TMI Tax Updates - e-Newsletter
April 14, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Benami Transactions: Tracing the evolution of Benami law in India - Benami Transactions (Prohibitions) Act, 1988
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Income Tax:
Relinquishment of right before development - Right to sue surrendered in lieu of getting compensation money - capital gain or business income - the impugned compensation amount is not liable to be treated as income u/s.2(24) of the Act nor the same is taxable as capital gain for business income being in the nature of a capital receipt. - AT
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Income Tax:
Reference for special audit u/s.142(2A) - Chartered Accountant failed to supply the Audit Reports in time - AO did not have any “good and sufficient” reasons for extending the period of audit “suo motu” to the maximum permissible extent, and was not correct in casually attaching the tag of non-cooperative attitude to the appellant. - AT
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Income Tax:
TPA - there is no difference between the form and substance of the transaction of distribution to recharacterise the transaction as a service agreement - the transaction is a distribution transaction and not service agreement - the TP analysis has to be done afresh and then it has to be seen if the provisions of section 92(3) would apply - AT
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Income Tax:
Payment of retention bonus - allowable busniss expenditure - Had the employees of erstwhile company not been retained by the assessee company its business would have adversely affected and this fact goes to prove that the retention bonus was paid as an incentive to the employee, which is salary as per Explanation 2 to section 15 of the Act, and is a business expenditure not creating any enduring benefit. - AT
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Income Tax:
Addition u/s 40A(3) - cash payments made against purchases of liquor exceeding ₹ 20,000/- - the payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms of Rule 6DD(b) of the I.T Rules 1962 - AT
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Income Tax:
The jurisdiction to proceed against the Directors of a delinquent Private Limited Company under Section 179(1) of the Act will only arise when the Revenue is unable to recover the tax dues from the delinquent Private Limited Company. - HC
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Income Tax:
Addition on account of excess cash found her in the course of Survey - Once the Assessee has retracted from the statement then it was on the AO to establish beyond any doubt the issues on which the additions has been made Once the assessee has submitted up to date cash book and stock register then it was duty of the Assessing Officer to pin point the defects in such books of account particularly with regard to the issues, on which the statement was recorded during the survey. - AT
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Indian Laws:
Application for revival/restoration of complaint - territorial Jurisdiction of Trial Court - Negotiable Instruments Act, 1881 - dishonor of cheques. - as the bank of payee i.e. the complainant is the HDFC Bank Ltd., situated at Kalkaji, New Delhi, the Court having jurisdiction to try the offences punishable under Section 138 of The Negotiable Instruments Act, 1881 is situated in the area of the South East District, Delhi. - HC
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Service Tax:
Refund of service tax - duty free shop in the departure terminal at Delhi International Airport - Scope of CA certificate - certificate is based on various riders - the auditors are not required to check the compliance with the customs, excise or service tax nor are they expected to carry out a statutory audit - cannot be brushed aside - AT
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Service Tax:
Refund of service tax - service tax paid on specified services which have been used in export of goods - duty free shop in the departure terminal at Delhi International Airport - it has to be accepted that the sale of goods at Duty free Shop at the departure terminal is exports. - refund allowed. - AT
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Service Tax:
VCES Scheme - There was no dispute that the audit was undergoing of the appellant’s records, therefore the issue of non-payment of service tax on the services in relation to the distribution of electricity was with the audit. Therefore the appellant was not eligible for the immunity provided under VCES Scheme - VCES declaration rightly rejected. - AT
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Service Tax:
Valuation - Cable Operator’s Services - Appellant cannot exclude the amounts received for maintenance charges from taxable value in view the Sub-Rule 1 of Rule 5 of Valuation Rules, which provides that where certain expenditure or costs are incurred by the service provider in the course of providing any taxable service, all such expenditure or costs shall be treated as consideration for the taxable services provided or to be provided and shall be included in the value for purpose of charging of service tax. - AT
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Service Tax:
Reverse Charge Mechanism - appellant availing services from outside India - deemed service provider - before 20.06.2012 there was no restriction upon the deemed service provider to pay the service tax liability from cenvat credit - AT
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Service Tax:
Cenvat Credit - Construction service - works contract - input services - The definition of input service interalia includes services used in relation to setting up of premises of service provider of output service within its fold - the credit of services used for construction of new office cannot be denied - credit allowed. - AT
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Service Tax:
Scope of SCN - various construction services - case of appellant is that the SCN as proposed demand of Service tax under the category of CICS whereas the Adjudicating Authority has upheld such demands under the category of WCS after analysing various activities in detail - demand liable to be set aside - AT
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Service Tax:
Liability of service tax - Point of Taxation - continuous supply of services - invoices are not raised even if the landmarks are reached - assessment based on Profit and Loss account - The foundation of the assessment is flawed. - HC
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Central Excise:
Refund claim - unjust enrichment - case of appellant is that Since the transaction is of job work and not of sale there is no question of passing of incidence of duty to the principal - unjust enrichment is very much applicable in the present case which the appellant could not prove that incidence of duty has not been passed on to any other person - AT
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Central Excise:
Refund claim - finalization of provisional assessment - unjust enrichment - captive consumption - even in respect of captive consumption, unjust enrichment provision is applicable - AT
Articles
Notifications
Circulars / Instructions / Orders
News
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India’s Foreign Trade: March 2018
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
Case Laws:
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GST
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2018 (4) TMI 608
Detention of goods - absence of Transit Declaration Form (TDF) - penalty - Held that: - in view of the fact that the goods have been seized on a single reason of absence of TDF without any other allegation in respect of illegal import of the goods into the State of U.P., the writ petition disposed off with a direction that subject to the petitioner furnishing security of the amount demanded, in the shape of indemnity bond as provided under Rule 140, the seized goods and the Truck may be released forthwith in favor of the petitioner.
Penalty - Held that: - the matter is still pending before the Proper Officer - penalty proceedings are not entered into.
Petition disposed off.
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Income Tax
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2018 (4) TMI 607
Addition on account of excess cash found during the course of survey - Held that:- Section 133A does not empower any Income tax authority to examine any person on oath and then use it as evidence to make addition. In such a situation, no addition can be made or sustained only on the basis of the statement recorded during the survey U/s 133A of the Act. Once the assessee has retracted from the statement then it was on the A.O. to establish beyond any doubt the issues on which the addition has been made.
Once the assessee has submitted up to date cash book and stock register then it was duty of the Assessing Officer to pin point the defects in such books of account particularly with regard to the issues, on which the statement was recorded during the survey. Further in the case of Shri Pawan Kumar, even the Assessing Officer recorded his statement but he has not asked any question with regard to amount of advance of ₹ 10.00 lacs for which the addition has been made only on the basis of a piece of paper, which was not signed by Shri Pawan Kumar. Similarly in the case of debtors, once the assessee has retracted then it was the duty of the Assessing Officer to examine these debtors to establish the truthfulness of the debt. - Decided in favour of assessee
Invoking the provisions of Section 145(3) - estimating the turnover and G.P. - Held that:- The assessee himself admitted that part of the sales/purchases are being made in unaccounted manner. As regards estimation of profit, after invoking the provisions of sec. 145(3) of IT Act, it may be stated that it is a settled law that even after invoking the provisions of sec. 145(3), the AO is not empowered to assess the income at whatever figures he wants and the AO is supposed to make an honest estimation either based on the past history of the appellant’s own case or on the basis of any comparable case - in the immediate preceding year the appellant has shown G.P. rate of 13.24%. Therefore it will be fair and reasonable to apply G.P. rate of 13.24% on estimated sales of ₹ 1800000/- and accordingly the gross profit is arrived at 2383200/- as against G.P. rate shown by the assessee for ₹ 2240422/-. Accordingly trading addition of ₹ 142778/- is made. The appellant gets relief of ₹ 316800/-. - no merits in the pleadings of the assessee
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2018 (4) TMI 606
Reopening of assessment - No fresh information and reassessment is based on change of opinion - no approval U/s 151 - Held that:- The revenue could not controvert the fact that the reopening has been made to meet the objections raised by the audit party. It is also not disputed that the assessment was reopened after four years from the end of the relevant assessment year and no approval U/s 151 of the Act is placed on record. Moreover, the assessee has placed before the Assessing Officer all relevant material during the original assessment proceedings. Under these undisputed facts, we are of the view that the action of the Assessing Officer is contrary to the settled law, which demonstrates that the Assessing Officer has not applied his mind independently. Hence, we find force into the submission made by the assessee. The impugned assessment order is hereby quashed being contrary to the law. - Decided in favour of assessee
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2018 (4) TMI 645
Addition u/s 40A(3) - cash payments made against purchases of liquor exceeding ₹ 20,000/- - Held that:- In the case of M/s. Amrai Pachwai & C.S. Shop (2014 (2) TMI 979 - ITAT KOLKATA) similar payments were made by the assessee against purchase of liquor by depositing the cash directly in the bank account of the supplier in the sums exceeding ₹ 20,000/- and the disallowance made for the same under section 40A(3) was deleted by the Tribunal as held the payments made by the assessee for purchase of country spirit and country liquor is to the government as per the notification issued by the government and is in legal tender specified by the notification - the payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms of Rule 6DD(b) of the I.T Rules 1962 - the addition as made by the AO and as confirmed by the CIT(A) by invoking the provisions of section 40A(3) of the I.T Act 1961 stands deleted – Decided in favour of Assessee.
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2018 (4) TMI 644
Penalty u/s. 271(1)(c) - addition under the head salary income as concealed income - non specification of charge - AO has not struck out the irrelevant portion in the show cause notice - Held that:- The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.
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2018 (4) TMI 643
Denying exemption U/s.11(l)(a) and S. 11(2) - proof of charitable activities - Held that:- The Director and the secretary are required to be appointed with the prior approval of MOC and I, Govt of India. Assessee institute receive grants from the Govt. under plan fund. Clauses 38 and 39 of MOA which demonstrate that Income and Property of Institute has to be applied only towards promotion of objects of the assessee and that assessee cannot declare dividends. Further, in event of winding up of the Institution nothing will be paid or distributed to the members of the assessee institute.
Assessee institution carries on activities of education, research and development, consultancy, laboratory research including testing and certification in relation to packaging at concessional rates to cover its recurring costs and future costs. The capital costs are usually met from grants of the government. Hence, there appears to be no profit motive, and surplus if any is nothing but recovery of future costs to be incurred by the assessee Institution for achieving its objects.
Keeping in view the activities already undertaken by the assessee it appears that both the lower authorities have not properly appreciated actual activity being undertaken by the assessee and invoked provisions u/s.2(15) for declining the claim of exemption u/s.11. In the interest of justice, we restore the matter back to the file of the AO for deciding afresh after considering above observations. We direct accordingly.
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2018 (4) TMI 642
Unexplained cash credit under section 68 - Held that:- Creditworthiness of the concerned creditors and the genuineness of the relevant transactions having been not proved by the person who responded to summons under section 131, the addition made by the A.O. u/s 68 on account of unexplained cash credit was fully justified. As regards the contention raised by the learned counsel for the assessee seeking one more opportunity to the assessee to establish the financial capacity of the creditors, find that the assessee has already been given sufficient opportunity in this regard and there is no evidence filed by the assessee even at this stage before the Tribunal to establish the financial capacity of the concerned creditors. It is thus not a fit case where another opportunity can justifiably be given to the assessee. Therefore, set aside the impugned order of the Ld. CIT(A) on this issue and restore that of the A.O. for making the addition under section 68. Ground No. 1 of the revenue’s appeal is accordingly allowed.
Unexplained investment - Held that:- Investment made by the assessee in purchase of land excluding ancillary expenses like stamp duty, registration fees etc. was duly reflected in his balance sheet. A.O. however treated the said investment as unexplained because the relevant entry in the books of accounts was made by the assessee only on 31.03.2012 while the investment was actually made on 22.11.2011. As contended on behalf of the assessee before the CIT(A) in this regard, he was not required to maintain books of accounts and therefore, the conclusion drawn by the A.O. regarding unexplained investment merely on the basis of different dates appearing in the books of account was not justified especially when the said investment was duly reflected in the balance sheet of the assessee. Keeping in view this explanation of the assessee, Ld. CIT(A) deleted the addition made by the A.O. on account of alleged unexplained investment made by the assessee
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2018 (4) TMI 641
Income from foreign country as salary income - number of days stay in India - according to the AO he could not take cognizance of the contentions made by the assessee unless a revised return is being filed - Held that:- A perusal of the given details indicate that the assessee was non-resident during the year. He has earned salary income in a foreign country and it was not taxable in India. By an inadvertent mistake, he has included that amount in the return of income which sought to be rectified by filing submissions. To our mind, the ld.CIT(A) has rightly taken cognizance of this fact, and has rightly allowed the claim of the assessee. After going through the order of the ld.CIT(A) we do not see any infirmity in his order on this issue, and accordingly upheld the same. The appeal of the Revenue is dismissed.
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2018 (4) TMI 640
Bogus purchases - Held that:- During the course of assessment proceedings, it was explained by the assessee in reply to the query raised by the A.O. that purchase of diamonds made from M/s. Nazar Impex Pvt. Ltd. vide bill No. In IPLS/PD/JUL/16/10-11 dated 14.07.2010 was genuine. It was also pointed out that the payment against the said bill was settled by account payee cheque and the quantity of diamond purchased was not only entered into the stock register, but even corresponding sale of the same was duly recorded.
The relevant documentary evidence was also filed by the assessee before the A.O. to support and substantiate his explanation. As rightly contended by the learned counsel for the assessee, the authorities below however brushed aside this cogent evidence produced by the assessee and treated the purchase of diamonds by the assessee from M/s. Nazar Impex Pvt. Ltd. as bogus merely on the ground that there was some delay in payment by the assessee against the said purchase. No enquiry whatsoever was made by them to verify the claim of the assessee for the purchase of diamond in question from M/s. Nazar Impex Pvt. Ltd. which was duly supported by the relevant documentary evidence. - Decided in favour of assessee.
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2018 (4) TMI 639
Disallowance of interest u/s 36(1)(iii) - Held that:- The assessee was engaged in production of various steel items which was capital intensive and therefore, in continuous need of uninterrupted power supply. The power supply was of utmost importance to carry out day to day activities of the manufacturing and the aforesaid agreement entitled the assessee to obtain 35KWH power supply at average rate of ₹ 2.75 per unit. Therefore, the said agreement was beneficial for the business interest of the assessee and the investment in the said entity was to finance the power project and hence, part and parcel of the same transaction. Further, the assessee was under an obligation to make the aforesaid investment before becoming entitled to obtain power in terms of the agreement. Hence, on factual matrix, proportionate disallowance u/s 36(i)(iii) as made by Ld. AO was not justified.
Interest disallowance u/s 14A read with Rule 8D(2)(ii) qua the above investments - Held that:- We restrict the impugned expenses disallowance u/s 14A to ₹ 12,355/-, being exempt income earned by the assessee. Ground No. 4 of assessee’s cross objection stands partly allowed.
Disallowance u/s 145A on account of unutilized closing balance lying as Cenvat / Modvat Credit stood squarely covered in assessee’s favor by the judgment in CIT Vs Diamond Dye Chem Limited [2017 (7) TMI 616 - BOMBAY HIGH COURT] - the assessee is consistently following exclusive method to account for excise duty in the books of accounts. We also concur with the view that whatever method of accounting i.e. exclusive method or inclusive method is followed by the assessee, the same would be tax / revenue neutral in nature since the adjustment of stock in a particular period shall result into corresponding variation in the subsequent year and further, the credit balance lying as Cenvat / Modvat Credit was adjustable in subsequent year against excise duty liability arising in subsequent period. Therefore, respectfully following aforesaid binding judicial precedent, we delete the impugned additions.
Addition u/s 40A(9) pertains to school expenses reimbursed by assessee to an educational society - Held that:- CIT(A) has rejected the claim of the assessee since the same did not fulfill the prescribed conditions of Section 40A(9). We also find that the nature of payment made by the assessee does not come within the purview of Section 40A(9) / (10). However, the Ld. AR has submitted that the same being incurred for the welfare of employee’s children, which in turn, helps in smooth running of assessee’s business, the same has been incurred for the business purposes of the assessee and hence, allowable u/s 37(1). Upon perusal, we find that there is not enough material on record to substantiate this fact. The school is situated at Khopoli where the manufacturing plant of the assessee is situated and therefore, we find some strength in the argument of Ld. AR. Hence, on factual matrix, we deem it fit to restore the matter back to the file of Ld. AO for considering the assessee’s claim u/s 37(1) with a direction to the assessee to demonstrate that the said expenditure has mainly been incurred for the children of the assessee’s employee and the same has resulted into smooth & efficient running of assessee’s business and the conditions as envisaged by Section 37(1) are fulfilled
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2018 (4) TMI 638
Transfer pricing addition - comparable selection criteria - functional similarity - Held that:- The assessee company is engaged in the design, development and maintenance of software for its group companies which essentially includes software architecture, coding, software testing, digital integration, software maintenance etc. It also provides some software activity to Indian Customers under independent domestic contracts, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Directions to compute ALP of the international transaction by treating foreign exchange fluctuation as an item of operating nature both for the assessee company and comparable companies.
Recruitment and Training employees for upgrading their skills - nature of receipt - Held that:- In the globalised set up, sudden upgradation of knowledge and skill of the IT engineers / technicians for providing IT Software Development Services particularly to foreign AE is also necessary for earning profit by a company. Moreover, when undisputedly there is no memorandum of understanding between the assessee company and its employees that the employee will work for specific period, as the attribution rate in software industry is highest, recruitment of employees and imparting of training to them cannot be considered as of enduring benefit. So, by following the law laid down by the Hon’ble Calcutta High Court Hindustan Aluminium Corporation Ltd. vs. CIT (1988 (3) TMI 5 - CALCUTTA High Court) and Hon’ble jurisdictional High Court in CIT vs. Munjal Showa Ltd [2012 (4) TMI 239 - DELHI HIGH COURT] - Decided in favour of the assessee.
Payment of retention bonus - allowable busniss expenditure - Held that:- As decided in assessee's own case payment of retention bonus made by the assessee company partakes character of salary payable to its employee for the business purposes and has to be treated as revenue expenditure. Had the employees of erstwhile company not been retained by the assessee company its business would have adversely affected and this fact goes to prove that the retention bonus was paid as an incentive to the employee, which is salary as per Explanation 2 to section 15 of the Act, and is a business expenditure not creating any enduring benefit. - Decided in favour of the assessee.
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2018 (4) TMI 637
TPA - comparable selection criteria - Held that:- Assessee company as engaged in providing Data creation, content development and back office data processing services thus companies functionally dissimilar with that of assessee and also fails the ITES revenue being more than 75% filter need to be deselected from final list.
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2018 (4) TMI 636
TPA - determination of the ALP of the international transactions - computation of mark up - Re-characterizing the Distribution activities of Appellant to a Service Provider - Held that:- In the case before us, there is no difference between the form and substance of the transaction of distribution to recharacterise the transaction as a service agreement. As per the agreement, the AE is entitled to a specified percentage of the distributor’s sales revenue less operating costs/expenses of the distributor. Since the assessee had no revenue left after reducing the operating cost/expenses, the AE was not paid any percentage. The revenue generated by selling the goods is retained by the assessee. The TPO has instead computed the mark up on the operating cost of the assessee to determine the ALP and brought the notional income to tax which is not justified. Therefore, the additional grounds of appeal are allowed.
As regards the applicability of the provisions of section 92(3) is the contention of the assessee that if the transaction is taken as distribution as agreed to between the parties, then the TP analysis would go to increase the loss. If the provisions of section 92(3) would apply, then the provisions of sub-sections (1) and (2A) of section 92 would not be attracted. Since, we have already held that the transaction is a distribution transaction and not service agreement, then the TP analysis has to be done afresh and then it has to be seen if the provisions of section 92(3) would apply.
Additional grounds of appeal raised by the assessee are allowed and AO/TPO is directed to conduct fresh TP analysis by treating the assessee’s transaction as a distribution agreement and by determining the most appropriate method afresh and after allowing the necessary adjustments. If the loss declared by the assessee is increased by such TP study, then no TP adjustment can be made as provided in section 92(3) of the Act. - Decided partly in favour of assessee
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2018 (4) TMI 635
Revision u/s 263 - Held that:- In the facts of the present case we find that the CIT has failed to address the replies of the assessee even after extracting them in the order and has passed a bald order without bringing out any error whatsoever let alone an error which can be said to be prejudicial to the interests of the revenue.
On going through the Explanation 2 to section 263 of the act which has been inserted w.e.f. 01/06/2015 held that explanation cannot be said to have overridden the law as interpreted by various High courts and the High courts have consistently held that before reaching the conclusion that the order of the AO is erroneous and prejudicial to the interests of the revenue the Commissioner himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interests of the revenue. In the facts of the present case we find that no such exercise has been done. - Decided in favour of assessee.
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2018 (4) TMI 634
Income accrued in India - Business Income - Offshore Repair and Supply of Spare Parts - taxability in India - DTAA - Held that:- As assessee is held to have an agency PE in India, the business income received in relation to offshore supply of spare parts and offshore repair services outside India were taxable in India under both section 9 (1) (i) of the Act as well as Article 5 read with Article 7 of tax treaty. SEE GE Energy Parts Inc. vs ADIT [2017 (2) TMI 780 - ITAT DELHI ]
Attribution of income - Held that:- We direct the attribution of income for the year under consideration in the case of assessee before us at 2.6% as has been held by this Tribunal in assessee’s own case in the group concern.
Levy of interest under section 234B - Respectfully following the decision of this Tribunal in case of GE Energy Parts Inc. vs ADIT(supra), we allow this ground raised by the assessee.
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2018 (4) TMI 633
Assessment u/s 153C - books of accounts or document did not belonged to assessee - Held that:- In the instant case the books of account or documents did not belong to the assessee and therefore, the AO was not justified in initiating action against the assessee under section 153A read with section 153C. The hand written paper i.e. page no. 35 does not fall within the meaning of books of accounts or document and does not belong to the assessee, hence, the proceedings U/s 153C would not have been invoked against the assessee. Thus, the assessee has established before the Assessing Officer as well as the CIT(A) that the document does not belong to the assessee. The issue herein is squarely covered by the decision of the Hon’ble Delhi High Court in Renu Constructions (2017 (9) TMI 670 - DELHI HIGH COURT), therefore, the order of the CIT(A) is set aside and appeal of the assessee is allowed
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2018 (4) TMI 632
Exemption u/s 11 denied - stay application moved by the assessee - Assessing officer moved the present application for vacation of ex-parte Stay order dated 15.2.2017 and 28.4.2017 - recovery proceedings initiated - Held that:- On each and every date of hearing, fresh orders for maintaining status quo were passed. In view of this, since the period of operation of the orders has already passed/ has become a past, we will be astonished to know how the vacation of the stay order dated 15.2.2017 and 28.4.2017 the period of operation of which was upto 4.5.2017 and 22.5.2017 respectively, at this stage, will in any manner of any help to the department. The vacation of order dated 15.2.2017 or of 28.4.2017 at this stage will not absolve the concerned officer/s of their act of violation of order during the subsistence of the order. We have not come across with any case law laying down the proposition that interim stay orders can be vacated with retrospective effect.
Even the orders dated 15.2.2017 and 28.4.2017 have not been continued as such rather the subsequent stay orders were passed in view of subsequent developments / change of circumstances such as recovery of the amount by the Department in violation of stay order dated 15.2.2017 and thereafter order of the Tribunal directing for refund of the amount dated 28.4.2017 and thereafter the status quo order after the statement of the AO that amount has been refunded to the assessee and also in view of the reluctanceof the concerned DRs in arguing the matter and seeking adjournments
The assessing officer in her application for condonation of delay with covering letter dated 20.2.2018 has referred to various dates of hearings stating that she was waiting for the disposal of the Misc. Application filed by the assessee against violation of the order dated 15.2.2017. This shows that the concerned ITO (E) was aware of the subsequent orders of stay/status quo, then why the application for vacation of two orders only has been filed is not understandable.
The department officials fully knowing that no useful purpose will be served either by moving the present application and even knowing that the present application was infructuous and non-maintainableeven on the date of its filing, not onl y filed this application, but also insisted for arguments despite that the hearing on the main appeal had already been concluded on a previous date. The only motive behind this application is to confront and show resentment and displeasure to this Tribunal for granting interim stay against recovery in this matter. This application is therefore dismissed with costs of ₹ 20,000/- to be deposited in Prime Minister's Relief fund within 15 days of receipt of the copy of this order
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2018 (4) TMI 631
Accrual of income - overdue interest relating to the NPA - Held that:- Addition cannot be made on overdue interest relating to the NPA. See District Co-operative Central Bank, Eluru Vs. ITO Ward-2, Eluru [2018 (4) TMI 553 - ITAT VISAKHAPATNAM]
addition u/s 40(a)(ia) - assessee required to deduct the TDS u/s 194C of the Act but failed to deduct the tax at source - omount is yet to be paid OR actually paid - Held that:- Assessee has made the payments for computerization to the extent of ₹ 21,46,000/- to M/s. D.Y. Systems, Hyderabad and ₹ 3,79,688/- to M/s. Techno Demo Office Automation Systems, Guntur. Now the issue is settled by by the Hon’ble Supreme Court in the case of Palam Gas Service v.Commissioner of Income-tax, [2017 (5) TMI 242 - SUPREME COURT] and held that the Word 'payable' occurring in section 40(a)(ia) not only covers cases where amount is yet to be paid but also those cases where amount has actually been paid. Therefore, we set aside the order of the CIT(A) and allow the appeal of the revenue.
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2018 (4) TMI 646
Jurisdiction to proceed against the Directors of a delinquent Private Limited Company under Section 179(1) - recover from the petitioners as Directors of a Private Limited Company, the tax dues of the Private Limited Company in respect of the Assessment Year 2008-09 which it failed to honour - Held that:- It is an agreed position between the parties that the issue arising herein would stand concluded in favour of the petitioners by the decision of this Court in Madhavi Kerkar V/s. Assistant Commissioner of Income Tax (2018 (1) TMI 749 - BOMBAY HIGH COURT) as held that the jurisdiction to proceed against the Directors of a delinquent Private Limited Company under Section 179(1) of the Act will only arise when the Revenue is unable to recover the tax dues from the delinquent Private Limited Company. The show cause notice issued to the Directors of the Private Limited Company must indicate briefly the steps taken to recover the tax dues from the delinquent Private Limited Company and the failure to recover the same.
In the above view, the impugned orders under Section 179(1) of the Act is quashed and set aside.
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2018 (4) TMI 630
Eligibility to claim exemption u/s 11 & 12 - proof of charitable activity - identification of dominant activity of the assessee - Held that:- Substantial portion of the income of the assessee came from stall charges, seminars, subscriptions and sponsorship. Asset base of the assessee was very small. However, it was holding substantial receivable of G24.83 lakhs and cash at bank of G18.79 lakhs as on 31.03.2010. Receivables as on 31.03.2011 came to G33.86 lakhs and cash at bank was G19.95 lakhs.
In our opinion the question that ought have been addressed by the ld. Assessing Officer was whether the activities of the assessee as reflected in its income and expenditure accounts and its statement of affairs as reflected in the Balance Sheets, would show what was the dominant activity of the assessee. AO ought have identified the dominant activity of the assessee and verified whether such activity was in line with its objects and whether income earned through stalls, seminars, conferences, entrance fees etc were part of such dominant activity or ancillary to it. Unless a close examination of this nature is done, in our opinion, a conclusion as to whether assessee was hit by the proviso to Section 2(15) of the Act cannot be reached. None of the lower authorities had done this analysis. In the circumstances, we are of the opinion that the matter requires a fresh look by the ld. Assessing Officer. - Decided in favour of revenue for statistical purpose.
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2018 (4) TMI 629
Disallowance u/s.40A(2)(b) - disallowance of interest invoking the provisions of Section 40A(2)(b) of the Act for the reason that to some related parties - assessee has paid the interest at the rate of 12.5%, 12% and 10% and on certain lending to the related parties interest has been charged at the rate of 8% or lower rate - Held that:- Since the business of the appellant was of financing, these interest rate keeps on changing depending upon the demand and supply of fund requirements. Since the assessee first has having the surplus funds and there was no demand that is why the surplus funds given to the parties on lower rate of interest. Further also it was argued by the ld. AO that the interest rates depend upon various other factors also like the borrowed/advances are call money or for fixed period.
Jurisdictional High Court in the matter of Aaditya Medicals Ltd. vs. CIT [2010 (5) TMI 823 - GUJARAT HIGH COURT] wherein, the interest at the rate of 24% to the related parties was treated to be allowable. Thus it does not warrant any disallowance u/s.40A(2)(b) of the I.T. Act.
Arguments of Ld. AR that interest depend upon the number of factors such as amount of loan, period of loan, creditworthiness of the parties etc. - Decided against revenue
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2018 (4) TMI 628
Reference for special audit u/s.142(2A) - Chartered Accountant failed to supply the Audit Reports to the appellant as mandated - Held that: AO passing the order under appeal has not see or considered a detailed reply of the appellant by two letters dt.01/07/2014 [one in reply to AO’s letter dt 25/06/2014 and second requesting amendment of orders u/s.142(2A)] as also letter dt. 29/07/2014 and 25/09/2014, explaining how the Accountant appointed u/s.142(2A) of the Act actually performed duties assigned to him, particularly the fact that the Accountant failed to even commence the Special Audit for the first 60 days after the appointment on 26/03/2014 and did not even spend a single day for audit work.
Accountant failed to supply the Audit Reports to the appellant as mandated by the provisions of S.142(2A) of the Act before the due date and actually supplied the same after the due date, even after availing the maximum period of 180 days and in spite of the appellant’s AR having alerting him of approaching limitation. These letter’s reference has also been given in the order of the ld. CIT(A). In our considered opinion AO did not have any “good and sufficient” reasons for extending the period of audit “suo motu” to the maximum permissible extent, and was not correct in casually attaching the tag of non-cooperative attitude to the appellant.
AO has exercised beyond his power. We can also see from the order of the lower authorities that no incriminating documents were found during the search and whatever document were found in earlier year for completed the assessment u/s.143(3) and 143(1). In our considered opinion, additions made were having no foundation or reference of any seized document al all. So whatever additions have been made by the AO were on the basis of commenced of special auditor - Decided against revenue
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2018 (4) TMI 627
Penalty u/s 271(1)(c) - legal heirs liability to pay tax on the amount received from NSS - Held that:- Revenue has not disputed the fact that this amount was offered by the assessee out of his own will. It is also not in dispute that at the time of investment, the assessee was minor. After considering the totality of the facts that the issue of taxability of the income being debatable, we are therefore of the considered view that the authorities below were not justified imposing the penalty. Accordingly, we direct the AO to delete the said amount penalty. - Decided in favour of assessee.
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2018 (4) TMI 626
Addition made towards receipts collected but not shown as income - Held that:- Admittedly, the addition has been made on adhoc basis, the basis of making addition is not specified by the AO - Decided against revenue
Disallow the depreciation only in respect of assets acquired for the year in which benefit of Section 12A has been availed by the assessee - Held that:- CIT(A) has rightly directed the AO to disallow the depreciation only in respect of the assets acquired for the year in which benefit of Section 12A of the Act had been first availed by the assessee. There is no dispute with regard to the fact that the assessee would be entitled for depreciation if he is not getting benefit of Section 12A of the Act. Under this fact, there is no infirmity in the order of the learned CIT(A). The same is hereby dismissed.
Excess application of income for charitable purposes to be carried forward - Held that:- CIT(A) was was justified in allowing the carry forward excess application of income as relying on Raghuvanshi Charitable Trust & Ors [2010 (7) TMI 158 - DELHI HIGH COURT]
Disallowance on account of expenses which cannot be treated as application of mind - Held that:- There is no discussion on this addition in the assessment order. The AO has merely made addition without specifying ground on which the addition has been made. Under this fact, such approach of the AO cannot be sustained. Moreover, learned CIT(A) has called a remand report from the AO and no adverse material was placed before the learned CIT(A). Therefore, we do not see any merit in this ground of the Revenue hence the same is rejected.
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2018 (4) TMI 609
Stay petition - Held that:- This is a fit case, where the petitioner has to approach the first respondent by way of a stay petition. This so because, according to the assessee, identical issue is pending in appeals for the earlier assessment years and those appeals are pending before the first respondent at various stages. However, the petitioner has not prayed for any stay in those appeals, because taxes have been remitted without prejudice. Thus, the petitioner has to necessarily move the first respondent by way of a stay petition, and if such petition is moved, then it is open to the first respondent to consider the prima facie case which the petitioner would place before the authority and take a decision on merits and in accordance with law.
The impugned communication dated 07.02.2018, is directed to be kept in abeyance for a period of four weeks from the date of receipt of a copy of this order. Within such time, the petitioner is directed to file a stay petition before the first respondent in the pending appeal dated 25.01.2018, and such stay petition shall be heard on merits
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2018 (4) TMI 625
Reopening of assessment - Addition of 25% on account of bogus purchase - reason to believe - Held that:- Tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the guilt.
The facts and circumstances of the present case indicate that assessee has engaged into dealings in the grey market. Dealings in the grey market give the assessee various savings at the expense of the Exchequer. Hence, on the overall consideration of facts and circumstances and following the decision in the case of CIT vs Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] we hold that a disallowance of 12.5% of the bogus purchase would meet the end of justice. Accordingly, we modify the order's of authorities below and direct that the disallowance in this case should be restricted to 12.5% of the bogus purchase. - Decided partly in favour of assessee.
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2018 (4) TMI 624
Penalty u/s. 271(1)(c) - defective notice - non specification of charge - Held that:- The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.
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2018 (4) TMI 623
Addition u/s. 41(1) being loan taken - Held that:- The said liability has been appearing in the balance sheet of the assessee. The assessee has not written off the same as irrecoverable. Confirmation from the party has also been produced. Furthermore, it has been brought on record that the amount involved was a loan taken for acquisition of fixed assets and it was not on account of trading account. Hence, it is clear that the authorities below had not given any finding that for this amount any allowance or deduction has been made in the earlier year in respect of loss, expenditure of trading liability.
These are the prerequisites for invoking section 41(1). As find that the assessee’s submissions are correct inasmuch as neither the amount involved was coming under the definition of items liable to be taxed u/s. 41(1) nor it has been cogently proved that there was any cessation thereof. - Decided in favour of the assessee.
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2018 (4) TMI 622
Eligibility for exemption u/s 11 & 12 - as per revenue the assessee is not an ‘educational institution’ so as to claim exemption - dominance of profit motive - Held that:- In the present case, there is no allegation, much less any evidence, brought out by the Revenue to say that any amount has been applied by the assessee for purposes other than its stated objects, which ostensibly is in the field of education. Pertinently, upto Assessment Year 2008-09, assessee was accepted to be an entity engaged in education and in even in the captioned years there is no charge against the assessee that any of its activities have undergone any change.
Therefore, merely because of insertion of the proviso, the nature of activities do not undergo a change unless it can be made out that profit motive is dominant all-pervading in the activities, an aspect which is absolutely absent in the present case. Therefore, even if we were to go along with the stand of the Assessing Officer that the activities of assessee fall within the expression ‘advancement of any other object of general public utility’ contained in Sec. 2(15) of the Act, even then, from Assessment Year 2009-10 onwards, the insertion of proviso does not take away the benefits of Sections 11 & 12 of the Act from the assessee inasmuch as the proviso does not disentitle the assessee’s activities from being considered as for charitable purpose because of the above discussion. - Decided in favour of assessee.
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2018 (4) TMI 621
Relinquishment of right before development - Right to sue surrendered in lieu of getting compensation money - capital gain or business income - Held that:- Assessee’s development license acquired in its all three agreements does not amount to part performance requiring compulsory registration u/s.17 of the Registration Act. We therefore conclude in this view of all this evidence as well as legal position that the impugned compensation amount is not liable to be treated as income u/s.2(24) of the Act nor the same is taxable as capital gain for business income being in the nature of a capital receipt.
Compensation sum as in facts of the instant case is not a business income as well since not covered under specific instances u/s.28(va) of the Act. The Revenue’s stands therefore holding both development and cancellation agreements in all cases is not sustainable in view of the same unregistered documents does not carry any merit as Section 17 of the Registration Law could not have been applied in view of bar on transfer of the lands in question. We thus observe that assessee’s above development license acquired in its all three agreements does not amount to part performance requiring compulsory registration u/s.17 of the Registration Act. We therefore conclude in this view of all this evidence as well as legal position that the impugned compensation amount is not liable to be treated as income u/s.2(24) of the Act nor the same is taxable as capital gain for business income being in the nature of a capital receipt. - Decided against revenue
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Customs
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2018 (4) TMI 610
Maintainability of petition - Alternative remedy of appeal - Held that: - On more than one occasion, Hon'ble Supreme Court as well as this Court, held that when there is an effective and alternate remedy, provided under the taxing laws, writ petitions, should not be entertained.
The order of the writ Court made in W.P.No26435 of 2017 dated 10.10.2017, directing the appellant to avail the alternate remedy provided under the statute, cannot be said to be manifestly illegal warranting interference - appeal dismissed.
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2018 (4) TMI 597
Refund of anti-dumping duty - duty paid under protest - rejection on the ground that the assessment itself had not been challenged before the appellate authority - Held that: - the refund claim of the appellant was maintainable under Section 27 of the Customs Act and the non-filing of the appeal against the assessed bill of entry does not deprive the appellant to file its claim for refund under Section 27 of the Customs Act, 1962 and which claim will fall under clause (ii) of sub-section (1) of Section 27.
Matter remanded to the original authority viz Deputy Commissioner of Customs (Refund) to examine the merits of the matter - appeal allowed by way of remand.
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Insolvency & Bankruptcy
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2018 (4) TMI 602
No service of notice on the ‘Corporate Debtor’ under Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Held that:- Adjudicating Authority issued notice recording the date of hearing of the application was not served on the ‘Corporate Debtor’ and returned unserved. It is also not disputed that the address of the ‘Corporate Debtor’ had been changed much prior to filing of the application under Section 7 of the ‘I&B Code’; therefore, it is not clear as to how the ‘Financial Creditor’ filed proof of service of notice on the ‘Corporate Debtor’.
The notice was served on one of the Directors, but such service of notice on one of the Directors cannot be treated as service of notice on the ‘Corporate Debtor’, which was the party respondent and not an individual Director. In view of the fact that the rules of natural justice have been violated - Set aside the impugned order dated 22nd December, 2017 which is set aside and remit the case to the Adjudicating Authority, Ahmedabad Bench for fresh decision.
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2018 (4) TMI 601
Corporate insolvency resolution process - existence of outstanding debt - Held that:- Financial creditors extended financial assistance in the form of Inter Corporate Deposits to the corporate debtor. The corporate debtor has duly acknowledged receipt of such Inter Corporate Deposits which were seen distributed through RTGS in the account of the corporate debtor. The corporate debtor has issued confirmation of accounts and thereby admitted the financial debts to be due and payable to the financial creditors in the case in hand. So also, corporate debtor has admitted the interest amount accrued at the rate 12% per annum on the principal sum. The statement of account also shows that the corporate debtor has deducted TDS.
The corporate debtor denied the entire transaction disputing the authenticity of the documents evidently executed and signed by the corporate debtor. The above said factors proves that the attempt of the corporate debtor is an attempt to evade payment which is found liable to pay to the financial creditors. Corporate debtors said attempt is found unsuccessful. Despite demands, reminders made by the financial creditors the corporate debtor has failed to repay the debt outstanding in its name. This petition for initiation of Corporate Insolvency Process under section 7 of the Insolvency & Bankruptcy Code, 2016 is liable to be admitted.
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PMLA
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2018 (4) TMI 600
Offence under PMLA - provisional attachment - Held that:- Adjudicating Authority ought not to have reached an adverse conclusion affecting the rights of the Appellant and ought not to have acted in haste without following the procedure established by law. The only reason given in the impugned order for upholding the provisional attachment order passed by the ED in respect of the said property is that the said property was owned by M/s Shamken Multifab Ltd. as the registration in favour of the Appellant was never done. The impugned order of the Ld. Adjudicating Authority does not even consider whether the said property was proceeds of the crime.
The legal effect of the registered Agreement to Sell between M/s Shamken Multifab Ltd. and M/s Arindam Sekhar Garments Marketing Pvt. Ltd. and thereafter of the sale deed which had been executed between M/s Shamken Multifab Ltd. and the appellant and presented for registration on 09.11.2013.
Despite the sale consideration as provided in the said agreement to sell, i.e. ₹ 5.66 crore and the payment of the requisite stamp duty and registration fees pursuant to the same having been paid by the Appellant, the Ld. Adjudicating Authority has not even thought it fit to call the Appellant under Section 8 (2).
Despite the sale consideration as provided in the said agreement to sell, i.e. ₹ 5.66 crores, has been stated as the value of the said property in the list of assets prepared by him, it had failed to take note of the fact that in light of the said agreement to sell no rights and interest in the said property continue to subsist in M/s Shamken Multifab Limited.
The impugned order confirming the order of provisional attachment of the Dy. Director has been passed without any application of mind and in a mechanical manner by the Ld. Adjudicating Authority. The Ld Adjudicating Authority without appreciating the merits and/ or demerits of the order of the Dy. Director has gone on to pass the impugned order without applying its mind, considering the facts in question or appreciating the statements made by various persons before it. The impugned order is more or less a replica of the order of the Dy. Director
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Service Tax
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2018 (4) TMI 619
Scope of SCN - various construction services - case of appellant is that the SCN as proposed demand of Service tax under the category of CICS whereas the Adjudicating Authority has upheld such demands under the category of WCS after analysing various activities in detail - Held that: - It is fairly well settled position of law that the Adjudicating Authority cannot travel beyond the allegation made in the show cause notice.
Tribunal in the case Ashish Ramesh Dasarwar vs. CCE&ST, Nagpur [2017 (9) TMI 1001 - CESTAT MUMBAI], in identical issue, has set aside the demand of service tax in a similar situation in which the show cause notice proposed classification under CICS whereas the Adjudicating Authority upheld the demand of Service tax under WCS.
Even the demand confirmed under WCS by the Adjudicating Authority are liable to be set aside for the reason that the Adjudicating Authority has traveled beyond the show cause notice.
Demand raised on amount received towards transportation and unloading of cement bags from Railway wagon - the Adjudicating Authority has classified the services under Transport of Goods by Road Service whereas the show cause notice had proposed classification of the same under Cargo Handling Services - Held that: - nothing is forthcoming in the record justifying the view taken by the Adjudicating Authority to the effect that the trucks which were used for transportation of the goods were belonging to the service recipient - matter remanded to the Adjudicating Authority for denovo decision on the subject.
The demand amounting to ₹ 9,11,262/- which is not challenged by the assessee, is upheld.
Appeal allowed in part and part matter on remand.
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2018 (4) TMI 613
Liability of service tax - Point of Taxation - continuous supply of services - invoices are not raised - assessment based on Profit and Loss account - business of promotion and construction of residential apartments and complexes - projects are undertaken on a joint venture basis, the petitioner being the builder, along with land owners - case of petitioner is that the customers have remitted, in advance, the consideration relating to several of the initial landmarks as a lump-sum and that the said amount has been offered to tax and it is incumbent upon the respondent to check whether the receipts offered to tax correspond and cover the stages in respect of which consideration has accrued as per the agreement with the customer.
Held that: - AS 7 deals with the recognition of income from building projects on the basis of the Project Completion Method' - The emphasis and thrust of each methodology is in alignment with the different purposes that they bear reference to AS 7, in the context of the preparation of financials, addresses the how much of the transaction over the term of contract whereas Rule 3 of the Rules addresses the when in relation to the rendition of service for computing taxability under the Finance Tax Act 1994.
The foundation of the assessment is flawed.
Rule 3(a) provides for a situation where the accrual of service is predicated upon the raising of an invoice. In the present case, the admitted position is that the petitioner does not raise invoices as and when a particular landmark is reached and the accrual of the consideration stage-wise is occasioned automatically upon completion of the stage of construction set out in the agreement itself - It is a well settled position that when a statutory provision or Rule addresses a specific scenario, such rule/provision is liable to be interpreted on its own strength and context and one need look no further to alternate sources to seek clarity in regard to the issue that has been addressed by the aforesaid rule/provision.
Insofar as Rule 3 sets out a specific modus operandi in this regard, it assumes priority and is the only relevant factor to be taken into account in the determination of point of rendition and accrual of services for the purpose of imposition of service tax.
The matter remitted to the file of the Respondent to be re-done de novo strictly in accordance with the provisions of Rule 3 of the Rules - petition allowed by way of remand.
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2018 (4) TMI 618
CENVAT credit - Management Consultancy Service - various input services - Insurance - Vehicle repair & maintenance - Taxi Hire charges - Telephone Charges - Construction Services - Work Contract - extended period of limitation - penalty.
Insurance - Vehicle repair & maintenance - credit has been denied as the motor vehicles are capital goods only for providing taxable services - Held that: - there is no evidence to substantiate that the payment for the said policy/repair has been made by the appellant. In absence of the same it cannot be ascertained in the services were availed in personal capacity of the employee or for the business - One of the ground of denial of credit is lack of evidence regarding the ownership of the vehicles and use of same for business purpose. No evidence to counter the same has been produced except a bald claim - matter is remanded for fresh adjudication.
Policies relating to workmen compensation, etc - denial on the ground that the same are in the name of individuals or the joint venture with Zaidun Leeng and hence the credit is inadmissible - Held that: - Credit can be allowed only in the circumstances where the cost of the service has been borne by the claimant as only in those circumstances it will form part of the taxable value - In these circumstances credit in respect of insurance expenses cannot be allowed in absence of evidence that the cost of such insurance is borne by the appellant - matter remanded for fresh adjudication.
Hire charges - denial on the ground that the invoices were issued in the name of Zaidun Leeng Sdn Bhd and not in the name of the appellant - Held that: - Joint Venture is a separate entity and any service used by such joint venture does not automatically become the service used by the appellants. In such circumstances credit cannot be allowed. However if the cost of such services is borne by the appellants the credit would be admissible - matter remanded for fresh adjudication.
Telephone bills, installed in the name of an employee/director - denial on the ground that in terms of Rule 9 of Cenvat Credit Rules, 2004 the Invoice/telephone should be in the name of the appellant to enable them to claim the credit - Held that: - the Commissioner has sought evidence and the appellants have not provided any evidence in terms of Rule 9 of the Cenvat Credit Rules - credit cannot be allowed.
Construction service - works contract - input services - Held that: - the appellants have used the services for the purpose of setting up of office for use in respect of their output service. This fact has not been countered by the Revenue. The definition of input service interalia includes services used in relation to setting up of premises of service provider of output service within its fold - the credit of services used for construction of new office cannot be denied - credit allowed.
Liability of service tax - Transactions with the associate enterprises - penalty - Held that: - The liability to pay tax arises in respect of the gross amount charged, in terms of Section 67 of the Finance Act, 1994. The time at which the payment is to be made is decided in terms of Rule 6 (1) of Service Tax Rules. In both, the section as well as rules, it has been clarified that any amount credited or debited, as the case may be, to any account, whether called suspense account or by any other name, in the books of accounts shall be liable to tax, where the transaction of taxable service is with any associate enterprises as gross amount charged - the provision of the law are very clear and there is no doubt regarding payment of service tax in respect of transaction with the associate enterprises.
Liability of service tax - foreign currency transaction - Held that: - the appellants have admitted in their appeal the said tax liability and paid the same along with interest.
Penalty - Held that: - it would not be correct to say that they had an intention to evade the tax. The appellants have paid the interest as well. In these circumstances imposition of penalty under section 78 cannot be sustained - penalty u/s 76 also waived.
Extended period of limitation - Held that: - it is apparent that the credit has wrongly been availed and the appellant do not have any evidence of the eligibility in terms of Rule 9 of the Cenvat Credit Rules - This by itself is sufficient to sustain the charge of suppression/misdeclaration - extended period rightly invoked.
Appeal allowed in part.
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2018 (4) TMI 617
Reverse Charge Mechanism - appellant availing services from outside India - deemed service provider - discharge of service tax liability from CENVAT credit account - contravention of provisions of Section 66A and Section 68 of the Finance Act 1994, Rule 6 of Service tax Rules 1994 and Rule 3 (4) of CCR 2004 - Held that: - under CCR 2004 there is no bar for utilization of Cenvat credit for the deemed service provider to pay the service tax liability casted upon him in terms of Section 66A - In terms of Rule 2 (r) the Appellant is a deemed service provider - Rule 5 of Taxation of Service Rules (Provided from outside India and Received in India) Rules only refers to availing of Cenvat Credit and not utilization of cenvat credit.
The restriction to utilize the cenvat credit came into Cenvat Credit rules by inserting explanation in rule 3 (4) vide N/N. 28/2012 – CE (NT) dt. 20.06.2012 which says that CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient - before 20.06.2012 there was no restriction upon the deemed service provider to pay the service tax liability from cenvat credit.
The appellant is a person liable to Service Tax. Once appellant is person liable to service tax, he becomes provider of taxable service under Rule 2(r) and consequently becomes output service provider under Rule 2(p) of the Cenvat Credit Rules - the finding of the Commissioner not treating the appellant as output service provider, is not correct.
Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 616
Demand of service tax - Valuation - Cable Operator’s Services - the Appellant is aggrieved with the impugned order on the ground that the copy of verification report relied upon by the Commissioner (Appeals) was not given to them in order to bring their version to defend their case - principles of Natural Justice - Held that: - the Appellant were given ample opportunities to defend their case.
The Appellant being a cable operator had provided the taxable services and collected fess/amounts from the input holders, therefore they were liable to pay Service Tax on the entire amount received as the taxable value which is the gross amount charged by the Appellant to input holders - Appellant cannot exclude the amounts received for maintenance charges from taxable value in view the Sub-Rule 1 of Rule 5 of Valuation Rules, which provides that where certain expenditure or costs are incurred by the service provider in the course of providing any taxable service, all such expenditure or costs shall be treated as consideration for the taxable services provided or to be provided and shall be included in the value for purpose of charging of service tax.
No fault can be found with the order passed by the Commissioner (Appeals) and no interference is required - appeal dismissed - decided against appellant.
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2018 (4) TMI 615
Voluntary Compliance Encouragement scheme - rejection on the ground that audit inquiry was going on therefore the goods is not qualified for VCES Scheme - benefit of N/N. 45/2010-S.T. dt. 20..7.2010 - services provided to Maharashtra State Electricity Distribution Service Ltd. which is a Electricity Distribution Company - Held that: - the appellant has provided the service of erection, installation and commissioning undisputedly to M/s. Maharashtra State Electricity Distribution Company Ltd. that is involved in distribution of electricity, therefore the service provided by the appellant is in relation to the distribution of electricity. Hence the same is covered by exemption N/N. 45/2010-ST which is effective upto 26.2.2010 therefore the demand upto 26.2.2010 is set aside.
As regard the demand for the period 27.2.2010 onwards there was no analogues notification existing for the service in relation to the distribution of electricity. The appellant have admittedly paid the service tax which was eclared under VCES even though the VCES was rejected.
There was no dispute that the audit was undergoing of the appellant’s records, therefore the issue of non-payment of service tax on the services in relation to the distribution of electricity was with the audit. Therefore the appellant was not eligible for the immunity provided under VCES Scheme - VCES declaration rightly rejected.
Appeal allowed in part.
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2018 (4) TMI 605
CENVAT credit - input services - Mediclaim Insurance Policy taken for their employees and their family members - Held that: - The Appellant has already reversed the credit pertaining to the period after March’ 2011 - In case of credit availed on impugned services prior to March’ 2011, the credit is available on impugned services viz. Mediclaim and Health Insurance Services as held by the Hon’ble High Court in the case of BNY Mellon International Operations (I) Pvt. Ltd. Versus Commissioner of Central Excise, Pune-III [2016 (12) TMI 161 - CESTAT MUMBAI].
Penalty - Held that: - demand prior to March’ 2011 set aside, penalty also not imposable - In case of penalty imposed for the period after March’ 2011, it is found that the credit has been reversed at the time of investigation and there is no reason to hold the Appellant guilty of any suppression or malafide intention, penalty set aside.
Appeal allowed in part.
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2018 (4) TMI 614
Refund of service tax - service tax paid on specified services which have been used in export of goods - duty free shop in the departure terminal at Delhi International Airport - denial on the ground that since the Respondent is not an exporter, hence not eligible for the refund - N/N. 41/2012 – ST dt. 29.06.2012 - Held that: - There is no dispute that the goods were not cleared for home consumption, warehouse transfer or any other purpose but to International passenger for taking the goods outside India at departure terminal. Hence it is clear that the clearance was made for export of goods only.
In terms of Para 3.3 of the Standing order dt. 03.03.2008 and Para 4.3 of Public Notice dt. 27.02.2006 it has been clarified that for the purpose of Section 69 the sales voucher/ bills issued by the assessee to the passenger shall be deemed to be shipping bill u/s 50 of the Act for the purpose of export and further that the goods can only be sold to international passenger. Hence it has to be accepted that the sale of goods at Duty free Shop at the departure terminal is exports.
The shop, known as ‘ Indian Gourmet’, is located only at the terminals of Mumbai International Airport, for which separate invoice was raised by the Mumbai International Airport Ltd to the Respondent. In such case, the Respondent is eligible to avail rebate of whole amount of service tax charged on rent amount - Further, in case of Delhi International Airport, the shop is located only at the departure terminal and, therefore, the Respondent is also eligible for the full rebate. Further, in case of processing / settlement charges charged by the bank for the card purchases made by the international passenger at the departure terminals at Mumbai, since the charges pertain to only departure terminal, therefore in such cases also the Respondent is eligible for full credit.
Whether the balance service tax levied in respect of duty free shop located in Mumbai is available to what extent? - Held that: -once it is established that the agreement made to MIAL is in the nature of rent for use of space and nothing else, the appropriate method of apportionment between the arrival and departure area would be on the basis of the usage of space, i.e. area occupied for the shops at the respective terminals - appellant have correctly arrived at the service tax in respect of input service attributable to the departure terminal.
Scope of CA certificate - certificate is based on various riders - The certification has been done based on their professional guidelines and the certificate is given in accordance with the Guidance Note on Audit Reports and Certificates for the Special Purposes (Guidance Note) issued by the Chartered Accountants of India - the auditors are not required to check the compliance with the customs, excise or service tax nor are they expected to carry out a statutory audit . Hence, the objection raised by the Revenue does not in any way debar the Respondent from claiming the rebate and their refund claim cannot be rejected on the above ground.
Appeal dismissed - decided against Revenue.
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2018 (4) TMI 604
Penalty - service tax collected but was not paid - demand with interest paid before issuance of SCN - Section 73 (3) of FA - Held that: - once the service tax amount has been paid alongwith the interest, no penalty should have been imposed upon the Appellant in terms of Section 73 (3) of the Finance Act - penalties set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 603
Penalty - payment of service tax with interest on a later date - Accommodation Services - Held that: - no instance has been pointed out in the show cause notice that the short payment and non payment of service tax was due to any malafide intention of the Appellant - the service tax was paid by Nov’ 2011 whereas the SCN was issued in Oct’ 2012. Since the Appellant had deposited the tax, they were eligible for the benefit u/s 73 (3) - penalty set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 599
Validity of assessment order - enhancement of value - non-speaking order - whether enhancement of declared value can be done without rejecting the same and providing contemporaneous value? - Held that: - the Lower Authority have not brought of record any contemporaneous value in order to enhance the value declared by the appellant of the goods imported. In the absence of any such evidence to indicate that there was under valuation, the Impugned Order is unsustainable - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 598
Commercial and Industrial Construction Service - construction of two buildings, one for National Rifle Association of India and another one for ICFAI University, Dehradun - Original Authority held that these buildings are commercial in nature, and liable to tax - whether the two buildings are commercial in nature? - Held that: - Regarding the Headquarter building of National Rifle Association of India, we find that the said association is an official representative of Rifle Sports, which are duly recognized by the Ministry of Youth Affairs and Sports and affiliated to Indian Olympic Association - the building cannot be considered as commercial building for service tax purposes.
Building in the campus of ICFAI University, Dehardun - Held that: - the said building is for use by a recognized university for education. The same also cannot be considered as commercial building - collection of fees for promoting or allowing the person to use the facility by these bodies will not make the building commercial.
Demand set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 596
Benefit of cum-tax - remuneration received as consideration for arranging holidays - case of appellant is that as they had not collected tax from their principal, the benefit of ‘cum-tax’ should be extended to them - penalties - Held that: - The appellant has discharged tax liability on ‘cum-tax’ computation. It is apparent from the records that no service tax has been collected from the recipient of the service, therefore, it would be appropriate to limit the tax liability to that discharged by the appellant.
Penalties - Held that: - The issuance of the show cause notice itself is questionable and not in accordance with law. The scope of imposition for penalties does not exist.
Appeal allowed.
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2018 (4) TMI 595
Voluntary Compliance Encouragement Scheme - rejection of declaration under VCES Scheme - time limitation - case of appellant is that the denial of declaration owing to proceedings initiated against them following a search conducted in November 2013 is not consistent with the statute as their declarations had been filed in August 2013.
Held that: - the show cause notice was issued on 14th August 2014 whereas the declaration was filed on the 20th August 2013 - circular No. 174/9/2013-ST dated 25th September 2013 prescribes a time-limit of thirty days from the date of filing of declaration for placing the declarant on notice that their declaration was liable to rejected. Having failed to initiate the action within the prescribed time-limit, the proceedings for rejection stand vitiated.
Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 594
Validity of SCN - Perusal of the impugned order does not provide any head or tail thereof - Held that: - When the SCN is read it exhibits the allegations made therein clearly. But that was not examined by the learned Commissioner to exhibit his mind. Writing several pages with reproduction of ELT headlines is irrelevant in justice administration.
Approach should be made to bring out the matter in controversy in clear terms to examine the pleadings of both sides as well as evaluate evidence for appreciation and application of law. This is the object of the process of delivery of justice. Such elementary jurisprudence has not been followed by the learned Commissioner (Appeals).
Matter remanded back to the learned adjudicating authority to re-hear the matter and re-adjudicate the issue considering the pleadings and evidence of the appellant to reach to a reasoned decision - appeal allowed by way of remand.
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Central Excise
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2018 (4) TMI 612
Refund claim - unjust enrichment - case of appellant is that Since the transaction is of job work and not of sale there is no question of passing of incidence of duty to the principal - whether the refund claim of appellant is hit by unjust enrichment or otherwise? - Held that: - duty was deposited during investigation with reference to removal of goods manufactured by appellant on job work basis - the goods were undisputedly dutiable therefore payment made by the appellant is differential duty therefore it cannot be said that amount paid by the appellant is deposit and not the duty.
The refund of duty paid in excess is subject to test of unjust enrichment as provided under Section 11B of Central Excise Act, 1944 - unjust enrichment is very much applicable in the present case which the appellant could not prove that incidence of duty has not been passed on to any other person, accordingly, impugned order is sustainable.
Appeal dismissed - decided against appellant.
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2018 (4) TMI 611
Refund claim - finalization of provisional assessment - unjust enrichment - captive consumption - time bar - Held that: - refund claim was filed admittedly within one year from date of submission of CAS-4 certificate, only on obtaining CAS-4 certificate appellant could established excess payment of duty - the refund claim filed after finalisation of the price i.e. on submission of CAS-4 certificate, refund is well within time period of one year - refund claim is not time barred.
Unjust enrichment - submission of the appellant is that since the goods were cleared to their own unit which amounts to captive consumption there is no sale of the goods, hence the incidence of duty paid in excess was not passed on - Held that: - even in respect of captive consumption, unjust enrichment provision is applicable as held by Hon'ble Supreme Court inc case of Union of India vs. Solar Pesticides Pvt. Ltd. [2000 (2) TMI 237 - SUPREME COURT OF INDIA] - it is obvious that when the goods is sold all the cost of raw material including taxes, duties thereof is considered for arriving at the cost of final product.
Since the appellant and the recipient unit are under the same umbrella of one company, balance sheet of company consist of final sale transaction takes place by all the units therefore whether there is sale between appellant and their own recipient unit or otherwise that cannot be sole factor to decide that there is no unjust enrichment - the factual matrix has to be ascertained that whether excess duty paid by the appellant was absorbed in the value of the Pan Masala and Gutkha, only thereafter it can be established that whether the incidence of duty has been passed on to any other person or otherwise.
Since no exercise has been carried out on this factual aspect, in the interest of justice one opportunity can be extended to the appellant to prove that incidence of excess paid duty has not been passed on or otherwise - appeal allowed by way of remand.
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2018 (4) TMI 593
CENVAT credit - clearance of input as such - whether the duty is payable equivalent to the CENVAT Credit availed on such inputs or in terms of Section 4 and the rules made thereunder for clearance of the goods to their own unit? - Rule 3(4) of CCR.
Held that: - the appellant was required to pay the duty on removal of inputs as such, only equal to the amount of CENVAT Credit availed on such inputs - There is no dispute that the appellant have paid the excise duty on the removal of input as such to their own unit equal to the CENVAT Credit availed on such inputs - duty was not required to be paid in terms of Rule 8 of the Central Excise Valuation (Determination of price of excisable goods) Rules, 2000 as alleged by the Revenue - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 592
Reversal of CENVAT credit - Revenue demanded different reversal of the CENVAT credit on the value declared in Balance Sheet after adjusting the reversal amount - Held that: - it would be apparent that the figures of closing balance of included value of traded goods. In these circumstances the figures from Balance Sheet cannot be relied to compute the value of duty paid raw material and finished goods.
In absence of above figures of Balance Sheet cannot be treated as true measure of quantity of duty paid raw material on which the credit has been taken and the value of finished goods manufactured from duty paid raw material. Since there is no evidence to substantiate allegations, credit allowed.
Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 591
CENVAT credit - GTA Services - whether the respondent is entitled for CENVAT credit of service tax paid on GTA service (used for transportation of coal to the power plant) and Central Excise duty paid on inputs and capital goods procured by respondent and supplied to BPL for generation of power or otherwise?
Held that: - the respondent is eligible for the availment of CENVAT credit of the service tax paid on GTA service and Central Excise duty paid on the input, and capital goods as there being no dispute that the power plant is within the factory premises and the 'factory premises' defined under Section 2(a) of the Central Excise Act wherein it is defined as factory includes any premises including precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured.
Order of the Tribunal in the case of Steel Authority of India Ltd [2016 (3) TMI 153 - CESTAT NEW DELHI] would squarely apply in the case in hand, where it was held that the factory premises as licenced under Central Excise provisions in respect of the appellants continued to be unaffected and no separate Central Excise licence with de-marketed premises was given to the power plant separately. In such situation, the Revenue cannot take a stand that the power plant is another factory and not to be considered as within the factory of the appellant.
Appeal dismissed - decided against Revenue.
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2018 (4) TMI 590
100% EOU - carry forward of credit - whether the unutilized CENVAT credit lying in balance in the books of accounts in the case of respondent EOU can be carried forward to the respondent unit on its debonding to be a DTA? - Held that: - There is no dispute as to the fact that the respondent is functioning under a Central Excise registration when they were an EOU and the same registration number was continued as DTA unit - reliance placed in the case of Tecumseh Products India P. Ltd. Versus C.C.,C.E. & S.T., Hyderabad-IV [2015 (9) TMI 1487 - CESTAT BANGALORE], where it was held that there being no law prohibiting carrying forward unutilized CENVAT credit it cannot be held against the assessee - appeal dismissed - decided against Revenue.
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2018 (4) TMI 589
CENVAT credit - Revenue wants to re-argue the matter on the various aspects of the law - Held that: - assessee did not file any appeal before first appellate authority against said order-in-original. Revenue preferred an appeal on the ground that adjudicating authority has erred in allowing cenvat credit.
This approach was attempted by the Revenue in the case of Ahmadabad Packaging Inds. Ltd. [2009 (7) TMI 1002 - CESTAT, AHMEDABAD], in which case the Bench held that such recourse of rearguing the matter does not arise unless the Revenue has preferred an appeal against the decision of first appellate authority.
Appeal dismissed - decided against Revenue.
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2018 (4) TMI 588
CENVAT credit - input service - medical insurance in respect of employees - penalty - Held that: - insurance of the employees is mandatory under factory act, therefore it is used in relation to manufacture of the final product as without employees contribution no manufacturing can take place - This Tribunal in Hinduja Founders Ltd. Vs. Commissioner of C Ex., Chennai-I [2016 (4) TMI 326 - CESTAT CHENNAI] has held that credit on the employees, insurance service is admissible - credit allowed.
Penalty - Held that: - issue is debatable and in some of the judgments on these services credit have been allowed - no malafide intention can be attributed to the appellant - penalty set aside.
Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 587
CENVAT credit - input service - services providing assistance for maintenance of company vehicle and equipments - transportation charges for providing shift basis rent-a-cab service - service of providing drivers for operating company vehicle - cleaning and maintenance of garden around the factory building.
Maintenance of vehicle - Held that: - maintenance of vehicle is in respect of appellant company's own vehicle which is used for factories activity therefore it is covered under first limb of definition of input service which allows the Cenvat credit in respect of services which is used in or in relation to the manufacture of final product - credit allowed.
Providing drivers for operating company vehicle - Held that: - driver is in respect of appellant company's own vehicle which is used for factories activity therefore it is covered under first limb of definition of input service - credit allowed.
Gardening services - Held that: - this tribunal time and again held that maintenance of garden is under statutory obligations under Factory/ Industrial Act to maintain environment of the factory premises - credit allowed.
Rent a cab service - period involved is June, 2014 to January, 2015 - Held that: - w.e.f. 1-4-2011 rent a cab service was excluded from the definition of input .service, therefore due to such exclusion the credit in respect of rent a cab service is not available to the appellant - credit not allowed.
Appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (4) TMI 586
Validity of assessment order - short payment of tax, treating the galvanizing as works contract - availment of Input Tax Credit on ineligible rules - non-payment of TDS, as per Section 13 of the Act on construction of the building - Held that: - Since the facts are complicated and already the respondent appears to have a closed mind to the issue, presumably, because of a report of the Enforcement Wing Officials, in the best interest of the petitioner, they should pursue the matter before the Deputy Commissioner of Commercial Taxes, Pollachi. This is more so, because, for the earlier assessment year 2010-11, identical issue has arisen and the petitioner has rightly preferred an Appeal before the Appellate Authority.
Taking note of the fact that this is the second time, the petitioner is before the Court, raising very same contentions and that, similar issue is pending before the Appellate Authority, for the assessment year 2010-11, this Court would direct the petitioner to file Appeal before the Appellate Authority.
Petition disposed off.
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Indian Laws
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2018 (4) TMI 620
Application for revival/restoration of complaint - territorial Jurisdiction of Trial Court - Negotiable Instruments Act, 1881 - dishonor of cheques.
Held that: - Admittedly the cheques in question are issued by the accused drawn on the Bank of Baroda, Basant Lok, New Delhi and thus did not fall within the jurisdiction of the South East District, Saket on the date when the complaint was returned on 14.05.2015.
In terms of the amendment to The Negotiable Instruments Act, 1881, Section 142(2) was inserted to The Negotiable Instruments Act, 1881, the jurisdiction in relation to an offence punishable under Section 138 of The Negotiable Instruments Act, 1881 lay only with the branch of the bank where the payee of the holder in due course maintained his / its account which in the instant case was the HDFC Bank Ltd., Kalkaji, New Delhi i.e. the bank of the petitioner herein i.e. the complainant of the CC no. 157/1/12 and thus the jurisdiction lay with the Court having jurisdiction over the area of Kalkaji i.e. South Eash District, New Delhi on the date when the application seeking revival / restoration of the complaint, was taken up on 08.10.2015.
It is apparent that in terms of the provisions of Section 142A(1), the amended provisions of Section 142(2) of the NI Act, 1881 thereof are deemed to have been in play and operation at all times and give retrospective applicability to Section 142(2) of the The Negotiable Instruments Act, 1881
The jurisdiction lay only with the branch of the bank where the payee or holder in due course maintained his / its account, and the Court there alone would have jurisdiction, qua the complaint for an offence punishable under Section 138 of The Negotiable Instruments Act, 1881 which can be inquired into or tried - in the instant case as the bank of payee i.e. the complainant is the HDFC Bank Ltd., situated at Kalkaji, New Delhi, the Court having jurisdiction to try the offences punishable under Section 138 of The Negotiable Instruments Act, 1881 is situated in the area of the South East District, Delhi.
The Court of MM having jurisdiction to try cases under Section 138 of The Negotiable Instruments Act, 1881 of the South East, Saket has jurisdiction to proceed with the Complaint Case no. 157/1/12 - complaint is restored to its original stage - petition allowed.
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