TMI Tax Updates - e-Newsletter
June 15, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Clarification regarding definition of "Fund Manager" under Section 9A(4)(b) of the Income-tax Act, 1961
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Income Tax:
Benefit of set off of brought forward business loss - application u/s. 154 in subsequent year - where as a consequence to the order of Appellate Authority, the assessee has received relief which has the cascading effect on subsequent assessment years, the AO is duty bound to give effect to the said order in later affected assessment - set off is duly allowable and not time bared u/s 153
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Income Tax:
Disallowance of Sales Promotion, Advertisement and Publicity Expenses - when assessee is able to provide the business nexus of incurrence of expenditure with supporting documents, it cannot be simply denied/rejected merely on the ground of propriety, which action would lead to, travelling beyond the brief and stepping into the shoes of the assessee by the revenue - no disallowance
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Income Tax:
Penalty u/s 271D - violation of section 269SS - assessee had taken the cash loans from the close relatives i.e. sons-in-law whose spouses are partners and amounts taken as capital contribution but due to inadvertent mistake of the accountant the same was recorded as loans - all of them are assessed to income tax and submitted the confirmations - these aspect neither examined by the JCIT nor by CIT(A) by making cross verification - No penalty
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Income Tax:
Addition of cash credits u/s 68 - Once the PAN and confirmation letters are placed before the AO, it is for the AO to establish that the creditor has no capacity to make the advance and the loan is ingenuine - it is also incorrect to hold that every assessee should run behind the creditors and parade them before the AO after furnishing the confirmation letters - assessee has discharged the burden u/s 68
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Income Tax:
Reopening of assessment u/s. 147 - revenue could not prove that there was proper issue and service of notice u/s. 148 on the assessee within the time prescribed under the Act - reopening u/s. 147 is bad in law and assessment framed u/s. 143(3) r.w.s 147 is liable to be quashed.
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Income Tax:
Validity of retraction of the statement made in survey proceedings u/s 133A - It is always open for the revenue authorities to examine the correction of the retraction statement and should point out the errors in such retraction statement - outrightly rejecting the assessee’s retraction statement without pointing out any mistake in such retraction statement is devoid of merit and is uncalled for
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Income Tax:
Short Term Capital Gain - assessee was just a name lender of a company and not have to receive any consideration on the transfer of lands because he has not incurred any cost on the purchase of the land, registration, conversion and the development, the purchase consideration at the actual cost incurred by its group company - not the real income of assessee - no STCG
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Income Tax:
Failure to pass Draft Assessment order u/s 144C(1) - assessment order issued along with notice of demand u/s. 156 and notice of penalty u/s. 271(1)(c) is passed in violation of mandatory provisions of section 144C is not sustainable
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Income Tax:
Penalty u/s 271(1)(c) - the fact that the assessee and his son have declared the undisclosed income in their individual return of income and have paid taxes but capital expenditure and payment towards purchase of land cannot be held as undisclosed income in the hands of the assessee - no penalty under explanation 5A to section 271(1)(c) unless assessee is owner of the undisclosed income
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Customs:
Demand of Customs Duty - illicit removal - shortage of stock - The notification does not place a premium on the efficient utilisation of imported inputs of operation and it would not be proper for the customs authorities to read such as an object of the notification.
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Customs:
Levy of Additional Duty of Customs - exemption from duty subject to manufacturing without the aid of power - a simple declaration evidencing that the product was manufactured without the aid of power would suffice for the purpose of grants exemption from payment of customs duty.
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Customs:
Duty Drawback - higher All Industry Rate (AIR rate) denied - In the absence of any proof of such non availment of Cenvat credit by the manufacturer, obviously the appellant/merchant exporter was therefore entitled only to get the reduced duty draw back after deducting the amount of Cenvat Credit availed by the manufacturer.
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Customs:
Jurisdiction/power of Tribunal to hear the appeal - Section 129 of Customs Act - Gold bars imported as Baggage - Baggage Rules, 2016 are applicable - Order of Commissioner (Appeals) which relates to the goods imported as baggage is not maintainable before this Tribunal
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DGFT:
Waiving off the requirement of destruction certificate from excise/custom authorities for the unutilised duty free imported material in case of imports from unregistered sources with pre-import conditions
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Corporate Law:
Oppression and mismanagement - appellant has no inherent right to continue as Managing Director/Director in the 1st respondent unless he is able to carry the majority shareholders with him - further non providing the copy of the Power Purchase Agreement relates to operation of the company and does not come under oppression and mismanagement
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IBC:
Initiation of CIRP - It is true that the ‘Corporate Debtor’ had taken guarantee but the said guarantee was not invoked in favour of the Appellant - Appellant make exercise its right since the ‘Moratorium’ period having come to an end - The ‘Resolution Professional’ has rightly not accepted the claim of the Appellant
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PMLA:
Offence under PMLA - Provisional Attachment Order - due process has not been followed which is mandated in law. If alternative oblique system will continue, the confusion is to continue.
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SEBI:
Guidelines for Enhanced Disclosures by Credit Rating Agencies (CRAs)
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SEBI:
Proof of transfer of shares - the signatures of the appellant on the share transfer form was duly verified from the specimen signatures kept with the Company - The contention that the signatures on the share transfer forms were forged was rightly disbelieved.
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Service Tax:
Refund claim of service tax paid - the appellant is assisting or facilitating their principal to purchase goods from India and no third party is involved which is in nature of Business Support Service and Business Auxiliary Service and specifically excluded from the intermediary service - refund claim cannot be denied by holding that the appellant is providing intermediary service
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Service Tax:
Classification of services - exclusive right to develop the said property and to sell individual developed plots - period 2005-2006 to 2009-2010 - the extensive construction and development had to be carried out by the Appellant with arrangement of finance and, thereafter, land/ plots were to be sold - neither Real Estate Agent service nor site formation service - no service tax
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Service Tax:
Refund of service tax paid - Manpower Supply Services - unjust enrichment - CA Certificate and Balance Sheet of company produced during hearing and not objected by the Respondent can be taken as additional evidence as per rule 23 of CESTATE Rules - on reading of the above documentary evidence reveal that incidence of tax has not been passed on by the Appellant to any other person - refund is allowable
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Central Excise:
Invocation of extended period of Limitation - inclusion of Product Development Charges (PDC) received in the value of the goods sold - Such PDC receipts have been properly accounted for and duly disclosed since 2007-2008 and audited by the earlier audit team and no such objection was taken at that time - thus SCN pursuant to the subsequent audit, is only by way of change of opinion - SCN not maintainable
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Central Excise:
Maintainability of appeal u/s 35G - the issue arising in these Appeals relates to appropriate valuation of goods sold by the Respondent on the application of C.E. Valuation Rules, 2000. Thus, appeal to this Court would not be maintainable in view of Section 35G as it specifically excludes the jurisdiction of this Court to entertain Appeals, inter alia, on question having relates to valuation of goods
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Central Excise:
Imposition of penalty - service tax with interest paid before issuance of SCN - the bonafide belief that one is not liable to pay the tax has to be based on some facts on record which led to the belief - appellant belief was neither supported by any reasonable explanation nor on a ruling of the some authority that it not liable to pay service tax on outward transportation - no benefit of section 80
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Central Excise:
Principles of natural justice - It must be borne in mind that the principles of natural justice, is not a one way street. It does not require the authority to keep adjourning the hearing till such time as the party condescends to attend the hearing and make submission - witnesses whose cross examination were sought were not the witnesses in support of the show cause notices - no perversity
Articles
Notifications
Circulars / Instructions / Orders
News
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FM holds Pre-Budget Consultation with Economists
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FM holds Pre-Budget Consultation with representatives of Social Sector
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FM holds Pre-Budget Consultation with representatives of Infrastructure Sector and experts on Climate Change
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Guidelines for Compounding of Offences under Direct Tax Laws, 2019
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Kimberley Process Intersessional Meeting 2019 in Mumbai
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Repayment of 6.90% Government Stock 2019
Case Laws:
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GST
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2019 (6) TMI 674
Constitutional validity of Section 174 of the Kerala State Goods and Services Tax Act - Time limitation - HELD THAT:- A remittance of the writ petition for consideration of the questions other than the validity of Section 174 of the KGST Act, is warranted and will serve the ends of justice. Hence we are inclined to remit the writ petition for a fresh consideration and disposal. The writ petition is restored on to the files of this court for fresh consideration and disposal on the issue.
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Income Tax
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2019 (6) TMI 673
Maintainability of writ petition against assessment order - Alternative remedy of appeal - approaching the wrong forum under bona fide mistake - HELD THAT:- SLP dismissed. No coercive steps will be taken for a period of four weeks from today in order that the petitioner avail of the alternative remedy provided.
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2019 (6) TMI 672
Attachment orders - Transfer/refund/repatriate the entire amount from the account of the Respondent to the respective accounts of the Petitioners - encasement of FDs of the Petitioners and transferred to the PD Account of the Respondent which does not carry any interest - delaying the proceedings u/s 153-A - HELD THAT:- The principles laid down by the Hon'ble Supreme Court in the case of KCC Software [ 2008 (1) TMI 12 - SUPREME COURT] apply to the facts of this case. We are respectfully bound by the said judgment. In our view, the judgment of the Patna High Court in the case of Smt. Bimla Singh [ 1997 (4) TMI 46 - PATNA HIGH COURT] also assists the case of the Petitioners. We accordingly direct the Respondents to invest the amount realised from those FDs and transferred to the PD Account of the Respondent No.2, in a fixed deposit of a Nationalized bank initially for a period of one year and for like period after obtaining further orders from this Court. The statement made by the learned counsel for the Petitioners that the Petitioners would invoke the provisions of Section 245-C after the proceedings are initiated u/s 153-A is accepted. It is made clear that if it is found that the amount encashed by the Respondents from the FDs are more than the tax liability of the Petitioners, the right of the Petitioners would be in accordance with the provisions of law including the provisions under the Income Tax Act, 1961. The amount shall be transferred to the fixed deposit within two weeks from the date of communication of this order. The amount which is directed to be invested by the Respondents in a fixed deposit, such fixed deposit shall be in the name of the concerned Respondent and shall not be encashed without leave of this Court.
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2019 (6) TMI 671
Review petition - from order of the Tribunal that addition as assailed as ground no.4 and dealt with by the Tribunal in deleting substantial part of the addition, made under section 68. Hence, when by order dated 8th May, 2014 it was said that Tribunal had not answered the question extracted therein, being ground no.2 raised before the Tribunal, this came to be an error apparent since the addition under section 68 had been dealt with by the Tribunal - HELD THAT:- Review is possible in exercise of jurisdiction under section 260A of the Income Tax Act, 1961. We are satisfied that the assessee has made out good ground for review.
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2019 (6) TMI 670
Penalty u/s 271(1)(c) - non specification of charge - HELD THAT:- AO did not specify for which act of charge or offence, the penalty was initiated, respectfully following the decision of SMT. BAISETTY REVATHI [ 2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] the notice issued u/s 271(1)(c) is to be held as invalid. Accordingly, we quash the notice issued u/s 271(1)(c) and cancel the orders of the lower authorities and allow the appeal of the assessee. Since we have quashed the notice and cancelled the consequent orders of lower authorities, we consider it is not necessary to adjudicate the other grounds raised by the assessee.
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2019 (6) TMI 669
Levy of penalty u/s 271D - violation of the provisions of section 269SS - acceptance of cash loans - non application of mind by JCIT - HELD THAT:- JCIT has not applied his mind while imposing the penalty and did not come to a conclusion whether the explanation offered by the assessee was acceptable or not. On such wrong impressions and surmises the penalty is not leviable. The ld.CIT(A) cannot improve the satisfaction reached by the JCIT for levying penalty applying his mind. In the instant case, JCIT has levied the penalty on incorrect assumption and without application of mind hence, the same is unsustainable. assessee had taken the cash loans for purchase of car from the close relatives i.e. sons-in-law of the Managing Partner through their spouses who are partners and all of them are assessed to income tax and submitted the confirmations. It was stated by the assessee that the amounts were received as capital contribution and due to inadvertent mistake of the accountant the same was recorded as loans. This aspect neither examined by the JCIT nor the Ld.CIT(A) by making cross verification. No penalty is leviable without application of mind by the levying authority. JCIT has not considered the explanation of the assessee before levy of penalty and levied the penalty under mistaken impression and presumptions. Therefore, we hold that the JCIT has not made out case for levy of penalty under section 271D - Decided in favour of assessee.
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2019 (6) TMI 668
Rectification u/s 254 - typographical errors - HELD THAT:- a) At page No.1 underneath to ITA No., assessment year has wrongly been mentioned as A.Y. 2007-09, which shall be read as Asst. Year : 2007-08 . b) At page No.1, the year mentioned in the date of hearing date of pronouncement have wrongly been mentioned as 2018, which shall be read as 2019 . c) At page No.8, the year underneath to the signatures of the Members has wrongly been mentioned as 2018, which shall be read as 2019 . With the aforesaid modifications, this Misc. Application filed by the assessee is allowed.
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2019 (6) TMI 667
Penalty u/s 271 (1 )(c) - ad-hoc disallowance of expenses - HELD THAT:- Penalty cannot be levied on addition on account of estimated disallowance. We, therefore, uphold the order of the CIT(A) in deleting the penalty which was levied on account of additions made on ad-hoc disallowance of expenses. See RELIANCE PETROPRODUCTS PVT. LTD. [ 2010 (3) TMI 80 - SUPREME COURT] . Hence, the appeal of the Revenue is dismissed.
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2019 (6) TMI 666
Addition u/s 14A - HELD THAT:- We find the CIT(A) deleted the disallowance made by the Assessing Officer u/s 14A r/w. Rule 8D on the ground that the assessee has not earned any dividend income during the year. DR also could not controvert the above factual findings given by the CIT(A), therefore, following the decision of Cheminvest Limited [ 2015 (9) TMI 238 - DELHI HIGH COURT] we hold that no disallowance u/s. 14A r/w. Rule 8D is called for when the assessee has not received any dividend income during the year. The order of the CIT(A) is accordingly upheld and ground raised by the revenue is dismissed.
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2019 (6) TMI 665
Disallowance of claim of depreciation to assessee trust - double deduction - HELD THAT:- Assessee trust in the case on hand is to be allowed its deduction of depreciation on assets while computing its income u/s 11 even though the amount spent on acquisition of the said capital asset was already allowed as application of income in furtherance of the objects/charitable activities of the assessee trust in the year of acquisition. In coming to this view, we place reliance on the decisions of CIT Vs. Society of Sisters of St. Anne [ 1983 (8) TMI 44 - KARNATAKA HIGH COURT] , Al-Ameen Charitable Fund Trust [ 2016 (3) TMI 462 - KARNATAKA HIGH COURT] and Karnataka Reddy Janasangha [ 2016 (3) TMI 462 - KARNATAKA HIGH COURT] and the decisions of City Hospital Charitable Trust [ 2015 (6) TMI 235 - ITAT BANGALORE] and Jyothi Charitable [ 2015 (7) TMI 859 - ITAT BANGALORE] which have decided the issue in favour of the assessee and against revenue on the issue of the assessee being entitled to be allowed depreciation on assets, the cost of which has already been claimed as application of income u/s 11 of the Act. - Decided against revenue. Carry forward of current year s deficit along with earlier year s deficit for set off to the subsequent years - HELD THAT:- Following the decision of the co-ordinate bench of this Tribunal in the case of Shraddha Trust [ 2017 (4) TMI 1289 - ITAT BANGALORE] we uphold the order of the learned CIT(A) in allowing the assessee s claim to carry forward of current year s deficit along with earlier year s deficit for set off to the subsequent years. Consequently, the ground No.2 raised by Revenue in this appeal is dismissed.
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2019 (6) TMI 664
Late filing fee u/s 234E - exercise of power u/s 200A - scope of amendment - HELD THAT:- The issue in the present appeal is decided in favour of the assessee by the decision of Hon ble Karnataka High Court in the case of Fatheraj Singhvi Ors vs. Union of India Ors. [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT , when the amendment made under Section 200A of the Act which has come into effect on 1.6.2015 is held to be having prospective effect, no computation of fee for the demand or the intimation for the fee under Section 234E could be made for the TDS deducted for the respective assessment year prior to 1.6.2015. Hence, the demand notices under Section 200A by the respondent-authority for intimation for payment of fee under Section 234E can be said as without any authority of law and the same are quashed and set aside to that extent - decided in favour of assessee.
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2019 (6) TMI 663
TP Adjustment - comparable selection - Functional dissimilarity - application of RPT filter - exclusion of Honda Siel, Hyundai Motors and Maruti Udyog from the final set of comparables on the ground that the quantum of total Related Party Transactions was less than 25% of the total transaction - HELD THAT:- AO did not apply any RPT filter but the CIT(A) had applied RPT filter of 15% and the three concerns were excluded in the hands of the assessee. In view thereof, we find no merit in the issue raised by the Revenue vide ground of appeal No.1. We hold that the RPT filter needs to be applied in the present set of facts and the three concerns having not fulfilled RPT filter cannot be included in the final list of comparables. In the case of assessee itself, the Assessing Officer / TPO had applied RPT filter of 25% in assessment year 2005-06. Hence, there is no merit in plea of Revenue. Inclusion of Hindustan Motors as functionally comparable - The case of AO was that it cannot be included in the final list of comparables on the ground that it incurred losses during the year. However, as pointed out by the CIT(A), the said concern was not persistent loss making concern and in such circumstances, there is no merit in excluding Hindustan Motors from the final list of comparables. Accordingly, we uphold the order of CIT(A) in this regard and dismiss ground of appeal No.2 raised by the Revenue Economic adjustment on import duty and adjustments to be allowed on account of capacity under utilization - HELD THAT:- The assessee is in second year of operation and has pointed out that it has only utilized 33% of the total capacity whereas the comparables have on an average utilized 50 to 70% of the total capacity and hence, the margins of the comparables need to be adjusted accordingly. The Delhi Bench of the Tribunal in DCIT Vs. Class India Pvt. Ltd. [ 2015 (8) TMI 755 - ITAT DELHI] has laid down the procedure for computing capacity utilization adjustment under the TNM method. Hence, we hold that the said procedure be applied by the Assessing Officer/Transfer Pricing Officer to work out the adjustment on account of capacity utilization. - Decided against revenue
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2019 (6) TMI 662
Disallowance of claim of business loss on cancellation of lease deposit - HELD THAT:- The lease deposit was made in the regular course of carrying on the business of textiles and jewellery by the assessee by opening a shop at Puducherry and as per the leave and license agreement, the landlord is supposed to carry out the construction as per the specifications of the assessee and obtain necessary regulatory approvals. The assessee had to terminate the lease due to non-performance of the landlord by getting electricity connection for the subject mentioned lease premises and in that process, the assessee had to forego a regular business deposit of ₹ 30 lakhs and consequently had to write-off the same in its books and claim the same as deduction. This, in our considered opinion, would have to be construed only as a loss incidental to the regular carrying on of normal business by the assessee allowable U/s.28. See MYSORE SUGAR COMPANY LIMITED [ 1962 (5) TMI 3 - SUPREME COURT] - Thus loss on account of cancellation of lease should be treated as business loss of the assessee - Decided in favour of assessee Proportionate disallowance of interest on borrowed funds - HELD THAT:- One of the primary requirement of making disallowance U/s.36(1)(iii) is that the borrowed funds should have been utilized for non-business purposes. In the instant case, we have already held that the payment of higher education fees to Harvard University, USA is for business purposes only. Hence we hold that no disallowance of interest U/s.36(1)(iii) of the Act could become operational. Accordingly the Ground raised by the assessee are allowed.
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2019 (6) TMI 661
Disallowance of Sales Promotion, Advertisement and Publicity Expenses - allowable business expenses u/s 37 - the said expenditure is hit by the CBDT Circular No.5 / 2012 - HELD THAT:- The expenditure incurred by the assessee towards sales promotion, advertisement and publicity expenses were incurred in line with the business of the assessee and that the revenue had not doubted the genuineness of the incurring of such expenditure.It is well settled that the revenue cannot step into the shoes of the assessee to decide whether the expenditure is required to be incurred by the assessee or not where the genuineness of the same is not questioned. AO has to see whether the particular expenditure incurred is not personal in nature , is not capital in nature and incurred wholly and exclusively for the purpose of business of the assessee. When assessee is able to provide the business nexus of incurrence of certain expenditure with supporting documents, it cannot be simply denied / rejected by the revenue merely on the ground of propriety, which action would lead to, travelling beyond the brief and stepping into the shoes of the assessee by the revenue. We therefore hold that the expenditure incurred by the assessee towards sales promotion, advertisement and publicity is an allowable expenditure. The assessee had only distributed the DVD players, silver coins, calenders and diaries to Tablets India Ltd which was marketing the products of the assessee. There was absolutely no distribution of gifts made by assessee to any medical practitioners and hence the applicability of CBDT Circular No. 5/2012 itself deserves to be rejected. Circular issued by the CBDT cannot enlarge the scope of a different regulation issued under a different act so as to impose any kind of hardship or liability to the assessee. - Decided in favour of assessee. Claim of deduction u/s 80IC - whether disallowance of aforesaid expenditure would correspondingly go to increase the claim of deduction u/s 80IC ? - HELD THAT:- The issue of whether deduction u/s.80IC of the Act should be computed on the profits as increased by the disallowance u/s.37(1) of the Act is covered in favour of the assessee by the decisions in CIT V.Gem Plus Jewellery India Ltd [ 2010 (6) TMI 65 - BOMBAY HIGH COURT] and DCIT V. Vertex Infosoft Solution (P) Ltd [ 2014 (11) TMI 975 - ITAT CHANDIGARH] The issue now stands settled by the CBDT Circular No.37 / 2016 dated 02.11.2016 where the Board had clarified that the deduction under Chapter VI-A will be on such profits including disallowance under sections 32, 40(a)(ia), 40A(3), 43B etc of the Act which will include disallowance made u/s.37(1) as well. The computation of income made by the ld AO, that the ld AO had disallowed the entire Sales promotion, advertisement and publicity expenses u/s 37(1) of the Act separately. Further he had again reduced the claim of deduction u/s 80IC of the Act by the very same amount of sales promotion, advertisement and publicity. This would effectively result in double disallowance made by the ld AO which we direct the AO to rectify. Disallowance u/s 14A under normal provisions of the Act - disallowance should be restricted to the exempt income - HELD THAT:- Without going into the veracity of workings of disallowance made under Rule 8D(2) of the Rules made by the AO and without going into the basis of suo moto disallowance made by the assessee in the return of income, we direct the ld AO to restrict the disallowance made u/s 14A to the extent of exempt income i.e ₹ 12,73,586/- under normal provisions of the Act by accepting the additional ground raised by the assessee. Disallowance u/s 14A in computation of book profits u/s 115JB - HELD THAT:- The issue now stands settled in the case of ACIT V. Vireet Investment Pvt Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] as held that the computation mechanism provided in Rule 8D(2) of the Rules cannot be imported into in clause (f) of Explanation to Section 115JB(2) - disallowance of actual expenditure incurred for earning exempt income is required to be made under clause (f) of section 115JB(2) - the assessee itself had disallowed a sum of ₹ 9,89,496/- u/s 14A in the return of income on some actual basis. In order to settle the disputes to rest, we direct the AO to consider this sum of ₹ 9,89,496/- for disallowance under clause (f) of Explanation to Section 115JB(2) of the Act as direct expenditure incurred for earning exempt income.
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2019 (6) TMI 660
Disallowance of depreciation on equipment leased under financial lease arrangement - assessee was asked to produce copies of agreements and that the assessee had only produced a few of them - HELD THAT:- We set aside the issue to the file of the AO for fresh adjudication in accordance with law. The assessee is directed to produce copies of those agreements which the AO may call for. The AO shall examine these agreements and if the terms conditions mentioned in these agreements are similar to the terms and conditions mentioned in the agreements considered by in the case of ICDS Ltd. [ 2013 (1) TMI 344 - SUPREME COURT] and if there are no material variations in the contracts, then depreciation has to be granted to the assessee as claimed. TP adjustment - payments made for administrative support services - HELD THAT:- Admittedly, this issue is covered in favour of the assessee by an order of the Tribunal in the assessee s own case for the AY 2008-09, AY 2009-10 and AY 2010-11 [ 2014 (12) TMI 890 - ITAT BANGALORE] where this very same issue was examined. The Tribunal has set aside the matter to the file of the TPO with certain directions. Consistent with the view taken therein, we restore the matter to the file of the TPO for fresh adjudication in accordance with the law. Determination of ALP of international transactions for Purchase of equipment for financial lease from AE - MAM selection - HELD THAT:- We find strength in the argument of the assessee that the purchase price of the equipment cannot be determined based on ROCE adopting TNMM as the MAM. This does not appear to be a correct method. CUP is a more direct method and when internal CUP is available for determination of ALP, it would be the most direct method and this, in our view, has to be adopted as the MAM. As submitted cost of imported equipment is the basis on which the assessee determines the rate of return to be charged from the ultimate customer and that if the price of the purchase is inflated, then the rate of return would also be high. Only adjustments that could be made is on account of depreciation on these assets, as this is the only item of expenditure that affects the profit loss account. We would not express any view on this argument. We set aside the matter to the file of the AO for fresh adjudication in accordance with the law. The AO shall, without being influenced with the methodology adopted by the assessee in its TP study, independently decide as to what is the MAM for determination of ALP for the international transaction of purchase of equipment for financial lease from AE. - set aside the matter to the file of AO for fresh adjudication in accordance with the law.
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2019 (6) TMI 659
Penalty u/s 271(1)(c) - voluntary action of appellant in declaring additional income once in the revised return and again in response to notice u/s 153A - undisclosed expenditure towards capital cost/purchase of land - validity of Documents found and seized during the course of search - owner of the undisclosed income - HELD THAT:- Admission and surrender has been made by the assessee in his individual capacity and not by the companies/firms, the second limb can only be said to be satisfied in the instant case. In the instant case, the first limb is not satisfied, therefore, the penalty cannot be levied as the requirement is satisfaction of both the limbs individually and cumulatively. Admittedly, the assessee is a partner in M/s Manglam Vardhman Developers and also a Director in M/s Richwell Enterprises Pvt. Ltd. However, by merely becoming a partner in a firm or a director in the company, the transactions undertaken by the firm/companies will remain the transactions of the firm/companies even though the same have been executed/undertaken by the partner/director in his fiduciary capacity. The assessee and his son were not doing any construction business in his individual capacity rather the business of construction of residential complex and other related activities have been carried out by the companies/firms wherein the assessee and his son were partner/Director. Therefore, basis the statements of the assessee and his son, other documents/transactions found during the course of search and even as per the tax filings which have been accepted by the Revenue, we find that that it is the companies/ firms and not the assessee and his son which are found to be the owner of the undisclosed income. The fact that the assessee and his son have declared the undisclosed income in their individual return of income and have paid taxes thereon and the fact that the Revenue has also accepted the same, the same is true as far as the quantum proceedings are concerned and which has now attained finality, however, when it comes to penalty proceedings, the provisions have to be read strictly and only where the conditions specified therein are satisfied, the penalty can be held justified. In explanation 5A to section 271(1)(c), it talks about where in course of search initiated under section 132 on or after 1st day of June, 2007, the assessee is found to be the owner of any income based on any entry in any books of account or other documents or transactions and in section 271AAB, it talks about any income of the specified previous year represented wholly or partly by any entry in the books of accounts or other documents or transactions found during the course of search u/s 132 and therefore the reasoning applied therein applies equally in the instant case and therefore, capital expenditure and payment towards purchase of land cannot be held as undisclosed income in the hands of the assessee. Assessee cannot be fastened with the penalty so envisaged under explanation 5A to section 271(1)(c) and the order of the ld CIT(A) directing deleting of penalty is upheld for the reasons as stated above. - Decided in favour of assessee.
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2019 (6) TMI 658
Failure to pass Draft Assessment order u/s 144C(1) - AO passed the final assessment order without Draft Assessment Order and issued notice u/s. 156 and 271(1)(c) - Nowhere, in the proceedings before DRP or the AO the assessee raised objections challenging the validity of Draft Assessment Order - HELD THAT:- The demand notice u/s. 156 and notice initiating penalty proceedings u/s. 271(1)(c) are issued only after passing of final assessment order. Since, the said notices were issued by the AO along with the Draft Assessment Order, the said assessment order partake the character of final assessment order. The AO at no point of time after issuing notice u/s. 156 and u/s. 271(1)(c) has withdrawn the said notices. Failure of AO to adhere mandatory requirement of section 144C in not first passing the Draft Assessment Order invalidates the final assessment order and subsequent the proceedings arising there from. In catena of judgments by Hon ble High Courts it has been held that passing of final assessment order u/s. 144C(13) r.w.s. 143(3) without passing Draft Assessment Order u/s. 144C(1) is in violating of provisions of section 144C and hence, such final assessment order is unsustainable. Thus assessment order issued along with notice of demand u/s. 156 and notice of penalty u/s. 271(1)(c) is passed in violation of mandatory provisions of section 144C of the Act. - Decided in favour of assessee.
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2019 (6) TMI 657
Benefit of set off of brought forward business loss - application u/s. 154 - Whether the business loss arrived at by AO while giving effect to the order of Tribunal can be carried forward and benefit of set off against the business income in the subsequent assessment years can be allowed to assessee in the absence of such claim in the return of income? - HELD THAT:- Where as a consequence to the order of Appellate Authority, the assessee has received relief which has the cascading effect on subsequent assessment years, the Assessing Officer is duty bound to give effect to the said order in later affected assessment. We do not find merit in the observations of CIT(A) that in the absence of claim of set off of brought forward business loss in the return of income the same cannot be allowed to the assessee. The CIT(A) while making such observations has failed to consider the fact that the assessee in its return of income had declared Nil income, the business loss determined by the Assessing Officer was consequent to the order passed while giving effect to the order of Tribunal. Since the assessee has raised the claim before appellate authority, the same should have been considered by CIT(A) instead of rejecting the same at threshold. The Hon'ble Bombay High Court in the case of In the case of CIT Vs. Pruthvi Brokers Shareholders P. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] has held the assessee is entitled to raise additional grounds not merely in terms of legal submissions but also additional claims to wit claims not made in the return filed by it. We hold that the assessee is eligible for claiming the benefit of set off of brought forward business loss in the impugned assessment years. - Decided in favour of assessee.
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2019 (6) TMI 656
Rectification of mistake u/s. 254(2) - Unexplained jewellery - whether jewellery found in search belonged to daughter in law ? - HELD THAT:- We find that assessee in this case is seeking review of the order of the Tribunal in income tax appeal [ 2017 (9) TMI 956 - ITAT MUMBAI] . ITAT was very much conscious about the assessee s claim that the jewellery belongs to daughter in law. However, ITAT considered it an afterthought. Now assessee seeks that the said order may be reviewed and assessee s claim accepted. The assessee also submits that case law relied by the ITAT in the M.A. actually helps the assessee. We find that the assessee is clearly seeking review of the order by the assessee which is not permissible under the Act. No cogency whatsoever in the submission of the assessee. The assessee by any means wants a review of the ITAT order and acceptance of its claim which was rejected as an afterthought. This is not at all permissible in an Miscellaneous Application.
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2019 (6) TMI 655
Sales tax subsidy received - whether capital or revenue receipt - HELD THAT:- Since the issue of sales tax subsidy received by the assessee by virtue of scheme of Punjab Government has already been decided by the I.T.A.T. in the case of the assessee itself in the preceding years [ 2011 (11) TMI 743 - ITAT CHANDIGARH] , holding the same to be capital in nature and with no distinguishing facts having been brought to our notice by the Ld. DR, we see no reason to interfere in the order of the CIT(A) allowing the assessee s appeal following with order of the I.T.A.T. - Decided in favour of assessee Addition made on account of technical knowhow fees - revenue or capital expenditure - HELD THAT:- Identical issue stands decided in favour of the assessee in assessment year 2009-10 by the I.T.A.T., which has been admitted to by the Revenue also and no distinguishing facts having been brought to our notice by the Ld. DR, the Ld.CIT(A), we hold, has rightly allowed the assessee s appeal following the order of the I.T.A.T. in assessee s own case for assessment year 2009-10. We therefore find no reason to interfere in the order of the Ld.CIT(A) holding the technical knowhow expenses as revenue in nature. Disallowance of prior period expenses - assessee was following the mercantile system of accounting - HELD THAT:- No reason to interfere in the order of the CIT(A), deleting the disallowance made of prior period expenses, since we find that the said expenses had been booked as per the established and consistent policy followed by the assessee .Further considering the fact that even prior period incomes have been booked, no purpose would be served, we find, by disallowing only prior period expenses since in that case, even prior period income would have to be reduced from the taxable profits of the assessee. MAT computation - deduction from the Book Profits u/s 115JB on account of sales tax subsidy being in the nature of capital receipt - HELD THAT:- As in the case of H.M Steels [ 2018 (11) TMI 1628 - ITAT CHANDIGARH] wherein identical issue has been dealt holding the VAT subsidy, being capital in nature, as not includible in the Book Profits u/s 115JB as taken note of the decision of Apollo Tyres [ 2002 (5) TMI 5 - SUPREME COURT] as per which any adjustment to the Profit and Loss account prepared by the assessee was ruled out for the purposes of calculating the Book Profit amenable to tax. ITAT held as per section 115JB the profit and loss account prepared should be in accordance with Part II III of Schedule VI to the Companies Act,1956 and therefore adjustments to the same can be made to make it compliant with the Schedule. ITAT accordingly held that Sales tax/VAT subsidy being capital in nature would have to be reduced from the profits. We find is identical to that in H.M Steels ,with the Sales tax subsidy having been held to be capital in nature. In view of the same ,the issue we hold is squarely covered by the decision of the ITAT in the case of H.M Steels, following which we hold that the sales tax subsidy is to be reduced from the Book Profits for the purposes of paying tax u/s 115JB. Disallowance of bad debts written off being in the nature of irrecoverable advance as business loss u/s 37(1) r.w.s. 28 - HELD THAT:- It is not disputed that the amount claimed as bad debts related to advances given, as admitted by assessee also. There is, therefore, no question of the same having been debited or considered while computing the income of the assessee. Further the assessee has been unable to demonstrate the same even before the lower authorities or even before us. Also undoubtedly, for claiming the write off of any amount as bad debts, the necessary pre-requisite is that the said amount should have been earlier taken into account while computing the income of the assessee. We have no hesitation in upholding the order of the Ld.CIT(A) in disallowing the claim of the assessee of bad debts. Disallowance of deduction being in the nature of fine and penalties as business loss u/s 37(1) - A.O. disallowed deduction claimed by the assessee in its Profit Loss Account under the head Penalty on the ground that it was in the nature of fine/penalty and further sum claimed did not pertain to the year under consideration but to assessment year 2013-14 - HELD THAT:- No reason to interfere in the order of the CIT(A) in disallowing the penalty. The fact relating to the nature of the penalty, as pointed out by the Ld. DR before us, is not disputed. Thus ₹ 2000/- being penalty levied for sleeping driver, is clearly no allowable being in the nature of penalty for infringement of law. Similarly, also, the amount levied by the Arbitral Tribunal on the assessee to compensate the respondent in a case filed by it to the Tribunal is, we hold, rightly held by the CIT(A) to be in the nature of penalty and thus disallowed u/s 37(1) - it is an undisputed fact that the order levying penalty/cost by the Tribunal was dated 17.2.2013. Therefore, we agree with the authorities below that the liability to pay the fine accrued in assessment year 2013-14 and, therefore, did not pertain to the impugned year at all. We agree with the Ld.CIT(A) that the amount of ₹ 77,000/- was in the nature of penalty paid by the assessee and further out of the above ₹ 75,000/- pertained to the earlier year and, therefore, for the aforesaid reasons, the said amount was not allowable to. Ground of appeal No.3 raised by the assessee is, therefore, dismissed. Disallowance of deduction of provision of warranty rejections - HELD THAT:- The factual findings of the lower authorities that the impugned provision of ₹ 56,162/- had not been reversed in the subsequent year by way of debt note received from a party on account of rejected material, has not been controverted by the assessee before us. Therefore, as per the explanation of the assessee, also the said provisions did not relate to any rejected material received back by the assessee from any party because as per the explanation given by the assessee, such provisions were created on receipt of rejected material as at the end of the year pending the debit notes to be issue by the concerned parties. In the impugned case, the fact that no debit note was issued in the subsequent year shows that there was no receipt of rejected material to that extent as at the end of the year and the amount did not represent any liability but was only a provision for the same. The disallowance of the same is, therefore, rightly upheld by the CIT(A) - Decided against assessee.
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2019 (6) TMI 654
Short Term Capital Gain - no transfer of property under the provisions of section 2(47) - Validity of the agreement with the company which was not there in existence - assessee was just a name lender in the entire deal of the transactions - HELD THAT:- Assessee did not have any occasion to receive any consideration on the transfer of such lands on the agreement to sell. It is because the assessee has not incurred any cost on the purchase of the land, registration of the land, conversion of the land and the development of the land. Thus the assessee being a representative of Abellon Agrisciences Ltd (AAL) had no occasion to receive the consideration on the transfer of the land either at the time of agreement to sell or registration of sale deed. Therefore we are of the view that the provisions of section 53A of the Transfer of Property Act can be applied in the case on hand There was a property transfer by the assessee to the companies as discussed above in the A.Y.2009-10. Accordingly, we are of the view that the subsequent registration of the conveyance deed in the A.Y. 2011-12 will not amount to transfer of property under the provisions of section 2(47). Accordingly, the question of capital gain for the year under consideration does not arise. The impugned land transferred by the assessee in the A.Y.2009-10 when it was an agricultural land which does not fall within the meaning of capital assets as provided u/s 2(14). Accordingly the same cannot be the subject matter of capital gains under the Act in the AY 2009-10. The buyers of the impugned land have recorded the purchase consideration in the books of accounts at the actual cost incurred by its group company. As such we note that there was no element of profit transferred by the companies to the assessee. Therefore it can be inferred that there is no loss to the Revenue as the buyers of the land have recorded the purchase consideration at the actual cost incurred by its group company. Accordingly, the buyers (group companies) will show the profit at the high value or less loss as the case may be on the subsequent sale of such impugned land in the given facts circumstances. We hold that the assessee is not liable to pay tax on the capital gain computed by the AO as the same is not the real income and it was not generated in his hands. Hence the assessee succeeds in his grounds of appeal.
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2019 (6) TMI 653
Exemption u/s 11 - Addition treating the receipt from hostel and transportation facility in the nature of business activity and not allowing the benefit of section 11 - disallowance of claim of depreciation - HELD THAT:- Reasoning of the AO to held that fees received for hostel facilities and transportation charges is a separate and distinct activities from education cannot be sustained, because these activities are incidental to the main objects of the trust, i.e., carrying out educational activities and it cannot be reckoned as a separate business activities for which separate books of accounts is required to be maintained. The hostel facility and transportation of students is inextricably linked with the running of school and is part of overall educational activity. In the case of Karnataka Lingayat Education Society [ 2015 (5) TMI 260 - KARNATAKA HIGH COURT] held that providing the hostel to the students and the staff working for the society is incidental to achieve the object of providing education which is object of the society. This issue has also been considered by the Tribunal in assessee s own case [ 2019 (1) TMI 794 - ITAT DELHI] . Respectfully following the same we decide in this issue in favour of the assessee and hold that these activities are incidental to the attainment of the main object of the trust of the education and consequently assessee is entitled for benefit u/s 11. Disallowance of depreciation - HELD THAT:- This issuer stands covered in favour of the assessee by the judgment of Hon ble High Court [2017 (3) TMI 896 - ALLAHABAD HIGH COURT] .
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2019 (6) TMI 652
Validity of Summons issued u/s 131 - additions during the survey proceedings u/s 133A - addition made solely on the basis of statement taken during survey - HELD THAT:- Assessee's Ground has no merit because the survey team and the jurisdictional Assessing Officer are well within their powers to issue the summon u/s 131 of the Act in order to complete the survey proceedings in the interest of revenue. Validity of retraction of the statement made in survey proceedings u/s 133A - HELD THAT:- The assessee has within a reasonable period of 3 months, after analysing various documents relating to purchase and sale of the stock, market price vis-a-vis the cost price of the products, deduction for defective goods and also on observing the stock of another sister concern M/s. Gayatri Coating Pvt. Ltd which was lying in the same premises and was wrongly included by the survey team in the unaccounted stock even when the stock of the sister concern M/s. Gayatri Coating Pvt. Ltd was duly disclosed in their regular books of accounts filed a retraction statement on 28.4.2014. It is always open for the revenue authorities to examine the correction of the retraction statement and should point out the errors in such retraction statement (if any). Therefore the action of Ld. A.O of outrightly rejecting the assessee s retraction statement without pointing out any mistake in such retraction statement is devoid of merit and is uncalled for. We therefore allow Ground No.2 raised by the assessee . Unaccounted/ unexplained investment made in excess stock - HELD THAT:- The assessee has successfully demonstrated with the help of various documentary evidence in the form of the invoices for selling of goods post survey, quotations of grey cloth regularly purchased by the assessee, financial statement showing the gross profit rate, proof of the stock belonging to Ms/ Gayatri Coating Pvt. Ltd wrongly included in the unaccounted stock of the assessee and the fact that no other discrepancy has been pointed out in the regular books of accounts maintained by the assessee, we are therefore inclined to hold that the assessee has rightly valued the unaccounted stock at ₹ 1,82,15,777/- which has been offered to tax and Ld. A.O erred in making the addition for ₹ 2,09,44,333/- and the same deserves to be deleted. We therefore set aside the findings of both the lower authorities and allow the assessee s Ground of the instant appeal.
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2019 (6) TMI 651
Reopening of assessment u/s. 147 - proof of proper service of notice to the assessee and within period of limitation - addition u/s.68 in respect of share application money received - HELD THAT:- As the Revenue could not prove that there was proper issue and service of notice u/s. 148 of the Act on the assessee within the time prescribed i.e. on or before 31.03.2016 for the A.Y. 2009-10, the Ld. CIT(A) has rightly concluded that the reopening u/s. 147 is bad in law. On this ground alone the assessment framed u/s. 143(3) r.w.s 147 of the Act is liable to be quashed. Even on merits the CIT(A) examined the addition made by Assessing Officer with references to the evidences furnished by the assessee and the averments of the Assessing Officer and concluded that the assessee has proved the identity, genuineness, creditworthiness of the creditor Once the assessee furnished all the details in respect of the loan transactions assessee has discharged its initial burden and the burden shifts to the assessee. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. See M/S SHREE LAXMI ESTATE PVT LTD, M/S SHREE LAXMI DEVELOPERS VERSUS ITO, WD. 15 (3) (3) , WD. 26 (3) (2) , MUMBAI [ 2017 (12) TMI 1699 - ITAT MUMBAI]. The decision relied on by the Ld. DR in the case of CIT v. NRE Iron and Steel (P.) Ltd [ 2019 (3) TMI 323 - SUPREME COURT] is distinguishable on facts. Thus we uphold the order of the Ld.CIT(A) in quashing the reassessment order and deleting the addition made u/s. 68 - Decided in favour of assessee.
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2019 (6) TMI 650
Assessment u/s 153A - no incriminating material validating additions - HELD THAT:- AO is not permitted to make the disallowance without having the supporting incriminating material in the case of completed assessments. Accordingly, the additions made by the AO for the A. Y. 2004-05 to 2008-09 relating to the interest disallowance, cash credits, estimation of undisclosed business income, disallowance u/s 40(ia) and the addition towards suppression of sales are unsustainable and accordingly deleted. Interest on loan used for purchase of property - allowable business expenditure - use for the purpose of business - CIT(A) confirmed the addition - HELD THAT:- During the appeal hearing, the Ld. AR did not furnish any evidence to support the claim that the site was used for the purpose of business. Therefore we do not find any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. Addition of cash credits u/s 68 - HELD THAT:- Department has not made any enquiry and did not shift the burden to the assessee. Therefore, merely scrutinizing the confirmation letter, the AO cannot conclude that the loan is not genuine and credit worthiness is not proved. CIT(A) is also incorrect in holding that mere submission of PAN and confirmation letter is not sufficient to hold that the loan is genuine. Once the confirmation letters are placed before the AO, it is for the AO to establish that the creditor has no capacity to make the advance and the loan is ingenuine. It is also incorrect to hold that every assessee should run behind the creditors and parade them before the AO after furnishing the confirmation letters. Therefore, having filed the confirmation letters with PAN and the address, we hold that the assessee has discharged the burden and there is no case for making addition. Accordingly, we set aside the order of the CIT(A) and delete the addition made by the AO u/s 68 Addition u/s 68 relating to loans taken from creditors - HELD THAT:- The assessee has filed the confirmation letters in respect of Sri Venkateswara Agencies with a clear address. The creditor also has furnished the income tax assessment details along with copy of the bank account. In the bank account copy of the creditor, a sum of ₹ 1 lakh was debited in favour of the assessee by cheque No. 540844. Since the creditor has filed the confirmations furnishing the details before ACIT, Vijayawada along with details of bank account and income tax returns, there is no reason to suspect the genuineness of the loan accepted from Sri Venkateswara Agencies, thus we are unable to sustain the order of the Ld. CIT(A) and accordingly delete the addition of sum received from Sri Venkateswara Agencies Loans accepted from Sri Balaji Marketing Services, the assessee did not file confirmation letter either before the AO or before the Ld. CIT(A). Hence, we do not find any reason to interfere with the order of the Ld. CIT(A). Accordingly, out of the addition confirmed by the Ld. CIT(A) for an amount of ₹ 2 lakhs, the addition of ₹ 1 lakh in the case of Sri Venkateswara Agencies is deleted and addition of ₹ 1 lakh in respect of Sri Balaji Marketing Services is confirmed. Accordingly, the appeal of the assessee on this ground is partly allowed. Addition towards unaccounted business income - addition of gross profits estimating the unaccounted sales in the hands of the assessee for non furnishing the names of the customers, delivery challans etc. - CIT(A) confirmed the addition - HELD THAT:- AO did not bring on record any case which is having more profit than the assessee and the AO has not rejected the books of accounts in the assessee s case. CIT(A) also in his order observed that there is no complete documentary evidence available in the assessee s premises with regard to unaccounted production of finished goods. The Income Tax Department has resorted for the ultimate action of search in the assessee s case and did not find any evidence to show that the assessee has either resorted for unaccounted sales or inflation of purchases etc. AO also did not bring any evidence to show that the gross profit of the assessee is lesser than the comparable cases. In the absence of any such evidence, we hold that the addition made by the AO is purely based on guess work and the CIT(A) also confirmed the addition merely believing the presumption and assumptions of the AO. Therefore, we are unable to uphold the order of the Ld. CIT(A) and accordingly set aside the orders of the lower authorities and delete the additions made by the AO for the A. Y. 2009-10 and 2010-11 on account of undisclosed business income and allow the appeals of the assessee Unexplained investment in jewellery and silver articles - Addition of cash credit - CIT(A) allowed telescopic benefit which was admitted by the assessee under the head unaccounted income on account of business gifts being gold and silver items and sustained the addition as unaccounted income - HELD THAT:- On close scrutiny of the Ld. CIT(A) order it is observed that the additional income admitted by the assessee was towards generation of income, but it is not linked to application of income towards the investments and expenditure. During the appeal hearing, the Ld. DR also could not make any submission or argument to support that the balance amount of ₹ 98 lakhs was already allowed the telescopic benefit in respect of any other asset or application of income towards expenditure or any other asset. Since the assessee has admitted additional income till the date of search and the items found during the course of search in respect of gold and silver articles were acquired before date of search and similarly the cash credits were also introduced in the books of accounts before the date of search, there is no reason to reject the telescopic benefit sought by the assessee, from the additional income declared by the assessee. We direct the AO to allow the telescopic benefit from additional income declared by the assessee towards investments in gold and jewellery
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Customs
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2019 (6) TMI 649
Duty Drawback - higher All Industry Rate (AIR rate) denied - N/N. 103/2008- Cus (NT) dated 29th August 2008 - HELD THAT:- There is no error in the order impugned passed by the learned Tribunal. The purpose of allowing the reduced duty draw back in the hands of the merchant exporter unless he fails to satisfy the authorities of the department that no CENVAT facility has been availed by the manufacturer in respect of the goods exported by the merchant exporter, is to avoid a double benefit in the hands of the exporter/manufacturer of those goods. The duty draw back is allowed for giving incentive to the export to the extent of Excise component only to the extent of Excise duty actually suffered by the goods in question. Since admittedly the appellant M/s. Big Bags International Private Limited in the present case has not purchased the bags in question from the open market but has purchased the same from the manufacturer M/s. Bishan Saroop Kishan Agro Industries (P) Ltd., directly, who has been granted Cenvat credit in respect of the bags in question, the duty draw back available to the exporter was liable to be reduced to that extent - In the absence of any proof of such non availment of Cenvat credit by the manufacturer, obviously the appellant/merchant exporter was therefore entitled only to get the reduced duty draw back after deducting the amount of Cenvat Credit availed by the manufacturer. Appeal dismissed - decided against appellant.
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2019 (6) TMI 648
Release of Consignment - import of peas - restriction imposed by N/N. 4/2015-2020 dated 25.04.2018 - HELD THAT:- It is seen that the the petitioner entered into a contract on 05.10.2017 itself. It is stated that the payment was made on 15.11.2017 itself. As per the restrictions imposed by the notification, the petitioner has reduced the quantity to 7,000 Metric tonnes which is below the specified quantity. It is stated that the dun peas are not cultivated in India. The bills of lading is prior to the date of 01.04.2018 to 30.06.2018 which was extended till 31.12.2018 vide notification No.37/2015-2020 dated 28.09.2019, thereby continuing the restriction between 01.10.2018 and 31.12.2018. The bill of lading is on 06.10.2018 which is within the extended period. The consumer goods are perishable and if the shipment is not released, the food materials will go as a waste. This Court deems it fit to pass an order to release the shipment on the condition that the petitioner will remit the entire duty component of the consignments imported by them in cases were such duty is leviable - petition allowed.
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2019 (6) TMI 647
Levy of Additional Duty of Customs - exemption from duty subject to manufacturing without the aid of power - finalisation of provisional assessment - Circular No.26/2004-Cus, 31.03.2004 - HELD THAT:- It is seen in the present case that the petitioner had produced a certificate dated 11.02.2003, issued by the Forest Department of the Sri Lankan Government, evidencing that the product was extracted manually and there was no aid of power. This certificate has not been considered by the second respondent in the impugned order by either disbelieving the same or questioning its validity. Since the CEGAT had earlier held that a simple declaration evidencing that the product was manufactured without the aid of power would suffice for the purpose of grants exemption from payment of customs duty, there is no justification on the part of the second respondent herein to hold otherwise in the present impugned order. As such, the respondents are not justified in rejecting the declaration given or the certificate issued by the Government Agency of the Supplying Country, which would be sufficient for the purpose of the exemption, in view of the circular dated 31.03.2004. Petition allowed.
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2019 (6) TMI 646
Demand of Customs Duty - illicit removal - shortage of stock - N/N. 177/94-Cus dated 21st October 1994 - Gold jewellery - HELD THAT:- While proper account of import, consumption and utilisation are to be maintained for periodic submission to the Assistant Commissioner of Customs, it is the satisfaction of the Development Commissioner on the usage of the goods for the purpose specified in the notification or any other purpose permitted in the Export Import Policy that must be complied with. In the present instance, there is no record of the satisfaction of the Development Commissioner having been ascertained. The shortage of 8971.11 gms at the premises of assessee does not, by itself, indicate that condition no.8 of the notification has not been complied with as has been held by the Tribunal in RB. JEWELLERY CORPORATION VERSUS COMMR. OF CUS., AIRPORT, MUMBAI [ 2006 (8) TMI 405 - CESTAT, MUMBAI] . The notification does not place a premium on the efficient utilisation of imported inputs of operation and it would not be proper for the customs authorities to read such as an object of the notification. In the absence of any evidence of removal from the export processing zone without following proper procedure or of having failed to satisfy the Development Commissioner of proper utilisation, the provisions of levy of duty and imposition of penalty would not sustain - Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 645
Jurisdiction - power of Tribunal to hear the appeal - Section 129 of Customs Act - goods imported as Baggage - illegal import of Gold bars - HELD THAT:- The baggage is an aspect of Customs Network through which common man going abroad or returning from abroad comes in contact with Customs as per Baggage Rules, 2016 which have replaced the Baggage Rules, 1998. It is only the used personal effects and new articles upto the value of ₹ 50,000/- per person (except infant) which are allowed duty free if carried on person or in accompanied baggage. The appellant herein was found carrying 8 gold bars weighing 933.12 grams valuing double to 81758 grams on his person and was coming neither from Nepal, nor Bhutan nor even from Mayanmar but from Riyad. It is also an admitted fact that appellant was often travelling Riyad-India Sector. Resultantly, the Baggage Rules, 2016 are applicable to the given facts and circumstances. The Appeal against the Order of Commissioner (Appeals) which relates to the goods imported as baggage is not maintainable before this Tribunal. Resultantly, the impugned Appeal is hereby returned to the appellant to seek appropriate remedy before appropriate forum, if any, however keeping in view the applicable laws including that of limitation. Appeal disposed off.
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2019 (6) TMI 644
Imposition of penalties u/s 112(a) and u/s 114AA of CA - import of White Poppy Seeds - whether the import of 340 MT of White Poppy Seeds of Chinese origin for which 4 Bills of Entry filed had been filed between 25.09.2009 to 08.10.2009 is in accordance with law or otherwise? HELD THAT:- The explanation furnished by the Appellant in wrong mentioning of the reference number in the import documents had later been clarified/rectified by approaching the appropriate Chinese authorities, is acceptable being supported by letter dt.11.11.2010 issued by the Chinese authorities, a fact not controverted by the department. Therefore, the findings of the Commissioner that the imports were against cancelled Contract No.TTHK 09027 and not authorized is incorrect. On the contrary, the said contract No.TTHK 09027 was cancelled and Registration No.216/CBN/ Poppy Seeds/2009-10 has been surrendered; hence the consignments imported were against Contract No.TTHK 09028 with Registration No.217/CBN/Poppy Seeds/2009-10, which was validly obtained. Therefore, imports were authorised under Contract No.TTHK 09028 and under valid Registration No.217/CBN/Poppy Seeds/2009-10. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2019 (6) TMI 643
Oppression and mismanagement - Section 421(1) of the Companies Act, 2013 - removal of the appellant as Director of 1st respondent company - HELD THAT:- The appellant is apparently against the appointment of 3rd respondent as Director of 1st respondent but this will not amount to prove that he was not informed or was not aware of the Meeting and the said Meeting was not held in terms of provisions of Companies Act, 2013. Apart from this, considering the shareholding of parties as noted in para 2, (which includes Respondent No.3), Respondent had no fear not to serve Notice on Appellant for holding EGM. Thus the argument that the Notice was not given has no substance. It is also noted that the appellant has been Managing Director of the 1st respondent from 29.3.2010 to 22.12.2016 almost 6 years and he has no inherent right to continue as Managing Director/Director in the 1st respondent unless he is able to carry the majority shareholders with him. Therefore, there is no force in the arguments of appellant and the same is rejected outrightly. We are of the view that non providing the copy of the Power Purchase Agreement relates to operation of the company and does not come under oppression and mismanagement. Appeal dismissed.
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2019 (6) TMI 642
Restoration of the name of the company in the register of companies - Section 252 of Companies Act, 2013 - HELD THAT:- No case is made out by the appellants for us to interfere in the impugned order - no evidence was produced to come to a conclusion about the status of the company - appeal dismissed - decided against appellant.
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2019 (6) TMI 641
Oppression and mismanagement - removal from Board of Directorship of respondent no.1 company - mandatory permanent injunction has been passed without affording any opportunity to the Appellants - principles of natural justice - HELD THAT:- In the present matter, NCLT has noted that the Petitioner moved NCLT for Ad Interim Orders but the Orders as have been passed, do not purport to say that they are Interim Orders and the original Respondents (Appellants) are to be heard. When the Hon ble High Court itself in its wisdom had on 21.09.2018, preferred to issue Notice and in the meanwhile, directed that the meeting may go on but the outcome therein shall not be given effect till next date, the NCLT could have itself adopted similar recourse and the Order could have stated that the Resolution as may have been adopted would remain stayed till the next date. Instead of that, NCLT simply pronounced magic words that there was a prima facie case in favour of the Petitioner and balance of convenience is also in favour of Petitioner and that if Interim Orders are not passed, Petitioner will suffer irreparable loss on the basis that if the Company which runs the hospital suffers bad name, the Petitioner will bear the negative image apart from losing valuable investments. The question of Company suffering bad name appeared to be based on de-empanelment of the hospital. Record shows (Annexure P8 of the company Petition Diary No.8869 Page 118) that the hospital had already been de-empanelled from the Mahatma Jyotiba Phule Jan Arogya Yojna on 28th February, 2018 itself. Thus, whatever harm had to take place on that count had already taken place. NCLT not only restrained the Respondents Appellants from altering shareholding and from giving effect to the Resolution removing the Respondent Petitioner as Director until further Orders, but also went ahead to pass Orders which are in the nature of mandatory Orders to cancel DIR 12 etc. which were not necessary. The Impugned Order is modified accordingly and the Order passed by NCLT shall be treated as Ad-Interim Order.
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Securities / SEBI
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2019 (6) TMI 640
Failure to make disclosures under Regulations 13(3), 13(4A) read with 13(5) of SEBI 'PIT Regulations' and SAST Regulations - appellant sold 6,00,000 shares without requisite disclosures - as contented the physical share certificates had been lost or misplaced and were not traceable - penalty imposed - HELD THAT:- We find that the consistent stand of the appellant was that he had never sold the shares and that the physical shares were misplaced or lost and were not traceable. In order to verify this aspect the Registrar Transfer Agent was called who produced the share transfer forms as well as the original certificates which showed the signatures of the appellant. The signatures of the appellant matched with the specimen signatures kept with the Company. The contention of the appellant that the expert opinion provided by the appellant with regard to his signatures was not taken into consideration is patently misconceived. AO considered the expert opinion and found that it was not necessary as there were ample evidence to show that the signatures on the share transfer forms were that of the appellant. We are further of the opinion that no attempt was made by the appellant to get the signatures appended in the share transfer form compared with the specimen signatures kept with Company. Verifying and comparing the signatures of the appellant on the share transfer forms with the signatures of the appellant on other documents like PAN Card, Passport, Bank signatures are immaterial when specimen signatures of the appellant are kept with the Company. The primary evidence for comparing the signatures is the specimen signatures kept with the Company. Allegation that no opportunity was given to the appellant to cross-examine the Registrar and Transfer Agent is patently erroneous and an afterthought. No such stand was taken by the appellant before the AO in this regard nor any such application was made to this effect. The fact that the transfers were made at various places in Gujarat is immaterial. What is material is the signature of the appellant on the shares transfer certificates. The contention that the signatures of the witness are different in the share transfer forms cannot be accepted at this stage. Such stand was not taken before the AO nor any ground has been taken before us in this appeal. Such arguments cannot be made without there being a ground in the appeal. The contention that the physical shares of ₹ 10/- each could not have been transferred unless the split share certificates were given is patently erroneous. The Companies Act did not at any stage prohibit the transfer of pre-split shares to the transferee. The contention raised does not have any merit. Thus, the contention of the appellant that he had never sold the shares cannot be believed in as much as the signatures of the appellant on the share transfer form was duly verified from the specimen signatures kept with the Company. The contention that the signatures on the share transfer forms were forged was rightly disbelieved. Imposition of penalty is grossly disproportionate to the violation committed by the appellant. Further, the factors contemplated under Section 15J have not been considered. We affirm that part of the order of the AO holding that the appellant had violated the provisions of Regulations 13(3), 13(4A), and 13(5) of the PIT Regulations and Regulations 29(2), 29(3), 30(2) and 30(3) of the SAST Regulations and to that extent the order of the AO is affirmed. We, however, do not agree with the order of the AO imposing a penalty of ₹ 4 crores and to that extent the order of the AO cannot be sustained and is set aside. The appeal is consequently, partly allowed. The matter is remitted to the AO to re-decide only the quantum of penalty, in the light of the observations made above after giving an opportunity of hearing to the appellant.
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Insolvency & Bankruptcy
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2019 (6) TMI 639
Initiation of Corporate Insolvency Resolution Process - proceedings against Corporate Debtor - approval of resolution plan - grievance of the Appellant is that the claim of the Appellant was not taken into consideration by the Resolution Professional because of non-invocation of the Corporate Guarantee, and was neither invited or made a member of the Committee of Creditors despite it being a Financial Creditor of the Corporate Debtor on the basis of its claim against the Corporate Guarantee given by the Corporate Debtor . HELD THAT:- It is true that the Corporate Debtor had taken guarantee but the said guarantee was not invoked in favour of the Appellant- Edelweiss Asset Reconstruction Limited . However, the said guarantee was not invoked by the Appellant- Edelweiss Asset Reconstruction Limited as on the date of admission or filing of the claim - On declaration of Moratorium , it was not open to the Appellant- Edelweiss Asset Reconstruction Limited to invoke the guarantee (Corporate Guarantee). The Resolution Professional has rightly not accepted the claim of the Appellant- Edelweiss Asset Reconstruction Limited and the Adjudicating Authority has rightly rejected the application filed by the Appellant- Edelweiss Asset Reconstruction Limited for accepting its claim. The rejection of the claim for the purpose of collating the claim and making it part of the Resolution Plan will not affect the right of the Appellant- Edelweiss Asset Reconstruction Limited to invoke the Bank Guarantee against the Corporate Debtor in case the Principal Borrower failed to pay the debt amount, the Moratorium period having come to an end. Appeal dismissed.
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2019 (6) TMI 638
Admission of application - Section 9 of the Insolvency and Bankruptcy Code, 2016 - the total amount has been paid to the Operational Creditor and the Committee of Creditors has not yet been constituted - HELD THAT:- The order (s), passed by the Adjudicating Authority appointing Interim Resolution Professional , declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, taken by the Interim Resolution Professional , including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the I B Code is dismissed. Learned Adjudicating Authority will now close the proceeding. The Corporate Debtor (company) is released from all the rigour of law and is allowed to function independently through its Board of Directors with immediate effect. Appeal allowed - decided in favor of appellant.
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FEMA
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2019 (6) TMI 637
Maintainability of petition - Petitioner's alternate and efficacious remedy against the impugned order made by the Enforcement Directorate, to the Appellate Tribunal for Foreign Exchange, Ministry of Law, Justice and Company Affairs, Government of India - violation of principles of natural justice as certain statements made by some buyers and these statements have been acted upon without afford of any opportunity or cross examination to the Petitioners - HELD THAT:- In the present case, after the show cause notice dated 6th September, 2017 was served upon the Petitioners, the Petitioners chose to file reply through their Chartered Accountant. Neither in the reply nor at any stage of the proceedings before the impugned order came to be made, the Petitioners objected to taking into consideration the statements of the buyers on the ground that the same were not tested in the cross examination. There was no request made for examination of such buyers in the presence of the Petitioners or their legal representatives and thereafter for opportunity to cross examination of such buyers In any case, all the contentions including the contention with regard to the alleged breach of principles of natural justice can always be raised before the Appellate Authority. Accordingly, we uphold the preliminary objection raised and dismiss the present petition. However, we leave it open to the Petitioners to avail alternate remedy available under the statute. None of the observations in this order should be used to foreclose any contentions which any of the parties may have, in case the Petitioners, choose to avail of an alternate remedy available under the statute.
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2019 (6) TMI 636
Non-realization/short of foreign exchange received - Failure to realize export proceeds on exported goods - FEMA v/s FERA proceedings - contravention of provisions of section 7 8 of FEMA, 1999 read with regulation Nos. 8,9 13 of Foreign Exchange Management (Export o Goods and Services) Regulations, 2002 - Penalty imposed - HELD THAT:- Foreign Exchange Management Act, 1999 ( FEMA ) was brought in to keep pace with the changing dynamics of the Indian economic polity repealed the Foreign Exchange Regulation Act, 1973 ( FERA ) and came into force on 1-6-2000. Apart from removing criminal prosecution for non-compliance of foreign exchange norms, FEMA also introduced a sunset clause for taking notice of contraventions under FEMA. FEMA provides that no adjudicating authority shall take notice of any contravention under FERA two years after the coming into force of FEMA. In other words, it provided a window up to 31-05-2002 for the authorities under FEMA to take notice of contraventions under FERA. The export of goods had been made on 29h May, 2000 under GR No. 366158. The subject export was governed by the Foreign Exchange Regulation Act, 1973 and no proceedings under section 8 of the FEMA 1999 which came into force on 1st June 2000 could be applicable for the GR No. 366158 dated 29.05.2000. In BHUPENDRA V. SHAH VERSUS UNION OF INDIA ORS. [ 2010 (3) TMI 20 - DELHI HIGH COURT] held show cause notice (SCN) issued after the sunset clause period of 31-05-2002 for alleged contravention of Section 7 8 of FEMA by an exporter in not realizing proceeds of export made in 1997- 98(pertaining to the FERA period. In order to invoke section 7 of FEMA, the ED will have to show that the party reached the time limits specified in FEM EGS Regulations. At the relevant point of time, FEMA was not a force and hence there could be no question of contravening the provisions of FEMA and if at all there was any contravention, it would only under FERA and the same had to be shown to have continued beyond the two year sunset period - the legislative intent was very clear in having a limited continuation of two years for contraventions under FERA - on reading of Section 49(4) [which is subject of section 49 (3)] the contravention under FERA had to be governed by the Provisions of FERA. Therefore the alleged contravention was one under FERA and by virtue of the sunset clause so there was no question of the contravention continuing after 31-5-2000. Decision under FERA but still valid under FEMA- In LIC VS Escorts Ltd.[ 1985 (12) TMI 289 - SUPREME COURT] wherein it has been held that RBI is empowered to grant ex-post permission under Section 18(2). Thus, mere non-realisation of export proceeds will not amount to contravention of Section 18(2) of FERA, unless RBI refused permission to write off the receivables or to extend the period. It is rightly submitted on behalf of appellants that according to the decision of Hon ble Apex Court LIFE INSURANCE CORPN. OF INDIA VERSUS ESCORTS LTD. [ 1985 (12) TMI 289 - SUPREME COURT] initiation of enquiry against the noticee company by the Directorate of Enforcement for same and identical matter pending before their banker for last 8 years is a long delay. No doubt, there is no prescribed period stipulated but at the same time, it is settled law that if the party has a reasonable case on merit, the issue of delay cannot be considered while deciding the matter. In the light of above and for the reasons stated, the appeals are allowed by setting aside the impugned order. All appeals and pending application are disposed of.
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PMLA
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2019 (6) TMI 635
Offence under PMLA - Provisional Attachment Order - HELD THAT:- This tribunal is of the view that the adjudicating authority is duly bound to specifically come to the final conclusion as to whether the property attached was involved in money laundering or not and it was acquired from the proceed of crime or not. No doubt, if the property which was acquired is not traceable or disposed of due to misconduct of the accused party, only then other property can be attached in lieu of value thereof, in order to secure the proceeds of crime. However, in the present appeal, the hearing officer was unsure about the same, he had adopted oblique system which is not permitted in law. It is evident that due process has not been followed which is mandated in law. If alternative oblique system will continue, the confusion is to continue. The impugned order is set-aside. The matter is remanded back to the Adjudicating Authority to decide afresh after hearing both parties and their contentions raised. The same be decided within 180 days from today. All the contentions raised by the appellant shall be considered by the Hon ble Member (Law) who will hear the matter.
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Service Tax
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2019 (6) TMI 634
Refund of service tax paid - Manpower Supply Services - period from 2003 to 2008 - unjust enrichment - HELD THAT:- Admittedly, as apparent from record, no document was produced before the adjudicating authority and Commissioner (appeals) to justify non-applicability of doctrine of unjust enrichment to the appellant but submission of CA Certificate and Balance Sheet of company during hearing of the appeal, which is not objected by the Respondent Department, the same can be taken as additional evidence as per rule 23 to CESTATE procedure Rules 1982 - Cursory reading of the documentary evidence would reveal that incidence of tax has not been passed on by the Appellant to any other person. Refund allowed - appeal allowed - decided in favor of appellant.
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2019 (6) TMI 633
Classification of services - taxable service Real Estate Agent and Site Formation and Clearance, Excavation and Earth Moving and Demolition provided by the Appellant during the period 2005-2006 to 2009-2010 - Circular dated 27 July 2005 - HELD THAT:- The clauses of the present agreement clearly indicate that extensive construction and development had to be carried out by the Appellant and, thereafter, land/ plots were to be sold. The finances were also to be arranged by the Appellant. An agent does not carry out these activities. Thus, for this reason also the impugned order cannot be sustained. A Division bench of the Tribunal in M/S RADIUS CORPORATION LTD. VERSUS CCE, RAIPUR [ 2013 (9) TMI 517 - CESTAT NEW DELHI] examined the scope for site formation services and it was observed that the contract signed for construction of the Major Ground Balancing Reservoir for raising the height of the existing reservoir would not fall under the category of site formation . The activity carried out by the Appellant would, therefore, not fall under site formation . Extended period of limitation - HELD THAT:- It is not necessary to deal with the other submissions advanced by learned Counsel for the Appellant relating to co-venture or extended period of limitation. The pre-deposit made by the Appellant in this Appeal shall be refunded to the Appellant within a period of two months from the date of copy of the order is produced before the competent authority. Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 632
Short payment of service tax - Broadcasting Service - Advertising Space or Time Service - Consulting Engineer Service - cum-tax benefit - extended period of limitation - HELD THAT:- It would be appropriate at this stage to examine the chart that is contained in the second show cause notice dated 18 May 2009. The said chart is for the Financial Years 2003 04 to 2007-08. It gives the total income receipt for each of the Financial Years and the taxable value as per ST-3 returns for each of the Financial Years. It then gives the difference in the taxable values for each of the Financial Years and the short paid service tax in each Financial Year. It is no doubt true that the first show cause notice dated 17 October 2008 that was issued to the appellant is for a part of the Financial Year 2007-08, namely from April 2007 to September 2007 which period is included in the second show cause notice dated 18 May 2009, but what needs to be pointed out is that the first show cause notice is based on the total income shown by the appellant in the ST-3 return for the said period. The show cause notice alleges that even on the taxable value shown in the ST-3 return, the appellant short paid service tax. It does not challenge the correctness of the taxable value shown in the ST-3 return. Validity of second SCN - HELD THAT:- The second show cause notice, on the other hand, challenges the taxable value indicated by the appellant in the ST-3 return for the Financial Year 2003-04 to Financial year 2007-08. It is stated that lesser taxable value has been shown .There is, therefore, no overlapping of issues in the two show cause notices. Penalties - HELD THAT:- The penalties are set aside by invoking section 80. Appeal allowed in part.
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2019 (6) TMI 631
Rectification of Mistake - Error apparent on the face of record - HELD THAT:- The word 'justified' used in para 7 is an error apparent on the face of record. The word used ought to have been 'not justified'. The impugned final order is therefore modified to the extent of correcting the said sentence - ROM Application allowed.
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2019 (6) TMI 630
Refund claim of service tax paid - input services - Intermediary Services or not - HELD THAT:- The appellant is assisting or facilitating their principal to purchase goods from India. These services are purely between the appellant their principal and no third party is involved. Moreover, the appellant is providing only the said service which is in nature of Business Support Service and Business Auxiliary Service and the said service has been specifically excluded by the CBEC Education Guide of Taxation of Services - Admittedly, the activity undertaken by the appellant has specifically excluded from the intermediary service, in that circumstance, the refund claim filed by the appellant cannot be denied by holding that the appellant is providing intermediary service - refund allowed - appeal allowed - decided in favor of appellant.
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2019 (6) TMI 629
Refund of service tax paid - C F Agent Service - Reverse Charge Mechanism - Rule 2 (d)(xii) and (xvii) of the Service Tax Rules, 1994 - HELD THAT:- The relationship is in the nature of Principal and Agent and further satisfies the definition of Clearing and Forwarding Agent under Section 65 (25) ibid. Consequently, we are of the view that during the period 1997-1999, M/s. IES would be liable for payment of Service Tax on Reverse Charge Basis - In the light of the validating amendments vide Finance Act, 2000, subsequent to the order of the Hon ble Supreme Court in Laghu Udhog [ 1999 (7) TMI 1 - SUPREME COURT ] , Service Tax paid under the category of C F Agent Service, will not be refundable. Demand of Service Tax under the category of Clearing and Forwarding Agent service - Time limitation - HELD THAT:- M/s. ICI has acted as C F Agent of M/s. IES for providing clearing and forwarding agent service. Since the agreement has continued during the dispute period, the classification of the service will continue under the Clearing and Forwarding Agent Service. Hence, M/s. IEL will be liable for payment of Service Tax as a service provider in terms of the agreement and we uphold the demand for Service Tax. Time Limitation - HELD THAT:- The service, Clearing and Forwarding Agent Service has been the subject matter of much Litigation. There have been conflicting decisions at the level of various judicial fora regarding the activities which are covered under the definition of Clearing and Forwarding Agent Service. A perusal of the agreement indicates that the activity undertaken is in the nature of Consignment Agent which is subsumed within the definition of Clearing and Forwarding Agent Service - the Revenue is not entitled to raise the demand for the extended period of limitation. Appeal disposed off.
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2019 (6) TMI 628
Classification of services - works contract service or not - composite contracts or not - Wrongful payment of service tax - HELD THAT:- The contracts on which the service tax has been demanded by the impugned order-in-original, are contracts of composite nature where the transfer of property as well as service components are involved. It has already been held by Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] held that any contract which involves transfer of the property as well as service component same has to be classified as the work contract service and same will not be entitled for the classification as the service simplicitor - Considering the views of the Apex Court and of the fact that a new service under the category of work contract service was got enacted by the Finance Act since 1 June 2007, it is held that where both transfer of the property as well as the service component were involved in the respective contracts of the appellant, same are not taxable under the service tax simplicitor category and need to be classified under the work contract service and service tax need to be demanded accordingly. On the purchases which involved both transfer of the property in contract as well as the service component, the appellant was entitled to avail the composition scheme for payment of the work contract. The learned Adjudicating Authority has erred in holding that the appellant was not entitled to switch over to work contract service from the respective services in respect of the ongoing contract/purchase after 1 June 2007 to pay service tax under work contract composition scheme. The Adjudicating Authority should examine every contract which are subject matter of the present service tax demand to ascertain whether a contract is a composite indivisible work contract or not - appeal allowed by way of remand.
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Central Excise
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2019 (6) TMI 627
Principles of natural justice - Whether in the facts and circumstances of the case, the Tribunal was justified in not giving any finding on the submission of the Appellants that the Order in Original dated 15th February, 2008 was passed ex-parte without considering the request made by the Appellants by letter dated 5th February, 2008 to await the outcome of Writ Petition No. 974 of 2008? HELD THAT:- If the Appellants were so concerned about the fact that the cross examination was necessary, in the facts of the present case, they ought to have moved the Court and sought urgent interim relief, from the Court before the hearing and disposal of the notice of the Commissioner of Central Excise. The Appellants seek adjournment on the ground that a writ is pending, clearly show that the Appellants seeks to delay the proceeding by not cooperating with the adjudication proceeding. This is apparent from the history of the present proceedings, particularly the earlier exparte order passed on account of non cooperation of the Appellants in disposal of the show cause notice by the Commissioner. This lead to the order of the Tribunal dated 24th September, 2007 setting aside the order dated 11th April, 2007 and restoring the notices to the Commissioner for fresh adjudication. We would have expected the parties to have cooperated with the adjudicating proceeding. It must be borne in mind that the principles of natural justice, is not a one way street. It does not require the authority to keep adjourning the hearing till such time as the party condescends to attend the hearing and make submission. So far as the submission that no reasons were indicated in the Commissioner's order dated 18th December, 2007 rejecting the cross examination, cannot be accepted. This for the reason that the application which was made on 10th December, 2007 seeking cross examination gave no reasons as to why the cross examination of the investigating offices, audit officers and jurisdictional range officers are necessary for appropriate disposal of the notices, bearing in mind that they are not the witnesses upon which the show cause notices were issued/relied. In any case, the orders of the Commissioner dated 15th February, 2008 and 19th February, 2008 record reasons for non giving of cross examination. The impugned order of the Tribunal finds that the the documents relied upon by the revenue were given to the Appellants along with show cause notices and there was no evidence produced to show that evidence other then that relied upon in the show cause notices were being relied by the revenue. Besides, witnesses whose cross examination were sought were not the witnesses in support of the show cause notices. Thus, the view taken by the Tribunal in dismissing the Appellants' Appeal in the present facts, cannot be said to be perverse in any manner. Appeal dismissed.
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2019 (6) TMI 626
Imposition of penalty - service tax with interest paid on being pointed out before issuance of SCN - suppression of facts with intent to evade - INVOCATION OF section 73(3) of Finance Act - HELD THAT:- Appellant had not paid the service tax as the outward transportation under the category of GTA for the period from April, 2009 to December, 2011, this even though they had admittedly incurred expenses for the same. It is only during the course of EA 2000 audit that above non payment of service tax on the part of the Appellant was discovered by the revenue. This discovery on the part of the Revenue led the Appellant to deposit the service tax as well as interest thereon even before the show cause notice was issued by the revenue - In the circumstances, even if the tax and the interest on the same was paid before the issue of notice, it is not open to the Appellant to take benefit of section 73 (3) of the Act as the non payment of the service tax was on account of suppression with a malafide intention to evade payment of service tax. Thus in view of section 73(4) of the Act, the benefit of section 73 (3) of the Act, claimed by the Appellant would not be available. The contention that there was a bonafide belief that the Appellant are not liable to pay the service tax on outward transportation of goods and the GTA is not supported by any reasonable explanation. The bonafide belief that one is not liable to pay the tax has to be based on some facts on record which led to the belief - Thus, it is not possible to accept the contention that the Appellant had bonafide belief of for non payment of tax, so as to invoke section 80 of the Act. Appeal dismissed - decided against appellant.
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2019 (6) TMI 625
Maintainability of appeal - Method of Valuation - sale to related as well as unrelated parties - Whether in the facts and in the circumstances of the case and in law, the Tribunal was right in holding that Rule 9 read with Rule 8 of Valuation Rules, 2000 is not applicable, since the Respondent did not sell its 100% production to or through related person? - HELD THAT:- The issue arising in these Appeals relates to appropriate valuation of goods sold by the Respondent on the application of Central Excise Valuation (Determination of price of excisable goods) Rules, 2000. Thus, the issue clearly relates to valuation of good and its appeal to this Court would not be maintainable in view of Section 35G of the said Act. This as the above Section 35G of the Act specifically excludes the jurisdiction of this Court to entertain Appeals, inter alia, on question having relates to valuation of goods. Thus, these appeals are not maintainable before this Court. These Appeals are disposed of as not maintainable before this Court.
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2019 (6) TMI 624
Invocation of extended period of Limitation - Valuation - inclusion of Product Development Charges (PDC) received in the value of the goods sold to the customers - suppression of facts or not - change of opinion - HELD THAT:- Such PDC receipts have been received and properly accounted for and duly disclosed since 2007-2008, which period was audited in the earlier audit conducted in November, 2008. However, no such objection was taken by the Revenue at that time. Thus, the present show cause notice, pursuant to the subsequent audit, is only by way of change of opinion on the part of the Revenue. The invocation of extended period of limitation is not available to the Revenue on the basis of the change of opinion on the same facts and circumstances - the show cause notice is held to be not maintainable for invocation of extended period of limitation. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (6) TMI 623
Reversal of Input Tax Credit - TNVAT ACT - fervent plea made by the writ petitioner is that some time may be granted to the writ petitioner to file objections with supporting documents now - HELD THAT:- Considering the peculiar facts and circumstances of the case and considering the undisputed legal position that the assessment in such cases have to necessarily be independent of proposal given by the Enforcement Wing Officers coupled with the fervent plea made by the writ petitioner that they will file objections together with documents now, this Court directs to set aside the impugned assessment orders - petitioner shall file objections together with all supporting documents within a period of four (4) weeks from the date of receipt of a copy of this order along with payment of 15% of disputed tax - petition disposed off.
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2019 (6) TMI 622
Principles of Natural Justice (NJP) - though time was sought for and several opportunities were given for filing objections, the same has not been effectively utilized by the petitioner - HELD THAT:- After the writ petitions were heard out for some time, as much as the writ petitions were taken up for disposal by consent, it was agreed by both counsel that an order can be passed by consent to the effect that the petitioner Assessee will be given an opportunity to submit all the records within a prescribed time frame subject to the petitioner paying 15% of the disputed tax (obviously excluding penalty) as per the amount set out in the respective impugned orders. The impugned order of assessment in each of these writ petitions are set aside and the matter is remanded back to the sole respondent for assessment afresh - Petition allowed by way of remand.
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Indian Laws
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2019 (6) TMI 621
Maintainability of the review petition - three documents unauthorizedly removed from the office of the Ministry of Defence, Government of India - Production of evidences - right to information - claim for privilege - HELD THAT:- In this case in fact, the documents in respect of which the privilege is claimed are already on record. Section 123 of the Evidence Act in fact contemplates a situation where party seeks the production of document which is with a public authority and the public authority raises claim for privilege by contending that the document cannot be produced by it. Undoubtedly, the foundation for such a claim is based on public interest and nothing more and nothing less. The documents in question have been published in The Hindu , a national daily as noticed in the order of the learned Chief Justice. It is true that they have not been officially published. The correctness of the contents per se of the documents are not questioned. Lastly, the case does not strictly involve in a sense the claim for privilege as the petitioners have not called upon the respondents to produce the original and as already noted the state does not take objection to the correctness of the contents of the documents. The request of the respondents is to remove the documents from the record. In regard to documents which are improperly obtained and which are subject to a claim for privilege, undoubtedly the ordinary rule of relevancy alone may not suffice as larger public interest may warrant in a given case refusing to legitimise what is forbidden on grounds of overriding public interest. In the writ petition out of which the review arises the complaint is that there has been grave wrong doing in the highest echelons of power and the petitioners seek action inter alia under the provisions of Prevention of Corruption Act. The order of the learned Chief Justice upheld.
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