TMI Tax Updates - e-Newsletter
April 8, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Highlights / Catch Notes
-
GST:
Reverse Charge u/s 9(4) - receipt of supply of goods and / or services from an unregistered person from an unregistered person - the RCM is applicable on the transactions effected from 1.7.2017 to 12.10.2017
-
GST:
Classification of goods - Geared Motor - in view of the exclusion note under chapter heading 8483 and inclusive note to 8501, it would be against the scheme of HSN to agree with the jurisdictional officer’s view.
-
GST:
Clarification regarding exercise of option to pay tax under notification No. 2/2019- CT(R) dt 07.03.2019
-
GST:
Levy of GST - reimbursement of expenses - failure to prove of being Pure Agent - GST is levied on reimbursement of expenses from the lessee by the lessor at actuals and expenses constitute composite supply, GST would be payable at a rate as applicable to the principal supply
-
Income Tax:
Case selected under CASS - limited scrutiny - in the absence of any approval received from Pr.CIT / CIT, there is no merit in the order of AO in making any addition other than on the issues selected under CASS.
-
Income Tax:
Reopening of assessment - validity of reasons to believe - AO has failed to refer to any tangible material coming to his knowledge - re-assessment proceedings were initiated on the ground that declaration of income from unsold flats by the assessee as ‘Income from house property’ was not correct - no merit in re-assessment proceedings
-
Income Tax:
Addition u/s.68 - share premium - nothing in law prohibits issue of shares at high premium once the assessee had duly complied with statutory requirements as to shares allotment - taxability u/s 56(2)(viib) is w.e.f from 01/04/2013 only
-
Income Tax:
Scope of scrutiny in cases selected under CASS - conversion the limited scrutiny in to unlimited - cases, selected under CASS, the additions on the non-CASS issues can only be made after obtaining due permission from the superior authorities and the said approval of the superior authorities in writing should be available on records.
-
Income Tax:
Approval u/s 80G(5)(vi) - registration u/s 12AA established for charitable purposes having the objects therefore, even if no activity have been carried out by the assessee-society towards its objects, it would not make the assessee disentitle for approval u/s 80G - non receipt of donation should not be a relevant reason to reject the approval
-
Income Tax:
Taxability of minor u/s 64(1)- both the parent had died - foundational error in the order of the Tribunal is leaving the income of the Minor untaxed altogether, the error committed by the two authorities below, forgetting the provisions of Sections 159 and 160 (1) (ii) - what was apparently taxable has been let off by the Tribunal to be altogether non-taxable and that too ignoring the important provisions of the Act
-
Income Tax:
Adjustment of unconsumed raw material purchased from AE - valuation of unconsumed material as closing stock is same as purchase cost debited - in case any adjustment is required to be made is to be restricted to the material purchased from the AE and consumed during the year
-
Income Tax:
Revision u/s 263 - payment of conversion charges and job charges to related parties u/s 40A(2)(a) thoroughly examined by the AO - CIT had only tried to substitute his knowledge in technical aspect of the industry thereby trying to substitute his opinion on the impugned issue as against the opinion already framed by the AO - not permissible
-
Income Tax:
Revision u/s 263 - AO made detailed inquiries regarding claim of LTCG before accepting the same - it was incumbent upon Pr.CIT to make inquiry so as to reach the conclusion that the order of the AO was erroneous and prejudicial to the interest of the revenue - invocation of revision u/s 263 was wrong
-
Customs:
100% EOU - The condition of installation of capital goods within one year was, thus, made applicable both for goods which are imported duty free as well as procured duty free - the appellant being falls under the second category failed to complete installation of goods so procured within one year or even within extended period of five years it is liable to pay Customs duty
-
Customs:
Revocation of CHA License - to expect the CB holder to carry out further investigations and independent inquiry not only about the existence of importing firm but also about its real owner is beyond the mandate of the law.
-
Customs:
Revocation of CHA License - imposition of almost impossibly high standards upon the CB holder who is expected to not only verify the correctness of the documents with reference to the publically available material but also carry out independent investigations - who is not a public servant or in any way connected with the Customs Department to act as a public trustee is beyond what is contemplated
-
Customs:
Levy of ADD - designated authority, having recorded findings in support of the injury sustained by the domestic industry by dumping of like products by exporters/producers from Saudi Arabia - stating a three month span of dumping was insufficient for recording a finding is misconceived notion when there is no such mandate in the Rules of 1995
-
Corporate Law:
Restoration of the name of the company to the ROC - non compliance of ROC - Accidental or inadvertent omission can occur once or twice but when the non-compliance relates to many years, it cannot be claimed that there was accidental or inadvertent omission on the part of the company or its directors - No case for restoration of the name of the company
-
Corporate Law:
Wilful defaulter - Foreign Letter of Credit - even if, the loan amount or the fund was not directly disbursed in the petitioner’s current account but it was directly paid to the exporters on behalf of the petitioner by the bank - relationship of lenders and borrower has been established - rightly considered as wilful defaulter
-
State GST:
Verification of applications for grant of new registration.
-
IBC:
Initiation of Corporate Insolvency Resolution Process - NCLT missed vital information regrading dispute after non payment and settlement was made before court - claim was not barred by limitation - remanded to settle the matter before Adjudicating Authority for admit the application u/s 9 of I&B Code
-
PMLA:
Offense under PMLA - attachment orders - assets acquired prior to enactment of PMLA - It is noteworthy that the phrase ‘reason to believe’ has a specific connotation in criminal jurisprudence and is not merely an ordinary and colloquial phrase - the requirement of having reason to believe must be strictly complied with in statute like PMLA
-
SEBI:
Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2019
-
Central Excise:
Judicial discipline - Once it is decided by the CESTAT that the appellant is not entitled to refund of some amount of the CENVAT credit under Rule 5 of the CCR, 2004, the lower authority cannot sanction such refund.
-
Central Excise:
ISD - If the head office commits an error or plays mischief and wrongly distributes credit either by availing ineligible credit itself or by improperly distributing it can the recipient of the ISD invoices be able to correct the mistake? - Held No
Articles
Notifications
GST - States-
560-F.T. - Order No. 04/2019-State Tax - dated
29-3-2019
-
West Bengal SGST
THE WEST BENGAL GOODS AND SERVICES TAX (FOURTH REMOVAL OF DIFFICULTIES) ORDER, 2019
-
559-F.T. - 16/2019-State Tax - dated
29-3-2019
-
West Bengal SGST
The West Bengal Goods and Services Tax (Second Amendment) Rules, 2019.
-
558-F.T. - 9/2019-State Tax (Rate) - dated
29-3-2019
-
West Bengal SGST
Amendments in this Department notification No. 377-F.T. [02/2019- State Tax (Rate)], dated the 7th March, 2019.
-
557-F.T. - 8/2019-State Tax (Rate) - dated
29-3-2019
-
West Bengal SGST
Amendments in this Department Notification No. 1125-F.T. [1/2017-State Tax (Rate)], dated the 28th June, 2017.
-
556-F.T. - 7/2019-State Tax (Rate) - dated
29-3-2019
-
West Bengal SGST
Notify that the registered person shall in respect of supply of goods or services or both an unregistered supplier shall pay tax on reverse charge basis as recipient of such goods or services or both.
-
553-F.T. - 4/2019-State Tax(Rate) - dated
29-3-2019
-
West Bengal SGST
Amendments in this Department notification No. 1136-F.T.[12/2017- State Tax (Rate)], dated the 28th June, 2017
-
552-F.T. - 3/2019-State Tax (Rate) - dated
29-3-2019
-
West Bengal SGST
Amendments in this Department notification No.1135-F.T. [11/2017-State Tax (Rate)], dated the 28th June, 2017
SEBI-
SEBI/LAD-NRO/GN/2019/08 - dated
5-4-2019
-
SEBI
Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2019
Circulars / Instructions / Orders
News
Case Laws:
-
GST
-
2019 (4) TMI 457
Application for withdrawal of Advance Ruling application - Supply or not - supply of promotional product - whether the supply of the main product with free product would fall within the mischief of a mixed supply attracting the rate of tax of the product attracting the highest rate of tax? - Held that:- The Applicant has requested to permit them to withdraw the application filed for advance ruling quoting the reason that the Central Board of Indirect Taxes and Customs has issued certain clarification on the issue raised by the company. The application filed by the Applicant for advance ruling is disposed off as withdrawn.
-
2019 (4) TMI 456
Application for withdrawal of Advance Ruling application - classification of supply - room rent and food supplied in the room - restaurant facilities - whether mixed supply or not? - Held that:- The Applicant has requested to permit them to withdraw the application filed for advance ruling, consequent to the decision of the Board of Directors of the Applicant Company. The application filed by the Applicant for advance ruling is disposed off as withdrawn.
-
2019 (4) TMI 455
Classification of goods - Geared Motor - combination of gear box and electric motors' - the product Gear Box is classified under the HSN Code 8483 , Electric Motors are classified under the HSN Code 8501 - whether the Geared Motor would be classified under the HSN Code 8483 or HSN code 8501? - Held that:- The product Geared Motors is a combination of gear box and electric motors. Vide Notification No. 1/2017 C.T. (Rate) dated June, 28, 2017, tariff rates have been notified for the purpose of levy and collection of GST which has classified goods into 4 digit codes as per HSN. In the said Notification it has been specified that for the purpose of classification of goods, the section notes, chapter notes and the General Explanatory notes mentioned under Customs Tariff Act, 1975 would apply to classification of goods under the GST Act. Therefore the classification of the product is to be decided in terms of HSN. From the harmonious reading of Section notes 4 and 5 to Section XVI and the inclusion Note in 8501 and the exclusion Note in heading 8483 referred to above, the geared motors being a combination of machines that is Electric Motors and Gear Box intended to contribute together a cleared defined function to run industrial machineries with speed controlling mechanism, the Geared Motor is appropriately classifiable in the heading 8501. The jurisdictional officer has different view. He submits that Geared Motor is a machine consisting of two individual components interconnected. His view is that electrical motors when attached to Gear Box will no longer remain an electrical motor but a geared motor with altogether a different function that is transmission of mechanical power and speed from one shaft to another. Though the contention of the jurisdictional officer appears convincing, in view of the exclusion note under chapter heading 8483 and inclusive note to 8501, it would be against the scheme of HSN to agree with the jurisdictional officer s view. Thus, the Geared Motors supplied by the applicants fall under Tariff Heading 8501.
-
2019 (4) TMI 454
Reverse Charge u/s 9(4) prior to 13.10.2017 - receipt of supply of goods and / or services from an unregistered person from an unregistered person - N/N. 8/2017 dated 28.06.2017 read with N/N. 38/2017 dated 13-10-2017 - section 9(4) of the CGST Act SGST Act - recovery of tax under section 9(4) of CGST Act - interest on the delayed payment of CGST / SGST under section 9 (4) of the Act - Effect of taxation of circular dated 2nd May 2018 including interest on the transaction dated 31st August 2017. Held that:- The applicant has received the tenancy rights from an unregistered person. The agreement was made between the parties on 31.08.2017. The transaction amount is ₹ 54.00 lakhs. The Transfer of tenancy rights in goods or of undivided share in goods without the transfer of titles thereof is treated as supply of services under clause (b) of para I of schedule II of CGST Act 2017. There is no difficulty in arriving at the conclusion that there is nothing to show that the amendment notification No.38/2017 would have retrospective effect and therefore we find that the provisions of RCM u/s.9(4) of the CGST Act are applicable, irrespective of any threshold limit, right from 01.07.2017. Thus the benefit of exemption from payment of tax on RCM as provided u/s. 9(4) of the GST Act is not applicable from 01.07.2017 as claimed by the applicant - thus, the RCM is applicable on the transactions effected from 1.7.2017 to 12.10.2017. The issues, interest on the delayed payment of CGST / SGST and effect of taxation of circular dated 2nd May 2018, are not answered since the question has been withdrawn by the applicant.
-
2019 (4) TMI 453
Extension of FORM GST TRAN-1 - transitional credit - migration to GST regime - Held that:- As the petitioner has already submitted an application for extension of time, to submit the revised FORM GST TRAN-1 to the Nodal Officer, the Commissioner concerned is directed to ensure that the aforesaid application so submitted by the petitioner before the Nodal Officer may be called upon by him and appropriate orders are passed on it in accordance with law most expeditiously, if possible, within a period of one month from the date of production of a certified copy of this order before him - Petition disposed off.
-
2019 (4) TMI 451
Import of goods from Pakistan - Benefit of concessional rate of duty - Applicability of Notification dated 16.2.2019 - goods already entered into India on or before 16.2.2019 and bill of entry had already been filed - Release of goods - petitioner prayed that liberty be granted to the petitioner to file a detailed and comprehensive representation before the appropriate authority by incorporating the grievance as raised in the present writ petition - Held that:- The present petition disposed off by granting liberty to the petitioner to file a detailed and comprehensive representation raising all the pleas as raised in the present writ petition before the appropriate authority.
-
2019 (4) TMI 422
Application for withdrawal of Advance Ruling application - input tax credit - Operation & Maintainenance service received by the applicant in Pre-GST regime - invoices for such services were received after the appointed date - Held that:- The application filed by the Applicant for advance ruling is disposed Off as withdrawn.
-
2019 (4) TMI 421
Levy of GST - reimbursement of expenses from the lessee by the lessor at actuals - Rate of GST? - Pure Agent services or not - composite supply or mixed supply? - Applicant is of the view that reimbursement of water charges, electricity charges, is nothing but repayment of certain expenses incurred by a person on behalf of other and they do not have character of supply as defined under the GST Act. Held that:- The applicant has agreed to lease out the Theatre which is an immovable property to lessee to conduct and operate the Theatre for rent. As per entry no. 5 (a) of Schedule II - Activities of Transaction to be treated as supply of Goods or supply of Services; renting of immovable property is a supply of services and liable to tax under the provisions of GST Act. We strongly feel that Theatre business will not be organic unless it is accompanied with supply of power and water. The utilities such as electricity, supply and water supply are basic amenities subject to which competent authority will not issue No objection Certificate to conduct business of running a Theatre. As such applicant is providing more than two services such as renting of immovable property, supply of power through DG set and water through RO besides cooking fuel. Composite supply or mixed supply? - Held that:- The renting of immovable property would be the main supply and provision of other utilities such as electricity, and water supply, fuel etc. would be in the nature of ancillary supply which help in better enjoyment of the main supply that is Theatre. Principal supply or main supply basically signifies the supply of goods or services that is formed as a substantial constituent of a composite supply and any other supply being ancillary - the utility charges in the nature of electricity charges and water reimbursed by the applicant from lessee forms part of composite supply. The value of supply includes all amounts that pertains to specific supply for the purpose of levy of tax except, subsidies provided by the government and the value of discount. However, as per Rule 33 of GST Valuation Rules, 2017 the expenditure or cost incurred by a supplier, as a pure agent of the recipient of the supply shall be excluded from the value of supply. However, such exclusion of expenditure incurred as a pure agent is possible where the conditions are required to be considered as a pure agent and further conditions stipulated in the rules are satisfied by the supplier. Pure Agent or not? - Held that:- The applicant has installed the main electric connection and has different sub connections at each location for reading actual consumption of electricity. Applicant has also installed the DG sets for generation of electricity in case of power failure. The water required is also provided through RO system. All these goes to show that these supplies are on their own account and is for effective enjoyment of activities related to the Theatre - the provision of supply is made by the applicant to comply with the mandatory requirements of the local body and the Licensing Authority under Cinema Act and Cinema Rules 3 to operate the Theatre - there is no authorization, obtained by the applicant from the recipient of the services, to act as pure agent and to make payment to third parties. The applicant has failed to establish themselves as a pure agent as defined under the GST Valuation Rules and therefore the expenditure or cost incurred by the applicant and subsequent reimbursement thereof cannot be excluded from the value of supply.
-
Income Tax
-
2019 (4) TMI 420
Taxability of minor u/s 64(1)- both the parent had died - Taxability in hand of representative assessee - reopening of assessment - AO held that since both the parents expired, entire income earned was liable to be taxed in the hands of the Assessee-Minor herself - Tribunal held that no provision to assess the minor's income in the hands of the minor, hence not taxable - HELD THAT:- we are of the clear opinion that the Tribunal has wholly erred in holding that since there is no provision to assess the minor's income in the hands of the minor and, if the parents do not survive, the income cannot be clubbed in the hands of any of his grandparents or anybody, who maintains minor child, and, therefore, the orders of two authorities bringing the income of minor to tax in the hands of the Minor deserve to be quashed While the foundational error in the order of the Tribunal is leaving the income of the Minor untaxed altogether, the error committed by the two authorities below, namely, Assessing Authority and First Appellate Authority, was that they held the income to be taxable in the hands of the minor girl herself, altogether forgetting the provisions of Sections 159 and 160 (1) (ii) in Chapter XV of the Act. They also possibly did not fully comprehend the entire Scheme of the Act in a composite and harmonious manner and instead of considering the question as to who should be assessed and held liable to pay the tax, they fell in error of taxability or non-taxability entirely in respect of the income of the Minor, which was apparently taxable under the provisions of the Act. The income from share of partnership firms and income of interest from money lending business do not have any exemption from tax in the exemption provisions contained in Chapter III, comprising Sections 10 to 13B and, therefore, what was apparently taxable has been let off by the learned Tribunal to be altogether non-taxable and that too ignoring the important provisions of the Act, as aforesaid. Once we come to the conclusion that Income in the present case was taxable in the hands of representative-assessee-Guardian and grandfather Mr.R.P.Sarathy for the period for which the said minor girl Ms.M.Pranuthi remained a Minor, we do not find any justification for holding otherwise, by pronouncing upon the question of validity of Reassessment proceedings under Section 147/148 of the Act. The said proceedings were also apparently rightly invoked on the basis of Return of Income filed by grandfather Mr.R.P.Sarathy himself on behalf of Minor only as NIL Return and only an Intimation of Assessment under Section 143 (1) (a) of the Act was issued by the Assessing Authority. In order to bring to tax such escaped income, the Assessing Authority rightly invoked Section 147/148 of the Act. It is brought to the notice of this Court that the Guardian of the Minor, namely, Mr.R.P.Sarathy has expired recently on 04.01.2019 and that the Minor Ms.M.Pranuthi has become major. Therefore, it is made clear that our answers have been given for the period in which Ms.Pranuthi was only Minor in the years from 1995 to 1999 and the assessment/reassessment made against her grandfather as Legal Representative was valid and the consequential recovery action can now proceed against her and her assets or business, as the case may be - Decided in favour of revenue
-
2019 (4) TMI 419
Power of Tribunal - AO made addition as non-genuine purchases of two parties - enquiry letters issued to the aforesaid two parties, had been returned unserved - CIT(A) direct AO to conduct an inquiry with the AO having jurisdiction over the PAN of the said parties and ascertain whether return of income has been filed for the relevant year by the party and if so, he had disclosed the turnover of business in such return, in excess of amount of purchases, shown by the assessee, as have been made from the said party - HELD THAT:- The Tribunal, being the last court of fact and law, ought to have considered the materials on record, especially, when it has come on record that the said party has not filed the return of income. The Tribunal was swayed away by the contention of the respondent – assessee, but lost sight of the fact that the Revenue has also raised the issue of addition of ₹ 3,38,72,852/- to be non-genuine purchases. The matter is remanded back to the Tribunal concerned to re-hear the matter afresh and decide the appeal on merits.
-
2019 (4) TMI 418
Reopening of assessment - validity of reasons to believe - assessee showed license fee of unsold flats as ‘Income from house property’ - HELD THAT:- AO has failed to refer to any tangible material coming to his knowledge, which was relied upon for reopening the assessment, there is no merit in re-assessment proceedings initiated in the hands of assessee. It may also be pointed out that re-assessment proceedings were initiated on the ground that declaration of income from unsold flats by the assessee as ‘Income from house property’ was not correct and the Assessing Officer was of the view that income should be assessed as ‘Income from other sources’. However, the jurisdictional High Court in CIT Vs. Sane & Doshi Enterprises (2015 (4) TMI 882 - BOMBAY HIGH COURT) have held the same to be assessable as ‘Income from house property’. Accordingly, we find no merit in the jurisdiction exercised by Assessing Officer. Since we are deciding the issue on preliminary issue itself and even where the issue is in favour of assessee on merits, the appeal filed by assessee is thus, allowed.
-
2019 (4) TMI 417
Deduction claimed u/s 80IB(10) - entitled to the prorata deduction - profits being earned on the sale of additional seven floors constructed in building-B of approved project - direction to exclude profits on prorata basis on seven additional floors in building-B and allow the claim of deduction on remaining profits - HELD THAT:- When the originally sanctioned units were completed by assessee and it sought completion certificate, the same was not issued by PMC as the assessee had violated the provisions of section 80IB(10) and constructed additional seven floors in building-B without any approval; against the same on a later date, the assessee paid compounding fees and even those floors were approved and completion certificate of the building-B was issued in 2012. The assessee is not entitled to claim any benefit of deduction u/s 80IB(10) in respect of said additional seven floors in building-B as the same were constructed without any approval. For the balance project, which was constructed as per approved building plan and within stipulated time provided under section 80IB(10) the claim of assessee cannot be denied. CIT(A) has categorically noted the fact that the assessee had applied for completion certificate vide its application dated 25.03.2011, which was submitted in the office of PMC on 30.03.2011 i.e. well within stipulated date. Though AO had pointed out that the said application was submitted on 01.04.2011, but necessary verification exercise was carried out by the CIT(A) and information was received from the Assistant Engineer, PMC, Pune and the copy of said application for occupancy certificate is scanned and of the appellate order. Hence, it is clearly proved that the application was filed within time in respect of 11 floors of building-A and 4 floors of building-B. Once the same have been completed within stipulated time, merely because the completion certificate has not been received, cannot result any denial of claim of deduction u/s 80IB(10) in respect of completed units. The assessee is entitled to the prorata deduction in this regard. The assessee is not entitled to claim any deduction under section 80IB(10) in respect of additional seven floors in building-B, which were constructed without any approval from PMC, the same were approved by paying compounding fees and any issue connected with the same is not before us and hence, we uphold the order of CIT(A) in allowing the claim of assessee in respect of proata deduction of the completed units. The grounds of appeal raised by Revenue are thus, dismissed.
-
2019 (4) TMI 416
Case selected under CASS - limited scrutiny - case of assessee was selected for scrutiny under CASS on the ground that the assessee had shown low profit before interest and tax - no permission from the superior authorities extension of scope of scrutiny to other issues and making addition on such issues, where the case of assessee was picked up for scrutiny under CASS - HELD THAT:- We hold that in the absence of any approval received from Pr.CIT / CIT, there is no merit in the order of AO in making any addition other than on the issues selected under CASS. Thus, the assessment order passed in the present case suffers from infirmity and the same is quashed.
-
2019 (4) TMI 415
Approval u/s 80G(5)(vi) - - assessee-society has been granted registration u/s 12AA - allegation that no activity have been carried out by the assessee-society - HELD THAT:- Since the assessee-society has been granted registration under section 12AA therefore, it is an admitted fact that assessee is established for charitable purposes having the objects which are charitable in nature. Therefore, even if no activity have been carried out by the assessee-society towards its objects, it would not make the assessee-society disentitle for approval under section 80G. Assessee-society is carrying out certain charitable activities, which have not been examined by the Ld. CIT(E). Therefore, the matter requires reconsideration at the level of the Ld. CIT(E). Further, the Ld. CIT(E) is not justified in holding that assessee-society failed to produce the instance of any donation received by the society because unless the assessee-society is granted approval under section 80G(5), nobody will provide donation to the assessee-society. - Decided in favour of assessee for statistical purposes.
-
2019 (4) TMI 414
Disallowance u/s 14A r.w. Rule 8D - HELD THAT:- Disallowance of expenditure in terms of Section 14A r.w. Rule 8D cannot exceed the exempt income itself. AO is accordingly directed to restrict the disallowance under s.14A of the Act to the extent of exempt income. See CIT vs. Corrtech Energy Pvt. Ltd.[2014 (3) TMI 856 - GUJARAT HIGH COURT] MAT - book profit computed for the purposes of Section 115JB of the Act on account of disallowance under s.14A - HELD THAT:- In view of the long line of judicial precedents including the decision of Special bench in ACIT vs. Vireet Investments Ltd. [2017 (6) TMI 1124 - ITAT DELHI], we find merit in the plea of the assessee. The AO is accordingly directed to delete adjustments made to the book profit on this score. Disallowance of provision for leave encashment and provision for gratuity u/s 43B - HELD THAT:- We find that identical issue came up for consideration by the co ordinate bench of Tribunal in Integrated Coal Mining Ltd. vs. DCIT (2015 (12) TMI 1326 - ITAT KOLKATA) wherein the issue was set aside to the file of the AO to pass appropriate order based on the outcome of the main appeal on merits by the Supreme Court in Exide Industries Ltd.[2009 (5) TMI 894 - SUPREME COURT]. In parity, the grievance of the assessee as per Ground no.3 is set aside to the file of the AO. Payments of employees’ contribution towards provident fund - HELD THAT:- This issue has been decided against the assessee by the Hon’ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT]. Therefore, the grievance of the assessee is answered in negative and against the assessee. Adjustment of provision of wealth tax for Book profit u/s 115JB - HELD THAT:- The assessee seeks to claim that wealth tax is not a tax defined under Explanation 2 to Clause (a) of Explanation 1 to Section 115JA of the Act. In parity with the decision of the co-ordinate bench in ASB International (P.) Ltd [2012 (8) TMI 335 - ITAT MUMBAI] and CIT vs. Echjay Forgings (P.) Ltd. [2001 (2) TMI 56 - BOMBAY HIGH COURT] AO is directed to exclude the provision for wealth tax for the purposes of computation of book profit. Excess interest payment under s.40A(2)(a) - Treatment to interest as business expenditure - HELD THAT:- we are in agreement with the plea of the assessee that merely because the assessee company is paying huge interest on outstanding credit balance to Sun Pharma while no interest is being charged by the assessee from its debtors cannot be the justifiable reason for resorting to the disallowance of interest. See CIT vs. Aditya Medisales Ltd. [2010 (5) TMI 823 - GUJARAT HIGH COURT] towards deletion of disallowance made on account of excess interest payment under s.40A(2)(a) of the Act. Thus, the issue stands concluded in favour of the assessee Allowability of Discount payment to customers C&F agents u/s 37 - HELD THAT:- The assessee in the instant case demonstrated on facts that payment of such discounts are integrally connected to the sales/turn over achieved or has potential to achieve. The discount expenses have thus been incurred with the object of furthering the trade or business interest of the assessee. Therefore, such expense falls within the expression ‘wholly and exclusively’ referred to in Section 37 - no hesitation to concur with the conclusion drawn by the CIT(A) for allowability of discounts given to stockiests/distributors etc. We are unable to understand the reasoning of the CIT(A) for discarding the claim of discount expenditure paid to the Doctors. When the test of commercial expediency applied in its natural perspective, there is no reason to exclude Doctors purchasing medicines from C&F agents for the purpose of eligibility of discount payments. We thus set aside the action of the CIT(A) to this extent and direct the AO to allow the trade discount paid to all parties including Doctors as ordinary business expenditure. Thus, Ground No.2 of the Revenue’s appeal is dismissed Eligible for deduction u/s 80G - donation to to Vision Foundation of India - HELD THAT:- The payment made on instruction of Shir Dilip Sanghvi, receipt of thanks by Shri Dilip Sanghvi and receipt sent to Shri Dilip Sanghvi are wholly irrelevant considerations as rightly observed by the CIT(A). It is the assessee company which is entitled to deduction under s.80G for which conditions laid down therein are not shown to be not fulfilled. Therefore, we decline to interfere of the order of the CIT(A). - Decided against revenue. Disallowance of discount paid to Doctors - HELD THAT:- No merit in the disallowance made by the AO towards discount paid to the Doctors as discussed in relation to AY 2009-10. We thus agree with the conclusion drawn by the CIT(A) despite wrong reasoning. The Ground no.2 of Revenue’s appeal is thus dismissed. Disallowance u/s 14A for interest - HELD THAT:- CIT(A) has rightly approached the issue and deleted the proportionate disallowance of interest expenditure under Rule 8D(2)(ii) on the ground that investment in shares giving rise to exempt income is far lower than the corresponding interest free funds available with the assessee by way of capital and reserves. Therefore, a presumption would naturally arise in favour of the assessee for deemed utilization of interest free funds for investments yielding tax free income in preference to the borrowed funds. Therefore, we do not see any infirmity in the order of the CIT(A). Suo motu disallowance for earning of exempt income - The Revenue authorities, in our view, have also rightly invoked formula under Rule 8D(2)(iii) for disallowance of management and general expenses deemed to be attributable to tax free income. However, the disallowance is required to be computed having regard to the investments which has actually yielded exempt income instead of gross investments in consonance with the decision of the Special Bench in Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] as placed on behalf of the assessee. The issue is therefore remitted back to the file of the AO for re-computation of disallowance under Rule 8D(2)(iii) of the Rules. AY 2009-10 - In view of sufficient own funds available (Rs.30.35 Crores) in excess of corresponding investment (Rs.12.54 Crores) giving rise to exempt income, there is no warrant to make disallowance under Rule 8D(2)(ii) in view of the decision in CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. Disallowance under Rule 8D(2)(iii), the AO shall re compute the disallowance with reference to investments which have actually given rise to tax free income instead of gross investments
-
2019 (4) TMI 413
Adjustment on account of AMP expenses - “international transaction” - Bright line Test application - HELD THAT:- As relying on M/S PEPSICO INDIA HOLDINGS PVT LTD, ERSTWHILE M/S PEPSI FOODS PVT. LTD.) VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 1, CHANDIGARH [2018 (12) TMI 277 - ITAT DELHI] reject Bright line Test applied by TPO and further hold that, AMP expenditure cannot be considered as International transaction in the facts and circumstances of present case. - Decided in favour of assessee.
-
2019 (4) TMI 412
TPA - Comparable selection - HELD THAT:- Assessee is engaged in the business of manufacturing and marketing of Crushers and Screeners and also provided business support and engineering design services to its Associated Enterprises (AEs)Companies functionally dissimilar with that of assessee need to be deselected from final list. Adjustment on account of capacity utilization - HELD THAT:- Capacity adjustment is not limited to depreciation and repair of machinery. In a business entity, there are certain fixed overheads such as rent, administrative expenses etc., which have to be incurred irrespective of the percentage of capacity utilization. There are variable expenditures which are in direct proportion to the production i.e. the capacity utilized. The net margin of an entity will vary with that of another entity in case there is a difference in the capacity utilization. If there is higher capacity utilization, then the fixed overheads get spread over such higher capacity utilization with the result that the net margin of such entity will be much higher as compared to the another entity where the capacity utilization is low and as such there is a higher proportion of fixed overheads which get allocated to such lower capacity/production. Thus, the right method is to identify all the fixed expenses including depreciation and to adjust the same in the ratio of the capacity utilized. We direct the TPO to exercise his powers under section 133(6) of the Act and to call for the information on capacity utilization of comparable companies. After obtaining the information, he will share the details so obtained with the assessee and give an opportunity to the assessee and grant adjustment for capacity under-utilized. Addition on account of Foreign Exchange Loss - addition u/s 43A - HELD THAT:- Any difference arising consequent to a change in the Rate of Exchange after the acquisition of such asset, the difference is adjusted against actual cost/written-down value of such asset. Thus, the condition for applicability of this section is that the capital asset is acquired from a country outside India. In the present case, the assets were purchased in India and not acquired from the country outside India. Thus, DRP was correct in holding that provisions of section 43A, proposed by the AO in the draft assessment order, are not applicable. This issue, as rightly stated by the Ld. DRP, is covered by the judgement of Hon ble Supreme Court in the case of Woodward Governor India Private Limited [2009 (4) TMI 4 - SUPREME COURT]. Adjustment on account of non-cenvatable custom duty on imports made by the assessee company while computing margin of the Manufacturing segment - HELD THAT:- In case non-cenvatable custom duty on import made by the assessee company is materially affecting the transaction vis- -vis the comparables being considered by the TPO then the same needs to be eliminated. Since, this issue has not been considered by the TPO and considering the fact that we have remitted the matter back to AO for allowing adjustment on account of capacity utilization, we deem it fit to restore this issue also to the TPO. The TPO will examine whether non-cenvatable custom duty on imports paid by the assessee is materially affecting the PLI of the assessee company and if he finds that this payment of non-cenvatable custom duty is materially affecting the transaction with that of the comparables then he will suitably make adjustment thereof. Adjustment for abnormal foreign exchange fluctuation while computing margin of the Manufacturing segment - exclusion of the foreign exchange loss on account of restatement of loan liability - HELD THAT:- In the present case, the admitted fact is that this relates to restatement of loan liability. Such expenditure, though, may be allowable as business expenditure while computing the taxable income but the fact that such expenditure is of extra-ordinary nature cannot be ignored. Therefore, we are of the view that this exchange loss needs to be excluded while computing the PLI of the assessee. We are also in agreement with the contention of the Ld. AR that only the Foreign Exchange loss pertaining to the Manufacturing segment needs to be considered while computing margin of the Manufacturing segment. Accordingly, we direct the AO to also exclude Foreign Exchange loss pertaining to other segments while computing the margin of the Manufacturing segment. Value of consumption of the raw material purchased from associate enterprise - HELD THAT:- It is undisputed fact that the assessee has made purchases of ₹ 105,55,16,000/- during the year out of which material worth ₹ 41,34,29,000/- was not consumed during the year and, therefore, the impact on the margin, if any, in respect of such purchases during the year is only of the material consumed and not of the material purchased and which is lying unutilized at the end of the year as closing stock. The purchase cost debited in respect of such raw material and the valuation of such material as closing stock is at same cost. Considering this fact, we direct the TPO that in case any adjustment is required to be made after giving effect to the adjustment on account of capacity and other issues decided by us in this appeal the same is to be restricted to the material purchased from the AE and consumed during the year.
-
2019 (4) TMI 411
Disallowance u/s 14A - application of matching concept - no exempt income received during the previous year - HELD THAT:- As decided in assessee's own case [2017 (5) TMI 1409 - ITAT CHENNAI] the exemption extended to dividend income would relate only to the previous year when the income was earned and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. See M/s. Redington (India) Ltd. Versus ACIT [2017 (1) TMI 318 - MADRAS HIGH COURT] - Decided against revenue
-
2019 (4) TMI 410
Stay petition - huge difference of Valuation of shares between assessee and AO - assessee valued share as per rule 11UA - prima facie balance of convenience for grant of stay of entire demand - HELD THAT:- Huge difference in the valuation done by the AO and working given by the assessee as per Rule 11UA, which prima facie appears to be based on the method laid down in Rule 11 UA, we are of the opinion it is not a prima facie case to reject the stay application and direct the assessee to pay such huge demand. Looking to the financial position of the assessee as on date and also as per the figure given in the audited balance sheet and profit for the year ending 31st March, 2018, it is seen that assessee does not have any means or any liquid asset to pay such a huge demand. Thus, prima facie balance of convenience is in favour of the assessee for grant of stay of entire demand. Accordingly, we are granting stay of entire outstanding demand of ₹ 59,61,35,380/- for the period of six months; or till the passing of the order whichever is earlier. Since appeal has already been posted on out of turn basis, therefore, we are adjourning the matter to be fixed for hearing on 6th May, 2019. Stay application filed by the assessee is allowed.
-
2019 (4) TMI 409
Grant of registration u/s. 12A - no proper opportunity to being heard to assessee - SCN received belatedly - assessee not satisfied the Commissioner about the conditions required for grant of registration - application for grant of registration rejected - HELD THAT:- Show cause notice dated 11.09.2017 issued by the CIT(E) was received by the assessee only on 12.12.2017. Our attention was drawn to the date of receipt seal of the assessee in which the receipt of show cause notice issued by the CIT(E) dated 11.09.2017 is recorded as 12.12.2017. In the given facts and circumstances, we are satisfied that the assessee did not have proper opportunity of being heard before the CIT(E). We, therefore, set aside the order of CIT(E) and direct the CIT(E) to examine afresh the question of grant of registration u/s. 12A to the assessee, after affording proper opportunity of being heard. - Appeal of assessee allowed for statistical purposes.
-
2019 (4) TMI 408
Suppressed Income from Drama Company - suppression of turnover - Estimation of profit on adhoc basis - HELD THAT:- The gross receipts as per the profit and loss accounts filed by the assessee, exceeds the total amount as per the impounded material and there is no suppression of turnover in Assessment Years 1996-97, 1997-98 and 1998-99. Net income from the Drama Company, as a percentage of gross receipts, cannot be as high as has been held by the CIT(A). In this context, it is pertinent to note that the Co-ordinate Bench of this Tribunal in the first round of appeals for these Assessment Years at para 5.4 thereof had come to the conclusion that no addition was called for on this issue. This finding of the Tribunal has not been controverted by the authorities below i.e., by the CIT(A); while sustaining the addition made at on adhoc figure of 50%; as being the earnings of the drama company. Thus in the absence of any comparable case put forth by the authorities below, the additions, even to the adhoc extent upheld by the CIT(A) cannot be justified - decided in favour of assesee Additions on account of Kalyana Mantapa (i.e., income from house property) - HELD THAT:- The assessee has neither received any income / receipt from the Kalyana Mantapa nor has she incurred any expenditure pertaining the same. All donations / receipts were received by Someshwar Temple Committee and the same were expended for temple organisational activity and the Kalyana Mantapa. If at all any addition is to be made, the same ought to have been done based on notional ALU of the property. In my view, the additions made, based on receipts by the Temple Committee, is not correct and therefore delete the addition sustained by the CIT(A) @ 30%, on account of income from Kalyana Mantapa. Consequently, grounds raised by the assessee on this issue are allowed. Validity of assessment u/s 147/148 - reasons provided to assessee - No objection filed - HELD THAT:- the assessee had requested for a copy of the reasons recorded for initiation of proceedings vide letter dated 05.11.2007; which were communicated to the assessee by the AO vide letter dated 12.02.2008. It is a matter of record that the assessee has not raised any objections in this regard. In the light of the above facts, it is evident that the AO has correctly and validly assumed jurisdiction under section 147 of the Act for commencing proceedings for assessments for Assessment Years 1995-96 to 1998-99. Though raised by the assessee, it is seen that there is no violation of the provisions contained in section 151 of the Act. Charging of interest u/s 234A and 234B - HELD THAT:- The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon ble Apex Court in the case of Anjum H. Ghaswala (2001 (10) TMI 4 - SUPREME COURT) and therefore, uphold the action of the AO in charging the assessee the aforesaid interest u/s 234B of the Act. The AO is, however, directed to re-compute the interest chargeable u/s 234B of the Act, if any, while giving effect of this order.
-
2019 (4) TMI 407
Computation of long term capital gain - property inherited - indexed cost of acquisition u/s 49 - assessee had become the owner of the property after the death of his father and mother - whether, the benefit of indexation has to be taken from the year in which the asset was first held by previous owner and not from the year in which the asset was held by the assessee? - HELD THAT:- As MANJULA J. SHAH (DEAD) [2011 (10) TMI 406 - BOMBAY HIGH COURT] held the expression “held by the assessee” used in Explanation (iii) to section 48 has to be understood in the context and harmoniously with other sections and as the cost of acquisition stipulated in section 49 means the cost for which the previous owner had acquired the property, the term “held by the assessee” should be interpreted to include the period during which the property was held by the previous owner. Hence, indexation of cost of improvement shall be allowed from the date the previous owner acquired that asset. Further, the Hon’ble Delhi High Court in case of Arun Shungloo Trust [2012 (2) TMI 259 - DELHI HIGH COURT] has also held that benefit of indexation cost of improvement by previous owners in cases covered by section 49 would be allowed. - Decided against revenue
-
2019 (4) TMI 406
Assessment u/s 153A r.w.s. 143(3) - No incriminating material found during the course of search - post search investigation - Addition of share application money received u/s 68 and disallowance of donation paid - denial of right to cross-examination a witness - HELD THAT:- No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have been admittedly retracted by them and the Assessing Officer has not based the additions on these statements. Even otherwise, when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. Assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the ld. D/R claims that the additions have been made. AS in the case of Kishinchand Chellaram vs. CIT [1980 (9) TMI 3 - SUPREME COURT] had held that the opportunity of cross-examination must be provided to the assessee. Also it is not clear as to which of these statements were recorded during the course of search operation u/s 132 or whether the statements were recorded during the course of any survey operations u/s 133A. It is well settled that a statement recorded during the course of survey operation cannot be used as evidence under the Act. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be part of the chain of companies was not confronted to the assessee. The alleged statements that were recorded from directors of these companies which formed this alleged chain were also not brought on record. Only a general statement has been made. There is no evidence whatsoever that cash has been routed from the assessee company to any of these chain of companies. There is no evidence that any cash was deposited by the assessee company. Moreover, there is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company. - Decided in favour of assessee.
-
2019 (4) TMI 405
Assessee in default - non deduction of TDS u/s 194C - payment to contractor - HELD THAT:- Supreme Court in the case of HINDUSTAN COCA COLA BEVERAGE PVT. LTD VERSUS COMMISSIONER OF INCOME TAX [2007 (8) TMI 12 - SUPREME COURT OF INDIA], has held that the taxes cannot be recovered once again from assessee in a situation in which recipient of income has paid due taxes on income embedded in payments from which tax withholding requirements were not fully or partly, complied with by assessee. We are therefore inclined to set aside this issue to Ld.AO for verification whether taxes has been paid by RIETS on amount received from assessee during the year under consideration, either directly or in the form of withholding tax, which stands deposited with government Treasury as per law - allowed for statistical purposes
-
2019 (4) TMI 404
Admission of the additional ground - cash found in search - year of taxability - search action on the bank locker of the assessee was carried out on 09/09/2010 - addition in AY 2009-10 - Whether any addition for the unexplained cash found could be made in the assessment year corresponding to the previous year in, which the locker was searched or other year - HELD THAT:- There is no dispute as far as date of search on the locker owned by the assessee is concerned, which is 09/09/2010. The date of search falls in previous year 2010-11 and the corresponding assessment year is 2011-12. There is nothing on record to show that this cash found was out of any income earned by the assessee in the year under consideration. In absence of any explanation in respect of the cash found during the previous year corresponding to the assessment year 2011-12, the addition should have been made only in the assessment 2011-12 and not in the assessment year under consideration. In view of the settled position of law on this issue, we set aside the order of the lower authorities and direct the Assessing Officer to delete the addition in the year under consideration. The additional ground raised by the assessee is accordingly allowed.
-
2019 (4) TMI 403
Rectification of mistake u/s 154 - Reopening of assessment u/s 147 - reopening after expiry of 4 years - whether there was no failure on the part of the assessee to disclose any material or information necessary for assessment 143(3) - determination of claim of losses while passing order u/s. 143(3) for the assessment year 2006-07 on the basis of the original return of income filed by the assessee - HELD THAT:- Referring provisions of section 147 we find that the AO has failed to substantiate that how there was escapement of income after expiry of 4 years as there was no failure on the part of the assessee to disclose any material or information necessary for assessment 143(3) of the act. No substance in the decision of CIT(A) holding without any reason that the order passed u/s. 154 by the assessing officer on 26-11-2010 allowing carry forward of loss was not sustainable in law. We observe that the assessing officer has completed the assessment for the assessment year 2005-06 on 06-12-2007 and addition to income was made u/s 40(a)(ia) as the amount of TDS was paid after the specified due date. Therefore, the assessee has filed the revised return of income for the assessment year 2006- 07 within the stipulated time claiming increased amount of losses, however, the assessing officer inadvertently determined the claim of losses while passing order u/s. 143(3) for the assessment year 2006-07 on the basis of the original return of income filed by the assessee. When the matter was brought to the notice of the assessee as elaborated above he has rectified the apparent error by passing order u/s. 154 of the act in the assessment year 2007-08 vide which the claim of the losses of the assessee was allowed. AO has rectified the mistake u/s. 154 of the act and correctly allowed the claim of set off of carried forward business/depreciation, therefore, we are not inclined with the unjustified finding of the CIT(A). Considering we allow the ground of appeal of the assessee for assessment years 2007-08 to assessment year 2008-09. In the result, all the grounds appeal of the assessee are allowed.
-
2019 (4) TMI 402
Revision u/s 263 - difference of opinion - allegation that assessee has paid higher prices for the goods and services to its sister concern over the FMV and h disallowable u/s 40A(2)(b) - HELD THAT:- The aspect of payment of conversion charges and job charges by the assessee to various parties including the related parties as specified u/s 40A(2)(a) together with the respective rate per MT paid to each of those parties thereon were thoroughly examined by the AO in the course of assessment proceedings itself. AO, after examination of those factual details submitted by the assessee with corresponding evidences thereon, had arrived at a conscious conclusion that no disallowance u/s 40A(2)(a) of the Act was warranted in the facts and circumstances of the case while completing the assessment. We find that the CIT had only tried to substitute his knowledge in technical aspect of the industry thereby trying to substitute his opinion on the impugned issue as against the opinion already framed by the AO. This, in our considered opinion, is not permitted under the revisionary proceedings u/s 263. See GABRIEL INDIA LIMITED [1993 (4) TMI 55 - BOMBAY HIGH COURT] - Decided in favour of assessee.
-
2019 (4) TMI 401
Addition u/s.68 - Securities Premium received from Investors - addition u/s 56(2)(viib) - addition u/s addition as shares were issued at high premium since the financials of the company did not justify issue of shares at high premium - Source of source - HELD THAT:- nothing in law prohibits issue of shares at high premium and the assessee had duly complied with statutory requirements as to shares allotment. Importantly, the provisions of Section 56(2)(viib) were not applicable to the assessee since these provisions are inserted by Finance Act, 2012 and are applicable with effect from 01/04/2013 only. The revenue, in our opinion, by questioning the wisdom of the investor, could not make addition in the hands of the assessee as unexplained cash credit u/s 68 unless it was established that the assessee’s unaccounted money was routed in the books through the mechanism of fictitious share allotment. Nothing on record demonstrate such exchange of cash between the investor and the assessee. The assessee was incorporated only during the year 2008 and it was in the process of setting up its business operations. Under this scenario, is difficult to infer that the assessee had such huge unaccounted money in its possession which was routed in the accounts through the mechanism of share allotment. The assessee was required to prove the source of the money only and nothing beyond. We find that the assessee has demonstrated the same by filing the requisite documents in this regard to the revenue authorities. Totality of the above factual matrix as well as settled legal position lead us to form a belief that the impugned additions u/s 68, in the hands of the assessee, were not justified. By deleting the same, we allow the appeal of assessee
-
2019 (4) TMI 400
Revision u/s 263 by CIT - Long term capital gain allowed by AO - proof of AO's order as erroneous in so far as being prejudicial to the interest of the revenue - HELD THAT:- AO had made detailed inquiries regarding the assessee’s claim of long term capital gain and, thereafter, after considering the reply submitted by the assessee, the Assessing Officer had made further inquiries also which is evident from the copy of questionnaire as well as the reply thereto which has been placed in the Paper Book filed by the assessee before us. Thus, in view of the documentary evidences as called for and examined by the AO, it is very much evident that the AO had applied his mind to the issue of long term capital gains and it was only after having been satisfied with the correctness of the claim that he accepted the return filed by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the AO while accepting the claim of the assessee and, therefore, the contention of the Pr.CIT that no inquiry was made by the AO is factually incorrect. It is not the case where no inquiry has been made by the AO. Merely because the Ld. Pr. CIT felt that further inquiry should have been made does not make the order of the Assessing Officer erroneous and prejudicial to the interest of the revenue. Pr.CIT has merely remitted the matter back to the AO without making any inquiry himself. It is apparent that no independent inquiries have been made by the Pr.CIT although it was incumbent upon him to make such inquiry so as to reach the conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue - Pr.CIT had wrongly invoked the revisionary powers u/s 263 - Decided in favour of assessee.
-
2019 (4) TMI 389
Taxability of notional rental income regarding property held as stock-in-trade - unsold flats of the construction company - Income from house property - addition u/s 22 r.w.s. 23(4) - HELD THAT:- It is an undisputed fact that the assessee never let out the unsold flats held as stock-in-trade. It is the case of the AO that the provisions of sections 22 to 23 of the Act should be invoked for taxing the notional income on such flats. As perused grounds revolved around the provisions of sections 22 to 23 relating to the head of income i.e. income from house property. Further, it is an undisputed fact the provisions of section 23(5) of the Act was amended by the Finance Act, 2017 w.e.f. 01.04.2018 and, therefore, these provisions will not come to the rescue of the Assessing Officer for bringing the deemed income on such unsold flats to taxation under the head ‘income from house property’. In absence of enabling the provisions of the Income Tax Act, calculating the notional income in respect of the properties which were not rented out and rental income was never earned actually, the AO’s policy to tax such income is unsustainable in law in view of the various decisions cited in the preceding paragraphs of this order. - Decided in favour of assessee.
-
2019 (4) TMI 388
Scope of scrutiny in cases selected under CASS - conversion the limited scrutiny in to unlimited - CBDT Instruction No.7/2014, dated 26-09-2014 - approval of the Pr.CIT/DIT for taken up for comprehensive scrutiny - HELD THAT:- In the cases, selected under CASS, the additions on the non-CASS issues can only be made after obtaining due permission from the superior authorities and the said approval of the superior authorities in writing should be available on records. In all these ten appeals under consideration, we find there is no whisper about the obtaining of such approval from the superior authorities before the scrutiny scope is extended to non-CASS issues. In any case, the Assessing Officer did not make any addition on account of the issues selected under CASS. Therefore, in our considered view, the said order of the Tribunal covers the common solitary preliminary issue raised before us in all the ten appeals. Accordingly, the preliminary issue raised by the assessee in all these ten appeals is allowed.
-
Customs
-
2019 (4) TMI 452
Import of goods from Pakistan - Benefit of concessional rate of duty - Applicability of Notification dated 16.2.2019 - goods already entered into India on or before 16.2.2019 and bill of entry had already been filed - Release of goods - petitioner prayed that liberty be granted to the petitioner to file a detailed and comprehensive representation before the appropriate authority by incorporating the grievance as raised in the present writ petition - Held that:- The present petition disposed off by granting liberty to the petitioner to file a detailed and comprehensive representation raising all the pleas as raised in the present writ petition before the appropriate authority.
-
2019 (4) TMI 450
Credit of duty on its exported product - DEPB Scheme - Implementation of Exim Policy 1997-2002 - retrospective effect from 1st April, 1997 to the credit rate at 15% fixed w.e.f. 1st April, 2000 under the Duty Exemption Pass Book Scheme - Whether the petitioners are entitled to credit of duty on its exported product under the DEPB scheme at 15% with retrospective effect from 1st April, 1997, though the same was issued only on 1st April, 2000? Held that:- It was only w.e.f. 5th July, 1997 that a Public No. 22/97 was issued in exercise of powers under paragraph 4.11 of the Exim Policy inter alia providing the rate of credit at 7% of the FOB value of export under the DEPB scheme to be utilized in discharge of duty on imports. Thereafter, on the representation made by the Council to which petitioners belong the credit rate of 7% under the DEPB scheme for petitioners' final product were enhanced to 8% w.e.f. 31st March, 1999 for finally to 15% w.e.f. 31st March, 2000 on the FOB value of exported final product. It is not disputed that the Public Notice dated 31st March, 2000 fixing the rate of credit at 15% under the DEPB scheme is not made specifically retrospective. It is also not the petitioner's case that the enhancement of the credit rate under the DEPB scheme with effect from 1st April, 2000 was in view of a clarification with regard to the correct interpretation of the Exim Policy or the Handbook of the Director General of Foreign Trade - A plain reading of the provision in para 7.50 of the Handbook being relied upon by the petitioners would reveal that it applies only where the credit rate is not notified. In this case, the credit rate under the DEPB scheme was first notified on 5th July, 1997 and thereafter enhanced on 31st March, 1999, and later on 31st March, 2000. Thus, it would have no application to the present facts. The reliance upon the retrospective benefit of credit rate under the DEPB scheme in case of Marine Products is without placing on record the Public Notice by which the same was given. In any case, from the Trade Notice dated 26th February, 1999 annexed at Exhibit' P' to the petition, it appears to be a case where the description of the product in the Input-Output norms was itself changed / amended. This would lead to a change in the rate of credit of duty and the erstwhile para 7.50 of the Policy introduced w.e.f. 21st May, 1997 was in the Handbook at that time. However, the same does not find a place at the time when the Public Notice was issued on 31st March, 2000 (commencing from 1st April, 2000) as it stood substituted by the new provision. The impugned order dated 27th February, 2001 cannot be found fault with - petition dismissed.
-
2019 (4) TMI 449
Smuggling - Supari (Betel Nuts) - goods seized primarily on the premise that the goods (Supari) are of foreign origin as has been informed by two unknown businessmen and therefore, they are being imported into India unauthorisedly - Held that:- The goods (Supari) were already in India and as such there is no question of bringing the goods (Supari) inside India by the petitioner so as to categorise the transportation of goods as part of smuggling transaction - Moreover, by mere naked eyes even no businessman can certify that the goods (Supari) are of foreign origin and that there is no recognised Government Institute where the goods (Supari) could be inspected and certified so as to make distinction between local and that of foreign origin. List for admission/final disposal on the expiry of six weeks.
-
2019 (4) TMI 448
Refund of CVD - rejection on the ground of unjust enrichment - N/N. 30/2004-CE dt.9.7.2004 - Held that:- It is a fact on record that the appellants have paid CVD and under protest and the letter of protest has not denied by the Revenue. Moreover, the invoice also confirms that they have not charged any CVD from the buyer. Moreover, it is also mentioned in the invoice itself that all duties of excise exempted vide Notification No. 30/2004-CE dt.9.7.2004 - further, the chartered accountant also certifies that the amount of CVD has not recovered from the customers and to that effect, the appellant has produced a certificate dt.25.03.2017 on record. Admittedly at the time of clearance of the imported goods, the appellants have paid CVD under protest as the said duty was not recovered from the customers evidencing invoiced issued by the appellants. Therefore, the appellants have passed the bar of unjust enrichment - Merely, the appellants have made debit entry in the Profit and Loss Account as expenditure and not shown in the balance sheet as dues recoverable from the department cannot be the reason to deny the refund claim for the reason that the appellants have not passed the bar unjust enrichment - the certificate issued by the chartered accountant certifying that the appellants have not passed the duty incidence to the customers. The appellants have passed the bar of unjust enrichment and they are entitled to claim refund of CVD paid under protest at the time of clearance of the imported goods - appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 447
Smuggling - 5 gold bangles of 99.9 purity and weighing 311 grams - non-declared goods - baggage rules - It is the case of the Revenue that the appellant was, first of all, not entitled to carry the gold because they had not stayed in abroad for more than six months to become eligible passenger to bring gold as required under the Foreign Trade Policy applicable during the relevant period. Further, they have not declared the gold bangles before the Customs - confiscation. Held that:- The only point of merit which the appellant is claiming is that she had taken five kadas out of India while leaving. If that be so, it should have been recorded in the passport or the appellant could have declared somewhere before the Customs while leaving or produce the same to substantiate their claim that these bangles were actually taken by her out of India while leaving and have been brought back in the genuine personal baggage. The records would show that when the bangles seized by the Customs Officers from the passenger, she claimed that the same were given by her daughter while she was in Chicago and carried out them while leaving from abroad. Therefore, this argument of the appellant holds no water. s per the records, got the bangles while she arrived at Hyderabad Airport and had not declared the same to the Officers under Section 77. It is the responsibility of the passenger to make declaration which she failed. The fact that there were some blank forms signed by her which are lying in the coat pocket of her husband does not change this situation - They cannot even claim ignorance because they had blank baggage declaration forms which they signed and kept in pocket until caught. As far as the request of the appellant to initiate disciplinary action or direct the Department to take disciplinary action against the Officers who have investigated the matter or passed the adjudication orders or the Orders in Appeal against them are concerned, this is downright absurd. No Officer can be punished for catching the appellant smuggling the goods, investigating the matter, issuing show cause notice, adjudicating the matter or passing Order-in-Appeal - They have discharged their responsibilities in catching the appellant while smuggling gold and completing the investigation and legal proceedings. There is no ground to interfere with the confiscation of the goods in question under section 111 or penalties under section 112(a)(ii) and 114AA as ordered by the first appellate authority in the impugned order - appeal dismissed - decided against appellant.
-
2019 (4) TMI 446
Refund of CVD - appellants have preferred refund claims for ₹ 2,24,56,116/- with retrospective effect from 1st March 2006 on the grounds that Customs Department has been erroneously charging CVD at 10% AD valorem instead of specific rate of ₹ 30 per SQM in spite of the Board clarification dated 16.03.2012 - rejection of refund claim on account of re-assessment, limitation and unjust enrichment and also the classification. Held that:- The appellant has relied upon various decisions to prove that duty burden has not been passed on to the buyer and has been borne by themselves. For this also, the appellant relied upon the various decisions but the same were not considered by the Commissioner (A). In view of all these circumstances, the impugned order is not sustainable in law and therefore the same is set aside - further matter remanded to the Commissioner (A) for the purpose of examining the issue of limitation and unjust enrichment. Appeal allowed by way of remand.
-
2019 (4) TMI 445
Smuggling - export of drugs - prohibited goods or not - allegation in the show-cause notice is that the export of the drug in question was prohibited and 22 consignments of this drug were exported in violation of this prohibition and therefore such exports could amount to smuggling in terms of Section 2 read with 113 of the Customs Act - Confiscation - Held that:- The very basis of the show-cause notice that the export of the drug was prohibited is not correct as has been clarified by the Central Drugs Standard Control Organisation vide their letter dated 30.12.2011. The Notification prohibited manufacture, sale and distribution but did not specifically mention export. A doubt can arise whether sale does not include sale through export also. This point was clarified by the very organisation which is supposed to administer the prohibition. Therefore, the drugs in question were not prohibited drugs for export during the relevant period. The related question is whether appellant was required to take NOC from the Drugs Controllers General of India before export and answer is Yes . The appellants have not taken NOC before export. In such a case, when the shipping bills were processed, the exports could have been stopped by the Customs Officer who were processing the goods. Even if the Assessing Officer had missed out the fact that no NOC was submitted, the officer issuing Let Export Order is expected to verify all documents before issuing Let Export Order - It was wrong on the part of the appellant to export the drug without obtaining NOC. It was equally wrong on behalf of the Customs Officer to have cleared the export consignment without the NOC. It does not appear from the show-cause notice that the customs officers have been put to notice for clearing the consignment without NOCs or that any action has been taken against them. The lapse of the appellant in not obtaining an NOC before exporting the drug requires confiscation of the goods which were already exported under Section 113. This section provides for confiscation of goods attempted to be improperly exported - however, once the goods are exported they cease to be export goods and will not be covered by Section 113. It was quite logical why Section 113 did not cover confiscation of goods already exported. As the goods would be outside India and the Customs Act, as per Section 1(2) did not extend outside India during the relevant period. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 444
application for out-of-turn hearing of appeal - Held that:- The issue in this appeal may be covered by the earlier decisions. Accordingly, application for out-of-turn hearing of appeal is allowed and Registry is directed to list the matter for disposal on 27.02.2019.
-
2019 (4) TMI 399
Revocation of CHA License - Forfeiture of security deposit against CHA - Imposition of penalty - the inquiry revealed discrepancies in the residential address of the partner of the importer M/s. Unisys Enterprises and that the CB holder did not properly discharge his functions - Held that:- This Court is not persuaded to exercise jurisdiction to set aside the order entirely because the role ascribed to the CB holder was one of carelessness and negligence. In this regard the Court notices that both the authorities, the Commissioner as well as the CESTAT appeared to have imposed almost impossibly high standards upon the CB holder who is expected to not only verify the correctness of the documents with reference to the publically available material but also carry out independent investigations. No doubt, the CB holder acts as an interface between the Customs Authorities and facilitates the task of a consignee/importer, yet to expect such an independent agent - who is not a public servant or in any way connected with the Customs Department to act as a public trustee (an expression used by the Commissioner), is beyond what is contemplated. Appeal dismissed - decided against Revenue.
-
2019 (4) TMI 398
Revocation of CHA License - Forfeiture of security deposit - whether there was violation of Regulations 18 and 20 of Customs Broker Licensing Regulations, 2013 or not - Held that:- In this case the Customs Authorities have not held that any clandestine material was brought or that the goods were misdeclared or the contraband was the subject matter of the Bill of Entry in question. The role of the appellant was merely one of a facilitator. There is no material on record to show that the KYC documents were fraudulent or incorrect or in any manner irregular. In these circumstances, to expect the CB holder to carry out further investigations and independent inquiry not only about the existence of importing firm but also about its real owner is beyond the mandate of the law. Appeal allowed - the question of law is answered in favour of the appellant.
-
2019 (4) TMI 397
100% EOU - Effect of notification - N/N. 65/99-Cus., dated 19-5-99 - requirement of notification is that the imported capital goods shall be used within a period of one year from the date of importation or procurement - the appellant had imported the goods in November, 1997 i.e. prior to the date of issuance of the subject notification. Held that:- On a close scrutiny of the amended notification it is clearly discernible that the amended notification provides for procurement of goods either from a public warehouse or a private warehouse, in addition to import. The condition of installation of capital goods within one year was, thus, made applicable both for goods which are imported duty free as well as procured duty free, the appellant having procured the capital goods from its bonded warehouse at Nagpur, it falls under the second category and having thereafter failed to complete installation of goods so procured within one year or even within extended period of five years it is liable to pay Customs duty because the rewarehousing was done after 19-5-1999. In any case, even in the pre-amended notification the appellant was under obligation to satisfy that once having claimed exemption, the capital goods have been used in the manufacture of articles or in connection with the production or packaging or job work for export of goods or services out of India. This condition or obligation having not been fulfilled by the appellant even in March, 2005, even if for the sake of argument, the amended notification is not applied, the appellant was still liable to satisfy the demand. The substantial question of law is answered against the appellant that in the amended notification dated 19-5-1999 the date of procurement of goods would be the relevant date for application of the notification - Appeal dismissed.
-
2019 (4) TMI 396
Levy of ADD - imports of normal Butanol or N-butyl Alcohol from Saudi Arabia - period of investigation by the designated authority - material injury or not - termination of investigation - Held that:- It may be noted that though the designated authority seems to have proceeded under the assumption that the scope of the investigation was circumscribed by the prayer of the petitioning domestic industry, the petitioner company, the Rules of 1995 do not support such a narrow interpretation. Rule 4 thereof, as already stated, sets out the duties of the designated authority and requires it to submit its findings, provisional or otherwise, to the Central Government not only as to the injury but also the threat of injury to an industry established in India or the material retardation to the establishment of an industry in India, consequent upon import of a like article from the specified countries. Therefore, the designated authority was wholly unjustified in holding that it had no mandate to look into the possible threat of injury to or material retardation of the domestic industry consequent upon the import of the product from Saudi Arabia. The refusal by the designated authority in the case on hand to look into any possible threat of injury or material retardation to the establishment of any industry in India therefore falls short of the statutory mandate. That apart, the specific conclusion of the designated authority was that the investigation had to be terminated in accordance with Rule 14(b) of the Rules of 1995. It is only when the designated authority does not find sufficient evidence of dumping or, where applicable, injury to justify the continuation of the investigation that it can terminate it. In the case on hand, as already noted supra, the findings recorded by the designated authority clearly demonstrated sufficient evidence of dumping within the short span of three months by the exporters/producers from Saudi Arabia and also the injury caused to the domestic industry thereby. Therefore, the designated authority could not have taken recourse to this clause for justifying the termination of investigation. In fact, none of the clauses in Rule 14, which deals with termination of investigation, had application whereby the designated authority could have taken such a step. When the designated authority found that several other countries who were exporting the very same product to India had been subjected to anti-dumping measures, allowing exporters/producers from Saudi Arabia to do so without subjecting them to the same anti-dumping measures, even though their activities within a short span of three months clearly indicated their invasive capturing of the domestic market and the consequential injury to domestic industry, was clearly not warranted. Though the counter-affidavit stressed upon the designated authority not rendering final findings and recommendations only on the ground that the dumping took place for three months during the period of investigation, the final findings, as set out supra, clearly indicate to the contrary. This Court finds that the designated authority, having recorded findings in support of the injury sustained by the domestic industry by dumping of like products by exporters/producers from Saudi Arabia, failed to carry through on the same note and strangely did a volte face, when it came to the final recommendation. This was on the strength of his misconceived notion that a three month span of dumping was insufficient for recording a finding - there is no such mandate in the Rules of 1995, the Final Findings dated 28-11-2017 are set aside and the matter is remitted to the designated authority for consideration afresh. Petition allowed by way of remand.
-
2019 (4) TMI 395
Maintainability of appeal - reasoned order - Section 130 of the Customs Act, 1962 - case of appellant is that the CESTAT did not even consider or deal with their arguments on the merits - principles of natural justice - Held that:- There is no merits in the appellant’s grievance; the order in original - the common one against several assessees, was appealed through separate proceedings. The CESTAT noticed the arguments addressed in each of those appeals, however, it summarily disposed of all the appeals in merely two paragraphs, on an assumption of culpability and consequential reliability of the assessees. The matter is remitted for fresh hearing and consideration by the CESTAT which shall address the arguments of all the appellants on their merits and pass a speaking and reasoned order dealing with all contentions - appeal allowed in part by way of remand.
-
Corporate Laws
-
2019 (4) TMI 394
Wilful defaulter - Petitioners default in meeting its repayment obligation to the respondent no1./bank - Opportunity of personal hearing through advocate - HELD THAT:- Bank paid the amount to the foreign exporters for the purchase of machinery by the petitioner. The petitioner is legally bound to repay this amount to the Bank therefore, even if, the loan amount or the fund was not directly disbursed in the petitioner’s current account but it was directly paid to the exporters on behalf of the petitioner by the respondent – Bank. Hence, the relationship of lenders and borrower has been established between petitioners and respondent No.1/bank . Since, the petitioners have defaulted in meeting its repayment obligation to the respondent no1./bank even when it has a capacity to pay therefore, rightly invited findings in respect of wilful default. The company was having the equity share of ₹ 103.43 Crores, and out of which withdrew the ₹ 54.22 Crores equity share without honouring its commitments under the letters of credit opened by to respondent No.1/bank . Therefore, under 2.1.3(c) the petitioners have rightly been categorized as ‘wilful defaulter’. Opportunity of personal hearing through advocate is concerned a coordinate Bench of this court in the case of Surender (2018 (6) TMI 1587 - MADHYA PRADESH HIGH COURT) has already held that the borrower is not having right to be represented through lawyer/advocate under the master circular. As per clause 3.(b) the personal hearing is available only to borrower Director and Promoter of the alleged default unit. The identification committee is neither a court nor a tribunal. Therefore, I have no reason to take a different view as taken by the coordinate bench of this court in the case of Surender (supra). Even otherwise, the similar issue is also pending before the Div. So far the opportunity of hearing by review committee is concerned, same is not provided in clause 3 of master circular. The mechanism is provided for identification of ‘wilful defaulter’ by the identification committee. The order passed by committee is liable to be reviewed by another committee headed by superior officer named as review committee. Therefore, the RBI has decided to provide double check system by two levels of authorities before declaring any unit as ‘wilful defaulter’. Since the review committee has affirmed the stand taken by identification committee therefore, opportunity of hearing is not required. It is not like remedy of appeal to the default unit. If the identification committee does not pass any order declaring the borrower as ‘wilful defaulter’ then, review committee did not be setup to review such type of decision. It means the role of review committee is only to cross-check the decision of identification committee before declaring borrower as ‘wilful defaulter’ otherwise, a right would have been given to Bank also to apply for review before the review committee in case, identification committee does not pass an order declaring the borrower as ‘wilful defaulter’. Hence, this contention raised by the petitioners is also not having any substance. Hence same is liable to be rejected. By impugned communication dt.23.10.2018, the name of the petitioner has been forwarded to CIC.So far the offer of One Time Settlement is concerned, the Bank has already initiated the proceeding for recovery before DRT, Jabalpur. If the petitioners are really serious for settlement dispute with the respondents – Bank then they may submit an offer before the DRT in a pending proceeding for which no direction is required from this court. The petition is accordingly, dismissed.
-
2019 (4) TMI 393
Application for restoration of the name of the company to the ROC - HELD THAT:- We do not find that the appellant pleaded or made out a case for restoration of the name of the company before the National Company Law Tribunal nor has it convinced us that the name of the company deserves to be restored. We are proceeding to dismiss the appeal but, however, we will expunge the sentence regarding the company to be a shell company as according to us, there needs to be more material to brand a company as a shell company. The appeal is dismissed. The impugned order is maintained except for the sentence "The company is a shell company", which we expunge.
-
Insolvency & Bankruptcy
-
2019 (4) TMI 392
Initiation of Corporate Insolvency Resolution Process - proof of pre-existing dispute - claim barred by limitation - HELD THAT:- We hold that the claim of appellant is not barred by limitation, for the reasons already noticed on 11th December, 2018 and recorded above. The Adjudicating Authority failed to appreciate the relevant facts while passing the impugned order. For the reasons aforesaid, we set aside the impugned order dated 17th August, 2018 and remit the matter to the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahmedabad to admit the application under Section 9 in absence of any pre-existing dispute and paper being complete, after notice to the Respondent to enable the Respondent to settle the matter before admission of the application under Section 9 of I&B Code, if it so decides.
-
PMLA
-
2019 (4) TMI 391
Offence under PMLA - attachment orders - assets acquired prior to enactment of PMLA - HELD THAT:- There is a requirement that an action may be taken by an officer only when there is reason to believe, especially in the context of a statute where stringent procedures are laid down, the requirement of having reason to believe must be strictly complied with. PMLA is exactly such a statute where stringent procedures have been laid down. No reason why the essence of the definition contained in section 26 of the IPC should not inform the interpretation of the same phrase in section 17 of the PMLA. It is noteworthy that the phrase ‘reason to believe’ has a specific connotation in criminal jurisprudence and is not merely an ordinary and colloquial phrase. We must never forget the venerated principle of law laid down by the Privy Council in the case of Nazir Ahmad vs. Emperor reported as AIR 1936 PC 253, that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all; and other methods of performance are necessarily forbidden. In our view this principle must a fortiori apply to a special statute such as PMLA. No infirmity in the impugned judgment on the issue. We hold that ingredients of section 17 of PMLA must be scrupulously complied with and it is impermissible for seizure to be made by relying instead upon the provisions of section 102 of the CrPC. Wherever there is/are any provision/s covering any aspect of proceedings under PMLA, such provisions would prevail and must be adhered to regardless of any cognate provision contained in the CrPC. Provisions of the CrPC may however be relied upon as residuary provisions for proceedings under PMLA on aspects and matters for which no specific provision is contained in PMLA. In case of any conflict or contradiction as between provisions of PMLA and CrPC, those contained in PMLA would prevail and those of the CrPC must yield. Insofar as the question of whether assets acquired prior to enactment of PMLA come within the definition of ‘proceeds of crime’, the view taken by the single Judge, namely that it is irrational to hold that such assets could never fall within the definition contained in section 2(1)(u) of the PMLA, has not been challenged or argued before us. The appellant has also not pressed any challenge to the observation of the single Judge that the private parties shall be entitled to seek consequential relief in any other court or forum.
-
Service Tax
-
2019 (4) TMI 443
Refund of erroneous tax paid - renting of immovable property being residential premises for use as residence - period from April, 2012 to June, 2014 - refund rejected on the ground that it being filed beyond the statutory period of one year i.e. on 07.01.2016 - time limitation - Held that:- In view of Section 83 of the Finance Act, 1994, Section 11B of the Central Excise Act, 1944 and its ancillary provisions are applicable to service tax matters. The leading case of Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT OF INDIA] governs the rule of refund as contemplated in Section 11B of the Central Excise Act, 1944 - In view of the binding president of the judgment of the Hon’ble Supreme Court in Mafatlal Industries case, except where unconstitutionality of a provision under the levy was created, no refund is admissible if filed beyond the prescribed limit stipulated in Section 11B of the Central Excise Act, 1944. Appeal dismissed.
-
2019 (4) TMI 442
Benefit of N/N. 6/2005-ST dated 1.3.2005 - renting of immovable property service - benefit denied on the ground that appellant started payment of service tax suo motto at the beginning of the financial year 2007-08, as soon as the tax was imposed on the renting of immovable property service - Held that:- The option of exercising to avail the exemption was not originally exercised but was exercised by filing a revised return. This cannot come in the way of eligible benefit to the appellant. Further, it is seen that the total rent received by him for the two properties owned by him for the period June 2007 to March 2008 works out to less than ₹ 8,00,000/- - benefit cannot be denied - appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 441
Refund of unutilized CENVAT credit - mandatory registration required or not - Rule 5 of the CENVAT Credit Rules, 2004 - Held that:- Admittedly, there is no dispute about the factum of export of service as well as the receipt of foreign exchange for such export but the claim for refund pertains to the period prior to obtaining the registration for premises of the respondent - The Commissioner (A) has held that the requirement of registration cannot be held against the respondent by following the observations of the Hon’ble Karnataka High Court in mPortal India Wireless Pvt. Ltd. [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - refund allowed. Whether the three refund claims are hit by time bar when they examined with regard to Section 11B of the Central Excise Act, 1944? - Held that:- This Section governs the sanction of refund and specifies that the claims for refund are to be filed within a period of one year from the relevant date specified in the said Section. The N/N. 5/2006 (NT) dated 14.3.2006 provides that the refund claims are to be submitted not more than once in a quarter in a calendar year before the expiry of the period specified in Section 11B - all the three claims are filed within time. In respect of the claim for the period January to march 2009 filed on 14.9.2009, the benefit has already been allowed by the Commissioner (A). Appeal dismissed - decided against Revenue.
-
2019 (4) TMI 440
Cable operator service - Failure to discharge service tax liability - MSOs raised bills to the appellant on account of service provided for receiving cable signals from them for onward re-transmission to their subscribers in Kota - period from 16.08.2002 to 31.03.2006 - time limitation - Held that:- The impugned is the case of cable operator services. Those services brought into the tax net w.e.f. 16.08.2002 by amending Section 65 of Finance Act, 2008. Despite that the party had neither obtained registration from the Department under cable operator services nor filed ST-3 return to the Department. Rather, kept suppressing their value of taxable service till the year 2006, when the matter was actually scrutinized by the Department. There is no denial of the appellant that during the investigation, in furtherance of said scrutiny, his statement was recorded and requisite documents were provided by him. It is thereafter that the impugned show cause notice dated 09.10.2007 was issued by the Department. From the Order in Original it is apparent that the appellant despite being called almost five times could not appear. It is also apparent from the order that he not even filed the reply to the show cause notice. Thus the order announced against the appellant is for lack of evidence. Also, the knowledge of Order-in-Original was with the appellant in the year 2012 for filing the appeal which was filed in the year 2016. Time Limitation - Held that:- Commissioner (Appeals) had limitation being a statutory mandate to not to condone the delay of more than three months. The delay herein Is of six years and for sake of arguments, if the argument of appellant about the period to reckon from the date of receipt of order is considered, the delay is still is of more than 5 months - Despite the knowledge and receipt of impugned SCN, the absence of any effort to enquire about the orders in furtherance whereof the recovery proceedings as mentioned in the said Newspaper except a letter dated 6th August, 2015 is not opined sufficient for condoning delay of almost 6 years. Same rather amount to be highly negligent act. There is no cogent reason still to provide opportunity to the applicant for the delay of 6 years from the date of Order-in-Original to have been condoned - appeal dismissed - decided against appellant.
-
2019 (4) TMI 439
Penalty u/s 77 and 78 of FA - service tax with interest paid on being pointed out - bonafide belief that service tax was not payable - Held that:- The appellant has paid the entire service tax along with interest as and when pointed out and has also fully cooperated with the investigation by providing whatever information was sought without delay - the assessee made out a case to seek waiver of penalty under Sec.80 of the Finance Act - penalty set aside. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 438
Charge on service tax on services received from outside India - was sending their new or existing product to Germany (foreign service provider) for know-how or testing - recipient of services - Difference of Opinion - Held that:- Section 66A read with Rule 3 proposes to seek to levy Service Tax on any service provided from outside India and received in India. The proviso seeks to cover such cases where part of taxable service is performed in India and part outside India. The main Section refers to the entire service being provided from outside India. As we are sitting in a Division Bench, we consider it appropriate to refer the matter to a Larger Bench to examine this issue. The Registry shall place the matter before the President for passing appropriate orders.
-
Central Excise
-
2019 (4) TMI 437
Clandestine removal - fly ash bricks containing 48.2% of ESP dust by weight - appellants were alleged to have manufactured fly ash bricks and not ESP dust bricks - suppression of facts or not - extended period of limitation - Held that:- The issue as to whether the appellants are entitled to concessional duty rate or exemption under Notification No. 5/2009-C.E. has been dealt with by the Tribunal in its order dated 9-2-2017 by substituting para 4 of its previous order dated 29-9-2016 by leaving it on the jurisdictional authority to verify the accounts maintained by the appellants and on fulfilment of such conditions for exemption under the subject notification, exemption available shall be extended to the appellants. The appellants have admittedly neither maintained any record nor filed any return even though they were selling goods as fly ash bricks, therefore, extended period of limitation in terms of Section 11A of the Act has rightly been invoked. The present is a case of wilful evasion of duty. Denial of cross-examination of chemical examiner whose report has been used against them - Held that:- At this stage, it would be appropriate to refer to the appellants’ reply to the show cause notice (Annexure-A/4) stating that the report of chemical examiner is not on record, therefore, copy of the same may be provided to them. This itself makes it apparent that the department has not relied on the chemical examiner’s report, therefore, there was no question of affording the appellants an opportunity to cross-examine the chemical examiner. The Schedule forming part of profit and loss accounts of the appellants for the period ending on 31-3-2005 and 31-3-2006 would refer to the items sold during the period specifically mentioning “sales of fly ash bricks”. Thus the appellants themselves were treating the bricks manufactured by them as “fly ash bricks” and not ESP dust bricks. Similar is the situation with the accounts ending on 31-3-2007. All the substantial questions of law are answered against the appellants - Appeal dismissed.
-
2019 (4) TMI 436
Refund of unutilized CENVAT Credit - closure of unit - refund rejected on the ground that the claimant failed to demonstrate that unutilised cenvat credit was in respect of inputs or input services used for manufacture of final products exported by them or intermediate products used for exports - Rule 5 of CCR, 2004 - Held that:- Once the factory was closed there was no scope of utilising the credit so accumulated. The respondent has cited plethora of judgments of Hon’ble High Courts and Apex Court in addition to the various Tribunal’s Order wherein the refund of accumulated cenvat stands allowed. Also in the present case, one of the reason for accumulation of credit was due to payment of duty in cash and imposition of additional SAD of 4% - appeal dismissed - decided against Revenue.
-
2019 (4) TMI 435
CENVAT Credit - dutiable goods subsequently became exempt goods - inputs used in the manufacture of said final product and is lying in stock or in process or is contained in final product lying in stock - N/N. 30/2004–CE dated 09.07.2004 - Held that:- The N/N. 30/2004–CE dated 09.07.2004 is not an absolute notification but a conditional notification issued under section 5A. The notification has the condition of non availment of cenvat credit. The sub-rule (3) (i) and (ii) of Rule 11 of the CCR, 2004 are separate - In the present case the sub rule 3 (i) would thus apply as per which the manufacturer is required to pay an amount equivalent to the CENVAT Credit in respect of inputs used in the manufacture of said final product and is lying in stock or in process or is contained in final product lying in stock. In the present case all the conditions enumerated under sub rule 3 (i) has been followed by the Appellant and he is not required to reverse the entire credit lying in balance on the date of opting notification No. 30/2004–CE dated 09.07.2004. Therefore, the balance credit is not liable to be reversed. For the same reason the credit utilised by him for clearance of finished goods or capital goods. On similar issues in the case of Wearit Global Ltd. [2018 (8) TMI 1094 - CESTAT NEW DELHI], Janson Textile Processors [2018 (7) TMI 850 - CESTAT CHENNAI] and Sitaram India Ltd. [2018 (10) TMI 11 - CESTAT NEW DELHI], the credit stands allowed to the manufacturer. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 434
CENVAT Credit - denial on the ground that inputs have not been received in the factory of the appellant - Held that:- Apart from the statement of transporter, no corroborative evidence has been produced by the Revenue. The said statement has not been examined in chief, therefore, the statement of the transporter cannot be relied without examination in chief of the same by the appellants - further it is noticed that the investigation and the matter was started in the year 1999 and thereafter the show cause was notice issued in 2002. After lapse of 17 years, if the matter is remanded to the adjudicating authority that will not serve the purpose - the credit cannot be denied to the appellant. Clandestine removal - it was alleged that there was receipt of the inputs without cover of the invoices and non-accountal of the goods in the statutory records and the same were used in manufacturing of final goods which were cleared clandestinely - Held that:- No evidence has been produced by the Revenue to allege clandestine manufacture/removal of the goods how the goods were manufactured or from where the other raw materials were procured and how clandestine manufacture goods were transported and how the payment on the said goods have been received. In the absence of any corroborative evidence, except the statement of the transporter whose cross examination has not been granted, therefore, denial of cross examination is in the gross violation of the principles of natural justice, the allegation of clandestine removal of the goods is not sustainable - the demand on account of clandestine removal of the goods is not sustainable. This was a majority decision and in view of majority decision, it is held that the credit cannot be denied to the appellant and no demand can be confirmed against the appellant on account of clandestine removal of the goods. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 433
Refund of CENVAT in cash - Rule 5 of Cenvat Credit Rules, 2004 - transfer of such credit as Input Tax credit in CGST Act or cash refund - Rule 5 of the CENVAT Credit Rules, 2004 - N/N. 27/2012- CE(NT), dated 18.06.2012 - first proviso to Section 142(3) of CGST Act, 2017. Held that:- The proviso to Section 142(3) of CGST Act, 2017 deals with the cases of rejection of credit of CENVAT Credit. It specifically indicates that such amounts shall lapse. It is true, that with better planning, the appellants could have taken back the credit of CENVAT of refund which was rejected in terms of Para 2(i) of Notification No. 27/2012-CE(NT), dated 18.06.2012. Such credit would have seamlessly got transferred as input tax credit under GST into their new account post introduction of CGST, but they have not done so. Judicial discipline demands the lower authority follows the decision of the higher authority. Once it is decided by the CESTAT that the appellant is not entitled to refund of some amount of the CENVAT credit under Rule 5 of the CCR, 2004, the lower authority cannot sanction such refund as it would constitute judicial indiscipline. Therefore, the lower authority was correct in rejecting the request of the appellant. A plain reading of Section 140 of the CGST Act shows that it provides for transfer of CENVAT credit lying in balance in the assessee s account just before the CGST Act came into force. It does not provide for CENVAT credit which may have accrued to the assessee prior to this date but which was not in balance in their books of account. CESTAT was created under the Customs Act, 1962 and has been given powers under the Central Excise Act, 1944 and the Finance Act, 1994. Therefore, the powers of interpretation and application of these laws alone is the jurisdiction of the CESTAT. However, when other laws have a bearing on the application of these three laws, (e.g.: SEZ Act, Foreign Trade Development and Regulation Act, various Environmental laws), interpretation of such laws also falls within the scope of CESTAT insofar as they affect the application of the Customs Act, Central Excise Act and Finance Act, 1994. The appellant s claim for refund of the disputed amount of CENVAT credit under Rule 5 has already been rejected by this bench in their previous appeal. Therefore, they are not entitled to refund of CENVAT credit. The argument that they could have planned differently and taken back the credit before CGST Act came into force and could have transferred it as Input Tax credit and since they have not done so and hence they should now be paid in cash has no legal backing. Appeal dismissed - decided against appellant.
-
2019 (4) TMI 432
Recovery of erroneously refund claimed - area based exemption - genuineness of receipt of goods - N/N. 56/2002-CE dated 14.11.2002 - denial of CENVAT Credit to recipient of goods - Sole allegation in the case is that farmers from whom the inputs were purchased were non-existence - Held that:- The investigation was not conducted at the end of the appellants and whole case has been based on the investigation conducted at Commissioner Central Excise, Merrut-II. Without investigation, it cannot be held that the appellant was not manufacturer during the impugned period. Moreover, the entries of vehicles at the toll barriers also certified that the movements of raw material and finished goods - during the period of investigation itself, the appellants were allowed continue their activity by procuring inputs from UP based supplier and selling goods manufacturing to their buyers. During the course of investigation, itself shows that the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants were not manufactured the goods during the impugned period. The appellant M/s Abhay Chemicals was the manufacturer during the impugned period and paid the duty on the goods manufactured by them, therefore, duty cannot be demanded on the allegation that the appellant was not a manufacturer. Consequently, the cenvat credit can’t be denied to the recipient of goods located in the State of U.P i.e. M/s Siddhant Chemicals and M/s Neeru Enterprises. Therefore, no penalty is imposable on the appellants. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 431
CENVAT Credit - area based exemption under N/N. 56/2002-CE dated 14.11.2002 - the sole allegation against the appellant is based on the investigation conducted by Commissioner of Central Excise, Merrut, and as per the investigation, it is alleged that farmers from whom the inputs were purchased were non-existence - the appellants were not the manufacturer and issued cenvatable invoices enabling to their buyers to avail inadmissible cenvat credit - Held that:- The investigation was not conducted at the end of the appellants and whole case has been based on the investigation conducted at Commissioner Central Excise, Merrut-II. Without investigation, it cannot be held that the appellants were not manufacturer during the impugned period. Moreover, the entries of vehicles at the toll barriers also certified that the movements of raw material and finished goods - during the period of investigation itself, the appellants were allowed continue their activity by procuring inputs from UP based supplier and selling goods manufacturing to their buyers. During the course of investigation, itself shows that the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants were not manufactured the goods during the impugned period. Similar issue on identical facts came up before this Tribunal in the case of Nanda Mint and Pine Chemicals Ltd. [2018 (10) TMI 877 - CESTAT CHANDIGARH], where it was held that Without bringing any concrete evidence against the appellant on record, the proceedings against the appellant are not sustainable. The appellant were manufacturing unit in the state of Jammu & Kashmir is entitled for benefit of the exemption Notification No. 56/2002- CE dated 14.11.2002 and claimed the refund of duty paid through PLA. The appellant was manufacturer during the impugned period and paid the duty on the goods manufactured by them, therefore, duty cannot be demanded on the allegation that the appellant was not a manufacturer - Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 430
CENVAT Credit - input service distribution - credit is sought to be denied on the ISD invoices on the ground that there is no nexus between the manufacture of final products and the services in question - Held that:- The definition of input service for the purpose of manufacture is very wide. Obviously, several activities such as sales promotion, marketing, legal services, accounting etc., may not be handled in the factory but in the head office of the company. In such a case, the invoices will be received in the head office. Where the head office has more than one unit, provision has been made in Rule 7 of CCR, 2004 for the head office themselves to be registered as ISD and further distribute the credit to their manufacturing units. In case such service is attributable to only one unit, it has to be distributed to such unit only. Where such service can be attributable to more than one, it has to be distributed prorate to such units. Evidently, the scheme of CENVAT Credit Rules itself envisages the manufacturing unit in the field getting credit of services which are used in the head office, which will be indirectly relatable to the manufacture or which will not be directly relatable to the manufacture of final products in the field units. If the head office commits an error or plays mischief and wrongly distributes credit either by availing ineligible credit itself or by improperly distributing it can the recipient of the ISD invoices be able to correct the mistake? - Held that:- In my considered view, they will not be able to do so. They will also not be able to explain why the credit was wrongly taken or distributed by their head office - Even if this argument is accepted, no malafide such as fraud, collusion, wilful misstatement or suppression of facts can be attributed to the field office. Once they have accepted the ISD invoices issued by their head office in good faith. Extended period of limitation cannot be invoked and the entire demand is time barred in this case. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 429
CENVAT Credit - capital goods - SS plates and corrugated sheets purchased to cover the silo to protect from rain and sun - Wire mesh used by them to apply ceramic labelling for screen making - Welding electrodes used in repairing of plant and machinery - Other spares such as chair rollers, rayon tapes for printing machines - OSM projects - all these items were purchased post 01.4.2011. Held that:- It is not in dispute that all the goods in question were received in the factory after 01.04.2011 and that the term ‘input’ has been enlarged in CCR, 2004 on 01.04.2011 to include all goods used in the factory by the manufacturer of the final products. Once these goods are received in the factory and have been used in the factory, they get covered by the term ‘input’ unless they fall under the one of the categories of exclusion - A plain reading of the clause ‘B’ makes clear the exclusion with reference to the inputs used in such works contract service or laying foundation or making or structures for support of capital goods. Clearly none of the goods in question fall in this exclusion because they have not been part of any works contract services - The appellant is entitled to CENVAT credit on the disputed goods in terms of revised definition of inputs w.e.f. 01.4.2011. Excess credit availed in respect of three invoices - Held that:- This issue needs verification and accordingly for the limited purpose of verifying if the appellant had the other two invoices mentioned by them and if so if those are taken into account, the CENVAT credit can be explained, the matter is remitted back to the original authority for verification. Appeal allowed in part and part matter on remand.
-
2019 (4) TMI 428
CENVAT Credit - hiring of capital goods - earth moving equipments used for mining of minerals at the mines - Held that:- Both the authorities below have not considered the full definition of input service under Rule 2(l) during the relevant period which has resulted in the present proceedings. Further in view of the various decisions cited, the excavators, loaders and tippers used for providing taxable service of mining of minerals are capital goods as defined in Rule 2(l) of CCR 2004 and hiring of the said capital goods which is a taxable service, is eligible for CENVAT credit in terms of Rule 2(l)(B) of CCR, 2004 during the relevant period. Time Limitation - Held that:- The SCN which was issued on 07/11/2014 was for the period from May 2011 to May 2012 and the Department has not brought any evidence on record to show that the appellant has suppressed any material fact with intent to evade payment of duty. Moreover, audit was conducted and report was made available on 07/05/2012 and all the transactions have been recorded in the books of accounts and are verified by the audit party - there cannot be any allegation of suppression with intent to evade payment of duty and therefore invocation of extended period of limitation is not sustainable in law. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 427
CENVAT Credit - Cement cleared to SEZ developers - period November, 2008 to December, 2008 - demand of amount equivalent to 8% or 10% of the value of cement - Rule 6 of CCR - Held that:- The issue is no more res integra as the Hon’ble High Court of Andhra Pradesh in the case of CCCE, Hyderabad vs Sujana Metal Products Ltd [2015 (3) TMI 781 - ANDHRA PRADESH HIGH COURT], has settled the law and upheld the order of the Tribunal in that case wherein the Tribunal took the view that provisions of Rule 6 of CENVAT Credit Rules, 2004 are not applicable to supply to SEZ unit. Appeal allowed - decided in favor of appellant.
-
2019 (4) TMI 426
Clandestine removal - undervaluation of excisable goods - death of sole proprietor - abatement of proceedings or not - Held that:- The appellant was a sole proprietorship concern and Sh. Harilal M. Patel was the sole proprietor of the appellant firm who died on 27.12.2011 when the appeal was pending before this Tribunal. Further, Mr. Ashok Kumar S/o Sh. Harilal M. Patel, has not come forward to defend the case of the appellant rather he has filed an affidavit saying that he has no concern with the proprietorship concern and he has not succeeded to the said business and has distanced himself from the appellant. In view of the Apex Court decision in the case of Shabina Abraham v. Collector of Central Excise [2015 (7) TMI 1036 - SUPREME COURT] no recovery proceedings can be initiated against the dead person. The present appeal abates after the death of the sole proprietor, Sh. Harilal M. Patel.
-
2019 (4) TMI 425
100% EOU - Interest on delayed refund - Section 11 BB of the Central Excise Act - debonding of unit - Held that:- The ld. Commissioner (Appeals) has erred in rejecting the claim of interest, observing that the some new documents were filed and examined pursuant to the remand by this Tribunal. It is evident from the record that on the very same documents, which the appellants had filed on the date of filing the refund claim i.e. (17.04.2009), the refund claim was found to be admissible and allowed. The appellant is entitled to interest as per Rules as provided under Section 11 BB of the Act for the period from 18.07.2009 to till date of sanction of refund - Appeal allowed - decided in favor of appellant.
-
CST, VAT & Sales Tax
-
2019 (4) TMI 424
Valuation - inclusion of freight charges in the assessable value - the amount of freight charges are shown separately in the invoice and the price of goods is not inclusive of freight charges - Rule 6 of TNGST Rules, 1959 - Held that:- In terms of the Rule 6, freight and charges for delivery are not to be included in the total turnover rather to be deducted from the total turnover. Therefore, the Revenue is not right in contending that the assessee has to first include the same in the total turnover and then claim exemption. The expression used in Rule 6 is “deducted”. Therefore, in our understanding, the deduction should be prior to submission of the return. Admittedly, in the case on hand, the freight charges have been shown separately and this has been recognized by the Assessing Officer himself. However, the Assessing Officer proceeded to revise the assessment rejecting the contention of the assessee. The judicial discipline requires that the earlier order of the Tribunal is followed especially when it is in the assessee's own case and identical transaction. The Tribunal was wrong in allowing the appeal by the State and setting aside the order passed by the First Appellate Authority - tax case revision allowed.
-
2019 (4) TMI 423
Principles of natural justice - validity of assessment order - grievance of the petitioner before this Court is that the said order was passed without issuing a notice of proposal and affording an opportunity to the petitioner to defend the claim of the Revenue - Held that:- Perusal of the impugned order would show that the same came to be passed pursuant to an inspection conducted by the Enforcement Officials and without issuing any further notice of proposal to the petitioner. Therefore, it is evident that the impugned order passed in violation of principles of natural justice cannot be sustained, even though, the same came to be passed based on the report submitted by the Enforcement Officials. Therefore, this Court is inclined to interfere with the impugned order by setting aside the same, however, by remitting the matter back to the Assessing Officer to redo the assessment after issuing the notice of proposal and hearing the petitioner. Petition allowed by way of remand.
-
Wealth tax
-
2019 (4) TMI 390
Monetary limits for filing of wealth tax appeals - low tax effect - HELD THAT:- In view of extension of circular to wealth tax appeals coming into effect, which is applicable to pending appeals, the present appeals filed by the Revenue before the Tribunal are liable to be dismissed on account of low tax effect. Therefore, without going into merits of the additions made in the hands of assessee, we dismiss the appeals filed by Revenue. The Cross Objections filed by assessee against appeals filed by the Revenue have thus become infructuous and are dismissed accordingly. Before parting, we clarify here that the Revenue shall be at liberty to approach the Tribunal for restoration of appeals with the requisite material to show that the appeals are protected by the exceptions prescribed in Para 10 of the Circular No. 3/2018 (supra) or for any other tenable reason. In the result, appeals by the Revenue and the Cross Objections by the assessee are dismissed.
-
Indian Laws
-
2019 (4) TMI 458
Appointment of arbitrator for resolving the Dissolution dispute between the partners - unregistered partnership - petition dismissed on account of bar contained under Section 69 (3) of the Partnership Act - Held that:- The need to remand the case has occasioned because we find that the High Court did not decide the issue, which was the subject matter of the writ petition, keeping in view the law laid down by this Court in the case of Krishna Motor Service by its Partners vs. H.B. Vittala Kamath, [1996 (4) TMI 518 - SUPREME COURT]. The High Court should have noticed the aforementioned decision and decided the question accordingly in the light of law laid down therein. The High Court unfortunately did not take note of the said decision and has thus committed an error requiring interference of this Court. The matter should be remitted to the High Court for deciding the writ petition afresh on merits keeping in view the law laid down by this Court in the case of Krishna Motor Service.
|
