TMI Tax Updates - e-Newsletter
March 27, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Input tax credit {ITC} - GST paid on the railway freight - the final clearance of goods for export has taken place from the Raxaul unit, the export warehouse of the Appellant and not from the Appellant's Haldia unit. Therefore, endorsement copies of ARE-3 cannot be treated as final proof of export. - Benefit of export / zero rated supply not available.
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Income Tax:
Recognition of income under constriction contract - A fact which has not been addressed by either the AO or the ITAT is that the Assessee follows the CCM and not the PCM.
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Income Tax:
Income declaration scheme 2016 - The self assessed tax and advance tax cannot be transposed for the purpose of discharging the liability to pay tax, surcharge or penalty by a declarant of undisclosed income under the said scheme.
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Income Tax:
Addition u/s 68 - unexplained cash credit - Merely because the lenders have not shown the interest income in their return of income, does not mean the assessee has not paid interest.
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Income Tax:
Levy of penalty u/s 271C - TDS default u/s 194C - assessee is consistently following the practice of arriving the TDS liability at the end of the year - there is no doubt that the assessee has duly deducted the TDS and remitted to Govt. account. - no penalty.
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Income Tax:
TDS liability on freight expenses u/s 194C - once the assessee is in receipt of PAN and has not deducted TDS, it has complied with the first statutory obligation cast upon him and the assessee cannot be penalized for non-deduction of TDS, merely because of non furnishing of prescribed information to the revenue Authorities.
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Income Tax:
Nature of receipt - sale of business - true consideration for the payment of US dollars to company - scope of “coining of the concept” - arrangement of non compete Agreement - There is no escape from the taxation of these receipts in the hands of the assessee.
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Income Tax:
Deemed dividend u/s 2(22)(e) - the revenue has to prove that the said loans and advances are really in the nature of loans, but not normal commercial transactions. - assessee has succeeded in his attempt on the issue of business exigency.
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Income Tax:
If the plea of the assessee that in case of a non-filer of tax returns, assessments cannot be reopened on the basis of AIR information that assessee has made huge cash deposits in the bank account is accepted, then the provisions of section 147 and 148 in the statute will become redundant.
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Income Tax:
Addition of Undisclosed Income - Source of payment of Capitation Fee - Income Tax Department should have proceeded against such Engineering Colleges cancelling their Section 11 exemption entitlements, which most of them illegally enjoy, rather than punishing parents and students by imposing tax on such alleged Undisclosed Income
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Income Tax:
Proceedings u/s 158BD - Recording of satisfaction - not raising any objection in the first instance by the Assessee is fatal - decided against assessee
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Income Tax:
TDS on salary u/s 192 - salary paid to Nuns, Sisters, Missionaries and Fathers applicability of Canon Law - provisions of Income Tax Law are dry, plain and simple, a-political, a-religious in character - provisions of Income Tax Act have nothing to do with religion - TDS is deductible
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Income Tax:
MAT /s 115JB - AO has no jurisdiction to alter the book profit u/s 154 through rectification order in respect of upward adjustment of international transaction.
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Income Tax:
Capital gain computation - indexation of cost in cases covered by section 49 - previous owner of the property vs present owner of the property - indexed cost of acquisition had to be computed with reference to the year in which the previous owner first held the asset.
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Income Tax:
Recovery of tax u/s 179(1) from directors against the dues of company - explanation to Section 179 was added w.e.f. 01.06.2013 - the word “Tax” used in Section 179 was to be used also for penalty and interest - If the word “ Tax” is not read in that way, there will be loss of interest and penalty to the State Exchequer.
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Income Tax:
Penalty u/s 271(1)(c) - surrendered undisclosed income during the search and seizure - assessee contented that income disclosed in the return U/s 139(1) though claimed as exempt U/s 10(38) - declared income is also finally assessed as such - penalty u/s 271(1)(c) is not sustainable
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Income Tax:
Levy of penalty u/s 271D - violation of the mandate u/s 269SS - advances to promoter for day to day expenditure - current account of a company with its promoters, where such current account was a running one, could not be considered as loan or advances.
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Income Tax:
Levy of penalty u/s 271D - Advances or other receipts of money in cash in relation of transfer of immovable property came within the ambit of Section 269SS only w.e.f. 01.6.2015 - Amendment is prospective in nature, not applicable for earlier period.
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Income Tax:
Undisclosed Income - scope of statements recorded u/s 132(4) - admission of payment of Capitation Fee to the Engineering College does not mean ipso facto declaration of Undisclosed Income
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Income Tax:
Taxability of Keyman Insurance Policy - accrual or receipt basis - From the provisions of section 2(24)(xi) read with section 28(vi), it is evident that the amount of bonus on Keyman Insurance Policy is to be taxed on receipt basis only.
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Income Tax:
Commission paid to directors - Directors paying tax at the maximum rate on income including commission which is higher than DDT - no infringement of any law - neither can be treated as an amount paid in lieu off dividend or excessive under section 40A(2)(b)
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Income Tax:
Intangible assets like trademark, brand names etc. were self-generated - amendment to section 55(2)(a) by the Finance Act, 2001 deeming to be a nil cost of acquisition in respect of a self-generated trademark is prospective.
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Customs:
Anti-dumping duty imposed on 'Acetone', originating in or exported from European Union, Singapore, South Africa and United States of America.
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Customs:
Exemption from IGST and compensation cess to EOUs on imports extended till 31.03.2020
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Customs:
Exemption from Integrated Tax and Compensation Cess extended upto 31.03.2020 on goods imported against AA/EPCG authorizations.
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Customs:
100% EOU - Cancellation of Permission to operate as an Export Oriented Unit - unit not commenced production of their own and was merely carrying out job works for entities in the domestic tariff area or the local market though it had availed of duty free imports and also exemption u/s 10(B) of the Income Tax Act - Permission was rightly canceled.
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IBC:
Corporate insolvency proceedings - The debt in question falls within the ambit of “Regulatory Dues”. Therefore, as a sequel, need not be treated as an operational debt. - The right forum to initiate recovery proceedings for non-payment of Listing Fees is not NCLT.
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IBC:
Corporate Insolvency Resolution Process - consortium finance - Application by lead banker - no bar for the applicant to approach this Hon'ble Tribunal for initiating resolution process without seeking consent of other lenders.
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Service Tax:
The fact that compensation was declared as one of the taxable services w.e.f. 01/07/2012 indicates that prior to the said date no tax can be collected on the compensation either indirectly or by treating the same as rent received.
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Service Tax:
The extended period cannot be invoked against statutory body. Inasmuch as, no contumacious conduct or suppression of facts can be attributed to them.
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Central Excise:
Concessional rate of duty - Failure to mention / imprint MRP on Footwear - Mere existence of the invoices submitted in routine will not suffice for restricting the demand to the normal period. - Demand confirmed with penalty.
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Central Excise:
CENVAT Credit - the appellants are not allowed to utilize the Cenvat credit lying in their Cenvat credit account. But there is no provision that “how the same shall be recovered” - Rule 14 is not applicable in the situation.
Articles
Notifications
Circulars / Instructions / Orders
Case Laws:
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GST
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2019 (3) TMI 1273
Input tax credit - GST paid on the railway freight for transportation of the refining crude petroleum oil, inter alia, High Speed Diesel (HSD), Motor Spirit (petrol) and Aviation Turbine Fuel (ATF) from its Haldia Refinery to its export warehouse at Raxaul - Place of supply of goods or services or both - Held that:- The goods are supplied to the recipient (in this case the Bihar Unit) in India as the movement terminates at Raxaul. In such cases it will be an inter-state supply to a distinct person as defined under section 25(4) of the GST Act, and the place of supply shall be determined under section 10(l)(a) of the IGST Act - The IOCL, Haldia issued ARE-3 against CT-2 for stock transfer of said goods to their Raxaul Depot. It is IOCL, Raxaul Depot who prepares the ARE-I for export of the said goods to the NOC, Nepal. Hence, the movement of goods through ARE-3 terminates for delivery to the recipient IOCL, Raxaul Depot, who is a distinct person as per GST Act. The final clearance being made from the export warehouse at Raxaul, it is the Bihar Unit that is responsible for export on preparing ARE-I. Removal of goods without paying duty (under Bond) from Haldia Refinery to the export warehouse at Raxaul, therefore, cannot be termed as export of goods within the meaning of section 2(5) of IGST Act and cannot be termed as zero rated supply under Section of the IGST Act. Movement from the Applicant's factory at Haldia to the export warehouse at Raxaul is not, therefore, inextricably linked to ultimate export to Nepal. The Appellant has admitted that the NOC issued PDO (Product Delivery Order) on Raxaul Depot of the IOCL which is actually the supply point of the products. And the Appellant's Raxaul unit prepared and submitted ARE-I (Application for Export) to the Customs Authority for endorsement. Hence, the final clearance of goods for export has taken place from the Raxaul unit, the export warehouse of the Appellant and not from the Appellant's Haldia unit. Therefore, endorsement copies of ARE-3 cannot be treated as final proof of export. There is no infirmity in the ruling rendered by the West Bengal Authority for Advance Ruling.
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Income Tax
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2019 (3) TMI 1272
Recognition of income under constriction contract - Completed Contract Method ( CCM ) vs. Percentage Completion Method ( PCM ) - Payment of compensation to flat/space buyers - some allottees of the flats refused to take them for completion since the New Delhi Municipal Council ( NDMC ) changed the usage of the Lower Ground Floor ( LGF ) - compensation paid in lieu of surrender of rights in flats/space shown in work and progress in balance-sheet and enhance the value of work and progress? - HELD THAT:- A fact which has not been addressed by either the AO or the ITAT is that the Assessee follows the CCM and not the PCM. - as far as the case in hand is concerned, since there is no dispute that the Gopal Das Bhawan Project was completed in FY 1994-95, it is AS 7, pre-revised, which would apply. There is merit in the contention of the Assessee, based on AS 2 that compensation paid subsequent to the completion of the project is an extraordinary item. It was not cost of completion of the project and, therefore, such compensation could not be added to the value of the stock and trade of the Assessee. AS 2 governs valuation of inventories. Cost comprises all of the costs of purchase, cost of completion and other costs incurred in bringing the inventories to their present location and condition. That which is not relevant to bringing the stock to its present condition or location cannot be a part of its value. In the considered view of the Court, the view expressed by the CIT (A) merits acceptance. The conclusion of the ITAT that the payment was made for extraneous consideration appears to be based on surmises and conjectures. Applying the law explained by the Supreme Court in the CIT v. Nainital Bank Ltd. [1966 (9) TMI 46 - SUPREME COURT] to the case in hand, the plausible conclusion is that the compensation paid by the Assessee to the allottees of the commercial spaces for the surrender of their rights therein cannot be said to be disallowable on the ground of such payment having been made for extraneous considerations. The result of the above discussion is that the Court holds that the payment made by the Assessee to the allottees of the flats for their surrendering the rights therein should be allowed as business expenditure of the Assessee. Rental income earned from its stock and trade - business income or income from house property - ITAT held the same from income from house property except in one year - HELD THAT:- The Court finds that barring this one year i.e. AY 1996-97, in all the other AYs, the consistent view of the ITAT that rental income is to be assessed as IHP and not business income has been accepted by the Revenue. Following the rule of consistency as explained in the above decisions, this Court declines to entertain the plea of the Revenue which appears to be confined to AY 1996-97, with none of the earlier or subsequent AYs being challenged by the Revenue. Accordingly, the issue is decided in favour of the Assessee and against the Revenue by answering the question in the affirmative and holding that the rental income of the Assessee from the properties forming part of its stock-in-trade would be IHP and not business income. Allowabilty of brokerage and commission - HELD THAT:- For AY 1995-96, the Revenue filed ITA No.69 of 2003 in this Court raising a question on this issue but it was not admitted by this Court by the order dated 8th January 2004. Likewise, for AY 1997-98, when the ITAT followed its earlier order the Revenue filed ITA 772 of 2005. This Court did not frame any question on this issue following its earlier order dated 8th January 2004 in ITA 69 of 2003. Following the rule of consistency, this Court finds no merit in the contention of the Revenue and this question is accordingly answered in favour of the Assessee Allowabilty of Expenditure on foreign travel - HELD THAT:- this issue is similar to the issue of brokerage and commission which was held allowable and accepted by the Revenue for all of the AYs in question except for AY 1996-97. Again, following the rule of consistency, this Court answers this issue in favour of the Assessee Allowabilty of Interest and guarantee commission - interest was capitalised only up to the stage of completion of the project under capital work and progress. and subsequent period, after completion of project, claimed and as a revenue expense - HELD THAT:- as rightly pointed out, AS 2 would apply in terms of which, with the Assessee following the CCM, the expenditure incurred subsequent to the completion of the project cannot be attributed to work and had to be allowed only as revenue expenditure. Consequently, the question is answered in the affirmative in favour of the Assessee Withdrawal of credit of TDS u/s 154 - Assessee was not the owner - rent received by the Assessee from the tenants was passed on to the respective owners with Tax - HELD THAT:- AO also did not dispute the fact that the Assessee passed on the rent collected to the respective owners. The TDS deducted at the time of such passing on of rental income was also deposited by the Assessee. Further, the owners did disclose the rental income in their returns. Thus on the one hand, there was credit of TDS and on the other hand there was debit of tax paid on behalf of the owners. The Court is of the view that there was no occasion to invoke Section 154 of the Act, since the issue was a debatable one. The decisions of the CIT (A) as affirmed by the ITAT take a plausible view and deserve to be upheld. Interest under Section 201 (1A) - HELD THAT: - Under Section 194-I of the Act, the liability to deduct TDS is on the tenant paying the rent. The amount passed on to the owners by the Assessee was not its capacity as tenant. It is further pointed out that for AY 1998-99 the Revenue accepted the order of the CIT (A) by not filing any further appeal. This issue is also, therefore, accordingly answered in favour of the Assessee Disallowance of Advertisement expenses - HELD THAT:- Further in AYs 1995-96 and 1996-97 a similar expenditure was allowed and no question was framed by this Court. The Assessee being in the real estate business cannot carry on its business without publicity. The expenditure was necessary for the promotion of the business. The question is accordingly answered in favour of the Assessee and against the Revenue. Disallwance of Service charges - revenue expenditure - HELD THAT:- The Assessee is admittedly following the CCM. Service charges were incurred after the completion of the project and would not be part of the capital work in progress. Having been incurred at a stage subsequent to the completion of the project it had to be shown as revenue expenditure and was rightly allowed as such by the ITAT. This question is also therefore answered in favour of the Assessee
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2019 (3) TMI 1271
Allowable expense u/s 37(1) - Advertising and Publicity expenses - Deduction in respect of expenditure on production of feature films - whether expenses were not part of cost of production as per Rule 9A of Income Tax Rules, 1962 and provisions of Section 37(1)? - HELD THAT:- The cost of print and the cost of publicity and advertisement (which was incurred after the production and certification of the film by the Censor Board) are under consideration. These costs, we fail to see how can satisfy the description “expenditure in respect of cost of production of feature film”. We may recall term “cost or production” defined for the purpose of this rule specifically excludes the expenditure for positive print and cost of advertisement incurred after certification by the Board of Film Censors. What would therefore, be governed by the formula provided under Rule 9A is the cost of production minus these costs. The legislature never intended that those costs which are in the nature of business expenditure but are not governed by Rule 9A due to the definition of cost of production are not to be granted as business expenditure. In other words, if the cost is cost of production of the feature film, it would be governed by Rule 9A. If it is not it would be governed by the provisions of the Act. The Commissioner was, therefore, wholly wrong in holding that the expenditures in question were covered under Rule 9A of the Rules and therefore, not allowable. The Tribunal was correct in coming to the conclusion that such expenditure did not fall within the purview of Rule 9A and therefore, the assessee's claim of deduction was governed by Section 37 of the Act. Any expenditure in connection with the preparation of the positive prints for the purpose of exhibition would really be a post production expenditure and item of expenditure in relation to the business of production and exhibition of films and therefore, would qualify for deduction as expenditure laid out wholly and exclusively for the purpose of business. See CIT Vs. Prasad Productions P. Ltd. [1989 (1) TMI 38 - MADRAS HIGH COURT]. - decided in favour of assessee.
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2019 (3) TMI 1270
Stay of demand - deposit of 15% OR 20% of the disputed amount - recovery proceedings - HELD THAT:- What prima facie emerges from the record is that, the Petitioner undisputedly has an arguable case on the three additions which the Assessing Officer has made. Prima facie case is one of the considerations which will weigh while imposing condition of deposit of disputed tax pending Appeal as held and observed by this Court in case of UTI Mutual Fund Vs. Income Tax Officer [2013 (3) TMI 350 - BOMBAY HIGH COURT]. In the CBDT Circular dated 29/02/2016 while providing that the Assessing Officer shall stay pending Appeal on deposit of 15% of the disputed amount, (which was later on revised to 20% by virtue of the circular in 2017, other conditions remained constant.) The circular also envisaged cases where such requirement can either be increased or decreased depending on facts of the case. Thus requirement of 20% deposit of tax pending the Appeal is not a rigid one and cannot be implemented in all cases, irrespective of relevant facts. Since the Appeal of the Petitioner is pending before the Appellate Commissioner, we would be well advised not to consider the Petitioner’s argument on merit of disallowances threadbare. Suffice to reiterate that the Petitioner has a prima facie case on such disputed issues. The Petitioner had already deposited advance tax of ₹ 11 Crores and TDS of ₹ 7,05,288/by the time of filing of the return. The Petitioner has deposited further sum of ₹ 1 Crore with the tax department. Impugned order passed by the Commissioner does not take into account the sum of ₹ 11,07,05,288/, perhaps due to oversight since it appears that the Petitioner may not have brought such facts to his notice. Be that as it may, whatsoever direction we may issue for depositing the tax pending appeal, this amount must be taken into consideration. ORDER - Petitioner shall deposit a further sum of ₹ 3 Crores with the Department latest by 30/03/2019. This shall, along with the amounts already deposited by the Petitioner represent roughly 15% of the basic tax demand. Subject to the Petitioner depositing the same, there shall be no further recovery of the tax and interest pursuant to the order of assessment till the Petitioner’s Appeal is disposed of by the Commissioner (A).
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2019 (3) TMI 1269
Recovery of dues - Waiver of interest before the Principal Commissioner of Income Tax u/s 220(2A) - recovery proceedings - Default in payment of tax - proclamation of sale - demand for the payment of tax as well as interest - without waiting for the outcome of the waiver of interest application, the respondent is proceeding with the sale of the petitioner's property as per the impugned proclamation of sale - entitlement for waiver in view of the closure of their business pursuant to orders passed by the Hon'ble Supreme Court as well as due to the appeal filed by the Department in respect of depreciation - petitioner has paid the entire tax liability - HELD THAT:- In the instant case, the tax liability as per the respondent's demand is ₹ 53,78,316/-, which has already been duly paid by the petitioner. Whereas the interest component is an exorbitant figure of ₹ 1,32,93,493/-. Considering the exorbitant interest demanded by the respondent, before the first respondent, this Court is of the considered view that before passing any final order in the application filed by the petitioner, under Section 220 (2A) the properties belonging to the petitioner as per proclamation of sale, dated 20.02.2019, issued by the respondent cannot be brought for sale as it will violate the principles of natural justice. The purpose of a statutory power given to any assessee to seek waiver of interest will be defeated, if the respondent is allowed to bring the property for sale, even before the outcome of the proceedings under Section 220 (2A) of the Income Tax Act, 1961 and it will defeat the objects of Section 220(2A). For the foregoing reasons, this Court quashes the impugned proclamation of sale, dated 20.02.2019 issued by the respondent. Court directs the Principal Commissioner of Income Tax-I, Cochin, to dispose of the application filed by the petitioner under Section 220(2A) of the Income Tax Act, 1961, before the Principal Commissioner of Income Tax, Trivandrum.
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2019 (3) TMI 1268
Income declaration scheme 2016 - Declaration of undisclosed income - benefit of advance tax or self assessed tax for the purpose of the said scheme - segregation of the declaration still survives - granting benefit of the self assessed tax or advance tax under the Act, for the purpose of discharging the assessee's liability under the said scheme - HELD THAT:- Section 184 provides that the declaration under the said scheme shall not be entitled in respect of undisclosed income declared or any amount of tax and surcharge paid to reopen the assessment or reassessment under the Income Tax Act or the Wealth Tax Act. Section 191 provides that any amount of tax and surcharge and penalty paid pursuant to the declaration shall not be refundable. Thus, the scheme makes clear demarcation between an undisclosed income declared under the said scheme and the assessment of the assessee's declared income under the Income Tax Act, 1961. Therefore, in absence of any specific provision in the scheme, granting benefit of the self assessed tax or advance tax under the Act, for the purpose of discharging the assessee's liability under the said scheme, the same cannot be readily presumed. To reiterate these provisions provided for two separate compartments between the assessment proceedings under the said Act and declaration of undisclosed income under the said scheme. The self assessed tax and advance tax would be adjusted against an assessee's liabilities arising in the assessment under the said Act and cannot be transposed for the purpose of discharging the liability to pay tax, surcharge or penalty by a declarant of undisclosed income under the said scheme. The reference to the Rules or the formant for making declaration or payment would not change this provision. Nothing contained in the Rules or the formats prescribed therein would indicate any intention on the part of the legislature to grant the benefit of advance tax or self assessed tax for the purpose of the said scheme. In any case, such right had to be recognized under the Act and cannot be interpreted on the strength of prescribed formants for making declaration. CBDT Circular dated 30.6.2016 has clarified the provision in relation to the tax deducted at source, providing that adjustment under the scheme would be permissible in cases where relation between the income declared under the scheme and the advance tax can be established and such tax has not been claimed in the return of income filed for any assessment year. This clarification made by the CBDT would neither indicate that the legislature while framing the scheme envisaged the adjustment of other taxes namely the advance tax or self assessed tax, nor would state different treatments given to the two kinds of taxes rendered the provisions of the said scheme ultra virus, the constitution being in violation of Article 14 of the Constitution. The CBDT exercises its power vested under Section 119 of the Act. As is well settled, it is within the power of CBDT to issue clarifications for reducing the rigors of the statutory provisions. Even otherwise the very nature of tax deducted at source is different from the other two categories namely advance tax and self assessment tax, since tax deducted at source is always relatable to certain income which the assessee would disclose under the said scheme. Segregation of the declaration still survives - The provisions contained in the scheme enable the assessee to disclose undisclosed income. There is no provision in the scheme which requires the declarant to make a composite declaration in relation to several assessment years for which he desirous to make a declaration of undisclosed income. The scheme does not prohibit multiple declarations by the assessee, making separate declarations for different assessment years. Under these circumstances, we do not find any provision under the said scheme requiring competent authority to either accept or reject the declaration in respect of several assessment years in entirety. In other words, if the declaration of the assessee of undisclosed income for the particular assessment year fulfills all requirement of the scheme, there is no reason why such a declarant should not get benefit of such declaration simply because in relation to other assessment years, the declaration may fail for any reason. Sum total of this discussion would be that in relation to those assessment years where the petitioner relied on the adjustment of self assessed tax or advance tax for making good, the requirement of depositing tax, surcharge and penalty under the scheme, the declaration must fail and the action of the Revenue Authorities must be confirmed. In relation to those assessment years where without any adjustment of advance tax or self assessed tax, deposits made by the petitioner were sufficient to cover the tax, surcharge and penalty under the scheme by the due dates, such declaration must be accepted.
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2019 (3) TMI 1267
Addition of Undisclosed Income - Source of payment of Capitation Fee - Assessee in the statements recorded u/s 132(4) admitted payment of Capitation Fee - scope of the admission in the statement - HELD THAT:- There is no admission on the part of the Assessee in the present case that Capitation Fee was paid by the Assessee out of Undisclosed Income not so far declared. Just because the statements state that he paid Capitation Fee to the Engineering College viz., Satyabhama Engineering College, Chennai, it does not mean that it could result in an addition ipso facto in the already declared Undisclosed Income in the hands of the Assessee in his Returns filed after the search. In fact, on the basis of disclosure of Undisclosed Income made by the Assessee himself in the Return of Income after search was made to the extent of ₹ 23,65,700/- and the same was brought to tax, the Assessee has paid tax thereon. Therefore, even though such Capitation fee was presumed by the Assessing Authority to have been paid out of Undisclosed Income, there was no reason to impose tax separately on the said amount and the same could have been very well taken as paid out of Declared Undisclosed Income in the Return filed by the Assessee after the search. We cannot sustain such an addition merely on the basis of the alleged admission made by the Assessee in the Statements. Such an addition could not have been made, as we do not find any incriminating confession made by the Assessee in the said statements recorded under Section 132 (4) of the Act. Such an admission on the part of the assessee would require a corroborative evidence to support such an addition and, therefore, such an unsupported, vague and non-specific admission can not result in a sustainable addition in the declared income, attracting imposition of tax thereon. The scourge of Capitation Fee by Medical and Engineering Colleges is an infamous and thoroughly extortionist act that is going on in the education sector in our country and it is almost a known fact that these so called Educational Institutions act more like Business Houses rather than Educational Institutions, throwing out of gear the entire higher educational system in India. Parents and students, who are compelled to pay such high Capitation Fee in different forms developed in innovative ways, have no choice in the matter and such Capitation Fee is just extracted from them, making an affordable higher education a mirage for middle class families. What the Revenue-Department i.e., Income Tax Department, having come to know of such facts existing should have proceeded against such Engineering Colleges cancelling their Section 11 exemption entitlements, which most of them illegally enjoy, rather than punishing parents and students by imposing tax on such alleged Undisclosed Income merely on the basis of the so called admission made in the statements recorded u/s 132 (4) which too, as we have found in the present case, does not support the case of the Revenue at all. Therefore, we find that the orders passed by both the Appellate Authorities below are perverse and unsustainable - Appeal of the Assessee deserves to be allowed
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2019 (3) TMI 1266
Proceedings u/s 158BD - Firstly addition was made in case of son of assessee u/s 158BC - ITAT held in case of assessee son that this income is taxable in hand of assessee u/s 158BD - then notice u/s 158BD was issued to assessee - first instance, no objection was raised by the Assessee before the Assessing Authority regarding the necessity to record separate reasons for initiating proceedings u/s 158BD - HELD THAT:- In our opinion, the Appellate Authorities below have not committed any error in so holding. On the contrary, for not raising any objection in the first instance by the Assessee before the learned Assessing Authority itself when the Notice under Section 158BD of the Act was served upon her, it should be deemed that the mother present Assessee - had acquiesced to the jurisdiction of the authority to proceed under Section 158BD of the Act and given up any objection with regard to the same. Appeal of the son of the present Assessee has been dealt with by the Tribunal and in those appellate proceedings under Section 158 BC of the Act only, the Tribunal found that for the transaction in question for sale of property which was standing in the name of the present assessee, namely, mother- Smt.V.Vijayalakshmi, AO could have initiated proceedings only under Section 158BD of the Act. That being so, we have found, as aforesaid, that the Assessing Officer could proceed on the basis of that satisfaction under Section 158BD of the Act. Hence, the learned Tribunal and also the CIT (A) have rightly dismissed the appeal of the present Assessee, laying a challenge to the proceedings under Section 158BD of the Act against the present Assessee. - Decided against assessee.
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2019 (3) TMI 1265
Order for recovery of tax u/s 179(1) - scope the the Word “tax” used in Section 179 - does it includes interest and penalty - explanation to Section 179 was added w.e.f. 01.06.2013 - Liability of directors of private company in liquidation - HELD THAT:- If we have to go with the presumption that the Parliament had intended to provide that the liability of the Company and the directors would be joint and several to pay the tax and the Parliament also intended that the word 'Tax’ includes penalty and interest and as the burden of proof is shown on the directors to prove that they were not negligent etc., then it follows that the directors can be held responsible to pay penalty and interest when the company was liable to pay the penalty and interest. The non-obstante clause with which Section 179 starts shows that the provisions of Company Act 1956 will not come in the way of fastening the liability created by Section 179 on the directors and it also shows that right from the beginning, there was such intention of the Parliament. The Court is expected to keep in mind some principles of interpretation when such point comes for interpretation. The language of each provision may be restricted to its own object. Many a times when there are two provisions, both the provisions can be allowed to run in parallel lines though there may be conflict on the surface. The Court needs to interpret the statute in such a way that the provision is not rendered meaningless. If the Court gives only limited meaning to a provision it may result in non-compliance of the provisions in entirety and to that extent, the intention of the Legislature gets defeated. In the present matter, in view of the explanation given and also the intention, which can be gathered from Section 179 itself, it can be said that the word “Tax” used in Section 179 was to be used also for penalty and interest. If the word “ Tax” is not read in that way, there will be loss of interest and penalty to the State Exchequer. The provision is made to see that the amount is recovered from the directors when the company is not able to make the payment of the amount of liability. The word used in “enactment” is important, but the context is no less important and the definition clause does not necessarily apply in the same context in all the provisions of the statute and it can be ascertained as to whether in particular provision, meaning to that word is in excess than given in the definition. In the present matter also, unless such interpretation is made, the provision of Section 179 will not become meaningful in entirety. Further, there is one more circumstance like, the same procedure is provided for recovery of tax, penalty and interest and it is up to the directors to show that they were not negligent and there are the grounds of defense for them as provided in Section 179. The aforesaid interpretation also allows to hold and interpret that the provisions of Sections 170, 177, 188A and 189 are only enabling provisions. They cover specific situations mentioned in those Sections and the Parliament had no other intention for making such specific provisions. Those provisions cannot be read to ascertain the scheme of the Act.
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2019 (3) TMI 1264
Assessment of trust - funds received from abroad - transfer of funds and utilization of funds received from abroad - assessee is a Pastor and running a religious society - AO has treated the entire amount received by the assessee as a professional income in his individual capacity and the same is added to the total income of the assessee - HELD THAT:- The assessee has not established a fact that the amounts received by the assessee from abroad have been transferred to the society for the purpose of construction of the building and maintenance of church. Therefore, we find that the assessee failed to discharge the burden casted upon him to show that the funds received from abroad to his individual savings account and subsequently by withdrawing the amount, the same has been transferred to the society. Therefore, we are of the opinion that the AO as well as CIT(A) rightly made the addition. We find no infirmity in the order of the CIT(A). Thus, this appeal filed by the assessee is dismissed. Receipt of gifts from abroad - HELD THAT:- Assessee has not established a fact that the funds received by the assessee have been transferred to the society for the purpose for which the funds are received. We find that the assessee failed to discharge the burden casted upon him to show that he has transferred the funds from his personal account to the society. His explanation is that on 01/02/2004 the entire amount was withdrawn and handed-over to the society for the purpose for which it is received. There is nothing available on record what is the work carried by the society and what is the expenditure incurred - Entire transaction is not a genuine transaction. Therefore, we find no infirmity in the order passed by the ld. CIT(A). Thus, this appeal filed by the assessee is dismissed.
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2019 (3) TMI 1263
Penalty u/s 271(1)(c) - quantum assessment order u/s 143(3) - addition being 25% of alleged bogus purchases - HELD THAT:- The undisputed position that emerges is the fact that the penalty has been levied / confirmed merely against estimated disallowances of 12.5%. Nevertheless, the assessee’s claim has been accepted substantially which do not suggest that there was furnishing of inaccurate particulars of income or concealment of income within the meaning of Section 271(1)(C). Therefore, the factual matrix does not inspire to concur with the stand of first appellate authority. Hence, we delete the impugned penalty. - Decided in favour of assessee.
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2019 (3) TMI 1262
Penalty u/s 271(1)(c) - income admitted by the assessee and surrendered to tax as undisclosed income during the search and seizure action - assessee filed return of income U/s 139(1) - assessee contented that income disclosed in the return of income filed U/s 139(1) of the Act, though the same was claimed as exempt U/s 10(38) of the Act, therefore, it is not a case of concealment of particulars of income or furnishing inaccurate particulars of income - long term capital gain was already declared in the original return of income filed U/s 139(1) and was also duly recorded in the books of account - HELD THAT:- In the case in hand when the assessee already furnished return of income before the date of search and also declared long term capital gain then none of the conditions as prescribed under clause (a) (b) are satisfied so as to bring the case of the assessee in the mischief of Explanation 5A to Section 271(1)(c) of the Act. The transaction of purchase and sales are not off market but at the floor of the Stock Exchange which can be duly verified from independent source without any influence of the assessee. Hence, the documents produced by the assessee are the evidence which cannot be manipulated and also can be verified from the independent sources. Once the assessee has produced all these documents to establish the genuineness of purchase and sale of transactions of shares through Stock Exchange than the mere disclosure and surrender of income would not lead to the conclusion that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. If the transactions are accepted as genuine and are already declared in the return of income filed U/s 139 as well as duly recorded in the books of account then long term capital gain arising from the sale of listed shares is exempted U/s 10(38) of the Act. The withdrawal of claim of exemption by the assessee in the statement U/s 132(4) of the Act, ignoring the supporting evidence of genuineness of the claim, would not ipso facto amount to concealment of income or furnishing inaccurate particulars of income. It is undisputed fact in this case that the impugned income subjected to the assessment is only income which is surrendered by the appellant during the search and also disclosed in return of income filed under section 153A. There is no corroborative evidence/material /document in support of income so surrendered and offered for taxation and the same is only on the basis of the statement of the assessee recorded during search. The declared income is also finally assessed as such. Thus the penalty levied on this account under section 271(1)(c) is not sustainable and accordingly the same stands as cancelled. See AJAY TRADERS VERSUS THE DCIT, CENTRAL CIRCLE, ALWAR [2016 (6) TMI 422 - ITAT JAIPUR] - Decided in favour of assessee
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2019 (3) TMI 1261
Disallowance u/s. 14A r.w.r. 8D towards expenditure incurred in relation to income not includible in total income - HELD THAT:- As decided in assessee's own case it is very clear that the assessment for the assessment year 2010-2011 onwards, the disallowance u/s 14A should be made under Rule 8D by the A.O. In the impugned assessment year, i.e., 2009-2010, the CIT(A) has rightly upheld the order of the A.O. - decided against assessee. Disallowance of deduction of special reserve u/s. 36(1)(viii) - assessee had not advanced any loan as long term finance for development of housing in India, industrial or agricultural development or development of infrastructure facility in India - CIT(A) allowed deduction u/s. 36(1)(viii) of the Act for the income generated from advancing loans to industrial or agricultural development and development of infrastructure facility in India and upheld the action of the Assessing Officer in so far as the disallowance of the claim of the assessee for advances given for development of housing is concerned u/s. 36(1)(viii) - HELD THAT:- Being a Banking Company, it is clear that the assessee is a Specified entity within Clause (iii) of Explanation (a) to Section 36(1)(viii). Amendment provided the deduction to National Housing Bank. But the amendment also substituted the previous words with words 'Development of Housing' which has to be interpreted in its plain dictionary meaning in absence of any definition given. We cannot read into law anything that is not specifically provided therein. Construction/purchase of individual houses does not tantamount to Housing Development. Hence, we uphold the action of the lower authorities in so far as the disallowance of the claim of the assessee for advances/loans given for Development of Housing is concerned. No deduction shall be allowed to assessee u/s 36(1)(viii) for the amount claimed by assessee in respect of advances/loans given for individual houses. Deduction u/s 36(1)(viii) computation - as per DR assessee had not advance any loan for such purposes - HELD THAT:- No infirmity in the order of the CIT(A) in granting relief to the assessee u/s. 36(1)(viii) of the Act with regard to providing long term finance for industrial or agricultural development or development of infrastructure facility in India and the same is confirmed. Interest contemplated under Sections 234A, 234B and 234C is mandatory in nature. In view of the fact that the appellate authorities have considered the matter based on "the judgment of the Supreme Court ANJUM MH GHASWALA AND OTHERS [2001 (10) TMI 4 - SUPREME COURT], this issue is also answered against the appellant Addition on account of depreciation claimed on ‘Held to Maturity’ category investments - HELD THAT:- As decided in assessee's own case held that the depreciation on investment which are "Held to Maturity' and forming part of stock-in-trade is entitled to claim the same as a deduction. - decided against revenue
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2019 (3) TMI 1260
Revision u/s 263 by CIT-A - Nature of expenditure - revenue v/s capital expenditure - land maintenance expenditure - erroneous or prejudicial to the interest of the revenue - HELD THAT:- The expenditure that the assessee has incurred is on account of labour charges at the factory for cleaning, removal of waste and increasing vegetation. The expenditure was incurred wholly and exclusively for carrying on the business of the assessee-company in compliance with the directions of the Kerala State Pollution Control Board. The expenditure is only revenue in nature and hence there is no error in the assessment order. Insofar as the expenses incurred for the Childrens Park, we notice that it is a periodic maintenance for the upkeep of the park and not a capital expenditure. The expenditure is revenue in nature and wholly and exclusively for the purpose of the business and hence there is no error in the assessment order. The Cochin Bench of the Tribunal in the case of Acumen Capital Marketing (I) Ltd. [2017 (6) TMI 61 - ITAT COCHIN] had held that in order to invoke the provisions of section 263 of the I.T.Act, the assessment order has to be erroneous and such order has to be prejudice to the interest of the revenue - we are of the view that land maintenance expenses incurred and debited to the P & L account is clearly being revenue in nature, the assessment order cannot be stated to be erroneous. - Decided in favour of assessee.
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2019 (3) TMI 1259
Levy of penalty u/s 271D - violation of the mandate u/s 269SS - Advances received from customers for transfer of immovable property - advances to promoter for day to day expenditure - advances received by the assessee were found to be genuine in such assessment - amendment by Finance Act, 2015 in Section 269SS w.e.f. 01.06.2015 - HELD THAT:- Advances or other receipts of money in relation of transfer of immovable property, whether or not such transfer took place, came within the ambit of Section 269SS only w.e.f. 01.6.2015. Thus in our opinion receipts of cash by the assessee as advance against sale of flats were not covered u/s.269SS for the impugned assessment year. Coming to the second part of the cash receipts received from the promoters of the assessee company, explanation given by the assessee was never found to be incorrect. Nothing has been brought on record by the Revenue to show that the receipts were superfluous in nature and not for the business of the assessee. Had it been so, it would have come out in the scrutiny assessment done for the impugned assessment year. Admittedly, there were no adverse findings in such scrutiny. Hon’ble Jurisdictional High Court in the case of Idyayam Publications Ltd [2006 (1) TMI 97 - MADRAS HIGH COURT] has clearly held that cash transactions in the current account of a company with its promoters, where such current account was a running one, could not be considered as loan or advances. There is no case for the Revenue that assessee had not produced ledger before AO during the course of assessment proceedings or that the accounts of the promoters in the books of the assessee were not in the nature of funds introduced for the running of its business. Hence we are of the opinion that advances received from the promoters in cash through their respective current accounts could not be considered as loan or advances coming within the ambit of Section 269SS of the Act. - Decided in favour of assessee.
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2019 (3) TMI 1258
Addition u/s 68 - unexplained cash credit - AO disbelieving the genuineness of the loan transactions treated them as unexplained cash credit - in the bank account of the lenders there are cash deposits prior to issuance of cheque to the assessee - Addition based on doubt of creditworthiness of the lenders - statements given under oath by the lenders - assessee has not paid interest on the loan to the lenders - HELD THAT:- Both the lenders have appeared before the Assessing Officer in the course of assessment proceedings and have categorically stated on oath that they have advanced the loans to the assessee. The aforesaid statements given under oath by the lenders have not been proved to be false by the Assessing Officer. Merely because in the bank account of the lenders there are cash deposits prior to issuance of cheque to the assessee and further the income returned by the lenders are not substantial, it cannot be presumed that the lenders did not have the creditworthiness to advance the loans to the assessee. The assessee has filed the balance sheet of the creditors to demonstrate availability of fund. Further, the lenders are income tax assessees and filing their return of income regularly. The loan transactions have also been reflected in their return of income for the concerned assessment year. Nothing has been brought to our notice by the Department to indicate that the loan transactions have been disallowed or doubted in case of the lenders. Therefore, merely on presumption and surmises, it cannot be held that the lenders did not have the creditworthiness. The assessee has not paid interest on the loan to the lenders is factually incorrect. On a perusal of the bank account copy furnished in the paper book we have noticed that the assessee has regularly paid interest on the loan advanced. Merely because the lenders have not shown the interest income in their return of income, does not mean the assessee has not paid interest. It is also seen that the assessee has repaid the loan amount to the lender though subsequent to the date o the assessment order - assessee has discharged the primary onus cast upon him to prove the genuineness of loan transaction as contemplated under section 68 - Decided in favour of assessee.
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2019 (3) TMI 1257
Rectification of mistake u/s 154 - deduction claimed towards interest expenditure u/s 57 - HELD THAT:- Assessee filed an application under section 154 of the Act before learned Commissioner (Appeals), however, as it appears, the said application was rejected by learned Commissioner (Appeals) in a mechanical manner without affording an opportunity of being heard to the assessee and without verifying the evidences furnished by the assessee. Be that as it may, it is the specific contention of the assessee from the assessment stage itself that the actual interest received by him from Tinco Chemicals is ₹ 68,277, and not ₹ 6,08,542, as reflected in the return of income. Since the aforesaid claim of the assessee has not been properly verified either by the Assessing Officer or learned Commissioner (Appeals) it requires to be restored to the Assessing Officer for verifying assessee’s claim about the actual amount of interest received from Tinco Chemicals. The Assessing Officer is directed to verify the revised computation of income and other supporting evidences filed by the assessee with regard to the actual interest income received from Tinco Chemicals. If on verification of evidences filed by the assessee the claim is found to be correct, the AO should compute the interest income of the assessee as per the revised computation of income. - Appeal allowed for statistical purposes.
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2019 (3) TMI 1256
Penalty levied u/s 271(1)(c) - claim of deduction u/s.54 - Tribunal while deciding quantum additions had granted relief to the assessee based on facts and circumstances of the case held that the gains arising from sale of property were long term capital gains and the assessee is entitled for deduction u/s 54 - HELD THAT:- The quantum additions have been decided in favour of the assessee by tribunal [2016 (8) TMI 60 - ITAT MUMBAI] wherein gains arising on sale of property were held to be long term capital gains chargeable to tax in AY 2012-13 and not in AY 2011-12 and tribunal further held that the assessee is entitled for deduction u/s 54 of the 1961 Act meaning thereby adverse findings of the AO in quantum are reversed by tribunal. Since, the tribunal has held that gains earned by the assessee on sale of property are long term capital gains chargeable to tax for the AY 2012-13 and further that the assessee is entitled for deduction u/s 54 of the 1961 Act, the whole edifice on which penalty u/s 271(1)(c) was levied by the AO goes. The said order of the tribunal has attained finality as appeal filed against the said order before Hon‟ble Bombay High Court has been dismissed as not pressed owing to low tax effect, consequently penalty levied by the AO u/s 271(1)(c) cannot stand. - decided against revenue
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2019 (3) TMI 1255
TDS u/s 195 - liability to pay the interest u/s 201(1A) - TDS liability - HELD THAT:- Writ Petition has already been admitted. We notice that the petitioner has kept a sum of ₹ 10 Million US Dollors in escrow account which would be by and large sufficient to meet with its TDS requirement if ultimately so arises. Pending the petition, allowing the department to proceed further with the hearing of show cause notices under Sections 201(1) and 201(1A) of the Act, would lead to multiplicity of the proceedings. In order to avoid this and also in order to protect the interest of the Revenue, the Civil Application is disposed of with following directions:- i. Pending the Writ Petition, further proceedings in connection with the notices issued to the petitioner under Sections 201 and 201(1A) of the Act shall stand stayed; ii. The petitioner shall maintain the said sum of ₹ 10 Million US Dollars in escrow account and shall not withdraw the same. iii. The Writ Petition be posted for hearing on 14th June, 2019.
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2019 (3) TMI 1254
Revision u/s 263 - debatable issue - non-compete and trademarks - capital receipt - erroneous or prejudicial to the interest of the Revenue - intangible assets like trademark, brand names etc. were self-generated and not acquired from others could be brought to tax only with effect from 1st April, 1998 - Applicability of amendment u/s 55(2)(a) - ITAT held that The non-compete fee was not taxable in law and the trademark was self generated is not taxable in AY 1995-96 - HELD THAT:- Section 55(2) (a) of the Act was amended by the Finance Act, 2001 with effect from 1st April, 2002 whereby there was deemed to be a nil cost of acquisition in respect of a self-generated trademark. Consequently, from AY 2002-03 onwards any amount received for assignment/transfer of a trademark would be taxable under capital gains . This amendment was clearly prospective. Both receipts i.e. the non-compete fee and the payment towards assignment of trademark were disclosed by the Assessee in Part-IV of the return for the AY in question. With the trademark being self-generated and not acquired for consideration, the cost of acquisition of the said marks could not be substituted as the market value as on 1st April, 1981 so as to attract capital gains. PNB Finance Limited v. CIT [2008 (11) TMI 7 - SUPREME COURT]followed - decided in favour of the Assessee The view taken by the AO on the nature of the non-compete fee and the consideration for assignment of trademark was a plausible one. There was no occasion for the CIT to assume jurisdiction under Section 263 of the Act. In PCIT v. Delhi Airport Metro Express Pvt. Ltd. [2017 (9) TMI 529 - DELHI HIGH COURT] it was held that the CIT had to come to a prima facie finding as regards the merits of an issue before seeking to set aside the same and remanding it to the AO for de novo adjudication. That is absent in the case on hand - answered in favour of the Assessee
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2019 (3) TMI 1253
Deduction of TDS on salary u/s 192 - Nuns, Sisters, Missionaries and Fathers are bound by the Canon Law for their vows of poverty to the Christ and that they cannot be taxed in respect of the Grant-in-Aid or salary received from the State Government by respective school or educational institutions - Ld. Single Judge held that Assessee Institutions and the Missionaries, discussing the Canon Law in detail and held that no income tax can be deducted at source from the salaries and other monetary benefits paid to these persons - religious denomination under Article 26 of the Constitution of India - right to practice a religion as guaranteed under Articles 25 and 26 of the Constitution of India HELD THAT:- provisions of Income Tax Law are dry, plain and simple, a-political, a-religious in character. In fact, except the provisions contained in Section 11 which provides for income from property held for charitable or religious purposes to be exempt, subject to compliance of the conditions and registration by the registered Trusts etc., there is no exemption available even to the charitable or religious institutions themselves, who have to secure registration as such and then, their income and application of income for charitable or religious purposes only is regulated strictly in accordance with the provisions contained in Chapter III of the Act. These provisions have no application to the individual Nuns, Sisters or Missionaries so as to claim any exemption from income tax. As far as the provisions with which we are concerned, namely Sections 15 and 192 of the Act, we do not have an iota of doubt that these provisions have nothing to do with religion or any other special status of the person receiving the income described to be salary by the payer of the same. Diversion of income at source - Religious binding character of the Nuns and Missionaries to make over even their salary receipts to the Institution, Church or Diocese amounts to diversion of income at source, by overriding title in favour of the Institution, Church or Diocese towards such religious obligations or is merely an application of their salary income taxable in their hands and such application of income can obviously be made only after meeting their tax obligations under the Income Tax Act a priori - applicabilty of old Circular issued on 24th January 1944 prior to Independence HELD THAT:- salary in question was not directly received by the Congregation or Religion by overriding diversion of title, but were paid by the State to the Teachers who are Nuns or Missionaries and thereafter, it might have been applied or made over to the Church or Diocese or the Institution run by them. Merely by illustrative view of the entry shown as deposit of salary in common bank account or such Nuns or Missionaries not signing the receipt of salary in the Registers maintained by the Institution itself is not sufficient to prove such facts for all such persons belonging to the said class and the same cannot be taken as a proof of diversion of their salary income by overriding title in favour of the Institution or the Religion. The salary is paid under the contract of employment with which Educational Institution or the Church or Diocese is not even a privy to such contract of employment qua the State Government. State Government as a Payer of salary under Income Tax Act is not bound by any Religious tenets or provisions of Canon Law. It has nothing to do with the Religious freedom as guaranteed under Articles 25 and 26 of the Constitution of India. In the present case, the State Government cannot be said to be bound to pay such salary in favour of the Church or Diocese in place of Teachers concerned who may be Nuns or Missionaries and who may even leave and come out of such Religious Order on their own volition. On the other hand, the State Authorities, if they do not deduct tax at source on such salary payments, may be held guilty of not following the provisions of Income Tax Act rendering them to pay penalty and even face prosecution. Therefore, neither the Income Tax Department nor the State Government have anything to do with the religiious character of the Institution, may be Teachers or Nuns or Missionaries and therefore, they cannot take a stand for not making the tax deduction at source in view of the Canon Law. In our opinion, with great respects, the learned Single Judge has taken an impermissible route of Canon Law to interpret the provisions of Income Tax Law and holding such Tax Law to be of secondary importance, vis-a-vis the Canon Law applicable to the individual Teachers belonging to the class of Nuns, Missionaries or Sisters. Therefore, we are of the considered opinion that the present writ appeals filed by the Union of India deserve to be allowed and the order of the learned Single Judge under the appeal deserves to be set aside.
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2019 (3) TMI 1252
Levy of penalty u/s 271C - TDS default u/s 194C - deduction of TDS at the year end - assessee is consistently following the practice of arriving the TDS liability at the end of the year since, the material supplies are involved in the contract and material supply would be more than the payments to the contractor during the interim period thus the assessee contended that the assessee should not be treated as offender for non-deduction of tax at source - default u/s 201(1) - HELD THAT:- Assessee was supplying the material to the contractor throughout the year and at the end of the year, after receiving the bills, the assessee is making the payments to the contractor duly deducting the tax at source and remitting to the Govt. account and no default is committed. From verification of the account copy of M/s S.V.Constructions, we observe that the assessee has continuously supplied and material and there was no payment made by the assessee to the contractor till 31.12.2013. However, on 31.12.2013, the assessee passed a journal entry for a sum of ₹ 3,21,77,600/- against which the material supplied was ₹ 5,96,72,210/-. Since the assessee had duly deducted the tax at source u/s 194C as at the end of the year and remitted to the Govt. account, the assessee’s case is squarely covered by the decision in the case of CIT-XVIII, Delhi Vs. Bank of Nova Scotia [2016 (1) TMI 583 - SUPREME COURT]. In the instant case, as observed earlier, there is no doubt that the assessee has duly deducted the TDS and remitted to Govt. account. - Decided against revenue
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2019 (3) TMI 1251
TDS u/s 194C - TDS liability on freight expenses - Additions u/s 40(a)(ia) - person responsible for paying or crediting the amount - primary onus on the recipient to furnish his PAN to the payer and the payer, on receipt of such PAN number, is under statutory obligation not to deduct TDS on such payments - scope of Amendment introduced by Finance Act (No.2) 2009 - HELD THAT:- Statutory obligation to furnish the information regarding receipt of PAN and nondeduction of TDS is a fall out of and consequent of the first statutory obligation to not deduct TDS on receipt of PAN. Merely because there is non-compliance on part of the assessee to furnish the prescribed information to the Revenue authorities, the same cannot lead to a conclusion that the assessee has not complied with the first statutory obligation. There are separate penal provisions for non-compliance thereof and the AO has infact invoked those penal provisions whereby show-cause has been issued to the assessee u/s 234E /271H dated 28.01.2019. In the instant case, once the assessee is in receipt of PAN and has not deducted TDS, it has complied with the first statutory obligation cast upon him and the assessee cannot be penalized for non-deduction of TDS. The provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in the limited context of non-deduction of TDS and the same cannot be extended to ensure that even where the assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because the subsequent obligation in terms of filing of prescribed forms has not been complied with, the assessee should suffer thirty percent of disallowance of the expenditure. As decided in case of Soma Rani Ghosh Vs. DCIT [2016 (10) TMI 55 - ITAT KOLKATA] if the assessee complies with the provisions of section 194C(6), disallowance under section 40(a)(ia) does not arise just because there is violation of provisions of section 194C(7) - u/s 194C(6), as it stood prior to the amendment in 2015, in order to get immunity from the obligation of TDS, filing of PAN of the Payee-Transporter alone is sufficient and no confirmation letter as required by the learned CIT is required. Sections 194C(6) and Section 194C(7) are independent of each other, and cannot be read together to attract disallowance u/s 40(a)(ia) read with Section 194C of the Act - decided in favour of assessee.
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2019 (3) TMI 1250
Commission paid to directors - paid in lieu of dividend or not - increase of commission @15% - whether unreasonable and excessive - Addition u/s 40A(2)(b) - Disallowance u/s 36(1)(ii) - Allegation to evade dividend distribution tax u/s 115-O - Directors paying tax at the maximum rate on income including commission - applicability of Section 198 and 309 of the Companies Act - HELD THAT:- Section 198 and 309 are not applicable to the assessee company as the assessee being neither a public company nor a private company which is the subsidiary of a public company hence are not applicable and neither received any payment beyond the provisions of sub section 1(a) of section 309. As per the Board Resolution maximum commission of 27% over the turnover can be paid to the Directors whereas the total payments is only 1.25% of the value of the export orders achieved by them. AO has not brought anything on record nor gathered any evidence about the contribution of the Directors which goes contra to the payments they received. AO has not brought any comparative cases to determine as to how the commission paid to the Directors is excessive. There is no doubt about the qualifications and contribution of the Directors for obtaining the orders and increasing the turnovers. The payment of commission has been the practice of the company for the past seven years. The Directors who have been receiving the commission are also paying tax at the maximum merchant rate so as the company hence no revenue leakage could also be found based on the tax payments. Even the dividend distribution tax in the hands of the company @ 12.5% and tax free in the hands of the recipient would not be give any credence to the alleged surreptious tax planning. Increase in personal expenses and comparing it with the increase in Directors remuneration cannot be accepted as a methodology to calculate the reasonable remuneration. The company can determine the rates of salary, remuneration, commission as long as it doesn’t infarct any law enforce which is the case of the assessee. Hence we hereby delete the addition made and hold that no interference is called for pertaining to the commission paid by the assessee to the Directors. - Decided in favour of assessee Addition u/s 14A - STT payment, is directly related to the dividend income, disallowance was already made under Rule 8D(2)(i) suo-moto disallowance Rule 8D(2) regarding administrative expenses - HELD THAT:- AO did not examine this plea in nor could find any fault in the claim of the assessee having regards to its account. The interpretation of the AO regarding the applicability of the provisions of Rule 8D is certainly incorrect and not in accordance with the law as interpreted in the case of Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT OF INDIA]. Since the AO did not record any satisfaction on regarding the claim of the assessee having its accounts, the AO was not empowered to invoke Rule 8D at the first place. Accordingly, the action of the AO of making disallowance there under is not justified. Assessee has given details of interest expenses, none of which had any nexus with the dividend income. Accordingly, no disallowance under Rule 8D(2)(ii) was called for. Evidently, the assessee had already made disallowance under sub-clause (i) and (iii) of Rule 8D(2), therefore, no further disallowance was called for u/s 14A. - Decided in favour of assessee Income from trading of shares - Short Term Capital Gains or business income - correct head of income - HELD THAT:- CIT(A) has deleted the addition on a factual ground holding that the assessee has already paid tax @30% on the amount of ₹ 9,36,208/- out of the total profits amounting to ₹ 9,64,305/-. Hence there was no need to convert the capital gains into business income. The balance amount was earned out of sale of securities and mutual funds. Since it was found by the authorities below those deliveries were duly taken and period of holding was substantial, in the absence of any contrary findings on record we hereby decline to interfere in the order of the Ld. CIT(A). Disallowance of Rent - unreasonable payment to related persons - CIT(A) deleted the addition based on the orders in the case of the assessee for the A.Y. 2007-08 and 2008-09 - maintenance charges were included in the rent - HELD THAT:- CIT(A) also held that there was no excessive or unreasonable payment to related persons as per the provisions of Section 40A(2)(b). Since we find that the Assessing Officer has not considered the payment of the maintenance charges, location, and applicability of the provisions of Section 40A(2)(b) and since no evidence regarding unreasonableness of the rent paid has been brought on record we hereby decline to interfere in the order of the Ld. CIT(A).- Decided in favour of assessee Taxability of Keyman Insurance Policy - accrual or receipt basis - HELD THAT:- The proceeds from Insurance company in respect of Keyman Policy will be taxable only on receipt basis. From, the provisions of section 2(24)(xi) read with section 28(vi), it is evident that the amount of bonus on Keyman Insurance Policy is to be taxed on receipt basis only. Hence the addition made by the Assessing Officer taxing the income on accrual basis cannot be held to be valid in the eyes of the law. Hence we decline to interfere in the order of the Ld. CIT(A).- Decided in favour of assessee
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2019 (3) TMI 1249
Reopening of assessment u/s 147 - assessment proceedings u/s 143(3) concluded - disallowance u/s 14A r.w.r 8D - HELD THAT:- The order is ex-facie non-speaking. The Ld. CIT(A) has not considered the objection of the assessee. During the course of hearing, Ld. Counsel for the assessee has taken additional ground against the reopening of the assessment. - matter restored before the CIT(A).
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2019 (3) TMI 1248
Capital gain computation - indexation cost in cases covered by section 49 - previous owner of the property vs present owner of the property - flat received as a bequest from his deceased father - HELD THAT:- By applying the deeming provisions contained in Explanation 1(i)(b) to section 2(42A) the assessee was deemed to have held the asset from January 29, 1993, to June 30, 2003, by including the period for which the asset was held by the previous owner and, accordingly, held liable for long-term capital gains tax. While computing the capital gains, the indexed cost of acquisition had to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. See case of MANJULA J. SHAH (DEAD) [2011 (10) TMI 406 - BOMBAY HIGH COURT] also confirmed by SC [2018 (10) TMI 590 - SUPREME COURT]. The Hon’ble Delhi High Court in the case of Arun Shungloo Trust [2012 (2) TMI 259 - DELHI HIGH COURT] has also held that the benefit of indexation cost of improvement by previous owners in cases covered by section 49 would be allowed. - Decided against revenue.
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2019 (3) TMI 1247
MAT u/s 115JB - jurisdiction of AO to alter the book profit u/s 154 through rectification order - upward adjustment in respect of international transaction regarding 80IC deduction to the book profit of the assessee u/s 115JB - adjustment specified in Explanation (1) section 115JB - HELD THAT:- AO has no jurisdiction to alter the book profit u/s 154 of the Act. On an examination of Explanation (1) to section 115JB of the Act, we find as rightly held by the CIT(A) that there was no clause specified in respect of upward adjustment of international transaction. Regarding the decision in Berkadia Services India Pvt.Ltd. vs DCIT [2014 (11) TMI 840 - ITAT HYDERABAD] as relied by the CIT(A) in its order that the CO-ordinate Bench of Hyderabad Tribunal held that when the income having been finally assessed by the AO as per the normal provisions of the Act, the issue in respect of TP adjustment would become academic in nature. CIT(A) rightly placed reliance on the order of Co-ordinate Bench of Hyderabad Tribunal and as we discussed above, the AO completed assessment under normal provisions of the Act and he has no jurisdiction to add upwards adjustment as recommended by the TPO to the book profit. - decided against revenue
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2019 (3) TMI 1246
Nature of receipt - Capital Receipt not chargeable to tax or business income as revenue receipt - sum received on transfer of an asset - sale of business - true consideration for the payment of US dollars to company - scope of “coining of the concept” - arrangement of non compete Agreement - “non-complete” by the assessee clause in the business purchase agreement with Trend Micro - as per assessee transfer of an asset is a capital receipt not chargeable to tax since the asset was a self-generated asset - whether amount received by the assessee from Trend Micro USA is towards the sale consideration of a self generated asset by way of a new concept? - HELD THAT:- If “coining of the concept”, as assessee puts it, was indeed so valuable that it would, on standalone basis, fetch the assessee ₹ 10 crores, there could not have been any logic in allowing a company to commercially exploit or develop the same for 7 years, without any royalty, consideration and arrangement for sharing the results of its commercial exploitation. The terms of the provisions of the agreement do not make commercial sense at all. What is being shown in this agreement, in our considered view, not real. Apart from the fact that, as noted earlier, on the face of it, it is an agreement without consideration, it does not appear to be a legally enforceable contract anyway, it is completely at variance with the ground realities of the commercial world. All these facts taken together raise serious doubts about the claim of the assessee with respect to the true consideration for the payment of US $ 15,75,000. We donot have sufficient material on record to come to the conclusion that this payment was indeed “coining of an idea”, reproduced earlier, and, in any event, if at all, the assessee had one important and significant right that the assessee gave away in this consideration was his non compete right. As learned CIT(A) has rightly observed, “non-complete” by the assessee clause in the business purchase agreement with Trend Micro was clear thrust and a significant obligation by the assessee for which impugned payment was made to the assessee. As clause 6.6 of the business purchase agreement clearly states, “an original counterpart of the noncompetition agreement duly executed and delivered by Tandon (i.e. the assessee)” is a was delivered, contemporaneously with or prior to the execution of business purchase agreement. Clause 9.1 (a) of this agreement further provides unambiguous thrust on non competition agreement by the assessee. It is for the assessee to decide as to what is appropriate for justifying his case, and when he does not file a document, with specific prayer for admission of such additional evidence, he cannot have a grievance about not been given an opportunity to furnish that evidence. In any case, whatever documents have been placed before us donot help us conclude that the amount received by the assessee from Trend Micro USA is towards the sale consideration of a self generated asset by way of a new concept. It is only elementary that the onus is on the assessee to demonstrate that an income is exempt from tax, and that onus is clearly not discharged by the assessee. There is no escape from the taxation of these receipts in the hands of the assessee. The erudite arguments of the learned counsel, therefore, donot come to the rescue of the appellant. We are unable to accept the plea of the assessee that the impugned receipt is in the nature of an exempt income. We are, therefore, in considered agreement with the conclusions arrived at by the learned CIT(A). In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. - Decided against assessee.
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2019 (3) TMI 1245
Unexplained cash credit under section 68 - genuineness of the loan transaction and creditworthiness of the creditors - discharge of onus of proving the genuineness of loan transaction - HELD THAT:- The assessee has not only furnished the confirmations from all the loan creditors but he also produced various other documentary evidences like income tax returns of the loan creditors indicating their PAN details, bank statement copies, ledger account copies, etc. It is evident, AO has disbelieved the unsecured loan with some general observations like loan confirmations are not in the prescribed format, creditworthiness of the creditors not proved, etc. On a specific query from the Bench the learned Departmental Representative submitted that there is no loan confirmation form / format prescribed in the statute. Therefore, the aforesaid allegation of the Assessing Officer is totally irrelevant. As regards the genuineness of the loan transaction and creditworthiness of the creditors are concerned, it is a fact on record that in course of assessment proceedings, the assessee has not only furnished loan confirmations of all the creditors but has also furnished their income tax return copies, bank account copies, Balance Sheet, ledger account copies, etc. On a perusal of these documents it is evident that all the loan transactions were carried out through proper banking channel. Moreover, the bank account copies also reveal regular transaction. The Balance Sheet and Capital Account of the creditors also reveal that loan transactions are duly reflected in them. AO has not conducted any independent enquiry with the loan creditors or the concerned AO where the creditors are assessed or even with the bank to ascertain the genuineness of the loan transactions. No material has been brought on record by the Assessing Officer to prove either the fact that the creditors do not have creditworthiness or the loan transactions are not genuine. Merely on presumption and surmises the Assessing Officer has treated the loan transactions as unexplained cash credit under section 68 of the Act. Unfortunately, Commissioner (Appeals) has concurred with the view expressed by the Assessing Officer in a mechanical manner without properly evaluating the evidences furnished by the assessee or even conducting any enquiry at her level, though, she is empowered to do so. After overall consideration of facts and material available on record, we are of the view that the assessee has discharged the onus of proving the genuineness of loan transaction - Decided in favour of assessee.
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2019 (3) TMI 1244
Addition u/s 68 - unsecured loans and advances - lender companies ignored summon issued to them u/s 131 - genuineness of the transaction - discharge on initial onus - In spite of several opportunities neither did the assessee produce the Principal Officers of the three lender companies in spite of summon issued to them u/s 131 - HELD THAT:- Assessee has filed copy of Income Tax return, Bank Account confirmed copy of account from its books of accounts, bank statement and copy of Form 16A to prove the fact that assessee has deducted TDS on interest payment to the aforesaid party. When assessee has duly discharged its initial onus by proving the identity of the creditors by filing their copy of ITR, Bank Accounts, the addition u/s 68 of the Act cannot sustain merely on the ground that assessee has failed to produce them despite issuance of summons u/s 131 of the Act. In Dy. Commissioner of Income Tax vs. Rohini Builders ROHINI BUILDERS. [2001 (3) TMI 9 - GUJARAT HIGH COURT] decided the identical issue in favour of the assessee that when assessee has discharged initial onus lay on it in terms of Section 68 by providing their complete address, bank statement and the assessee has also proved on record confirmed copy of account of his creditors from its books of account, bank statement and copy of form 16A showing that assessee has deducted TDS on interest payment to the creditors addition u/s 68 of the Act is not sustainable. More over assessee has established the identity and creditworthiness of the creditors as well as genuineness of the transaction by bringing on record the fact that the loans in question were taken and repaid through banking channel and TDS thereon was duly deducted and all the three creditors were assessed to Income Tax.- Decided in favour of assessee.
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2019 (3) TMI 1243
Deemed dividend addition u/s 2(22)(e) - business exigency - Norman business transactions or otherwise - assessee firm is holding more than 20% share in the lender company through two of its partners - case selected for scrutiny and notice u/s 143(2) and 142(1) - HELD THAT:- In this case, CIT(A) has recorded categorical finding that the transactions between the assessee and M/s Arbes Tools Pvt Ltd has arisen out of normal business transactions, for which the assessee has filed comparative purchases for last three years, as per which, the assessee is regularly dealing with the company for purchase of raw materials. Once a particular transaction is not in the nature of loans and advances, then the provisions of section 2(22)(e) could not be applied. Therefore, to that extent, we are in agreement with the findings of Ld.CIT(A). Insofar as the finding of CIT(A) with regard to the beneficial shareholder and registered shareholder and further, only an amount received by a shareholder from a company where he is holding beneficial interest is taxable as deemed dividend, is devoid of merit in view of the decision of Gopal And Sons, HUF vs CIT [2017 (1) TMI 331 - SUPREME COURT] wherein held that even if HUF is not a registered shareholder in lending company, advances / loans received by HUF is taxable as deemed dividend u/s 2(22)(e) if karta shareholder has substantial interest in HUF. There is no dispute with regard to this legal proposition rendered by the Hon’ble Supreme Court. To that extent, the findings of facts recorded by the CIT(A) are incorrect. Fact remains that the assessee has succeeded in his attempt on the issue of business exigency, where the assessee has filed complete details to prove that the transactions between the assessee and the lending company is arising out of normal commercial transactions for purchase of goods. Therefore, we are of the considered view that the AO was erred in treating loans received from lending company as deemed dividend u/s 2(22)(e) - Decided against revenue.
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2019 (3) TMI 1242
Reopening of assessment u/s 148 - validity of the reopening proceedings - addition u/s 68 - non-filers of return - reopening based on AIR information - non-compliance before the AO and CIT(A) - admission of additional evidence - HELD THAT:- The assessee is not a tax payer and has made huge deposits in her bank account maintained with Syndicate Bank. The above information was received from the CIB Kanpur. The Assessing Officer had given due opportunity to the assessee to explain the source, but, there was no compliance for which the Assessing Officer, after recording the reasons and after obtaining due permission from the Pr. CIT, Meerut issued notice u/s 148. Under these circumstances, the reassessment proceedings initiated by the Assessing Officer cannot be held as invalid. If the plea of the assessee that in case of a non-filer of tax returns, assessments cannot be reopened on the basis of AIR information that assessee has made huge cash deposits in the bank account is accepted, then the provisions of section 147 and 148 in the statute will become redundant. Accordingly, the grounds relating to validity of reassessment proceedings are dismissed. Assessee admittedly did not appear before the Assessing Officer. However, before the CIT(A) the assessee explained the reasons for non-appearance which was due to death of the father of the counsel of the assessee. CIT(A) should have accepted the additional evidences filed before him showing that such deposits were out of sale of certain agricultural lands on different dates and could have obtained a remand report from the A.O. Since there was non-compliance before the Assessing Officer and ld.CIT(A) did not accept the additional evidences, therefore, considering the totality of the facts of the case and in the interest of justice, deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate her case. - Appeal filed by the assessee is partly allowed for statistical purposes.
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Customs
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2019 (3) TMI 1241
Permission to operate as an Export Oriented Unit - Non-compliance of the obligations arising under the Foreign Trade Policy - failure to fulfill the obligations arising out of the Letter of Permission and the standard conditions - unit shall export its entire production, excluding rejects - unit not commenced production of their own and was merely carrying out job works for entities in the domestic tariff area or the local market though it had availed of duty free imports and also exemption u/s 10(B) of the Income Tax Act. Held that:- There is no denying fact that the petitioner has failed to comply with any of the obligations that have been imposed on it under the Letter of Permission. The Letter of Permission, treating the unit as an Export Oriented Unit, being a conditional one subject to the condition imposed under Clause (vi) of paragraph 2 of the letter, this Court does not find any error or perversity in the reasoning assigned by the Original Authority or the Appellate Authority to arrive at the conclusion rendered by them. No material is demonstrated or placed before this Court by the petitioner for this Court to conclude contrary to the finding of fact rendered by the Original Authority as confirmed by the Appellate Authority. Petition dismissed.
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2019 (3) TMI 1240
Smuggling - Gold - Cigarettes - unaccompanied baggage imported in container - Absolute confiscation - penalty - Held that:- Although the said container may well have been brought from Colombo to Tuticorin Port at the behest of the D.R.I, nonetheless, it had been initially destined for Tuticorin Port only. Although the connection sought to be established between the second container CAXU 3151576 and the appellants is not absolutely watertight and absolute, nonetheless, enough linkage has been established between these two persons and the gold and cigarettes that have been attempted to be smuggled in the said container. There is a preponderance of probability that in this case also, that had the two appellants been footloose and free, they would very well have filed import documents for the container load, moved the container out of the port and taken it to their godown for possible removal replacement / swapping of goods and / or container. The acts and omissions on the part of Mohammed Rabeek and Rahamath Ali will attract penalty for abetting the said attempted smuggling under Section 112 of the Customs Act, 1962. However, the quantum of such penalty will have to be commensurate not only to the degree of proof that the investigation has been able to throw up against these two persons but also / to the degree of complicity and abetment of each of them. Undoubtedly, there is a needle of suspicion that had the earlier container TLXU 2021855 not been seized and Shri Mohammed Rabeek and Shri Rahamath Ali not been in judicial custody, they would have caused clearance of the second container CAXU 3151576 also, and facilitated Mr.Roselan on the smuggling gold and cigarettes etc. from Malaysia and handed over the same to persons as instructed by Roselan. But it remains only a needle of suspicion. As mentioned earlier, statements from Rabeek have been recorded after the seizure from container CAXU 3151576 which in any case have been retracted subsequently. The main linkage that now connects Mohameed Rabeek with the seizure from the second container is the exchange of e-mails between Roselan and him with regard to attempt of Roselan to call back the second container from Colombo back to Malaysia. And from a legal view point, a needle of suspicion is not watertight proof or incontervertible evidence - The requests for cross examination made by both Rabeek and Rahamath Ali were also not acceded to. These inadequacies in the investigation and adjudication proceedings only serve to dilute the degree of abetment and complicity that has been alleged in the SCN. In the circumstances, the penalty of ₹ 25 lakhs is unnecessarily high and not commensurate with all these factoids. In our view, interest of justice will be more than adequately served by modifying and reducing the penalty imposed on Shri Mohammed Rabeek under Section 112 of the Customs Act, 1962 to ₹ 5,00,000/-. Penalty imposed on Shri Rahamath Ali - Held that:- There is no allegation that any such e-mails have been exchanged between Roselan and Rahamath Ali. Rahamath Ali has also pointed out that he was not informed by Mohammed Rabeek from where the contraband goods originated, who only was in touch with Roselan or anyone else in Malaysia through e-mail or phone. He has also alluded to the letter of Roselan dt. 3.10.2016 where latter has stated that he was never in touch with Rahamath Ali and that he never spoke to him - the penalty of ₹ 25,00,000/- imposed on Shri Rahamath Ali under Section 112 ibid is undoubtedly high and that penalty of ₹ 2,50,000/- would meet the ends of justice in this case. Penalty imposed on Bin Dawood Cargo & Travels, Chennai - Held that:- Penalty is set aside since the penalty has already been imposed on its proprietor of Shri S. Rahamath Ali. Application disposed off.
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2019 (3) TMI 1239
Smuggling - foreign currency - confiscation - penalties - Held that:- The Appellate Authority has extended the benefit to the respondent by observing that the mere possession of foreign currency cannot result in application of the provisions of the Section 111 of the Customs Act and the Revenue is under an onus to prove that the said foreign currency was smuggled into the country. He also appreciated the respondent s stand that foreign currency is not one of the notified items under Section 123 of the Customs Act and as such onus to prove their smuggled nature is on Revenue. In the absence of any evidences to that effect, he set aside the order of the Original Adjudicating Authority. Revenue has not advanced any evidence to show that the foreign currency, in question, was smuggled into the country. As such, the Commissioner (Appeals) is fully agreed upon that in the absence of such evidences, confiscation of the same cannot be uphold, neither penalties can be imposed upon respondents. Appeal dismissed - decided against Revenue.
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Insolvency & Bankruptcy
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2019 (3) TMI 1238
Approval of Resolution Plan - corporate insolvency proceeding - grievance of the Appellant is that the Adjudicating Authority has granted huge Income Tax benefits to the 2nd Respondent- ‘Synergies Castings Ltd.’ without impleading the Appellant department as a Respondent to the said proceedings - HELD THAT:- From the plain reading of sub-section (21) of Section 5, we find that there is no ambiguity in the said provision and the legislature has not used the word ‘and’ but chose the word ‘or’ between ‘goods or services’ including employment and before ‘a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, and State Government or any local authority’. ‘Operational Debt’ in normal course means a debt arising during the operation of the Company (‘Corporate Debtor’). The ‘goods’ and ‘services’ including employment are required to keep the Company (‘Corporate Debtor’) operational as a going concern. If the Company (‘Corporate Debtor’) is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax etc., will arise. As the ‘Income Tax’, ‘Value Added Tax’ and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company. For the said reason also, we hold that all statutory dues including ‘Income Tax’, ‘Value Added Tax’ etc. come within the meaning of ‘Operational Debt’. For the said very reason, we also hold that ‘Income Tax Department of the Central Government’ and the ‘Sales Tax Department(s) of the State Government’ and ‘local authority’, who are entitled for dues arising out of the existing law are ‘Operational Creditor’ within the meaning of Section 5(20) of the ‘I&B Code’. No interference is called for against the impugned order challenged in Company Appeal In the other appeal, the statutory dues have been treated as ‘Operational Debt’ and equated them with similarly situated ‘Operational Creditors’, we find no reason to interfere with the impugned order(s) challenged in Company Appeal
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2019 (3) TMI 1237
Corporate Insolvency Resolution Process - existence of dispute - dispute regarding execution, validity and legality of Settlement Agreements is pending before civil court - there is ‘Pre-existence dispute’ prior to the notice served under section 8 of I & B Code - HELD THAT:- A conclusion can be drawn that there is ‘Preexistence dispute’ and was raised by corporate debtor time and again much prior to the notice served under section 8 of I & B Code. It is a fit case to reject the application under section 9 of the Insolvency & Bankruptcy Code, 2016.
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2019 (3) TMI 1236
Corporate insolvency proceedings - Appropriate forum - recovery mechanism - “Regulatory Dues outstanding - whether the non-payment of listing fees is an ‘operational debt’ or a ‘regulatory due’? - scope of operational debt - HELD THAT:- Regulatory dues need not be included in the definition of Operational Debt. Because of this final observation as made in Para 1.20 of the Law Commission Report this Bench is of conscientious view that in spite of the fact that there was a listing agreement executed between BSE with the Corporate Debtor being issuing company, but totally governed and supervised by the regulations issued by SEBI dated 02.09.2015. As discussed supra, the regulatory authority i.e. SEBI is already empowered to execute not only its recovery mechanism, but also enshrined with power to punish the defaulter, hence, the insolvency proceedings shall not be gainful either to the Regulator or the Exchange. As a consequence, the debt in question can also be categorised under the head “Regulatory Dues”. The debt in question thus falls within the ambit of “Regulatory Dues”. Therefore, as a sequel, need not be treated as an operational debt. It is also worth to add in this order that sub-section 3 of section 14 w.r.e.f 06.06.2018 prescribing that the transaction notified in consultation with ‘Financial Sector Regulator’ be not covered under ‘Moratorium’ clauses - keeping in mind the Legislative intent that while applying the “moratorium” as per the provisions of section 14 IBC, vide sub section (3), the provisions of moratorium U/s 14 IBC shall not apply on “Financial sector Regulator”. Had it been not so, the regulator shall be in a disadvantageous position in respect of regulatory dues being treated at par with “Operational Debt” as prescribed under IBC. This view shall put the Financial Sector Regulator at an advantageous pedestal so as to protect the interest of a regulator i.e. SEBI, as defined U/s 3(18) of IBC. As a consequence, the Debtor Company shall not get any shield or protection under the excuse of moratorium in respect of recovery of regulatory dues by the Financial Sector Regulator/SEBI. The right forum to initiate recovery proceedings for non-payment of Listing Fees is not NCLT. In view of above, the petition is hereby ‘Dismissed’ with Liberty to the Petitioner to approach the appropriate forum and take legal steps for which he is entitled to.
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2019 (3) TMI 1235
Corporate Insolvency Resolution Process - consortium finance - Application by lead banker - Applicant bank filed an OA for recovery which is pending before the Debt Recovery Tribunal - HELD THAT:- The Letter of Indian Banks Association dated 19.04.2017, wherein the IBA has clearly stated that the Committee has concluded that the Resolution plan does not meet the stipulations under the S4A Scheme. The respondent is well aware of the same and vide letter dated 21.04.2017 acknowledged the same. Also the rejection of the resolution plan under S4A Scheme was also recorded in the Minutes of Consortium/JLF meeting held on 09.05.2017, wherein it was also declared that the accounts of the Corporate Debtor with all the lenders have been declared as NPA in their respective books/ledgers. Further the members of the consortium have decided to appoint IRP and the same has been duly recorded in the JLF meeting held on 12.06.2018. Since most of the exposure of the Respondent company was by way of consortium finance wherein the applicant was lead bank and there is no bar for the applicant to approach this Hon'ble Tribunal for initiating resolution process without seeking consent of other lenders. As per the circular dated 26.02.2018, all such restructuring schemes have been cancelled/ withdrawn by RBI where implementation had not taken place, including S4A Scheme. All requirements of Section 7 of the Code for initiation of Corporate Insolvency Resolution Process by a Financial Creditor stand fulfilled. - this petition is admitted.
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2019 (3) TMI 1234
Corporate Insolvency Resolution Process - procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the Financial Creditor - applicants had booked a office unit and advanced to the respondent corporate debtor - amount of default as exceeding ₹ 1 lakh - complete application under Section 7 of the Code for initiative - whether respondent corporate debtor has committed default in payment of the financial debt? - HELD THAT:- The present application under Section 7 of the Code for initiative Corporate Resolution Insolvency Process has been filed by petitioner financial creditor in Form-1 in terms of Rule 4 of Insolvency and Bankruptcy (application to Adjudicating Authority) Rules, 2016 accompanied with required information, documents and records as prescribed under the Rules. It is reiterated that the Form-1 filed in the present case under Section 7 of the Code read with Rule 4 of the Rules, shows that the Form is complete in all respect and there is no infirmity in the same. In the present case the amount of default exceeds much more than 1 lakh. In view of Section 4 of the Code, the moment default is Rupees one lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable. There is sufficient material on record to conclude that respondent corporate debtor has committed default in repayment of the financial debt. The applicant clearly comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of office unit. Though considerable long period has since lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor. The material on record reveals that there is no disciplinary proceeding pending against the proposed IRP. In the facts we are satisfied that the present application is complete and there has been a default in payment of the financial debt - Accordingly, in terms of Section 7 (5) (a) of the Code, the present application is admitted.
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Service Tax
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2019 (3) TMI 1233
Refund claim - time limitation - section 11B of CEA - It is the case of the Revenue that the claim of refund made by the petitioner has to be considered only under Section 11B of the Act - Held that:- The refund claimed not being made within the time prescribed under Section 11B of the Act, the petitioner is not entitled to the relief sought for. The settled principle of law is mere payment of tax made by the respondent under the mistaken notion would neither validate the nature of payment nor the nature of transaction. The controversy in the present case involves around the applicability of Section 11B of the Act to the facts of the present case - In the KVR Construction, [2012 (7) TMI 22 - KARNATAKA HIGH COURT], the Division Bench of this Court has categorically observed that when once there was no compulsion or duty cast to pay the service tax, the amount paid by petitioner under mistaken notion, would not be a duty or service tax payable in law. Once it is not payable in law there was no authority for the department to retain such amount which would otherwise be outside the purview of Section 11B of the Act. Respondent No.2 is directed to process and sanction the refund of tax of ₹ 2,19,196/- in an expedite manner, in any event, within an outer limit of eight weeks from the date of receipt of certified copy of this order - petition allowed.
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2019 (3) TMI 1232
Liability of service tax with interest - construction services provided to L&T for On-shore Terminal Project - Held that:- Although appellants therein had urged various contentions on facts and in law seeking to distinguish the ratio of the Afcons Infrastructure (supra) the Tribunal in para-15 has made it clear that they were not dealing with the issue as the matter is being remanded. In the circumstances, there cannot be any proposition that Tribunal in L&T (supra) have departed from the ratio laid down in Afcons (supra) or that they have differed from it. Even though the Tribunal has remanded the matter to the adjudicating authority to determine the classification, Tribunal has also directed the adjudicating authority to take into account CESTAT Mumbai decision in AFCONS INFRASTRUCTURE LTD. VERSUS COMMISSIONER [2016 (2) TMI 1223 - BOMBAY HIGH COURT] - there is no ground for remand as prayed by the Ld. Advocate - there is also no infirmity in the demand of ₹ 2,49,31,259/- with interest and equal penalty imposed under Section 78 of the Act. Imposition of penalty u/s 78 - Held that:- This apart, the very fact that the issue has been mired in litigation for quite some time and only by the Afcons decision (supra) has it been decided by the Tribunal that OT is not a transport terminal for the purposes of Section 65 (25b) of the Finance Act, 1994, and appeal against the Afcons decision has been admitted by the Hon’ble High Court of Bombay [2016 (2) TMI 1223 - BOMBAY HIGH COURT], there is a case for setting aside penalties imposed on the appellant in respect of this demand - penalties set aside. Penalty u/s 78 in respect of delayed payment of service tax in respect of contracts other than to L&T - Held that:- Considering that the related demand itself may have been put to question in view the Hon’ble Supreme Court judgment in L&T [2015 (8) TMI 749 - SUPREME COURT] which was pronounced by the Apex Court in October 2015, the imposition of penalty under Section of the Act is unjustified and requires to be set aside Liability of service tax - interest on the value of goods and materials supplied by clients / customers to the appellants free of cost - Held that:- Consequent to the ratio laid down by the Hon’ble Apex Court in the case of CST Vs Bhayana Builders (P) Ltd. [2018 (2) TMI 1325 - SUPREME COURT OF INDIA], the value which is not part of the contract between service provider and the service recipient has no relevance in the determination of the value of taxable service provided by the service provider - demand set aside. Appeal disposed off
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2019 (3) TMI 1231
Benefit of N/N. 11/2010-ST dated 27.02.2010 - Sub-station cum SDO offices of Electricity Department of Noida having been constructed by the assessee - Held that:- Inasmuch admittedly the demand is in respect of the activity of construction of Sub-station or the SDO office for electricity department, it has to be held that the benefit of notification is available to the appellant - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 1230
Penalty u/s 78 of FA - tax with interest paid before issuance of SCN - Sub-section (3) of Section 73 of Finance Act, 1994 - Held that:- Since, the appellant had reversed the Cenvat credit before the issuance of the show cause notice along with payment of interest, we are of the view that the revenue should not have even issued the show cause notice in terms of provisions of Sub-section (3) of Section 73 of Finance Act, 1994 - Accordingly, while upholding the reversal of Cenvat credit along with interest, we set aside the penalty imposed to the extent of ₹ 2,12,309/- - appeal allowed in part.
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2019 (3) TMI 1229
Classification of services - Renting of Immovable Property Service or not - compensation awarded by the Additional District Judge, Civil Court, Mujaffarnagar - Held that:- There is no suggestive definition in the said category of Renting of Immovable Property so as to treat the compensation, which can be penal in nature or as damages to the property, or as a costs of litigation to the petitioners. The fact that compensation was declared as one of the taxable services w.e.f. 01/07/2012 also indicates that prior to the said date no tax can be collected on the compensation either indirectly or by treating the same as rent received. As such, there is no justification in the Revenue s stand - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 1228
Classification of services - Renting of Immovable Property service or Business Support Services - appellant was allowing certain people to keep their goods in the said rented shop for further sale - extended period of limitation - Held that:- The extended period cannot be invoked against statutory body. Inasmuch as, no contumacious conduct or suppression of facts can be attributed to them. If any part of the demand falls within the limitation period, the original adjudicating authority would calculate the same and intimate the appellant, who would pay the same along with interest - appeal disposed off.
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2019 (3) TMI 1227
Condonation of delay of 117 days in filing the appeal - Service/communication of order - claim of the appellant is that they have not received the order till it was delivered on 27.8.2018 - Held that:- The Revenue is able to establish on the basis of the report of the Postal Department, accompanied with copy of the acknowledgment that the order was delivered to the appellant on 2.12.2017. Thus, the due date for filing appeal was 2.3.2018 whereas the appellant filed the appeal on 10.8.2018. In the affidavit, the appellant has submitted that the work was entrusted to a C.A. but he did not respond in time and also the copy of the order was delivered late to them. There is no valid reason in accepting the submission of the appellant that they have not received the copy of the order as on 2.12.2017. In the result, the explanation furnished by the appellant explaining the delay seems to be not bona fide and attributable to negligence of the appellant. The miscellaneous application seeking condonation of delay is dismissed.
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2019 (3) TMI 1226
Demand of Interest - taxability - advertising agency services carried on by the appellant - period upto 31.3.2003 - Held that:- The matter should be considered by the CCE(A) as regards the contentions raised by the assessee in respect of taxability of the services - If the CCE(A) comes to the conclusion that the services during the relevant period were not taxable, then the assessee is entitled to a partial relief from the demand of differential interest, which was remitted by them under protest on 06.10.2008/07.10.2008. The matter is remanded to the CCE(A) to consider the issue regarding taxability of service for the relevant period - Appeal allowed by way of remand.
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2019 (3) TMI 1217
CENVAT credit - input services - denial of the credit on the ground that provider of services should not have paid service tax - Construction of Industrial or Complex service - service tax collected for construction of roads carried out by M/s. Sunmar Constructions - Held that:- It is seen that M/s. Sunmar Constructions have collected service tax from the appellant and issued proper invoices. The appellants have availed credit of the same amount under proper documents. It is now the case of the department that M/s. Sunmar Constructions ought not to have paid service tax on the construction of the roads since such activities are not leviable to service - On an analogous situation, wherein credit was availed on inputs, when the process does not amount to manufacture, the Courts have consistently held that the credit cannot be denied at the receiver’s end. The Hon'ble Apex Court in the case of Commissioner of Central Excise Vs. MDS Switchgear Ltd. [2008 (8) TMI 37 - SUPREME COURT] has held that the MODVAT credit enables the recipient manufacturer to avail the benefit of duty paid by the supplier manufacturer - In the present case, CENVAT scheme enables the service recipient to avail credit of the service tax paid by the service provider. The CENVAT scheme therefore allows the manufacturer or service recipient to avail the credit of duty to the extent that has been paid by the supplier or provider and in the invoices in full unless the same is restricted or barred by some other legal provision in law. The manufacturer or service recipient cannot be denied the credit only on the score that the same has been short-paid or has been paid when not required. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (3) TMI 1225
CENVAT Credit - common inputs used for both dutiable and exempted products - non-maintenance of separate records - contravention of provisions of section 57CC of Central Excise Rules, 1944 - non-application of mind - Held that:- This Court holds that at this stage, it is not possible to consider the matter in detail as from the nature of order made by CESTAT, it can be said that necessary material is not considered by the CESTAT and there was non application of mind. The matter is remanded back for fresh decision which needs to be given after considering the relevant material and CESTAT is expected to give reasoned order in respect of the material available against the assessee - Appeal allowed by way of remand.
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2019 (3) TMI 1224
Valuation - related party transaction - scope of meaning of ‘related’ in terms of section 4(4)(c) of Central Excise Act, 1944 - Held that:- The judicial interpretation of rule 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is that it is applicable only when there is exclusive supply to a ‘related person’. That is not so in the present instance - Hence without going into the issue of whether the finding of being related is contestable and whether demand is barred by limitation, the impugned order is set aside - appeal allowed.
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2019 (3) TMI 1223
Concessional rate of duty - Failure to mention / imprint MRP on Footwear - MRP between rs. 250 and 750 and above ₹ 750 - whether it is mandated that the goods be marked with the price? - N/N. 5/2006-CE dated 1st March 2006 - Held that:- The footwear is covered within the ambit of the Rules and, in such circumstances, the contention that these are not required to be so marked or are exempt, is not relevant - the assessment should be under section 4A of Central Excise Act, 1944. Applicability of the notification - Held that:- The notification itself is not restricted to the two categories enumerated but also a third category, viz., that of goods that are marked with a retail price of over ₹ 750/- per unit. The manner in which the entitlement to the exemption, or concession is to be extended is prescribed in the notification itself, i.e. by embossing or marking with indelible ink. It is not the case of the Learned Counsel for appellant that the goods were marked. Mere existence of the invoices submitted in routine will not suffice for restricting the demand to the normal period. It is on record that the appellant-company had filed returns but without indicating that the goods were not marked but affixed with stickers. The provisions of the notification are also crystal clear and it was incumbent upon the appellants to comply with the conditions therein. Imposition of penalty under section 11AC would not, therefore, suffer from illegality. The duty liability would be restricted to the tariff rate of 16% on the goods cleared without embossing or marking the ‘maximum retail sale price’ of indelible ink subject to appropriate abatement - appeal allowed in part.
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2019 (3) TMI 1222
SSI exemption - clubbing of clearances - dummy units - applicability of the case of COMMISSIONER OF CENTRAL EXCISE NOIDA-I VERSUS M/S GARG INDUSTRIES [2015 (11) TMI 1754 - ALLAHABAD HIGH COURT] - Held that:- The Revenue in the memo of appeal has not advanced any argument on the applicability of the said decision. However, the appeals stand filed by raising the grounds which were originally disclosed in the show cause notice. In the absence of any dispute that the issue stands decided by the said decisions of the Tribunal as upheld by Allahabad High Court, no infirmity can be found in the orders of the Commissioner (Appeals), who has followed the said decision - appeal dismissed - decided against Revenue.
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2019 (3) TMI 1221
CENVAT Credit - common capital goods used in manufacture of taxable as well as exempt goods - fruit pulp based product namely ‘Maaza - Sub-rule (4) of Rule 6 of the Cenvat Credit Rules, 2004 - extended period of limitation - Held that:- The machine are required for manufacture of Sweetened Aerated Water and Fruit Juice/Pulp based Ready to Serve Beverages - the assessee always had an intention to use the capital goods for manufacture of fruit pulp based soft-drinks as also for manufacture of aerated water. The Hon’ble Allahabad High Court in M/S. BRINDAWAN BEVERAGES PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCIS [2014 (2) TMI 1099 - ALLAHABAD HIGH COURT] had directed the Lower Authority to examine such aspect and has observed that if the assessee had the intention to manufacture both the types of goods i.e. exempted goods as also dutiable, the benefit of Cenvat Credit has to be allowed. The Adjudicating Authority has observed that inasmuch as the machine is designed to handle carbonated/aerated soft drinks by software changes and minor adjustment, the objective can be achieved without any modification and as such the assessee has to be held as admissible to cenvat credit. Revenue has not advanced any justifiable ground to interfere in the said order of the Commissioner - appeal dismissed - decided against Revenue.
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2019 (3) TMI 1220
Classification of goods - 2-in-1 Eclairs - Kismi Tofee - Kismi Toffee Bars - classified under Sub-heading 1704 90 20 or under Sub-heading 17049 030? - benefit of exemption in terms of N/N. 12/2012-CE dated 17.03.2012 - Held that:- The issue is no more res-integra and stands settled by the Tribunal’s decision in the same assessee’s case reported as M/s Marko Foods & M/s Pahladrai Confectionaries Pvt. Ltd. [2018 (9) TMI 14 - CESTAT ALLAHABAD] where the Tribunal has held that the appellant’s products i.e. “Parle 2-in-1 Eclairs”, “Kismi Toffee” and “Kismi Toffee Bars” are classifiable under the heading adopted by the assessee’s and are entitled to benefit of Notification No.12/2012-CE dated 17.03.2012 - appeal dismissed - decided against Revenue.
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2019 (3) TMI 1219
Benefit of N/N. 6/2006-CE dt.1.3.2006 (Entry No.90) - Supply of bus chassis to Delhi Metro Railway Corporation (DMRC) - case of Revenue is that such transaction would signify that the buses have neither been procured by DMRC nor will be owned by DMRC. Therefore, M/s. Tata has failed to fulfil the condition No. 18 under exemption N/N. 6/2006-CE dt.1.3.2006 - Held that:- As per the condition 18 of notification, the goods are required to be procured by or on behalf of the Delhi Metro Rail Corporation Ltd. for use in the Delhi MRTS project and the goods are part of the inventory maintained by the Delhi Metro Rail Corporation Ltd. and shall be finally owned by the Delhi Metro Rail Corporation Ltd - Admittedly, the goods in question have been procured by DMRC in Metro Feeder bus service, therefore, the use of bus is for MRTS project. The sole reason to deny the benefit of exemption notification is the agreement between DMRC and its operators. As per agreement after five years the operator shall become the owner of the bus. In fact, on the basis of record placed before us, operators have never completed contract and agreements were not rescinded. Consequently, the DMRC remains the owner of the buses in question, therefore, on that ground the benefit of exemption notification cannot be to the appellant. It is admitted that these bus chassis purchased by DMRC from M/s.Tata are used as feeder bus service to carry passengers from various routes of metro and vice versa are integral part of the Delhi MRTS project and DMRC is the owner of the buses, therefore, DMRC has rightly issued certificate in terms of N/N. 6/2006-CE dt.1.3.2006 and M/s.Tata is entitled to avail exemption notification and have rightly cleared chassis in question without payment of duty. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 1218
Valuation - inclusion of reimbursement charges in assessable value - provision of service tax is for a consideration in money - Section 67(1)(i) of the Finance Act - Held that:- Hon'ble Supreme Court in the case of Intercontinental Consultants & Technocrats (P) Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA], where it was held that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider ‘for such service’ and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. The appeal filed by the Revenue is dismissed - the substantial question of law is answered against the Revenue.
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2019 (3) TMI 1216
CENVAT Credit - transitional provisions - Revenue is of the view of that as the appellants have started manufacturing exempted goods, therefore, the Cenvat credit lying in their Cenvat credit account contained in inputs/ semi finished goods/ finished goods shall lapse in terms of Rule 11 - Rule 11(3) of the Cenvat Credit Rules, 2004 - Held that:- As the appellant’s final product has become exempt from payment of duty absolutely, therefore, the appellants are not allowed to utilize the Cenvat credit lying in their Cenvat credit account. But there is no provision that “how the same shall be recovered” - Rule 14 of the Cenvat Credit Rules, 2004, is applicable only in a case where the Cenvat credit has been taken and utilized wrongly. Admittedly, the Cenvat credit has not been utilized by the appellants i.e. lying in Cenvat credit account. Moreover, at the time of taking the Cenvat credit, the appellants were entitled to take the Cenvat credit, therefore, they have not taken and utilized the Cenvat credit wrongly. Therefore, the provisions of Rule 14 are not applicable to the facts of this case. Moreover, there is no charging provision has incorporated for recovery of Cenvat credit till yet. A similar issue has been dealt by this Tribunal in the case of M/s Shiv Engineering Industries [2018 (11) TMI 418 - CESTAT CHANDIGARH], wherein in terms of Rule 3(5) of the Cenvat Credit Rules, 2004, if the inputs were cleared as such, the assessee is required to reverse the Cenvat credit taken on such inputs in terms of Rule 3(5) of the Cenvat Credit Rules, 2004. But in case, if the Cenvat credit has not been reversed then how the same is recoverable. Admittedly, in the case in hand, the Cenvat credit sought to be recovered in terms of Rule 14 of the Cenvat Credit Rules, 2004, the appellants were entitled to take the Cenvat credit at the time of availment of Cenvat credit, therefore, the same cannot be said that they have taken Cenvat credit wrongly. Further, the Cenvat credit is lying in their Cenvat credit account; therefore, the same has not been utilized by the appellants wrongly. In these terms, Rule 14 of the Cenvat Credit Rules, 2004 is not applicable to the facts of this case. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (3) TMI 1215
Principles of natural justice - petitioner submitted that the petitioner has not been afforded adequate opportunity by the second respondent before passing of the impugned assessment order - reversal of input tax credit - Held that:- This Court has perused and examined the impugned assessment order. Admittedly, the petitioner has sent a detailed reply, dated 08.05.2015, wherein, he has referred to the objections, which were raised by the learned Counsel for the petitioner during his arguments and relied upon various decisions of this Court and also internal circulars of the Department in support of his case. But, under the impugned assessment order, this Court finds that all the objections raised by the petitioner were not considered by the second respondent. It is the case of the petitioner that he has shown gross profit while filing his monthly returns before the second respondent - But without application of mind, the second respondent has come to a wrong conclusion that the goods sold by the petitioner at a lesser price than the purchase price and the petitioner has shown losses in the monthly return submitted by him. This Court is also unable to find out from the assessment order as to why the second respondent has come to that conclusion, despite the fact that the petitioner is a profit making concern and has also disclosed gross profit, as seen from the reply, dated 08.05.2015, sent to the second respondent. This Court is of the considered view that the second respondent has violated the principles of natural justice by not affording personal hearing to the petitioner and also for not having considered the vital objections raised by the petitioner in his reply, dated 08.05.2015, objectively under the impugned assessment order - Petition allowed by way of remand.
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2019 (3) TMI 1214
Principles of natural justice - compounding assessment under Section 3(4) of the TNVAT Act, 2006 - the respondent has passed the impugned assessment order without furnishing those documents - Held that:- Admittedly, in the instant case, the petitioner by his reply, dated 18.01.2017 to the pre-revision notice, dated 27.09.2016 had categorically denied the alleged interest purchaser from Sri Said Industries, Anandapur and they have also requested for copies of the documents pertaining to the alleged purchase from the second respondent. Eventhough, these objections were received by the second respondent, even without furnishing a copy of the documents pertaining to the alleged purchase from Sri Sai Industries, Anandhapur or any other documentary proof to prove the said purchase. The second respondent has passed the impugned assessment order, without applying his mind to the reply, dated 18.01.2017 objectively. It has been consistently held by this Court that sufficient opportunity must be granted to the assessee before any assessment order is passed - But, in the instant case, even though, the specific request was made for production of proof for the said alleged purchase made by the petitioner from Sri Sai Industries, Anandhapur. The said proof has neither being given to the petitioner nor the second respondent has sent any reply to the objection, dated 18.01.2017 sent by the petitioner before passing of the impugned assessment order. This Court is of the considered view is that, principles of natural justice has been violated by the second respondent under the impugned assessment order - the matter is remanded back to the second respondent for fresh consideration in accordance with law - petition allowed by way of remand.
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2019 (3) TMI 1213
Validity of assessment order - deemed assessment - TNVAT Act - the respondent initiated revision of assessment proceedings under Section 27(1) of the Act for the years 2013-14 to 2015-16 and under Section 22(4) of the Act, for the year 2016-17, by issuing a prerevision notice - principles of natural justice - Held that:- The assessment of the total taxable turnover of the petitioner was done by the respondent only for a period of nine months under Section 22(2) of the TNVAT Act, 2006. The assessment will have to be done for the whole year. Even though the petitioner had furnished all the details and supporting documents in support of their objections in the impugned assessment orders, the same has not been duly considered by the respondent objectively. Instead they have verbatim reproduced the sales figures contained in the inspection report dated 25.01.2017 of the Enforcement Wing Officers of the respondent - Admittedly, in the instant case, it has been seen from the impugned assessment orders that no personal hearing was afforded to the petitioner. Even though, it is mentioned that the request was made by the petitioner for personal hearing under the impugned assessment orders, while granting personal hearing, the respondent ought to have fixed a date for personal hearing to enable the petitioner to present themselves before the respondent and submit their objections. In the instant case, no such specific date was fixed for personal hearing by the respondent. In the instant case, as seen from the impugned assessment orders, the objections raised by the petitioner has not been considered by the respondent objectively. Instead, he has accepted the inspection report of the Enforcement Wing Officials in entirety, without applying his mind independently. Further, in the instant case, no personal hearing was afforded to the petitioner before passing the impugned assessment orders. Therefore, this Court is of the considered view that the respondent has violated the principles of natural justice. The matter is remanded back to the respondent for fresh consideration and the respondent shall pass final orders, after giving sufficient opportunity to the petitioner to raise all objections available to him under law - Petition allowed by way of remand.
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2019 (3) TMI 1212
Validity of assessment order - revision of assessment - TNVAT Act - According to the petitioner, without issuing any notice, the impugned assessment order has been passed - principles of natural justice - Held that:- It is an undisputed fact that the main reason for revision of assessment under Section 27 of the 'Act' by the respondents are that the other end seller has not reported to the respondents the sales made to the petitioner. It is seen from the records that the purchases made by the petitioner from the other end seller have been duly reported to the second respondent by the petitioner without any suppression - this Court is of the considered view that the respondents have violated the principles of natural justice. Hon'ble Division Bench Judgement of this Court in the case of G.V.Cotton Mills (P) Limited Vs. The Assistant Commissioner (CT) [2018 (3) TMI 1617 - MADRAS HIGH COURT] has held that even if the assessee does not ask for a personal hearing, it is mandatory for the assessing officer to grant personal hearing to the dealer/assessee. The matter is remanded back to the second respondent for fresh consideration and the second respondent shall pass final orders, after giving sufficient opportunity to the petitioner to raise all objections available to him under law - petition allowed by way of remand.
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2019 (3) TMI 1211
Validity of assessment order - exempt from payment of tax or not - TNVAT Act - sufficient opportunity not provided to the petitioner before passing impugned order - principles of natural justice - Held that:- Admittedly in the instant case, the petitioner has not sent any objections to the show cause notice sent by the second respondent - Even though the second respondent in their show cause notice has offered the petitioner the right of personal hearing, they have not issued separate notices fixing the date of personal hearing. The objections raised by the petitioner in this writ petition that they are exempted from payment of tax is a vital issue which has to be gone into by the second respondent before passing the final orders - The Hon'ble Division Bench of this Court in G.V. COTTON MILLS (P) LTD. VERSUS THE ASSISTANT COMMISSIONER (CT) AVARAYAMPALAYAM ASSESSMENT CIRCLE, COIMBATORE [2018 (3) TMI 1617 - MADRAS HIGH COURT] has also held that even if objections are not submitted, the assessee should not be denied the opportunity of personal hearing. In the instant case, no such opportunity was granted to the petitioner. Therefore, this Court is of the considered view that the respondents have violated the principles of natural justice by not affording sufficient opportunity to the petitioner to submit his objection and also denied the opportunity of personal hearing to the petitioner. The matter is remanded back to the second respondent for fresh consideration in accordance with law and the second respondent shall give sufficient opportunity to the petitioner - petition allowed by way of remand.
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2019 (3) TMI 1210
Sales Tax Waiver Scheme - Interest Free Sales Tax Deferral Scheme - applicability for eligibility certificate - principles of natural justice - Held that:- In the case on hand, the respondents have already assessed the petitioner based on the returns submitted by them. All the transactions pertain to the period 1993 to 2001, whereas the impugned demand notice has been made by the respondent only in the year 2016, without furnishing a copy of the Auditor General's Report - this Court is of the considered view that the second respondent has violated the principles of natural justice by not furnishing the details sought for by the petitioner which includes furnishing of copies of Auditor General's Report as well as other documents. Therefore, this Court is of the considered view that the impugned demand notice has to be quashed - petition allowed.
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Indian Laws
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2019 (3) TMI 1209
Dishonor of Cheque - repayment of borrowed loan - case of petitioner is that he never borrowed any amount much less the sum of ₹ 1,25,000/- from the complainant - presumption under Section 139 of the Negotiable Instruments Act - Held that:- This Court finds that the private complainant by his oral evidence in P.W.1 coupled with the documentary evidence of Exs.P.1 to P.8 and taking into account the fact that the accused has not disputed the signature in the cheque, both the Courts below have rightly come to the conclusion that he is entitled for a presumption under Section 139 of the Negotiable Instruments Act. Though the revision petitioner / accused has taken several grounds, he failed to probabilise his suggestive case. However, for the reasons recorded in the preceding paragraphs, in the absence of any positive evidence to indicate that the accused alone has actually travelled on the date and using the tickets travelled Thakkalay and come back to Thanjavur, the plea of alibi on the date of issuance has not been proved in the manner known to law. The finding of the Lower Appellate Court that the revision petitioner / accused miserably failed to probabilise the suggestive case being well considered and well merited does not warrant any interference by this Court at this revisional stage and accordingly, this Court holds that the revision petitioner / accused having failed to probabilised his suggestive case, there is no merit in this Revision Case. Criminal Revision Case is dismissed.
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2019 (3) TMI 1208
Rejection of Appointment as Executive Officer - the Appellant's performance was not found satisfactory, the training period could be extended by a period not exceeding one year - deemed confirmation - terms and conditions of the appointment letter - Held that:- Clause 3 of the offer of engagement, contents whereof have been reproduced hereinabove, provides for extension of the training period. In terms of Clause 9 of the said letter, the trainee is entitled for consideration for the position of “Executive Officer”. This consideration is subject to review of performance and conduct of the trainee. It evidently means that upon completion of the training period of one year or the extended term of training, the trainee does not have an automatic right for being appointed on the post of Executive Officer. In the present case, on completion of the extended period of training, the Appellant submitted his appraisal form and was called for a personal interaction with the Council Members. On evaluation of his performance, his candidature was not found adequate and appropriate for the post of Executive Officer, he was informed that the Respondents were willing to offer him the post of Assistant (Grade-I) pay scale (Rs. 5500-175-9000/-). The learned Single Judge has also inter alia held that on completion of the training, the Appellant was only entitled for consideration for the post of Executive Officer. Respondents did not find him suitable for the said post and the subjective assessment is beyond the scope of judicial review as a Court cannot sit an appeal over the decision of the Management viz-a-viz suitability of the candidature of an employee. The learned Single Judge has also carefully examined the judgments relied upon by the Appellant and has held that the same to be inapplicable to the facts of the present case - There is no infirmity in the view taken by the learned Single Judge and we do not find any reason to interfere with the same. Appeal dismissed.
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