TMI Tax Updates - e-Newsletter
July 15, 2019
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Detention of goods and vehicle - Section 129 (1) of KGST Act, 2017 - non-production of Part B of E-Way Bill - directed to furnish bank guaranty for the tax and penalty - release of goods within twelve hours from the date and time of receipt of bank guarantee - pass the order within four weeks from today
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GST:
Constitutional validity of the amendment brought in Section 140 of the CGST Act, 2017 by way of the CGST (Amendment) Act, 2018 w.e.f 1st day of July, 2017 - to retrospectively disallow the transition and carry forward of the EC and SHEC in the GST regime - notice issued
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Income Tax:
Exemption u/s 10(23BBA) - erroneous filling of returns for A.Y. 2014-15 and 2015-16 - the petitioner firstly is an institution under HR&CE Act and Secondly, satisfies the requirement of Section 10(23BBA) is not under obligation to file return - determination of income for above AY is illegal, contrary to the statutory exemption and violation of Article 265 of Constitution of India - entitled for refund
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Income Tax:
Penalty u/s 271(1)(c) - defective notice - AO is under obligation to specify the appropriate limb of clause (c) of section 271(1) at the time of initiation as well as at the time of levy of penalty - since legal requirement of making a clear cut reference to the applicable limb is not met - no penalty
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Income Tax:
Deemed dividend u/s 2(22)(e) - security deposits received for lease of land - rent of land offer in return was accepted by department - assessee have established that the payments received by them as security deposits were paid by the company in the course of its business, hence, the deeming fiction of deemed dividend to section 2(22)(e) is not applicable
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Income Tax:
Addition of payment of retention bonus - concern employee is not holding any share of the company and he is working for the company and the amount paid is in the nature of reward given to the employee for working for a longer duration and it is absolutely contractual payment which was decided at the time of the employment of the employee to retain them - duly allowable
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Income Tax:
Treating compensation income as operating income for PLI calculation - compensation income has arisen during regular conduct of operation of the business, this income cannot be considered to be one time income to justify its exclusion on the ground of extraordinary income - part of PLI calculation
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Income Tax:
Revision u/s 263 - AO made no enquiry for details of deposits neither anyalysed identity, genuineness and creditworthiness nor examined eligibility for deduction u/s. 80P(2) - neither audited account by an accountant or under co-operative audit was filed, even TAR u/s 44AB not filed - without making any enquiry into these issues, the AO accepted the assessee’s claim - the assessment order is erroneous which also resulted in loss to the revenue - revision valid
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Income Tax:
TP Adjustment - exclusion of comparables - high turnover per se cannot be a ground for exclusion and that the AO has to probe into the matter further - it is functional similarity which should be considered rather than the turnover
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Income Tax:
Rectification u/s 254 - assessee claimed that contract were not forward contracts by virtue of proviso clauses (a)&(b) to Section 43(5) - the earlier portion of the main impugned order specifically noticed the compilation of documents produced during the proceedings, which contained specific contracts and the transactions which the Revenue alleged were speculative - remanded to consider the contentions
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Income Tax:
Revision u/s 263 - limitation - assessment order passed u/s u/s 153A r.w.s. 143(3) - since Section 147 and section 153A operate in two different and distinct fields, hence decision of Apex Court given u/s 147 would not help the assessee - revision is within limitation
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Income Tax:
Unaccounted labour payments in cash - AO of payer-Runwal Developers Pvt. Ltd., had given a categorical finding that he had made unaccounted cash payments of ₹ 8.70 Crores to the assessee for labour payments - Hence, the order of the Department itself explains the source of ₹ 8.70 Crores - no addition in the case of assessee - income based of presumptive basis may sustain being a contracter
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Income Tax:
Deduction u/s.10A - income increase due to disallowance made u/s.40(a)(i) for non deduction of TDS u/s 195 - in light of judicial precedent and CBDT Circular No.37/2016 dated 02/11/2016 deduction is duly allowable
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Income Tax:
Unexplained investment in jewellery - when Tribunal accepted such assertion which is supported by affidavits and corroborative evidences likes VDIS declaration and copies of Wealth Tax returns of the giver/creditors, it was incorrect to brush it aside - evidence simply cannot be rejected by a presumption that the claim was an after thought - no addition
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Income Tax:
Disallowance of freight and transportation expenses - on enquiry AO found that transporters are not in existence - mere production of crossed demand drafts was not sufficient to establish the expenses - when records are self-serving and these records do not dislodge the specific finding of the AO based on Commission issued to the ITO, Cuddappah then expenses are not allowable - no substantial question of law arise
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Customs:
Entity Registration and Approval under new Sea Manifest Regulations
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DGFT:
Action for recovery of penalty, pending Appeals/Reviews
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Service Tax:
CENVAT Credit - medical insurance for the employees and their families - the health insurance services have been clearly excluded from the Rule 2(l) of CCR 2004 - no credit
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Service Tax:
100% EOU - Refund of CENVAT Credit - ITC on general insurance - the insurance in question was not for the personal benefit of any individual or Director, it only covers any liability that may arise on them in the course of their official work - entitled for the benefit of CENVAT credit and consequently refund U/R 5 of CCR 2004 in respect of such invoice
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Service Tax:
Extended period limitation - ST liability on payment to overseas Sales Commission Agent under RCM - being CENVAT was available,it is Revenue neutral situation - it cannot be said that there was malafide intention on the part of the appellant in non-payment of service tax - extended period was clearly not invokable
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Service Tax:
Works Contract Services - Composition rules - admittedly the composition rules are applicable on an option exercised by the assessee which was exercised only w.e.f. December 2010 onwards - in the absence of any option having been exercised for the period in question, the applicability of the composition rules cannot be upheld- remanded for redetermined the demand for the period falling within five years from the date of SCN
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Service Tax:
Works Contract Services - SCN for period October 2007 to November 2010 - Undisputedly the SCN was issued on 25 June 2014, hence u/s 73 of the FA, 1994, revenue can raise the demand for the maximum period of five years from the date of issuance of SCN - demand for the period prior to five years from the date of the SCN is liable to be set aside on this ground
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Central Excise:
Imposition of penalty on partners - penalty on partner is not imposable when the firm is penalised under Rule 25 of the Central Excise Rules, 2002.
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Central Excise:
CENVAT Credit of CVD - duty paid pursuant to order of Settlement Commission - finality of order of Settlement Commission cannot be allowed to be disturbed in any manner, much less any indirect gain or duty paid can be allowed to be taken back under the provisions of any other law, including the CE Act and the CCR - Rule 9(1)(b) of the CCR also prohibits the same - credit not allowed
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Central Excise:
Maintainability of writ - Tribunal functioning within the State of Maharashtra exercise jurisdiction in breach of principles of natural justice or in flagrant disregard of the law of precedents by not referring the issue to the President for constituting a Larger Bench of Tribunal, if it did not agree with the earlier decisions of the Tribunal then we would certainly exercise our writ jurisdiction
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Central Excise:
Non-speaking order - Once the litigant before the Tribunal placed reliance upon the decision of the a coordinate Bench of the Tribunal, then a speaking order would require the Tribunal to consider those decisions and state how and why the aforesaid decisions are not applicable to the facts of the present case - In the absence of this exercise is being done, order itself suffer from being a non speaking order - quashed
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VAT:
Addition to sales turnover - difference in the value of stock transfer(F-Form) and books of accounts - the authorities have not considered that suppression in the sale turnover with respect to the quantity of goods received under stock transfer - The evasion or escapement of tax can be attributed only if there is any specific allegation in disclosing the sales turnover - remanded as above said aspect are not considered
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VAT:
Retrospectively declaration of C-Form as obsolete - ‘C’ Form issued by M/s. Sarv Manglam Sales in favour of the petitioner is declared obsolete with effect from the date of issuance of such forms by CVAT - Once the form that has been issued, is utilized, the question of subsequently declaring such used forms as obsolete would not arise - Rule 5(14) do not permit the CVAT to declare forms that have already been issued and acted upon as obsolete - order set aside
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (7) TMI 679
Detention order - there is an omission or illegality in transportation of goods - Section 129 (1) of KGST Act, 2017 - HELD THAT:- The issues raised are at preliminary stage and this Court is not convinced to entertain the writ petition and adjudicate upon merits at this stage. To confirm to the scheme under the Act, the writ petition is disposed of by this order.
The petitioner submits bank guarantee for the tax and penalty as shown in Ext.P12 and applies for release of goods by enclosing a copy of this order within two days from today. The respondent shall release the goods detained under Ext.P11 and subjected to enquiry in Ext.P12 within twelve hours from the date and time of receipt of bank guarantee.
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2019 (7) TMI 678
Constitutional validity of the amendment brought about in Section 140 of the Central Goods and Services Tax Act, 2017 - Transitional Arrangements for Input Tax Credit - Credit of Education Cess, and the Secondary and Higher Secondary Education Cess - challenge is substantially on the ground that the amendment seeks to retrospectively disallow the transition and carry forward of the EC and SHEC in the GST regime, which was levied on the inputs, capital goods and inputs services used in the manufacture of excisable products, which were cleared on the payment of the Central Excise duty under the CGST Act.
HELD THAT:- Let Notice be issued to the learned Attorney General of India. Let Notice be also issued to the respondents herein, returnable on 31st July 2019. Let Notice be also issued as regards interim relief, which has been prayed for, in this petition, returnable on 31st July 2019. Direct service is permitted.
Notify this matter on 31st July 2019 on top of the Board.
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Income Tax
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2019 (7) TMI 641
Penalty u/s 271(1)(c) - ‘under- valuation of closing stock’ and ‘higher claim of depreciation’ - HELD THAT:- We straightway notice that both the additions/disallowances are tax neutral over period of time and thus taxation cannot be escaped perennially on the aforesaid two items.
Over-Valuation of stock in one year would result in higher valuation of opening stock in other year and profit will be accordingly adjusted downwards in the subsequent assessment years. Same is the case with depreciation allowance. This apart, the assessee has independently offered explanation for such error which cannot be bracketed in the realm of mala fide per se. The variation in the valuation of stock is less than 3%. The method of valuation adopted by the assessee in sync with the method adopted by the AO in the earlier years and is also a recognized method. Importantly, no difference in net quantitative tally has been brought on record. The valuation of stock embodies certain degree of subjectivity and is not an entirely objective process. Thus, where a fair and plausible explanation has been offered by the assessee for ascertainment of value of closing stock, the pre-requisites for invoking Explanation-1 to sec. 271(1)(c) are not, in our view, satisfied.
A mere wrongful claim or a bona fide error could not automatically invite stringent penalty. The assessee in our view has successfully offered explanation which is reasonable & commensurate in the circumstances. The depreciation allowance also claimed for the full year is not entirely without any basis. The ownership of the property was actually transferred in favour of the assessee and such property was hold for more than 180 days. An error committed by higher claim of depreciation would not automatically lead to consequences in the form of penalty of stringent nature. We thus find merits in the plea of the assessee for cancelling the penalty on these additions. The order of the CIT(A) is accordingly set aside and the AO is directed to cancel the penalty on both counts. - Decided in favour of assessee.
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2019 (7) TMI 667
Penalty u/s 271(1)(c) - non recording the satisfaction at the time of initiation of penalty proceedings - HELD THAT:- We are of the opinion that the legal requirement of making a clear cut reference to the applicable limb of clause (c) of section 271(1) is not met by the AO while initiating and levying the penalty u/s 271(1)(c). Thus, the satisfaction of the AO suffers from ambiguity in his mind.
Considering the above referred binding judgments, we are of the view that such penalty is unsustainable in law legally. It is a settled legal proposition that the AO is under obligation to specify the appropriate limb of clause (c) of section 271(1) at the time of initiation as well as at the time of levy of penalty. Without going into the merits of the case, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the entire penalty imposed by him. Accordingly, the grounds raised by the assessee are allowed on legal issue. - Appeal of the assessee is allowed.
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2019 (7) TMI 666
Deemed dividend u/s 2(22)(e) - security deposits received for lease of land - CBDT Circular No. 19 of 2017 dated 12.6.2017 - trade advances which are in the nature of commercial transactions - security was disproportionate in respect of land holding and not mentioned in Balance Sheet of company - HELD THAT:- In the case in hand, the assessee have established that there is a contractual relationship of lessor and lessee with the company, the land rented out is a high value land , the rent paid by the company has been returned in the income tax returns of the lessors and duly accepted by the Department, there is no question to doubt the payment of security deposits also. The assessee, thus, have proved that it was commercial transaction between the assessee and the company, hence, the deeming fiction of deemed dividend as per the provisions of section 2(22(e) cannot be applied in this case.
DR said that the amount paid as security deposits to different assessee is disproportionate vis-a vis to the share of the assessee in property in question, it is undisputed that the assessee herein are family members and the total security deposits paid by the company to the assessee never exceeded the limit as stipulated in the lease agreement. It is up to the assessee to settle between them as to in which assessment year what amount of the security deposit will be retained by either or any of them.
This cannot be a ground to doubt or to reject the transaction in question. It is held that the assessee have established that the payments received by them as security deposits were paid by the company in the course of its business, hence, the deeming fiction of deemed dividend to section 2(22)(e) is not applicable to these transactions. This common ground taken by the assessee in all the appeals is allowed and additions made by the AO on this issue are hereby ordered to be deleted.
Additions u/s 68 - cash deposit in bank account - contended that cash is available with the assessee to meet the deposits - cash flow statement show more withdrawals than the cash deposits in the bank account - HELD THAT:- Assessee has invited our attention in this respect Reconciliation of the Cash Account / cash flow statement to show the date wise cash available with the assessee to meet the deposits made in the bank account. Assessee has submitted that each and every entry has been reflected in the consolidated cash flow chart. The aforesaid cash flow statement furnished by the assessee could not be rebutted by the DR.
A perusal of the cash flow statement as well as opening and closing balance of the year proves that the assessee had funds available on the relevant dates to make the deposits in the bank account of the assessee. The source of the deposits in the bank account of the assessee, thus, stands explained by the assessee. In view of this, the addition made by the lower authorities on this issue is also held to be not justified and the same is accordingly ordered to be deleted. - Decided in favour of assessee.
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2019 (7) TMI 665
Deduction u/s 80IC - @ 30% or 100% claimed by the appellant - substantial expansion - initial assessment year - HELD THAT:- As decided in assessee's own case [2019 (5) TMI 941 - ITAT CHANDIGARH] Tribunal passed in relation to the eligibility of deduction @ 100% u/s 80IC of the Act was in respect of the 7th year from the start / operation of manufacturing activity of the assessee. The findings given above are applicable for the assessment year under consideration also being the 8th year as it has been held that the assessee will be eligible for deduction @ 100% on account of substantial expansion subject to the condition that the total period of deduction u/s 80IC would not exceed to 10 years.In view of this, this issue is decided in favour of the assessee.
Disallowance u/s 14A - disallowance out of interest expenditure u/s 36(1)(iii) - HELD THAT:- The assessee is eligible for claim of 100% deduction on its income from eligible business for the year under consideration. Hence, the aforesaid additions will not have any tax bearing in view of our findings given above. Hence, ground Nos. 2 & 3 of the appeal have become infructuous.
Disallowance of deduction u/s 80IC of Misc. Income - HELD THAT:- Assessee has explained before us that out of the misc. income of ₹ 2,81,825/-, a sum of ₹ 1,37,649/- is on account of discounts and deductions which relates to the business activity of the assessee and was part of the business income. A sum of ₹ 53,229/- was received on account of insurance claim, the expenditure related to which was debited in the earlier years. The insurance claim received by the assessee to indemnify the losses would go on to enhance the business income of the assessee. Further, the balance sum of ₹ 90,945/- was received by the assessee on account of return of cheques of membership subscription paid to the association. It was nothing but the refund of the amount already paid and claimed as expenditure. In view of this, the misc. receipt of ₹ 2,81,825/- is held to be income relating to the business activity of the assessee and thus eligible for deduction u/s 80IC of the Act.
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2019 (7) TMI 664
TP Adjustment - arm’s length price relating to international transaction of back office support services rendered by the assessee - Comparable selection - HELD THAT:- TCS E-serve ltd - One of the filters applied by the ld. TPO was to consider the companies whose turnover is more than One Crore. We find that assessee also has considered the same filter in his TP study report with regard to turnover, but the assessee had considered the comparables which are reasonable and comparable with the size and scale of operations with that of the assessee, whereas the TPO by considering the comparable like TCS E-serve ltd with that of assessee had practically considered the comparable whose turnover is several times more than that of the assessee. We hold that the giant size ITES provider like TCS E-serve ltd cannot be compared with routine ITES / BPO service provider like that of the assessee.
ITES company would then get compared with top giants like TCS E-serve ltd and others with the same high turnover, which would in turn result in mandatory ALP adjustment in all the cases. That cannot be certainly the intention of the legislature. In order to avoid any absurdity in this regard, the test of reasonableness should be applied by the TPO by comparing the cases whose turnover is either 10 times below or 10 times above the turnover with that of the assessee which would be reasonable for the purpose of comparison. Hence, the argument advanced by the ld. DR in this regard is not appreciated. Accordingly, we hold that this comparable i.e. TCS E-serve ltd deserves to be excluded due to huge turnover.
TCS E-serve ltd is excluded the mean margin of the comparables would be 16.21% as against the assessee’s margin of 12% and accordingly, the assessee would fall within +/-5% tolerance limit. We direct the TPO to verify the said workings given by the ld. AR and if the contention of the ld. AR is found to be correct, then no adjustment to ALP need to be made in respect of ITES segment of the assessee. Since, we directed the TPO to exclude TCS E-serve ltd from the list of comparables, the adjudication of other comparables, both inclusion / exclusion become academic in nature and no opinion is rendered by us herein. Accordingly, the ground No.2 read with ground No.4 raised by the assessee are allowed for statistical purposes.
Arm’s length adjustment made relating to international transaction of software support services (IT segment) - Comparable selection - HELD THAT:- If the argument advanced by the ld. DR is to be accepted for both the comparables (i.e Infosys and Wipro) , filters adopted by the assessee as well as by the ld. TPO, then in every transfer pricing adjustment of any software company, Infosys Limited and Wipro Technologies Ltd, would be subject matter of comparability and adjustment to ALP would have to be made mandatorily, which is not the intention of the legislature as it would only result in absurdity. In view of the aforesaid observations we direct the TPO to exclude both Infosys Ltd., as well as Wipro Technologies Ltd., from the final list of comparables in IT segment and recompute the margins of the comparables and decide whether at all any adjustment to ALP need to be made in IT segment of the assessee.
House property income - shown in revised return - effect of non inclusion of said income in draft assessment order - HELD THAT:- We agree with the argument of the AR, but both the parties before us were not able to give us the workings specifically as to whether this sum was included in the final computation adopted by the AO both in draft assessment proceedings as well as in the final proceedings. Hence, with the consent of both the parties, we hereby direct the ld. AO to verify whether this sum of ₹ 9,99,600/- representing house property income was at all considered by him in the draft assessment order. If it is so considered, then, the ld. AO is justified in considering the same in final assessment order pursuant to direction of the DRP. If from verification, it is proved otherwise, then the said addition requires to be deleted. With these observations, the ground No.5 raised by the assessee is disposed off.
Deduction u/s.10A - TDS not deducted u/s 195 on payments made to foreign parties - disallowance made u/s.40(a)(i) - whether the said disallowance would consequently increase the claim of the deduction u/s.10A? - Circular No.37/2016 dated 02/11/2016 - HELD THAT:- It is not in dispute that assessee had made certain payments to foreign parties in the sum of ₹ 31,59,524/- relating to the unit for which deduction u/s.10A is eligible. It is now well settled that even if disallowance u/s.40(a)(i) is to be made for non-deduction of tax at source, still it would only result in enhancement on business income of the eligible unit of the assessee which would inturn consequently increase the claim of deduction u/s.10A for the assessee, thereby making it revenue neutral.
We find that the ld. AR in this regard had rightly placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs. Lionbridge Technologies (P) Ltd., [2017 (9) TMI 1410 - BOMBAY HIGH COURT] . We also find that recently, the CBDT had also issued a Circular No.37/2016 dated 02/11/2016 wherein it has been categorically stated that disallowances made u/s.32, 40(a)(ia), 40A(iii), 43D of the Act etc., and other specific disallowances related to the business activity against which Chapter VIA deduction has been claimed result in enhancement of the profits of the eligible business and that deduction in Chapter VIA is admissible on the profits so enhanced by the disallowance. The same analogy would apply for deduction u/s.10A of the Act also. Respectfully following the aforesaid decision of Hon’ble High Court reported in Lionbridge Technologies (P) Ltd. (supra) and the Circular of the CBDT, the ground 6 & 7 raised by the assessee are allowed.
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2019 (7) TMI 663
Unaccounted labour payments in cash - search proceedings - assessee in his statement submitted that the said unaccounted cash payments were to the tune of ₹ 8.70 Crores which were received in cash from Runwal Developers Ltd. - assessee alternatively pleaded before the CIT(A) that he being a Civil Contractor may be taxed at the rate of 8% of ₹ 8.70 Crores - CIT(A) taxed @16% based on profit of earlier years - HELD THAT:- Assessing Officer of Runwal Developers Pvt. Ltd., had given a categorical finding that Runwal Developers Pvt. Ltd., had indeed made unaccounted cash payments of ₹ 8.70 Crores to the assessee. Hence, the order of the Department itself explains the source of ₹ 8.70 Crores for the assessee in respect of labour payments thereon by the assessee. Hence, there cannot be any addition that could be made in the hands of the assessee in the sum of ₹ 8.70 Crores in the facts and circumstances of the instant case. We also find that both the assessee as well as Runwal Developers Pvt. Ltd., were assessed by the same Assessing Officer and by the same Circle namely DCIT, Central Circle 4(1), Mumbai. Accordingly, we have no hesitation in directing the AO to delete the addition made in the sum of ₹ 8.70 Crores in the hands of the assessee. - Decided in favour of assessee.
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2019 (7) TMI 662
Exemption u/s 11 - registration u/s 12AA rejected - alleged that assessee does not fulfill the requirement of law as mandated u/s 12AA - HELD THAT:- Observation of the Ld. CIT(Exemption) that no other activities have been carried out is contrary to the material placed before us. As per the material placed, the assessee society has also conducted health camps. Further, it is submitted that the training programme conducted by the assessee is under Skill India scheme of the Central Government of India.
CIT (Exemption) has not doubted the genuineness of the activities but he rejected the application merely on the basis that the courses so provided by the assessee society are not recognized by the Government. This reasoning of the Ld. CIT (Exemption) is not in accordance with the provisions of law. As per section 12AA, Ld. Principal CIT or CIT on receipt of an application for registration of a Trust or Institution would call for such documents or information from the Trust or Institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of Trust or Institution. There is no suspicion casted upon the activities of the assessee society. Under these facts, the reasoning of the Ld. CIT is not sustainable - set aside the order of CIT and restore application to the file of the Ld. CIT to reconsider the same. Hence, the grounds raised are allowed for statistical purposes.
Application for registration of Samiti u/s 80G rejected - HELD THAT:- In this appeal also, the ground of the assessee’s appeal is allowed for statistical purposes. Application for registration u/s 80G is restored to the file of the Ld. CIT (Exemption) to re-decide it. Ld. CIT is hereby directed to reconsider the same after disposing of the application, which has been restored for registration u/s 12AA.
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2019 (7) TMI 661
Revision u/s 263 - proceedings barred by limitation - assessment order passed u/s u/s 153A r.w.s. 143(3) - HELD THAT:- No merit into this contention of the assessee that impugned order is hit by limitation as in the case in hand, there was no assessment u/s 143(3). It was merely a processing where the assessing officer had processed the return of the income and did not scrutinise the claim of the assessee. We are also in agreement of the finding of the Ld. CIT(DR) that section 147 and section 153A operate in two different and distinct fields. Therefore, the judgement of Hon'ble Apex Court rendered in the case of CIT Vs. Alagendran Finance Ltd. [2007 (7) TMI 304 - SUPREME COURT] would not help the assessee. Hence, we find no merit in the ground raised and the same is dismissed.
Undisclosed sale of property - not working out LTCG in accordance with the value adopted by the stamp valuation authority as per section 50C - Lack of enquiry on the admissibility of claim for deduction u/s 54F - no incriminating material found - HELD THAT:- CIT had invoked provisions of section 263 of the Act on the basis that the assessee failed to disclose the sale consideration and also did not work out long term capital gain in accordance with the value adopted by the stamp valuation authority as per section 50C. The contention of the assessee is that provisions of section 50C of the Act are not applicable as the assessee is engaged in the real estate business. However, this fact is contrary to the records as per the audited report, wherein the nature of business is stated to be contractors/civil contractors. Hence, we do not have any hesitation to come to the conclusion that the Ld. Principal CIT was justified in invoking the provisions u/s 263. The grounds raised in the appeal are dismissed. However, before parting we wish to clarify that A.O. would decide claim of deduction u/s 54F in accordance with law. - Decided against assessee.
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2019 (7) TMI 646
Revision u/s 263 - Addition u/s 56(2)(vii)(c) - CIT(A) deleted the addition - HELD THAT:- In the light of Order of ITAT, Mumbai Bench in the case of Sudhir Menon (HUF) vs. ACIT [2014 (3) TMI 534 - ITAT MUMBAI] in which it was held that provisions of Section 56(2)(vii)(c) would not apply to bonus shares.
ITAT, Delhi Bench in the case of Meenu Satija, New Delhi vs. Pr. CIT (Central), Gurgaon [2017 (1) TMI 1677 - ITAT DELHI] , on identical facts quashed the proceedings under section 263 . Therefore, ratio of the decision of the Tribunal in the case of Meenu Satija, New Delhi vs. Pr. CIT (Central), Gurgaon (supra), squarely apply to the facts and circumstances of the case. Whether this order have been passed under section 263 or merit would not make any difference. The principle of law have been clearly decided in favour of the assessee on the identical facts.
The Tribunal has also relied upon the decision of Mumbai Bench in the case of Sudhir Menon (HUF) vs. ACIT [2014 (3) TMI 534 - ITAT MUMBAI] which is relied upon by the Ld. CIT(A) as well. No infirmity have been pointed out in the Order of Ld. CIT(A). The issue is, therefore, covered by the Order of ITAT, Delhi Bench in the case of Meenu Satija, New Delhi vs. Pr. CIT (Central), Gurgaon (supra). The Departmental Appeal has no merit and the same is accordingly dismissed.
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2019 (7) TMI 660
Nature of expenditure - revenue or capital expenditure - remuneration paid for the installation and commissioning new brazing furnace and implementation of new technology - HELD THAT:- We observe that it is an undisputed fact that the services of expat technicians were utilized by the assessee and that was for installation of new equipments. This amount is, therefore, part of the capital of the assessee and has to be taken to the Balance Sheet and it cannot be part of the Profit & Loss account either as operating or non operating expenditure.
We, therefore, set aside the impugned order and direct the AO/TPO to re-compute the operating profit by excluding such expenditure from the overall expenses. Hence, additional ground No.2 of appeal of the assessee is allowed for statistical purposes.
Disallowance of good work reward - amount paid to the senior level employees under Management Incentive Bonus Plan (MIBP) - addition made u/s 43B r.w.s.36(1)(ii) considering bonus - HELD THAT:- Observation of the Revenue Authorities is incorrect since the facts on records clearly demonstrates that the issue of bonus as well as issue of MIBP are in altogether different terms and conditions. The judgment of SHRIRAM PISTONS AND RINGS LTD. VERSUS CIT [2008 (4) TMI 273 - DELHI HIGH COURT] has referred to the “Good Work Reward” and it has been clearly held that it does not constitute bonus within meaning of section 36(1)(ii) and was allowable as normal business expenditure u/s.37.
We, therefore, set aside the order of the Ld. CIT(Appeals) on this issue and held that the MIBP paid to the employees are not bonus in the hands of the employees and the said amount is allowable for deduction u/s.37(1) by the assessee. Thus, this ground of appeal of the assessee is allowed.
Disallowance of provision for warranty - trading liability incurred by the assessee in respect of the products sold by it to the customers in the ordinary course of its business - HELD THAT:- As decided in assessee's own case [2017 (4) TMI 1261 - ITAT PUNE] wherein as directed to the AO to allow the claim of the assessee vis-à-vis provision for warranty.
TP adjustment - direction of CIT(Appeals) in restricting TP adjustment, if any, to the value of international transactions and not to the total turnover of the assessee - As decided in assessee's own case [2017 (4) TMI 1261 - ITAT PUNE] and [2013 (5) TMI 891 - ITAT PUNE] the said issue is squarely covered by the decision of Hon’ble Bombay High Court in Commissioner of Income Tax Vs. ALSTOM Projects India Limited [2016 (12) TMI 1408 - BOMBAY HIGH COURT] , wherein held that in the absence of segmental accounts, TP adjustment have to be restricted only to transactions with Associated Enterprises on proportionate basis.
Transfer pricing adjustment of Product Development and testing - doubt regarding the receipt of service - HELD THAT:- The facts further demonstrated that for yearlier year the Co-ordinate Bench of the Tribunal(supra) has restored the issue to the file of AO for verification of nature of the expenses debited by the assessee. Taking totality of facts and circumstances into consideration and in view of the fact that there is difference of observation on facts by the Ld. TPO as well as the CIT(A), we set aside the order of the Ld. CIT(A) on this issue and restore the issue back to the file of the AO/ TPO to verify the nature of expenses. Thus, ground No.2 of the Revenue’s appeal is allowed for statistical purposes.
Exclusion of foreign currency losses from operating expenses - applicability of Safe Harbour Rules” issued by the CBDT dated 18.09.2013 - ssessee has been consistently treating foreign exchange fluctuation as operating in nature - HELD THAT:- The Co-ordinate Bench of the Tribunal has referred the judgment in Pr. CIT Vs. Ameriprise India Private Limited [2016 (3) TMI 1272 - DELHI HIGH COURT] and the judgment Pr. CIT Vs. B.C Management Services Pvt. Ltd. . [2017 (12) TMI 255 - DELHI HIGH COURT] wherein it has been held that foreign exchange fluctuation in relation to trading transactions, prior to Safe Harbour Rules from 2013, is operating gain or loss. Thus, in view of the foregoing discussion we are of the opinion that the amount of foreign exchange gain/loss arising out of business/trading transactions is required to be considered as an item of operating revenue/cost. Thus, the ground No.3 raised in appeal by the Revenue is allowed
PLI calculation - compensation income is operating income or not - one off transaction which had not occurred in any of other assessment years - HELD THAT:- CIT-A has correctly observed that compensation income of ₹ 2.65 Cr. has arisen during regular conduct of business. Without operation of the business, the assessee would not have earned this income. This income cannot be considered to be one time income to justify its exclusion on the ground of extraordinary income. Therefore, the Ld. CIT(A) has rightly directed to the AO to include this compensation income for computing PLI being operating income. Thus, we are of the considered view that the order of the Ld. CIT(A) is fair and reasonable and it does not call for any interference and relief provided to the assessee is hereby sustained. Accordingly, ground No.4 raised in appeal by the Revenue is dismissed.
Addition on account of payment of retention bonus - HELD THAT:- Assessee submitted that the person namely, Mr. Sunil Kaul is the Manager of the assessee‟s company and he is not holding any share of the company and he is working for the company and the amount paid is in the nature of reward given to the employee for working in a company for a longer duration and it is absolutely contractual payment. That even, these facts are mentioned in the order of CIT (Appeals). DR could not bring any evidences or material on record to controvert these facts. We do not find any infirmity with the findings of CIT(Appeals) and the relief provided to the assessee is therefore sustained. Thus, ground No.5 raised in appeal by the Revenue is dismissed.
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2019 (7) TMI 659
Unexplained purchases - purchases from grey market - search & seizure operation u/s 132 - genuineness of transactions - accommodation entry - HELD THAT:- As decided in M/S. MANSAROVAR INFRATECH PVT. LTD. VERSUS ASSTT. CIT [2019 (4) TMI 1722 - ITAT DELHI], we directed the Assessing Officer to restrict the disallowance to the tune of 5% of the impugned purchases wherein the same party M/s Meet Enterprises was involved. .
Respectfully following the aforesaid precedents, we direct the Assessing Officer to restrict the disallowance to 5% of the impugned purchase - decided in favour of assessee
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2019 (7) TMI 645
Addition of expenditure as commission on export of goods - payment on behalf of the Assessee to its overseas agents for facilitating its export business - claiming deduction by filing of a revised return - Department's appeal is on the footing that no deduction/expenditure, which was not claimed in the return of income, could be claimed before the Assessing Officer without filing any revised return - HELD THAT:- A similar plea, in a similar case involving the same issue, was before this Court in The Principal Commissioner of Income Tax, Panaji v/s. M/s. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd. [2019 (7) TMI 416 - BOMBAY HIGH COURT] after considering the case law cited by the Revenue and, in particular, the case of Goetze (India) Ltd. Vs. Commissioner of Income Tax, [2006 (3) TMI 75 - Supreme Court] held that there was no question of the Assessee claiming any deduction by filing of a revised return.
This Court held that what the Assessee received from its foreign buyers was the net FOB value; the Assessee was not claiming any expenditure on account of commission paid and, there was, thus, no question of any revised return. In that case, the Court observed that there was no tax effect whatsoever by reason of the expenditure made by foreign buyers by way of commission paid outside India and that, in the premises, no substantial question of law arose for consideration of the Court.
The decision in M/s. Rajaram Bandekar (Sirigao) Mines Pvt. Ltd. (supra) covers the facts of the present case. For the reasons stated in that case, no substantial question of law arises in the present Tax Appeal for consideration of this Court. The Appeal, in the premises, is dismissed.
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2019 (7) TMI 644
Disallowance of depreciation claimed at a higher rate of 60% on point of service (POS) terminals - HELD THAT:- The issue stands decided against the Revenue by the decision of this in Principal Commissioner of Income Tax-2 v. Connaught Plaza Restaurant (P) Ltd. [2016 (9) TMI 1485 - DELHI HIGH COURT] . Consequently, no question is framed in this regard.
Disallowance of the expense incurred in Software development and upgradation - capital or revenue expenses - HELD THAT:- ITAT rightly upheld the order of the CIT (A) treating the expenditure as revenue in nature and allowed it as such. Consequently, the Court is not persuaded to frame any question in this regard as well.
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2019 (7) TMI 643
Revision u/s 263 - notice preceding the order u/s 263 was sent to the Assessee at the wrong address - sufficient opportunity was not granted to the Assessee to oppose the notice u/s 263 - HELD THAT:- On this short ground, the ITAT has remanded the matter to the PCIT for passing a fresh order after hearing the Assessee. It is plain to this Court that the remand would not result in the PCIT coming up with new grounds for reopening the assessment under Section 263 of the Act.
Those grounds have already been set out in the show cause notice issued by the PCIT. All that the PCIT has now to do is to give the Assessee a hearing and pass a fresh order on merits, obviously uninfluenced by the earlier order passed by the PCIT. If the Assessee is aggrieved by such a fresh order, it will obviously be open to the Assessee to seek further remedies in accordance with law.
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2019 (7) TMI 642
Rejection of books of accounts u/s 145 - According to the AO, the Assessee had inflated the expenses and showed artificial excess consumption to the tune of 9.67% - HELD THAT:- Mr. Hossain was unable to dispute the fact that for the immediately preceding and subsequent AYs, the Assessee’s books of accounts were in fact accepted by the AO in scrutiny under Section 143 (3) of the Act without making any addition.
He was unable to explain how this would be tenable particularly considering that it is inconceivable that the accounts of a particular AY are found unacceptable under Section 145 of the Act but not those of the immediately preceding or subsequent AYs. If accounts of a particular AY are found not reflecting the true state of affairs, they would undoubtedly impact the accounts for the immediately preceding or subsequent AY.
It is inconceivable that the accounts of one particular AY in isolation is rejected and not those of the immediately preceding or subsequent AY. While as explained in Honey Enterprises v. Commissioner of Income Tax [2015 (12) TMI 519 - DELHI HIGH COURT] the rule of consistency is not inflexible, and has to be applied given the facts and circumstances of a particular case, as far as the case on hand is concerned, for the reason explained hereinabove, its invocation by the ITAT in the impugned order cannot be faulted.
In view of the detailed findings given by the CIT(A) by examining the accounts afresh and holding that there was no justification for the AO to make the addition, which findings have been concurred with by the ITAT, no case is made out for remand of the matter to the CIT (A).
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2019 (7) TMI 677
Disallowance of expenses on consumption and replacement of stores and spares - revenue expenditure OR capital expenses - HELD THAT:- As decided in assessee's own case [2019 (4) TMI 1723 - GUJARAT HIGH COURT] expenditure claimed as revenue expenditure is in respect of components of the machinery which cannot be treated as the independent machinery in itself as they are not capable of functioning independently.
The chemical and fertilizer plant was very large plant within which again there are large machines and within the machine there are components requiring replacement due to wear and tear, that was different plants within the fertilizers and chemical plant. Reference was also made to past history of disallowance wherein the Tribunal had set aside the issue to the AO for the assessment years 1998-99 to 2002-03, who in turn accepted the explanation furnished by the appellant in de novo assessment proceedings and no additions were made. On perusal of the facts noted by the CIT (Appeals) as well as affirmed by the Tribunal, it is clear that question (a) raised by the revenue is a pure question of fact and in the absence of any perversity being pointed out in the concurrent findings of fact recorded by the Tribunal, does not give rise to any question of law
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2019 (7) TMI 676
Nature of expenses - Disallowance of expenses on consumption and replacement of stores and spares - revenue expenditure OR capital expenses - HELD THAT:- The proposed question is no longer res-integra in view of the judgement of this Court in the case of the very same assessee rendered in Tax Appeal [2019 (4) TMI 1723 - GUJARAT HIGH COURT] as CIT-A found that the expenditure claimed as revenue expenditure is in respect of components of the machinery which cannot be treated as the independent machinery in itself as they are not capable of functioning independently. It was further held that the chemical and fertilizer plant was very large plant within which again there are large machines and within the machine there are components requiring replacement due to wear and tear, that was different plants within the fertilizers and chemical plant.
Reference was also made to past history of disallowance wherein the Tribunal had set aside the issue to the Assessing Officer for the assessment years 1998-99 to 2002-03, who in turn accepted the explanation furnished by the appellant in de novo assessment proceedings and no additions were made. On perusal of the facts noted by the CIT (Appeals) as well as affirmed by the Tribunal, it is clear that question (a) raised by the revenue is a pure question of fact and in the absence of any perversity being pointed out in the concurrent findings of fact recorded by the Tribunal, does not give rise to any question of law.
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2019 (7) TMI 675
Nature of expenditure - expenditure incurred on replacement of Rotor assembly, Impeller assembly, Gas Chromatograph, Relay and control Panel - revenue or capital expenditure - HELD THAT:- Proposed question is no longer res-integra in view of the judgement of this Court in the case of the very same assessee rendered [2019 (4) TMI 1723 - GUJARAT HIGH COURT] found that the expenditure claimed as revenue expenditure is in respect of components of the machinery which cannot be treated as the independent machinery in itself as they are not capable of functioning independently. It was further held that the chemical and fertilizer plant was very large plant within which again there are large machines and within the machine there are components requiring replacement due to wear and tear, that was different plants within the fertilizers and chemical plant. - Decided against revenue
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2019 (7) TMI 658
Penalty u/s 272A(2)(c) r.w.s. 274 - assessee did not furnish the details called for under the notice issued u/s 133(6) - HELD THAT:- On identical facts the Cochin Bench of the Tribunal in the cases of Kakoor Service Co-operative Bank Ltd. [2018 (1) TMI 548 - ITAT COCHIN] the assessee has not offered any valid reason for not furnishing the information called for u/s 133(6) of the Act. Many of the notices issued by the ITO (Intelligence) were never responded to by the assessee. In many instances the AO has mentioned that when they had approached, the assessee Society, for seeking information u/s 133(6) there was total lack of co-operation on the part of the assessee society as well as threat (reference order imposing penalty u/s 272A(2)(c) in appeals.
Since there is no reasonable cause furnished by the assessee as mentioned u/s 273B of the IT Act for non furnishing of information sought by the ITO(intelligence) u/s 133(6) of the Act, the order imposing penalty cannot be quashed. - Decided in favour of revenue.
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2019 (7) TMI 674
Disallowance of expenses - freight and transportation paid to Venkata Subbareddy Transport Contractors and Subbareddy contractors - on enquiry AO found that transporters are not in existence - HELD THAT:- Mere production of crossed demand drafts was not sufficient to establish the stand taken by the assessee. When the AO was able to establish that there was no such person or transport company, the assessee set up another case by stating that there is another partner by name Rama Muni Reddy, who is also in Cuddappah. The said person has given a statement stating that they had nothing to do with the said business.
Revenue preferred an appeal before the Tribunal. The Tribunal rightly reversed the finding of the CIT(A) and noted the fact that the transporters are not in existence has not been repelled by the assessee in the appeal proceedings and the CIT(A) merely accepted the plea of the assessee without any material or evidence on record.
We find all these records are self-serving and these records do not dislodge the specific finding of the AO based on Commission issued to the ITO, Cuddappah referred above. Therefore, the assessee having not been able to establish by documents that the finding of the AO was incorrect, we have no hesitation to hold that the order passed by the CIT(A) is utterly perverse.
According to the learned counsel for the appellant/assessee, the finding of the Tribunal is perverse. We do not agree with said submission as we have already held that the order of the CIT(A) is utterly perverse.
Hon'ble Supreme Court of India in the case of Mangalore Ganesh Beedi Works Vs. CIT [2015 (10) TMI 1283 - SUPREME COURT] as held that there was no reason to reverse the finding of the fact particularly since nothing has been shown to conclude that the finding of fact was perverse in any manner whatsoever. It was further held that if the finding of the fact arrived at by the Tribunal were to be set aside, a specific question regarding a perverse finding of fact ought to have been framed by the High Court and in the said case, it was noted that the Revenue did not seek for framing of any such question. In this regard, the Supreme Court referred to the decision in the case of K.Ravindranathan Nair Vs. CIT [2000 (11) TMI 3 - SUPREME COURT] - Decided against assessee.
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2019 (7) TMI 673
Exemption u/s 10(23BBA) - erroneous filling of returns for A.Y. 2014-15 and 2015-16 - petitioner is a registered temple coming under the scope of HR&CE Act - Whether erroneous filing of returns ought not to have been processed and likewise by referring to these assessment years and the tax determined, withdrawing a sum of ₹ 10 lakh from the account of the petitioner-temple, is illegal, arbitrary, beyond the Act and unconstitutional? - HELD THAT:- The petitioner firstly is an institution under HR&CE Act. Secondly, the petitioner satisfies the requirement of Section 10(23BBA) of the Act. Therefore, is not under obligation to file return under the Act. Even if the tax is paid erroneously, the respondents, de hors the statutory exemption, firstly could not have determined the total receipts received from the petitioner as income for the particular year and demand tax.
Such determination of demand of income tax is contrary to Article 265 of Constitution and Section 10(23BBA) of Act. The said position remains undisputed. The entitlement of petitioner in fact and law is not disputed by the respondents. On the other hand, without joining the issue with the petitioner, for the sake of resolving an issue, the factual and statutory position are fairly stated by the respondents. Therefore, the petitioner prays for appropriate orders.
With the above observations and by accepting the stand taken in the statement filed by the respondents, the writ petition could have been disposed of.
Such course keeps alive the issue of refund of tax collected without authority from the petitioner. Therefore, this Court by keeping in view the character, scope and admission of the petitioner vis-à-vis HR&CE Act and exemption in Section 10(23BBA) declares that the determination of income of petitioner for the assessment years 2014-15 and 2015-16 is illegal, contrary to the statutory exemption and violation of Article 265 of Constitution of India. Consequent thereto the petitioner is entitled for refund of the tax already collected from the petitioner institution. For the said purpose of securing refund of tax collected, the petitioner is given liberty, by enclosing a copy of this judgment, within two months from today to apply to second respondent under Section 264 of the Act for passing a consequential order keeping in view the above declaration, including refund of income tax recovered from the petitioner.
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2019 (7) TMI 672
Unexplained investment in jewellery - addition of 11065 grams - assessee filed affidavits from 15 persons to substantiate his case which was rejected by AO and CIT(A) on the ground that they were stereo-type affidavits - Tribunal accepted affidavits and explanation of gold deposits of his relatives and those relatives numbering 15 persons produced their PAN numbers as well as the Wealth Tax returns and VDIS returns - HELD THAT:- The evidence produced by the assessee before the AO was held to be sufficient to explain the gold and jewellery which were seized at the time of search in assessee's premises
Details of the claim of gold deposits from relatives and the extent to which it was accepted and extend to which it was supported by the Wealth Tax and VDIS returns of respective persons. Where the assessee asserts that it had received as gold deposits from its family members/relative more than what it was stated at the time of search and such assertion is supported by affidavits and corroborative evidences likes VDIS declaration of the giver/creditor and copies of Wealth Tax returns of the giver/creditors, in our opinion it was incorrect to brush it aside. Lower authorities simply went by a presumption that the claim was an after thought. Gold deposits agreements stipulates a return on investments to the credit and therefore this cannot be deemed gratuitous transactions
With regard to the claim of the assessee in respect of 1042 grams of gold jewellery belonging to the gold-smith, since the Tribunal has remanded this issue for fresh consideration to the Assessing Officer, we find there is no ground to interfere with the same.
Revenue referred to case of Principal Commissioner of Income-tax (Central)-1 Vs. NRA Iron & Steel (P). Ltd. [2019 (3) TMI 323 - SUPREME COURT] which can be of no assistance to the revenue in this appeal on account of the factual position therein. - We find that factual details have been reappraised by the Tribunal to come to the conclusion as held in the impugned order. - Decided against revenue
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2019 (7) TMI 623
Disallowance made u/s. 14A - maintaining mix funds - claim for deduction u/s. 80IA - HELD THAT:-Delay condoned. Issue notice, returnable on 09.07.2019.
Respondent accepts notice on caveat and as such no notice need be served on the respondent.
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2019 (7) TMI 671
Exemption u/s 11 denied - continued availability of registration under Section 12A(a) of the Act for the appellant as a public charitable trust - HELD THAT:- In the assessee's own case for the assessment years 2009-10, 2010- 11 and 2011-12, the Tribunal, by a common order [2016 (8) TMI 1445 - ITAT CHENNAI] dismissed the appeals filed by the assessee thereby denying the benefit of tax exemption computation despite recognition in the form of continued registration under Section 12A(a) of the Act. The said common order dated 03.8.2017 was challenged by the appellant – assessee before this Court and by a common judgment [2019 (7) TMI 620 - MADRAS HIGH COURT] , we allowed the appeals, set aside the common order passed by the Tribunal and remanded the matters to the Tribunal for a fresh consideration on all issues that may be raised by both the assessee as well as the Revenue.
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2019 (7) TMI 657
Revision u/s 263 - ineligibility of benefit of section 80P(4) - no enquiry - HELD THAT:- In the present case, the AO was under obligation to determine income from other sources being deposits for which source was not explained. The assessee is not a co-operative Bank having the meaning assigned to it in part V of the Banking Regulation act, 1949. The AO should have called for details of deposits and anyalysed identity, genuineness and creditworthiness of the same. Even if the benefit of section 80P(4) of the Act is available to Primary Agricultural Co-operative Society, this does not imply that eligibility u/s. 80P(2) automatically flows to the assessee which has to be established. Further, the accounts were not subjected to audit u/s 44AB. In the present case, the profit and loss account and balance sheet were not filed either by an accountant or under co-operative audit. The assessee was liable to file further report by an accountant in the prescribed format as per the provisions of section 44AB. It appears that all these aspects were not enquired into and no proper efforts were made to find out whether the assessee was eligible for deduction u/s. 80P(2). Without making any enquiry into these issues, the AO accepted the assessee’s claim. The failure on the part of the AO to make necessary enquiry rendered the assessment order erroneous which also resulted in loss to the revenue. The CIT had observed in his order that it is to be decided by the AO after fresh examination . Hence, the order of the CIT cannot be held as erroneous. The CIT’s approach was correct. - Decided against assessee.
Grant of deduction u/s. 80P - HELD THAT:- In our opinion, the issue was considered by the Jurisdictional High Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] wherein it was held that the Assessing Officer is not obliged to grant deduction by merely looking at the certificate of registration issued by the competent authority under the Co-operative Societies Act. Instead, he has to conduct an enquiry into the factual situation as to the activities of the assessee and arrive at a conclusion whether the benefits of section 80P can be extended or not.
Accordingly, the issue in dispute is remitted to the file of the AO for fresh consideration in accordance with the above direction. This ground of appeal of the Revenue is partly allowed for statistical purposes.
Deduction u/s. 80P(2)(a)(i) - income from business OR income from other sources - HELD THAT:- With regard to the interest income earned by the assessee from other Banks and Treasury on which deduction u/s. 80P(2)(i)(a) is to be granted, there is no dispute that the assessee has made investments in the course of banking activities and such interest income was received on investments made with cooperative banks and other scheduled banks. The co-ordinate bench of the Tribunal in the case of Kizhathadiyoor Co-operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that such interest income received by the assessee should be assessed as “income from business” instead of “income from other sources”. In view of the order of the co-ordinate bench, we hold that the CIT(A) is justified in holding that interest income received by the assessee should be assessed as “income from business”.
As regards grant of deduction u/s. 80P(2)(i)(a), the Assessing Officer shall follow the law laid down by the Larger Bench of the Jurisdictional High Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] and examine the actual activities of the assessee so as to grant deduction u/s. 80P(2)(i)(a). Accordingly, we remit this issue to the file of the AOfor fresh consideration in accordance with the above direction. Thus, this ground of appeal of the Revenue is partly allowed for statistical purposes for both the assessment years.
Unexplained credits u/s. 68 - HELD THAT:- It is the duty of the assessee to prove the identity of the depositors to the satisfaction of the AO. It is seen that the assessee has not furnished the details of names and addresses and PAN Nos. of the concerned depositors. In our opinion, the assessee has to fulfil the above requirements. However, we make it clear that the assessee, being a Co-operative Society, need not prove the creditworthiness and genuineness of the deposits, but it has to prove the identity of the depositors by furnishing proof of address and PAN details of the depositors to the satisfaction of the Assessing Officer as held by the Hyderabad Bench of the Tribunal in the case of ACIT vs. Citizen Co-operative Society Ltd. [2012 (9) TMI 756 - ITAT HYDERABAD] . Accordingly, we remit this issue to the file of the Assessing Officer with a direction to the assessee to furnish the identity of the depositors with PAN details before the AO and decide the issue in accordance with law. Thus, this ground of appeals of the assessee is partly allowed for statistical purposes.
Disallowance of deduction u/s. 80P on addition of unexplained income u/s 68 - HELD THAT:- Merely because the assessee is running a business in which are found certain unexplained cash credits, it does not necessarily follow that such credits represent suppressed business receipts and there would be no error of law in regarding the unexplained cash credits as income of the assessee from some independent and unknown sources unless there are strong reasons for connecting the unexplained cash credits with known sources of income of the assessee, there would be no alternative to treating them as income from other sources.
Reliance is also placed on the judgment of Supreme Court in the case of CIT vs. Deviprasad Viswanath Prasad [1968 (8) TMI 5 - SUPREME COURT] wherein it was held that when the assessee pleads that the impugned cash credits came out of suppressed profit, it is for him to prove that it is so. If these receipts are allowed by treating as business receipts, then the assessee will be entitled to set off of business expenditure against these receipts which is not permissible. The assessee's business is carrying on of export activities in granite slabs and not dealing in unexplained credits. Being so, we are inclined to hold that the assessee is not entitled for deduction u/s 80P on account of addition u/s. 68. This ground of appeals of the assessee is dismissed.
Provision for bad and doubtful debts u/s 36 - HELD THAT:- Admittedly, the CIT(A) gave a finding that exemption u/s. 80P(2)(a)(i) is available to the assessee on the part of disallowance made on account of provision of bad and doubtful debts and the disallowance made to that extent was deleted. Being so, the assessee cannot have any grievance against this finding of the CIT(A) on this issue. Hence, the ground raised by the assessee with regard to exemption u/s. 36(1)(viia) is misconstrued. Accordingly, this ground of appeal of the assessee is dismissed.
Levy of penalty u/s. 271B for non-filing of audit report by an accountant within the prescribed format - HELD THAT:- Assessee furnished documents such as Annual Report of the Financial year 2013-14 depicting the audited financial statements, copy of receipts and distribution statement etc. The audit report by the accountant in the prescribed format was not produced before the Assessing Officer. In our opinion, non production of audit report in the prescribed format can be a reason for levying penalty u/s. 271B. Thus, this is a fit case for levying penalty u/s. 271B as the assessee has not given explanation regarding reasonable cause for not filing the audit report within the prescribed time limit. Accordingly, we confirm the penalty levied u/s. 271B. Thus, the appeal of the assessee dismissed.
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2019 (7) TMI 670
Unexplained investments - Tribunal held that the disallowance to the extent of inflated expenses will adequately cover the unexplained peak amount of investment made in the bogus purchase and no separate addition required - HELD THAT:- Tribunal has followed the dictum as laid in the decision of this Court in the case of VIJAY PROTEINS LTD. VERSUS CIT [2015 (1) TMI 828 - GUJARAT HIGH COURT] . In our opinion, the Tribunal committed no error in applying the dictum as laid in Vijay Proteins Ltd. (supra) in the facts of the present case.
Addition on account of under valuation of stock - Tribunal deleted addition - HELD THAT:- Tribunal held that CIT(A) has analysed the submissions of the assessee as well as findings of the AO and after arrived at a fair reasonable valuation of closing stock, hence the findings of the CIT(A) in reducing the closing stock to ₹ 5,61,588/- from ₹ 27,66,485A is therefore upheld.
Addition on account of motor case expenses and depreciation - Tribunal deleted addition - HELD THAT:- Tribunal took the view that the CIT(A) correctly deleted the said addition. In such circumstances, the Tribunal thought fit not to interfere.
No error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. None of the questions proposed by the Revenue could be termed as the substantial questions of law involved in the present Tax Appeal.
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2019 (7) TMI 656
Admission of additional evidence - Capital gain - Capital asset or agricultural land - the ‘certificate from the Tehsildar’, sought to be admitted as additional evidence is both unreliable and ambiguous. Indeed it does not qualify as a certificate from the tehsildar. - Rule 46A of IT Rules - Rule 29 of Appellate Tribunal Rules - said evidence is liable to be admitted in the facts and circumstances of the case, or not so - HELD THAT:- Where therefore the appellate court considers that such an additional evidence would be necessary for proper adjudication of the matter, i.e., where it cannot, in the absence of the said evidence, pronounce a judgment satisfactorily, it is to invoke its’ discretion even if the evidence being furnished before it is for the first time, and there has been no denial of opportunity by the authority below (i.e., before whom it ought to have been furnished) for adducing the said evidence. This, then, explains the law in the matter.
It is, in view of the fore-going, not considered necessary for pronouncing the judgment satisfactorily to admit the ‘certificate from the Tehsildar’, sought to be admitted as additional evidence. The said certificate is both unreliable and ambiguous. Indeed it does not qualify as a certificate from the tehsildar. There is nothing on record, or sought to be admitted, that the prescribed distance applicable in this case is 2 km., with the applicability of a higher distance failing the assessee’s case. Even if falling outside the said limit, it will not by itself imply that the said land, forming part of one, contiguous land sold by the assessee, which is not an agricultural land by definition and, thus, a capital asset u/s. 2(14)(iii), is an agricultural land.
It is the entirety of the facts that are to be seen, which suggest the subject land to be not an agricultural land and, in any case, not sold as an agricultural land. In fact, given the area of the land under consideration (16K, 1.5 M), the said limit, where so, would be breached by some metres, hardly impacting the nature of the land. Indeed, the ld. CIT(A), who has also decided the issue on merits, only considered the sale document, registered with the office of the subregistrar, specifying the subject land to be within the municipal limits of Goraya, as itself sufficient for the purpose. In fact, the municipal limits itself keep changing with time, so that that is another aspect of the matter, and which would therefore require to be determined before placing reliance on the said certificate, even as we have examined the issue even from the stand point of the truth of its contents, finding it to be of no consequence.
In our view, therefore, the assessment stands satisfactorily concluded on the basis of the material on record and, accordingly, the assessee’s plea for admission of additional evidence is liable to be rejected. We decide accordingly. - the assessee’s appeal is dismissed
Non-grant of indexation benefit u/s. 48 in computing the impugned long-term capital gain - HELD THAT:- As perusal of the assessment order, however, reveals an indexation benefit of 5.82 as having been applied by the AO in arriving at the long-term capital gain, inflating thus the cost (of acquisition) by the said factor. The charge therefore is incorrect. Any mistake in applying the correct index, if so, could be addressed by moving a rectification application. We have accordingly no reason to interfere. We decide accordingly. Assessee’s appeal is dismissed.
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2019 (7) TMI 655
TP adjustment - management and administrative cost allocation by AE - argument that issue stands settled by APAs made u/s 92CC - HELD THAT:- In assessee’s own case for assessment year 2008-09, we find that in [2018 (11) TMI 264 - ITAT PUNE] the issue has been deliberated upon but is not being reproduced for the sake of brevity. Following the same parity of reasoning, we remit this issue back to the file of AO to examine the facts and decide the issue of applicability of APAs to assessee’s case for the year under consideration in principle.
TP adjustment for rendering of supply base development and other back office services under the Business Support Services (BSS) - HELD THAT:- Objection of authorities below that the assessee itself had included the said concern as comparable in its TP report, but during TP proceedings objected to its inclusion. We find that the issue now stands covered by the dictate of Jurisdictional High Court in CIT Vs. Tata Power Solar Systems Limited [2016 (12) TMI 1600 - BOMBAY HIGH COURT] where it has been held that a concern can be excluded though it was originally selected by assessee as comparable, where the assessee establishes that it was not functionally comparable. Hence, we direct the Assessing Officer to exclude Saket Projects Limited from the final list of comparables for BSS segment of assessee.
TSR Darashaw Limited stands covered by order of Tribunal in assessment year 2008-09, wherein the said concern was excluded being not functionally comparable to the assessee. Following the same parity of reasoning, we direct that the said concern be excluded. We find no merit in the observations of TPO that a concern which was selected by assessee in its TP study in earlier years cannot be excluded in this year, since the finding of TPO has been reversed by Tribunal in assessment year 2008-09.
Saket Projects Limited and TSR Darashaw Limited are excluded from final list of comparables, then the margins in BSS segment would be within +/- 5% range and there is no need to adjudicate the issue of exclusion of ICRA Online Limited and risk adjustment as they would become academic. In view thereof, we do not adjudicate other connected issues raised in BSS segment and direct the AO to exclude Saket Projects Limited and TSR Darashaw Limited in the said BSS segment and work out the arm's length price of international transactions and if the same is within +/- 5% range, then no adjustment is to be made in the hands of assessee.
Adjustment pertaining to Application Engineering Services Segment - Comparable selection - HELD THAT:- Vardaan Projects Ltd. was rendering services of financial structuring, financial analysis, financial arrangements, etc. and was also engaged in asset valuation for compliance with IFRS and others. In such case, where the segmental details were not available, then the said company could not be held to be functionally comparable to the assessee, though the entire operating revenue earned by assessee was reported under the head ‘Income from Engineering Consultancy Services’. Accordingly, we hold that Vardaan Projects Ltd. needs to be excluded from final list of comparables in the hands of assessee in Application Engineering Services segment.
Rejection of CG VAK - assessee was providing services which comprised of customization of design of turbochargers to particular vehicle models of different customers, such design services fall within ambit of Information Technology Enabled Services. M/s. CG VAK was also engaged in providing similar ITES services though in medical field and was selected as comparable to the assessee by TPO in assessment year 2008-09. Assessee has drawn our attention to the functional analysis of the said concern and has pointed out that there were no changes in functionality during the year when compared with earlier year. In such circumstances, we find no merit in the order of TPO in excluding CG VAK from the final list of comparables. Hence, we direct him to include the same for benchmarking transactions in ITES segment.
Additional companies were identified based on updated data on the basis of revised filters applied by TPO and the same should have been included in final list of comparables - HELD THAT:- The perusal of order of TPO / DRP reflects that Agrima Consultants International Ltd. was proposed to be included in final list of comparables. The objection of assessee before both the authorities was on that ground of supernormal profitability. But this contention of assessee was not accepted by any of the authorities. However, before us, AR for the assessee has pointed out that the financials of Agrima Consultants International Ltd. which were available in public domain covers period only upto 31.12.2008. Since the said concern was unlisted company, data for the three months was not available in public domain.
We find that the Hon’ble Bombay High Court in CIT Vs. PTC Software (I) (P) Ltd.[ 2018 (4) TMI 1002 - BOMBAY HIGH COURT] have held that provisions of Rule 10B(4) of the Income Tax Rules are clear in as much as it obliges that data to be used for comparability analysis should be of the same financial year in which international transactions were entered into by tested parties. Applying the said principle, we hold that in case the data for same financial year as followed by assessee is not available in public domain, then the margins of said concern could not be applied to benchmark the international transactions of said segment. In this regard, as this issue was not raised before any of the authorities below, this needs verification. Hence, we remit this issue back to the file of Assessing Officer/TPO to carry out necessary verification and decide the issue.
Cosmic Global Ltd. is to be excluded from final list of comparables. We are not addressing the issue of supernormal margins as we have directed exclusion of Cosmic Global Ltd. otherwise.
ICRA Online Ltd. being KPO division could not be held to be functionally comparable during the year, to the assessee and hence, the same is directed to be excluded.
Microgenetics - assessee pointed out that in case updated margins are to be applied, then the said concern would be included in the final list of comparables. The assessee had not included the said concern in TP study report. After updated margins were applied by the TPO, no such concern was selected and even before the DRP, AR for the assessee was not able to point out the para in which the said issue was raised. However, in the written note, it relied on DRP directions for assessment year 2011-12. We find no merit in the plea of assessee and the issue of inclusion of Microgenetics is decided against assessee.
Grant of risk adjustment in the Application Engineering Services - HELD THAT:- Ground of appeal relates to both the segments i.e. BSS segment and AE segment; but in respect of BSS segment, the learned Authorized Representative for the assessee pointed out that the said issue be not decided as its margins were within +/- 5% range. However, in respect of AE segment, it was pointed out that the ratio laid down in the case of Sony India Pvt. Ltd. [2008 (9) TMI 420 - ITAT DELHI-H] be applied to allow 20% as it was not possible to quantify the risk adjustment. It was also pointed out that the said directions have been given in assessee’s own case for assessment year 2008-09. Accordingly, we hold that risk adjustment as directed in the case of Sony India Pvt. Ltd. (supra) should be allowed on operating margins of comparables in the provision of Application Engineering Services segment.
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2019 (7) TMI 640
Payments due from defaulting subscribers treated as bad debt - whether there is no relationship of creditor and debtor between them? - HELD THAT:- It is squarely stated by the learned counsel for the Revenue that the above substantial question of law has been answered against the Revenue in the assessee's own case for the assessment year 1995-96.
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2019 (7) TMI 621
Stay petition rejected - manner in which the stay petitions of this nature have to be disposed of - petitioner submitted impugned order rejecting stay is not only cryptic, but it has given a complete go by to the parameters and determinants which have to be taken into account while disposal of stay petition of this nature - HELD THAT:- This court in MRS. KANNAMMAL VERSUS INCOME TAX OFFICER WARD 1 (1) TIRUPUR [2019 (3) TMI 1 - MADRAS HIGH COURT has laid down the parameters and determinants which have to be taken into account in disposal of such a stay petition
Revenue very fairly submitted that the aforesaid order in MRS. KANNAMMAL case has been given legal quietus and there is no appeal against the same. As the Revenue has given legal quietus and finality to the aforesaid order, it follows as a indisputable sequitur that the Revenue has to necessarily follow the parameters laid down in the said order for disposal of stay petition.
Before this Court proceeds further, to be fair to the first respondent, it is to be recorded that this Court has noticed that the impugned order was passed on 22.09.2017, whereas the aforesaid order came to be passed by this Court only on 13.02.2019.
Be that as it may, as there is no dispute or disagreement that the aforesaid order is operating and the obtaining position with regard to disposal of stay petitions, it follows as a natural sequitur that the impugned order which is cryptic and which does not make any reference to the parameters and determinants adumbrated in the aforesaid order deserves to be set aside.
Matter is sent back to the Principal Commissioner of Income Tax, Chennai – 600 006 for disposal of the stay petition with regard to assessment year 2012-2013 afresh after affording an opportunity to the writ petitioner and by adhering to the aforesaid order of this Court
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2019 (7) TMI 669
Rectification application u/s 254 - ITAT failed to appreciate the assessee’s contention with respect to the contracts which it claimed were not forward contracts by virtue of proviso clauses (a) & (b) to Section 43 (5) of the Act - HELD THAT:- The contention was declined on the ground that no correlation between the forward contract transactions of gold and corresponding purchases and export of jewellery was established to satisfy the requirements of law. This Court is of the opinion that the assessee’s contention has some merit - the earlier portion of the main impugned order specifically noticed the compilation of documents produced during the proceedings, which contained specific contracts and the transactions which the Revenue alleged were speculative.
In these circumstances, given that the Revenue’s appeal has been remitted, the ITAT’s approach in our opinion was not correct. Accordingly, the assessee’s question with respect to the verification of the transactions and the correlation with specific contracts shall be examined having regard to the assessee’s contentions as well
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2019 (7) TMI 668
TP Adjustment - exclusion of two comparables in the transfer pricing - two comparables i.e. M/s Bharat Earth Movers Ltd. and M/s Telco Construction Equipment Co. excluded by ITAT on the ground that both these companies have reported unusually high turnover - HELD THAT:- This Court is of the opinion that the ITAT’s opinion is ex facie untenable. This Court in Chryscapital Investment Advisors (India) pvt. Ltd. vs. Deputy Commissioner of Income Tax [2015 (4) TMI 949 - DELHI HIGH COURT] , had held that unusually high turnover per se cannot be a ground for exclusion and that the AO has to probe into the matter further. The Court also held that it is functional similarity which should be considered rather than the turnover. As a consequence, the impugned order cannot be sustained, on the first question, and is hereby set aside.
Additional depreciation - Revenue urges that the items bought and for which said relief was claimed, cannot be termed as equipment - HELD THAT:- ITAT had relied upon its previous order granting the same relief. Moreover, the assessee engages itself in manufacturing of equipments for construction and building industry. In the circumstances, unless the connection of the items purchased and claimed to be equipment is shown to be remote, the Revenue cannot dictate and say that the said equipment is not plant, and not connected with the manufacturing activities.No question of law arises on this aspect.
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Corporate Laws
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2019 (7) TMI 639
Approval of the scheme of amalgamation of the transferor company into the transferee company - the appointed date for amalgamation provided in the scheme will be April 1, 2017 - HELD THAT:- In the joint petition it has been affirmed that no proceedings under sections 206 to 229 or Chapter XIV of the Companies Act, 2013 are pending against the petitioner-companies.
The shareholders of the petitioner-companies are the best judges to protect their interest, fully conversant with market trends, and therefore, their decision should not be interfered with by the Tribunal for the reason that it is not a part of judicial function to examine entrepreneurial activities and their commercial decisions. It is well-settled that the Tribunal while evaluating the scheme of which sanction is sought under sections 230-232 of the Companies Act, 2013 will not ordinarily interfere with the corporate decisions of companies approved by shareholders and creditors.
Right to apply for the sanction of the scheme has been statutorily provided under sections 230-234 of the Companies Act, 2013 and therefore, it is open to the applicant-companies to avail the benefits extended by statutory provisions and the Rules.
Upon considering the approval accorded by the members and creditors of the petitioner-companies to the proposed scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs, the report of official liquidator and the report of the Income-tax Department there appears to be no impediment in sanctioning the present scheme - Consequently, sanction is hereby granted to the scheme under sections 230 to 232 of the Companies Act, 2013.
Petition disposed off.
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Insolvency & Bankruptcy
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2019 (7) TMI 638
Maintainability of application - Interpretation of statute - Scope of I&B Code - non-banking financial institution rendering ‘financial service’ - whether out of the purview of the I&B Code or not? - HELD THAT:- The definition of ‘financial services’ as defined in Section 3(16) of I&B Code is not limited to the 9 activities as shown at Clause (a) to (i) of Section 3(16). The Clauses (a) to (i) are inclusive which means there are other services means there are other services which come within the meaning of “financial services” - The Registration of Certificate issue by RBI shows that it has granted certificate to commence/carry on business of “non-banking financial services”. However, the Respondent has not been allowed to accept the public deposit and such certificate is condition to other conditions as provided in the back of the Certificate.
Chapter IIIB of The Reserve Bank of India Act, 1934 relates to “Provisions Relating to Non-Banking Institutions Receiving Deposits and Financial Institutions”. It is not applicable to State Bank or a banking company as defined in Section 5 of the Banking Regulation Act, 1949 or a corresponding new bank as defined in clause (da) of Section 5 of the Act or Regional Rural Bank or a cooperative bank or a primary agricultural credit society or a primary credit society.
Therefore, it is clear that the Respondent, a non-banking financial institution is carrying on business of financial institution and thereby it being financial service provider do not come within the meaning of Corporate Person/Corporate Debtor.
So far as the allegation that the Respondent, Non-Banking Finance Company, is taking deposits from others in violation of conditions imposed by the Reserve Bank of India, such issue cannot be decided by the Adjudicating Authority while considering an Application under Section 7 or 9 of the I&B Code. Only on such ground the Adjudicating Authority cannot admit or reject an application under Section 7 or 9 of the I&B Code.
The application under Section 7 of I&B Code is not maintainable - Appeal dismissed.
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2019 (7) TMI 637
Admissibility of petition - Initiation of the Corporate Insolvency Resolution Process - Corporate Applicant/Corporate Debtor - existence of debt/default - Section 10 of the Insolvency and Bankruptcy Code, 2016 read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- The corporate applicant is having its outstanding debts due to its Financial and Operational Creditors, but is unable to pay the same, which amounts approximately to ₹ 4,25,17,532.01 to the Financial Creditors. That apart, there is some disputed dues of newly impleaded respondent/objector IFFCO-TOKIO General Insurance Company Ltd. to the extent of ₹ 23,27,535/- only. Hence, the corporate applicant has moved for initiation of CIRP for itself.
This Adjudicating Authority is bound to admit an application, if it is found complete by providing requisite information under Section 10 of the I& B Code read with Form 6 of the relevant rules and it does not suffer from any ineligibility prescribed under Section 11 of the Code. Therefore, once the IB Petition is found complete, then this Adjudicating Authority cannot reject the application on other grounds as agitated by the IDBI and other objectors - Further, there can be no serious prejudice to their claim when the petition is admitted and CIRP is triggered, as they can still lodge their claim before the IRP/RP which shall be dealt with as per I & B Code.
The present IB petition is found complete. Hence, it deserves for admission so as to trigger the C.I.R.P under Section 10 the Code - Petition admitted under Section 10 of the Insolvency & Bankruptcy Code and the Moratorium under Section 14 of the Code is hereby declared in respect of the Corporate Applicant / Debtor Company.
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2019 (7) TMI 636
Extension of mining lease - initiation of Corporate Insolvency Resolution Process - Corporate Debtor - It is alleged by the Corporate Debtor/Applicant that that the order dated 26.09.2018 passed by the 1st Respondent, rejecting the request of the Applicant for deemed extension of the Mining lease, is in violation of Section 14 of the Insolvency and Bankruptcy Code, 2016.
Whether the order dated, 26.09.2018 passed by the Respondents No.1 to 3 by which Mining Lease bearing No. ML-2293 is terminated and the request for Deemed Extension of the said Mining Lease is rejected, violates the Moratorium declared by this Authority on 12.03.2018 while initiating the CIRP against the Corporate Debtor/Applicant?
HELD THAT:- The intention of the legislature in relation to Section 14 is to ensure that after the declaration of moratorium, there is a standstill period during which there is a bar on creating any encumbrance, sale or alienation of the assets of the Corporate Debtor, so that the financial position of the Corporate Debtor must remain preserved and transparent as a going concern. The suspension of all proceedings against the Corporate Debtor is essential as it stabilizes the assets of the Corporate Debtor thereby giving the creditors clarity regarding the financial health of the Corporate Debtor and providing them a drawing board to formulate a Resolution Plan, which could effectively restructure the outstanding debts. Thus, the language of Section 14 of the Code is wide enough to include legal proceedings of any nature within its ambit.
The Corporate Debtor must continue to be a going concern during the moratorium, and any action which is likely to frustrate the object of the CIR process is prohibited. Thus, any violation of the moratorium will certainly derail the CIR process and Resolution Plan, which the Committee of Creditors (“CoC”) may be considering, thereby defeating the scope and purpose of the Code. In view of it, the Tribunal/Court has to make a purposive Interpretation of the provisions of Section 14 of the Code, so as to give effect to the same by keeping in mind the purport and object of the Code - In the case on hand, Clause (d) of Sub-Section (1) of Section 14 of the IBC is relevant, which provides that the declaration of the Moratorium prohibits ‘the recovery of any property by any owner or lessor where such property is occupied by or in possession of the Corporate Debtor.’
The Respondent Nos. 1 to 3 are directed to execute Supplement Deeds in favour of the Corporate Debtor/Applicant extending the period of the Mining Lease bearing ML No.2293 up to 31.03.2020, in accordance with Sec. 8 A (6) of the M.M.D.R Act, 1957 as amended under the Mines and Minerals (Development and Regulation) Amendment Act, 2015, within a period of two weeks from the date of the receipt of the certified copy of this Order.
Application disposed off.
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Service Tax
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2019 (7) TMI 635
Condonation of delay in making the payment of interest - HELD THAT:- Taking note of the fact that the appellant is a sick unit registered with BIFR and the delay was only due to such financial hardships, I am of the opinion that the delay in making the interest payment deserves to be condoned - Further, it has to be noted that appellant has paid the amount within a reasonable time and there is no huge or wanton delay in making such payment. Interest also has been paid within one month after the time prescribed (3 months).
The delay in making the payment of interest is condoned - COD application allowed.
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2019 (7) TMI 654
Works Contract Services - Composition rules - non-discharge of service tax - period October 2007 to November 2010 - time limitation - HELD THAT:- Undisputedly the SCN was issued on 25 June 2014. In terms of the provisions of section 73 of the Finance Act, 1994, Revenue can raise the demand for the maximum period of five years from the date of issuance of show cause notice - the period prior to five years from the date of the show cause notice cannot be re-opened by the Revenue and the demand for the said period is liable to be set aside on this ground.
Admittedly the composition rules are applicable on an option exercised by the assessee. Such an option was exercised by the appellant only w.e.f. December 2010 onwards. In the absence of any option having been exercised for the period in question, the applicability of the composition rules cannot be upheld. As such the demand has to be quantified in terms of the provisions of Rule 2A of Service Tax Valuation Rules, by taking into account the VAT assessment orders.
Matter remanded to the adjudicating authority for fresh quantification of the demand against the appellant for the period falling within five years from the date of show cause notice.
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2019 (7) TMI 653
Extended period limitation - Taxability - sales commission paid by the appellant to overseas Sales Commission Agent - reverse charge mechanism - Section 66A of Finance Act, 1994 - revenue neutrality - HELD THAT:- During the relevant period, in the light of the Hon'ble Punjab & Haryana High Court judgment in the case of Ambika Overseas (supra), the appellant was entitled for the Cenvat credit in respect of the service tax payable on commission paid to overseas commission agent. Therefore, even if the service tax was payable, there was a Revenue neutral situation hence, since there is no gain to the appellant, it cannot be said that there was malafide intention on the part of the appellant in non-payment of service tax. Therefore, extended period was clearly not invokable in the facts of the present case.
The demand for the longer period is set aside - the demand for the normal period is maintained, if any - penalty imposed under Section 76 and 78 is also not sustainable - appeal allowed in part.
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2019 (7) TMI 652
100% EOU - Refund of CENVAT Credit - input services - output services relatable to their export of services - invoice issued by ICICI Lombard General Insurance Company Ltd - HELD THAT:- The insurance in question was not for the personal benefit of any individual or Director, it only covers any liability that may arise on them in the course of their official work. Therefore, respectfully concurring with the decision of CESTAT, Chandigarh in the case of Ernst and Young Associates [2017 (10) TMI 456 - CESTAT CHANDIGARH] , the appellant is entitled for the benefit of CENVAT credit under Rule 2(l) and consequently refund under Rule 5 of CCR 2004 in respect of this invoice - refund allowed.
IFFCO-TOKIO General Insurance Co. Ltd. - three invoices providing medical insurance for the employees and their families - HELD THAT:- It does not appear that all the services listed in the above clause have to be relatable to employees being on vacation such as Leave or Home Travel Concession. Such an interpretation would lead to absurd conclusions. It is inconceivable that the company provides outdoor catering to an employee who is on leave or home travel concession. Similarly it is absurd to say that the company may be providing beauty treatment or health services or plastic surgery or membership of a club, health and fitness centres etc., while the employee is in vacation or Home travel concession - the health insurance services have been clearly excluded from the Rule 2(l) of CCR 2004.
Invoices issued by M/s TATA AIG General Insurance Co. Ltd. - HELD THAT:- No individual has been made the beneficiary in this invoice. It is a commercial liability insurance meant for the company itself. Therefore, this is clearly not excluded under clause ‘C’ of Rule 2(l) - the appellant is entitled for CENVAT Credit on the invoice issued by M/s TATA AIG General Insurance Company Limited.
Invoices issued by New Vision Interiors for works contract services - HELD THAT:- All these are “Works contracts” and they pertain to several activities such as scaffolding for replacement of facade glass of out gate area, fixing of toughen glass etc. Therefore, they are clearly excluded in the definition of ‘input services’ under Rule 2(l) - the appellant is not entitled to CENVAT Credit on these services.
Appeal allowed in part.
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Central Excise
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2019 (7) TMI 634
Scope of SCN - classification of ‘rubber solution’ - while the claimed classification was heading no. 4006 90 of the First Schedule to the Central Excise Tariff Act, 1985, the show cause notice proposed classification under heading no. 4005 00 of the First Schedule to the Central Excise Tariff Act, 1985 despite which the impugned order has classified the goods under heading 3506 00 of the First Schedule to the Central Excise Tariff Act, 1985 - HELD THAT:- During the pendency of the proceedings on the lists filed under section 173B and 173C of erstwhile Central Excise Rules, 1944, the assessment of periodical returns were kept pending or, upon completion, computed in accordance with the law as settled in the dispute. The original authority has merely directed the jurisdictional range officer to re-work the demand of duty for recovery of the differential amount.
As the classification has since been settled and the re-working of the differential duty thereof on the RT-12, filed for the relevant period, is a mandatory consequence, we find that the original authority has merely utilized the proceedings arising out of the show cause notice to issue directions for compliance with the orders of the Tribunal which are anyway to be implemented.
There is no flaw in the order - This is not a decision on classification on the initiative of the original authority after due evaluation of any submission but mere direction to enable implementation of the orders of the Tribunal.
Appeal dismissed - decided against appellant.
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2019 (7) TMI 633
Time limitation - Scope for invoking section 11AB in absence of demand under section 11A of Central Excise Act, 1944 - price escalation clause - short payment of duty - section 11AB of Central Excise Act, 1944 - appropriation of duty paid voluntarily, along with interest under section 11AB of Central Excise Act, 1944 - HELD THAT:- There is no dispute that the Tribunal in Collector of Customs, Madras v. TVS Whirlpool Ltd [1996 (4) TMI 232 - CEGAT, MADRAS], has held that the time-limit provided for in section 28 of the Customs Act, 1962 would also apply in such provisions of the statute that do not mandate a time-limit.
The show cause notice issued in March 2006 and August 2007 for clearance effected between February 2001 and February 2005 is barred by limitation - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 632
Valuation - lubricating oils - gear oils - demand is based on the existence of advice on maximum retail price - section 4A of Central Excise Act, 1944 - period August 2005 and March 2006 - HELD THAT:- Under section 4A of Central Excise Act, 1944, an assessee is required to clear the goods on application of prescribed rate of duty on the value arrived at after abatement of prescribed portion from the maximum retail price affixed on the product or on the packaging. The appellant, admittedly, did revise ‘maximum retail price’ for their products but have claimed that the earlier production, lying in stock at the time of such revision, are cleared only at the price already printed on the product and, there being no additional consideration, was not violative of section 4A of Central Excise Act, 1944.
On a perusal of section 4A of Central Excise Act, 1944, it is seen that the assessable value is ‘deemed to be the retail price declared on such goods less such amount of abatement’ and that, under sub-section (4A)(4) of Central Excise Act, 1944, the consequence of ascertaining of the maximum retail sale price will arise only upon the removal without declaring the retail sale price or when declared retail sale price is tampered with, corrected by or altered from the one declared on the package at the time and place of removal.
Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 631
Taxability/Excisability - Waste/by-product - press mud - demand of tax at the rate of 6% of the clearance value of Press Mud - HELD THAT:- The issue squarely covered by the decision in the case of M/S. BANNARI AMMAN SUGARS LTD. VERSUS THE COMMISSIONER OF G.S.T. & CENTRAL EXCISE, SALEM COMMISSIONERATE [2018 (11) TMI 1449 - CESTAT CHENNAI] where it was held that from a bare reading of Explanations 1 and 2 - press mud does not fit into the definition of “exempted goods”, as defined under Rule 2(d) of CCR because it is not an excisable good; nor can it be termed as a final product because it is not manufactured or produced from input or using input service. This is because it is a natural by-product which does not involve any effort nor is it the primary intention of a sugar manufacturer to intend to manufacture press mud.
Demand do not sustain, as it is a natural by-product - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 630
Imposition of penalty on partners - HELD THAT:- It is settled principle and there are umpteen number of decisions in which it was held that once a firm is penalised, separate penalty is not imposable upon the partner of the firm because partner is not separate legal entity and cannot be equated with the employee of the firm.
The Hon’ble High Court in that matter answered the question in favour of the Appellants therein and set aside the penalty on the partners. Similarly, a coordinate Bench of the Tribunal in the matter of M/S NATIONAL IMPEX AND SHRI UMAR T CHAMADIA VERSUS COMMISSIONERS OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX-DAMAN [2015 (12) TMI 1350 - CESTAT AHMEDABAD] has held that penalty on partner is not imposable when the firm is penalised under Rule 25 of the Central Excise Rules, 2002.
The authorities below are not justified in imposing the penalty on the partners of M/s. Classic Packaging Industry and therefore the penalties imposed on Mr. Jasbir Singh Siwach and Ms. Kiran S Siwach, partners of M/s Classic Packaging Industry are not sustainable and are hereby set aside.
Penalty set aside - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 629
Refund of pre-deposit - sanctioned refund was adjusted by refund sanctioning authority towards alleged outstanding interest liability/arrears - principles of natural justice - HELD THAT:- Admittedly, the appellant has not reversed the interest on the credit. Adjudicating authority vide Order, dated 19.06.2018 has adjusted the sanctioned refund towards the arrears of interest. It is seen that the appellant was not given any personal hearing with regard to adjustment sought to be made by the adjudicating authority. The proceedings were with regard to request for refund of pre deposit only. The learned consultant has adverted attention to the amendments brought forth in Rule 14 of CCR, during the relevant period involved in these two proceedings [refund as well as wrongly availed credit].
The appellant ought to be given a chance to explain as to the liability to pay interest during the period. For verifying the liability/quantification of interest that has to be paid by the appellant, the matter requires to be remanded.
Appeal allowed by way of remand.
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2019 (7) TMI 628
CENVAT Credit - input/input services - rejection on the ground that appellant had availed drawback for the export clearances and SSI exemption on clearances for home consumption - HELD THAT:- The appellant has already availed drawback of ₹ 20 lakhs. Then the appellant cannot avail credit of inputs/input services. The credit availed is, therefore, wrong and not eligible to the appellant - The order disallowing the credit and recovery of the same is legal and proper
Penalty - HELD THAT:- The appellant, who is doing major clearance as export cannot in any way benefit by availing the credit. They availed the credit on opinion that it would be more beneficial than drawback. They did not suppress the fact of availing drawback benefit - the penalty of ₹ 4,23,503/- is unwarranted.
Appeal allowed in part.
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2019 (7) TMI 651
Maintainability of writ - Section 35B of the Central Excise Act, 1944 - Non-speaking order - the impugned order dated 11th May 2018 ignores earlier orders in respect of the same petitioner-assessee being final orders No.A/8537385374/ 17/EB dated 20th September 2016 and No.A/8674186742/ 17/EB dated 21st March 2017, which according to the petitioner is on identical facts - HELD THAT:- The Tribunal in the impugned order seems to do away with its obligation to be bound by the decisions of its coordinate Benches by observing that “the issue of revenue neutrality is to be decided on the basis of facts of each case and the judgments cited by the appellant cannot be made applicable automatically”.
Once the litigant before the Tribunal placed reliance upon the decision of the a coordinate Bench of the Tribunal, then a speaking order would require the Tribunal to consider those decisions and state how and why the aforesaid decisions are not applicable to the facts of the present case. - In the absence of this exercise is being done, the impugned order itself suffer from being a non speaking order.
We find that where Authorities like the Tribunal functioning within the State of Maharashtra exercise jurisdiction in breach of principles of natural justice or in flagrant disregard of the law of precedents by not referring the issue to the President for constituting a Larger Bench of Tribunal, if it did not agree with the earlier decisions of the Tribunal then we would certainly exercise our writ jurisdiction. Merely stating that the earlier judgments would not be applicable, without more, would not meet the requirement of an order with reasons - impugned order is set aside
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2019 (7) TMI 627
Rectification of Mistake - there is either no finding/specific finding or certain grounds have not been considered - HELD THAT:- There is an error of not passing an order on merits and hence, in the interests of justice, an order is required to be passed on merits. However, since the same cannot be passed without recalling my earlier order, the Final Order is required to be recalled to this extent. The Miscellaneous Application for rectification of mistake to this extent is correct and the Final Order No. 40406/2019 dated 06.03.2019 in the above case is recalled, to be heard afresh on merits.
Registry is directed to post the above case for hearing on 16.08.2019.
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2019 (7) TMI 626
Captive Consumption - Clinker - benefit of N/N. 67/95-CE dated 16.03.1995 - clinker captively consumed within the factory for the manufacture of Cement cleared availing benefit under N/N. 2/2001-CE dated 27.01.2001 and 16/2001-CE dated 26.03.2001 as amended - period February 2001 to May 2001 - HELD THAT:- This issue has been considered in the case of TOYOTA KIRLOSKAR MOTOR LTD. VERSUS COMMR. OF C. EX. (LTU), BANGALORE [2008 (9) TMI 254 - CESTAT BANGALORE], wherein, it was held that the benefit of Exemption N/N. 67/95 is available even for the period prior to the amendment Notification No. 31/2001-CE.
The Exemption under N/N. 67/95-CE was also extended for the period prior to the amendment made by N/N. 31/2001-CE. - the appellant is entitled for the Exemption N/N. 67/95-CE even for the period prior to N/N. 31/2001-CE i.e. for the period February, 2001 to May 2001.
CENVAT Credit - remand order to Commissioner - HELD THAT:- It is open for the Commissioner to decide the issue of reversal of credit and consequent relief i.e. grant of Exemption N/N. 67/95-CE - the order is grant and proper to the extent it, dropped the demand on the basis of reversal of credit - Appeal of Revenue dismissed.
Appeal dismissed - decided against Revenue.
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2019 (7) TMI 625
CENVAT Credit - input/input services - outward freight incurred for transportation of finished goods to the customer’s premises - period from July, 2015 to November, 2016 - Department was of the view that the place of removal being the factory gate, the appellants are not eligible for the credit - HELD THAT:- In the present case, the appellants have incurred the freight charges and has included the freight charges in assessable value on which excise duty has been discharged. This being so, the ownership of the goods remain with the appellant till it reaches the buyer’s premises and the conditions for F.O.R. sale as elucidated in the case of M/s. Roofit Industries [2015 (4) TMI 857 - SUPREME COURT] stands discharged by the appellant - In the present case, as the freight charges have been included in the assessable value on which excise duty has been discharged, there is no hesitation to conclude that the decision in M/s. Roofit Industries will apply to decide the place of removal.
Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 622
CENVAT Credit of CVD - Rule 9 (1) (b) of the Cenvat Credit Rules, 2004 - case of the Revenue is that even Rule 9 (1) (b) of the Cenvat Credit Rules,2004, prohibits the credit of excise duty or customs duty in case the same has been paid and recovered from the Assessee on account of earlier non-levy or short-levy, by reason of fraud, collusion, wilful misstatement or suppression of facts - Approach to Settlement Commission - HELD THAT:- The effort of the Assessee in the present case seems to be taking away what was given by it under the order of the Settlement Commission under another law. In other words, what was paid under the Customs Act resulting in a binding order passed by the Settlement Commission is sought to be scuttled by the proceedings under the Central Excise Act,1944. It is precisely these kinds of loopholes, which were sought to be checked and plugged by the Parliament, by enacting the provision of Section 127-J of the Customs Act,1962.
What is intended by making the order of the Settlement Commission to be conclusive is that both the parties, namely, the Assessee and the Revenue, are for ever bound and to remain within the four corners of the orders of the Settlement Commission and this is the specific negation of re-opening of any proceedings under the Act (The Customs Act,1962) or under any other law for the time being in force (including the Central Excise Act,1944, or the Cenvat Credit Rules made thereunder).
Giving a finality and conclusiveness to the orders of the Settlement Commission has to be taken to its logical end and the position inter se between the parties flowing from the order of the Settlement Commission cannot be allowed to be disturbed in any manner, much less any indirect gain or duty paid can be allowed to be taken back by the Assessee under the provisions of any other law, including the Central Excise Act and the Cenvat Credit Rules - The case of the Revenue that even Rule 9 (1) (b) of the Cenvat Credit Rules,2004, prohibits the credit of excise duty or customs duty in case the same has been paid and recovered from the Assessee on account of earlier non-levy or short-levy, by reason of fraud, collusion, wilful misstatement or suppression of facts, also has considerable force.
The contents of the Show Cause Notice in the present case, would clearly reveal that the case of the Revenue against the Assessee in the said Show Cause Notice was that of misstatement of facts and suppression of facts as well as misrepresentation of the assessable value of the goods to the extent of ₹ 49,02,861/-, which was declared only at ₹ 13,93,827/- - even on the applicability of Rule 9 (1) (b) of the Cenvat Credit Rules,2004, we find that the denial of Cenvat Credit to the Assessee in the present case independently was also justified.
There is no merit in the contention raised by the learned counsel for the Assessee that the Assessee was independently entitled to Cenvat Credit in respect of the CVD paid by it under the orders of the Customs Duty Settlement Commission in the present case under the provisions of Cenvat Credit Rules, 2004 - appeal dismissed - decided against assessee.
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CST, VAT & Sales Tax
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2019 (7) TMI 650
Attachment of bank account - application for condonation of delay - stay of demand - validity of penalty order and order of assessment - Section 25(1) of the KVAT Act - case of petitioner is that either the mere filing of appeal or mere pendency of appeal does not amount to granting stay by the assessing authority - HELD THAT:- A case is made out for issuing necessary directions to second respondent to dispose of the delay condonation petitions and stay petitions in Ext.P3 series.
The respondents have issued Ext.P4 bank attachment notice. The petitioner apprehends recovery or realisation of the subject matter of penalty pending before the appellate authority. The petitioner volunteers to pay 20% of the penalty amount demanded, i.e., ₹ 15,55,770/- and permit the petitioner to operate the bank account.
The appellate authority/second respondent considers and disposes of Ext.P3 series applications as early as possible, preferably within two months from the date of receipt of copy of this judgment - The respondents are directed not to take coercive steps or recover the amounts determined in the orders under appeal for ten weeks from today.
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2019 (7) TMI 649
Retrospectively declaration of C-Form as obsolete - validity of Notification dated 18 June, 2018 issued by the Commissioner of Value Added Tax (CVAT) under Rule 5 (13) of the Central Sales Tax Act (Delhi) Rules, 2005 - ‘C’ Form issued to Gentex International in favour of the present petitioner is declared obsolete with effect from the date of issuance of such forms - HELD THAT:- Once the form that has been issued is utilized, the question of subsequently declaring such used forms as obsolete would not arise. Rule 5(14) makes the requirement of surrender of the ‘unused forms’ of the series design or colour that have been rendered obsolete clear and provides that only for such unused forms would new forms be issued. It is, therefore, plain that the above rules do not permit the CVAT to declare forms that have already been issued and acted upon as obsolete.
The impugned notification 18th June, 2018 issued by the CVAT is hereby quashed - Petition allowed.
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2019 (7) TMI 648
Retrospectively declaration of C-Form as obsolete - Validity of Notification dated 11th July, 2018 issued by the Commissioner of Value Added Tax (CVAT) under Rule 5 (13) of the Central Sales Tax Act (Delhi) Rules, 2005 - ‘C’ Form issued by M/s. Sarv Manglam Sales in favour of the present petitioner is declared obsolete with effect from the date of issuance of such forms - HELD THAT:- Once the form that has been issued is utilized, the question of subsequently declaring such used forms as obsolete would not arise. Rule 5(14) makes the requirement of surrender of the ‘unused forms’ of the series design or colour that have been rendered obsolete clear and provides that only for such unused forms would new forms be issued. It is, therefore, plain that the above rules do not permit the CVAT to declare forms that have already been issued and acted upon as obsolete.
The present petition should succeed since here there is no legal basis for the Respondents to have declared by the impugned notification, the ‘C’ Forms already issued and acted upon as ‘obsolete’.
The impugned notification dated 11th July 2018 issued by the CVAT is hereby set aside - Petition allowed.
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2019 (7) TMI 624
Request for rectification rejected - Validity of assessment order - Section 25 of the KVAT Act - alleged suppression of inter-State purchase - whether the first respondent, after realising the necessity to furnish the soft copy of details of inter-State purchases, can be allowed to complete the assessment without satisfactorily demonstrating that the soft copy is given, thereafter an opportunity is provided to petitioner /assessee and necessary orders are passed?
HELD THAT:- The very purpose of availing rectification power through Ext.P4 is only to set this anomalous situation straight.
This Court is persuaded to set aside Ext.P5 and remit the matter to first respondent for consideration and disposal in accordance with law - With a view to give quietus to the other procedural aspects which is being canvassed by the petitioner, the Court directs the first respondent to give soft copy under an acknowledgment of the details on which the first respondent intends to rely on for determining the inter- State purchases, within two weeks from today.
Petition allowed by way of remand.
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2019 (7) TMI 647
Addition to sales turnover - difference in the value of stock transfer noted in the Form-F declarations, when compared with the books of accounts - failure to account the entire value of goods received on stock transfer, when compared with the value reflected in 'Form- F' declarations - HELD THAT:- There occurred a failure on the part of the revision petitioner /assessee to reconcile the difference detected in accounted value of the goods received under stock transfer, by producing any proper documents in proof of the same, either before the Assessing Authority or before the first Appellate Authority. However, we take note of the fact that, the authorities have not considered the question whether there occurred any suppression in the sale turnover with respect to the quantity of goods received under stock transfer, with respect to which the difference was detected. The evasion or escapement of tax can be attributed only if there is any specific allegation that there occurred a suppression in disclosing the sales turnover, because the taxable event at the hands of the assessee is the point of sale.
Matter remanded for fresh consideration.
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