TMI Tax Updates - e-Newsletter
June 13, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise

Highlights / Catch Notes

• GST:

  The product ‘Geared Motor’ is classifiable under Chapter Heading 8501 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Chapter Heading 8501 is applicable to the said product.
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• GST:

  Classification of goods - Power Driven Pumps used for dispensing an exact nature of water such as clear, raw, storm, waste or sewerage - would not be eligible for Goods and Services Tax rate of 12% (CGST 6% + SGST 6% or IGST 12%).
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• GST:

  Classification of goods - Supply under GST - The product ‘Electrically operated Drum with Bell and Zalar’ manufactured and supplied by the applicant is classifiable under Heading 9208 of the First Schedule to the Customs Tariff Act, 1975 - Not eligible for exemption under GST.
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• GST:

  Valuation - Job work - The value of supply by the applicant shall be the transaction value, which is the price actually paid or payable for the said supply as Job Charges, in view of sub-section (1) of Section 15 of the GST Acts.
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• GST:

  Job-work activity or not? - The activity of manufacturing industrial gases viz. Oxygen, Nitrogen and Argon undertaken by the applicant amounts to ‘Job Work’ as defined under Section 2(68) of the GST Acts.
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• GST:

  Classification of supply - The printed advertisement materials manufactured and supplied by the applicant are classifiable as 'supply of goods' - classifiable under chapter heading 4911 of the GST Tariff and the rate of tax applicable is 6% CGST + 6% SGST.
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• Income Tax:

  Claim of expenditure towards contribution made to Aslaji Agiary Trust - payment made to discharge the social responsibility - It cannot be said that the said expenditure is for the company in its entirety. - CIT(A) is justified in upholding the addition.
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• Income Tax:

  Nature of Expenditure - revenue or capital - Weight of other business considerations, the test of enduring benefit might even break down - the expenditure incurred on laying of the water pipeline involving the land owned by Maharashtra Government constitutes Revenue expenditure.
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• Income Tax:

  Doctrine of Merger - Revision order passed by CIT u/s 263 - CIT(A) dismissed the appeal - CIT as set-aside the reassessment order on the limited issue of examination of deduction u/s 80IA/80IB - CIT(A) should not have dismissed the appeal holding the same to be infructuous.
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• Income Tax:

  Disallowance u/s 40A(3) - payments made exceeding cash limit for purchase of country spirit - Payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms of Rule 6DD(b)
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• Income Tax:

  Denial of deduction u/s 80-IA (4) - 'Cargo facility' operated and maintained by the assessee is infrastructure facility eligible for deduction u/s 80IA(4).
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• Income Tax:

  Lease rent payment - nature of expenditure -assessee acquired the land on lease for 33 years, the capital structure did not undergo any change. The assessee has merely acquired the facility to carry on business profitably by paying nominal lease rent thus revenue expenditure.
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• Income Tax:

  TPA - comparable selection - turnover filter application - turnover filter is one of the essential filter in order to select comparables when acted in same atmosphere - Adoption of turnover filter confirmed.
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• Customs:

  Valuation of imported goods - zinc ash - Since real transaction value i.e. the amount transferred through legal channels and amount paid to the local representative of the foreign supplier is available the same becomes transaction value and the duty can be demanded taking the same as assessable value.
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• Customs:

  Classification of Cogent Lifescan for Finger Print Scanner - finger printer scanners held to be classifiable only under CTH 8471.
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• IBC:

  Corporate insolvency proceedings -The ‘Resolution Plan’ contravenes the provisions of the Income-tax Act - we are not interfering with the illegal Schemes dated 11th March, 2010 and 28th July, 2016 though we hold them as illegal.
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• Service Tax:

  Classification of services - The appellants though are performing certain activities in relation to the maintenance and safety of the tank trucks and are issuing a certificate to the effect that the tanks are purged/degased, the same cannot be considered to be a service within the scope of “Technical Inspection and Certification Service”
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• Service Tax:

  Invocation of Extended period of limitation - mere inaction or failure on the part a manufacturer/ service provider is not sufficient to invoke the larger limitation of five years.
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• Service Tax:

  Technical Inspection and Certification Services - issuing Kimberley Process Certificate - even if the service is held to be classifiable as Technical Inspection and Certification Services, still being 'statutory and mandatory' nature no tax can be demanded in terms of the circular dated 18.12.2006
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• Central Excise:

  Recovery u/s 11D of CEA - during the exemption limit, the same price was charged towards the sale of the goods, but during the exemption limit, the appellant have not shown the excise duty either in the excise invoice or in the commercial invoice - since, no amount was collected representing duty of excise during the exemption limit - the demand was raised without any basis u/s 11D
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• Central Excise:

  Remission of duty - destruction of goods in flood - the claim of remission cannot be rejected on the ground that the goods were destroyed after clearance from the factory in the circumstances when the goods were cleared for the purpose of export.
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• Central Excise:

  Valuation - toothpaste - MRP based valuation - there are lot of assumption and presumption involved and it is highly arbitrary - impugned order cannot be upheld
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Articles

• GST on free supplies by customers

Notifications

• DGFT

• 11/2015-2020 - dated 12-6-2018 - FTP
  Amendment in import policy conditions of Natural Rubber under Exim code 4001 10 of Chapter 40 of ITC (HS), 2017 - Schedule - 1 (Import Policy)

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Circulars / Instructions / Orders

• DGFT - 13/2015-2020 - dated 12-6-2018
  Eligibility of Indian Mackerel under Table 2 of Appendix 3B of Foreign Trade Policy 2015-20

News

• 3,000 Additional Atal Tinkering Labs Announced

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• RBI Reference Rate for US $

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• Draft guidelines on Loan System for Delivery of Bank Credit

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• Official Statistics - A Clarification

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• Ministry of Finance, RIS and FICCI organise Thematic Seminar on ‘Private Sector Participation and Innovation in Resource Mobilization’:

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Case Laws:

• GST

• 2018 (6) TMI 519
  Classification of supply - supply of goods and/or services - printed advertisement materials - Whether the printed advertisement materials classifiable as 'supply of goods? - If yes, whether it is classifiable under chapter heading 4911 of first schedule to Customs Tariff Act, 1975? - Held that:- As per Section 7 of CGST Act, 2017 read with Schedule-II Sl. No. 1(a) of CGST Act, "any transfer of the title in goods is a supply of goods" - In the instant case the applicant is engaged in the business of manufacturing and sale of digital printed materials, wherein preparation of such printed material would be undertaken as per the customers specification and except specifying the specifications and designs to be printed, clients/customers of applicant does not provide any materials and all required materials for the preparation of the advertisement materials are procured by the applicant ,and the applicant is transferring the title in the goods i.e., printed advertisement materials. Therefore, instant case of supplying printed advertisement materials amounts to supply of 'goods' only. The printed advertisement material are classifiable under Tariff heading 4911 in accordance with 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 as made applicable for the interpretation and classification of goods under GST Tariff. Ruling:- The printed advertisement materials manufactured and supplied by the applicant are classifiable as 'supply of goods' - The printed advertisement material are classifiable under chapter heading 4911 of the GST Tariff and the rate of tax applicable is 6% CGST + 6% SGST.

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• 2018 (6) TMI 518
  Job-work or not? - Activity of manufacturing industrial gases viz. Oxygen, Nitrogen and Argon - transition to GST regime - Valuation - related party transaction or not? - Whether the activity undertaken by the applicant amounts to Job Work as defined under Section 2(68) of the Central Goods and Services Tax Act, 2017? - What is the value on which the applicant is liable to pay GST? Held that:- It is clear that the Atmospheric Air used by the applicant belongs to M/s. Essar. Thus, all the inputs viz. Atmospheric Air, Industrial Water and Electricity belongs to M/s. Essar - As all the necessary ingredients of the definition of job work are fulfilled in this case, the activity of manufacturing of industrial gases viz. Oxygen, Nitrogen and Argon by the applicant amounts to Job Work as defined under Section 2(68) of the said Acts - it is evident that under the Central Excise regime also, the applicant was discharging duty under Rule 10A of the Central Excise Valuation Rules, 2000, which Rule was applicable where the excisable goods were produced or manufactured by a job-worker, on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorized by him. The activity of manufacturing industrial gases viz. Oxygen, Nitrogen and Argon undertaken by the applicant amounts to Job Work as defined under Section 2(68) of the said Acts. Valuation - related party transaction - Held that:- The applicant and M/s. Essar are not related persons as defined under Explanation (a) and (c) of Section 15 of the said Acts - Further, the computation of Job Work Charges has been described at clause 6 of the agreement entered into between the applicant and M/s. Essar. The Job Work charge agreed by the applicant and M/s. Essar is the sole consideration payable by M/s. Essar to the applicant for the agreed activity to be carried out by the applicant - The value of supply by the applicant shall be the transaction value, which is the price actually paid or payable for the said supply as Job Charges, in view of sub-section (1) of Section 15 of the said Acts. Ruling:- The activity undertaken by the applicant falls under the Job Work as defined under Section 2(68) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 - The applicant is liable to pay Goods and Services Tax on the value of supply determined under Section 15(1) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017.

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• 2018 (6) TMI 517
  Classification of goods - Electrically operated Drum with Bell and Zalar - whether the said product is eligible for exemption vide Sl. No. 143 of N/No. 2/2017-Central Tax (Rate), dated 28-6-2017 issued under the Central Goods and Services Tax Act, 2017 and corresponding Notification issued under the Gujarat Goods and Services Tax Act, 2017, which provided exemption to ‘Indigenous handmade musical instruments’ of Chapter 92? Held that:- The product manufactured by the applicant is distinctly known in the market as ‘Electrically operated Drum with Bell and Zalar’ and the Drum, Bell and Zalar used in the said product are played in a rhythm by mechanical operation of electric motor run by electricity - the said product is appropriately classifiable under Heading 9208 of the First Schedule to the Customs Tariff Act, 1975, which inter-alia covers the products musical boxes, fairground organs, mechanical street organs, mechanical singing birds, musical saws and other musical instruments not falling within any other heading of Chapter 92. The exemption vide Sl. No. 143 of the said Notification is now admissible only to those indigenous handmade musical instruments of Chapter 92 as are listed in Annexure-II of the said Notification - The said product do not correspond to the description ‘Getchu Vadyam or Jhallari’ mentioned at Sr. 4 or ‘Gethu or Jhallari’ mentioned at Sr. 43, or ‘Nagara–pair of Kettledrums’ mentioned at Sr. 113 of Annexure – II of N/N. 2/2017-Central Tax (Rate), dated 28-6-2017, as amended, as claimed by the applicant, or to any other items of said Annexure – II. As Page 4 of 5 the list of indigenous handmade musical instruments given in Annexure-II of N/N. 2/2017-Central Tax (Rate) is exhaustive and the wordings of Entry at Sl. No. 143 of said Notification are very clear, the benefit of Sl. No. 143 of Notification No. 2/2017-Central Tax (Rate), dated 28-6-2017 is not admissible to the product ‘Electrically operated Drum with Bell and Zalar’ manufactured and supplied by the applicant. Also, the Sl. No. 143 of Notification No. 2/2017-Central Tax (Rate), dated 28-6-2017, as amended, is not pari-materia to Entry 43 under the Gujarat VAT Act. Therefore, the Determination Order issued in respect of Entry 43 of the Gujarat VAT Act, is not found to be applicable in the present case. Ruling:- The product ‘Electrically operated Drum with Bell and Zalar’ manufactured and supplied by the applicant is classifiable under Heading 9208 of the First Schedule to the Customs Tariff Act, 1975 - the product is not eligible for exemption provided vide Sl. No. 143 of N/N. 2/2017-Central Tax (Rate), dated 28-6-2017, as amended, issued under the Central Goods and Services Tax Act, 2017 and corresponding Notification issued under the Gujarat Goods and Services Tax Act, 2017.

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• 2018 (6) TMI 516
  Classification of goods - Supply of goods - applicable rate of GST - Power Driven Pumps used for dispensing an exact nature of water such as clear, raw, storm, waste or sewerage - Whether the goods supplied by the applicant are covered under Sl. No. 192 of Schedule II of N/N. 1/2017-Central Tax (Rate), dated 28.06.2017 issued under the Central Goods and Services Tax Act, 2017 and corresponding Notifications issued under the Gujarat Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017? - Interpretation of statute. Held that:- It is now well settled principle of interpretation of statue that the word not defined in the statute must be construed in its popular sense, meaning ‘that sense which people conversant with the subject matter with which the statue is dealing would attribute to it’. It is to be construed as understood in common language - The terms ‘sewage’ and ‘water’ have been separately used in the said Notification and therefore the term ‘water’ cannot be said to include ‘sewage’ or waste. Had the intention of the legislature been to include ‘sewage’ also in the term ‘water’ for the purpose of Notification No. 1/2017-Central Tax (Rate), then the term ‘sewage’ and ‘water’ would not have been separately used, as is the case at Sl. No. 238 of Schedule – III of the said Notification. Ruling:- The product ‘Pumps for sewage or waste’ would not be covered by Sl. No. 192 of Schedule II of N/N. 1/2017-Central Tax (Rate), dated 28.06.2017 and corresponding Notifications issued under the GGST Act 2017 and the IGST Act, 2017.

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• 2018 (6) TMI 515
  Classification of goods - Geared Motors - applicable rate of GST - Whether ‘Geared Motor’ falls under Chapter Heading 8483 or 8501 of the Customs Tariff Act, 1975? - Held that:- The Tariff Heading 8483 does not cover Gear Boxes or other variable speed changers combined with a motor. Motor remain classified under Tariff Heading 8501 even when they are equipped with pulleys, with gears or gear boxes, of with a flexible shaft for operating hand tools - On the basis of the Explanatory Notes of HSN under Tariff Heading 8483 and 8501, it is evident that the product ‘Geared Motor’, which is an assembly product of the ‘Electric Motor’ and ‘Gear Box’, will appropriately fall under Chapter Heading 8501 of the Customs Tariff Act, 1975. Ruling:- The product ‘Geared Motor’ is classifiable under Chapter Heading 8501 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Chapter Heading 8501 is applicable to the said product.

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• Income Tax

• 2018 (6) TMI 520
  Disallowance of bad and doubtful debts of non rural branches - Held that:- following the decision of the Hon’ble Supreme Court in the case of Catholic Syrian Bank Ltd. vs. CIT [ 2012 (2) TMI 262 - SUPREME COURT OF INDIA] it is held that the bad debt written off in respect of non rural branches is allowable as deduction u/s. 36(1)(vii) - hence we direct the AO to allow deductions towards bad debt written off in respect of non rural branches. Disallowance of expenditure incurred in relation to exempt income u/s 14A - Held that:- in view taken by the Co-ordinate Bench in the assessee’s own case [2017 (10) TMI 583 - ITAT MUMBAI] for AY 2009-10, we direct the Assessing Officer to restrict the disallowance worked out u/s. 14A to 2% of the exempt income. Disallowance of diminution in value of investment held as stock-in-trade - Held that:- following the judgement in case of COMMISSIONER OF INCOME-TAX VERSUS BANK OF BARODA [2003 (3) TMI 80 - BOMBAY HIGH COURT]we are of the view that CIT was right in deleting the additions towards diminution in value of investment held as stock-in-trade - thus appeal filed by assessee is allowed and cross objection of revenue is dismissed. Disallowance of broken period interest - Held that:- CIT has deleted the additions made by AO following the judgement in case of American Express International Banking Corpn. Vs. CIT [2002 (9) TMI 96 - BOMBAY HIGH COURT]. Additions towards unreconciled credit entries in the nostro mirror accounts credited to P&L a/c - Held that:- where amount in question had remained with assessee-bank owing to fact that payees or holders of draft/pay orders had not encashed them, section 41(1) could not be invoked - thus unreconciled credit entries cannot be treated as income of the assessee - AO is directed to delete the addition.

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• 2018 (6) TMI 513
  Disallowance u/s 40A(3) for payments made exceeding cash limit - purchase of country spirit - Held that:- Following the judgement in case of M/s. Amrai Pachwai & C.S. Shop [2014 (2) TMI 979 - ITAT KOLKATA] wherein held payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms of Rule 6DD(b) of the I.T Rules 1962 - we delete the disallowance made by the Assessing Officer and confirmed by the Ld. CIT(A) u/s 40A(3) - Decided in favor of assessee.

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• 2018 (6) TMI 512
  Deduction u/s 10B of the Act on export profit earned by its unit - assessee is registered and approved EOU - Held that:- The fundamental requirement in all the agreement is creation of dossier, which is compilation of the relevant technical education to enable manufacture of product. Dossier has all the attributes of product being an article or thing and it is creation specifies the requirement of a production. In fact, creation of dossier entails the actual production of the formulation initially in the laboratory and therefore upto a batch size. In similar circumstances Hon’ble Supreme Court in the case of Scientific Engineering House Pvt. Ltd vs. CIT (1985 (11) TMI 1 - SUPREME COURT) held that the compilation of technical knowhow is an article to be considered as capital asset eligible for deduction for depreciation. The assessee is entitled to deduction under section 10B as it has established that the relevant conditions of section 10B that there must be a production of article or thing and export of such article or thing and consideration thereof brought into India within the time permissible under the foreign exchange regulations are fulfilled and accordingly allowable. We allow this issue of assessee’s appeal. Not computing the deduction under section 10B undertaking wise and thereby not allowing the deduction in respect of Beta lactam Division (BLD) and Star Unit - Held that:- We direct the AO to recompute the deduction as claimed by assessee under section 10B in term of the decision of Hon’ble Supreme Court in the case of Yokogawa India Ltd. (2016 (12) TMI 881 - SUPREME COURT). The second proviso to section 10B(1) of the Act was only for assessment year 2003-04 and not for other years. The AO will verify the facts of the case and accordingly, will allow the claim of the assessee. This issue of assessee’s appeal is set aside to the file of the Assessing Officer. Disallowing deduction under section 10B for the unbilled Revenue recorded by Star Unit - Held that:- income has not accrued as agreed by both the sides. Hence, the assessee is not entitled for deduction under section 10B of the Act on unbilled Revenue recorded on the basis of internal accounting policy but we are also of the view that the income also cannot be assessed in the absence of its accrual. The AO is directed to delete the addition wherever income has not accrued but added by the AO, after verification of the factual position. The AO can also verify where consideration has been received within 6 months of raising of the invoice, the AO can allow the deduction as claimed in the year Claim of weighted deduction under section 35(2AB) to be allowed Disallowing a portion of rental expenditure on the ground that the rent paid to related parties is unreasonable in view of the provisions of section 40A(2)(b) - Held that:- As find from the facts of the case that the lower authorities failed to appreciat the facts that the significant portion of the property belonging to the related party are used for R&D and Corporate Office which houses the Corporate Office Finance, HR, R&D. SCM, Planning departments. This it is be rented out to any third party without any modification. This can as it is be rented out to any third party without any modification this had a central superior quality construction and utilization for corporate office structure of related party building compared to outside party building which is used for manufacturing plant. The rental agreements with outside party were entered into in May 2001 and the rents were fixed for initial 7 years. Whereas, the rental agreement with related party were entered into during August 2004 in case of one property and June 2006 in case of two other properties - the rent paid is not falling within the mischief of section 40A(2)(b) and seems reasonable. Disallowing the expenditure of premium of redemption of foreign currency convertible bonds (FCCB) - Held that:- When a Company issues FCCB, it incurs a liability to pay a larger amount than what is borrowed and such higher amount payable by the Company will be for the purpose of its business in order to generate funds for its business activities. The amounts so obtained are used by the Company for the purposes of its business. Hence the liability to pay the additional amount would therefore be revenue expenditure. The additional amount is nothing but an interest computed at 6.8% p.a. We are of the view that the assessee has rightly claimed the liability as expense and we allow the same. This issue of assessee’s appeal is allowed. Disallowing the expenses relatable to exempt income under section 14A - Held that:- As disallowance cannot exceed the exempt income. Respectfully, following the Hon’ble Delhi High Court in Cheminvest Ltd.[2015 (9) TMI 238 - DELHI HIGH COURT] we restrict the disallowance under section 14A at ₹ 600/- i.e. to the extent of dividend income. We direct the AO accordingly. Levy of interest under section 234B and 234D - Held that:- charging of interest under section 234B and 234D is consequential in nature and AO will charge interest as per the provisions of the Act at the time of giving appeal effect to the order of the Tribunal. As the issue is consequential, we direct the AO to charge interest as per law. TPA - appropriate interest rate applicable to the international transactions relating to advancement of interest free loan / extended credit facility to the overseas A.E - Held that:- We direct the AO to compute the disallowance by taking LIBOR rate plus 300 basis point. We direct the AO accordingly.

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• 2018 (6) TMI 511
  Denial of deduction u/s 80-IA (4) - assessee did not enter into an agreement with any government/statutory body which is a pre-requisite for claiming deduction - Held that:- Deduction is allowable not only for development of a infrastructure facility, but is also allowable in case of operating and maintaining or developing, operating and maintaining an infrastructure facility - 'Cargo facility' operated and maintained by the assessee is infrastructure facility eligible for deduction u/s 80IA(4). The assessee does not require a specific and independent agreement with the Government for claiming deduction under section 80IA(4) Thus following the decision of ITAT in assessee’s own case for AY 2012-13 [2017 (4) TMI 245 - ITAT HYDERABAD] we uphold the order of the CIT(A) in both the years under consideration and dismiss the grounds raised by the revenue in both the AYs under consideration - Decided in favor of assessee.

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• 2018 (6) TMI 510
  Penalty u/s 271(1)(c) - addition made on account rent free accommodation and unexplained expenditure - defective notice - non specification of charge - Held that:- The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. Following the judgement in case of Jeetmal Choraria vs ACIT [2017 (12) TMI 883 - ITAT, KOLKATA] we cancel the penalty imposed by the A.O. under section 271(1)(c) and confirmed by the Ld. CIT(A) - appeal of revenue is dismissed.

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• 2018 (6) TMI 509
  Exclusion of Freight & Insurance from Total Turnover for the purpose of quantifying deduction u/s.10B - Held that:- It is a settled legal proposition that the said expenditures, i.e. freight and insurance are to be excluded both from the total turnover and the expected turnover of the assessee for the year under consideration. Therefore, following the decision of Co-ordinate Bench of the Tribunal in assessee’s own case [2016 (8) TMI 1047 - ITAT PUNE] Ground Nos. 1 and 2 raised by the Revenue are dismissed. Claim of expenditure towards contribution made to Aslaji Agiary Trust - payment made to discharge the social responsibility - Held that:- the expenditure of ₹ 14 lakhs falls short of the legal requirement of wholly and exclusiveness qua the business purpose of the assessee. It cannot be said that the said expenditure is for the company in its entirety. - CIT(A) is justified in upholding the addition. Expenditure incurred on laying of the water pipeline involving the land owned by Maharashtra Government - revenue or capital - Held that:- Weight of other business considerations, the test of enduring benefit might even break down. The said view has strength of the Supreme Court judgment in the case of Dalmia Jain and Company Ltd. Vs. CIT [1971 (7) TMI 2 - SUPREME COURT] as well which is relevant for the proposition that certain litigation expenditure relating to the leasehold rights constitute Revenue expenditure. Therefore, we are of the opinion that the expenditure incurred on laying of the water pipeline involving the land owned by Maharashtra Government constitutes Revenue expenditure. Addition of rent paid for the property - Held that:- Considering the above decision of the Tribunal in assessee’s own case, we are of the opinion that the expenditure on account of rent paid on the house property is allowable in favour of the assessee. Allowability of depreciation of capital expenditure in connection with the said house property at 70, Koregaon Park - Held that:- There is no clarity with reference to the capitalised items of assets credited to the Serum Institute of India Ltd. in the said house premises occupied by Mr. Z.S. Poonawalla, applicable rate of depreciation and the use of the asset etc. As discussed in the open court, we are of the opinion that this limb of the ground should be remanded to the file of AO for fresh adjudication after granting reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Allowability of deduction to the Wealth Tax paid by the assessee for the purpose of computing book profits u/s.115JB - AO denied the said payment of tax as not an allowable deduction - Held that:- Wealth Tax paid constitutes an allowable deduction as held by the Tribunal in assessee’s own case for the A.Y. 2008-09.

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• 2018 (6) TMI 508
  TP adjustment - International transaction - notional interest on outstanding receivables - Held that:- Assessee is a zero debt company, fully funded by AE, no interest liability and assessee also did not charge any outstanding amount even from third parties, therefore question of charging interest on the outstanding amount does not arise. Following the decision in case of Pegasystems Worldwide India Pvt Ltd., Vs ACIT [2015 (10) TMI 2495 - ITAT HYDERABAD] it is held that there is no need or bringing to tax the notional interest on the outstanding receivables - thus no TP adjustment can be made - since the very addition is not confirmed, the issue on rate of interest as raised by Revenue in its appeal becomes academic and infructuous - appeal of revenue is dismissed.

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• 2018 (6) TMI 507
  TDS u/s 194C - Disallowance u/s 40(a)(ia) - non deduction of TDS in respect of payment representing reimbursement of expenses to Clearing and Forwarding Agent - Held that:- It is necessary to observe the fact whether M/s. S. K. Agency has incurred cost on behalf of the assessee and for this purpose the agreement between the assessee and M/s. S. K. Agency was required to be referred - thus in the absence of specific documents we restore this issue to the file of the AO for fresh adjudication by the law - ground of appeal of the Revenue is allowed for statistical purposes.

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• 2018 (6) TMI 506
  Lease rent payment - nature of expenditure - revenue expenditure or capital expenditure - Held that:- Following the judgement in assessee’s own case for AY 2011-12 [2017 (11) TMI 54 - ITAT HYDERABAD] wherein as held that the assessee acquired the land on lease for 33 years, the capital structure did not undergo any change. The assessee has merely acquired the facility to carry on business profitably by paying nominal lease rent. The lease rent paid by the assessee was allowable as revenue expenditure we dismissed the grounds raised by the revenue. Transfer pricing adjustment on account of reimbursement of expenses received from Associated Enterprises - Held that:- The cross objections raised by the assessee in this AY are materially identical to that of AY 2011-12 wherein as held the concept of utilizing the expertise with other independent companies are not heard of in the market nor encouraged in the normal business. Since there are no comparable cases in the market, and also it is the business decision of the assessee to share the employee cost with other sister concerns on cost to cost basis. Accordingly, the addition of markup should be deleted. For the limited purpose of verification of transaction whether the transactions are routed through books, it is remitted to the AO. - Decided in favour of assessee for statistical purposes.

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• 2018 (6) TMI 505
  Determining Arm’s Length Price u/s 92CA - comparables selection - extraordinary event - Held that:- The assessee company is engaged in providing/rendering R&D support services in respect of CAD and CAE tools in designing the automobile parts and is into modelling and iterative simulation. It receives the basic design from its group company. With respect of CAD modelling, it made a 3-D CAD modelling data of vehicle components using CAD software tools primarily CIT-A. Companies selected as comparable must match functionally with assessee. Provision for bad and doubtful debts and bad debts written off as non operating expenses for the purpose of margin computation of comparable companies as selected by the TPO - Held that:- We direct the AO/TPO to recompute the margins of comparable companies by including bad debts and provision for bad and doubtful debts as operating expenses for the purpose of computing profit and loss of comparable companies. Accordingly, this ground is allowed. Adjustment should be restricted to the value of international transactions - Since the assessee failed to furnish the evidence in respect of the invoices raised for revenue of ₹ 71,26,20,193/- either before the TPO or before the DRP, the DRP rejected the objections raised by the assessee. To meet the ends of justice, we remit this issue back to the file of the TPO with a direction to give one more opportunity to the assessee to submit the required information to substantiate its claim. We direct the assessee to file the required information to substantiate its claim. This ground is allowed for statistical purposes.

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• 2018 (6) TMI 504
  Disallowance considering bogus purchases - bogus purchases/ receiving hawala bill - Held that:- Once, the sales are not doubted it is presumed that the assessee might have made purchases from grey market and obtained these bogus bills to save on account of VAT and purchases from grey market are made at a lower rate - thus following the judgement in case of assessee’s sister concern in the case of DCIT vs. Laboratories Griffon Pvt. Ltd. [2018 (4) TMI 709 - ITAT KOLKATA] the profit rate of 30% will meet the end of justice - appeals of assessee are partly allowed.

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• 2018 (6) TMI 503
  Doctrine of Merger - Revision order passed by CIT u/s 263 - CIT(A) dismissed the appeal - reopening of assessment order - requirement of set off of losses on notional basis while computing deduction allowable under section 80IB in respect of MBF unit has neither been considered nor set aside by the CIT in revisionary proceedings under section 263 - Held that:- A perusal of the order of CIT passed u/s 263 shows that the ld. CIT by invoking powers conferred on him u/s 263 has set-aside the reassessment order on the limited issue of examination of deduction u/s 80IA/80IB. The entire order has not been set-aside and there is no specific comment by the ld. CIT in his order regarding the validity of the reassessment proceedings initiated by the Assessing Officer u/s 147/148. CIT(A), in our opinion, should not have dismissed the appeal holding the same to be infructuous. He was duty bound and obliged to decide the issue of validity of the reassessment proceedings initiated by the Assessing Officer which was challenged before him. If the assessee succeeds on this legal ground before the ld. CIT(A) then the 263 order passed by the ld. CIT would fail. The arguments by ld. DR, in our opinion, are without any merit and has to be rejected. Since the CIT(A) in the instant case has not decided the validity of the reassessment proceedings challenged before him and had dismissed the appeal as infructuous because of the revisionary powers exercised by the ld. CIT u/s 263, therefore, we deem it proper to restore the issue to the file of the ld. CIT(A) with a direction to decide the legal ground raised before him challenging the validity of the reassessment proceedings. Matter is restored to the file of the ld. CIT(A) with a direction to adjudicate the validity of reassessment proceedings. - Decided in favour of assessee for statistical purposes.

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• 2018 (6) TMI 502
  Rejection of books of account u/s 145 - estimation of net profit @ 3% - Held that:- AO has not given any reasons for rejection of books of account - thus we direct the AO to adopt net profit rate at 1.75 % in place of 3 % and recomputed the addition after applying this rate - hence appeal filed by the assessee is partly allowed. Initiation of penalty u/s u/s 271(1)(c) - Held that:- Penalty needs to be cancelled on the ground that the AO did not specify the charge also the addition has been made on the basis of estimation - thus penalty u/s u/s 271(1)(c) is cancelled - Decided in favor of assessee.

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• 2018 (6) TMI 501
  Disallowance u/s 14A - Held that:- There is no dispute with regard to the proposition that if assessee demonstrated that it has more interest free funds than the investment then interest expenditure not to be considered for disallowance. There was incremental decline in the borrowed funds right from 31st March, 2005 up to 31st March, 2011. Thus, figures indicate that the assessee has not used interest bearing funds. Inclusion of disallowance u/s.14A while computing book profit - MAT computation - Held that:- Respectfully following the order of the Tribunal in assessment year 2008-09, we allow this ground of appeal and direct the Assessing Officer not to make any disallowance u/s.14A while computing book profit u/s.115JB. Disallowance of foreign travel expenditure to the extent of 75% - Held that:- There is no material whatsoever to come to the conclusion that 75% time on this trip was used for personal purposes of the director. . Once the CIT(A) came to the conclusion that the trip was for some business purposes, it was not open to him to deny any part of deduction for these expenses- particularly when there is no material to hold that the visit was for personal purposes. - Assessee appeals allowed.

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• 2018 (6) TMI 500
  Rectification of mistake u/s 154 - Disallowance of LTA - change in method of accounting - Held that:- LTA is well supported by logical and scientific methodology - assessee has also given sound reasons for change in the method of accounting and providing LTA on actuarial basis which is based on the valuation of perquisites offered to the employees as part of overall packaging and accounted for as a short term provision since LTA has to be availed by the employee in every block of two years and has to be disbursed by the employer as taxable perquisites - thus there is a mistake which is apparent from record in the findings of the first appellate authority - hence AO is allowed to delete the addition. - Decided in favour of assessee.

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• 2018 (6) TMI 499
  Initiation of penalty u/s 272A(2)(k) - delay in e-filing of TDS returns - Held that:- following the judgement in case of Nav Maharashtra Vidyalaya Vs. Addl. CIT [2017 (1) TMI 722 - ITAT PUNE] and also because of the requirement of e-TDS furnishing of TDS statement arising for the first time in AY 2011-12, there were problems faced by the assessee and hence, the delay in filing quarterly TDS return late - though the assessee had deposited tax at source in time, we hold that the assessee had reasonable cause in not furnishing the same in time and in view of the provisions of section 273B, we hold that the assessee is not liable to levy of penalty under section 272A(2)(k) - Decided in favor of assessee.

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• 2018 (6) TMI 498
  Disallowance u/s 14A - Held that:- Admittedly, the assessee has not earned any exempted income. Therefore, the CIT(Appeals) by placing reliance on the judgment of Madras High Court in Redington (India) Ltd. v. Addl. CIT ( 2017 (1) TMI 318 - MADRAS HIGH COURT) deleted the disallowance made by the Assessing Officer. Since the CIT(Appeals) has followed the judgment of jurisdictional High Court, which is binding on all the authorities, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Addition under Section 43B - Delay in making employees contribution - Held that:- CIT(Appeals) by placing reliance on the judgment of Madras High Court in CIT v. Industrial Security and Intelligence India (P.) Ltd.[2015 (7) TMI 1063 - MADRAS HIGH COURT], allowed the claim of the assessee. It is not in dispute that the employees contribution was deposited before the due date for filing the return of income. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

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• 2018 (6) TMI 497
  PE In India - ‘Fixed place of PE’ OR 'service PE' - subsidiary of the Appellant - Liaison Office - business connection in India - Whether on a true and correct interpretation of section 9(1 )(i) the Respondent can be said to have a ‘business connection’ in India in the form of a Liaison Office? - India- Finland DTAA - Held that:- There is absolutely no concept of ‘Service PE’ in the then existing provision of Article 5; and secondly, other than off-shore supply of equipment, no other activities has been carried out by the assessee after the incorporation of the Indian subsidiary NIPL and this fact has been accepted by the Hon’ble High Court also. Any activities relating to NIPL under the independent contract cannot be reckoned to constitute a PE in the context of Article 5(1); and even if for argument sake it is accepted that the activities of NIPL were managed by assessee, then also, it does not constitute PE qua activities of supply contract or any activity from where it can be held that any income has been received or accrued to the assessee in India or through or from any asset in India. NIPL is an independent entity and all its income from India operation is liable for tax in India. So far as the issue of fixed place PE is concerned the same does not get established at all by making to reference of providing of telephone, fax and car facility to the employees of assessee visiting India. As regards allegation that expatriates employees of assessee in India were assisting the NIPL and hence used the office of NIPL, is of no relevance qua assessee’s business, because, the technical expatriates were in India to assist/help NIPL with performance of installation activities of NIPL and not to carry out the business of the assessee which was manufacturing and sale of network equipments. This activity per se cannot be reckoned that the Indian office was being used for the purpose of assessee’s business or assessee was undertaking business in India through fixed place of business -nothing has been brought on record by the AO or ld. CIT-DR that any physical space was made available which can be said to be at the disposal of assessee for assessee’s own business of supply and sale of equipments. In terms of Article 5(4), there could not be any fixed place PE under Article 5(1) because the activities of the assessee in India were purely pertaining to network planning, negotiation and signing of contracts before off-shore supply of (GSM) equipments and sale of goods have been made off-shore outside India. Here the crucial test is that activities of the assessee must be carried out through the agent wholly and almost wholly for the assessee. When installation activity is not carried out by the assessee in India and is done by NIPL on principal to principal basis with the customers then there is no question of examining the installation activity for purpose of PE. The activity carried out by the assessee through an agent in India would be key factor for examining PE. Thus, provision of paragraph 7 of Article 5 will also not apply. The exception given in Article 5(8) to a company controlled by a foreign enterprise or its subsidiary answers most of the allegation made by the Department that NIPL being a subsidiary of the assessee itself will provide status of a PE. Concept of virtual projection brought in by the AO will not lead to any kind of establishment of PE. In so far as allegation of the department that employees of assessee were responsible for all the activities, it has been already dealt by us that if at all it may have some bearing or relevance when examining Service PE, which was absent in the then prevalent DTAA. Thus, we hold that there is no PE within the terms of Article 5 of India Finland DTAA. Where any income accrues or arises to a non-resident through or from any “business connection” in India where all the operations are not carried out in India only such income will be chargeable to tax in India as can be attributed to the operations carried out in India. In light of these provisions and facts of the case, we will analyse the rival contentions of the parties and the judicial proposition highlighted before us in this regard. In the present case, the goods were manufactured outside India and even the sale has taken place outside India and once this fact is established even in those cases where there is a one composite contract supply has to be segregated from installation and only then would question of apportionment arise having regard to expressed language of Section 9(1)(i) of the Act, which makes the income taxable in India to the extent it arises in India. The marketing activities and installation contract undertaken by NIPL has been on principal to principal basis; and in the case of former agreement between assessee and NIPL, the payment has been made to NIPL on cost plus markup basis which has not been disturbed; and in the later agreement there is an independent contracts by NIPL with Indian customers which has nothing to do with the assessee. The income arising from both the contracts are taxable in the hands of the NIPL in India Since we have already held that nothing is taxable on account of signing, network planning and negotiation of offshore supply contracts, therefore, there is no question of any attribution of income on account of these activities which are purely related to supply contracts Taxability of interest from Vendor Financing, assessee has not debited the account of any customer with interest which can be treated as income of the assessee. Nowhere has it been held by the Assessing Officer/CIT (A) that such an interest is legally claimable right against the Indian customers in respect of interest on delayed credit period on Vendor Financing. Thus, we hold that when assessee has neither treated the amount to be legally claimed nor has acknowledged any debt due too on its customer as delayed payment then it cannot be held that any interest accrued to the assessee, and therefore, such a notional charging of interest for each day elapsed from the due date to the actual payment cannot be held to be taxable to the assessee. - Decided in favour of the assessee.

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• 2018 (6) TMI 495
  TPA - comparable selection - Whether turnover filter is to be applied or not - Held that:- turnover filter is one of the essential filter in order to select comparables when acted in same atmosphere - thus we do not find any error in the order of the ld.CIT(A) on adoption of turnover filter - hence grounds of appeal raised by the Revenue is rejected. Assessee is engaged in the business of manufacture of bulk drugs - Sales of Welcure Drug & Pharmaceuticals Ltd. are less than the turnover filter of ₹ 23 crores. Thus, it falls in the criteria of consideration and ought to be included in the list of comparable. Once it is included in the list of comparable, then the profit level indicator would be (-) 3.69% and no adjustment would be required in the value of international transaction as per section 92(3) of the Act, because it will go to reduce the value of the international transaction as declared by the assessee. Considering this aspect, we allow appeal of the assessee and delete adjustment made in the value of international transactions. Addition on account of inflation of purchase of raw-material- Held that:- To the show cause, assessee explained reasons for the variations in the consumption of the raw material as also extent of and how the variations arisen. As decided in assessee's own case [2015 (9) TMI 325 - ITAT AHMEDABAD] such addition to be deleted.

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• 2018 (6) TMI 496
  Reopening of assessment - assessee’s objections to the reopening of assessment - Held that:- Consideration of the assessee’s objections to the reopening of assessment is not a mechanical ritual, but it is a quasi judicial function. It has been mandated that the order disposing of the objections should deal with each objection, giving proper reasons for the conclusion and no attempt should be made to improve or add to the reasons, as recorded and disclosed. Though the reasons recorded by the AO for belief of escapement of income contain reference to material forming the basis thereof, such material, despite written request by the assessee to the AO in this regard, was never supplied by the AO to the assessee. This is in direct contravention of the principle of natural justice, as reiterated in “Sabh Infrastructure Limited” (2017 (9) TMI 1589 - DELHI HIGH COURT). In the present case, the alleged material was only supplied to the assessee in the remand proceedings, where too, the objections of the assessee were not met. CIT(A) also did not deal with these objections of the AO. The reasons recorded by the AO are found to be not in accordance with law. Accordingly, they are cancelled. Too, in view of “Sabh Infrastructure Limited” (supra), none of the other decisions cited by the Department are of any aid to it. Consequently, the reassessment proceedings, culminating in the order under appeal, are also not sustainable in the eye of law and they too are cancelled. Nothing further survives for adjudication. Appeal is allowed.

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• 2018 (6) TMI 494
  Unaccounted/ undisclosed income in respect rent received in cash - Held that:- As decided in assessee's own case for assessment year 2010-2011 Assessing Officer has clearly given a finding that the income against which the assessee wants them to be telescoped related to separate piece of loose papers and they have nothing to do with the seized paper with reference to which this addition has been made. Now the assessee is submitting that there has been no such rent receipt in cash. Merely making such a statement will not support the case of the assessee when incriminating material has been found. Furthermore, the assessee pleas that the assessee follows cash system of accounting. This also does not helps the case of the assessee. The assessment being based upon specifically identified loose paper which the assessee has duly agreed during the course of assessment cannot be said to be arbitrary. - Decided against assessee Addition being notional rent for Penthouse - Held that:- Assessee’s submission are that assessee was not having any other premises for office and this was only premises for use of office, has not been addressed by the authorities below. In our considered opinion, the assessee being a professional artist is entitled to have a proper office and storage space. Hence, in our considered opinion, this issue needs to be remitted to the file of the assessing officer. The assessing officer is directed to consider the issue afresh Addition on the basis of loose papers - unexplained cash payments - Held that:- As it is seen that the same is a scribbling for a real estate property of 5100 ft. total price this has been mentioned as ₹ 7 cr 65. There is also mention of cash ₹ 3.35 and cheque of ₹ 2.15. In this regard, the assessee’s case is that the said paper was only a proposal and was later on cancelled with the same party. The assessee entered into a new agreement for 2995.70 ft. for ₹ 4.65 crore. Assessee has duly submitted confirmation of payment and agreement for the new project. The cancellation of the cheques given for the earlier project have also been shown and conformed - The above said document cannot be said to be a conclusive proof of cash payment of ₹ 3.5 crores. The assessee's plea that the same is a proposal which was not carried through cannot be brushed aside in light of the confirmation from the parties involved. It is also on record that the assessee never purchased estate property of 5100 sq. ft. from the said builder. Hence, the claim that it was a proposal later on not carried through and cancelled is having sufficient cogency. No addition to be confirmed Telescoping of the income with the declaration of undisclosed income by assessee's mother - Held that:- Revenue's plea is not sustainable. Throughout the search assessment it has been noted that assessee's mother has been handling all the affairs of the assessee. When the Revenue can make additions in the hands of the assessee, on the basis of that it was so stated and accepted by the assessee's mother, there is no reason why such telescoping cannot be granted. Accordingly, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals) as allowed telescoping of the income with the declaration of undisclosed income by her mother Undisclosed income - arranging of wedding functions - Held that:- Addition has solely been made on the basis of a statement obtained from the secretary of the assessee. There is no corroborative material whatsoever. A mere statement by the secretary cannot be said to be a conclusive proof of undisclosed income earned. Hence, we are of the considered opinion that the ld. Commissioner of Income Tax (Appeals) has correctly accepted the assessee’s submission in this regard and deleted the addition

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• 2018 (6) TMI 514
  Liability to pay the liquidated damages - accrual of liability - payment as per terms of the agreement accrued when the delivery was made within the previous year ended 30.06.1983 - Held that:- As decided in assessee's own case the right to receive the extra price arose when the delivery was made, and the assessee had actually accounted for the extra price when the goods were actually delivered. - Decided in favour of the assessee Provision made for increase in wages on the basis of the Wage Board Award - assessee agreed before the Arbitrators that the award shall come into operation from an earlier date? - Held that:- Section 145 was substituted in the Income-tax Act with effect from 01.04.1997, and sub-section (3C) was inserted into Section 211 of the Companies Act with effect from 31.10.1998, more than 12 years after the assessment year 1984-85 which is the relevant period with which we are concerned in the present case. As neither of these provisions were in the statute book during the relevant previous year 01.07.1982 to 30.06.1983, reliance placed on behalf of the assessee, on the judgment in Pact Securities and Financial Services Ltd.10 which had placed heavy reliance on the aforesaid two provisions to hold that Accounting Standards should be followed, is misplaced. Liability to pay tax cannot be determined relying on its possible consequences of whether or not it would make any difference if the deduction is claimed in one year or the other. The consequences of the liability being held to arise in a previous year, different from the previous year in which the liability actually arose, are many. It is wholly unnecessary for us to make a detailed analysis of such consequences as the Income-tax Act makes an assessee liable to tax on the income which accrued in his favour in the previous year; and, in determining such income, the liability/expenditure incurred in such a previous year alone should be take into consideration. - Decided against assessee Deduction towards commission payable to two agents in Sri Lanka - accrual of liability - Held that:- As the assessee maintained its books of accounts, under the mercantile system of accounting, their liability to pay commission to the agents arose in the relevant previous year in which the agent secured the order; and as, in the present case, both the agents had secured orders from the clients in Sri Lanka, during the previous year relevant to the assessment year 1984-85, the Tribunal has, in our view rightly, held that the liability to pay commission accrued when the orders were secured by the agents, and not when supplies were effected by the assessee. This question is answered in the affirmative, in favour of the assessee Weighted deduction u/s 35-B with respect to payment of commission - Held that:- Neither does the agreement, between the assessee and its Sri Lankan Agent, disclose fulfillment of the ingredients of Section 35-B(1)(b)(iv), nor was the payment of 500,00 U.S dollars, by the assessee to its agent, made for any expenditure incurred in the promotion of the sale outside India of the assessee's goods. In the present case, the assessee has not discharged the onus of establishing that the expenditure was wholly or exclusively incurred for the purposes mentioned in Section 35-B(1)(b)(iv) of the Act. The Tribunal fell in error in holding otherwise. This question is answered in the negative, in favour of the Revenue Deduction of insurance premium payable for a policy to cover all risks in erection of the project in Sri Lanka - Held that:- It is only on the date on which the insurance premium is paid or, in terms of the facility extended by the Insurance Corporation of Sri Lanka, the first installment, of the insurance premium payable in four installments, is actually paid, can the assessee claim that the liability to pay the insurance premium had arisen. As, admittedly, no amount was paid towards insurance premium, in the previous year 01.07.1982 to 30.06.1983 (as is evident from the letter of the Insurance Corporation of Sri Lanka dated 30.06.1983), the liability towards the insurance policy did not arise in the previous year 01.07.1982 to 30.06.1983, since the basic condition, relating to actual payment of insurance premium, had not been fulfilled by the assessee by then - Decided in favour of the Revenue Liability to pay commission under the agreement - accrual of liability - Held that:- The obligation to pay commission, in terms of Clause (1) of the agreement, is on the procurement of an order by the agent, and the agent had procured the order during the previous year 01.07.1982 to 30.06.1983. Notwithstanding the fact that the obligation to make payment of commission was dependent on receipt of payment from the client, the liability to pay commission arose on the date on which the order was procured by the agent. The view taken by the Tribunal, that the liability arose, on the date on which the order was procured by M/s. Annapurna Agencies, is a possible view. Even if the view taken by the revenue is presumed also to be a possible view, it cannot be overlooked that, even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute - Decided in favour of assessee.

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• Customs

• 2018 (6) TMI 489
  Principles of natural justice denied - non-speaking order - Mis-declaration of export goods - Advance License Scheme - it was alleged that Advance licences were obtained by mis-declaring the goods exported as 100% Polyester Filament yarn whereas these were actually manmade fibre made from 100% polyester staple fibre - penalty. Held that:- It is seen that both the sides have cited plethora of case laws which are relevant to the facts of the case. The impugned order does not examine any of arguments or the case law. It grants relief by just stating that there is no need to discuss the case law. To that extent the impugned order is not a speaking order. The grounds of review are very limited on this issue. There is merit in the grounds of appeal as the impugned order does not deal with the case laws on the issue but relies on the same. It is not clear as to which case laws he has relied upon and for what reasons. As can be seen from arguments of both sides there are plethora of case law on the issue and Commissioner was required to examine the same and state specifically why he agrees or disagrees with them. The impugned order in so far as it relates to the appeal filed by revenue against the transferee importers is concerned is not a speaking order and is therefore set aside and the matter remanded to the original adjudicating authority to determine the issue afresh with cogent reasons and speaking order - matter on remand. Penalty u/s 112(a) and 114(i) of the CA 1962 - Held that:- The persons whose signatures were forged were stated to be scientists and in-charge of SASMIRA, authorized signatory of steamer agents, appraisers, IAO, Clerks, Assistant Collectors Preventive Officers etc. in his statement he also stated that besides forging the signatures on bills of lading and SASMIRA test report, he had also forged the signatures of the Appraising Officers in the Part–F of the DEEC book for the purpose of auditing. Shri Ashok Pokharkar had also admitted in his statement that Shri Balchander V. Jhadav had forged the documents - the penalty on Sh Jhadav is fully justified. Part matter on remand - partly in favor of Revenue.

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• 2018 (6) TMI 488
  Valuation of imported goods - zinc ash - rejection of the declared assessable value - demand based on the confessional statement of the Director - Confiscation - redemption fine - Held that:- The Director of the appellant firm had in his statement agreed that the invoices received by DRI along with its information showed real price of the goods. He also agreed that the amount of differential value was given in cash to the Indian representative of the foreign supplier in cash. The statement has not been retracted at any time. The claim of appellant that the said statement was obtained due to coercion was unsubstantiated and cannot be accepted. The case of Revenue is not merely based on rejection of transaction value in terms of Rule 10A of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - It is not that the Customs has the evidence of real transaction value and thus there is no need to go to the rules. Since real transaction value i.e. the amount transferred through legal channels and amount paid to the local representative of the foreign supplier is available the same becomes transaction value and the duty can be demanded taking the same as assessable value. Confiscation - redemption fine - Held that:- The goods are not available for confiscation no confiscation can be ordered and no redemption fine can be imposed - confiscation and redemption fine set aside. Appeal allowed in part.

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• 2018 (6) TMI 487
  Rectification of Mistake - erroneous recording of submissions made during the hearing - Held that:- It is seen that the order had been dictated and pronounced in open court in the presence of the representative authorised to appear on behalf of the appellant. It is, therefore, not open to the Learned Counsel to argue now that the Tribunal had wrongly recorded submissions that he is not privy to - there is no justification to allow this ROM application - ROM Application dismissed.

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• 2018 (6) TMI 486
  SAD Refund - N/N. 102/2007 dated 14.9.2007 as amended - unjust enrichment - case of Revenue is that the amount was not shown as receivables in the balance sheet for the financial year 2007–2008 when the goods were imported - Held that:- The refund claim is filed under N/N. 102/2007 which allows the importer to file refund claim of SAD on producing evidence that VAT has been discharged on sale of the imported goods. This being so, it cannot be insisted that the respondents have to show the CVD as receivables immediately after the import of the goods - refund rightly allowed - appeal dismissed - decided against Revenue.

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• 2018 (6) TMI 485
  Classification of imported goods - Cogent Lifescan for Finger Print Scanner - whether classifiable under CTH 84716050 eligible for ‘Nil’ Basic Customs Duty or under CTH 85437099 under residual heading of ‘Electrical Machines and Apparatus having individual functions not specified or included elsewhere in Chapter 84 & 85? Held that:- The lower appellate authority has searched the internet merely for ‚Life Scan Finger Print Devices‛ and not the ‘Cogent Lifescan Finger print Scanner’ and based on the information that popped up, has arrived at a facile conclusion that the finger print scanners are having independent memory and are capable of having functioning of their own. The Tribunal decision in the case of STJ Electronics Pvt. Ltd [2016 (2) TMI 141 - CESTAT NEW DELHI] is on all fours will squarely apply to these appeals also, where similar finger printer scanners were held to be classifiable only under CTH 8471. Appeal allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2018 (6) TMI 493
  Corporate insolvency procedure - liquidation proceedings - no person applied as a ‘Resolution Applicant’ nor filed any ‘Resolution Plan’- Held that:-‘Corporate Debtor’ had been incurring huge loss every year and the ‘Audited Balance Sheets’ of the ‘Corporate Debtor’ show that they had been incurring recurring losses every year and the losses have eroded its reserves and surplus Directors have committed various falsification of accounts irregularities and discrepancies in accounts have been made. Waiver of debts to the tune of ₹ 31.00 Crores, due to the ‘Corporate Debtor’ has been shown as bad debts. This apart funds were collected from third parties by the Director, which were not reflected in the books of accounts of the ‘Corporate Debtor’. From the record it is clear that the ‘Information Memorandum’ was prepared by the ‘Resolution Professional’ which was published but in the absence of any ‘Resolution Applicants’, there was no other option for the Adjudicating Authority, but to go for liquidation on completion of 270 days.

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• 2018 (6) TMI 492
  Initiation of ‘Corporate Insolvency Resolution Process’ - whether an application under Section 7 of the ‘I&B Code’ is maintainable when winding up proceeding against the ‘Corporate Debtor’ has already been initiated? - Held that:- In the present case, admittedly the High Court of Bombay has already been ordered for winding up respondent-‘Corporate Debtor’, which is the second stage of the proceeding. For the said reason, we hold that initiation of ‘Corporate Insolvency Resolution Process’ which is the first stage of resolution process against the same ‘Corporate Debtor’ does not arise. In view of the aforesaid finding, we are not inclined to interfere with the impugned order. In absence of any merit, the appeal is dismissed.

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• 2018 (6) TMI 491
  Corporate insolvency proceedings - infirmity in the scheme - Held that:- The Scheme was framed without notice to the appellant - unsecured creditor. The Scheme which is deemed to be a ‘Resolution Plan’ is in contravention of Section 30(2)(e) of the I&B Code i.e. not in accordance with the provisions of law time being in force.‘Committee of Creditors’ are supposed to approve the ‘Resolution Plan’ and the ‘Resolution Applicant’ is supposed to pay the dues but no such provision has been made in the scheme. The ‘Resolution Plan’ contravenes the provisions of the Income-tax Act, as alleged by the Principal Commissioner of Income-Tax-7. If the impugned Schemes are treated to be approved (Resolution Plan) under sub-section (1) of Section 31 of the ‘I & B Code’ they being against the provisions of the existing laws and being in violative of clause (e) of sub-section (2) of Section 30 of the I&B Code are illegal. Though, we find that the impugned Schemes dated 11th March, 2010 and 28th July, 2016 are illegal, however, in absence of our jurisdiction to exercise of powers under Section 61 of the ‘I&B Code’ and appeals being barred by limitation, we are not interfering with the illegal Schemes dated 11th March, 2010 and 28th July, 2016 though we hold them as illegal. In absence of any provision to get the Schemes in question executed through any court of Competent jurisdiction, the relevant provision(s) having been repealed, the appellant(s) may raise the question, if the respondent(s) move before any court of Law for implementation of the Schemes.

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• 2018 (6) TMI 490
  Corporate Insolvency Resolution Process - whether unilateral ‘transfer’ of liability does not constitute a ‘dispute’ within the meaning of Section 5(6) of the ‘I&B Code’? - Held that:- Insolvency application under Section 9 was filed on 20th February, 2017 and no reply was filed within the stipulated period of ten days. The notice of dispute under Section 8(2) was issued on 2nd March, 2017, which cannot be taken into consideration to hold that there was ‘existence of dispute’. The ‘Operational Creditors’ have brought to the notice of the Adjudicating Authority the copies of Commercial Tax (Sales Tax) monthly returns of the ‘Corporate Debtor’. The ‘Corporate Debtor’ has taken plea before the Commercial Tax Department, Kanpur that during the relevant period supplies were made by the ‘Operational Creditors’ and thereby acknowledged the purchase made in their monthly tax returns. On the basis of such, the ‘Corporate Debtor’ having already taken ‘input tax credit’ from the Tax Department, now cannot take plea that the ‘Corporate Debtor’ do not owe any debt to the ‘Operational Creditors’. No merit in these appeals.

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• PMLA

• 2018 (6) TMI 484
  Offence under PMLA - Provisional Attachment Order - Order of acquittal - Held that:- From the Impugned Order that the reply/documents/materials and evidence filed by the appellant have not been considered nor the statement made by Shri Shankar Kollur, Smt. Parvati Shankar Kollur, Shri AvinashKollur and Shri Rakesh Kollur which would show the salary income / rental income /agriculture income /tailoring income/ business income/hiring of vehicles /income from civil work/acquisition of movable and immovable property and details of sources for acquisition /loans from bank and others/ salary and retirement benefits of Smt. IravvaMareppa mother of Parvati Kollur. Provisional Attachment Order has not discussed the source of funds available with the accused. It was merely assumed that the accused/appellant had not any savings despite of submitting the material and documents and also from his spouse, son Rakesh and Avinash. Adjudicating Authority ought to have complied with all the principles of duly conducting a judicial proceeding where rights of the parties are to be based on the cogent findings based on the evidence led in the case, as every proceedings under the PMLA 2002 is a judicial proceeding within the meaning of section 50 of PMLA Act 2002. No appeal has been filed against the acquittal order and quashing of charge sheet ( as informed by the parties). The complaint was decided on merit. The respondent was aware about the said trial. No steps were taken to have the consolidated-trial under schedule offence and prosecution complaint. The prosecution has examined large number of witnesses and documents were marked. The statement of the accused u/s 313 of Cr.P.C. was also recorded. The case of the accused is of total denial. Once the acquittal order is passed against the appellant holding that he was not involved in the Prevention of Corruption Act and he has purchased/ acquired the properties in legal resources, the question of money laundering does not arise. Allegations are same and ECIR was registered on the basis of charge sheet. There were only two options left after acquittal, either to file the appeal against the judgement and the trial under PMLA ought to have been conducted along with the trial with the case registered under schedule offence. The respondent apparently did not make efforts in this regard. Thus, the present appeal is allowed

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• Service Tax

• 2018 (6) TMI 483
  Classification of services - Business of refining of crude and marketing of various petroleum products - whether taxable under the head 'Technical Inspection and Certification Service' or otherwise? - Held that:- The taxability will depend on the conditions that such services are provided by an agency; such agency should involve in inspection or examination and on completion of such inspection or examination; a certificate is issued stating to meet any of the criteria like quality, maintenance of standards, functionality or utility, safety or any other characteristics. The appellants though are performing certain activities in relation to the maintenance and safety of the tank trucks and are issuing a certificate to the effect that the tanks are purged/degased, the same cannot be considered to be a service within the scope of Technical Inspection and Certification Service - The appellants are not basically an agency involved with the testing and certification. In fact, it is abundantly clear that they are performing certain activities which make the truck tanks fit to be filled with LPG for further transportation. This is to be construed only as an activity related to the safety and maintenance of the tank truck. M/s. HPCL have not fulfilled the conditions so as to impart the activity of purging and degassing tank trucks as Technical Inspection and Certification Service - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 482
  Banking and Other Financial Services (BOFS) - an agreement with VISA for providing Member Support Services and connectivity services to the Member Banks and by virtue of this agreement, they are providing the support and connectivity to the banks - It appeared that VISA are not resident and have no office in India - invocation of provisions of Rule 2(1)(d)(iv) of STR 1994 - Held that:- Larger Bench decision in the case of Standard Chartered Bank & Ors. vs. CST [2015 (8) TMI 686 - CESTAT DELHI (LB)], held that credit card services were specifically included as a separate service in the Finance Act, 2006 and it is substantive legislative, which enacts levy on the several transactions enumerated in the subclauses (i) (ii)(vii) specified in the definition set out in Section 65(33a) - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 481
  Benefit of N/N. 45/2010- ST dated 20.7.2010 - scope of activity ‘in relation to’ transmission of electricity - Works contract with MESCOM for repair and reconditioning of faulty distribution transformers of different capacities - Held that:- The benefit of exemption of notification appears to be for all taxable services relating to transmission of electricity - there are plethora of judgments, wherein it has been held that erection commissioning and installation comes within the ambit of the expression ‘in relation to’. The activity undertaken by the appellants are to be held to fall in the ambit of ‘in relation to’ transmission of electricity in terms of N/N. 45/2010 dated 20.7.2010 as there is a clear nexus between the service rendered by the appellant and transmission and distribution of electricity - exemption allowed - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 480
  Demand of service tax - appellant is a non-profit institution and is registered as a charitable institution under Section 12A of the Income Tax Act, 1961 - Technical Inspection and Certification Services - Membership of Club & Association Services - Business Exhibition Service - Business Auxiliary Services. Club & Association Services - If the service provided by the Appellant to its members can be treated a 'Service' at all? - mutuality of interest - Held that:- The matter being subjudice before the Hon Apex Court in the case of State of West Bengal &Ors. Vs. Calcutta Club Ltd. [2016 (6) TMI 476 - SUPREME COURT], no final view can be taken at this stage on the issue regarding services provided by the appellant to its members. The next ground to challenge the demand under Membership of Club & Association Services is decision of Tribunal in the case of Federation of Indian Chambers of Commerce & Industries (FICCI) [2014 (5) TMI 183 - CESTAT NEW DELHI] - The Ld counsel for appellant has argued that in the case of FICCI, the Tribunal after examining the definition of Club and Association Service has held that Electronic and Computer Software Export Promotion Council would fall under the exclusionary clause (i) of Section 65(25a) of the Act. Section 65(25a) of the Act defines Club or Association - Held that:- The ratio of this decision squarely applies to the instant case. The appellants are identically placed organization. The facts in the case of Federation of Indian Chambers of Commerce & Industries squarely apply to the instant case, Thus no demand can be made against the appellant under the head of "Club or Association" service - appeal allowed. Technical Inspection and Certification Services - services provided by the appellant in respect of issuing Kimberley Process Certificate - Held that:- It is seen that the duty of issuing the KP cerificates has been expressly and exclusively, by law given to the appellant. The appellants are a body created under the law. In these circumstances it cannot be denied that the issue of KP is a mandatory and statutory function and the benefit of the circular cannot be denied to the appellants - even if the service is held to be classifiable as Technical Inspection and Certification Services, still being 'statutory and mandatory' nature no tax can be demanded in terms of the circular dated 18.12.2006 - decided in favor of appellant. Business exhibition service - Business Auxiliary Service - case of Revenue is that the claim of reimbursement towards expenses like rent for premises, telephone charges, stationery charges, etc. cannot be permitted as reimbursable expenses - Held that:- There are no evidence in support of the reimbursable nature of these expenses has been brought and therefore the claim made by appellants cannot be accepted - appeal dismissed. Penalty 76 and 77 of FA - Held that:- The issue regarding the excludability of the specific costs from the assessable value is clear. There are very specific tests provided in law for that purpose. In the facts of the case there is no scope for doubt. In these circumstances the penalty u/s 76 in respect of the amount of demand confirmed - penalty u/s 77 also upheld. Appeal allowed in part.

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• 2018 (6) TMI 479
  Levy of tax on State Police - Security agency service - Section 65 (105) (ee) of the Finance Act, 1994 - Held that:- Deployment of Police personnel on payment basis, will also to be considered as part of statutory function of the State Government. Thus, the activity undertaken by the Police Department is not covered by the definition of security agency service - reliance placed in the case of THE DEPUTY COMMISSIONER OF POLICE JODHPUR, SUPERINTENDENT OF POLICE VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, JAIPUR [2016 (12) TMI 289 - CESTAT NEW DELHI], where Tribunal has held that Police Department, being an agency of the State Government, cannot be considered to be a ‘person’ engaged in the business of running security services - demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 478
  Invocation of Extended period of limitation - proviso to Section 73 (1) and Section 75 of the Finance Act, 1994 - Air Travel Agent’ services - suppression of facts or not? - Held that:- A mere non-disclosure of the fact cannot make a guilty mind of the assessees so as to justifiably invoking the longer period - Hon’ble SC in the case of Collector of Central Excise Vs. Chemphar Drugs & Liniments [1989 (2) TMI 116 - SUPREME COURT OF INDIA] has observed that a mere inaction or failure on the part a manufacturer is not sufficient to invoke the larger limitation of five years and the same would be applicable only when something positive indicating that the manufacturer had the reasonable belief that he has to give the particular information. In the present case, there is no evidence of any malafide on the part of the assesse. Also, the said issue was the subject matter of litigation with the Revenue pending at various levels and all the Air Travel Agents were fighting the case with the department on the taxability. As such, it cannot be held that the present appellant was guilty of any suppression or mis-statement etc., so as to invoke the larger period of limitation - the major part of the demand, being beyond the normal period of one year is barred by limitation. A part of the demand would fall within the limitation period for which the matter is remanded to the original adjudicating authority for re-quantification of the demand - appeal allowed by way of remand.

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• Central Excise

• 2018 (6) TMI 476
  Clandestine removal - demand worked out on the basis of electricity consumption - Held that:- This issue has been consistently held in various judgments of Hon'ble Supreme Court, Hon'ble High Court and this Tribunal that merely on electricity consumption, it cannot be held that the assessee has produced the extra production and cleared clandestinely in absence of any other corroborative evidence. In the present case also, except the electricity consumption that too only on the basis of Dr. Batra's report, there is no evidence of receipt of raw material, production, clandestine removal and consideration towards the sale of clandestine removal of goods, therefore, demand of duty only on basis of electricity consumption cannot be confirmed. Demand do not sustain - appeal dismissed - decided against Revenue.

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• 2018 (6) TMI 475
  Recovery u/s 11D of CEA - Concessional rate of duty - N/N. 1/93 dated 28.2.1993 and N/N. 16/97 dated 1.4.1997 - The case of the department is that during the course of exemption, the price charged to the customer is inclusive of excise duty, therefore, excise duty is recoverable u/s 11D of the CEA 1944 - Held that:- The facts is not in the dispute that during the exemption limit, the same price was charged towards the sale of the goods, but during the exemption limit, the appellant have not shown the excise duty either in the excise invoice or in the commercial invoice to show that the appellant have collected the amount in the name of excise duty during the exemption limit, whatsoever the price was charged, therefore, the price for sale of the goods and no element of excise duty was involved. From the plain reading of Section 11D, it can be seen that when any person who has collected any amount from the buyer of any goods in any manner is representing duty of excise, shall forthwith would pay amount so collected to the credit of the Central Government - in the present case, no amount was collected representing duty of excise during the exemption limit - the demand was raised without any basis u/s 11D, hence is not sustainable. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 474
  Valuation - toothpaste - MRP based valuation - tooth paste was cleared under Bond under Rule 19 of Central Excise, 2002, who in turn was exported the same - Demand was raised adopting the MRP declared for the purpose of export as MRP for domestic clearance - whether the demand raised is justified? - Held that:- The SCN proposed assessment on the basis of MRP ascertained on the strength of the statement of the Director of the company. The said method was not found proper by original adjudicating authority, who devised his own method of ascertaining MRP - on perusal of the arguments given in the Order-in-Original for revising the MRP, it shows that there are lot of assumption and presumption involved and it is highly arbitrary - impugned order cannot be upheld - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 473
  CENVAT credit - input services - Outdoor Catering Services which were used for providing canteen facility within the factory premises for the employees - period involved is prior to 1.4.2011 - Held that:- The period involved is prior to 1.4.2011 when the definition of ‘input services’ had wide ambit as it included various services involving various activities related to business - relying in the decision in the case of CCE Chennai Vs Bharat Heavy Electricals Ltd. [2016 (3) TMI 441 - MADRAS HIGH COURT], where the credit was allowed in similar situation. However, it is noted that the appellants have received part of the contribution from the employees for providing outdoor catering services. Service tax credit to that portion which has been received from the employees is not eligible and therefore it requires to be quantified as to the quantum of credit appellant is eligible. Matter remanded for the limited purpose of re-quantification of eligible credit - appeal allowed by way of remand.

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• 2018 (6) TMI 472
  Remission of duty - destruction of goods in flood - Rule 21 of the CER - rejection on the ground that such remission can be allowed in terms of Rule 21 of the Central Excise Rules, only if the goods have been destroyed "at the time before removal" - rejection also on the ground that the application for remission in respect of goods cleared prior to 25/26.7.2005, when flood took place, was filed on 21.4.2008 and as such there was delay in filing the application. Whether remission can be granted when goods are cleared for export from the factory and the same are destroyed before export? - Held that:- The decision of Larger Bench of the tribunal in the case of Honest Vio-Bet Pvt. Ltd. [2014 (11) TMI 579 - CESTAT AHMEDABAD] is relevant, where it was held that the claim of remission cannot be rejected on the ground that the goods were destroyed after clearance from the factory in the circumstances when the goods were cleared for the purpose of export. Delay in giving intimation to department - Held that:- The impugned order does not identify in what manner the procedure prescribed in the Central Excise Manual has not been followed. To that extent, the said order is not speaking order. The impugned order is therefore set aside and matter is remanded to the original adjudicating authority for fresh decision - Appeal allowed by way of remand.

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• 2018 (6) TMI 477
  Condonation of delay of 104 days in filing appeal - Section 35 of the CEA 1944 - the decision in the case of M/s. NATURAL SUGAR AND ALLIED INDUSTRIES LTD. Versus THE COMMISSIONER (APPEALS) CENTRAL EXCISE AND CUSTOMS, AURANGABAD AND ANOTHER [2017 (4) TMI 1354 - BOMBAY HIGH COURT], contested - Held that:- None appears for the respondent, though the service is complete - Permission to file SLP without certified copy/plain copy of the impugned order is granted. There shall be stay of the operation of the impugned Demand Notice dated 11.05.2017 issued by the Office of the Superintendent of Customs, Central Excise and Service Tax, Osmanabad Range.

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