TMI Tax Updates - e-Newsletter
April 10, 2019

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Eligibility and conditions for taking Input Tax Credit (ITC) under GST_Part-2

   By: Ganeshan Kalyani

News

1. Auction for Sale (Re-Issue) of Government Stocks

2. Brief highlights of the recent searches in NCR, Bhopal, Indore and Goa

Notifications

Central Excise

1. 01/2019 - dated 9-4-2019 - CE

Seeks to further amend Notification Nos. 20/2015-Central Excise and No. 21/2015-Central Excise both dated 08.04.2015 to incorporate procedure for utilisation of paperless MEIS and SEIS scrips

GST - States

2. G.O.MS.No. 270 - dated 4-4-2019 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Removal of Difficulties) Order No, 4 of 2018

3. G.O.MS.No. 269 - dated 4-4-2019 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Removal of Difficulties) Order No.3 of 2018

4. G.O.MS.No. 268 - dated 4-4-2019 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Removal of Difficulties) Order No. 2 of 2018

5. G.O.MS.No. 267 - dated 4-4-2019 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Removal of Difficulties) Order No. 2 of 2018

6. G.O.MS.No. 266 - dated 4-4-2019 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Removal of Difficulties) Order, 2018

7. Order No. 04/2019-State Tax - dated 29-3-2019 - Goa SGST

Goa Goods and Services Tax (Fourth Removal of Difficulties) Order, 2019

8. 38/1/2017-Fin(R&C)(9/2019-Rate) - dated 29-3-2019 - Goa SGST

Amendment in Notification No. 38/1/2017-Fin(R&C)(2/2019-Rate)/2527, dated the 8th March, 2019

9. 38/1/2017-Fin(R&C)(8/2019-Rate) - dated 29-3-2019 - Goa SGST

Amendment in Notification No. 38/1/2017-Fin(R&C)(1/2017-Rate) dated the 30th June, 2017

10. 38/1/2017-Fin(R&C)(7/2019-Rate) - dated 29-3-2019 - Goa SGST

Notify certain services to be taxed under RCM under Section 9(4) of the Goa Goods and Services Tax Act, 2017

11. 38/1/2017-Fin(R&C)(6/2019-Rate) - dated 29-3-2019 - Goa SGST

Under section 148 of the Goa Goods and Services Tax Act, 2017 to notify certain class of registered persons under Goa Goods and Services Tax Act, 2017

12. 38/1/2017-Fin(R&C)(5/2019-Rate) - dated 29-3-2019 - Goa SGST

Amendment in Notification No. 38/1/2017- -Fin(R&C)(13/2017-Rate), dated the 30th June, 2017

13. 38/1/2017-Fin(R&C)(4/2019-Rate) - dated 29-3-2019 - Goa SGST

Seeks to amend Notification No. 38/1/2017-Fin(R&C) (12/2017-Rate), dated the 30th June, 2017

Circulars / Instructions / Orders

SEBI

1. CIR/LAD/1/2019 - dated 4-4-2019

Issue of Certified copies of Orders and Circulars

Income Tax

2. 07/2019 - dated 8-4-2019

Extending the due date for furnishing of report u/s 286(4) of the Income-tax act, 1961

Customs

3. 11/2019 - dated 9-4-2019

Phasing out of physical copies of Merchandise Exports from India Scheme (MEIS)/Services Exports from India Scheme (SEIS) Duty Credit Scrips issued with EDI port as Port of registration

Highlights / Catch Notes

Income Tax

• Off-market share purchase without source proof leads to disallowed LTCG exemption u/s 10(38); income added u/s 68.

  Case-Laws - AT : Addition u/s 68 - bogus LTCG - off market purchase in physical form by paying cash - The assessee has failed to furnish the proof of source for the purchase transactions - LTCG claimed exempt u/s. 10(38)is disallowed and sales proceeds on sale of shares added u/s 68
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• Taxpayer Allowed to Withdraw Self-Imposed Disallowance u/s 14A After Reporting No Exempt Income.

  Case-Laws - AT : Disallowance u/s 14A in return - not earned any exempt income - request for withdrawal of suo moto disallowance before the AO itself - permitted
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• Tax Reassessment Quashed: Section 147 Reopening Flawed by Mechanical Approval Process u/s 151(1) Lacking Independent Judgment.

  Case-Laws - AT : Reopening of assessment u/s 147 - approval u/s 151(1) - Pr. CIT, has accorded approval for issuing notice u/s 148 in a very routine, mechanical manner & without application of mind by simply putting her signatures below the rubber stamped ‘Yes, satisfied - not sufficient - reassessment quashed
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• Tax Case on Payments to Non-Residents: Section 201 Order Limit is One Year; Section 201(3) Not Applicable.

  Case-Laws - AT : Assessee in default - proceedings u/s. 201(1) and 201(1A) - payment to non resident u/s 195 - limitation to pass order u/s. 201 shall be one year from the end of financial year in which proceedings u/s. 201 were initiated - Section 201(3) does not apply as it relates only to the payments made without TDS to person resident in India
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• Assessing Officer's Discretion: Penalty u/s 271AAB Requires Evaluation of Undisclosed Income Criteria.

  Case-Laws - AT : Penalty u/s 271AAB - It is not mandatory but the AO has a discretion after considering all the relevant aspects of the case and then to satisfy himself that the case of the assessee falls in the definition of undisclosed income as provided in the explanation to section 271AAB - AO is duty bound to first hold that the income disclosed by the assessee is undisclosed income before levying penalty
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• Section 271AAB Penalty Requires More Than Just a Statement u/s 132(4); Needs Corroborative Evidence.

  Case-Laws - AT : Penalty u/s 271AAB - statement recorded u/s 132(4) itself would not either constitute an incriminating material or undisclosed income in the absence of any corresponding asset or entry in the seized document - No penalty
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• Dehradun Unit's Higher Profit Rate Justified by Lower Costs and Incentives u/s 80IC.

  Case-Laws - AT : Deduction u/s 80IC - higher rate of profit declared by the assessee-company in its Dehradun Unit is justifiable as cost of production of the same Unit was lower due to various incentives and the availability of raw material at cheaper rates in the local market
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• No TDS Deduction Application Needed u/s 195(2) If Payment Isn't Chargeable Under Income Tax Act.

  Case-Laws - HC : Requirement of application of non deduction of TDS u/s 195(2) - unless person (deductor) is responsible for paying any sum chargeable under the Act - there is no question of making any application u/s 195(2)
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• Section 40(a)(ia) Disallowance Inapplicable: No TDS Needed on Commission to Foreign Agents for Services Rendered Abroad.

  Case-Laws - HC : Disallowance u/s 40(a)(ia) - commission paid to foreign agents from India - All services are rendered abroad - When the payment made by the assessee to the overseas agent is not income chargeable to tax in India then there was no obligation on assessee to deduct TDS u/s 195 - disallowance u/s 40(a)(ia) not attracted
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• Authorization Warrant and Search Validity Challenged u/s 132 Due to Missing Required Conditions; Deemed Invalid.

  Case-Laws - HC : Warrant of authorisation u/s 132 - Validity of search proceedings u/s 132(1) - In the absence of existence of any of the three circumstances envisaged u/s 132(1), the impugned authorisation is invalid and cannot be sustained
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• Contested Penalty for Non-Compliance with Notices Dropped as Compliance Deemed Satisfactory u/s 143(3) Proceedings.

  Case-Laws - AT : Penalty u/s. 271(1)(b) - non-compliance of statutory notices - since the order was passed by the AO u/s. 143(3) and not 144 means the subsequent compliance in the assessment proceedings was considered as good compliance and default committed earlier were ignored by AO - No penalty leviable
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• Case Remanded for Further Verification on Property Sale u/s 69; No Seller Cross-Examination or Property Valuation.

  Case-Laws - AT : Addition of 'on money' for the sale of the property u/s 69 - addition based on seller statement - no mention as to cross examination of the seller - no valuation of the property - specification of particular activities carried out by the vendors for earning income - appropriate to remand back to AO for verification
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• Interest-Free Loans to Associates: Commercial Expediency u/s 36(1)(iii) of Income Tax Act Questioned.

  Case-Laws - HC : Addition u/s 36(1)(iii) - advanced interest bearing fund without charging any interest to its associate concerns - Whether it is commercially expedient or not for the Assessee cannot be decided by the Revenue authorities unless a decision taken by the Assessee can be held to be arbitrary or motivated, deliberately taken to defeat the purpose of the revenue
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• Trusts Must Amend Objectives to Qualify for Registration u/s 12AA, Avoid Exclusivity to Religious Groups.

  Case-Laws - AT : Registration u/s 12AA - fulfillment of condition u/s 13(1)(b) - benefit of any particular reli­gious community or caste - not eligible for registration u/s 12AA - however, trust can modify its objectives clearly indicating that charitable benefits are meant for all sections across society and thereafter, can seek registration u/s 12AA
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• Subsidy for Industrial Unit in Maharashtra's Backward Regions Examined for Taxability Under Explanation 10, Section 43(1) IT Act.

  Case-Laws - AT : Taxability of subsidy - adjustment in capital assets - given to the assessee to establish the industrial unit in backward regions of the Maharashtra State - from language of the Explanation 10 to section 43(1), it is manifest that it is attracted only when the object of the Scheme is to subsidize the cost of an asset and not otherwise.
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• Subsidy for Industrial Units in Maharashtra is Capital Receipt, Not Revenue; Section 2(24) Change from AY 2016-17.

  Case-Laws - AT : Taxability of subsidy - revenue of capital - subsidy to establish the industrial unit in backward regions of the Maharashtra State is in nature of capital receipt - quantification in the form of rebate on the Excise duty does not alter the nature of subsidy from capital to a revenue receipt - insertion of sub-clause (xviii) in Section 2(24) is prospective and effective from AY 2016-17
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Customs

• MEIS and SEIS Transition to Digital Duty Credit Scrips for EDI Port Registrations to Boost Efficiency.

  Circulars : Phasing out of physical copies of Merchandise Exports from India Scheme (MEIS)/Services Exports from India Scheme (SEIS) Duty Credit Scrips issued with EDI port as Port of registration
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• Customs Seizure of Floating Crane After Two Years Deemed Arbitrary; Highlights Issues in Enforcement Timelines and Procedures.

  Case-Laws - HC : Re-import of Export goods - Floating Crane - The extreme action taken by the respondents of the seizure of vessel after lapse of about two years from the date of issuance of 'out of charge' order is arbitrary.
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• Concessional Duty Rate Applies to Ostomy and General Products; Multi-Use Tapes Still Qualify for Benefits.

  Case-Laws - AT : Benefit of concessional rate of duty - The notification apart from covering the specific Ostomy products, also covers the general purpose products - Merely because the tapes in question are being used as multiple use items, the same would not be a reason to deny the benefit of the notification.
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Service Tax

• Range Superintendent Can Summon Petitioner u/s 14 to Ensure Compliance and Prevent Misuse of Service Tax Act.

  Case-Laws - HC : Validity of summon u/s 14 - registration under service tax - The Range Superintendent, being the registration issuing authority, is well within its competence to summon the petitioner to ascertain that there is no misuse of the provision of the Act.
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Central Excise

• Trial Validity Upheld u/s 9 Despite Technical Omissions, Ensuring Natural Justice by Clearly Stating Charges.

  Case-Laws - HC : Principles of natural justice - Validity of trial u/s 9 of the Central Excises and Salt Act, 1944 - When the charge is clear regarding the allegations, quoting of the offences or omission of quoting the sub-section will not vitiate the trial.
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• Court Rules Self-Declaration as Manufacturer in Tender Documents Insufficient for Demand Confirmation.

  Case-Laws - AT : Clandestine removal - The confirmation of demand solely on the basis of fact that Appellant declared himself as manufacturer in tender documents cannot be sustained in law.
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Case Laws:

• Income Tax

• 2019 (4) TMI 575
  Interest accrued on NPA - Addition on account of interest accrued on non-performing assets - whether non-performing assets in the hands of the assessee- Cooperative Banks is taxable on accrual basis or not? - Held that:- Matter is covered by the order of this Court in The Principal Commissioner of Income Tax-3, Ludhiana v. The Ludhiana Central Co-Op. Bank Ltd., Ludhiana [2018 (11) TMI 442 - PUNJAB AND HARYANA HIGH COURT] along with other connected appeals decided, wherein the appeals filed by the revenue were dismissed.

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• 2019 (4) TMI 574
  Stay petition - recovery proceedings - attachment of bank accounts - AO issued a notice initially by letter to the Bank of India withdrawing the earlier notice on the ground that petitioner was having business of essential commodities in the interest of general public for consumers - After addressing such letter on 20.1.2019, respondent no.1 issued a fresh notice u/s 226(3) for attaching the accounts of the petitioners, attachment the petitioners are unable to make payment to Bharat Petroleum Corporation Limited which is required to be paid for supply of Cooking gas cylinders to the customers of the petitioners - HELD THAT:- Statement of learned Counsel for the petitioners that the petitioners are required to pay various amounts to Bharat Petroleum Corporation Limited towards supply of LPG cylinders and if such amount is not paid, large number of the customers of the petitioners would be seriously affected is accepted. There is substance in the submission made by the learned Counsel for the petitioners. AO is directed to dispose of the application for stay filed by the petitioners on 23.1.2019 (Exh. 3 Colly) to the petition within two weeks from the date of communication of this order after giving an opportunity of being heard to the petitioners. Till such application for stay is decided by the Assessing Officer, the petitioners would be permitted to make payment of Rs. 3,00,000/- to the Bharat Petroleum Corporation Limited without prejudice to the rights and contentions of the respondents.

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• 2019 (4) TMI 573
  Liberty to withdraw the Writ Petition and Special Leave Petition and instead avail of his remedies under the provisions of the Income Tax Act - HELD THAT:- Liberty as prayed is granted. The Writ Petitions as also the Special Leave Petition are accordingly closed on withdrawal with liberty as aforesaid. This Court is of the considered opinion that once the apex Court has not interfered with the Show Cause Notice dated 8/11/2011 and 4/7/2014 and has permitted the petitioner to avail the remedies under the provisions of the Income Tax Act, 1961, the question of interference with the Show Cause Notices, by this Court does not arise.

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• 2019 (4) TMI 572
  Disallowance u/s 40A(3) - cash payments exceeding permissible limits - CIT(A) affirmed the said addition considering a case of splitting of entries which had been done to avoid the provisions of Section 40A(3) - assessee took two months, and took 9 dates for submitting revised copy of account - Tribunal confirmed addition stating submissions of the assessee cannot be accepted as no attempt had been made to demolish the conclusions drawn on facts - scope of findings of fact - HELD THAT:- An effort was made by learned counsel for the appellant to demonstrate that the conclusions and the concurrent finding of facts recorded by the Assessing Officer, the CIT(A) and the Tribunal was erroneous and perverse by referring to the copy of evidence produced before us, but the appeal under Section 260A of the Act lies only on a substantial question of law. The appreciation of evidence to arrive at different conclusion on the same evidence does not fall within the ambit of substantial question under Section 260A of the Act. The aforesaid findings of fact recorded by the Assessing Officer, the CIT(A) and the Tribunal, thus, cannot be held to be perverse based on non-appreciation of material on record or based on misreading of any evidence on record which may warrant interference by this Court. No question of law, much less, substantial question of law arise in the appeal. - Decided against assessee.

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• 2019 (4) TMI 571
  Warrant of authorisation u/s 132 - Validity of search proceedings u/s 132(1) - sufficiency of the satisfaction recorded by the concerned authority - mandation of following summons u/s 131(1) or notice u/s 142(1) - HELD THAT:- Existence of any one of the circumstances is mandatory to justify the exercise of power to issue authorisation. The condition precedent for exercising power to issue authorisation for search and seizure is hedged in by the requirements of these conditions precedent and it is only if these conditions are fulfilled that the power can be exercised. In the facts of the present case, it is an admitted position that no such summons or notice as envisaged under clause (a) of section 132(1) has been issued in the present case. Therefore, the circumstance envisaged under clause (a) of section 132(1) of the Act does not exist in the present case. On reading the satisfaction note in its entirety, except for what is referred to hereinabove, this court could not find any other material whatsoever insofar as the petitioner is concerned, for the purpose of recording satisfaction u/s 132(1). In the affidavit-in-reply the reason given by the respondent for issuance of search warrant is that the petitioner was not expected to comply with the notice of the respondent No.1 or the respondent No.5 as the petitioner would have brought the alibi of jurisdiction to evade or non-comply with the notice. As rightly submitted by assessee the belief that the petitioner would not respond to a summons or notice issued as envisaged under clause (b) of section 132(1) is not based upon any information or other material but is based upon conjectures and surmises that the petitioner would take the alibi of lack of jurisdiction on the part of the respondents. This contention of the first respondent also lends support to the contention raised on behalf of the petitioner that powers under section 132 of the Act have been resorted to because that is the only provision which vests jurisdiction in the Kolkata authorities for taking action against the petitioner. Evidently, therefore, the circumstance envisaged under clause (b) of section 132(1) does not exist in the present case. Third circumstance as contemplated under clause (c) of section 132(1) on a perusal of the satisfaction note as well as the affidavit-in-reply filed on behalf of the respondents and submissions advanced by the learned senior standing counsel for the respondents, it is evident that the sole ground on which the search is sought to be carried out is that the petitioner herein had advanced a loan of Rs. 10,00,00,000/- (rupees ten crore) to Goan Recreation Clubs Private Limited. There is nothing on record to indicate that any belief has been formed by the competent authority to the effect that the petitioner has in his possession any money, bullion, jewellery or other valuable article or thing which would not have been disclosed by him for the purposes of the Act. From the record of the case as produced by the respondents as well as by the petitioner, it is evident that the loan transaction whereby the petitioner had advanced Rs. 10,00,00,000/- to the borrower company has been duly reflected in the books of account of the petitioner. In his return of income, the petitioner has duly shown the interest income from such transaction. The tax deducted at source in respect of such interest income, has been credited to the account of the petitioner by the concerned authority. The entire transaction has been disclosed by the petitioner. There is no other material on record on the basis the respondents could have formed the belief as contemplated under clause (c) of section 132(1). Evidently, therefore the circumstance envisaged under clause (c) of section 132(1) also does not exist in the present case. There is no material on the basis of which a reasonable person could have formed the belief that action under sub-section (1) of section 132 of the Act is called for. It appears that merely because the first respondent does not have any other power under the Act to directly take action against the petitioner herein, resort has been made to the provisions of section 132(1) of Act by taking shelter behind the notification dated 13th November, 2014 issued by the CBDT in exercise of powers under sub-sections (1) and (2) of section 120 of the Act, which vests jurisdiction under Chapter XIII of the Act in respect of the territorial areas of the whole of India in the Director General of Income Tax specified in column (2) or the Principal Director/Director of Income-tax specified in column (4) of the Schedule to the notification. Respondent authorities have proceeded on the footing that Goan Recreation Clubs Private Limited has received various unsecured advances leading to the belief that the transaction in question is non-genuine - the petitioner has produced on record a mortgage deed dated 22nd June, 2016 executed by and between Royale Recreation Pvt. Ltd. as the First Party, Goan Recreation Clubs Private Limited as the Confirming Party or the Second Party and the petitioner Shri Laljibhai Kanjibhai Mandalia as the Mortgagee or the Third Party, which had been executed by way of a security for repayment of the amount advanced by the petitioner to Goan Recreation Clubss Private Limited. The genuineness of such document has not been disputed by the respondents. Under the circumstances, on the basis of the information referred to hereinabove, no reasonable person could have come to the conclusion that the ingredients contained in clauses (a), (b) or (c) of sub-section (1) of section 132 of the Act were attracted. In the absence of existence of any of the three circumstances envisaged under sub-section (1) of section 132 of the Act, the impugned authorisation is invalid and cannot be sustained. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned warrant of authorisation under section 132 is hereby quashed and set aside. - Decided in favour of assessee.

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• 2019 (4) TMI 570
  Addition u/s 36(1)(iii) - Assessee had advanced interest bearing fund without charging any interest to its associate concerns - Matching Principles - whether the lower interest paid on the borrowings made by the assessee company from the sister concerns or the group companies is for the purpose of its business or not? - scope of commercially expediency - HELD THAT:- Whether it is commercially expedient or not for the Assessee cannot be decided by the Revenue authorities and unless a decision taken in the usual course of business by the Assessee can be held to be arbitrary or motivated, deliberately taken to defeat the purpose of the Revenue, it cannot be held that the lower interest rate paid to the borrowers on the borrowings made by the assessee company is disallowable under Section 36 (1) (iii). No such finding of fact has been recorded by the Tribunal. On the contrary, in Para 7 of the Tribunal s order, quoted above, the Tribunal, in our opinion, rightly held that when the cash system of accounting was adopted by the Assessee, an Investment Company, whose business is only to borrow and lend or invest, the same cannot be said to be not in the business interest or commercially expedient for the purpose of business and the concept of Matching Principles , which has been applied by the Assessing Authority and the CIT (A) in the present case, was not really applicable. It is not for the Revenue authorities to substitute their own wisdom or notion about the rate of interest agreed to between the parties, including the group companies and, as such, the finding of fact about commercial expediency or absence thereof is a finding of fact, out of which, no substantial question of law can be said to be arising, requiring our consideration under Section 260A - Decided against revenue.

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• 2019 (4) TMI 569
  Addition on account of unexplained cash payment - based on on loose sheets - seized from the premises of a third person and not written by the assessee - as per CIT-A and ITAT document in question does not contain any signature and date, and the word “cash” is nowhere mentioned on the seized document - HELD THAT:- Having regard to the facts as emerging from the record as well as the contents of the seized documents, there is nothing to connect the assessee with the contents thereof. The relied upon documents have not been seized from the assessee and on the basis of some noting made by a third party, no conclusion could be drawn that the same pertain to the assessee, more so, when the seized documents nowhere refer to the assessee. Having regard to the material on record, this court does not find any infirmity in the concurrent findings of fact recorded by the Tribunal after appreciating the material on record - No substantial question of law warranting interference. - Decided against revenue.

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• 2019 (4) TMI 568
  Admittion of additional evidences under Rule 46(A)(1) - AO had granted ample opportunity to the assessee to adduce evidence - assessee was not prevented by any sufficient cause from producing the evidence - genuineness of the commission payment raised by CIT(A) - HELD THAT:- It is evident that it was at the instance of the Commissioner (Appeals) that the assessee had produced the additional evidence on record, which would fall within the ambit of subrule (4) of rule 46A of the rules, and hence, the question of violation of such rule on the ground urged on behalf of the appellant based on sub-rules (1) and (2) of rule 46A, does not arise. Moreover, the Assessing Officer has been given opportunity to deal with the additional evidence produced by the assessee as the remand report was called for. Under the circumstances, no substantial question of law can be said to have arisen insofar as this issue is concerned. Disallowance u/s 40(a)(ia) - commission paid to foreign agents without TDS u/s 195 - Income deemed to accrue or arise in India - PE in India - HELD THAT:- In this case the source of income for the overseas agents is the services rendered abroad by them to the assessee by way of searching prospective foreign buyers/clients and the payment is received by them directly outside India in their country. Thus, the non-resident overseas agents have offered services to procure export sales order. All these services are rendered abroad, only the payment is made by the assessee from India. Insofar as the nonresident overseas agent is concerned, the source of income is the transaction whereby services are offered by them to the assessee by procuring export sales orders abroad. The overseas agents do not have any permanent establishment or any business connection in India nor is the source of income through, by means of, in consequence of or by reason of any source of income in India. The revenue is trying to confuse two aspects, namely, it is trying to equate the source of payment with the source of income. Insofar as the source of income, it is not the place from where the payment is made, but the place where the transaction which yields such income has taken place. As discussed earlier, the source of income is the services rendered by the overseas agent abroad and not the payment made by the assessee, and hence, it cannot be said that any income accrues of arises to the overseas agent India as contemplated in section 9 of the Act. Under sub-section (2) of section 5 of the Act, insofar as a non-resident is concerned, the income should have been received or deemed to be received in India in such year; or should accrue or arise or deemed to accrue or arise to him in India during such year. In the facts of the present case, neither of the conditions is satisfied. Therefore, when the commission paid to the non-resident agents was neither received or deemed to be received in India nor accrued or was deemed to accrue in India, no income was chargeable to tax under the provisions of the Act. When the payment made by the assessee to the overseas agent for services rendered abroad is not income chargeable to tax in India, there was no obligation cast upon the respondent assessee to deduct tax at source u/s 195 and consequently, the provisions of section 40(a)(ia) would not be attracted. The Tribunal, therefore, did not commit any error. No question of law can therefore, be said to arise. Requirement to application of non deduction of TDS u/s 195(2) - HELD THAT:- Section 195(2) starts with the words “where the person responsible for paying any sum chargeable under the Act to a non-resident”, therefore, for the purpose of falling within the ambit of section 195(2) the person should be responsible for paying any sum chargeable under the Act. In the facts of the present case, the sum paid by the assessee to the overseas agent not being chargeable to tax under the Act, there is no question of making an application u/s 195. - Decided against revenue.

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• 2019 (4) TMI 567
  Penalty u/s 271(1)(c) - Non recording of satisfaction - jurisdictional defect - addition of bogus sundry creditors and agricultural income as income from other sources and on addition of accrued interest on FD’s - HELD THAT:- Admittedly, as noticed from the assessment order, no such satisfaction as contemplated u/s.271(1)(c) have been recorded by the AO while completing the assessment that in which limbs, the issue is following. AO has simply mentioned that “penalty proceedings u/s.271(1)(c) are initiated separately”. See case of V.V.Projects and Investments Pvt Ltd. [2007 (12) TMI 97 - ANDHRA PRADESH HIGH COURT]. - Decided in favour of assessee.

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• 2019 (4) TMI 566
  Deduction u/s 80IC - higher rate of profit declared by the assessee-company in its Dehradun Unit - THAT:- The reasons for the higher profit margin earned by the Dehradun Unit were also explained by the assessee by showing as to how the cost of production of the same Unit was lower due to various incentives and the availability of raw material at cheaper rates in the local market. Keeping in view all these relevant aspects highlighted for the assessee as well as the other reasons given by the CIT(Appeals) in his impugned order, we are of the view that there was no justifiable reasons for the Assessing Officer to doubt or dispute the higher rate of profit declared by the assessee-company in its Dehradun Unit and to estimate the same at a lower rate thereby restricting the claim of the assessee for deduction under section 80IC. In that view of the matter, we uphold the impugned order of the CIT(Appeals) deleting the disallowance made by the AO on account of assessee’s claim for deduction under section 80IC. Addition u/s 80IA(8) - sale price charged by the assessee to the other group concern was alleged by the Assessing Officer as understated by the assessee on the basis of M.R.P. of the relevant products - understatement of sales price by the assessee on the basis of MRP of the relevant products - HELD THAT:- It is difficult to comprehend as to how the sale price could be lower when profitability shown by the assessee was higher. Moreover, the sale price charged by the assessee to its associate concern M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited was the subject matter of Transfer Pricing Exercise in A.Y. 2013-14 and as already noted by us, the same was accepted by the Transfer Pricing Officer as at Arm’s Length after carrying out the Transfer Pricing Analysis based on comparable cases. It was also pertinent to note here that the sale price charged by the assessee to M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited on the same basis was accepted by the Assessing Officer in the assessments for all the earlier years and there was no cogent material brought on record by the Assessing Officer to dispute the price mechanism adopted by the assessee in the year under consideration. Having regard to all these facts and circumstances of the case, we are of the view that the addition made by the Assessing Officer by alleging the understatement of sales price by the assessee on the basis of MRP of the relevant products was not sustainable and the CIT(Appeals) was fully justified in deleting the same. Disallowance of advertisement expenditure - entire advertisement expenses incurred during the year under consideration were claimed by the assessee in Kolkata Unit - HELD THAT:- Entire advertisement expenses were incurred by the assessee in respect of its own products, which were manufactured in Kolkata Unit whereas no advertisement expenses were required to be incurred in respect of Dehradun Unit where the entire sales was made to the sister concern M/s. Shree Baidyanath Ayurved Bhawan Pvt. Limited of their own products. It clearly shows that the entire expenditure incurred by the assessee on advertisement was related to marketing of its own products sold under its own brand and since such products were manufactured solely in Kolkata Unit, we find ourselves in agreement with the ld. CIT(Appeals) that the disallowance made by the Assessing Officer out of advertisement expenses was not justified especially when the genuineness of the said expenses was never doubted or disputed by the Assessing Officer. We, therefore, uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance - Revenue appeal dismissed.

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• 2019 (4) TMI 565
  Penalty u/s 271AAB - tax on the undisclosed income surrendered under section 132(4) - validity of penalty proceedings for want of specifying the default as per clause (a) to (c) of section 271AAB(1) - relevance of Statement recorded under section 132(4) - HELD THAT:- Penalty u/s 271AAB is not mandatory but the AO has the discretion to take a decision and the same should be based on judicious decision of the AO. Accordingly following the earlier decision of this Tribunal in the case of Ravi Mathur vs. DCIT [2018 (6) TMI 1128 - ITAT JAIPUR] we hold that the levy of penalty under section 271AAB is not mandatory but the AO has a discretion after considering all the relevant aspects of the case and then to satisfy himself that the case of the assessee falls in the definition of undisclosed income as provided in the explanation to section 271AAB AO in the show cause notice has neither specified the grounds and default on the part of the assessee nor even specified the undisclosed income on which the penalty was proposed to be levied. show cause notices issued by the AO for initiation of penalty proceedings under section 271AAB are very vague and silent about the default of the assessee and further the amount of undisclosed income on which the penalty was proposed to be levied. Levy of penalty u/s 271AAB - entries in the seized documents representing the expenditure on account of construction of the house and purchase of other assets as well as advances in the absence of the real transactions - HELD THAT:- in view of the facts and circumstances of the case as well as the decision of the Coordinate Bench of this Tribunal in the case of Rajendra Kumar Gupta vs. DCIT (supra), we hold that the entries in the seized documents representing the expenditure on account of construction of the house and purchase of other assets as well as advances in the absence of the real transactions do not constitute the undisclosed income of the assessee as defined in the explanation to section 271AAB of the Act. Accordingly, the penalty levied under section 271AAB in respect of the said amount is not sustainable and liable to be set aside. Undisclosed income on account of excess stock - HELD THAT:- Once the stock is found recorded in the books of account, it does not fall in the category of valuable article or things which has not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year. Stock which was found at the time of search and seizure was not disputed by the department that the same has been recorded in the books of accounts of the assessee. Once the stock is recorded in the books of account and no discrepancy is found as far as quantity of stock, then the difference of valuation would not amount to undisclosed income in terms of definition prescribed in the explanation to section 271AAB Jewellery found during the course of search and seizure action - HELD THAT:- Once the jewellery was not found to be purchased during the year under consideration, then the same cannot be treated as an undisclosed income for the year under consideration which is specified previous year. The department has not found that the jewellery was purchased or acquired by the assessee and other family members only during the year under consideration. The jewellery belong to the family members of the assessee and found in the locker was old jewellery and, therefore, the valuation of the jewellery for the purpose of computing the undisclosed income by applying the current rates on the gross weight is not permissible. Hence when the department has not made any efforts to ascertain the year of acquisition of the jewellery and then to apply the rates as prevailing in the year of acquisition and some of the jewellery even not acquired by the assessee or the family members but is inherited, then the manner in which the disclosure is obtained on account of the jewellery would not represent the undisclosed income as defined in the explanation to section 271AAB Statement recorded under section 132(4) itself would not either constitute an incriminating material or undisclosed income in the absence of any corresponding asset or entry in the seized document representing the undisclosed income. Accordingly, the penalty levied by the AO under section 271AAB of the Act is deleted. - Decided in favour of assessee.

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• 2019 (4) TMI 564
  Assessee in default - proceedings u/s. 201(1) and 201(1A) - period of limitation - Payment to resident in India & payment to non resident - TDS u/s 195 without deduction of tax at source to non-resident/overseas entities - HELD THAT:- A bare perusal of sub-section (3) as it was inserted by the Finance Act, 2009 and subsequently amended by the Finance Act, 2014 would show that reference is to the payments made without deduction of tax at source to "person resident in India". The sub-section (3) is silent about the limitation period for passing the order u/s. 201 where the payments are made without deduction of tax at source to non-resident/overseas entities. In the present case as is evident from the impugned order, during the assessment years under appeal the payments have been made to the entities based in Canada, USA, UK, Belgium, Sweden, UAE and Hongkong. The provisions of sub-section (3) to section 201 does not get attracted as it relates only to the payments made without deduction of tax to person resident in India. Where the payments are made to the entities/persons other than the persons specified in sub-section (3), the limitation period of one year from the end of financial year in which the proceedings u/s. 201 were initiated, as laid down in MAHINDRA & MAHINDRA LIMITED [2014 (7) TMI 265 - BOMBAY HIGH COURT]would apply. In the instant case, since, the order u/s. 201 has been passed much after the elapse of one year period from the end of financial year in which proceedings u/s. 201 were initiated, the order u/s. 201 in the impugned assessment years is void-ab-initio and hence, is liable to be quashed. - decided against revenue.

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• 2019 (4) TMI 563
  Penalty u/s. 271(1)(b) - non-compliance of statutory notices issued u/s. 142(1) - assessment order passed by AO u/s. 148 r.w.s 143(3) not u/s 144 - HELD THAT:- We further note that the assessee has made part compliance and the assessment order is not passed u/s. 144, therefore, relying on the judgment in the case of Ram Commercial Enterprises Ltd [1998 (10) TMI 13 - DELHI HIGH COURT] wherein it was held that since the order was passed by the AO u/s. 143(3) and not 144. This means the subsequent compliance in the assessment proceedings was considered as good compliance and default committed earlier were ignored by AO. Therefore, it will be deemed that the assessee had made proper compliance and penalty u/s. 271(1)(b) should not be levied. - Decided in favour of assessee.

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• 2019 (4) TMI 562
  Disallowance u/s 14A of the Act read with rule 8D - No exempt income earned - HELD THAT:- Undisputedly during the year, the assessee has not earned any exempt income. In absence of any exempt income earned by the assessee, no disallowance can be made u/s 14 A as held by the honourable Delhi High Court in case of Cheminvest vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT]. Therefore, respectfully following the decision of the honourable Delhi High Court no disallowance can be made u/s 14 A of the income tax act in case of the assessee wherein it has not earned any exempt income. Accordingly the orders of the lower authorities are reversed and the learned assessing officer is directed to delete the above disallowance. Addition account of unchanged S. Creditors u/s 41(1) - unchanged in the creditors for last 3 years - assessee company is a public limited company and - All the amount of the creditors in the financial statement of the company had itself admitted liabilities - HELD THAT:- merely because such creditors are stagnant the liabilities do not ceased to exist. Hence no addition can be made under section 41 (1) as held by the honourable Supreme Court in COMMISSIONER OF INCOME-TAX VERSUS SUGAULI SUGAR WORKS PVT. LIMITED [1999 (2) TMI 5 - SUPREME COURT] and the honourable Delhi High Court in CIT VERSUS HOTLINE ELECTRONICS LTD [2011 (12) TMI 90 - DELHI HIGH COURT]. Disallowance of payment of compensation - debited to the profit and loss account as project expenses - assessee was to launch some plot development and group housing schemes and offered at a very attractive price. However later on it realized that it would not be viable for the company to deliver the project properties at such a low price and that if the company holds the stock the same can give better results in future and paid compensation - as per AO above amount should have been shown as project expenditure and from year to year should have been carried in the project account and not in the profit and loss account as assessee following PCM method - CIT(A) allowed stating project itself was given up is not viable there is no question of the compensation being added to the cost of the project - HELD THAT:- in the present case no such facts have been demonstrated that what the real reasons for cancellation of the bookings are. The assessee has given a very general answer that the property could be used for better options. Therefore, the decision of the honourable Delhi High Court in GOPAL DAS ESTATES AND HOUSING PVT. LTD. VERSUS COMMISSIONER OF INCOME TAX [2019 (3) TMI 1272 - DELHI HIGH COURT] does not help the case of the assessee. learned AO has looked at from the angle that whether the project expenses are required to be loaded in the project cost or not on the basis of method of accounting followed by the assessee. In the present case, it is also not coming out from the facts which method of accounting the assessee has followed as already stated above. In view of the above facts, we set aside whole issue back to the file of the learned assessing officer with a direction to the assessee to show that (a) what is the method of accounting employed by the assessee, (b) what the booking was made for stating the nature of the property, the area booked, the rate at which it is booked, consideration paid by the buyers, the relevant agreements between the buyer and the assessee, (c) reasons for cancellation of such bookings, (d) relevant agreements made at the time of surrender of booking, (e) rate of compensation paid,(f) Whether it is in nature of interest or business expenditure, if the provisions of tax deduction at source applies to it or not. The learned AO may examine the same and then decide the issue about the allowability of such claim in accordance with law after affording proper opportunity of hearing to the assessee.

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• 2019 (4) TMI 561
  Registration u/s 12AA - fulfillment of condition u/s 13(1)(b) - benefit of any particular reli­gious community or caste - activities on both religious and charitable in nature having mixed objects - charitable activity or not? - HELD THAT:- we find that there are objects which are for the particular religious community i.e. Christianity and particularly followers of Hope Unlimited Church are in clauses such as clauses (c); (g); (j) and (m). The other objects such as (a),(b), (d), (e), (f), (h), (i) and (l) are general in nature and are not limited to any particular community or religion and the activities mentioned therein are clearly charitable in nature. The objectives like (b) and (k) are commercial in nature. Therefore, it cannot be said that all the objectives of the assessee are charitable in nature or that the religious objects are both religious and charitable in nature. The assessee, therefore, has been held to be not eligible for registration u/s 12AA. The assessee trust can modify its objectives clearly indicating that charitable benefits are meant for all sections across society and that they are not restricted only to Christian community and also only to the followers of “Hope Unlimited Church” and also to exclude the commercial activities intended to be carried out by the assessee and thereafter, seek registration u/s 12AA. As regards the objection of the CIT (E) that the assessee has filed the application manually instead of electronically as required by the CBDT vide Circular No.10/18, we direct the assessee to now file the application electronically and on such filing after the amendment of clauses, the CIT (E) shall consider the application afresh on merits. - Decided partly in favour of assessee for statistical purposes.

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• 2019 (4) TMI 560
  Addition u/s 36 (1) (ii) - Bonus paid to a Shareholder - HELD THAT:- Section 10 (2) (x) of 1922 Act required that the payment of bonus commissions should be reasonable but there is no such requirement in Section 36 (1) (ii) of 1961 Act and hence, judgments noted by the AO are not applicable. Therefore, we decide the issue in favour of the assessee because this is not the case of the revenue that the amount in dispute paid by the assessee to its director as bonus was otherwise payable to the director as dividend and therefore, the provisions of section 36 (1) (ii) are not helping the revenue in the facts of the present case. See ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1 (1) , MANGALORE VERSUS MANDOVI MOTORS PVT. LTD. [2010 (11) TMI 960 - ITAT BANGALORE] - Decided against revenue

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• 2019 (4) TMI 559
  Addition of 'on money' for the sale of the property u/s 69 - addition based on documents and material and cash found during the search of the seller of the property - Denial of cross examination - principles of natural justice - valuation of property - HELD THAT:- From the perusal of the Assessment Record before us it can be seen that on the note sheet of 02.07.2007 there is no mention as to cross examination of the seller. Thus, there is no opportunity given to the assessee for cross examination of the seller. From the summary of the findings of the Assessing Officer it can be seen that the total money paid by buyer in cash which was found in the lockers was on the estimated basis. But no verifications were done by the Assessing Officer as relates to the slips of the PNB bank found in the locker. The Assessing Officer has also not specified particular activities carried out by the vendors for earning income. Instead has given a general finding that the vendors were engaged in numerous activities. No valuation of the property was done by the AO to arrive at the proper findings. Thus, it will be appropriate to remand back these issues to the file of the Assessing Officer for verification as well as allow the assessee to cross examine the sellers. Thus, we are accepting the submissions of the Ld. AR to remand back these matters to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Appeal allowed for statistical purpose.

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• 2019 (4) TMI 558
  Ad-hoc disallowance of 50% commission payment - allegation that some of the bills were handmade and self-made vouchers and having discrepancies - CIT-A deleted the addition - HELD THAT:- It is observed that the assessee paid commission of Rs. 22.59 lakhs to Kasturchand Raghunath Sons, which fact was clearly stated before the AO as has also been recorded in the assessment order. Not only that, the assessee also furnished details of commission. AO proceeded to make an ad hoc disallowance at 50% of commission without even endeavoring to verify the genuineness of such payment from Kasturchand Raghunath Sons. He simply stated that vouchers were handmade and there were discrepancies in some vouchers and bills. He, however, failed to spell out any such discrepancy in any of the vouchers produced by the assessee. Under the given circumstances, we are satisfied that the CIT(A) was justified in deleting the addition. We, therefore, uphold the same. Addition on account of interest on interest-free loans - advance for allotment of shares - HELD THAT:- CIT(A) has categorically recorded that the assessee did charge interest @9% on the advance given to Indo Sprint. Such an interest was shown as receivable in the books of account of the assessee. This finding has not been controverted on behalf of the Revenue. In our considered opinion, no exception can be taken to the view canvassed by the ld. CIT(A) on this issue in deleting the addition to this extent. As regards the second component of disallowance of interest being advance given to Vyanjan Hotels, it is seen that the assessee contended before the CIT(A) that this amount was given for purchase of shares of that company. The assessee furnished details of the shares which it was intending to purchase. CIT(A) restored the issue to the AO and directed him to find out if shares of the company were allotted to it. If it was found that the shares were not allotted to the assessee company after making the payment, then the interest cost would be taken to shares account and added to their cost of acquisition and in the otherwise scenario it should be taken as revenue expenditure. No grievance on the part of the Revenue in as much as the CIT(A) has adopted a legally valid view. AR submitted that the shares were in fact allotted and the assessee has no objection if the amount of interest was capitalized. Under the given circumstances, we countenance the impugned order to this extent. Taxability of subsidy - revenue of capital - financial assistance of Government of Maharashtra to eligible units under the Financial assistance to Grain Distillery Scheme, 2007 - as per CIT-A amount of subsidy should be reduced from the cost of assets in terms of Explanation 10 to section 43(1) - HELD THAT:- we find that the subsidy was given to the assessee to establish the industrial unit in backward regions of the Maharashtra State. Even if such subsidy was quantifiable in the form of rebate of Rs. 10/- per litre on the Excise duty, but the purpose of its grant, which is to accelerate the industrial development in grain based distilleries in the backward regions of the Maharashtra State, does not alter the nature of subsidy from capital to a revenue receipt. Considering the mandate of the scheme issued by the Government of Maharashatra, it becomes clear that the subsidy is a capital receipt not a revenue receipt. The impugned order is upheld to this extent. The language of Explanation 10 clearly states that : where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee . Proviso to this Explanation states that : where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee . On going through the language of the Explanation 10, it is manifest that it is attracted only when the object of the Scheme is to subsidize the cost of an asset and not otherwise. Proviso also refers to `such subsidy only. subsidy given by the Central Government or a State Government or any authority etc. for any purpose, except where it is taken into account for determination of the actual cost of the asset under Explanation 10 section 43(1), has become chargeable to tax. Even if a subsidy is given to attract industrial investment or expansion, which is a otherwise a capital receipt under the pre-amendment era, shall be treated as income chargeable to tax, except where it has been taken into account for determining the actual cost of assets in terms of Explanation 10 to section 43(1). This amendment is patently prospective. As the assessment year under consideration is 2011-12 and the amendment is effective from assessment year 2016-17, new hold that section 2(24) (xviii) will have no application. In view of the foregoing discussion, we are satisfied that the subsidy received by the assessee from the Government of Maharashtra is a capital receipt and accordingly not chargeable to tax and at the same time, it is not liable to be reduced from the cost of assets for the purposes of depreciation in the year under consideration. - Decided in favour of assessee.

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• 2019 (4) TMI 557
  Addition u/s 68 - fresh issue of share capital and share premium - Case selected for scrutiny under section 143(3) - year of assessment - HELD THAT:- Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. We note that the share application money and share premium money which were received by the assessee company from the two share applicant companies viz: M/s. Prism Vintrade Private Limited, and M/s. Gannet-Vintrade Private Limited, during the period December, 2012 to March, 2013 had already been suffered disallowance under section 68 of the Act. As these two share applicant companies invested the same money in the assessee company, therefore, no further disallowance is warranted in the hands of the assessee company. Once taxed income cannot be taxed again. In the case of third company, M/s Haven Vincom Pvt. Ltd the identity, creditworthiness and genuineness have been proved beyond doubt. All documents that is, the PAN details, bank account statements, audited financial statements, balance sheet, profit and loss account, Income Tax acknowledgments, and ROC statements etc were placed on AO's record. One of the directors of share applicant companies appeared before the AO in response to summon u/s 131 of the Act and explained the genuineness of three share applicants. Therefore, considering this factual position and precedents relied on the subject, as noted above, we delete the addition made by the assessing officer U/s 68 - Decided in favour of assessee.

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• 2019 (4) TMI 556
  Reopening of assessment - addition on account of share premium - CIT-A deleted addition observing that the share capital and share premium was received by the assessee in the preceding year and not during the year under consideration - HELD THAT:- Additional evidence filed before the ld. CIT(A) was sent by him to the Assessing Officer for his comments and the Assessing Officer in his remand report stated that in compliance to the letter U/s 133(6) the assessee has furnished written reply on 12/6/2014 and in the reply, the assessee has accepted that the share premium was received during the A.Y. 2009-10 and no details has been furnished during the assessment proceedings. The findings recorded by the CIT(A) is contrary to the observation of the Assessing Officer in his remand report. Therefore, in all the fairness, we restore the matter back to the file of the AO for deciding the issue afresh after considering the audited balance sheet of the assessee for the year under consideration as well as the balance sheet for the preceding year. If the Assessing Officer found that the amount on account of share capital and share premium was received and credited in the preceding year, no addition is warranted during the year under consideration. Accordingly, the Assessing Officer is to decide the issue afresh in terms of our above direction. - Decided in favour of revenue for statistical purposes.

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• 2019 (4) TMI 555
  Reopening of assessment u/s 147 - non fulfillment of mandate of provisions of Section 151(1) - non independent application of mind by AO - borrowed satisfaction - approval given by the Pr. CIT for issuing notice U/s 148 was in a very routine and mechanical manner which was without application of mind by simply putting her signatures below the rubber stamped ‘Yes, satisfied’ - addition u/s 68 on Share Capital - HELD THAT:- We also found that the proceedings u/s 147/148 have been initiated after four years from the end of the relevant assessment year without fulfilling the mandate of proviso to Sec. 147 of the Act. Therefore, the notice issued u/s 148 is bad in law. In view of the above discussion and judicial pronouncements it is abundantly clear that it is a case of change of opinion and the ld. AO has not fulfilled the mandatory requirement of proviso to section 147. Therefore, the notice issued by him is liable to be quashed being void ab initio. The ld. Pr. CIT, Ajmer has accorded approval for issuing notice u/s 148 in a very routine, mechanical manner & without application of mind by simply putting her signatures below the rubber stamped ‘Yes, satisfied’. The approval has been accorded by the ld. Pr. CIT, Ajmer simply for verifying the transactions mentioned in the letter of DDIT (Inv.), Kolkata received by the ACIT, Bhilwara on 21.03.2017. In his proposal the AO has not mentioned the fact that the reopening was being made after 4 years from the end of the relevant assessment year and in the original assessment proceedings this issue had been examined by the then AO. The reopening in the case of the assessee has been made after four years from the end of the relevant assessment year. Proviso to section 147 is clearly applicable in this case. There is no whisper of applicability of such proviso in the reasons recorded by the AO and approved by the ld. Pr. CIT, Ajmer. If she had read over the reasons and applied her mind she must not have accorded the permission under such circumstances in absence of any cogent material at all. The approval granted by her is clearly without application of mind and is not as per the mandate of the provision of section 151 of the I.T. Act, 1961. The notice issued u/s 148 on the basis of such approval and consequent assessment made on the basis of such notice are bad in law and deserve to be quashed. With regard to the merit of the addition, we found that the detailed finding has been given by the ld. CIT(A) with regard to identity, genuineness and creditworthiness of the share applicants. The ld. CIT(A) also observed that the addition has been made by the Assessing Officer merely on suspicion and without bringing any positive material on record to substantiate that the share application money emanated from the coffers of the assessee, we found that the genuineness of the share capital/share premium was thoroughly examined by the then AO who completed the original assessment u/s 143 (3) on 21.12.2012 and he recorded a categorical finding of his satisfaction regarding identity, creditworthiness and genuineness of transaction of the two companies to whom the shares were allotted. During the course of reassessment proceeding the AO again asked the assessee to prove the genuineness of the share capital and the assessee again filed all the documentary evidences, confirmations etc. before the AO on 28.11.2017 and 08.12.2017. Yet, the Assessing Officer has made addition of Rs. 15,59,00,000/-, without undertaking any further inquiry, investigation etc. and without bringing anything new on record. AO has made addition purely on the basis of his suspicion without any evidence or basis at all which deserves to be deleted. - Decided against revenue.

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• 2019 (4) TMI 554
  Addition on late payment of ESIC and PF contribution - addition u/s.36(1)(5) r.ws 2(24)(x) - as alleged no payment within the stipulated period mentioned in the concerned Act - HELD THAT:- As relying on case of M/S CHECKMATE FACILITY AND ELECTRONIC SOLUTIONS PVT LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 [2018 (10) TMI 994 - GUJARAT HIGH COURT] no infirmity in the order passed by the authorities below in making the addition in total on account of delay in depositing the ESIC and PF contribution with the concerned authorities. Hence the ground of appeal preferred by the assessee is dismissed. Addition u/s 14A r.w. Rule 8D - no interest income earned by the assessee - HELD THAT:- This is a settled principle of law that when there is no exempt income available with the assessee disallowance u/s.14A r.w Rule 8D cannot be higher than the dividend income earned by the assessee while laying down the ratio the Jurisdictional High Court in the matter of Corretech Energy Pvt; Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] further held that if there is no tax free income in the hands of the assessee, then no disallowance under section 14A r.w. rule 8D of Income Tax Rules ought to be made. We restrict the disallowance to the dividend amount of Rs. 10,600/-. Thus the assessee appeal is partly allowed.

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• 2019 (4) TMI 553
  Depreciation claim of assessee trust - assessee is registered under section 12A - double deduction - HELD THAT:- As decided in assessee's own case [2017 (9) TMI 965 - ITAT AHMEDABAD] we find that this issue is no more res integra as hon’ble jurisdictional high court’s decision in CIT vs. Seth Manilal Ranchhodlal Bhavan Trust [1992 (2) TMI 51 - GUJARAT High Court]. Benefit of section 11 & 12 for the rent paid to the trustees - contravention to the provisions of section 13(1)(c)(ii) - HELD THAT:- As decided in assessee's own case [2017 (9) TMI 965 - ITAT AHMEDABAD] CIT-A taking into account an approved valuer’s report as well as all corresponding documents indicating all relevant particulars indicating the assessee to be utilizing vacant space alongwith land and building whilst concluding that the payments in question cannot be held as excessive ones. It has further come on record that the assessee had been paying similar rents in preceding assessment years as well. It places on record assessment order(s) pertaining to earlier assessment years not showing any such disallowance. The Revenue fails to rebut all these findings with the help of any cogent evidence on record. Addition on account of capital expenditure - amount utilized for Requiring Fixed assets - HELD THAT:- As decided in assessee's own case [2017 (9) TMI 965 - ITAT AHMEDABAD] higher authorities that the amount utilized for Requiring Fixed assets is allowable as application of income as per sec. 11(1)(a) of the Act. There are two separate issues one is pertaining to application of income and other is computation of income. In application of income of trust, amount applied for acquiring fixed assets is considered as eligible, therefore this ground of appeal is allowed and AO is directed to allow amount of investment in the fixed assets as part of application of income as per sec. 11(1)(a) - Revenue appeal dismissed.

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• 2019 (4) TMI 552
  Disallowance u/s 14A - not earned any exempt income - withdrawal of suo moto disallowance before the AO itself - HELD THAT:- Issue relating to request for withdrawal of suo moto disallowance before the Learned CIT(A) whether can at all been entertained is not required to be dealt with in this particular case before us. Respectfully relying upon Corrtech Energy [2014 (3) TMI 856 - GUJARAT HIGH COURT] we do not hesitate to delete the disallowance u/s 14A r.w.r. 8D particularly in view of the fact that the assessee neither have any exempt income nor earned dividend income in the case in hand before us. Decided in favour of assessee.

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• 2019 (4) TMI 551
  Claim of deduction u/s 10AA on interest on FOR and Sundry balance written back - HELD THAT:- As decided in assessee's own case for Assessment Year 2010-11 [2018 (6) TMI 1027 - ITAT MUMBAI] sundry credit balance written back represented the sundry creditors related to the export business of the assessee and that the said expenses were considered as part of export business. There is nothing on record to prove that the order of the FAA is factually incorrect. Similarly, it is found that the disputed interest income was earned on fixed deposits pledged with bank or the authorised brokers, that it was a pre-requisite to carry the hedging transaction, that the revenue generated by it from overseas, that hedging transaction were entered into by the assessee as a safeguard against exchange rate fluctuation, that hedging is directly related to export business of the assessee. - Decided against revenue Disallowance u/s 43B - ESIC & PF contribution paid beyond due date - HELD THAT:- As decided in assessee's own case as relying on Hindustan Organics Chemicals Ltd.(2014 (7) TMI 477 - BOMBAY HIGH COURT) and Ghatge Patil Transporters Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT) held that employee’s contribution to PF had to allowed as deduction, if it was paid by the employer before the due date of filing of income. - Decided against revenue.

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• 2019 (4) TMI 550
  Disallowance u/s. 40(a)(ia) in respect of commission expenses - non deduction of TDS u/s 195 - HELD THAT:- After considering the decision in the case of GE India Pvt. Ltd [2010 (9) TMI 7 - SUPREME COURT OF INDIA] we consider that provision of section 9(1)(i) are not applicable to the case of the assessee. Regarding applicability of section 195 we observe that once the income is not taxable, there is no liability of deduction of tax, therefore, it was not applicable for the assessee to deduct tax, therefore, there was no violation of provision of section 195. After considering the above facts, we observe that in the case of the assessee, the commission paid to non-resident agent was not liable to tax under the provisions of act when the services were rendered outside India, payments were made outside India and there was no permanent establishment or business connection in India. These undisputed facts has not been disproved by the revenue, therefore, we do not find any infirmity in the decision of the CIT(A). Accordingly, this ground of appeal of the revenue is dismissed. Disallowance u/s. 14A - HELD THAT:- It is undisputed fact that assessee has not earned and claimed any exempt income during the year under consideration, therefore, we consider that CIT(A) has rightly deleted the disallowance after following the decision of Jurisdictional High Court of Gujarat in the case of Corrtech Energy Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT]. Therefore, we do not find any merit in this ground of appeal of the revenue and the same is dismissed. Disallowance of interest u/s. 36(1)(iii) - assessee has given the working of interest capitalized after taking into consideration the capital expenditure incurred for capital asset and the quantum of work in progress from time to time - HELD THAT:- AO has disallowed the interest on all the term loans availed after August, 2010 without considering as to what part of the term loan was applied for the new asset which was already put to use. The assessing officer has not disproved the detailed working of the calculation of capitalization of interest given by the assessee. The term loan was sanctioned in the middle of the year and by that time many purchases for machineries were made by the asssessee by utilizing its own funds. We observe that the presumption of the assessing officer that the total term loan received was applied towards CWIP was not based on relevant supportive evidences. Considering the above facts and the detailed findings of the CIT(A), we do not find any merit in the ground of the appeal of the revenue. Therefore, this ground of appeal of the Revenue is dismissed. Disallowance u/s. 80IA - operation of captive power plant - HELD THAT:- Assessee is eligible to claim deduction under section 80-IA with regard to unit-6 also as a standalone power generating undertaking. See West Coast Paper Mills Pvt. Ltd. vs. CIT [2014 (7) TMI 554 - ITAT MUMBAI].

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• 2019 (4) TMI 549
  Disallowance of interest expenditure u/s 36(1)(iii) - allegation to use interest bearing fund in respect of capital work-in-progress - proof of interest free funds available with the assessee in the shape of share capital, reserves and surplus - HELD THAT:- A perusal of the order of the ld.CIT(A) would indicate that the ld.CIT(A) has not recorded any finding rather simply relied upon the order of the CIT(A) in the Asstt.Year 2013-14. This order did not meet approval of the Tribunal in the Asstt.Year 2013-14. The Tribunal has allowed the appeal of the assessee and deleted the disallowance considering interest free funds available with the assessee in the shape of share capital, reserves and surplus, as well as net revenue from operations, we are of the view that alleged investment in WIP could be assumed as carried from these surplus funds. No notional interest ought to be calculated for capiialization. In order to fortify ourselves, we would like to refer to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] - Decided in favour of assessee.

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• 2019 (4) TMI 548
  Income of State government society - accrual of real income - amounts collected on account of selling VAT forms - 20% of receipt was to be remitted affront to the State treasury, while 80% was to be retained by it for meeting out expenses and balance thereafter to be remitted to the State treasury - scope of amendment to section 40(a) - Registration u/s 12AA refused as activities carried on by the society were not for the benefit of general public utility, but was for providing infrastructure facilities to the State Government (Excise and Taxation Department) - HELD THAT:- These issues have already been decided by the I.T.A.T. in the earlier years in the case of the assessee holding that 20% of the amount received which was remitted directly to the State treasury was not the income of the assessee while relief of 80% of the amount was allowed to the extent the surplus remaining out of it was remitted to the State Government in the impugned year. Further the order of the ITAT is upheld by HC [2018 (12) TMI 834 - HIMACHAL PRADESH HIGH COURT] The Revenue has pointed out that an amendment has been brought on Statute to section 40(a) by inserting clause (iib) disallowing amounts remitted to State Governments claimed as expenditure and the said amendment is effective from the impugned year only. Notwithstanding the same, since the Hon'ble High Court has held that the remaining 80% of the collection by the assessee was not in the nature of income at all we are bound by the same. Respectfully following the case of the assessee for preceding years therefore we hold that the entire amount collected by the assessee was not in the nature of its income. - decided in favour of assessee.

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• 2019 (4) TMI 547
  Deduction u/s 80P(2)(d) - assessee had earned interest income on the deposits held with Saraswat Co-operative Bank, TJSB Bank, Cosmos Banks and IDBI Bank - claim of deduction by the assessee was denied by the AO for interest income earned from Saraswat Co-operative Bank on the ground that the same is not a Co-operative Society - HELD THAT:- The Veer Cooperative Group Housing Society Limited [2018 (9) TMI 287 - ITAT DELHI] has held that Sarswat Co-operative Bank to be a Co-operative Society and the interest earned therein to be entitled to claim deduction u/s 80P(2)(d). After relying on the decision in the case of Kaliandas Udyog Bhavan Premises Cooperative Society Ltd., (2018 (4) TMI 1678 - ITAT MUMBAI) has held that the interest earned on investments held with the Co-operative Banks would be eligible for deduction u/s 80P(2)(d). Revenue has not pointed out any contrary binding decision nor has placed on record any material to demonstrate that the aforesaid decisions have been set aside/ stayed/over-ruled by any higher Judicial Forum. Following the aforesaid decisions, hold interest income earned by the assessee on the deposits held with Banks would be eligible for deduction u/s 80P(2)(d) - Decided in favour of assessee.

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• 2019 (4) TMI 546
  Deduction u/s 80IC on interest income - interest received from partners - wrong mention of ‘interest from FDRs’ in place of interest from partners - HELD THAT:- It is held that if there is a receipt of interest from the partners as well as payment of interest to the same partners, the assessee is entitled to netting of the same. Therefore, the matter is remanded to the file of the Assessing officer to verify this fact and allow the relief to the assessee accordingly. However, the assessee is not entitled to deduction u/s 80IC of the Act on the aforesaid interest income. Addition of unexplained cash credits u/s 68 - denial of deduction u/s 80IC on the said amount - HELD THAT:- Matter needs examination and verification at the hands of the Assessing officer. The assessee will demonstrate before the Assessing officer the source and creditworthiness of the creditor including the source of the deposits in the proprietorship concern. The Assessing officer will examine the same and decide the issue afresh in accordance with law. Since it is a case of capital introduction, the assessee is entitled to any deduction u/s 80IC of the Act on this account. Therefore, the issue raised vide ground No.3 is restored to the file of the Assessing officer, whereas, the issue raised vide ground No.4 is decided against the assessee. Unexplained cash credit u/s 68 for unsecured loan - share of one partner converted in unsecured loan on their retirment from the partnership during the year under consideration - HELD THAT:- Since these aspects has not been examined by the Assessing officer and I have also restored the other issues to the file of the Assessing officer, hence, this issue is also restored to the file of the Assessing officer to examine the above contentions of the assessee and decide the issue in accordance with law.

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• 2019 (4) TMI 545
  Disallowance u/s 36(1)(iii) interest in respect of capital work in progress - own interest free funds available with the assessee - HELD THAT:- As decided in assessee's own case in AY 2012-13 [2019 (4) TMI 258 - ITAT AHMEDABAD] considering interest free funds available with the assessee in the shape of share capital, reserves and surplus, as well as net revenue from operations, we are of the view that alleged investment in WIP could be assumed as carried from these surplus funds. No notional interest ought to be calculated for capitalization. See case of CIT Vs. Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] - Decided in favour of assessee.

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• 2019 (4) TMI 544
  Deduction u/s 80IA - profits earned from ICDs and on rolling stocks - whether activities undertaken by the assessee do not fall within Clause (d) of the Explanation to section 80IA(4) defining the term Infrastructure facility? - HELD THAT:- In the case of M/s Container Corporation of India Ltd. [2018 (5) TMI 359 - SUPREME COURT OF INDIA], the operating activities of the assessee were mainly carried out at its Inland Container Depots (ICDs), Container Freight Stations (CFSs) and Port Side Container Terminals (PSCTs) spread all over the country. The issue in the above appeal was with regard to the deduction claimed u/s 80IA on the profits earned from ICDs and on rolling stocks. Their Lordships of the Hon’ble Supreme Court, dismissing the appeal filed by the revenue (supra) stating that Notification that has been issued by the Central Board of Excise & Customs (CBEC) dated 24.04.2007 in terms holds that considering the nature of work carried out at these ICDs they can be termed as Inland Ports. Further, the communication dated 25.05.2009 issued on behalf of the Ministry of Commerce and Industry confirming that the ICDs are Inland Ports, fortifies the claim of the respondent herein. Though both the Notification and communication are not binding on CBDT to decide whether ICDs can be termed as Inland Ports within the meaning of Section 80-IA the appellant herein is unable to put forward any reasonable explanation as to why these notifications and communication should not be relied to hold ICDs as Inland Ports. Unless shown otherwise, it cannot be held that the term 'Inland Ports' is used differently under Section 80-IA. All these facts taken together clear the position beyond any doubt that the ICDs are Inland Ports and subject to the provisions of the Section and deduction can be claimed for the income earned out of these Depots. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places. Addition u/s 14A - HELD THAT:- Assessing Officer to make the computation of disallowance u/s. 8D(2)(iii) of the Act by excluding the investment which have not earned any exempt income during the year in the computation in accordance. Disallowance u/s 14A r.w.r. 8D while calculating Book profit u/s 115JB - HELD THAT:- In the case of ACIT v. Vireet Investment [2017 (6) TMI 1124 - ITAT DELHI], it is held that computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated under section 14A read with rule 8D. Accordingly, we delete the disallowance made by the AO to the book profit shown by the assessee u/s 115JB of the Act. Claim of deduction u/s 80IA - facility usage charges - rental income from immovable property - HELD THAT:- In the instant case, the assessee has received Rs. 2,00,000/- as rent from Vodafone India Pvt. Ltd on account of usage of its CFS area for setting up mobile tower. It also received Rs. 6,93,000/- as service charges for providing office space area, furniture & utility facility to customers in CFS area. In the instant case, we find that the assessee has not filed before the AO the relevant contracts and connected data with regard to the above claim. Therefore, we restore the matter to the file of the AO for making an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the connected documents/evidence before the AO.

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• 2019 (4) TMI 543
  Addition u/s 68 - bogus LTCG - off market purchase in physical form by paying cash - assessee has indulged in non-genuine and bogus capital gain obtained from the transactions of purchase and sale of shares - HELD THAT:- It is noticed that the purchase transaction has been done off market in physical form by paying cash. The assessee has purchased the share M/s Kappac Pharma Ltd. in physical form and thereafter, the same have been converted into electronic mode. The purchase payments were made in cash and not through the normal banking channel therefore the same were non-verifiable from the authentic supporting details such as bank account/ documents. Assessee is not a regular investor in shares. The assessee has failed to furnish the proof of source for the purchase transactions. Thus, the entire transactions are against human probability. Also considering the findings of the Investigation Wing, inquiries conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee the LTCG claimed exempt u/s. 10(38) by the assessee cannot be allowed and the amount received back as sales proceeds on sale of shares was required to be added back towards his taxable income u/s 68. The above amount was deemed as income of the assessee u/s. 68 over and above, the income already declared in ITR during AY 2014-15. Landmark decision in the case of McDowell and Company Limited [1985 (4) TMI 64 - SUPREME COURT] is squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. However, the case laws cited by the Ld. counsel for the assessee are on distinguished facts, hence, not applicable in the instant case. The assessee has not raised any legal ground and argued only on merit for which assessee has failed to substantiate his claim before the lower revenue authorities as well as before this Bench. - decided against assessee.

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• 2019 (4) TMI 542
  Alternative remedy of appeal - Writ petition dismissed against order of assessment - HELD THAT:- The impugned judgment correctly says that there is an alternative remedy of appeal. If the Authority files an appeal within four weeks from today, the interim order that has been granted by this Court will continue till the appeal is disposed of.

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• 2019 (4) TMI 541
  TDS liability - Payment of interest on delayed delivery of plot - nature of interest as defined in Section 2(28A) - provision of Section 40(a)(ia) applicability - HELD THAT:- SLP dismissed.

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• 2019 (4) TMI 540
  Registration u/s 12A rejected - Tribunal declining to condone the delay of 445 days in filing the appeal against rejection order - HELD THAT:- SLP dismissed.

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• Customs

• 2019 (4) TMI 539
  Re-import of Export goods - Floating Crane - liability of Customs Duty - seizure of goods - petitioners contend that, since the vessel is reimported after the export, Notification No.94/96 dated 16.12.1996 has applicability and the case is covered by Entry Sr. No.3 which does not call for payment of duty - Held that:- In the instant matter, there is absolutely no material placed, nor is there any indication in the seizure memo as regards the reason to believe that the material collected or relied upon is available for taking such drastic action. It is true that sufficiency of the grounds is not a justiciable issue, however, there must exist a ground basically which needs to be reflected in the order. Judicial review is not against the decision as such, but against the decision making. The Court cannot dis-set each and every materials which has gone into decision making, and in the reported matter, exactly such approach was adopted. It is canvassed by the petitioners that there is no material before the officer for forming an opinion and the question is not being raised as regards adequacy of such material. The terms the reason to believe appearing in section 110 does not mean the subjective satisfaction of the officer concerned. The officer has to act in a reasonable manner and the exercise of power shall not be arbitrary and the powers are liable to be used in accordance with the restraints imposed by law. Drawing parallel inference in the instant matter, it does appear that the proper officer has not indicated any reason to believe that the goods are liable to confiscation. It is not a matter of controversy that by application of Exemption Notification, no duty was levied and out of charge order was issued two years back. Even otherwise, it was open for the respondent authorities to initiate proceedings under section 28 of the Customs Act, however, without taking the steps permissible in law, the extreme action of seizure of goods has been resorted to which appears to be high handed and arbitrary. The vessel has been cleared and out of charge order has also been issued. As such, the issuance of order of seizure is bad in law. The contention that, it is a case of misrepresentation or fraud also does not deserve consideration. The vessel has been released after issuance of due permission. Even in case of mere non payment of duty, it cannot be treated and read as collusion or willful misrepresentation or suppression of facts. By no stretch of imagination, it can be contended in the instant matter that the petitioners have acted willfully with an intent to evade the duty or they are guilty of misstatement or suppression of facts - Also, it cannot be contended that the petitioners have misstated or suppressed the material facts. The extreme action taken by the respondents of the seizure of vessel after lapse of about two years from the date of issuance of out of charge order is arbitrary. The petitioners are directed to keep alive the bank guarantee of Rs. 6 crore furnished to this Court up to 29.5.2019 - petition disposed off.

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• 2019 (4) TMI 538
  Benefit of concessional rate of duty - applicability of N/N. 21/2002, dt.01.03.2002 - import and trading of various surgical products, including surgical tapes from China/Taiwan and Thailand - whether the surgical tapes imported by the appellant and declared as skin barrier Micropore Surgical Tapes would be entitled to the benefit of the notification in question. Sl.No.22 of List 37 under Sl.No.363A of Notification No.21/2002, dated 01.03.2002? - Majority decision. Held that:- The entire evidences produced in the impugned order by the Commissioner, which is primarily based upon the information downloaded from the web sites, relates to the Ostomy procedure and various Ostomy products, which in our view is not of much importance, inasmuch as, it is the assessee s own case that such surgical tapes can be used in other procedures also. Learned advocate has rested his case on the simple reading of the said notification and the interpretation of the same and has impressed upon the point that the goods in question being admittedly skin barrier Micropore Surgical Tapes are entitled to the exemption even though the same were capable of being used, apart from Ostomy products, in other procedures also - The notification nowhere insists on the end-use of the products and, inasmuch as, the product in question is capable of being used as Ostomy products, the same would attract the exemption. The expression used in the notification is skin barrier Micropore Surgical Tapes and there is no justification in interpreting the said expression as wafers . As such, the Revenue s stand that such expression only refers to the product Ostomy Wafers cannot be appreciated. According to us as long as the appellant s product satisfy the definition of the skin barrier Micropore Surgical Tapes , exemption would beavailable to them. As regards the interpretation of the notification, we can have guidance from the Hon ble Supreme Court s decision in the case of Commissioner of Central Excise, Gujarat Vs M/s. Reliance Petroleum Ltd [2008 (5) TMI 13 - SUPREME COURT] wherein it was observed that an exemption notification has to be considered liberally and the benefit thereof should not be denied by taking recourse to doctrine of narrow interpretation. In the present case, we agree with the learned advocate that the entire purpose of the notification is to grant exemption to the products which are used for management of specified Ostomy procedures. The notification apart from covering the specific Ostomy products, also covers the general purpose products as already observed by us. Hence, benefit cannot be disallowed on the sole ground that the product in question is not being used exclusively as Ostomy product. Merely because the tapes in question are being used as multiple use items, the same would not be a reason to deny the benefit of the notification. The benefit of notification cannot be denied and the appeal has to be allowed

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• 2019 (4) TMI 537
  Rectification of mistake - computation of period of limitation for filing appeal - error apparent on the face of record or not - Held that:- There is error committed in the final order of this Tribunal. Firstly, the ground taken by the appellant, as regards the period of limitation, has not been decided. Secondly, there is no discussion on the ruling relied on by the appellant, which had a binding effect on the Division Bench passing the final order. Thirdly, the department till date could not produce the proof of delivery. The date of receipt of the recovery notice is the date of knowledge i.e. 01.02.2013, when the appellant received notice of recovery - further, there is no proof of proper service of the order-in-original on the appellant, as required under the provisions of Section 153(a). From the date of knowledge, the appeal filed by the appellant before this Tribunal on 24.05.2013, was within time as the same is within 90 days from 25.02.2013 - Accordingly, the final order is recalled and appeal restored to its original number to be heard on merits. ROM application allowed.

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• Service Tax

• 2019 (4) TMI 536
  Non payment of service tax - non submission of S.T.3 return - period from Oct. 05 to April 06 - inclusion of services provided to a client by an advertising agency - application for fresh registration under Rule 4 of Service Tax Rules, 1994, without having any order in his favour of cessation of the registration certificate - scope of Commercial Concern - Held that:- In the case at hand, evident it is that the petitioner was engaged in the business of advertising thus cannot claim that he is not a commercial concern and had rightly obtained the registration certificate under Service Tax Act in the year 1997 - In the case at hand, evident it is that the petitioner was engaged in the business of advertising thus cannot claim that he is not a commercial concern and had rightly obtained the registration certificate under Service Tax Act in the year 1997. That by substituting the expression person in place of Commercial Concern , will not lead to a conclusion that the person was a different from Commercial Concern - the assumption drawn by the petitioner that with the substitution of Commercial Concern with the word person in 2006, the petitioner was not amenable to service tax cannot be countenanced. As per paragraph 6(7) of Chapter II of said manual A registration certificate granted under this rule may be revoked or suspended by the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, if the holder of such certificate or any person in his employment, is found to have committed breach of any of the provisions of the Act or the rules made there under or has been convicted of an offence under Seciton 161, read with Section 109 or with Section 116 of the Indian Penal Code (45 of 1860) - the contention that the petitioner was not required to pay the service tax prior to Finance Act, 2006 is not correct. The communication which is under challenge emanates from the procedure stipulated under Section 14 of the Central Excise Act, 1944. The Range Superintendent, being the registration issuing authority, is well within its competence to summon the petitioner to ascertain that there is no misuse of the provision of the Act. The impugned communication cannot be faulted with, as would warrant an indulgence - petition fails and is dismissed.

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• 2019 (4) TMI 535
  Short payment of Service tax - Commercial Construction Services - recovery of short paid service tax with interest and penalty - inclusion of value of free supplied material in assessable value - Exemption Notification dated 01 March, 2006. Inclusion of Cost of material supplied free by the service recipient - non-consideration of judgement on which reliance was placed upon - principles of natural justice - Held that:- The decision of the larger Bench of the Tribunal in Bhayana Builders (P) Ltd. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] and the decision of the Supreme Court in Bhayana Builders (P) Ltd. [2018 (2) TMI 1325 - SUPREME COURT OF INDIA], are clearly applicable to the facts of the case inasmuch as the charge in the show cause notice was that the cost of free supplied material should have been included in the gross value. The Commissioner has ignored the decision of the larger Bench by simply observing that the facts of the case before the Commissioner were not squarely covered, without even giving any reason as to why they were not covered. In fact, as noticed above, the issue required to be decided by the Commissioner stood answered in favour of the Appellant in the said decision - there is no hesitation in setting aside the finding recorded by the Commissioner that the value of goods supplied free of cost to the Appellant was required to be included in the gross value. Denial of benefit of Exemption Notification dated 01 March, 2006 - denial for the reason that the Appellant had availed the benefit of Cenvat Credit in relation to the work order relating to soil testing - Held that:- The proviso to the Exemption Notification dated 01 March, 2006 provides that the Notification shall not apply if the Cenvat Credit has been used for providing 'such taxable service'. The taxable service under consideration is 'Commercial or Industrial Construction Service'. The Cenvat Credit availed by the Appellant in regard to ‘Consulting Engineer Service’ cannot, therefore, be taken into consideration - The Appellant had not availed any input credit for the second works order relating to actual construction. It cannot be urged that the taxable service of ‘Consulting Engineer Service’ can be considered as a composite service with ‘Commercial Construction Service’ since it has an essential character of construction - the benefit of Exemption Notification dated 01 March, 2006 cannot be denied. Benefit of abatement of service tax - demand of Service Tax amounting to Rs. 7,81,030/- on amount of Rs. 63,19,012/- - Commissioner has recorded that the benefit of 67% abatement obtained by the Appellant would not be available as the Appellant did not fulfil the condition of the said Exemption Notification dated 01 March, 2006 - Held that:- The Appellant had taken a specific stand in response to the show cause notice that the details in the data sheet were of invoices submitted to M/s GTL from May 2007 to August 2007 against which the Appellant expected payments to be made, but had actually received payment in 2008 and, thereafter, the Service Tax on the payment received against these invoices were paid on 09 July, 2008 and were included in the ST-3 Returns for the period April, 2008 to September, 2008. This factual position has been found to be correct by the Commissioner, but what prevailed upon the Commissioner to deny the benefit of 67% abatement claimed by the Appellant was that the conditions set out in the Exemption Notification dated 01 March, 2006 had not been fulfilled. The order dated 28 August, 2014 passed by the Commissioner is set aside - Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 534
  Business support services - the appellant is purchasing space from the shipping lines and selling it to the exporters for profit - Held that:- It is not in dispute that the appellant herein is purchasing the space from the shipping lines and then is selling the same to exporters. It is the case of the revenue that this amounts to acting as an intermediary for helping the business of the shipping lines and therefore they are liable to pay service tax on business auxiliary services on the profit which they receive. It is the case of the appellant that this is a deal on principal to principal basis between them and the shipping lines and again between the exporters and them. They are not acting as an agent. They could purchase the space for a lower price and sell it at a higher price and thereby earn profit. On the other hand, if they failed to sell the space to exporters, after purchasing from the shipping lines, they may incur a loss. They are not receiving any commission whatsoever from the shipping line or from the exporters. In an identical case, in the case of Phoenix International Freight Service Pvt Ltd [2016 (9) TMI 585 - CESTAT MUMBAI], the Tribunal has held that buying and selling space on ships does not amount to rendering a service and any profit or income earned through such transactions is not leviable to service tax. The demand of service tax, interest and penalties are liable to be set aside - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 524
  Audit under Service Tax - Production of documents for the purposes of Audit of accounts/records - constitutional validity of Rule 5A of the Service Tax Rules, 1994 - competence of the authority to issue the impugned notice - very long list of documents or not - Held that:- The Court is of the view that the Petitioner has made out a prima facie case in its favor to grant of further stay of proceedings pursuant to the impugned letter/notice dated 20th February, 2019. It is accordingly directed that till the next date of hearing, further proceedings pursuant to the impugned letter dated 20th February, 2019 shall remain stayed. List on 1st August, 2019.

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• Central Excise

• 2019 (4) TMI 533
  Principles of natural justice - CENVAT Credit - Use of common inputs used in exempt and dutiable goods - non-maintenance of separate records - it is contended that the impugned order, although notices the reply to the show cause notice in some details but does not deal with the decision of the jurisdictional CESTAT Bench being Esab India Ltd. [2008 (6) TMI 317 - CESTAT, KOLKATA] Held that:- The impugned order proceeds not to consider Esab India Ltd. - the non-consideration of Esab India Ltd. is an incident, which tantamounts to breach of principles of natural justice by the adjudicating authority - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 532
  Intervening period between the issuance of show cause notices and issuance of notice for personal hearing - issuance of notices in the year 2018 for personal hearing after about nearly thirteen years to seventeen years for the purpose of adjudication - difficulty in participating in the personal hearing - Held that:- The case of the petitioners is covered by the decision in the case of SIDDHI VINAYAK SYNTEX PVT LTD. VERSUS VERSUS UNION OF INDIA & 2 [2017 (3) TMI 1534 - GUJARAT HIGH COURT], where it was held that Revival of proceedings after a long time gap without any proper explanation therefor, is unlawful and arbitrary. The grievance voiced by the petitioners that they have closed down their business since 2004 to 2005 and issuance of notices for personal hearing in the year 2018 has caused immense prejudice to them. The department did not take any further steps after issuance of show cause notices and filing of reply by the respective petitioners to the said show cause notices for number of years. Even the show cause notices were transferred to call book even without intimation to the petitioners - issuance of notices in the year 2018 for personal hearing after about nearly thirteen years to seventeen years for the purpose of adjudication is unlawful, arbitrary and vitiates the entire proceedings. The impugned show cause notices issued in the case of respective petitions are hereby quashed - Petition allowed - decided in favor of petitioner.

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• 2019 (4) TMI 531
  Principles of natural justice - Validity of trial u/s 9 of the Central Excises and Salt Act, 1944 - absence of charge - the charge laid against the petitioner was only under Section 9 without indicating under which limb of that section he has to face trial - seizure of labelled and unlabelled beedies - seizure of beedi tobacco - Held that:- There was amendments in the year 1992. Thus, on a careful perusal, it can be seen that, a re-numbering was done under Section 9(1) and all the offences impugned therein are seen made punishable under Section 9(1)(i) & (ii). There may be an omission of sub-section (i), which was introduced by the Act 36 of 1973. That omission cannot be treated as material in the light of Section 464 of the Code of Criminal Procedure. In this case, by going through the charge, it can be seen that the details of the allegation for which, he is facing the trial is made clear. When the charge is clear regarding the allegations, quoting of the offences or omission of quoting the sub-section will not vitiate the trial. The Court below awarded a minimum sentence of six months and to pay a fine of Rs. 20,000/- with default simple imprisonment for three months - Considering the fact that the age of the revision petitioner who is accused No. 1. was given as 53 in the judgment and the case is that of the year 1990 and now we are in 2018 and for the last 28 years the case is therein and also considering the fact that the aged revision petitioner is suffering from various ailments, this can be treated as a special circumstance to give reduction in the minimum sentence awarded by the Court below as provided in the Act. The sentence imposed is modified and reduced as simple imprisonment for two months. As there is reduction in the substantial sentence, the fine amount is increased to Rs. 1,00,000/- and in default of payment of the fine amount, he shall undergo simple imprisonment for 15 days more - Revision allowed in part.

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• 2019 (4) TMI 530
  Clandestine removal - manufacturing activity or not - Revenue pointed out that Appellant declared himself as manufacturer in tender documents - confiscation of goods seized at Wazirabad premises - Held that:- Once the issue that the premises was not in possession of Appellant and that the Appellant did not carry out any manufacturing at the said premises has conclusively been decided and accepted by Department, holding the Appellant guilty of clandestine manufacturing and clearing the consignments without payment of duty from Wazirabad premises is ex-facie unsustainable in law. Thus on this short ground alone, Appellant’s Appeal succeeds. During the course of investigation itself, Appellant had adduced the evidence of procurement of impugned bed nets from job workers in Cuttack and East Midnapore and transportation of goods from there to Delhi. Further, on investigation, it was found that the job workers as well as transporters in their respective statements admitted to have issued the documents i.e bilty/letters evidencing transportation / manufacturing but could not adduce the supporting documents. Learned Commissioner in the impugned order has rejected those documents as afterthought and confirmed the demand holding that as the Appellant in the tender documents declared himself as manufacturer and hence he cannot be allowed to turn around to say that the goods were procured from job workers. The confirmation of demand solely on the basis of fact that Appellant declared himself as manufacturer in tender documents cannot be sustained in law. The demand confirmed on the basis of conjectures and surmises is unsustainable in law - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (4) TMI 529
  Validity of assessment - Pondicherry General Sales Tax Act - benefit of exemption notification in G.O.Ms.No.35/99/F.2 dated 30.03.1999 - completion of infrastructure before cut-off date - Held that:- The provisional certificate issued by the Directorate of Industries, Government of Pondicherry is a provisional registration certificate registering the appellant as a small scale undertaking unit. This certificate is to enable the appellant to obtain all clearances/facilities for its setting. The certificate clearly states that no production should be started before obtaining necessary clearances and it is granted without any guarantee for availability of any raw material and such other matters. Therefore, to term such a certificate as a license as required to be obtained in terms of the Proviso in G.O.Ms.No.35/99/F.2 dated 30.03.1999 is an argument which is stated to be rejected - The learned Single Bench was fully right in rejecting the contentions raised by the appellant by arguing that they qualify for exemption in terms of the Proviso. Whether G.O.Ms.No.36/2000/F.2 dated 21.07.2000 would come to the aid and assistance of the appellant? - Held that:- The Government Order in G.O.Ms.No.36/2000/F.2 dated 21.07.2000 explicitly states that the Government discontinued the exemption made in G.O.Ms.15/74/Fin.(CT) dated 25.06.1974 and G.O.Ms.164/86/F.6 dated 29.09.1986 which was in terms of G.O.Ms.No.35/99/F.2 dated 30.03.1999 - What is important to note is that G.O.Ms.No.36/2000/f.2 dated 21.07.2000 is not in supersession of G.O.Ms.No.35/99/F.2 dated 30.03.1999 and consequently, the correct manner to interpret the exemption notification is to hold that with effect from 01.04.1999 a new industry commencing production of Indian Made Foreign Liquor is not entitled for any exemption from payment of sales tax. Even assuming G.O.Ms.No.36/2000/F.2 dated 21.07.2000 is made applicable, the appellant having not started production within two years from 21.07.2000 is not entitled to any benefit. The appellant has not made out any case for interference with the orders passed in the writ petitions or against the assessment orders - Appeal dismissed.

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• 2019 (4) TMI 528
  Validity of pre revision notice - TNVAT Act - alleged sales suppression committed by the petitioner - according to the petitioner, at the time of inspection by the Enforcement Wing Officials of the respondent, they have illegally calculated a sum of Rs. 50,000/- as advance tax from the petitioner - Held that:- In the instant case, the Enforcement Wing Officials have collected the advance tax during the time of inspection itself, even before the show cause notice was issued to the petitioner for revision of assessment proceedings. But that cannot be a ground for quashing the impugned pre revision notice as the pre revision notice calls upon the petitioner to pay a sum of Rs. 4,12,275/- which is in excess to the sum of Rs. 50,000/- which was collected by the Enforcement Wing Officials of the respondents from the petitioner during the time of inspection. It is settled law that the show cause notice cannot be challenged under Article 226 of the Constitution of India unless and until, the same has been issued without authority under law or without jurisdiction. In the case on hand, the respondents has got the power to issue notice under Section 27 of the TNVAT Act, 2006 for revision of assessment proceedings. Therefore, the petitioner has not satisfied any of the grounds required for quashing of the pre revision notice under Section 27 of the TNVAT Act, 2006 - However, considering the fact that the respondents have collected a sum of Rs. 50,000/- from the petitioner as advance tax at the time of inspection of the petitioner's premises, which they are not legally entitled to, the said will have to be adjusted as and when the final assessment order is passed. Petition dismissed.

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• 2019 (4) TMI 527
  Condonation of delay in filing appeal - exclusion of period during which the application under section 84 of the TN VAT Act, 2006 was pending before the second respondent for the purpose of calculating the period of limitation as stipulated under section 51 of the TN VAT Act, 2006 - Held that:- In the instant case, the original assessment order dated 07.05.2015 was received by the petitioner on 12.05.2015. Thereafter, the petitioner filed a rectification application under Section 84 of the TN VAT Act, 2006 on 04.06.2015 which was rejected by the second respondent on 25.06.2015 and the rejection order copy was received by the petitioner on 01.07.2015. The period of 21 days when the application for rectification was kept pending before the second respondent under Section 84 of the TN VAT Act, 2006 has to be excluded for the purpose of calculating the period of limitation. If that period is excluded, the appeal filed by the petitioner before the first respondent on 28.07.2015 is well within the prescribed period of 60 days as stipulated under Section 51 of the TN VAT Act, 2006. The first respondent ought to have entertained the Appeal and passed orders in accordance with law but in the instant case it has not been done so - the Appeal petition is restored to the file of the first respondent, who shall admit and decide the writ appeal on merits and in accordance with law - petition allowed.

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• 2019 (4) TMI 526
  Validity of assessment - Section 25 of KVAT Act - whether an assessment under Section 25(1) can be sustained on the allegations constituting ingredients of Section 26 of the KVAT Act? - Held that:- The assessment is not made under Section 26 of the KVAT Act based on any allegation that the Assessing Authority has reason to believe that the appellant was carrying on business in the name of or in association with the partnership firm to which Sri. Abdul Ashraf and Sri. Narendra Patali are partners. On the otherhand, the case seems to be that, the partnership to which the revision petitioner, his wife and daughter are the partners, was conducting business in the inspected premises. For arriving such a conclusion, there is absolutely no materials available with the Assessing Authority. The reliance placed by the Appellate Authorities on the partnership deed and lease agreement produced by the appellant, will not in any manner help the Assessing Authority to confirm the assessment made in the name of the appellant. The assessments impugned in the Revision Petitions are not sustainable - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 525
  Maintainability of Settlement Application - application for settlement in Form-I - Settlement of arrears and issue of certificate of settlement - Held that:- While under the substantive provisions of Section 11, no assessing authority, reviewing authority, appellate authority or revisional authority can proceed to decide any assessment, review, appeal or revision under the relevant Act relating to any period in respect of which an application has been made under Section 5 of the Act, the proviso appended thereto says that such authority shall proceed to decide such assessment, review, appeal or revision for such period in accordance with the provisions of the relevant Act, if a certificate of settlement referred to in sub-section(1) of Section 8 is refused to the applicant by an order passed by the designated authority in writing under subsection (2) of Section 8. In other words, if the settlement as applied for under Section 5 of the Act, is refused by an order passed by the designated authority under sub-section (2) of Section 8 of the Act, the appeal or the revision as the case may be has to proceed. It is only when a certificate of settlement is issued under sub-section (1) of Section 8 of the Act, the review, appeal or revision as the case may be, shall be deemed to have been withdrawn by the applicant from the date of making of the application under sub-section (1) of Section 5 and not otherwise. An assessee has a statutory right to file an appeal as the case may be which cannot be taken away or affected except in accordance with the provisions of Section 10 of the Act of 2009 as amended. In other words, it is only when a certificate of settlement is issued under sub-section (1) of Section 8 of the Act, the review, appeal or revision as the case may be, shall be deemed to have been withdrawn by the applicant from the date of making of the application under sub-section (1) of Section 5 and not otherwise. The impugned order is hereby set aside subject to the petitioner depositing a total amount of Rs. 10,00,000/- against the total dues before the first respondent within three weeks from today - petition allowed.

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