TMI Tax Updates - e-Newsletter
March 9, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Valuation under GST - the cost of the tools supplied by the OEM customer on FOC basis to the Appellant is not required to be added to the value of the components supplied by the Appellant - the ruling of the AAR reversed.
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GST:
lassification of goods - marine paints - ‘marine paints’ are in no way an integral piece of a ship which would in any way form the whole ship. - This may be mandatory requirement for the sail worthiness of the ship but that does not indicate that they are parts of the ship.
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GST:
Classification of goods - Reactor - the product manufactured by the Appellant does not merit classification under the subheading 8413 91- as “Hand Pumps and parts thereof”
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GST:
E-way bill - prima facie, revenue seeks to impose penalty, redemption fine and confiscation under section 130 of the Act without initiating any proceedings under section 129 of the Act, which is not permissible in law.
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GST:
Bail application - input tax credit - obtaining invoices without delivery of the goods - offence punishable u/s 132 - by imposing stringent conditions if the petitioners are ordered to be released on anticipatory bail, it would meet the ends of justice.
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GST:
Profiteering - printing cartridges - The passing of the benefit by the distributor or retailer does not rest on the fact that the manufacturer or his supplier should have passed on the same benefit to him first - Respondent has profiteered by increasing his base price. Hence he is liable for penalty.
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Income Tax:
Deduction u/s. 80P - all expenses/losses attributable to such interest income are required to be necessarily deducted and only resultant interest income is eligible for deduction under S. 80P(2)(d)
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Income Tax:
TDS u/s 194H - non deduction of tds on commission payment - the payment made by the assessee to M/s.TQ Services is, in no way, commission payment, but, is, in fact, a sharing of profit and consequently, the provisions of Section 194H of the Act did not apply.
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Income Tax:
Recovery proceedings - Notice u/s 226(3) - After declaration of Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 institution of other proceeding mentioned in Section 14(1) will prohibited. Hence proceeding pursuant to Notice u/s 226(3) become infructuous.
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Income Tax:
Claim of deduction of long term capital gain claimed u/s 54 - delayed filing of ITR - No deposit in capital gain account scheme account - in such case claim is allowable as section 54(2) for utilization only mentioned return filed u/s 139 and not 139(1).
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Income Tax:
Subsidy or incentive - purpose tests for grant of subsidy/incentive - incentives received in the form of Sales Tax and Central Excise benefit - revenue or capital receipt - If on facts it was proved that subsidy was granted under schemes framed by the State and the Central Government, to set up new industry in Kutch District or to encourage investment which would in turn, provide fresh employment opportunity in the district which had suffered due to devastating earthquake then applying purpose test it would in capital nature.
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Income Tax:
Revision u/s 263 - Gain on cancellation of forwarding contract - characterization of income - Revenue may be correct in contending that, the Assessing Officer had not carried out detailed enquiries that by itself would not be sufficient to enable the Commissioner to exercise revisional power if based on materials already on record come to the same conclusion that amount is capital nature and not taxable.
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Income Tax:
Sale tax paid on sales return - allegation of bogus sales - allowable business loss - When the factum of sales return has been proved in favour of the assessee and payment of sale tax by the assessee on the said fictitious sales is not disputed same has to allowable as business loss.
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Income Tax:
Penalty u/s.271(1)(c) - Disputed income offered in subsequent year - When all the facts are available, that cannot be termed as furnishing of inaccurate particulars of income leading to invoking the rigours of penalty u/s. 271(1)(c).
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Income Tax:
Reopening of assessment - Grant of the sanction by the CIT u/s 151 of the Act, is not a mechanical act on his part but it requires due application of mind to the reasons recorded before granting the sanction.
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Income Tax:
Devaluation of stocks and spares - AS-2 - revaluation of certain old inventories which were obsolete and non moving items of spares - if based on technical evaluation deduction is duly allowable. - The method of revaluation cannot be faulted for reason of it having been accepted by accounting principle AS-2.
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Income Tax:
Levy of penalty u/s 271(1)(b) - non comply with the notice issued u/s 142(1)- Once on record it is proved that notice was complied with, no penalty 271(1)(b) for non compliance is leviable.
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Income Tax:
Deduction u/s 10B - profit of eligible undertaking for the purpose of allowing deduction u/s 10B of the Act at the source itself without deduction of unabsorbed brought forward depreciation
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Income Tax:
Addition u/s 68 - share capital and share premium - allegation regarding identity and creditworthiness - non appearance of director - addition cannot be sustained merely based on inferences drawn by circumstance.
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Customs:
Duty Drawback - mis-declaration - they manipulated the marking and numbers on the good to establish the identity with the imported goods - such an approach is nothing but an act of mis-declaration which render the goods liable for confiscation.
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Service Tax:
Validity of rcovery/garnishee order - short payment of service tax - without issuing the show cause notice, if the explanation of the petitioner is not accepted, initiating recovery proceedings by issuing garnishee order to the bankers cannot be substantiated
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Service Tax:
Imposition of penalty u/s 78 - mere non-payment of short-payment of duties or taxes cannot be construed as with an intent to evade duties/taxes. There must be something more than mere failure to pay taxes for invoking the provisions of Section 78 ibid.
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Central Excise:
Recovery of arrears of tax / duty of company from the director of company - The action of the respondents in compelling the petitioner to clear the dues of the company cannot be sustained
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Central Excise:
Refund claim - when a specific limitation has been provided u/s 11B, then that limitation has to be adhered specially when it is not the case of appellant that he had deposited such amount under protest to carve out an exception under second proviso to Section 11B(1)
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Central Excise:
CENVAT Credit - input service distribution (ISD) - there is no restriction in the rule that the Central unit cannot avail the whole credit accruing through its unit for common input services even if it has got a centralized purchase sale and accounting system.
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Central Excise:
Suo moto credit of excess credit reversed - process involving availment of suo motu Cenvat credit of the amount reversed earlier is a technical book adjustment and in absence of outflow of funds from assessee, filing of refund claim under Section 11B of the Act does not arise.
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VAT:
Evasion of tax - mala-fide intention or not - the dealer has specifically pointed out that there were other similar manufacturers, who were also selling for the same price. If the Assessing Officer chose to disbelieve the statement, it goes without saying that he has to enquire the other dealers. Without doing so, he cannot discredit or reject the explanation or statement made by the petitioner/dealer.
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VAT:
Classification of goods - rate of tax - skimmed milk powder - to state that milk food is same as milk powder is a wrong interpretation of the Entry.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (3) TMI 430
Profiteering - printing cartridges - benefit of reduction in the GST rates not passed on - section 171 of the CGST Act, 2017 - Held that:- It is clear that anyone alleging profiteering can file a complaint. So it is not necessary that the complainant has to purchase the products, Moreover, all the details are available so the question of not considering the compliant do not arise at all. Even the MRP that is manually written happens to be correct MRP as admitted by the respondent. Therefore, the Standing Commitee has rightly forwarded the same the DGAP and the DGAP has accordingly completed its investigation and filed his report.
In the present case, we are concerned with the supplier and the supplier is the respondent who has increased the price even after reduction of GST rate of tax. The passing of the benefit by the distributor or retailer does not rest on the fact that the manufacturer or his supplier should have passed on the same benefit to him first - the benefit of reduction of tax has to be necessarily has to be passed on to the recipients. Moreover the DGAP has rightly taken the transaction value of supplier which was the price that was charged by the respondent from his recipients which excluded the impact of discounts.
Thus, the respondent is directed to reduce the price of the products as per provisions of Rule 133 (3) (a) of CGST Rules, 2017 by making commensurate reduction in the prices, keeping in view the reduction in the rate of tax.
Penalty - Held that:- It has been established that the Respondent has profiteered by increasing his base price. Hence he is liable for penalty under Section 122(1)(i) of the CGST Act, 2017, for issuing incorrect invoices. In the interest of natural justice before imposition of penalty a notice for hearing need to be issued.
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2019 (3) TMI 432
E-way bill - confiscation of goods - Procedure to be followed in case where any goods are in transit in contravention of the provision of the Act or the rules made thereunder - Held that:- The attention of the court was invited to the impugned show cause notice dated 1.3.2019, to submit that the same seeks to impose penalty, redemption fine and confiscation under section 130 of the Act without initiating any proceedings under section 129 of the Act, which is not permissible in law - Issue Notice returnable on 8th March, 2019.
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2019 (3) TMI 435
Valuation - inclusion of amortized cost of the tools in assessable value - tools are supplied by the customer free of cost and used by the Appellant in the manufacture of the components - Section 15 of the CGST Act read with Rule 27 of CGST Rules - challenge to AAR decision - Held that:- Under the erstwhile Central Excise regime, Rule 6 of the Central Excise Valuation Rules, 2000 required an assessee to calculate the intrinsic value of the excisable goods by including any additional consideration flowing directly or indirectly from the buyer to the assessee - Under the GST regime of taxation, the taxable event which attracts the levy of GST is the ‘supply’ of goods or services, in terms of Section 9 of the CGST (and SGST) Act or Section 5 of the IGST Act, depending on whether the transaction of ‘supply’ is intrastate or interstate.
In so far as the valuation of the supply is concerned, Section 15 of the CGST Act provides that the value of taxable supply shall be the transaction value which is the price paid or payable by the recipient provided the supplier and recipient are unrelated parties and price is the sole consideration for the supply. Further Section of the said Act specifically states that where any amount which the supplier is liable to pay in relation to a supply but the same has been incurred by the recipient on behalf of the supplier, then such amount is required to be added while determining the transaction value.
On going through the terms and conditions of the contract between the Appellant and DICV, it is evident that the Appellant is required to use DICV Owned Tools concerning the part to be manufactured with the tool. The tool shall be used only for the purpose of fulfilling its manufacturing obligations under the supply contract - in this case, the customer, DICV, has assumed the responsibility to provide the tools to the Appellant in the interest of ensuring that there is uninterrupted supply of their parts. While the first priority is that the supplier should use the DICV Owned Tools for the manufacture of the component parts, there is also the possibility that Non-DICV Owned Tools can also be used for the manufacture of parts for the customer. In the event of the second possibility, the customer, DICV takes ownership of the Non-DICV Owned Tools by way of a security only with the objective of ensuring that the supply of their parts by the Appellant is uninterrupted. In the event there is an interruption in delivery of manufactured components using the Non-DICV Owned Tools, then the customer, DICV, has the right to demand the surrender of the tools and reimburse the Appellant the percentage of the tool cost which has not been amortized. On perusal of the contract, it is understood that, in the case Non- DICV Owned Tools are used in the manufacture of the components, the price agreed upon includes the amortized cost of the Non-DICV Owned Tools.
CBIC in its Circular No 47/21/2018-GST dated 08.06.2018 has clarified that goods owned by OEM that are provided to a component manufacturer on FOC basis do not constitute a supply as there is no consideration and in such cases, the value of goods provided on FOC basis shall not be added to the value of supply of components.
Thus, the cost of the tools supplied by the OEM customer on FOC basis to the Appellant is not required to be added to the value of the components supplied by the Appellant - the ruling of the AAR is set aside.
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2019 (3) TMI 429
Profiteering - Caribbean Wood Tile - benefit of reduction in the rate of tax no passed on - contravention of Section 171 of the Central Goods & Service Tax (CGST) Act, 2017 - Held that:- There was no reduction of tax with the introduction of GST. The DGAP on examining various facts has categorically mentioned that the invoices very clearly show that no VAT was levied and CST was also exempted prior to 01.07.2017. In fact the rate of tax has increased from Central Excise Duty 13.97% to GST 28% w.e.f. 01.07.2017. Therefore, the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017 as there has been no reduction in the rate of tax.
There is no merit in the application - application dismissed.
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2019 (3) TMI 431
Bail application - offence punishable under Section 132 of Central Goods and Services Tax Act - it is alleged that petitioners have obtained Invoices from the Company of the respondent without delivery of the goods - Held that:- On reading of Sections 132, 138 and 139 of the G.S.T. Act, it is found that the maximum punishment provided under the Act is five years and fine and if that is taken into consideration, the magnitude of the alleged offence and it is not punishable with death or imprisonment for life. Even as per the said provision, the alleged offence is also compoundable with the Authority, who has initiated the said proceedings.
The only consideration which the Court has to consider while releasing the petitioners on anticipatory bail is, that whether the petitioners can be secured for the purpose of investigation or for the purpose of trial - thus, by imposing stringent conditions if the petitioners are ordered to be released on anticipatory bail, it would meet the ends of justice.
The petitioners are ordered to be released on anticipatory bail in the event of their apprehension or arrest in O.R.No.40/2018-19 filed under Section 132 of G.S.T.Act, subject to conditions imposed - petition allowed.
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2019 (3) TMI 434
Classification of goods - marine paints supplied by the Appellant - whether the goods are to be considered to be part of ship and accordingly, be then classified under S. No. 252 of the Schedule I of the Notification No. 1/2017? - rate of tax - N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 - Held that:- Notification No.1/2017 dt.28.06.2017 prescribes the applicable rate of CGST. The paints supplied by the appellant are classifiable under Chapter heading 3208 and 3209 which are covered under Schedule IV of the said Notification and liable to GST @ 28%. However, under the same rate notification, Schedule-I which covers goods taxable @ 2.5% CGST has entry No.252 which covers parts (classifiable under any chapter) of goods, falling under heading 8901,8902,8904, 8905,8906 and 8907.
In common parlance, paints generally means any liquid which is commonly applied to a number of surfaces and is used to provide texture to an object as well as protect the surfaces. The paint supplied by the appellant is ‘anti fouling paint’ which is generally applied to hulls of ships. In order to address the contention of the appellant, it is to be seen as what is understood by the meaning of the term ‘parts’ - What we understand from the term ‘part’ is that it should be identified as something integral and mandatory to the completion of the whole article and without which the article will not be complete. By the application of the above, it cannot be said that marine paint is part of the ship. An essential part of ship or something without which ship could not be completed and would not exist. It presumes that the article as such must, in its condition and functioning, be so essential that the whole cannot function without it. We agree with the observation of the AAR that ‘marine paints’ are in no way an integral piece of a ship which would in any way form the whole ship.
The main contention of the appellant is that as per the provisions of the Merchant Shipping Act, paints are mandatorily required on all ships and therefore they should be considered as part of ships. This may be mandatory requirement for the sail worthiness of the ship but that does not indicate that they are parts of the ship. The mandatory requirement under some other law cannot be an adequate ground for classifying a product as ‘part’.
Thus, the impugned product would not be a part of ship - AAR decision upheld.
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2019 (3) TMI 433
Classification of goods - Reactor - classified under HSN 8413 91 or HSN 8421 21 90? - Held that:- The impugned product is not fitted with the hand pumps at the time of manufacturing of the hand pumps, rather it is retrofitted with the hand pumps with the purpose different from the hand pumps whose main function is to draw the underground water from the bore well whereas the primary function of the impugned product is to purify the water. Thus, the impugned product is not an essential part of the hand pumps because hand pump can function even without the impugned product. Rather it can be construed as accessory fitted to the hand pumps having the characteristics of the water purifier which adds to the value of the product- in this case, water- obtained from the main equipment/machines- in the instant case, the Hand Pump.
The impugned product is in no way associated with the extraction of the underground water from the bore well, which is the main function the Hand Pump - the impugned product manufactured by the Appellant does not merit classification under the subheading 8413 91- as “Hand Pumps and parts thereof” as contended by the Appellant and is classifiable under the heading 8421 21 90 having description as 'filtering or purifying machinery and apparatus for liquids'.
Appeal dismissed.
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Income Tax
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2019 (3) TMI 392
Stay of demand - recovery proceedings - HELD THAT:- We find that the assessee has an arguable case and as seen from the submissions of the DR itself, the assessee does not have funds to meet the outstanding demand of tax. However, we deem it fit and proper to grant stay of the recovery of the outstanding demand of tax for all the A.Ys under consideration subject to the condition that the assessee pays ₹ 3.00 crores on or before 15.03.2019. The assessee shall submit the copy of the challan and also file the paper books within time so that the matter can be heard on 27.03.2019 which is the date fixed for hearing. The stay shall be in force for a period of 180 days or till the disposal of the appeal, whichever is earlier.
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2019 (3) TMI 402
Waiver of interest chargeable u/s. 234A, 234B and 234C granted by the Settlement Commission in original order - Rectification filed - Rectification of above order was allowed by commission - Assessee challenged before High Court - High Court held that no rectification is permissible in view of decision of Supreme Court in case of Brij Lal and ors [2010 (10) TMI 8 - SUPREME COURT] - department, thereupon, challenging original order - High Court inter-alia hold that "13. Under the circumstances, we direct modification of the order of Settlement Commission dated 11.08.2000 by reversing the waiver of interest in terms of Settlement Commission's directions contained in its order dated 11.10.2002. In other words, we adopt the same directions for modification of the Settlement Commission's original order dated 11.08.2000." - can Quashed order could be relied upon by the High Court much less for making it a part of their order for issuing a writ - Appeal against above observation in High Court order -
HELD THAT:- It is not in dispute that when the Settlement Commission passed the first order on 11.08.2000 disposing of the application of the appellants(asseesee), the issue with regard to the powers of the Settlement Commission was not settled by any decision of this Court. These two decisions of BRIJ LAL & ORS.[2010 (10) TMI 8 - SUPREME COURT] and GHASWALA AND OTHERS [2001 (10) TMI 4 - SUPREME COURT] were rendered after the Settlement Commission passed the order in this case. Therefore, the Settlement Commission had no occasion to examine the issue in question in the context of law laid down by this Court in these two decisions. However, the issue in question was, at that time, pending before the High Court in the petitions(SCAs).
In a situation like the one arising in the case, the High Court instead of going into the merits of the issue, should have set aside the order dated 11.08.2000 passed by the Settlement Commission and remanded the case to the Settlement Commission for deciding the issue relating to waiver of interest payable under Sections 234A , 234B, and 234C of the Act afresh keeping in view the scope and the extent of powers of the Settlement Commissioner in relation to waiver of interest as laid down in the said two decisions.
The High Court, however, committed a jurisdictional error when it observed that they (High Court) adopt the directions contained in the order of the Settlement Commission dated 11.10.2002 and then went on to make the said directions as a part of the impugned order in relation to waiver of interest. This approach of the High Court is wholly without jurisdiction.
Since the order dated 11.10.2002 of the Settlement Commission was already held bad in law on the ground that it was passed under Section 154 of the Act, the same was neither in existence for any purpose and nor it could be relied upon by the High Court much less for making it a part of their order for issuing a writ.
We consider it apposite to set aside the impugned order and the order dated 11.08.2000 passed by Settlement Commission to the extent it decided the issue in relation to waiver of interest and remand the case to the Settlement Commission to decide the issue relating to waiver of interest payable by the assessee (appellants herein) afresh keeping in view the law laid down by this Court in Ghaswala (supra) and Brijlal (supra) after affording an opportunity to the parties concerned.
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2019 (3) TMI 391
Long term capital gain - additional construction on pre owned property - completion of “transfer” of Capital asset - development agreement entered with developer wherein assessee was entitled to receive a sum in cash and two flats that are going to be constructed - taken possession in earlier year - completion certificate also issued in earlier year - Only allotment letter of flat already in possession was issued in relevant financial year.
HELD THAT:- The assessee has entered into development agreements in the year 2002. As per the supplementary agreement, the assessee was to receive ₹ 49.50 lakhs and two flats from the developer. Hence the flats received by the assessee are only a part of total sale consideration receivable by the assessee as per the development agreement. No dispute that the capital gains liability shall arise upon completion of “transfer” of Capital asset. Hence the assessee cannot postpone the capital gains tax liability on account of delay in receipt of sale consideration and on the very same criteria, the AO cannot bring capital gains to taxation in the year of receipt of part of sale consideration. The tax authorities are not justified in placing reliance on the allotment letter given by the developer to the assessee.
As per the decision rendered in the case of Chaturbhuj Dwarkadas Kapadia [2003 (2) TMI 62 - BOMBAY HIGH COURT] the liability to capital gains tax shall arise upon entering development agreement, if the assessee has handed over the possession of property and received part consideration. The copy of occupancy certificate show that the assessee had handed over the possession as per the development agreement and the construction itself has been completed in the year 2006. All these events have taken place much prior to the financial year relevant to AY 2008-09. The assessee has also placed copies of electricity bills to show that he has taken possession of flats in the year 2005 itself. These facts would show that the capital gains liability cannot, in any case, would arise in AY 2008-09.
Thus the capital gains, if any, arising on account of development agreement is not assessable in assessment year 2008-09. - Decided in favour of assessee.
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2019 (3) TMI 390
Levy of penalty u/s 271(1)(c) - enhancement of net profit rate - concealment of income or furnishing inaccurate particulars of income - HELD THAT:- Even if there is discrepancies noted in the books of account and other records produced by assessee, but, it is not a case of concealment of income or furnishing inaccurate particulars of income by the assessee. Since the assessee has shown higher income by showing better net profit rate in assessment year under appeal as compared to preceding assessment years, therefore, there was no occasion for the assessee to conceal income or file inaccurate particulars of income.
The assessee produced complete details and records before AO for his verification. Therefore, it is a case of estimated income, in which, assessee agreed for higher net profit rate because of the discrepancies noted by the A.O. in the record produced by assessee. It is well settled Law that provisions of Section 271(1)(c) are not attracted to the cases where the income of assessee is assessed on estimate basis and additions are made therein on that basis. See HARIGOPAL SINGH VERSUS COMMISSIONER OF INCOME-TAX. [2002 (8) TMI 65 - PUNJAB AND HARYANA HIGH COURT] - Decided in favour of assessee.
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2019 (3) TMI 428
TP adjustment - Comparable selection criteria - exclude the comparables of SIRO Clinpharm Pvt Ltd. Assessee is a company engaged in manufacture and sale of pharmaceutical products - as per revenue SIRO Clinpham Pvt Ltd included as comparable by the respondent itself in its transfer pricing study and therefore, bound by it - HELD THAT:- If an assessee in view of mistake or an incorrect advice does include and / or exclude a company from the list of comparables, it is not irrevocable / irreversible. Thus, if on facts, the assessee is able to establish that the company if sought to include is not comparable, it is not to be included in the list of comparable. Thus, there is no merit in the first objection on behalf of the Revenue.
So far as the second objection Revenue invited our attention to the fact that the Tribunal by its order dated 8.3.2013 for assessment year 2002-03 had accepted M/s. SIRO in its list of comparables to determine the ALP of the respondent. However, in view of the difference between the business model between M/s. SIRO and the respondent, the Tribunal had restored the issue to the Assessing Officer for appropriate adjustment while determining the ALP. This was so because M/s. SIRO's business model is based on inhouse activity while that of the respondent is based on outsourcing activity. This order of the Tribunal dated 8.3.2013 was challenged before this Court by the Revenue being Income Tax Appeal No. 2183 of 2013 for being restored to the Assessing Officer. However, the same was dismissed by this Court on 27.6.2016. However, the order dated 8.3.2013 in respect of assessment year 2002-03 was not challenged by the respondent assessee - no justification for the impugned order of the Tribunal to exclude M/s. SIRO from the list of comparables
M/s. Choksi Laboratories Ltd - It is to be noted that on 26.3.2018, this Court in the case of CIT Vs. Aptara Technology P Ltd [2018 (4) TMI 404 - BOMBAY HIGH COURT] had held that the company which outsources it work is not comparable for ALP determination with a company that does the activity inhouse. Therefore, no fault can be found with the impugned order of the Tribunal in applying the binding decision of this Court. Therefore, in view of the decision of this Court in Aptara Technology P Ltd (supra), the question as proposed to the extent it seeks to include M/s. SIRO does not give rise to any substantial question of law. Thus, not entertained.
M/s. Syngene International Pvt Ltd - This entity is wholly owned subsidiary of M/s. Bicon Ltd and is having substantial related party transactions. This fact has not been disputed by the Revenue before the Tribunal nor before us. Thus, the question of including M/s. Syngene International P Ltd would not arise in determining the ALP of the respondent assessee transactions with its A.Es. Therefore, the concurrent finding of facts by the Commissioner of Income Tax (Appeals) as well as the Tribunal in excluding this entity cannot be faulted with in the absence of the Revenue showing it to be perverse. Thus, the question as proposed to the extent of seeking to include M/s. Syngene International P Ltd in the list of comparable, does not give rise to any substantial question of law.
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2019 (3) TMI 399
Substantial question of law - book profit u/s. 115JB - MAT computation - Admitted question regarding addition made in provision for bad and doubtful debts, revenue generated from trial run production and sales tax subsidy in computation of book profit u/s. 115JB.
No substantial question of law admitted regarding - provision for Director's Retirement Benefit - excess expenditure on Voluntary Retirement - expenses on VRS pertaining to earlier years - addition made in respect of expenditure debited to P & L account - book profit u/s. 115JB - MAT computation - HELD THAT:- The CIT(A) and the Tribunal by concurrent orders deleted such additions on the ground of the liabilities being ascertained contrary to what the Assessing Officer had held and / or on the ground that the Assessing Officer cannot tinker with the assessee's books of accounts while computing income under Section 115JB of the Act by placing reliance on the judgment of the Supreme Court in case of Apollo Tyres Ltd Vs. CIT [2002 (5) TMI 5 - SUPREME COURT].
As perused the documents on record, we are broadly in agreement with the view of the Tribunal. The liabilities in question related to the provisions made for directors' retirement benefits, liability arising out of voluntary retirement scheme etc. These questions are, therefore, not considered.
Addition being expenditure claimed in respect of temporary structure - HELD THAT:- Question similar to one considered by this Court in M/S ASSOCIATED CEMENT COMPANY LTD[2015 (12) TMI 1787 - BOMBAY HIGH COURT] in which by order dated 9.12.2015, this question was not considered.
Addition in respect of provision for deferred tax liability - tribunal deleted addition made by the AO resulted into double disallowance to the assessee - HELD THAT:- CIT(A) and the Tribunal both have concurrently held the disallowance amounts to double disallowance and therefore, deleted the same. This additional question, therefore, not considered.
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2019 (3) TMI 427
Reopening of assessment - notice issued beyond a period of four years from the end of the relevant Assessment Year - non entitlement to benefit of Section 80IB - HELD THAT:- We find that, the reasons in support of the impugned notice, merely mentions about the Assessment for Assessment Year 2015-16.
However, it does not mention of any failure to disclose the correct date of commencement being a fact which came to the knowledge of the Revenue while passing the Assessment Order for Assessment Year 2015-16.
As during regular assessment proceedings, for the subject Assessment Year 2011-12, the Petitioner had at the instance of the Assessing Officer given complete details with regard to the purchase of the flat, the date of agreement of purchase of the flats and also date of possession to the Assessing Officer. The same was examined by the Assessing Officer. At that time, the Assessing Officer was satisfied that the flats were sold prior to the amendment of 2010. It is consequent to the above that the Assessing Officer passed an order dated 26th March, 2014 under Section 143 (3) of the Act and accepted Petitioner's claim for deduction under Section 80IB (10)
As held in HINDUSTAN LEVER LTD. VERSUS RB. WADKAR, ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS (NO. 1). [2004 (2) TMI 41 - BOMBAY HIGH COURT] reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced.
Therefore, in facts of this case, the reasons in support of the impugned notice not having alleged/ particularized any failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment, the impugned notice is without jurisdiction. - Decided in favour of assessee.
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2019 (3) TMI 389
Penalty u/s 271(1)(c) - non mentioning the specific charge in the Show Cause Notice issued u/s 274 - defective notice - HELD THAT:- The charge for which penalty is proposed to be levied under section 271(1)(c) of the Act, whether for concealment of income, or for furnishing of inaccurate particulars of income, is not specific. The law mandates that the authority who is proposing to impose penalty shall be certain as to the basis on which the penalty is being levied and the notice must reflect that specific reason, so that the assessee, to whom such notice is given, can prepare himself regarding the defence which he would like to take to support his case.
The show cause notice, which has not specified the charge and limb under which the penalty is proposed to be levied, is void ab initio and the consequent penalty imposed on the basis of such notice is, therefore, illegal and bad in law - Decided in favour of assessee.
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2019 (3) TMI 388
Addition u/s 68 - unexplained cash credit - money was transferred originally from the loan account of Shri Viniyak Atterde to SB account of Shri Viniyak Atterde and withdrawal of cash by Shri Viniyak Atterde from the SB account and gave a loan to the assessee - HELD THAT:- SB account of Shri Viniyak Atterde, the creditor of the assessee, assumes from significant for deciding the issue meaningfully. Therefore, the said additional evidences are admitted and referred to the file of the AO for deciding the issue afresh.
AO shall examine the cash flow statement of loan account to the SB account of Shri Viniyak Atterde and if the amounts and debts are matching to the cash received by the assessee as loan, claim of the assessee, may be allowed after examining the documents, additional evidences and the submissions of the assessee in the remand proceedings. Accordingly, the issue is remanded to the file of the Assessing Officer for deciding the issue afresh - Decided in favour of assessee for statistical purposes.
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2019 (3) TMI 387
Levy of penalty u/s 271(1)(b) - non comply with the notice issued u/s 142(1) - as contended that the assessee duly filed reply to the said notice u/s 142(1) as issued by AO - HELD THAT:- The contention of the assessee is found to be correct. Copy of assessee’s reply dated 28/10/2016 to the notice dated 19/10/2016 issued to the assessee under section 142(1) produced. The first page of this reply (APB 14), a scanned copy whereof is reproduced as bears the stamp of the Assessing Officer and signatures thereon. These are dated 21/12/2016. The Department has not been able to show otherwise.
Therefore, it cannot be said that the assessee did not comply with the notice dated 19/10/2016 issued under section 142(1) of the Act. Thus as the assessee has duly complied with the notice, penalty under consideration is entire uncalled for. It is, accordingly, cancelled. - Decided in favour of assessee.
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2019 (3) TMI 386
Carry forward of deficit on account of excess expenditure - Accumulation of income u/s.11(1)(a) - whether double benefit to the assessee, first as 'accumulation' of income u/s.11(1)(a) or as corpus donation u/s 11(1)(d) in earlier years/current year and then as 'application' of income u/s 11(1)(a) in the subsequent years - HELD THAT:- Consistent view taken by Hon’ble Courts and co-ordinate Benches of the tribunal in favour of the tax-payer on this issue of carry forward of excess of expenditure incurred towards the object of the trust over income of the tax-payer trust from property held for charitable purposes to the subsequent years to be set off against income/surplus of the subsequent years, we dismiss the appeal of the Revenue by adjudicating this issue in favour of the assessee.
Pendency of revenue SLP - HELD THAT:-SLP in the case of MIDC was dismissed by the Hon’ble Supreme Court vide orders dated 13.12.2017, in CA No. 009813/2014 reported in CIT VERSUS RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA[2017 (12) TMI 1067 - SUPREME COURT]
No hesitation in holding that the assessee would be entitled to carry forward excess of expenditure incurred towards objects of the trust over income from property held for charitable purposes being deficit for the impugned year to be carried forward to subsequent years to be set off against income of the subsequent years. The Revenue fails in its appeal.
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2019 (3) TMI 385
Deduction u/s 80P - commission received from MSEB - Income attributable to the Business Income - HELD THAT:- Similar issue was decided by the Pune Bench of the Tribunal in the case of Dronagiri Nagri Sahakari Patsanstha Maryadit [2018 (6) TMI 1576 - ITAT PUNE] in favour of the assessee stating that Income from MSEB commission is held to be business activity as per decision cited by the assessee in the case of Ahmednagar District Co-operative Bank Ltd. [1990 (4) TMI 119 - ITAT PUNE]. - Decided in favour of assessee
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2019 (3) TMI 384
Claim of deduction of long term capital gain claimed u/s 54 - Due date of return u/s 139(1)is 31.07.2013 - Return actually filed on 25.01.2014 - Claimed amount utilized up to 25.01.2014 is allowable - No deposit in capital gain account scheme account - HELD THAT:- When the return of income was filed by the assessee the entire amount which was subject to capital gain tax has not been utilized for the purpose of construction of new house nor were the unutilized amount deposited in the notified bank account in term of section 54F(4) before filing of return of income. The assessing officer has taken into account all amounts utilized for construction of the house, as the dates noted above and therefore in the present facts the decision in the case of Humayun Suleman Merchant [2016 (9) TMI 70 - BOMBAY HIGH COURT] squarely applies the facts of the present case. - Decided in favour of assessee.
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2019 (3) TMI 383
Treatment to rental income - correct head of income - income from ‘House Property’ OR ‘Business Income’ - AO treated the rental income as ‘income from business’ - HELD THAT:- Considering the various judgments cited by the respective parties, keeping in view the orders by the Coordinate Bench of ITAT in assessee’s own case for AY 2010-11 [2016 (8) TMI 1421 - ITAT MUMBAI] and also the facts of the present case that assessee is in the business of development of real estate projects and letting of property is not the exclusive business of the assessee, therefore while relying upon the judgment of jurisdictional High Court in the case of CIT Vrs. Gundecha Builders [2014 (2) TMI 1350 - ITAT MUMBAI], we are of the view that the rental income earned by the assessee was rightly treated as income under the head ‘House Property’ CIT(A).
No new facts have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the CIT(A). Hence, we are of the considered view that the findings so recorded by the CIT (A) are judicious and are well reasoned. Resultantly, these ground raised by the revenue stands dismissed.
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2019 (3) TMI 382
Sales Return disallowed stating bogus - unexplained income - evidence produced - CIT-A deleted the addition based on evidence- HELD THAT:- Assessee has duly proved before the CIT(A) that out of total quantity of the sale return during the year under assessment approximately 40.3% quantity of such stock was resold and approximately 22.4% of quantity was included in the closing stock being sellable goods in the subsequent years and remaining quantity of approximately 37.3% was claimed as expired / damaged stock which was not included while computing the value of the closing stock as on 31st March, 2005.
So when sale returns has been duly proved with physical stock available with the assessee, CIT(A) has rightly decided the issue in favour of the assessee that the same cannot be added as unexplained income - decided against revenue.
Addition on account of sale tax on sales return - allowable business loss - HELD THAT:- It is the case of the assessee that at the time of making the sale the assessee has debited the account of party with value of sales and sale tax, thus, the assessee has made payment of sales tax to the Government. However, when the goods were recovered by the assessee, the sales tax paid by the assessee was never recovered and the assessee has written of the amount of sales tax as bad debt. When the factum of sales return has been proved in favour of the assessee and payment of sale tax by the assessee on the said fictitious sales is not disputed, the CIT(A) has rightly allowed the sale tax paid on sales return as business loss - decided against revenue.
Foreign exchange fluctuation loss disallowed - loss on exchange loss is only notional loss and is not a real loss - CIT(A) deleted the addition relying upon decision of CIT vs. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] - HELD THAT:- When the factum of availing of the aforesaid loan is not disputed by the revenue then why the loss on account of exchange differences on revenue items arising on foreign currency transactions has to be treated as income / expenses during the year under consideration. So, Ld. CIT(A) has rightly deleted the addition on account of foreign exchange loss by following the decision rendered by Hon’ble Supreme Court in CIT vs. Woodward Governor India Pvt. Ltd. - decided against revenue.
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2019 (3) TMI 381
Deduction u/s. 80P - CIT(A) denied deduction in exercise of its power of enhancement - maintainability of deduction u/s 80P(2)(d) in the hands of the credit co-operative society towards interest earned from deposit placed with co-operative banks, more so, in the light of insertion of s. 80P(4) of the Act by Finance Act, 2006 - HELD THAT:- For the purposes of Section 80P the principle of mutuality has been obliterated in view of insertion of Section 2(24) (viia) of the Act by Finance Act, 2006 and such principles thus no longer serve as strict guiding principle to test the relief eligible under S. 80P(2)(d). Therefore, the plea raised on behalf of the Revenue towards absence of principle of mutuality in such deposits with co-operative banks is a damp squib. Thus, the assessee being a co-operative society as contemplated under s. 80P(1) of the Act, cannot be deprived of benefit of S.80P(2)(d) despite purported absence of mutuality in investment with a co-op bank. We, thus, concur with plea of assessee for allowability of deduction on interest income derived from co operative society in the form of Co-operative bank on first principles. - Decided in favour of assessee.
assessee to demonstrate on facts that the investee co-operative bank in question is recognised as a co-operative society indeed within the meaning of Section 2(19) of the Act. A self declaration from the respective co-op. bank in this regard or any other suitable document may discharge the onus of the assessee towards the status of the co-op. bank. Similarly, the assessee is entitled to avail deduction of resultant ‘income’ derived and not gross receipt of interest under S. 80P(2)(d) of the Act in accord with basic rationale of taxation. Hence, all expenses/losses attributable to such interest income are required to be necessarily deducted and only resultant interest income is eligible for deduction under S. 80P(2)(d) of the Act. The AO would thus be at liberty to ascertain these factual aspects for which the assessee shall provide suitable assistance.
Allowance of pro-rata expenditure against the interest income from investment in co operative banks - HELD THAT:- Assessee is entitled for deduction under s.80P(2)(d) for resultant income derived from investments placed with co-operative banks, we do not seek to delineate further. Therefore, AO may allow claim of deduction under s. 80P(2)(d) of the Act on net income from interest after reduction of all incidental expenses incurred to earn such income. The issue is thus remitted back to AO for quantification of deduction of interest income in accordance with law on being satisfied that the receiver co-operative bank satisfies to be a co-operative society equally.
Interest income derived by the assessee society from investment with private bank - HELD THAT:- It neither qualified under s. 80P(2)(a)(i) of the Act in the light of the ratio of The Citizen Co-Operative Society Ltd. (2018 (1) TMI 290 - SUPREME COURT OF INDIA) nor under s.80P(2)(d) of the Act. Thus, the assessee is not entitled for deduction or interest derived from the private bank. - Decided against assessee
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2019 (3) TMI 380
Penalty u/s.271(1)(c) - difference of opinion - all the requisite particulars were furnished - Disputed income offered in subsequent year - other two grounds also related to pre-ponment of income from AY 2008-09 to the current year i.e. AY 2007-08 - Disallowance of benefit of claim U/s.80IB(10)in subsequent year - ITAT subsequently allowed 80IA - HELD THAT:- Now the Revenue has accepted the deletion of penalty qua two of the additions and appealed to the ITAT qua one of the additions. No reason for this differentiation has been brought on record.
The Revenue in grounds raised itself admits that the impugned amount was offered for taxation in next Assessment Year although with a claim of incorrect deduction u/s.80IB. In this regard, we note that as in the case with other two additions, this addition being business income on account of Manish Garden Project was also offered for taxation in next Assessment Year. Hence, no case of furnishing of inaccurate particulars is made out as in other two additions. The assessee and the CIT(A) are correct in this proposition that it is only a matter of opinion. The A.O. is of a different opinion. When all the facts are available, that cannot be termed as furnishing of inaccurate particulars of income leading to invoking the rigours of penalty u/s. 271(1)(c).
As rightly noted by the CIT(A) the issue was only year of taxability and in this regard, the ld. CIT(A) has rightly relied upon the decision in the case of CIT vs. Excel Industries [2013 (10) TMI 324 - SUPREME COURT] as expounded that the Revenue should not be aggrieved if it was only a matter of difference in the year of taxability. It was held that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, it was held that the dispute raised by the Revenue was entirely academic or at best may have a minor tax effect. Therefore, it was held that there was no need for the revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers.
Though the assessee has not challenged the addition, we note that when the additions itself is on weak footing, the deletion of levy of penalty qua that addition by the CIT(A) cannot be faulted.
Just because the assessee has not appealed against the addition, the same cannot lead to a inference of contumacious conduct of the assessee. See COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee
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2019 (3) TMI 398
Revision u/s 263 - Gain on cancellation of forwarding contract - characterization of income - income from other sources or capital receipt - HELD THAT:- The Revenue may be correct in contending that, the Assessing Officer had not carried out detailed enquiries with respect to this claim of assessee. However, this by itself would not be sufficient to enable the Commissioner to exercise revisional power. In a given case, as in the present one, if the answer to the legal issue can be had on the basis of the material already on record, there would be no useful purpose in asking the Assessing Officer to carry out the same exercise and come to the same conclusion as the Tribunal in the present case has. In this context, we do not accept the contention of the Counsel for the Revenue that, answer in law had to come from the Assessing Officer and not the Tribunal.
If the Tribunal has come to the correct conclusions in law and said conclusions are based on materials already on record, it would be futile to reinstate the order of the Commissioner, which in turn, would require the Assessing Officer to carry out the same exercise and axiomatically come to the same conclusion. This line, we are adopting, is within the fold of the requirement of the order of Assessing Officer being 'erroneous'.
Undisputed facts are that the assessee was constituted as a special purpose vehicle to carry out the foundational tasks for setting up a coal based power plant, during the period relevant to Assessment Year in question, the business of the assessee had not yet commenced and the assessee had entered into contract for purchase of plant and machinery from abroad. In relation to such purchase, either on account of cancellation of contracts or on account of notional adjustment, due to favouable fluctuation of foreign exchange rate. The assessee had gained certain income.
This being the position, as per settled law, the profits or gains arising out of the fluctuation of the foreign exchange rate, would undoubtedly on the capital account
In case of CIT v/s. Bokaro Steel Ltd. [1998 (12) TMI 4 - SUPREME COURT] the facts were that, the assessee-company was set up to produce steel. During period relevant to Assessment Year in question, construction of the plant was not completed. The assessee earned interest on advance to the contractors and also by way of rent from quarters let out to employees of the contractors and such other related activities. The Court held that, the amounts were directly connected to and incidental to construction of plant by assessee and said amounts were, therefore, capital in nature and not income of the assessee from the other source. - Decided in favour of assessee.
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2019 (3) TMI 379
Addition u/s 68 - share capital and share premium - allegation that identity and creditworthiness of the investor could not be property verifiable - directors of the share subscribers did not turn up before AO - HELD THAT:- Genuineness cannot be disbelieved unless the papers filed before the AO/Ld. CIT(A) or before us is found to be false or fabricated.
Coming to the creditworthiness, we note that from the aforesaid figures which emanate from the Balance Sheet placed along with the paper book of each subscriber shown that the share subscribers had enough money to subscribe in the share capital. We note that all of them have filed their income tax acknowledgement which shows that they are income tax assessees and had their PAN also disclosed in that.
In the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed.
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2019 (3) TMI 378
Deduction u/s 10B - assessee has claimed deduction u/s. 10B without considering the brought forward unabsorbed depreciation - Show cause notice stating that why brought forward unabsorbed depreciation may not be first allowed before calculating the deduction u/s. 10B - whether the profit of eligible undertaking for the purpose of allowing deduction u/s 10A (which is analogous to section 10B) at the source itself or after deduction of unabsorbed brought forward depreciation? - HELD THAT:- As decided in YOKOGAWA INDIA LTD. [2011 (8) TMI 845 - KARNATAKA HIGH COURT] it is seen that the Hon. High Court has answered the question as to whether the profit of eligible undertaking for the purpose of allowing deduction u/s 10A of the Act (which is analogous to section 10B) at the source itself or after deduction of unabsorbed brought forward depreciation, in favour of the assessee. The Hon. Court while upholding the contention of the assessee that deduction u/s 1OA was to be allowed at the source itself. - Decided against revenue
Addition of demerger expenses - HELD THAT:- We remit the cross objection of the assessee back to the file of Assessing Officer for deciding it afresh after making proper verification. The Assessing Officer is directed to verify the contention of the assessee that the demerger expenses were already considered in the computation of income and shall give credit thereof, if it is found so.- Decided in favour of assessee for statistical purposes.
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2019 (3) TMI 397
Subsidy or incentive - purpose tests for grant of subsidy/incentive - incentives received in the form of Sales Tax and Central Excise benefit - characterization of income - revenue or capital receipt - HELD THAT:- The subsidy was granted under schemes framed by the State and the Central Government, to be given to the assesses who set up new industry in Kutch District. The scheme was envisaged to encourage investment which would in turn, provide fresh employment opportunity in the district which had suffered due to devastating earthquake. The computation of subsidy may be on the basis of sales tax or excise duty. Nevertheless, the purpose test would ensure that, the subsidy was capital in nature.
Adjustment of subsidy - Subsidy not to be considered as payment directly or indirectly to meet any portion of the actual cost - whether such subsidy would be adjustable towards assessee's costs of acquisition of capital assets? - If the subsidy is treated as a capital in nature, the same must bring down assessee's costs of acquisition of plant and machinery - HELD THAT:- Similar question was considered in case of CIT v/s. Grace Paper Industries Pvt. Ltd. [1990 (3) TMI 66 - GUJARAT HIGH COURT]. The Court noted that, the subsidy was granted by the Government for development of industries in backward areas. It was not part of the actual cost of plant or machinery. The Court, therefore, held that it could not have been deducted towards costs of acquisition.
Also as decided in SWASTIK SANITARY WORKS LIMITED.[2006 (4) TMI 89 - GUJARAT HIGH COURT] basis for determining the subsidy was only a measure adopted under the scheme to quantify the financial aid and it was not a payment, directly or indirectly to meet any portion of the actual cost of acquisition of capital asset. No question of law.
Disallowance u/s. 14A if the assessee has own surplus funds - HELD THAT:- Question itself records that the issue at hand is covered by the decision of this Court in case of HDFC v/s. DCIT [2014 (8) TMI 119 - BOMBAY HIGH COURT] but that, the department has not accepted the decision of the High Court. In that view, this question also is not required to be entertained.
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2019 (3) TMI 396
Recovery proceedings - Notice u/s 226(3) - effect of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - whether the petitioner or the respondent-bank/department would have precedence to recover the outstanding liabilities from M/s R. P. Basmati Rice Ltd.? - HELD THAT:- As stated an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 filed by the respondents has been admitted by the National Company Law Tribunal, Chandigarh Bench, Chandigarh (in short 'NCLT') and Moratorium under Section 14(1) of the Code has been declared.
In view of the above, we declare the Moratorium in terms of sub section (1) of Section 14 of the Code as under:- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any Court of law, tribunal, arbitration panel or other authority; - (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; -(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; - (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.”
Learned counsel for the parties are ad idem that in view of the Moratorium issued by NCLT, the present petition has become infructuous and may be disposed of as such.
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2019 (3) TMI 395
Devaluation of stocks and spares - revaluation of certain old inventories which were obsolete and non moving items of spares - After audit of C & AG one committee was formed, on technical evaluation which resulted in a recommendation to devalue 313 items by 50% and the 14 items at 100% which was claimed in return- AO disallow the claim - CIT(A) allowed 80% of the appellant’s claim finding 20% to be the scrap value of those items following its earlier year order - ITAT permitted 80% of the claim with respect to 100% devaluation claimed items, again, apportioning 20% as the scrap value of such items. However, with respect to the items in which 50% devaluation was claimed, the Tribunal found that the committee had not spoken of the utility value or about the physical condition and the 50% devaluation was recommended by the committee without doing any realistic appraisal of each of the items included in the list of 313 items. - HELD THAT:- Tribunal’s findings that the committee’s recommendations were without any basis cannot hence be accepted. The Committee of officers based on the technical evaluation had recommended devaluation at 50% finding the 313 items of stocks and spares to be of some use in the business of the Company or possible of earning 50% of the cost price in the market being second hand stores and spares. When the devaluation of 100% obsolete items were allowed to the extent of 80%, we do not find any plausible reason for declining the devaluation to an extent of 50% claimed on the basis of a technical evaluation and recommendation made by a committee of officers appointed by the Board. In such circumstances, we reverse the order of the Tribunal and allow the claim made of 50% devaluation with respect to the 313 items. The questions of law are answered in favour of the assessee and against the Revenue.
When the stores and spares were put to use, their written off value was debited to the profit & loss account. However, here the stores and spares were never used and hence a valuation was attempted as per accounting principles itself to revalue the obsolete stores and spares. This works out to the prejudice of the revenue, but that sole reason cannot result in it being disallowed. The valuation was an accepted practise and it was necessitated as the situation warranted a revaluation of obsolete stores and spares. The method of revaluation cannot be faulted for reason of it having been accepted by accounting principle AS-2.
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2019 (3) TMI 394
Reopening of assessment - Application of mind while granting sanction u/s 151 - sanction granted by the Commissioner of Income Tax on a complete misreading of the reasons - HELD THAT:- The reasons for sanction is different from the reasons recorded and thus appears to be without application of mind to the reasons recorded.
We note that the para 3(ii) of reasons recorded in support of the impugned notice records the activity of one Himanshu Verma group in providing accommodation entries while the order granting sanction proceeds on the basis that it is the respondent assessee who is engaged in providing accommodation entries.
Order granting the sanction records that the funds of public limited company are being siphoned of to the private limited companies. This is not evident at all from the reasons recorded which makes references only to Private Limited companies being used as vehicles for providing accounting entries by the Himanshu Verma group. Thus, on the face of it, the sanction granted is bad in law.
Grant of the sanction by the CIT under Section 151 of the Act, is not a mechanical act on his part but it requires due application of mind to the reasons recorded before granting the sanction. This has been so provided as to safeguard against issue of reopening notice (which seek to disturb the settled position) to ensure that assessee is not troubled with reopening issues without satisfactory reasons. Therefore, it must pass muster of the Superior Officer in the context of Sections 147 and 148 of the Act, before it is issued to the party. - Decided in favour of assessee.
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2019 (3) TMI 393
TDS u/s 194H - non deduction of tds on commission payment - fee for technical services - passing of 'make available test' - Tribunal deleted the disallowance u/s 40(a)(ia) for non deduction of TDS holding that the payment was not in the nature of commission, but in the nature of income sharing arrangement - HELD THAT:- We are fully convinced that the Tribunal, on examination of the factual position, concluded that payments made are not commission, but a sharing of profit with M/s.TQ Services. Apart from that, the Tribunal remanded the matter to the Assessing Officer for verification of the necessary details and as to whether any technical services have been actually provided and also as to whether the same passes the 'make available test'. Thus, there are no grounds to interfere with the order passed by the Tribunal.
Revenue contention that the agreement is camouflaged and that the commission is shown to be as if it is a profit sharing is not acceptable on account of the fact that the Tribunal examined the agreement and rendered a factual finding and in this appeal, we do not propose to re-examine the factual issue, which has been concluded by the Tribunal. We are convinced to state that no substantial question of law arises for consideration in this appeal. - Decided against revenue.
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2019 (3) TMI 401
Transfer pricing adjustment - selection of comparables - election of comparables by the TPO whose results are not available in the public domain - HELD THAT:- As rightly held by the CIT(Appeals) in this regard, the restriction stipulated in Rule 10D is applicable only to the auditor and not to the TPO, who has an inherent power to make enquiry and collect and use the information and material, which is found to be relevant for the purpose of transfer pricing analysis in order to determine the arm's length price of the relevant international transactions between the AEs. He has also discussed and relied upon various judicial pronouncements, which support this view. We, therefore, find no merit in Ground No. 1 of the assessee's appeal and dismiss the same.
Exclusion of comparable - Not functionaly similar - Selection of M/s. South India Surgical Co. Limited (SISCO) as comparable by the TPO - HELD THAT:- catalogue was filed by the assessee before the ld. CIT(Appeals) under letter dated 24.12.2005 and although the ld. D.R. has contended that this general catalogue cannot conclusively establish the manufacturing activity of SISCO, we are of the view that the same coupled with the other relevant details reflected in the financial statements and annual report of SISCO are sufficient to establish that the SISCO was engaged in manufacturing also as a significant activity and in the absence of segmental details, the same cannot be taken as comparable to the assessee-company, which is mainly engaged in trading activity. We accordingly direct the TPO to exclude SISCO from the list of final comparables and allow Ground No. 2 of the assessee's appeal.
We accordingly direct the AO/TPO to re-compute the arm's length price of the international transactions of the assessee-company with its AE by excluding SISCO from the list of final comparables and if the same is found to be within the tolerance limit of 5%, the AO/TPO is directed to delete the addition made on account of transfer pricing adjustment.
Addition of bad debts written off - claim disallowed by AO on the ground that there was a failure on the part of the assessee to establish that the relevant debts had actually become bad and irrecoverable during the year under consideration - HELD THAT:- The assessee's appeal now stands squarely covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of TRF Limited [2013 (10) TMI 1316 - SUPREME COURT] wherein it was held that the legal position relating to the allowability of bad debts written off has changed after the amendment made by the Direct Taxes laws (Amendment) Act, 1987 in section 36(1)(vii) with effect from 01.04.1989 and it is no more necessary for the assessee to establish that the debt, in fact, has become irrecoverable. As further held by the Hon'ble Supreme Court, it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Respectfully following the said decision of the Hon'ble Apex Court, we delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of assessee's claim for deduction on account of bad debts written off.
Disallowance on account of interest paid on capital borrowings - HELD THAT:- In the present case, the borrowed funds having been utilized by the assessee-company for acquiring a going concern and the profits from the business of the said concern having been offered to tax in the year under consideration, we find ourselves in agreement with the CIT(Appeals) that the borrowed funds were utilized by the assessee-company for the purpose of its business and interest paid thereon was eligible for deduction u/s 36(1)(iii) as applicable to the year under consideration. We accordingly uphold the impugned order of the CIT(Appeals) on this issue and dismiss Ground No. 2 of the Revenue's appeal.
Penalty u/s 271(1)(c) - transfer pricing adjustment Quantum addition deleted - HELD THAT:- we agree with the reasons given by the ld. CIT(Appeals) for cancelling the penalty imposed by the Assessing Officer u/s 271(1)(c) in respect of addition made on account of transfer pricing adjustment, it is pertinent to note that even the addition made on account of transfer pricing adjustment to the extent of ₹ 2,60,32,000/- as sustained by the ld. CIT(Appeals) is found to be not sustainable by us while disposing of the quantum appeals as held in the foregoing portion of this order. Consequently the penalty imposed u/s 271(1)(c) in respect of the said addition is not sustainable and the impugned order of the ld. CIT(Appeals) cancelling the penalty imposed by the Assessing Officer deserves to be upheld on this ground also.
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2019 (3) TMI 400
Disallowance of deduction claimed u/s 10B on call centre operation - no approval from Deputy Director STPI - Delegation of power to grant approval to other officer - CBDT Instruction (F.No.178/19/2008-IT-I) dated 9th March’ 2009 - HELD THAT:- Relying decision in WIZARD ENTERPRISES PVT. LTD [2016 (3) TMI 1020 - ITAT KOLKATA] we direct the AO to grant deduction u/s 10B of the Act to the assessee in the facts and circumstances of the case - decided in favour of assessee.
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2019 (3) TMI 426
Levy of penalty u/s 271D and 271E - cash transactions exceeding permissible limit - taking of loan or repayment of loan in cash - HELD THAT:- The assessee had furnished all the necessary details of the transaction before the CIT (A), but the CIT (A) has failed to consider the details filed by the assessee. On examination of the documents filed by the assessee, we are convinced that the amount received and repaid by the assessee subsequently is not a loan.
This is a transaction done on behalf of his children to accommodate than in obtaining DD’s without charges and cannot be considered as taking of loan or repayment of loan in cash. The decisions relied upon by the learned Counsel for the assessee, i.e. CIT vs. Deccan Designs (India) P Ltd [2010 (7) TMI 818 - MADRAS HIGH COURT] and Director of Income Tax (Exemption) vs. All India Deaf and Dumb Society [2005 (5) TMI 32 - DELHI HIGH COURT] are to the effect that where the transactions are genuine and enough reasons are offered by the assessee to justify the cash transaction, the penalty is not leviable both u/s 271D and 271E of the Act. - Decided in favour of assessee.
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Customs
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2019 (3) TMI 425
Penalty u/s 112(a) and (b) of the Customs Act - smuggling of Gold - territorial jurisdiction - scope of Customs Act beyond the territory of India - mandatory procedure prescribed under section 138B of the Customs Act, 1962 - uncorroborated statements of co-accused - ex-parte order - principles of natural justice - Held that:- On getting the show cause notice, the appellant sent a letter to the Commissioner of Central Excise & Customs on 01.10.2014. In that reply, he has mentioned that the documents referred to in the notice, and stated to be relied upon by the prosecution, were not handed over to him. The allegations against him of having arranged for smuggling of gold through Karipur Airport with the aid of Navas and Shafeeq in Dubai, and of Abdul Basheer, his friend, at Calicut Airport, is also denied by the appellant. He has denied having any connection with Navas and Shafeeq or arranging gold for smuggling through Altaf. He denies having any acquaintance with Navas or Shafeeq. It is also pointed out that neither Altaf nor Abdul Basheer, who were apprehended in this connection, could give any whereabouts of Shafeeq or Navas, and therefore, without identifying those persons who have admittedly contacted the passenger Altaf or Manoj, it would not have been possible to connect the appellant to the alleged act of smuggling.
The appellant had produced documentary proof of the fact that the telephone number spoken to by the witnesses as his, belonged to someone else. But the authority had concluded that the mobile number belongs to him relying solely upon the statements of Basheer and Shamsudhin. Going through the entire Annexure H order of the Adjudicating Authority, we do not find anything concrete to rope the appellant in the alleged smuggling of gold, but for the recorded statements of persons, who were directly involved.
The Adjudicating Authority here has relied on the statements recorded under Section 108 without affording an opportunity to the appellant to cross-examine them. In the reply to the show cause notice filed by the appellant, he has specifically requested for the witnesses to be cross-examined, and therefore, the Adjudicating Authority was bound to follow the mandatory procedure prescribed in Section 138B of the Act. Without having done so, the order is not sustainable - appeal allowed.
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2019 (3) TMI 423
Duty Drawback - Section 74 of the Customs Act, 1964 - the goods presented for re-export were found to be different from the goods imported against the B/E as claimed by the appellants - Held that:- On examination the said goods were found not to be tallying with the goods imported by the Appellants against B/E’s on which duty now claimed as drawback was paid. It was found that Sr No mentioned on the items was changed and fresh Sl No, chiseled on the said goods - in terms of Rule 4 of Re-Export of Imported Goods (Drawback of Custom Duties), Rule 1995, appellant were required to make declaration on the Shipping Bill not only in respect of goods entered for exportation and their value but also in respect of the drawback being claimed by them in terms of Section 74. Any misdeclaration in respect of the drawback claimed shall be construed as a mis-declaration.
Section 113(i), is not restricted to mis-declaration in respect of value or description of goods entered for exportation, but if the mis-declaration is an respect of “any particulars with the entry made under this Act” then also goods liable for confiscation. The entries made on the shipping bill in respect of the details of import under Rule 4 referred above are definitely made under this Act, any misdeclaration of the same will attract Section 113(i) - In the present case the appellants have entered the goods with the Sr No chiseled on them. Prima facie appellants have tried to manipulate the goods so as to tally them with the goods imported. When the goods were found not to be in accordance with the goods imported by them against the B/E’s referred they took recourse to other evidences and claimed that on the basis of computer records and other evidences they can establish the identity of the goods. However reading of rule 4 will make it evident if there any difficulty being faced by the Appellants in establishing identity the then appellants should have approached Commissioner and sought his intervention by establishing the identity with other records. Having not done so, they manipulated the marking and numbers on the good to establish the identity with the imported goods - such an approach is nothing but an act of mis-declaration which render the goods liable for confiscation.
Since the goods have been rendered liable for confiscation under Section 113 (i) the penalty under Section 114 will follow - however, quantum of redemption fine and penalty is reduced.
Appeal allowed in part.
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2019 (3) TMI 424
Competence and jurisdiction under the amended Section 28 of the Customs Act, 1962 - Power to issue SCN - Held that:- Following the order in Forech India [2017 (12) TMI 984 - DELHI HIGH COURT], these appeals are allowed and the CESTAT would independently apply its mind to the question of jurisdiction and also decide the appeal on merits including the aspect of imposition of penalty if any - appeal allowed in part.
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Service Tax
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2019 (3) TMI 422
Principles of natural justice - ex-parte order - Works contract - levy of service tax - It is the case of the petitioner that the works contract services done by the petitioner for BHEL for the period from 2006-2007 to 26.07.2009 is exempted - Held that:- The Finance Act, 1994, enjoins upon the Tribunal to pass order in the appeal confirming, modifying or annulling the decision or order appealed against or may remand the matter. It does not give any power to the Tribunal to dismiss the appeal for default or for want of prosecution in case, the appellant is not present when the appeal is taken up for hearing.
The Hon'ble Supreme Court in various cases while considering Section 35-C (1) of the Central Excise and Salt Act, 1944, which deals with the orders of the appellate Tribunal r/w. Rule 20 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982, has held that the Central Excise Act, 1944, does not give power to the Tribunal to dismiss the appeal for default or for want of prosecution, in case, the appellant is not present when the appeal is taken up for hearing.
The first respondent Tribunal could not have dismissed the appeal filed by the petitioner for want of prosecution and it ought to have decided the appeal on merits even if the appellant or its Counsel was not present when the appeal was taken up for hearing. Further, non-compliance of the conditional order by the petitioner for the grant of stay will also not empower the first respondent Appellate Tribunal to dismiss the main appeal for non-prosecution.
The matter is remanded back to the first respondent for fresh consideration - petition allowed by way of remand.
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2019 (3) TMI 420
Imposition of penalty u/s 78 of FA - service tax along with interest paid on being pointed out - suppression of facts or not - Held that:- The Revenue has failed to bring any evidence to show that the appellant had in fact indulged into the activities of fraud, collusion, willful mis-statement, suppression etc. with intent to evade payment of service tax. On the contrary it is admitted fact that the service tax liability is not disputed by the Appellant and the same has been discharged with applicable interest, for delayed payment, much more before the initiation of proceedings.
Mens rea has to be proved for invoking the extended period of limitation and also for imposing penalty under Section 78 of the Finance Act, 1994. Mere inaction to declare what was supposed to be declare d under the law does not lead to suppression of facts. Similarly, mere non-payment of short- payment of duties or taxes cannot be construed as with an intent to evade duties/taxes. There must be something more than mere failure to pay taxes for invoking the provisions of Section 78 ibid.
The appellant has shown their bona fide by paying the service tax alongwith interest thereon immediately admitting their unintentional lapse - the authorities below have failed to brought on record any evidence to prove suppression or mala fide intention on the part of the appellant and, therefore, no case has been made out for invoking the provisions of Section 78 ibid - penalty set aside - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 421
Validity of rcovery/garnishee order - short payment of service tax - Section 87 of the Finance Act, 1994 - Held that:- Section 87 of the Finance Act, 1994 contemplates for recovery of any amount payable due to the Central Government which the Central Government under any of the provisions of Chapter V or of the Rules made thereunder is not paid, the Central Excise Officer shall proceed to recover the amount by one or more of the modes mentioned therein. Amount payable by a person is sine qua non for initiating recovery proceedings under the Finance Act, 1994.
The discrepancy pointed out by the Audit Wing under para.2 regarding the short payment of service tax amounting to ₹ 38,66,902/- was explained by the petitioner that the same was correctly declared in page.11 of the same return under the head ‘CENVAT Credit details’. A communication was issued to the petitioner indicating that the objections were not accepted by the audit group, show cause would be issued in respect of paras.1 to 5. The show cause notice issued on 29.02.2016 relates to paras.1,3,4 and 5 of the objections raised by the Audit Wing and the said notice is yet to be adjudicated. In such circumstances, without issuing the show cause notice to the short payment of service tax of ₹ 38,66,902/-, if the explanation of the petitioner is not accepted, initiating recovery proceedings by issuing garnishee order to the bankers cannot be substantiated and is not in conformity with Section 87 of the Finance Act, 1994.
The garnishee orders impugned dated 29.03.2016 and 22.05.2018 at Annexures- ‘M’ and ‘Z’ respectively are quashed - petition allowed.
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2019 (3) TMI 419
Rectification of mistake - It has been contended that the submissions made by the Authorised Representative during the course of hearing were not taken into consideration in the said order passed by the Tribunal - Held that:- It is evident that without considering the submissions made by Revenue, the Tribunal had passed the order dated 13.04.2018, which is an apparent mistake on the face of the record. Accordingly, the miscellaneous application filed by Revenue merits consideration for recalling the order dated 13.04.2018 and for hearing of appeal afresh.
The miscellaneous application filed by Revenue is allowed and Registry is directed to list the appeal No. ST/89908/2014 for hearing afresh on 25.03.2019.
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2019 (3) TMI 418
Refund claim - rejection on the ground that export invoices against which FIRC received during the quarters April 2012 to September 2012 had already been considered in allowing the refund claims filed for the earlier period i.e. October 2011 to March 2012 - Held that:- The refund claims based on the invoice value under the old provisions, if not claimed, could be claimed within one year from the relevant date even after 1.4.2012 but not twice for the same invoices, once while raising the invoices and second time while receiving the proceeds of the invoice. Both proceedings operate in different spheres which would be clear if the proviso to Rule 5(2) of Cenvat Credit Rules, 2004 is read along with the amended definition of ‘export turnover services’.
Once the ‘export turnover of services’ is reduced automatically, the total turnover gets reduced. This fact needs to be ascertained by applying the formula in the proper perspective.
The appeal is allowed by way of remand to the adjudicating authority to recalculate the refund amount based on the formula prescribed under the amended Rule 5 of Cenvat Credit Rules, 2004 taking into consideration the correct export turnover of services as well as total turnover.
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2019 (3) TMI 417
Whether for non-payment of service tax within the stipulated time, the appellant is exposed to the penal consequences provided under Section 76 of Finance Act? - Held that:- Section 76 of the Act mandates that in case of non-levy, short levy or non-payment or short payment of service tax, penalty at the appropriate rate shall be imposed on the assessee - Admittedly, the service tax liability along with interest had been deposited by the appellant during the course of adjudication proceedings. Thus, the appellant is exposed to penal consequences provided under Section 76 of the Act - appeal dismissed - decided against appellant.
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2019 (3) TMI 416
Non-payment of service tax - maintenance and repair service - case of appellant is that tax liability has been wrongly arrived at - Held that:- Learned Commissioner (Appeals) in the impugned order dated 28.02.2018 has recorded the submissions of the appellant at paragraph 3 in the grounds of appeal that quantum of service tax is incorrect and that the correct demand should be Rs. ₹ 3,04,452/-. However, no findings were recorded in the said order, quantifying the actual service tax liability, which was required to be paid by the appellant,
The matter should go back to the original Authority for computation of the correct tax liability - appeal allowed by way of remand.
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Central Excise
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2019 (3) TMI 413
CENVAT Credit - input service distribution - credit availed on common input services, Chartered Accountants Services, Banking & other Financial Services, Management, Consultants Services to the registered office of the appellant having several units without obtaining license for input service distribution - Rule 7 of CCR - Held that:- It has been clearly mentioned that the input service distributor May distribute the CENVAT Credit in respect of service tax paid on the input service to its manufacturing units (whether registered or otherwise) providing output services subject to certain conditions which was enumerated in the original draft with two conditions and two explanations while in 2012 with two conditions and three explanations. Therefore, from a plain reading of Rule 7, it is very much clear that the service distributor i.e. the main unit may distribute CENVAT Credit or hold the credit with itself. If it intends to distribute CENVAT Credit, then as per the conditions, it has to register itself and follow the rest of conditions like pro rata distribution on the basis of prediction as well as no distribution to the unit which is wholly providing exempted service.
This being the dictate of the rule, it can be said that there is no provision under the CENVAT Credit Rules for mandatory registration for IST. Moreover, there is no restriction in the rule that the Central unit cannot avail the whole credit accruing through its unit for common input services even if it has got a centralized purchase sale and accounting system.
Credit rightly availed - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 412
Suo moto credit availed on wrongly paid CENVAT Credit - amount reversed on being pointed out and refund claim filed - time limitation - rejected only the ground that it was submitted beyond one year from the date of making excess payment i.e. December, 2014 - Section 11B of Central Excise Act, 1944 - Held that:- The time period of one year for filing a refund claim as prescribed under Section 11B ibid, is not applicable in case of refund of duty tax, which was paid excess or paid under mistake of law. It is not disputed that the appellant had paid the excess amount in the month of December, 2014 and immediately on realizing their mistake, the appellant very promptly Look re-credit of the same in their CENVAT Credit Register in the month of January, 2015.
The re-credit entries were reversed because of advice by the department and a refund claim was filed. The Appellants cannot be penalised for action taken by them at the instance of Revenue Authorities which itself was not in accordance with law.
Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 415
Recovery of arrears of tax of company from the director of company - Prohibition restraining the respondents from taking coercive recovery measures - Held that:- It is well settled that in the absence of any specific provision in the statute, the duty/penalty liability of the company cannot be recovered from the assets of its director - The Director is not personally liable towards liability of the company.
This court while delving into an identical issue in Subhash Goyal vs. State of Haryana and others, [2015 (11) TMI 1014 - PUNJAB AND HARYANA HIGH COURT] held that in the absence of taking any specific recourse to proceedings under Section 18 of the Central Sales Tax Act, 1956 and any valid order for effecting recovery of arrears of sales tax from the directors of a private limited company in liquidation, the proceedings relating to recovery of arrears of tax from the petitioner being a director were not permissible in law.
The action of the respondents in compelling the petitioner to clear the dues of the company cannot be sustained - petition allowed - decided in favor of petitioner.
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2019 (3) TMI 414
Refund claim - Time limitation - appeal dismissed on the ground of delay and latches - section 11 (B) of the Central Excise Act, 1944 - Held that:- In the present case, no challenge was made to provisions of the Finance Act. Further, there is no challenge to the finding of facts recorded by the Authorities below that there was no deposition of tax under protest.
In case of Union of India Vs. Namdang Tea Estate, [2004 (1) TMI 73 - SUPREME COURT OF INDIA], the Supreme Court has held that the limitation for refund applied for under the provisions of Section 11 B of the Central Excise Act, 1944, which itself makes a provision for limitation of six months from the relevant date i.e. date of payment, claim for refund filed for the period beyond six months from the relevant date is not admissible - Now this period being amended to one year vide Act of 2000 with effect from 12.05.2000; therefore, when a specific limitation has been provided under Section 11 B, then that limitation has to be adhered specially when it is not the case of appellant that he had deposited such amount under protest to carve out an exception under second proviso to Section 11 B (1).
In the present case challenge is only restricted to refund, which is governed by Section 11 (B) of the Central Excise Act and since second proviso below Section 11 (B) prescribing limitation of one year provides for an exception that such limitation may not be attracted if any duty and interest is paid under protest, the proviso is not available to the petitioner.
Appeal dismissed.
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2019 (3) TMI 411
CENVAT Credit - inputs or capital goods? - M.S. plates - Held that:- In this case, the fact is not under dispute that the duty paid plates were received and used by the appellant in its registered factory premises. Since the plates are used in the mason manufacturing cement bricks and blocks within the factory of the manufacturer of final product, the same should clarify as input as per the definition provided in the rules.
Further, it has not been specifically alleged by the authorities below that the disputed plates are falling under the excluded category provided in such definition clause. Thus the disputed plates should merit consideration as input for the purpose of availment of the Cenvat benefit.
Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 410
CENVAT Credit - input services - GTA Services - Held that:- In this case, it is an admitted fact on record that the goods were removed from the factory of the appellant for onward sale to its buyers and for that purpose, the GTA service was availed by the appellant. Thus, as per the judgment of Hon’ble Supreme Court in the case of Commissioner of Central Excise and Service Tax Vs. Ultra Tech Cement Ltd. [2018 (2) TMI 117 - SUPREME COURT OF INDIA], GTA service should not be considered as input service for availment of Cenvat benefit.
Penalty - Held that:- The issue was highly contentious and resolved by the judgment of Hon’ble Supreme Court - penalty not attracted in the present case.
Appeal allowed in part.
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2019 (3) TMI 409
Rectification of mistake - typographical error or not - Held that:- The incorrect figures as pointed by Revenue has also been accepted by learned Consultant appearing for the assessee-appellant. Since the error in the final order is typographical in nature, the order dated 13.03.2018 passed by this Tribunal should be rectified in the interest of justice.
Rectification of mistake - appellant contended that the Tribunal has not specifically recorded any findings with regard to the imposition of penalty - Held that:- There is no specific order / observations being recorded by this Tribunal for disposal of the appeal. Thus, at this juncture, prayer of the assessee-appellant for rectification of mistake cannot be considered.
Appeal of Revenue allowed - the application filed by assessee-appellant is dismissed.
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2019 (3) TMI 408
Suo moto credit of excess credit reversed - section 11B of CEA - Held that:- The fact is not under dispute that the appellant had inadvertently reversed the amount of 7% in the Cenvat account, instead of the prescribed amount of 6% of the value of exempted goods. The process of reversal of excess Cenvat credit and taking of re-credit of the said excess amount involve only accounting/book adjustment. There was practically no outflow of fund towards this accounting adjustment. Thus, the provisions of Section 11B of the Act for refund claim will not be applicable to the case in hand.
The Hon’ble Madras High Court in the case of ICMC Corporation Ltd [2014 (1) TMI 1473 - MADRAS HIGH COURT] have held that process involving availment of suo motu Cenvat credit of the amount reversed earlier is a technical book adjustment and in absence of outflow of funds from assessee, filing of refund claim under Section 11B of the Act does not arise.
Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (3) TMI 407
Evasion of tax - mala-fide intention or not - under-invoicing in respect of sales made to different customers - enquiry as provided under Rule 18-C of the Rules - Validity of assessment made u/s 12-A of the Tamil Nadu General Sales Tax Act, 1959 - Held that:- The impugned assessment is not an assessment under Section 16 of the TNGST Act. On a reading of the assessment order as well as the order passed by the first appellate authority and the Tribunal, it is evidently clear that the Assessing Officer invoked the power under Section 12-A of the TNGST Act.
A reading of the section 12A shows that there are principally two elements which are required, which the Assessing Officer has to be satisfied while invoking the power under Section 12-A of the TNGST Act; first of which being that there is an intention on the part of the petitioner/dealer to evade payment of tax and for such intention, if he had shown that the sale prices are at abnormally lower rates compared to the prevailing market price of such goods, the power can be invoked; and secondly, the power can be invoked within the time stipulated under Section 12-A of the TNGST Act - Admittedly, in the instant case, the Assessing Officer did no enquiry to ascertain the prevailing market price of Oxygen at the relevant time. The assessment has been completed solely based upon the price of gas sold by the petitioner as recorded in their books of accounts. Therefore, we are of the view that unless there was a comparison with the prevailing market price and then the Assessing Officer is satisfied that the price shown in the books of accounts of the dealer was abnormally low compared to the prevailing market price and this was with a view to evade payment of tax, then alone, Section 12-A could have been invoked. There is a marked distinction between the power exercisable under Section 16 and Section 12-A of the TNGST Act.
In the case on hand, the Assessing Officer has gone only by the difference in price of the gas sold by the petitioner/dealer and there is nothing on record to indicate that the petitioner/dealer had collected more than what was shown in their books of accounts - Therefore, unless the twin tests stipulated in Section 12-A were satisfied, the question of invoking the same would not arise. The Tribunal erred in holding that it would be unnecessary to make an enquiry with the other dealers.
In the case on hand, the dealer has specifically pointed out that there were other similar manufacturers, who were also selling for the same price. If the Assessing Officer chose to disbelieve the statement, it goes without saying that he has to enquire the other dealers. Without doing so, he cannot discredit or reject the explanation or statement made by the petitioner/dealer. However, as already pointed out, the Assessing Officer did not undertake any such exercise. In fact, the order is cryptic and devoid of reasons.
Tax case revision allowed - substantial questions of law are answered in favor of the petitioner/dealer.
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2019 (3) TMI 406
Principles of natural justice - closure of business - case of petitioner is that the demand was without any basis, returns were not filed with the second respondent, since the petitioner's business was closed down within two months from the date of commencement of business, and the also no notice was received by the petitioner before passing the order - Held that:- This Court is of the considered view that the respondents have violated the principles of natural justice by not affording sufficient opportunity including the right of personal hearing to the petitioner before passing the impugned demand - the matter is remanded back to the second respondent for fresh consideration and the second respondent after affording sufficient opportunity to the petitioner including the right of personal hearing, pass fresh orders on merits - petition allowed by way of remand.
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2019 (3) TMI 405
Classification of goods - rate of tax - skimmed milk powder - whether would fall under Entry 103 Clause 8 of the 1st Schedule to TNGST Act or otherwise - whether the petitioner is entitled to the reduced rate of tax at 4% claiming benefit under notification G.O.P No.253, dated 17.03.1986? - Held that:- Admittedly, on and after 26.09.1991, the benefit of reduced rate of tax is inapplicable because milk food was removed from the notification and the reduced rate of tax at 4% was restricted only to baby milk foods.
The petitioner's case is that the skimmed milk powder only undergoes a process of drying and therefore, it is a milk food in dry form. First of all, the notification in G.O.P. No.253 dated 17.03.1986 is a notification issued under exercise of powers conferred under Section 17 of the Act is an exemption notification or in other words, a notification to reduce the rate of tax. Therefore, interpretation given to such a notification should clearly and wholly lean in favour of the Revenue.
We are not entitled to read any words or figures into a notification and we have to go by the plain meaning of the items mentioned in notification. The notification in G.O.P.No.253 gives relief of reduced rate of tax for two products namely milk food and baby milk foods. On or after 26.09.1991, the reduced rate of tax for milk foods were totally removed and it was restricted only to baby milk foods - The Entry 103(viii) deals with the items which are chargeable to tax at 10%. The items, which we are concerned in this case is milk food. Two distinct products have been mentioned in Entry 103(viii), they are milk food and milk food including milk powder.
The argument of the learned counsel for the petitioner that the words “milk powder” are mentioned in Entry 103(viii), therefore, it is a milk food is not tenable. The entry is inclusive entry not for all purposes, but the entry includes only one of the products namely milk powder, there may be other products which are not included in Entry 103. Therefore to state that milk food is same as milk powder is a wrong interpretation of the Entry - the Assessing Officer rightly taxed the sale of skimmed milk powder which goes through a process before being marketed, at 10%, the finding is just and proper and calls for no interference.
Tax case revision revision allowed - decided in favor of petitioner.
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2019 (3) TMI 404
Restoration of assessment - TNVAT Act - suo motu framing the issue and adjudicating the same which were not at all disputed by the respondent in its Appeal - restoration of levy of tax and penalty u/s 27(3) in absence of any purchase omission - Held that:- In the instant case, we have seen the memorandum of appeal filed by the Revenue before the Tribunal in Form-Z and the said memorandum of appeal has disputed only two of the turnovers, which were assessed to tax and were deleted by the first appellate authority, viz., difference in sales turnover of ₹ 9,40,800/- and receipt of cartage for ₹ 3,76,435/-. The turnover, which has now been restored by the Tribunal being ₹ 5,25,000/- was never appealed against - Similarly, the Revenue did not challenge the order passed by the first appellate authority deleting the entire penalty imposed by the Assessing Officer under Section 27(3) of the TNVAT Act. Thus, the impugned order is wholly without jurisdiction.
Tax case revision is allowed - the order passed by the Tribunal is set aside; and the order passed by the first appellate authority is restored - decided in favor of petitioner-dealer.
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2019 (3) TMI 377
Vires of Section 174 of the KSGST Act - power to enact section 174 of KGST Act - time limitation under Section 25(1) of the KVAT Act - Held that:- The issue is squarely covered by the decision in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT], where it was held that The petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed.
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Indian Laws
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2019 (3) TMI 403
Legality of Clause 3(2)(iii) of The Nationalized Banks (Management and Miscellaneous provisions) Scheme, 1970 - whether Clause 3(2)(iii) of the Scheme is legal or ultra vires the Constitution? - disqualification for being nominated as a Director - the submission is that the disqualification provided in Clause 3(2)(iii)(b) of the Scheme for the worker/employee category is only confined to their category. No such similar disqualification is made applicable to the officer/employee category - Held that:- It would be clear from a perusal of clauses (e) and (f) of Section 9(3) of the Act that both the categories of employees are different one is worker/employee category as defined under Section 9(3)(e) and the other is officer/employee category as defined under Section 9(3)(f) of the Act. Second, it is for the legislature to decide as to what qualifications and disqualifications should be prescribed for various categories of the employees for their nomination on the post of Director. Third, there lies a distinction between the worker and the officer. The former, i.e., worker is defined under Section 2(s) of the Industrial Disputes Act, 1947 and is governed by that Act whereas the latter, i.e., officer is not governed by the Industrial Disputes Act but is governed by separate service rules. Both these categories of employees, therefore, cannot be equated with each other and nor can be placed at par for providing equal qualification or/and disqualification for their nomination as a Director in the Board of Directors. Fourth, Article 14 of the Constitution applies inter se two equals and not inter se unequals. Fifth, the nominee worker/employee has only a right under the Act to be appointed as Director from the category of worker/employee in terms of Section 9 (3)(e) of the Act provided the concerned nominee whose name is recommended by the Union fulfills the qualifications laid down in Clause 3(2)(iii) of the Scheme but not beyond it.
Appellants then submitted that once the employee is nominated to the Board of Directors may be from different categories specified under Section 9, then no distinction should be made between them while prescribing the qualification and disqualification - This submission has also no merit. A mere reading of Section 9(3) clause (a) to (i) would go to show that the Board of Directors consists of persons coming from different fields. There cannot, therefore, be a uniform qualification or/and disqualification for such persons. Indeed, the qualifications and disqualifications are bound to vary from category to category and would depend on the post, experience and the stream from where a person is being nominated as a Director. Moreover, the qualification and disqualification has to be seen prior to his/her becoming a Director and not after his/her appointment as a Director.
There is no good ground to interfere with the reasoning and the conclusion arrived at by the High Court, which rightly dismissed the appellants’ writ petition, and upheld Clause 3(2)(iii) of the Scheme as being legal - appeal dismissed.
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