Based Consultants (HBCs) / Doctors - Employee employer relationship exists or not - TDS was rightly deducted u/s 194J.
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Income Tax:
Short term capital gain - value of consideration in kind - transfer u/s 2(47) - the right to receive consideration in kind is not marred by any contingency - additions confirmed.
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Income Tax:
Addition u/s 68 - Parties failed to respond to the summons - The issue of share premium raised by the revenue in the assessment order to doubt the genuineness of share capital raised cannot be held against the assessee as the assessee was never required to explain or justify this matter.
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Income Tax:
Disallowance of expense of forfeited advance for purchase of land - the loss was made in the ordinary course of real estate business of assessee and was also incidental to the said business - claim allowed.
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Income Tax:
Additions u/s 69 - difference between the actual consumption of raw material vis-àvis standard consumption prescribed under the Exim Input-Output Norms - CIT(A) was wrong in relying on the input out consumption ratio.
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Income Tax:
Disallowance u/s 14A r.w.r. 8D - sourcing of investment from borrowed funds or own funds - investment is taken as stock-in-trade - ex-parte order - additions confirmed.
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Income Tax:
Bogus LTCG - penny stock - The transactions were all through account payee cheques and reflected in the books of accounts. - In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated.
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Income Tax:
Revision u/s 263 - Explanation 2 to section 263 (Deeming erroneous order) is applicable only when there is no enquiry made by the Assessing Officer.
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Income Tax:
Prior period expenditure cannot be disallowed simply by observing that it is not ascertainable whether this expenditure was incurred for earning a particular receipts offered under the head prior period income.
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Income Tax:
Comparability of an international transaction with an uncontrolled transaction shall be judged with (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions.
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Income Tax:
Capital gain on conversion of capital asset into stock in trade is payable only in the year in which the assessee ultimately sells such stock in trade.
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Income Tax:
For applicability of Section 44BB, it is necessary that the vessels given on hire by the Assessee are shown to be fitted with necessary equipments, and having the technical capacity for use in the prospecting for, or extraction or production of, mineral oils.
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Customs:
Paragraph 4.14 of the Foreign Trade Policy whereby a condition of pre-import has been put for availing the benefit of exemption from levy of integrated tax and GST compensation cess, are ultra vires the scheme of the Foreign Trade Policy, 2015-2020 and liable to be set aside.
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DGFT:
Amendment of Para 2.54 (d) (v)iv in Handbook of Procedures, 2015-2020 - Mundra Port is included as seventh sea port where PSIC is not required in case of metallic scrap imported from safe countries/regions.
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SEBI:
Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2002.
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Service Tax:
Refund claim including interest - service tax paid on non taxable services - even though there is no specific provision in the Section 102 but once service tax is not payable than the interest paid on such service tax also become refundable.
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Service Tax:
Refund of Service Tax erroneously under Reverse Charge Mechanism - unjust enrichment - the service tax is supposed to be treated as deposit as there is no sanctioned behind it by the legislature in conformity to Section 265 of the constitution of India - refund allowed.
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Central Excise:
SSI Exemption - use of same brand name - All the assessees become owner of Vivek brand, accordingly it cannot be said that any of the assessees against when demand was confirmed is using the brand name of another person.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (2) TMI 1456
Extension of time for filing GST Tran-1 - input tax credit - migration to GST regime - extension sought on the ground that application was not entertained on the last date i.e. 27.12.2017 - Held that:- The respondents are directed to reopen the portal within two weeks from today. In the event they do not do so, they will entertain the application of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. They will also ensure that the petitioner is allowed to pay its taxes on the regular electronic system also which is being maintained for use of the credit likely to be considered for the petitioner.
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2019 (2) TMI 1452
Attachment of bank accounts - input tax credit - power of Commissioner to order provisional attachment - section 83 of the CGST Act - Held that:- Under section 83 of the CGST Act, the Commissioner is empowered to order provisional attachment for the purpose of protecting the interest of the Government revenue. In the facts of the present case, while a liability of ₹ 14.62 crores had been estimated at the time when the order under section 83 of the CGST Act came to be passed, the present estimate is ₹ 16.24 crores. Thus, the petitioner, upon conclusion of any proceedings that may be taken pursuant to the proceedings under sections 67, 73 or 74 of the CGST Act, may be liable to pay such amount.
Admittedly, the petitioner has already reversed input tax credit to the tune of ₹ 13,28,00,000/ - In the opinion of this Court, considering the amount paid by reversing input tax credit, the interest of the Revenue is sufficiently secured. Therefore, the provisional attachment of the above referred bank accounts of the petitioner is no longer justified.
Petition allowed.
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2019 (2) TMI 1450
Release of seized vehicle alongwith the goods - Sub-section (1) of Section 129 of the Punjab Goods and Services Tax Act, 2017 - Section 20 of the Integrated Goods and Services Tax Act read with sub-Section (3) of Section 68 of the Central Goods and Services Tax Act, 2017 - Held that:- We dispose of the present petition by directing respondent No.3 to take a decision on the representation dated 25.01.2019 (Annexure P-2), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one week from the date of receipt of the certified copy of the order.
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Income Tax
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2019 (2) TMI 1454
TDS u/s 192 OR 194J - payment to Hospital Based Consultants (HBCs) / Doctors - Employee employer relationship exists or not - HELD THAT:- We find that a Division Bench of this Court in the case of Commissioner of Income-tax (TDS Pune) v/s GRANT MEDICAL FOUNDATION (RUBY HALL CLINIC) (2015 (2) TMI 457 - BOMBAY HIGH COURT) and to which one of us was a party (S. C. Dharmadhikari, J), was considering whether the Tribunal was correct in holding that there exists no relationship of employer and employee between the assessee – Grant Medical Foundation (Ruby Hall Clinic) and the Consultant doctors employed in the hospital. Assessee treated the same as professional services and deducted TDS u/s 194J - After perusing the law on the subject, this Court answered the aforesaid question in favour of the assessee and against the revenue.
TDS u/s 194C OR 194J - Payments made to Hinduja TMT/Global Solution Ltd. towards call centre expenses - HELD THAT:- After examining the record that the CIT (Appeals) as well as ITAT came to the conclusion that the services that were rendered by these two entities were not of a technical or professional nature that would require deduction of TDS under Section 194J. The CIT (Appeals) specifically came to the conclusion that the contract between the assessee and these two entities was in the nature of a 'works contract' and therefore the deduction of TDS under Section 194C was correctly done by the assessee. In these circumstances, we do not find that these factual findings suffer from any perversity that would give rise to any substantial question of law.
TDS u/s 194C OR 194H - Drug Handling Charges paid - HELD THAT:- We are fully satisfied that in the facts of the present case, the assessee correctly deducted TDS under section 194C. We find that in the present case there was no question of payment of any commission to Saxsons Biotech which supplied the radioactive drug used by the assessee in Nuclear Medicine Treatment. The facts and as recorded by the authorities below would clearly show that the drug supplied by Saxsons Biotech to the assessee was invoiced by Saxsons Biotech in the manner set out earlier. This being the case, there was no question of such a payment being in the nature of commission that would require deduction of TDS under Section 194H.
TDS u/s 194J - Payments made to Hinduja Foundation for its employees who had rendered services to the assessee in key managerial positions - HELD THAT:- On going through the findings given by the CIT (Appeals) as well as the ITAT on this issue, we find that both the authorities below have given their findings on the basis of facts presented before them. We find that the authorities below are fully justified in coming to the conclusions that they did, namely, that the payments made by the assessee to the Foundation was in the nature of reimbursement and not in the nature of any technical or professional services which required deduction of TDS under Section 194J.
Orders u/s 201 (1) for the Financial Year commencing from 1st April, 2007 and earlier years as time- barred - HELD THAT:- As per the said provisions and as per the Circular of CBDT dated 5/2010, the time-limit for passing such orders was 31st March, 2011. Considering the answers that we have already given to Questions (a) to (d) above, and considering that TDS was deducted under the correct provisions of the I.T. Act, this question really becomes academic in the facts of the present case. We, therefore, do not propose to give any finding on this question and leave it open to be considered in an appropriate case.
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2019 (2) TMI 1436
Short term capital gain - value of consideration in kind - transfer u/s 2(47) - case of the assessee before the Tribunal is that no effective transfer of the land took place as the land is still in Green Zone and would be considered as Non-Agricultural land, fit for construction, only when it goes to Yellow Zone - AR’s contention was that albeit there was a Development Agreement but, in fact, there was no transfer of possession to SCTPL warranting the invocation of the provisions of section 45 - HELD THAT:- Clause of the Agreement that the assessee executed PoA on the same date in favour of the Developer for the development of the said property, and such PoA was to remain in force till the construction, possession and completion of the Scheme under which the residential units were effectively sold. Thus, it is vivid that no construction could have been done without handing over possession of the land to the Developer - the assessee, immediately on signing of the Agreement, handed over the possession to the Developer for construction and further this Agreement is irrevocable at the instance of the either party.
The assessee did hand over the possession of the land to the buyer and the contrary contention put forth on her behalf is devoid of merit. The present situation is covered within the definition of “transfer” as given in section 2(47)(v) as: `any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to section 53A of the Transfer of Property Act, 1882’. Not only the assessee transferred the possession of the land to the Developer pursuant to the Agreement, but also received a sum of ₹ 20.00 lakh by cheque in part performance. As such, it is held that the assessee transferred the land u/s.2(47) of the Act and resultantly the provisions of section 45 are attracted.
On going through the prescription of section 48, it transpires that what is contemplated as the full value of consideration is the amount which is “received or accruing as a result of the transfer of capital asset”. Not only the amount actually received but also the amount accruing to the assessee is liable to be included in the same. As the assessee in the instant case acquired the right to receive 2000 sq.ft. of saleable area in the new building to be constructed, which right is a part of consideration and has accrued to the assessee, the same is held to have “accrued” to the assessee qualifying for inclusion in the full value of consideration - the right to receive consideration in kind is not marred by any contingency. Further, it is a crystallized right, which under no situation, can be denied to the assessee because the Agreement itself is irrevocable. It is not the case of the assessee that there is any cloud hovering over the consideration in kind. In such a scenario, it is difficult to accept the contention of the ld. AR that the value of consideration in kind should be ignored.- Decided against assessee.
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2019 (2) TMI 1435
Disallowing deduction u/s.80P in relation to interest income earned from Fixed Deposits kept with the Nationalized Banks - HELD THAT:- In the absence of there being any change in the legal position prevailing on this issue and respectfully following the view taken by the Pune Bench of the Tribunal in ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha [2018 (11) TMI 1589 - ITAT PUNE] and host of other orders reiterating the similar view, reverse the impugned order in denying deduction u/s.80P on the interest income earned on Fixed Deposits kept with Nationalized banks. - Decided in favour of assessee.
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2019 (2) TMI 1434
Disallowing of interest expenses - funds taken on higher rate of interest have been given to sister concerns at lower rate of interest - A.O. held that rate of interest charged from sister concerns was lesser by 9% - HELD THAT:- Case law relied upon by the Ld. AR for the assessee is directly applicable in the present case i.e. CIT Vs. S.A. BUILDERS (2006 (12) TMI 82 - SUPREME COURT), wherein, it has been held that If advance was given for commercial expediency then no disallowance for interest can be made - Decided in favour of assessee.
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2019 (2) TMI 1433
Assessment u/s 153A - Addition u/s 68 - HELD THAT:- CIT(A) has rightly admitted the additional evidences produced by the assessee under Rule 46A of the IT Rules. We further note from the evidence filed that the share applications were received through banking channel. All share applicant companies are duly assessed to tax and are existing companies with annual returns filed under the Companies Act also.
The summons / notices issued by the revenue had been duly served on these parties, and their failure to respond to the summons merely cast the onus on the assessee to establish the transactions. The assessee filed copies of share application forms received from the share applicant companies, bank statements evidencing the receipt of share application money, and PAN details of the applicant companies. Thus, the primary onus stood discharged by the assessee. Therefore, it cannot be concluded that these parties are non-existent or that the share application money received was bogus. There is nothing on record to suggest that the finding of the revenue that the share applicant companies could not be found at the given addresses, was confronted to the assessee. The issue of share premium raised by the revenue in the assessment order to doubt the genuineness of share capital raised also cannot be held against the assessee as the assessee was never required to explain or justify this matter. No evidence was found in the search to establish that the share capital raised was not genuine.
Unaccounted commission paid on the accommodation entry of share application - HELD THAT:- We note that there is no evidence to support the allegation of the revenue that commission was paid to raise share capital. The addition was without any basis, hence, Ld. CIT(A) has rightly deleted the addition on this ground. Even otherwise, we uphold the action of the Ld. CIT(A) on the deletion of addition of share capital u/s. 68.
Disallowance of expense of forfeited advance for purchase of land - HELD THAT:- Real estate developers usually buy land stock from farmers at agreed rates. Cash advances are given to the prospective seller landowners to book the properties. Sometimes, dispute arise between farmers and developers as to the terms of the sale. In such circumstances, the agreements fall through and the amounts of advances given are forfeited by the sellers. It is usual practice in the real estate business. The fact of payment is not disputed, at least there is no evidence that the payments were not made. Thus, the loss was made in the ordinary course of real estate business of assessee and was also incidental to the said business. In these circumstances, the claim is allowable loss/ expenditure u/s. 37(1) of the Act and hence, the disallowance made was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue.
Addition on account of unaccounted purchases of coal - HELD THAT:- Assessee carried on unaccounted business of purchase / manufacture and sale of katha. On this count, the assessee has admitted additional net income of ₹ 6,00,00,000/- during this assessment year and disclosed in the return filed as income from other sources. The undisclosed manufacture of katha obviously involved undisclosed purchase of the coal, which was used in the manufacturing process. The said purchase of coal was expenditure incurred for the manufacturing of katha. It is not the case that the coal was not used for manufacture. As the net income from undisclosed business was admitted, no separate addition on account of purchase of coal is unwarranted. Therefore, the addition made was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute.
Addition on account of unaccounted transactions in the seized documents - HELD THAT:- we find that the income from undisclosed manufacture and sale of katha and undisclosed income from sale of real estate to be taxed, based on the documents seized, amounted to ₹ 8,05,91,893/-. As against this amount the additional income offered to tax was ₹ 8,10,63,320/-, i.e. ₹ 7,30,63,320/- in the hands of the assessee and ₹ 80,00,000/- in the hands of M/s Raj Katha Products Pvt. Ltd. an associate concern. However, the calculation made by the AO suffers from mistakes as pointed out by both the parties. However, there is no case bringing additional income to tax. Therefore, the addition made by the AO was rightly deleted by the CIT(A), which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute.
Addition on account of difference between income being admitted by the assessee in his statement recorded at the time of search u/s. 132(4) and the income disclosed in the return - HELD THAT:- We note that the AO has himself accepted that the undisclosed income based on transactions recorded in seized documents came to ₹ 9,34,79,821/-. Thus, the question of any further addition with regard to the undisclosed income as per the seized documents does not arise. Hence, the addition made cannot be legally sustained and therefore, was rightly deleted by the CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue.
Addition on account of unexplained sources - HELD THAT:- CIT(A) has rightly held that the addition made by the AO based on mere statement of the director of the assessee company is not backed by any evidence and the unaccounted income detected during search has already been offered to tax. Hence, he rightly held that the addition made by the AO is not legally sustainable and accordingly, deleted the addition in dispute, which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute and reject the ground raised by the Revenue
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2019 (2) TMI 1432
Penalty proceedings u/s 271(1)(C) - unexplained investment u/s 69 - HELD THAT:- As undisputed fact that assessee does not have any source of income other than agricultural income and department itself has accepted that in the return of income assessee has shown agriculture income of ₹ 2,50,000/-. Once assessee has no source of income other than agricultural income then to hold that she must have made investment out of her unexplained sources would be very difficult to believe. Further, when factum of agricultural income has been accepted in this year, then assessee must have earned similar agricultural income in the earlier years as stated by her and savings from such an income can be held to explain the investment made in stamp duty in this year.
Thus, when amount of ₹ 10 lacs paid for purchase of agricultural land from her father was made in the earlier years then same cannot be added in this year and stamp duty payment as held above stands explained, then addition on account of unexplained investment u/s 69 can be made. Accordingly, addition of ₹ 8,00,880/- as sustained by CIT(A) stands deleted.
In so far as levy of penalty u/s 271(1)(C) is concerned, since as already deleted the addition, therefore, the penalty levied on the same amount has no legs to stand. - Decided in favour of assessee.
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2019 (2) TMI 1431
Bogus LTCG - penny stock - denying the exemption claimed by the assessee u/s. 10(38) - HELD THAT:- So, as the facts of the case are very similar, the AO has failed to establish any link and therefore the order is based on surmises, predetermined, solely relying upon the investigation report which is general in nature and no concrete material has been brought on record proving otherwise.
The assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the AO in the year of its acquisition and thereafter until the same were sold. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO [2016 (12) TMI 1074 - ITAT KOLKATA] and PCIT Vs. BLB Cables & Conductors Pvt. Ltd. [2018 (8) TMI 525 - CALCUTTA HIGH COURT] wherein all the transactions took place off market and the loss on commodity exchange was allowed in favour of assessee. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus. - Decided in favour of assessee.
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2019 (2) TMI 1449
TP adjustment - TPO to use Transactional Net Margin Method (TNM Method) to determine the Arms Length Price (ALP) of the respondent's International Transactions on the ground that it is the most appropriate method as it is consistently accepted/adopted by the Revenue - HELD THAT:- We note that the Revenue has been accepting the TNM method as most proper method for benchmarking the aggregated international transactions with AE's over the period of time. The same has been accepted by the Revenue on examination of the issue. It is found that the TPO had for the other years on same facts has accepted the fact that there was no difference in two segments involved for transfer pricing. Thus, consistently accepting the TNM method as the most appropriate method to determine the ALP of the respondent's aggregated International Transaction till Assessment Year 2015-16.
The Revenue has not been able to show any material difference in the subject assessment year which would justify a change in the most appropriate method (TNM method) adopted while benchmarking the international transactions.
So far as the order dated 1st August, 2018 of this Court in case of John Deere India (P) Ltd. [2015 (3) TMI 318 - ITAT PUNE] admitting the appeal of the Revenue is correct, we find that it has not been admitted on the question which arises in the present petition, i.e. the effect of the Revenue consistently accepting TNM Method as the most appropriate method for benchmarking international transactions with AE's in the absence of any material change of the facts or law.
No application to the present facts. The objection to rejection of comparables taken by the Revenue before us, does not address the issue of the most appropriate method for benchmarking its international transaction. We are also unable to understand the contention on behalf of the Revenue that it is for the respondent to prove that there is no change/ difference in facts in the subject Assessment Year from the subsequent Assessment Years.
Where TNM method is accepted to determine the ALP of international transaction. Infact, no change in facts has been asserted by the respondent. Therefore, it would be for the Revenue to show the difference in facts warranting a different view in this Assessment Year to that taken in the subsequent Assessment Years. We have herein above extracted paragraph 18 of the impugned order of the Tribunal and on its reading we are of the view that the same is a finding of fact based on appreciation of evidence. No substantial question of law.
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2019 (2) TMI 1429
Revision u/s 263 - scope of Explanation 2 to section 263 - deemed erroneous order - assessee failed to place on record, during the assessment proceedings, any such documentary evidence of substantive nature, to justify the deduction u/s 80IA - HELD THAT:- As decided in SUNBEAM AUTO LTD. [2009 (9) TMI 633 - DELHI HIGH COURT] where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry as following SHRI NIRAV MODI [2016 (6) TMI 1004 - BOMBAY HIGH COURT]
PCIT issued a similar notice u/s 263 of the Act as he found that the assessment order framed u/s 143(3) of the Act dated 14.03.2014 was erroneous, in as much as it was prejudicial to the interest of the revenue for at 2011-12. Tribunal considered the issue [2018 (11) TMI 1322 - ITAT DELHI] and set aside the order of the PCIT and restored that of the AO. The facts of assessment year 2011-12 are same as the facts of the year under consideration except the claim of deduction under Chapter VI is different in value. Since the Tribunal has quashed the order framed u/s 263 of the Act, we are of the considered opinion that the claim of deduction in the initial assessment year i.e. 2011-12 was justified and, therefore, the same cannot be disturbed in the subsequent assessment year when the facts are identical and law has not changed.
Before parting, the ld. DR has also heavily relied upon Explanation 2 to section 263 of the Act. In our considered opinion, the said Explanation is applicable only when there is no enquiry made by the Assessing Officer whereas in the case in hand, as demonstrated elsewhere, the Assessing Officer had made ample enquiries before framing the order u/s 143(3) of the Act. - Decided in favour of assessee.
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2019 (2) TMI 1446
Stay petition - Demand issued u/s 156 - recovery of the tax amount/penalty - Held that:- It is not disputed that the application for stay is pending before the Appellate Authority. Without waiting for a decision on the said stay application, petitioner has rushed to this Court by way of this petition contending that in view of the provisions contained in Sub-Section (6) of Section 220 of the Income Tax Act, the petitioner after having preferred an appeal under Section 246A cannot be declared defaulter and no coercive action can be taken against him for recovery of the tax amount/penalty. Petitioner has placed reliance on the decision of Sanjay Kumar Sahu Vs. Income Tax Officer and Others [2013 (4) TMI 484 - MADHYA PRADESH HIGH COURT]
After hearing learned counsel for the petitioner at length, we are of the considered opinion that we should refrain ourselves from making any observation which may prejudice either the petitioner or revenue either way since admittedly the appeal is pending before the Appellate Authority along with the stay application - dispose of this writ petition with the simple direction to the Appellate Authority to take up the matter as expeditiously as possible
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2019 (2) TMI 1398
Attachment on the petitioner’s cash credit - existence of debtor-creditor relationship - recovery of dues - Held that:- This court in the case of Kaneria Granito Ltd. v. Assistant Commissioner of Income Tax, [2016 (7) TMI 65 - GUJARAT HIGH COURT], wherein it has been held that cash credit accounts were opened to enable the assessee to borrow the money from the bank for the purpose of its business. Any money, therefore, that the bank may make available to the assessee would necessarily be in the nature of a loan or a cash credit facility, in either case, would be in the nature of borrowing by the assessee from the bank. The bank and the assessee, therefore, do not have the debtor-creditor relationship.
The respondent is directed to forthwith release the attachment on the petitioner’s cash credit account bearing No.02950500012441 maintained with the Bank of Baroda, Kapadvanj, Kaira - petition allowed.
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2019 (2) TMI 1443
Deemed dividend u/s 2(22)(e) - payments made by the company M/s.Ceebros Property Development Private Limited to M/s.Ceebros Hotels P. Ltd. - HELD THAT:- Concurrent finding of CIT(A) & Tribunal is to the effect that no benefit has accrued to the assessee, the credit is the result of a business transaction and is neither in the nature of a loan or a deposit. .
Since the assessment of the husband, who is similarly situated as the respondent/assessee, wife in the present case before us, has already been decided in favour of the assessee by the Co-ordinate Bench of this Court (2016 (12) TMI 1289 - MADRAS HIGH COURT), we do not find any merit in the contention of the learned counsel for the Revenue before us. The appeal of the Revenue, therefore, deserves to be dismissed, following the aforesaid judgment of the Co-ordinate Bench. - Decided against revenue
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2019 (2) TMI 1442
Treatment to income of the sale of hybrid seeds - Character of income - as agricultural income exempt under Section 10(1) or commercial income - HELD THAT:- Order of the Tribunal dismissed the Revenue's appeal before it on the above issue following an order of this coordinate bench for Assessment Year 2000-01 in respect of the same respondent assessee. It also notes the binding order in CIT Vs. M/s. Monsanto India Ltd.[2011 (8) TMI 1298 - BOMBAY HIGH COURT] raising the same issue, which were dismissed by this Court - As the impugned order has followed the decision of this Court, no fault can be found with the same -Tribunal was correct in treating its commercial income of the sale of hybrid seeds, as agricultural income exempt under Section 10(1) - Decided against revenue
Allocation of expenses amongst two 80IB units - Scientific basis of allocation of corporate expenses as an estimated rate of 10% made by the company - whether no evidence was produced before either the AO or the appellate authorities as against the AO's allocation being based on the turnover of the units? - HELD THAT:- The impugned order records the fact that corporate expenses could not be identified as being incurred in any particular 80IB unit. In the above circumstances, the impugned order of the Tribunal noted the fact that in Note 4 b of the Notes to Accounts, had declared that 10% of the corporate expenses were allocated between the two units in the ratio of production hours utilized by the two plants. The impugned order also records the fact that for the earlier assessment year i.e. A.Y. 200405, the Assessing Officer himself under Section 143(3) of the Act allocated the common corporate expenses at 10% between the two 80IB units.
The impugned order of the Tribunal concluded that as the respondent has provided a scientific basis for allocation of expenses and therefore disregarded the allocation of expenses on the basis of turnover - it is not a case of the respondent not formulating the basis of its allocation. The Tribunal found that the basis of allocation adopted by the respondent is more scientific than the allocation being done on the basis of turnover. Thus, a possible view. - Decided against revenue
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2019 (2) TMI 1441
Penalty u/s 271(1)(c) - availability of alternative remedy of appeal - HELD THAT:- We find that the disputed questions of fact have been sought to be raised in the writ petition. Further, the petitioner has an alternative efficacious remedy of appeal against the impugned order(s). The Apex Court in Commissioner of Income Tax and others vs. Chhabil Dass Agarwal, (2013 (6) TMI 69 - ALLAHABAD HIGH COURT) elaborately considered the question of entertaining writ petition where alternative statutory remedy was available.
Keeping in view the availability of alternative remedy of appeal against the impugned order(s) and the law laid down by the Apex Court on the issue, we do not find any ground to interfere in exercise of writ jurisdiction under Articles 226/227 of the Constitution of India. Accordingly, we dismiss the present writ petition by relegating the petitioner to take recourse to the remedies as may be available to him before the appropriate Forum, in accordance with law.
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2019 (2) TMI 1422
Revenues earned by assessee for providing vessels on hire to be used for undertaking seismic data acquisition and onboard processing - application of deemed profit rate of 10% u/s 44BB - action of the AO to bring the revenue to tax as royalty u/s 9(1 )(vi) at an estimated net income @15% of gross receipts r.w.s 44DA - whether Section 44BB has application in the case of the Assessee? - claim of the assessee U/s 44BB of I.T. Act is based on the contention that it has supplied plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils - proper marshalling of facts -
HELD THAT:- It is necessary for the claim of the assessee for applicability of Section 44BB of I.T. Act to succeed, that the vessels given on hire by the Assessee are shown to be fitted with necessary equipments, and having the technical capacity for use in the prospecting for, or extraction or production of, mineral oils. In addition, it is also necessary for assessee’s claim U/s 44BB of I.T. Act to succeed, that the vessels used by PGS Norway and PGS Singapore for their contract with ONGC and RIL were the same vessels (fitted with necessary equipments, and has the technical capacity for use in the prospecting for, or extraction or production of, mineral oils) that were taken on hire by PGS Norway and PGS Singapore from the assessee.
On perusal of the aforesaid order dated 02.12.2014 of DRP, we find that there is no mention in the order of the DRP that these requirements are fulfilled in the case of the assessee. The order of DRP is silent on the crucial facts as to whether the vessels hired by the Assessee to these companies i.e PGS Norway and PGS Singapore are fitted with necessary equipments, and has the technical capacity for use in the prospecting for, or extraction or production of, mineral oils; and whether the vessels used by PGS Norway and PGS Singapore for their contract with ONGC and RIL were the same vessels (fitted with necessary equipments, and having the technical capacity for use in the prospecting for, or extraction or production of, mineral oils) that were taken on hire by PGS Norway and PGS Singapore from the assessee.
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2019 (2) TMI 1421
Unexplained income u/s. 68 - penny stock - denial of exemption of long term capital gains arising on transfer of shares claimed u/s. 10(38) - HELD THAT:- Transactions claimed by the assessee whether real or sham, requires a revisit by the AO. Similar directions as given in the cases of Vimalchand Gulabchand, Praveen Chand, Gatraj Jain & Sons (HUF) and Mahendra Kumar Bhandari [2018 (4) TMI 701 - ITAT CHENNAI], read alongwith the directions given in the case of Heerachand Kanunga [2018 (6) TMI 1329 - ITAT CHENNAI] are given herealso.
Useful reference may be made to the law laid down in the case of CIT vs. Sunita Dhadda [2018 (3) TMI 1610 - SUPREME COURT OF INDIA] while affirming a judgment of Hon’ble Rajasthan High Court where the importance of providing an opportunity to cross examine the witness has been stressed. Their lordship held that this was an important constituent of natural justice. Only after all the steps required under law is complete, it can be ascertained whether claim of capital gains was bogus or not. We therefore set aside the orders of the lower authorities and remit the issue back to the file of the ld. Assessing Officer for consideration afresh in accordance with law. - Appeal of the assessee is allowed for statistical purposes.
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2019 (2) TMI 1440
Entitlement to the benefit of deduction u/s 80IB(10) - assessee had undertaken the housing project known as "Jai Hind" - date of approval of the said project by the local authority was given on 30th September 1998, just one day prior to the cut off date given under Section 80IB(10) - HELD THAT:- The expenditure incurred by the assessee prior to the cut off date of 01.10.1998 is not in the nature of development and commencement of the housing project itself and that the expenditure incurred in levelling of the land and construction of the compound wall was to protect the land in question so that the project could be commenced and completed once it is approved by the concerned public authority.
The approval in question was admittedly given on 30th September 1998 and therefore, the commencement of the project could only take place thereafter. There is no dispute that the project in question was completed before outer and cut off date, namely 31st March 2008. Therefore, the concurrent findings of the facts given by the two appellate authorities below that the commencement of the project was done within the statutory time frame and accordingly, deduction under Section 80IB(10) was allowable to assessee - Decided in favour of assessee.
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2019 (2) TMI 1414
Late payment of employees’ contribution towards superannuation fund u/s.36(1)(va) - HELD THAT:- The due date for depositing the employee’s contribution towards PF/ESI should be seen from the date of the payment and not from the due date. In this regard, we note that the Jurisdictional Tribunal in the identical facts and circumstance in the case of Suzlon Energy Ltd.[2018 (8) TMI 447 - ITAT AHMEDABAD] has restored this issue to the file of the AO for fresh adjudication. Therefore, respectfully following the same we are inclined to restore the issue on hand to the file of AO for fresh adjudication and in accordance to the provision of law as well as after considering the order of this Tribunal in the case of Suzlon Energy Ltd. (Supra). Thus, the ground of appeal of the assessee is allowed for statistical purpose.
Allowing the set off of the brought forward losses/unabsorbed depreciation against the current year income as well as not allowing the same to be carried forward to the succeeding assessment years - HELD THAT:- There was no defect pointed out by the authorities below on the submission of the assessee. Therefore, we are of the view that the matter needs to be adjudicated afresh by the Assessing Officer after giving a reasonable opportunity of hearing to the assessee. Accordingly, we set aside the issue to the file of AO with the direction to allow the brought forward losses/unabsorbed depreciation of the earlier year against the current year income as well as to carry forward such losses/unabsorbed depreciation to the succeeding assessment years as per the provisions of law. Hence, the ground of appeal of the assessee is allowed for statistical purposes.
Prior period income under the provisions of section 41 - HELD THAT:- We find that income of the assessee is being assessed at entity level. All the expenditure debited under different heads cannot be decided qua a specific receipt. Once the assessee has been offering income of prior period as an entity, then its prior period expenditure cannot be disallowed simply by observing that it is not ascertainable whether this expenditure was incurred for earning a particular receipts offered under the head prior period income. If an assessee is offering prior period income, then the expenditure which was incurred under different heads ought to be set off against that income. Therefore, we are of the view that net differential amount ought to be assessed as income of the assessee. We allow both these grounds of appeal for statistical purpose and direct the AO to allow set off prior period expenditure against prior period income and only net income is to be added to the total income of the assessee. - Decision in the case of Dishman Pharmaceuticals [2018 (5) TMI 1640 - ITAT AHMEDABAD] followed.
MAT credit u/s 115 JAA - HELD THAT:- We note that the Assessing Officer rejected the credit of MAT as claimed by the assessee on the ground that the assessee is not entitled to claim the credit of taxes paid under MAT in the earlier years while determining the income under the head MAT. From the order of the Assessing Officer, it is transpired that the assessee was claiming the credit of tax paid under MAT in the earlier years against the income determined under MAT provisions for the current year. However, the submission of the assessee reveals that it has claimed the credit of tax paid under MAT against the computation of income under the normal provisions. From the above details, we note mismatch between the finding of the Assessing Officer vis-a-vis submissions made by the assessee before the Ld. CIT(A).
We note that the assessee is very much entitled to claim the credit of tax paid under MAT against the income computed under the normal provisions under section 115JAA of the Act - entire matter needs re-examination afresh by the Assessing Officer. Accordingly, we set aside the issue to the file of Assessing Officer for fresh adjudication following the provisions of law. Hence, grounds of appeal of the assessee are allowed for statistical purposes.
Adjustment on account of upward transfer pricing adjustment - HELD THAT:- We do not want to deviate from the finding of the Hon’ble ITAT in the own case of the assessee as discussed above. Therefore we direct the AO/ TPO to select comparable companies having the nearest turnover to the assessee company. In the instant case, we note that there is a single company as discussed above having the nearest turnover to the assessee company. Therefore we direct the AO/TPO to select that company and make suitable adjustments within the provisions of law. From the above, we note that the assessee succeeds in its appeal by turnover criteria as directed above for the selection of comparable companies. Therefore we refrain ourselves from adjudicating the issue of super profit as indicated by the assessee. Thus the grounds of appeal of the assessee are allowed.
Not allowing deduction u/s.10B on account of foreign exchange gain - HELD THAT:- To de decided in favour of assessee[2008 (12) TMI 296 - ITAT AHMEDABAD] the assessee would be entitled to the deduction under section 10B with regard to exchange gain only which is the gain on the day of deposit of US$ in the EEFC Account. Therefore, the assessee should be granted deduction under section 10B of the Act with regard to exchange gain.
Not granting deduction u/s.10B of the Act on the revised gross total income - HELD THAT:- We hold that the deduction u/s.10B of the Act will be enhanced by the disallowances made by the Assessing Officer in the assessment proceedings. Thus, we direct accordingly. Hence, the ground of appeal is allowed.
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2019 (2) TMI 1397
Unexplained investment in purchases of raw materials - inflation of purchases of raw materials u/s.69 - difference between the actual consumption of raw material vis-àvis standard consumption prescribed under the Exim Input-Output Norms - HELD THAT:- As decided in assessee's own case [2016 (8) TMI 1043 - GUJARAT HIGH COURT] assessee was manufacturing pharmaceutical, medicines, which are being exported. The assessee was maintaining the norms which are prescribed by the Government of India for a particular pharmaceutical medicine which is to be exported.
Since there was a variation in the ratio, the Assessing Officer made addition based on the statement of the General Manager, in-charge production. In our view, the AO has based his addition on the basis of the documents which are not available on the record and based on the statement of the General Manager, in-charge production. Whether the assessee has followed the prescribed norms is not within the purview of the Income-tax Authority, In our view, the Tribunal has rightly held that the CIT(A) was wrong in relying on the input out consumption ratio. In our view, the Assessing Officer and the Commissioner of Income-tax (Appeals) have gone on different directions. - Decided against revenue.
Claim of deduction u/s 10B - HELD THAT:- There is no ambiguity about the eligibility of deduction claimed by the assessee u/s 10B . Thus, if any disallowance is made in respect of the unit eligible for deduction u/s 10B of the Act, then the assessee will be entitled todeduction on the amount of profit enhanced by such disallowance - Circular No.37 of 2016 issued by CBDT dated 02.11.2016 stated disallowances made under sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance - Decided against revenue.
Addition u/s 36(1)(va) r.w.s 2(24)(x) on account of alleged late payment of employees' contribution towards provident fund, ESI, etc. - HELD THAT:- AR before us has submitted that the due date for depositing the employee’s contribution towards PF/ESI should be seen from the date of the payment and not from the due date. In this regard, we note that the Jurisdictional Tribunal in the identical facts and circumstance in the case of Suzlon Energy Ltd. [2018 (8) TMI 447 - ITAT AHMEDABAD] has restored this issue to the file of the AO for fresh adjudication. Therefore, respectfully following the same, we are inclined to restore the issue on the hand to the file of AO for fresh adjudication
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2019 (2) TMI 1412
Disallowance u/s 14A r.w.r. 8D - sourcing of investment from borrowed funds or own funds - investment is taken as stock-in-trade of shares - ex-parte order - HELD THAT:- CIT(A) had rightly appreciated the facts of the present case to the effect that the assessee had made investment in exempt income earning avenues and earned dividend income during the year, but not made any disallowance by invoking rule 8D. From the records of balance sheet, the assessee’s own funds as on 31.03.12 were only ₹ 1.47 crores against the investment of ₹ 48.07 crores.
The short term borrowings stands at ₹ 44.43 crores and thus after appreciating the documents, CIT(A) rightly appreciated that the investment was not sourced by the assessee from own funds, but was sourced from borrowed funds. Moreover, no new facts have been brought on record before us in order to controvert or rebut the findings so recorded by CIT (A). Therefore, the findings of the revenue authorities were un-rebutted and thus there are no reasons for us to interfere into or deviate from the findings recorded by the CIT (A). - Decided against assessee.
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2019 (2) TMI 1411
Disallowance of claim of the assessee u/s 80IB(10) - the built-up area of the flats are less than 1000 sq,ft or not - reliance of report of DVO - HELD THAT:- In view of the report of the DVO filed before us and in view of the law relied upon the Ld. Representative of the assessee in the case of M/s.Nahar Enterprises Vs. DCIT [2017 (4) TMI 913 - ITAT MUMBAI] we are of the view that the CIT(A) has wrongly confirmed the finding of the AO which is not liable to be sustainable in the eyes of law. Therefore, we set aside the finding of the CIT(A) on this issue and directed the AO to allow the claim of the assessee u/s 80IB(10) of the Act fully. Accordingly, these issues are decided in favour of the assessee and against the revenue.
Addition Car Parking sale - some documents seized during the search notable the hard disc shows that several parking are not mentioned in the agreement to sale - HELD THAT:- We noticed that the as per the seized documents, parking places have either been sold along with the flats or separately. When the car parking is sold along with the flats, the same is shown under the column ”Included”.
When car parking is not included the said sale is shown under the column “Not included”. The sale of parking has been shown at ₹ 3,13,30,000/- in the books of account. The assessee has also declared sale of car parking in the next year also. We notice that the CIT(A), after the examination of books of accounts, seized material and submission of the assessee, has allowed the claim of the assessee. The facts were not distinguished before us nor any material was placed to contradict the finding given by CIT(A). Therefore, we are of the view that the finding of the CIT(A) on this issue is upheld. - Decided against Revenue
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2019 (2) TMI 1439
MAT computation - provision for non-performing assets to be reduced from the book profits computed under section 115JA - Deemed Income relating to certain companies - rectification application u/s 154 - assessee countered the proposal pointing out that the provision towards non-performing assets had been created in terms of the Prudential Norms issued by the Reserve Bank of India and were ascertained - response was rejected and the rectification effected as per the proposal of the assessing officer - When the order under s.154 as aforesaid was passed by the Assessing Officer, the jurisdictional High Court, had, in the case of Deputy Commissioner of Income Tax V. Beardsell Ltd. (2000 (3) TMI 37 - MADRAS HIGH COURT) considered the identical issue of whether a provision for doubtful debts was liable to be included in the computation of book profits under s.115JA
HELD THAT:- The settled position in law as on date is that with effect from 01.04.1998 any amount set aside as provision for diminution in value of asset would be liable to be added back to the 'book profits' in terms of s.115JA of the Act. The substantial questions of law that arise for the respective Assessment Years are now answered bearing in mind the dates of the impugned orders.
Rectification u/s 154 - Revenue did not have the benefit of the decision of this Court in Beardsell (supra) at the time when the s.154 order was passed and the error cannot be said to be one 'apparent from the face of record' and was debatable. The invocation of section 154 to rectify an intimation u/s 143(1) of the Act is thus incorrect as when the order was passed for Assessment Year 1997-98, the position in regard to the disallowance was debatable. The questions of law in so far as they relate to assessment year 1997-98 are answered in favour of the Assessee and against the Revenue.
The order u/s 154 in respect of Assessment Year 2000- 2001 was passed on 26.04.2001, subsequent to the decision of this Court in the case of Beardsell (2000 (3) TMI 37 - MADRAS HIGH COURT). Thus, the substantial questions of law are answered in favour of the Revenue and against the assessee for Assessment Year 2000-2001 - Decided in favour of revenue
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2019 (2) TMI 1438
Exemption u/s 11 - entitled for accumulation and carry forward the surplus amount when the assessee had not filed Form 10 within the due date prescribed - Information relevant to the claim of accumulation - whether the prescription to file Form 10 for the purposes of accumulation under Section 11 (2) of the Act is mandatory for the purpose of grant of exemption in terms of Section 11 of the Act, or only directory? - HELD THAT:- The Supreme Court, in the case of Commissioner of Income Tax v. Nagpur Hotel Owners' Association [2000 (12) TMI 99 - SUPREME COURT], considered the identical question and concluded that a claim under Section 11 of the Act would have to be considered by the assessing authority on the basis of the information supplied by the assessee at the time of assessment and if the relevant information to support such a claim was not available with the assessing authority, the same was liable to be rejected.
In the instant case, we find that the Assessing Authority, the CIT (A) and the Tribunal have taken note of the resolution passed by the Board of Trustees dated 22.09.2003, proposing the accumulation of a sum of ₹ 4.10 crores for the purpose of construction of a building. As a fact, the prescribed Form 10 for accumulation has also been filed before the CIT (A).
Requirement of filing Form 10 at the time of assessment is only directory and if it would suffice if the same were filed at the stage of appeal, so long as all relevant information in support of the claim for accumulation is furnished by the assessee along with the claim for consideration by the assessing authority. This conclusion is supported by a line of decisions, including that of the jurisdictional High Court in the case of CIT v. Jayant Patel, [1998 (9) TMI 6 - MADRAS HIGH COURT].
Thus information relevant to the claim of accumulation was furnished to the assessing officer at the time of assessment and there is thus substantial compliance of the provisions of Section 11 (2) of the Act. - Decided in favour of assessee.
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2019 (2) TMI 1409
Computation of long term capital gain on conversion of capital asset into stock in trade - FMV determination - HELD THAT:- CIT(A) has directed the AO to determine the fair market value of the land by obtaining cost of construction incurred by the developer. The assessee claims that M/s Bhoomi Developers has filed requisite details vide their letter dated 20-04-2011, as per which cost of construction per sq.ft. works out to ₹ 591, as against the AOs adoption of ₹ 300 per sq.ft. CIT(A) was right in directing the AO to determine the fair market value of the land by taking cost of construction incurred by the developer. Since the developer has submitted requisite details in respect of cost of construction, the AO is directed to adopt the cost of construction incurred by the developer in place of estimated construction cost taken to arrive at fair market value of the land accordingly, the ground taken by the revenue as well as the assessee are rejected.
In this case, on perusal of facts, there is no doubt, whatsoever with regard to completion of project in AY 2008-09. This fact has not been disputed by the AO. Therefore, we are of the considered view that the Ld.CIT(A) was right in coming to the conclusion that the project has been completed in AY 2008-09 and accordingly, the assessee has rightly recognised revenue from the project in the year in which the project has been completed. This being so, as per the provisions of section 45(2), the capital gain derived from conversion of capital asset into stock in trade shall be chargeable to tax in the year in which such stock in trade has been sold. Since these two events, i.e. completion of project and recognition of revenue from the project has taken place in AY 2008-09, the resultant capital gain derived from conversion of capital asset into stock in trade is also taxable in AY 2008-09 - there is no reason to interfere with the findings of the Ld.CIT(A) and hence, we are inclined to uphold the findings of CIT(A) and reject ground taken by the revenue in all appeals.
Disallowance of deduction claimed u/s 80IB(10) in respect of housing project - AO has disallowed deduction claimed u/s 80IB(10) on the ground that the assessee has not fulfilled the conditions laid down to claim such deduction as the commencement of construction of the housing project was started before 01-10-1998 and also the completion of the project was not complete in all respects before 31-03-2008 - HELD THAT:- The basic works carried out by the assessee including construction of compound wall and filling up of land cannot be considered as commencement of construction of the building. The said two works have been done before issue of commencement certificate by MCGM on 06-05-1998. In fact, the actual construction work has been commenced on 05-10-1998 as per the certificate of architect. AO was incorrect in observing that the project work has been started before 01-10-1998.
Coming to the date of completion of project - According to the AO, the project has not been completed before 31-03-2008 as per the requirement of provisions of section 80IB(10). AO has given this finding on the sole basis of no OC certificate from MCGM. On the other hand, the assessee has filed enormous details including certificate by fire fighting department, certificate for lift operation from Municipal Corporation, architect’s certificate for completion of building on 27-11-2007, copies of possession letter issued to the buyers of the flat and also certificate of complete of civil engineer dated 14-01- 2008. On perusal of details filed by the assessee, we find that the project has been completed before 31-03-2008. Insofar as occupation certificate, though it is necessary to obtain occupation certificate from MCGM after completion of the project, in this case, on perusal of details, it is very clear that the assessee has filed an application before MCGM for issue of occupation certificate on 19- 05-2005 in case of A-Wing of the building.
In RUNWAL MULTIHOUSING PVT. LTD. VERSUS ASST. COMMISSIONER OF INCOME TAX [2014 (2) TMI 595 - ITAT PUNE] had considered similar issue in the light of non issue of occupation certificate by municipal authorities and after considering relevant facts, held that when the assessee has handed over possession of the flat to the buyers, merely for non receipt of completion certificate, deduction cannot be denied. The Ld.CIT(A), after apprising all facts, held that the assessee has fulfilled conditions prescribed u/s 80IB(10) in order to be eligible for deduction for eligible profits. We do not find any error or infirmity in the findings of the Ld.CIT(A) and hence, we are inclined to uphold the findings of Ld.CIT(A) and reject ground taken by the revenue.
Chargeability of interest receipt from bank FD - HELD THAT:- Ratio laid down by the Hon’ble Supreme Court in the case of Totgar Cooperative Sales Society Ltd vs ITO [2010 (2) TMI 3 - SUPREME COURT] will squarely apply, where it was held that the Parliament has included specific business profit into the definition of the word ‘income’. Therefore, one is required to give a precious meaning to the words ‘Profits and gains of business or profession’.
In the instant case, when we apply the ratio laid down by the Hon’ble Supreme Court in the said case, we find that interest earned on short term FD could not be said to be attributable to the activities of the assessee, mainly carrying on the business of construction and development of flats. Therefore, we are of the considered view that the AO was right in assessing interest earned on FDR under the head ‘Income from other sources’. CIT(A), without appreciating these facts directed the AO to assess interest under the head ‘Income from business or profession’, as claimed by the assessee. Hence, we reverse the finding of the Ld.CIT(A) and restore the assessment of interest income under the head ‘Income from other sources’.
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2019 (2) TMI 1408
Re-opening of assessment - Proof of independent application of mind on the material by the AO before recording of reasons that income subject to tax has escaped assessment - information received from the Forward Markets Commission - Borrowed satisfaction - HELD THAT:- A perusal of the assessment order demonstrates that in the report of the FMC there is no allegation whatsoever made that the assessee had booked bogus losses. The information was general in nature and the assessee company was not named. The Assessing Officer was duty bound to apply his mind to the information received prior to coming to the conclusion that he has reason to believe that income subject to tax has escaped assessment. This information received and the material had to be prima facie examined and the material has to have live link with the formation of belief that income subject to tax has escaped assessment.
When FMC audit does not find fault with the transactions of the assessee company and when the assessee company is not named in the FMC report, to base the reason on such information without verification, is bad in law. The assessee has produced all evidence to prove that the transactions are genuine and that he had participated as an arbitrager. There is no proof of cash changing hands. The FMC audit had cleared the transactions of the company. A plain look at the reasons demonstrates that the re-opening was based on the information which was never examined or verified by the Assessing Officer before recording reasons for reopening of assessment.
Re-opening is bad in law as the Assessing Officer has not independently applied his mind to the material and has recorded reasons which are vague and based on borrowed satisfaction. Hence this ground of the assessee for both the Assessment Years are allowed. - Decided in favour of assessee.
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2019 (2) TMI 1406
N.P. rate of 5% on unrecorded sales - HELD THAT:- It is pertinent to note that the turnover in question was unaccounted sales of the assessee and, therefore, all other expenditures which are common and below the trading account are already booked by the assessee in the Profit & Loss account against the accounted sales and, therefore, for the purpose of estimating the income on the unaccounted sales the GP would be the income from such unaccounted sales.
We find that even if we apply the average of GP for the earlier year including the NP @ 5% for the assessment year 2011-12, it will be around 4.21%. Thus we restrict the addition on account of estimated income in respect of unaccounted sales by taking the NP at 4.21%. The AO is directed to re-compute the addition by considering the NP on unaccounted sales at 4.21%. We may clarify that the earlier order for the assessment year 2011- 12 is not a decision based on the facts but it was only an estimation of income by the A.O. and, therefore, it will not operate either as res judicata or estoppel against the assessee.- Appeal of the assessee is partly allowed.
Validity of the order passed under section 271(1)(c) - HELD THAT:- When the AO has not specified the limb for initiation of penalty proceedings under section 271(1)(c), the same is bad in law and accordingly the impugned order passed under section 271(1)(c) is not sustainable in law and liable to be quashed.
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2019 (2) TMI 1401
Deduction u/s 10A computation - exclusion of telecommunication and insurance charges from the total turnover and the export turnover - CIT(A) had adjudicated these issues following the judgment of the jurisdictional High Court in the case of Tata Elxsi Ltd., Vs. CIT [2015 (3) TMI 1220 - ITAT BANGALORE] in which it has been categorically held that if any expenditure is excluded from the export turnover, the same should be excluded from the total turnover. Since the CIT(A) has adjudicated the issue in the light of the judgment of the Hon’ble High Court, we find no infirmity in the order of the CIT(A). Accordingly, we confirm the same.
Disallowance of licence fees paid to Consultant/Doctors abroad - AO had disallowed licence fees paid by the assessee having observed that the licence fees paid and claimed as an expenditure by the appellant company ought to have been borne by the Consultant/Doctors abroad - HELD THAT:- It is an arrangement between the appellant and the consultant doctors with regard to remunerations and the licence fees to be paid. If the appellant takes the responsibilities of making the payment of licence fee on behalf of the Doctors and paid a lesser remuneration, this arrangement should not have been doubted by the Revenue authorities unless and until the arrangement is held to be in contravention to the provisions of law. We therefore find no infirmity in the order of the CIT(A) who has rightly allowed the claim of the assessee. Accordingly, we confirm the order of the CIT(A). - Decided against revenue.
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2019 (2) TMI 1400
N.P. rate determination - HELD THAT:- N.P ratio is higher in the A.Y. 2014-15 in comparison to A.Y. 2012-13 & 2013-14. As found that the Assessing Officer has not found that purchase and sales recorded in the books are inflated or bogus. Further the Books of accounts are audited u/s 44AB of the income tax act. Without pointing out any defects in the books of accounts the learned A.O’s conclusion to possible leakage of revenue is hypothetical and not tenable.
It is very clear that there is increase N.P. rate during the year under consideration as compared to the earlier two years. Under these facts and circumstances of the case, there is no justification for making any trading addition. Accordingly entire trading addition so made by the Assessing Officer is directed to be deleted.
Disallowance of foreign travelling of expenditure - HELD THAT:- As found that actual foreign travelling was at ₹ 115,000/- incurred by B.P. Singh on tour to Jeddah on behalf of the assessee. Rest of the expenses ₹ 3,72,881/- were payment to one of the staff Mr. Puneetsingh for inland travelling which inadvertently displayed as a foreign travelling in the income tax return. All expenses were paid to him by cheques as per his submission of bank statement for online payment to IRCTC and Airlines and Hotels. Since the assessee was having export sales to Jeddah and Bahrain, travelling to this country was for the purpose of business. No merit for disallowance foreign travelling expenditure, having been incurred by the assessee for the purpose of this business. Assessing Officer is directed to delete the same.
Addition on account of deemed rental income - HELD THAT:- The property purchased by the assessee is situated at Kamla Crystal and not in Kamla Enclave and the same was used for residential purposes by the assessee since its purchase. The house at 6-A-42, C.S. Azad Nagar was occupied for the business of R.K. Textiles for grading and finishing job. The house which is not having any actual rental income but self occupied by assessee should be determined as per the municipal ratable value. Accordingly, the matter is restored to file of the Assessing Officer to find out the municipal ratable value of the house for computing income u/s 22.
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Customs
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2019 (2) TMI 1399
Smuggling - Cigarettes - It has been alleged that accused being Custom Officer was aiding co-accused in smuggling of the said articles - Held that:- It has been admitted by Ld. SPP for Customs during arguments that the accused was indeed a part of team which investigated the said case as mentioned by Ld. Senior Advocate Sh. Vikas Pahwa. It is stated that the accused has been apprehended only on the basis of disclosure statement of co-accused and said statement was also retracted by him - The accused is in Judicial Custody since 04.02.2019. His custodial interrogation is no more required.
The applicant/accused Sunil Kumar is admitted to bail on furnishing personal bond In the sum of ₹ 50,000/- with one surety in the like amount to the satisfaction of the Ld. CMM/Link MM/Duty MM.
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2019 (2) TMI 1430
Imposition of penalty - Smuggling - export of prohibited item - Red Sanders - reliability on statements - Held that:- The present proceedings, based as it is on the same evidence and the same statement, that were found to have failed the test of credibility against less rigorous touchstone in Customs Act, 1962, cannot sustain that warranted in the more consequential Custom Broker Licensing Regulations.
In view of the lack of any evidence to sustain the charges of complicity that were held as proof to justify that consequent detriment by the Commissioner of Customs in the impugned order, the same is set aside - appeal allowed.
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2019 (2) TMI 1445
Validity of Pre-import conditions - Exemption from integrated tax and GST compensation cess - benefit of N/N. 18/2015- Cus - Import against Advance Authorisation - Duty Exemption/Remission Schemes - pre-import conditions - principal challenge in these petitions is to the “preimport condition” in paragraph 4.14 of the Foreign Trade Policy 2015-2020 inserted vide Notification No.33/2015-2020 dated 13.10.2017 and such “pre-import condition” introduced by clause (xii) in Notification No.18/2015-Customs by virtue of Notification No.79/2017-Customs dated 13.10.2017.
Held that:- Considering the interpretation of the condition of physical export and pre-import put forth by the DRI, it is more or less impossible to make any exports under an Advance Authorisation without violating the condition of pre-import. In effect and substance, what is given by one hand is taken away by the other. In other words, in the light of the condition of pre-import, the benefit of exemption from levy of integrated tax and GST compensation cess becomes more or less illusory.
Paragraph 4.13 is a provision which is specifically made for “pre-import” condition and provides for the categories of cases to which such condition has to be applied - even according to the respondents, there is a specific provision in the Foreign Trade Policy specifying inputs which are to be imported under pre-import condition, viz. paragraph 4.13. Therefore, if a condition of preimport has to be put in respect of any input, ideally such input should find place in paragraph 4.13 of the Foreign Trade Policy, which is not so in the present case.
Due to the condition of pre-import contained in paragraph 4.14 and condition (xii) of the notification, though the inputs imported by the petitioners may not fall within the categories enumerated in paragraph 4.13 of the Foreign Trade Policy and are as such not subject to the pre-import condition, the same become subject to the condition of pre-import qua specific levies viz. integrated tax and GST compensation cess, which creates an anomalous situation, inasmuch as the import of the inputs against an Advance Authorisation is subject to several levies under section 3 of the Customs Tariff Act and in respect of the levies under sub-sections (1), (3) and (5) thereof, there is no pre-import condition; however, insofar as integrated tax and GST compensation cess leviable under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act, 1975 are concerned, for the purpose of exemption from such levies, such imports would be subject to “pre-import condition”, as a result of which if the importer wants the benefit of exemption from the levy of integrated tax and GST compensation cess, the fact that the other levies are not subject to “pre-import condition” becomes immaterial inasmuch as the same input would be subject to the pre-import condition qua integrated tax and GST compensation cess which would, therefore, result in the input being subject to pre-import condition in respect of all the levies.
Thus, in terms of the interpretation put forth by the DRI as referred to hereinabove, compliance is required of the authorisation as a whole and in case the condition of preimport is violated, the entire Advance Authorisation gets vitiated - by virtue of the amended paragraph 4.14 of the Foreign Trade Policy, even in case of inputs not falling within the ambit of paragraph 4.13, if such inputs have been imported against an Advance Authorisation, the same are subject to “pre-import condition” insofar as claim for exemption from the levy of integrated tax and GST compensation cess under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act is concerned.
By virtue of the amended paragraph 4.14 of the Foreign Trade Policy, even in case of inputs not falling within the ambit of paragraph 4.13, if such inputs have been imported against an Advance Authorisation, the same are subject to “pre-import condition” insofar as claim for exemption from the levy of integrated tax and GST compensation cess under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act is concerned.
Whether the impugned “pre-import condition” in any manner furthers the objective of the Foreign Trade Development Act and the Foreign Trade Policy? - Held that:- The scheme of Advance Authorisation has been working smoothly without any hitch for all these years (nothing has been pointed out on behalf of the respondents that there were any difficulties or irregularities on account of non-imposition of the “pre-import condition”), therefore, in the absence of anything adverse, there was no necessity to change the scheme by subjecting the two levies referred to in sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act to the condition of pre-import. More so, when the Foreign Trade Policy has a separate paragraph 4.13 which provides for “pre-import condition” in respect of specific inputs, there is no rationale for placing a condition of pre-import qua any inputs than those specified under paragraph 4.13. As discussed hereinabove, though in paragraph 4.14 the condition of pre-import is not qua specific inputs, but for availing benefit of exemption from levy of integrated tax and GST compensation cess, in effect and substance, it operates as a condition for pre-import qua all the raw material imported under an Advance Authorisation.
The Government has found it to be in public interest not to have a condition of pre-import for availing the benefit of exemption from integrated tax and GST compensation cess leviable on material imported against an Advance Authorisation, which vindicates the stand of the petitioners.
Therefore, the condition of pre-import militates against the Advance Authorisation Scheme and therefore, the impugned condition (xii) in Notification No.18/2015-Cus dated 1st April, 2015 introduced vide Notification No.79/2017 dated 13th October, 2017 as well as the amendment in paragraph 4.14 of the Foreign Trade Policy made vide Notification No.33/2015-2020 dated 13th October, 2017, to the extent the same imposes a “pre-import condition” in case of imports under Advance Authorisation for physical export for exemption from the whole of the integrated tax and GST compensation cess leviable under sub-section (7) and sub-section (9) respectively, of section 3 of the Customs Tariff Act, do not meet with the test of reasonableness and are also not in consonance with the scheme of Advance Authorisation.
Benefit of zero-rating resulting in double benefit - Held that:- Rule 3(1)(vii) of the Cenvat Credit Rules allows credit. Prior to July, 2017, if duties were paid under subsections (3) and (5) of section 3 of the Customs Tariff Act, credit was admissible. However, now the levies under subsections (3) and (5) of section 3 of the Customs Tariff Act are replaced by sub-sections (7) and (9) of section 3 of the Customs Tariff Act and there is no change in the basic scheme warranting a different procedure.
The Government did not find any nexus between the condition of pre-import and the objective of this Scheme, this court is of the considered view that the impugned exemption notification and paragraph 4.14 of the Foreign Trade Policy, to the extent the same are subject matter of challenge in these petitions, cannot be said to meet with the test of reasonableness - this court is of the view that paragraph 4.14 of the Foreign Trade Policy whereby a condition of pre-import has been put for availing the benefit of exemption from levy of integrated tax and GST compensation cess vide Notification No.33/2015-2020 dated 13th October, 2017 as well as the condition (xii) inserted in Notification No.18/2015 dated 1st April, 2015 vide Notification No.79/2017 dated 13.10.2017, are ultra vires the scheme of the Foreign Trade Policy, 2015-2020 and the Handbook of Procedure and are, therefore, required to be quashed and set aside.
Petition allowed.
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2019 (2) TMI 1444
Auction of goods - whether the goods were Hot Rolled or Cold Rolled? - Release of goods - Held that:- The reports of Bokaro Steel Plant were received directly in the Court which were opened and it was opined therein that the material was Cold Rolled Steel as is clear from the order dated 8.7.2016 (Annexure P-12). This Court vide order dated 12.7.2016 (Annexure P-14) ordered for release of the goods and as regard the variation of thickness of the goods as raised by respondent No.1 vide affidavit dated 12.7.2016 (Annexure P-13), petitioner No.1 was directed to furnish the bank guarantee.
Since the goods were found to be 'Cold Rolled', respondent No.2 assessed the Bills of Entries and ordered for release of the goods vide out of charge order, Annexure P-16. Vide letter dated 2.8.2016 (Annexure P-17), respondent No.2 returned the Bank Guarantee of the petitioners.
We dispose of the present petitions by granting liberty to the petitioners to file a detailed and comprehensive reply to the show cause notice dated 13.12.2016 (Annexure P-1) raising all the pleas as raised in the present writ petition before the appropriate authority within a period of one month from the date of receipt of the certified copy of the order.
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2019 (2) TMI 1403
Reclassification of goods - Drawings and Design for 33M2 Sinter Plant - whether classified under CTH 8417 or under CTH 49060000? - Held that:- What is sought to be imported is drawings and design and not the plant per se and from the Order-in-Original - Also, the adjudicating authority has nowhere discussed as to how the drawings and design require re-classification.
Therefore, a finding was required by the adjudicating authority as to how the drawings and design sought to be imported could be categorized as either nuclear reactor or boiler or machinery and mechanical appliances, to be covered under Chapter 84 - Revenue has not made out any case to justify intervention - appeal of Revenue dismissed.
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Corporate Laws
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2019 (2) TMI 1453
Injunction restraining encashment of Bank Guarantees (BGs) and the objection of the defendants to the subject jurisdiction of this Court to entertain these suits - delayed the receipt of payment under the BBG by nearly over three months. HELD THAT:- As the Civil Court of Original Jurisdiction to be not having jurisdiction to entertain the dispute subject matter of the present suits. Resultantly, the plaints in the suits are liable to be rejected.
What emerges on going through all the documents is that the plaintiff, after submitting the resolution plans and after the same were approved by the CoC, has had second thought and/or was not in a position to furnish PBG and started making counter- offer, of conversion of BBG into PBG and opening of an Escrow Account for the balance amount of the PBG and which was not acceptable to the RP/CoC who, after giving sufficient latitude to the plaintiff have invoked the BGs.
It cannot also be lost sight of that in the whole process, considerable time, out of the time bound schedule in terms of the Code for the resolution process, has been wasted and wastage of which time may ultimately result in the possibility of Castex and ARGL Limited being restructured ceasing to exist and being inevitably required to be liquidated, all at the cost of the creditors thereof and wastage of the stressed assets of the said two companies. The loss caused by such conduct of the plaintiff is thus mammoth, having adverse consequences on all the creditors and shareholders of the said two companies and also on the economy of the country and to remedy which, the code was enacted. The NCLT is best equipped to also deal with apportionment of the amount of the BBGs in proper account.
The present case thus also falls in the category of cases envisaged in SAW Pipes Ltd.
[2003 (4) TMI 438 - SUPREME COURT OF INDIA] where loss caused on account of delays in construction of say, a public road, though does not cause loss to any individual or person or company in particular but causes loss to the residents of the country and which is unmeasurable and in which regard a pre-estimate is permitted to be forfeited without proof of any loss. The loss likely to be caused by the conduct of the plaintiff similarly, is to the country as a whole and thus the amount of the BBGs which the plaintiff was required to furnish to ensure that the plaintiff, after furnishing resolution plan does not withdraw, as the plaintiff has done, though not expressly but by conduct, qualifies as a genuine pre-estimate of the loss.
On merits also thus, I do not find the plaintiff entitled to a restraint against encashment/payment under the BG. However since this Court has been found to be not having subject jurisdiction to entertain the suits, the plaint in both the suits is rejected.
The plaintiff, by instituting the suits has delayed the receipt of payment under the BBG by nearly over three months.
The law requires Courts to, while vacating the interim injunction, balance the equities. Though I am refraining from directing the plaintiff to reimburse SBI with interest on the amounts of the BGs but burden the plaintiff in each of the suits with costs of ₹ 25,00,000/- considering the expense incurred by the defendants in contesting the suits including by engaging senior counsels. The plaintiff is directed to pay the said costs to SBI within four weeks of today.
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2019 (2) TMI 1451
Allotment of land to the petitioner cancelled by Indore Development Authority - plot, which was allotted to the respondent was a commercial plot and the Indore Development Authority also allotted various plots to various newspapers irrespective of their circulation again without adhering to tender process on concessional rates - HELD THAT:- After termination of allotment to other newspapers, no fresh allotment has been done till date nor any regularization has taken place. No lease deed has been executed in respect of any newspaper, whose allotment was terminated. The respondent before this Court has not be able to point out from any document to establish that any regularization has taken place in respect of other newspapers nor has been able to point out nor able to bring on record any lease deed, which has been executed in favour of any newspaper, whose allotment was terminated
The State Government has framed Rules for allotment of land and now there is a prescribed procedure for allotting the land belonging to public body like Indore Development Authority. It is not a case where the land is being allotted to the respondent and the decision has been taken for social good, public good or common good like allotment of affordable houses to members of Scheduled Caste and Schedule Tribe or implementation of housing scheme for Below Poverty Line families.
If allotment of land and execution of sale deed in favour of respondent is not for social good, public good or common good, it cannot be dissipated in favour of private entrepreneur virtually free of cost or for consideration not commensurate with its worth without attracting Article 14 and 39(b) of the Constitution of India.
No allotment can be done in the manner and method it has been directed by the learned Single Judge in the present case. The land in question is situated in commercial area. Undisputedly, it is not a part of Press Complex and the plots in the Press Complex cannot be compared with the plots which are situated in commercial area and is valued at about ₹ 200 Crores. The State Government has framed Rules for allotment of land and the Indore Development Authority does not have any choice except to follow the Rules framed on the subject.
In the present case, the respondent wants the land belonging to Indore Development Authority for almost negligible consideration that too dehors the statutory provision governing the field on the ground that in similar circumstances land has been allotted to various other newspapers. It has been stated at bar by the learned Advocate General that after the judgment was delivered by the Division Bench in the first round of litigation, leases have not been renewed in respect of other newspapers and no final order has passed by the Indore Development Authority, otherwise also no relief can be claimed on the ground of negative equality.
This Court would like to clarify one more thing that the land for which the petitioner is staking his claim is not a land in the area which is marked for Press Complex, on the contrary the piece of land is situated in a commercial area surrounded by commercial buildings and therefore, the petitioner can never said to be an identically placed person claiming the land, which is situated in identical place, where the land was allotted to other newspaper groups.
Resultantly, the impugned judgment dated 14/11/2013 passed by the learned Single Judge in Writ Petition No.2801/2012 is quashed. The Indore Development Authority shall be free to dispose of the land in question in accordance with law, keeping in view the statutory provisions as contained under the Rules of 2018. With the aforesaid, writ appeal stands allowed.
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2019 (2) TMI 1410
Oppression and mismanagement - contesting Respondents were restrained from interfering with the affairs of the Company by holding themselves out as Managing Director/Directors - HELD THAT:- As seen the consents which were filed with the Company Petition, which were titled as 'Power of Attorney' and detailed recitals are there empowering original Petitioner No.1 to engage and appoint Counsel to conduct and defend legal proceedings in any Court of Law, Tribunal or Company Law Board and to sign Vakalatnama, pleadings etc. These documents are of 2007, copies of which are at Pages - 641 to 667.
Going through these documents, it cannot be said that the concerned members, who were referring to their Share Folio numbers and number of shares and who were authorizing the original Petitioner No.1, did not know that they were authorizing the Petitioner No.1 to move Courts, Tribunals, CLB with regard to protecting their interests as well as the interests of the Company. Those Petitioners have not questioned the act of Petitioner No.1 maintaining the Petition on their consent. Contesting Respondents cannot profess to have entered their brains to say that they did not give intelligent consent. Thus, on this count, we do not find that there is any defect made out.
No reason to interfere with the Impugned Order except for a small portion. Direction 'A' of the operative order of para - 23 of the Impugned Order (reproduced earlier) was not well worded and needs to be modified. The original Petitioners have not sought declaration of termination of the agreement dated 9th October, 2003. It was an agreement between original Respondents 2 and 3. Whatever legal effect it had viz-a-viz original Respondent No.2, was matter between original Respondent Nos.2 and 3. In the absence of any material to show that the original Petitioners were party to such agreement or that the Company was party to such agreement, the declaration should have been that the said agreement is not binding on the original Petitioners and the Company and would not confer any rights on the contesting Respondents viz-a-viz the shareholders of the Company.
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Service Tax
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2019 (2) TMI 1424
Refund of Service Tax erroneously under Reverse Charge Mechanism - unjust enrichment - Held that:- The test of unjust enrichment, in its limited applicability, is confined to the consideration as to who had borne the incidence of tax? If it is borne by the appellant and not passed on to any other person, then appellant cannot be regarded as being enriched with the refund of such tax component borne by any other person.
In the instant case, going by the service commission agreement - calculation is given as: “CIF price to customer minus CIF price to Godrej” and the service commission calculation has been reached at a certain amount, as found from simple agreement copies placed at page no. 130 & 131 of the appeal memo - Chartered Accountant also had furnished the certificate indicating non-realisation of tax component from the service receiver - The appellant’s claim that it had paid the Service Tax under the erroneous belief that as per Reverse Charge Mechanism, it is liable to pay the same but subsequently Board Circular had clarified the same to be non-taxable. Therefore, the service tax is supposed to be treated as deposit as there is no sanctioned behind it by the legislature in conformity to Section 265 of the constitution of India.
The appellant has passed the test of unjust enrichment and it is entitled to the refund claimed by it for non-leviable Service Tax - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 1427
Classification of services - Business Auxiliary service or not - miscellaneous income received as documentation charges/ other charges - High Seas Sale - contradiction in the facts - Held that:- It has been argued in the impugned order that the said imported goods namely, valves are used by different manufacturer as well as consumers. A specification and other warranty certification, drawing process test certification, valves test certification, instruction and maintenance manually etc. required to be given in number of sets as per requirement of client. Consequently, the documents in thousands of pages are required to be given to the client namely the buyer of High Seas Sales product. On perusal of the appeal memorandum as well as defence made by the appellant before lower authority shows that they have claimed that thus documentation is made in respect of valves manufactured and sold by them to their client. In none of the document, it has been asserted that the said documentation is made in the course of High Seas Sales.
From the discussion in the impugned order, it is apparent that the same has been passed on presumption that the entire transaction is in respect of High Seas Sales of goods imported by the appellant to various client of overseas supplier. From the submission made by the appellant before original adjudicating authority as well as Tribunal, it is seen that the appellant have claimed that the documentation provided by them to their client is in respect of valves manufactured and supplied by them, thus there is contradiction in facts.
The matter remanded back to the original adjudicating authority to decide the matter afresh clearly stating the facts and identifying the specific Clause of definition of business auxiliary service where the revenue seeks to classify the said service - appeal allowed by way of remand.
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2019 (2) TMI 1420
Refund claim - restriction on the amount of refund - refund of interest paid on service tax when the service tax is refundable in terms of Section 102 of Finance Act, 2016 - Whether the appellant’s refund claim can be restricted by the amount of cenvat credit availed on input service attributed to output service which is not taxable by virtue of Section 102 of Finance Act, 2016? - Held that:- Even though there is no specific provision in Section 102 but Rule 6 clearly provides that the cenvat credit is not allowed in respect of input service which was used in non taxable/exempted service. Therefore, the cenvat credit availed on the input service attributable to the non taxable output service is required to be reduced from the total service tax paid on the output service - thus, the refund should be restricted by the amount of cenvat credit on the input service attributed to not taxable output service.
Refund of interest paid on the service tax - Held that:- The service tax was admittedly refundable which is not in dispute even by the department. Therefore, even though there is no specific provision in the Section 102 but once service tax is not payable than the interest paid on such service tax also become refundable.
The refund claim is to be restricted by the amount of cenvat credit in respect of input service attributed to non taxable construction service - The appellant is entitled for the refund of interest paid on service tax on the output service - appeal allowed in part.
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2019 (2) TMI 1405
Refund of service tax paid - Jurisdiction - rejection on the ground that that the appellant is registered as service provider in Gurugram, therefore, the refund claim is required to be filed there. Therefore, they are not entitled to claim refund from the Panchkula office - Held that:- The appellant has filed refund claimed either of the Commissionerates of Gurugram and Panchkula. The appellant is registered with the Service Tax department, Gurugram. However, as the Housing Board Haryana paid service tax on the rendered by the appellant to the Panchkula Commissionerate, then the appellant is having jurisdiction to file refund with the Panchkula Commissionerate. Therefore, they have rightly filed refund claim before the Panchkula Commissionerate.
Further, the appellant has produced certificate from the Housing Board Haryana certifying that the appellant can file refund of service tax paid by Housing Board Haryana and the service tax borne by the appellant. In that circumstance, the appellant is entitled to file refund claim before the Panchkula Commissionerate.
The concerned officer of Panchkula Commissionerate is directed to sanction the refund claim to the appellant within 30 days of receipt of this order - appeal allowed.
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2019 (2) TMI 1404
Valuation - Abatement claim - composition scheme/ Rule 2A of Service Tax Composition Rule - rection, commissioning or installation services - consultation services/ commercial or industrial service - consulting engineering service - Held that:- The service provided by the appellant pertain to ‘work contract services’ which is leviable for service tax only after 1/06/2007, and therefore, the demand prior to 01/01/2006 to 31/05/2007 is liable to be dropped - Similarly the demand in respect of pure trading of trading goods is also not sustainable as the same falls outside the ambit of Finance Act. Also the demand in respect of airport is also not sustainable being the outside the definition of ‘work contract services’.
Residential complex of the Government employee - Held that:- The demand is not tenable as the amount for personal use and outside the work contract.
It is also found that the demand created on the value of material is liable to be dropped as under the composite contract only the service tax portion is to be taxed excluding the material portion in terms of the Rule 2 A of composition scheme and Notification No. 12/2003-ST dated 20/06/2003. All these issues are required to be worked out once again.
The Ld. Adjudicating Authority is directed to consider the submissions made by the appellant following the departmental circular and judicial precedent on the issue at hand and pass appropriate order after affording the opportunity of personal hearing - appeal allowed by way of remand.
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2019 (2) TMI 1402
Refund of CENVAT Credit - export of services - refund rejected by the Commissioner (Appeals) on the ground that services provided by the appellant are not management consultant service and services provided by appellant does not qualify as export - whether services provided by appellant are classifiable under management consultant service or not?
Held that:- It is clear that any service provided by management or business consultant in connection with management of any organization in any manner will be covered under management consultant service.
From the scope of services, it is clear that appellant provides information on upcoming projects or potential collaborations of interest to its parent company. Appellant provides the updates and information about the government policies, economic scenario, political climate and industry analysis in India to its parent company. Appellant also provides information about vendors and other procurement related services. Appellant also provides services in relation to recruitment of employees. The said services are used by the parent company to explore the business opportunities in India.
The said services provided by appellant are related to management of business of parent company in India and for HR management. The said services are used by parent company to take decisions about the business opportunities in India - Since services in question are related to business management the said services are clearly covered under the definition of ‘management and business consultant service’.
Whether services provided by appellant qualifies as export or not? - Held that:- From the facts of the present case it is evident that services recipient i.e. parent company is located outside India. Further service provided by appellant are used by its parent company outside India to take decisions and payment are received by appellant in foreign currency. Since all conditions of export of service are satisfied, services provided by appellant qualifies as export.
Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (2) TMI 1448
Rectification application - condonation of delay - time limitation - Section 35 C of the Central Excise Act - principles of Natural Justice - Held that:- There is a little room for doubt that the Tribunal would have inherent power to recall its order (rectify) if sufficient cause is shown for the delay in approaching it - reliance placed in the case of SUNITADEVI SINGHANIA HOSPITAL TRUST VERSUS UNION OF INDIA [2008 (11) TMI 249 - SUPREME COURT OF INDIA], where it was held that The Tribunal failed to take into consideration that, ipso facto, in a case of this nature provisions of Section 129B of the Customs Act as such has no effect.
Clearly the Tribunal fell in error by not noticing the decision of the Hon'ble Supreme Court recorded in Sunita Devi Singhania's case - matter remitted back to the Tribunal to decide the issue afresh.
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2019 (2) TMI 1428
Permission to clear the goods for further processing - permission to re-export the goods - Rule 56B of the Central Excise Rules, 1944 - production of H forms - Circular No. 212/46/96-Cx dated 20.05.1996 - Held that:- The appellant have failed to produce H Forms at least in the 10 cases listed at para 10.5 of the impugned order for which there is no defense - In the instant case ‘M/s Core’ from where the goods have been claimed to have been exported was a registered unit. If they wanted to export they were not entitled to the concession given to small scale units.
Circular 212/46/96-CX dated 20.05.1996 and 648/39/2002-CX dated 25.07.2002 are in the shape of relaxation offered to fully exempted Units as a concession. The said procedure is not applicable to Units other than those specified in the said Circular.
Appeal dismissed - decided against appellant.
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2019 (2) TMI 1426
Valuation - physician samples cleared by them for free distribution - section 4A of CEA - appellant are manufacturing physician samples on behalf of their loan licensee and selling the same to the loan licensee who further distribute the same free of cost to physicians - Held that:- The assessment in the said case need to be done in terms of decision of Hon’ble Apex Court in the case of M/s Sun Pharmaceuticals Industries Ltd [2015 (12) TMI 670 - SUPREME COURT] where it was held that the assessment in such case is to be done on the basis of transaction value of sale of physician samples from the appellant to the loan licensee.
The physician samples manufactured by the appellant on their own behalf are distribute free of cost by the appellant to the physician - Held that:- In respect of physician samples cleared by the appellant on their own behalf for free distribution are to be assessed on the basis of the value ascertained for the identical medicine cleared in the open market and assessed under Section 4A of the Central Excise Act.
Since the impugned order has not quantified two categories separately, the impugned order is set aside and matter is remanded to the original adjudicating authority to pass afresh order in above terms - appeal allowed by way of remand.
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2019 (2) TMI 1425
Rectification of mistake - Restoration of appeal - order of Tribunal passed ex-parte - applicant seeks to recall the order on the ground that the applicant/ advocate could not be present at the time of hearing - Held that:- Though the hearing notice was sent but that was received by the applicant almost on the same day of hearing. Therefore, non-prosecution on the part of the applicant is not intentional - Order is recalled and appeal restored to its original number - application allowed.
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2019 (2) TMI 1423
CENVAT Credit - credit denied on the stock lying on 31st March, 2003 on the ground that as per N/N. 40/2003-CE (N.T.) dated 30/04/2003 when there was no change in the stock on 01/04/2013 the assessee is required to give intimation which was not given by the appellant - Held that:- Appellant had filed declaration for the stock as on 31/03/2003. Since, in their reply they had stated that there is no change in the stock, the same may be considered as intimation, as there is no time period stipulated for such intimation - Hence, only for non filling of intimation which is of procedural nature, credit should not be denied - credit allowed.
CENVAT Credit - credit denied on the ground that the appellant have not carried out any manufacturing activity on man-made fabric - Held that:- Since, the appellants have cleared the same goods on payment of duty, CENVAT credit is admissible in terms of Rule 16 of Central Excise Rules, 2002 - Demand on this ground set aside.
Exemption under N/N. 38/2003-CE dated 30/04/2003 - exemption denied on the ground that the goods cleared by the appellant is not covered by the notification and the relevant invoices were not produced to ascertain the nature of the goods - Held that:- The Ld. Commissioner (A) has already considered and set aside the major demand on filing of 13 invoices by the appellant. However, for the remaining amount, appellant failed to produce any invoices. In absence of invoices, it cannot be ascertained that the goods cleared is covered by notification 38/03-CE. Therefore, the demand of ₹ 23,608/- is upheld.
Penalty - Held that:- Since the major demand is set aside and the demand which was confirmed also relates to the applicability of the notification, there is no malafide on the part of the appellant, hence, the penalty imposed by the lower authority is also set aside.
Appeal allowed in part.
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2019 (2) TMI 1419
CENVAT Credit - input services - outward GTA service - inclusion of freight element in the assessable value - Board’s Circular No. 1065/4/18-Cx dated 08.06.2018 - Held that:- There is a development by way of Board Circular No. 1065/4/18-Cx dated 08.06.2018, the adjudicating authority has also not verified whether the freight element is included in the assessable value, therefore, the matter needs to be reconsidered by the adjudicating authority - appeal allowed by way of remand.
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2019 (2) TMI 1418
Maintainability of appeal - appeal was dismissed on the ground of time bar - communication of order - Held that:- The order was issued on 17.09.2014 but as per the appellant submission they had not received the order copy and the zerox copy of the order was received on 02.06.2016 and appeal was filed on 26.07.2016 - The Ld. Commissioner (Appeals) has dismissed the appeal on the ground of time bar however he has not verified the fact that whether the order in original was served upon the appellant in 2014 itself after dispatch of the same - without verifying the dispatch and delivery of the original order, Commissioner (Appeals) cannot take a stand that the appeal was filed belatedly.
Appeal is allowed by way of remand to the Commissioner (Appeals) to decide the matter only after ascertaining the fact that when the order was delivered to the appellant.
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2019 (2) TMI 1417
CENVAT Credit - used capital goods or scrap? - used printing cylinders sold as scrap - liability for the period upto 01/04/2012 and after 27/09/2013 - extended period of limitation - Held that:- From 01/04/2012 to 27/09/2013, the law is very clear and even in respect of capital goods cleared as scrap, the appellants are required to reverse the credit as per the said provision. In this regard, Ld. Counsel has argued that in some of the cylinders, they have not availed the Cenvat Credit. The said claim was, however, not made before the lower authorities. It is apparent, that the provisions of Central Credit Rules, 2004 would apply only to the capital goods cleared as scrap on which they have availed Cenvat Credit. In respect of others, the said provision may not apply.
The reversal of CENVAT Credit needs to be requantified in such cases. Accordingly, for the period 01/04/2012 to 27/09/2013, the matter is remanded to original Adjudicating Authority to work out to exact liability - In respect of period after 27/09/2013, the law is very clear and capital goods cleared as scrap has to be charged to duty on the basis of the transaction value. The appellant has already discharged the liability and thus the demand cannot sustain for that period.
Extended period of limitation - Held that:- The law and the material time was very clear and there was no scope for doubt. In these circumstances, the extended period is rightly been invoked.
Appeal allowed in part and part matter remanded.
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2019 (2) TMI 1416
CENVAT credit - distribution of credit by the Head Office - Head Office is registered as an ISD - credit denied on the ground that - Held that:- The rejection of credit is only for the reason of technical defects in the invoices. There is no dispute with regard to the services consumed - The argument of the ld. consultant that as per proviso to Rule 9(2), the AC / DC ought to have verified the accounts of the assessee when there are technical defects in the invoices is correct.
The impugned order is modified to the extent of setting aside the penalty only without disturbing the disallowance of credit or the interest thereon - appeal allowed in part.
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2019 (2) TMI 1415
SSI Exemption - use of same brand name by different firm of Family members - N/N. 8/2003-CE dated 01.03.2003 - Held that:- The brand name ‘Vivek’, the same was belonging to a family and members of the family for using the said brand and all were claiming as their own brand. Though there were some dispute among the family members regarding ownership of ‘Vivek’ brand but later on in a Civil suit they filed the consent that all are eligible to use the brand and there will be no objection in using the said brand by all the assessees.
All the assessees become owner of Vivek brand, accordingly it cannot be said that any of the assessees against when demand was confirmed is using the brand name of another person. In the facts all the assessees are owner of ‘Vivek’ brand. Therefore, all are eligible for SSI exemption Notification No. 8/2003-CE - appeal allowed - decided in favor of assessee.
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2019 (2) TMI 1413
Rectification of Mistake - applicant produced extract of Para 6 of the order dated 22.12.2017 and seeks rectification of mistake - Held that:- The application does not point out the mistake apparent of record. In absence of any specific error apparent on record, it is not possible to entertain this application - ROM Application dismissed.
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2019 (2) TMI 1407
Cash refund - the ld. Commissioner (A) allowed the refund claim but the same has been re-credit to their cenvat credit account - refund claim entertained post GST regime - Held that:- As the appellant has filed the appeal before the ld. Commissioner (A) before GST regime but refund claim has been entertained by the ld. Commissioner (A) after GST regime. In that circumstances, the ld. Commissioner (A) was required to allow the refund of cenvat credit to the appellant in cash instead of allowing re-credit in cenvat credit account - appeal disposed off.
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CST, VAT & Sales Tax
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2019 (2) TMI 1455
Compliance with the pre-deposit - Direction to deposit 5% of the disputed tax amount as a pre-condition for hearing the stay application - Held that:- It is true that the petitioner has a prima facie case on merits but it is also true that there was only one member of the Commercial Tax Tribunal deciding the stay application/ exemption application, and he has referred in his order to the fact that the Second Appeal is cognizable by a Division Bench of the Tribunal and, therefore, he cannot consider the matter on merits, as was argued before him by the learned counsel for the petitioner/ appellants therein.
This Court therefore directs the learned Tribunal to consider the appeal filed by the petitioner on merits along with the stay application as and when the Division Bench is available before the Tribunal and the direction for pre-deposit of 5% of the assessment amount shall remain stayed, subject to the condition that the petitioner shall deposit the amount as directed by the Tribunal in case of failure in the Appeal along with interest determined on current Bank rate of interest - petition disposed off.
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2019 (2) TMI 1447
Reversal of Input tax credit - difference in purchase turnover to tax - audit reveals that the sellers have not reported the corresponding purchases in their returns filed for the period in question - TNVAT Act - Held that:- The statutory requirement for claim of ITC is production of proof of purchases by way of original invoices from the selling dealer - In the present case, the Department, does not dispute the position that the purchasers have duly produced the original invoices from the seller. In such a circumstance, no reversal is liable to be made, in the absence of any further condition imposed upon the dealer in this regard.
A learned Single Judge of this Court in the case of JKM Graphics Solutions Private Limited Vs. Commercial Tax Officer, Vepery Assessment Circle, Chennai, [2017 (3) TMI 536 - MADRAS HIGH COURT], has considered an identical challenge raised by several dealers, wherein their claim for Input Tax Credit was reversed on an alleged mis-match between their returns and the returns filed by the sellers, where Matters are remanded to the respective Assessing Officers, to undertake a fresh exercise by conducting a thorough enquiry in consultation with the Assessing Officers of the other end dealer.
The impugned order of assessment is set aside - The assessment will be re-done as indicated in the order in the case of JKM Graphics pursuant to fresh show case notice to be issued by the Assessing Authority - petition allowed by way of remand.
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2019 (2) TMI 1437
Interest on the deposited amount as sales tax - C-Forms - CST Act, 1956 - Held that:- We dispose of the present petition by directing respondent No.3 to take a decision on the representation dated 17.5.2018 (Annexure P-5), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month from the date of receipt of the certified copy of the order.
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