TMI Tax Updates - e-Newsletter
July 1, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Articles
Notifications
Central Excise-
20/2017 - dated
30-6-2017
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CE (NT)
Seeks to notify the new CENVAT Credit Rules, 2017
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19/2017 - dated
30-6-2017
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CE (NT)
Seeks to notify the new Central Excise Rules, 2017
Companies Law-
F. No. 16/61/2016-Legal - dated
29-6-2017
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Co. Law
Companies (Removal of Difficulties) Order 2017
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F. No 1/5/2016-CL-V - dated
29-6-2017
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Co. Law
Companies (Transfer of Pending Proceedings) Second Amendment Rules, 2017
Customs-
33/2017 - dated
30-6-2017
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ADD
Seeks to Extend the applicability of Anti anti dumping duty imposed vide the Customs notification No. 34/2012- Customs (ADD) concerning imports of a Soda Ash a originating in or exported from China PR, EU, Kenya, Pakistan, Iran, Ukraine and USA
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32/2017 - dated
29-6-2017
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ADD
Seeks to impose ADD on the imports of Pentaerythritol originating in or exported from China PR for a period of five years
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26/2017 - dated
29-6-2017
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Cus
Seeks to amend Customs Exemption notifications for various export promotion schemes
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62/2017 - dated
30-6-2017
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Cus (NT)
Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg
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61/2017 - dated
29-6-2017
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Cus (NT)
Shipping Bill (Electronic Declaration) (Amendment) Regulations, 2017
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60/2017 - dated
29-6-2017
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Cus (NT)
Shipping Bill and Bill of Export (Forms) Regulations, 2017
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (6) TMI 1159
Exemption claimed under the DTAA - Whether the transaction in question, i.e., sale of shares of Indian Subsidiary to the Singapore based company was in principle taxable in India or not? - Held that:- Tribunal disagreed with the opinion of the AO and the CIT(A) in this regard. The Tribunal found that Section 9(1)(v) of the Act had no applicability and therefore, the interest could not be said to have accrued or arisen or deemed to have accrued or arisen in India. The Tribunal accordingly held that the interest paid by the non-resident to the assessee company abroad was ineligible to be brought to tax under Section 9 of the Act. The opinion of the AO that this interest was paid on account of a transaction involving the sale of a capital asset in India was not accepted by the Tribunal as the said interest was paid by Ascendas to compensate for the delay in remitting the sale consideration and it could not be considered to be part of the sale consideration. The Tribunal further opined that even if it were to be considered as part of the sale consideration, it would be exempt under the DTAA and therefore, either way, the interest received by the assessee company abroad from the non-resident could not be brought to tax in India. Whether applicability of Article 13(4) of the DTAA was raised before the CIT(A) or the Tribunal ? - Held that:- The fact remains that the AO, having initially opined that the inclusive clause in Article 13(4) of the DTAA would be applicable to the transaction thereby making it taxable in India, thereafter accepted the plea of the assessee company that it was not applicable. This acceptance by the AO is explicit from the assessment order. Having agreed with the assessee company on this aspect, the AO held that Article 13(1) of the DTAA would be applicable to the transaction. This finding, which was confirmed in appeal by the CIT(A), is now sought to be discarded by the revenue. The learned senior standing counsel fairly concedes that Article 13(1) was wrongly applied by the authorities to the transaction and contends that it is Article 13(4) which would have application, as the exclusionary clause therein would not apply. The record however reflects that this issue was never raised by the revenue before the Tribunal. Without a factual finding as to whether the immovable property of VITP Limited was property in which its business was carried on, the question of applying one or the other parts of Article 13(4) at this stage would not arise. In consequence, the contention of the learned senior standing counsel that interpretation of Article 13(4) of the DTAA is purely a question of law does not merit acceptance. Therefore, the issue of applicability of Article 13(4) of the DTAA to the subject transaction, so as to make it taxable in India, cannot be permitted to be raised at this late stage. Whether the interest paid to the assessee company by Ascendas is taxable in India? - Held that:- agreement contemplated extension of the closing date by the parties. It appears that the closing date, which could be mutually extended, was so extended as recorded in the letter dated 15.02.2005 addressed by Ascendas to the assessee company. As consideration for such extension of the closing date, Ascendas undertook to pay interest at 7% per annum on the sale consideration, payment of which stood deferred consequent to the extension of the closing date. In effect, payment of the said interest did not partake the nature of penalty charges as it was not penal in character, in any manner. Therefore, Article 11(1) of the DTAA applied on all fours, and irrespective of whether such interest accrued or arose or is deemed to have accrued or arisen in India under Section 9(1)(i) of the Act, it stood exempted from taxation in India under the DTAA. The finding of the Tribunal to this effect therefore does not warrant interference.
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2017 (6) TMI 1158
Declining interest on refund of TDS to the petitioners - Held that:- We are of the view that the delay up to the date of filing the petition before CBDT i.e., 26.02.2008 is attributable to the petitioners and they are not entitled to claim interest on refund until this date but the delay thereafter had essentially been on the part of the respondents; and it had been squarely against the plain statutory provisions as also against the spirit of law that the respondents chose to deny interest altogether to the petitioners. As observed, the right of receiving interest is available to the petitioners as per the statute and nothing of any estoppel could be considered operating against the petitioners over the statutory provisions contained in Section 244-A of the Act. Thus, we are clearly of the view that the impugned orders in so far the respondent No.1 had declined the payment of interest over the refundable amount of tax and consequential denial of interest in the impugned assessment orders cannot be approved and in modification of the impugned orders, the petitioners deserve to be allowed interest on the refundable amount of tax w.e.f. 26.02.2008. Declined refund of TDS for want of confirmation from the deductors - Held that:- No reason that refund of the said amount of ₹ 11,44,821/- was denied to the petitioners in the aforesaid assessment orders dated 30.12.2013. The claim of the petitioners in this regard deserves to be allowed. Entitlement to compensation for delayed payment of interest in the form of interest over interest - Held that:- The peculiar circumstances of the present case, as already noticed, had been that the initial long delay is attributable to the petitioners themselves. The other part of delay in ordering and making refund is adequately taken care of by the amount of interest, which the petitioners are held entitled to w.e.f. 26.02.2008. Though accepting the claim for refund in the assessment orders dated 30.12.2013 but issuing refund cheques in the month of May, 2014 cannot be appreciated but, in the overall circumstances of this case, we find no reason to award any further interest over the statutory interest to the petitioners. This part of the claim of the petitioners is, therefore, declined.
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2017 (6) TMI 1157
Treatment to sale considerations - capital gain or business income - Held that:- Decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Groz-Beckert Saboo Ltd. (1978 (11) TMI 2 - SUPREME Court) wherein an assessee converts his capital assets into stock-in-trade and starts dealing in them, the taxable profit on the sale must be determined by deducting from the sale proceeds the market value at the date of their conversion into stock-in-trade and not the original cost of the assessee. As in the case of M/s. Essorpe Mills Ltd. and M/s. Essorpe Holdings Pvt. Ltd Versus DCIT [2013 (7) TMI 996 - ITAT CHENNAI] wherein the revenue has accepted the sale of 50% of the same property by the Essorpe Holdings Pvt. Ltd., to an extent of 5.075 acres of land for the assessment year 2009-10, directing the Assessing Officer to apply the provisions of Section 45(2) of the Act and compute the capital gains upto to the date of conversion into stock in trade, and thereafter on actual sale of the land i.e. the difference between the value of sale and stock in trade to be considered as business income.
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2017 (6) TMI 1156
Cost of improvement eligible for deduction u/s 48(2) - cost of the new asset which is provided to RFC on long term irrevocable lease - Held that:- Hon’ble Mumbai High Court in the case of CIT Vs. Piroja C. Patel reported in [1999 (3) TMI 38 - BOMBAY High Court] held that payment made to hutment dwellers for vacation of property amounted to cost of improvement and accordingly allowable as expenditure within the meaning of section 48 r.w.s. 55 of the I.T. Act, 1961. Thus we are of the considered view that the cost of the new asset which is provided to RFC on long term irrevocable lease against the vacation of assessee’s property from its possession has a direct nexus with the property sold during the year and therefore the cost of ₹ 1,01,97,208/- paid by the assessee for the acquisition of new property is the cost of improvement eligible for deduction u/s 48(2) of the Act out of the total sale consideration for the purpose of computing the capital gain. Accordingly the Ground is allowed in favour of assessee.
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2017 (6) TMI 1155
Disallowance u/s 10A - exclusion of payments made for import of goods and services from export turnover and exclusion of foreign travel related cost incurred in foreign currency from the export turnover - Held that:- As decided in ITO Vs. Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] for the purpose of applying the formula under sub-s. (4) of s. 10B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula. The appeals filed by the Department are thus dismissed. Disallowance u/s 14A - Held that:- We find lot of force in this argument of Ld. AR and accordingly admitting the additional evidence and direct the Ld. AO to verify the claim of the assessee in this regard and make disallowance accordingly without resorting to Rule 8D of the Rules in these facts and circumstances of the case. W also find lot of force in the arguments advanced by the Ld. AR that in any case, investments yielding taxable income need to be excluded while computing disallowance under Rule 8D of the Rules. However, this finding becomes infructous in view of our earlier directions given herein above. Disallowance u/s. 14A in the computation u/s. 115JB - Held that:- While computing the “Book Profit” of the company under the provisions of section 115JB of the Act; any disallowance made under the normal provisions of the Act also cannot be given effect to for arriving at the “Book Profit” for the purpose of Section 115JB of the Act. Thus we direct the Ld. AO not to make any disallowance u/s. 14A of the Act while computing book profits u/s. 115JB of the Act. Whether disallowance made u/s. 14A of was only on account of disallowance of business expenses of the assessee and thereby correspondingly would only increase the business profit of the assessee which would in turn consequently increase in the claim of deduction u/s. 10A ? - Held that:- The assessee was entitled to exemption u/s. 10A with reference to addition or disallowance of various payments, as the plain consequence of the disallowance and add back made by the Assessing Officer is an increase in the business profits of the assessee and the same to be considered for the purpose of computation of deduction u/s. 10A of the Act. Adopting the similar principles, we are inclined to direct the Assessing Officer to consider the disallowance u/s. 14A r.w.Rule 8D as part of business profit so as to compute deduction u/s. 10A of the Act. Disallowing the fringe benefit tax for the purpose of computing book profits u/s. 115JB - Held that:- We direct the Ld. AO to grant deduction for fringe benefit tax while computing book profit u/s. 115JB of the Act. Accordingly, raised by the assessee is allowed.
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2017 (6) TMI 1154
Addition u/s 40A - Held that:- As per the terms of the contract, the amount has to be paid on the same day and given that there was no evening branch of any bank at Bayana, the assessee was left with no option but to make payment in cash and hence the case of the assessee is covered under Rule 6DD(g) of the Income Tax Rules. On perusal of the said rules, it is provided therein that where the payment is made in a village or town which on the date of such payment is not served by any bank to any person who ordinarily resides or is carrying on any business profession or auction in any such village or town, it shall be considered as an exceptional circumstance for making the cash payment. CIT(A) has given a finding that both the buyer and seller are functioning in an area where ample banking facilities are available. The said finding has not been controverted by the assessee. Further, the Rules provides that on the date of payment, the place where the payment is made is not served by any bank. The Rules however have not provided for a situation as in the instant case where even though the place is served by the bank but at the relevant point in time (evening) when the payment is made, whether the place is served by the bank or not. In absence of the same, we are unable to accede to the contention of the ld. AR in respect of payment amounting to ₹ 2,13,314/- covered under Rule 6DD (g) of the Income Tax Rules. Accordingly, the assessee deserves relief to the extent of only ₹ 79,392/-. Addition on profit earned on unaccounted sales - Held that:- Assessing Officer has worked out the unaccounted sale based on the impounded papers which clearly show the quantity of the material, rate, date & name of the party. Therefore, the contention of the ld. AR that these were rough estimates cannot be accepted and we accordingly confirmed the unaccounted sales as worked out by the Assessing Officer at ₹ 13,37,586/-. Regarding estimation of GP rate on the unaccounted sales, the ld. CIT(A) has applied the GP rate which is otherwise offered by the assessee herself in respect of accounted sales recorded in the books of accounts for the year under consideration. Where the GP rate of the same year is available, there is no justification for applying the average GP rate for last 3 years as done by the Assessing Officer. We accordingly, confirmed the action of the ld. CIT(A) in confirming the profit earned on unaccounted sales amounting to ₹ 4,14,652/-.
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2017 (6) TMI 1153
Difference between the sale consideration received by the appellant and the value computed by the Valuation Officer u/s 50C(2) - Held that:- The property was inspected by the Valuation Officer and it has been specifically mentioned in Column 3.4 that the property is situated about 300 to 400 Mts. from the main road, containing hill/slope are touching the boundary of Adivashi hutments. The size of the land is also not square and touching the big nalla. The method adopted by the Assessing Officer is comparison of stamp duty/ready reckoner 2007 and the sale instances adopted for all these properties. We have also perused the sale instances wherein, the valuation comes to ₹ 192.36 per Sq. Mtr, whereas, in the case of the assessee, the valuation has been adopted towards higher side. Considering the totality of facts, we find force in the explanation of the assessee, therefore, direct the Assessing Officer to delete the addition, because, the valuation adopted by the Valuation Officer does not depicts the true facts and the lacunas and explained by the assessee were not considered while adopting the value of the plot. The Valuation Officer adopted the rates of the property towards higher side quoting the sale instances, which are not of similar land. Even otherwise, the points quoted/explained by the assessee were conveniently ignored. Thus, this ground of the assessee is allowed and the addition made on this count is directed to be deleted.
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2017 (6) TMI 1152
Addition of return of share application money - Held that:- Revenue has nowhere doubted the fact that the funds flew towards the said concern through the very same bank account of the assessee. Thus find that the occasion to consider and ponder on the issue why its premises after a few years were found to be locked is not a relevant issue for the purposes of the present case. As noted the third party evidence showing flow of money to the said concern by way of the Bank statement of the assessee and again the flow back by RTGS from M/s D.U. Securities Pvt. Ltd. to the very same bank account where existence of M/s D.U Securities Pvt. Ltd. is not in doubt and the consistent unrebutted explanation that it was for share application money all fully support the claim of the assessee. Accordingly, in the afore-mentioned peculiar facts and circumstances, find that the addition on facts has wrongly been made and sustained and accordingly is directed to be deleted. - Decided in favour of assessee. Claim of sale of jewellery - Held that:- Considering the fact that the written submissions dated 16.08.2013 were filed before the CIT(A) as part of which have been reproduced in page 4 of the impugned order while considering the first ground it is also seen that it is accompanied by an affidavit of Smt. Santosh Devi, W/o-Late Sh. Dwarka Das, Aged 65 years and R/o-1/5265. Balbir Nagar, Shahdara, Delhi-110032 affirming the fact that ornament weight 440 grams was gifted by her to her son-in-law on 10.02.1989 i.e. date of his marriage anniversary. The said affidavit is dated, attested and notarized on 25.03.2013. There is nothing on record to rebut the fact that the specific jewellery was not sold to M/s Gupta Jewellers P.Ltd. whose M.D. as per the claim of the assessee itself was produced for cross-verification before the AO. This assertion of fact in the assessment order also stands unrebutted. In these circumstances, find no justification for denial of assessee’s claim. Being satisfied by the consistent explanation offered and supported by affidavit of the donor on record alongwith copy of the Bill of M/s Gupta Jewellers Pvt. Ltd. through whom the jewellery was sold, I find that the addition on facts has wrongly been made and sustained. Accordingly, the addition is directed to be deleted.- Decided in favour of assessee.
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2017 (6) TMI 1151
Reopening of assessment - interest income from FDR - Held that:- We find that in the instant case the Assessing Officer completed the reassessment first time on 22/12/2006 and there is no change in the facts of the interest income from FDR, reopening of the reassessment dated 22/12/2006, amounts to change of opinion and which is not permitted by law. In the instant assessment year, the first reassessment was completed under section 147 of the Act and four years had expired from the end of the relevant assessment year on 31/03/2007, therefore, the reassessment completed on 22/12/2006 could not have been reopened after 31/03/2007 except in the event of failure by the assessee in disclosing fully and truly all material facts. The Assessing Officer in the reasons recorded has not pointed out any such failure on the part of the assessee in disclosing material facts. Thus invoking the provision of section 147 second time reassessment could not have been made in the case of the assessee. - Decided in favour of assessee.
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2017 (6) TMI 1150
Non-service of notice u/s. 143(2) - Held that:- It is not clear from record in the instant case whether there was proper service of notice supported by proof of service or there was deemed service of notice as observed in the above decision or there was no service at all. The ld. DR has only reiterated the contents of impugned order. In presence of all these facts, in our opinion, it will be appropriate in the interest of justice to restore the issue to the file of AO to decide the same afresh as per law after confronting the proof of service of notice to the assessee, which is stated to be available on assessment record as per remand report. In case, the statutory notice is found properly served on the assessee as per law, the assessee would not be entitled to any relief, but if it is found otherwise, the assessment order so passed, would be rendered null and void, as held in various judicial pronouncements. Needless to say, the assessee shall be given reasonable opportunity of being heard. Accordingly, the appeal of the assessee deserves to be allowed for statistical purposes.
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2017 (6) TMI 1149
Allowability of interest expenditure u/s. 57(iii) - Held that:- The assessee’s funds have been mostly utilized for loans and advances to various parties from where the assessee has earned interest income of ₹ 16,22,79,443/-. The assessee has also paid interest on secured and unsecured loans. Once the funds have been utilised for giving loans and advances to the parties on which interest income has been earned,then ostensibly cost of funds in the form of interest payment has a direct nexus with the earning of such an income. We are unable to appreciate the blanket observation of the AO that funds lying with the assessee ware not identifiable and the assessee is unable to prove the nexus. Once, both the availability and application of funds are evident from the balance sheet, then there is apparently direct nexus between earning of income from deployment of funds and expenses incurred on cost of funds. Accordingly, the assessee is eligible for claim of interest expenditure u/s. 57(iii) and the same is directed to be allowed. Addition on difference between sale and purchase - addition stands enhanced by the ld. CIT(A) by taking 1% profit on the sales figure - Held that:- Such an enhancement by the ld. CIT(A) admittedly is without complying the mandatory requirement of subsection (2) of section 251 which provides that enhancement of income by first appellate authority cannot be made without giving notice to the assessee. Consequently, such an enhancement of income cannot be sustained. Accordingly, we direct the deletion of enhanced amount of ₹ 5,52,969/- and thus, ground no. 6 is allowed.
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2017 (6) TMI 1148
Computation of long term capital gains on sale of hotel land and building - action of Assessing Officer in making reference under section 55A to the DVO to determine the Fair Market Value of property as on 01.04.1981 - Held that:- The issue arising in the present appeal is identical to the issue before the Tribunal in co-owner’s case and following the same parity of reasoning, find there is no merit in computation of income in the hands of assessee as determined by the Assessing Officer. The reference made under section 55A of the Act by the Assessing Officer to the DVO to determine the Fair Market Value of property as on 01.04.1981 which was worked out to be lesser than the value declared by the assessee on the basis of Registered Valuer’s Report, is not warranted. CIT(A) is set aside and the Assessing Officer is directed to delete the addition made on this account. The grounds of appeal raised by the assessee are thus, allowed.
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2017 (6) TMI 1147
Estimation by Valuation Officer - validity of assessment - Held that:- As law stood as on this assessment years under consideration, Section 142A cannot be applied and no reliance can be placed on that provisions for these assessment years. Consequently, the assessments framed on the said DVO’s report cannot be upheld. In view of this, we are inclined to annul these assessments for all these three assessment years which is wholly based on DVO’s report which was obtained under Section 142A of the Income Tax Act. Accordingly, all the three appeals for assessment years 1995-96, 1996-97 & 1997-98 are allowed. Since we have quashed the assessments itself, we are not going into the other arguments and grounds raised by the assessee as well as by department in these appeals. Levy of penalty u/s 271(1)(b) - Held that:- The assessment order for the year under consideration was passed with the participation of the assessee’s counsel. Further, the penalty was levied for non- reply of notice dated 03-01-2006 posting the case for hearing on 16-01-20016. However, there is no reference of assessee’s failure to comply with this notice in the assessment order. Thus, it leads to conclusion that the assessing officer was able to complete the assessment u/s 143(3) though assessee has not complied this notice and no prejudice caused to A.O. In our opinion, it is not appropriate to levy penalty mechanically for such technical breach of provisions of the act. Accordingly, we are of the opinion that this is not a fit case to levy penalty u/s 271(1)(b) of the act and we delete the penalty levied under Section 271(1)(b) of the Act by assessing officer and confirmed by the CIT(A).
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2017 (6) TMI 1146
Take closing WDV of the assets in the preceding year as the opening of WDV in the present year - Held that:- Respectfully following the decision of Co-ordinate Bench for Asst. Year 2007-08 we are of the considered opinion that this is settled position of law that the closing WDV of the preceding year has to be adopted as opening WDV of the present year and we direct the Assessing Officer to pass necessary order in the light of above discussion after providing reasonable opportunity of being heard to the assessee. Levy of interest under section 234B - Held that:- Interest u/s 234B/234C would not have been charged on the assessee on the increase in total income resulting from retrospective amendment to section 43(6) of the Act. Accordingly, this ground of assessee is allowed. Addition u/s 41 - Held that:- For application of such Section 41 (1) of the Act, therefore, what is primarily required is that there is allowance or deduction made by the assessee in respect of loss, expenditure or trading liability incurred by the assessee. In the present case, as held by the CIT [A] as well as the Tribunal, what the assessee did was only make a provision for a possible expenditure or liability. It was thus neither an allowance nor deduction, in any case, not for any loss, expenditure or trading liability incurred by the assessee. In that view of the matter, the Tribunal correctly held that Section 41 (1) of the Act would not apply. Further, we have noticed that CIT (A) has permitted the Assessing Officer to re-verify whether any deduction towards such provision was allowed in the assessment years 2003-04 to 2007-08. He further provided that if any amount of such provision is found allowed, for the said years to that extent, the provision on written back is to be taxed under Section 41 (1) of the Act. This has also been confirmed by the Tribunal. This is one more ground to convince us not to interfere. No reason to interfere with the order of ld. CIT(A) deleting the addition made u/s 41(1) of the Act towards provisions written back. Accordingly, this ground of Revenue is dismissed.
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2017 (6) TMI 1145
Addition u/s 69C - bogus purchases - estimation of profit - Held that:- The suppliers stated in their affidavits before the Sales Tax authorities that they were merely engaged in supply of bills for commission and therefore, they never supplied or delivered the material to the buyers. The reason being that, the revenue never doubted the sales and AO never disturbed the sales account of the assessee in the year under consideration, addition of entire purchases is not valid. Therefore, the addition of entire such purchases as done by the AO is not correct and thus, the decision of the CIT(A) in deleting the same is upheld. Resultantly, the appeals filed by the revenue are decided protanto. The profit portion of the suspected purchases is required to be taxed. We proceed to apply the same the facts of the present case. Genuity of purchases - Held that:- In the present case, considering the affidavits failed by the suppliers before the Sales Tax authorities and the enquiry results u/s 133A, the onus is on the assessee to demonstrate the facts with the evidences. Merely stating that the purchases are genuine and quality of the contract is undisputed by the government is not enough and therefore, the same are unacceptable. To that extent, the arguments of the assessee's AR are dismissed. Correctness of adopting 8% of suspected purchases for addition by FAA - Held that:- It is the claim the assessee without prejudice that the profit rate, if any, should be restricted to the said profit internal rates. But the same cannot be accepted considering the said Gujarat High Court's judgement in the case of Simit P Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) wherein 12.5% is confirmed. We also cannot confirm the ill conceived profit rate of 8% as the same is not in tune with the reasoning given by the Hon'ble HC/Tribunal in the case of Simit P Sheth (supra). As such, AO never applied his mind to this aspect of the profit rate on the suspected purchases. CIT (A) did not remand this aspect to the file of the AO before adopting the profit rate of 8%. AO shall note that the 12.5% was confirmed in the case of Simit P Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT ) when its internal profit is only 3.56%. It is a case of Steel Trader and the said profit rate may not apply to the facts of the present who is in the business of Civil Contractor / real estate. In the remand proceedings, AO shall grant reasonable hearing opportunity to the assessee before arriving at the reasonable profits on the suspected purchases as applicable to the facts of this case. Assessee is also allowed to supply the AO appropriate documents and data to arrive at appropriate profit rate. With the said directions, we allow the grounds of both the assessees for statistical purposes.
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Customs
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2017 (6) TMI 1133
100% EOU - warehousing period - extension of warehousing period - delicensing of warehouse - Held that: - When any warehouse is delicensed, the goods may be deposited therein without payment of duty. But if such goods continued to be stored therein without payment of duty even after the warehousing period is over or the warehouse is de-licensed, the goods are deemed to have been removed improperly in violation of provision of Section 71 of the Customs Act, 1962. Under such circumstances, the duty on the said goods is liable to be discharged in terms of provisions of Section 72 (1) (b) ibid. Similar provision exists in Central Excise Law also in respect of goods procured duty free by EOUs. Since in this case the goods deemed to be removed by HCL, were not acquired into any other warehouse by Sykes, the responsibility for paying the duty lies upon the consigner i.e. H.C.L - it would suffice, if the appellant is asked to pay interest on the duty liabilities for the above period in respect of both imported and indigenous goods. The necessity for EOUs for separately obtaining extension of warehousing period for capital goods each time has been done away with vide Board Circular No.7/2005 Cus. dated 14.02.2005 - there is no justification for either demand of duty or confiscation of the goods lying in the bonded warehouse. Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 1132
Jurisdiction - power of Directorate of Revenue Intelligence (DRI) to issue SCN - Held that: - similar issue has come up before this Tribunal on many earlier occasions also. The Tribunal remanded the cases to the original adjudicating authority - appeal allowed by way of remand.
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2017 (6) TMI 1131
Jurisdiction of Directorate of Revenue Intelligence (DRI) - power to issue SCN - Held that: - sub-section 11 was inserted under section 28 of the Customs (Amendment and Validation) Act, 2011 dated 16.09.2011, assigning the functions of proper officers to various DRI officers with retrospective effect - Later on, i.e. for the period subsequent to the amendment, the matter i.e. the DRI officers having the proper jurisdiction to issue the SCN or not had come up before the Hon’ble Delhi High Court in the case of Mangali Impex vs. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT], and the High Court inter alia, held that even the new inserted section 28(11) does not empower either the officers of DRI or the DGCEI to issue the SCN for the period prior to 8.4.11. Matter remanded to the original adjudicating authority to first decide the issue of jurisdiction after the availability of Hon’ble Supreme Court decision in the case of Mangli Impex and then on merits of the case but by providing an opportunity to the assessee of being heard - appeal allowed by way of remand.
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Corporate Laws
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2017 (6) TMI 1130
Scheme for rehabilitation of the Company - Held that:- In view of the facts and circumstances of the case, simply because, the Promoters have filed civil suit or that two of the promoters may be representing their group have now filed the instant petition, it would not be appropriate to order exit to the petitioners especially when the main contention raised by learned petitioners' counsel during arguments was basically confined to putting the appointment of R-9 as an Executive Director to test and approval of the remunerations to him. The present is not a case, where functioning of the company has come to a standstill as it is noticed that various decisions were taken by the company from time to time though the said decisions may be subject matter of challenge before this Tribunal. I am also of the view that simply because minority has been voted out on certain decisions, that cannot be considered to be the ground to order exit. Even the Investor cannot shirk from the responsibility of making all out efforts to make the business of the Company profitable. It was with this objective that the 'Investor' was inducted in the company's affairs by executing SHA. Thus, the Investor cannot be permitted to wholly replace the original shareholders/Promoters. In view of the above observations, I hold that the exit is not the appropriate course in this case. In view of above findings on various issues, the instant petition is partly allowed to the extent that agenda of continuation of L.K. Singh respondent No.9 as Director/Executive Director be placed in the meeting of the shareholders for approval along with his pay/emoluments/perks. For rest of the prayers, the instant petition is dismissed. It is directed that further continuation of Mr. L.K. Singh R-9 as Director/Executive Director/Whole time Director shall be subject to the approval of the shareholders meeting to be convened in terms of Section 152 of the Companies Act, 2013 and other applicable provisions of law.
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2017 (6) TMI 1128
Acts of oppression and mismanagement - allotment of the increased 10,000 equity shares - Held that:- When the petitioners have categorically stated that they were not served with any notice regarding the AGM meeting, dated 29.05.2008, it was duty of the respondents to place on record the documents to show that such notices were issued and also to place on record the copies of the minutes book of the said date. In the absence of such a material, the transfer of shares on the basis of meeting held on 29.05.2008 would be illegal and not binding upon the petitioners. The respondents should have placed on record the documents for showing the compliance of the aforesaid Articles of Association before accepting the transfer of shares in favour of Pawan Garg respondent and others, but such observations will not help the petitioners in the absence of impleading the other transferees of the shares as necessary parties. As already observed that in the absence of the necessary parties, this Tribunal would not be able to set aside the transfer made by R-2 to R-4. There is absolutely no reason forthcoming as to why all the transferees of the shares from R-2 to R-4 have not been impleaded as party despite the objections to this effect taken in the written reply filed in February, 2010 by R-1 and R-5 to R-9. List of the shareholders as on 29.05.2008 are given at page 65 and 66 of the reply of contesting respondents, which is in consonance with the plea taken in paragraph 6 (g) of the written statement. No merit in the instant petition, which is hereby dismissed
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Insolvency & Bankruptcy
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2017 (6) TMI 1129
Petition under Section 9 of The Insolvency and Bankruptcy Code, 2016 - Resolution Professional appointment - Held that:- This Adjudicating Authority, by this order passed under sub-section (5) of Section 9 of the Code, is admitting this Petition. This Adjudicating Authority is also of the view that it is necessary to make a Reference to the Insolvency and Bankruptcy Board of India established under the Code to recommend the name of an Insolvency Professional, against whom no disciplinary proceedings are pending, to this Adjudicating Authority, within ten (10) days from the date of receipt of the Reference. Section 13 of the Code enjoins upon the Adjudicating Authority to exercise its discretion to pass an order to declare a moratorium for the purposes referred to in Section 14, to cause a public announcement of the initiation of corporate insolvency resolution and call for submission of claims as provided under Section 15 of the Code. Sub-section (2) of Section 13 says that public announcement shall be made immediately after the appointment of Interim Resolution Professional. In the case on hand, simultaneous with the admission order, this Adjudicating Authority is not going to appoint Interim Resolution Professional because the Applicant did not propose the name of Interim Resolution Professional. But, this Adjudicating Authority is going to appoint Interim Resolution Professional after the same is recommended by the Insolvency and Bankruptcy Board of India under Section 16(4) of the Code.
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Service Tax
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2017 (6) TMI 1144
Penalty u/s 78 - valuation - reimbursable expenses - extended period of limitation - Held that: - this Tribunal in the case of Amit Sales [2016 (9) TMI 98 - CESTAT NEW DELHI] has clearly held that the reimbursable expenses cannot be added in the assessable value of the C & F services. Extended period of limitation - Held that: - there are no grounds stated in the SCN for invoking the provisions of proviso to Sub-section(1) of Section 73. Therefore, the said SCN is not sustainable for extended period. The matter remanded to the original authority to re-determine the service tax liability taking into consideration that the assessable value should not include reimbursable expenses during the entire period for determination of service tax liability and determine service tax liability within the normal period of limitation from the date of issue of the SCN - appeal allowed by way of remand.
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2017 (6) TMI 1143
Refund claim - N/N. 41/2007-ST dated 06.10.2007 - THC charges - bills of lading charge - origin haulage charges - repo charges - denial on the ground that these services are not covered under Port Service as the service providers are registered under different category of services - Held that: - irrespective of the classification of service provided by the service providers, the same should merit consideration as port service for the purpose of refund benefit, since such services were provided within the port of export - refund allowed. Refund claim - denial on the ground that Proper invoice not submitted (debit notes have not been prescribed as the valid document for the purpose of claiming refund of service tax - Held that: - Rule 4A ibid mandates that taxable service has to be provided on invoice, bill or challan, containing certain informations. If the debit notes issued by the service provider contained the desired information, the same should be considered as the valid document for the purpose of extending the benefit contained in Notification dated 06.10.2007 - Since, the debit notes have to be verified by the original authority for ascertaining their contents, we are of the view that matter should go back to the original authority for necessary verification - matter on remand. Refund claim - CHA service - denial on the ground that Description of goods not mentioned in the invoices issued by CHA. Further, details of other expenses have not been furnished - Held that: - since the appellant claims that the invoice contained the reference of shipping bills and the description of goods, we are of the view that the matter should be verified to the original authority for verification of such aspect - matter on remand. Appeal allowed - part matter on remand and part decided in favor of assessee.
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2017 (6) TMI 1142
Mining activities - The activities undertaken by the appellant was considered by the department as categorized as taxable service under 'Site Formation and clearance, excavation and earth removing and demolition services' - Held that: - in an identical set of facts, this Tribunal in the case of Kanak Khaniz Udyog [2017 (3) TMI 1365 - CESTAT NEW DELHI] has held that services relating to mining provided prior to 01.06.2007 shall not be liable to service tax under the category of mineral service defined under Section 65(105)(zzzy) of the Finance Act, 1994 - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 1141
Refund claim - refund of the amount of service tax has been paid by mistake of law, which was otherwise not taxable - time limitation - whether the refund claim which is filed on ground of payment of Service Tax by mistake of law can be granted or not beyond one year under Section 11B of the Central Excise Act? - Held that: - the issue is no longer res integra as decided in the case of MILES INDIA LIMITED Versus ASSISTANT COLLECTOR OF CUSTOMS [1984 (4) TMI 63 - SUPREME COURT OF INDIA], where it was held that the order of the Customs, Excise & Gold (Control) Appellate Tribunal suffers from no infirmity. If really the payment of the duty was under a mistake of law, the appellant may seek recourse to such alternative remedy as it may be advised - appeal dismissed - decided against appellant.
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Central Excise
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2017 (6) TMI 1140
Refund claim - rejection on the ground of time limitation - Held that: - the amount of ₹ 47,49,715/- paid under protest by appellant on 22/03/2006 was not towards any duty adjudged against the appellant by any competent authority. The said amount was neither the duty liability arising out of manufacture nor arising out of any confirmed demand. Therefore, the said amount was Revenue deposit with Revenue. Since the demand raised in respect of said issue amounting to ₹ 48,90,461/- does not survive, the exchequer does not have right to keep the said amount with it - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 1139
Short payment of tax - utilisation of CENVAT credit during the default period - sub rule(3A) of Rule 8(1) - Held that: - The appellant for the default period i.e 1st may to 9th May, 2008. have not utilized any cenvat credit therefore proposal of the department for payment of duty in cash till the period 24-6-2008 does not hold good. In this fact, the demand of the duty in cash against utilization of the Cenvat credit for the period from 1st May, to 24 June, 2008 doe not sustain - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 1138
Clandestine removal - MS ingots - assessee claims that the entire case is booked on the basis of chits/ papers recovered from the premises of third party and nothing incriminating was found from the premises of M/s Nashik strips - natural justice - Held that: - the demands are mainly based upon the documents and records of third parties and none of the evidences was found from premises of M/s Nashik Strips. In such circumstances when M/s Nashik Strips has objected to statements of third parties and requested for cross examination the same should have been granted by the adjudicating authority. It also appears that the director of the Appellant factory has retracted his statement. Thus the adjudicating authority ought to have permitted the cross examination - the denial of cross examination of the persons requested by the Appellant M/s Nashik Strips is not correct and the same should have been granted as the demands were based upon third party records and statements. The adjudicating authority should have followed the provisions of Section 9D before placing reliance upon such statements and passing of the adjudication order. Matter remanded to adjudicating authority, who shall grant cross examination of the persons as requested by M/s Nashik Strips and shall decide the case De Novo - Appeal allowed by way of remand.
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2017 (6) TMI 1137
Waiver of penalty and interest - suo moto credit taken by appellant, which was reversed on being pointed out - Rule 6 of the CCR, 2004 - Held that: - Rule 14 states that the interest is chargeable on the amount either wrongly taken or utilized - Therefore even if the credit was not utilized, the interest is chargeable even on taking credit also therefore the interest is correctly chargeable as held by Hon'ble Supreme Court decision in the case of Union of India Vs. Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court] - interest waived. Penalty - Held that: - the issue whether 8% 10% the reversal is required in case of exempted goods supplied under N/N. 10/97 -CE was contentious. Initially the issue was decided in favor of the assessee in the case of Andhra Pradesh Paper Mills Ltd. [2004 (11) TMI 229 - CESTAT, BANGALORE] and subsequently the same was reversed by the Hon'ble Supreme Court in the case of Amrit Paper [2006 (7) TMI 7 - SUPREME COURT OF INDIA]. In this fact of the case, the penalty is not imposable - penalty waived. Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 1136
CENVAT credit - removal of capital goods after use - in terms of Rule 3(5) of Cenvat Credit Rules, 2004 whether an assessee is required to pay duty equal to the total amount of Cenvat Credit availed on capital goods or on transaction value when it is cleared after use? - Held that: - even though the machine was put to use, while clearing its nature of "as such" does not change and therefore the removal falls under Rule 3(5) of Cenvat Credit Rules, 2004 - as per Sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004 there is no dispute that the duty is required to be paid on the capital goods only when it is removed "as such" from factory premises of the assessee. As per undisputed facts of this case all the capital goods were admittedly cleared after substantial use - , in case of removal of used capital goods, the duty equal to cenvat credit availed cannot be leviable - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 1135
Penalty u/r 27 of CER, 2002 - appellants were alleged to have supplied unaccounted packing material to the manufacturers M/s Shyam Traders - whether invocation of rule 27 is justified or rule 26 should have been invoked? - Held that: - the imposition of penalty of ₹ 75 lakhs on the appellant through the said Order-in-Original dated 23.03.2007 was beyond the proposal of imposition of penalty under Rule 27 on the appellant through said show cause notice dated 20.10.2004. Therefore, imposition of penalty of ₹ 75 lakhs on the appellant through the above sated Order-in-Original is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 1134
SSI exemption - it appeared to Revenue that Fly Ash or Phospho Gypsum was not purchased and used by M/s Hilite in the manufacture of their final product and therefore they were not eligible to avail the said SSI Exemption - natural justice - Held that: - the said Notification 5/1999-CE dated 28/02/1999 entitles the manufacturer to clear goods at nil rate of duty if the said goods are containing more than 25% by weight of Fly Ash or Phospho Gypsum though the entire emphasis by Revenue was only on single commodity i.e. Phospho Gypsum and there was an attempt to establish that Phospho Gypsum was not used whereas there was no discussion on Fly Ash at all in the whole proceedings - Further, we find that Original Authority in Para 4.22 has held that opinion by Dr. Badri Prasad through letter dated 17/09/2007 was only an assumption which gives an impression that the Original Authority has tried to examine technical opinion without seeking any technical opinion from the competent wing of the Department i.e. CRCL. We are of the opinion that this matter needs to be remanded back to the Original Authority with a direction that the said Original Authority should refer said opinion dated 17/09/2007 given by Dr. Badri Prasad to CRCL and seek expert technical opinion about the correctness of opinion given by Dr. Badri Prasad - appeal allowed by way of remand.
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Indian Laws
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2017 (6) TMI 1127
Offence punishable under Section 138 - Held that:- The cheque was issued by the accused which was drawn on the account which was not belonging to the accused but someone else. It appears that the said account was of the father of the accused. In view thereof, it can safely be said that the ingredients of Section 138 are not attracted. Paragraph 2 of the complaint reveals that the cheque was issued from the account of the accused. However, the account number is not mentioned. In paragraph 3 of the complaint, it is mentioned that the cheque was issued for crediting the same in the account of father of the accused. The said fact makes amply clear that it does not attract the provisions of Section 138 of the N.I.Act. On careful scrutiny of the case, it appears that the loan transaction was with the father of the accused and the accused had handed over the cheque which was to be credited in the account of his father, to repay the outstanding amount due on his father and the said cheque was utilised by the bank authority for securing the dues of the accused from his account i.e. Account No. 0000226. Thus, the complainant has utterly failed to prove that the cheque was drawn on the account of the accused. The ingredients of section 138 of the N.I. Act are not proved by the complainant. The accused is therefore entitled for acquittal.
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