TMI Tax Updates - e-Newsletter
April 11, 2019

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy FEMA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

• Income Tax:

  Penalty u/s 271AAB - An advance represents an outflow of funds and what has been envisaged by the legislature while defining “undisclosed income” in section 271AAB is an inflow of funds which has not been recorded in the books of accounts on or before the date of search.
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• Income Tax:

  Levy of penalty u/s. 271(1)(c) - suppression of turnover - penalty imposed at the minimum amount of 100% of the tax sought to be evaded - The penalty imposed for both the years is at the minimum rate, confirmed.
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• Income Tax:

  Expenditure for repairs and maintenance to plant & machinery - If the expenditure incurred by the assessee would not result in replacement of old machinery with new, then it may come within the ambit of current repair, but expenditure on such a magnitude which ultimately replaces full machinery within one or two years, then it would not come under concept of “current repair”
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• Income Tax:

  Validity of reopening of assessment - proceeding u/s 147 initiated on the basis of satisfaction note recorded u/s 153C - curable defect u/s 292B - not challenging before AO is fatal
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• Income Tax:

  Condonation of delay of 439 days - sufficient cause - lack of proper advice - appeal filed against assessment order before the CIT (A) within time but no Challenge of order of CIT passed u/s 263 - it was not a total lack of diligence on the part of the assessee - The sufficiency of the cause shown by the appellant is a matter to be weighed on the scales of justice
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• Income Tax:

  Exemption u/s 11 - nexus of corruption by way of bribe and criminal misconduct by the assessee trust - misconduct and desire to defy rules and norms - registration was rightly cancelled since inception u/s 12AA(3)
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• Income Tax:

  Unexplained cash credit u/s 68 - partnership firm is not liable to justify the source of fund in the hands of the partner - if the AO is not convinced about the creditworthiness of the partner, the inquiry had to be made at the end of the partner and not against the firm
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• Income Tax:

  Penalty u/s 271(1)(c) r.w. Explanation 5A - penalty by AO on the basis of assumption that some assets, money, bullion, jewellery or diary are part of undisclosed income in response to section 153A is not permissible
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• Income Tax:

  Power of Tribunal to dismiss the Appeals for want of prosecution - Even if the assessee could not appear, the Tribunal should decided the appeal on merits, ex parte, after hearing the Revenue Side - dismissal of the appeal for want of prosecution is not only illegal but also entails further litigation - Tribunals should not shirk their responsibility to decide the cases on merits
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• Income Tax:

  Addition u/s 69C - unexplained expenditure - not been expended by the assessee but was merely routed through in account - the question of debiting such amount to the profit and loss account did not arise - not in the nature of unexplained expenditure
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• Income Tax:

  Addition of Undisclosed Income - Just because the statements u/s 132 (4) state that he paid Capitation Fee , it does not mean that it could result in an addition ipso facto as Undisclosed Income without the corroborating material - an addition based on such an unsupported, vague and non-specific admission can not result in a sustainable addition attracting imposition of tax thereon
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• Income Tax:

  Reopening u/s 147 - validity of notice u/s 148 - original assessment u/s 143(1) - "change of the opinion" - High Court was not justified in dismissing the appeal on the ground that the appeal did not involve any substantial question of law.
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• Income Tax:

  Stay of demand for penalty u/s.271(1)(c) - quantum appeal pending - assessee prima-facie having fair chance of win - enforcement for recovery would cause serious loss and damage - demand stayed
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• Income Tax:

  Penalty u/s. 271A - confusion between the ‘books of account’ as per section 44AA and the ‘accounts’ as per section 145(3) - no finding either by the AO or by the CIT(A) that books or documents being not maintained by the assessee - not maintaining ‘proper accounts' will not attract penalty u/s. 271A
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• Income Tax:

  Taxability of Fees for technical services (FTS) - In Article–13(4)(c) of the India–UK tax treaty the words “or consists of the development and transfer of a technical plan or technical design”, appearing in the second limb has to be read in conjunction with “make available technical knowledge, experience, skill, knowhow or processes” - since technical design/drawings/plans supplied by the assessee cannot be used by the Indian entity in any other project in future same is not FTS taxable in India
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• Customs:

  Valuation of exported goods - iron ore - enhancement of value based on contemporaneous export - provisions of Rule 4 provides for determination of export value by comparison.
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• Indian Laws:

  Dishonor of Cheque - proceedings initiated under section 138 and 141 of the Negotiable Instruments Act, 1881 - No evidence of unimpeachable quality has been brought on record by the accused to indicate that allowing the proceedings to continue would be an abuse of process of the court.
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• IBC:

  Withdrawal of IB petition - proposal of settlement at the post-admission of the present IB Petition - no impediment for accepting the proposal of settlement at the post-admission of the present IB Petition.
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• Service Tax:

  CENVAT Credit - duty paying documents - CENVAT Credit cannot be denied on mere technicalities that is Bank Slip issued by the Bank cannot be considered as proper document
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• Central Excise:

  Valuation - inclusion of Dharmada Charges (Charitable donation) - The Dharmada collected by the appellant which is clearly an optional payment made by the buyer cannot be regarded as part of the transaction value for the sale of goods
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• Central Excise:

  Valuation - inclusion of Dharmada charges (charitable donation from customers) in the assessable value - The amount of Dharmada cannot be included in the transaction value.
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• Central Excise:

  Goods cleared for construction of water treatment plant - benefit of exemption - Mistake in mentioning the wrong notification number cannot be the sole reason for denying the benefit to the assessee which they were otherwise eligible.
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• VAT:

  Nature of activity - sale or service? - Unbranded software/uncanned software - it was the duty of the Company to have placed the basic material, i.e., the agreement or the contract so entered by it with its client to bring the said software out of the purview of the goods.
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Articles

• ONE SIDED CLAUSES IN AN AGREEMENT CONSTITUTES AN UNFAIR TRADE PRACTICE

Notifications

• Customs

• 18/2019 - dated 10-4-2019 - ADD
  Seeks to amend notification No. 23/2013-Customs(ADD), dated the 10th October, 2013 to extend the anti-dumping duty on ductile iron pipes originating in, or exported from China PR till 9th May, 2019

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• 17/2019 - dated 9-4-2019 - ADD
  Impose definitive anti-dumping duty on Cast Aluminium Alloy Wheels or Alloy Road Wheels used in Motor Vehicles originating in or exported from China PR, Korea RP and Thailand

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• 16/2019 - dated 9-4-2019 - ADD
  Central Government rescind Notification No. 21/2015-Customs (ADD) dated 22nd May, 2015

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• GST - States

• 38/1/2017-Fin(R&C)(3/2019-Rate) - dated 29-3-2019 - Goa SGST
  Seeks to amend Notification No. 38/1/2017-Fin(R&C)(11/2017-Rate), dated 30th June, 2017

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• Order No. 04/2019-State Tax - dated 30-3-2019 - Maharashtra SGST
  Maharashtra Goods and Services Tax (Fourth Removal of Difficulties) Order, 2019

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• 16/2019 – State Tax - dated 30-3-2019 - Maharashtra SGST
  Maharashtra Goods and Services Tax (Second Amendment)Rules, 2019

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• 09/2019—State Tax (Rate) - dated 30-3-2019 - Maharashtra SGST
  Amend to Notification No. 02/2019- State Tax (Rate) so as to provide for application of Composition rules to persons opting to pay tax under Notification No. 2/2019- State Tax (Rate)

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• 08/2019—State Tax (Rate) - dated 30-3-2019 - Maharashtra SGST
  Amend to Notification No. 1/2017- State Tax (Rate) so as to notify MGST rate of certain goods as recommended by Goods and Services Tax Council for real estate sector

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• 07/2019—State Tax (Rate) - dated 30-3-2019 - Maharashtra SGST
  Seeks to notify certain services to be taxed under RCM under section 9(4) of MGST Act as recommended by Goods and Services Tax Council for real estate sector

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• 06/2019—State Tax (Rate) - dated 30-3-2019 - Maharashtra SGST
  To notify certain class of persons by exercising powers conferred under section 148 of MGST Act, 2017

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• 05/2019—State Tax (Rate) - dated 30-3-2019 - Maharashtra SGST
  Amendment to Notification No. 13/2017- State Tax (Rate) so as to specify services to be taxed under Reverse Charge Mechanism (RCM) as recommended by Goods and Services Tax Council for real estate sector.

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• 04/2019—State Tax (Rate) - dated 30-3-2019 - Maharashtra SGST
  Amendment to Notification No. 12/2017- State Tax (Rate) so as to exempt certain services as recommended by Goods and Services Tax Council for real estate sector

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• Order No. 03/2019—State Tax - dated 8-3-2019 - Maharashtra SGST
  Maharashtra Goods and Services Tax (Third Removal of Difficulties) Order, 2019.

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• 2/2019—State Tax (Rate) - dated 7-3-2019 - Maharashtra SGST
  To provide Composition Scheme for supplier of services with a tax rate of 6% having annual turnover in preceding year upto ₹ 50 lakhs

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• 14/2019—State Tax - dated 7-3-2019 - Maharashtra SGST
  To supersede Notification No. 08/2017 - State Tax dated 29.06.2017 in order to extend the limit of threshold of aggregate turnover for availing Composition Scheme u/s 10 of the MGST Act, 2017 to ₹ 1.5 crores

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• 13/2019—State Tax - dated 7-3-2019 - Maharashtra SGST
  Prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019

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• 12/2019—State Tax - dated 7-3-2019 - Maharashtra SGST
  Prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores for the months of April, May and June, 2019

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• 11/2019—State Tax - dated 7-3-2019 - Maharashtra SGST
  To prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover upto ₹ 1.5 crores for the months of April, May and June, 2019

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• 10/2019—State Tax - dated 7-3-2019 - Maharashtra SGST
  To give exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs

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• Income Tax

• 35/2019 - dated 9-4-2019 - IT
  U/s 10(46) of the Income-tax Act, 1961 Central Government notifies ‘Kerala Headload Workers Welfare Board’, Kochi a Board constituted by the State Government of Kerala, in respect of the specified income arising to that Board

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• 34/2019 - dated 9-4-2019 - IT
  U/s 10(46) of the Income-tax Act, 1961 Central Government notifies ‘Telangana State Electricity Regulatory Commission’, Hyderabad, a commission constituted by the State Government of Telangana, in respect of the specified income arising to that Commission

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• 33/2019 - dated 9-4-2019 - IT
  U/s 10(46) of the Income-tax Act, 1961 Central Government notifies ‘Mysore Palace Board’, Karnataka, a board constituted by the Government of Karnataka, in respect of the specified income arising to that board

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Case Laws:

• Income Tax

• 2019 (4) TMI 633
  Reopening u/s 147 - validity of notice u/s 148 - original assessment u/s 143(1) - change of the opinion - High Court dismissing the Revenue's appeal in limine holding that no substantial question of law involved - HELD THAT:- We are of the view that the High Court was not justified in dismissing the appeal on the ground that the appeal did not involve any substantial question of law. We are, therefore, constrained to allow this appeal, set aside the impugned order and remand the case to the High Court for deciding the appellant s appeal afresh on merits in accordance with law. Four questions framed need to be answered by the High Court on their respective merits while deciding the appeal filed by the Revenue (appellant herein) u/s 260A. We are, therefore, of the view that such order is not legally sustainable in law and hence deserves to be set aside. The appeal succeeds and is accordingly allowed. The impugned order is set aside. The case is remanded to the High Court for answering the aforementioned questions on merits in accordance with law.

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• 2019 (4) TMI 632
  Condonation of delay of 439 days - sufficient cause - lack of proper advice - assessee was under the impression that he need only to challenge the assessment order before the CIT (Appeals) - no Challenge of order of CIT passed u/s 263 - after getting proper legal advice, subsequently Challenge before the Tribunal in appeal with condonation of delay - HELD THAT:- The assessee had preferred an appeal against the assessment order issued against him, within the time stipulated, before the CIT (Appeals). Therefore it is not a case where there was a total lack of diligence on the part of the assessee. On the other hand, it has to be accepted that there occurred a lack of proper advice upon him in the matter of preferring the appeal against the order of the CIT, before the Tribunal under Section 253(1)(c). Hence, we are of the view that it is not a case where the appellant had not shown any cause at all to condone the delay. The sufficiency of the cause shown by the appellant is a matter to be weighed on the scales of justice, which the Tribunal had virtually failed to do. Therefore, there exist a substantial question of law as to whether the Tribunal had acted in accordance with law while it refused to condone the delay, at least in terms of cost. We are satisfied that there is failure in this regard on the part of the Tribunal. Consequently, the said question need to be answered in favour of the appellant and against the revenue. In view of such finding we need not answer any other questions of law framed, because the matter need to be remitted to the Tribunal for consideration of the appeal on its merits. The above appeal is hereby allowed.

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• 2019 (4) TMI 631
  Stay petition - recovery proceedings - attachment orders - petitioner had deposited 20% of the assessed tax while filing the appeal before the CIT and the opposite parties in most arbitrary manner have seized the bank accounts of the petitioner - HELD THAT:- It is undisputed that the matter is pending before the Income Tax Appellate Tribunal and the stay application is also pending. The matter is listed for 19.3.2019. Since the application for interim relief is pending consideration before the learned Tribunal, as such, till disposal of stay application, the opposite parties shall not take any coercive measures including seizing of the bank accounts of the petitioner. The opposite parties shall, therefore, release the bank accounts of the petitioner forthwith.

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• 2019 (4) TMI 630
  Stay of demand exceeding 365 days - whether delay in disposal of appeal is not attributable to the assessee - HELD THAT:- The matter in issue is no longer res integra and stands concluded by the decision of this Court in M/S CARRIER AIR CONDITIONING AND REFRIGERATION LIMITED [2016 (5) TMI 396 - PUNJAB AND HARYANA HIGH COURT] whereby identical question as claimed in the present appeal, has been held not to be substantial question of law.

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• 2019 (4) TMI 628
  Penalty u/s 271(1)(c) - quantum addition proceedings remitted back - HELD THAT:- No substantial question of law arises in the present case for consideration by this Court under Section 260A of the Act since the matter has been remitted to the Assessing Officer for re-consideration on the issue of additions made by the Assessing Authority and the penalty under Section 271(1)(c) is a consequential issue it can be considered after a decision is arrived on the issue of additions, the present Appeal is premature one and the Assessee is free to move the Assessing Authority in pursuance of the direction of the Tribunal. Therefore, we are of the considered opinion that no substantial question of law requires our consideration. - Decided against assessee

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• 2019 (4) TMI 627
  Recovery of demand - order passed u/s 201 - stay rejected by AO - petitioner's bank accounts are attached and garnishee orders are served - right to approach the CIT or Chief CIT - HELD THAT:- the petition is disposed of with following directions:- (i) The petitioner shall file a stay petition before the Chief CIT (TDS) within a period of seven days from today. (ii) If such stay petition is filed within the time permitted, said Authority may dispose of the same as expeditiously as possible. (iii) For a period of ten days after the date of communication of the order of Chief Commissioner passes, there shall be no coercive recoveries against the petitioner in connection with this issue. (iv) In the meantime, since we have prevented further coercive recoveries, the attachment of the bank accounts of the petitioner as well as garnishee orders stand lifted.

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• 2019 (4) TMI 626
  Addition u/s 69C - unexplained expenditure - consolidated amount received from insurance company including doctor fee - Doctor fee just routed though appellant account - not debited in the profit and loss account - inadvertently TDS deducted u/s 194J - HELD THAT:- The facts as emerging from the record reveal that the payment of ₹ 10,32,200/- made to Shri Abhay Vasavada was by the Insurance Company towards doctor’s fees and such amount was merely routed through the assessee. The Tribunal was, therefore, wholly justified in holding that such amount was not in the nature of unexplained expenditure so as to attract the provisions of section 69C. Since the amount of ₹ 10,32,200/- had not been expended by the assessee but was merely routed through the assessee, the question of debiting such amount to the profit and loss account did not arise. No infirmity can be found in the impugned order of the Tribunal so as to give rise to a question of law, much less a substantial question of law, so as to warrant interference. - Decided against revenue

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• 2019 (4) TMI 625
  Power of Tribunal to dismiss the Appeals for want of prosecution - ex parte order in appeal - HELD THAT:- Tribunal could not have dismissed the appeal for want of prosecution. Even if the assessee could not appear, the Tribunal could have decided the appeal only on merits, ex parte, after hearing the Revenue Side but, the dismissal of the appeal for want of prosecution is not only illegal but also entails further litigation and proceedings by compelling the Assessee to move for setting aside the ex parte order, which Tribunal is supposed to do but in the present case even that application too came to be dismissed by the learned Tribunal. The Proviso to Rule 24 clearly mandates that the Tribunal shall set aside such ex parte order and restore the appeal for deciding the same on merits. Tribunal seems to have been contended by dismissing the appeal for want of prosecution only and not touching the merits of the case at all and then further erred in dismissing the Miscellaneous Petition filed for recalling the ex parte order dismissing the appeal for want of prosecution. We reiterate that the fact finding Tribunals should not shirk their responsibility to decide the cases on merits because the view and reasons given by such Tribunals are important for the Constitutional Higher Courts to look into while deciding the substantial questions of law under Section 260-A of the Act arising from Tribunal's orders. Obviously, such cryptic orders, not touching the merits of the case, would not give any rise to any substantial question of law for consideration by the High Courts under Section 260-A of the Act. The Assessee's valuable rights of getting the issues decided on merits by the final fact finding body viz., the Tribunal cannot be given a short shrift in the aforesaid manner. A legal and binding responsibility, therefore, lies upon the Tribunal to decide the appeal on merits irrespective of the appearance of the Assessee or his counsel before it or not. Considering the enabling powers in the words 'as it thinks fit' employed in Section 254 of the Act read with Rule 24 and in view of S. CHENNIAPPA MUDALIAR [1969 (2) TMI 10 - SUPREME COURT] we set aside the impugned order of the learned Tribunal and direct the Tribunal to decide the appeal on merits afresh in accordance with law. - Decided in favour of the Assessee Copy of this judgment may be sent to the President of the Income Tax Appellate Tribunal as well as the Law Secretary in the Ministry of Law and Justice so that the same may be brought to the notice of all the Members of Income Tax Appellate Tribunal and the new appointees in Income Tax Appellate Tribunal at the time of their recruitment itself. The President of Income Tax Appellate Tribunal may also get it circulated to all the existing Members of the Income Tax Appellate Tribunal, so that such orders resulting in serious miscarriage of justice should not be repeated by any Member of the Tribunal.

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• 2019 (4) TMI 624
  Deduction u/s 80IA - inclusion /exclusion of components of price for sale of electricity fixed on basis of tax liability as part of sale price of electricity in computing relief - HELD THAT:- As decided in assessee's own case [2013 (1) TMI 136 - MADRAS HIGH COURT] no hesitation in accepting the plea of the assessee that the Commissioner committed serious error in dissecting the tariff to come to the conclusion that the tax component specified as part of the tariff is reimbursement of the liability of the assessee and hence it would not form part of the income. As already pointed out, when the Revenue had not questioned the genuineness of the agreement between the parties and liberty is thus available for the parties to arrive at the cost of the energy to be supplied by the assessee as guided by the notifications of the Ministry of Power in this regard, we find no ground to sustain the plea of the Revenue that the relief to be granted under Section 80IA calls for exclusion of the tax component in the sale price of electricity. - Decided in favour of assessee.

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• 2019 (4) TMI 623
  Validity of reopening u/s 147 - satisfaction note by the A.O. relates to initiation of proceedings u/s 153C and not u/s 147 - curable defect u/s 292B - HELD THAT:- The assumption of jurisdiction would begin from the recording of satisfaction by the A.O. that certain income has escaped assessment pertaining to a particular assessment year. Admittedly, the assessee has not challenged the validity of notice u/s 148. The assessee was duly supplied satisfaction recorded u/s 153C of the Act. The assessee considered it as a satisfaction recorded u/s 148 of the Act and filed return in response thereto. This fact is not controverted by the assessee. It is also a fact that the manner in which the satisfaction u/s 147 is required to be recorded is not prescribed under the law. Therefore, considering the totality of the facts and under the peculiarity of the facts of the present case, in our considered view section 292B comes to rescue of the Assessing Officer. Hence, the grounds of the assessee’s appeal is hereby dismissed. Addition based on diary of third party - addition without confronting the same with the assessee and giving opportunity of cross examination - HELD THAT:- There is no dispute with regard to the fact that the addition has been made on the basis of the statement of employee of one Shri Nilesh Ajmera recorded in relation to the certain transaction recorded in the diary of Shri Nilesh Ajmera. The assessee was not confronted with the employee of Shri Nilesh Ajmera nor any cross examination of Nilesh Ajmera or his employee was given to the assessee. The addition is based on a diary of a third party. As relying on SHRI PUKHRAJ SONI [2019 (2) TMI 733 - MADHYA PRADESH HIGH COURT] evidence in the nature of diary or loose papers which are not maintained in the course of business by the third party would not be a good piece of evidence. Therefore, we are of the view that the assessing officer was not justified in making the addition without confronting the same with the assessee and giving opportunity of cross examination to the assessee. - Decided in favour of assessee.

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• 2019 (4) TMI 622
  Exemption u/s 11 - charitable activity OR not? - activity of providing education through the medical college - assessee was engaged in the nefarious activities for inducing of fresh batch of students for academic session without the requisite infrastructure - HELD THAT:- CIT (Central)-3, New Delhi has noted that the assessee was engaged in the nefarious activities for inducing of fresh batch of students for academic session without the requisite infrastructure and therefore, it is a clear violation of clause (ii) of para 4 of the trust deed, simultaneously, violating the provisions of section 2(15) while carrying out of its activity. Assessee-society was established with the sole intention of helping charitable and philanthropic venture of running medical college and thereby seeking to claim exemption on the income so generated under section 11 and 12 of the I.T. Act. It is further noted that due to nexus of corruption by way of bribe and criminal misconduct by the assessee trust, registration of the Trust was cancelled since inception u/s. 12AA(3) of the Income Tax Act, 1961. Therefore, in our opinion, Ld. Pr. CIT has rightly observed that a charitable trust conduct must be at par with its provision of trust deed and as per existing law. Its misconduct and desire to defy rules and norms have been exposed by virtue of the bribe activities. Such incidents cannot be classified as charitable by any reckoning. Such organisations which do not carry any charitable activity, cannot be granted registration. In these facts and circumstances, Ld. Pr. CIT was correctly satisfied that the activities of the trust are not genuine and not being carried out in accordance with the objects of the trust. Due to nexus of corruption by way of bribe and criminal misconduct by the assessee trust, registration of the Trust was cancelled since inception u/s. 12AA(3). We also note that in the case of ACIT-I vs. Agra Development Authority [2018 (2) TMI 756 - ALLAHABAD HIGH COURT] it was observed by the Court that assessee had not obtained registration by practicing fraud or collusion or concealment of any material fact, but in the present case there is nexus of corruption by way of bribe and criminal misconduct by the assessee trust. - Decided against Assessee.

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• 2019 (4) TMI 621
  Disallowance of payment towards Employee’s Contribution u/s 43B - payment not deposited in the relevant fund on or before the due date - HELD THAT:- This issue has been settled by the Hon’ble jurisdictional High Court in two occasions, viz. in the case of Gujarat State Road Transport Corporation Ltd. [2014 (1) TMI 502 - GUJARAT HIGH COURT] and M/s.Checkmate Facility & Electronics Solutions P.Ltd. Vs.DCIT [2018 (10) TMI 994 - GUJARAT HIGH COURT] wherein it is held that the employees’ contribution to the Employees’ Provident Fund (EPF)/ Employees’ State Insurance Corporation (ESIC) deposited beyond the due date prescribed under section 36(1)(va) would not be eligible for deduction under section 43B of the Act, even if deposited before the due date of filing the tax. Therefore, there is no merit in this ground of appeal assessee. Addition being expenses incurred on software up-gradation of computers - revenue or capital expenditure - HELD THAT:- As decided in assessee's own case assessee has incurred expenditure to the extent of 60.93% of the value of the machinery in the AY 2010-11 and 31.58% in A.Y.2011-12, meaning thereby, by way of this method, almost 92% expenditure were incurred in two years on the value of the plant & machinery. It amounts to replacement. CIT(A) in this background has rightly observed that other companies in similar line were incurred expenditure to the extent of 2% to 6%, whereas the assessee has incurred expenditure at 43%. CIT(A) rightly upheld disallowance of expenditure partly by treating it in the capital field. - Decided against assessee

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• 2019 (4) TMI 620
  Penalty u/s 271AAB - search proceedings - income surrendered by the assessee in his statement u/s 132(4) consist of cash advances to farmers for purchase of wheat and cash - HELD THAT:- As far as cash of ₹ 7,97,915 found in possession of the assessee during the course of search is concerned, there cannot be any dispute that the same represents undisclosed income so defined in section 271AAB and which has not been recorded in the books of accounts of the assessee at the time of search. Regarding the contention of the AR that such cash is out of past savings of the assessee, these are contentions which are relevant for determining the nature and source of such undisclosed income for the purposes of determining the quantum of penalty which the CIT(A) has duly considered and has upheld the levy of penalty @ 10% as against 30% levied by the AO. In the result, we confirm the levy of penalty @ 10% on the undisclosed income of ₹ 7,97,915 so sustained by the ld CIT(A). Regarding cash advances to farmers for purchase of wheat - whether the advances so given to the farmers for purchase of wheat qualify as undisclosed income? - HELD THAT:- An advance represents an outflow of funds and what has been envisaged by the legislature while defining “undisclosed income” in section 271AAB is an inflow of funds which has not been recorded in the books of accounts on or before the date of search. Further, the deeming fiction so envisaged in section 69 and 69B cannot be extended and applied automatically in context of section 271AAB which contains a specific definition of undisclosed income. In light of above discussions and following the earlier decision of the Coordinate Bench of the Tribunal in the case of M/s Rambhajo vs ACIT (2019 (1) TMI 1057 - ITAT JAIPUR), we delete the penalty levied under section 271AAB of the Act on cash advances of ₹ 7,43,79,200 paid to farmers towards purchase of wheat. Since the issue of levy of penalty U/s 271AAB of the Act has been decided on merits, therefore, the issue of validity of initiation of the penalty proceeding due to defective show cause notice become academic in nature and we do not propose to adjudicate the same. Appeal of the Revenue is dismissed and the appeal of the assessee is partly allowed.

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• 2019 (4) TMI 619
  Penalty u/s 271(1)(c) - non specific finding - AO used expression “or” in between the concealment of income/furnishing inaccurate particulars - HELD THAT:- In the case of Snita Transport P.Ltd. [2012 (12) TMI 981 - HIGH COURT OF GUJARAT] as observed that while issuing notice under section 271(1)(c) r.w.s. 274 provide an opportunity to explain as to why penalty be not imposed. If an Assessing Officer used expression “or” in between the concealment of income/furnishing inaccurate particulars, then that show cause notice be not fatal to the proceedings, but while visiting the assessee with penalty the ld.AO ought to have recorded a specific finding, for which breach, he has visited the assessee with penalty i.e. whether he has visited the assessee with penalty for concealment of income or furnishing inaccurate particulars of income. In the penalty order he cannot use both the expression. As AO was not specific in his finding for which he has visited the assessee with penalty we allow this appeal of the assessee and quash the penalty order. - Decided in favour of assessee

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• 2019 (4) TMI 618
  Disallowance of prior period expenses - netting off of prior period expenses & income - allowable revenue expenditure u/s 37 - HELD THAT:- CIT(A) has rightly observed that prior period expenses claimed by the assessee are of revenue in nature, and they have been crystallized during the accounting period relevant to this assessment year. Considering this aspect, the ld.CIT(A) has rightly deleted the disallowance. A reference to the decision in the case of Adani Enterprises [2016 (7) TMI 1250 - GUJARAT HIGH COURT]has also been made for the proposition that once an income pertaining to prior period is being recognized in the current year, and offered for taxation, then equal treatment be given to prior period expenditure which are revenue in nature and crystallized in this year. - Decided against revenue Disallowance u/s 14A r.w. Rule 8D - HELD THAT:- There is no dispute with regard to the fact that the assessee has earned ₹ 4.29 crores as dividend income. The assessee has made investment of ₹ 9.14 crores. It has interest free funds of ₹ 433.13 crores. The ld.CIT(A) by putting reliance upon the judgment of CIT Vs. Suzlon Energy Ltd.[2013 (7) TMI 697 - GUJARAT HIGH COURT] and CIT Vs. Torrent Power Ltd. [2014 (6) TMI 185 - GUJARAT HIGH COURT] has held that when the assessee has more interest free funds, then it is to be construed that investment was made out of interest free funds and no disallowance is to be made on account of interest expenditure. Administrative expenses are required to be calculated for disallowance under section 14A of the Act. However, the ld.AO shall take into consideration the average of investment, which has yielded tax free income during the year. This exercise be carried out after providing due opportunity of hearing to the assessee. In view of the above, ground no.2 raised by the Revenue is rejected MAT computation u/s 115JB including disallowance under section 14A - HELD THAT:- As relying on VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] question answered in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully following the above allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules.

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• 2019 (4) TMI 617
  Penalty u/s. 271(1)(c) - non-availability of separate calculation of interest on refund and other technical fault - bifurcation of interest amount and tax amount refunded to the assessee - minor difference on account of contractual receipt - HELD THAT:- No separate information about the interest and tax element of refund has been provided in Form No. 26AS issued to the assessee. Therefore, as per page no. 10 & 11 of the paper book the assessee has made working of interest receivable on the refund on estimated basis as per the material on record. In respect of difference of ₹ 6,844/- in contractual receipt it is noticed that as per actual contract the total contract receipt was to the amount of ₹ 15,44,92,552/- whereas the contract receipt shown by the assessee was at ₹ 15,44,85,708/-;after taking into account the huge volume of contract receipt minor difference of ₹ 6,884/- for want of reconciliation in the account of the assessee and in the account of the contractee R & B Department of Gujarat is not a case of furnishing inaccurate particular of income. Non-availability of separate calculation of interest on refund and other technical fault as explained above. CIT(A) is not justified in sustaining the penalty u/s. 271(1)(c) levied by the AO. Appeal of the assessee is allowed.

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• 2019 (4) TMI 616
  Disallowance u/s 14A in the book profit determined u/s 115JB - MAT - HELD THAT:- Special Bench in VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] answered this question in favour of the assessee and held that computation for the purpose of clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A r.w. rule 8D. Respectfully following the above decision of the Special Bench , we allow this ground of appeal and direct the AO not to make adjustments in book profit for the purpose of MAT liability on the basis of calculations made with Rule 8D of the Income Tax Rules. Disallowance u/s 14A - interest expenditure - HELD THAT:- Assessee has more interest free funds than the investment made by it which has resulted tax free income. Apart from above, we further find that the assessee has net interest income. Therefore, in view of the judgment in the case of Nirma Credit & Capital P.Ltd. [2017 (9) TMI 485 - GUJARAT HIGH COURT] no disallowance on account of interest expenditure is to be made in the present case. We allow this ground partly and confirm the disallowance to the extent of ₹ 6,790/- representing administrative expenses and ₹ 954/- which is relatable to direct expenditure. Interest expenditure of ₹ 1,43,261/- disallowed by the AO is deleted.- Appeal of the assessee is partly allowed.

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• 2019 (4) TMI 615
  Penalty u/s 271(1)(c) r.w. Explanation 5A - search u/s 132 - undisclosed income declared in response to the notice u/s 153A - Whether assets found in the possession of the assessee, such as money, bullion, jewellery during the search representing undisclosed income - HELD THAT:- AO has not made reference to any material found during the course of search which can suggest that additional incomes declared by the assessee are representing any money, bullion, jewellery or impounded any diary. It cannot be construed that some assets were found during the course of search representing that income which has been declared by the appellants. Revenue cannot assume existence of seized material by holding that had the search not carried out, assessee would have not disclosed this income in response to section 153A notice. In respect of this assumption, there should be recovery of some assets, such money, bullion, jewellery or diary. No such things have been referred in these cases. Therefore, we allow all these appeals and deleted all the penalties impugned in these appeals. - Decided in favour of assessee.

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• 2019 (4) TMI 614
  Exemption u/s 80G(5)(vi) - delay in filing of appeal - not complied by concern person being an old man of 69 years and suffering from various ailments - CIT rejected vide exparte order without going into merits by passing non-speaking order - HELD THAT:- we find that owing to peculiar medical conditions of the accountant being an old man, the assessee’s case could not be represented in appropriate manner. Therefore, assessee’s case requires reconsideration by the ld. CIT(Exemption). - set aside the order of the ld. CIT and remanded back for reconsideration.

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• 2019 (4) TMI 613
  Rectification petitions u/s 254(2) - penalty imposed on the basis of total cash deposit in account - Tribunal considering business of assessee consider 90% deposit as explained and sustain penalty on 10% - Dept. appeal before High Court interpreting that penalty of 100% of tax reduced to 10% which is not permissible - High court suggest for rectification before Tribunal - HELD THAT:- The issue on merits on what Their Lordships have held and any further analysis of legal position will inevitably take us there, and we humbly accept our mistake. We may, however, add that the school of thought that “It is settled that the findings given in the assessment proceedings would be relevant and admissible materials in penalty proceedings, but those findings cannot operate as res judicata because the considerations that arise in penalty proceedings are different from those in the assessment proceedings” has consistently found favour with several non jurisdictional High Courts, including in the case of CIT Vs Ishitiaq Hussain [1997 (11) TMI 78 - ALLAHABAD HIGH COURT]. The findings in the assessment proceedings have not thus be treated as final adjudication binding in the penalty proceedings. An approach adopted by the basis of the views expressed by Hon’ble High Court, even if non jurisdictional, cannot be said to be a glaring error incapable of two views being taken. Even if the rectification petition was to be treated as a petition filed well within the time limit, the rectification petition was to be dismissed on merits anyway- in the light of the nature of the mistake and the limited scope of powers under section 254(2). There would not have been any difference to the outcome of the exercise. Dismissal of this rectification petition is on account of delay in filing of rectification petition as also on account of inherently limited powers vested in the Tribunal under section 254(2). That does not affect the fact that, in the light of the observations of Hon’ble jurisdictional High Court, this Tribunal was in error in granting the relief in the impugned order and we must gracefully acknowledge the same. There are, however, limitation to what we can do in the course of exercise of our powers under section 254(2) and as much as we must acknowledge our mistake, we must also acknowledge our limitations of rectifying the same. Just as Their Lordships, having noticed the mistake in the impugned order, declined to tinker with the same, for the larger causes of justice, and allow it to thus reach finality nevertheless, we must also refrain from revisiting the conclusions arrived at in the impugned order, in the garb of rectifying the mistake apparent on record, as, howsoever desirable be the ultimate objective, ends cannot justify the means; the legal remedies can only be provided within the framework of law.

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• 2019 (4) TMI 612
  Stay of recovery of demand - Capital gain in return filed on receipt of notice u/s.148 - penalty u/s.271(1)(c) levied - HELD THAT:- Considering the facts and circumstances of the case, that the demand arose out of penalty order and the impugned appeal is posted for hearing on 06.06.2019, we grant stay of recovery of demand till the disposal of the appeal. However, the assessee shall actively pursue the appeal for the early disposal. Issue of notice is dispensed with. Stay petition is allowed.

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• 2019 (4) TMI 611
  Levy of penalty u/s 271(1)(c) - quantum addition proceeding remanded back - HELD THAT:- The tribunal has set aside the quantum proceedings back to the file of the first appellate authority. The appeal in the instant case is qua penalty on both the additions under appeal in the quantum proceedings. Per contra, the penalty proceedings would necessarily have to be restored back. The same are, accordingly, set aside to the file of the ld. CIT(A), to decide the same in light of and by taking into consideration the explanations furnished; the material/s brought on record, as well as the finding/s issued by the first appellate authority in the quantum proceedings, of course after providing reasonable opportunity of being heard to both the parties before him. - Decided in favour of assessee for statistical purposes.

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• 2019 (4) TMI 610
  Levy of penalty u/s. 271A - non-maintenance of accounts - GP estimation @ 16%, i.e., as against the disclosed rate of 12.78% - HELD THAT:- Section 271A prescribes a penalty for a failure to keep and maintain such books of accounts and documents as required u/s. 44AA, or rules made thereunder for any previous year. In the present case there is no finding either by the AO or even by the CIT(A) qua any of these books or documents being not maintained by the assessee. How, then, one wonders section 271A gets attracted? As afore-noted, both the authorities have stated of the assessee not maintaining ‘proper accounts’. Even as the assessee claims otherwise, where the accounts are not correct and complete, i.e., to the satisfaction of the AO, it is section 145(3) that would get attracted, entitling the assessing authority to, rejecting the books results, make an estimate of the assessee’s income relying on the relevant material. As it appears, there has occurred a confusion between the ‘books of account’, referred to in section 44AA and section 271A, and the ‘accounts’ referred to in section 145(3). The rejection of accounts per se would not, even as explained in Asst. CIT vs. Aggarwal Construction Co. [2007 (1) TMI 203 - ITAT CHANDIGARH-B] attract section 271A - Decided in favour of assessee.

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• 2019 (4) TMI 609
  Levy of penalty u/s. 271(1)(c) - interest on borrowed funds, interest on the said capital was disallowed u/s. 36(1)(iii) - as alleged furnishing of inaccurate particulars of income - HELD THAT:- No change in the circumstances between October, 2004 and August, 2005, has been stated. Why, she did not have sufficient funds to buy the land, deploying borrowed capital for the purpose, much less to set-up an industrial unit? Why, the document executed in her favour in October, 2004, i.e., the GPA along with the affidavit, as admitted, itself prevented the assessee from registering the land in her name, a fact of which she would not but be aware of while making the investment, clearly indicting the assessee’s explanation. Further still, the assessee being short of funds and other resources, including time, yet does not transfer the land to her son for a consideration, but without it. The recoupment of cost from her son by the assessee would not have attracted any additional stamp duty nor any gain in the assessee’s hands. The aspect of it being for a new project, so that the interest expense was not admissible, would in any case obtain. The levy of penalty for furnishing inaccurate particulars of income is, in principle, valid. At the same time, as observe two major inconsistencies in the penalty as levied, also pointed out during the hearing. Firstly, the investment by the assessee is in October, 2004, i.e., midway during the current year, though the interest disallowed is for the full year. The interest disallowed has necessarily to be for the period during the relevant year for which the investment obtains. Two, the assessee has repeatedly, both in the quantum and penalty proceedings, stated that the interest allowed on unsecured loans is at 9% p.a, while the interest disallowed has been worked out @ 12% p.a. AO is accordingly directed to, after verifying the assessee’s claim as to the rate of interest, modify the penalty, working out the same at the same rate of tax at which it stands levied, i.e., after making adjustment for the two factors i.e., period of investment and the rate of interest, for which reasonable opportunity of hearing shall be allowed to the assessee. Assessee’s appeal is partly allowed.

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• 2019 (4) TMI 608
  Levy of penalty u/s. 271(1)(c) - suppression of turnover - penalty imposed at the minimum amount of 100% of the tax sought to be evaded - HELD THAT:- The sales, as stated, are of the same goods as the asseseee deals in in the normal course of his trade. The disclosed profit is ₹ 11,000 (8.03%) and ₹ 17,125 (12.50%) for AY 1992-93 and AY 1993-94 respectively. He replied in the negative. Why, then, should not the income on the additional, admitted turnover be assessed at the same rate, as indeed it was in the original assessment proceedings? The undisclosed purchases by the assessee for the relevant years are at ₹ 24.38 lacs and ₹ 32.40 lacs for AY 1992-93 and 1993- 94 respectively. That is, as it appears, the undisclosed profit for the two years is in fact in a much higher sum of ₹ 5.74 lacs (Rs.30.12 lacs - ₹ 24.38 lacs) and ₹ 4.74 lacs (Rs.37.14 - ₹ 32.40 lacs) for the two consecutive years respectively. All these facts are on the basis of the material on record and, in fact, admitted. The income had, rather, been assessed a much lower rate of 2.5%, applied uniformly for both the manufacturing and trading turnover. How then, and on what basis, one wonders, the assessee states that he has not concealed particulars of income when he had concealed the turnover on the purchases from SICOP. In fact, penalty would arise even if the assessee had declared the same profit rate as on the disclosed turnover in the reassessment proceedings. This is as the same would only be upon detection by the Department. penalty is to be levied with reference to original return is, again, well settled (CIT vs. Onkar Saran & Sons [1992 (3) TMI 1 - SUPREME COURT]. The penalty imposed for both the years is, as afore-stated, at the minimum rate. - decided against assessee

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• 2019 (4) TMI 607
  Income From House Property OR Business income - assessee is the owner of the building comprising of 5 floors with common facility like air-condition plant, power back-up, lift, watchmen - fair market rent receipt - difference in the amount of rent charged by the assessee from the unrelated and related party - HELD THAT:- Rental income of the assessee is taxable under the head House Property at the fair market rent and not under the head Business and Profession. Unexplained cash credit u/s 68 - capital contributed by the partner to the firm as unexplained cash credit - addition in the hands of the partnership firm or partner - HELD THAT:- There remains no ambiguity that the assessee has shown contribution by the partner of the firm in the year under consideration. Now the question arises about the source of fund in the hands of the partner. Regarding this the law is settled that the partnership firm is not liable to justify the source of fund in the hands of the partner. In this connection we find support and guidance from the judgement of PCIT vs Vaishnodevi Refoils & Solvex reported in [2018 (1) TMI 861 - GUJARAT HIGH COURT] assessee has furnished the details with regard to the source of the capital introduced in the firm and the concerned partner had confirmed such contribution, the assessee had duly discharged the onus cast upon it. Thereafter, if the Assessing Officer was not convinced about the creditworthiness of the partner who had made the capital contribution, the inquiry had to be made at the end of the partner and not against the firm. No addition made in the hands of the partnership firm on account of the capital contributed by the partner of the firm to the firm. In case any justification is required for the source of fund in the hands of the partner, then partner in his individual capacity is liable to explain. There is no liability fastened on the assessee (firm) for the explanation about the source of funds in the hands of the partner. Hence we disagree with the order of the CIT (A) and accordingly direct to the AO to delete the addition made by him. - Decided in favour of assessee.

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• 2019 (4) TMI 606
  Addition made on protective basis - proceedings arising from the substantive assessment - unexplained income of the assessee company - accommodation entries receipt - CIT-A deleted the addition - HELD THAT:- Relying in M/S. TOPGRAIN MANAGEMENT PVT. LIMITED [2019 (2) TMI 708 - ITAT KOLKATA] we set aside the impugned order of the ld. CIT(Appeals) on this issue and remit the matter back to him for keeping it alive and pending till the outcome of the proceedings arising from the substantive assessment. Thus, grounds raised by the Revenue are allowed for statistical purposes. also see CIT –vs.- Surendra Gulab Chand Modi [1981 (3) TMI 21 - GUJARAT HIGH COURT]

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• 2019 (4) TMI 605
  Taxability of Fees for technical services - amount received towards common cost recharge and consulting engineering services - PE in India - India–UK tax treaty(DTAA) - Whether development and transfer of a technical plan or technical design simplicitor without making available technical knowledge, experience, skill, knowhow or processes, etc., would be in the nature of fees for technical services? - HELD THAT:- In the present case, the amount received by the assessee, which has been treated as fees for technical services is towards supply of technical drawings/designs/plans. On a careful reading of Article–13(4)(c) of the India–UK tax treaty it becomes clear that the words “or consists of the development and transfer of a technical plan or technical design”, appearing in the second limb has to be read in conjunction with “make available technical knowledge, experience, skill, knowhow or processes”. The reasoning of the Assessing Officer that the second limb of Article–13(4)(c) of the India– UK tax treaty has to be read independently, in our view, cannot be the correct interpretation of the said Article. Whether by supply of technical, designs, drawing, plans, the assessee has made available technical knowledge, experience, skill, knowhow or processes? - HELD THAT:- As per the settled principle of law, technology is considered to have been made available when the recipient of such technology is competent and authorised to apply the technology contained therein independently as an owner without depending upon the service provider. The recipient of technology should be able to make use of technical knowledge, experience, skill, knowhow or processes by himself in his business or for his own benefit and without recourse to the service provider in future and for this purpose a transmission of the technical knowledge, experience, skill, knowhow or processes, from the service provider to the service recipient is necessary. Undisputedly, in the present case, as revealed from the material on record, the technical design/drawings/plans supplied by the assessee to the Indian entity are project specific, hence, cannot be used by the Indian entity in any other project in future. Therefore, the claim of the assessee that it has not made available any technical knowledge, experience, skill, knowhow or processes while developing and supplying the technical drawings/designs/plans has to be accepted. It is worth mentioning, while deciding a dispute of identical nature concerning fees for technical services as per India–USA tax treaty under which definition of fess for included services as per Article–12(4)(b) is identically worded like Article 13(4)(c) of the India–UK tax treaty, the Tribunal, Pune Bench, in Gera Developments Pvt. Ltd. v/s DCIT [2016 (8) TMI 1009 - ITAT PUNE] has held that mere passing off project specific architectural, drawings and designs with measurements does not amount to making available technical knowledge, experience, skill, knowhow or processes. The Tribunal held that unless there is transfer of technical expertise skill or knowledge along with drawings and designs and if the assessee cannot independently use the drawings and designs in any manner whatsoever for commercial purpose, the payment received cannot be treated as fees for technical services - Thus the amount received by the assessee has to be treated as business profit and in the absence of a PE in India, it cannot be brought to tax in India. Since, we have held the amount received towards consulting engineering services to be not in the nature of fees for technical services, the reasoning of the departmental authorities with regard to cost recharge would also fail, since, they have treated it as ancillary and incidental to consulting engineering services. Once, the Departmental Authorities have treated the amount received towards cost recharge to be in the nature fees for technical services, it implies rendering of service- amount received towards consulting engineering services to be not in the nature of fees for technical services we hold that the amount received towards cost recharge cannot be brought to tax in India in the absence of PE. - Decided in favour of assessee.

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• 2019 (4) TMI 603
  Addition u/s 43B - service tax though debited to the profit and loss account but not credited to the Central Government - Section 43B does not contemplate liability to pay service tax before actual receipt of the funds in the account of the assessee - HELD THAT:- SLP dismissed.

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• 2019 (4) TMI 602
  Expenditure on Employee Stock Ownership Plan (ESOP) - Addition u/s 14A - HELD THAT:- Delay condoned. Leave granted.

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• 2019 (4) TMI 576
  Expenditure for repairs and maintenance to plant & machinery - Revenue or capital expenditure - current repair - HELD THAT:- If the expenditure incurred by the assessee would not result in replacement of old machinery with new, then it may come within the ambit of current repair, but expenditure on such a magnitude which ultimately replaces full machinery within one or two years, then it would not come under concept of “current repair”. AO has observed that the assessee has incurred expenditure to the extent of 60.93% of the value of the machinery in the AY 2010-11 and 31.58% in A.Y.2011-12, meaning thereby, by way of this method, almost 92% expenditure were incurred in two years on the value of the plant & machinery. It amounts to replacement. CIT(A) in this background has rightly observed that other companies in similar line were incurred expenditure to the extent of 2% to 6%, whereas the assessee has incurred expenditure at 43%. The CIT(A) rightly upheld disallowance of expenditure partly by treating it in the capital field. We do not find any error in the order of the CIT(A) in both years on this issue. An alternative contention has been raised that in case expenditure is not allowed as revenue expenditure, then depreciation on the disallowed amount be granted to the assessee. We remit this aspect to the file of the AO. He will work out and grant depreciation to the assessee on the addition made by disallowing the current repairs. This alternative contention of the assessee is accepted. - Decided partly in favour of assessee.

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• Customs

• 2019 (4) TMI 601
  Grant of Anticipatory bail - Imposing of condition to keep an amount of ₹ 3 crores in a fixed deposit in some bank and to undertake to surrender that amount for payment of legally adjudicated demand - Held that:- The anticipatory bail has been allowed and made absolute subject to the condition that as and when the demand is raised by the investigating agency, the petitioner is required to meet out with the demand in legal manner and in order to ensure compliance, the petitioner has been ordered to keep an amount of ₹ 3 crores in fixed deposit in some bank. While granting bail, it has been ordered to undertake to surrender the fixed deposit for payment of legally adjudicated demand with the department towards payment of duty. Meaning thereby the petitioner has been directed to keep an amount of ₹ 3 crores in fixed deposit in his name and to furnish copy of the FDR to the department. It clearly shows that the condition has been imposed to have the FD of said amount in the name of the petitioner. It is settled law that economic offence constitute a class apart and such like offence having deep rooted conspiracy by causing huge loss of public funds affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. At the time of granting bail, the Court has to consider and keep in mind the nature of allegations, severity of punishment, the character of the accused, circumstances which are peculiar to the accused and also the reasonable possibility of securing presence of the accused during trial as well as reasonable apprehension of the witnesses being tampered with. The offences are cognizable and non-bailable and the matter is under investigation. In the present case, the petitioner has not cooperated in the investigation and just to ensure his availability during ongoing investigation, such condition was imposed - The condition for depositing amount is not unconditional but just to ensure to deposit said amount in case in the investigation he is found to be involved for evasion of the duty. The amount so deposited would be for the purpose of recovery. No financial loss has been caused in any manner to the petitioner as the same has been ordered to deposit by attracting interest. Petition dismissed.

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• 2019 (4) TMI 600
  Grant of anticipatory bail - compliance of the non-bailable warrants - seizure of 27 gold bars - Held that:- The evidence worth arrest of the petitioner and his further custodial interrogation has come on record. It could not be disputed by learned Senior counsel appearing for the petitioner that in pursuance to the summons issued to the petitioner under Section 108 of the Customs Act to appear and produce documents, after the consignment carrying gold bars worth ₹ 9.41 crores from Afghanistan was seized by the Customs Authorities at International Check Post, Attari, the petitioner evaded his appearance before the Customs Authorities. It has also come on record from the FSL report and the transcription of the mobile conversation of the petitioner with Mohd. Khalid in Afghanistan about the dealings in crores of rupees, which may raise a serious concern about the national security or hawala transactions. There is no ground to grant the relief of anticipatory bail to the petitioner - petition dismissed.

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• 2019 (4) TMI 599
  Valuation of imported goods - liquid bulk cargo - inclusion of demurrage charge incurred prior to import in assessable value - Held that:- The issues involved in the appeal have been considered by this Tribunal in the case of BPCL Vs. CC, Cochin [2018 (5) TMI 569 - CESTAT BANGALORE] and have been allowed in favour of the assessee, by holding that demurrage charges are admittedly incurred after the goods reached at Indian ports and, therefore, it is a post-importation event. Such charges, therefore, cannot form part of the transaction value - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 598
  Maintainability of appeal - non-prosecution of the case - Held that:- Atleast for the last six hearings, the appellant was not present nor was represented by any legal representative. It is further seen that the notice for hearing today has been sent to the address given by the appellant in appeal Form CA-3 filed by them on 30.10.2018, which has been returned undelivered. It appears that the appellant is not serious to pursue the matter - Appeal is dismissed for non-prosecution.

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• 2019 (4) TMI 597
  Valuation of exported goods - iron ore - enhancement of value based on contemporaneous export - Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - Held that:- It is on records, in the Order-in-Original itself there have been contemporaneous exports near about same quantity of iron ore with 61% Fe content at the price of US $ 116.50 PDMT (CFR). The Adjudicating Authority curiously did not accept this price was accepted by the exporters M/s Bagadiya Brothers Pvt. Ltd., but chose to recalculate/re-determine the export value of the appellants iron ore by basing the adjustments holding 63.5% as standard Fe content and working back the value to demand additional duty from the appellant. This approach of lower authority seems to be inconsistent and not in accordance with the provisions of the Customs Valuation Rules. The provisions of Customs Valuation (Determination of Value of Export Goods) Rules, 2007, provisions of Rule 4 provides for determination of export value by comparison. In the case in hand, the consignment brought in for exports was comparable with the goods which were exported by M/s Bagadiya Brothers Pvt. Ltd., in January, 2010. The exports in this case are April, 2010 which about three months from the export consignment of M/s Bagadiya Brothers Pvt. Ltd. The First Appellate Authority was absolutely correct in setting aside the Order-in-Original - Appeal dismissed - decided against Revenue.

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• Corporate Laws

• 2019 (4) TMI 604
  Scheme of merger - HELD THAT:- No objector has approached, neither to the Petitioner nor before Tribunal, to oppose this Scheme of Merger (by absorption). The Official Liquidator has filed his report stating therein that the affairs of the Transferor Companies have been conducted in a proper manner and the Transferor Companies may be ordered to be dissolved without winding up. From the material on record, the Scheme of Merger (by absorption) appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy.

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• Securities / SEBI

• 2019 (4) TMI 596
  Violation of SEBI PFUTP Regulations - non adherence to mandated disclosure under Regulation 7 of the Takeover Regulations, 1997 - as alleged parties connected to each other and were Persons Acting in Concert (“PACs”) with the Birlas acquired shares of the appellant company without making mandatory disclosures as prescribed under law - HELD THAT:- Here the target company in question is the appellant whose promoters held 63% of its share capital at the relevant time. That means even if all other parties coming together would still be in a minority. The argument that an effort in substantial acquisition of shares in the appellant company has been made stands disproved as it is an admitted fact that the combined shareholding of all respondents together was less than 10%. The trigger for mandated disclosure under Regulation 7 of the Takeover Regulations, 1997, has been violated does not have merit since it is found that respondents who were found to be PACs had a maximum shareholding of only about 4.85% of the shareholding in the appellant company. We also found no merit in the argument that all the 10 respondents were persons acting in concert and came together to dislodge the then management of the company based on the fact that they were petitioners/consenting shareholders to a Company Petition filed against mismanagement and oppression etc. In fact what is on evidence is that some of the respondents had sold part of their shares even prior to the Company Petition filed in March 2010. If these entities were in fact consolidating their shareholding in the appellant company such reverse transactions would not have been done. Similarly, some of the entities such as Respondent No. 2 had acquired the shares of the appellant company since the latter’s incorporation and as such cannot be held to have acquired the shares of the appellant with a motive or objective of dislodging the management and for taking over the company. In the light of these facts even if Respondents 2 to 11 were parties to a Company Petition filed under Section 397/398 of Companies Act as shareholders with certain objective that same motive cannot be extended to allege commonality of intent or motive as PACs under 2(1) e (1) of the Takeover Regulations, 1997. As held in Daiichi Sankyo Company Limited [2010 (7) TMI 289 - SUPREME COURT OF INDIA] and K.K. Modi (supra) [2001 (11) TMI 947 - HIGH COURT OF BOMBAY] a common objective for acquiring shares need to be established which is not available in this present matter. Accordingly, we find no merit in the contention that the respondents have violated Regulation 7 of Takeover Regulations, 1997. Appeal dismissed.

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• 2019 (4) TMI 595
  Non Disclosures in Prospectus for IPO - Unsecured bridge loan taken not disclosed in the Prospectus for the IPO - violation of provisions of Regulation 64(1) of the ICDR Regulations holding that a crucial fact was not disclosed in the prospectus and therefore the Adjudicating Officer imposed a penalty u/s 15HB of the SEBI Act - HELD THAT:- Admittedly a loan of ₹ 5.94 crores was taken immediately before the issuance of the IPO which admittedly was not disclosed in the prospectus. The means and sources of this loan was not disclosed to the public in the prospectus. In the absence of this material fact the investors were unaware of this financial liability as well as the fact that this loan would be paid from the IPO proceeds. Such information was required to be disclosed in the prospectus. Non disclosure was in violation of Regulation 60(4) of the ICDR Regulations which requires disclosure of all material developments. Loans taken prior to the issuance of the IPO has a bearing in as much as the said loan was eventually paid from the IPO proceeds. Non disclosure was in violation of Regulation 60(4) of the ICDR Regulations which requires disclosure of all material developments. Loans taken prior to the issuance of the IPO has a bearing in as much as the said loan was eventually paid from the IPO proceeds. In our opinion, this was a material fact which was required to be disclosed in the prospectus. Thus, the Adjudicating was justified in holding that there was a violation of Regulation 57 of the ICDR Regulations. We find that quite apart from the fact that the loan taken was not disclosed in the prospectus, a wrong statement was made in the prospectus that the Company had not raised any bridge loan against the proceeds of this issue. This statement was factually incorrect as the loan of ₹ 5.94 crores was clearly a bridge loan. The Merchant Banker is required to present the Company’s information to the investors in a fair, concise and unambiguous form. By not furnishing full disclosures and in fact allowing false information to creep in the disclosures has misled the investors. Thus, we are of the opinion that the appellant did not exercise due diligence and did not disclose fairly in the offer document. We are, thus, of the opinion that the imposition of penalty which could extend up to ₹ 1 crore under Section 15HB imposed by the Adjudicating Officer in the given facts is just and reasonable. In the light of the aforesaid, we do not find any error in the impugned order. The appeal fails and is dismissed.

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• Insolvency & Bankruptcy

• 2019 (4) TMI 594
  Withdrawal of IB petition - proposal of settlement at the post-admission of the present IB Petition - Adjudicating authority power and jurisdiction to permit the petitioner to withdraw this IB Petition at post admission stage even without seeking consent of the CoC and its members - HELD THAT:- The present application for settlement was filed on 04.02.2019 before this Adjudicating Authority, which is prior to the constitution of the CoC. That apart, it is pertinent to note here that there is sole member in the CoC i.e. IOB, who may or may not give its consent for such withdrawal of the IB Petition. While the provisions of Section 12-A of the Code stipulates that settlement can be made with 90% voting of the members of the CoC, which is not practically possible in the present case, being sole member who can accept or reject the proposal by 100% voting only. The interest of the Financial Creditor, being a sole member of the CoC, can adequately be taken care of while making such observation that the present settlement in no manner shall affect the rights and the claim of the sole Financial Creditor or any other creditor to agitate the same before a competent Court of Law including this Adjudicating Authority under the relevant provisions of the Code. The Operational Creditor has moved the present application, by settling its dues for an amount of ₹ 35,00,000/- (Rupees Thirty Five Lakhs only) as full and final settlement which happen much prior to the constitution of the CoC. Hence, this Adjudicating Authority can accept it in the interest of justice by following case of SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT OF INDIA] No impediment for accepting the proposal of settlement at the post-admission of the present IB Petition. Hence, it is hereby accepted. Notwithstanding the above, it is expedient to issue necessary direction to the Petitioner-Operational Creditor as well as to the Corporate Debtor company to bear the expenses and cost of the CIRP, which has been incurred by the present IRP, towards payment of his professional fees and other expenses incurred.

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• 2019 (4) TMI 593
  Corporate insolvency process - Corporate Debtor defaulted paying the dues outstanding against the invoices raised by the Applicant - Corporate Debtor raised a dispute over the warranty from as back as 2015 by sending notices and emails, therefore the Corporate Debtor submits that this Petition is liable to be dismissed - pre-existing dispute - HELD THAT:- There is a clear material inferring that the dispute is in existence in between the parties since 2015. Looking at the corporate debtor from time to time notifying the applicant not providing manufacturer warranty since 02.03.2015, that is far before the applicant sending statutory notice u/s. 434 of the Companies Act 1956, we believe that a single sentence of the Corporate Debtor e-mail dated 18.09.2014 confirming that as per the applicant combined statement, the total amount comes to ₹ 742.31 lacs, but as per the records of the corporate debtor outstanding amount as on date was of ₹ 699.42 (in the email dated 18.09.2014 at 5.49 p.m. from the corporate debtor side not disclosing as to whether it is in lakhs or not, therefore not suffixed with lacs, may be, it is lakhs only) will not have any bearing on the proof showing from 2015 onwards the corporate debtor insisting upon manufacturer warranty and this dispute being covered under the definition of dispute There being a money recovery suit pending before the Hon'ble High Court of Delhi on the above subject matter before filing this company petition, which is also covered under the definition of dispute, this Bench without going into other merits of the case, this CP is hereby dismissed on the ground that dispute is in existence as on the date this Applicant filed winding up petition before Honourable High Court and before section 8 notice given by the Corporate debtor. Company Petition dismissed as misconceived.

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• FEMA

• 2019 (4) TMI 592
  Detention orders u/s 3 read with Section 12A of COFEPOSA - orders made during the period of Emergency proclaimed under Article 352(1) of the Constitution of India - grounds of detention were not communicated to the detenu in a language known to him - notice under Section 6(1) of SAFEMA to show cause why properties be not declared to be illegally acquired properties and forfeited to the Central Government under the provisions of SAFEMA - HELD THAT:- In the present case the order of detention under COFEPOSA was passed on 19.12.1974 and the petition challenging the detention was filed on 29.04.1975 i.e. before the proclamation of emergency was issued on 25.06.1975. The detenu was released after the lifting of the emergency. All through, the Writ Petition was alive and pending in High Court and it was disposed of as having become infructuous on the statement made by the counsel for the Writ Petitioner on 24.02.1978. The instant case is thus covered by para 41 of the decision of this Court in Amratla [1994 (5) TMI 235 - SUPREME COURT]. However, since the matter was remitted by this Court on 24.02.2004, to be disposed of on merits, we now proceed to consider whether merits were rightly considered. The order of detention in this case was not revoked under any of the postulates of the proviso nor was it set aside by any competent court and as such the provisions of SAFEMA must apply. The High Court was right in observing that the detention had run right through the duration or continuance of the emergency . Though the petition was pending during the length of this time and was taken up for hearing after the lifting of the emergency, no attempts were made to have the petition disposed of on merits. Pertinently, the notices under SAFEMA were issued to Roshan Lal and his wife Sheelawati while the possibility that the SAFEMA proceedings could be premised on the validity of the detention order was very much alive and yet, the matter was chosen not to be agitated on merits. The criticism of Mr. Bagai, learned Advocate that the High Court had overruled the order dated 24.02.2004 passed by this Court, is totally incorrect. Nonetheless, we proceed to consider the submissions raised by Mr. Bagai, learned Advocate regarding challenge on merits. In the present case, the representation dated 17.01.1975 was considered by the State on 11.02.1975 and the rejection was communicated to the detenu. Moreover, at no stage, any grievance was raised that the grounds of detention were not communicated to him in a language known to him. Similarly, the submission that the grounds of detention were identical, is also without any merit. Insofar as the order of detention under COFEPOSA was concerned, the grounds dealt with instances where the detenu had indulged in smuggling of goods, on the basis of which subjective satisfaction was arrived at as regards his propensity to deal in smuggled goods. Having considered the factual aspects of the matter, the grounds raised by Mr. Bagai, learned Advocate are without any substance and merit. We, therefore, affirm the view taken by the High Court and dismiss said submission. The challenge to order of detention dated 19.12.1974 passed under the provisions of COFEPOSA in respect of Roshan Lal must fail. The Competent Authority and the Appellate Tribunal constituted under the provisions of SAFEMA had, after issuance of due notice and granting every opportunity to the noticees, arrived at findings that the properties mentioned in the schedules to the notices were illegally acquired and that they stood forfeited to the Central Government free from all encumbrances. All the prayers made in Civil Writ Petition being meritless said Writ Petition deserved to be rejected and was rightly dismissed by the High Court. No reason to take a different view in the matter and this Criminal Appeal is dismissed. Detention under Section 3(1) of COFEPOSA - HELD THAT:- The detention order was sought to be assailed before the High Court inter alia on the grounds of non-supply of documents; delay in passing the order of detention and supply of illegible documents. Those grounds were found to be without any substance by the High Court and the challenge so raised was negated. Having gone through the record, we do not find any error in the view taken by the High Court. We, therefore, dismiss this Appeal.

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• Service Tax

• 2019 (4) TMI 591
  Principles of natural justice - Exparte order - Tribunal dismissed the appeal for non-prosecution - HC confirmed the order - Held that:- We are not inclined to interfere with the impugned judgment - SLP dismissed.

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• 2019 (4) TMI 590
  Works contract service - Scope of SCN - Demand of service tax under the head Construction of Residential Complex service - benefit of abatement of 67% - Held that:- THe matter is indeed covered by the case laws of M/s. Larsen and Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] and M/s. Real Value Promoters Pvt. Ltd. [2018 (9) TMI 1149 - CESTAT CHENNAI] relied upon by her. Thus, when the service performed is Works Contract Service for the entire period covered by the impugned order, the demand of service tax under ‘Construction of Residential Complex’ instead will only serve to vitiate the proceedings ab initio - the entire demand cannot be sustained and will require to be set aside - decided in favor of assessee.

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• 2019 (4) TMI 589
  Classification of services - Manpower recruitment and supply agency service or not - appellant is required to cut sugarcane and transport the same to Sugar Factory. The contract was for a lump sum payment of 1% of sales and not as per “man days” - Held that:- The contract entered into by the Appellants was for chopping and transportation of sugarcane and not to supply any manpower. This Bench in the case of Samarth Sevabhavi Trust [2013 (8) TMI 218 - CESTAT MUMBAI] has held that from the documents available on record we do not find any activity undertaken by the trust either for the recruitment of manpower or for supply of manpower to the sugar factory - the facts of the case are identical. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 588
  CENVAT Credit - duty paying documents - Credit has been taken by the appellant based on Bank slip - whether prescribed document in terms of Rule 4A of the Service Tax Rules, 1994 read with Rule 9 (1) of the Cenvat Credit Rules, 2004 or not? - Held that:- Since the substantial requirement regarding receipt of taxable service and payment of service tax amount to the service provider has been complied with; CENVAT Credit cannot be denied on mere technicalities that is Bank Slip dated 05.03.2011 issued by the Bank cannot be considered as proper document - there are no merits in the impugned order, so far as it denied CENVAT benefit on Banking services to the appellant - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (4) TMI 587
  Valuation - inclusion of Dharmada Charges (Charitable donation received from the customers) in the assessable value - Held that:- The receipts on account of Dharmada were voluntary, earmarked for charity and in fact credited as such. Though the payment as Dharmada has been found to be voluntary, it would make no difference to the true character and nature of the receipts even if there were found to be paid compulsorily because the purchaser, purchased the goods out of their own volition. The purchase of the goods is the occasion and not consideration for the Dharmada paid by the customer. When an amount is paid as Dharmada along with the sale price of goods, such payment is not made in consideration of the transfer of goods. Such payment is meant for charity and is received and held in trust by the seller. If such amounts are meant to be credited to charity and do not form part of the income of the assessee they cannot be included in the transaction value or assessable value of the goods. The Dharmada collected by the appellant which is clearly an optional payment made by the buyer cannot be regarded as part of the transaction value for the sale of goods - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 586
  Valuation - inclusion of Dharmada charges (charitable donation from customers) in the assessable value - According to the Respondent, the Dharmada was meant for charity and was accordingly credited to charity - Held that:- The amount of Dharmada cannot be included in the transaction value for the purposes of assessments - The present case has been tagged with the case of M/s D.J. Malpani vs. Commissioner of Central Excise, Nashik [2015 (7) TMI 1118 - SUPREME COURT] - appeal dismissed.

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• 2019 (4) TMI 585
  Extended period of limitation - suppression of facts - whether the order of the Settlement Commission is liable to be interfered with by this court? - Held that:- From the order of the Settlement Commission, it is clear that the Settlement Commission was apprised of the fact that differential duty had been calculated incorrectly. Therefore, one of the questions that the Settlement Commission was called upon to decide was whether the extended period of limitation was justifiably invoked by the Central Excise Department - By taking into consideration the requests for clarification and the voluntary payment of differential duty in respect of depot sales on stock transfer basis, the Settlement Commission concluded that there was no suppression of facts. In fact, the Settlement Commission has expressly stated that the Applicant therein/First Respondent herein would not have requested for clarification or communicated with regard to payment of differential duty, which included the methodology adopted for calculation thereof, if it intended to suppress facts so as to evade payment of excise duty and that these communications were not responded to by the Central Excise Department. From the proviso to Section 11-A, it is clear that the extended period can be invoked only if there is fraud, collusion, wilful misstatement, suppression of facts or contravention of the Central Excise Act or the Rules made thereunder with intent to evade excise duty - In the instant case, there is no allegation of fraud or collusion. As regards willful misstatement or suppression of facts, the question arises as to whether suppression of facts per se justifies invoking the extended period. In the instant case, the Settlement Commission expressly adverted to the fact that the First Respondent would not have sought for a clarification from the Central Excise Department as to the correct method of calculating duty on depot sales on stock transfer basis or paid the differential duty, with the method of valuation, if there was intention to evade excise duty. Thus, the order of the Settlement Commission does not suffer from any infirmities and is not liable to be interfered with by this court in the exercise of supervisory jurisdiction. Petition dismissed.

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• 2019 (4) TMI 584
  Classification of goods - galvanized silo storage systems - whether the goods classifiable under subheading 8437 1000 of the Schedule to the Central Excise Tariff Act, 1985 as “machinery used in milling industry” or under heading 9406 0099 as “prefabricated building used for storage”? Held that:- The adjudicating authority, while passing the order in de novo proceedings does not appear to have complied with the directions of the Tribunal. While examining the issue of classification keeping in view the directions of the Tribunal, he has proceeded on the assumption that the appellant has conceded the classification of the products under Central Excise Tariff Heading 9406 0093 - It has been reiterated that the classification claim of the appellant is under Heading 8437 and further, it has been pointed out that the adjudicating authority has traveled beyond the proposals made in the show-cause notice. The claims that classification has been made under 8437 by certain other manufacturers of similar goods also appear to have been brushed aside by the adjudicating authority. There is no option other than to set aside the impugned order passed, without proper compliance of the directions of the Tribunal, in the case of order dated 13.10.2014 in the last round of litigation - appeal allowed by way of remand.

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• 2019 (4) TMI 583
  Valuation - goods cleared from factory to the depot - Rule 7 of the Central Excise (Valuation) Rules, 2000 - period April 2005 to November 2006 - suppression of facts or not - Held that:- The allegation of suppression raised in the show-cause notice is based on the audit objection and no specific grounds have been alleged for raising the ground of suppression. The demands raised based only on audit objection cannot be presumed ipsofacto to have been made on the basis of suppression. From the records, it is also seen that the appellant has taken all reasonable care by obtaining a legal opinion for guidance of the practice to be adopted, at the time of opening the new depot. The substantial part of the demand amounting to ₹ 3,21,715/- falls within the extended period of limitation and will be liable to be held as hit by time bar. For the remaining demand amounting to ₹ 21,403/- falling within the normal period of limitation, the same stands conceded by the appellant and the same is upheld - appeal allowed in part.

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• 2019 (4) TMI 582
  Classification of goods - Sterilized Atraumatic needled Sutures - whether classifiable under Chapter heading 9018 or under Chapter heading 3006 of CETA? - benefit of concessional rate of duty - N/N. 10/2006-CE dt. 01/03/2006 - Held that:- The Tribunal in appellant own case SUTURES INDIA PVT. LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE-II [2010 (9) TMI 744 - CESTAT, BANGALORE] has held that the goods are rightly classifiable under CETA 9018 and entitled to the benefit of concessional rate of duty under N/N. 10/2006 dt. 01/03/2006 - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 581
  Goods cleared for construction of water treatment plant - benefit of N/N. 06/2006-CE dt. 01/03/2006 (Sl.No.7) - duty free benefit denied - mentioning of wrong notification number - Held that:- At the time of clearance of the goods in September, 2006, Notification No.6/2006 extended the benefit of duty free clearance for various goods required for setting up of water treatment plants. This was subject to the condition that a certificate is issued by the District Collector or other authorities of the district in which the plant is located - The N/N. 6/2006 replaced the earlier N/N. 47/2002 dt. 06/09/2002. The wording of the original notification has been retained in the new notification substantially. The CBEC Circular referred to in the certificate issued by the District Collector dt. 06/09/2002 was issued in the context of exemption N/N. 47/2002 dt. 06/09/2022. The goods covered by the said certificate are intended for construction of water treatment plant for Krishna Drinking Water Supply Project. The fact that the certificate has mentioned a different N/N. 3/2004 dt. 08/01/2004 cannot take away the substantial benefit intended for setting up of water treatment plant for drinking water supply project - Mistake in mentioning the wrong notification number cannot be the sole reason for denying the benefit to the assessee which they were otherwise eligible. The goods cleared by the appellant cannot be denied the exemption - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (4) TMI 580
  Grant of stay - non-production of materials by petitioner to substantiate their contentions or not - invocation of supervisory jurisdiction - Held that:- At the time when the impugned interim order was passed by the Tribunal, the documents were available before the said authority. Hence it is evident that there occurred a failure on the part of the Tribunal in adverting to those documents - a direction to the Tribunal to pass appropriate orders on the rectification application, after taking note of the documents produced before the Tribunal, would suffice to meet the ends of justice. Petition is hereby disposed of by directing the Kerala Value Added Tax Appellate Tribunal, Additional Bench, Kottayam to consider and dispose of Interim Application filed seeking rectification of the order passed by the Tribunal, within a period of three weeks from the date of receipt of a certified copy of this judgment - rectification application disposed off.

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• 2019 (4) TMI 579
  Nature of activity - sale or service? - Unbranded software/uncanned software - software developed according to the specification of the client tailor made to the customers particular requirement - whether comes under the scope of 'Goods' or not? - levy of tax - Held that:- In the present case, it is not disputed that no agreement or contract was ever filed or brought to the notice of the assessing authority or the appellate authority by the assessee, despite the show cause notice given by the assessing authority. Argument of Sri Gulati to the extent that had the assessing authority called for further information or document, the assessee was ready to furnish the same does not have much force, as the entire case of the revisionist-assessee rest upon the fact that software so developed, is on the instructions and specification of client and after the software is developed it becomes the property of the client as per the contract or agreement so arrived between them, hence the agreement/contract is the basis of claim of the assessee, relying upon which his case falls apart from the definition of goods and immediately come within the purview of service. Where any assessee is carrying on both the work of sale of software and development of software, then the assessing authority has to distinguish and indentify between the two in such a harmonious way so as to uphold the right of both the Legislation to levy tax, which falls within their respective area for arriving at such conclusion the assessee is also duty bound, apart from submitting his return to produce such documents as may be necessary and demanded by the authority concerned to segregate between the two, so as to make it abundantly clear as to which Law i.e. the State Law or the Central Act will be applicable. In the present case, the moment assessee produces/submits work contract/agreement before the assessing authority so as to bring his case within the purview of software development, the case comes out of the purview of the State Taxing authority and the same becomes amenable to Service Tax under the Law enacted by the Parliament. There is no doubt as to the fact that the Company is dealing in two types of products, namely, the branded software which are sold off the shelf, which is not under dispute and the other unbranded software, which is developed according to the specification of the client. These softwares so developed are undoubtedly are for the clients and the same becomes the property of the client, the moment it is developed and the assessee Company has no right over the same, nor it can sell the same to the other clients as a branded item - But, in the present case during the assessment proceedings when the assessee Company was required by the assessing authority to substantiate the sale under the head 'unbranded software', it was the duty of the Company to have placed the basic material, i.e., the agreement or the contract so entered by it with its client to bring the said software out of the purview of the goods. The assessee failed to bring, not only before the Assessing Authority, First Appellate Authority as well as the Tribunal the agreement, which it is relying upon before this Court. The matter is remitted back to the Tribunal to record specific finding after going through the agreements/contract as to the claim of the assessee in regard to the application of software development and support service given to its client as unbranded software not covered under the definition of goods and is a service to the customers - Matter on remand.

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• 2019 (4) TMI 578
  Validity of assessment order - suppression of purchases - mismatch in the reporting of sales and purchases between the petitioner and the other end seller - opportunity of hearing not provided to petitioner - principles of natural justice - Held that:- The request made by the petitioner in his reply dated 17.04.2017, has not been considered. While passing the impugned assessment order, the reasons for rejection of the said request has also not been given in the impugned assessment order - it is evident that adequate opportunity has not been afforded to the petitioner. It is settled law that the petitioner will have to be afforded adequate opportunity before an assessment order is passed against him. Petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2019 (4) TMI 577
  Dishonor of Cheque - proceedings initiated under section 138 and 141 of the Negotiable Instruments Act, 1881 - invocation of power under section 482 of Cr.P.C. - Held that:- The High Court, in deciding a quashing petition under S. 482, Cr.P.C., must consider whether the averment made in the complaint is sufficient or if some unimpeachable evidence has been brought on record which leads to the conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time. While the role of a Director in a company is ultimately a question of fact, and no fixed formula can be fixed for the same, the High Court must exercise its power under S. 482, Cr.P.C. when it is convinced, from the material on record, that allowing the proceedings to continue would be an abuse of process of the Court. A perusal of the record in the present case indicates that the appellant has specifically averred in his complaint that the respondent nos. 1 and 2 were actively participating in the daytoday affairs of the accused no.1 company. Further, the accused nos. 2 to 4 (including the respondent nos. 1 and 2 herein) are alleged to be from the same family and running the accused no.1 company together. The complaint also specificies that all the accused, in active connivance, mischievously and intentionally issued the cheques in favor of the appellant and later issued instructions to the Bank to Stop Payment . No evidence of unimpeachable quality has been brought on record by the respondent nos. 1 and 2 to indicate that allowing the proceedings to continue would be an abuse of process of the court. Appeal disposed off.

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