TMI Tax Updates - e-Newsletter
May 23, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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GST:
Classification of goods - Bags made of Cotton - the bags (handbags/ shopping bags) made of cotton are squarely classifiable under Chapter heading 4202 of the Customs Tariff and not under Chapter 63 - Rate of GST is 18%.
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GST:
Levy of GST on ocean freight - where the value of import goods includes Ocean Freight - Vires of N/N. 8/2017-Integrated Tax [Rate] dated 28th June 2017 and Entry 10 of the N/N. 10/2017-Integrated Tax [Rate] also dated 28th June 2017 - Stay granted.
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Income Tax:
Penalty u/s 271(1)(c) - deemed dividend u/s 2(22)(e) - assessee in its balance sheet has disclosed loan from a sister concern, Therefore, it cannot be said that the assessee has furnished wrong particulars of income or had concealed any income - in a debatable issue and in a case like this where the assessee had furnished complete details of the transaction, the penalty cannot be imposed
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Income Tax:
TDS u/s 195 - assessee has purchased shrink wrap software or off-shelf software, which is copyrighted article and not purchased any copyright and hence the same is not liable to deduct tax at source u/s 195 - cannot be held to be liable for non deduction of tax u/s 201(1), interest u/s 201(1A) and penalty u/s 271C
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Income Tax:
Remission or cessation of liability u/s 41(1) - AO, based on available material ought to have verified as to whether there is any remission or cessation of liability - in the absence of any such verification AO could not have added such amount of credit for taxation - addition deleted
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Income Tax:
Dismissal of appeal ex-parte by CIT(A) - Section 250(6) mandate the ld. CIT(A) to dispose of the appeal by setting the point of determination, decision thereon and the reasons for such decision - All three conditions is lacking in the impugned order - remanded to AO as original order was passed u/s 144
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Income Tax:
Re-assessment u/ss 147 / 148 - no failure on the part of the Assessee to disclose fully and truly the relevant material resulting in such escapement of income in the form of either excess deductions or some additions or deductions u/s 36(1) - there is nothing on record to show that there was non-application of mind on the part of the AO in original assessment u/s 143(3) - reassessment not valid as it is mere case of change of opinion
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Income Tax:
Allowability of depreciation intangible rights/assets - company had purchased Imidachlorpid business on slump sale from a company which is not a related concern u/s 40A(2)(b) - The valuation of Intangible assets and marketing rights have been done in accordance with the AS 10 issued by the ICAI - depreciation u/s 32 is allowable both on the intangible assets as well as marketing rights
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Income Tax:
Allowability of legal & professional fees pertaining to buyback of shares - deduction in respect of expenditure incurred for proceeding of implementation of buyback of shares which would not in any manner enhance the capital structure of the assessee but there is outflow of capital and no deduction is claimed for outflow of capital - allowed such expenditure as revenue expenditure.
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Income Tax:
Disallowance u/s 43B - nomination charges paid to the State Government at the rate of 10% of the turnover of granite blocks - It is simply a contractual payment of lease rental specified by the State Government being the Lessor - A mere reference of the statute, ie., Rule 8-C(7) of the Tamil Nadu Minor Mineral Concession Rules, 1959, does not make it a statutory levy, in the realm of 'tax, duty, cess or fees' - no disallowance u/s 43B
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Income Tax:
Addition on valuation of closing stock - excise duty on closing stock of its finished goods - exclusive VS inclusive method - although the method of valuation of stock followed by the assessee is not in conformity with the prescription u/s 145A, there is no effect on the P & L account of the relevant FY - following the net method of valuation of closing stock, excise duty has rightly been excluded
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Income Tax:
Rectification u/s 254 - error apparent on face of record - non-disposal of specific ground raised in the grounds of appeal is an error within the meaning of 254(2) - appeal is reopened only for the purpose of disposal of ground under reference.
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Income Tax:
Rectification u/s 154 - addition u/s. 40(a)(ia) - TDS from the labour charges - other High Court have different view - if issue was considered by the Jurisdictional High Court then within the jurisdiction of Kerala High Court, the issue in dispute cannot be said to be a debatable issue - AO is justified in making addition u/s. 40(a)(ia) vide proceedings u/s. 154
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Income Tax:
Challenge of assessment order in writ - violation of principles of natural justice - in the name of additional and extended opportunities, one cannot expect the authorities to prolong the matter in perpetuity - denial of opportunity differs from inadequate opportunity - writ dismissed
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Customs:
Violation of import conditions - actual user condition - after clearance of the goods from Mumbai Port, the same were transferred to Lonikhand, Pune, though the lorry receipts were issued for Hyderabad, to be utilised in construction of road projects awarded by Pune Municipal Corporation - benefit of notification denied.
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Customs:
Waiver of Penalty u/s 114A - redemption find u/s 111(o) - goods have been imported by the respondent by claiming benefit of duty exemption to re-export which they tried their level best but not done due to some technical issues - there is no collusion and wilful mis-statement or suppression of fact or “Mens rea” to evade payment of duty - no penalty and the confiscation
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DGFT:
Discontinuing submission of physical copy of RCMCs with effect from 1.07.2019 while filling application for incentives/entitlements under FTP and further clarification in the matter
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SEBI:
Participation of Mutual Funds in Commodity Derivatives Market in India
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SEBI:
Increase of shareholding beyond 55% - violation of Section 11 of the Takeover Regulations, 1997 - the default is inadvertent, technical and, in any case, unintentional - quantum of penalty reduced.
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Service Tax:
Taxability of the service of access to a road or bridge in the period 8-11-2016 to 1-12-2016
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Service Tax:
Classification of services - fee paid to overseas players - reverse charge - the remuneration received by the petitioner from the IPL franchisee could not be taxed under business support service
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Service Tax:
Franchise service or Business Support services - demand of service tax on Central Rights Income - Revenue Sharing - BCCI is not commercial organization and only organizing game of cricket. Therefore any service rendered to BCCI-IPL is not in the nature of support of business of BCCI.
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Central Excise:
Manufacture of paper / paper board - Principal Process of lifting of pulp is done by hand or not - To extend the benefit of exemption notification, only the Principal Process of lifting of pulp by hand would be looked into - Therefore, the benefit of the exemption notification cannot be denied to the appellants, as the liquid with pulp fibres is pumped from the pulpier to storage tanks through pipe lines.
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Central Excise:
When the assessee acted under bonafide belief on a particular aspect and there were difference of opinion in the department on such aspect, the extended period of limitation cannot be invoked.
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Central Excise:
CENVAT credit - Though, the appellants are disputing classification as adopted by the Customs but in the meantime, they have paid the differential duty and availed CENVAT credit of the CVD part of the differential duty - this is a case of re-assessment of the Bill of Entry and the appellant is entitled to CENVAT credit of duty paid on the imported goods - credit allowable
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Central Excise:
Condonation of delay in filing appeal u/s 35(1) - The power to condone the delay conferred upon the Commissioner (Appeals) ends if the appeal is preferred after 30 days of extended period and expiry of 60 days of initial limitation - Even the High Court will not take away the effect of the law and the bar created u/s 35(1)
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VAT:
Issuance of Form 'C' - purchase of Natural Gas - period July, 2017 to June, 2018 - petitioner sent a letter for issuance of 'C' Form - High Court directed department to dispose of the petition by way of letter requesting 'C' Form in accordance with law by passing a speaking order and after affording an opportunity of hearing
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VAT:
Penalty u/s 12(3)(b)(iv) of the TNGST Act - penalty cannot be imposed unless return is not filed or the filed return is rejected and, thereafter, assessment is made on best judgment basis - Neither of these requirements were fulfilled in the instant case - order is liable to be set aside
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VAT:
Maintainability of appeal - pre-deposit - Punjab VAT Act - protection u/s 62(5) can be granted in only in rare of the rarest cases where the impugned order is void and without jurisdiction and such deposit would frustrate the purposes of filing of appeal and that the appellant was suffering from any financial incapacity or hardship on account of poverty or insolvency - dismissal of appeal is correct for want of pre-deposit
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VAT:
Time Limitation - proceedings were initiated under the HGST Act - after enactment of the HVAT Act which came into force w.e.f 01.04.2003, the limitation period prescribed u/s 15 became applicable which require finalizing the judgment assessment is three years from the close of the year to which the assessment relates - law of limitation is a procedural law and operates retrospectively - order time barred
Articles
Notifications
Circulars / Instructions / Orders
Case Laws:
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GST
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2019 (5) TMI 1212
Levy of GST on ocean freight whereas the value of import goods includes Ocean Freight - Vires of N/N. 8/2017-Integrated Tax [Rate] dated 28th June 2017 and Entry 10 of the N/N. 10/2017-Integrated Tax [Rate] also dated 28th June 2017 - HELD THAT:- Similar issue decided in the case of MOHIT MINERALS PVT LTD VERSUS UNION OF INDIA [2018 (2) TMI 770 - GUJARAT HIGH COURT] wherein, similar question of facts and law are involved and this Court had issued notice.
Under the circumstances, issue Notice, returnable on 19.6.2019.
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2019 (5) TMI 1213
Classification of goods - Bags made of Cotton - whether the Cotton Bags manufactured by the appellant and classified by the Original Authority under CTH 42022220 is legal and proper or requires modification? - challenge to AAR decision.
The first contention of the Appellant is that Chapter 42 of Customs Tariff covers only articles of leather or composition leather or articles which are characteristically of leather trade - HELD THAT:- Classification of goods for the purposes of GST is based on the entries in the First Schedule to the custom Tariff Act 1975. In terms of explanation (iii) and (iv) to Notification No. 1/2017 - Central Tax (Rate) dated: 28-06-2017, tariff heading, sub-heading, heading and chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods.
‘Shopping bags of textile material’ is specified in the Chapter Heading 4202 itself. Further, those shopping bags with outer surface of textile material is classified under CTH 4202 22 and thereupon depending on the constituent material, the bags are sub-classified. Applying the Interpretative Rule 1, we find that Chapter heading 4202 above, specifically classifies Shopping Bags of cotton with outer surface of textile material - In the case at hand the bags are ‘shopping bags’ made of Cotton having an outer and inner surface made of cotton, a textile material and merits classification under CTH 4202 22 20. Further, the Customs Tariff is based on the Harmonious System of Nomenclature(HSN) which is a dependable guide for interpreting the customs tariff.
In as much as it is clear that Chapter 42 is not restricted only to article of leather and Tariff Heading specifically covers ‘Shopping bags’ of cotton, with outer surface of textile materials, we do not find merit in the contention of the appellant that articles of leather or characteristically of leather trade is alone classified under Chapter 42.
The next contention of the appellant is that the observation of the AAR is not based on any reasoning supported by Chapter Notes or Section Notes or any interpretative rules and In the absence of any such distinction recognized in the chapter headings, the observation of the AAR is totally without the authority of law - HELD THAT:- The appellant has not disputed the fact that the bags manufactured by them are used as a carry bag and not as packing bags. The difference between the bags covered under the CTH 6305 & the bags under consideration and as to how these bags do not fall under CTH 6305 is also brought out in Para 5.2 of the Ruling. In as much as the original authority has reasoned the decision taken by them, we do not find any infirmity and conclude the contention of the appellant is not supported.
The final contention of the Appellant is based on the clarification issued by CBIC vide Circular No. 80/54/2018 dated 31.12.2018 on the issue of classification and applicable GST rates on Polypropylene Woven and Non-Woven Bags and Polypropylene Woven and Non-Woven Bags laminated with BOPP - HELD THAT:- The Circular mentioned is based on the deliberations in the 31st Meeting of the GST Council. The deliberations related to the clarification as to the classification of Polypropylene Woven and Non-Woven Bags and PP Woven and PP Woven and Non-Woven Bags laminated with BOPP(Proposal SI.No. 9 of Part B of Annexure I of the Agenda) - the clarification by the Board in the context of the adoption of HS classification in Customs and the duty drawback clearly provides that the bags (handbags/ shopping bags) made of cotton are squarely classifiable under Chapter heading 4202 of the Customs Tariff and not under Chapter 63.
The appellant has stated that the bags supplied by them are in the nature of carry bags/re-usable shopping bags made of cotton, which is a specific entry under tariff heading 42.02. The fact being so, there are no reason to interfere with the ruling of the Original Authority on the Classification and applicable rate of tax payable on such cotton bags.
Ruling of AAR upheld - Appeal dismissed.
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Income Tax
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2019 (5) TMI 1199
Validity of Reopening of assessment - no notice under section 143(2) have been issued and served upon the assessee - HELD THAT:- Since no notice under section 143(2) have been issued and served upon the assessee, therefore, the mandatory requirement of Law have not been complied with in the matter. It is well settled Law that re-assessment order cannot be passed without service of notice under section 143(2) of the I.T. Act, 1961
See Hon’ble Delhi High Court in the case of Pr. CIT vs. Sri Jai Shiv Shankar Traders Pvt. Ltd. [2015 (10) TMI 1765 - DELHI HIGH COURT] , Pr. CIT vs. Silverline [2015 (11) TMI 809 - DELHI HIGH COURT and CIT vs. Lunar Diamonds Ltd.[2005 (3) TMI 33 - DELHI HIGH COURT] . Considering the above discussion, we are of the view that reassessment order is nullity and bad in law. - Decided in favour of assessee.
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2019 (5) TMI 1198
Maintainability of appeal before CIT(A) - non payment of the admitted tax liability u/s 140A - non-est appeal in view of provisions of section 249(4) - appeal is filed within the prescribed period of 30 days - Tribunal directed to treat the date of the deposit of self-assessment tax as the date of removal of defect and then if any delay is found, it was to be explained - entire self-assessment tax along with interest u/s 234B has been deposited by the assessee on 28/03/2014 - second round of proceedings with condonation of the delay - CIT(A) treated the date of payment of the self-assessment tax as the date of filing appeal before the Ld. CIT(A)
HELD THAT:- In our opinion , the Ld. CIT(A) failed to notice that the appeal was filed originally within the prescribed period of 30 days from the receipt of the order of Assessing Officer. Once the defect of remittance of self-assessment tax stands removed , the Ld. CIT(A) was required to adjudicate the appeal on merits as directed by the Tribunal. In our view, the action of the Ld. CIT(A) is not in accordance with the direction of the Tribunal. In view of the above facts and in the interest of justice, we set aside the order of the Ld. CIT(A) and restore the appeal to the Ld. CIT(A) for adjudicating on merit in accordance with law. The grounds raised by the assessee are allowed for statistical purposes.
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2019 (5) TMI 1197
Rectification u/s 254 - HELD THAT:- As per the provisions of section 254(2) of IT Act, the Tribunal can rectify an apparent mistake, if any, in the order passed by it under subsection (1) of section 254 whereas in the present case, the request is made by the assessee for rectification of some alleged mistakes in the order passed by the Tribunal under sub-section (2) of section 254 of IT Act.
Hence it is seen that the request of the assessee is outside the scope of section 254(2) of IT Act and therefore, this M.P. of assessee is not maintainable and we dismiss the same.
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2019 (5) TMI 1196
Disallowance of inadmissible expenses u/s.14A r.w.r.8D - assessee has substantially used interest free funds for making investment - HELD THAT:- In absence of exempt income, disallowance u/s.14A of the Act of any amount was not permissible . See M/S OIL INDUSTRY DEVELOPMENT BOARD [2019 (3) TMI 1571 - SC ORDER] . - Decided in favour of assessee
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2019 (5) TMI 1195
Penalty u/s 271(1)(c) - addition on deemed dividend u/s 2(22)(e) - difference of opinion between the Assessing Officer and the assessee - HELD THAT:- The assessee had claimed this amount as loan from a sister concern, which the Assessing Officer has held to be deemed dividend u/s 2(22)(e) of the Act. The undisputed fact is that this amount of ₹ 3,00,000/- was disclosed by the assessee in its balance sheet as loan and from the copy of balance sheet itself, the Assessing Officer further enquired about the nature of the transaction.
Therefore, it cannot be said that the assessee has furnished wrong particulars of income or had concealed any income. The penalty has been imposed only on account of difference of opinion between the Assessing Officer and the assessee. The assessee held it to be a loan taken from a sister concern whereas the Assessing Officer treated it as deemed dividend. In a debatable issue and in a case like this where the assessee had furnished complete details of the transaction, the penalty cannot be imposed as has been held by various decisions. - Decided in favour of assessee.
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2019 (5) TMI 1194
TP Adjustment - international transaction of provision of software development services - comparable selection - functional similarity - HELD THAT:- Cybermate Infotek Ltd. being engaged in both sale of software products and also providing software development services and in the absence of any segmental details of two divisions being available, the margins of said concern cannot be applied in order to benchmark arm's length price of international transactions undertaken by the assessee, which was solely engaged in providing software development services.
Cybercom Datamatics Information Solutions Ltd. also cannot be included in final list of comparables while benchmarking international transactions of assessee of providing software development services to its associated enterprises.
Infobeans Systems Pvt. Ltd. is also not to be included in the final list of comparables as the financials of said concern clearly reflect that in addition to providing software development services to its associated enterprises, it had also earned foreign exchange from export of goods on FOB basis. The event of export of goods was also mentioned in notes and also in the Profit and Loss Account, where revenue from sale of software was declared. The segmental details of two activities carried on by the said concern were not available and in the absence of the same, the concern could not be equated as functionally comparable to a concern which was providing software development services to its associated enterprises
Thirdware Solutions Ltd not functionally comparable to the assessee
E-Zest Solutions Ltd. cannot be held to be functionally comparable to the assessee as it was engaged in provision of KPO services.
Accordingly, we hold that concerns Cybercom Datamatics Information Solutions Ltd., Cybermate Infotek Ltd., Thirdware Solutions Ltd., Infobeans Systems Pvt. Ltd. and E-Zest Solutions Ltd. are to be excluded from final list of comparables while benchmarking international transactions undertaken by assessee. - Decided in favour of assessee.
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2019 (5) TMI 1193
TDS u/s 195 - payments made for software purchased by assessee - case of assessee is that it is across counter purchase, wherein the assessee does not acquire any copyright but it purchased copyrighted article for its application purposes - HELD THAT:- We hold that there is no merit in the orders of authorities below where the assessee has purchased shrink wrap software or off-shelf software, which is copyrighted article and not purchased any copyright and hence the same is not liable to deduct tax at source u/s 195. Hence, the assessee cannot be held to be liable for non deduction of tax u/s 201(1) and interest charged u/s 201(1A). We thus, direct the Assessing Officer to delete demand created u/s 201(1) and interest charged u/s 201(1A). The grounds of appeal raised by assessee are thus, allowed.
Penalty u/s 271C of the Act for such non deduction of tax at source out of payment made for purchase of royalty - HELD THAT:- As already held that the assessee has not defaulted in non deduction of tax at source and hence, the assessee is not liable for any penalty u/s 271C. The grounds of appeal raised by Revenue are thus, dismissed.
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2019 (5) TMI 1192
Eligibility of deduction u/s 80P - AO denied deduction by treating that its activities are that of a co-operative bank and not a cooperative society - HELD THAT:- The assessee is admittedly registered as a primary agricultural society under the Kerala Co-operative Societies Act, 1969 by the Registrar of Societies. The Full Bench of the Hon’ble High Court in the case of The Mavilayi Service Co-operative Bank Ltd. [2019 (3) TMI 1580 - KERALA HIGH COURT] held that the Assessing Officer has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. It was held by the Hon’ble High Court that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Co-operative Society classifying the assessee-society as a cooperative society. The Hon’ble High Court held that each assessment year is separate and eligibility shall be verified by the Assessing Officer for each of the assessment years.
The issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether its activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law.
Interest on the investments with Cooperative Banks and other Banks - `income from business’ or `income from other sources’ - HELD THAT:- As in the case of Kizhathadiyoor Service Cooperative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. As regards the grant of deduction u/s 80P(2) on such interest income, the AO shall examine the assessee’s activities whether it is in tune with the activities expected of a co-operative society registered under the Kerala Co-operative Societies Act, 1969 and grant deduction on such interest income u/s 80P(2).
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2019 (5) TMI 1191
Deduction u/s 80P(2) - assessee is registered as a primary agricultural credit society under the Kerala Co-operative Societies Act, 1969 - AO held that the assessee was doing the business of banking and loans disbursed by the assessee was for non-agricultural purpose - HELD THAT:- The assessee is admittedly registered as a primary agricultural society under the Kerala Co-operative Societies Act, 1969 by the Registrar of Societies.
As in the case of The The Mavilayi Service Co-operative Bank Ltd. V. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] held that the Assessing Officer has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. It was held by the Hon’ble High Court that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Cooperative Society classifying the assessee-society as a cooperative society. The Hon’ble High Court held that each assessment year is separate and eligibility shall be verified by the Assessing Officer for each of the assessment years.
Thus the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether its activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. - Appeal filed by the Revenue is allowed for statistical purposes.
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2019 (5) TMI 1190
Eligibility of deduction u/s 80P - AO denied deduction by treating that its activities are that of a co-operative bank and not a cooperative society - HELD THAT:- The assessee is admittedly registered as a primary agricultural society under the Kerala Co-operative Societies Act, 1969 by the Registrar of Societies. The Full Bench of the Hon’ble High Court in the case of The Mavilayi Service Co-operative Bank Ltd. [2019 (3) TMI 1580 - KERALA HIGH COURT] held that the AO has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. It was held by the Hon’ble High Court that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Co-operative Society classifying the assessee-society as a cooperative society. The Hon’ble High Court held that each assessment year is separate and eligibility shall be verified by the Assessing Officer for each of the assessment years.
The issue of deduction u/s 80P(2)(a)(i) is restored to the AO. AO shall examine the activities of the assessee and determine whether its activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law.
Interest on the investments with Cooperative Banks and other Banks - `income from business’ or `income from other sources’ - HELD THAT:- As in the case of Kizhathadiyoor Service Cooperative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. As regards the grant of deduction u/s 80P(2) on such interest income, the AO shall examine the assessee’s activities whether it is in tune with the activities expected of a co-operative society registered under the Kerala Co-operative Societies Act, 1969 and grant deduction on such interest income u/s 80P(2) of the I.T.Act.
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2019 (5) TMI 1189
Entitlement to deduction u/s 80P - need for inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P - HELD THAT:- The Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. [2019 (3) TMI 1580 - KERALA HIGH COURT] held that the Assessing Officer has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Co-operative Society classifying the assessee-society as a cooperative society. Each assessment year is separate and eligibility shall be verified by the Assessing Officer for each of the assessment years.
Thus the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the respective assessee and determine whether their activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law.
Whether the interest income received on investments can be treated as ‘income from business’ and granted deduction u/s 80P- HELD THAT:- In the case of Kizhathadiyoor Service Cooperative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] held that interest income earned from investments with treasuries and banks is part of banking activity of the assessees, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P(2) on such interest income, the Assessing Officer shall examine the assessee’s activities whether it is in tune with the activities expected of a co-operative society registered under the Kerala Co-operative Societies Act, 1969 and grant deduction on such interest income u/s 80P(2)
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2019 (5) TMI 1211
TP Adjustment - Comparable selection - Excluding Infosys BPO Limited - whether comparable ought not to be excluded only on the basis of ‘high turnover’ ? - HELD THAT:- The comparable discussed in Agnity India Technologies Pvt. Ltd. . [2013 (7) TMI 696 - DELHI HIGH COURT] which was sought to be excluded was an Infosys Group Company which undoubtedly was ‘a giant corporation’.
On the other hand, in Chrys Capital Investment Advisors India (P.) Ltd. [2015 (4) TMI 949 - DELHI HIGH COURT] the three comparables included were Brescon Corporate Advisors Limited, Keynote Corporate Services Limited and Khandwala Securities Limited and the rejected comparables were IDFC Investment Advisors Ltd., Sumedha Fiscal Services Limited and Future Capital Holdings Limited.
Clearly therefore none of the comparables involved was a ‘giant corporation’ like Infosys. Consequently, this Court is not persuaded that the ITAT erred in the present case in excluding Infosys BPO Limited relying on the decision of this Court in Agnity India Technologies Pvt. Ltd. (supra).
The Court has with the help of the chart produced by Mr. Hossain examined the facts in relation to each of the nine other comparables including TCS E-Serve International Limited. This Court is not persuaded to hold that the ITAT erred in law in excluding them from the list of comparables for the purposes of determining the ALP of the Assessee’s international transactions. No substantial question of law arises
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2019 (5) TMI 1188
Eligibility for deduction u/s 80P(2)(a(i) - interest income earned by the assessee from banks and sub-treasuries - HELD THAT:- The assessee had made investments in the course of banking activities and such interest income was received on investments made with co-operative banks and other scheduled banks. The co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] had held that such interest income received should be assessed as `income from business’ instead of `income from other sources’.
In view of the coordinate Bench order of the Tribunal, we hold that the CIT(A) is justified in holding that interest income received should be assessed as `income from business’.
As regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] and examine the activities of the assessee-society before grant of deduction u/s 80P - Appeal filed by the Revenue is allowed for statistical purposes. .
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2019 (5) TMI 1187
Rectification u/s 154 - addition u/s. 40(a)(ia) - debatable issue - assessee firm had not deducted TDS from the labour charges paid - making addition u/s 40(a)(ia) when the payee has included the entire interest paid by the appellant in its total income and filed return of income accordingly - HELD THAT:- The Ld. AR submitted that issue in dispute is a debatable issue and cannot be dealt by the Assessing Officer vide proceedings u/s. 154. He drew our attention to the judgments in CIT vs. Ansal Landmark Townships (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] and CIT vs. Shraddha & S.S. Kale, Joint Venture [2017 (4) TMI 525 - BOMBAY HIGH COURT]
This issue was considered by the Jurisdictional High Court in the case of CIT vs. Thomas George Muthoot [2015 (7) TMI 810 - KERALA HIGH COURT] . Being so, within the jurisdiction of Kerala High Court, the issue in dispute cannot be said to be a debatable issue. In our opinion, the Assessing Officer is justified in making addition u/s. 40(a)(ia) of the Act vide proceedings u/s. 154 of the Act dated 02/08/2010. Accordingly, this ground of appeal of the assessee is dismissed.
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2019 (5) TMI 1210
Addition on account of decline in GP /NP Ratio u/s 145 - AO rejected the explanation offered by the assessee stating that it maintained excise records and that the note of the auditor was only in respect of valuation - invoking Section 145, the AO applied the net profit ratio of the earlier AY and confirmed by CIT - ITAT deleted addition - HELD THAT:- ITAT having perused the auditor’s report noticed that a company’s inventory was valued at lower cost or net reliable value and included cost of bringing the goods in the present location and other conditions. The Auditor had stated that the valuation adopted that is based on the retail method could be used when the actual cost of production was approximated. With the nature of business activity carried on by the Assessee, it was not possible to keep the production cost of each and every finished product, it could be, therefore, on an approximate basis, it could be spread over the goods produced.
ITAT has also referred to the accounting standards and come to the conclusion that there was a valid explanation for the drop in the net profit ratio.
Having perused the impugned order of the ITAT, the Court finds that it deals essentially with the factual aspects after having perused the Auditor’s report. No substantial question of law.
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2019 (5) TMI 1186
Rectification u/s 254 - error apparent on face of record - HELD THAT:- In the third line of para 8 at page 4 of the Tribunal order, this Tribunal observed that “Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority”. This observation is inadvertently made.
Accordingly, the following line at para 8 is deleted:-
“Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority”.
Instead the following shall be inserted:
“Therefore, this Tribunal finds justifiable reason to interfere with the order of the lower authority” - Para 8 is rectified accordingly.
Coming to page 5, on 8th and 9th line of para 10, this Tribunal observed as follows:-
“Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority.”
It is an inadvertent mistake. Hence, the same is deleted. Instead, the following shall be inserted:-
“Therefore, this Tribunal finds justifiable reason to interfere with the order of the lower authority”
The error at para 10 is rectified accordingly.
Disallowance of production expenses - Admittedly, this ground was not disposed of by this Tribunal. As rightly submitted by the Ld. representative for the assessee, non-disposal of specific ground raised in the grounds of appeal is an error within the meaning of 254(2) of the Act. Therefore, it needs to be disposed of. Accordingly, the appeal is reopened only for the purpose of disposal of ground No.4. The Registry is directed to post the appeal for disposal of ground No.4 alone on 17.06.2019. Miscellaneous Petition filed by the assessee stands allowed.
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2019 (5) TMI 1209
Assessee-in-default u/s 201(1) - TDS u/s 195 - interest u/s 201(1A) - payment of 'Royalty' for use of Copyrights, Software and Logo of US Company and was covered by Article 12 of DTAA between India and USA - HELD THAT:- What was paid by the assessee as an annual fee is for the use of software which gives a right to use, copy develop and market the same by using the trademark and logo of Mls.Bluestone Software Inc. Therefore, the payment made by the assessee as annual fee would be for the purpose of using the software for copying and developing and also for using the trademark or logo for marketing the product in Indian market. Therefore, in our opinion, the payment of annual fee by the assessee to Mls.Bluestone Software - Inc. squarely falls within the definition "royalty" as provided in Article 12(3) of the Doubt Taxation Avoidance Agreement
We agree with the view taken by the Karnataka High Court in [2013 (2) TMI 448 - KARNATAKA HIGH COURT] on the issue that the payments made by the Assessee Company to the US Company for user of its Software, Logo and Trade Marks were in the nature of Royalty covered under Article 12 of the Double Tax Avoidance Agreement (DTAA) between India and USA and therefore, the Assessee, Indian Company was liable to deduct tax at source and pay the same to the State. On account of its failure to do so, it was also liable to pay interest thereon u/s 201(IA) - appeal dismissed
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2019 (5) TMI 1208
Allowability of legal & professional fees pertaining to buyback of shares - HELD THAT:- It is clear that expenditure incurred does not include the price paid to share holders for buying back the shares, but it only relates to expenditure incurred for carrying out buyback scheme. Assessee has claimed deduction in respect of expenditure incurred for proceeding of implementation of buyback of shares which would not in any manner enhance the capital structure of the assessee but there is outflow of capital and no deduction is claimed for outflow of capital. Therefore, Tribunal has rightly allowed such expenditure as revenue expenditure.
Allowability of club membership fees - Chairman and the Managing Director for increasing its business and business development - HELD THAT:- The Tribunal relied upon the decision of this Court in case of Gujarat State Export Corporation Ltd v. CIT [1993 (9) TMI 52 - GUJARAT HIGH COURT] , wherein the payment of fees to the Sports Club of Gujarat Limited has been examined and it was held that if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefits of the business, it is properly attributable to capital and is of the nature of capital expenditure. However, if it is made for running the business or working with a view to produce the profits, it is a revenue expenditure. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. In view of this test laid down, the court, therefore, held that the payment of entrance fee for becoming a member of the sports club cannot be termed as a capital expenditure.
In view of above settled legal position, it cannot be said that the Tribunal has committed any error of law in allowing membership fees paid to club by the Chairman and the Managing Director as revenue expenditure.
Allowability of depreciation intangible rights/assets - company had purchased Imidachlorpid business on slump sale - whether manufacturing rights, marketing rights, other commercial rights and other assets relating to development, manufacturing process, registration, use, sale marketing and distribution of product are intangible assets - HELD THAT:- Assets acquired under slump sale were capitalized in books of account as per generally accepted accounting principles in a slump sale several assets are purchased for a consolidated price and price is paid for the entire business as a whole. Hence, value to individual assets cannot be assigned directly.
The valuation of Intangible assets and marketing rights have been done in accordance with the Accounting Standard 10 (AS 10) issued by the Institute of Chartered Accountants of India (ICAI) the company has assigned the values to the various assets on a fair basis. The payments made for acquisition of lmidachloropid products business pursuant to transfer of Business Transfer Agreement and intangible assets was allocated on the basis of valuation report from independent valuer M/s. Bansi S. Mehta Et Co. who had assigned the value of individual assets in accordance with AS 10.
In view of the findings of fact, arrived at by the Tribunal holding that the assessee having purchased various assets under the business transfer agreement by way of slump sale and further that Mitsu Industries Ltd. was not a related concern as per the provisions of section 40A(2)(b) at the point of sale, depreciation u/s 32 is allowable to the assessee company both on the intangible assets as well as marketing rights. The Tribunal has therefore, not erred in allowing depreciation both on intangible assets as well as marketing rights u/s 32.
It is not possible to state that the Tribunal has committed any legal error so as to warrant interference. No question of law, as proposed or otherwise, much less, substantial question of law. The appeal is dismissed.
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2019 (5) TMI 1207
Disallowance u/s 43B - nomination charges paid by it to the State Government at the rate of 10% of the turnover of granite blocks - can be equated with the terms “tax, duty, cess or fee” appearing in Section 43B(a) - allowability as business expenditure u/s.37 - HELD THAT:- We find that the 'nomination charges' specified and prescribed by the State Government through various Government Orders, are none of these four imposts specified in Section 43B. It is simply a contractual payment of lease rental specified by the State Government being the Lessor for which both the Lessor and the Lessee had agreed at a prior point of time to fix and pay the said prescription of nomination charges. Rule 8-C(7) of the Rules, does not take it out from the four corners of Lease Deed which is a non-statutory contract between the parties. A mere reference of the statute, ie., Rule 8-C(7) of the Tamil Nadu Minor Mineral Concession Rules, 1959, does not make it a statutory levy, in the realm of 'tax, duty, cess or fees'.
The view that it is a contractual payment is further fortified by the enabling powers as provided under Clause-2 of the Annexure to the Lease Deed in question and the State Government was at liberty to fix the nomination charges or not to impose the same altogether. Therefore the said prescription of nomination charges cannot be held to be a compulsorily impost falling within the four corners of Section 43B. The State Government not only has the power to impose the same but also to waive, reduce or modify the same as well, depending upon the quantum of commercial exploitation and other relevant circumstances. It could also be treated as 'Royalty' payable by the Assessee TAMIN, to the State for parting with its exclusive rights by giving Leasehold right to the Assessee. Royalty is not a tax, is a settled legal position by the Constitution Bench decision.
The statutory levy in general, will apply to all subjects uniformly and not to a specific Assessee or a person. In the present case, therefore, the levy in question in the name of 'nomination charges' emanates only from the contract of Lease between the parties, a privately contracted levy. Even with reference to the statutory rule, it does not, in our considered opinion, fall within the mischief or the specified zone of Section 43B. It is neither tax nor a cess nor a duty nor a fee. Therefore, Section 43B does not stand attracted in the present case at all.
Once we come to the conclusion that Section 43B of the Act does not apply to the present payment, the question of applying the rigor of payment within the time schedule will not decide the allowability or otherwise of the said payment under Section 43B, which would then depend upon the method of accounting followed by the Assessee and if the Assessee has made a provision for this payment in its Books of Account and has claimed it as accrued liability in the Assessment Year 2004-2005, he is entitled to get that deduction in the Assessment Year 2004-2005 itself, without any application of Section 43B.
The reasons assigned by the authorities below in the present case on an incorrect interpretation for application of Section 43B made to the present levy in question, was not sustainable and therefore, in our opinion, the Assessee deserves to succeed in the present appeal.
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2019 (5) TMI 1206
Re-assessment Proceedings u/ss 147 / 148 - original assessment u/s 143(3) - beyond the limitation of 4 years - failure on the part of the Assessee to fully and truly disclose the relevant materials resulted in such escapement of income - disallowance of broken period interest - entertainment expenses - share issue expenses - disallowance u/s.14A - deduction u/s.36(1)(viia) - provision for salary arrears - depreciation on buildings - recognition of commission, exchange and brokerage on receipt basis - non inclusion of claims under ECGC & DICGC - HELD THAT:- In the facts and circumstances of the case, from the reasons for reopening, which we find only in the form of Assessment Proceedings as reproduced by the learned Tribunal, we cannot infer any such failure on the part of the Assessee to disclose fully and truly the relevant material resulting in such escapement of income in the form of either excess deductions or some additions or deductions u/s 36(1).
All these deductions / allowance / disallowance of expenses were dealt with by the Assessing Authority at the time of original assessment upon scrutiny made u/s 143(3) of the Act and there is nothing on record to show that there was non-application of mind on the part of the Assessing Authority on these aspects of the matter at the time of original assessment u/s 143(3).
The learned Tribunal was justified in relying upon the judgment of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT]. The Hon'ble Supreme Court, in the above judgment, dealt with the amendment in law, with effect from 1st April 1989 under Section 147 of the Act, prior to and after enactment of the Direct Tax Law (Amendment) Act, 1987 has held that after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.
These words enabling the Assessing Authority to undertake the Re-assessment Proceedings, viz.that the 'reasons must have a live link with the formation of the belief' on the basis of 'tangible material' to come to the conclusion that there is escapement of income, are the conditions precedent for invoking Re-assessment Jurisdiction, and though the distinction between the two, viz. 'change of opinion' on the one side and 'reason to believe' on the other side is thin, it is definite and discernible. We do not find that the Tribunal, on the basis of the alleged reasons for reopening, wrongly found it to be a mere case of change of opinion or it has erred in arriving at such conclusion relying upon the aforesaid decision of the Hon'ble Supreme Court. - we do not find any substantial question of law arising for consideration in these appeals - appeals dismissed
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2019 (5) TMI 1205
Benefit of deduction u/s 80IA allowable to sub contractor - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. - Assessing Authority denied the said benefit was that the Assessee himself did not enter into any such contract with the Railways or with the Central Government - HELD THAT:- The controversy involved in the present Appeal is covered by the Judgment [2019 (4) TMI 683 - MADRAS HIGH COURT] wherein held Proviso does not require that there should be a direct agreement between the transferee enterprise and the specified authority for availing the benefit under Section 80IA. There is no dispute before us that the Assessee was duly recognised as transferee or assignee of the principal contractor M/s.ST-CMS Company Private Limited and was duly so recognised by the Railways to operate and maintain the said railway sidings at Vadalur and Uthangalmangalam Railway Stations. The findings of fact with regard to the said position recorded by the learned Tribunal are, therefore, unassailable and that clearly attracted the first Proviso to Section 80IA(4) - Decided in favour of the Assessee
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2019 (5) TMI 1204
Remission or cessation of liability u/s 41 - assessee was specifically asked to explain why the unclaimed credit balance should not be brought to taxation - assessee had failed to furnish PAN numbers and address of the creditors for verification - additional evidence - Appellate Authority allowed the appeal holding that the AO could not have invoked provisions of Section 41(1) in the absence of any material evidence on record - HELD THAT:- To attract the above provision, the Assessing Officer, based on available material ought to have verified as to whether there is any remission or cessation of liability. In the absence of any such verification, the Assessing Officer could not have added such amount of credit for taxation. Therefore, the Tribunal has rightly held that in the absence of any material evidence, the assessing authority could not have invoked Section 41(1). We see no error or illegality in the order passed by the ITAT.
No substantial question of law would arise for consideration in the appeal - appeal is dismissed.
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2019 (5) TMI 1203
Writ against assessment order - availability of remedy of statutory appeal - withdrawal of appeal - violation of the principles of natural justice - HELD THAT:- This Court is not inclined to admit the writ appeal, the learned senior counsel sought permission to withdraw the writ appeal subject to indulgence of this Court to direct the appellate authority to consider all the grounds which will be raised against the assessment, including the ground with respect to the alleged violations of principles of natural justice, and to direct the appellate authority to take a decision untrammeled by any of the observations contained in the impugned judgment of the learned Single Judge.
Permission is granted. The writ appeal is hereby dismissed as withdrawn. It is made clear that, if the appellant approaches the statutory appellate authority in a properly constituted appeal, the said authority shall consider all the challenges raised before it, including challenge based on the ground of violation of the principles of natural justice in finalising the assessment.
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2019 (5) TMI 1166
Reopening of assessment u/s 147 - no notice u/s 143(2) have been issued within the time - assessment as time barred - HELD THAT:- As relying on SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. [2015 (10) TMI 1765 - DELHI HIGH COURT] and MADHYA BHARAT ENERGY CORPN. LTD. [2011 (7) TMI 66 - DELHI HIGH COURT] since notice under section 143(2) have been issued beyond the period of limitation, therefore, entire reassessment order is nullity and void abinitio. We, accordingly, set aside the orders of the authorities below and quash the reassessment order. - decided in favour of assessee
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2019 (5) TMI 1185
Addition on account of valuation of closing stock - method of valuation prescribed u/s 145A - matching principal of accountancy - assessee did not add the excise duty on closing stock of its finished goods, contending that the liability accrued, was not due on its stock of finished goods, as on 31/3/2014 - AO added the liability, holding that the assessee had not followed the method of valuation prescribed by section 145A - CIT- A deleted the addition - HELD THAT:- The statutory auditors/independent auditors of the company have not qualified their report in respect of the valuation of stock of finished goods, as well as of the raw material, and they have also not qualified their opinion in respect of either the accounting policy adopted by the company in relation to the valuation of stock, or the accounting of the sales and the purchases made by the assessee company. The method prescribed by the Accounting Standard is called the ‘exclusive method’ and the method prescribed in section 145A of the Act is called the ‘inclusive method’. Hence, although the method of valuation of stock followed by the assessee company is not in conformity with the prescription u/s 145A, the deviations will have no effect on the profit & loss account of the relevant financial year.
No excisable item of the closing stack of the assessee was removed from the factory premises till the end of the accounting year. Thus, following the net method of valuation of closing stock, excise duty has rightly been excluded from the value of closing stock of finished goods at the end of the accounting period. The assessee has consistently followed the method of accounting adopted by it. The method of valuation of closing stock is at cost or net realizable value, whichever is lower. In valuing the stock, the excise duty, etc., are not added to the purchases, sales or valuation of inventories.
In view of the above, finding that the ld. CIT(A) has correctly deleted the addition wrongly made, the impugned order is confirmed and the grievance sought to be raised by the Department is rejected, being shorn of merit.
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2019 (5) TMI 1184
Dismissal of appeal ex-parte by CIT-A - three times adjournments were sought and nobody attended on last day of hearing - Assessment u/s 144 - first appeal of the assessee was dismissed in ex-party order - denial of granting sufficient opportunity to the assessee - HELD THAT:- Sub-section(6) of section 250 of Income-tax Act mandate the ld. CIT(A) to dispose of the appeal by setting the point of determination, decision thereon and the reasons for such decision. All three conditions stipulated in sub-section (6) of section 250 of the Act is lacking in the impugned order. Therefore, we are of the view that the order passed by ld. CIT(A) is not in accordance with the mandate of section 250(6) of the Income –tax Act. We have also found force in the contention of ld. AR of the assessee that despite receiving the application for adjournment on 30.06.2017, the ld. CIT(A) passed the impugned order by dismissing the appeal in limine. No contrary fact or law is brought to our notice by ld DR for the revenue.
The assessment order was passed under section 144 and further first appeal of the assessee was also dismissed in ex-party order, we deem is appropriate to restore all the grounds of the appeal to the file of Assessing Officer to decide all the issues (additions/ disallowance) afresh in accordance with law
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2019 (5) TMI 1202
Cancellation of registration u/s 12AA - registration was cancelled by the CIT(C), Ludhiana retrospectively from 1.10.2004 on the ground that the activities of the assessee were not genuine and charitable allegedly on account of additions made during the assessment proceedings for the assessment years 2005-06 and 2006-07 - HELD THAT:- Tribunal while allowing the appeal of the assessee had noticed that the first addition was in respect of unaccounted cash found and seized from the residence of the trustees of the assessee.
In the quantum appeal, the revenue's appeal was dismissed by confirming the relief granted to the assessee. As far as unaccounted payment of ₹ 8 lakhs made to M/s R.K. Engineering Works is concerned, the same had been deleted and no appeal was filed against the deletion of the addition. The issue regarding unexplained cash transfer entry was also decided in favour of the assessee. Further, the assessee had been granted registration again on 30.11.2008 which was made effective from the assessment year 2008-09 finding the activities of the assessee as genuine and the objective being charitable.
The Tribunal [2012 (7) TMI 398 - ITAT DELHI] while allowing the appeal held that the addition was based on the cancellation of the assessee trust u/s 12AA and denying the exemption u/s 11 of the Act. Since we have allowed the appeal of the assessee for granting the registration, therefore, we set aside the orders of the authorities below. - Decided in favour of the assessee.
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2019 (5) TMI 1201
Exemption u/s 11 - assessee had been granted registration under Section 12AA - HELD THAT:- Since the assessee had been granted registration under Section 12AA of the Act, therefore, its income had to be computed by giving benefit of Sections 11 and 12 of the Act. The assessee had fulfilled the conditions as provided in Sections 11 and 12 of the Act. See M.R. EDUCATION SOCIETY, [2013 (4) TMI 926 - ITAT DELHI]
Cancellation of registration u/s 12AA - HELD THAT:- There was nothing on record on the basis of which the registration could be continued to be denied to the assessee-trust as the impugned additions made stood deleted. Reference has been drawn to order dated 30.11.2008 of CIT, Central Ludhiana had afterwards considered the activities of the trust as genuine and the objectives as charitable while granting the registration w.e.f. A.Y. 2008-09. A copy of the said order is placed on record, from which it is evident that the date of order of the CIT(C) Ludhiana granting the registration is dated 12.6.2008, and not 30.11.2008 as mentioned in the order of the Hon'ble ITAT. Therefore, respectfully following the decision of the Hon'ble ITAT, the appeal of the assessee allowed
Penalty u/s 271(1)(c) - HELD THAT:- What an assessee has to pay by way of penalty is an amount equivalent to the tax sought to be evaded or 3 times of the tax sought to be evaded. Once additions are deleted, then there is no amount on which assessee can be said to have evaded the tax and, therefore, there cannot be any penalty. Ld. CIT(A) has observed that additions are deleted, the penalty cannot prevail. We do not find any reason to interfere in the order of Ld. CIT (A). - Decided in favour of the assessee
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2019 (5) TMI 1200
Grant of approval u/s 80G rejected - registration u/s 12AA which still continues - benefit u/s 11 of the Act was allowed to the assessee - HELD THAT:- Assessment of the assessee for the A.Y. 2012-13 was completed u/s 143(3) wherein the benefit u/s 11 was allowed by AO. The assessee had filed its return of income for the A.Y. 2016-17 on 8.10.2016 declaring its income as 'Nil' by claiming exemption u/s 11 for whole of the income. There was no violation on the part of the assessee which could lead to the withdrawal of registration u/s 12AA.
Once the assessee was established as charitable institution by the revenue authorities at the time of granting registration u/s 80G, it cannot be denied registration u/s 80G. It was recorded by the Tribunal that as per Circular dated 27.10.2010, the registration was deemed to have been extended in perpetuity had the registration expired on or after 1.10.2009, but due to technical reason, the registration u/s 80G of the Act was not deemed to have been extended. Accordingly, the Tribunal vide order dated 26.9.2017 (Annexure A-2) directed the CIT(E) to allow the assessee registration u/s 80G from the date of application.
No illegality or perversity could be pointed out by learned counsel for the revenue in the findings recorded by the Tribunal which may warrant interference by this Court. No question of law - Decided against revenue
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Customs
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2019 (5) TMI 1174
Violation of import conditions - actual user condition - import of Hot Mix Plant Batch Type with Electronic Control and Bag Type with Filter Arrangement - it was found that just after the import, the said Hot Mix Plant were directly sent to and installed and used at Lonihkand Taluka, Haveli, Pune, instead of NHAI Project at Hyderabad - benefit of 21/2002-Cus dated 01.03.2002 (Sl.No.230) - HELD THAT:- On perusal of the Letter of Acceptance dated 29.06.2005 of NHAI, we find that the contract was for balance work of 4 laning of Nagpur – Hyderabad section and Hyderabad – Bangalore section of NH-7, in the State of Andhra Pradesh. But it was found that the said contract had been sub-contracted to M/s Sew on 03.02.2007, prior to the date of filing the Bill of Entry. It is admitted by the appellant that after clearance of the goods from Mumbai Port, the same were transferred to Lonikhand, Pune, though the lorry receipts were issued for Hyderabad, to be utilised in construction of road projects awarded by Pune Municipal Corporation - The adjudicating authority observed that such Projects / Contract awarded by Pune Municipal Corporation would not qualify for duty exemption under the notification.
The appellant had filed the Bill of Entry on 13.12.2007 for use of the machine at Nagpur - Hyderabad section and Hyderabad – Bangalore section in the State of Andhra Pradesh. Hence, the letter dated 02.02.2007 of NHAI has no relevance in the present case - Admittedly, the appellant had violated / contravened the conditions of the notification and therefore, the adjudicating authority has correctly denied the benefit of notification.
Appeal dismissed - decided against appellant.
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2019 (5) TMI 1183
Waiver of Penalty u/s 114A as well as dropping confiscation/redemption find under Section 111(o) of the Customs Act, 1962 - demand of duty alongwith Interest - import of goods for repair, and re-export the goods thereafter - benefit of N/N. 158/95-Cus dated 14.11.1995 - it was alleged that the goods were neither re-exported after repairs/reconditioning nor there was a request for the extended period by the appellant - HELD THAT:- The goods have been imported by the respondent by claiming benefit of duty exemption under Notification No. 158/95-Cus dated 14.11.1995 so as to re-export the same after doing the necessary repair which the respondent tried their level best but due to some technical issues, they could not do the repair as per the specification of the client and therefore they could not re-export the said goods within the time prescribed in the Notification.
Further, the Commissioner (Appeals) has rightly held that there is no collusion and wilful mis-statement or suppression of fact in the present case because the respondent has admitted their liability along with interest but they have only challenged before the Commissioner the imposition of penalty under Section 114A and confiscation of goods under Section 111(o) - Further, the Commissioner (Appeals) has rightly held that there is no “Mens rea” on the part of the respondent to evade payment of duty and therefore he has rightly set aside the penalty and the confiscation.
Appeal dismissed - decided against Revenue.
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2019 (5) TMI 1182
Condonation of delay in filing appeal - Service of order - order of finalization of provisional assessment not served on appellants - HELD THAT:- The order of finalization of provisional assessment have not served on the appellants and from the records produced by Ld.AR, the proof of service of adjudication orders is not available - the delay in filing the appeals before the Commissioner (Appeals) is condoned.
The Commissioner (Appeals) has not passed the orders on merits. Therefore, the impugned orders is set aside and the matters remanded back to the Commissioner (Appeals) to pass the orders on merits - appeal allowed by way of remand.
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Securities / SEBI
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2019 (5) TMI 1173
Revision of offer price for acquiring 26 percent of the shares of the target Company - SEBI resorted to the provisions of Regulation 8(16) of the SAST Regulations and appointed M/s. Haribhakti and Company LLP (referred to hereinafter as ‘Haribhakti’) as Chartered Accountant for computation of fair price of the target company - HELD THAT:- Considering the report of the two valuers submitted by the appellant Tenneco Inc. alongwith the draft letter, respondent SEBI took the course of appointing an independent Chartered Accountant Haribhakti. On the basis of this third valuation report in its direction/observation has revised the offer price to ₹ 608.46/-.
The record of SEBI as produced before us would show that after communicating these observations the appellant sought the material from respondent SEBI on the basis of which Haribhakti had arrived at the said conclusion.
Though elaborate procedure of hearing the acquirer before appointing independent Chartered Accountant by respondent SEBI is not required, the respondent SEBI ought to have given an opportunity to the appellant before revising the offer price by providing material on the basis of which Haribhakti had arrived at different valuation. Then respondent SEBI should have taken decision by recording brief reasons upon consideration of the objections, if any, received from the appellant to the valuation arrived at by Haribhakti.
In the circumstance, in view of the above fact there is no need to consider the plea of Mr. Mohan Krishnaswamy, the appellant and counter submissions of the appellant.
The case is remitted back to the respondent SEBI. Since the appellant has now received the valuation report of Haribhakti and other documents during the pendency of the appeal it would be at liberty to raise objections to the report before the respondent SEBI, within a period of three weeks from the date of this order.
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2019 (5) TMI 1172
Increase of shareholding beyond 55% - violation of Section 11 of the Takeover Regulations, 1997 - appellants acquired 2.19% shares in the target company pursuant to a conversion of their portion of warrants thereby increasing their shareholding from 53.85% to 56.04% - SEBI imposing a monetary penalty of ₹ 1 crore under Section 15H(ii) of the SEBI Act, 1992 and a penalty of ₹ 2 lakh was imposed for non-disclosure under Section 15A(b) of the SEBI Act, 1992 - appellants suo motu reduced their shareholding as a remedial measure - HELD THAT:- We find that AO of SEBI had found that it could not be ascertained that there was any disproportionate gain or unfair advantage made by the appellants nor could it be ascertained with regard to the loss caused to the investors as a result of the failure on the part of the appellants to make a public announcement within the time required - The allotment of the shares by the target company to the appellants was made in accordance with resolution passed by the shareholders in its annual general meeting. Further there was no repetitive nature of the default made by the appellants. Appellants belong to the promoter group and even though there was a marginal increase in the individual shareholding of the appellants, there was no change in the management or control of the target company due to the increase in the shareholding of the appellants and the promoter’s group. Appellants after becoming aware of crossing the threshold limit of 55% took remedial measures and reduced its shareholding to less than 55%.
We find that the default is inadvertent, technical and, in any case, unintentional.
Imposition of penalty upon the appellants is excessive and disproportionate. The minimum penalty specified under Section 15H(ii) is ₹ 10 lakh to a maximum of ₹ 25 crore. This Tribunal, in appeal, apart from exercising the powers of the Board can also exercise powers to make such orders and given such directions as may be necessary or expedient to secure the ends of justice as specified under Rule 21 of the Securities Appellate Tribunal (Procedure) Rules, 2000. These powers have been conferred upon the Tribunal with a view to do complete justice between the parties which is equitable in nature to be exercised to ensure justice between the parties or to prevent miscarriage of justice.
Consequently, for the reasons stated aforesaid, the appeal is partly allowed. The impugned order is modified and the penalty is reduced to ₹ 30 lakh which shall be paid by the appellants to the respondent within six weeks from today
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Service Tax
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2019 (5) TMI 1171
Classification of services - Franchise service or Business Support services - demand of service tax on Central Rights Income - Revenue Sharing basis - case of the Revenue is that the appellant-assessee is having franchise relationship and by way of maintaining a team is supporting business of BCCI in IPL tournament - HELD THAT:- In the case of Sir Ganga Ram Hospital [ 2017 (12) TMI 509 - CESTAT NEW DELHI ], wherein it was held that if there is Revenue sharing by the doctors wherein some part of fees retained by the hospital and some is given to the doctor, the same cannot be taxed under Business support services - thus the appellant-assessee is not providing any Business Support Service.
Also, BCCI is not commercial organization and only organizing game of cricket. Therefore any service rendered to BCCI-IPL is not in the nature of support of business of BCCI. Therefore, on that ground also; no service tax is payable by the appellant-assessee.
Thus, on central rights income, no service tax is payable by the appellant-assessee - demand set aside.
Classification of services - fee paid to overseas players - classified under the head Business Support Service or not? - HELD THAT:- The main activity of the appellant-assessee is to play cricket apart from that, the appellant-assessee are engaged in the promotional activities which are ancillary to the main activity of playing cricket - In the case of Sourav Ganguly [ 2016 (7) TMI 237 - CALCUTTA HIGH COURT ] it was held that the remuneration received by the petitioner from the IPL franchisee could not be taxed under business support service - thus on player’s fee, no service tax is payable by the appellant-assessee - demand set aside.
Classification of service - player transfer fees - classified under the category of manpower recruitment or supply agency services? - HELD THAT:- The prime activity of the appellant is that they are engaged in the activity of organizing the cricket tournament and ‘manpower recruitment or supply agency service’ is not the principal business of the appellant-assessee. Therefore, the service tax cannot be demanded under the category of ‘manpower recruitment or supply agency service’ for transfer of player to another team as held by the of Hon’ble Gujarat High Court in the case Arvind Mills Limited [ 2014 (4) TMI 132 - GUJARAT HIGH COURT ] - As the main activity of the appellant-assessee to play cricket, therefore, no service tax is payable by the appellant-assessee under the category of ‘Manpower Recruitment or Supply Agency service’ for transfer of player fee - demand set aside.
Classification of services - appellant-assessee entered into an agreement with Emirates, Dubai for granting the sponsorship rights of the cricket team of the appellant to Emirates - sponsorship service or not? - demand was confirmed on this account on the ground that the Emirates had invested money for the promotion of his own brand and not the sports event, that profit is being generated through this activity and that Emirates did not sponsor the sporting event and therefore, the exclusion under the sponsorship service is not available to them - HELD THAT:- We have gone through the definition of sponsorship service. As per definition, it does not include services in relation to sponsorship of sports events and IPL is a sport event as held by this Tribunal in the case of DLF Ltd. [ 2012 (5) TMI 404 - CESTAT, NEW DELHI ] - as per CBEC circular No.334/1/2010 dt.26.2.2010, the exclusion clause is available for sponsorship services pertaining to sports events was withdrawn and the period involved in this case is prior to that, in that circumstance, the demand under the category of sponsorship service is not sustainable - demand set aside.
Classification of services - player release fee paid to overseas cricket board - classified under manpower recruitment or supply agency service or not? - Reverse charge mechanism - HELD THAT:- Neither cricket board nor the appellant-assessee are engaged in providing Manpower Recruitment or Supply Agency Service’ of employees. Therefore, no service tax is payable by the appellant-assessee - demand set aside.
Classification of service - amount paid to overseas agency - classified under Business Auxiliary Service or not? - HELD THAT:- The appellant-assessee entered into agreement with the overseas agencies for holding negotiations with overseas players as regards arrangement with IPL, which were undertaken outside India and for that activity, the amount has been paid to the overseas agencies. Such amount has been paid by the appellant-assessee for arranging player, who has to play cricket in IPL tournament and as per section 65 (19) of Finance Act, 1994 definition of business auxiliary service, the service tax is required to be paid for promotion or marketing or sale of goods produced or provided by or belonging to the client or promotion or marketing of service provided by the client - Admittedly, organizing sport event is neither any service nor any goods, therefore, the said amount paid on account of negotiations cannot be qualified as Business Auxiliary Service under section 65 (19) of Finance Act, 1994 - demand set aside.
Classification of services - amount paid to African Earth Events - classified under the category of Business Support Service or not? - HELD THAT:- In this case, the main object of the appellant-assessee is to promote game of cricket in India through IPL tournaments. For obtaining service of organizing the said tournaments cannot be treated a service is in nature of Business Support Service. Therefore, no service tax is leviable under the category of Business Support Service - demand set aside.
CENVAT Credit - taxable as well as exempted services - gate receipts collected by the appellant-assessee terming it that they have provided any exempted service - Rule 6 (3) (i) of Cenvat Credit Rules, 2004 - HELD THAT:- The amount has been received by the appellant as the sale of ticket for cricket tournament which is not service, therefore, when it is not the service, it cannot be termed as service, no service tax is required to be reversed. Further, for the period 2010-12, the appellant-assessee has also reversed the said amount, therefore, no demand is sustainable on that account - the demands of service tax are not sustainable against the appellant- assessee.
Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 1181
Non-compliance with mandatory pre-deposit - Section 35F of Central Excise Act, read with Section 83 of the Finance Act, 1994 - service tax has been paid by M/s Hindustan Unilever Limited under GTA services on Reverse Charge basis - HELD THAT:- It is seen that in the appellant’s own case vide Miscellaneous Order No. M/30067-30068/2019 [2019 (5) TMI 1097 - CESTAT HYDERABAD], the Tribunal had allowed the plea of the appellant that since M/s Hindustan Unilever Limited has paid up the service tax demand under GTA services, the same may be treated as compliance of mandatory pre-deposit on their part.
The appellant has complied with the mandatory requirement of pre deposit, taking into consideration that the service tax has been paid by M/s Hindustan Unilever Limited under GTA services on Reverse Charge basis.
Appeal admitted.
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Central Excise
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2019 (5) TMI 1170
Manufacture of paper / paper board - Principal Process of lifting of pulp is done by hand or not - Benefit of N/N. 3/2005-CE dated 24.02.2005 (from 28.02.2005) - condition as mentioned in sub-heading No. 4802.20 (upto 27.02.2005) and in Notification - extended period of limitation - HELD THAT:- The expressions “lifting the pulp is done by hand”, if read with prefixed words “the Principal Process”, it would make clear that lifting of the pulp by hand is required to be only on the Principal Process and not the entire process. In this context, if we look into the manufacturing process mentioned above, it would be noticed that the liquid with pulp fibres is the mixture of waste paper, waste paper tubes / coals and sludge pulp, which is pumped into a storage tank through pipe lines. The main process is the liquid with pulp fibres form layer on the cylinder moulds is transferred through the felt over a sheet copper roll, from where the wet sheets are cut / slit and lifted by hand.
On close reading of the CBEC Circular 61/6/71-CX.2 dated 14.6.1972 and the letter of KVIC, it appears that the Principal Process can be described as lifting of pulp or lift of a wet sheet of paper - In the present case, it is found from the manufacturing process that wet sheets are cut / slit and lifted by hand and therefore, the condition of the Tariff heading and the notification are fulfilled. In the HSN, it is stated that these pulps are obtained by a series of mechanical or chemical cleaning / screening and de-inking processes.
To extend the benefit of exemption notification, only the Principal Process of lifting of pulp by hand would be looked into - Therefore, the benefit of the exemption notification cannot be denied to the appellants, as the liquid with pulp fibres is pumped from the pulpier to storage tanks through pipe lines.
Other issue is that during the visit of the officers, it was found that width of all the three cylinders Mould Vats exceeded the limit of 40 inches, as prescribed in Condition No. (b) of the Tariff / notification. It is contended by the appellant that while measuring the width of cylinder Mould VAT, the perforated portion of the cylinder, where the pulp layer is formed would be considered - HELD THAT:- It appears from the impugned order that this measuring of the perforated portion of the cylinder Mould Vat was not taken into account and therefore, the question of violation of Clause (b) of the Tariff / notification cannot be sustained.
Extended period of Limitation - HELD THAT:- The issue involved interpretation of the Tariff heading and the notification. Hence, it cannot be construed that there is suppression of fact, with intent to evade duty - extended period of limitation cannot be invoked.
Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 1180
CENVAT credit of the CVD part of the differential duty - benefit of Concessional rate of duty of BCD and CVD under N/N. 12/2012-Cus dated 17.03.2012 - Import of Bituminous coal in the guise of Steam coal - re-assessment of the Bill of Entry - Applicability of provisions of Rule 9 (1) (b) and Rule 3 of the CCR, 2004 - HELD THAT:- The appellants have imported the coal as ‘steam coal’ since 2004 but an investigation was conducted after an Alert Circular was issued by DRI alleging that the appellants are importing ‘Bituminous coal’ in the guise of ‘Steam coal’ in order to avail benefit of concession rate of duty under Notification No.12/2012-Cus dated 17.03.2012. Though, the appellants are disputing classification as adopted by the Customs but in the meantime, they have paid the differential duty of ₹ 48,73,556/- and availed CENVAT credit of ₹ 24,44,987/- of the CVD part of the differential duty.
I find that this is a case of re-assessment of the Bill of Entry and the appellant is entitled to CENVAT credit of duty paid on the imported goods. Further, I find that Rule 9 (1) (b) of CCR are not applicable to the instant case because in the present case CENVAT credit is availed on re-assessment of the Bill of Entry. Further, I find that in the present case, there is no suppression on the part of the appellant with intent to evade payment of duty because the appellants have declared all the particulars at the time of availing the Bill of Entry which were considered by the Customs and thereafter the goods were released.
In the case of M/S ESSAR OIL LTD. VERSUS CCE RAJKOT [2014 (2) TMI 766 - CESTAT AHMEDABAD] the Tribunal has held that when additional duty is paid under re-assessment or on being pointed out by the Revenue then the credit of such duty paid will be admissible as CENVAT credit to the assessee under Rule 9 (1) (c) of the CCR, 2004.
find that the ratio of the decision in the case of Coastal Energy Pvt. Ltd. [2014 (8) TMI 246 - CESTAT BANGALORE] wherein the Tribunal has held that when the issue relates to classification of the imported goods and is technical in nature then “mens-rea” could not be alleged and extended period could not be invoked and no penalty can be imposed u/s 129B of the Customs Act, 1962
In view of my discussion above, I am of the considered view that the impugned orders are not sustainable in law - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 1179
CENVAT Credit - payment of duty through CENVAT Account - appellants contended that they had a credit on the goods lying in stock as on 01.06.2006 and they are eligible to pay the applicable duty through CENVAT also. Therefore, they have ended up paying more interest - HELD THAT:- The appellants have submitted that they have paid interest of ₹ 74,61,293/- and are entitled for refund of ₹ 62,36,018/- as there was huge stock of materials lying in stock as on 01.06.2006 the credit on which is available to them therefore the duty paid by them in cash should only be reckoned for the purpose of calculating interest as this is the duty which is actually not paid.
The interest is payable on the differential amount only. However, in this case, the availability of credit is in dispute and this Bench has directed the lower authorities to allow credit after verifying the record, available with the appellants or the Department, pertaining to receipt (imports), storage and distribution of parts to various service centres within three months of receipt of the order. In view of the Miscellaneous Order, we find that the claim of interest by the appellant is pre-mature.
The amount of credit available to the appellant needs to be arrived at by the authorities and thereafter, the net amount payable as on the date of payment of the duty by the appellants i.e. 04.05.2007 requires to be arrived at - the differential amount alone shall be reckoned for the purpose of payment of interest - Appeal allowed by way of remand.
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2019 (5) TMI 1169
Valuation - inclusion of value of scrap in assessable value - Job-work - Demand of Differential Duty - Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - HELD THAT:- In terms of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, the manufacturer of final product is permitted to take credit on inputs received in its factory and send the same to the job worker for the manufacture of intermediate product, for use in the manufacture of the ultimate final product. In such a situation, the job worker who manufactures the intermediate product is not liable to pay any duty - Thus, the principal manufacturer M/s Tata Motors could have followed the procedure prescribed under Rule 4(5)(a) ibid and the appellant could have manufactured the finished product out of the inputs supplied on job work basis and return the same without payment of duty. In such eventuality, the differential duty cannot be demanded in terms of the procedures prescribed under the Cenvat statute.
The value of scrap need not be included in assessable value of the product and cleared by the job worker.
Valuation - inclusion of the amortized value of moulds and dies in the job charges - HELD THAT:- The appellant had accepted the duty liability and not contested the duty demand confirmed against it - thus the duty demand on such ground has been rightly confirmed by the authorities below.
Appeal allowed in part.
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2019 (5) TMI 1168
Process amounting to manufacture or not - activities of cutting and corrugation of GP Coils/Sheets received from various parties - case of Department with regard to corrugation of sheets, is that, it was held that such activity undertaken by the respondent amounts to manufacture, as a new entity emerges after such activity, which is distinct in name, use and character - extended period of limitation.
The impugned order has dropped the proposed duty demands for the said goods manufactured during February’ 2012, holding that proposal for recovery was made beyond the normal period of one year and thus, the show cause proceedings initiated were barred by limitation of time.
HELD THAT:- The issue, as to whether, the activity of corrugation amounts to manufacture or not was highly contentious and there were divergent views by different judicial forums and finally the issue gets settled by the Hon’ble Punjab & Haryana High Court, in the case of Hansa Metallics Ltd. Vs. Union of India, [ 2001 (2) TMI 138 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ], holding that process of corrugation of plain metallic sheets and galvanized sheets undertaken by the petitioner amounts to manufacture, as a new commercial product having different identity and use come into existence. Even after pronouncement of the said judgment by the Hon’ble Punjab & Haryana High Court, the Hon’ble Supreme Court, in the case of Vardhman Industries Ltd. Vs. CCE, Chandigarh, [ 2008 (3) TMI 51 - SUPREME COURT ], while remanding the matter for re-adjudication, have directed the original authority for passing of denovo order uninfluenced by the judgment of the said High Court passed in the case of Hansa Metallics Ltd., keeping the question of law open as to whether, corrugation amounts to manufacture or not.
Thus, we accept the submissions of the respondent that non-payment of the duty amount was due to the bona fide belief that the activity will not amount to manufacture.
The law is well settled by the Hon’ble Apex Court, in the case of Chamundi Die Cast Vs. CCE, Banglore [ 2007 (5) TMI 55 - SUPREME COURT ], Gopal Zarda Udyog Vs. CCE, New Delhi [ 2005 (9) TMI 83 - SUPREME COURT ], Ugam Chand Bhandari Vs. CCE, Madras [ 2004 (5) TMI 73 - SUPREME COURT ] that when the assessee acted under bonafide belief on a particular aspect and there were difference of opinion in the department on such aspect, the extended period of limitation cannot be invoked especially, when the activities of the assessee were in the knowledge of the department officers, who regularly visit its factory.
The extended period of limitation cannot be invoked - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2019 (5) TMI 1178
Time Limitation - ignoring limitation of five years available u/s 28 of the HGST Act, 1973 for the purpose of proceeding with the assessment - Haryana VAT Act - delay in filing the appeals ranging from 58 days to 436 days for which no satisfactory explanation has been given by the learned counsel for the appellant-revenue - whether the assessment orders passed by the assessing authority on 26.3.2009, for the assessment years 1999-2000 to 2002-03, were barred by limitation or not? - applicability of limitation prescribed under HVAT Act in order passed under HGST Act.
HELD THAT:- It is well settled that the law of limitation is a procedural law and operates retrospectively unless it has been provided differently in the amending statute. In other words, unless there is a contrary intention manifested by express or necessary implication of the legislation itself, procedural law is generally retrospective. Procedural law relating to limitation is not a substantive right and its object is not to create any right but to prescribe periods within which legal proceedings be initiated or completed for enforcement of rights existing under substantive law. Statutes of limitation are thus retrospective in so far as they apply to all legal proceedings brought after their operation for enforcing cause of action accrued earlier. However, there is an exception to this rule - Where the right of action is barred under the law of limitation in force before the new provision came into operation and a vested right had accrued, the new provision cannot revive the time barred right or take away the accrued vested right.
Identical issue came up for consideration before this Court in State of Punjab and others vs. Patiala Cooperative Sugar Mills Limited, [ 2015 (9) TMI 1327 - PUNJAB AND HARYANA HIGH COURT ] wherein it was held that in view of amendment of Section 11 of the Punjab General Sales Tax Act, 1948 by Ordinance of 1998 issued and effective from March 3, 1998 which was replaced by Punjab Act 12 of 1998 published on April 20, 1998 whereby limitation of three years for completion of assessment had been prescribed, no assessment order for assessment years upto 1997-98 could be passed after April 30, 2001. It was further held that the amended provisions prescribing limitation would operate retrospectively and would govern all assessments pending relating to periods before the amendment came into operation. There was no limitation prescribed u/s 11 of the 1948 Act for passing an assessment order before the amendment. Therefore, the period of three years prescribed for passing an assessment order would be counted for all those assessment years under the amended provision effective from March 3, 1998.
In State of Punjab and others vs. The Doaba Cooperative Sugar Mills Limited, [ 2018 (9) TMI 809 - PUNJAB AND HARYANA HIGH COURT ], the issue was whether the law laid down by this Court in Shubh Timb Steel Limited vs. The State of Punjab, [ 2010 (4) TMI 993 - PUNJAB AND HARYANA HIGH COURT ] holding that where no period was provided, the assessment order was to be passed within three years and in any event not beyond the period of five years, could be made applicable in the cases decided much before the pronouncement of the judgment.
The effect of sub-section (1) of Section 61 of the HVAT Act is that substantive provisions of the HGST Act shall be treated to be in existence for the purposes of action which had been initiated there under and were pending on the commencement of HVAT Act. Under Section 61(2)(a) of HVAT Act, the pending application, appeal, revision and other proceedings made or preferred to any authority under HGST Act would stand transferred for disposal to the officer or authority who would have jurisdiction to entertain such application under the HVAT Act. The period of revision of five years provided under HGST Act for revision shall stand extended to eight years in certain eventualities. Further, HVAT Act would not affect the concluded actions or the assessments etc.
In so far as assessment finalized for assessment years prior to coming into force of HVAT Act, the limitation under the HGST Act would be applicable. However, law of limitation being procedural law, amended or new provision of law under HVAT Act relating to limitation shall apply to the pending proceedings initiated under the HGST Act in respect of cases upto assessment year 2002-03 as well.
The assessment proceedings in question were initiated under the HGST Act and therefore, after enactment of the HVAT Act which came into force w.e.f 01.04.2003, the limitation period prescribed u/s 15 thereof became applicable to the said assessment proceedings - the limitation period for the assessment in the present cases ended on 31.3.2006 whereas the impugned assessment orders were passed on 26.3.2009 i.e. long after the expiry of limitation. Thus, the Tribunal rightly held the assessment orders being barred by limitation and allowed the appeals filed by the assesses.
In case of failure on the part of the assessee to file return or respond to a notice, the assessing authority may proceed to assess to the best of his judgment within five years after the expiry of such period which would mean initiation of proceedings. It was concluded that the proceedings have to be concluded with the passing of the order. It is not merely initiation of proceedings for revision. In these cases, the factual position being different, the same cannot be of any advantage to the learned counsel for the appellant-revenue.
Appeal dismissed both on merits as well as on the ground of delay.
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2019 (5) TMI 1177
Imposition of penalty u/s 12(3)(b)(iv) of the TNGST Act - return filed by the Petitioner, not rejected - HELD THAT:- It is very clear that the Assessing Officer proceeded to impose penalty by impugned order dated 26.06.2006 without rejecting the return filed by the Petitioner. This course of action is contrary to the provisions of Section 12(2) of the TNGST Act. Consequently, penalty cannot be imposed under Section 12(3) of the said Act.
Hon'ble Division Bench of this Court in APPOLLO SALINE PHARMACEUTICALS VERSUS COMMERCIAL TAX OFFICER (FAC) AND OTHERS [2001 (10) TMI 1100 - MADRAS HIGH COURT] held that penalty cannot be imposed unless return is not filed or the filed return is rejected and, thereafter, assessment is made on best judgment basis. Neither of these requirements were fulfilled in the instant case.
Petition allowed - decided in favor of petitioner.
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2019 (5) TMI 1167
Classification of goods - narrow woven fabric labels - classified under heading '58.06' of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 or not - exemption from sales tax under Entry 11 of Part A of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959 - case of the Respondent is that the exemption applies to narrow woven fabric, which is classified under heading 58.06 of the Additional Duties of Excise Act but not to woven labels, which are classifiable under heading 58.07 of the Central Excise Tariff Act, 1944.
HELD THAT:- On perusal of Entry 11 of the Part A of the Third Schedule of the Tamil Nadu General Sales Tax Act, it is clear that narrow woven fabrics of silk, wool, cotton or man-made textile materials (produced or manufactured in India) as described in column (3) against the heading '58.06' in column (1) of the First Schedule to the Additional Duties of Excise Act were exempted from sales tax.
The position is confirmed by clarification dated 13.02.2001, where it was held the clarification already issued in this office reference D.Dis.Acts Cell II/65536/2000 dated 13.10.2000 and D.Dis.Acts cell II/76081/2000 dated 30.10.2000, treating the product as falling under Entry 67 in Part-D of the First Schedule to the TNGST Act, 1959, taxable at 11% is hereby cancelled - Thereafter, by the subsequent clarification dated 18.05.2001 read with erratum dated 29.10.2001, it was also clarified that both settled cases and pending cases, in respect of narrow woven fabric labels, would be decided as per the clarification dated 13.02.2001.
The question arises as to whether the assessing officers are bound by the clarifications issued under Section 28A or whether they can deviate there from - The above question is no longer res integra and was decided in several judgments. For instance, in PAPER PRODUCTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [1999 (8) TMI 70 - SUPREME COURT], it was held that instructions/clarifications issued under Section 37B of the Central Excise Act, 1944, which is broadly similar to Section 28A of the TNGST Act, are binding on the assessing officer.
In the instant case, it is evident that the re-assessment proceedings were initiated in disregard of the clarifications dated 13.02.2001 and 18.05.2001 read with the erratum thereto dated 29.10.2001. The text of clarification dated 13.02.2001 underscores the fact that earlier clarifications classifying the product under Entry 67 in Part D of the First Schedule to the TNGST Act were expressly cancelled whereas the assessing officer does precisely the converse. It is further evident that this was done largely on the basis of audit objections.
Petition allowed.
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2019 (5) TMI 1176
Maintainability of appeal - non-compliance with the pre-deposit - Section 62(5) of Punjab VAT Act - HELD THAT:- The Tribunal while dismissing the appeal of the appellant noticed that protection under Section 62(5) of the Act cannot be granted in each case but only in rare of the rarest cases where the impugned order is void and without jurisdiction and such deposit would frustrate the purposes of filing of appeal and that the appellant was suffering from any financial incapacity or was under any other hardship on account of poverty or insolvency - The law required the entertainment of appeal only when compliance under Section 62(5) was made. Therefore, the appellant was liable to comply with the provisions of Section 62(5) of the Act. Since the appellant failed to deposit 25% amount of the additional demand of the tax and interest only as directed by the DETC(A) and the Tribunal, the Tribunal had rightly dismissed the appeal on that account.
In the present case, the appellant was required to pre-deposit 25% amount of the additional demand of the tax and interest only as a condition precedent for hearing of the appeal, which was reasonable and justified - No illegality or perversity could be pointed out by the learned counsel for the appellant in the findings recorded by the Tribunal which may warrant interference by this Court. No question of law arises in this appeal. Accordingly, finding no merit in the instant appeal, the same is hereby dismissed.
Appeal dismissed - decided against appellant.
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2019 (5) TMI 1175
Issuance of Declaration Form 'C' - purchase of Natural Gas used as fuel for manufacturing of goods for sale and captive power generation for the manufacturing of taxable domestic goods - The petitioner was unable to file the online quarterly returns R-1 for the period July, 2017 to June, 2018 as while uploading the return, a message was being displayed that 'there is no obligation found corresponding to this TIN Number'. Accordingly, the petitioner sent a letter dated 27.7.2018 (Annexure P-5) to respondent No.3 for issuance of 'C' Form, but to no effect.
HELD THAT:- We dispose of the present petition by directing respondent No.2 to take a decision on the letters dated 27.7.2018 and 29.9.2018 (Annexures P-5 and P-6, respectively), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month from the date of receipt of the certified copy of the order.
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