TMI Tax Updates - e-Newsletter
March 11, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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GST:
Central Goods and Services Tax (Third Removal of Difficulties) Order, 2019 - Issue of Bill of Supply in lieu of Tax Invoice in case of Service Provider availing benefit of composition.
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GST:
Nature of Supply of Priority Sector Lending Certificates (PSLC)
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GST:
Grant of regular bail - offence punishable under Section 132 (1) (a), (b) and (c) of Goods & Services Tax Act, 2017 - issuance of fake invoices to get input tax credit - main accused have not been arrested so far - Petition dismissed.
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Income Tax:
Gratuity exemption u/s Section 10(10)(iii) - exemption limit raised to ₹ 25 lakhs
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Income Tax:
Exemption u/s 10(37) - Assessee has received compensation on compulsory acquisition of urban agricultural land - Once sufficient material is placed that land was agriculture land, exemption was allowable.
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Income Tax:
Exemption u/s 54 - LTCG - delay in obtaining possession of residential flat and getting purchase deed executed was on account of the developer and was by reason beyond the control of the assessee - exemption is allowable
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Income Tax:
Prosecution u/s 276-C(1) & 277 - revenue sought additional witness and additional documents - there is no basis to come to a conclusion that respondent (revenue) is adopting dilatory tactics or is in any way harassing petitioner assessee - production of additional witness/documents on record is permissible.
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Income Tax:
Reopening of assessment -Notice u/s 143(2) - AO given the notices u/s 143(2) to the assessee immediately to filing the return, which shows non-application of mind on the part of the of the AO. Therefore, notice under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed.
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Income Tax:
Justification for the expenditure - amount paid towards secondment of employees - The contention of the AO that, real beneficiary of the Australian entity’s employees was not the JV but the AE, rejected. - Revenue is not permitted to hold salary payment reimbursed to AE is a non deductible expenditure.
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Income Tax:
Eligibility of deduction u/s 54 and 54F - in return deduction claimed u/s 54F - in assessment proceedings revised his claim u/s 54 - AO is duty bound to allow deduction to the assessee if the assessee is eligible for such deduction under the provisions.
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Income Tax:
Profit attributable to India - an assessee whose business operations are not exclusively carried out in India, the amount of income which will be deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India.
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Income Tax:
Capital gain - Joint development agreement - amendment brought in by the Finance Bill 2017 is prospective and not retrospective - For the prior period, capital gain is taxable in year of project.
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Income Tax:
Addition u/s 41 - remission/cessation of liability - liability continued from past so many years - merely on the basis of surmises and assumptions it cannot be said that there is remission/cessation of liability in the impugned assessment year - Addition u/s 41 to be deleted
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Income Tax:
TP adjustment - comparable selection - functinal dissimilarity - media content and TV broadcasting are totally dissimilar activities - not at all comparable - AO/ TPO to exclude the broadcasting companies from comparables
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Income Tax:
Revision u.s 263 - assessment order passed pursuant to the revisionary order has resulted in reduction of tax liability - not prejudicial to the interest of the Revenue - revision not permissible
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Customs:
Carriage of coastal cargo from one Indian port to another port in vessels carrying out coastal runs.
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Customs:
Seizure of contraband Gold - The mere fact that the interception and seizure was not affected in an international border or near an airport or seaport is irrelevant, since the statements of the intercepted persons clearly indicate that they were asked to avoid such means of transport and stick to the normal modes of public transport.
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Customs:
Validity of Pre-import conditions - Exemption from integrated tax and GST compensation cess - benefit of N/N. 18/2015- Cus - Import against Advance Authorisation - Duty Exemption/Remission Schemes - ultra vires provision as inserted struck down.
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Customs:
Valuation of imported goods - in spite of the admission on behalf of the importer, the Revenue is required to satisfy the requirements prescribed under Section 14 of the Customs Act read with Customs Valuation Rules before any enhancement of valuation.
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Customs:
Principles of natural justice - imposition of penalty on the co-noticee/appellant - Mere signing of bill that too in the capacity of being employee is not sufficient to prove gravest of allegations of improper export.
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Customs:
Refund claims - price variation clause - transaction value determined after importation due to annual discount/quantity rebate, determined after end of the contract period - refund allowed.
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Customs:
Imposition of redemption fine - import of copper scrap druid - mis-declaration of description and value - no supplier would supply a high priced goods against an order of less priced goods - redemption fine and penalty confirmed.
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SEZ:
Special Economic Zones (2nd Amendment) Rules, 2019
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FEMA:
Foreign Exchange Management (Permissible Capital Account Transactions) (First Amendment) Regulations, 2019
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Service Tax:
Construction services - construction of building for Manyavar Kanshi Ram Hospital at Greater Noida - Revenue could not give any evidence to establish that the said building was being used for such purposes by which the organization using the same was making profit - Demand set aside.
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Service Tax:
The claim of the appellant (Krishi Upaj Mandi Samiti) that the allotment of shop or land to the traders cannot be considered as “renting of immovable property” is not tenable.
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VAT:
Availing Input Tax Credit (ITC) wrongly - Penalty u/s 27(4) - strict interpretation has to be given to any exemption notification and the interpretation should lean in favour of the Revenue - levy of penalty confirmed.
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VAT:
Sale of goods or not? - supply of drugs, medicines, implants, surgical tools etc. to the patient during treatment - mere passing of property in an article or commodity during the course of the performance of a contract or service, which is essentially one and indivisible, does not render it a transaction of sale, except in the case of the specific instances as available in clauses (b), (c) and (f) of article 366(29A).
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (3) TMI 489
Extension of time for filing GST Tran-1 - transitional credit - transition to GST regime - Held that:- The respondents are directed to open the portal before 31st of March 2019. In the event they do not do so, they will entertain the GST TRAN-1 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. List this matter on 10.04.2019.
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2019 (3) TMI 488
Constitutionality of section 174 of KGST Act and 101st Constitutional Amendment - Jurisdiction - power to enact section 174 of KGST Act - Held that:- Identical issue decided in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT], where it was held that The petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed.
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2019 (3) TMI 487
Constitutionality of section 174 of KGST Act and 101st Constitutional Amendment - Jurisdiction - power to enact section 174 of KGST Act - Held that:- Identical issue decided in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT], where it was held that The petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed.
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2019 (3) TMI 486
Grant of regular bail - offence punishable under Section 132 (1) (a), (b) and (c) of Goods & Services Tax Act, 2017 - issuance of fake invoices to get input tax credit - main accused have not been arrested so far - Held that:- U/s. 69 of the GST Act, the Commissioner is having power to arrest if he has reasons to believe that a person has committed an offence specified in Clause (a) or (b) or (c) of sub-section (1) of Section 132 of the GST Act. Section 132(1) (a), (b) and (c) of GST Act define types of offences and according to which, whoever commits offence of supply of any goods or services without issue of any invoice or issues any invoice or bill without supply of goods or services of both or avails input tax credit using such invoice, shall be punished with imprisonment of term which may extend to 5 years and with fine, if the amount involved is more than ₹ 500 Lakhs. In view of the statement of the petitioner recorded u/s. 70 of the GST Act and the fact that the main accused have not been arrested so far, in the considered opinion of this Court, the petitioner is not entitled for grant of bail. Application dismissed.
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2019 (3) TMI 485
Grant of regular bail - offence punishable under Section 132 (1) (a), (b) and (c) of Goods Services Tax Act, 2017 - issuance of fake invoices to get input tax credit - main accused have not been arrested so far - Held that:- U/s. 69 of the GST Act, the Commissioner is having power to arrest if he has reasons to believe that a person has committed an offence specified in Clause (a) or (b) or (c) of sub-section (1) of Section 132 of the GST Act. Section 132(1) (a), (b) and (c) of GST Act define types of offences and according to which, whoever commits offence of supply of any goods or services without issue of any invoice or issues any invoice or bill without supply of goods or services of both or avails input tax credit using such invoice, shall be punished with imprisonment of term which may extend to 5 years and with fine, if the amount involved is more than ₹ 500 Lakhs. In view of the statement of the petitioner recorded u/s. 70 of the GST Act and the fact that the main accused have not been arrested so far, in the considered opinion of this Court, the petitioner is not entitled for grant of bail. Application dismissed.
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Income Tax
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2019 (3) TMI 484
Prosecution u/s 276-C(1) & 277 - Application for getting the present AO examined as an additional witness and another application for filing additional documents - right to cross-examine the additional witness in respect of documents sought to be placed on record - HELD THAT:- Reasoning adopted by the trial court, as referred does not suffer from any illegality or infirmity. There is no basis to come to a conclusion that respondent is adopting dilatory tactics or is in any way harassing petitioner. The additional evidence sought to be led appears to be for bonafide purpose and to substantiate the allegations made in the complaint. Petitioner does not suffer any prejudice as petitioner has an opportunity to cross-examine the additional witness in respect of documents sought to be placed on record. Finding no infirmity in the concurrent findings returned by the courts below, this petition and the application are accordingly dismissed while refraining to comment upon the merits of this case.
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2019 (3) TMI 483
TP Adjustment - CIT(A) findings on fact approved by ITAT - justification for the expenditure - Salaries paid to the assessee’s Australian AE, were towards reimbursement of expenses - methodology with respect to the Comparable Uncontrolled Prices (CUP) method under Rule 10B - revenue contention that real beneficiary of the Australian entity’s employees was not the JV but the AE - HELD THAT:- This court is of the opinion that the view of the CIT (A) which also commanded itself to the ITAT was in the circumstances of the case justified. The CIT(A) noted correctly that the revenue nowhere could establish that its employee did not work in India and the AE has also compensated for the services of the employee on the roll of the assessee. The decision of the JV and the assessee clearly constituted a business or managerial decision which the revenue could not have, in the manner it did, interfered with holding that the employees of the AE were subjected to secondment, which resulted in non deductible expenditure. No substantial question of law arises.
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2019 (3) TMI 482
Disallowance u/s 80IC - substantially expansion of new business - AO restricted the deduction to the extent of 25% - HELD THAT:- As decided in PR. COMMISSIONER OF INCOME TAX, SHIMLA VERSUS M/S. AARHAM SOFTRONICS [2019 (2) TMI 1285 - SUPREME COURT] in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of Section 80-IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become ‘initial assessment year’, and from that assessment year the assessee shall been entitled to 100% deductions of the profits and gains. Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes ‘initial assessment year’ once again. However, this 100% deduction would be for remaining three years, i.e. 8th, 9th and 10th Assessment Years. - decided against revenue.
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2019 (3) TMI 481
Unexplained investment u/s.69 - cash deposit in the Bank as unexplained cash credits - income from salary, stridhan, interest income for a prolong period in relation to the income of the assessee’s wife - HELD THAT:- As perused the documents annexed assessee’s wife in whose name the amount was claimed to have been deposited either by assessee or herself was from her income from salary, sale of jewellery and other sources including Income Tax Return as available seems to be genuine. The salary certificate is also part of the document before us. The chart prepared by the assessee regarding her source of income appearing in the written submission before the Learned CIT(A) dated 07.05.2013 for Financial Year 2002-03 to 2007-08 have also been perused by us. We have carefully considered the judgments relied upon by the assessee as well. We find that since the pay-in-slips bore the signature of the assessee and not the signature of the assessee’s wife. AO came to a conclusion that the transactions were made by the assessee and not by his wife. While doing so, the AO did not take into account that the evidence relating to income from salary, stridhan, interest income for a prolong period in relation to the income of the assessee’s wife or that the fact that the preposition of deposing this money in a joint account by the husband by putting his own signature instead of his wife does not necessarily lead to a conclusion that the husband has deposited the same from his own income other than the income earned by the wife. Since the genuineness of the source of income of the wife has not been questioned by the authorities below the entire addition cannot be made as unexplained investment u/s 69. The entire source of amount so deposited was failed to have been established by the assessee with corroborating evidences. Taking into consideration the entire gamut of the matter found it fit and reasonable to allow ₹ 3,00,000/- as the saving of the wife of the assessee from such addition made by the authorities below. - Decided partly in favour of assessee.
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2019 (3) TMI 480
Stay petition - recovery proceedings - disallowance of exemption u/s. 10(38) - HELD THAT:- In this case the assessee has already deposited ₹ 25,00,00,000/- against the outstanding demand. The assessee has tried to make out a prima facie case in its favour by stating. We are therefore of the opinion that stay should be granted subject to the condition that assessee shall deposit another ₹ 25,00,00,000/- on or before 15-03-2019. Therefore, the outstanding demand is stayed for a period of six months from the date of this order subject to condition that the assessee would deposit ₹ 25,00,00,000/- on or before 15-03-2019. The assessee is also granted out of turn hearing on 23-04-2019 and the registry is directed accordingly. Since the date of hearing is announced in the open court, the issuance of separate notices is dispensed with.
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2019 (3) TMI 479
Penalty proceedings u/s. 271(1)(c) - defective notice - AO has mentioned both the limbs, viz., concealment of particulars of income and furnishing of inaccurate particulars of income in notice - HELD THAT:- AO has initiated penalty proceedings for furnishing of inaccurate particulars of income. However, while imposing penalty, AO has held that the assessee has concealed particulars of income and also furnished inaccurate particulars of income. Even though the AO has mentioned both the limbs, viz., concealment of particulars of income and furnishing of inaccurate particulars of income, it is not clear as to which one has weighed his mind while imposing penalty. This indicates the non-application of mind on the part of the AO and the same would vitiate penalty proceedings in both the years. Accordingly, we set aside the orders passed by the Ld. CIT(A) in both the years under consideration and quash the penalty orders passed by the AO in both the years. - Decided in favour of assessee.
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2019 (3) TMI 478
Revision u/s 263 - AO taxed sale of land partly as capital gain and partly as unexplained cash credit u/s.68- CIT directed to tax total as capital gain and allow exemption u/s.54F in respect of one flat - assessment order passed pursuant to the revisionary order has resulted in reduction of tax liability - whether the original assessment order can be considered as not prejudicial to the interest of the Revenue? - HELD THAT:- Where the AO adopted one of several courses permissible in law or where two views are possible and the AO has adopted one with which the CIT does not agree, the order cannot be treated as erroneous as well as prejudicial to the interest of the Revenue unless a view taken is unsustainable in law. In a present case it is seen that the amount of tax determined pursuant to the revisionary order has been computed at ₹ 84.26 lakh, which is lower than the amount of tax computed pursuant to the original assessment u/s.143(3) at ₹ 95.57 lakh. Section 263 empowers the Commissioner of Income-tax to revise an assessment order which is erroneous as well as prejudicial to the interest of the Revenue. It is trite law that the revisionary power can be exercised only when the assessment order passed by the AO is both erroneous as well as prejudicial to the interest of the Revenue. If one of the two conditions is not satisfied, the power to revise is ousted. Here is a case in which the assessment order passed pursuant to the revisionary order has resulted in total tax liability of the assessee at ₹ 84.26 lakh, which is less than the amount of tax originally determined as payable at ₹ 95.57 lakh, which order became subject matter of revision by the ld. Pr. CIT. We find that the Department, by virtue of the revisionary order, is losing tax lawfully payable by the assessee. That being the position, the assessment order cannot be considered as prejudicial to the interests of the Revenue. Since the assessment order does not suffer from the second infirmity namely “prejudicial to the interest of the Revenue”, we hold that the revisionary power u/s.263 cannot be exercised as both the limbs of an order, being, erroneous and prejudicial to the interest of the Revenue are not cumulatively satisfied. We, therefore, set-aside the impugned order. - Decided in favour of assessee.
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2019 (3) TMI 477
Eligibility for deduction u/s 80IA(4)(i) - Manufacturing activity - whether the assessee is a developer or mere works contractor? - whether the assessee, engaged in construction of a dam cannot be said to be engaged in manufacturing or production of an article inasmuch as a dam is constructed and not manufactured? - CIT-A allowed the claim - HELD THAT:- We note that the contention of the assessee for eligibility for deduction under section 80IA(4) is fortified by certificate from the Superintendent Engineer, Municipal Engineering Directorate of the West Bengal Govt., in which it was clarified, that the assessee is developing a new infrastructure facility/project of public interest meant for Drinking Water Supply Project to improve health & sanitation and to provide civic amenities for local people. The Co-ordinate Bench of this Tribunal [2017 (3) TMI 1050 - ITAT KOLKATA] held on the similar facts that the assessee is not a work contractor but he is a developer therefore eligible to claim the deduction u/s 80IA(4)(i) of the Act. From the perusal of the terms and conditions in the agreement, it is abundantly clear that the assessee is not a works contractor. The assessee company is a developer. Thus, clearly the assessee is eligible for deduction under section 801A(4)(i) of the Act. No reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of the Revenue is dismissed.
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2019 (3) TMI 476
Exemption u/s 54 - assessee could not obtain the possession and got the purchase deed executed within the period of three years - HELD THAT:- Assessee has made payment of for the purchase of flat to the developer. The fact of payment of the same and the transaction of purchase of flat are not in dispute. The only issue is that assessee could not obtain the possession and got the purchase deed executed within the period of three years. The delay was on account of developer and not on account of the assessee. As perused the paper book, where we find that there is a complaint filed by La Tropicana, Resident Welfare Association against the developer with National Consumer Disputes Redressal Commission. Thus, the fact that delay in obtaining possession and getting purchase deed executed was on account of the developer and was by reason beyond the control of the assessee. The assessee has made substantial payment of ₹ 62,68,311/-. In such peculiar facts and circumstances, we are inclined to agree with the contentions of the assessee that exemption under section 54 cannot be denied to the assessee. The assessee has done all what he could have done. There is no failure on the part of the assessee. We are of the considered opinion that CIT(A) was not justified in denying the exemption claimed by the assessee under section 54 and direct the assessing officer to delete this addition. Disallowance of exemption in respect of amount deposited by the assessee in the capital gain account on the ground that the same was not utilised within the period of three - HELD THAT:- The delay in the present case was on account of the developer and not on account of the assessee. The assessee had deposited the amount in capital gain account. The balance amount could not be utilised as there was a dispute and stay by the National Disputes Redressal Commisison. Accordingly, for the reasons stated hereinabove, we hold that the CIT(A) was not justified in confirming the action of the Assessing Officer and direct the AO to delete this. Even if the amount deposited by the assessee in the capital gain account scheme is to be charged to tax, then it could be taxed only after the expiry of the prescribed period not in the year to which the capital gain pertains to. The addition made by the AO and sustained by the CIT(A) deserves to be deleted. Expenses incurred by the assessee at the time of purchase of property - HELD THAT:- On going through the assessment order, we note that assessee failed to submit any evidence in respect of the expenses incurred at the time of purchase of the property. Before us also the AR has not produced any evidences. Therefore, in absence of any evidence on record, the claim of the assessee does not stand substantiated. We, therefore, support the addition made by the AO and sustained by the CIT(A). Finding no infirmity in the impugned order on this score, this issue is decided against the assessee Disallowance on account of cost of improvement - HELD THAT:- We find that the facts of this issue are identical to the issue of disallowance of cost of improvement dealt by us above wherein we have upheld the action of the Assessing Officer in ignoring the expenses in the absence of any evidence. Here also, in the absence of evidences, we hold that AO was correct in rejecting the claim of the assessee. The department is not supposed to make spot enquiry even when the assessee fails to adduce any evidence in support of its claim. Accordingly, this addition also deserves to be sustained.
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2019 (3) TMI 475
Penalty u/s 271(1)(c) - quantum addition deleted by ITAT - income estimated under deeming provisions - HELD THAT:- Penalty U/s 271(1)(c) I.T. Act of ₹ 1,27,50,670/- levied by AO, and already deleted by the Ld. CIT(A); has no legs to stand when the corresponding additions made by the AO have already been deleted by ITAT When the quantum addition does not survive, the penalty levied U/s 271(1)(c) of I.T. Act on the corresponding quantum addition also cannot survive. We take support from judicial precedent in the case of K.C. Builders vs. ACIT [2004 (1) TMI 7 - SUPREME COURT] in which held that where the additions made in the Assessment Order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment, and therefore, in such a case, no such penalty can survive and the same is liable to be cancelled. In view of the foregoing, appeal filed by Revenue is hereby dismissed.
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2019 (3) TMI 474
Deduction u/s 80HHC on sale to Export House, M/s.Abad Exports Private Limited - goods sold to the Export House - HELD THAT:- The Export House had issued disclaimer certificate in Form No.10CCAB dated 22.12.2004, along with copy of revised CA certificate in Form No.10CCAC dated 23.02.2005. There is also evidence on record that the Export House, M/s.Abad Exports Private Limited had not claimed deduction u/s 80HHC with regard to export of goods manufactured by the assessee. Therefore, the assessee undoubtedly, is entitled to deduction u/s 80HHC of the I.T.Act with regard to goods sold to the Export House, M/s.Abad Exports Private Limited. As noticed that deduction u/s 80HHC claimed by the assessee on account of sale to Export House, M/s.Abad Exports Private Limited which is in excess of the profits earned by the Export House. Therefore, for the limited purpose of quantification of deduction u/s 80HHC of the I.T.Act, the issue is restored to the Assessing Officer Claim u/s 10A - claim for unexpired period, i.e., assessment year 2002-2003 in respect of exports to Exports House other than IQF [individual Quick freezing] - HELD THAT:- Going by ABAD EXIM (P) LTD. [2018 (8) TMI 985 - KERALA HIGH COURT] the assessee would be entitled to the claim of deduction u/s 10A of the I.T.Act for the unexpired period, i.e., assessment year 2002-2003 in respect of exports to Exports House other than IQF. The quantification of the amount that the assessee is entitled for deduction u/s 10A of the I.T.Act for the relevant assessment year has to be computed by the Assessing Officer for the reason that the Hon’ble High Court had stated that the claim of IQF, deduction u/s 10A of the I.T.Act cannot be granted. So also, there shall not be overlapping of deduction u/s 10A and 80HHC of the I.T.Act with regard to the same export (i.e. export made to Export House, M/s. Abad Exports Private Limited). Therefore, for the limited purpose of computation of deduction u/s 10A of the I.T.Act, the issue is restored to the Assessing Officer. It is ordered accordingly. - Appeal filed by the Revenue is allowed for statistical purposes.
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2019 (3) TMI 473
Exemption u/s 10(37) - Assessee has received compensation on compulsory acquisition of urban agricultural land - proof of land as used for agricultural purposes - HELD THAT:- The assessee filed copy of the sale deed which clearly described the impugned land to be agricultural land and used for agricultural purposes. At appellate stage, as per directions of the CIT(A), Certificate of Tehsildar was filed who has certified that at the time of acquisition of the land, the land was used for agricultural purposes. The assessee also produced Revenue record to show that land in question was used for agricultural purposes. Thus, sufficient material was produced on record to prove that at the time of acquisition of the land in question, the land was used for agricultural purposes. Thus, assessee satisfied the conditions of Section 10(37) of the Income Tax Act. Therefore, assessee’s income is exempt under the said provision - Decided in favour of assessee. Addition on commission payment - allowable business expenses - A.O. accepted 80% of the commission payment and disallowed 20% out of it - HELD THAT:- TDS have been deducted and commission agents have disclosed the commission income in their return of income. There is an increase in sales of the assessee in assessment year under appeal. The commission payment in the past have been accepted by the authorities below. It is also explained that on the same reason, the commission payment have been accepted in preceding A.Y. 2009-2010. These facts, therefore, clearly show that commission payment have been made to the Commission Agents who are unrelated parties and are identified. Genuineness of the commission payment is not doubted. Assessee proved that Commission Agents render services for business purpose of the assessee.- Decided in favour of assessee. Shortage in stock as found by RINL - A.O. noted that assessee is saddled with the consignment work as Agent (Handling Contractor) of RINL - proof of normal business transaction - HELD THAT:- The assessee has filed copy of the ledger account of the principal to show that there was opening balance in this account for the earlier year and that while settling the bills of the assessee for payment of handling charges, the principal has deducted amount in question from the final bill because of the normal shortage. The assessee is receiving handling charges and if during handling services principal has suffered loss on account of shortage and it has recovered from the assessee as is evident from the letter of RINL, the assessee would get a lesser payment. The amount in question have not been debited to the profit and loss account and has not been claimed as deduction by the assessee. Therefore, the same could not be disallowed by the A.O. since it is a normal business transaction and shortage is recovered by the Principal and is also confirmed by the Principal, therefore, A.O. should not have doubted the explanation of the assessee - Decided in favour of assessee.
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2019 (3) TMI 472
Levy of penalty u/s 271(1)(c) - A.O. framed ex-parte assessment order u/s 144 rejecting the books of account - N.P. rate determination at higher rate @12% - CIT(A) reduced the application of the net profit rate to 8% by excluding cost of material supplied and sales tax - HELD THAT:- It is well settled Law that provisions of Section 271(1)(c) are not attracted to a case where income of assessee is assessed on estimate basis and additions are made therein on that basis. In the present case, for non-production of books of account and the details, A.O. rejected the books of accounts under section 145(3) of the Income Tax Act and applied higher net profit rate at 12% against the contractual receipt to make the addition. However, the Ld. CIT(A) reduced the application of the net profit rate to 8% by excluding cost of material supplied and sales tax. Therefore, it is not a case of concealment of income or furnishing of inaccurate particulars. The assessing officer made estimated addition which is reduced by the Ld. CIT(A) substantially. Since no definite finding of fact have been given for concealment of income or furnishing inaccurate particulars of income and income is merely estimated, therefore, it is of view that penalty is not leviable - Decided in favour of assessee.
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2019 (3) TMI 471
Unexplained cash credit u/s 68 - share capital and share premium received by the assessee - high premium charged by the assessee - HELD THAT:- AO had lost sight of the fact that high premium charged by the assessee cannot be a ground for making the addition, because what section 68 of the Act, pre-supposes to charge to the Income Tax, is the sum found to be credited in the books of the asseseee if, (i) the nature and source of the same is not explained by the assessee, (ii) the explanation offered by the assessee is not found satisfactory by the AO. From the records, we observed that assessee had duly proved the above ingredients. Moreover, in the present case, the share premium was paid by two parties but the addition was made only in respect of one concern. Thus it can be concluded that AO had accepted the receipt of share premium in case of other concern. Assessee has discharged its onus by adequately disclosing the transaction in its books of accounts, filing statutory forms as regards allotment of shares, providing name, address and PAN of the shareholders, etc. the assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 of the Act and no addition can be made on this account. CIT(A) had passed a detailed order while relying upon various judgments cited by the parties and also considering the principles laid down in the case of Lovely Exports Pvt. Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] and moreover, no new facts have been brought on record before us in order to controvert or rebut the findings so recorded by CIT (A). Therefore, there are no reasons for us to interfere into or deviate from - Decided in favour of assessee.
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2019 (3) TMI 470
Bogus purchases and sub-contract labour expenses - notice u/s 133(6)were issued - did not respond as the notices and the same got returned unserved - certain discrepancies in the statements of parties no opportunity for cross-examination - HELD THAT:- The assessee has discharged the primary burden that is cast on it to prove the genuineness of these transactions. The Assessing Officer as well as the CIT(A), in our opinion, have not come out with irrefutable proof to negate the evidences submitted by the assessee. It is not the case of the revenue that the standard operating procedure laid down by the assessee’s head office was violated by the site office nor that the procedure and documentation was not correct . The entire disallowance is made on suspicion and probabilities. These cannot take the place of evidence. Under these circumstances, we uphold the contentions of the assessee and delete the addition made herein. Disallowance of deduction claimed u/s 80-IA - CIT(A) followed order of ITAT in assessee own case and allowed claim - HELD THAT:- In view of the above discussion, we respectfully follow the proposition of law laid down by the co-ordinate bench of the ITAT in the assessee’s own case [2017 (3) TMI 1050 - ITAT KOLKATA] on the very same issue and uphold the order of the ld. CIT(A) that the assessee is eligible for deduction u/s 80-IA of the Act. As decided in assessee's own case the projects from Serial No. 1 to 2 have been considered as eligible projects for claim of deduction u/s 80-IA(4) by the Tribunal in the earlier Assessment Years. Only in the case of Kolkata Metro Rail Corporation at S. No. 7 and Bangalore Development Authority at S. No. 8, the projects were not considered earlier as to whether they are projects on which the assessee is eligible for deduction u/s 80-IA of the Act. On a query from the Bench, the assessee submitted that the details of the duties and responsibilities of the assessee company as a contractor have been place in the paper book. In our view, this needs to be examined by the Assessing Officer as the Assessing Officer has not considered the same. For the earlier Assessment Years 2011-12 & 2012-13, this Bench of the Tribunal under similar circumstances has restored four projects to the file of the Assessing Officer for examining whether they fall within the ken of exemption u/s 80-IA of the Act. As Consistent with the view of the Tribunal in the earlier Assessment Years, we set aside the issue of grand of deduction u/s 80-IA(4) of the Act, to the Assessing Officer, on the following projects:- Kolkata Municipal Corporation and Bangalore Development Authority. As regards deduction claimed on all other six projects at S. No. 1 to 6 in the table above, we uphold the order of the ld. CIT(A). Disallowance made u/s 14A - HELD THAT:- Hon’ble ITAT Kolkata in the case of REI Agro Ltd. vs. DCIT, [2013 (9) TMI 156 - ITAT KOLKATA] to restrict the disallowance u/s 14A of the Act, to ₹ 55,565/-. As the ld. CIT(A) has applied the decision of the Jurisdictional Tribunal, which was later upheld by the Hon’ble High Court we find no infirmity in the same
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2019 (3) TMI 469
Deduction u/s 80P(2)(a)(i) - interest earned from deposits with nationalized bank - treatment as income from other sources - HELD THAT:- Identical issue on denial of claim of deduction u/s 80P of the Act on the interest earned from deposits from banks arose in the case of Swa Ashokrao Bankar Nagar Sah. Patsanstha Maryadit [2017 (5) TMI 1655 - ITAT PUNE] wherein following the order of the Tribunal in the case of ITO Vs. Niphad Nagari Sahakari Patsanshta Ltd [2015 (1) TMI 1004 - ITAT PUNE] and other decisions, decided the issue in favour of the assessee.
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2019 (3) TMI 468
Claim of deduction u/s 80IA denied - infrastructure development activity for Windmill - it takes land on lease from MIDC or purchases land on its own and sub–leases them for Windmill - develops other infrastructure for filling roads, fencing and other activities- laying transmission line/network of various windmills to the sub–stations of Maharashtra State Electricity Board (MSEB) - AO alleged that assessee itself was not setting–up windmills - HELD THAT:- Commissioner (Appeals) allowed assessee’s claim following the view taken by the learned Commissioner (Appeals) while deciding assessee’s appeals in assessment year 2002–03, 2006–07 and 2007–08. Disallowance of project expenses - assessee did not furnish the complete details of the project expenses, thus the genuineness of such expenses could not be verified - HELD THAT:- Since the issue relating to claim of various expenditure under the head project expenses is a purely factual issue and has to be decided on the basis of facts involved in each assessment year and the supporting evidences furnished by the assessee, it cannot be allowed without factually verifying the claim of the assessee and by simply relying upon the written submissions and the preceding years orders. Since, in our considered opinion, the deduction claimed by the assessee under the head project expenses has not been factually verified with reference to the supporting evidences justifying such claim, we are inclined to restore the issue to the file of the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee and examining the supporting evidences furnished/to be furnished by the assessee.
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2019 (3) TMI 467
Addition u/s 41 - outstanding expenses - remission/cessation of liability - assessee had failed to prove the genuineness of liability - assessee had obtained a benefit either in cash or in any form in respect of such liability - HELD THAT:- It is an undisputed fact that the said liability is continuing in the books of account of the assessee for a long period without being paid by the assessee. Expenses have been claimed by the assessee in earlier years and are continuing unchanged till the impugned assessment year. But the disallowance was made by holding that assessee had failed to file confirmations and no payments have been made for years together. AO accepts that the liabilities were created in the earlier years, then the genuineness of such transactions have to be examined in those assessment years and not in assessment year under consideration. Reading of the provisions of section 41(1) we are of the view that before treating the amount outstanding as deemed income of the assessee u/s 41(1) on account of remission/cessation of liability, the AO is duty bound to examine whether the condition laid down u/s 41(1) are fulfilled or not. Remission or cessation of liability is also acceptable by unilateral act of writing off such liability in its account by the person showing such liability. Therefore, before applying the provisions of section 41(1), it is necessary to establish on record that the assessee had obtained a benefit either in cash or in any form in respect of such liability in the relevant previous year. Thus, when in AO’s own admission liability continued from past so many years, then what prompted the AO to conclude that the assessee has obtained benefit in respect of such liability in the impugned assessment year must be clearly brought on record. In the absence of any material to establish that the assessee had obtained any benefit in respect of the liability in the impugned assessment year, so merely on the basis of surmises and assumptions it cannot be said that there is remission/cessation of liability in the impugned assessment year. Addition u/s 41 to be deleted - Decided in favour of assessee.
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2019 (3) TMI 466
Eligible u/s 54 and 54F - alleged that on the date of transfer of Dhruv Malad Building, the assessee was owner of more than one residential house other than the new asset - complete rights in the property vests with the owner only when he receives possession of the said property - HELD THAT:- The duty of the AO is to correctly compute the real income of the assessee in accordance with the statutory provisions. AO is empowered to disallow any deduction claimed by the assessee if it is not in accordance with provisions of Act, in the same manner, he is duty bound to allow deduction to the assessee if the assessee is eligible for such deduction under the provisions. Since the capital gain arises from sale of residential house, the assessee is eligible to claim deduction under section 54. That being the case, the restrictions imposed under the proviso to section 54F(1) will not apply to the assessee. Therefore, we do not feel the necessity to deliberate on the issue whether the property at Vapi is a residential or commercial building. No infirmity in the decision of Commissioner (Appeals) in this regard. Having held so, now it is necessary to examine whether the investments made by the assessee in the new assets (flats) would qualify for deduction u/s 54 of the Act. AO while disallowing assessee’s claim has observed that mere letters issued by the real estate development company allotting flats to the assessee does not confer ownership rights, hence, assessee cannot be considered to be the owner of the flat to claim deduction. However, in our considered opinion, once the assessee makes investment in purchase of flats and flats are allotted in its name, the conditions of section 54 of the Act are satisfied. The materials placed on record clearly prove that not only the flats were allotted to the assessee in the impugned assessment year but the sale deeds relating to the flats purchased were executed and registered in favour of the assessee before the end of the financial year relevant to the assessment year under dispute. That being the case, the investments made by the assessee in purchase of flats is within the period prescribed under section 54(1) of the Act. Therefore, the assessee is eligible to claim deduction under section 54 of the Act in respect of the investment made in purchase of new flats. - Decided against revenue.
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2019 (3) TMI 465
Addition u/s 68 - Unexplained credit-sundry creditor - proof of bogus corresponding sales - HELD THAT:- There is hardly any dispute that this assessee is a wholesale dealer / trader in various electrical items and appliances such as water pumps, fans, coolers, gesysers, home appliances etc.,. It transpires during the course of hearing that neither of the lower authorities has rejected assessee’s corresponding sales nor have they treated assessee’s purchases to be bogus. They simply hold the corresponding parties as bogus sundry creditors. DR fails to dispute that if the corresponding sales and purchases are treated as genuine, the very course of action has to be followed regarding creditors parties in issue in order to avoid inconsistency.We therefore reverse the impugned addition in principle on this count alone. Assessee failure to prove its relevant parties to be genuine - as contended lower authorities have accepted sales of the corresponding items and all this sufficiently proves assessee’s purchases to be genuine - HELD THAT:- We find no substance in assessee’s instant argument as it is assessee’s bounden duty to prove of the purchases in issue by way of leading cogent evidences. The fact also remains whole of the assessee’s purchases cannot be treated as bogus since corresponding sales have already been accepted. We hold in these peculiar facts and circumstances that the impugned purchases deserve to be disallowed @ 12.5% only. We therefore direct the Assessing Officer to restrict the impugned disallowance of ₹1,10,17,324/- to the extent 12.5% thereof only in consequential computation. This former substantive ground is partly accepted in above terms. Capital gains addition - treating assessee’s agricultural land sold to be a capital asset - AO completed his best judgment assessment u/s. 144 - HELD THAT:- The assessee could not produce all the relevant details in the lower appellate proceedings as well. We reiterate that we have already restored the former issue back to the Assessing Officer with specific directions. We therefore deem it appropriate that larger interest would be met in case the Assessing Officer adjudicate the instant issue afresh as per law after affording three effective opportunities to the assessee. This latter substantive ground is accepted for statistical purposes.
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2019 (3) TMI 464
Bogus LTCG - unexplained cash credits u/s 68 - HELD THAT:- There is no dispute that assessee having derived her LTCG on transfer of shares held in M/s Kailash Auto Finance Ltd. Learned Departmental Representative fails to dispute that very issue stands adjudicated in assessee’s favour in co-ordinate bench’s decision in SANJEEV GOEL (HUF) VERSUS INCOME TAX OFFICER, WARD-45 (3) , KOLKATA [2018 (8) TMI 1747 - ITAT KOLKATA] Revenue fails to indicate any specific evidence against the assessee in above terms qua his LTCG derived from transfer of share in Jackson Investments Ltd. Therefore adopt the above extracted reasoning mutatis mutandis to delete the impugned bogus LTCG addition. Same order to follow in all remaining twelve cases as well since notice that there is no specific evidence co-relating these assessee with any kind of rigging of share price. All these impugned LTCG/losses addition(s) are reversed in these fact and circumstances. - Decided in favour of assessee.
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2019 (3) TMI 463
Unaccounted cash in hand - search proceedings - HELD THAT:- Assessee have successfully demonstrated with the help of the statement given during the course of search about this relation with these persons, source and bifurcation of cash belonging to these persons and their confirmation letters that sum of ₹ 95,000/- (Rs.30,000 + ₹ 50,000 + ₹ 15,000) belonged to these persons and not to the assessee. As regards the sum claimed to be owned by the assessee’s wife Smt. Vandana Sharma, revenue failed to rebut the contentions of the Ld. Counsel for the assessee that in the case of Smt. Vandana Sharma the Ld.A.O has accepted the cash flow and cash in hand at ₹ 1,52,144/- on the date of search and in such circumstances addition in the hands of the assessee as unexplained cash is devoid of any merits and is uncalled for. As regards the remaining sum of ₹ 3,17,000/- is concerned the assessee has filed the cash flow statement. No defect have been appointed out by the lower authorities in the cash flow statement. It is also brought to the notice that assessee has withdrawn ₹ 7 lakhs from his savings bank account held with State Bank of India on 30.04.2009. CIT(A) has also appreciated this fact in his findings. In this given facts and circumstances of the case, in our considered view cash in hand at ₹ 3,17,000/- also stands explained by view of cash flow statement filed by the assessee. In the result order of CIT(A) deserves to be set aside and the addition of ₹ 5,62,000/- for unaccounted cash in hand needs to be deleted. - Decided in favour of assessee.
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2019 (3) TMI 462
Transfer pricing adjustment - ALP determination - profit attributable to India - assessee a foreign company is a tax resident of Hong Kong - income accrued in India - MAM selection - HELD THAT:- If the provisions of section 9 is read as a whole, it would be very much clear that as per Explanation 1 to section 9(1)(i) of the Act, in case of an assessee whose business operations are not exclusively carried out in India, the amount of income which will be deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. The income which is deemed to accrue or arise in India must have a territorial nexus. It is well settled position of law as per the various judicial precedents including the decisions cited before by the Sr. Counsel, agency / marketing commission paid to non–residents agent outside India and for services rendered outside India is not taxable in India. Moreover, if one carefully reads the provision contained in Explanation below section 9(2) of the Act, it will be very much clear that it will not be applicable to the agency commission earned by the assessee. Therefore, in principle, we agree with the contention of the assessee that income accruing or arising outside India would not be taxable under the Act. It is the case of the Department that the assessee itself has admitted that the profit attributable to India is Rs. ₹ 252,59,62,559. Contesting the aforesaid finding of the TPO and the DRP, the learned Sr. Counsel for the assessee has submitted that the profit attributable to India. For demonstrating such fact, he has heavily relied upon the transfer pricing study report filed before the Transfer Pricing Officer. However, since the actual profit attributable to India is a purely factual issue which has to be demonstrated by the assessee through proper documentary evidences / books of account, for the limited purpose of verifying this fact, we are inclined to restore the issue to the AO to examine assessee’s claim. In the event, the claim of the assessee that actual profit attributable to India is ₹ 227,80,28,141, is found to be correct, no further adjustment can be made to the arm's length price since the Transfer Pricing Officer himself has concluded that the profit margin of the international transaction shown by the assessee is higher than the average margin of the comparables. Since, there is no dispute between the parties with regard to the most appropriate method selected by the assessee as well as profit margin shown and the dispute is only with regard to the factual issue relating to the actual profit attributable to India under PSM, we do not found it necessary to deal with the contention raised by the learned Sr. Counsel regarding the power of the Transfer Pricing Officer to determine the profit attributable to India. With the aforesaid observations, these grounds are allowed for statistical purposes. Decision of the departmental authorities in bringing the royalty income to tax @ 42.23% instead of 21.115% - HELD THAT:- We find that while dealing with identical issue in assessee’s own case in assessment year 2007–08 the Tribunal [2016 (2) TMI 836 - ITAT MUMBAI] has restored the issue to the Assessing Officer with the following direction:– “26. So far as issue raised vide ground 7 and 8, the assessee has challenged the taxation of service fee income @ 41.82% on the gross basis as against applicable @ 10.455% on gross basis. We direct the AO to apply the correct tax rate in accordance with section 115A and examine the contention of the assessee that tax rate of 10.45% and 20.91% should be applied.” Facts being identical, we direct the Assessing Officer to decide the aforesaid issue following the directions of the Tribunal as referred to herein above. This ground is allowed for statistical purposes. short grant of TDS credit - Held that:- We direct the Assessing Officer to verify assessee’s claim and grant credit for actual TDS. Levy of interest under section 234C - HELD THAT:- It is the contention of the learned Sr. Counsel for the assessee that since the assessee is a non–resident and liability was cast upon the payer to deduct tax at source while making the payment, interest cannot be charged under section 234C of the Act for failure to pay installments of advance tax. In this context, he has relied upon the decision in DIT v/s NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]. We find substantial merit in the aforesaid submissions of learned Sr. Counsel. Accordingly, we direct the Assessing Officer to decide the issue of levy of interest under section 234C of the Act by following the ratio laid down by the Hon'ble Jurisdictional High Court in NGC Network Asia LLC (supra), this ground is allowed for statistical purposes.
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2019 (3) TMI 461
Reopening of assessment - capital gain - transfer of property as per section 2(47)(v) - CIT(A) allowed the appeal of the assessee by taking new amendment brought in by the Finance Bill 2017 and directed the AO to tax the capital gains in the year of completion of project - HELD THAT:- CIT(A) has verified the current status of the project and finds that it is still in incomplete stage and has uncertainties prevailing on completion of the project. It clearly shows that there is no reasonable certainty in the project completion. We notice that AO by considering the first JDA, intends to tax on the capital gains in the ratio of 50:50, when the same was renegotiated to 38.5:61.5 ratio. The ratio has changed and new developer has taken over the responsibility of completion of the project. The basic terms have undergone change due to revision of JDA on 06/11/2012. From the above discussion, it is clear that the possession of the land was handed over to the developer with the right of ownership as de-facto and not dejure. The transfer in the ownership has not passed on to the developer until the developer undertakes to complete the project as per the terms or at least 90% of the project has to be complete or to the satisfaction of the parties involved in the agreement. In the given case, there is no possibility of completing the project in certainty. Considering the uncertainties and that no real development activities were carried on by the developer in AY 2009-10, in our considered view, there is no incidence of transfer of property as per section 2(47)(v) in the AY 2009-10. Therefore, AO cannot tax the capital gains in AY 2009-10. Accordingly, ground raised by the revenue in this regard, is dismissed. Proceedings u/s 153C - AO has initiated proceedings u/s 147 after forming an independent opinion with regard to escapement of income on the basis of receipt of information from AO of the searched person communicating after the CIT(A)’s order and not on the basis of receipt of seized document - HELD THAT:- As far as this assessee is concerned, since the incriminating material was found during the search, the provisions of section 153C(2) applies. The revenue has to invoke only section 153C(2) even after receipt of information from the AO of the searched person even after direction of CIT(A)’s order, provided they follow the due procedure as per section 153C. Therefore, resorting to initiation of proceedings u/s 147 is not proper and void ab-initio. Contention of the revenue that section 153C is not attracted because AO who was having jurisdiction over the searched person did not form satisfaction required as per the said provisions to transfer the related material as he was of the opinion that the entire capital gains had arisen in the hands of the assessee on whom he was having jurisdiction and assessed accordingly. Therefore, section 153C not attracted. We are not in a position to accept this proposition as the liability arises on the assessee only because of incriminating material found during search. The procedure laid down for the purpose of search and seizure has to be followed otherwise, the purpose of section 153A, 153B and 153C is defeated. The provision relevant to search requires the AO of the searched person to record satisfaction and he forms the wrong satisfaction, it fails there itself. Further, as per section 153C, not only AO of the searched person but AO of the other person to whom the incriminating material allegedly belongs also has to form satisfaction before initiating proceedings u/s 153C. It cannot be compensated by invoking section 147 as the mandate of section 147 is different. Since, the liability of assessee arises only because of search proceedings, proceedings u/s 153C alone can be initiated. Therefore, we uphold the order of CIT(A) on this issue and dismiss the ground raised by the revenue accordingly.
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2019 (3) TMI 460
TP adjustment - comparable selection - functinal dissimilarity - broadcasting companies are not comparables with content producers like assessee - FAR analysis of content producer and broadcasting companies - HELD THAT:- we are of the view that the media content and TV broadcasting are totally dissimilar activities except the only linkage is that of media content is made only for the purpose of broadcasting on the TV channels. Production of media content is one of the functions of the assessee while broadcasting is the function of its AE and hence, due to functional divide & due to this aspect, this is the prime reason for entering into international transaction by the assessee with its AE. Hence, the activity of producing content and broadcasting the content is altogether different and not at all comparable. Even investment requires for making same content is very less compared to investment required for carrying out the broadcasting activity. Hence, on economic factor, functional analysis and the activities, these two are entities are dissimilar and cannot be compared. Hence, the CIT(A) has rightly directed the AO/ TPO to exclude the broadcasting companies taken by Revenue and by assessee while comparing the two. Inclusion of creative Eye Limited as comparables - HELD THAT:- We find that the Creative Eye Limited is functionally similar to the assessee company reason being it is also engaged in production of film production that is why is functionally same with the assessee. Even otherwise, in this year only, the loss is made by Creative Eye Limited due to loss of volume because of competitive pressure on account of production of 3D film ‘Abra Ka Dabra’. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. This issue of Revenue’s appeal is dismissed. Transfer Pricing adjustment made on account of income from distribution i.e. distribution Revenue (payment segment) - selection of MAM - CUP v/s TNMM - HELD THAT:- We find that the assessee while making transfer pricing study under Cup Method, which is direct method available to the assessee and assessee has used the proper and scientific data which is available for comparison. But the TPO applied TNMM method for computing Arms Length Price without any basis just on the basis of search conducted on Google and comparing the data with cable TV operators. The assessee is consistently following the CUP method for benchmarking the transaction with its AE’s and for which scientific and correct data is available. TPO or the AO has not pointed out any ambiguity in the data supplied by the assessee for benchmarking the Cup Method in the TP study. The AO applied TNMM method which is without any data or any basis. Hence, we are of the view that the CIT(A) has rightly deleted the adjustment and we confirm the same. Adjustment made to the reimbursement of advertisement and sale promotion expenses - HELD THAT:- Assessee has not availed any specific manpower for this purpose and existing manpower of the assessee has carried out for the incidental activity. In this process, the assessee also received indirect benefit in the shape of increased market development, as a result of major advertisement and sales promotion costs. Such costs will increase the viewership of the channel which will in turn result in higher income for the assessee in term of increase sales and distribution of adds receipt on the channels. Hence, according to us, no further expenditure has been incurred by assessee and consequently no further reimbursement was made by the assessee and hence, no markup can be added. Hence, we confirm the order of CIT(A) deleting the addition. This appeal of Revenue is dismissed. Disallowing of advertisement and sale promotion expenses as incurred for assessee’s own business - HELD THAT:- The issue is squarely covered by Tribunal’s decision in assessee’s own case as held assessee was in the business of acting as advertising sales agent in India and as the assessee was to receive a percentage of advertising revenue received in India as its commission, it was in the business interests of the assessee to incur advertisement and sales promotion expenditure so that there is increased advertisement revenue which in turn would entitle the assessee to receive increased commission. Accordingly, the expenditure claimed by the assessee was allowed as business expenditure. - Decided against revenue
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2019 (3) TMI 459
TP adjustment - addition of Advertisement, Marketing and Promotion ('AMP') expenses - agreement of assessee with its AE descries about right of distribution of licensed product in the territory - HELD THAT:- Though the AE has reserves its right for the zones of excluded areas. The contentions of the ld. AR for the assessee is that clause 8 of the agreement does not obligates the assessee to incur expenses on AMP so as to promote the brand owned by its AE s. And that the expenses are incurred by assessee in the normal course of its business. The perusal of the clause 7 and 8 reveals that there is no agreement between the assessee and the AE s for sharing the expenses and the payments made by the assessee for the expenses of AMP. TPO has also not brought any fact on record that there exist any agreement between the assessee and its AE to share or reimburse the AMP expenses. Moreover, we have seen that there is no material change in the facts for the year under consideration. Therefore, considering the above factual discussions and the decision of the coordinate bench of Tribunal for AY 2008-09 to 2010-11,[2016 (5) TMI 1379 - ITAT MUMBAI] on the identical issue the ground No.2 to 21 of the appeal is allowed. Adjustment on account of payment of Royalty and technical knowhow - HELD THAT:- Both the parties have made their exhaustive submission on the issues under consideration, however, on careful perusal of the order of Tribunal for Assessment Year 2011-12 we find that the identical issue has been restored to the file of DRP. Therefore, in all fairness we deem it appropriate to restore these grounds to the file of ld. DRP to decide the issue afresh. Needless to say that before deciding the issue afresh in accordance with law, the assessee shall be granted sufficient opportunity of hearing. The assessee is given liberty to raise all their submission before the DRP, including the argument that for assessment year 2015-16 the transfer pricing officer has accepted the payment of royalty on use of license trademark at 1.75% without making any adjustments.
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2019 (3) TMI 458
TDS u/s 195 - payments made to Deere & Co. USA on account of for software license fees and IT support services - income accrued in India - default u/s 201(1) and 201(1A) - assessee was one of the permitted users by Deere & Co. of the aforesaid software - whether payments were liable to tax as Royalty / FTS as per section 9(1)(vi) & 9(1)(vii) of the Act as well as Article 12 of the Double Taxation Avoidance Agreement (DTAA) between India and USA? - amended definition of ‘royalty’ under the domestic law - HELD THAT:- Purchase of software by the assessee being copyrighted article is not covered by the term ‘royalty’ under section 9(1)(vi) of the Act. Where the assessee did not acquire any copyright in the software, is not covered under Explanation 2 to section 9(1)(vi) - amended definition of ‘royalty’ under the domestic law cannot be extended to the definition of ‘royalty’ under DTAA, where the term ‘royalty’ originally defined has not been amended. As per definition of ‘royalty’ under DTAA, it is payment received in consideration for use or right to use any copyright of literary, artistic or scientific work, etc.; thus, purchase of copyrighted article does not fall in realm of ‘royalty’. We also hold that since the provisions of DTAA overrides the provisions of Income Tax Act and are more beneficial and the definition of ‘royalty’ having not undergone any amendment in DTAA, the assessee was not liable to deduct tax for payments made for purchase of software. In such scenario, the assessee cannot be held to be in default and the demand created under section 201(1) and interest charged under section 201(1A) of the Act is thus, cancelled. Payment with regard to provision of IT support charges i.e. internet charges, use of e-mail charges, backup support services, etc. was held to be ‘royalty’ - HELD THAT:- The terms of DTAA between India and Australia and India and USA are similar and applying the said ratio to the facts of present case, we hold that the amount paid by assessee for internet charges, use of e-mail facility and backup support services is not ‘royalty’ under Article 12 of DTAA between India and USA and is also not ‘royalty’ under section 9(1)(vi) of the Act. The assessee has filed breakup of expenses accordingly, we hold that internet charges paid, line charges, service charges and other charges i.e. VPN charges, online meeting charges, etc. of ₹ 22,94,256/- are not payment of ‘royalty’ and are not even for make available of any technical services and hence, there was no requirement to deduct tax at source out of such payments. In the said breakup, the assessee has also pointed out that software charges paid were to the tune of ₹ 4,22,73,399/-, which we have already held in the paras hereinabove, not liable for deduction of tax at source. Payment on account of lease line charges and non deduction of tax at source - HELD THAT:- As in ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. VERSUS DIRECTOR OF INCOME-TAX [2011 (1) TMI 47 - DELHI HIGH COURT] held that there was no lease of equipment but only use of broadband facilities and applying the said ratio to the facts of present case, we hold that in the case of assessee, there is no question of any equipment royalty where the assessee was only using lease lines for transmitting data and it cannot be said to be a case of equipment royalty. Applying the said propositions to the facts of present case, we hold that the assessee has not defaulted in non deduction of tax at source out of payments made for lease line charges. We also uphold the alternate plea of assessee that the said lease line charges are at best reimbursement of expenses and hence, not liable for deduction of tax at source. Training fees paid to Deere & Co - DTAA between India and USA - default for non deduction of tax at source on charges paid to Deere & Co. on account of reimbursement of salary of expat employees - HELD THAT:- As decided in VEEDA CLINICAL RESEARCH (P.) LTD. [2014 (1) TMI 886 - ITAT AHMEDABAD] where the onus was on Revenue authorities to demonstrate that these services too involve any transfer of technology and since that onus was not discharged, then the payment was not covered by the definition of ‘Fees for Technical Services’. The facts of the said case are similar to the facts before us, wherein training availed by employees of assessee were web based services available on internet and no technical knowledge was being imparted by service provider and the Revenue has failed to demonstrate that the services did involve transfer of technology and in the absence of same, it cannot be said to be payments in the nature of Fees for Technical Services. Applying the said ratio, we hold that there was no liability upon the assessee to deduct tax at source on the aforesaid payments and hence, assessee cannot be held to be in default under section 201(1) and 201(1A) Reimbursement of salary of expat employees - HELD THAT:- Where the Hon'ble Supreme Court has only dismissed SLP, then no ruling on principle being laid down by the Apex Court, the proposition laid down by the jurisdictional High Court of Bombay in MARKS & SPENCER RELIANCE INDIA PVT. LTD. [2017 (5) TMI 1638 - BOMBAY HIGH COURT] would rule. Accordingly, we further hold that the assessee having deducted tax at source out of salary paid to employees deputed, has not defaulted under section 201(1) / 201(1A) of the Act. The grounds of appeal of assessee allowed.
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2019 (3) TMI 436
Reopening of assessment - non complying with the mandatory conditions of section 147 to 151 and without recording valid reasons as per law - HELD THAT:- Assessee appeared on 12.8.2015 and stated that original return filed by the assessee may be treated the return of income filed in response to the notice u/s. 148 of the Act, but on the same date the AO given the notices to the assessee i.e. 12.8.2015 u/s. 143(2) which shows non-application of mind on the part of the of the AO. Therefore, notice under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed. Accordingly, set aside the orders of the authorities below and quash the reassessment proceedings in the matter and allow appeal of assessee.
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Customs
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2019 (3) TMI 457
Seizure of contraband Gold - whether seized goods or not - confiscation - burden of prove - section 123 of CA - Held that:- In case of seizure of gold, even without markings, the burden is upon the person, who has custody of the gold, under Section 123 of the Act, to prove that the gold was legally acquired. The statement recorded under Section 108 of the Act could be safely relied upon in the proceedings against respondents. The unmarked gold recovered from the possession of two persons and their statements as to the source of the gold was sufficient to have a reasonable belief that the gold is smuggled. The two persons who were carrying the gold had nothing in their possession to prove the legitimacy of the gold they carried. The fact that the gold bars and pieces did not have any marking on them is suspicious and it points to a concerted effort to erase the markings on them. The burden under Section 123 which is only of a reasonable belief; is effectively discharged by the Department who initiated action on the basis of the seizure and the recorded statements of the detained persons. The mere fact that the interception and seizure was not affected in an international border or near an airport or seaport is irrelevant, since the statements of the intercepted persons clearly indicate that they were asked to avoid such means of transport and stick to the normal modes of public transport. The assertion was that the gold found on the two employees were that purchased by the Company at Mumbai; which details are available in the registers maintained by the Company. The stock of refined gold and gold ornaments as seen from the stock register produced at the time of investigation substantially varied from the abstracts of the stock registers produced before this Court, where Om Prakash Khatri approached for anticipatory bail. The explanation offered for the anomalies was that some gold possessed by sales men were not accounted for. This clearly belies the veracity of the registers produced in the course of investigation. The Tribunal was not justified in upsetting the findings of the first appellate authority - appeal allowed.
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2019 (3) TMI 456
Validity of Pre-import conditions - Exemption from integrated tax and GST compensation cess - benefit of N/N. 18/2015- Cus - Import against Advance Authorisation - Duty Exemption/Remission Schemes - pre-import conditions - Held that:- Held that:- A similar controversy was raised before this court in the case of M/s Maxim Tubes Company Pvt. Ltd. v. Union of India [2019 (2) TMI 1445 - GUJARAT HIGH COURT], where this court has allowed the petitions and has struck down the “pre-import condition” contained in paragraph 4.14 of the Foreign Trade Policy, 2015- 2020 inserted vide Notification No.33/2015-2020 dated 13.10.2017 and clause (xii) in Notification No.18/2015-Cus inserted vide Notification No.79/2017-Cus dated 13.10.2017 as being ultra vires the Advance Authorisation Scheme as contained in the Foreign Trade Policy, 2015-2020 as well as the provisions of the Handbook of Procedures and has further held that consequently, all proceedings initiated for violation of “pre-import condition” would no longer survive. The “pre-import condition” contained in paragraph 4.14 of the Foreign Trade Policy, 2015- 2020 inserted vide Notification No.33/2015-2020 dated 13.10.2017 and clause (xii) in Notification No.18/2015-Cus inserted vide Notification No.79/2017-Cus dated 13.10.2017, is hereby struck down as being ultra vires the Advance Authorisation Scheme as contained in the Foreign Trade Policy, 2015-2020 as well as the provisions of the Handbook of Procedures. Petition allowed.
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2019 (3) TMI 455
Valuation of imported goods - enhancement of value of imported goods - main ground raised is that the respondent had given his written acceptance of the enhanced values and thereby has forgone his right to speaking order under Section 17(5) of the Customs Act - Held that:- Section 14 of the Customs Act, 1962 read with Customs Valuation Rules makes it abundantly clear that transaction value in the ordinary course of commerce is to be taken as the assessable value. The Customs Valuation Rules outlines the step by step methodology to be adopted for re-determination of the assessable value in certain cases. The primary requirement for re-determination of the value is that the transaction value should be rejected for cogent reasons prescribed in the Customs Valuation Rules. If the transaction value is rejected, then the Customs Valuation Rules prescribes the basis for arriving at the assessable value. Perusal of the records of the case indicates that the only reason cited reason for re-assessment of value is that the respondent has accepted the enhanced value. No doubt acceptance of the enhanced value in writing waives the requirement of the issue of speaking order under Section 17(5) ibid. However, the requirement of Section 14 and the Customs Valuation Rules need to be satisfied for enhancement of value. Nothing is forthcoming in the record of the case from which the basis for such re-assessment can be made out. Also, in spite of the admission on behalf of the importer, the Revenue is required to satisfy the requirements prescribed under Section 14 of the Customs Act read with Customs Valuation Rules before any enhancement of valuation. The matter is required to be remanded to the Original Assessing Authority for sharing the basis for such re-assessment with the importer - appeal allowed by way of remand.
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2019 (3) TMI 454
Principles of natural justice - imposition of penalty on the co-noticee/appellant - case of Revenue is that appellant has been observed to be associated with Deepak Rishi @ Rajesh And Hemant Sachdeva for the noticed stuffing and custom clearance of the container No. KKTU 7808312 mis-representing himself as G-Card holder - Held that:- Girish Kumar himself in his statement under Section 108 of Customs Act, 1962, as was recorded on 15.10.2012 has acknowledged him to be the employee of Deepak Rishi @ Rajesh Hemant Sachdeva and about signing the impugned shipping bill. But this evidence though highlight the guilt of Deepak Rishi for whom the appellant was working but is highly insufficient to prove any act of present appellant of conspiracy with said Deepak Rishi for the stuffing of red sanders in the impugned assignment except for being the latter s employee Without the evidence to prove the intent of appellant about the impugned stuffing and no knowledge for bill of entry, as signed by him, to be false. Liability cannot be fastened on him. Mere signing of bill that too in the capacity of being employee is not sufficient to prove gravest of allegations of improper export. The malafide cannot be attributed to Girish Kumar unless and until proved beyond reasonable doubt. Same is miserably missing. The Order of adjudicating authority as far as the imposition of penalty upon Girish Kumar appellant is concerned is opined to be based on mere presumptions, conjectures and surmises - penalty set aside - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 453
Refund claims - price variation clause - transaction value determined after importation due to annual discount/quantity rebate, determined after end of the contract period - rejection on the ground that the assessments are final and as such, refund claims are not maintainable - Held that:- Tribunal in the case of Commissioner of Customs (Export) New Delhi Vs. Lalit Kumar [2017 (1) TMI 7 - CESTAT NEW DELHI] has held that refund claim of the appellant was maintainable under Section 27 of the Customs Act and the non-filing of the appeal against the assessed bill of entry does not deprive the appellant to file its claim for refund under Section 27 of the Customs Act, 1962 - refund allowed - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 452
Imposition of redemption fine - import of copper scrap druid - mis-declaration of description and value alongwith direction for re-export within three months - CBEC Circular No. 401/101/2011-Cus. III dated 22.06.2011 and JNCH Public Notice No. 94/2011 dated 07.07.2011 - Held that:- Admittedly appellant has not been in possession of any licence issued by the Central Pollution Control Board and the goods imported by it has been mis-declared. The plea of appellant that both the copper and aluminium are insulated for which it was difficult for it to distinguish the goods is not acceptable for the reason that no supplier would supply a high priced goods against an order of less priced goods for which the order passed by the Commissioner (Appeals) in imposing penalty for mis-declaration needs no interference. It is also an admissible fact that copper scrap druid are not absolutely permitted for import and these import is regulated by the licence to be issued by the Central Pollution Control Board , which appellant did not have at the time of import but going by the CBEC Circular and Public notice, such goods can be cleared for home consumption to the interested buyer with approval of the importer - the goods can be cleared to the intended buyer in possession of such licence upon execution of bonds by the appellant and payment of redemption fine as directed by the Commissioner (Appeals). Appeal alowed in part.
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Insolvency & Bankruptcy
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2019 (3) TMI 451
Jurisdiction of Adjudicating Authority to decide the claim or counter claim - Initiation of Corporate Insolvency Resolution Process - Material belonging to the Corporate Debtor - direction to Corporate Debtor to hand over custody of the Materials - restraining Insolvency Resolution Professional from alienating and/or creating any third-party interest in the Materials - Held that:- Sub-section (5) of Section 60 empowers the National Company Law Tribunal (Adjudicating Authority) to entertain or dispose of any application or proceeding by or against the Corporate Debtor or Corporate Person; any claim made by or against the Corporate Debtor or Corporate Person including claims by or against any of its subsidiaries situated in India; apart from any question of priority or any question of law and facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor or corporate person under the code - From sub-section (6) of Section 60 it is clear that after period of moratorium, a suit or application can be filed against the Corporate Debtor for which an order of moratorium has been made under the Part II and in such case, the period during which such moratorium is in place shall be excluded for the purpose of counting the limitation. In the present case the dispute relating to claim and counter claim as made by one or other parties, is brought to our notice by the Resolution Professional. The Resolution Professional while held that the material belongs to the Corporate Debtor, apart from the Appellants, other parties have also made claim that the same very material belongs to them. As the claim is not against the Corporate Debtor or its subsidiaries but includes inter-se claim for the same very material, such dispute cannot be decided by the Adjudicating Authority under Sub-section (5) of Section 60 of the I&B Code. It is only after completion of the period of moratorium and it is finally decided that the material belongs to the Corporate Debtor and order is accordingly passed, it is open to the persons to file a suit before appropriate forum claiming right and title over the material in question and for filing such suit claiming right over the material the moratorium period has to be excluded for the purpose of counting the period of limitation. The Adjudicating Authority has no jurisdiction to decide the claim or counter claim with regard to the parties - Appeal dismissed.
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Service Tax
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2019 (3) TMI 450
Demand of service tax - Management, Maintenance and Repair and Erection, Commissioning and Installation Services - case of assessee is that the services, during the relevant period, were provided to various government authorities under their work order and as such the same were exempted for payment of service tax in terms of Entry No.12 of the Mega Exemption Notification No.25/2012-ST dated 20.06.2012 - Held that:- The adjudicating authority has itself recorded in the order that appellant has carried out maintenance and repair works which does not only include electrification hence, there is no reason for denying exemption to the appellant as they are undoubtedly repair and maintenance of civil structures meant predominantly for use other than for commerce, industry, or any other business or profession hence, covered under the scope of entry 12 (a) of Mega Exemption Notification No.25/2012-ST dated 20.06.2012. The findings of the Adjudicating Authority are correct and there are no infirmity in the same - Revenue has not advanced any justifiable ground so as to establish the said order to be perverse - appeal dismissed - decided against Revenue.
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2019 (3) TMI 449
Withdrawal of SCN and issuance of fresh SCN for the same period - time limitation - Held that:- We do not understand how the department could withdraw the show cause notice and issue a fresh SCN case for the very same period. The Larger Bench in the case of Agauta Sugar Chemicals [2010 (9) TMI 16 - CESTAT, NEW DELHI] has considered the validity of show cause notice issued and adjudicated after the amendment in 2003 / 2004. It did not discuss a situation in which a fresh show cause notice is issued, where already show cause notice is pending. On perusal of the adjudication order, we do take note of the fact that the adjudicating authority has started the order by stating that the proceedings arise out of show cause notice dated 30.8.2001. However, in the operative portion, it is stated by him that this show cause notice stands abated and treated as withdrawn due to issuance of the show cause notice dated 27.10.2004. Show cause notice dated 27.10.2004 is also on the similar set of facts as alleged in the earlier show cause notice. The only allegation of suppression made in the show cause notice is that the appellant did not file returns and did not pay tax. When there is no liability on the service recipient the appellant could not have been expected to file returns or pay tax. There is no positive act of suppression brought out from the facts or evidence placed - there are no ingredients for invocation of extended period and therefore the demand cannot sustain. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 448
Construction services - non-payment of service tax - it was alleged that appellant had constructed building for Manyavar Kanshi Ram Hospital at Greater Noida and did not pay service tax - burden to prove - CBEC Circular No.80/10/2004-ST dated 17.09.2004 - Held that:- Through the proceedings, we have came to know that revenue has repeatedly passed on the onus on the appellant to establish that the building constructed for use by Manyavar Kanshiram Hospital was not for commercial purpose. However, as per the said clarification onus was on revenue to prove that the said building was being used or to be used for making profit. The construction of the building was done during the year 2008-09 and 2009-10 where the show cause notice was issued on 24.10.2013. For issue of show cause notice Revenue could not give any evidence to establish that the said building was being used for such purposes by which the organization using the same was making profit. Therefore, in terms of the said circular service tax was not leviable on the said activity performed by the appellant. Since the service tax was not leviable and appellant is succeeding on merit the issue of limitation need not be discussed and decided. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 447
Non-payment of service tax - Renting of Immovable Property Services - non-payment of service tax for the period from June 2007 to March 2013 - Held that:- The appellants status as an authority created under Rajasthan State enactment is not in dispute. Their overall functions and the activities were regulated by the said enactment and the rules made thereunder is also an admitted fact. The appellant strongly pleaded that they are allotting land/shops to various traders in furtherance of their statutory functions for promoting welfare of agriculturists - but here that the allotment of land/shops to the traders is not in terms of the Rajasthan Agricultural Produce Markets Act, 1961 or the rules made thereunder. In fact, allotments of land and shops were made by the appellants in terms of the Immovable Property Allotment Rules, 2005 and the fees are received for such allotments, thus, the arrangement for Renting of Immovable Property for a consideration. The claim of the appellant that the allotment of shop or land to the traders cannot be considered as renting of immovable property is not tenable. Extended period of limitation - penalty - Held that:- The tax entry renting of immovable property service itself was subject matter of serious litigation in various judicial forum - also, considering the status of the appellant as a Government Organisation, the ingredients for invoking demand for extended period are not present in the present case - demand upheld for normal period - penalty also set aside. Appeal allowed in part.
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2019 (3) TMI 446
Rectification of mistake - it is contended that the impugned order cannot be set aside in its entirety inasmuch as the appeal filed by Revenue has not yet been taken up for hearing - Held that:- Considering the fact that the bench was not aware about filing of any appeal by Revenue and moreover, the order dated 05.07.2018 was dictated and pronounced in the open court, in presence of both sides, it cannot be said that there was an apparent mistake in the order of the Tribunal, which can be recalled for rectification - ROM application dismissed.
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2019 (3) TMI 445
CENVAT Credit - commonly used input services used for providing the output service as well as for undertaking the trading activity - non-maintenance of separate records - Rule 6 of CCR - appellant claimed to have reversed the proportionate credit - Held that:- The reversal of Cenvat Credit as claimed by the appellant was not inconformity with Rule 6 of the Rules. Therefore, denial of Cenvat benefit in the adjudication order is proper and justified. Demand of interest - Rule 14 of CCR Held that:- The said rule was amended w.e.f. 17.03.2012. The effect of amendment is that the word “or” was replaced with word “and”, resulting thereby that Cenvat Credit unless utilized for payment of service tax on the output service, the interest demand cannot be fastened on the Assessee. However, since the reversal particulars and available balance in the Cenvat account during the disputed period was required to be verified, this matter should also go back to the original authority for fact finding with regard to payment of interest by the appellant considering the provisions of both un-amended and amended Rule 14 of the rules. Penalty - Held that:- The provisions of Rule 15(3) of the rules read with Section 78 of the Act cannot be invoked inasmuch as there was no element of suppression, misstatement etc., on the part of the appellant in defrauding the Government Revenue - penalty set aside. Appeal allowed in part and part matter on remand.
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CST, VAT & Sales Tax
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2019 (3) TMI 444
Classification of goods - motor vehicles as well as chassis fitted with engine which is also cleared at times by the appellant - Held that:- The appeal, being devoid of any merit, is liable to be dismissed and, is dismissed accordingly.
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2019 (3) TMI 443
Recovery of tax - the petitioner, an assessee under the KVAT Act, was found entitled to refund for AY 2007-08; it was also found liable under Section 25(1) of the Act for AY 2016-17. As the amount due from it was more than the amount due to it, the assessing authority adjusted the amount to be refunded and, then, demanded the balance amount - Held that:- Section 89 of the act plainly reveals that if a dealer has paid tax more than what is due from him, he must have that excess amount refunded to him. Once an assessing authority receives an order from any appellate or revisional authority or any officer under subsection (5) of section 47, to refund tax or penalty to a dealer, he must comply with that - But the assessing authority has the power to adjust the amount due to be refunded towards the recovery of any amount due, on the date of adjustment, from the dealer. If the assessing authority delays refund without justification, the dealer may earn interest @10% p.a. Was the petitioner due to pay any amount to the Department “on the date of adjustment”? - Held that:- Section 31(1) declares that every dealer liable to pay tax for any return period shall pay the tax within such period as may be prescribed. Then, subsection (3) holds that the adjustment must be of “any amount due [from the dealer] on the date of adjustment.” The amount becoming due, I reckon, differs from the dealer’s liability to pay. The amount becomes due the moment it is ascertained by the assessing authority, say, through an order of assessment. But the dealer may have breathing time to pay that amount. So, meritless is the petitioner’s contention that the amount should not be adjusted until the time frame mentioned under Section 31 (3) gets exhausted. Petition dismissed as has no merit.
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2019 (3) TMI 442
Principles of natural justice - the assessing authority was not satisfied with the petitioner's Ext.P2 reply, went ahead, and rendered the Ext.P3 assessment order - Held that:- As the record bears out, the assessing authority remained unconvinced of the petitioner's Ext.P2 reply. So he rendered the Ext.P3 assessment order-but without providing an opportunity of hearing to the petitioner - True, the petitioner may not have the luxury of insisting on producing additional material only as a condition subsequent to the assessing authority's dissatisfaction about the reply. But the assessee must have an opportunity of hearing and it was asked for. The petitioner has been denied an effective opportunity of hearing - the Ext.P3 is set aside and matter remanded to the assessing authority for fresh adjudication.
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2019 (3) TMI 441
Principles of natural justice - It is the case of the petitioner that the second respondent while passing the impugned assessment order failed to consider the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016 - Held that:- It is not in dispute that G.O.Ms.Nos.78 and 79 referred to supra that are applicable for automobile dealers belonging to sale of used cars. In those G.Os, it has been cleared that only 4% tax payable if the sales were not effected upto 11.07.2011 and 5% were effected for sales from 12.07.2011 onwards. The Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, has clarified both the G.O.Ms.No.78 and 79. They have clarified that only 4% of the tax is payable if the sales were effected upto 11.07.2011 and 5% tax is payable if the sales were effected from 12.07.2011 onwards. Despite categorical clarification given in the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, the respondent has passed the impugned assessment order levying higher rate of tax at 14.5%, based on the entire value of the cars in stead of 5% on the value addition of the cars alone. This Court is of the considered view that the assessment order has been passed without jurisdiction and without applying the mind to G.O.Ms.78 and 79 referred supra as well as the Proceedings of the Authority for Clarification and Advance Ruling, dated 25.10.2016, by the second respondent - the matter is remitted back to the second respondent for fresh consideration and the second respondent after giving sufficient opportunity to the petitioner - petition allowed by way of remand.
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2019 (3) TMI 440
Inter-state sales or local sales - incorrect Form-C - Whether, on the facts and in the circumstances of the case and on a true and correct interpretation of Section 3(a) of the Central Sales Tax Act, 1956, the Appellate Tribunal is justified in law in treating the local sales effected by the petitioner's branch in Bangalore to M/s.Shree Renuka Sugars Ltd., Karnataka as inter-State sales by the petitioner based on the incorrect C form issued by M/s.Shree Renuka Sugars Ltd., Karnataka? Held that:- We are not a fact finding authority and exercising power under Section 60(1) of the TNVAT Act, we have to decide the substantial question of law. The exercise, which we are invited today by the petitioner, is clearly the role of the Tribunal or for that matter the first appellate authority. In any event, we do not want to foreclose the rights of the petitioner, since it is the consistent case of the petitioner that those two entries shown in the Form 'C' declaration are dated 18.09.2009 is a genuine mistake. In fact, though the first appellate authority pointed out that the mistake should have been rectified in the online entries maintained in the State of Karnataka, he did not issue any direction to the Assessing Officer to return the Form 'C' declaration, which was found in page 187 of the assessment file. If that course had been adopted, in all probabilities, the Commercial Taxes Authority of the State of Karnataka may have even rectified the Form 'C' declaration. Bearing this in mind, we propose to issue appropriate directions to enable the petitioner to obtain necessary correction in the Form 'C' declaration. The tax case revision is disposed of by directing the petitioner's Assessing Officer to return the subject Form 'C' declaration within a period of two weeks' from the date of receipt of a copy of this order.
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2019 (3) TMI 439
Availing Input Tax Credit (ITC) wrongly - Whether the input tax credit availed by the assessee on the purchase of cement, which was used for the manufacture of RCC pipe can be curtailed, while they availed the benefit of a notification issued by the Government in G.O.Ms.No.79, Commercial Taxes and Registration (B2), dated 23.03.2007 whereby, the Government reduced the rate of tax payable by any dealer on the sale of certain goods under the TNVAT Act? Held that:- In the instant case, the assessee manufactures RCC pipes. For the assessee to be entitled to the reduced rate of tax at 4%, he should not avail the input tax credit on the purchase of same. This is a restriction or a condition specified in the notification. The Court cannot substitute words, nor delete any portion of the notification and redo the same as interpreted by the assessee. Very recently, the Hon'ble Supreme Court has held that strict interpretation has to be given to any exemption notification and the interpretation should lean in favour of the Revenue. Therefore, the contention advanced by the assessee does not merit acceptance. Penalty u/s 27(4) - Held that:- The Assessing Officer has clearly recorded a finding as to how the assessee has wrongly availed the input tax credit - the case would fall under Section 27(2) of the TNVAT Act and the penalty under Section 27(4) is automatic - penalty upheld. Tax case revision dismissed - decided against assessee.
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2019 (3) TMI 438
Sale of goods or not? - deeming fiction - Whether the medicines supplied, implants carried out, the consumables used and surgical tools exclusively used in a particular procedure, as part of treatment of patients in a hospital, the price of which is recovered by way of bills from the patients are “sale of goods” as contemplated by the legislation levying such tax? - article 366(29A)(f) of the Constitution of India. Held that:- When the Constitution by a deeming fiction permitted only certain transactions to be treated as sale of goods, the State Legislature cannot enlarge the scope of the definition in excess of that available in the deeming fiction to those transactions not strictly answering the definition of sale of goods or extend the fiction to those other transactions. In the Explanation, the State Legislature cannot have any intention in excess of the fiction as brought in by the amendment to the Constitution. Even if such an intention was there, to the extend it is beyond and steps out of the ambit of, the fiction created by the 46th amendment, it would be vitiated for total absence of legislative power. The definition of sale as found in section 2(xxi) of the KGST Act took care of instances as provided under clauses (a) to (f) in article 366(29A) respectively by Explanations (1A), (2), (3), (3A), (3B) and (3C) - After the deeming fiction was introduced by article 366(29A), all the transactions coming under the aforesaid Explanations stood validated as sale of goods. Similarly in the KVAT Act, section 2(xliii) defines “sale” and the Explanations I to VI took care of the transactions covered by clauses (a) to (f) of article 366(29A). Under the KGST Act and KVAT Act, the State cannot legislate in excess of the specific transactions brought in under article 366(29A), to create further deeming fiction with respect to other composite transactions. With respect to hospital services, we cannot but observe that the sale of drugs, implants and other consumables are a part of the medical treatment rendered. There is no identity of the medicines or consumables or implants, as it does not lie in the mind or mouth of the patient to identify the drugs to be administered in the course of the treatment. Though a patient on his volition could refuse to take a particular drug, he cannot demand, as a matter of right, that a drug be administered to him in the course of the medical treatment. A demand of that nature will not be complied with by either a medical practitioner or a hospital, the latter of whom dispenses medicines only in accordance with the directions of the attending physician or surgeon - The cost of the implants, consumables or the drugs is irrelevant insofar as deciding what is the dominant nature of the transaction or service rendered to the patient in a hospital, which, without any doubt, is the therapeutic treatment rendered. The patient has no control or say, has limited control, on the procedures taken in the course of the treatment, the drugs administered and the consumables used. The declaration so made was with respect to the development contract which was held to be a works contract. As to the other transactions the dominant nature test applies and in hospital services the dominant intention is provision of medical care and treatment, to effectively cure the patient of his/her ailment and it is not the sale of drugs, implants or other consumables. The service offered is one of medical treatment and the dispensation or administration of drugs or implants carried out in the course of surgical procedures and the consumables used in the course of any medical procedure would be an inseparable, indivisible part of the treatment rendered. The business expediency has no control in the administration of drugs, use of consumables or the implants carried out and neither does the control lie with the hospital, as a corporate or other legal entity. The supply of drugs use of consumables and the implants made are on professional medical advice intended at curing the patient and not deriving profits. Though not a charitable activity, hospitals cannot be said to be a business house established primarily for sale of drugs, consumables or implants. The principle is that mere passing of property in an article or commodity during the course of the performance of a contract or service, which is essentially one and indivisible, does not render it a transaction of sale, except in the case of the specific instances as available in clauses (b), (c) and (f) of article 366(29A). The fiction extends to only the specific clauses as coming under article 366(29A) and stops there and does not extend beyond that or encompass any other composite transaction. The decisions in Malankara Orthodox Syrian Church [2002 (12) TMI 587 - KERALA HIGH COURT], Comtrust Eye Hospital v. Addl. Sales Tax Officer [2006 (10) TMI 413 - KERALA HIGH COURT] do not propound and declare the correct position in law. We direct the registry to place the matters before the Division Bench for consideration of the individual cases.
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2019 (3) TMI 437
Principles of natural justice - no reason for passing the impugned order of assessment stated in the first notice of proposal - notice of proposal dated 22.11.2013 does not indicate the proposal to impose penalty, whereas the impugned order imposes penalty - Held that:- Perusal of the reasons stated in the impugned order would show that the Assessing Officer did not make the proposal for reversing the ITC. On the other hand, the Assessing Officer has only given certain facts and figures in the tabular column without stating those two reasons, which are stated as the first time in the impugned order. Therefore, the very order of assessment passed based on those two reasons, is in violation of principles of natural justice, since no notice of proposal was issued to the petitioner stating those reasons for imposing tax. Further, it is seen that the said notice of proposal does not indicate that the Assessing Officer has proposed to impose penalty as well. In the absence of such notice, the Assessing Officer passed the impugned order of assessment imposing penalty also at the rate of 150% - the imposition of penalty without any notice of proposal to that effect, violates the principles of natural justice and consequently, cannot be sustained. Above all, no personal hearing was given to the petitioner before concluding the assessment. The impugned assessment order cannot be sustained and consequently, the matter has to go back to the Assessing Officer to re-do the assessment after hearing the petitioner in person - petition allowed by way of remand.
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