TMI Tax Updates - e-Newsletter
March 5, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
To deny the benefit of additional depreciation to a generating entity on the basis that electricity is not an “article” or “thing” is in our view an artificially restrictive meaning of the provision - Claim u/s 32(1)(iia) allowed.
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Income Tax:
Penalty u/s 271(1)(c) - assessee filed its return under VDIS but failed to pay the tax - This itself will not lead to the conclusion that the assessee has concealed its particular of income.
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Income Tax:
No travelling expenses can be allowed for assessee’s international travel for income received related to house property in India.
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Income Tax:
Amendment made in Section 80AB, which was inserted by Finance (No. 2) Act, 1980 with effect from 1st April, 1981 have prospective effect evident from Finance Act as well as Circular of CBDT.
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Income Tax:
Claim for write off of bad debts - advertisement expenses incurred for and on behalf of the franchisees, which was to be reimbursed by them to the assessee - franchisees were unable to reimburse - Cannot be allowed as bad debts.
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Income Tax:
Unaccounted opening cash balance - In the Balance sheet the cash balance and sundry creditor is shown at NIL figure - in the light of the reason given by the assessee not to have uploaded the details of closing balance is justified and since books of account have been accepted, the addition was not warranted
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Income Tax:
Reopening of assessment - Original assessment u/s 143(3) - Assessment notice was based upon a second opinion or revisiting of the same facts by a subsequent Assessing Officer and no more. For these reasons, the reassessment notice has to be quashed.
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Income Tax:
Rectification u/s 254(2) - receipt from other advertisers towards sale of online ad space in Inida under AdWord Program is chargeable to tax as 'Royalty - issue is highly debatable and two views are possible. It would not be appropriate to exercise powers u/s.254(2) of the Act as the order does not suffer from any mistake apparent on the face of the record.
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Income Tax:
Deduction u/s 54 is allwable to assessee applying rule of purposive construction and the object which Section 54F seeks to achieve if on facts it was proved that Money has only been contributed by the assessee irrespective the fact that land belong to HUF which is not stranger to assessee.
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Income Tax:
SLP against High Court decision that Two Initial Assessment Year is permissible in 80IC for 100 % deduction stand dismissed.
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Income Tax:
Rectification of mistake - ITAT has allows appeal on merit & dismissed the assessee’s cross objections as infructuous regarding re-opening of assessment. Assesse not challenged that order. After reversal of appeal by High court on merit assesse filed rectification application before Tribunal. High Court held that rectification application filed by the assessee was barred by the principle of finality, and to an extent the doctrine of merger. High Court further held that this is not apparent mistake or error warranting rectification.
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Income Tax:
Addition u/s 69D - Hundies v/s bills of exchange - documents recovered all bilateral and not tripartite - Section 69D applies to hundi alone and not to bills of exchange. Hence, the disallowance u/s. 69D is unsustainable.
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Income Tax:
Exemption u/s 54 - assessee purchased the new residential house within the time period stipulated in Sec.54 but possession was not taken - Asssessee was duly entitled for claim of exemption under the said statutory provision irrespective of the fact that possession was not taken..
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Income Tax:
Exemption u/s 54 - capital gains invested outside India for purchase of residential house - Benefit to investment of LTCG in residential house outside India is available before A.Y. 2015-16 as amendment in Section 54 has prospective effect.
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Income Tax:
Penalty u/s. 271(1)(b) - Non response to notice issued in assessment proceedings - non response has already led to addition of the entire amount and the very purpose of the notice was to ask the assessee to produce the parties, in our considered opinion, penalty levied for non-response by the assessee in this regard will amount to double prejudice. Hence penalty is not sustainable.
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Income Tax:
Addition of share premium u/s 56(2)(viib) r.w.r. 114A(2)(a) - Excess of share premium collected by the assessee is taxable u/s 56(2)(viib) r.w.r. 114A(2)(a) - AO has the power to examine and verify the correctness or the reasonableness of the valuation adopted by the assessee.
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Income Tax:
Bogus LTCG - penny stock - addition u/s 68 - The AO failed to bring on board any material to suggest that the assessee had made cash payment to the purchaser of share from electronic platform of BSE under the strict watch of SEBI. In the absence of evidence/material only discussing modus operandi floted by Investigation could not entitled the claim of assessee of LTCG on sale of shares as bogus.
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Customs:
Offences u/s 132 and 135 - power of Collector of Customs - Section 3 of the Antiquities and Art Treasures Act, 1972. - Prosecution under Sections 132 and 135(1)(a) of the Customs Act, 1962, is not barred in regard to the antiquities or art treasures
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Customs:
In the guise of handicraft furniture and woods/ metals the appellant intended to export red sander. Therefore, red sander is absolutely confiscated - absolute confiscation upheld.
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SEBI:
Noncompliance of summons had hampered the further course of investigation. The failure was without any justification. - the Appellate Tribunal has observed that details were withheld with a view to delay the investigation being conducted by SEBI to the detriment of investors from whom funds were collected by the appellants in contravention of CIS Regulations. - Levy of penalty confirmed - SC
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Service Tax:
Classification of services - discount received against their own export consignment from the shipping agents - the appellant has not rendered any services of clearing and forwarding to the shipping agents - demand not sustainable.
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Service Tax:
Valuation - maintenance services - inclusion of notional interest on ‘maintenance refundable security deposit’ in assessable value - There is no justification for inclusion of the notional interest.
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Service Tax:
Grant of Interest on refund of erroneously payment of service tax - the authority has not to wait for any order specifically payment of interest. The moment department becomes liable under Section 11BB the consequence of payment of interest shall follow.
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Service Tax:
Penalty - short-payment of service tax - Once the appellant had paid the service tax before the issue of show-cause notice along with interest and there is no fraud, willful misstatement or suppression of facts with intent to evade tax, then he is not liable to pay any penalty
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Central Excise:
Once the department was aware of the procedure followed by the appellant for taking the CENVAT credit subsequently the department cannot allege suppression with intention to evade duty.
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Central Excise:
CENVAT Credit - input services - security guard for providing security of guest house - cycle stand and residential premises outside the factory premises - these services have a nexus, though indirectly to the manufacturing activity - credit allowed.
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Central Excise:
Suo moto adjustment of sanctioned refund against the demand - the demand confirmed been already sub-judiced before the competent authority - The question of suo moto adjusting the sanctioned refund qua the said demand therefore does not arise.
Articles
Notifications
Case Laws:
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GST
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2019 (3) TMI 168
Maintainability of petition - Validity of order passed under Section 73 (9) of the U.P. GST Act, 2017 dated 21.1.2015 - appealable order under Section 107 of the U.P. GST Act or not? - Held that:- The order is appellable under Section 107 of the U.P. GST Act - In view of the statutory provision for appeal we are not inclined to entertain the petition at all.
In appeal question of fact as well as law both can be considered and decided. Therefore, even if question of law is arising and there may not be any dispute of fact, still it is not proper to allow the petitioner to bye pass the statutory remedy.
Appeal dismissed on the ground of alternative remedy.
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Income Tax
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2019 (3) TMI 171
Deduction u/s 80HH - computation of deduction - whether it is to be available out of ‘income’ as computed under the Act or out of ‘profits and gains’, without deducting therefrom ‘depreciation’ and ‘investment allowance’? - HELD THAT:- Reading of Section 80HH along with Section 80A would clearly signify that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act. Correctly pointed out by Division Bench in the reference order that in Motilal Pesticides case, the Court followed the judgment rendered in the M/s. Cloth Traders (P) Ltd. which was a case under Section 80M of the Act, on the premise that language of Section 80HH and Section 80M is the same. This basis is clearly incorrect as the language of two provisions is materially different. We are, therefore, of the considered opinion that judgment of Motilal Pesticides [2000 (2) TMI 9 - SUPREME COURT] is erroneous. We, therefore, overrule this judgment.
Unable to subscribe to Revenue that Section 80AB, which was inserted by Finance (No. 2) Act, 1980 with effect from 1st April, 1981 is clarificatory in nature. It is a provision made with prospective effect as the very Amendment Act says so. Therefore, it cannot apply to the Assessment Years 1979-80 and 1980-81, when Section 80AB was brought on the statute book after these assessment years. This position becomes clear from the reading of Circular No. 281 dated September 22, 1980 issued by the Central Board of Direct Taxes itself. This circular inter alia describes the reasons for adding new Sections 80AA and 80AB.
It is, thus, clear that change in legal position is brought about only, with the insertion of Section 80AB and made applicable from AY 1981-82. In view thereof, judgments in the case of M/s. Cloth Traders [1979 (5) TMI 2 - SUPREME COURT] relied by the Revenue will be of no relevance
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2019 (3) TMI 205
Deduction u/s 54EC - Reopening of assessment - scope of amendment - HELD THAT:- When the case of the assessee was reopened on 14.03.2014, this amendment was not in existence and therefore restrictions imposed by statue under first proviso of section 54EC will not be applicable here. Thus we find substance in the argument advanced by the AR.
Taking into consideration the order passed by the Learned Tribunal we are of the view that the assessee is entitled to exemption on the investment made of ₹ 50 lacs in NHAL bond on 13.04.2011 for long term capital gain since the same was invested within 6 months from the transfer of the capital asset. We delete the addition made by the authorities below. - Decided in favour of assessee.
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2019 (3) TMI 208
Undisclosed income u/s 158B(b) - special procedure for assessment of search cases - bogus purchases - HELD THAT:- Leave granted. The appeal is allowed of in terms of the signed Reportable judgment.
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2019 (3) TMI 204
Rectification of mistake - limited mandate of Section 254(2) - adhoc disallowance of 15% of vehicle expenses, tea and sundry expenses - assessee submitted self supporting vouchers which could not be verified with third party evidence , which disallowance stood reduced to 5% by learned CIT(A) because personal element in these type of expenses cannot be ruled out - ITAT further reduced the disallowance to ₹ 1,00,000/- - HELD THAT:- ITAT has taken a decision based on entire factual matrix of the case which cannot be faulted with and what assessee vide this MA is seeking review of the tribunal order dated 21.12.2017 which is not permissible within limited mandate of Section 254(2) of the Income-tax Act, 1961 as only mistakes apparent from record can be rectified within limited mandate of Section 254(2). Thus,this MA stood dismissed.
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2019 (3) TMI 164
Penalty u/s.271(1)(c) - time limit prescribed u/s.275 - limitation period - HELD THAT:- The internal transfer of documents including the Tribunal order from the office of CIT, Kolhapur to CIT-IV, Pune, cannot have any bearing on the determination of the date on which the order of Tribunal was served on the competent Commissioner having jurisdiction over the case at the material time.
As further brought to our notice that the ITO Ward 1(1), Solapur issued notice for penalty u/s 271(1)(c) on 4.4.2003 fixing the date of hearing on 17.4.2003, which is prior to 13.05.2003, being the date of the alleged service of the order of the Tribunal on the competent CIT. As the CIT, Kolhapur had the jurisdiction over the AO and the order of Tribunal was served on CIT, Kolhapur, on 13.12.2002, in our considered opinion, the limitation period has to be reckoned from the date of such service.
Going by this date of service of order of Tribunal on CIT, Kolhapur, we hold that the penalty order passed by the AO on 30-09-2003 is time-barred.
Both the sides are in agreement that the facts and circumstances of other six appeals are similar to that of Ekata P. Raka. We hold that the penalty orders passed on these six persons were also time-barred. - Decided in favour of assessee.
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2019 (3) TMI 163
Revision u/s 263 - disallow the claim of the assessee u/s. 32(1) - amount paid DOT for purchase of 3G spectrum and restricting the allowance being proportionate amount as applicable for the year as per provisions of section 35ABB - HELD THAT:- No response from the Pr. CIT has been received on this issue, has no relevance for the adjudication before us. We find that the ITAT in the case of Idea Cellular Limited (2017 (12) TMI 660 - ITAT MUMBAI) on same issue has concluded that the assessee was entitled to depreciation.
3G Spectrum was not applied or allotted, assessee could have still continued providing telecommunication services under existing license. The license to operate telecom services is issued u/s. 4 of the Indian Telegraph Act, 1885 which provide rights to establish and operate telecom services. As stated above, without such license one is not ever eligible to bid for 3G Spectrum. 3G Spectrum fees are merely for right to use a particular frequency/spectrum while providing telecommunication services. Even the provisions of section 35ABB of the act are not applicable to such payment In view of these facts, we are of the view that the assessee is entitled for claim of depreciation on merits also and AO has rightly allowed the claim while framing assessment under section 143(3) of the Act and the revision order of CIT Under section 263 of the Act is bad in law - Decided in favour of assessee.
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2019 (3) TMI 162
Addition u/s 69D - Hundies v/s bills of exchange - loans/borrowing in the Hundies which were repaid in cash from undisclosed income - CIT-A held that the instruments against which the appellant had borrowed were bills of exchange and not Hundies - HELD THAT:- We note that in the case of Dexan Pharmaceuticals Pvt Ltd. (1995 (1) TMI 54 - ANDHRA PRADESH HIGH COURT) has noted that “A bill of exchange in the vernacular language is generally called as hundi. Hundies are negotiable instruments written in an oriental language. They are sometimes bills of exchange and at other times promissory notes and are subject to local usages and are unaffected by the provisions of the Indian Negotiable Instrument Act.”
Thus we find that in the present case also the instrument as submitted in the paper book before us are in English language and are all bilateral and not tripartite. In the facts and circumstances of the case, as per the precedent as above, it cannot be treated as hundi. Hence, the disallowance u/s. 69D is unsustainable. Accordingly, we set aside the order of the ld.CIT(A) and decide the issue in favour of the assessee.
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2019 (3) TMI 161
Exemption u/s 54 - assessee purchased the new residential house within the time period stipulated in Sec.54 - assessee after purchasing the property was either not put into the possession of the same by the seller or had not taken the possession of the same for any other reason - HELD THAT:- We are unable to find ourselves in agreement with the observation of the A.O that in case where an assessee had purchased a residential house within the time period envisaged under Sec.54, but had not taken possession of the same within the said period, he would for the said reason stand disentitled for claim of exemption under the said statutory provision.
We are of a strong conviction that as the assessee in the case before us had purchased the new residential house within the time period stipulated in Sec.54 i.e within a period of two years after the date on which the old residential hose had been transferred, thus she was duly entitled for claim of exemption under the said statutory provision.
The mere fact that the assessee after purchasing the property was either not put into the possession of the same by the seller or had not taken the possession of the same for any other reason, would in no way adversely affect her entitlement towards claim of exemption under the said statutory provision.
The fact that the assessee had purchased the new residential house vide registered agreement dated 06.06.2012 i.e within the stipulated period of 2 years from the date on which the old residential house was sold by her on 14.11.2011 is not in dispute before us - the assessee had duly complied with the requisite conditions contemplated in Sec.54 , hence her claim of exemption under the said statutory provision was well in order - Decided in favour of assessee.
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2019 (3) TMI 160
Exemption u/s 54 - capital gains invested outside India for purchase of residential house i.e. Dubai - LTCG received on sale of residential property - scope of amendment to Sec. 54 by the Finance (No.2) Act, 2014 had w.e.f 01.04.2015 - HELD THAT:- Amendment as per which the term ‘constructed a residential house’ has been substituted by ‘constructed, one residential house in India’, vide the Finance (No.2) Act, 2014 w.e.f 01.04.2015, in itself reveals the legislative intent of restricting the exemption available under the aforesaid statutory provision only in respect of a residential house which was either constructed or purchased by the assessee in India with effect from assessment year 2015-16 and the aforesaid amendment under consideration to Sec. 54 was to be given a prospective effect from A.Y. 2015-16.
We are of the considered view that as the entitlement of an assessee to claim exemption under Sec.54 was not qualified by any such condition that the investment towards the construction or purchase of the new residential house was to be made in India during the year under consideration, hence the claim of exemption so raised by him under Sec. 54 in respect of the new residential house that was purchased by him at Dubai, UAE was well in order. No infirmity emerges from the order passed by the CIT(A), who had rightly directed the A.O to grant exemption to the assessee under Sec. 54 in respect of the investment made by him in the residential property in Dubai, UAE, thus uphold his order. - Decided against revenue
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2019 (3) TMI 159
Penalty u/s. 271(1)(b) - Non response to notice issued in assessment proceedings - Ex-parte order - Substantial addition was made in assessment - assessee received from accommodation entries for purchases - HELD THAT:- The notice sent has returned unserved. Hence, we proceeded to adjudicate the issue by hearing the Departmental Representative and perusing the records.
Upon careful consideration, we note that in response to notices for reopening, the assessee has duly responded and submitted that the return filed earlier should be accepted as return filed pursuant to notice u/s.148. The reopening related to information that assessee has received accommodation entries for purchases. Since that assessee was not able to produce these parties pursuant to notices, the entire amount has been added.
When the non response has already led to addition of the entire amount and the very purpose of the notice was to ask the assessee to produce the parties, in our considered opinion, penalty levied for non-response by the assessee in this regard will amount to double prejudice. In our considered opinion, the same is not sustainable. Hence, we levy of penalty. - Decided in favour of assessee.
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2019 (3) TMI 158
Addition of share premium u/s 56(2)(viib) r.w.r. 114A(2)(a) - valuation adopted by the assessee using the DCF Method - HELD THAT:- The assessee contention that the AO has taken the lower of the valuation, whereas he is required to adopt the higher valuation is not correct. The valuation adopted by the assessee using the DCF Method has not withstood the scrutiny of the AO. The assessee has not been able / failed to furnish the details that went into and formed the basis for the projections made by the assessee. As pointed out by the CIT(A), there is absolutely no correlation between the figures adopted by the assessee in its projections and the actual figures reported. Since the very basis for the DCF valuation was itself not substantiated by the assessee, the AO has adopted the NAV Method to determine the valuation.
In the case of Agro Portfolio Pvt. Ltd. [2018 (5) TMI 1088 - ITAT DELHI] are similar to that of the assessee in the case on hand and we are of the considered view that the findings rendered therein are applicable to the present case before us. We uphold the action of the AO in determining the share premium collected in the assessee’s hand u/s 56(2)(viib) r.w.r. 114A(2)(a) of the Rules and the action of the CIT(A) in upholding the AO’s action / addition. Grounds of assessee’s appeal are dismissed.
Claim for write off of bad debts - HELD THAT:- CIT(A) rendered a finding that these amounts are expended towards advertisement expenses incurred for and on behalf of the franchisees, which was to be reimbursed by them to the assessee. The assessee’s explanations that the franchisees were unable to reimburse the aforesaid expenses incurred by the assessee on their behalf due to insufficient / tight cash flow position and therefore the same has to be written off as advertisement expenses; in the view of the CIT(A); does not qualify to be “Revenue” to be written off as bad debts. We find that the findings rendered by the CIT(A) has not been controverted by the assessee before us. No further documents / details were furnished by the assessee. In this factual matrix of the case, as discussed above, we uphold the action of the factual findings rendered by the authorities below in disallowing the assessee’s claim for write off of reimbursable “advertisement expenses” incurred by the assessee as bad debts.
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2019 (3) TMI 157
Unexplained cash credit u/s. 68 - denial of natural justice - amounts received by the assessee towards share capital and share premium - reassessment order passed ex parte by invoking sec. 144 - grievance of the assessee is that no proper opportunity was given to the assessee to discharge the onus casted upon it as required when section 68 - HELD THAT:- We note that other than issuing summons u/s. 131 of the directors of the assessee company no other investigation as directed by Ld. CIT was conducted by AO as is discernable from the order. So, in the light of the aforesaid facts, we find force in the submission of the Ld. AR that no proper opportunity the assessee got before the AO during the reassessment proceedings. Since proper opportunity was not given to assessee by AO during the reassessment proceedings, we are of the opinion that assessee should get proper opportunity before the AO during reassessment proceedings.
in the light of the Hon’ble Supreme Court’s decision in Tin Box Company [2001 (2) TMI 13 - SUPREME COURT] and taking into consideration the fact the order of the Ld. CIT passed u/s. 263 of the Act in similar cases being upheld up to the level of Apex Court, and taking note of Hon’ble Delhi High Court’s order in Jansampark Advertising & Marketing Pvt. Ltd. [2015 (3) TMI 410 - DELHI HIGH COURT], we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2019 (3) TMI 156
Bogus Long Term Capital Gain (LTCG) - penny stock - addition u/s 68 - unaccounted sale of shares - genuineness of the purchase and sale transactions of shares - AO denying the LTCG claim relying on Investigation Wing’s general report and looking at the fundamental financials of M/s. UIL was of the opinion that the shares of M/s. UIL cannot fetch such high astronomical value per share - HELD THAT:- Assessee after purchasing the share of M/s. BREPL had taken possession of the share certificates which are evident from the bills of the respective parties and payments were made through account payee cheque. After the amalgamation of M/s. BREPL with UIL, the assessee had sold the shares of M/s. UIL through Bombay Stock Exchange. We note that the assessee had made payment of STT of the said scrips. In the light of the aforesaid documents, the assessee had discharged its burden of proving the genuinity of the transactions. We note that the AO/Ld. CIT(A) has not found fault with the aforesaid documents.
AO failed to bring on board any material to suggest that the assessee had made cash payment to the purchaser of M/s. UIL from assessee which happened in the electronic platform of BSE under the strict watch of SEBI. Since there is no evidence/material to suggest leave alone substantiate the modus operandi as suggested by the general report of Investigation Wing of the Department against the assessee, the claim of assessee of LTCG on sale of shares of M/s. UIL cannot be disallowed - Decided in favour of assessee.See PRAKASH CHAND BHUTORIA VERSUS ITO, WARD-35 (1) , KOLKATA [2018 (7) TMI 46 - ITAT KOLKATA] - Decided in favour of assessee.
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2019 (3) TMI 167
Rectification of mistake - earlier ITAT dismissed the revenue appeal and cross objection of the assessee - Revenue went to HC, wherein HC restored the matter before ITAT - Status of the "cross objection" - doctrine of merger - validity of reassessment proceeding - HELD THAT:- Assessee’s claim for rectification is precluded by the doctrine of finality and not merely merger. Once the additions were upheld on merits, the second innings as it were before the tax authorities which have the effect of unsettling binding decisions of higher courts, cannot be countenanced. In that sense the issue of merger applies. This court is of opinion that the doctrine of finality applies as well. The assessee by conduct in not seeking remedy for the dismissal of its cross objection and speculatively waiting for the outcome of the revenue’s appeal, cannot be heard to complain that its grievance with respect to reassessment remained unaddressed. The court is conscious that it is not dealing with an uninformed litigant; instead it is advised by counsel.
ITAT had rejected its application this court would have given suitable directions. Instead, waiting for the time till the two members who decided the first ITAT orders were not available and choosing to prefer the rectification application at a convenient time, the assessee no doubt technically was compliant, but stood exposed to the odium of forum shopping.
The court holds that the rectification application filed by the assessee was barred by the principle of finality, and to an extent the doctrine of merger. The ITAT, in the opinion of this court, entirely mis-appreciated its jurisdiction which, as held in Honda Siel, is to correct an apparent mistake. That its previous decision to dismiss the cross appeal as infructuous was a mistake in the light of the subsequent reversal of its order on the merits of the addition, is not in the considered view of this court, a mistake or error warranting rectification. This court deprecates in the strongest terms, the invocation of the power of rectification. W.P. succeed.
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2019 (3) TMI 170
Entitlement to deduction u/s 80-IC - Two Initial Assessment Year - “undertaking or an enterprise” (Unit) established after 7th January, 2003, carrying out “substantial expansion” - specified window period, i.e. between 7.1.2003 and 1.4.2012, would be entitled to deduction on profits @ 100%, under Section 80-IC - Held that:- Special Leave Petition is dismissed.
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2019 (3) TMI 169
Additions made on the ground of undervaluation of the sales - estimated GP and on the ground of clandestine removal of goods - HELD THAT:- SLP dismissed.
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2019 (3) TMI 155
Disallowance of exemption u/s 54F - This exemption was denied to the assessee on the ground that new plot was not purchased by him in his individual name, but it was purchased in the name of HUF. - HELD THAT:- Assessee has his share to the extent of 1/4th in the HUF. The other members of HUF are not stranger. They are wife of the assessee and two sons. Money has only been contributed by the assessee. Therefore, to our mind, the facts as available in CIT Vs. Kamal Wahal [2013 (1) TMI 401 - DELHI HIGH COURT] are squarely applicable on this case. We allow the appeal of the assessee, and direct the AO to grant exemption under section 54F of the Income Tax Act to the assessee. - decided in favour of assessee.
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2019 (3) TMI 154
Rectification u/s 254(2) - Royalty - Levy of tax on receipt from other advertisers towards sale of online ad space in Inida under AdWord Program - PE in India - it was contended that, the revenue assessed the receipts in the hands of GIL as business profits should be rectified suitably - HELD THAT:- It was never the case of the AO or the DRP/CIT(A) that receipts from sale of Advertisements under the AdWord Program was business profits of GIL and that it was taxable in the hands of GIL because GIPL constituted PE of GIL in India. The case of the revenue has always been that the said receipts were in the nature of royalty. It was the case of GIL that the receipts were not in the nature of royalty and were in the nature of business profits of GIL and since GIL did not have a PE in India, the said receipts are not chargeable to tax in India. To this extent it can be said that there appears to be a mistake in the order of the Tribunal in paragraph 190 of the order.
The appeals were not heard by either of us. We are therefore unable to fathom as to why the Tribunal remanded the case to the AO to reframe assessment in the light of the directions contained in the order. The issue sought to be agitated in this MP before the Tribunal is highly debatable and two views are possible on the issue. In such circumstances, we are of the view that it would not be appropriate to exercise powers u/s.254(2) of the Act as the order does not suffer from any mistake apparent on the face of the record. None of the observations in this order should influence the mind of the parties in their interpretation of the order.- Miscellaneous petition dismissed.
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2019 (3) TMI 166
Reopening of assessment - Original assessment u/s 143(3) - notice u/s 147/148 to be premised on fresh or tangible material - HELD THAT:- It is far too well settled that any notice u/s 147/148 is to be premised on fresh or tangible material – made available with the Revenue within the time granted or within the extended time under Section 147.
The only other circumstance when it can seek recourse to the reassessment power is if material documents, having significance on the reassessment, are withheld or improperly disclosed. The duty of the AO, it has been repeatedly emphasised from the decision of the Supreme Court in Calcutta Discount Co.Ltd. vs. ITO, Companies District-I, Calcutta (1960 (11) TMI 8 - SUPREME COURT) is to truly assess the income disclosed by the assessee. The corresponding duty or the responsibility of the assessee is to disclose all material facts. Once that duty is discharged, the inability of the AO to carry out the task assigned to him by the statute properly does not authorize a second opinion, based upon which the AO can issue reassessment notice.
In the present case, it is plain that the reassessment notice was based upon a second opinion or revisiting of the same facts by a subsequent Assessing Officer and no more. For these reasons, the reassessment notice has to be quashed. - Decided in favour of assessee.
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2019 (3) TMI 207
Additional depreciation u/s 32(1)(iia) - electricity is not an “article” or “thing” - assessee is a joint venture company of two public sector undertakings and is engaged in the production of thermal power - additional depreciation in respect of an entity engaged in the business of generation and distribution of power - HELD THAT:- Electricity has been held to be “goods” for the purposes of sales tax in the Constitution Bench judgment of the Supreme Court in State of Andhra Pradesh vs. NTPC Ltd. [2002 (4) TMI 694 - SUPREME COURT OF INDIA]. Electricity has all the necessary trappings of “articles” or “things” and the benefit of additional depreciation cannot be denied.
As held by the Constitution Bench, electricity is capable of abstraction, transmission, transfer, delivery, possession, consumption and use like any other movable property. Following the same logic, to deny the benefit of additional depreciation to a generating entity on the basis that electricity is not an “article” or “thing” is in our view an artificially restrictive meaning of the provision. The benefit of additional depreciation under Section 32(1)(iia) has, therefore, been rightly granted to the assessee by the concurrent judgments of the CIT(A) and the Tribunal.
We also note that, w.e.f. from 01.04.2013, the provision has been amended by the Finance Act, 2012 and assessee engaged in the generation of power have expressly been included in the ambit thereof. No substantial question of law arises
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2019 (3) TMI 206
Penalty u/s 271(1)(c) - assessee filed its return under VDIS but failed to pay the tax - maximum penalty levy - HELD THAT:- It is an admitted fact that initial declaration was made by the assessee under VDIS. The proof for payment of advance tax within the allowable time is not dispute. Till that stage, the Department was absolutely unaware of the fact that the assessee having earned any such income.
Had the VDIS complied with the payment of tax, etc. the question of levy of penalty would not have been agitated. Admittedly the tax has not been paid by the assessee on the income declared under VDIS. This itself will not lead to the conclusion that the assessee has concealed its particular of income as the concealment, as we discussed, means something more with the malafide intention coupled with mens rea. Tribunal was right in holding that penalty u/s 271(1)(c) can not be levied in a case where the assessee filed its return under VDIS but failed to pay the tax. No substantial question of law.
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2019 (3) TMI 152
Addition u/s 68 - unsecured cash credit - genuineness of the transaction and identity of the creditor - HELD THAT:- AO of the lender/creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing Officer of the lender/creditor but instead of adopting such course, AO himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the lender/creditor has been rejected by its AO, AO of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. Without doing so in the light of the documents filed the creditworthiness of the lenders/creditors cannot be doubted.
CIT(A) has taken note that the loan lenders had filed their KYC documents to prove identity, bank statement, Balance Sheet, Income Tax Return and acknowledgment, Affidavit from loan creditors, loan confirmation and when the fact was that out of total loan amount of ₹ 1,38,23,606/-, the assessee had paid back ₹ 70,88,606/-. These facts were taken into consideration by the Ld. CIT(A) to give relief to assessee. So we sustain the action of CIT(A) except that of ₹ 5 lakhs. Before us the Ld. AR of the assessee failed to substantiate the money lent by Mohan Prasad Khemka to the tune of ₹ 5 lakh which addition is sustained since assessee failed to substantiate the capital account balance of this lender so it is confirmed and thus the appeal of the revenue is partly allowed.
Unexplained introduction of cash in the guise of sale of sarees - HELD THAT:- No adverse view can be drawn when there is no infirmity can be pointed out, when transaction of purchase/sale in the business of saree exhibition is entered in cash, more so when the relevant documents were furnished and confirmations have been received by the AO from suppliers of goods (sundry creditors). We note that in cloth business, it is a practice to get goods on credit, particularly, when the assessee is not new in the trade and we note that CIT(A) has given a factual finding at para 7 of his order that the A.O. has accepted a similar sale made in the preceding year, which finding has not been challenged as erroneous, so we do not find any infirmity in the order of the CIT(A), so we confirm the action of CIT(A).
Unexplained cash introduction in the proprietary firm of the assessee - HELD THAT:- Assessee had withdrawn ₹ 12 lakhs from her proprietary concern which had cash of ₹ 17,21,870/- from sale of sarees, which has been disbelieved by the AO on suspicion and surmises, so when he [Ld. CIT(A)] having accepted the assessee’s sale consideration of ₹ 17,21,870/- from sale of sarees from exhibition in earlier grounds, which action of CIT(A) having been upheld by us, the assessee’s explanation of withdrawing ₹ 12 lakhs from proprietary concern M/s. Jyothi Consultancy Services which had fund with it is a plausible explanation supported by cash flow statement (supra). So the action of Ld. CIT(A) in deleting ₹ 12 lacs is confirmed
Unaccounted opening cash balance - In the Balance sheet the cash balance and sundry creditor is shown at NIL figure - HELD THAT:- Complete final accounts of the preceding year and the instant year were submitted before the A.O which clearly reflected the figure of cash balance of ₹ 30,329/- is appearing in the balance sheet of proprietary concern. Considering these facts, CIT(A) has deleted the addition and gave his finding that this amount is the closing balance as on 31.03.2007 which finding of CIT(A) could not be controverted by the department, since it is elementary that closing balance of the previous year is the opening balance of this year. So, in the light of the reason given by the assessee not to have uploaded the details of closing balance is justified and since books of account have been accepted, the addition was not warranted and, therefore, the CIT(A) rightly deleted the addition
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2019 (3) TMI 203
Traveling expenses claimed against the amount received from house property against use of amenities in the said house property - Deduction u/s.57 on travelling expense against compensation for amenities shown under other source of income - HELD THAT:- The assessee in this case is claiming travelling expenses against the amount received from house property against use of amenities in the said house property. The assessee’s plea is that the assessee had to incur huge expenditure in travelling to India to manage the property. We find that this submission of the assessee has been rejected by the authorities below. We find ourselves in full concurrence that no travelling expenses can be allowed for assessee’s international travel for income received related to house property in India. This is more so when the amount claimed is lump sum without any supporting whatsoever.
Assessment of Interest on refund as income - Interest Received u/s 244A - addition to income - return being processed u/s 143(1) - HELD THAT:- Interest on refund granted was withdrawn when the demand of ₹ 24,67,560/- was raised for the same assessment year subsequently. Hence, when the income stood withdrawn there is no question of the assessee offering the same as income. We find that this view also gets support from the ITAT decision in the case of Assistant Director of Income-tax, (International Taxation) - 1(1), Mumbai vs. Credit Agricole Indosuez [2013 (9) TMI 364 - ITAT MUMBAI]. In this case, it was expounded that only that much interest u/s. 244A can be brought to tax which is finally determined on assessment. In the present case, in the final assessment huge demand has been raised and there was no question of assessment of any interest income.
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2019 (3) TMI 202
Addition of freight inward/import clearing expenses to cost of closing inventory - HELD THAT:- If valuation of closing stock is changed then the value of opening stock should also be changed on the same basis or method. The closing stock of a particular year is the opening stock of the subsequent year. It is not the case of the revenue that the method of valuation of closing stock is materially affecting the accounts and profits disclosed by the assessee. This adjustment sought to be made is revenue neutral and at best may result in preponment or postponement of revenue. The issue is whether such exercise is at all required on the ground of materiality. Materiality is a concept which is well recognized both in accountancy and law. Accounting standards notified by the CBDT u/s 145(2) mandate that the concept of materiality be taken into consideration when finalizing the accounts of an assessee.
Addition on account of cost of rejection of semi-finished goods and obsolete items to the value of closing stock - aforesaid rejections comprised of abnormal rejections arising in the course of manufacturing, like rejections on account of obsolescence, etc. - HELD THAT:- It is not practically possible for the assessee to segregate normal and abnormal wastages embedded in the aforesaid costs and therefore, the assessee, as per consistent and regular method of accounting, accepted by the Revenue as such in the earlier years, did not consider the aforesaid expenditure for the purposes of valuation of closing inventory of finished goods. The AO/DRP was not correct in making this addition.
Disallowance of provision for increase in price of material - AO held that provisions emanating from retrospective price amendments are contingent in nature and thus, not an allowable business expenditure - HELD THAT:- While price revisions are pending or negotiations are on, the vendors keep on supplying the material provisionally at the agreed rates, with the understanding that pursuant to negotiations being finalized, the arrears of the amount due to them would be paid to them retrospectively. Such price revisions, being an accrued liability at the time of purchase of raw materials, are recorded in the books of accounts by the assessee. At the year end, the company estimates the additional liability on account of price revision under negotiation and makes upward/downward provision, as the case may be, in relation to material supplied until the end of the relevant year. Thus, the Assessing Officer was incorrect in disallowing this claim
Disallowance of cost of scrap material - as seen that in the course of the business of manufacturing, the process generates some scrap on account of rejection of components, obsolescence of components, etc. - HELD THAT:- Assessee is not dealing in scrap, and/or holding the scrap as inventory, and thus was not required to value the closing stock after taking into account the value of scrap. The Tribunal for A.Y. 2010-11 and 2011-12 while coming to the aforesaid conclusion, laid emphasis on the fact that such transaction was revenue-neutral and held that considering the size of the assessee company, it could not be expected to keep quantitative tally of miniscule items. The facts are identical in the presnt year as well.
Disallowance of prior period expenses - HELD THAT:- Assessee is a large sized manufacturing company which receives services from several vendors, running into hundreds. The assessee made reasonable attempt to quantify the liability incurred towards expenses during the relevant previous years and provide for it which was not doubted by the Assessing Officer. It is not practically possible to consider and provide for all expenses, in absence of relevant details/material/information for various reasons like, non-receipt of bills/invoices from the vendors, the contract terms with vendors not being settled, disputes in relation to bills received, services contracted by zonal/regional/branch officer not intimated to the head office, etc. Therefore, the assessee in our opinion has rightly claimed deduction for miscellaneous expenses aggregating pertaining to prior period
Provision of Head office expense reversed in succeeding year - at the end of year, the assessee made provision for various expenses incurred during the year on the basis of reasonable estimate, since in the absence of receipt of bills/invoices from the vendors, which are received in the succeeding year, the exact amount payable there against was not ascertainable - HELD THAT:- In the present Assessment Year also, the provision for advertisement expenses, has been made on the basis of actual Purchase orders and agreements and thus, has been made on reasonable and scientific basis. Detail of provisions for advertisement was submitted before the lower authorities. Further, AO in the set-aside proceedings for A.Y. 2008-09, vide order dated 26.02.2015, accepted the claim of the assessee and allowed relief on the aforementioned identical issue by observing that the assessee had computed the provision on the basis of actual Purchase Orders, which was scientific and logical in nature. Thus the issue is squarely covered by the order of the Tribunal in A.Ys. 2010-11 & 2011-12.
Disallowance of alleged excessive purchases from related parties as per AS-18 - parties were not related to the assessee company in terms of section 40A (2), disallowance on ground of excessive purchase price could not have been made under that section - HELD THAT:- The purchase prices of components which are purchased from various suppliers are based upon negotiations with such vendors and are different due to various factors. The assessee also prefers purchasing material from certain suppliers, due to business/commercial expediency. The said parties are not related to assessee, in terms of the provisions of section 40A(2)(b). During the relevant previous year, the assessee made total purchases of various raw materials, etc.. Out of the aforesaid total purchases, purchases from related parties, i.e., parties related to the assessee, in accordance with definition given in AS-18 issued by the ICAI and as disclosed in the notes to accounts of the audited accounts of the relevant previous year, but admittedly not related in terms of definition provided in section 40A (2)
Deemed dividend addition u/s 2(22)(e) - HELD THAT:- It is pertinent to note that when payments by dealers to HFCL are due to the dealers, due to convenience of facility of collection centers of the assessee available all over India, make payment into the assessee's bank account, for and on behalf of HFCL, which is in turn remitted by the assessee to HFCL in 2- 3 days. Thus, the assessee is mere custodian of the said amount. Thus, Section 2(22)(e) will not be applicable in the present case.
Disallowance of payments made for advisory services availed from Hero Corporate Services Ltd. (HSCL)- HELD THAT:- Assessee made elaborate submissions explaining the nature of services received from Hero Corporate Services Ltd. and nexus of same with the business of the assessee. This fact is identical with the earlier Assessment Years. The issue is squarely covered in favour of the assessee by the Tribunal’s order for A.Ys. 2010-11 & 2011-12. Besides this the Revenue has accepted this issue and has not challenged the same in Hon’ble High Court. Thus, this issue attains finality.
TDS on quarterly target and turnover discount and Sales Discount - expenditure towards the quarterly target on turnover discount on trade discount - HELD THAT:- Issue in favour of the assessee relying on the decision of Hon’ble Delhi High Court in the case of CIT vs. Mother Dairy Ltd. (2012 (2) TMI 80 - DELHI HIGH COURT) and Jai Drinks Pvt. Ltd. [2011 (1) TMI 1035 - DELHI HIGH COURT], holding that the discount in question is not in the nature of commission but an incentive for higher sale targets.
TDS u/s 194J - TDS on legal and professional charges - AO disallowed the aforesaid expenses, invoking section 40(a)(ia), for the failure of the assessee to deduct tax at source there from - HELD THAT:- In the present Assessment Year, the Assessing Officer disallowed the aforesaid expenses, invoking section 40(a)(ia), for the failure of the assessee to deduct tax at source there from under section 194J of the Act. But it is pertinent to note here that the Assessing Officer did not doubt that the payment was made by assessee towards reimbursement of expenses, it was still held that assessee was liable to deduct tax at source under section 194J of the Act. Thus, the issue is squarely covered by the order of the Tribunal for A.Ys. 2010-11 and 2011-12.
Disallowance of Royalty Expenditure/TGF and model fee - Addition on the ground of being capital in nature it can be seen that the assessee company has been manufacturing two wheelers in India since 1985 on the basis of technology provided by M/s. Honda Motors Co. Ltd., Japan ("HM") and has thus far launched various models of motorcycles by obtaining the technology provided by that company. - HELD THAT:- No proprietary rights in the know how vested in the assessee, the assessee being a mere licensee with limited rights to use the technical assistance during the currency of the agreement, there is no explicit or implied intention to transfer or create ownership in the technical know-how /technical information in the assessee. Expenditure by way of royalty, technical guidance fee and model fees incurred by the assessee was allowable revenue deduction as held in the decision given by the Tribunal for A.Ys. 2010-11 and 2011-12.
Gains from sale of investments income treated as business income - AO held that, having regard to the magnitude/volume of total turnover from sale of investments, the aforesaid income was taxable under the head 'business income’ - HELD THAT:- It is pertinent to note that the assessee invested surplus funds arising in the course of business under various modes of investment like mutual funds/PMS, shares, etc. The gains realized from sale of such various instruments, amounting during the relevant previous year, were disclosed under the head ‘capital gains.’ The issue is identical in the AY 2010- 11 and 2011-12 wherein the Tribunal allowed this issue in favour of the assessee.
Addition u/s 14A - HELD THAT:- Assessing Officer did not accept the method of disallowance computed by the assessee under section 14A and made further disallowance invoking provisions of Rule 8D of the Income Tax Rules, 1962 after reducing the suo moto disallowance of ₹ 65.23 lakhs made by the assessee in the return of income. But the Assessing Officer has not given the proper calculation to that effect. Therefore, the matter is restored back to the file of the Assessing Officer.
Depreciation on Model Fee - AS seen that the assessee manufactures two-wheelers under technical collaboration agreement entered into with Honda Motor Co. Ltd., Japan (‘Honda’) - HELD THAT:- The facts of the present Assessment Year and the earlier Assessment Year are not different. In the present year also the expenditure was incurred on new model fees prior to commencement of production of new models of two wheelers, thus, this action is revenue neutral in a broader perspective as the same adjustment would be required to be made to the opening stock of finished goods for the year under consideration. Thus, this issue is covered by the decision of the Tribunal for A.Ys. 2010-11 and 2011-12.
Disallowance of reimbursement of foreign travelling expenses to directors/employees - amount on the ground of no evidence/proof of actual expense incurred by employees of ₹ 451.00 crores - HELD THAT:- It is pertinent to note that for payment of per diem allowance, as per policy, the assessee does not require the expenses to be necessarily supported / backed by bills considering the practical difficulties/impossibilities in producing invoices for petty expenses like local conveyance, telephone bills, etc. The employees are only required to submit details of expenditure incurred in specified form, on basis of which travel bill is settled. The Tribunal in A.Ys. 2010-11 and 2011-12 and earlier years held that disallowance cannot be made merely on the basis that vouchers were not produced by the employees, Thus, the facts have not changed in this year as well, therefore, the issue is squarely covered by the decision of the Tribunal for earlier Assessment Years.
Expenses incurred on advertisement on death anniversary of Late Shri Raman Munjal - AO disallowed aforesaid expenditure claimed by assessee on the ground that same was personal expenditure being related to promoters’ family and was not incurred for the purpose of business - HELD THAT:- The aforesaid disallowance made by the Assessing Officer in the preceding years, viz. Assessment Year 2010-11 and 2011-12 has been deleted by the Tribunal vide consolidated order dated 24.10.2016, wherein the Tribunal held that such expenditure incurred by the assessee on death anniversary of Sh. Raman Kant Munjal was not personal expenditure of the promoter family and satisfied the tests of ‘commercial and business expediency' and thus was an allowable business deduction under Section 37(1) of the act. It is also pertinent to mention that no appeal has been filed by the department before the High Court. Thus, the Tribunal decision has attained the finality.
Disallowance of commission paid to Managing Director, Shri Pawan Munjal under Section 36(1)(ii) - AO disallowed the aforesaid total amount of commission paid to Shri Pawan Munjal u/s 36(1)(ii) on the ground that commission was paid in lieu of distribution of dividend to him. who was also shareholder of the assessee company - HELD THAT:- Disallowance made by the assessing officer in the preceding years, viz. AY 2010-11 and AY 2011-12 has been deleted by the Tribunal vide recent consolidated order dated 24.10.2016. In the said order, the Tribunal held that the commission paid to directors with reference to percentage of profits of the company for the services rendered as per the terms of appointment, constitutes part of the remuneration package, and in the absence of any disallowance on other components of remuneration paid to such director, the commission cannot, ipso facto be classified as payment of profit/dividend covered within the exception provided under Section 36(1)(ii) of the Act. It is also pertinent to mention that no appeal has been filed by the department before the High Court.
Disallowance of proportionate amount of premium paid for land taken on lease for 99 years - eligibility of depreciation - AO has held that the impugned payment has resulted in the enduring benefit to the assessee in the capital field, since the assessee had taken the land on lease over a long period of 90 years and such land was to be used for construction of factory building thereon - HELD THAT:- DRP, allowed the assessee depreciation on the premium paid for acquiring of leasehold rights of land, considering the same as an intangible asset in the nature of ‘business or commercial right’ which is eligible for depreciation under Section 32(1)(ii) of the Act. This direction was not at all considered by the Assessing Officer. Therefore, we direct the Assessing Officer take into account the direction of the DRP and pass necessary order after giving hearing to the assessee by following principles of natural justice. Therefore, we remand back this issue to the file of the Assessing Officer.
CSR expenditure - allowable business expenditure - AO disallowed the aforesaid expenses on the ground that it was not incurred wholly and exclusively for the purposes of earning business income from the activity of manufacture and sale of two-wheelers - HELD THAT:- Tribunal held that the expenditure incurred by the assessee company on Corporate Social Responsibility, prior to insertion of explanation 2 to Section 37(1) of the Act, was an allowable business deduction under the said provision. The Tribunal, in the said order, further elaborated that the role of the assessee was not restricted to merely earning profit, but also discharging certain community related expenses, which would be considered to have been incurred on account of commercial/ business expediency. It is pertinent to point out that no appeal has been filed by the Department in assessment year 2011-12. Thus, the decision of the Tribunal attains finality.
Disallowance u/s 80IC on account of cost to cost sale to Vendor i.e. trading activity as well as disallowance u/s 80IC on account of Job work/outsourcing of manufacturing activity - proportionate amount of sales to vendors for processing of semi-finished goods supplied by the assessee, compute on ad-hoc basis, on the ground that manufacturing activity to the aforesaid extent of sales was outsourced - HELD THAT:- Tribunal while adjudicating upon the issue of disallowance u/s 80IC on account of job work/ outsourcing of manufacturing activity in the immediately preceding assessment years, i.e. AY 2010-11 and AY 2011-12, held that outsourcing of certain intermediary processes or procurement of finished components in the process of manufacture does not tantamount to outsourcing of manufacturing activities and thus would not hamper the claim of deduction of the assessee company under Section 80 IC of the Act. It is also pertinent to mention that no appeal has been filed by the Department before the Hon’ble Delhi High Court. These fact are identical with the present Assessment Years. The issue is squarely covered in favour of the assessee by the Tribunal’s order for A.Ys. 2010-11 & 2011-12.
Disallowance u/s 80IC on account of violation with respect to inter unit transfer as per Form No. 10CCB - HELD THAT:- The claim of deduction of the appellant is also duly supported with the audit report in Form 10CCB issued by the auditors, answering each question in the format and how the appellant satisfied all such conditions. In the final assessment order, the assessing officer has not pointed out violation of any such condition precedent. We agree with the submissions of the Ld. Counsel that the various errors (assuming without admitting) in submission of complete details/information by the appellant to the assessing officer, as noted in the assessment order, related to the computation of deduction, on the basis of which entire claim could not have been denied. Accordingly, in our view, the assessing officer was not justified in denying the benefit of deduction u/s 80IC
Disallowance u/s 80IC on account of section 80IA(10) - AO disallowed deduction u/s 80-IC by an amount holding that for the purpose of computing deduction under the latter section, inter-unit transfer of goods should have been recorded at market price, instead of cost price as carried out by the assessee - HELD THAT:- Tribunal in the immediately preceding assessment years, i.e. AY 2010-11 and AY 2011-12 wherein identical disallowance made by the AO has been deleted. The Tribunal, while allowing the claim of the assessee under section 80-IC held that for the purpose of computing market price of inter-unit transfer of goods, when the non-eligible units procured goods at market price from third party vendors and supplied the same to the eligible unit at the same purchase price as increased by the applicable freight cost, no further substitution of such price is warranted in terms of section 80IA(10) of the Act and the transaction was a genuine business transaction borne out of commercial expediency.
Disallowance u/s 80IC on account of profit attributable to the brand value and marketing network - AO held that profits are derived by the assessee-company on account of three assets, viz., (1) manufacturing assets, (2) brand assets and (3) marketing assets whereas deduction under section 80IC is available only on profits derived from business of manufacturing of specified articles or things - HELD THAT:- The issue is squarely covered in favor of the assessee by the order passed by the Tribunal for immediately preceding assessment years, i.e. AY 2010-11 and AY 2011 -12, [2017 (1) TMI 266 - ITAT DELHI] wherein identical disallowance made by the AO has been deleted. The Tribunal, in coming to the aforesaid discussion, reiterated that the head office is not a separate profit centre and, therefore, no profit is to be separately attributed to such activity. It further observed that, for the purpose of working out eligible deduction under section 80-IC of the Act, actual expenses incurred at the head office are to be allocated between various profit centers on a rational and scientific basis.
Disallowance u/s 80IC on account of other income - Such incomes were not derived from the business of manufacture of specified articles or things - Held that:- Tribunal in immediately preceding assessment years, i.e. AY 2010-11 and AY 2011-12 [2017 (1) TMI 266 - ITAT DELHI] after examining the nature of the aforesaid incomes, held that other incomes in the nature of Interest on loan to employees, interest on loan to vendors for working capital support, freight recovery, sundry sales, cash discounting from vendors and exchange fluctuation gain, etc. earned by a unit eligible for deduction u/s 80IC of the Act shall be considered as incidental to the activity of carrying out manufacturing and thus eligible for deduction under that section.
Nature of expenditure - repairs and maintenance expenditure of various assets - revenue or capital expenditure - AO disallowed aforesaid expenditure after allowing depreciation thereon @ 10% on the ground that the same was not in the nature of “current repairs" but is capital in nature - HELD THAT:- We delete the disallowance made by the and assessing officer respectfully following the decision of the coordinate bench in assessee’s own case for earlier years and consequent order of the Ld. and AO after examining the complete details in the result, we direct the Ld. and assessing officer to delete the disallowance made by holding that expenditure incurred as allowable repairs and maintenance expenditure on the existing assets of the company and is revenue in nature.
Benefit of deduction u/s 80IC - non compliance of Rule 18BBB and non-adherence to condition specified in Industrial Policy - HELD THAT:- Appellant during the course of set-aside proceedings had point-wise given entire details /information as to how it satisfied each condition precedent for claiming deduction under said section. The claim of deduction of the appellant is also duly supported with the audit report in Form 10CCB issued by the auditors, answering each question in the format and how the appellant satisfied all such conditions. In the final assessment order, the assessing officer has not pointed out violation of any such condition precedent. We agree with the submissions that the various errors (assuming without admitting) in submission of complete details/information by the appellant to the assessing officer, as noted in the assessment order, related to the computation of deduction, on the basis of which entire claim could not have been denied.
TDS u/s 194C OR 194J - TDS at lower rate or wrong provision - payment made for event organization - assessee had incurred expenditure on account of display of hoardings for advertisements and arrangement of various events for publicity - disallowance u/s 40(a)(ia) - HELD THAT:- Assessee had incurred expenditure on account of display of hoardings for advertisements and arrangement of various events for publicity. All arrangements for this event were done by M/s G2 RAMS India Pvt. Ltd. The said company was entrusted with the overall responsibility for organizing the event. The contract entered into with the said company was a composite contract for organizing an event, involving various arrangements for carrying out work of organizing the event. In view of the above, tax was deducted at source u/s 194C of the Act before remitting the payment under that Section. Thus, the facts are identical to that of the A.Ys. 2010-11 and 2011-12 and therefore, the order of the Tribunal is applicable in the present case.
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Customs
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2019 (3) TMI 201
Offences under Sections 132 and 135 of the Customs Act, 1962 - maintainability of prosecution under the Customs Act, 1962 or not - power of Collector of Customs - Section 3 of the Antiquities and Art Treasures Act, 1972.
Whether there is a common genus contained in the specific enumeration of two laws namely the Ancient Monuments Preservation Act, 1904 and the Ancient Monuments and Archaeological Sites and Remains Act, 1958? - Held that:- The Antiquity (Export Control) Act, 1947 came into force. The said Act has been repealed by the Antiquities Act but we will refer to certain provisions contained in the Act in connection with one of the contentions of the appellant. It is thereafter that the Ancient Monuments and Archaeological Sites and Remains Act, 1958 which is another enactment specifically enumerated in Section 30 of the Act in question came to be enacted - The statement of objects and reasons would indicate, inter alia, that the Ancient Monuments Preservation Act, 1904 and the Ancient and Historical Monuments and Archaeological Sites and Remains (Declaration of National Importance) Act, 1951, were two Acts in force relating to ancient monuments.
We have noticed that in the Statement of Objects and Reasons for the passing of the Act and providing for the repeal of the earlier law based in the year 1947 was to provide for comprehensive law relating to antiquities. Antiquities made their appearance in the law which was made in the year 1904 as we have already noticed. Broadly the heritage of the nation can be said to be contained in immovable properties in the form of ancient monuments. Antiquities on the other hand would be essentially moveable objects. What makes it an antiquity is the historical or archaeological value which is associated with the object - The 1904 Act and The Ancient Monuments and Archaeological Sites and Remains Act, 1958 indicate, therefore, a one common genus. The context for the commonality is provided essentially by history. It is, inextricably intertwined with the heritage and history of the nation. All the laws reflect the legislation intention to protect the Ancient Monuments and Archaeological Sites and remains as also antiquities. Apart from the same no doubt under the Antiquities Act, art treasures being human work of art which are not antiquities but which become art treasures by way of notification declaring them to be art treasures are also dealt with.
The intention behind Section 30 was as noted is to provide for any other law which deal with antiquity to continue to have force and declare its enforceability even after passing of the Antiquity Act. In that view of the matter we are of the view that the words ‘any other law for the time being in force’ must be construed as ejusdem generis.
The Customs Act is applicable subject to two qualifications. Firstly, it will apply except where the provisions of the Customs Act are inconsistent with the provisions of the Antiquities Act. In other words, if there are provisions in the Antiquity Act, which are inconsistent with the Customs Act, the provisions of the Antiquity Act will prevail over the Customs Act - The Second limitation on the applicability of the Customs Act is as regards the specific provisions contained in Section 125 and an option ordinarily made available under Section 125 is not to be extended as provided in Section 4 of the Act. Still further legislature has taken care to incorporate certain aspects under the Customs Act under Section 25. The provision that a prosecution under Section 25 will not take away the power to confiscate or impose a penalty under the Customs Act is explicitly provided.
Thus, the word “any other law” in Section 30 of the Antiquities Act, would not include the Customs Act, 1962.
Whether prosecution under Sections 132 and 135(1)(a) of the Customs Act, 1962 is permitted under Section 4 of the Antiquities Act and what is the impact of Sections 25 and 26 of the Antiquities Act? - Held that:- If we contrast Section 132 of the Customs Act with Section 25 of the Act, it will be seen that the offence under Section 25 of the Antiquity Act lies in exporting or attempting to export any antiquity or art treasure by violating Section 3 of the Act. When a person exports or attempt to export an antiquity it is but essential that he would be having a transaction with relation to the customs. If in his transaction with the customs in regard to export or attempted export of any antiquity or art treasure he does any of the acts contained in Section 132 of the Customs Act, can it be said that he is being prosecuted for the same offence as contained in Section 3 read with Section 25 of the Antiquity Act. The answer is, No. Quite clearly the ingredients of Section 25 of the Act and Section 132 of the Customs Act are distinct and different from one another. It may be true that it may be the same acts or transaction which gives rise to the two distinct offences but that may not matter.
The prosecution is launched in regard to Section 135(1)(a) on the basis that Section 3 of the Antiquities Act prohibits export of antiquity and this is read with Section 3 of the Foreign Trade and Development Act 1992 read with Export and Import Policy for the year 1992-1997 bringing in Section 11 of the Customs Act.
We have expounded the ingredients of Sections 132 and 135(1)(a) of the Customs Act. The view we are taking would give full play to the Customs Act to the extent that it is not inconsistent with the Act as contemplated under Sector 4. The view which we are declaring does not do violence to the provisions of Section 25 of the Act. The contrary view which has gained acceptance at the hands of the High Court, in our view, fails to give meaning and full play as intended to the Customs Act as provided in Section 4 of the Act. Furthermore, the principle that a transaction or the same set of facts can give rise to more than one distinct offence provided the legislative intention in this regard is clear from the provisions which creates such offences cannot be lost sight of.
Prosecution under Sections 132 and 135(1)(a) of the Customs Act, 1962, is not barred in regard to the antiquities or art treasures - appeal allowed.
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2019 (3) TMI 200
Confiscation of export consignment - redemption fine - penalties - prohibited goods - red sanders - handicraft furniture and wood/ metals - Held that:- The facts are not in dispute that the appellant filed a shipping bill containing 70 packages and on examination 6 packages were found of red sanders. On being asked about the invoice, the ld. Counsel for the appellant failed to produce the invoice before the Bench for proper examination of the contents of the invoice. Therefore, adverse view has been taken against the appellant and it is observed that in the guise of handicraft furniture and woods/ metals the appellant intended to export red sander. Therefore, red sander is absolutely confiscated - absolute confiscation upheld.
Confiscation of handicraft furniture and wood/ metals - Held that:- The red sander as well as the other handicraft items were owned by the appellant and shipped from their own premises for export of the same - handicraft furniture of wood/metal are liable for confiscation and can be redeemed on payment of redemption fine of ₹ 1,50,000/-.
Penalty of ₹ 3.00 Lakhs under Section 114 (iii) of the Customs Act, 1962 is affirmed and penalty of ₹ 3.00 Lakhs is reduced under Section 114 (i) of the Act for attempting to export of prohibited goods.
Appeal allowed in part.
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2019 (3) TMI 199
Refund of excess duty paid - amendment in the Bill of Entry under Section 149 of the Customs Act - Anti-dumping duty paid which was not required to be paid - Sl. No. 12 of Notification 48/2012 dated 08.10.2012 - Held that:- The appellants have filed the Bill of Entry and an objection was raised regarding the liability of the appellant to pay the Anti-dumping duty which was paid by the appellant without any protest. Further as per the Notification, the appellant is not liable to pay the Anti-dumping duty if the appellant clearly establishes that the country of origin and the country of export is from Russia.
Further, the objection of the Commissioner (Appeals) that there is an inordinate delay in challenging the assessment is not tenable in law as the appellant has moved an application seeking amendment in the Bill of Entry after the expiry of five and half months only. Further, with regard to the country of origin, the appellant has not been able to clearly establish with the documents that the country of origin is Russia as there are certain discrepancies in the Certificate of Country of Origin vis-à-vis the commercial invoice issued by the Sojitz Corporation and further the commercial invoice mentions the contract and the purchase order in the invoice on the basis of which goods have been exported which have not been brought on record to clearly establish that country of origin of the goods imported by the appellant.
This case needs to be remanded back to the original authority to examine all the documents placed on record - appeal allowed by way of remand.
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Corporate Laws
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2019 (3) TMI 198
Disbursement of subsidy - Requisite capital investment for grant of subsidy - Special Incentive Package - refuse disbursement of subsidy on the ground that the petitioner’s viability in question - HELD THAT:- Since there appears to be no dispute that the petitioner had defaulted in payment of liabilities towards lease rentals related to the assets, which are capitalized as investment, the decision that the petitioner has not made the requisite investment cannot be faulted.
The respondents were entitled to verify the capital investments made by the petitioner and since the petitioner had failed to provide the necessary documents evidencing such investments, the same could not be considered by the respondents. This Court finds no infirmity with this decision. If the investment of ₹ 96.95 crores is excluded, the NPV of the investments made would fall within the threshold limit of ₹ 1000 crores and the petitioner would not be entitled for any subsidy under the scheme.
The subsidy was required for sustaining the project and not necessarily incurring capital expenditure. More importantly, there is no material to indicate that the subsidy would be used for capital investment as originally envisaged that the same would result in the petitioner meeting the criteria of capital investment (NPV of ₹ 1000 crores).
The decision of the respondents to refuse disbursement of subsidy on the ground that the petitioner’s viability in question also cannot be faulted. Plainly, the object of the Scheme was to support eligible projects. In the given set of facts where the viability of the petitioner’s project is itself under serious question, the respondent cannot be expected to disburse any subsidy – which was envisioned for long term benefits. The opening paragraph of the Scheme indicated that the same was in expectation of return by way of contribution to the GDP of the country.
Petitioner could not dispute that even if the NPV was calculated on the basis as accepted in Indosolar (supra), the NPV of the petitioner’s capital investment would not exceed the threshold of ₹ 1000 crores if the outstanding lease rentals and the capital expenditure amounting to ₹ 96.95 crores was excluded from such calculation. - Petition dismissed.
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Securities / SEBI
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2019 (3) TMI 197
Penalty u/s 15HB of SEBI Act - Penalty for failure to furnish information, return, etc - determining the quantum of penalty - test of preponderance of probability - HELD THAT:- Huge volume of trading between same set/group of brokers can in a given case reasonably point to some kind of a fraudulent and manipulative exercise with prior meeting of minds. Further, there is a difference between synchronized trading involving bulk quantities and negotiated trades as a result of consensual bargaining involving synchronization of buy and sell orders resulting in matching thereof as per permissible parameters which are programmed accordingly.
Test of preponderance of probability applies for the adjudication and determination of civil liability for violation of the SEBI Act or the provisions of the Regulations framed thereunder (see RAKHI TRADING PRIVATE LTD. [2018 (2) TMI 580 - SUPREME COURT OF INDIA]). Keeping the aforesaid parameters in mind, the adjudicating authority had imposed penalty of ₹ 3,00,000/( Rupees three lakhs only) under Section 15HB of the SEBI Act, which has been upheld by the Appellate Tribunal being commensurate with the violation.
No infirmity with the concurrent findings or with the quantum of penalty imposed and the same is upheld.
Penalty for violation of Section 11C( 3) under Section 15A( a) of the SEBI Act - HELD THAT:- During the course of hearing by SEBI, most details as provided by the appellants were general in nature. In case there was no violation pertaining to mobilization of funds from the public under various schemes/arrangements, this could have been so stated in clear and categoric terms. Moreover, the contention that the offices were sealed which rendered them incapable to furnish information has been rejected for two good reasons.
First, this stand is belated and held to be an afterthought when it could have been raised at the first instance when the reply dated 5th December, 2012 was furnished, given that the records were seized by the police on 5th May, 2011. Second, assertion was contradicted by their own conduct when during the proceedings they had submitted a few documents, which were incomplete and not as desired. They did not make any distinction as to the documents within their possession and as to those with the police.
Appellate Tribunal had in these circumstances affirmed the finding that there was a lack of good faith and failure in complying with the aforesaid notices/letters/summons/emails. Adjudicating Officer had, therefore, rightly recorded that noncompliance of summons had hampered the further course of investigation. The failure was without any justification. Agreeing with the said findings, the Appellate Tribunal has observed that details were withheld with a view to delay the investigation being conducted by SEBI to the detriment of investors from whom funds were collected by the appellants in contravention of CIS Regulations.
No fault with the reasoning given. We are of the opinion that the fault squarely lied with the appellants and, thus, penalty of ₹ 1,00,00,000/( Rupees one crore only) for violation of Section 11C( 3) under Section 15A( a) of the SEBI Act does not call for any interference.
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Insolvency & Bankruptcy
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2019 (3) TMI 196
Initiation of Corporate Insolvency Resolution Process - default in repayment of the outstanding financial debt - HELD THAT:- As a sequel to the discussion and the material placed on record it is confirmed that applicant-financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of a residential flat. Though a considerable long period has lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor as per the provision of the Flat Buyer’s Agreement. It is accordingly held that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Thus, the application warrant admission as it is complete in all respects.
Accordingly, in terms of Section 7 (5) (a) of the Code, the present application is admitted.
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2019 (3) TMI 195
Corporate Insolvency Resolution Process - Outstanding debt - HELD THAT:- The communication dated 18.11.2015 placed of the typed set filed with the Rejoinder is concerned, it has neither been sent on the letterhead of the Corporate Debtor nor signed by its Managing Director. The documents dated 04.03.2014 and 26.04.2014 appear to be genuine. However, the document dated 18.11.2015 is not having any credentials for being admitted as genuine because neither it has been sent on the letterhead of the Corporate Debtor nor was signed by its Managing Director. In the circumstances, the last date of balance confirmation is being treated as 26.04.2014 and the Application under Section 9 has been filed on 21.02.2018 which is being filed after the expiry of the period of limitation and the same is barred by the law of limitation. Therefore, this issue is decided against the Operational Creditor and in favour of the Corporate Debtor.
In relation to the 2nd issue, the Corporate Debtor has clearly brought out the factual details in its Reply Statement and has proved that the amounts claimed by the Operational Creditor, on the basis of the Invoices the detail of which is placed at page 16 of the typed set filed with the Application, have been paid through RTGs except Invoice No. 456, the amount of which was paid in cash. The Corporate Debtor has also placed the original documents pertaining to the payments made against the Invoices, the detail of which is given under Para 13 at Table 'A' of the Reply Statement.
Cash Payment Advices with regard to which this Authority has suggested the Operational Creditor that the original documents need to be sent to the Handwriting Expert as the signatures of the authorized signatory of the Operational Creditor are being disputed by the Operational Creditor. But, the same has been refused and the Handwriting Expert's opinion placed on record is not inspiring the confidence of this Authority, as the opinion has been formed on the basis of the scanned copies, photo state etc. Therefore, the 2nd issue is also decided against the Operational Creditor and in favour of the Corporate Debtor. Application filed under Section 9 of the I&B Code, 2016 by the Operational Creditor is devoid of merits and the same stands dismissed.
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2019 (3) TMI 194
Initiation of Corporate Insolvency Resolution Process - demand notice under Section 8 of the Code was duly sent through courier to the registered office address but the same was returned to the Applicant with remark “S/A RTO” - HELD THAT:- Adjudicating Authority erred in rejecting the application under Section 9 on wrong presumption that demand notice is to be served on the Registered Office of the Corporate Debtor and not on Corporate Office (Industrial Area Office herein). If the demand notice under Section 8 (1) is served on Corporate Debtor either on its Registered Office or its Corporate Office, it should be treated to be valid service of notice under Section 8 and application under Section 9 on failure of payment, if filed after 10 days, is maintainable.
We accordingly set aside the impugned order dated 17th September, 2018 passed by the Adjudicating Authority (National Company Law Tribunal) and remit the case to Adjudicating Authority to admit application under Section 9 without going into other issues in the matter, in view of deemed service on the Corporate Debtor. A fresh notice may be issued to the Corporate Debtor to give an opportunity, in its both aforesaid addresses to enable the Respondent to settle the claim with the Appellant and enable the Appellant to withdraw its petition.
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2019 (3) TMI 193
Corporate Insolvency Resolution Process - default in repayment of the loan - existence of default in terms of the guarantee agreements executed by the corporate debtor - HELD THAT:- By considering the demand made by the Applicant as per demand letter dated 13.12.2017 issued by the Applicant Bank requesting the corporate debtor to make payment of the amount mentioned in the notice in terms of the guarantee executed by the corporate debtor company; that the obligations to be discharged by the corporate debtor shall continue in full force and would be valid only till the happening of the events mentioned in Clause 24 of the guarantee agreement dated 28.03.2015; that the promoter borrowers discharged its obligations to be performed as per the terms of the guarantee agreements dated 19.12.2012 and 28.03.2015, that there is no further obligations to be performed by the corporate guarantor/corporate debtor.
Non-acceptance of infusion of fund as per the terms of guarantee agreement by the Applicant is not legal or proper. So the Applicant has failed in proving existence of default in terms of the guarantee agreements executed by the corporate debtor.
Corporate Debtor discharged the obligation as per the terms of the Guarantee and therefore there is no debt due as claimed by the Financial Creditor from the Corporate Debtor. The Applicant being failed in proving existence of a default in terms of the guarantee agreements, this application is liable to be rejected.
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2019 (3) TMI 150
Corporate insolvency process - pre-existence dispute - HELD THAT:- From the record, we find that demand notice under Section 8(1) of the ‘I&B Code’ was issued by the Respondents on 23rd October, 2017, but much prior to the same an e-mail was sent by the Respondent on 5th May, 2017 which was brought to the notice of the Adjudicating Authority.
In view of such e-mail addressed by the Respondent demanding commission from the tenderer enquiry was made. E-mail dated 5th May, 2017 was enclosed as Annexure “B”, but in spite of the same, the Adjudicating Authority admitted the application under Section 9, without looking into the pre-existence dispute relating to such demand of commission and the question whether demand of commission was justified or not; cannot be decided by the Adjudicating Authority or by this Appellate Tribunal, we are of the opinion it was not a fit case for admission.
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2019 (3) TMI 192
Corporate Insolvency Resolution Process - HELD THAT:- The documentary evidence placed on the case file is sufficient in order to ascertain the existence of a default on the part of the Corporate Debtor. Therefore, in the light of the facts and circumstances and the legal position stated above, the Financial Creditors have fulfilled all the requirements of law, for admission of the Application filed under Section 7 of the I&B Code, 2016 and has proposed the name of the IRP after seeking his consent in Form-2. Therefore, the Application stands admitted. The commencement of the Corporate Insolvency Resolution Process is ordered, which ordinarily shall get completed within 180 days, reckoning from the day this order is passed.
Mr. Kannan Sambasivam, is hereby appointed as IRP as has been proposed by the Financial Creditor. There is no disciplinary proceeding pending against the IRP as reflects from Form-2. The IRP is directed to take charge of the Respondent Corporate Debtor's management immediately. He is also directed to cause public announcement as prescribed under Section 15 of I&B Code, 2016, within three days from the date the copy of this order is received, and call for submissions of claim in the manner as prescribed.
The moratorium is hereby declared which shall have effect from the date of this Order till the completion of Corporate Insolvency Resolution Process, for the purposes referred to in Section 14 of the I&B Code, 2016.
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Service Tax
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2019 (3) TMI 191
CENVAT credit of Clean Energy Cess paid on imported / indigenous coal or lignite - Denial on the ground that the appellants are not entitled to take CENVAT credit on Clean Energy Cess - period from 01/04/2015 to 30/09/2015 and from 01/10/2015 to 31/12/2015 - Held that:- This issue has been considered in the appellants own case for the earlier period THE RAMCO CEMENTS LIMITED VERSUS C.C.,C.E. & S.T. - COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH WEST COMMISSIONERATE [2018 (10) TMI 10 - CESTAT BANGALORE] and the appeal of the appellant is allowed by setting aside the impugned order denying the CENVAT credit for Clean Energy Cess - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 190
Business auxiliary service - appointment of commission agents in foreign countries to promote their business - benefit of N/N. 18/2009ST dated 07.07.2009 denied - Held that:- On going through the notification it is seen that the noticee have not informed the department and obtained acknowledgment from the jurisdictional Deputy/Assistant Commissioner; whereas the appellants were required to furnished all relevant documents they fail to furnish the copy of the agreement between them and the commission agents and have not furnished a copy of original documents showing actual payment of commission - appellant have not furnished copies of the bills which Challans as required under table B of the forum EXP-2; the documents whatever submitted by the appellants have not certified by the person who has been authorities by the board of directors; they have not furnished the declaration to the effect that the claim of exemption is not in respect of export of canalized items, product report are export financed underlines of credit extended by Government of India or AXIM Banks or export made by Indian partner in a company with equal participation in an overseas joint-venture are wholly owned subsidiary of the exporter had been produced by the exporter along with the claim.
Thus, the appellants failed to comply with the conditions of the notification 18/2009 ST dated 07.07.2009 - It is not open for the appellant to continue to follow the conditions of the notification and claim substantial compliance and thus benefit of the notification. The intention of the Government was to extent the benefit subject to the compliance of the conditions mentioned therein in the notification. The appellant having not complied with the same would forgo the right to avail the benefit of the notification - benefit of notification rightly denied.
Penalty - Held that:- Having not complied with the conditions of the notification it was not open for the appellants to claim that there was no extent to evade payment of duty - moreover, for the subsequent period they have not discharged their duty liability. They have only paid the duty liable to be paid by them for the year 2007-08 along with interest - the penalty imposed in respect of the demand of ₹ 3,67,133/- can be waived as duty and interest have been paid. However, with respect to the penalty on the service tax confirmed for ₹ 22,69,757/- held that the penalty imposed is sustainable.
Appeal allowed in part.
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2019 (3) TMI 189
Valuation - inclusion of reimbursement expenses in assessable value - payment made by the respondent to M/s. Morarji international, Italy on account of reimbursement of charges made by the said Morarji international in the year 2006-07 towards staff cost, insurance, travelling, conveyance, communication etc. - Held that:- The issue is no longer res Integra - the issue has been decided by the Hon’ble Supreme Court and Delhi High Court in the case of Inter- Continental Consultants and Technocrats Pvt. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT] - Hon’ble Supreme Court [2018 (3) TMI 357 - SUPREME COURT OF INDIA] has categorically held that service tax is to be paid only on the services actually provided by the service provider.
There is no dispute, as regards the excludability of reimbursement expenses from the service tax - However, in the instant case the original authority has given a finding that the respondent did not give any bifurcation or prove that these expenses were relating to reimbursement of expenses made by the respondent to their international company in Italy. Allegation was that the balance sheet for the year 2006-07 has shown a lump sum amount of payment by the respondent to their sister concern. No bifurcation was showed - it will be in the interest of justice that the matter goes back to the original authority to calculate the quantum of such payments and deduct them from the amounts on which service tax is payable - appeal allowed by way of remand.
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2019 (3) TMI 165
Penalty - short-payment of service tax - service tax with interest paid on being pointed out - no intent to evade - Held that:- Once the appellant had paid the service tax before the issue of show-cause notice along with interest and there is no fraud, willful misstatement or suppression of facts with intent to evade tax, then he is not liable to pay any penalty - Reliance placed in a Tribunal decision M/S BHORUKA ALUMINIUM LIMITED. VERSUS THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, MYSORE [2016 (11) TMI 1292 - CESTAT BANGALORE], where it was held that Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of the show cause notice, then in that case, show cause notice shall not be issued - penalty not imposable - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 188
Non-payment of service tax - Maintenance or Repair service - period 16.06.2005 to 31.08.2008 - Held that:- Ientical issue is now decided by the Tribunal in the case of Sadhana Electricals & Technical Works MACS Limited [2014 (12) TMI 1136 - CESTAT BANGALORE], where it was held that according to Notification No. 45/2010-ST, dt.20.07.2010, the tax on taxable services relating to transmission and distribution of electricity provided by the service provider to the service receiver which was not being levied shall not be required to be paid in respect of taxable services relating to transmission and distribution of electricity upto 21.06.2010 - In the case in hand, undisputedly, services rendered by appellant are to APTRANSCO.
The entire tax liability which has been paid by them, if would have come in contest, the same would have been set aside due to retrospective notification issued by the Govt. of India - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 187
Classification of services - Clearing & Forwarding Agent Services or not - discount received against their own export consignment from the shipping agents - Held that:- It is undisputed that appellant herein is a manufacturer and exporter of finished goods; the said finished goods are exported through containers which are procured through the shipping agents and it is a common knowledge that if the volume of exports and the containers booked are substantial, shipping agents do extend a discount to the exporter for the business generated by such shipping agents. The appellants have recorded the receipt of this amount as brokerage in their books of accounts.
The orders of the lower authorities considering the amount received by the appellant as liable for tax on the category of ‘Clearing & Forwarding Agent Services’ is incorrect for a simple reason that appellant is a manufacturer and has utilised the services of various shipping agents for procuring containers for export of their goods. Here, the appellant has not rendered any services of clearing and forwarding to the shipping agents - demand not sustainable - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 153
Grant of Interest u/s 11BB of Central Excise Act, 1944 - whether the Department is liable to pay the interest on the amount of refund sanctioned? - Held that:- The Hon’ble Apex Court in the case of Ranbaxy Laboratories vs. Union of India & ORS [2011 (10) TMI 16 - SUPREME COURT OF INDIA] clarified that the Boards own Notification dated 1/10/2002 has given a clear direction to the Department in case claims of non payment of interest in refund/rebate cases clarifying that the authority has not to wait for any order specifically payment of interest. The moment department becomes liable under Section 11 BB the consequence of payment of interest shall follow. The above adjudication is very much binding on this Tribunal.
The Explanation to Section 11 BB further clarifies the controversy which says that where any order of refund is made by Commissioner (Appeals) Appellate Tribunal, National Tax Tribunal or any Court against the an order of Assistance Commissioner of Central Excise under sub-Section 2 of Section 11 B, the order passed by the Commissioner(Appeals), Appellate Tribunal or as the case may be shall be deemed to be an order passed under the sub-section 2 of the sub-Section B for the purposes of this Section - the application as has been referred in Section 11 B sub-Section 1 only has to be considered for the purposes of Section 11BB - In the present case the order of this Tribunal dated 4th August 2017, in view of the said explanation, reverts back to stage of order of the Assistant Commissioner.
The refund dated 17.2.16 is much beyond 3 months of the date of initial order. The Department is liable to pay the interest. The Department has once sanctioned it but later denied while reviewing - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 151
CENVAT Credit - common services on taxable as well as exempt goods - trading activity - Rule 6 (3) of the Cenvat Credit Rules, 2004 - period April 2008 to March, 2012 - extended period of limitation - Held that:- For the period prior to 01.04.2011, there were divergent views of this Tribunal, in that circumstances, for the period prior 01.04.2011 demand on account of reversal of Cenvat Credit of common input services used for trading activity is not required to be reversed as show cause notices has been issued on 08.10.2013 and 10.10.2013 for the period upto March, 2012 by invoking extended period of limitation.
As appellants have contended that for the period post 01.04.2011, the appellant is reversing cenvat credit attributable to common input services availed for trading activity, in that circumstances, cenvat credit cannot be asked to reverse by the appellant.
Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 186
Nature of activity - trading or service? - distribution of electricity - whether the electricity can be considered as goods or not - Held that:- The issue is no more res-integra in view of the ruling by Hon’ble Supreme Court in the case of State of A.P. vs. National Thermal Power Corpn. Ltd. [2002 (4) TMI 694 - SUPREME COURT OF INDIA]. The Hon’ble Supreme Court has held that electricity is goods and, therefore, the transaction between the appellant and the companies with whom the appellant is having power purchase agreement is sale and purchase of goods - thus, there is no service involved in the transaction - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 185
Classification of services - Maintenance and Repair Service or not - appellant is collecting a reserve fund contribution from the purchasers of property for the purpose of replacement of machinery and equipments and for arranging major repairs - Held that:- This Tribunal in the case of Kumar Beheray Rathi (supra) has held that collection of such type of funds cannot be treated as consideration for Maintenance or Repair Service - service tax demand of around ₹ 10.98 lakhs along with interest and penalty under Maintenance or Repair Service is not sustainable.
Business Auxiliary Service or not - contribution collected by the appellant from all the shop owners for planed events during the festivals and fairs to decorate mall and organize events for attracting customers to the mall - Held that:- Revenue could not establish that appellant were promoting or marketing sale of goods produced or belonging to clients or providing to any customer care service etc. - the said transaction cannot be covered by Business Auxiliary Service.
Business Auxiliary Service - transfer charges of property - Held that:- There is no promotion or marketing of sale of goods or services belonging to others or clients. Therefore, the transaction does not satisfy definition of Business Auxiliary Service - demand set aside.
Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 184
Valuation - maintenance services - inclusion of notional interest on ‘maintenance refundable security deposit’ in assessable value - Department was of the view that interest accrued on such interest free security deposit should be added to value of services and service tax should be paid on such charges - Held that:- The issue of addition of Notional interest on refundable security deposit in the value of service has already been settled by the Tribunal in the case of MURLI RELATORS PRIVATE LIMITED v. COMMISSIONER OF CENTRAL EXCISE, [2014 (9) TMI 461 - CESTAT MUMBAI], where it was held that Notional interest on interest free security deposit cannot be added to the rent agreed upon between the parties for the purpose of levy of service tax on renting of immovable property.
The above decision is given in respect of notional interest on security deposit taken for rent but the principle enunciated therein will apply to notional interest on refundable security deposit taken for maintenance service also.
There is no justification for inclusion of the notional interest in the consideration for payment of service tax - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (3) TMI 182
CENAT Credit - credit on excise invoices produced by the appellant - suppression of facts or not - time limitation - Held that:- In the impugned order, the Commissioner (A) has recorded in para 6 that there is a statement of the appellant dated 8.8.2003 wherein they have explained the procedure regarding availment of CENVAT credit, which means that the appellants have not suppressed the relevant information from the Department. Thereafter, the Department issued the show-cause notice on 1.4.2007 after almost four years after the disclosure of information by the appellant regarding their method of taking the CENVAT credit.
Once the department was aware of the procedure followed by the appellant for taking the CENVAT credit subsequently the department cannot allege suppression with intention to evade duty. It is settled law that mere failure to declare the information does not amount to willful mis-declaration or willful suppression. There must be some positive act on the part of the party to establish willful mis-declaration or willful suppression.
The entire demand is barred by limitation - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 181
Extended period of limitation - penalty - irregular credit availed on input services - credit on disputed services was reversed along with interest much before the issuance of the SCN - malafide intent present or not - Held that:- The allegation in the SCN is mere suppression of facts without anything further. There is no such allegation that the Appellants was under legal obligation to give invoice wise and item wise details of Cenvat credit which they have not given. Merely, mentioning malafide intention or suppression of facts or willful default is not sufficient. There has to have something more to prove malafide/ suppression/ willful default on the part of the Appellant.
In the present case, none of the authorities below have brought out any evidence on record to substantiate the allegation of suppression of fact or willful default on the part of the Appellant. All the transactions were duly reflected in excise return and this itself support the submission of the Appellant that there was no intention on the part of the Appellant to deliberate suppress any information with intention to evade payment of duty. Mensrea or malafide intention is necessary ingredients for invoking the extended period and also for imposing penalty - also, it is clear that immediately upon pointing out by the Audit, the Appellant reversed the entire Cenvat credit of ₹ 12,95,069/- with interest, without even waiting for show cause notice and this itself establishes that it is a case of bonafide mistake and there was no intention to evade duty.
Penalty u/s 11AC of CEA - Held that:- The authorities below have failed to brought on record any evidence to prove suppression on the part of the Appellant and the Appellant by his conduct has proved that there was no malafide intention on the part of the Appellant and it was only a bonafide error/belief on the part of the Appellant, therefore neither extended period of limitation is invocable in the facts of the present case nor penalty is liable to be imposed on the Appellant.
Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 183
Attachment of property - Recovery of amount of Government dues payable by the petitioner - Held that:- This court is of the view that since the petitioner is ready and willing to deposit an amount of ₹ 40,00,000/- in cash as well as furnish sufficient bank guarantee to secure the interest of the revenue in the above proceedings, the request made by the learned advocate for the petitioner requires to be accepted - the petition succeeds and is accordingly allowed in part.
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2019 (3) TMI 180
Reversal of Cenvat Credit - Clearances of electricity for a consideration w.e.f. 01/03/2015 - invocation of Rule 6 of CENVAT Credit Rules, 2004 - scope of SCN - Held that:- In the impugned order, the Commissioner, in para 23, has dropped all the demands raised against the appellant in the show-cause notices but in para 24, he has, without any justification, recorded the finding that the provisions of Rule 6 of CCR are attracted for clearances w.e.f. 01/03/2015 which was not the period involved in the present case and there was no show-cause notice for the period after the amendment - thus, the adjudicating authority cannot go beyond the show-cause notice.
Thus, para 24 in the order portion is not sustainable in law - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 179
CENVAT Credit - maintenance and repair service - denial on the ground that the purchase order shows that the service provided is that of civil work - Held that:- Perusal of the definition as it stands after 01.04.2011 makes it clear that definition’s first part includes the words “services used in relation to modernisation, renovation or repairs of factory”. The second part has the exclusion part wherein it states that the service portion in the exclusion of works contract and the construction services in so far as they are for construction of execution of work contract of a building or civil structure or a part thereof is excluded - It becomes clear that the services as that of maintenance and repair and any civil work related to maintenance and repair falls under 1st part of the definition and the services for civil construction and the work contract for civil construction are in the second part i.e. the exclusion part of the definition.
The several works have been executed by the service providers i.e. M/s. Shivaji Traders & M/s. R S Fabricators. There are several invoices involved in the appeals and each invoice has variety of work done/ services provided by the provider - the invoices itself are sufficient to bifurcate both the nature of the services based whereupon the adjudicating authority below could have quantify the amount for the services obtained qua repair and maintenance of the appellants premises and qua the construction therein.
Appeals remanded to the adjudicating authority itself for properly bifurcating the services eligible for inputs than from the services, which are not eligible for being classified as inputs - appeal allowed by way of remand.
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2019 (3) TMI 178
CENVAT Credit - input services - security guard for providing security of guest house - cycle stand and residential premises outside the factory premises - Held that:- The scope for any service to be called as the input service is vide enough, as the definition takes into its ambit the words “directly or indirectly in or in relation to manufacture of final product” and “clearance of final product”. Thus, the definition is not at all restrictive in nature confining itself to the services specifically availed for manufacturing activities, but stands extended to the services, which are having any nexus either direct or indirect to the activity of manufacture of the dutiable product.
Hon’ble High Court of Andhra Pradesh in the case of CCE, Hyderabad vs. ITC Ltd. [2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT] has held that where the manufacturer with an objective to have the instant availability of the work force involved in the process of manufacture provides the facilities as that of accommodation any services utilized for the purpose have a nexus, though indirectly to the manufacturing activity.
Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 177
Suo moto adjustment of sanctioned refund against the demand - appeal against the order is still pending adjudication - Held that:- The demand which has got setoff vide the sanctioned refund claim has not yet attained finality. The only provision available with the Department to recover the sums due to the Government is Section 11 of Central Excise Act, 1944.
Bare perusal of section 11 makes it clear that only such sum is liable to be recovered in such manner, which is payable by the assessee to the Government - In the present case, since the amount qua which the refund has been adjusted is not finally held as being payable, the demand confirmed been already sub-judiced before the competent authority, to my opinion, Department was not entitled to recover the same. The question of suo moto adjusting the sanctioned refund qua the said demand therefore does not arise.
The Commissioner (Appeals) has committed an error while relying upon such direction of the Board, which was technically as well as practically of no relevance at the time of impugned order - the Department was not entitled to suo moto adjust the refund claim - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 176
CENVAT Credit - duty paid on inputs which are used in the manufacture of exempted goods - separate account in respect of inputs, input services which were used in the manufacture of exempted goods not maintained - 6% of the value of the exempted goods as per the provisions of Rule 6(3)(i) of CCR not paid - time limitation - Held that:- Revenue has failed to bring on record any material to show that the appellant has suppressed the material fact with intent to evade payment of duty - further, the appellant has been filing the returns regularly wherein they have been showing the availment of credit. The appellant has produced the copies of various returns filed before the Department wherein they have mentioned the cenvat credit availed by them. Further in view of the various decisions relied upon by the appellant, it can be concluded that extended period has wrongly been invoked.
The cenvat credit amounting to ₹ 2,58,144/- is hit by limitation and the remaining amount of ₹ 1,50,604/- is within limitation which is confirmed but the entire penalty is dropped.
CENVAT credit on input service tax credit of ₹ 2,81,659/- - Held that:- The credit was taken during December 2015. Further up to September 2014, the appellant is entitled to take cenvat credit on all the invoices as the said amendment was made applicable from September 2014. Accordingly invoice dated July 2014 and August 2014 amounting to ₹ 1,26,693/- is not time-barred and invoices beyond September 2014 amounting to ₹ 1,54,966/- is confirmed.
Interest and penalty - Held that:- Since the appellants were having sufficient balance in their cenvat account and they have availed the credit but not utilized the same, the appellants are not liable to pay interest liability.
Appeal allowed in part.
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2019 (3) TMI 175
Rebate of duty - appropriation of the amount - appeal rejected on the ground that the said demand was confirmed against the appellant and recovery was due - Held that:- As on date there is no confirm demand against the appellants. Therefore, there is no justification in appropriation of the amounts - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (3) TMI 174
Classification of manufactured goods - Aswini Homeo Hair Oil - classified under Entry 37 of Schedule-I to The Andhra Pradesh General Sales Tax Act, 1957 - Held that:- The fact that the respondent is using the Homeopathic Pharmacopoeia referred to earlier in manufacturing of the hair oil has not been traversed by the appellant. Neither has the Commissioner dealt with that contention of the respondent nor was such a plea taken before the High Court by the appellant - the product manufactured by the respondent was rightly assessed at the relevant point of time in the assessment years 1994-1995 and 1995-1996, as covered by Entry 37 of Schedule-I of the APGST Act.
The view taken in these appeals is in the fact situation of this case and confined to the assessment years 1994- 1995 and 1995-1996 only and would not apply or be of any avail to the respondent for the subsequent assessment years, in view of the amendment effected in the APGST Act - appeal disposed off.
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2019 (3) TMI 173
Maintainability of appeal - appeal was dismissed on the ground of non-compliance of Section 62(5) of the PVAT Act, 2005 - assessee is in possession of valid declaration forms (C-Forms) - Held that:- In the present case, the appellant has been required to predeposit 25% amount of the additional demand of the tax as a condition precedent for hearing of the appeal, which was reasonable and justified - No illegality or perversity could be pointed out by the learned counsel for the appellant in the findings recorded by the Tribunal which may warrant interference by this Court. No question of law arises in this appeal - appeal dismissed.
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Wealth tax
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2019 (3) TMI 172
Maintainability of wealth tax appeal - monetary limit - HELD THAT:- The CBDT vide earlier Circular No.3/2018, dated 11.07.2018 had prescribed the monetary limits for filing of appeals by the Department before the Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court.
As per para 11 of said circular, it was specified that monetary limit in para 3 shall not apply to writ matters and direct matters other than income tax and filing of appeals in such cases shall continue to be governed by relevant provisions of Statute and rules. However, vide circular No.5/2019, dated 05.02.2019, the CBDT has recognized vide para 2 that there is no charge under Wealth Tax Act, 1957 w.e.f. 01.04.2016 and hence as a step towards litigation management, the Board has decided that monetary limits for filing of appeals in income tax cases as prescribed in para 3 of the circular shall also apply to wealth tax appeals.
In view of extension of circular to wealth tax appeals coming into effect, which is applicable to pending appeals, then the present appeals filed by the Revenue before the Tribunal because of low tax effect, merits to be dismissed in toto.
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