TMI Tax Updates - e-Newsletter dated: March 19, 2018 - with Direct Tax, Indirect Tax and GST Updates and Updates on FTP, FEMA, IBC & Corporate Laws etc. published on TMI with Latest Case Laws

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TMI Tax Updates - e-Newsletter March 19, 2018 Case Laws in this Newsletter: Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS Expenditure related to exempt income - Rule 8D of the Rules is prospective in nature w.e.f. AY 2007 onward when this Rule was inserted - SC Highlights / Catch Notes Income Tax Applicability of section 14A - expenditure related to exempt income - Rule 8D of the Rules is prospective in nature and could not have been made applicable in respect of the Assessment Years prior to 2007 when this Rule was inserted - SC Visit to Get Source Applicability of section 14A - Before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance u/s 14A was not correct. - SC Visit to Get Source Since assessee was trading at un-recognised stock exchange, therefore, income arising out of trading of commodities at such unrecognized stock exchange also amounts to speculation income, therefore, there is nothing wrong for allowing set off speculation loss against speculation income and for carry forward of unabsorbed speculative loss to be set off against the future speculation income - AT Visit to Get Source Addition of amount shown as “Share Premium” as ‘Income from other sources' - genuineness of the said transaction of purchase of 5 lakh shares of the assessee company @ ₹ 1,000 per share i.e. at a premium of ₹ 990 per share by M/s. Walden Properties Pvt. Ltd. in the year under consideration has not been established - additions confirmed - AT Visit to Get Source Rejection of the declaration under the Pradhan Mantri Garib Kalyan Yojna, 2016 (PMGK Scheme) - No provision prohibits or bars an assessee, who had made true and correct disclosure, to partly take benefit of the option under Section 115BBE and partly exercise the second option in the form of declaration under PMGK Scheme. - HC Visit to Get Source Special audit under Section 142(2A) - service of notice - whether the assessment proceedings would have abated if the order under Section 142(2A) was passed on 30th March, 2013 and was received or served on or after 1st April, 2013? - Held No - HC Visit to Get Source Addition u/s 68 - Gift to the assessee by his maternal aunt - maternal aunt, is a ‘relative’ as defined under the explanation to Section 56(2)(v) - it is not permissible for the AO to judge the conduct of the donor sitting in his arm chair - no additions - HC Visit to Get Source Nature of sale of land - whether plot of land is agricultural land or non agricultural land - classified as dry land for which Kisthu has been paid - the land in question sold by the assessee was agricultural land and cannot be held as capital asset and no capital gains are chargeable - HC Visit to Get Source Sale of asset - adventure in the nature of trade or would be the normal sale of assets attracting long term capital gain - Revenue’s stand is that pursuit of higher profit by itself would confer on the transaction the character of business venture. - HC Visit to Get Source Reopening of assessment - AO has blindly gone by the objections raised by the Revenue’s Audit party without his own independent application of mind or the actual verification of the assessment records. - reopening of assessment u/s.147 in terms of aforesaid “reasons recorded” is unjustified in law - AT Visit to Get Source Treatment of loss - as the activity of the assessee of share trading which was carried on its own account and on behalf of the client formed single composite indivisible business and the profit or loss of the same could not be artificially bifurcated for the purpose of Explanation to Section 73 - AT Visit to Get Source Reopening of assessment u/s 147 - service of notice by affixture was done at the wrong address - notice served to the assessee not in accordance with the procedure - assessment stand cancelled - AT Visit to Get Source Customs Classification of imported goods - Hormones Levonorgestrel - The product imported by the appellant is basic hormones, which is used as ingredients for further manufacturing of chemical contraceptive preparations based on hormones. Therefore, the product imported by the appellant is hormone and not a preparation. Accordingly, the correct classification is heading 2937 2300. - AT Visit to Get Source Imposition of ADD - Styrene Butadiene Rubber (SBR) - the upward trend is not significant which can be construed as growth of DI - appellants have not made out any case against the final finding and the customs notification imposing AD duty on the impugned goods - AT Visit to Get Source Valuation of imported goods - various electrical and automobile parts - NIDB data for contemporaneous imports - The Bank attested invoice for supply of the goods is identical to the declared values. Revenue has not brought anything on record to indicate that any additional consideration has been paid by the importer for such goods - the transaction value is required to be accepted. - AT Visit to Get Source Imposition of ADD - Ammonium Nitrate - The DI suffered in terms of market share, inventories, profit, cash profits and return on investment - the conclusion of the DA regarding injury margin and causal link for such injury due to dumped imports cannot be contested either on law or on facts. - AT Visit to Get Source Rebate claim - The inaction on the part of the Department is not appreciable and it is a clear case, where the officials were blatantly violated the circular issued by the Central Board of Excise & Customs, New Delhi wherein it is specifically stated that, in no case, the refund claim should be kept pending beyond the period of three months. - HC Visit to Get Source Refund of excess duty collected - unjust enrichment - Primarily when the goods imported by an importer truned out to be in short quantity as compared to the export consignment the question of passing on the burden of customs duty on such quantity of goods would not arise - HC Visit to Get Source Service Tax Refund of unutilzed CENVAT credit - Management or Business Consultant Service (MBCS) - Business Auxiliary Service (BAS) - Providing Real Estate Advisory Service (REAS) to foreign/ overseas clients in respect of the properties situated in India - The activities would come within the purview of “MBCS” and the appellants are entitled for the refund benefit - AT Visit to Get Source Refund claim of unutilized CENVAT credit - export of services - assessee is eligible for refund of CENVAT credit even though the output services is exempted from the levy of service tax - AT Visit to Get Source GTA - reverse charge - The appellant is one of the categories specified for tax liability on reverse-charge basis. The freight is borne by the appellant. Though the arrangement is such that M/s NTPC imported the goods as per the contract, the appellant is in-charge of reaching the goods at site office and, thereafter, for further work - appellant liable to pay service tax. - AT Visit to Get Source Business Auxiliary Service - While charging their customers towards freight charges for the cargo booked, they are collecting extra charges and collect the same from their clients - whether the service fall under Business Auxiliary Services? - Held NO - AT Visit to Get Source CENVAT credit - the appellant had availed credit on construction services which were availed for constructing warehouse - whether the appellant is eligible for credit availed on construction services? - The period involved is prior to 1.4.2011 - credit allowed - AT Visit to Get Source Refund of unutilized CENVAT credit - Rule 5 of CCR - input services - Event Management Service - car parking services - The denial of credit stating that these services do not have nexus with the output services provided is not justified. - AT Visit to Get Source Central Excise Refund claim for unspent advance deposit lying balance in PLA - unspent balance is nothing but unutilised advance deposit made by the appellant - In case of claiming refund of unspent balance of PLA, limitation of one year shall not apply. - AT Visit to Get Source When the nature of product is in dispute, it is necessary to have it tested by the competent laboratory to get a clear view. Such tests were done by the Chemical Examiner. Unfortunately, the methodology adopted is apparently not proper. The Standard specified for testing the Henna Powder cannot be applied to paste - AT Visit to Get Source CENVAT credit - sales commission for domestic, as well as on export sale - The service availed by the respondent would not be outside scope of ‘input service’ and disallowance of CENVAT credit is without merit - AT Visit to Get Source Classification of goods - C.I. Roller and separators - the items disputed being Separators and CI rollers are specifically used by the railways as the same are fitted to the specially designed wagons - to be classified under chapter 86 - AT Visit to Get Source Cenvat Credit - The purchase of goods made from the foreign/domestic supplier. If all these aspects are found to be correct then merely on the basis of copies, of Cenvatabe documents are other than original copies credit cannot be denied. - AT Visit to Get Source Articles NO SERVICE TAX ON REIMBURSEMENT OF EXPENSES – JUDICIALLY SETTLED NOW WATERY COCONUT – OIL SEED? Notifications GST - States 30/ST-2 - dated 25-1-2018 - Haryana SGST The Haryana Goods and Services Tax (Third Amendment) Rules, 2018. 15/ST-2 - dated 11-1-2018 - Haryana SGST The Haryana Goods and Services Tax (Second Amendment) Rules, 2018. 05/ST-2 - dated 9-1-2018 - Haryana SGST The Haryana Goods and Services Tax (Amendment) Rules, 2018. EXN-F(10)-06/2018 - dated 20-2-2018 - Himachal Pradesh SGST Corrigendum to Corrigendum dated 2nd February, 2018 published in the Gazette of Himachal Pradesh vide No. EXN-F(10)-6/2018, 2nd February, 2018 EXN-F(10)-06/2018 - dated 12-2-2018 - Himachal Pradesh SGST Corrigendum - Notification No. 6/2018-State Tax (Rate) dated 24th Jan., 2018 EXN-F(10)-44/2017 - dated 3-2-2018 - Himachal Pradesh SGST Corrigendum to notification No. 75/2017-State Tax EXN-F(10)-06/2018 - dated 2-2-2018 - Himachal Pradesh SGST Corrigendum- Notification No. 5/2018-State Tax (Rate) dated 24th Jan., 2018. EXN-F(10)-05/2018-09/2018-State Tax - dated 30-1-2018 - Himachal Pradesh SGST Notifies www.gst.gov.in and www.ewaybillgst.gov.in. EXN-F(10)-05/2018-08/2018-State Tax - dated 30-1-2018 - Himachal Pradesh SGST Extends the time limit for furnishing the return by an Input Service Distributor in FORM GSTR-6. EXN-F(10)-05/2018-07/2018-State Tax - dated 30-1-2018 - Himachal Pradesh SGST Waive the amount of late fee return in FORM GSTR-6. EXN-F(10)-05/2018-06/2018-State Tax - dated 30-1-2018 - Himachal Pradesh SGST Waive the amount of late fee return in FORM GSTR-5A. EXN-F(10)-05/2018-05/2018-State Tax - dated 30-1-2018 - Himachal Pradesh SGST Waive the amount of late fee FORM GSTR-5. EXN-F(10)-05/2018-04/2018-State Tax - dated 30-1-2018 - Himachal Pradesh SGST Waive the amount of late fee FORM GSTR-1. EXN-F(10)-05/2018-03/2018-State Tax - dated 30-1-2018 - Himachal Pradesh SGST The Himachal Pradesh Goods and Services Tax (Second Amendment) Rules, 2018. 2798 - dated 27-1-2018 - Himachal Pradesh SGST Notifies that no e-way bill shall be required for the intra-state movement of goods. EXN-F(10)-06/2018-09/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Amendments in the notification of the notification No. 45/2017-State Tax (Rate), dated the 15th November, 2017. EXN-F(10)-06/2018-08/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Exempt the state tax on intra-state supplies of goods Old and used, petrol Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles. EXN-F(10)-06/2018-07/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Amendments in the Notification No.2/2017-State Tax (Rate), dated the 30th June, 2017. EXN-F(10)-06/2018-06/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Amendments in the Notification No.1/2017-State Tax (Rate), dated the 30th June, 2017. EXN-F(10)-06/2018-05/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Exempt the intra-State supply of services by way of grant of license or lease to explore or mine petroleum crude or natural gas or both. EXN-F(10)-06/2018-04/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Notifies the following classes of registered persons who supply development rights to a developer, builder, construction company or any other registered person against consideration, wholly or partly, in the form of construction service of complex, building or civil structure. EXN-F(10)-06/2018-03/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Amendments in the Notification No.13/2017- State Tax (Rate), dated the 30th June, 2017 EXN-F(10)-06/2018-02/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Amendments in the Notification No. 12/2017- State Tax (Rate), dated the 30th June, 2017. EXN-F(10)-06/2018-01/2018-State Tax (Rate) - dated 24-1-2018 - Himachal Pradesh SGST Amendments in the Notification No. 11/2017- State Tax (Rate), dated the 30th June, 2017. EXN-F(10)-01/2018-01/2018-State Tax - dated 18-1-2018 - Himachal Pradesh SGST Amendments in the Notification No.8/2017-STATE TAX, dated 30th June, 2017. EXN-F(10)-44/2017-75/2017-State Tax - dated 16-1-2018 - Himachal Pradesh SGST The Himachal Pradesh Goods and Services Tax (Sixteenth Amendment) Rules, 2017. EXN-F(10)-44/2017-73/2017-State Tax - dated 16-1-2018 - Himachal Pradesh SGST Waive the amount of late fee FORM GSTR-4. EXN-F(10)-44/2017-72/2017-State Tax - dated 16-1-2018 - Himachal Pradesh SGST Extension of due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores. EXN-F(10)-44/2017-71/2017-State Tax - dated 16-1-2018 - Himachal Pradesh SGST Special Procedure for filing outward supplies for suppliers whose aggregate turnover is up to 1.50 crore rupees in the preceding financial year or the current financial year –furnishing of quarterly returns - extension of time Va Kar/GST/02/2018- S.O. No. 24 - dated 5-3-2018 - Jharkhand SGST Notification related to Refund. News Repayment of 7.83% Government Stock 2018 Anti-Dumping Duty on Steel Case Laws: Income Tax 2018 (3) TMI 811 Disallowance u/s 35(1)(ii) - scientific research organization donation - eligibility criteria - Held that:- The payer (the assessee herein) would not get affected if the recognition granted to the payee had been withdrawn subsequent to the date of contribution by the assessee. Hence no disallowance u/s 35(1)(ii) of the Act could be made in the instant case. There is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. As decided in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior reported in (2018 (2) TMI 1220 - SUPREME COURT OF INDIA) held that the power of cancellation of registration us 12A of the Act was conferred by the Act on the ld CIT w.e.f. 1.10.2004 and the Hon ble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act . Hence we hold that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(ii) of the Act. - Decided in favour of assessee 2018 (3) TMI 810 Disallowance of interest - Held that:- No disallowance of interest can be made merely because advance was given at a lower rate of interest or without charging any interest to the wholly owned subsidiaries. In the instant case before us, advance was given to the wholly owned subsidiaries at an interest rate of 9%. No infirmity in the order of CIT(A) for deleting the disallowance of interest so made by the AO. Disallowance u/s. 14A r.w.R. 8D(2)(iii) - Held that:- Since the assessee s own funds were more than the investment no disallowance of interest is warranted under Rule 8D2(ii) of the IT Act. Accordingly, there is no infirmity in the order of CIT(A) for deleting the disallowance of interest u/s.14A. No merit for the disallowance of corporate membership fees paid to be treated as revenue expenditure incurred for business purposes. Disallowance made by AO under Rule 8D(2)(iii) - Held that:- Restore the matter back to the file of AO and direct the AO to recompute the disallowance after excluding the investment on which no exempt income has been earned as well as investment in subsidiary companies. Reopening of assessment - allowing setting of speculation loss from trading in shares out of income from trading in commodities - Held that:- Since assessee was trading at un-recognised stock exchange, therefore, income arising out of trading of commodities at such unrecognized stock exchange also amounts to speculation income, therefore, there is nothing wrong for allowing set off speculation loss against speculation income and for carry forward of unabsorbed speculative loss to be set off against the future speculation income. The AO has not disproved that the commodity trading income was not out of unrecognized commodity exchange market and as long as when the assessee earned out of unrecognized commodity exchange, the income or loss out of transaction on such unrecognized exchange will remain speculative in nature- the amendment in Sec 43(5)(d) was only to provide benefit to the assessees to treat their losses as non speculative only when such losses were incurred while trading on any recognized stock exchange and not otherwise. In view of decision of Bharat Ruia [2011 (4) TMI 37 - BOMBAY HIGH COURT ] the assessee has correctly set off speculation loss on shares against speculative income from trading in commodity and carried forward the unabsorbed speculative loss to the subsequent year to be set of against speculative income. - Decided in favour of assessee. 2018 (3) TMI 809 Registration u/s 12AA denied - entitlement to CIT-A to reject application for registration - charitable activities of assessee - Held that:- Under section 12AA the Commissioner is entitled to see as to whether the objects are charitable in nature, and also to see whether the activities are genuine or not. Examination of the genuineness of the activities would mean to see that the activities are not by way of camouflage or bogus or artificial and whether these are in accordance with the objects of the institution. The scope of such enquiry does not extend beyond that point. The registration granted by the Commissioner does not extend any exemption to an institution under section 11, except to the fact that such registration is mandatory for claiming exemption under section 11. Meaning thereby, exemption under section 11 can be availed of by institutions which are genuinely engaged in ‘charitable activities’. However, benefit of section 11 is subject to application of income for charitable activities and the Assessing Officer is well entitled to see whether such application has been done and the other conditions of section 11 have been complied. The registration under section 12AA is only fait accompli to the objects of the institution [‘ACIT vs. Surat City Gymkhana’, (2008 (4) TMI 16 - SUPREME COURT)]. The activities of an institution, though genuine at the time of grant of registration, may not remain so during its life-span and the registration granted to it cannot be a life-time guarantee that it would remain so. That is why the law itself prescribes a procedure for withdrawal of the registration granted, in appropriate cases. CIT(E) has erred in rejecting the assessee’s application for registration u/s 12AA of the IT Act - Decided in favour of assessee 2018 (3) TMI 808 Reopening of assessment - Validity of Notice u/s.148 - second notice issued - change of opinion - Held that:- the issue of notice under Section 148 of the Act is for assessment of income and not reassessment, as is normally understood. Since no assessment had taken place and no opinion has been formed on the issue on which the Assessing Officer had reason to believe that the assessee's income liable to tax had escaped assessment, it cannot be said that there has been a change of opinion. Since no opinion had been formed earlier, the question of change of opinion does not arise. The first notice issued under Section 148 of the Act on 18.4.2012 was dropped and a second notice under Section 148 of the Act was issued on 10.6.2013. This, in itself, does not constitute “Change of Opinion.” This fact comes out clearly from the Assessing Officer’s letter dt.4.6.2013 wherein AO has mentioned that the proceedings initiated by issue of the earlier notice under Section 148 of the Act dt.18.4.2012 was dropped as the reasons have not been properly recorded. Thus the issue of the second notice under Section 148 of the Act on 10.6.2013 for Assessment Year 2008-09 is valid, as all the other procedures mandated in the Act have been followed by the Assessing Officer. Also, since substantive issue in question was never examined under the proceedings in the first notice issued on 18.4.2012, the question of change of opinion does not arise. - Decided against assessee Addition of amount shown as “Share Premium” as ‘Income from other sources' - genuineness of the said transaction of purchase of 5 lakh shares of the assessee company @ ₹ 1,000 per share i.e. at a premium of ₹ 990 per share by M/s. Walden Properties Pvt. Ltd. in the year under consideration has not been established - Held that:- It is settled principle that the burden of proof lies with the assessee to prove the credits in its books of account are not its income, which onus, in our view has not been discharged by the assessee in the case on hand. Even before us, the assessee has not put forth any cogent reasons to controvert and repudiate any of the above findings rendered by the Assessing Officer. The arguments put forth by the assessee has been only to state and reiterate the principle that share premium cannot be assessed in the hands of the company. As we had already held, the facts of the case on hand are different from the facts and context in which the cited judicial pronouncements were rendered. The case on hand is one in which the Assessing Officer has examined the genuineness of the credits in the books of account, in continuation of earlier enquiries which established that the assessee is a conduit as part of a layering process. No infirmity in the decision of the Assessing Officer in holding that the receipt of ₹ 49.50 Crores by the assessee as its income under the head “Income from Other Sources” and confirm the decision of the learned CIT (Appeals) in upholding the aforesaid addition - Decided against assessee. 2018 (3) TMI 807 Levying penalty u/s 271(1)(c) - addition made for clients deposit account - Held that:- We do not find it a fit case to sustain the penalty u/s. 271(1)(c). It is notable that the assessment proceedings and the penalty proceedings are separate proceedings and the Assessing Officer in the penal proceedings has to prove the offense in terms of provisions of section 271(1)(c) of the Act. In the instant case, it is not in dispute that the assessee had been showing the impugned amount as liability in the client deposit account. It is also born out on record that part of the amount received from the client stood deposited by the assessee. The dispute was as to the nature of amount lying in the account – whether in the nature of liability or income. In the quantum proceedings, the addition was, however, sustained as the assessee could not furnish any documentary evidence to support its claim. Relying on the decision in Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT), mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee, particularly when the assessee had shown some the reasons for not furnishing the supporting documentary evidence in the quantum proceedings. - Decided in favour of assessee. 2018 (3) TMI 806 Deduction u/s 80P disallowed - assessee is a Cooperative Society - eligibility criteria - Held that:- The claim of assessee under section 80P(2)(a)(i) would be available to the assessee and the same could not have been denied to the assessee by insertion of Section 80P(4) of the I.T. Act. The Hon’ble Gujarat High Court in the case of CIT v. Jafari Momin Vikas Co-op Credit Society Ltd. [2014 (2) TMI 28 - GUJARAT HIGH COURT] held that Section 80P(4) of the I.T. Act will not apply to assessee which is not a Cooperative Bank. The assessee being a Cooperative Society as per overriding provisions contained in Section 22 of the RRB Act, 1976, there is no bar for assessee to claim exemption under these provisions. Considering the above discussion in the light of various provisions contained under the Regional Rural Bank Act, 1976, we are of the view that assessee is entitled for exemption/deduction under section 80P(2)(a)(i) of the I.T. Act. The orders of the authorities below are, therefore, liable to be set aside. - Decided in favour of assessee. Section 80P deduction claim - issue belatedly raised before A.O. through a non-est return - Held that:- In the present case, the assessee has raised the issue of claim of exemption under section 80P before A.O. which have been discussed and considered by the A.O. Therefore, there was no bar on the powers of the ld. CIT(A) to consider the same issue even if such issue would not have raised before A.O. Ld. CIT(A) was entitled to consider this issue at the First Appellate Stage. There is no merit in the cross objection and the same is liable to be dismissed. Orders of the authorities below are set aside and matter is restored to the A.O. to re-frame the assessment in accordance with law by granting benefit to the assessee under section 80P(2)(a)(i) of the I.T. Act because the A.O. has not examined the conditions of above provisions. The A.O. shall give reasonable, sufficient opportunity of being heard to the assessee. 2018 (3) TMI 805 Applicability of section 14A - Method for determining amount of expenditure in relation to income not includible in total income - principle of apportionment of expenses - whether the dominant purpose test, which is pressed into service by the assessee would apply while interpreting Section 14A of the Act or we have to go by the theory of apportionment - retrospective or prospective - Different decision of different High Courts Held that:- The entire dispute is as to what interpretation is to be given to the words in relation to in the given scenario, viz. where the dividend income on the shares is earned, though the dominant purpose for subscribing in those shares of the investee company was not to earn dividend. The dominant purpose for which the investment into shares is made by an assessee may not be relevant. No doubt, the assessee like Maxopp Investment Limited may have made the investment in order to gain control of the investee company. However, that does not appear to be a relevant factor in determining the issue at hand. Fact remains that such dividend income is non-taxable. In this scenario, if expenditure is incurred on earning the dividend income, that much of the expenditure which is attributable to the dividend income has to be disallowed and cannot be treated as business expenditure. Keeping this objective behind Section14A of the Act in mind, the said provision has to be interpreted, particularly, the word in relation to the income that does not form part of total income. Prior to introduction of Section 14A the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business was deductible and, in such a case, the principle of apportionment of the expenditure relating to the non-taxable income did not apply. The principle of apportionment was made available only where the business was divisible. It is to find a cure to the aforesaid problem that the Legislature has not only inserted Section 14A by the Finance (Amendment) Act, 2001 but also made it retrospective, i.e., 1962 when the Income Tax Act itself came into force. The aforesaid intent was expressed loudly and clearly in the Memorandum explaining the provisions of the Finance Bill, 2001. We, thus, agree with the view taken by the Delhi High Court in Daga Capital Management (P.) Ltd.[2011 (11) TMI 267 - Delhi High Court], and are not inclined to accept the opinion of Punjab Haryana High Court Principal Commissioner of Income Tax v. State Bank of Patiala (2017 (2) TMI 125 - PUNJAB AND HARYANA HIGH COURT) which went by dominant purpose theory. The aforesaid reasoning would be applicable in cases where shares are held as investment in the investee company, may be for the purpose of having controlling interest therein. On that reasoning, appeals of Maxopp Investment Limited [2011 (11) TMI 267 - Delhi High Court] as well as similar cases where shares were purchased by the assessees to have controlling interest in the investee companies have to fail and are, therefore, dismissed. Where shares are held as stock-in-trade - Held that:-when the shares are held as stock-in-trade , certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail [2017 (2) TMI 125 - PUNJAB AND HARYANA HIGH COURT], though law in this respect has been clarified hereinabove. Before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance u/s 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the AO. Rule 8D of the Rules is prospective in nature and could not have been made applicable in respect of the Assessment Years prior to 2007 when this Rule was inserted. 2018 (3) TMI 804 Rejection of the declaration under the Pradhan Mantri Garib Kalyan Yojna, 2016 (PMGK Scheme) - Payment of tax, surcharge and penalty under the PMGK Scheme in respect of undisclosed income - Held that:- In the present case we perceive that an equitable resolution is possible on interpretation of the provisions without undermining the object and purpose behind the Amendment Act. Thus while we have rejected the argument that advance tax of ₹ 85,50,000/- can treated as payment of tax, surcharge and penalty under PMGK Scheme, we would hold that the declaration made under PMGK Scheme should not have been entirely rejected in view of the peculiar and specific factual background in the present case. We have given the aforesaid direction and finding keeping in mind and being sensitive to the petitioner's predicament and adverse consequences propounded by the respondents though the law enforcers were equally responsible in the lapse occasioned. Thus we direct (i) Deposit of ₹ 34,48,954/- will be treated as payment of tax, surcharge and penalty under the PMGK Scheme in respect of undisclosed income of ₹ 69,11,731.46. ₹ 34,48,954/- is 49.9% of ₹ 69,11,731.46. (ii) In respect of the balance undisclosed income of ₹ 1,71,34,268.54, the petitioner would take recourse to the first option under Section 115BBE. The petitioner would accordingly pay tax @ 60% on the aforesaid amount under Section 115BBE, surcharge @25% of the tax and cess as applicable. ₹ 85,50,000/- paid as advance tax would be counted. (iii) The petitioner would be also liable to pay interest on the late payment of taxes, surcharge, cess and late filing of return. (iv) ₹ 60,11,500/- deposited by the petitioner under Section 199F of the Finance Act will be refunded to the petitioner without interest after a period of four years in accordance with the deposit scheme. We perceive and believe that by giving the aforesaid directions, we have not interfered with the provisions of the Amendment Act. We have not directed refund of ₹ 34,48,954/-, which would be contrary to Section 199K of the Finance Act. We have also not directed that the advance tax of ₹ 85,50,000/- paid by the petitioner should be treated as payment of tax, surcharge and penalty under the PMGK Scheme, which as held above, is impermissible. Violation of Section 199M on account of misrepresentation or suppression of facts in the declaration is not alleged. Requirement of Section 199M of payment of tax, surcharge and penalty under Sections 199D and 199E is not violated when we treat the declaration as valid in respect of undisclosed income of ₹ 69,11,731.46 on which tax, surcharge and penalty was paid. For the balance undisclosed income of ₹ 1,71,34,268.54 the petitioner must exercise first option and pay 60% tax, 25% surcharge on tax and cess under Section 115BBE read with Section 2(9) of the Finance Act. No provision prohibits or bars an assessee, who had made true and correct disclosure, to partly take benefit of the option under Section 115BBE and partly exercise the second option in the form of declaration under PMGK Scheme. The sections do not prohibit part declarations under both options, provided entire undisclosed income has been accounted for in the declaration made under PMGK Scheme and Section 115BBE. Such recourse to both or any option was available to the petitioner on or after the Amendment Act was notified on 15th December, 2016. 2018 (3) TMI 803 Reopening of assessment u/s 147 - notice is admittedly beyond the period of 4 years from the end of the relevant Assessment Year - Petitioner failed to bring to the notice of the Assessing Officer the application of Section 79 - Held that:- The Petitioner had by letter dated 22.11.2012 given details as called for in the format specified along with annual return filed with the Registrar of Companies. Thus, the change in the shareholding pattern in two Assessment Years in the required format was forwarded to the AO. Prima facie there was complete disclosure of all facts by the Petitioner in respect of the change in shareholding pattern during the assessment proceedings. The grievance of the Revenue that the Petitioner failed to bring to the notice of the AO the application of Section 79 is a question of application of law and has nothing to do with the obligation as the Assessee makes full and true disclosure of all facts during the regular assessment proceedings. If all facts are truly and fully disclosed then reopening notice beyond the period of four years is barred by virtue of proviso to Section 147. Thus, prima facie, the first ground is not sustainable. Payment made in foreign exchange to players for performance in India during the previous year without having deducted tax at source - Held that:- So far as the second ground we note that it proceeds on the fundamental erroneous basis that the relevant previous year subject to the Assessment Year 2010-2011, Indian Premier League was performed in India when in fact, it has admittedly played in South Africa and not in India. During the assessment proceedings, the Assessee was called upon by letter dated 6.11.2012 to give details of all expenses along with TDS if applicable. The Petitioner in response on 22.11.2012 had given complete details of expenses during the relevant previous year to the subject assessment year 2010-11. Further by the letter dated 6.12.2012, the Petitioner gave complete list of players to whom payment was made in the subject Assessment Year and also extracts of the ledger account along with the agreements entered into with the players. AO did not at that point of time disallow any expenditure on account of non-deduction of TDS to foreign players for services rendered in South Africa. This acceptance by AO at that time seems to be supported by Section 115BBA of the Act. Full and true disclosure of all facts relating to the payments made to foreign players who performed in South Africa. Thus, on this ground also, the impugned notice is not prima facie sustainable. Thus the impugned notice is without jurisdiction. Accordingly, there shall be interim stay in terms of prayer clause (c) 2018 (3) TMI 802 Special audit under Section 142(2A) - service of notice - whether the assessment proceedings would have abated if the order under Section 142(2A) was passed on 30th March, 2013 and was received or served on or after 1st April, 2013? - Held that:- Khemi Ram (1969 (10) TMI 75 - SUPREME COURT) holds that communication would be effective when it was dispatched, no matter when it was actually received. Once an order was dispatched and goes out of the control of the authority, there was no chance whatsoever of the authority changing its mind or modifying the order. The judgment also observed that the communication could be actual or constructive. The said observations are relevant as the petitioner in the present case does accept having received ‘Terms of Reference’ on or before 31st March, 2013. In view of our findings recorded above, we would record that the order itself under Section 142(2A) was dispatched on 31st March, 2013. A communication takes place when the order is dispatched or “sent out” and is made known or public. Communication in this context can be actual or even constructive. Service of the letter dated 30th March, 2013 with the ‘Terms of Reference’ would be effective communication in the light of the aforesaid discussion even if it is presumed that the order under Section 142(2A) was not enclosed with the letter. Further, order under Section 142(2A) of the Act was certainly dispatched and sent by speed post vide postal receipt ED86785578IN on 31st March, 2013 at 1819 hours, i.e. within the prescribed period. In view of the aforesaid discussion and after examining the entire issue from factual as well as legal position, we have come to the conclusion that the writ petition has no merit. Assessment proceedings have not abated Accordingly, the writ petition is dismissed, 2018 (3) TMI 801 Loan taken for capital expenditure utilized for working capital and loss on currency fluctuation - allowable business loss - Held that:- We find that both the CIT(A) as well as the Tribunal have on perusal of the record, have come to a conclusion that the loan taken was utilized only for working capital requirements. Therefore, loss on account of foreign exchange variation would be allowable as a trading loss. In fact, even the Assessing Officer has held that term loan was not utilized for purchase of plant and machinery. We find that this issue stands covered by the decisions of the Supreme Court in Sutlej Cotton Mills Ltd., v/s. CIT (1978 (9) TMI 1 - SUPREME Court) that loss arising during the process of conversion of foreign currency is a part of its trading asset i.e. circulating capital, it would be a trading loss. No substantial question of law. Appeal on admitted on first substantial question of law : a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in holding that in exercise of power under Rule 46 (A)(4) of the Income Tax Rules 1962, the CIT(A) can rely upon documents called for by him in respect of payment made to certain parties claimed as expenditure without giving notice/ hearing the other side on the additional documents called for?” 2018 (3) TMI 800 Reopening of assessment - addition u/s 40(a)(ia) - change of opinion - Held that:- Assessing Officer had issued notice to the assessee as to why these payments should not be disallowed under Section 40(a)(ia) of the Act. The Assessing Officer has not been able to refer to any evidence or material on record to suggest as to what prompted him to form the opinion that there existed violation of the provisions of Section 40(a)(ia) of the Act. In the absence of any material, taking recourse to Section 147 of the Act was unwarranted. The Tribunal while accepting the appeal of the assessee concluded that the conditions required for invoking Section 147 were conspicuously absent. The revenue did not claim to have come in possession of any material to form the basis for the belief that income escaped assessment. It was, thus, held that the case seemed to involve a matter of change of opinion which was not permissible under law. Thus, invoking of jurisdiction under Section 147 of the Act by the Assessing Officer was held to be impermissible and could not be sustained. - Decided in favour of assessee. 2018 (3) TMI 799 Addition u/s 68 - Gift to the assessee by his maternal aunt - onus of proof regarding the gift by furnishing all the materials required for establishing the genuineness of the gift - Held that:- When the donor herself has given a confirmation letter clearly stating therein that she has transferred the amount of ₹ 73,00,000/- to the account of the assessee and further declaring that she gave the said gift out of her natural love and affection towards her nephew, the AO ought not to have entertained further doubts. If for facilitating receipt of a gift the assessee has opened an account, we do not find anything wrong in that. Thus the whole approach of the AO is wholly perverse which cannot be sustained. Equally, the reasons assigned by the two appellate bodies confirming the order of the AO are also perverse. When the Act itself does not envisage any occasion for a relative to give a gift, it is well-nigh impermissible for any authority and even for that matter for the Court to import the concept of occasion and develop a theory based on such concept. The donor being no other than the assessee’s own maternal aunt, is a ‘relative’ as defined under the explanation to Section 56(2)(v) of the Act and in the light of the plea of the assessee that she was brought up by the assessee’s parents, and her daughters having already been married off and in a well-todo position, it cannot be said that such a gift falls beyond “human probability” test as quite often applied by the Courts. Hence, it is not permissible for the AO to judge the conduct of the donor sitting in his arm chair - Decided against revenue Addition on loan from one of his family friends who is a resident of U.K. - Held that:- Proforma for seeking specific information under the provisions of “exchange of information”, article of double taxation avoidance agreement, was also enclosed to the said letter. In Sl. No.5, a sum of ₹ 87,95,724/- was mentioned as the amount lent by Dev Singh Palak as loan to the assessee. Having thus sought for confirmation about the genuineness or otherwise of the transactions, from the Director, FT and TR 1, New Delhi, the AO was silent in his order as to whether he has received a report and, if so, to what effect. As rightly argued by the learned counsel for the assessee, failure of the AO to refer to his queries to the Director and the result thereof in his order would give rise to an adverse inference against the Revenue and in favour of the assessee that the report is favourable to him and that therefore the AO deliberately refrained from referring to the report. The reliance of the AO on the pattern of the signature to arrive at the conclusion that Mr. Dev Singh Palak was not a man of means, reflects his highly archaic and imbalanced approach. Such a test can never be applied to determine one’s possession of means. The overwhelming material filed by the assessee explaining the cash receipt under item No.(ii) which remained unimpeached, renders the decision to treat the sum of ₹ 87,95,724/- as unexplained credit, is wholly unjust and illegal.- Decided against revenue Treating a sum claimed to be a loan from one J.V. Sudhakar as unexplained cash credit under Section 68 - Held that:- The identity of J.V. Sudhakar is clearly established from the bank account sent by ING Vysya bank, the authenticity and genuineness of which were not doubted by the AO. If the AO has entertained a doubt about the existence or otherwise of J.V. Sudhakar, in all fairness, he ought to have issued a notice to the assessee to produce the said Sudhakar, but he did not do so. Despite the availability of overwhelming and unimpeachable documentary evidence, the AO was not prepared to accept the same, as his approach appeared to be loaded with prejudice, suspicion and pre-determined mind and preconceived notions. The whole approach of the AO appears to be some how reject the every explanation of the assessee and the evidence produced in support of such explanation, by assigning reasons which are wholly imaginary and perverse. Assessee advanced loan to the company, by name, M/s. Dakshin Shelters Private Limited, on various dates - assessee followed the cash system of accounting and admitted the tax deducted at source as income and claimed the credit for TDS as the same was admitted as income - Method of accounting - Held that:- The finding that the assessee has received interest income but chose to keep it in the account in order to get interest, is in conflict with his previous observations that there is no prohibition for the assessee to withdraw the interest on the unsecured loan in the books of account of the company. Indeed, the Revenue has not disputed the claim of the assessee that the loanee company converted the unsecured loan and unpaid interest into equity shares during the year 2011-12 and accordingly issued equity shares certificates in lieu of repayment of unsecured loans and unpaid interest thereon. As submitted by the learned counsel for the assessee, the AO could have at best directed to restrict the claim of TDS in proportion to the income admitted and to allow the balance in the year in which interest income is admitted on receipt basis. Addition of sum received from Smt. P. Shanti Chowdhary, wife of the assessee, in the income as unexplained credit under Section 68 - Held that:- All the transactions, namely, gift of ₹ 73,00,000/- made by the maternal aunt of the assessee; loan of ₹ 87,95,724/- received from Dev Singh Palak; loan of ₹ 10,00,000/- advanced by J.V. Sudhakar and repaid by the assessee and the loan of ₹ 14,50,000/- received from the wife of the assessee are genuine and the onus cast on the assessee under Section 68 of the Act has been duly discharged with reference to the identity of his creditors, genuineness of the credits and also the capacity of the creditors to advance the money. The findings rendered by the AO and confirmed by the CIT(A) and the Tribunal, in cases other than the loan advanced by the assessee’s wife, and that in respect of the said transaction the findings rendered by the AO and confirmed by the Tribunal, suffer from perversity. - Decided in favour of assessee AO shall restrict the claim of TDS in proportion to the income admitted for the assessment year 2005-06 and allow the balance in the year in which interest income is admitted on receipt basis. 2018 (3) TMI 798 Non-deduction of TDS on the payments made on reimbursement of service charges - Disalllowance u/s 40(a)(ia) - Held that:- In respect of similar or identical expenses this Court in CIT v. DLF Commercial Project Corporation [2015 (7) TMI 576 - DELHI HIGH COURT] wherein held it is undisputed that M/s DLF Land Ltd. had deducted TDS on the payments made by it under various heads on behalf of the assessee. Further, it is also not disputed that the assessee deducted TDS on the service charge paid by it to M/s DLF Land Ltd. on the reimbursement expenses. In such circumstances, this Court holds that the entire amount paid by the assessee to M/s DLF Land Ltd. is entitled to deduction as expenditure. Disallowance of amounts claimed to have been paid to sundry creditors - Held that:- AO was of the opinion that since the books were rejected, the debits claimed were not justified. Both CIT(A) and ITAT noticed that there was sufficient material. Besides, they were impressed by the fact that even though the AO rejected the report, he accepted the credit and chose to completely ignore the debits. On account of this deficiency, which was clearly cured, the Court is of the opinion that no substantial question of law arises. Net expenditure credits under Section 68 addition - Held that:- Since the AO did not make any further enquiry, the burden cast upon the Revenue clearly had not been discharged so far as to entitle it to bring the amount to tax under Section 68 of the 1961 Act. Consequently, the Court is of the opinion that the approach of the ITAT as well as CIT(A) was proper and their conclusions correct. 2018 (3) TMI 797 Nature of sale of land - whether plot of land is agricultural land or non agricultural land - maintainability of appeal - Held that:- The question of whether a plot of land is in effect and in substance agricultural land or non agricultural land is a matter of fact. Of course, by reason of deeming provisions contained in law, certain principles may have to be applied for determination of whether a plot of land is agricultural land or non agricultural land. There can be no doubt that registration simpliciter of a plot of land as agricultural land would not in itself mean that the land was being used for the purpose of agriculture. Records are showing that the lands are agricultural land, classified as dry land for which Kisthu has been paid and falls far exclusion from the definition of capital asset u/s.2(14) of Income Tax Act. The case laws relied upon by the assessee are squarely applicable in the assessee's case. Therefore, we hold that the land in question sold by the assessee was agricultural land and cannot be held as capital asset and no capital gains are chargeable and hence we set aside the orders of the lower authorities and the assessee's appeal is allowed. The learned Tribunal arrived at the factual finding that the land in question sold by the assessee was agricultural land and could not be said to be capital asset. Right of appeal is not automatic. Right of appeal is conferred by Statute. If the right of appeal conferred by the Statute is limited to cases where there is a substantial question of law, this Court cannot sit in appeal over factual findings by re-weighing and re-analysing the evidence and materials on record. The questions raised in this appeal do not meet the tests laid down by the Supreme Court in Sir Chunilal V. Mehta's case [1962 (3) TMI 77 - SUPREME COURT]for holding that the questions are substantial questions of law. - Decided against revenue 2018 (3) TMI 796 Sale of asset - Whether a particular transaction would constitute adventure in the nature of trade or would be the normal sale of assets attracting long term capital gain? - Held that:- No material from records to suggest that at the time of acquisition of the properties such acquisition was for the purpose of undertaking a business venture. What we are to look at now is as to whether there was a business venture simultaneously with the development agreement. Major portion of the developed building was to remain with the assessee after construction. Sale of one unit therefrom per se would not have constituted an adventure in the nature of trade. Materials available on record do not show that building construction formed part of normal activity of the Assessee. Determining factor in this appeal, as urged by Revenue, becomes the intervening arrangement of agreement for sale and its subsequent cancellation when the property fetched better price. Revenue’s stand is that pursuit of higher profit by itself would confer on the transaction the character of business venture. We are, however, unable to agree with this submission. It might be natural for a person, who is not undertaking any business venture, to seek higher return from sale of his assets. That would be a rational pursuit and in our view reflects normal human behaviour and not a special attribute for a trader or a businessman. Just because for a particular unit, an intervening transaction is aborted for the reason that the property would fetch a better price, if sold to another person, grievance may be caused to the person with whom the earlier arrangement was entered into. But such an exercise would not transform the nature of activity from normal sale of capital asset to a business venture. There is substantial gap in time between the day of acquisition of the asset and its development and part-sale. The original assessee was not a property dealer but a member of the Indian Revenue Service, working with the Income Tax department itself. Only a portion of the property was sold. In these circumstances, the test laid down in the case of G.Venkataswami Naidu & Co. (1958 (11) TMI 5 - SUPREME Court) has to be decided in favour of the assessee. 2018 (3) TMI 795 Grant of exemption u/s 10(23C)(vi) - satisfaction of the condition of existing solely for philanthropic purposes and not for the purpose of profit - Held that:- It is not the case of the petitioner that the room charges or bed charges are negotiable. What is set out by the petitioner in the said letter is that in case of nonmember patients admitted to rooms, the consultants or doctors are permitted to negotiate with the patients for fixing the procedure/surgery charges. The specific case of the petitioner was that liberty is granted to the doctors to negotiate with the patients for fixing the procedure charges and surgery charges and not in respect of room charges. In fact 10% of the negotiated charges are taken by the petitioner. The negotiated amount of fees is collected by the petitioner. After deducting 10% affiliation charges, remaining amount is sent to the doctors through ECS. If in a particular year, very large number of such patients are treated, it is a different matter. If in a given year, only few such cases are entertained by the petitioner, it will not militate against the character of the activities of the petitioner. On this aspect neither the petitioner has placed details on record nor the first respondent called upon the petitioner to produce the details. Therefore, all grounds which are held against the petitioner, except the two grounds held against the petitioner set out in paragraphs 17 to 22 above, have no basis and on those grounds, the claim of the petitioner could not have been rejected. However, on the two grounds set out in paragraphs 18 to 22 above, the case will have to be remitted to the first respondent for reconsideration with liberty to the petitioner to produce all the material before the first respondent as indicated in the body of the judgment. 2018 (3) TMI 794 Reopening of assessment - disallowance of deduction u/s.10A - Non independent application of mind by AO - borrowed knowledge - Held that:- From a bare perusal of the “reasons recorded”, first of all, it is noticed that AO has referred to the records which were already available at the time of original assessment and secondly, he has held that deduction u/s.10A should have been disallowed by the Assessing Officer and such a mistake has resulted into incorrect allowance. After ascribing such a failure in the original assessment order, he mentions that escapement of income has been by the reasons of failure on the part of the assessee to disclose full and true all material facts. Nowhere has he brought out even remotely as to what was the failure on the part of the assessee in making the true and full disclosure. Mere stating these words will not suffice. AO has blindly gone by the objections raised by the Revenue’s Audit party without his own independent application of mind or the actual verification of the assessment records. We find that the Assessing Officer in the course of the original assessment proceedings had raised the query on deduction u/s.10A to which assessee had duly responded and explained the entire computation and this goes to show that the assessee has disclosed full and true disclosure of all the material facts relevant for the claim of deduction u/s.10A. If AO on perusal of the entire material fact disclosed and after raising a specific query has accepted the computation of the claim, then there cannot be any failure ascribed to the assessee so as to warrant acquiring of jurisdiction for reopening the assessment beyond the period of four years in terms of proviso to Section 147. Here in the “reasons recorded” the Assessing Officer has simply tried to use the phraseology appearing in the proviso to Section 147, without even actual examination as to what is the actual failure on the part of the assessee. Thus we hold that there is no failure on the part of the assessee in terms of proviso to Section 147, and therefore, the ld. CIT (A) has rightly held that reopening of assessment u/s.147 in terms of aforesaid “reasons recorded” is unjustified in law. - Decided in favour of assessee. 2018 (3) TMI 793 Denying the deduction u/s 10B with respect to interest income - Held that:- As decided in the case of Hewlett Packard Global Soft Ltd.[2017 (11) TMI 205 - KARNATAKA HIGH COURT] we decide first ground of appeal in favour of the assessee holding that the AO should not have denied the deduction under section 10 B of the Act in respect of interest income of ₹ 9. 81 lakhs and from business deposits pertaining to EOU of the assessee.- Decided against revenue Disallowance of claims regarding deduction u/s 43B, deduction about excise duty, other expenses and claim for set off of unabsorbed depreciation - Held that:- FAA has directed the AO to allow the claim/reductions after making verification. In our opinion, his order does not suffer from any legal infirmity. The AO is directed to give effect to the order of the FAA within a period of three months of receipt of our order. 2018 (3) TMI 792 Disallowance of interest expenditure - Held that:- Letter filed by the assessee during the course of assessment proceedings before the A.O. clearly shows that it was specifically pointed out by the assessee that the loans in question were given to the various parties out of internal accruals. Balance sheet of the assessee firm as at 31.03.2012 filed along with the return of income makes it abundantly clear that sufficient own funds in the form of partners capital were available with the assessee firm at the relevant time to give the loans in question free of any interest. These facts and figures available before the A.O. were sufficient to show that the interest free loans in question were given in assessee firm out of its own funds and there was no diversion of interest bearing borrowed funds warranting any disallowance out of interest expenditure claimed by the assessee. We, therefore, find no infirmity in the impugned order of the Ld. CIT(A) deleting the disallowance - Decided in favour of assessee Addition u/s 14A on account of interest as per Rule 8D(2)(ii) - Held that:- Since the total investment made by the assessee in shares and securities at the relevant time stood at more than 10 crores, it cannot be said that the said investment was entirely made by the assessee from its own funds. The interest bearing borrowed funds thus were utilised by the assessee at least partly for making investments in shares and securities and disallowance on account of interest thus was required to be made under section 14A by applying Rule 8D. However, while computing such disallowance, only net interest expenditure has to be taken into consideration and the investment in shares and securities on which exempt income was actually earned by the assessee during the year under consideration has to be taken into account. We, therefore, set aside the impugned order passed by the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. for computing the disallowance to be made on account of net interest expenditure under section 14A by applying Rule 8D(2)(ii) by taking into account only those investments on which exempt income was actually earned by the assessee during the year under consideration. Ground No. 2 of the revenue’s appeal for A.Y. 2012-13 is thus partly allowed. Disallowance u/s 14A r.w. Rule 8D - suo moto disallowance by assessee - CIT-A deleted the addition - Held that:- not been able to point out any observation or finding recorded by the A.O. in the assessment order to show his satisfaction, as regards the incorrectness of the disallowance so offered by the assessee u/s 14A having regard to the books of accounts of the assessee. As held inter alia in the case of REI Agro Ltd. (2014 (4) TMI 713 - CALCUTTA HIGH COURT) relied upon by the Ld. CIT(A) in his impugned order, the A.O. cannot made a further disallowance under section 14A without recording a positive satisfaction that the suo moto disallowance made by the assessee is not in order. - Decided against revenue 2018 (3) TMI 791 Taxability of receipts - Borrowed Service charges/Loaned Service Income - Royalty or Fees for included services - initiation of MAP settlement - DTAA - PE in India - Held that:- We hold that the taxability of the receipts was to be determined as per the MAP settlement. Therefore, the afore-said receipts, being Business Profits was covered by Article-7 of the Treaty and was not in the nature of Royalty or Fees for included services. The revenue has nowhere disputed or established that the assessee had PE in India. Therefore, the said receipts were not chargeable to tax in India except Firm Function Service Charges of ₹ 63.02 Crores, which were to be accepted at a mark up of 3% as per MAP settlement of earlier years. Needless to say that the same may suitably be modified by the revenue, if required, on the basis of outcome of MAP settlement for impugned AYs. Reimbursement of Firm Training Charges & Other expenses - Held that:- As AR, at the outset, submitted that the issue requires re-appreciation by lower authorities since these expenses were mere reimbursements in nature without any profit element and therefore, the assessee be afforded another opportunity to demonstrate the same. The Ld. DR did not raise any serious objections against the same. Resultantly, the issue stands remitted back to the file of Ld. AO for re-adjudication in the light of submissions made by Ld. AR. 2018 (3) TMI 790 Reopening of assessment - addition of expenses with ‘deferred revenue expenses’ - Held that:- We agree with the submissions advanced by DR that under Income Tax Act there is no concept of “deferred revenue expenditure” and the nature of deferred revenue expenditure in the present case could have been otherwise shown as revenue or capital expenditure by assessee as the case may be. Thus it is difficult to accept the contentions of Ld.Counsel on this issue regarding ‘change of opinion’ by assessing officer while initiating the reassessment proceedings. Argument of Ld.DR regarding application of sub clause (c) to Explanation 2 to section 147. Thus to reasons recorded to form basis for initiating reassessment proceedings as it falls under (i ), (iii) and (iv) of sub clause (c) to Explanation 2 to section 147. Thus respectfully following the decision of Hon’ble Supreme Court in the case of Calcutta Discount Company Ltd versus ITO (1960 (11) TMI 8 - SUPREME Court), we hold reopening of the assessment to be valid. Disallowance of expenses made by assessee under ‘Legal and Professional head’ treating the same as capital in nature - Held that:- It is very much relevant for assessee in its type of business to register its brand with the Trademark Registry as there would be many other pharmaceutical companies coming out with a similar type of products which could infringe the rights of assessee in case the same is not properly registered with the appropriate authority. No reason to confirm this addition, as these are genuine expenditure incurred by assessee for the purposes of business. Further section 32 (1) (ii) now categorically considers trademark to be an eligible expenditure in the category of intangible assets. Thus in our considered opinion the addition made by AO deserves to be deleted. Disallowance of towards the expenditure incurred under the head ‘Fees and Subscription’ - Held that:- As assessee is into manufacturing and marketing of pharma products, it has to have a license to trade in the products which is to be obtained from appropriate authority in the state. We do not find any contrary observation made by authorities below in respect of the nature of payment which assessee has to incur time and again for the purposes of carrying on its business. These expenses do not categorise to be in the nature of enduring benefit arising to assessee as the licenses issued by the State Government are for a fixed period of time which are revoke a will upon violation of the conditions stipulated there. Thus in our considered opinion these expenses incurred by assessee would be eligible for deduction under section 37 (1). Advertisement Expenses disallowance - Held that:- CIT(A) deleted the addition as it is incurred wholly and exclusively for the purposes of business. It is observed that assessee has already claimed advertisement expenses under the head ‘selling and distribution expenses’ being schedule 19 to the statement of accounts amounting to ₹ 21,95,824/-. Thus we do not find the reason as to why assessee considered advertisement expenses amounting to ₹ 19,94,690/-under the head ‘deferred revenue expenses’. This amounts to double deduction as claimed by assessee. Therefore the disallowance of advertisement expenses stands upheld. Depreciation claimed on computer peripherals such as UPS, battery etc. - Held that:- In our considered opinion this issue now squarely stands covered in favour of assessee by order of jurisdictional High Court in the case of CIT vs. BSES Yamuna Powers Ltd [2010 (8) TMI 58 - DELHI HIGH COURT] wherein it has been held that computer accessories and peripherals such as printers, scanners and servers etc. form an integral part of computer system and cannot be used without the computer, thus these are part of the computer system and eligible for depreciation at the rate of 60%. Addition on excess provision made under the head Fringe Benefit Tax (FBT) - Held that:- CIT(A) there is a categorical observation that from the computation of income and profit and loss accounts submitted by assessee it has been observed that no such provision for excess FBT has been claimed as deduction by assessee. In view of the above observation Ld. CIT (A) correctly deleted the addition made by Ld. AO. 2018 (3) TMI 789 Treatment of loss - business of purchase and sale of shares - Applicability of Explanation to Section 73 - assessee company contended that the loss from the business of purchase and sale of shares could not be considered in isolation for the purpose of application of Explanation to Section 73 as the activity of share broking was also the part and parcel of business of purchase and sale of shares. - Held that:- In the case of DCIT vs MPC Securities Ltd [2016 (7) TMI 539 - ITAT KOLKATA] held that the entire business of the assessee stock-broker constituted as one single composite indivisible business and therefore, income or loss from such business could not be artificially bifurcated for applying the provisions of Explanation to Section 73. Also as the activity of the assessee of share trading which was carried on its own account and on behalf of the client formed single composite indivisible business and the profit or loss of the same could not be artificially bifurcated for the purpose of Explanation to Section 73. Thus we uphold the impugned order of the Ld. CIT(A) allowing relief to the assessee on this issue Disallowance u/s 14A read with Rule 8D - Held that:- Both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of this Tribunal in the case of REI Agro Ltd.[2013 (9) TMI 156 - ITAT KOLKATA] - Revenue appeal dismissed. 2018 (3) TMI 788 Levy of penalty u/s 271(1)(c) - non specification of charge - Held that:- The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. Also when the quantum is deleted, there cannot be any levy of penalty u/s 271(1)(c ) of the Act. - Decided in favour of assessee. 2018 (3) TMI 787 Reopening of assessment u/s 147 - service of notice by affixture was done at the wrong address - notice served to the assessee not in accordance with the procedure - Held that:-.CIT(A) has rightly held that no notice is served on the assessee because affixture of notice by the Inspector is at a wrong address. The correct address is at D.No. 45-57-14/3, Narasimha Nagar, Visakhapatnam. The notice affixed at D.No. 49-57-14/3 is an invalid notice and set aside the order by following the judgment of Hon'ble Supreme Court in the case of Y. Narayana Chetty & another Vs. ITO (1958 (10) TMI 10 - SUPREME Court) - Decided against revenue 2018 (3) TMI 786 Unexplained capital introduction in the name of partners of the assessee firm - Held that:- We find that ld. CIT(A) by flowing the decision of the Hon'ble Jurisdictional High Court in the case of M. Venkateswara Rao (2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT) deleted the addition made in the hands of the firm. Unexplained unsecured loans - Held that:- From the above confirmation letters issued by the loan creditors, it is very clear that all the loan creditors have given their addresses and PAN numbers, and payments were received through cheques and also repaid through a cheque, except an amount of ₹ 6,00,000/- yet to be paid. The assessee filed confirmation letters from the loan creditors with complete details, all payments and repayments were made through cheques. Under these facts and circumstances of the case, we are of the opinion that assessee has discharged his burden casted upon him. If at all Assessing Officer is having any doubt with regard to creditworthiness of the creditors, he has to summon the loan creditors and examine them. All the payments received through banking channels and repayments also through banking channels. Finding given by the ld. CIT(A) that the assessee failed to discharge his burden, is not correct. The assessee has discharged burden in respect of loan received from four creditors and Assessing Officer failed to make enquiries, therefore we reverse the order of the ld. CIT(A). Thus, this ground of appeal raised by the assessee is allowed. Difference between the rates of CPWD & PDW - Held that:- We allow further deduction of 10% in addition to 5% which has already been granted by the CIT(A) to meet the ends of justice. Accordingly, Assessing Officer is directed to allow deduction of 15% on variation of rates between CPWD and PWD. Thus, this ground of appeal raised by the assessee is partly allowed. Unexplained flat advances from customers - Held that:- On appeal before the ld. CIT(A), ld. counsel has reiterated the submissions which he was made before the Assessing Officer but, no evidence is filed. Therefore, ld. CIT(A) confirmed the order of the Assessing Officer. Even before us also, no evidence with reference to the advance received from Sri W. Raju for purchase of flat. Therefore, we find no infirmity in the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed. Addition on account of cash credits in the bank account - Held that:- AO as well as ld.CIT(A) is not correct in taking the date as 27/09/2009 contrary to the bank statement on 27/10/2009. Thus, this addition made by the Assessing Officer and confirmed by the ld. CIT(A) are deleted by reversing the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the assessee is allowed. So far as addition of ₹ 45,000/- is concerned, the assessee has not placed any evidence before the Assessing Officer nor before the ld. CIT(A), even before us also. Under these circumstances, we find no infirmity in the order passed by the ld.CIT(A). Addition of unsecured loans - Held that:- On appeal before the ld. CIT(A), he was reiterated the submissions which he made before the Assessing Officer, but not filed any evidence to show that the impugned advance received by the assessee from the customer is returned back. Even before us also, no evidence is filed. In view of the above, this ground raised by the assessee is deserves to be dismissed for want of evidence. Accordingly, same is dismissed. Disallowance under section 40A(3) - Held that:- In this case, the Assessing Officer failed to bring on record the details with regard to the amounts of expenditure incurred in excess of ₹ 20,000/- party-wise. The Assessing Officer has not even made the effort to demonstrate that the assessee had incurred the expenditure in excess of ₹ 20,000/- in aggregating party-wise also. Therefore, we are unable to sustain the addition made by the Assessing Officer in respect of construction material account under section 40A(3) of the Act. Accordingly, we set aside the order passed by the ld. CIT(A) and allow this ground of appeal raised by the assessee. In respect of remaining payment of ₹ 9,36,009/- (Rs.43,72,498 – ₹ 34,36,489/-), the Assessing Officer has brought on record the details clearly, hence, we uphold the order of the ld. CIT(A) and the appeal of the assessee is partly allowed. Unexplained deposits in the bank account - Held that:- Assessee received the amount in question through cheque, but failed to explain on what purpose this amount is received and whether the creditor Mr. Subbirama Reddy has creditworthiness or not. Therefore, in the interest of justice, this issue has to be remitted back to the file of the Assessing Officer for fresh adjudication. We therefore, set aside the order passed by the ld. CIT(A) and direct the Assessing Officer to re-adjudicate this ground afresh in accordance with law after providing reasonable opportunity of being heard to the assessee. It is also directed the assessee to file all the relevant material before the Assessing Officer. This ground of appeal is allowed for statistical purposes. Addition towards unexplained expenditure - Held that:- The assessee is not able to explain the discrepancy pointed out by the Assessing Officer. Therefore, we find no infirmity in the order of the ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed. Customs 2018 (3) TMI 785 Refund of excess duty collected - short shipment of import cargo where the importer has failed to produce the documentary evidences - applicability of unjust enrichment - Held that: - the excess payment of customs was on account of short import of goods. Primarily when the goods imported by an importer truned out to be in short quantity as compared to the export consignment the question of passing on the burden of customs duty on such quantity of goods would not arise - appeal dismissed. 2018 (3) TMI 784 Rebate claim - petitioner's case is that they are engaged in the manufacture and sale of Silver Oxide Zinc/Silver Chloride Batteries in their factory situated in Pudukottai District - Held that: - Unfortunately, the Department did not consider the petitioner's claim, but appears to have lost the file and requested copies to be furnished so as to enable them to reconstruct the file. However, this reconstruction was done in 2013 and till date, nothing has moved. The inaction on the part of the Department is not appreciable and it is a clear case, where the officials were blatantly violated the circular issued by the Central Board of Excise & Customs, New Delhi wherein it is specifically stated that, in no case, the refund claim should be kept pending beyond the period of three months. Petition disposed off. 2018 (3) TMI 783 Waiver of container detention and demurrage charges - N/N. 26/2015-20 dated 1.9.2017 - Regulation 6 (1)(I) of the Handling of Cargo in Customs Area Regulations 2009 - Held that: - the respondents shall draw representative samples of one(1) piece per variety. While drawing the samples, the customs house agent of the petitioner should be permitted to be present and after the samples are drawn, the same shall be sent to the approved laboratory for testing and on receipt of the test report, the respondents are directed to pass appropriate orders on merits and in accordance with law. It is needless to state that the cost of testing shall be borne by the petitioner, if the demand is raised on the petitioner and the advance payment is called for and the same shall be remitted. Petition disposed off. 2018 (3) TMI 782 Imposition of ADD - Ammonium Nitrate - import from Russia, Indonesia, Georgia and Iran and imported into India - Exporter is aggrieved against not fixing individual AD duty for the exports made by them - Held that: - there is no grievance or appeal by the Indonesian exporter. The point raised by the Indian importer without having a categorical assertion on the correct factual position of nature of goods manufactured in Indonesia cannot be considered. In any case, we note that the DA categorically recorded that the interested parties themselves have contended that Ammonium Nitrate cannot be imported in melt form. Since, there is production and sale of solid Ammonium Nitrate having density above 0.83 it is inappropriate to consider another article as like article to the imported product under consideration. It is clear that the performance of DI has deteriorated over the injury period as can be seen that imports from subject country have increased not only in absolute terms, but also in relation to production and consumption in India. Such imports under cut prices of DI leading to significant price depression in the market. The DI suffered in terms of market share, inventories, profit, cash profits and return on investment - the conclusion of the DA regarding injury margin and causal link for such injury due to dumped imports cannot be contested either on law or on facts. Since, the ultimate actual exporter of subject goods to India did not file E.Q.R. the producer/exporter had been treated as noncooperative. Appeal dismissed. 2018 (3) TMI 781 Valuation of imported goods - various electrical and automobile parts - NIDB data for contemporaneous imports - price of similar goods - Held that: - there is no valid reason cited in the impugned order for rejection of transaction value other than reference to NIDB data. The Bank attested invoice for supply of the goods is identical to the declared values. Revenue has not brought anything on record to indicate that any additional consideration has been paid by the importer for such goods - the transaction value is required to be accepted. The Adjudicating Authority has also reopened the assessment made in respect of 52 Bills of Entry filed in the past. The reason recorded in the impugned order is that in the past also the appellant has imported such goods. The Revenue has undertaken no investigation into the value of goods imported vide the 52 Bills of Entry - In the absence of any investigation into the value of the goods covered under these Bills of Entry, the transaction value already accepted cannot be interfered with. Appeal allowed - decided in favor of appellant. 2018 (3) TMI 780 Preliminary objection against investigation itself raised by the domestic industry - All sides agreed that Civil Appeal on this issue filed before the Hon’ble Supreme Court No. 5580/2017 of M/s. Outokumpuoy is still pending disposal. We are not able to proceed with the above appeals - appeal disposed off. 2018 (3) TMI 779 Imposition of ADD - Styrene Butadiene Rubber (SBR) of 1500 series and 1700 series - import from EU, Korea RP or Thailand - whether or not the DA has erred in examining the scope of DI and in analyzing the injury to the DI as claimed by the submissions made by the appellants? - Held that: - In the present case, we have two units constituting DI and both are admittedly in a very nascent stage of viable commercial production and stable operation. This much has been admitted by all the parties as the same cannot be contested on facts. In such a situation, if the DA is called upon to examine the possibility of existence of dumping causing injury to domestic industry, it is not incorrect on the part of DA to examine the status of these two new industries, though in different stages of commercial production in time line. Admittedly, both are engaged in the manufacture of the impugned goods which were being imported by users in India. It is clear that while examining the impact of such imports on these DI, the DA has to apply specific economic criteria for a due conclusion. The DA, noting that the production, domestic sales and capacity utilization of DI had increased as these units commenced their production and accordingly there was an upward trend in domestic production and sales also recorded that the upward trend is not significant which can be construed as growth of DI. These three appellants have not made out any case against the final finding and the customs notification imposing AD duty on the impugned goods - appeals dismissed. 2018 (3) TMI 778 Confiscation of imported goods - whether old and used computer, chairs, books, TV’s stationeries & LCD, photo copier imported by the appellant, who is a Charitable Education Society, is liable to be confiscated? Held that: - As per Foreign Trade Policy, the appellant should have obtained the license and for failure to do so, the goods are liable for confiscation. Since the appellant is a charitable education society and running for social cause of Muslim community, they do not have any undue benefit. Accordingly, the mala fide intention is not proved - appellant deserves leniency - redemption fine reduced from ₹ 35,000/- to ₹ 15,000/- and penalty is reduced from ₹ 5000/- to ₹ 3000/- - appeal allowed in part. 2018 (3) TMI 777 Classification of imported goods - Hormones Levonorgestrel - Ethinyl Estradiol - whether the goods in question is classifiable under Heading 3006 6010 as claimed by the appellant or under Heading 2937 2300 as contended by the Department? - Held that: - heading 3006 6010 is not for the basic hormones but it is meant for preparation of chemical contraceptives based on hormones. Therefore, the product falling under Chapter heading 3006 is a preparation, which is one step ahead of basic hormones and the basic hormones are correctly classifiable under heading 2937. The product imported by the appellant is basic hormones, which is used as ingredients for further manufacturing of chemical contraceptive preparations based on hormones. Therefore, the product imported by the appellant is hormone and not a preparation. Accordingly, the correct classification is heading 2937 2300. Appeal dismissed - decided against appellant. 2018 (3) TMI 776 Speaking order on re-assessment - whether the Commissioner (Appeals) directing the Assistant Commissioner/ assessing authority to pass a speaking order for loading of value of imported goods and to comply with the provisions of Section 17(6) is correct or otherwise? - Held that: - since at the stage of assessing authority the loading/re-assessment was done arbitrarily and no speaking order was passed, there is a clear violation of the process of re-assessment as provided under Section 17(6) - The Commissioner (Appeals) in absence of any speaking order cannot decide the matter on either side, therefore, he was right in directing the assessing authority to pass a fresh order on the assessment after complying the provision of Section 17(6) - appeal disposed off by way of remand. 2018 (3) TMI 740 Notice of Motion No.126 of 2018 is made absolute in terms of prayer clauses (a) to (d) reserving all contentions on merits - amendment to be carried out. Service Tax 2018 (3) TMI 775 Reverse charge mechanism - liability of service tax - transport of goods by road services - centralized registration of all services - Held that: - Sub-rule (4) provides for single application for all taxable services for purpose of registration - The appellant did not produce any evidence that they have opted for central registration in terms of rule 4(2) as they have centralized billing systems or centralized accounting system. No such application for central registration for service tax purpose have been placed on record. A simple letter stating about operational control for the convenience of the appellant does not satisfy the statutory requirement of central registration as per Rule 4. In the case GTA service, the levy of service tax had been shifted from the service provider to the service recipient who is liable to pay freight as cosigner or consignee of the goods. This applies to specified categories of service recipient. The appellant paid identified amount of freight for the transportation of goods. M/s Lee actually paid service freight charges in terms of the sub-contract executed by them. M/s Essemm dealt with the transportation of goods. Freight paid to the transporter is by M/s Lee as agent of the appellant, who reimbursed the same. The appellant is one of the categories specified for tax liability on reverse-charge basis. The freight is borne by the appellant. Though the arrangement is such that M/s NTPC imported the goods as per the contract, the appellant is in-charge of reaching the goods at site office and, thereafter, for further work - appellant liable to pay service tax. Appeal dismissed - decided against appellant. 2018 (3) TMI 774 Refund of unutilized CENVAT credit - Rule 5 of CCR - input services - Event Management Service - car parking services - denial on account of nexus - Held that: - the period involved is prior to 1.4.2011 when the definition of input service had a wide ambit. It is also brought from the records that Event Management Service was availed by the assessee for the purpose of sales promotion. So also, the car parking was availed for the purpose of giving parking facilities to the employees as well as the management - The denial of credit stating that these services do not have nexus with the output services provided is not justified. CENVAT credit - Duty paying documents - debit notes - Held that: - The Tribunal in the case of Ad-Magnum Packaging Pvt. Ltd. [2017 (4) TMI 209 - CESTAT NEW DELHI] has held that debit notes are valid documents for availing credit provided it contains all requisite information as prescribed in Rule 9 (1) of Cenvat Credit Rules, 2004 - debit notes are valid documents for availing credit and rejection of refund on this ground is unjustified - For the limited purpose of verifying whether the credit availed on these debit notes is proper as to payment of service tax and other details, the matter is remanded to the adjudicating authority. Appeal allowed in part and part matter on remand. 2018 (3) TMI 773 CENVAT credit - the appellant had availed credit on construction services which were availed for constructing warehouse - whether the appellant is eligible for credit availed on construction services? - Held that: - The period involved is prior to 1.4.2011 during which period, the definition of input services included the activity of setting up of factory / premises of output service provider - The Hon ble High court of Andhra Pradesh in the case of Sai Sahmita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] has specifically analyzed the eligibility of credit on similar issue and held that A plain reading of both the above definitions would show that, unless excluded, ail goods used in relation to manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT credit - appeal allowed - decided in favor of appellant. 2018 (3) TMI 772 Business Auxiliary Service - While charging their customers towards freight charges for the cargo booked, they are collecting extra charges and collect the same from their clients - whether the service fall under Business Auxiliary Services? - Held that: - The demand is made alleging that the appellant had received consideration for pre-booking of space in airlines/ shipping lines - reliance placed in the decision in the case of Greenwich Meridian Logistics (India) Pvt. Ltd. Versus Commissioner of Service Tax Mumbai [2016 (4) TMI 547 - CESTAT MUMBAI], where it was held that The notional surplus earned thereby arises from purchases and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) ibid will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed. Therefore, the demands, with interest thereon, and penalties are set aside. The demand cannot sustain - appeal allowed - decided in favor of appellant. 2018 (3) TMI 771 Refund claim of unutilized CENVAT credit - export of services - rejection on the ground that the output services of the appellant, which is call centre services is exempted from levy of service tax in terms of Notification No. 8/2003 dated 20.6.2003 - whether assessee is eligible for refund of unutilized credit u/r 5 of CCR 2004 when N/N. 8/2003 exempts the levy of service tax on call centre services which are the output services of the respondent? Held that: - a service provider who provides an output service which is exported without payment of service tax shall be allowed refund of unutilized CENVAT credit used for providing the output service. The N/N. 5/2006-CE(NT) dated 14.3.2006 lays down conditions and limitations. This notification does not put forward any condition as alleged by the department. The only condition provided in Rule 5 is that the facility of refund will not be available if the manufacturer or service provider claims rebate of duty / service tax. The idea of Rule 5 is to avoid export of duty/taxes. Thus, the output service provider is given the benefit to claim refund of the taxes paid on input/input services used for providing output service. In KPIT Cummins Infosystem Ltd. vs. Commissioner of Central Excise, Pune I [2013 (7) TMI 124 - CESTAT MUMBAI], the refund was rejected for the reason that the output services viz. software development and consultancy service during the relevant period was an exempted service. The Tribunal held the availment of credit to be proper even though output services are not taxable. The Commissioner (Appeals) has rightly held that the respondent is eligible for refund of CENVAT credit even though the output services is exempted from the levy of service tax under N/N. 8/2003. Appeal dismissed - decided against Revenue. 2018 (3) TMI 770 Refund of unutilzed CENVAT credit - Management or Business Consultant Service (MBCS) - Business Auxiliary Service (BAS) - Providing Real Estate Advisory Service (REAS) to foreign/ overseas clients in respect of the properties situated in India - whether, the activities of the appellants would come within the purview of MBCS and BAS, as claimed by the appellant; or under the category of REAS, as held by the lower authorities and that whether, the appellants are entitled to get the refund under Rules 5 of the Cenvat Rules, 2004 read with Export of Services Rules, 2005? Held that: - by investing in a company in real estate sector, the investor does not acquire or purchase the real estate property itself - Tribunal in the case of AMP capital Advisors Indian Pvt. Ltd. Vs. CST, Mumbai [2015 (6) TMI 122 - CESTAT MUMBAI], observed that the appellant providing advisory services to AMP capital, Australia and the service recipient using said advice received for further advising for their customers in India, would qualify for export of service. The activities rendered by the appellant would come within the purview of “MBCS” and the appellants are entitled for the refund benefit - appeal allowed - decided in favor of appellant. 2018 (3) TMI 769 Extended period of limitation - receipt of subsidy from the Reserve Bank of India - suppression of facts or not? - Held that: - the Commissioner (Appeals)’s finding for dropping of demand for the extended period is only on the basis of a letter dated 16.10.2008. However, this very letter was not produced before the original authority. Therefore, the fact regarding submission of this letter and the genuineness thereof was not verified - ven the learned Commissioner (Appeals) also has not got this letter verified from the department seeking a report. The matter should be reconsidered by the original authority after verifying the genuineness of the letter dated 16.10.2008 - appeal allowed by way of remand. 2018 (3) TMI 768 Principles of Natural Justice - Till the recovery notice was served on them, they were unaware of proceedings launched against them commencing with the issue of SCN - Held that: - it is clear from the order of the original authority that the demand has been confirmed without affording the appellant an opportunity of being heard or for submitting reply to the SCN - this constitutes a violation of the principles of natural justice and it is only appropriate that the matter should be heard afresh - appeal allowed by way of remand. Central Excise 2018 (3) TMI 767 Maintainability of petition - alternative remedy - power of review - Whether the decisions of this Court in M/s. RESOLUTE ELECTRONICS PVT. LTD. V/s. UNION OF INDIA 2015 (319) ELT 51 (AP) and STAR ENTERPRISES V/s. JOINT COMMISSIONER, GUNTUR , [2015 (4) TMI 40 - ANDHRA PRADESH HIGH COURT] require reconsideration? Held that: - the Constitutional power of judicial review vesting in this Court under Article 226 cannot be whittled down or be made subject to statutory restrictions and parameters prescribed in the context of the remedies provided thereunder. It is only by way of self-imposed restraints that this Court sometimes refuses to exercise its discretionary jurisdiction under Article 226 of the Constitution in a given case. Ultimately, what would weigh with this Court is whether gross injustice would result from non-consideration of the challenge sought to be laid against the Order-in-Original. It is for the Court to decide, on the facts of each individual case, as to whether it should entertain the writ petition or not and this discretion cannot be shackled at this stage by laying down any straightjacket formula or conditions. The reference is answered holding that the decisions in M/s. RESOLUTE ELECTRONICS PVT. LTD. and STAR ENTERPRISES do not constitute good law. A writ petition would lie against an Order-in-Original, against which an appeal was filed and dismissed as time-barred or no appeal had been preferred as it would have been time-barred, provided sufficient grounds are made out warranting exercise of the power of judicial review under Article 226 of the Constitution. Petitions shall be placed before the appropriate Court for further consideration on merits - reference disposed off. 2018 (3) TMI 766 Valuation - the goods cleared by Unit-I (100% EOU) to Unit-II (DTA) were undervalued - Some goods were cleared clandestinely without payment of duty from Unit-I to Unit-II. Undervaluation - entire basis for rejecting the transaction value at which goods were cleared from appellant to Unit-II is the relationship between them - Held that: - Merely because the two units are related persons, the same would not ipso facto be the ground for rejecting the transaction value. Rule 3(3)(a) of the Customs Valuation Rules, 2007 specifically provides that where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price - The comparison of values can only be made in respect of consignments which compares in terms of identity of the goods as well as the quantity of the transaction. Hence, this comparison is not a valid basis for rejecting the transaction value. Clandestine removal - Held that: - there is no corroborative evidence on record to substantiate the stand of the Department that the goods reflected in the diary titled as “MONARK” were clandestinely cleared. The Department also has not carried out investigation regarding the purchase of extra raw material required for manufacture of such additional quantity of Unit-I. During the verification of record at Unit-I and Unit-II, no discrepancies have been noticed in respect of quantity of raw material or finished goods vis-a-vis the statutory documents - the charge of clandestine clearance cannot be upheld only on the basis of the seized private record especially in view of the fact that the statements admitting clandestine clearance of such goods stand retracted. Appeal allowed - decided in favor of appellant. 2018 (3) TMI 765 Exemption under N/N. 12/12-CE(Sl.No.134), as amended by the N/N. 12/13-CE dated 1.3.2013 - manufacture of Henna Powder and Henna Paste - Revenue entertained a view that they are not eligible for exemption for the said products as these are either not Henna Powder or Henna Paste not mixed with any other ingredients - Held that: - we are constrained by the lack of clarity in the proceedings initiated by the Revenue. First of all, when the nature of product is in dispute, it is necessary to have it tested by the competent laboratory to get a clear view. Such tests were done by the Chemical Examiner. Unfortunately, the methodology adopted is apparently not proper. The Standard specified for testing the Henna Powder cannot be applied to paste. We are constrained that the basic facts of the case have not been found in chromatography test so that the Tribunal will be able to pass an order on legality of the claim of the appellant. Matter remanded to the Original Authority for a due process to be followed including re-testing of the product manufactured and cleared by the appellant - appeal allowed by way of remand. 2018 (3) TMI 764 CENVAT credit - inputs/capital goods - HR Steel Plates used for fabricating storage tanks - Held that: - No credit is availed on these storage tanks which are fabricated inside the premises of the appellant-assessee. Storage tanks are specifically mentioned in the definition for capital goods under Rule 2(a) of the CCR 2004 - Even otherwise, the storage tanks are essential capital goods which are used by the manufacturer of excisable goods. HR Steel Plates are basic raw material for fabricating such storage tanks - credit on HR Steel Plates allowed - appeal allowed - decided in favor of appellant. 2018 (3) TMI 763 Clandestine removal - shortages of raw material and finished goods - Held that: - The shortages of the raw material and finished goods appeared either due to reconciliation of accounts as well as descrepancies detected during quarterly checking of stocks. This reconciliation was also informed to the department periodically. No instance has been pointed out by the Revenue to show that the raw materials alleged to have been short found were not received by the Respondent in their factory or the alleged short found raw materials and finished goods were clandestinely removed by the Respondent out of their unit. In absence of any instance or evidence of clandestine removal, no duty can be demanded on the un-reconciled stocks - appeal dismissed - decided against Revenue. 2018 (3) TMI 762 Cenvat Credit - Suo moto credit taken once again - The case of the department is that after reversal of credit duty, due to availability of invalid documents, appellant on their own should not have taken credit, they should have followed the procedure of Central Excise Act and rules made thereunder - Held that: - There is no specific copy was earmarked in terms of Rule 9 of Cenvat Credit Rules, 2004 for availing Cenvat Credit. As regard the credit availed on Xerox/extra copies of invoices, credit cannot be denied only on the basis that the invoices are not original. The purchase of goods made from the foreign/domestic supplier. If all these aspects are found to be correct then merely on the basis of copies, of Cenvatabe documents are other than original copies credit cannot be denied. Matter remanded to the Original adjudicating authority with clear direction that only on the nature of document prevailing in the present case credit cannot be denied - appeal allowed by way of remand. 2018 (3) TMI 761 Refund claim - unjust enrichment - Held that: - discount though passed on after removal of the goods but the same was known as per the agreement between appellant and OMCs, therefore discount was deductible from the assessable value - the excise duty paid on such discount was paid in excess which is prima facie liable to be refunded to the appellant - appeal allowed by way of remand. 2018 (3) TMI 760 Clandestine manufacture and removal - Whether the appellants are liable to pay duty according to the electricity power consumed in the manufacture of MS Bars, MS Angles etc? - Held that: - except the statements of the partners/directors, there is no other evidence and for this reason the Commissioner has dropped the proceedings - the finding of the Commissioner is agrred which says that much more evidence is required to establish the clandestine manufacture and removal of the finished goods. The Hon'ble Supreme Court in the case of Commissioner Versus RA. Castings Pvt. Ltd. [2011 (1) TMI 1302 - Supreme Court of India] has held that the demand only on the basis of electricity consumption cannot be confirmed in absence of any other corroborative evidence. Appeal dismissed - decided against Revenue. 2018 (3) TMI 759 Classification of goods - C.I. Roller and separators - whether the C.I. Roller and separators used by the Railway department for transportation, in ‘end unloading rake’ to unload the welded rails measuring more than 13 Mtr length are classifiable under Chapter 84.31 of CETA or under under the Chapter 86 - benefit of N/N. 62/95 dated 1.3.1995 - Held that: - the items disputed being Separators and CI rollers are specifically used by the railways as the same are fitted to the specially designed wagons. As these items falls under Chapter 86 and as such are entitled for full exemption under N/N. 62/95-CE. - So far waste and scrap is concerned under N/N. 89/95 dated 18.5.1995, as the same arise in manufacture of goods which are fully exempt from levy of duty are also held exempt - appeal allowed - decided in favor of appellant. 2018 (3) TMI 758 Refund claim - time limitation - Section 11B of CEA - Held that: - on the insistence of departmental officer appellant reversed the credit on 17-09-2014 only, thereafter refund has arisen, before that there was no occasion of filing any refund as the appellant had availed the credit which was made on 17-09-2014 - appellant’s filing the refund claim within six months is well within the time line as prescribed u/s 11B - appeal allowed - decided in favor of appellant. 2018 (3) TMI 757 Penalty - interest - Reversal of CENVAT credit - Held that: - the appellant had reversed CENVAT credit but it was held by the first appellate authority that no documentary evidence to that effect had been provided. The original authority, in order-in-original, acknowledges the reversal of CENVAT credit and, therefore, renders the proceedings for recovery to be a non-starter - penalty not warranted. Interest - Held that: - interest liability is modified to such extent that the utilization of CENVAT credit before the date of reversal did not fall below the amount so reversed and the interest liability restricted only to such deficits as are evidenced in the CENVAT credit account - Subject to any interest liability remaining consequent upon such ascertainment the impugned order is set aside except to the extent that the amount of CENVAT credit wrongly taken has been reversed and appropriated. Appeal disposed off. 2018 (3) TMI 756 CENVAT credit - case of the department is that appellant are engaged in the trading business also, therefore services on which credit was availed were used commonly in relation to the manufactured goods as well as trading goods - Held that: - when the Ld. Commissioner has allowed the Revenue’s appeal on the ground that no documentary evidence have been produced by the appellant to justify their claim of non availement of credit. In my view in this situation, Ld. Commissioner should have called for documentary evidence or remanded the matter to the adjudicating authority for verification. Matter needs to be re-considered as regard the claim of the appellant that they have not availed the Cenvat credit in respect of services used for trading activity - appeal allowed by way of remand. 2018 (3) TMI 755 Refund claim for unspent advance deposit lying balance in PLA - rejection on the ground of time limitation - Held that: - It is departmental officers, who were advising the appellant throughout this period and finally advised to file a formal refund claim. In these circumstances, it cannot be said that there is delay on the part of the appellant in the facts of the present case. Moreover, the refund is in respect of unspent balance of PLA, it is to be kept in mind that the PLA balance is not duty for the reason that whenever Challan is deposited it is as advance deposit towards PLA and from that amount duty payable is debited, therefore unspent balance is nothing but unutilised advance deposit made by the appellant. In case of claiming refund of unspent balance of PLA, limitation of one year shall not apply. Refund allowed - appeal allowed - decided in favor of appellant. 2018 (3) TMI 754 CENVAT credit - whether appellant is entitle for the Cenvat credit in respect of civil works i.e. repair and maintenance of road and drainage system within the factory premises, rent-a-cab service provided prior to 1-04-2011 and after 1-4-2011, loan processing fees for funds obtained for capital requirement? Repair and maintenance of road and drainage system - Held that: - the civil work service which is related to repair and maintenance of road and drainage system as renovation, modernisation and repairs at factory premises is included in the inclusion category and of the definition of input service therefore credit is admissible on such service - credit allowed. Rent-a-cab service - Held that: - the said service is used in or in relation to overall manufacturing activity of the appellant therefore credit is admissible only upto 31-03-2011 - however from 1-4-2011 rent a-cab service is excluded from the definition of the input service therefore credit for the period after 1-4-2011 is not admissible - credit upto 31-03-2011 allowed. Service of processing of loan - Held that: - financing is most important part of any business organisation without which no business can take off therefore credit in respect of service tax paid on loan processing fees is clearly admissible - credit allowed. Appeal allowed in part. 2018 (3) TMI 753 CENVAT credit - various input services - whether cenvat credit on the input services namely hiring of vehicles, auto repairing & maintenance, life/health insurance of staff and CISF personnel, canteen service, catering service, removal of honey comp, disposal of canteen waste, removal of medical waste, maintenance of garden & grass cutting etc. is admissible to the Appellant or otherwise? Held that: - the eligibility to avail cenvat credit on the input services depends on its use in the factory of the manufacturer. All the services are essential for the over-all operation of the petroleum refinery. The petroleum refinery is spreaded in a huge area, which consists of open ground, plants, garden etc. Therefore, all the services are required for up-keep and operation of the petroleum refinery plant. The period involved is 2014-15. W.e.f. 1.4.2011, the definition of input service has undergone a change. By reading the above amended definition, it is observed that certain services have been excluded from the purview of input service w.e.f. 1.4.2011. Amongst those services, the services involved in the present case are catering service (S.No. 43), hotel bill (S.No. 57). These services were consumed by the employees of the Appellant, therefore, the same are not eligible for cenvat credit. The credit on the services mentioned at S.No. 18 - car hiring, S.No. 28 - catering, S. No. 43 - catering, S.No. 53 (details not available), S.No. 57 - hotel bill, is not available to the Appellant. In respect of rest of the services, the credit is admissible. Appeal allowed in part. 2018 (3) TMI 752 Clandestine removal - shortage of goods - Department’s claimed that documents have been submitted to show that the goods had been cleared clandestinely, is blank statement as no evidence has been adduced - Held that: - all the submissions made by both appellants are afterthoughts as the same does not rebut charges of clandestine removal which is based on the documentary evidence - The concern person Shri. Jayesh Jain Director of the M/s. Sarvodaya also admitted the allegation made in the show cause notice. Merely denial of the statements at the time of filing reply is not sufficient to discard the statements - appeal dismissed - decided against appellant. 2018 (3) TMI 751 Penalty u/s 11AC - CENVAT credit - input service attributed to trading activity of goods - Held that: - As per the entire facts, the issue of Cenvat credit disputed in the SCN has been settled in favour of appellant except small portion of Cenvat credit which is related to common input service attributed to the trading of goods - Both the SCN were issued in the normal period for the reason that facts were very much disclosed by the appellant and case was made out on that basis only therefore no suppression involved - penalty set aside - appeal allowed. 2018 (3) TMI 750 CENVAT credit - duty paying documents - supplementary invoices - Rule 9(1)(b) of Central Excise Rules, 2004 - Held that: - this is not the case of clandestine removal with intent to evade payment of duty. Appellant's Hinjewadi unit cleared the goods on payment of duty, short payment is only due to the wrong calculation of costing. This does not mean that appellant's Hinjewadi unit intentionally suppressed the value to evade duty - It is also observed that both the unit belong the same company of the appellant therefore whatever duty is paid or payable by their HInjewadi unit was available as Cenvat credit to the appellant therefore due to this revenue neutrality intention to evade excise duty is not established. The settlement commissioner has taken very lenient view on imposing penalty which further proves that there is no malafide intention to evade payment of duty. Appeal allowed - decided in favor of appellant. 2018 (3) TMI 749 CENVAT credit - recovery of courier charges from the supplier of goods that were returned for non-compliance with supply schedule - Held that: - The inclusion of courier service charges in the said debit note does not in any way detract from the provision of service by the courier to the vendor of the goods. The appellant is not the recipient of courier service referred to in the debit note and has not taken the credit of any tax paid on the provision of said service to the vendor of the goods in question - In absence of eligibility to take such credit and, in absence of any evidence that the ineligible credit was availed in the first instance, reversal of credit will not arise - appeal allowed - decided in favor of appellant. 2018 (3) TMI 748 CENVAT credit - capital goods - HR coils, MS beams, MS channels and MS angles - Held that: - the contentions of the appellant had not been taken into consideration before arriving at the conclusion of liability. This requires remedy. Matter is remanded to the original authority to consider the submissions of the appellant that the storage tank/machinery and their supports are modular and hence not covered by the decision of the Larger Bench in re Vandana Global [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] and that, with the full disclosure in the returns, the show cause notice was issued beyond the period of limitation prescribed under law. Appeal allowed by way of remand. 2018 (3) TMI 747 CENVAT credit - sales commission for domestic, as well as on export sale - Is the credit of Business Auxiliary Service on account of sales commission now disallowed after the deletion of expression ‘activities related to business’? Held that: - On perusal of the definition of ‘input service’ in rule 2(l) of CENVAT Credit Rules, 2004, it is seen that inclusive portion specifically enumerates ‘advertisement of sale promotion’. It is also seen that the products manufactured by the respondent are tailor-made to meet the requirement of the customers. Consequently, any commission paid to agents has its genesis in placing of the order which by no stretch, is a post-removal activity. The service availed by the respondent would not be outside scope of ‘input service’ and disallowance of CENVAT credit sought by Revenue is without merit - appeal dismissed - decided against Revenue. 2018 (3) TMI 746 Clandestine removal - shortage of finished goods - Held that: - There is no allegation of shortage of stock detected through physical inspection. The allegation is entirely based on intimation furnished in accordance with a statute to another agency of Government of India - In absence of any evidence, to conclude or even to speculate, that there is shortage of stock of raw material or finished product, no valid ground remains to recover duty on presumption of clandestine removal - appeal allowed - decided in favor of appellant. 2018 (3) TMI 745 Penalty - CENVAT credit - goods cleared to the developer of a Special Economic Zone (SEZ) - non-maintenance of separate records of inputs/input service used in common for manufacturing of dutiable goods and exempted goods - Held that: - The exclusion provision in rule 6 of CENVAT Credit Rules 2004 is restricted to goods that are cleared for export or such as are deemed to have been exported under the Foreign Trade Policy or any other enactment. In so far as Special Economic Zone Act 2005 is concerned there is no distinction between supply of the goods to a unit or to a developer. Penalty u/s 11AC - Held that: - The decision of the Hon'ble High Court of Andhra Pradesh in the case of Sujana Metals Products Ltd. [2015 (3) TMI 781 - ANDHRA PRADESH HIGH COURT] has held that the scope of amendment to rule 6 of CENVAT Credit Rules, 2004 and its applicability being subject to interpretation precluded the invoking of the extended period of limitation. The ingredients for the extended period of limitation are the same as that justifying the invoking of section 11AC of Central Excise Act, 1944 - penalty set aside. Appeal dismissed - decided against Revenue. 2018 (3) TMI 744 CENVAT credit - input services - air travel agents’ service - telephone services - rent-a-cab services - goods transport agency services - legal consultancy services - other miscellaneous - credit involved in input service distribution - Held that: - Eligibility for CENVAT credit on air travel agents service is settled by the decision of the Tribunal in Steadman Pharmaceuticals (P) Ltd v. Commissioner of Central Excise, Chennai - III [2016 (7) TMI 590 - CESTAT CHENNAI], where it was held that when air travel was performed for the purpose of company business the Service Tax paid on the said air travel agent service is admissible as credit, the same principle is applicable for rail travel agents service also - credit allowed. Telephone service - Held that: - Eligibility of telephone service settled by Commissioner of Central Excise, Chennai v. Fourrts (I) Laboratories Pvt Ltd [2009 (10) TMI 175 - CESTAT, CHENNAI], where it was held that as regards telephone service, since they are required to meet out day to day business activities, such services are also in relation to business falling within the scope of the definition of input service and therefore service tax credit on telephone service is admissible - credit allowed. Rent a cab service - legal consultancy service - Held that: - ‘rent-a-cab service’ and ‘legal consultancy service’ are inputs within the meaning of rule 2(l) of CENVAT Credit Rules, 2004 with no justifiable ground for denying availment - credit allowed. Other miscellaneous service - Held that: - an amount of ₹ 21,185/- was availed as credit of the tax paid on the sitting fees of Directors on ‘reverse charge basis’. It is well settled in law that tax discharged as ‘reverse charge’ can be availed as CENVAT credit - credit allowed. Credit availed for input service distribution - Held that: - it is the claim of the appellant that recovery cannot be effected from the recipient of the service - Reliance has been placed on the decision of the Tribunal in Commissioner of Central Excise, Belapur v. Elder Pharmaceuticals Limited [2014 (11) TMI 76 - CESTAT MUMBAI], where it was held that Commissioner has no jurisdiction to reallocate the CENVAT credit to the assessee in question as there was no such allegation in the show-cause notice and he cannot go beyond the allegation in the SCN to decide the issue - There is no clear finding on this aspect in the order of the two lower authorities. This needs fresh determination. GTA service - Held that: - Credit availed on ‘goods transport agency service’, being relatable to outward transportation is disallowed - credit denied. Appeal allowed in part and part matter on remand. 2018 (3) TMI 743 CENVAT credit - advertisement services - Held that: - the lower authorities have not given due consideration to the information furnished during the hearing in relation to the form ST-3 returns for the relevant financial year - The disclosures made in the ST-3 returns should have been verified to ascertain the factum of reversal and also for comparison with proportion of sales vis-a-vis trading. Without such ascertainment it was inappropriate on the part of the lower authorities to arrive at a conclusion that CENVAT credit was wrongly availed. The matter is remanded back to the original authority to verify the submission of the appellant that CENVAT credit had been reversed and to ascertain correctness of the computation of CENVAT credit that was reversed - appeal allowed by way of remand. 2018 (3) TMI 742 CENVAT credit - supply of goods to developer of special economic zone - maintenance of separate records u/r 6 of CCR - Held that: - The exclusion provision in rule 6 of CENVAT Credit Rules 2004 is restricted to goods that are cleared for export or such as are deemed to have been exported under the Foreign Trade Policy or any other enactment. In so far as Special Economic Zone Act 2005 is concerned there is no distinction between supply of the goods to a unit or to a developer. Penalty u/s 11AC - Held that: - The decision of the Hon'ble High Court of Andhra Pradesh in the case of Sujana Metals Products Ltd. [2015 (3) TMI 781 - ANDHRA PRADESH HIGH COURT] has held that the scope of amendment to rule 6 of CENVAT Credit Rules, 2004 and its applicability being subject to interpretation precluded the invoking of the extended period of limitation. The ingredients for the extended period of limitation are the same as that justifying the invoking of section 11AC of Central Excise Act, 1944 - penalty set aside. Appeal dismissed - decided against Revenue. CST, VAT & Sales Tax 2018 (3) TMI 741 Validity of assessment order - TNGST Act - non-compliance of Rule 26(6)(a) and (b). Held that: - The factual position which emerges from the material papers are that the petitioner was both consignment agent and del credere agent of Mr.Haldia Petrochemicals Limited and an agreement to the said effect was entered into on 01.07.2002. Having accepted that the petitioner is a del credere agent, they are bound to comply with the instructions as per Section 40(1) of the TNGST Act read with Rule 26(6)(a) of the Rules. Admittedly, the petitioner has not complied with or observed any of the conditions as contemplated under the Rule. When the Court is convinced that the show cause notices are proper and the findings recorded in the impugned assessment orders are proper and the Court having tested the correctness of the impugned orders in these writ petitions and held that the contentions advanced by the petitioner do not merit consideration, it is left with no other option, except to affirm the impugned assessment orders. The petitioner has not made out any case for interference with the impugned assessment orders and accordingly, the writ petitions fails - decided against petitioner. Indian Laws 2018 (3) TMI 812 Interpretation of statute - Enforcement of award - Where arbitration proceedings have been initiated before amendment to Section 36,whether Section 36, which was substituted by the Amendment Act, would apply in its amended form or in its original form to the appeals in question? - construction of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 Held that: - If the first part of Section 26 were couched in positive language (like the second part), it would have been necessary to add a proviso stating that the Amendment Act would apply even to arbitral proceedings commenced before the amendment if the parties agree. In either case, the intention of the legislature remains the same, the negative form conveying exactly what could have been stated positively, with the necessary proviso. Obviously, arbitral proceedings having been subsumed in the first part cannot re-appear in the second part, and the expression in relation to arbitral proceedings would, therefore, apply only to Court proceedings which relate to the arbitral proceedings. The scheme of Section 26 is thus clear: that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force. From a reading of Section 26 as interpreted by us, it thus becomes clear that in all cases where the Section 34 petition is filed after the commencement of the Amendment Act, and an application for stay having been made under Section 36 therein, will be governed by Section 34 as amended and Section 36 as substituted. It is enough to state that Section 26 of the Amendment Act makes it clear that the Amendment Act, as a whole, is prospective in nature. Thereafter, whether certain provisions are clarificatory, declaratory or procedural and, therefore, retrospective, is a separate and independent enquiry, which we are not required to undertake in the facts of the present cases, except to the extent indicated above, namely, the effect of the substituted Section 36 of the Amendment Act. it will be important to first bear in mind the principles of interpretation of such a provision. That an Amendment Act does include within it provisions that may be repealed either wholly or partially and that the provisions of Section 6 of the General Clauses Act would generally apply to such Amendment Acts is beyond any doubt. Section 26 has, while retaining the bifurcation of proceedings into arbitration and Court proceedings, departed somewhat from Section 85A as proposed by the Law Commission - That a provision such as Section 26 has to be construed literally first, and then purposively and pragmatically, so as to keep the object of the provision also in mind. Even though the High Court may not be strictly correct in its appreciation of the law, yet it has attempted to do justice on the facts of the case. Appeal dismissed.
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