TMI Tax Updates - e-Newsletter
May 4, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
GST
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Filing of GST Tran-1/ Tran-2 forms - one time facility of filing, so as to result in a deemed credit as though the assessee had filed the form before the expiry of the stipulated time, will be available only to those individuals or concerns which had approached the authority before the stipulated time - HC
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Levy of Administrative Charges - post GST situation - sale and supply of molasses under the provision of the U.P. Sheera Niyantran Adhiniyam, 1964 - stay granted - HC
Income Tax
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Use of information gathered as a result of search - whether the material found in the course of survey in the premises of the builder could be used in Block Assessment of the assessee? - Held Yes - SC
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Reopening of assessment - Since the impugned notice for the reassessment is based only on the allegation that the appellant(s) has permanent establishment in India, the notice cannot be sustained once arm's length price procedure has been followed. - SC
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Validity of reopening of assessment - non compliance of the procedure indicated in the GKN Driveshafts (India) Ltd., would not make the order void or non est. Such a violation in the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority. - HC
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Levy of penalty u/s 271(1)(c) - defect in the notice - it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised - even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w.Section 271 of the Act. - HC
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Income from unexplained sources - once neither any item in the trading account, nor gross profit has been rejected, then one part of credit side of the trading account, that is, sales cannot be discarded completely so as to hold that it is unexplained money. - AT
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Computation of income from house property - the land does not belong to the assessee and the superstructure belongs to the assessee. - for computing the annual rental value of the building, the lease rental paid or payable by the assessee as per lease deed has to be excluded. - AT
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Deduction of interest from house property income (rental income) - AO restricted the deduction only for the part of the year during which the property had remained in existence - CIT(A) had erred in sustaining the order of the AO and thus misinterpreting the scope and gamut of Section 24(b) - AT
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Set off of interest paid to members of the society from Interest earned on bank deposits - Section 40 (ba) is applicable while computing business income. This clause is not applicable while computing income from other sources. There is no prohibition in Section 57 (iii) under which deduction of interest is eligible to the assessee society.- AT
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In terms of Article 12(5)(a) of the treaty, payment received by the assessee for the training required for the employees of the Gail at the time of delivery of the product to acquaint them with the operation of the equipment does not amount to FTS and cannot be brought to tax - AT
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Entitled to a claim of depreciation allowance on the assets of its’ unit managing shrines (holy places) - Without doubt, the same is admissible - However, the same would not be u/s 32(1), but as part of application of income towards capital expenditure - AT
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All the receipts and expenses being accounted, with the accounts being audited, we find no basis for drawing any adverse inference from the deposit of cash in bank post 08.11.2016. - AT
Customs
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Classification of goods - Heavy Melting Scrap and Re-rollable scrap - Since the cut ends do not have proportionate size they have very limited usage - we fail to understand how this can be the basis for concluding that the goods are not HMS - AT
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Violation of import conditions - As the appellant has discharged the export obligation, in that circumstance, it is not open for the Revenue to initiate proceedings against the appellant that they have not fulfilled the condition of the advance authorisation. - AT
Service Tax
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Non-issuance of SCN - Oral intimation of tax liability during audit - Waiver of SCN not accepted by the assessee - As such limitation for the extended period is not invokable unless show cause notice puts the Assessee to notice specifically as to various commissions/omissions stated in the proviso to Section 73[1] of the Act had been committed. - HC
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Demand of service tax on TDR - locus standi of the petitioner - the petitioner acts only as a facilitator between the buyer and seller of TDR - This Court do not find any ground to interfere with the impugned order at this stage when the alternative efficacious remedy is available under the statute. - HC
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CENVAT credit - input services - the advertisement expenditure was incurred for advertisements not for liquor but of other products of the company, such as, soda - such advertisement services do not come under the definition of input service within the definition of Rule 2 (l) - credit not allowed. - AT
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Reversal of CENVAT credit - partly exempt services - Rule 6(2) of CCR 2004 - the service per se is not exempted, but a part of the taxable value is only exempted - If this be so, then it cannot be said that the service provided by the appellant is exempted - AT
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Scientific and Technical Consultancy Service - In-house training M/s SMC, Japan does not covered under Scientific and Technical Consultancy Service in terms of Section 65 (95a) of the Finance Act, 1994 - the appellant is not liable to pay interest for the intervening period i.e. date of service provided till its realization. - AT
Central Excise
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Adjudication of Show cause notice - Input tax credit on 40 services - Matter is pending before SC in relation to 3 services out of 40 services in question - Adjudicating authority put the entire matter in the call book in view the circular dated 14.12.1995 - HC directed the revenue to adjudicate the matter in relation to 37 services.
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Classification of goods - NUZEN GOLD HERBAL HAIR OIL - ayurvedic medicament or cosmetic - the product NGHHO is used for treatment of dandruff, falling hair or hair loss, premature baldness and these are medical conditions which require treatment - product merits classification under chapter 30. - AT
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Reversal of CENVAT credit - inputs written off and written back in the books of account - the adjudicating authority must re-quantify the actual credit to be reversed on net written off quantity after adjusting the written back quantity. - AT
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Refund of excess duty paid on the component of Sales Tax - deduction of sales tax amount from the assessable value - The assessment being final and excise duty has been discharged correctly with no indication of sales tax 'payable' or 'paid', no variation in assessable value later is permissible. - AT
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CENVAT credit - inputs - certain inputs were rejected/ spoiled by the job worker and certain inputs were not received back by the appellant from the job worker - there is no need for reversal of Cenvat credit - AT
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Classification of goods - Vipul Booster - the correct classification of the Vipul Booster is an insecticide under heading 3808.10 - the classification sought by the Revenue under sub heading 3101.00 as fertilizer is not applicable - AT
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Reversal of cenvat credit - in the event credit on input service viz. manpower supply service was not used in providing the service for clearing Oxygen Gas for medical purposes, there was no requirement of payment of 5%/6% of the value of the Oxygen cleared for medical purposes under Rule 6(3) of CCR 2004. - AT
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CENVAT credit - inputs received from a 100% EOU - there is no warrant to restrict the scope of the term additional duty of customs occurring in the formula to only the additional duty leviable under sub-section (1) of section 3 and not to the additional duty leviable under sub section (5) thereof - AT
VAT
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Validity of re-assessment order - It is well settled principle that entertaining the writ petitions against the assessment orders directly would consume the precious public time of the Court and would be contrary to the intent of the Legislation providing mechanism and machinery for resolving the dispute before the hierarchy of Authorities prescribed. - HC
Articles
Notifications
News
Case Laws:
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GST
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2018 (5) TMI 275
Filing of GST Tran-1/ Tran-2 forms - IT Grievance Redressal Mechanism to address the problems faced by taxpayers due to IT glitches on common portal (GSTN) - Held that: - one time facility of filing, so as to result in a deemed credit as though the assessee had filed the form before the expiry of the stipulated time, will be available only to those individuals or concerns which had approached the GST Council or the concerned commissionerate/portal/officials etc. through e-mail or other means of communication before the stipulated time - List on 9th April, 2018.
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2018 (5) TMI 274
Levy of Administrative Charges - post GST situation - sale and supply of molasses under the provision of the U.P. Sheera Niyantran Adhiniyam, 1964 - the contention is that once the realization of tax has been subject to maintenance of separate accounts, the demand by the respondents of GST, as also Administrative Charges, would again amount to double taxation - Held that: - A Division Bench of this Court in the case of M/S SAF Yeast Company Private Ltd. Vs. State of U.P. & Anr.[2010 (3) TMI 933 - SUPREME COURT] held that the demand of Trade Tax on purchase of molasses was arbitrary illegal and unjust and accordingly allowed the Writ Petition to that extent. The petitioners have prayed for stay on the demand of Administrative Charges, as they are ready and willing to pay the GST at the rate of 28% (14% Central GST and 14% UPGST). However, they agree to maintain separate accounts and even the State would make an endeavour to keep a separate account for sale/purchase/supply of molasses. - stay granted. The matter requires consideration.
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2018 (5) TMI 273
Seizure of goods and vehicle - inter-state transfer - absence of Transit Declaration Form - Held that: - no other violation of the provisions of the Act have been alleged - petition is disposed of with the direction that subject to deposit of security in the shape of indemnity bond as provided under Rule 140, the seized goods and the Vehicle No.RJ34 GA1568 of the petitioner may be released forthwith.
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2018 (5) TMI 272
Seizure order - wrong declaration on the date in the E-way Bill - Held that: - petitioner states that it had been written down inadvertently - the goods and vehicle of the petitioner may be released forthwith subject to deposit of security other than cash or bank guarantee - petition disposed off.
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Income Tax
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2018 (5) TMI 266
Block Assessment - Use of information gathered as a result of search - whether the material found in the course of survey in the premises of the builder could be used in Block Assessment of the assessee? - Held that:- For the purpose of calculating the undisclosed income of the block period, it can be calculated only on the basis of evidence found as a result of search or requisition of books of accounts or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence. Section 158BB has prescribed the boundary which has to be followed. No departure from this provision is allowed otherwise it may cause prejudice to the assessee. Needless to say that it is the cannon of tax law that it should be interpreted strictly. The power of survey has been provided under Section 133A of the IT Act. Therefore, any material or evidence found/collected in a Survey which has been simultaneously made at the premises of a connected person can be utilized while making the Block Assessment in respect of an assessee under Section 158BB read with Section 158 BH of the IT Act. The same would fall under the words “and such other materials or information as are available with the Assessing Officer and relatable to such evidence” occurring in Section158 BB of the Act. In the present case, the Assessing Officer was justified in taking the adverse material collected or found during the survey or any other method while making the Block Assessment. - Decided in favour of revenue
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2018 (5) TMI 265
Reopening of assessment - appellant(s) has permanent establishment in India - Held that:- In the judgment of this Court in Assistant Director of Income Tax-I, New Delhi v. M/s. E-Funds IT Soluction Inc. [2017 (10) TMI 1011 - SUPREME COURT OF INDIA] and connected matters, it has been held that once arm's length principle has been satisfied, there can be no further profit attributable to a person even if it has a permanent establishment in India. Since the impugned notice for the reassessment is based only on the allegation that the appellant(s) has permanent establishment in India, the notice cannot be sustained once arm's length price procedure has been followed. Appeals are allowed.
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2018 (5) TMI 264
Taxability on notional interest - Accrual of income - AO added interest as the assessee’s income holding that it had “accrued” to it even if it was actually unpaid as the assessee followed the mercantile system of accounting - Held that:- in the absence of any findings that the cross holdings of the debtor companies was the predominant or sole reasoning for the assessee’s inability to recover its dues, is bound by the reasoning in Vishisht Chay Vyapar (2010 (11) TMI 88 - Delhi High Court ); more so, given that the Supreme Court has given its imprimatur on that ruling. The division bench had ruled that RBI’s prudential banking norms, embodied in its directions to banking and non banking entities, were as binding as accounting standards under Section 145 of the Income Tax Act, and reflection of income on notional basis, did not reflect the realistic assessment of real income - Decided in favour of assessee
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2018 (5) TMI 263
Seeking release the seized jewellery - jewelry found in search proceedings - possession of certain jewelry or ornaments - Held that:- The petitioner No.2 has placed before the respondents’ documents to show that the jewellery seized was part of their stock-in-trade. Documents to that effect has also been placed to show that the petitioner No.2 was carrying them for the purpose of sale as well as approval, transaction memos and the boarding pass, insurance policy were relevant for the said purpose. However, a look at the impugned order is quite amazing. In view of Section 132B proviso, the jewellery was liable to be released. In the light of the statement made under Section 132(4) by petitioner No.2 and in view of the documents and statements put forward on behalf of the petitioner No.1, there was no occasion to or reason to believe that the jewellery is part of undisclosed income of the petitioner No.2. Case of Diomondstar Exports Ltd. & Ors.(2004 (12) TMI 74 - BOMBAY High Court) and CIT Versus Vindhya Metal Corporation, reported in [1997 (3) TMI 3 - SUPREME Court] followed wherein held merely because there is an intimation that a person is with possession of certain jewelry or ornaments was not sufficient ground for purpose of action under Section 132 and seizure was held to be invalid. - Decided in favour of assessee.
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2018 (5) TMI 262
Compute the TP Adjustment proportionate to AE turnover - assessee has applied TNMM at entity level - prorata adjustment when TNMM is applied at entity level - Held that:- Transfer Pricing Adjustment is not to be done at the entity level but only in respect of international transactions of the Respondent with its Associated Enterprise (AE). This, on the application of proportionate method. See CIT v/s. M/s. Ratilal Becharlal & Sons [2015 (11) TMI 1524 - BOMBAY HIGH COURT] Comparability selection criteria - Held that:- Companies functionally dissimilar with that of assessee to be deslected. If the extra ordinary loss incurred in the subject Assessment Year as excluded while arriving at the profit of the Respondent-Assessee, then even in the absence of M/s. Rajasthan Udyog & Tools Ltd., and M/s. Hitco Tools Ltd., being considered to be a comparable, the profit margin of the Respondent-Assessee, would fall within +/5% of the profit margin of the comparables as permitted under Section 92C of the Act
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2018 (5) TMI 261
Treatment of damages and compensation awarded to the assessee - Dispute Settlement Arbitration award - AO rejected the assessee’s claim that these were towards capital receipts and ruled that they have fallen in the revenue stream - Held that:- The purpose of the ultimate use of the assessee’s land when acquired was rendered irrelevant on account of the seller/JMA Buildcom Private Ltd. defaulting in its commitment. This rendered the amount expanded by the assessee immobile. The eventual receipt of the amounts determined as compensation/damages, therefore, clearly fell into the capital stream and not revenue as was contended by the Revenue/appellant in this case.
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2018 (5) TMI 260
Validity of reopening of assessment - failure to follow the judgment of the GKN Driveshafts (India) Ltd. vs. Income Tax Officer, (2002 (11) TMI 7 - SUPREME Court) to the effect that on receipt of objection given by the assessee, to the notice u/s 148, AO is bound to dispose of the objections by passing a speaking order - Held that:- In case an order is passed without following a prescribed procedure, the entire proceedings would not be vitiated. It would still be possible for the authority to proceed further after complying with the particular procedure. We make the position clear that non compliance of the procedure indicated in the GKN Driveshafts (India) Ltd., would not make the order void or non est. Such a violation in the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority. The first issue is accordingly answered against the appellant. Period of limitation - appellant wanted the Court to adjudicate the question regarding limitation for passing a fresh order after giving disposal to the objections - Held that:- We are not expressing any opinion touching upon the question of limitation as the same would amount to pre-judging the issue. It is for the Assessing Officer to decide the said question by giving reasons. We confirm the order passed by the learned Judge remitting the matter to the Assessing Officer for passing a fresh order, after giving disposal to the objections. We set aside the findings given by the learned Single Judge with regard to the issue relating to limitation.
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2018 (5) TMI 259
Levy of penalty u/s 271(1)(c) - defect in the notice - assessee contended that the notices issued under Section 274 r/w. Section 271 are vitiated since it did not specifically state the grounds mentioned in Section 271(1)(c) - Held that:- All violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w.Section 271 of the Act. - Decided against the assessee
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2018 (5) TMI 258
Addition u/s 68 - Held that:- The assessee’s submissions with respect to the additions made under Section 68 were urged consistently before all revenue authorities; equally consistently, the revenue authorities rejected this explanation, with the exception of the CIT (A) who granted relief on a small aspect. This court is of the opinion that the findings impugned are entirely factual and fall within the exclusive domain of the revenue adjudicating and appellate authorities. No substantial question of law arises in this appeal.
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2018 (5) TMI 257
Denying exemption claimed u/s 11 - trust was not registered u/s 12 AA - application for registration was not disposed off by the CIT-I - Deemed registration - Held that:- CIT neither rejected the application nor did he grant registration. It is also a fact that the assessee had filed reminders with the office of the CIT, Thane to issue the registration certificate. In our opinon, an assessee cannot and should not be penalised for inaction of an officer representing the Sovereign. The Act provides that if the CIT does not reject the application or does not grant registration, it would be deemed that the assessee was entitled to registration. The assessee cannot be penalised for the delay in disposing of the application filed by the assessee for registration, that the AO and the FAA were not justified in holding that in absence of the registration certificate the assessee could not claim the exemption u/s. 11 of the Act. The assessee was to be treated to be deemed to be registered trust from the sixth month of the lodging the registration application with the CIT-1 Thane. Case of Promotion of Education Adventure Sport and Conservation of Environment (2008 (4) TMI 700 - ALLAHABAD HIGH COURT) has to be given preference over the judgment of Muzaffarnagar Development Authority(2015 (3) TMI 99 - ALLAHABAD HIGH COURT (LB) ), relied upon by the FAA, as the first judgment has been approved but the Hon’ble Supreme Court [2016 (2) TMI 672 - SUPREME COURT]- Decided in favour of the assessee. Not considering the capital expenditure for acquisition of fixed assets as application of income - Held that:- As we have held that the assessee was entitled to registration from the sixth month of making the application, so, in our opinion there was no justification in denying it the claim made about acquisition of fixed assets. Second ground is decided in favour of the assessee.
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2018 (5) TMI 256
Disallowance of expenditure limned by the assessee was not allowable as the expenses belong to another entity- bills issued by RRT were the names of Della Technician and not in the name of the assessee - Held that:- RRT in its letter dated 29/01/2013 has specifically mentioned that inadvertently bills belonging to the assessee were issued in the name of Della Technicia. We are unable to understand as to why the FAA discarded this evidence though the same was produced before him. He could have called for remand report or could have examined RRT in that regard. But, he simply confirmed the order of the AO. In our opinion the course adopted by the FAA is not as per the law. As a representative of the State, he is supposed to be an instrument in collecting due taxes and pass and adjudication order based on the evidences. As he has failed to do so, therefore, reversing his order we decide first ground of appeal in favour of the assessee. Disallowance of staff welfare expenses - Held that:- As AO said assessee was engaged in constructing villas in remote area. Considering the above fact, in our opinion, expenditure incurred for purchasing television sets, refrigerators etc. cannot be disallowed. The necessity of the business is to be decided by the assessee itself and not by the AO. It is not the case of the revenue authorities that those items were used by the family of the directors of the company for by the families of the officers of the company. It is said that AO. s should not step into the shoes of the assessee. Considering the peculiar facts of the case, we are of the opinion that the FAA was not justified in confirming the disallowance made by the AO. - Decided in favour of the assessee. Disallowance of the labour charges - Held that:- The details given by the assessee had to be further investigated. Therefore, in the interest of Justice, we are restoring that the issue to the file of the AO. He’s direct to afford a reasonable’ into the assessee. The assessee would five detailed submissions and explanation before the AO.- Decided in favour of the assessee for statistical purposes. Deduction in closing value of work in progress - Held that:- In the circumstances we hold that no reduction can be made as far as the amounts involved in grounds of appeal no. 1-3 are concerned. The AO is directed to restrict the reduction of work in progress to the undisputed disallowances only. Last ground is decided in favour of the assessee.
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2018 (5) TMI 255
Disallowance u/s 14A - Distinction for the disallowance u/s 14A in a case where the dividend was credited to the bank directly - sufficiency of own funds - Held that:- We find from the perusal of the balance sheet of the assessee that the assessee is having sufficient own funds at its disposal for the purpose of making investments and accordingly it could be held that no borrowed funds were utilized for making investments. This factual issue had already been considered in assessee’s own case by this tribunal in ITA No. [2016 (5) TMI 978 - ITAT KOLKATA] for the Asst Year 2007-08 had categorically held that all the investments were made only out of own funds of the assessee and not out of borrowed funds. Hence there cannot be any disallowance of interest under second limb of Rule 8D(2) of the Rules. We find that during the year under appeal, the same old investments were brought forward from earlier years. Moreover, the profits of the assessee for the year also has increased during this year and investments had decreased during the year. Case of Pr.CIT vs Rasoi Ltd [2017 (2) TMI 863 - CALCUTTA HIGH COURT] followed. No disallowance towards Interest under second limb of Rule 8D(2) of the Rules is warranted With regard to disallowance under Rule 8D(2)(iii) of the Rules, we hold that only investments yielding exempt income should be considered for the purpose of working out disallowance thereon, in consonance with the decision rendered by this tribunal in the case of REI Agro Ltd [2013 (9) TMI 156 - ITAT KOLKATA]. Accordingly we direct the AO to recompute the disallowance under the third limb of Rule 8D(2) of the Rules accordingly
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2018 (5) TMI 254
Addition on bogus purchases - Held that:- The assessee being an exporter of leather goods has explained the reason why bills from some parties were blank and later filled up, which has been accepted by the Tribunal since there was no quantitative discrepancy as held by the Ld. CIT(A). CIT(A) in A.Y. 2010-11 has taken note of the fact that even on the date of survey, the alleged blank bills did contain the quantity duly received by the assessee and only the rates were not mentioned in those bills at the time of survey and the reasons have been furnished elaborately by the assessee which has been found to be justifiable by the Tribunal and by CIT(A). Since all the purchases made by the assessee are duly backed by the corresponding export and the sales figures have been accepted, then purchase cannot be discarded. Therefore, we taking note of the Tribunal’s decision for the preceding assessment year is inclined to allow the appeal of the assessee and direct the A.O. to delete the addition. - Decided in favour of assessee.
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2018 (5) TMI 253
Disallowance of expenses pertained to a period prior to the relevant previous year - Held that:- Even on the first principles and under the mercantile method of accounting, the expenses are deductible in the year in which the liability to pay crystallizes particularly when expenses are of very small amounts having regard to the scale of operations and in view of the accounting concept of materiality. DR very fairly accepts that it is neither a case of double deduction of same expenses nor there is an issue about bonafides of these expenses which were admittedly not claimed in any of the earlier years as well. Hyper technical and pedantic view adopted by the AO has rightly been reversed by the CIT(A). The relief granted by the CIT(A) was, therefore, quite justified. We approve the same and decline to interfere in the matter. TDS on related payments to non-residents - Held that:- Unless there is a transfer of technology in the sense that recipient of service is enabled to provide the same service on his own, without recourse to the original service provider, the 'make available' clause is not satisfied and, accordingly, the consideration for such services cannot be taxed under Article 13 (4) of Indo UK DTAA. Whether rendition of consultancy services makes available any technical knowledge, skill, know how so as the recipient of services can render the same services without recourse to the service provider? - Held that:- Merely because consultancy services has technical inputs, these services donot become technical services and simply because the recipient of a technical consultancy services learns something with each consultancy, there is no transfer of technology in the sense that recipient of service is enabled to provide the same service without recourse to the service provider. Our careful perusal of the consultancy services agreement does not help us find any provision for transfer of technology either. Thus uphold the relief granted by the CIT(A) with respect to payments made to O&O, particularly as it is not even revenue’s case that O&O had any PE in India. On this point, the conclusions arrived at by the CIT(A) are confirmed. As for the payment made to Pharma Action, we find that the details placed on record are not really sufficient to form any opinion one way or the other. Prima facie these details show that the payment is made to a French resident for consultancy services but having regard to the fact that al that the assessee has furnished is a copy of invoice without any further details on facts, we deem it fit and proper to remit the matter to the file of the Assessing Officer for fresh adjudication on merits after giving yet another opportunity of hearing to the assessee Disallowance of interest - interest free advances granted by the assessee are less than interest free funds available to the assessee - Held that:- We remit the matter back to the file of the Assessing Officer for the limited verification to the effect that interest free loans granted by the assessee are less than interest free funds available to him or not. If the factual elements embedded in the plea of the assessee are indeed correct, entire disallowance will have to be deleted. Disallowance of depreciation - assets are not covered by the specific items set out under ‘plant and machinery’ and are in the nature of office equipment - Held that:- CIT(A) correctly said that functionality test needs to be applied in this context and when equipment is relatable to plant and machinery, depreciation at the rate admissible for plant and machinery needs to be applied as followed Hon’ble Bombay High Court’s judgment in the case of CIT vs Park Davis India Ltd (1994 (12) TMI 46 - BOMBAY High Court). Disallowance of additional depreciation even though the product has not undergone any transformation and no new distinctive article has come into existence - Held that:- conversion of acrylic sheets into intra ocular lens is clearly manufacture of new product and the grievance of the Assessing Officer does not merit acceptance. We reject the same. Disallowance u/s 40(a)(i) - commission paid to Kuntal Joshi, a US based individual - Held that:- As decided in Welspun’s case [2017 (1) TMI 1084 - ITAT AHMEDABAD] unless there is a specific and identifiable consideration for the rendition of technical services, taxability under section 9(1)(vii) does not get triggered. Therefore, irrespective of whether any technical services are rendered during the course of carrying on such agency commission business on behalf of Indian principal, the consideration for securing business cannot be taxed under section 9(1)(vii) at all. This profits of such a business can have taxability in India only to the extent such profits relate to the business operations in India, but then, as are the admitted facts of this case, no part of operations of business were carried out in India. The commission agents employed by the assessee, therefore, did not have any tax liability in India in respect of the commission agency business so carried out. Addition u/s 40(a)(ia) - assessee did not deduct tax at source from the related payment of conference charges - Held that:- In accordance with the law laid down by Hon’ble Delhi High Court in the case of CIT vs Ansal Landmark Township Pvt Ltd (2015 (9) TMI 79 - DELHI HIGH COURT) with the direction that in case the recipient has discharged his tax liability in respect of income embedded in these payments, the disallowance under section 40(a)(ia) will stand deleted.
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2018 (5) TMI 252
Admission of additional evidence - Held that:- We set aside the impugned order of the learned CIT(A) refusing to admit the additional evidence filed by the assessee and restore the matter to the file of the AO to decide the relevant issues afresh after giving proper and sufficient opportunity to the assessee to produce the relevant books of account and other record. We also direct the assessee to produce the books of account and other record as may be required by the AO for the purpose of completing the assessment afresh on the relevant issues and extend full cooperation to him. The relevant grounds of the assessee’s appeal are accordingly treated as allowed for statistical purposes. TPA - comparable selection criteria - Held that:- Assessee is into providing Chip design / software development services, this companies functionally dissimilar with that of assessee need to be deselected from final list. CIT(A) adopting the arm’s length margin at 14.92% as against 18.5% adopted by the TPO - Held that:- CIT-A rejected the computation of arm’s length margin of 18.5% made by the TPO erroneously on the basis of financial data of earlier two financial years and proceeded to determine the arm’s length margin afresh on the basis of second set of comparables selected by the TPO. While disposing of the appeal of the assessee, we have already approved this approach adopted by the learned CIT(A) in principle. Consequently, we find no merit in the appeal of the Revenue and dismiss the same.
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2018 (5) TMI 251
Addition of cash deposit in the bank account - unaccounted income as claimed as sale of stock by the assessee - Held that:- Sale made by the assessee out of his opening stock cannot be treated as unexplained income to be taxed as ‘income from other sources’ - the stock was available with the assessee in his books of account and trading in such stock including purchase, sale, opening and closing stock (quantity wise and value wise) has been accepted by the department year after year and in some years under scrutiny proceedings, therefore, non existence of stock or business cannot be upheld. The sale of stock in the earlier years and the sale of balance left out stock in subsequent years has been accepted or has not been disturbed, then to hold that no stock was sold in this year and remained with the assessee will be difficult proposition; thirdly, inquiry and inspection by the AO done much after the closure of business may not be persuasive for the past events especially in wake of facts as discussed above; and lastly, once neither any item in the trading account, nor gross profit has been rejected, then one part of credit side of the trading account, that is, sales cannot be discarded completely so as to hold that it is unexplained money. Because here in this case in the earlier years, scrutiny assessment have been done whereby the assessee’s opening stock, closing stock and trading activities have been duly accepted and it is not a simple case where mere return income has been accepted u/s 143(1). Thus, we hold that AO is not justified under law to treat the sales as income from unexplained sources and accordingly addition made by the AO and sustained by the CIT (A) is directed to be deleted. - Decided in favour of assessee
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2018 (5) TMI 250
Computation of income from house property - assessee submitted that the land does not belong to the assessee and the superstructure belongs to the assessee. The assessee received a composite rent for land and building - whether AO is not justified in taking the rent which relates to land on which the superstructure was standing? - whether assessee can reduce the rent paid for the land, which was taken on lease for the purpose of constructing superstructure while computing income from house property? - Held that:- As per Section 22 of the Act, the annual value of the property consists of any building or land appurtenant thereto of which the assessee is the owner. Wherever a right was acquired in respect of any building or part thereof by way of lease for a term not less than 12 years, it has to be construed as transfer. The annual value to be computed is in respect of building and land appurtenant thereto for which the assessee is the owner. In this case, admittedly, the assessee is not the owner of the land. The building was put up by the assessee on the land belonging to other persons. Under the common law, double ownership in respect of building is permissible. In respect of the lease, what was transferred to the assessee is a right to occupation and enjoyment on the land. The other rights relating to ownership continues to remain with the original owner. Therefore, the amount payable / paid as a lease rent for occupation and enjoyment of the land, which belongs to third party, has to be necessarily reduced while computing annual rental value under Sections 22 and 23 of the Act. The market value of the land and cost of construction of the building has to be estimated for the purpose of determining the annual rental value. In case, the assessee is not the owner of the land on which the superstructure was constructed, the market value of the land or the lease rent paid / payable for the land needs to be excluded. This Tribunal is of the considered opinion that for computing the annual rental value of the building, the lease rental paid or payable by the assessee as per lease deed has to be excluded. The rent received or receivable by the assessee for the building has to be reduced from the rent paid or payable by the assessee in respect of land to the land owners. - Decided in favour of assessee
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2018 (5) TMI 249
Addition made on account of disallowance of club membership fee - Held that:- The issue now stands settled by the decision of the Hon'ble Supreme Court in United Glass Manufacturing Co. Ltd. (2012 (9) TMI 914 - SUPREME COURT), wherein held that such expenditure is allowable under section 37(1) of the Act. Accrual of income - Addition made on account of professional income - assessee accounted for such income and offered it to tax in the subsequent assessment year - Held that:- On a perusal of the orders passed by the Co–ordinate Bench in assessee’s own case for assessment years 2009–10, 2010–11 and 2011–12, as referred to above, it is seen that identical issue has been decided in favour of the assessee considering the fact that the assessee has accounted for the income in the assessment year, wherein, the bills were raised and income was received. Moreover, as held by the Hon'ble Supreme Court in case of CIT v/s Excel Industries Ltd. (2013 (10) TMI 324 - SUPREME COURT), when the tax rate applicable in both the years are same there is no loss to the Revenue if the income is assessed in the subsequent assessment year. Addition account of un–reconciled AIR / ITS data - Held that:- The minimum the Assessing Officer could have done is to issue notices under section 133(6) or 131 of the Act to the concerned parties whose identities were available before the Assessing Officer, to ascertain the correct fact. When the assessee has asserted before the Assessing Officer that it has not received any such income, the Assessing Officer is duty bound to make proper enquiry before concluding that the disputed amount was earned by the assessee during the relevant assessment year. Instead of doing that the Assessing Officer has made the addition simply on the basis of AIR information, which, in our view is absolutely incorrect. Addition on account of un reconciled AIR data - Held hat:- As mentioned specific instances why the assessee could not reconcile certain entries in the AIR information, reason being, wrong mention of assessee’s PAN. Thus, the aforesaid facts clearly reveal that the figure shown in the AIR information in reality do not represent assessee’s income. Only on the basis of AIR information no addition can be made. In the case before us this exactly is the factual position. Addition deleted.
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2018 (5) TMI 248
Condonation of delay - Additional evidences submitted by the assessee - Held that:- Assessee had sought condonation of delay before Ld. CIT(A) vide letter dated 16/04/2014, which is not before us and therefore, it is not clear as to the stand taken by the assessee therein. Secondly, it is undisputed fact that the company was under liquidation and it was the liquidator only who alone was competent to carry out proceedings on behalf of the company. On totality of facts and circumstances, we deem it fit to restore the matter back to the file of CIT(A) for reconsideration of additional evidences submitted by the assessee before us and decide the same in the light of submissions made by the assessee.
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2018 (5) TMI 247
Reopening of assessment - service of notice u/s. 148 by way of affixture and non-return of books impounded - Held that:- As seen from the report of the ITI, the ITI records that the above address is the last known address given in the return of income for the AY. 2009-10 whereas proceedings are initiated for AY. 2009-10; which itself throws some doubt about veracity of the report of the ITI. Moreover even though there are two signatures of so called witnesses- neither their names nor their addresses have been placed on report, therefore, the veracity of the witnesses evidencing the service by affixture cannot be verified. The procedure followed by the AO to get the notices by way of affixture itself shows some doubt about the whole procedure. Unexplained investment - Held that:- Since there is no basis for the disclosure of amount of ₹ 50 Lakhs, the same cannot be brought to tax, just because assessee has disclosed the same by way of letter. In view of that, we are not in a position to appreciate the addition made by the AO. - Decided in favour of assessee
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2018 (5) TMI 246
Disallowance of deduction claimed u/s 80P for the interest on FDR - Held that:- The O.D. facility obtained were used for providing credit facilities to its Members. The assessee also filed Certificate that Bombay Mercantile Cooperative Bank Ltd., is a Cooperative Society. The findings of the Tribunal in the case of assessee for A.Y. 2008- 2009 have already been reproduced above in which it was held that Bombay Mercantile Cooperative Bank Ltd., have been assessed as a Cooperative Society and its income was allowed to be exempt under section 80P(2)(a)(i) of the I.T. Act by the Mumbai Bench. It was, therefore, held that fixed deposits placed with this Bank falls within the exemption granted by Section 80P(2)(d) of the I.T. Act and assessee was also eligible for deduction under section 80P(2)(a)(i) of the I.T. Act. CIT(A) in the case of the same assessee for A.Y. 2013-2014 vide order dated 15.02.2018 following the order of the Tribunal for A.Y. 2008- 2009 allowed the claim of assessee. therefore, there were no justification for Ld. CIT(A) in not following the order of the Tribunal in the case of same assessee for A.Y. 2008-2009. As in the case of Agrawal Warehousing and Leasing Ltd [2002 (7) TMI 86 - MADHYA PRADESH High Court] held that the Ld. CIT(A) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. The conditions of Section 80P(2)(a)(i) and also 80P(2)(d) are satisfied by assessee. - Decided in favour of assessee
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2018 (5) TMI 245
Deduction u/s 80IB in respect of the profits of Project A&B and D&E - built up area - Held that:- We hold that the balconies open to the sky are to be excluded from the calculation of the built-up area of a particular residential unit and accordingly qualify for deduction under section 80 IB(10) of the Act. We further hold that in view of the dispute as to the measurements between the assessee and the DVO, we restore this limited issue as to the discrepancy in measurements in respect of the alleged units with the area exceeding 1000 Sq.ft. to the file of the Assessing Officer for fresh examination and adjudication thereon after giving due opportunity to the assessee to present their case. Grounds of appeals of the assessee are answered accordingly.
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2018 (5) TMI 244
Disallowance of claim of deduction u/s.80IA(4) - assessee had developed the infrastructure facility and was engaged in operating the Road - Held that:- The obligations which had been assumed by the assessee under the terms of the contract were obligations involving the development of an infrastructure facility. Section 80-IA of the Act essentially contemplated a deduction in a situation where an enterprise carried on the business of developing, maintaining and operating an infrastructure facility. A port was defined to be included within the purview of the expression “infrastructure facility”. The obligations which the assessee assumed under the terms of the contract were not merely for on a BOT basis. On the fulfillment of the ten years, there was a vesting in the JNPT free of The finding that the assessee had developed the infrastructure facility and was engaged in operating the Road is entitled to the special deduction under Section 80 IA. Disallowance u/s. 40(a)(ia) - TDS deposited before filing the return u/s.139(1) - Held that:- TDS deducted on payments have already been deposited before filing the return u/s.139(1) the same cannot be disallowed by invoking provisions of section 40(a)(ia) of the Act. From the record, we find that TDS up to February, 2008 have been duly deposited in the Government account on 29.8.2010, which is prior to the last date of filing the return u/s. 139(1). Accordingly, there is no justification on the part of the Assessing Officer to disallow payment u/s. 40(a)(ia) of the Act. The Assessing Officer is directed to delete the disallowance so made. Disallowance of Labour Expenses - Held that:- Nature of assessee’s business and fact that labour payment have been made at site, we restrict the disallowance at ₹ 20,000/- in place of ₹ 2 lakhs made by the Assessing Officer. We direct accordingly.
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2018 (5) TMI 243
Disallowance u/s 14A - Held that:- As relying on Maxopp Investment Ltd [2018 (3) TMI 805 - SUPREME COURT OF INDIA] we uphold the finding of the Ld. CIT(A) in considering the investment in shares of M/s Gwalior steels private limited for working out average value of investment required for rule 8D(2)(ii) and 8D(2)(iii) of the Rules. Whether the interest amount considered by AO for proportionate disallowance u/r 8D(2)(ii) was corresponding to money borrowed and utilized towards investment in shares - Held that:- the onus is on the assessee to establish that funds utilized in investment in shares yielding exempt income, are not mixed funds and out of its own fund only. The assessee is required to prepare fund flow statement and demonstrate that investment in shares has been made only out of free reserves available. In view of the aforesaid discussion, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding a fresh after verification as stated above and in accordance with law after providing adequate opportunity of being heard to the assessee. Thus, this ground of appeal is partly allowed for statistical purposes. Taxability of perquisite in the hands of the Director of the company for being allowed possession/use of the assessee’s property at rates lower than the market value - Held that:- CIT(A) has not issued any direction to make addition in the case of directors and only made an observation for need to examine the issue in the hands of the Director. Certainly, the Assessing Officer of the directors of the company will have to examine the issue in accordance with law and for which the affected third-parties will get due opportunity of being heard. The Ld. CIT(A) has though allowed relief to the assessee on the issue in dispute, but has not directed the Assessing Officer of the directors of the assessee company to tax the said amount in their hands and observed a need to examine issue in their hands. Since the Ld. CIT(A) has not concluded on taxability on the issue in hands of the directors or issued directions under-section 150(1) of the Act, it is merely an observation and, thus, in our view, Ld. CIT(A) has not exceeded his authority. - Decided against assessee
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2018 (5) TMI 242
Deduction of interest from house property income (rental income) - assessee had claimed deduction u/s 24 on account of interest payment - Held that:- The same issue arose before the Tribunal in AY 2011-12 as held revenue erroneously restricted the claim of the assessee towards interest payable on the borrowed capital, only for the part of the year during which the property had remained in existence. We are persuaded to observe that if the legislature would have intended to restrict such a claim of the assessee, then the same would have specifically been provided for in the statute. We are thus of the considered view that the CIT(A) had erred in sustaining the order of the AO and thus misinterpreting the scope and gamut of Section 24(b), had wrongly disallowed 50% of the aforesaid ‘Interest on borrowed capital' - Decided in favour of assessee Disallowing set off of interest expenditure against interest income earned - whether direct and proximate nexus is established among surplus borrowed fund used for fixed deposit made from which interest income is earned - Held that:- We set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a fresh order after examining the contentions of the assessee. AO would examine the Fixed Deposit ledger account as well as Bank Book for the year under consideration as well as of preceding year. We direct the assessee to file the relevant documents/evidence before the AO. Disallowance of business loss - AO disallowed on the ground that the assessee has not done any business activity during the year under consideration and in the earlier years - Held that:- It is found from the annual accounts that the assessee has claimed a deduction of ₹ 7,894/-. It represents expenditure on rates and taxes to the tune of ₹ 14,768/-. Out of the above sum, an amount of ₹ 6,876/- has been disallowed u/s 14A of the Act. We further find that the above expenditure claimed is towards maintaining existence of the company. In view of the above facts, we delete the disallowance
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2018 (5) TMI 241
Reopening of assessment - estimating profit @ 25% out of alleged hawala purchases - Held that:- In case of return of income processed u/s 143(1), the only condition to be satisfied for reopening is taxable income has escaped assessment and the assessee’s plea that no fresh material was there before the AO warranting re-opening, is not relevant. We uphold the re-opening made by the AO by issuing notice u/s 148 of the Act. For bogus purchases we are of the considered view that the contentious issues in the instant case could be resolved by proper hearing by the AO. A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Cross-examination is allowed by procedural rules and evidently also by the rules of natural justice. We set aside the order of the CIT(A) on the above issue and restore the matter to the file of the AO to make a de novo order after examining the parties mentioned and allowing cross-examination to the assessee. It is the duty of the assessee to file before the AO the recent address of the above parties. Appeal is allowed for statistical purposes.
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2018 (5) TMI 240
Interest income earned on deposit with the Bank made out of the security deposit obtained from its members - applicability of principle of mutuality - Held that:- The interest expenditure has been incurred wholly and exclusively for earning such interest income on Bank deposit. As per the Apartment buyers agreement there is an obligation on every buyer to make security deposit and there is corresponding obligation on the society to pay interest on such deposit. Thus, the contention of the learned AR that this interest expenditure has not been incurred to earn interest income is incorrect. The assessee society has paid interest each one after deducting tax at source. Thus, it is not a case of exemption on the principle of mutuality. Such interest paid by the assessee society is taxable in the hands of the Apartment owner. Interest expenditure is to be set off against the interest income. As regards the AO’s contention that interest paid to member is not eligible deduction in the case of AOP under Section 40 (ba), we have perused the said Section. This clause excludes registered society from its applicability. Accordingly, this clause will not be applicable to the assessee society. Moreover, as rightly contended by the learned AR Section 40 (ba) is applicable while computing business income. This clause is not applicable while computing income from other sources. There is no prohibition in Section 57 (iii) under which deduction of interest is eligible to the assessee society. - Addition to be deleted - Decided in favour of assessee.
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2018 (5) TMI 239
TPA - comparable selection criteria - functional similarity - Held that:- Assessee is a company engaged in the business of providing back office data creation, content development, software and web development, thus companies companies functionally dissimilar with that of assessee need to be deselected from final list. Negative Working Capital adjustment - Held that:- As in the case of Adaptec (India) P. Ltd., Vs. ACIT [2015 (6) TMI 288 - ITAT HYDERABAD] Negative working capital should not be made. Therefore, AO is directed not to make any negative working capital adjustment. This ground is considered allowed accordingly. Short credit of tax deducted at source - Held that:- Since assessee did not get any opportunity and the working was not provided. Ld. Counsel pleaded for a direction to AO to give the credit as claimed. Since this requires verification of the TDS claims and the record of the department, we direct the AO to examine and give the credit as claimed after due verification. In case of any variation, assessee should be given an opportunity to explain or modify the claims or to furnish further evidence in support of its claims. AO is directed accordingly.
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2018 (5) TMI 238
Income accrued in India - PE In India - supply of equipment - functions of expatriate employees of the group companies seconded to Nortel India - Held that:- Income of the assessee wherein from was not chargeable to tax in India and the question relating to the attribution of any part of such income to activities in India does not arise. Income from installation, commissioning and testing activities as well as any function performed by expatriate employees of the group companies seconded to Nortel India would be subject to tax in the hands of Nortel India and the same cannot be considered as income of the assessee therein. In view of our finding, the question of attribution of any income to the alleged PE does not arise Transfer of copyrights - whether will tantamount to sale of a product and not covered within the scope of ‘Royalty’ - Held that:- It is not the case of the revenue that the software involved in this case is independent of the functioning of the hardware. Revenue does not dispute the fact that in this matter the hardware and software are interdependent in the sense that hardware is useless without this particular software and the software cannot be used in any hardware other than the one for which it is permitted to be used. Thus we hold that the payment for the embedded software is not royalty and the receipts on account of sale of embedded software cannot be separately brought to tax Taxing of income from providing training services as fees for technical services under the provisions of article 12 of the DTAA - Held that:- What is sold is the telecom equipment embedded with specific software to run that equipment; and for such purpose the assessee claims to have imparted some initial training because without which training the purchaser cannot operate the equipment and this training is only one time job for the use of equipment only. Admittedly, the contract between the assessee and the GAIL is not a service contract and the assessee is not entrusted with the job of any supervision or maintenance of the equipment so that for such continuous supervision or maintenance the requisite skills are made available to the employees of the GAIL. In terms of Article 12(5)(a) of the treaty, payment received by the assessee for the training required for the employees of the Gail at the time of delivery of the product to acquaint them with the operation of the equipment does not amount to FTS and cannot be brought to tax Deduction for R&D expenses - Held that:- R&D expenses appear in the same set of accounts of the assessee from which the sales figures of the equipment have been adopted and a GP rate has also been applied on the basis of the same accounts; and there are several cases of foreign, equipment manufacturers and suppliers including Nokia Corporation, being especially in the Department and in all such cases R&D expenses are being allowed and net profit ratio has been adopted from global accounts of the assessee for the purpose of attribution of profits which means R&D expenses have been allowed in that case on the basis of the global accounts. Income from the supply of equipment is not taxable in India. Assessee's income from supply of equipment was not chargeable to tax in India, the receipts on account of sale of embedded software cannot be separately brought to tax and that the income from providing training services cannot be treated as fees for technical services under the provisions of Article 12(5)(a) of the DTAA, the question relating to attribution of any part of such income to activities in India does not arise. Conclusion that the Assessee does not have a PE in India, the question of attribution of any income to the alleged PE also does not arise
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2018 (5) TMI 237
Assessment framed being barred by time - period of limitation - whether the limitation for framing reassessment would start from the date when the Tribunal passed order dated 11.12.2000 or from the date when the Hon'ble High Court issued direction to frame assessment de novo after quashing the finding of the Tribunal in respect of the issue of service of notice u/s 143(2)? - Held that:- There is no dispute with regard to the fact that the order of the Tribunal was not challenged by the assessee. Now, at this stage, the assessee cannot be permitted to take a plea against the order passed by the Tribunal in respect of the observation of the Tribunal that the issue regarding service of notice would be subjected to the outcome of appeal preferred against the order of the Tribunal. The limitation is required to be reckoned from the date when the Hon'ble High Court directed the AO to, frame the assessment. It is also a fact that the extension of framing of assessment was granted by the Hon'ble High Court in a Misc. Petition filed in the main appeal. Therefore, the limitation would run when the last direction was given by the Hon'ble High Court. No merit in the submissions of the assessee that the assessment so framed is time barred. Direct the Registry to fix the appeals for hearing on merit of the case related to other grounds raised by the assessee/revenue. - Decided against assessee.
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2018 (5) TMI 236
Penalty u/s 271(1)(c) - non allowability of expenses - non voluntary deceleration - Held that:- The three items in respect of which the addition is made, namely, loss on sale of fixed assets, fixed assets written off and provisions for doubtful debts do not fall under Chapter VIA of the Act and it leads no amount of support to the contention of the assessee that no query was raised for all the items. It, therefore, stands established that the assessee company had been suffering persistent losses and it is not an attempt to reduce the profit or tax. Though the notice u/s 143(2) and 142(1) was issued, in so far as the declaration of non allowability of these expenditures are concerned, such items were not covered under the query and to that extent, a revised computation filed by the assessee is voluntary. Undoubtedly, the assesseee is incurring persistent losses and there is considerable reduction in the manpower. Further, the tax audit report vide Clause 17(a) thereof says that the auditors’ reported the expenses of capital nature as ‘nil’. Mere issuance of notice u/s 143(2) does not ipso facto make the declaration of the assessee as non voluntary. We are convinced to believe that the mistake in this matter is the result of the assessee but does not amount to the concealment or furnishing of inaccurate particulars thereof. With this view of the mater, we hold that the penalty u/s 271(1)(c) cannot be sustained. - Decided in favour of assessee
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2018 (5) TMI 235
Entitled to a claim of depreciation allowance on the assets of its’ unit managing shrines (holy places) - Held that:- Without doubt, the same is admissible. The same would not be u/s. 32(1), as rightly pointed out by the ld. CIT(A), in-as-much as the assets do not represent or constitute a business undertaking. However, an annualized capital charge, based on a reasonable estimate of the life of the relevant assets, would definitely stand to be allowed, even as explained by the Board per its Circular No. 5-P (LXX-6) dated 19.06.1968. This, in fact, represents trite law and is also the premise for a claim of depreciation. The non-booking of depreciation in accounts, though essential inasmuch as it cannot be unaccounted, would not in our view be fatal. The first appellate authority ought to have issued specific directions in this regard as the assessee’s accounts, which are subject to audit, ought to bear the said charge. The same would also eschew a double claim in its respect, which is a distinct possibility where the asset value/s is not correspondingly reduced (by the amount of depreciation). Further, the assessee is equally entitled to claim capital expenditure, including on acquisition of capital assets, as a part of application of income. We state this in-as-much as exemption under section 11 is only on the basis of application of income, and not otherwise, and on which aspect we observe no finding by the AO. The matter, accordingly, shall travel to the file of the AO to compute the assessee’s income (for both the units) in accordance with law. The AO, whose powers in the matter of assessment are plenary, shall, after hearing the assessee, issue directions with regard to booking of depreciation deemed proper under the circumstances, which the assessee is entitled to claim, and which may extend to properties of both the units. We may clarify that the depreciation is to be consistently provided in accounts based on objective data. Penalty u/s. 271(1)(c) - excess of Gurdwara receipt over the related expenditure - Held that:- We have not only held of the assessee as being entitled for the claim of depreciation - which though would have to suitably quantified and also booked, but also for set off of capital expenditure as application of income, both in terms of settled law, which shall reduce the taxable income. In fact, even excluding section 11, the claim would stand, as it is only income thereafter that could be subject to application for charitable or religious purposes. In fact, merits apart, the assessment itself stands set aside. No case for the levy of penalty is under the circumstances made out. We decide accordingly.
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2018 (5) TMI 234
Denying the assessee registration u/s. 12AA - Incomes not included in total income - inflation of costs - Held that:- Charge of hefty fees undermines and violates the very basis or notion of charity, excluding those placed at the lower end of the societal strata. That apart, the assessee, by its constitution, is a non-profit society. The reasonableness afore-stated, however, is to be considered with reference to the cost of providing education, quality of which is to be maintained. The school is affiliated to the Punjab Board, running on CBSE pattern. There is nothing to suggest of the costs being inflated, as we not often, see, with a view to disclose a reasonable profit! A surplus, by itself, which in fact is essential, would not render the society as not a non-profit society, even as, given its mandate as a non-profit body, it may well be contained, if not restricted further, from the level of 20% to 25% (of the gross receipt) which obtains for f.ys. 2014-15 & 2015-16, being only the second and third years of its operation. This is as the total fees (cost to the students) could be reduced by as much, while still meeting the cost, which would only stabilize in future. All the receipts and expenses being accounted, with the accounts being audited, we find no basis for drawing any adverse inference from the deposit of cash in bank post 08.11.2016. The facts are required to be seen in perspective, which we find has not been by the competent authority. We only consider it proper that the matter is restored back to the file of ld. CIT(E). We have already noted two aspects on which we find the assessee to have not furnished a satisfactory explanation, and which impinge directly on the acceptance or otherwise - being germane to the parameters laid down for the purpose, of the assessee’s application u/s. 12A. The assessee, as assured by the ld. AR before us, shall clarify on those aspects before the ld. CIT(E), with a view to satisfy him thereon. It needs to be appreciated that it is, under law, the competent authority which is to be satisfied about the objects of the society as well as the genuineness of its’ activities. Assessee’s appeal is allowed for statistical purposes.
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2018 (5) TMI 233
Disallowance u/s 14A r.w. Rule 8D - Held that:- Regarding the disallowance made by the AO under Rule 8D(2)(i), it is found from the profit and loss account for the year ended 31.03.2012 of the assessee that the same relates to D-Mat charges. As this amount of expenditure is directly related to dividend income earned by the assessee, the same is confirmed. Disallowance made by the AO under Rule 8D(2)(ii) it is found that the partner’s capital account in the current year stands at ₹ 32,136,138/- whereas the investments were of ₹ 7,583,012/-. As the own fund in the instant case is more than the investments, we delete the disallowance made by the AO under Rule 8D(2)(ii). See HDFC Bank Ltd. vs. DCIT [2016 (3) TMI 755 - BOMBAY HIGH COURT]
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2018 (5) TMI 232
TPA - selection of comparables by Ld. TPO as well as exclusion of certain comparables that have been proposed by assessee - Held that:- Assessee functions as IT enabled service provider, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Disallowance on account of foreign exchange fluctuation by adjusting the same against the interest income shown under the head ‘income from other sources’ - Held that:- On one hand assessee projects itself to be a risk-free company wherein all the direct, indirect costs incurred by assessee including foreign exchange fluctuations are included in the cost remunerated by its AE. On the other hand assessee is considering loss earned due to foreign exchange fluctuation on conversion of its export revenues into INR as income from other sources. In our considered opinion assessee cannot blow hot and cold at the same time. We are therefore of the considered opinion that Ld. TPO was right in considering the loss incurred by assessee due to foreign exchange fluctuation as business loss. Insofar as providing adjustment in terms of foreign exchange fluctuation is concerned in respect of comparables, assessee is directed to provide necessary details in respect of any such risk assumed by such comparables that has been finally selected hereinabove for purpose of benchmarking international transaction. Ld.TPO shall then verify the same and accordingly grant risk adjustment while computing margin of assessee.
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2018 (5) TMI 231
Validity of reassessment proceedings - original assessment was completed as per the provisions of section 153A - non-payment of leave encashment amount - Held that:- A perusal of the notice reveal that it is a case where the original assessment was completed u/s. 143 (3) r. w. s. 153A, that reopening was done after a period of four years, that the basis for issuing notice u/s. 148 was non-payment of leave encashment amount, that an entry in the Tax Audit Report was the reason for initiating the reassessment proceedings. Now, if fact of filing of Tax Audit Report is taken into consideration it becomes clear that necessary details were made available to the AO, during original assessment proceedings. As the Tax Audit Report was available to the AO during assessment proceedings, so, the observation made, that the assessee had not filed necessary details, is factually incorrect. Considering the above, we are of the opinion that no new tangible material was relied upon by the AO for issuing notice u/s. 148 of the Act. In other words, same material was used to initiate the reassessment proceedings. Thus, it is a case of mere change of opinion. Also section 43B(f) would apply only to those cases where an employer would be any amount to an employee out of leave salary standing to credit of employees. In the case under consideration provision was made on the basis of actuarial valuation. Therefore, the provision for leave encashment would not fall under the preview of clause(f)to section 43 B of the Act. Thus t reopening has to be quashed on jurisdictional issue as well as on merits - Decided in favour of assessee
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2018 (5) TMI 230
Unexplained credits - addition u/s 68 - Held that:- The primary burden in this regard is on the assessee. However, we may clarify that where the assessee satisfies that money had been paid to a particular person in an earlier year, and it is he who has paid back the same, including as to the manner of transmission of funds, the initial onus on the assessee gets discharged. The credit/s under such circumstances is liable to regarded as reasonably explained unless the Revenue brings any adverse or contrary material on record. The matter, accordingly, to afford an opportunity to the assessee to state and present its case; we having delineated the scope of the onus as well as the parameters on which the essentially factual matter needs to be examined and determined, is restored back to the file of AO. As regards the balance sum (of ₹ 22.25 lacs), the assessee’s case is that the non-spelling out of the nature and source of the cash deposits in its’ bank account - as required u/s. 69A of the Act, is that the same is the cash (in hand) as per its cash book. Is it by way of cash withdrawals from the bank (either the same or another) itself - an unlikely situation as an assessee would not withdraw funds from the bank only to deposit it back; or sales - which are thus a revenue receipt; or cash receipt/s from other person/s, in which case it is this person/s who is the actual (real) source of funds – the ‘cash-in-hand’ being only an ostensible (illusory) source, etc. - addition is thus also set aside to the AO for fresh determination, by issuing definite findings of fact, and adjudication in accordance with the law. - Decided in favour of assessee for statistical purposes.
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2018 (5) TMI 229
TDS u/s 194C OR 194J - payment pertaining to installation service - Held that:- There is no specific qualification or recognized course required for Installation Service Provider to become eligible for installation of Dish and Set-Top Box. They are given basic training/instructions for a short period to make them understand the process of Installation so that they can apply the same at the place of the subscriber. CIT(A) was justified in holding that assessee was required to deduct tax u/s.194C of the Act. CIT(A) has dealt with the issue threadbare and after relying on various judicial pronouncements held that work of installation of Set-Top box amounts to ‘works contract. The detailed finding so recorded by CIT(A) are as per material on record which has not been controverted by ld. DR by bringing any positive material. We do not find any reason to interfere in the order of CIT(A) holding that installation of Set-Top Box amounts to works contract and no technical expertise are required so as to make the assessee liable under the provisions of Section 194J. Principal to principal relationship between assessee company - distributors and the discount given said to be ‘commission’ within the meaning of section 194H - Held that:- From terms and conditions of the agreement entered by the assessee which in parameteria with the terms and conditions having been discussed in case of Vodafone Essar Ltd [2010 (8) TMI 691 - KERALA HIGH COURT] no merit in the action of the lower authorities for treating the assessee in default in respect of non-deduction of tax at source on trade discount granted to principal distributor by holding the same as commission, hence liable for deduction of tax at source under the provisions of Section 194H of the IT Act.
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2018 (5) TMI 228
Addition u/s. 69/69A - unexplained cash payment - Held that:- In the present case section 69A which is more aptly applicable. This is as not only is the assessee found to have incurred expenditure during the relevant year, the same stands met by payments in cash during the relevant year. It is only these cash payments, and not the total expenditure actually incurred, on account of it being unexplained as to source thereof, which is brought to tax as its income. No correlation between expenditure incurred and the payments in cash, so that they pertain to specific item/s of expenditure, has been made at any stage, including before us, with in fact, the cash being paid in round figures while the expenditure is in odd figures. In the absence of any correlation and, in fact, apparent contradiction, the assessee’s case is without any factual basis. The assessee’s next argument is, again, only to be stated to be rejected. It is pleaded that as the partners had surrendered a total of ₹ 54 lacs, the same be telescoped against the addition that may stand to arise in the case of the assesseefirm. This is as it is they who made the cash available to the firm, which commenced operations during the current year, i.e., in June, 2006. The income referred to and offered by the partners is for AY 2009-10, which is the second year in appeal before us. How could the income generated, even if translating into cash, during the previous year relevant to AY 2009-10, be conceivably available during the relevant year, i.e., f.y. 2006-07. The ld. AR had no answer. Finally, the assessee’s states that there has been some duplication in arriving at the figure of ₹ 9.92 lacs. This is as the same figure of cash expenditure gets included both from the account of the expenditure as well as of the vendor, i.e., from whom the relevant goods/services stand sourced. We were taken through the relevant sheet by the ld. AR, to exhibit the same. We find this as correct. Also, it was shown by him that in a couple of cases, the payment made in April, 2007 has been also included while casting the total payment for which addition has been made.We, therefore, subject to the verification by the A.O. in the matter, direct for the deletion of the addition to the extent of the said duplication, clearly specifying the same in his order, as well as of the addition qua cash payments made after March 31, 2007. - Decided partly in favour of assessee Unexplained expenditure - Held that:- Considering from the stand-point of the source of expenditure, the document explains the source of cash, being from the project owners in the main, and from the partners (specified by name, with their respective amounts). In fact, none of the documents listing the expenditure, save three, list the dates on which the same is incurred. How could then it be said that the same is incurred during the relevant previous year, i.e., f.y. 2008-09, even as that before 26.06.2008 would get explained on the basis of the receipt and expenditure statement. The three documents refer to a date post 26.06.2008, so that the expenditure does not pertain to these projects, and is thus liable to be added as unexplained expenditure u/s. 69C. The amounts per the three documents aforesaid totals to ₹ 11,660/-. An addition to this extent is thus confirmed, and the balance directed for deletion.
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2018 (5) TMI 227
Exemption granted u/s 11 - Registration granted to the assessee u/s 12A cancelled with retrospective effect - Held that:- The assessee should be granted exemption u/s 11 of the Act for assessment year 2008-09, since the Tribunal has held that the cancellation of registration shall take effect from 01-06-2010 only. Accordingly we set aside the order passed by Ld CIT(A) for assessment year 2008-09 and restore all the matters to the file of the assessing officer with the direction to compute the total income of the assessee by applying the provisions of exemption granted u/s 11 of the Act. Applicability of the proviso to sec. 2(15) - cricket matches conducted by the assessee by selling tickets was a commercial activity - claim for exemption u/s 11 rejected - Held that:- There is no dispute that the promotion of cricket falls within the scope of objects of the assessee. Further, the recreational facilities did not become operational during the year under consideration. - Decided against revenue
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2018 (5) TMI 174
Disallowances made u/s. 40(a)(ia) - tds liability on legal and professional charges - Held that:- TDS has been deducted as well as paid within the same financial year on expense of ₹ 45,000/- only. Hence to this extent no disallowance u/s. 40 (a) (ia) can be made. However for the balance expense ₹ 1,01,000/-, the Ld. A.R. could not state as to why to this extent the disallowance u/s. 40 (a) (ia) has been incorrectly made. Thus, the disallowance to the extent of ₹ 1,01,000/- stands confirmed and disallowance to the extent of ₹ 45,000/- stands deleted. This ground is partly allowed. Addition u/s.14A r/w Rule-8D - Held that:- It is not in dispute that exempted income is only ₹ 13,063/-. Thus in view of all the disallowance u/s.14A/Rule-8D cannot exceed the amount of exempted income which is only ₹ 13,063/-. Addition of deemed dividend u/s.2 (22)(e) - Held that:- On examining the facts of present case, the assessee is a share holder in M/s Nanak Builders & Investors (P) Ltd., having 48.86% of share holdings. The assessee is having a running account with the company. There is no finding or evidence on record or otherwise to show that the transactions are undertaken with the object of evasion of any tax. Hence, find that the ratio of law as laid down in Suraj Devi Dada (2014 (5) TMI 625 - PUNJAB & HARYANA HIGH COURT) squarely applies to the facts of this case also. D.R. also did not controvert the contention of the Ld. A.R. that under the peculiar facts of this case, only the transactions of A.Y.2010-11 should be considered independently ignoring the opening balance for the limited purposes of examining the applicability of sec.2 (22) (e). Thus addition deleted - Decided on favour of assessee Correct head of income - hire charges receipts - busniss income or income from other sources - Held that:- The head of income being income from other sources is a residuary head of income wherein, apart from the specific nature of income as are to be covered under the head income from other sources, only such other incomes are to be included which cannot be assessed under any other head of income. ₹ 2,50,000/- have been received as hire charges of some farm land for one day to a private party for some event. Thus it is an activity in the nature of the business activity. Therefore, amount should be assessed under the head income from business and profession. On perusal of asstt. order as find that the A.O. has not assigned any reason for opting the head of income as income from other sources for this addition. Income stands assessed under the head income from other sources should be set off against un-absorbed brought forward depreciation - Held that:- Sec.72 (2) provides that any allowance shall be first treated as provided in sec.71 (1) and only thereafter the balance shall be carry forward. Thus, sec.72 (2) nowhere restricts for setting offf of income from other sources from B/F depreciation. It is also found that in the case of the assessee, in A.Y.2009-10, the A.O. himself allowed similar set off u/s.143 (3). It is also noteworthy that for not allowing this set off, in this year, the A.O. has not assigned any reason whatsoever. Thus direct that whatever income stands assessed under the head income from other sources should be allowed to be set off against B/F depreciation and B/F losses. In result this ground of appeal is allowed.
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Customs
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2018 (5) TMI 271
Maintainability of petition - Appellate remedy not availed of - petitioner approached this Court under Article 226 of the Constitution without availing the appellate remedy against the impugned order - Held that: - since the issue involved with regard to the classification of the product imported, the Division Bench of the High Court exercising appellate jurisdiction over the orders of the CESTAT, is denude of powers to decide a classification dispute, as appeal lies to the Hon'ble Supreme Court. Therefore, the petitioner cannot seek for a direction from this Court to rule on a classification dispute. On facts, it is admitted that the petitioner has been clearing the very same LCD panels by classifying the same under CTH 8529 for over three years. The question would be as to whether the petitioner at this juncture can claim that the imported goods are classifiable under CTH9013. The matter clearly involves appreciation of the factual position, what is the nature of the product imported by the petitioner etc. Undoubtedly, such an exercise cannot be undertaken by a Writ Court. Petition dismissed being not maintainable.
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2018 (5) TMI 270
Classification of goods - Heavy Melting Scrap and Re-rollable scrap - Department took the view that 197.915 MTs of cut/end pieces of TMT rods are classifiable under CTH 72149990, hence not eligible for exemption and that the declared value is not true transaction value - validity of SCN - Held that: - On perusal of the SCN though the section under which it is issued is under Section 124, the allegations made out as well as the proposal is for recovery of duty short paid. - Section 124 of the Act seeks only the action of confiscation of goods and / or imposition of penalty. To recover duties not levied /not paid/ short paid / short levied / erroneously refunded, a notice has to be served on the person chargeable with duty or interest etc. under Section 28 of the Act. Classification of goods - Held that: - On examination, the Chartered Engineer has opined that out of 232.85 MTs, only 34.91 MTs of twisted rods were having less than 5 ft. Length and balance quantity of 197.915 MTs was cut/end pieces of TMT rods - The basis for the Chartered Engineer to arrive at such conclusion is that in common parlance the length of TMT rods in the market is from 11 to 12 mtrs (33 to 36 ft) and the length of the rods imported range from 3 ft to 15 ft and are cut end pieces of assorted sizes. Since the cut ends do not have proportionate size they have very limited usage - we fail to understand how this can be the basis for concluding that the goods are not HMS, we are not able to find any cogent reason for discarding the pre-inspection certificate in toto. The Jurisdictional High Court in the case of CC Chennai Vs Kamatchi Sponge Power Corpn. Ltd. [2016 (3) TMI 220 - CESTAT CHENNAI] in similar set of facts had upheld the order passed by Tribunal, which set aside confiscation and penalty. The impugned goods are Heavy Melting Scrap only - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 269
Classification of goods - railway scrap consisting of axles equivalent to heavy melting scrap - whether classified under CTH 7302990 or under CTH 86071910? - Held that: - the Chartered Engineer nowhere disputed about the description of the goods declared by the appellant and more or less he agreed that the description was made correctly in the Bill of Entry. The Chartered Engineer also opined that the imported goods can either be used for melting purposes. Therefore, the goods declared as heavy melting scrap is not incorrect. There is no basis for making allegation against the appellant regarding the misdeclaration of the goods and the goods imported does not fall under the restricted category. Therefore, the same is not liable for confiscation. Enhancement of the value - Held that: - no material such as contemporaneous import of the like goods was relied upon. Therefore, the enhancement of the value is arbitrary and cannot be accepted. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 268
Violation of import conditions - As the imported goods were not used for manufacturing of the goods which are to be exported therefore, duty is sought to be demanded - N/N. 93/2004-Cus dated 10.09.2004 - Held that: - 50MT of Coco Butter was lost during transit from the port to their factory and the same has been intimated to the department but the lost quantity has been replaced by the appellant by purchasing the Cocoa Paste from the local market to fulfil their export obligation and appellant has not claimed any rebate or draw back in respect of the locally procured Coco Butter. Advance authorisation has been discharged by DGFT (licensing authority) as export obligation has been fulfilled by the appellant. As the appellant has discharged the export obligation, in that circumstance, it is not open for the Revenue to initiate proceedings against the appellant that they have not fulfilled the condition of the advance authorisation. The appellant has not violated any condition of the N/N. 93/2004-Cus dated 10.09.2004. As per the condition of said notification, the appellant shall not transfer or sale the imported goods. Admittedly, in this case, appellant has neither transferred nor sold the imported goods but the said goods were lost in an accident in transit. The appellant has discharged their export obligation and to that effect, they have redeemed their bond executed with the licensing authorities i.e. DGFT. In that circumstance, Customs authorities cannot initiate proceedings against the appellant - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 267
Rectification of mistake - penalty - appellant submits that imposition of penalty on the applicant is excessive inasmuch as his monthly earning is around ₹ 5,000/-. - Held that: - after analyzing the evidences placed on record and the role played by the appellant this Tribunal has arrived at the quantum of the penalty - Reassessing the quantum would result into re-appreciation of the evidences and review of the order, which is not vested with the Tribunal - ROM application dismissed.
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Corporate Laws
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2018 (5) TMI 226
Restoration of name of Company strike off from the Register of Companies - Held that:- The applicant Company has filed the present application within prescribed time under law, and also shown sufficient reasons to order Restoration of its name in the Register of Companies maintained by the Registrar of Companies. Therefore, the Company application deserves to be allowed, however, subject to filing all pending returns, Annual returns, Balance sheets, statements etc., along with prescribed and addl. fee under law. And also subject to giving undertaking that they would not resort to such type of violations in future. The Company application is disposed direction The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Applicant Company as if the name of the company has not been struck off from the Register of Companies and take all consequential actions like change of company's status from 'strike off' to Active (for e-filing), to restore and activate the DINs, to intimate the bankers about restoration of the name of the company so as to defreeze its accounts. The Applicant company is directed to file all the statutory document(s) along with prescribed fees/additional fee/fine as decided by ROC within 45 days from the date on which its name is restored on the Register of Companies by the ROC.
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Insolvency & Bankruptcy
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2018 (5) TMI 175
Corporate Insolvency Resolution Process - non-disclosure of facts beyond the statutory requirement under the I & B Code read with relevant form - Held that:- The case of the Appellant being covered by decision of this Appellate Tribunal in “M/s Unigreen Global Private Ltd. Vs. Punjab National Bank & Ors.”[2018 (1) TMI 505 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] we set aside the impugned order dated 28.11.2017 and remit the case to the Adjudicating Authority to consider application under Section 10 of ‘I & B Code’ afresh. If the application is otherwise complete, it will admit the application. However, in case it is incomplete, the Adjudicating Authority will grant time to the Appellant to remove the defects. If any statement made in Form- 6 is misleading, it will be open to the Adjudicating Authority to pass appropriate order in accordance with law. The appeal is allowed with aforesaid observation.
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PMLA
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2018 (5) TMI 225
Offence under PMLA - provisional order of attachment - application to keep the civil proceeding in abeyance for confirmation of the provisional order of attachment during pendency of the trial - Held that:- This Court is of the opinion that there is no further issue to be decided and the writ application can be disposed of with the observation that the findings, which may be recorded by the adjudicating authority, would be prima facie the findings under the provisions of the PML Act, 2002 and the same would not have any binding effect on the trial Court, which would try the case/charges against the appellant in the criminal case under the provisions of the Code of Criminal Procedure. Another stipulation in this observation that since the civil proceeding is separate and distinct proceeding, the show cause filed by the petitioners or evidence led by the petitioners before the adjudicating authority will be in no way used by the prosecuting agency against the petitioners in the criminal trial pending before the Learned Vigilance Judge. This Court hastens to add that the petitioners should file their show cause before the adjudicating authority within a period of 15 days. Provisional attachment is valid for 180 days and in the meantime since substantial time has elapsed during the pendency of this writ application and the earlier writ application, the said time should not be counted while calculating 180 days as stipulated in Section 5(1) of the PML Act, 2002.
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Service Tax
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2018 (5) TMI 223
Non-issuance of SCN - Oral intimation of tax liability during audit - payment of tax under protest - It is the grievance of the petitioner that no SCN was issued to the petitioner despite petitioner requesting the respondents to issue the same - Banking and other Financial Services - Held that: - Much emphasis is placed on Section 73[3] of the Act and clause 3.2 of the Circular dated 18.08.2015 by the Revenue, to contend that no show cause notice is necessary when the petitioner has paid the tax and penalty on the basis of tax ascertained by the Audit Enquiry Officer before service of notice under sub- section [1] of Section 73 of the Act. As narrated above in the preceding paragraphs, the petitioner has made clear that the amount paid was provisional and under protest. No waiver of show cause notice has been accepted. As such limitation for the extended period is not invokable unless show cause notice puts the Assessee to notice specifically as to various commissions/omissions stated in the proviso to Section 73[1] of the Act had been committed. Extended period of limitation of five years is available only in cases where the omissions or commissions enumerated in proviso to Section 73[1] are alleged. Section 73[4] further makes it clear that clauses enumerated in the proviso to Section 73[1] would not fall within the ambit of section 73[3]. Thus, tax, interest and penalty cannot be collected for five years period without alleging omission/commission of the clauses enumerated under the proviso to Section 73[1]. Explanation – 2 to Section 73[3] provides that no penalty under any of the provisions of the Act or the rules made thereunder shall be imposed in respect of payment of service tax under section 73[3] and interest thereon. Even assuming Section 73[3] is invoked by the revenue, no penalty can be leviable. Otherwise also, if Section 78[1] is invoked, show cause notice is mandatory. It is well settled legal principle that penalty is not automatic. If the Assessee is making payment within 30 days after issuance of show cause notice, the penalty prescribed is 15% of such service tax, opportunity to show cause cannot be denied to the petitioner who is disputing the liability to tax extending the period of limitation. SCN is necessary for determining the disputed tax, interest and penalty - matter is remitted to the Respondent No.2 to issue show cause notice to the petitioner to determine the disputed tax, interest and penalty in accordance with the provisions of the Act - petition allowed.
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2018 (5) TMI 222
Demand of service tax on TDR - locus standi of the petitioner - alternative remedy - Held that: - TDR was neither issued in the name of the petitioner nor was the TDR owned by them in their name nor the petitioner is the title holder of TDR at any point of time during the transaction and the TDR was always in the name of the seller (land owner) of the TDR, in whose name the TDR was issued by the authorities - the petitioner acts only as a ‘confirming party’ in the transaction of buying and selling of TDR for a consideration and thus, acts as a facilitator between the buyer and seller of TDR. This Court do not find any ground to interfere with the impugned order at this stage when the alternative efficacious remedy is available under the statute. The writ petition stands dismissed with liberty to the petitioner to file an appeal before the competent Appellate Tribunal.
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2018 (5) TMI 221
CENVAT credit - input services - advertisement in electronic media i.e. through television network on the payment of service tax - reason for the disallowance is that the advertisement undertaken were not for sales promotion of liquor but for other products of the same brand. Whether advertisement services used by the appellant can be considered as input services for the provision of the output service of promotion and marketing of the liquor produced by M/s United Spirits Limited, the customer? - Held that: - It is an admitted fact that the advertisement expenditure was incurred for advertisements not for liquor but of other products of the company, such as, soda - Since, the entire agreement with M/s United Spirits Limited is entered into with the appellant for promotion of IMFL, the advertisement services cannot be considered to be used in promotion and marketing of IMFL - such advertisement services do not come under the definition of input service within the definition of Rule 2 (l) - credit not allowed. Whether the disallowance of Cenvat credit can be sustained for the period covered by longer period of limitation under Section 73? - Held that: - Such advertisements are consciously made without showing liquor, circumventing the ban on advertisement for the IMFL products, but the appellant have asserted that such advertisements were for promoting the sale of IMFL by the company. This amounts to not only suppression of facts but even borders on fraud - demand for longer period upheld. Appeal dismissed - decided against appellant.
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2018 (5) TMI 220
Classification of services - appellant had made transport expenses for transportation of levy sugar, press mud and for export of sugar - Goods Transport Agency service or Clearing and Forwarding Agent Service? - Held that: - for transporting the goods, the transporters did not issue any consignment note s as provided under Rule 4B of Service Tax Rules, 1994 - Further, it is not the case of Revenue that being the agents of the appellant, such transporters have delivered the goods at the customer s place, under the instructions of the appellant. The services provided by the transporters to the appellant should appropriately be classifiable under Clearing and Forwarding Agent Service and not under GTA service - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 219
Commercial or Industrial Construction Service - case of appellant is that since the activities were for the construction of residential flats, which were less than twelve in numbers, such activities cannot be considered as taxable service, under the category of Construction of Commercial or Industrial Service - Held that: - It is evident from the work entrusted to the appellant that the same are not for construction of residential houses. Since the appellant is an independent service provider, the activities undertaken by it, in our considered view, should not fall under the category of Construction of Residential Complex Service . Further, the documents do not indicate that the appellant had supplied any material for execution of the job or had paid VAT/Sales Tax into the Government exchequer with regard to purchase of any goods - contention of the appellant cannot be accepted that it had provided Works Contract Service to M/s. Prabhu Construction. Appeal dismissed - decided against appellant.
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2018 (5) TMI 218
CENVAT credit - taxable as well as exempt services - Rule 6(2) of CCR 2004 - case of Revenue is that since the appellant is providing service of lending wherein the interest is exempted, therefore, they are required to pay 8/6% of the value of such exempted service - N/N. 29/2004 - ST dated 22.9.2004 - Held that: - the notification does not exempt the service as whole whereas the service tax is exempted only to the extent of so much of the value of taxable service provided to a customer in relation to overdraft facility, cash credit facility or discounting of bills, bills of exchange or cheques as is equivalent to the amount of interest on such overdraft, cash credit or as the case may be. It is therefore, very clear that the service per se is not exempted, but a part of the taxable value is only exempted - If this be so, then it cannot be said that the service provided by the appellant is exempted. Identical issue decided in the case of M/s Vaidyanath Urban Co-operative Bank Ltd. Versus Commissioner of Central Excise, Aurangabad [2015 (11) TMI 952 - CESTAT MUMBAI], where it was held that the Banking and other Financial Service, which are the output service of the appellant are not fully exempted and accordingly, do not fall under the category of exempt service as defined under Rule 2(e) of the Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 217
Penalty u/s 78 - service tax along with interest was paid before show cause notice - Held that: - the mala fide intention is not proved - the appellant’s case is squarely covered by Section 73(3) of the Finance Act, 1994, according to which, after payment of service tax along with interest, the Revenue was not supposed to issue any show cause notice - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 216
Scientific and Technical Consultancy Service - in-house training at M/s SMC, Japan of employees of the appellant - appellant has reimburse the expenses of the said training - demand of tax with interest - Held that: - M/s SMC, Japan has not provided any advice consultancy, scientific or technical assistance to the appellant. Moreover, the M/s SMC Japan is not scientist or technocrat or Science technology institution/organization in the disciplines of science or technology. Therefore, for in-house training M/s SMC, Japan does not covered under Scientific and Technical Consultancy Service in terms of Section 65 (95a) of the Finance Act, 1994, therefore, the appellant are not liable to pay service tax under the said category. During the impugned period the assessee was required to pay service tax on the receipt of the payment of service provided and not from the date of service provided - the appellant is not liable to pay interest for the intervening period i.e. date of service provided till its realization. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 215
Erectioning and Commissioning service - appellant claims the service to be works contract service, which was not at all considered - Held that: - even before the Authorities below the appellant from the very beginning raised the issue that the services rendered by them are Works Contract Service, in respect of certain agreements/contracts. However, the plea was not considered and the demand has been confirmed against the appellant. This issue has not been analysed and examined by the authorities below that whether the appellant in fact rendered Works Contract Service against the contracts. Hence, the aspect, needs to be scrutinized and verified in the light of the principle of law laid down by the Hon’ble Supreme Court in Larsen & Toubro Ltd.’s case [2015 (8) TMI 749 - SUPREME COURT]. Appeal allowed by way of remand.
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2018 (5) TMI 214
Valuation of taxable services - Security Agency Services - Section 67 of the Finance Act, 1994 - inclusion of expenditures incurred in providing the said service - Held that: - reliance placed in the case of SECURITY AGENCIES ASSOCIATION Versus UNION OF INDIA [2013 (2) TMI 356 - KERALA HIGH COURT], where it was held that the service providers are very much authorised and entitled to pass on the liability towards salary and statutory payments to the ‘Service Receivers’ by raising the Bills including such amounts payable as Service tax. Penalty u/s 76 and 78 - Held that: - penalty u/s 76 set aside following the case of Raval Trading Co. vs CST [2016 (2) TMI 172 - GUJARAT HIGH COURT], where it was held that simultaneous penalty cannot be levied u/s 76 and 78. Appeal allowed in part.
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Central Excise
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2018 (5) TMI 213
Adjudication of Show cause notice - Input tax credit on 40 services - Matter is pending before SC in relation to 3 services out of 40 services in question - Adjudicating authority put the entire matter in the call book in view the circular dated 14.12.1995 - Held that: - the respondents shall adjudicate the impugned show cause notice dated 08.02.2012 in respect of the said 37 services. We record Mr. Bansal’s statement that the petitioner will not contend that the appeal, if any, against the decision with respect to the remaining three services is not maintainable on account of the tax effect thereof being less than what is prescribed by any circulars - petition adjourned.
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2018 (5) TMI 212
CENVAT credit - input service - outdoor catering services - Held that: - the Tribunal, following the decision of this Court in case of Commr. Of C. Ex., AhmedabadI v. Ferromatik Milacron India Ltd. [2010 (4) TMI 649 - GUJARAT HIGH COURT], held in favor of the respondent, holding that Tribunal was justified in holding that the service tax paid on outdoor catering services by the canteen located in the respondent’s manufacturing premises has to be considered as an input service relating to business and that CENVAT credit is admissible - credit allowed - appeal dismissed - decided against Revenue.
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2018 (5) TMI 211
Pre-deposit - the Tribunal granted stay on condition that the appellant deposits an additional amount of ₹ 1.60 crores - Held that: - The appellant was asked to deposit an additional amount of ₹ 1.60 crores, only on account of factual finding that the petitioner has raised invoices and bills on the recipients of the service, for payment of the service tax also. The fact that the appellant was not able to recover money from the service recipients, cannot be a matter of concern for the Department. If the appellant had been successful in recovery of the money from the service recipients, the appellant would have been asked to pay the entire amount of ₹ 16.50 crores - appeal dismissed.
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2018 (5) TMI 210
Classification of goods - NUZEN GOLD HERBAL HAIR OIL - appellant claims that the product is an oil based Ayurvedic Proprietary Medicament (Anubhutayogams) used for the purposes of hair and scalp related ailments classified the same under chapter 3003 of Central Excise Tariff Act, 1985 - Revenue authorities were of the view that the said product merits classification under chapter 33 as perfumed hair oil and the seized stocks of NGHHO found in the factory premises. Whether the product would fall under chapter 30 as claimed by the appellant or under chapter 33 as claimed by revenue? Held that: - Hon’ble High Court of Gujarat in the case of Vasu Pharmaceuticals Pvt. Ltd. [ 2010 (8) TMI 1090 - GUJARAT HIGH COURT] while deciding the classification of similar product “Trichup Oil” as to whether the said product would be classifiable under chapter 30 or chapter 33, has held that the product merits classification under chapter 30. Penalties - Held that: - Since we have set aside the demands on merits itself, question of penalties on the company as well as on the individuals who are Directors would not arise, accordingly all the penalties are set aside. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 209
Redemption fine - excess quantity found during the search - Held that: - the Tribunal in the case of Ambey Laboratories vs CCE [2017 (6) TMI 374 - CESTAT NEW DELHI] has held that since the goods remained within the factory there is no justification for seizure and confiscation of such goods - redemption fine set aside. Demand of duty - job-work - yarn was received and was returned in the Hank form - Held that: - the appellant is a job worker. Primary duty payment liability lies with the job worker unless the principal manufacturer was taken over the liability - In the present case, the principal had not taken over the liability, so the appellant is liable to pay the duty liability of ₹ 40,32,222/-. This ground is rejected. Demand - goods sent for job worker - Held that: - In the instant case, the principal has not taken the liability to pay the duty demand so the duty demand lies with the job worker - if the duty demand in the instant case to be paid by job worker and not by the Principal appellant. Hence, the duty demand of ₹ 2,83,421/- is deleted. Clandestine removal - it was alleged that only Challans and internal gate passes were prepared before actually clearing the goods under the Central Excise invoices - Held that: - demand was raised solely on the basis of the statement of Sh. R. B. Shah, Authorized Signatory who, in his statement dated 30.01.1997 admitted that file No. 22 contained various challans showing dispatch of the finished goods and that no Central Excise invoices were for such dispatches made by them and that the said goods were removed by them without payment of Central Excise duty - demand sustained. Demand - shortage of yarn - Held that: - the demand is based merely on assumption basis. When it is so, then the demand is not sustainable. The penalties will be decided accordingly by the Adjudicating Authority in light of above confirmation of the duty. Appeal allowed in part.
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2018 (5) TMI 208
CENVAT credit - trading activity - case of the department is that the sale of the steel sheets to the vendor is a trading activity - Rule 6(3) of the Cenvat Credit Rules, 2004 - Held that: - though this removal of steel sheets is indeed a trading activity, but the said clearances were made on payment of excise duty. Therefore, it cannot be considered as an exempted service - Rule 6 applies on the trading activity only in a case when the goods are purchased and sold without taking credit and without payment of duty. In the present case, the removal of input under Rule 3(5) was made admittedly on payment of duty - there is no application of Rule 6(3) of the CCR 2004 - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 207
CENVAT credit - inputs contained in the by-products - Rule 57D of the Central Excise Rules, 1944 - demand of 8% of the value of the by - products - Held that: - all the three products viz. wool grease, lanolin anhydrous and technical lanolin are generated unavoidably during the course of manufacture of final product i.e. wool tops. Therefore, all these products are by-products - From the plain reading of the erstwhile Rule 57D and sub-para (3.7) of CBEC’s Central Excise Manual, it is mandated that if any input is contained in the by - product, waste or refuse, the cenvat credit on the said quantity of inputs can not be denied. This provision is with the clear logic that the credit is available on the inputs so long as it is used in the manufacture of final product which is cleared on payment of duty. In the present case, all the inputs are used for manufacture of final product viz. wool tops which is cleared on payment of duty. However, the by - products are emerged unavoidably. Hence in the light of the above provisions, canvat credit cannot be denied on the input contained in the by - products. The provisions of Rule 57CC of the Central Excise Rules, 1944, Rule 6(2)/6(3)(b) of the Cenvat Credit Rules, 2002/2004 have no application in the facts of this case. Demand set aside - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 206
Reversal of CENVAT credit - inputs written off and written back in the books of account - Rule 3(5B) of the CCR 2004 - Held that: - as and when assessee writes off the quantity of inputs on which the Cenvat Credit was taken, he is required to reverse an amount equivalent to cenvat credit taken in respect of the inputs which has been written off in the books of account. Therefore in principle on the quantity of inputs written off in the books of account, cenvat credit is required to be reversed. In the present case, there is a submission of the Ld. Counsel that they are not only writing off the inputs but as and when the written off quantity is found useable, the same is written back in the books of account. If at all there is any case of payment of cenvat credit it should be on the net quantity to written off after adjusting the written back quantity - the adjudicating authority must re-quantify the actual credit to be reversed on net written off quantity after adjusting the written back quantity. Appeal allowed by way of remand.
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2018 (5) TMI 205
Rectification of mistake - time limitation - whether the application for rectification of mistake is barred by limitation or not? - Held that: - the said issue came up before this Tribunal in the case of Haryana Acrylic Mfg. Company Pvt. Limited [2018 (3) TMI 170 - CESTAT CHANDIGARH], where relying in the case of Sunitadevi Singhania Hospital Trust [2008 (11) TMI 249 - SUPREME COURT OF INDIA], it was held that the limitation will be applicable to the Tribunal for taking suo-moto action for rectification of mistake but the aggrieved party can file an application for rectification of mistake at any time but showing the reasons for causing delay that there has been injustice done to them by the order of this Tribunal - Application for rectification of mistake cannot be dismissed merely on the ground of limitation. There was apparent mistake on record while drafting order wherein the truck number HR-38M-2282 transported the goods to M/s. Airvision India Pvt. Limited, Bahadurgarh instead of M/s. Novice Polymers, Bahadurgarh. Therefore, the final order of this Tribunal is required to be rectified - the matter is required to be relisted to hear the parties on the said limited issue. Application for ROM allowed.
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2018 (5) TMI 204
Extended period of limitation - excess CENVAT credit availed - Interest - penalty - Held that: - Department came to know about discrepancy in Cenvat credit only after being informed about the same by the appellant on 17.11.2011. In the SCN, the extended period has expressly not been invoked though there is mention that the assessee has utilized the excess Cenvat credit intentionally. Interest - Held that: - Once it is held by the adjudicating authority that section 11AC is not applicable and the elements for applying extended period for the demand are similar, the demand of interest itself becomes time barred - the show cause notice for demand of interest is clearly barred by limitation - demand of interest set aside. Penalty under Rule 15 (1) of Cenvat Credit Rules, 2004 - Held that: - The plea of the appellant is that they had not taken excess Cenvat credit whereas the department has alleged that they had taken excess Cenvat credit and hence they had violated Rule 15 (1) of Cenvat Credit Rules, 2004. Since there is no finding on this aspect at all, the matter is remanded back to the Commissioner to examine this aspect. Appeal allowed in part and part matter on remand.
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2018 (5) TMI 203
Refund of excess duty paid on the component of Sales Tax - deduction of amount of sales tax from the assessable value - rejection on the ground that as the Sales Tax has been paid after completion of the contract and the same is not inclusive in the contract, therefore, they have to bear the amount of Sales Tax and whatever duly have been paid by them at the time of clearance of goods is correctly paid - unjust enrichment. Whether the Member (Technical) is correct holding that any increase in duties, tax levy after expiry of delivery date has no bearing on the price of the past clearances, therefore, any increase in duty tax is to be borne by the appellant from their account, particularly when no documentary evidence to prove that the contract price actually included Sales Tax has been produced? - difference of opinion - majority order. Held that: - the assessable value in terms of the clearance documents and assessment made during the relevant time show that neither sales tax was paid or payable and as such no deduction was permissible. The claim of the appellant that the sales tax dispute was settled against them later will not have any bearing as the invoice and the assessments were on the claim of the appellant that no sales tax was paid or payable. The assessment being final and excise duty has been discharged correctly with no indication of sales tax 'payable' or 'paid' , no variation in assessable value later is permissible. Appeal dismissed - decided against appellant.
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2018 (5) TMI 202
CENVAT credit - whether input service credit on civil construction service for construction of their factory premises is admissible to respondent under the Cenvat Credit Rules, 2004? - Held that: - the issue pertaining to admissibility of input service credit on construction service for factory/manufacturing plant is already settled by the judgment of the Hon’ble High Court of Punjab & Haryana in the case of CCE, Delhi-III vs. Bellsonica Auto Components India P. Ltd. [2015 (7) TMI 930 - PUNJAB & HARYANA HIGH COURT], wherein it was held that input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal - credit allowed - appeal dismissed - decided against Revenue.
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2018 (5) TMI 201
CENVAT credit - inputs - certain inputs were rejected/ spoiled by the job worker and certain inputs were not received back by the appellant from the job worker - Where is the facts and circumstances of the case, the Cenvat credit of ₹ 6,00,613/- is required to be reversed by the appellant on the inputs rejected/spoiled at the job worker’s premises received back by the appellant in the absence of the proof of payment of duty on scrap or not? - difference of opinion - majority order - Held that: - there is no dispute that input were issued for manufacture and during manufacture they were either rejected or spoilt and then returned back to the manufacturer by the job worker - the requirement of para 3.7 of Supplementary Instructions are satisfied in respect of subject inputs and therefore I hold that there is no need for reversal of Cenvat credit of ₹ 6,00,613/- in the facts and circumstances of the present case - credit allowed. In view of the majority decision, the appeal is allowed.
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2018 (5) TMI 200
CENVAT credit - fake invoices - invoices received from a large number of firms located in Ghaziabad and Noida without actual receipt of material - penalty on co-noticees, who do not approach the Settlement Commission and undergo the adjudication process - Held that: - the appeals filed by present respondents can not be allowed on the ground that main accused got immunity from the Settlement Commission. The Commissioner (Appeals) is therefore required to examine the merits of the present case with the merits of the case against the main accused - appeal allowed by way of remand.
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2018 (5) TMI 199
Benefit of N/N. 56/02-CE dated 14.11.2002 - Classification of goods - Vipul Booster - whether the product is classifiable under sub heading 3101.00 of Central Excise Tariff Act? - Held that: - As this Tribunal in the case of Bahar Agrochem & Feeds Pvt Ltd., Versus Commissioner of Central Excise, Pune [2011 (2) TMI 600 - CESTAT, MUMBAI] has held that the correct classification of the Vipul Booster is an insecticide under heading 3808.10 instead of plant growth regulator under heading 3808.20 of the Central Excise Tariff - the classification sought by the Revenue under sub heading 3101.00 as fertilizer is not applicable to the facts of the present case. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 198
CENVAT credit - input services - outward transportation service beyond the place of removal - Held that: - the finding of the Commissioner (Appeals) is entirely based on the premise that the party cleared the goods at the factory gate - Clearly, breakdown given by the appellant in the letter dated 11.5.2012 has not been considered by the Commissioner (Appeals). The adjudicating authority has reached its conclusions on the basis of Board’s circular No.97/8/2007-ST dated 23.08.2007. The said circular has been held to be inapplicable for the period after 1.4.2008 by Hon’ble Supreme Court in the case of Ultra Tech Cement [2018 (2) TMI 117 - SUPREME COURT OF INDIA]. Demand and interest upheld - penalty set aside - For the remaining demand, the matter is remanded back to the adjudicating authority to pass a fresh order - appeal disposed off.
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2018 (5) TMI 197
Area Based Exemption - N/N. 49-50/2003-CE dated 10/06/2003 - Extended period of limitation - Held that: - it is an admitted fact that the appellant opted for exemption with effect from 06/06/2007 and did not intimate to the department in time but the appellant intimated to the department on 30/04/2009 availing the exemption with effect from 06/06/2007. As the fact of availment of exemption came to the knowledge of department on 30/04/2009 with effect from 06/06/2007 of the appellant's on persuasion. In that circumstances, the period of limitation starts from 30/04/2009. Admittedly, within one year of the said date of 30/04/2009, no SCN has been issued. Extended period of limitation is not invocable for the period 06/06/2007 to 29/04/2009 - the impugned order qua denying the exemption under N/N. 49-50/2003-CE dated 10/06/2003 is set aside - appeal allowed.
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2018 (5) TMI 196
Manufacture - assessee was engaged in the activity of manufacturing steel tabular poles and located in the state of Jammu & Kashmir paying duty on their activity - Revenue entertained the view that the activity undertaken by the assessee does not amount to manufacture - demand of interest and penalty - Held that: - as Registration Certificate itself was cancelled by the Revenue themselves holding that the activity does not amounts to manufacture. Therefore, the assessee was debarred to collect the duty from their perspective buyers, as the appellant was de-barred to collect duty, in that circumstances, interest cannot be demanded from the appellant as the Revenue itself is entertained their view till today that the activity does not amount to manufacture by keeping the appeal pending before this Tribunal on the issue that the activity does not amount to manufacturing. As the revenue entertained two views and revenue is also have not taken a clear stand on the issue. In that circumstances, penalty on the assessee is not imposable. Appeal dismissed - decided against Revenue.
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2018 (5) TMI 195
Recovery of excess Refund claimed by the appellant - excess self credit taken by the appellant - N/N. 56/2002-CE dated 14/11/2002 - Held that: - Admittedly, the appellant has not claimed refund of Cenvat Credit available to them. In that circumstances, it is revenue neutral situation, therefore, there was no requirement to issue show-cause notice to the appellant. It is the case of the revenue itself that they were not required to pay duty, therefore, the excess amount paid by the appellant is merely a deposit not a duty. Hence, the provisions of Section 11A of the Act, is not applicable to the case. In that circumstances, the appellant is not required to pay the excess refund claimed by them. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 194
Reversal of CENVAT credit - Oxygen Gas cleared for medical purposes - whether the appellant are required to discharge 5%/6% of the value of the exempted products i.e. Oxygen Gas cleared for medical purposes? - Held that: - the appellant have adduced sufficient evidences viz the Chartered Accountant’s Certificate and a communication from the buyer which established the fact that they have not utilized the manpower supply service in selling/ clearing oxygen for medical purposes. Tribunal in the case of M/s Aims Industries Ltd. Versus C.C.E. And S.T. Vadodara-i [2018 (5) TMI 93 - CESTAT AHMEDABAD], has already taken a view that in the event credit on input service viz. manpower supply service was not used in providing the service for clearing Oxygen Gas for medical purposes, there was no requirement of payment of 5%/6% of the value of the Oxygen cleared for medical purposes under Rule 6(3) of CCR 2004. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 193
Principles of natural justice - non-speaking order - Valuation - inclusion of the value of the free supply material in the assessable value - Held that: - the Commissioner (Appeals) has solely relied on the Board’s Circular and totally ignored all other submissions made by the appellant - the order of the Commissioner (Appeals) is not a speaking order - appeal allowed by way of remand for passing a speaking order after following the principles of natural justice.
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2018 (5) TMI 192
Valuation - job-work - Revenue is of the view that the job worked goods be assessed to duty under Rule 10A(ii) of Valuation Rules, 2000 - Held that: - Clause (iii) of the Rule 10A of Valuation Rules are applicable, as the goods are not cleared/sold from the premises of Job worker but returned to the principal manfacturere - stay application dismissed.
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2018 (5) TMI 191
CENVAT credit - part of the duty paid on the inputs received from a 100% EOU - Rule 3(7) of the CCR - Held that: - Tribunal in the case of METACLAD Industries Vs. Commissioner of Central Excise, Mumbai-III [2012 (11) TMI 244 - CESTAT MUMBAI], where in identical circumstances, the benefit has been allowed, by holding that there is no warrant to restrict the scope of the term additional duty of customs occurring in the formula to only the additional duty leviable under sub-section (1) of section 3 and not to the additional duty leviable under sub section (5) thereof - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 190
Clandestine removal - rejected HDPE bags/woven fabrics - it was alleged that illicit removal of the plastic bags were made in the guise of plastic waste during the period 1991-00 to 2000-01 - Held that: - The Revenue has recorded statements of the appellant's employee, who have admitted that they were clearing bags in the guise of waste. Revenue has also recorded statements of some of the buyers who have admitted that they have made the payment in cash in excess to the invoice value. No retraction has been made to these statements. Moreover even any scrap of plastic cannot be sold at price as low as ₹ 1.5 to ₹ 3 per kg. The statement of the buyers had not been retracted and the MD has also not contradicted the statements of the buyers. In these circumstances, we find merit in the impugned order. It is seen that substantial quantity of materials has been cleared in the guise of scrap and amounts have been received in cash. In these circumstances, the role of MD cannot be ruled out. Option to pay reduced penalty - Held that: - Since the option to pay 25% of the penalty subject to the condition of payment of duty along with interest within one month was not extended in the Order-in-Original, the same offer is now extended in terms of Section 11AC of the Central Excise Act, 1944. Appeal allowed in part.
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2018 (5) TMI 189
Time limitation - suppression of facts - Held that: - A perusal of the classification list filed by the appellant in the year 1991, 1992 & 1993 clearly show that the product has been correctly described and Revenue has accepted the classification claimed by the appellant - there was no mis-declaration on the part of the appellant as they had declared the product correctly and claimed the classification as per their understanding of the issue. No case has been made out by Revenue to sustain the invocation of longer period of limitation - appeal allowed on the ground of limitation.
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2018 (5) TMI 188
Clandestine removal - cross-examination sought for not allowed - principles of natural justice - Held that: - In absence of corss-examination of these witnesses when it was sought by the appellant before the adjudicating authority to test the veracity of the evidence, it would result violation of principles of natural justice, in view of principles of law laid down in the case of Andaman & Timber Industries case [2015 (10) TMI 442 - SUPREME COURT] - matter remanded to the adjudicating authority with the direction to allow cross examination of two witnesses - appeal allowed by way of remand.
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2018 (5) TMI 187
CENVAT credit - construction service i.e. repair and maintenance of the existing plant and machinery and factory building etc - Held that: - services received by the appellant relate to repair and maintenance service of their factory building, which is evident from the sample invoices produced by the appellant - Tribunal in Ion Exchange (I) ltd. case [2017 (12) TMI 151 - CESTAT AHMEDABAD] held that the construction service used for repair and renovation of factory even after 01.04.2011 is ‘input service’, and service tax paid on such service is admissible to credit - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 186
CENVAT credit - services used for manufacturing activities at their factory/plant as well as for generation of electricity - Alleging that appellant has sold electricity to Gujarat Energy Transmission Company Ltd (GETCO), hence, 6% of the value of the electricity energy sold was demanded u/r 6(3) of CCR 2004 - Held that: - the Ld Advocate has placed the relevant electricity bills paid by the Appellant after adjustments allowed for wheeling out of electricity to the grid of GETCO, generated at their wind mill. These evidences have not been examined. Therefore, only for the limited purpose of verification whether electricity energy generated at the Wind Mill was sold or otherwise, the matter is remanded to the Adjudicating Authority. CENVAT credit - Repair and Maintenance Services used at the Wind Mill situated away form the factory premises - Held that: - Cenvat Credit of Service Tax paid on input services viz., ‘Repair and Maintenance Service’ and ‘Works Contract Services’ in relation to ‘Repair and Maintenance service’ used for generation of electricity in Wind Mill situated away from the factory following the Larger Bench judgment in the case of Parry Engg & Electronics (P) Ltd vs CCE & ST Ahmedabad 1 [2016 (1) TMI 546 - CESTAT AHMEDABAD] - there is no merit in denying credit on other input services common for manufacturing activity and running of the wind Mill, when credit of service tax paid on repair & maintenance service is allowed - credit allowed. Appeal allowed in part and part matter on remand.
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2018 (5) TMI 185
CENVAT credit - invoices issued, but the materials were not supplied by M/s Annapurna Industries Pvt Ltd - the proceedings of Annapurna Industries Pvt Ltd has been though concluded, however, the issues raised and decided in the said case was not before the Ld Commissioner (Appeals) - Held that: - the Ld Commissioner (Appeals) has not discussed in detail the grounds raised in their appeal assailing the order of the adjudicating authority. Also, he could not have the benefit to take into consideration the judgment in Annapurna Industries Pvt Ltd's case, delivered subsequently. The appeals are remanded to the Ld Commissioner (Appeals) to decide the issues afresh on merit after taking into consideration the judgment of this Tribunal in Annapurna Industries Pvt Ltd case - appeal allowed by way of remand.
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2018 (5) TMI 184
CENVAT credit - differential duty paid subsequently - shifting/transfer of the unit - Rule 10 of the CCR 2004 - Held that: - credit is definitely admissible on the differential duty paid after shifting of their unit of Makarpura Unit and its merger with Atladra Unit - It is difficult to appreciate the contention of the Revenue that even if the Makarpura unit is no more in existence and closed down its business, but the outstanding customs dues for the past period could be recoverable but the differential duty cannot be admissible to the successor unit of the same company at Atladara. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 183
Utilization of CENVAT credit of education cess for discharge of Central Excise duty - Credit lying in balance in Secondary and Higher Secondary Education Cess - Rule 3(7)(b) of Cenvat Credit Rules 2004 - Held that: - provisions of Rule 3(7)(b) of the CCR and also CBEC Circular dt 30.4.2015 hold that Cenvat Credit lying in balance in the account of Secondary and Higher Secondary Education Cess and accumulated before 1.3.2015, can be used only for discharge of cess as provided under the rule and cannot be used for discharging the Excise duty - appeal dismissed - decided against appellant.
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2018 (5) TMI 182
CENVAT credit - Depreciation was also claimed - It is the case of the appellant that they had filed revised returns with the Income tax authorities, after cancelling the entry for the amount of Central Excise duty involved in the capital goods - Held that: - both the lower authorities have come to the conclusion that the appellant is not been able to justify that the revised income tax return so filed and that amount of Central Excise duty was deducted from the depreciation when the revised refund claim filed - the specific query was raised by the Bench as to whether CA certificate indicating that Central Excise duty has been reduced form the depreciation claim, it was not answered satisfactory. The entire matter needs reconsideration by the Adjudicating Authority - appeal allowed by way of remand.
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2018 (5) TMI 181
CENVAT credit - ‘Air Travel Service’ in relation to tours undertaken by the Directors for sales promotion activities - Held that: - the issue is covered by the decisions of the Tribunal in Reliance Industries Ltd’s case [2016 (8) TMI 123 - CESTAT MUMBAI], where it was held that the credit allowed on such service - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 180
Clandestine removal - short receipt of the inputs - Held that: - the amount debited was due to purity difference and not on account of short receipt of the inputs - As far as demand of credit relating to clearance of waste and scrap of capital goods is concerned, I find that the appellant has accepted an amount of ₹ 27,877/- pertains to metal scrap arising out of capital goods on which credit availed. In relation balance amount of credit they vehemently claimed that it pertains to clearance of fly ash and other scrap being not arose out of discarding the capital goods on which credit availed and accordingly duty is not required to paid on the scrap value - to ascertain the facts, the matter needs to be remanded to the Adjudicating Authority - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (5) TMI 276
Initiation of recovery proceedings, even though the appeal and application for stay are pending - Held that: - Taking note of the similar orders passed by this Court in analoguous situations, the petitioner can be given some respite from the rigor of recovery, at least until such time as the stay petition is considered by the appellate authority - recovery proceedings are to be kept in abeyance till the time the 2nd respondent passes an order on the stay petition, and communicates the same to the petitioner - petition disposed off.
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2018 (5) TMI 179
Validity of re-assessment order - demand notice in Form VAT-180 - Held that: - It is well settled principle that entertaining the writ petitions against the assessment orders directly would consume the precious public time of the Court and would be contrary to the intent of the Legislation providing mechanism and machinery for resolving the dispute before the hierarchy of Authorities prescribed - It is well settled principle that entertaining the writ petitions against the assessment orders directly would consume the precious public time of the Court and would be contrary to the intent of the Legislation providing mechanism and machinery for resolving the dispute before the hierarchy of Authorities prescribed. Matter remanded to the respondent No.1 – prescribed Authority for verification.
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2018 (5) TMI 178
Nature of activity - job-work or sale? - Form 3-D - Whether the learned Tribunal was justified in declaring that payment of ₹ 18,98,008, in absence of any material of evidence or single whisper of evidence, was made towards the job Work and was not sale? Held that: - In Form 3-D, there is a declaration in regard to the goods sold to any Company / Corporation or Undertaking referred to under Section 3-G. The form ends by a certification to the effect that the goods are meant for our own requirement and are not meant for re-sale or for use in the manufacture or packing of any goods, other than electrical energy, for sale - it may not be correct on the part of the revisionist to contend that non-production of Form 3-D by the assessee is fatal to his setting up the case of job work. Whether a contract is to be treated as the contract of sale of goods or the contract of work? - Held that: - It is significant to note that in the revision filed, there is no challenge to the findings given by the Tribunal that the entire raw materials, including the land and electricity were supplied by the contractee to the respondent assessee. Therefore, we have no occasion to go into the validity of the findings by the Tribunal, which is after all the final fact-finding authority that the raw materials, besides electricity, have all been supplied by the contractee Department to the respondent assessee. There is a definite case for the respondent assessee that the tiles, which are subject matter of the controversy, have been supplied under a contract, which was executed in the year 1986. The respondent assessee was assessed to tax in respect of the tiles, which were supplied apparently under the same contract in the year 1986-87, but the said assessment was interfered with by the order passed by the Tribunal. The Tribunal apparently has proceeded to hold that the transaction is in the nature of a job work. It is true no doubt that the contract as such has not been made available, but in the light of the fact that the Tribunal has rendered a finding at any rate that all the materials, including land and electricity have been supplied by the contractee Department, we are of the view that what is involved is a job work. Revision dismissed.
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2018 (5) TMI 177
Penalty u/s 16 (2) of the TNGST Act - suppression of facts - Held that: - the Tribunal concurred with the view of the Appellate Assistant Commissioner that there was no justification in penalising the assessee, as the turnover in question was based on assessee's books of accounts and that there was no element of willful non-disclosure of turnover - reliance was placed in the case of R. Subba Reddy Versus State of Tamil Nadu [1992 (8) TMI 251 - MADRAS HIGH COURT], where it was held that Under the proviso to sub-section (5) of Section 12 of the Tamil Nadu General Sales Tax Act,1959 penalty cannot be imposed after the period of five years from the expiry of the year to which the assessment relates. The finding and reasoning of the Tribunal affirming the order of the Appellate Assistant Commissioner that there was no willfulness attributable to the dealer and therefore penalty under Section 16(2) of the Act is not leviable, does not warrant any interference. Tax case revision petition dismissed.
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2018 (5) TMI 176
Rate of tax - different types of steel bars/rods of different diameters have been used for reinforcement in the construction of the building - whether the lower rate of tax chargeable on sale of iron and steel is applicable or the higher rate at 12.5% leviable for iron and steel used in execution of works contract in the same form? - Held that: - the apex court decision in the case of Smt. B. Narasamma Versus Deputy Commissioner Commercial Taxes Karnataka & Another [2016 (8) TMI 636 - SUPREME COURT] referred, where it was held that the declared goods in question can only be taxed at the rate of 4% - petition dismissed.
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Indian Laws
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2018 (5) TMI 224
Maintainability of petition - petitioner having withdrawn earlier writ petition without any leave - Held that: - It is fairly clear that the petition was withdrawn only on account of the pendency of the appeal. Apparently, that is why the High Court has, in fact, not dismissed the petition; it has only disposed it of - It appears that the prayer challenging the subsequent order passed in appeal was not brought to the notice of the High Court - petition is maintainable.
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