TMI Tax Updates - e-Newsletter
July 13, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Maintainability of Advance Ruling application - Classification of goods - goods in respect of which supply being, undertaken or proposed to be undertaken, should be existing - In the subject case applicant has submitted that they are proposing to manufacture the impugned product, which are presently not in existence. Thus their application is barred u/s 95 of the CGST Act.
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GST:
Interpretation of Statute - Renting of accommodation services - meaning of “Per Unit” - since they will be rending out the entire Villa, then each individual Villa may be treated as per unit’ - The two different clients will not be able to book the same villa and there will be no option of booking particular room of the villa. - the expression per unit” in the present case will be the entire villa.
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Income Tax:
Addition u/s 56(2) (viib) - shares issued to NRI mainly to encourage Foreign Investments - valuation of shares in compliance to Rule 11U - there is no finding of AO or CIT(A) on this aspect as to whether the said person from whom the amount in question was received by the assessee company was a resident in India or not in the present year.
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Income Tax:
Fall in GP rate - increase in cost of purchase - 95% of sales were made to related parties - Since no explanation was offered by the assessee before the AO regarding fall in GP rate AO has not estimated the income by totally disregarding the book results and he has only made an estimated addition because the assessee could not explain the reasons behind fall in GP rate particularly when the major sales to the extent of 95% are to the related parties
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Income Tax:
TP adjustments - Notional interest income on the loan (interest free) - the said notional interest income on the loans advanced by the assessee to its AE would be entitled to be adjusted against the expenditure incurred by the assessee by way of marketing service fees paid to its National Marketing Agency in India, i.e its NMC viz. ADSIL.
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Income Tax:
Disallowance of prior period expenses - Addition towards ESI payment - provisions of Section 43B of the Act which provides that certain expenditure / payments which are otherwise eligible for deduction under the Act shall be allowed as a deduction only in the year of actual payment irrespective of the year of accrual of such expenditure.
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Income Tax:
Denial of exemption u/s 11 & 12 - ‘Charitable Purpose’ as defined u/s. 2(15) - The mere fact that certain fee was charged by the assessee while rendering certain services and surplus was generated, the said fact alone, would not disentitle the assessee to claim the impugned exemption u/s 11 & 12 considering the fact that the primary objects of the assessee were charitable in nature
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Income Tax:
Penalty u/s 271(1)(c) - after learning about the serious irregularities in the activities of the aforesaid institute, acted in a bonafide manner, and in his return filed in compliance to notice issued u/s 148 of the Act, had withdrawn the claim of deduction u/s 35(1)(ii) that was earlier raised by him in the ‘Original’ return of income - there is nothing discernible from record which would conclusively prove to the hilt that the assessee had raised a false claim of deduction. - No penalty.
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Income Tax:
Deduction u/s 35(1)(ii) - Provisions of the Act are very clear that the payer (the assessee herein) would not get affected if the recognition granted to the payee had been withdrawn subsequent to the date of contribution by the assessee. Hence no disallowance u/s 35(1)(ii)
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Income Tax:
Reopening of assessment u/s 147 - When the notice issued under section 148 against the deceased person as well as the assessment framed by the AO in the name of the deceased assessee then the impugned assessment order passed by the AO is invalid for want of valid notice as well as the assessment framed against the dead person
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Income Tax:
Higher rate of tax @60% u/s 115BBE - though the alleged surrendered income is a business income but since assessee being individual having no limitation of earning income from sources other than for the objects of the business and also the assessee having not offered any explanation in the statement given during the course of survey which stands unrebutted, therefore the alleged unexplained/undisclosed income is liable to be taxed as income falling under Section 68 to 69D of the Act as applicable to the type of income and has been rightly taxed by Ld. A.O applying the higher rate of tax provided in Section 115BBE
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Customs:
Classification of goods - water signal / sensors, pressure sensors, heart film air mass meters / air mass sensors and temperature sensors - The appellants should be eligible to classify the goods under 9026 - Also, as it is not evidenced that the instruments do not have any mechanism to control or trigger, start or stop of the engine, in view of the HSN Explanatory Notes, they cannot be classified under 9032.
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Service Tax:
Extended period of limitation - Section 73(3) - even when an assessee has suppressed facts, the extended period of limitation can be invoked only when “suppression’ is wilful with an intent to evade payment of service tax. - The show cause notice could not have been issued as the Appellant had paid the service tax with interest before the service of the show cause notice and had also informed the Department of this fact.
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Service Tax:
Commercial Training or Coaching Services - appellant is a PSU mainly engaged in the activity of ship building and repair works - The lower authority seemed to have lost sight of the factual position that the subject courses have been approved by the Director General of Shipping, Ministry of Surface Transport, Govt. of India, in consonance with the provisions of the Merchant Shipping Act, 1958, a fact which was always available before them - There cannot be any iota of doubt to hold that the courses assumes to be of statutory nature and hence, qualifies as being “recognised under the law”
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (7) TMI 258
Revocation of cancellation order - rejection of first appeal - Section 107 of GST Act - HELD THAT:- The orders dated 27.5.2019 passed by the respondent no. 4 and 22.1.2020 passed by the respondent no. 3 are set aside. The application dated 10.5.2019 which was filed by the petitioner for the revocation of the cancellation order dated 16.4.2019 shall now be decided in accordance with law within a period of 15 days from the date of production of a copy of this order.
Petition disposed off.
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2020 (7) TMI 257
Reopening of portal for filing of Form GST TRAN-1 - transitional credit - HELD THAT:- List this petition after six weeks alongwith the records of Writ Tax No.887 of 2019 and Writ Tax No.338 of 2020 - Learned counsel for the respondents may seek instructions and if necessary file counter affidavit.
The respondents may in the meantime consider reopening of the portal and in the event the same is not feasible the respondents shall entertain the GST TRAN-1 of the petitioner manually and pass orders thereon after due verification of the credits as claimed by the petitioner.
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2020 (7) TMI 256
Revocation of cancellation order - rejection of first appeal - Section 107 of GST Act - HELD THAT:- The orders dated 22.1.2010 passed by the respondent no. 4 and 14.2.2020 passed by the respondent no.3 are set aside. The application dated 7.1.2020 which was filed by the petitioner for the revocation of the cancellation order dated 10.10.2018 shall now be decided in accordance with law within a period of 15 days from the date of production of a copy of this order.
Petition disposed off.
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2020 (7) TMI 260
Maintainability of Advance Ruling application - Classification of goods - Glass-fibre Reinforced Gypsum Board - benefit of the concessional rate of tax - Schedule II of Notification no - 1/2017 - Central Tax - HELD THAT:- As per Section 95 of the CGST Act, (a) “advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
Hence for the purpose of applying for advance ruling, one must raise questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to undertaken. Thus, the said section says that, in the case of goods, it is the supply being undertaken or proposed to be undertaken. It is not the case that the manufacture of goods may be undertaken or proposed to be undertaken. Thus, goods in respect of which supply being, undertaken or proposed to be undertaken, should be existing - In the subject case applicant has submitted that they are proposing to manufacture the impugned product, which are presently not in existence. Thus their application is also barred under Section 95 of the CGST Act.
The subject application is non-maintainable and is therefore liable to be rejected.
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2020 (7) TMI 255
Interpretation of Statute - Renting of accommodation services - meaning of “Per Unit” as specified under Chapter Section or Heading-9963 under entry no. 7 of the Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.
HELD THAT:- As per the submissions made by the applicant, that they are treating the entire Villa as one unit and therefore will give the same on rent to only one customer for any particular given date. In other words two different clients will not be able to book the same Villa for the same period i.e. if the particular Villa is booked by one client at a given date then another client will not able to book the same Villa on the same day - the applicant has no intention to rent out the rooms inside the Villa, individually and therefore there is no question of the individual rooms being treated as ‘per unit’ as per the above said Notification. The applicant’s representative, during the course of the hearing also admitted that, since they will be rending out the entire Villa, then each individual Villa may be treated as per unit’.
The ‘pattern of renting’ in relation to usage of the property provides the ‘context’ or ‘perspective’ in determination of unit of accommodation. In a hotel, a room constitutes ‘a unit’ whereas in a hostel, a bed may constitute ‘a unit’, as tariff is also declared accordingly. In the present case the applicant, themselves have mentioned that, rent is proposed to be offered to clients on per day basis for entire villa. The two different clients will not be able to book the same villa and there will be no option of booking particular room of the villa. Interested clients need to book the entire villa. Thus, it is crystal clear that villa per say is ‘indivisible unit’ in applicant’s business parlance, and the declared tariff is only for the villa as a whole.
Hence, the expression per unit” in the present case will be the entire villa.
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2020 (7) TMI 259
Permission for withdrawal of Advance Ruling application - Input Tax Credit - GST charged by the Vendors on expenses specifically incurred by us on behalf of Principal, the claim for which have been denied / disallowed by the Insurance Company - HELD THAT:- The Application in GST ARA Form No. 01 of M/s. Lfonds India Pvt. Ltd., is disposed of, as being withdrawn voluntarily and unconditionally.
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Income Tax
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2020 (7) TMI 250
Addition u/s 56(2) (viib) - shares issued to NRI mainly to encourage Foreign Investments - Whether the said person was resident in India or not - Whether valuation of shares is done fully in compliance to Rule 11U and there is no excess money is calculated? - HELD THAT:- If the person in question was not in India in the relevant previous year for 60 days or mor then such a person cannot be said to be a resident in India in that year. As per the copy of passport No. F5207571 submitted before us by learned AR of the assessee along with written submissions, it is seen that the name in the passport is “Vijaya” but as per the Assessment Order, the amount was received from Smt. Vijayalakshmi. This is also seen that passport copy was not submitted before the AO or CIT(A) and it is submitted before the Tribunal for the first time as an additional evidence. Hence, we feel it proper to restore this matter back to the file of AO for a fresh decision because there is no finding of AO or CIT(A) on this aspect as to whether the said person from whom the amount in question was received by the assessee company was a resident in India or not in the present year.
The AO is directed to examine this issue as per law and give a categorical finding as to whether the said person Smt. Vijayalakshmi from whom the amount in question was received by the assessee company was resident in India or not in the present year and thereafter, decide this aspect first as to whether the provisions of section 56(2)(viib) are applicable or not in respect of this amount in question received from Smt. Vijayalakshmi. If it is found that the provisions of section 56(2)(viib) are not applicable because the said person is not a resident in India in the present year then nothing more remains to be decided because in that situation, the provisions of section 56(2)(viib) cannot be made applicable in respect of this amount in question but if it is found that the said person i.e., Smt. Vijayalakshmi is a resident in India in the present year, then the whole issue should be examined and decided by the AO afresh. Assessee’s appeal stands allowed for statistical purposes
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2020 (7) TMI 249
Fall in GP rate - increase in cost of purchase due to appreciation of dollar rates - addition is made to plug the leakages in the gross under estimation of the gross profit and such addition is only about 1% of the total sales receipts since satisfactory explanation is not offered - HELD THAT:- This could not be established that there was any advance price agreement with the buyers and therefore, the assessee could not increase the selling price. This is also very important fact of the present case that 95% of the assessee’s sales is made to the sister concern - increase in cost is not only on account of increase in exchange rate of dollar but the purchase price in terms of dollar also has gone up because it is seen that the rate per meter was 1.33 US$ per meter during June to December 2007 and only in February to March 2008, the rate was 1.4 US$ per meter in the preceding year whereas in the present year, the purchase price was 1.4 US$ per meter up to September 2008 and during October to December 2008, it has further increased up to 1.54US$ per meter.
When the purchase cost is rising both in terms of rate per meter in US$ as well as the conversion rate of US$ into Indian rupees and the sale is mainly to the sister concerns that too without any agreed sale price in advance, the small addition made by the AO in the range of about 1% of the total sale value is neither excessive nor unreasonable. Since no explanation was offered by the assessee before the AO regarding fall in GP rate AO has not estimated the income by totally disregarding the book results and he has only made an estimated addition because the assessee could not explain the reasons behind fall in GP rate particularly when the major sales to the extent of 95% are to the related parties
Particularly this fact that 95% of sales were made to related parties at the old selling rate in spite of increase in purchase rate both in terms of price per meter in US$ and also the exchange rate of dollars, we hold that no interference is called for in the order of CIT(A). - Decided against assessee.
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2020 (7) TMI 248
Business connection /permanent establishment in India - India-Singapore Double Taxation Avoidance Agreement [DTAA] - primary business of the assessee is to make airline reservations for and on behalf of the participating airlines by using the CRS - fees in respect of its activity of providing airline reservations in India - HELD THAT:- Upheld the orders of the lower authorities and had concluded that the assessee was having business connection and PE in India. We find that though the assessee had raised a ground of appeal assailing the observations of the DRP that the assessee had a PE in India, but then, during the course of the hearing of the appeal no contention was advanced by the ld. A.R to support his aforesaid claim.
We thus following the orders passed by the coordinate benches of the Tribunal in the assesses own case [2018 (2) TMI 1767 - ITAT MUMBAI] uphold the order of the DRP that the assessee had a business connection/PE in India.
15% of the gross receipts pertaining to India bookings shall be the income attributable to the India operations of the assessee. Also, we follow the view taken by the Tribunal in the aforesaid preceding years that as the commission paid by the assessee to its NMC viz. ADSIL at 25% of its gross receipts pertaining to India bookings was higher than its income attributable to India, therefore, no part of the aforesaid income would remain in the hands of the assessee which could be brought to tax in India. As such, in terms of our aforesaid observations we allow the Ground of appeal raised by the assessee before us.
10% of the expenses reimbursed by ADSIL to be held as the business income of the assessee - HELD THAT:- As relying on own case [2018 (2) TMI 1767 - ITAT MUMBAI] we herein direct that 10% of the aforesaid amount be brought to tax as the business income of the assessee. At the same time, the assessee would be entitled for claiming ‘set off’ of the aforesaid amount against the commission payment made by it to its NMC viz. ADSIL. The Ground of appeal raised by the assessee is partly allowed in terms of our aforesaid observations.
Transfer pricing adjustment - USD denominated interest free ECB loan that was advanced by the assessee to its wholly owned subsidiary company in India, viz. ADSIL - HELD THAT:- We herein direct the A.O/TPO to take the ALP of the notional interest on the loan advanced by the assessee to ADSIL as per the LIBOR rate plus 2%.
Notional interest income on the loan (interest free) - alternative claim of the assessee that if the interest income (on interest free loan advanced to AE viz. ADSIL) was to be considered as part of its business income, there would not be any income chargeable to tax since the marketing fees paid by it to ADSIL would absorb the same - HELD THAT:- Loan as advanced by the assessee to its AE viz. ADSIL would be assessable as the income of the assessee which has a business connection/PE in India. At the same time, we are in agreement with the claim of the ld. A.R that the said notional interest income on the loans advanced by the assessee to its AE would be entitled to be adjusted against the expenditure incurred by the assessee by way of marketing service fees paid to its National Marketing Agency in India, i.e its NMC viz. ADSIL. The additional “Ground of appeal” raised by the assessee is thus disposed off in terms of our aforesaid observations.
Short credit of tax deducted at source (TDS) - HELD THAT:- A.R took us through the “Form 26AS” of the assessee company. In the backdrop of the aforesaid claim of the ld. A.R, we herein restore the issue to the file of the A.O with a direction to verify the factual position. In case the aforesaid claim of the assessee is found to be in order, then the A.O shall give credit for the short/deficit amount of TDS, involving no further loss of time. Ground of appeal allowed for statistical purposes.
Interest on refund u/s 244A - claim of the ld. A.R that the A.O had erred in not computing the interest upto the date of actual grant of refund - HELD THAT:- In the backdrop of the aforesaid grievance of the assessee, we herein restore the issue to the file of the A.O, who is herein directed to verify the veracity of the said claim of the assessee in terms of Sec. 244A.
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2020 (7) TMI 247
Deduction u/s 80P - assessee are co-operative societies registered under the Kerala Co-operative Societies Act, 1969 - Disallow the claim of deduction as the assessees were essentially doing the business of banking, and in view of insertion of section 80P(4) with effect from 01.04.2007, the assessee will not be entitled to deduction u/s 80P - HELD THAT:- After perusing the narration of the loan extracts for the financial periods under consideration, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. The narration in loan extracts / audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan.
The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O’s had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In these cases, such a detailed examination has not been conducted by the A.O’s.
In the light of the dictum laid down in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT]we are of the view that there should be fresh examination by the AO as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed for non-agricultural purposes and accordingly conclude that the assessee’s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) - Decided in favour of assessee for statistical purposes.
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2020 (7) TMI 246
Loss on forward booking of foreign exchange - Claim disallowed as regular business loss u/s 28 - whether CIT(A) is wrong treating the loss as speculative loss without considering that for payment of import purchases the assessee (importer) is required to make prior booking of foreign exchanges? - HELD THAT:- A plain reading of section 43(5)(a) makes it clear that the impugned loss cannot be regarded as speculation. The Act clearly excludes hedging foreign currency transactions for the definition of speculative transaction.
Actions of AO in considering the loss on hedging foreign currency exposure as speculative is not justified. For that we rely on the judgment in case of CIT vs. Soarajmull Nagarmull [1980 (9) TMI 69 - CALCUTTA HIGH COURT] herein the court observed that "where assessee enters into forward contracts in foreign exchange in order to cover the loss arising due to difference in foreign exchange rate and/or valuation, is not of speculative in nature and was incidental to the assessee's regular course of business. As such it was allowable as a trade loss - disallowance on the ground of speculative transaction requires to be deleted hence we delete the disallowance.- Decided in favour of assessee.
Disallowance of prior period expenses - Addition towards ESI payment - AO held that the expenditure is not related for this assessment year, therefore, the entire expense under the head prior period expense was disallowed - HELD THAT:- During the earlier year i.e. prior to the A.Y 2014-15, the assessee company was unaware to the ESI provision and its applicability to the organization. Hence, on becoming aware of the provisions and its applicability to the organization, the assessee deposited the entire sum as required under the ESI Act which included payments for the AY 2013-14. - provisions of Section 43B of the Act which provides that certain expenditure / payments which are otherwise eligible for deduction under the Act shall be allowed as a deduction only in the year of actual payment irrespective of the year of accrual of such expenditure. Since the assessee made payments relating to AY 2013-14 during the relevant assessment year 2014-15, applying the provisions of section 43B of the Act, the same is allowable expenditure.
Ad hoc disallowance of travelling and conveyance expenses - HELD THAT:- AO has passed the order u/s 143(3) of the Act but the assessee has failed to submit few bills and vouchers relating to travelling expenses/conveyance expenses before the AO for his verification, therefore we disallow ₹ 50,000/- out of ₹ 1,78,912/- to fill the gap of small anomalies done by the assessee. It is made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year. Therefore, we direct the Assessing Officer to delete the balance amount - Decided partly in favour of assessee.
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2020 (7) TMI 245
Denial of exemption u/s 11 & 12 - ‘Charitable Purpose’ as defined u/s. 2(15) - core principle of forming the assessee was to assist public and private sector banks in carrying out their commercial activities involving receipts and payments by charging a fee - HELD THAT:- It is undisputed fact that the assessee has been granted a valid registration u/s 12AA of the Act which has never been revoked by the revenue authorities. The registration has been granted post-insertion of proviso to Sec.2(15) obviously after looking into the object of the assessee.
Assessee has been incorporated under special provisions of Sec.25 of The Companies Act, 1956 which provide for registration of entities which are set up for promoting commerce, art, science, charity of any other similar useful object to promote public good and which do not intend to distribute their profits by way of dividend. As per various clauses of Memorandum & Articles of Association, the assessee is prohibited from distributing its profits by way of dividend to its members. Even in case of dissolution or winding up, the residual surplus was not to be distributed amongst the members but were to be transferred to specified entity having similar objects.
Assessee has sole authorization from RBI to operate the payment systems in India. The overall regulation as well as supervision was to be exercised by RBI in terms of PSS Act, 2007.
Although the assessee was not created under PSS Act, 2007 but it was sole authorized arm of RBI to carry out payment settlement system in India in a professional manner by utilizing the latest technology. The overall purpose was to achieve broad-based social objective to bring efficiency in the clearing systems in India with a view to benefit society at large. Hence, it could be concluded that the assessee’s objectives were to promote the welfare of general public.
Clearing functions of RBI were divested to the assessee with the emergence of PSS, Act 2007. The electronic payment infrastructure created by the assessee would enable a larger section of the society to enjoy unparalleled secure and convenient payment systems. The systems being developed by the assessee would bring down cost of clearing transactions which would ultimately benefit public at large availing the banking services. The greater penetration of epayments would encourage larger participation of citizen in banking system and help in meeting the larger objective of cash-less economy.
Therefore, it could safely be concluded that the primary objective of the assessee was to administer the payment settlement system for the larger benefit of general public and not to run the clearing system in a commercial manner or on a commercial basis.
Charging of fees - assessee was engaged in providing technology intensive infrastructure facilities at national level and would obviously require funds to meet the operational cost which would necessitate the charging of fees by the assessee - said fact would not materially alter the primary objective for which the assessee entity was created - fee charged by the assessee per transaction has drastically been reduced by as much as 70% over several years which would only bolster assessee’s claim that it was not running as commercial organization and its primary motive was not to make profits.
CIT-DR has sought to equate the activities of the assessee with that of e-commerce payment system paytm. No substance could be found in the same since the assessee was a national level entity envisioned by RBI to take over the clearing mechanism in a unified manner on PAN India basis. The activities of the assessee could not be equated with e-commerce payment system paytm which was merely facilitating e-payments to certain users and it would merely be using the infrastructure created by the assessee. Therefore, the said argument could not be accepted.
Applicability of the provisions of Sec.13(1)(c)(ii) - facilities / services being provided by the assessee were uniformly available to the user of the system against same fee. No concession in fee was given to the promoter entities and it could not be said that the assessee directly or indirectly applied its income for the benefit of persons as specified in Sec.13(3). Another pertinent observation is that the promoter banks were mere subscriber to assessee’s share capital and not entities who made substantial contribution of exceeding ₹ 50,000/- in assessee entity. It is matter of common knowledge that there is clear distinction between subscribers to the shares vis-à-vis contributors.
Difference in facility and services and therefore, the assessee would not be covered by the proviso to Sec. 2(15) - assessee was engaged in creating infrastructure facilities to improve the clearing mechanism. However, by creation of this facility, the assessee would ultimately be rendering the services to various entities and therefore, the fine distinction between the expression facility and services, in such a case, would get blur. On the facts and circumstances, it would not be correct to say that the assessee was merely creating facility and not providing any services and not hit by proviso to Sec.2(15). We do not find much substance in this argument.
Assessee has been granted a valid registration u/s 12AA of the Act which has never been revoked by the revenue authorities - The registration has been granted post-insertion of proviso to Sec.2(15). Therefore, considering the said fact alone, the deduction could not be denied to the assessee. However, the said fact on standalone basis, in our considered opinion, would not entitle the assessee to claim the exemption u/s 11 & 12 which is evident from the terms of registration certificate itself.
Considering all and applying the theory of dominant purpose test, the inevitable conclusion that could be drawn is that the assessee was entitled for exemption u/s 11 & 12. The mere fact that certain fee was charged by the assessee while rendering certain services and surplus was generated, the said fact alone, would not disentitle the assessee to claim the impugned exemption u/s 11 & 12 considering the fact that the primary objects of the assessee were charitable in nature. No substance could be found in the allegation of violation of Sec.13(1)(c)(ii). - Decided in favour of assessee.
Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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2020 (7) TMI 253
Disallowance u/s 40(a)(ia) - Scope of amendment brought about in the Finance Act, 2010 in Section 40(a)(ia) - retrospectively or prospectively effect of amendment - HELD THAT:- The issue whether the aforesaid amendment being curative in nature has retrospective operation was considered by the Supreme Court in the case of CALCUTTA EXPORT COMPANY [2018 (5) TMI 356 - SUPREME COURT] and it was held that the purpose of amendment made by Finance Act, 2010 is to solve the anomalies and proviso was inserted to remedy unintended consequences and to make the provision workable. A proviso which supplies an obvious omission in the Section is required to be read into the Section to give the Section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the Section as a whole.
Thus, it was held that amendment made by Finance Act, 2010 in Section 40(a)(ia) being curative in nature is required to be given retrospective operation. The aforesaid decision was followed by a division bench of this Court in the case of SANTOSH KUMAR SHETTY [2015 (8) TMI 232 - KARNATAKA HIGH COURT]. The issue with regard to retrospectivity of Section 40(a)(ia) is no longer res integra and is answered by SC in favour of assessee
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2020 (7) TMI 252
Revision u/s 263 - Reopening of assessment u/s 147 dropped - exemption u/s 11 - non recording any reasons by recording its own reasons for the first time in its order presuming the reasons on which the AO would have passed an order - HELD THAT:- From perusal of the proceeding, it is evident that the assessee was called upon to furnish certain details as well as documents on 28.10.2004 and 06.01.2005, which were supplied by the assessee on 18.02.2005. The Deputy Director, Income Tax (Exemptions) on 23.02.2005 confirmed that the assessee’s consolidation of accounts was done at Mumbai and assessment was completed.
After examining the submissions, made by the assessee, the proceeding under Section 147 of the Act were dropped. Director of Income Tax (Exemptions) in its order has found that the assessee for the Assessment year 1997-98 had disclosed an opening balance as corpus fund. The finding recorded by the Director of Income Tax (Exemptions) that the proceedings were dropped without proper enquiry and appreciation, cannot be sustained as from perusal of the record, it is evident that an enquiry was conducted and confirmation was sought from Deputy Director, Income Tax (Exemptions), Mumbai who confirmed that consolidation was done at Mumbai and assessment was completed and exemption under Section 11 of the Act was granted. The fact that assessee was sending accounts to Mumbai is recorded in the order under Section 263 passed by the Director of Income Tax (Exemptions), Mumbai.
Accounts were being submitted along with ISKON, Mumbai. The Director of Income Tax (Exemptions) has not found anything wrong in the accounts for the Assessment year 1997-98. It is pertinent to mention here that view taken by the assessing officer is one of the two plausible views and therefore, in view of law laid down in the case of MALABAR INDUSTRIAL CO. LTD [2000 (2) TMI 10 - SUPREME COURT] the proceeding under Section 263 of the Act cannot be upheld. The tribunal has therefore, rightly set aside the proceeding under Section 263 of the Act initiated against the assessee.
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2020 (7) TMI 244
Penalty u/s 271(1)(c) - furnishing of inaccurate particulars of income as regards his claim of deduction under Sec. 35(1)(ii) - claim made in ‘Original’ return of income - HELD THAT:- Assessee on learning about the fact that School of Human Genetics & Population Health was found to have indulged in ingenuine activities, had thus, in the return of income filed by him in compliance to Notice u/s 148, had in all fairness withdrawn the claim of deduction u/s 35(1)(ii) that was earlier raised by him in the ‘Original’ return of income. At this stage, we may herein observe that though serious irregularities were found in the activities of the aforesaid institute viz. School of Human Genetics & Population Health, but then, we cannot also remain oblivious of the fact that no clinching evidence had emerged which would prove beyond doubt that the assessee had not made any genuine contribution to the said institute.
In the case of the present assessee before us, we hold a conviction that he had after learning about the serious irregularities in the activities of the aforesaid institute, acted in a bonafide manner, and in his return filed in compliance to notice issued u/s 148 of the Act, had withdrawn the claim of deduction u/s 35(1)(ii) that was earlier raised by him in the ‘Original’ return of income
nothing has been brought to our notice from where it could be gathered that the aforesaid institute had categorically claimed to have provided a bogus/accommodation entry to the assessee before us. Be that as it may, as observed by us hereinabove, there is nothing discernible from record which would conclusively prove to the hilt that the assessee had raised a false claim of deduction. In fact, the conduct of the assessee who had in all fairness withdrawn the claim of deduction that was earlier raised by him u/s 35(1)(ii) in his ‘Original’ return of income inspires substantial confidence as regards the genuineness and veracity of the said claim.
As observed in CIT Vs. Upendra V. Mithani [2009 (8) TMI 1159 - BOMBAY HIGH COURT] wherein the High Court had concurred with the view taken by the Tribunal, that if the assessee gives an explanation which is unproved but not disproved, i.e it is not accepted but circumstances do not lead to the reasonable and positive inference that the assesse’s case is false, then no penalty u/s 271(1)(c) could be imposed. - Decided in favour of assessee.
Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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2020 (7) TMI 243
Deduction u/s 35(1)(ii) - donation to SHG&PH [School of Human Genetics & Research health, Kolkata] - whether or not the subsequent cancellation of registration to SHG&PH, vide CBDT order dated 15.09.2016, with retrospective effect, can invalidate the assesses claim of deduction under Sec. 35(1)(ii) - HELD THAT:- The issue of allowability of deduction in respect of donation to School of Human Genetics and Population Health is squarely covered by the decision of M/s P.R. Rolling Mills Pvt. Ltd. Vs DCIT [2018 (7) TMI 737 - ITAT JAIPUR] AND DCIT Vs Maco Corporation (India) [ [2018 (3) TMI 811 - ITAT KOLKATA]as considered the issue in regard to very same trust i.e. SGHPH and holds that prior to the date of donation under cancellation of registration has happened and there is absolutely no provision of withdrawal of recognition under section 35(1)(ii).
Provisions of the Act are very clear that the payer (the assessee herein) would not get affected if the recognition granted to the payee had been withdrawn subsequent to the date of contribution by the assessee. Hence no disallowance u/s 35(1)(ii) - Decided in favour of assessee.
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2020 (7) TMI 251
Reopening of assessment u/s 147 - transfer of the assessment proceedings initiated under Section 148 Jurisdiction of Assessing Officers - shift of assessee's residence - HELD THAT:- It is a question of fact that the petitioner though shifted his residence in the year 2015 from Alappuzha to Ernakulam and issuance of Pan card Ext.P1 in the year 2019 is a testimony of the same for the remaining assessment years of course in case of any dispute with income tax the jurisdiction would be vested with the Income Tax Authority, Ernakulam.
AO is required to record the satisfaction as per the provisions of sub section (2) before the assessment is made. It is a matter of record that the request Ext.P4 is dated 04.01.2020, ie within few days of receipt of the reassessment notice dated 30.12.02019 under Section 148 of the Income Tax Act.
Equity can be addressed, by directing 3rd respondent to take a call on the request Ext.P6 under sub section (4) of Section 124 or any other provisions of the Act regarding the jurisdiction of assessment or reassessment proceedings, by taking into consideration observation, herein above and the relevant provisions of the Act. Let this exercise be under taken within a period of one month from the receipt of a copy of this judgment after affording opportunity of hearing to the petitioner and by passing a speaking order. It is made clear that the 3rd respondent would take into consideration whether the claim made by the petitioner would or would not fall under sub section (2), when the original assessment 139 has been made or otherwise.
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2020 (7) TMI 242
Reopening of assessment u/s 147 - notice in the name of dead person - HELD THAT:- In case due to unawareness of death of the assessee, if the notice issued in the name of dead person is properly followed up by the AO then the AO could have issued another notice in the name of the legal representative of the deceased assessee but without taking any steps to issue a valid and legal notice under section 148 the AO has proceeded on the basis of the invalid notice issued u/s 148. It is a jurisdictional issue as notice under section 148 gives the jurisdiction to the AO to initiate the reassessment proceedings. Once the notice itself is not valid as issued against the dead person, then the entire proceedings got vitiated. See DURLABHAI KANUBHAI RAJPARA [2019 (4) TMI 784 - GUJARAT HIGH COURT].
When the notice issued under section 148 against the deceased person as well as the assessment framed by the AO in the name of the deceased assessee then the impugned assessment order passed by the AO is invalid for want of valid notice as well as the assessment framed against the dead person. Accordingly the same is quashed.
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2020 (7) TMI 241
Addition u/s 68 on account of Sale of Shares - unexplained cash credit - HELD THAT:- We find that the sale transactions have taken place through an independent broker and the sale proceeds have been received through banking channels. The sale could not take place without making purchases thereof. The purchases were supported by contract notes, holding letter and the payment was through banking channels. The shares were credited in the demat account of the assessee - stated purchase transactions were doubted by Ld.AO in AY 2008-09 and the purchase value of shares of MMTC was added to the income of the assessee as unexplained cash credit. Upon further appeal, Ld. CIT(A) deleted the same by observing that the assessee had discharged the onus by producing the brokers note and AO had not found any reason to doubt the same. Nothing was brought on record to show that these were false or untrue.
Matter of purchase of shares has already attained finality in assessee’s favor and hence, the purchase transactions were to be accepted as genuine and carried out in AY 2008- 09 only. When the purchase of shares was to be accepted as genuine then the sale thereof could also not be doubted. Grounds raised, in this regard, stands allowed.
Addition on account of Sale of Jewellery - HELD THAT:- Assessee, being a lady, as per the customs, would certainly acquire Jewellery in gifts on the occasion of marriage and on the occasion of the birth of a child. The said fact could be fortified with instruction No.1916 dated 11/05/1994 issued by CBDT which recognizes a fact that a married lady of reputed family could be expected to own 500 grams of ornaments and therefore the same need not be seized. This is coupled with the fact that the sale consideration has been received by the assessee through banking channels in subsequent financial years. Nothing on record would show that the said receipts have flown back to the purchaser of Jewellery. The assessee has placed on record financial statements of the three purchasers along with copies of their computation of income & Income Tax Returns. In their respective Balance Sheets, these purchase transactions have been recognized by the three purchasers and confirmation of account has also been placed on record. Therefore, claim of the assessee was to be accepted. Therefore, we are inclined to delete the impugned additions and allow grounds raised by the assessee, in this regard.
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2020 (7) TMI 240
Computing the Income surrendered in Survey proceedings - applying the provisions of section 115BBE(1) - taxing the Income declared at the maximum rate - as submitted that the alleged surrendered income is in the nature of business income duly offered to tax and the assessee do not have any other source of income except business income liable to normal rate of tax - HELD THAT:- Alleged surrendered income is the cumulative total of unrecorded and undisclosed income for preceding years which were not offered to tax during the year when they were earned. Before the insertion of Provision of Section 115BBE of the Act w.e.f. 1.4.2013 during the course of survey u/s 133A of the Act if any excess cash or excess stock was found and then the assessee was subjected to tax on the normal rate of tax applicable for the year in which the survey proceedings were carried out. No mechanism to make the distinction between the genuine assessee who regularly offers his correct income to tax on year to year basis and the assessee who conceals the income in the preceding years and only in case if he is subjected to survey action then he offers undisclosed income of excess cash or excess stock during the year when the survey takes place and offers it to tax.
Section 115BBE of the Act was inserted w.e.f. 1.4.2013 indicating that only if the income falls u/s 68 to 69D as discussed above which does not necessarily be income of business but can be from any head of income i.e. the income defined in Section 2(24) of the Act for which the assessee is unable to offer any explanation, then such higher rate of tax i.e. 60% is to be levied u/s 115BBE of the Act.
In the present case though the alleged surrendered income is a business income but since assessee being individual having no limitation of earning income from sources other than for the objects of the business and also the assessee having not offered any explanation in the statement given during the course of survey which stands unrebutted, therefore the alleged unexplained/undisclosed income is liable to be taxed as income falling under Section 68 to 69D of the Act as applicable to the type of income and has been rightly taxed by Ld. A.O applying the higher rate of tax provided in Section 115BBE of the Act. We therefore confirm the findings of Ld. CIT(A).- Decided against assessee.
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Customs
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2020 (7) TMI 239
Classification of goods - water signal / sensors, pressure sensors, heart film air mass meters / air mass sensors and temperature sensors - whether classified under Heading 9026 or under 9032? - HELD THAT:- It is not categorically stated anywhere that the impugned instruments are capable of controlling the main machines; it is stated that the measurement is accurate and improves the engine performance. It is not coming forth from the literature that these are capable of triggering the stop or start of the engines. Thus, the Revenue could not establish the controlling feature of the instruments. Therefore, Revenue has not discharged its final responsibility to establish the correctness of the classification proposed by them. It was open to the Department to investigate the matter further to establish with cogent evidence to substantiate their contention. Revenue was within their rights to obtain any technical opinion to establish the classification of the instruments under Heading 9032 and to counter the claim of the appellants about the classification under Heading 9036. The same having not been done, there is no evidence to contradict the claim of the appellants.
The appellants should be eligible to classify the goods under 9026 - Also, as it is not evidenced that the instruments do not have any mechanism to control or trigger, start or stop of the engine, in view of the HSN Explanatory Notes, they cannot be classified under 9032.
Appeal allowed - decided in favor of appellant.
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Securities / SEBI
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2020 (7) TMI 238
Acquisition of the shares by promoters - increase in the collective shareholding of all the appellants - the promoters, from 29.42% to 61.10% which was more than threshold limit of 5% - no public announcement was made - violation of provisions of Regulation 3(2) read with Regulation 13(1) of the SAST Regulations, 2011 - HELD THAT:- There should be common objective of purchase of shares or voting rights amongst the members to make them persons acting in concert. In the present case, while two promoters had an objective to dispose of their shares, the appellant No. 1 Susheel Somani had an objective to acquire the shares. This itself would show that there was no common cause between the appellant No. 1 Susheel Somani and the two transferors. Therefore, though the promoter group holdings in the company remained constant, the same would be irrelevant as observed by the AO. The order to that extent cannot be faulted with.
Whether the appellants were exempted from making a public announcement? - It is an admitted fact that the appellants have made requisite disclosures on 7th day as against the provisions of Regulation 29(3) that the disclosures are required to be made within two working days. Thus, technically the appellants were not exempted from making public announcement and, thus, are in violation of the relevant regulations. The AO has observed that as the condition of making disclosures within two working days is not fulfilled, the act was not fit for grant of exemption. In the circumstances, the penalty was imposed.
Quantum of penalty - AO took into consideration the mitigating factors that the interest of the shareholders of the target company is not jeopardized and the penalty of ₹ 15 lacs was imposed.
AO has not considered the fact that the appellants made the disclosures though belatedly after five days as required by Regulation 29 of the SAST Regulations. Thus, it was a technical breach and, therefore, in our view instead of imposing a penalty of ₹ 15 lacs, a penalty of ₹ 5 lacs would have been just and sufficient.
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Insolvency & Bankruptcy
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2020 (7) TMI 237
Approval of Resolution Plan - validity of public notice dated 18-4-2019 issued by the Resolution Professional - Jurisdiction of issuing public notice - HELD THAT:- The Appellant who was an Operational Creditor could not seek intervention after approval of Resolution Plan by the Adjudicating Authority. Admittedly, the Resolution Plan was approved by the Adjudicating Authority on 8-4-2019 and in terms of provision embodied in Section 31(1) of the I&B Code the approved Resolution Plan is binding on all stakeholders involved in the Resolution Plan including the 'Creditors'. It is not in dispute that approved Resolution Plan has not been assailed by the Appellant in appeal under section 61 of the I&B Code and limitation for filing such appeal has already expired. Thus, the approved Resolution Plan has attained finality and is beyond the pale of challenge at the instance of Appellant - 'Operational Creditor'.
It also emerges from the record that the Appellant had all along been represented throughout the Corporate Insolvency Resolution Process proceedings as a creditor and it could not lie in his mouth that the proceedings qua the validity or otherwise of the permitted User Agreement of the brand name were conducted behind its back - Appeal dismissed.
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2020 (7) TMI 236
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute or not - HELD THAT:- The facts as narrated do not establish that the debt and default in question are not in dispute, as contended by the Applicant/ petitioner. The Petitioner, though places work orders in question, has not enclosed all other terms and conditions as mentioned in the work order so as to examine whether the Petitioner is entitled to claim the amount in question or not - The Petitioner got issued notice dated 28.06.2019 to the Respondent in the context of dishonor of cheques issued by the Respondent. In response to this notice also, the Respondent has issued a Reply dated 12.07.2019, through their Counsel, by inter alia pointing out the defective services and the reasons for stopping the payment, the failure to rectify the defective services etc. Subsequently, they have filed Criminal Complaint before Chief Metropolitan Magistrate at Bangalore, and the case is stated to be pending there and appeal against is also stated to be pending. The Petitioner issued yet another Demand Notice dated 25.06.2019, under Rule 5 of I&B, 2016, to the Respondent by inter alia demanding to pay the outstanding amount within a period of ten days on failure to pay the outstanding amount the instant Company Petition filed by seeking to initiate CIRP in respect of the Corporate Debtor and thus filed the instant Petition.
The facts and circumstances shows that the amount claimed by the Petitioner is in substantial dispute, which is deemed to be pre-existing one. The Petitioner also invoked multiple remedies for same cause of action, which is not tenable basing on Principle of natural justice and doctrine of double jeopardy - It is also not in dispute that the Respondent has paid part amount for the work done, and the remaining claimed amount could not be paid due to the reasons explained supra. Admittedly, the Respondent is solvent Company having 40 employees and the Respondent has not paid the alleged amount due to the defective service rendered by the Petitioner.
It is a settled position of law that provision of the code cannot be invoked when there is pre-existing dispute and it also cannot be invoked for the recovery of the alleged outstanding amount.
Petition dismissed.
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2020 (7) TMI 235
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT:- The application is filed three years beyond the date of last Invoice as well as from the date of last payment. There was lot of E-mail correspondence with the Corporate Debtor. Of course, the Operational Creditor filed E-mail correspondence done by it with the Corporate Debtor at pages 46-66 of the Paper Booklet. Such E-mail correspondence is one-sided, viz. it emanates from the Operational Creditor without any acknowledgement in the form of reply from the Corporate Debtor. To constitute an acknowledgement, there must be E-mail reply from the Corporate Debtor to the Operational Creditor. Surprisingly, there is no reply by the Corporate Debtor through E-mail acknowledging the balance payable, to E-mail correspondence. Even otherwise, E-mail correspondence ended in February 2015. However, the application is filed on 16-11-2018. Thus, the application is beyond three years from the date of last E-mail correspondence with the Corporate Debtor. Thus, the application is barred by limitation.
No balance sheet of the Corporate Debtor is filed by the Operational Creditor. Burden lies on the Operational Creditor to prove the debt alleged is appearing in the Books of Account of the Corporate Debtor. No such material is placed for the Tribunal to come to conclusion that the alleged debt is appearing in the Books of Account of the Corporate Debtor. In absence of any such evidence, conclusion cannot be arrived at basing on the material available before the Tribunal. It is very clear that the application is barred by limitation under Article 137 of the Limitation Act.
Even otherwise, there was no reply to the Demand Notice by the Corporate Debtor. Had it been true that pending works were yet to be attended to by the Operational Creditor, then the Corporate Debtor would have given appropriate reply to the Demand Notice issued under section 8 of the I&B Code. Surprisingly, there was no reply alleging that pending work is yet to be completed. Therefore, it cannot be said that there was any pre-existing dispute and work was incomplete. Even though there was no prior dispute, yet the application is patently barred by limitation and as such the application cannot be admitted and is liable to be rejected - Application dismissed.
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2020 (7) TMI 234
Maintainability of application - initiation of CIRP - Corporate Debtor Failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- From the facts and records, it is emphatically clear that there is serious dispute between the parties which are prior to issuance of Demand Notice. Neither the Adjudicating Authority nor this Appellate Tribunal sitting in a summary jurisdiction can go into those issues which otherwise required regular trial.
It is mandatory that the Operational Creditor on the occurrence of a default, deliver a Demand Notice of unpaid operational debt, copies of invoices demanding payment of the amount involved in the default to the Corporate Debtor in such form and manner as may be prescribed. The Corporate Debtor shall, within a period of 10 days of the receipt of the Demand Notice or copy of the invoice mentioned in Section 8(1) of IBC bringing to the notice of the Operational Creditor regarding existence of a dispute (if any) record of pendency of the suit or the arbitration proceedings filed before the receipt of such notice or the invoice in relation to such dispute. In the present case, admittedly, there are disputes between the Appellant and the Respondent which is evident from the records - From the FIR lodged by the Appellant prior to sending of Section 8 Notice and the Respondent disputed the debt to be payable by the Respondent in their reply to the Demand Notice.
The moment there is an existence of a prior dispute, the Corporate Debtor gets out of clutches of the rigors of the Court. Further the adequacy of dispute is only to be seen whether the dispute raised by the Corporate Debtor specifies as a dispute as defined under section 5(6) of IBC.
In view of Section 9(5)(ii)(d) of the IBC on the ground that there is a record of dispute existence between the parties, which dispute is serious in nature - there is pre-existing dispute between the parties which cannot be adjudicated in a summary proceeding - Appeal dismissed.
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Service Tax
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2020 (7) TMI 233
Extended period of limitation - Validity of Show cause notice where service tax has been paid before issuance of SCN - Section 73(3) - Demand of service tax - reverse charge mechanism (RCM) - notification dated 03 March, 2009 - It has been contended on behalf of the Appellant that since the ECB facility for setting up the power project was to be consumed within the SEZ, it was entitled to exemption from service tax on the taxable services provided to the Appellant under the notification dated 31 March, 2004 - Circular dated 18 May, 2011 - extended period of limitation - validity of issuance of SCN - HELD THAT:- Though sub-section (1) of section 73 of the Act provides that where service tax has not been paid, the Central Excise Officer may serve notice on the person chargeable with the service tax requiring him to show cause why he should not pay the amount specified in the notice, but sub-section (3) of section 73 also provides that where any service tax has not been paid, the person chargeable with the service tax may pay the amount of such service tax before service of the notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1). The Appellant paid the service tax before service of the show cause notice and informed the Central Excise Officer of the payment in writing - The Commissioner has merely stated that since the extended period of limitation under the proviso to section 73 (1) had been invoked, the benefit of sub-section (3) of section 73 will not be available to the Appellant.
The issue as to whether sub-section (4) of section 73 of the Act would apply in the present case can be considered together with the contention raised on behalf of the Appellant that the extended period of limitation provided for under the proviso to section 73(1) of the Act could not have been invoked because the conditions for invocation are identical in both the situation - It is seen that sub-sections (1) & (4) of section 73 of the Act do not mention that suppression of facts has to be “wilful’ since “wilful’ precedes only mis-statement - It is, therefore, clear that even when an assessee has suppressed facts, the extended period of limitation can be invoked only when “suppression’ is wilful with an intent to evade payment of service tax.
Extended period of limitation - HELD THAT:- According to the Commissioner, it would be a case “amounting to deliberate non-declaration and suppression of vital information with a wilful intention to evade payment of service tax”. The Appellant, according to the Commissioner, had not furnished the required details of payment of ‘upfront fee’ either in the ST-3 returns or in any other way to the Department - The Appellant had, in reply to the show cause notice, explained that the extended period of limitation under the proviso to section 73 (1) of the Act could not have been invoked and also explained why the provisions of sub-section (4) of section 73 could not have been applied.
The show cause notice could not have been issued as the Appellant had paid the service tax with interest before the service of the show cause notice and had also informed the Department of this fact.
Validity of issuance of SCN - HELD THAT:- The Appellant is justified in asserting that the show cause notice could not have been served upon the Appellant under sub-section (1) of section 73 of the Act since the Appellant had deposited the entire tax with interest before the service of the show cause notice. The Department also could not have relied upon the provisions of sub-section (4) of section 73 of the Act as the conditions set out therein were not satisfied.
Appeal allowed - decided in favor of appellant.
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2020 (7) TMI 232
Commercial Training or Coaching Services - appellant is a PSU mainly engaged in the activity of ship building and repair works - period from April 2007 to June 2012 - Department entertained a view that the appellant is liable to pay service tax on the fee income earned from the students under the category of Commercial Training or Coaching Services - pre-negative and post negative list regime - HELD THAT:- The lower appellate authority has upheld the demand on the premise that the course offered by the appellant cannot be said to be statutory in nature and hence, cannot be said to have been recognised by law, which in our view is factually incorrect. The lower authority seemed to have lost sight of the factual position that the subject courses have been approved by the Director General of Shipping, Ministry of Surface Transport, Govt. of India, in consonance with the provisions of the Merchant Shipping Act, 1958, a fact which was always available before them - There cannot be any iota of doubt to hold that the courses assumes to be of statutory nature and hence, qualifies as being “recognised under the law” and consequently, eligible for claiming exclusion from levy of service tax both in the pre-negative list and negative list service taxation regime.
The Ld. Advocate for the appellant submitted a list containing detailed break-up of fee earned from courses which have been approved as well as courses which have not been approved by the Directorate General of Shipping. The same is being submitted for the first time before the Tribunal and hence, were not available before the adjudicating authorities below.
The justice would be met if the matter is remanded to the original authority for limited purpose of computation of service tax payable on courses not approved by the Directorate General of Shipping, restricted to the period covered under normal period of limitation, since the extended period of limitation is not available in absence of fraud or suppression on the part of the appellant. On the same count, penalty is also not imposable and hence set aside in entirety - appeal allowed by way of remand.
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2020 (7) TMI 231
Works contract service - Commercial Construction or Industrial Service - period from September 2004 to September 2007 - HELD THAT:- The issue is squarely covered by the Hon‟ble Supreme Court“s decision in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] relied by the appellant wherein it has categorically been held that no service tax can be demanded on construction services prior to introduction of “Works Contract Service” in June 2007 wherein there is a supply of goods and service.
The services provided by the appellant is a composite service involving supply of goods and not construction service simpliciter and hence, the same is legally classifiable under the category of “Works Contact Service”. Therefore, the assessee has rightly paid service tax under the said category effective from June 2007 which has also been appropriated in the impugned order and thus, the contention of the Revenue that tax on existing contracts prior to June 2007 could not be paid under Works Contact is not tenable.
The demand raised in the impugned order under the category of “Commercial Construction or Industrial Service” cannot be sustained and hence, set aside - Interest and penalties are also set aside - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (7) TMI 230
Issuance of C-Forms - purchase of High Speed Diesel from the suppliers in other States - CST Act - HELD THAT:- The Hon'ble Division Bench in THE COMMISSIONER OF COMMERCIAL TAXES, CHEPAUK, CHENNAI, THE ADDITIONAL COMMISSIONER (CT) VERSUS THE RAMCO CEMENTS LTD. AND THE STATE TAX OFFICER, THE JOINT COMMISSIONER (CS) (SYSTEMS) VERSUS SUNDARAM FASTENERS LIMITED [2020 (3) TMI 450 - MADRAS HIGH COURT] had clearly directed the State and the Revenue Authorities not to restrict the use of “C” Forms for their inter-State purchases of six commodities by the assessees and other registered dealers at concessional rate of tax and they are further directed to permit online downloading of such declaration in “C” Forms to such dealers. The circular letter of the Commissioner dated 31.05.2018 was quashed and the Hon'ble Division Bench also set aside the consequential notices and proceedings initiated against all the assessees throughout the State of Tamil Nadu.
Petition allowed.
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2020 (7) TMI 229
Revision of assessment order - certain C-Declaration Forms submitted by the petitioner were cancelled and that the petitioner had made corrections in the said declaration forms - HELD THAT:- Sri J.Anil Kumar, Special Counsel for Commercial Taxes appearing for respondents is not in a position to say why in spite of the letters dt.31.01.2020 and dt.12.02.2020 addressed by the petitioner to the 2nd respondent for return of the original C-Declaration Forms, the 2nd respondent did not return them to the petitioner for rectification/clarification by the petitioner’s vendors, who had issued them to him - Unless the petitioner is returned the original C-Declaration Forms by the 2nd respondent, petitioner would not be in a position to explain whether the said C-Declaration Forms were defective in any manner and he cannot get them rectified by his vendors. Denial of such opportunity to the petitioner has caused grave prejudice to the petitioner.
The 2nd respondent is directed to return the original C-Declaration Forms to the petitioner within two weeks from the date of receipt of a copy of this order - petition allowed.
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2020 (7) TMI 254
Validity of assessment order - Kerala VAT Act - Revenue Recovery Proceedings - consideration of stay petition - HELD THAT:- This Court in W.P.(C) No.3800/2020 had passed a detailed order after having called the Assistant Commissioner of Law in court with regard to the numbering of appeal and hearing of the stay application. Several writ petitions are pending in this Court seeking redressal of grievance for non-hearing of the appeal, along with stay applications - This writ petition is also of the similar nature and the petitioner is in dilemma. In such circumstances, this Court cannot sit as a mute spectator without coming to the rescue of such litigants.
This writ petition is disposed off with a direction to the appellate authority to consider the application of stay within a period of two months from the date of receipt of a copy of this judgment as the petitioner in such circumstances had not opted for automatic stay in view of the amended provisions of Section 55 (4) of KVAT Act, 2003. Steps for recovery of amounts pertaining to Ext.P4 shall be kept in abeyance, till such time the stay application is disposed of.
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2020 (7) TMI 228
Principles of Natural Justice - purchases made by the petitioner during the said Assessment Year on Electrical Goods (Electrical Motors And Oil Engines) from registered dealers in their States against ‘C’ Forms - COVID-19 pandemic situation - petitioner contends that knowing fully well the impossibility on it’s part to file objections / reply to the pre-Assessment show-cause notice, the 1st respondent had passed the impugned assessment order and the rectification order and that there has been a gross violation of principles of natural justice - HELD THAT:- When there is a severe restriction imposed by the State in the nature of lockdown on account of COVID-19 pandemic it is unreasonable on the part of the 1st respondent to inform the petitioner to file a response to the show-cause notice dt.16.03.2019 served on 20.3.2020, within the period of seven (07) days. The 1st respondent ought not to have denied the petitioner reasonable time to file objections to the show-cause notice and also a personal hearing since the same was specifically sought by the petitioner in the e-mail dt.24.03.2020.
The matter is remitted to the 1st respondent to pass a fresh order in accordance with law within three (03) months - Appeal allowed by way of remand.
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