TMI Tax Updates - e-Newsletter
July 2, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• MAT u/s 115JB - deduction of brought forward losses from the net book profit in absence of any un-absorbed depreciation cannot be allowed.

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• IGST on ocean freight has to be paid under RCM, even if such freight charges are included in the intrinsic CIF value of imported goods.

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Highlights / Catch Notes

• GST:

  Refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange
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• GST:

  Scope of GST - development of land and construction of flats to be given out on lease as per the Agreement of Lease entered by them with the customers - the transaction between Applicant and lessee is taxable under GST. It is not a transaction in immovable properly.
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• GST:

  Profiteering - Sanitary Napkins - prices of the product not reduced despite reduction in the rate of GST on the said product from 12% to Nil - Case is made out against the respondent.
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• GST:

  Exemption from GST - activity of providing Skill development training in different sectors/courses under Uttar Pradesh Skill development Mission (UPSDM) to train the youth of Uttar Pradesh for gainful employment of the candidates. - said exemption shall not be available to the applicant.
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• GST:

  RCM on Ocean Freight - IGST on ocean freight has to be paid by the importer under reverse charge mechanism, irrespective of the fact that such freight charges are included in the intrinsic CIF value.
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• GST:

  Classification of supply - Job-work - building of body on chassis of the principal - At no stage the ownership of the chassis will be transferred by the Principal to the job worker and body built thereon will be nature of job work.
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• GST:

  Classification of goods - “Gudakhu” being manufactured by the Appellant for use as a tooth paste is appropriately classifiable under residuary tariff item 2403 9990
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• GST:

  Scope of advance ruling - Input tax credit - capital goods received prior to 01 July 2017 - Since the Appellant has raised questions on the admissibility of the credit of the CENVAT paid, under the pre-GST regime, on capital goods, it is held that this authority does not have jurisdiction to pass any ruling on such matters - no reply
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• GST:

  Nature of supply - liability to pay tax under IGST or CGST and SGST - though the location of the recipient is outside India, the services supplied are in respect of goods which are made physically available by the recipient of the services to the supplier of the services in Maharashtra - then as per Section 13(3)(a) of IGST Act the ‘place of supply’ and the ‘service provider’ are in the same State, CGST and SGST are payable
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• Income Tax:

  MAT - the question of directing the respondents to allow reduction of the brought forward losses of the petitioner company from the net profit in order to compute book profits u/s 115JB in absence of any unabsorbed depreciation in the assessment year under consideration cannot be accepted.
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• Income Tax:

  MAT computation - whether the provision made for purchase tax, purchase tax on cane subsidy and wealth tax are not to be added while computing the book profits u/s 115JA? - In the absence of any data to show that scientific method was adopted, additions confirmed.
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• Income Tax:

  Depreciation on Goodwill - depreciation on Customer Relationship (CR) & Vendor Relationship (VR) considering them to fall under Any other business or commercial rights of similar nature - 'Goodwill' is an asset - claim allowed.
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• Income Tax:

  Claim of tax credit for Alternate Minimum Tax (AMT) u/s 115JD - set off of AMT Tax credit for the tax liability for next assessment year while filing revised computation during the assessment proceedings u/s 143(3) - set off allowed.
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• Income Tax:

  TDS u/s 194H - advertising agency commission - net revenue from advertisement was booked after adjusting of advertising agency commission - advertising agency commission expenses not claimed as separate expenses in its books of accounts - TDS liability on assessee confirmed.
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• Income Tax:

  Addition of premium paid to LIC under group gratuity scheme - scheme had been approved by Commissioner vide its order dated 17.03.2017 w.e.f. 01.01.2000 - once the Commissioner has approved the scheme, then the assessee is entitled to the deduction on account of premium paid to LIC group gratuity fund
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• Income Tax:

  Block assessment u/s 158BD - The entire proceeding has been initiated by the authorities by not applying the provision u/s 127 by not issuing notice intimating the assessee regarding transfer of jurisdiction of the AO and further by not applying the provision of Section 158BC r.w.s. 158 BD by not recording the satisfaction by the jurisdictional AO - entire proceeding is void ab initio
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• Income Tax:

  Reopening of assessment u/s 147 - reason recorded by the AO or the issuance of notice u/s 148 does not give any indication of obtaining sanction from the ACIT/JCIT though in terms of the provision of section 151 it is the pre-condition for initiating proceeding u/s 148 - Non-compliance is a defect which is admittedly not curable - entire proceeding void in law and liable to be set aside
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• Income Tax:

  TP Adjustment - comparable selection - where a concern is selected was showing low employee cost to sales ratio, then such concern cannot be selected while benchmarking international transactions of assessee in ITES segment, which is an employee oriented segment - exclude from comparable
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• Income Tax:

  Depreciation on wireless devices - @ 25% OR 60% - intelligent wireless systems, which were ideal for BPO office professionals and the said devices were compatible with certain types of PCs only, could be connected to computers via Bluetooth and similar technology - mere connection with computers would not make it part of computers eligible for deduction u/s 32 - depreciation @ 25%
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• Income Tax:

  Penalty u/s 271(1)(c) - reduction of deduction under the said Chapter VI via revised return correctly allocating of generation expenses - allocation between the eligible and ineligible undertakings cannot be directly attributable to the efforts of the AO as no SCN was issued on incorrect allocation - no penalty as filing revised return and payment of additional taxes demonstrate the good faith of the assessee
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• Income Tax:

  Penalty u/s 271G - assessee applied TNMM for determining of ALP - information/documents sought for determining of ALP as per CUP method - the difficulty in maintaining the information sought by the TPO has been well explained and analysed - allegation of the TPO that by non furnishing of documents has prevented him from determining the ALP under CUP method is unacceptable when he has accepted the benchmarking of the assessee - no penalty
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• Income Tax:

  Capital Gains - LTCG v/s STCG - sale of industrial sheds - date of allotment or date of registration is relevant for period of holding - if the assessee was enjoying the property under the provisions of the TP Act, it has to be considered the date of ownership from the date on which he was put in possession of the property - taxable as LTCG
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• Income Tax:

  Capital gain computation - year of taxation - transfer u/s 2(47) - once assessee has received consideration, handed over possession of the property, executed registered Power of Attorney in favour of the holder empowering him to absolutely deal with the property and the arrangement is covered by an agreement for sale, it will be transfer - capital gain is taxable in this year itself
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• Income Tax:

  Liability of directors of private company u/s 179 - recovery of unpaid tax dues of a private company from its directors - AO passed the order without considering such representation of the assessee. - When this was pointed out to him, he passed a further order describing it as one of the 'Corrigendum'. This was also impermissible - Recovery order set aside.
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• Income Tax:

  Power of AO in remanded matter - impact of direction of Tribunal - role of the AO was limited to giving effect to the directions of the Tribunal - if the Department had any legal dispute with the decision of the Tribunal, it was always open to the Department to challenge the same in accordance with law - he exceeded his brief virtually coming to the conclusion that the Tribunal was not justified in issuing such directions
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• Customs:

  Refund of amount paid as late filing charges - filing of bills of entry - There is no delay on the part of the appellant in filing the Bill of Entry; and if there is no delay, the same cannot be attributed to the appellant - demanding late filing charges cannot sustain
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• Customs:

  Classification of Aluminium Profiles - items prepared for use in structure - The end-use i.e., the articles “prepared for use” being specially finding a mention in the Tariff are required to be classified accordingly - the goods are classifiable under CTH 7610 9030
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• IBC:

  Declaration of the property as DISCLAIMED u/s Section 36(3)(c) and (h) of I&B Code - not owned by CD - it is essential that the property having onerous characteristics admeasuring 7.5 cents should form the part of the liquidation estate of the Company - as per Regulation 10 (5) of the Liquidation Regulations, the Respondents being affected by the disclaimer shall be deemed to be a creditor and maybe paid as a debt in liquidation u/s 53(l)(f).
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• Service Tax:

  100% EOU - Refund of unutilized CENVAT Credit - The refund claim of the appellant is not a claim u/s 11 B per se and therefore provisions of 11 B cannot be blindly applied in this case because, there is no disputes that the refund claim was under Rule 5 and the allowability or otherwise could only be as per the guidelines or the proviso under Rule 5 ibid
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• Service Tax:

  Renting of immovable property service - constitutional levy of service tax - services provided by local body ( Municipality) created under the constitutional provisions - absence of profit motive - Activity is liable to service tax - Matter remanded back for correct quantification.
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• Service Tax:

  Valuation - Renting of Immovable Property Service - renting the factory with plant and machinery to JV - The transaction is not in the nature of sharing of profit with JV partners - Liable to service tax - Demand confirmed with interest and penalty.
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• Central Excise:

  CENVAT Credit - inputs - Copper Ingots/imported Ingots/Bars - alleged fictitious purchases - there is no evidence of flow back of funds to the appellant - the revenue did not conduct any investigation to ascertain if the goods allegedly not received by the appellant were diverted elsewhere - only on the basis of check-post report, it cannot be concluded that the trucks did not transport the goods to the appellant factory - input allowable
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Articles

• Limitation of time and Refund of Tax vs Deposit under Indirect tax Laws
• Crucial three months for the taxpayer in GST to be ready to embrace new GST return functionalities
• Payment by Set-off

Notifications

• GST

• 11/2019 - dated 29-6-2019 - CGST Rate
  Seeks to specifies retail outlets established in the departure area of an international airport, beyond the immigrationcounters, making tax free supply of goods to an outgoing international tourist, as class of persons who shall be entitled to claim refund.

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• 01/2019 - dated 29-6-2019 - GST CESS Rate
  Exempts any supply of goods by a retail outlet established in the departure area of an international airport, beyond the immigration counters, to an outgoing international tourist.

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• 11/2019 - dated 29-6-2019 - IGST Rate
  Seeks to exempts any supply of goods by a retail outlet established in the departure area of an international airport, beyond the immigration counters, to an outgoing international tourist.

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• 10/2019 - dated 29-6-2019 - IGST Rate
  Seeks to specifies retail outlets established in the departure area of an international airport, beyond the immigrationcounters, making tax free supply of goods to an outgoing international tourist, as class of persons who shall be entitled to claim refund

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• 11/2019 - dated 29-6-2019 - UTGST Rate
  Seeks to specifies retail outlets established in the departure area of an international airport, beyond the immigrationcounters, making tax free supply of goods to an outgoing international tourist, as class of persons who shall be entitled to claim refund.

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• Income Tax

• 50/2019 - dated 27-6-2019 - IT
  U/s. 10(6C) of the Income-tax Act, 1961 - Notified royalty or fees for technical services

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• 49/2019 - dated 27-6-2019 - IT
  Central Government notifies ‘Karnataka Electricity Regulatory Commission’ a commission established by the Government of Karnataka, in respect of the specified income arising to that Commission

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• 48/2019 - dated 26-6-2019 - IT
  U/s 35(1) (ii) of IT Act 1961 Central Government approved M/s. Manipal Academy of Higher Education, Manipal, Karnataka

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Circulars / Instructions / Orders

• GST - 106/25/2019 - dated 29-6-2019
  Refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange
• GST - TRADE NOTICE No. 06/2019 - dated 10-6-2019
  Shifting of CGST & CX Divisions-A & B, Udaipur and its Ranges to new premises - Change of Address - Intimation
• GST - PUBLIC NOTICE No. 12/2019 - dated 28-5-2019
  Notification No. 26/2015-2020 dated 21.08.2018 in force
• DGFT - Trade Notice No. 21 /2019-20 - dated 28-6-2019
  Inviting suggestions on Review of the Foreign Trade Policy

News

• GST Revenue collection for the month of June, 2019 stands at ₹ 99,939 crore

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• 2nd anniversary of Goods & Services Tax to be celebrated on 1st July 2019

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• CBDT Circular

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• Outlays in the Expenditure Budget of the Central Government for 28 Centrally Sponsored Schemes (CSSs) for the last five years increased around 60% in 2019-20 BE (I) compared to Actual of 2015-16.

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• Fake Insurance Policies

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• National Common Mobility Card

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• Performance Evaluation of PSBS

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• Finance Commission to visit Madhya Pradesh from 3rd to 5th July, 2019

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Case Laws:

• GST

• 2019 (7) TMI 36
  Profiteering - Sanitary Napkins - prices of the product not reduced despite reduction in the rate of GST on the said product from 12% to Nil w.e.f. 27.07.2018 - benefit of reduction in the rate of tax not passed on - denial of ITC (ITC) on account of reduction in GST rate - contravention of provisions of section 171 of CGST Act - whether there is any reduction in rate of tax on any supply of goods or services or the benefit of ITC has been passed on to the recipient by way of commensurate reduction in prices? - HELD THAT:- It is revealed that the Central Govt. vide Notification No. 19/2018-Central Tax (Rate) dated 26.07.2018 the Government had reduced the rate of GST from 12% to NIL without ITC in respect of the The product with effect from 27.07.2018, the benefit of which was required to be passed on to the recipients as per the provisions of Section 171 of the CGST Act, 2017. From the above discussion and the invoices available, it is revealed that the base price of the product Sofy Bodyfit XL 6S was increased from ₹ 33.08/- to ₹ 37.05/-, when the rate of tax was reduced from 12% to NIL% with effect from 27.07.2018. Thus, increasing the base price of the product, post-GST rate reduction, the benefit of reduction in tax rate was not passed on to the recipients. The Respondent No. 2, who is the seller of the impugned product, had clearly increased the base price of the product as can be seen from the invoices. But as the benefit of ITC was not available to him post 27.07.2018, so the reversal of ITC on the closing stock was the extra cost on him. As can be seen from the records that reversal of ITC by him was more than excess realization on closing stock after denial of ITC benefit w.e.f. 27.07.2019, and therefore no profiteering can be established on his part and hence, we take the view that Section 171(1) is not attracted in respect of the Respondent No. 2 - Notwithstanding the fact that there had been reduction in MRP and the Respondent No. 1 had reduced his MRP, we find that it has not been commensurate with the net reduction in the rate of tax and that the benefit has not reached all the recipients which establishes contravention of the provisions of Section 171(1) of the CGST Act, 2017. It is absolutely clear even from a cursory perusal of the provisions of Section 171 that they are completely unambiguous and clear and hence there is hardly any scope for misinterpretation of the same. The intent of legislature shows that it proposes to hold the suppliers accountable for passing on the benefit of rate reduction as it is being given out of the public exchequer and any breach of the same will fall foul of the above Section. Thus the quantum of profiteering illegally obtained by the Respondent No. 1 is determined as ₹ 10,77,182.34/as per the details mentioned in para 11 supra in terms of the provisions of Rule 133 (1) of the CGST Rules, 2017 as the above Respondent has failed to pass on the benefit of rate reduction to his customers. Accordingly, the Respondent No. 1 is directed to reduce his prices by way of commensurate reduction keeping in view the reduced rate of tax which has been availed by him as per Rule 133 (3) (a). The Respondent No. 1 is further directed to deposit the above amount as per the provisions of Rule 133 (3) (c) in the ratio of 50:50 in the Central or the State Consumer Welfare Fund of all the States and UTS as mentioned in para 12 above, along with the interest @ 18% till the same is deposited within a period of 3 months. Penalty - HELD THAT:- Respondent had issued incorrect invoices while selling the above product to his recipients as he had incorrectly shown the base price without mentioning any specifics such as colour, texture, quality etc about the products being supplied with the sole intention of not having to pass commensurate benefit of reduction in rate of tax to his recipients. It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act and hence he is liable for imposition of penalty - In the interest of natural justice before imposition of penalty a notice be issued to him asking him to explain why penalty should not be imposed on him. Application disposed off.

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• 2019 (7) TMI 37
  Belated filing of Excise returns - Section 73 of CGST Act - whether communication letter to be treated as SCN - HELD THAT:- In the considered view of this Court, it is imperative that the aforesaid paragraph-3 of the impugned communication is kept in abeyance till the aforesaid 'SCN' attains finality as implementation of paragraph-3 will render the entire exercise post SCN infructuous - Petition disposed off.

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• 2019 (7) TMI 47
  Levy of IGST - specified imported equipments delivered to the eligible institutions - Whether benefit of customs exemption notification as applicable to Importer (OEM) is also applicable to supply of material by the importer to Domestic supplier - specified institution - Applicability of N/N. 51/ 1996-Customs, Dt: 23.07.1996 read with N/N. 43.2017-Customs, Dt: 30.06.2017 and Minutes of the 14th GST Council Decision Dated 18th/19th May, 2017 - non-issuance of corresponding Notification by the Central/ State Government to give effect to such decision of the Council - concessional rate of GST/IGST at the rate of 5% vide Notification No-45-CGST (Rate), Dt:14.11.2017 and Notification No-47-1GST (Rate), Dt: 14.11.2017 on supply of specified Indigenous Equipments to the eligible Institutions fulfilling conditions as specified under Column-(4) of the said notification with effect from 15.11.2017. HELD THAT:- The AAR, Odisha observed that the appellant satisfies the requirement of being a Public funded research institution as provided in Notification No-51/1996-Customs, dated 23.07.1996 read with Notification No-43/2017-Customs dated 30.06.2017 and ruled accordingly for being entitled to the exemption from levy of IGST on import of specified goods as listed under column (3) of the aforesaid notification. Non-applicability of Notification no 51/1996-Customs, dated 23.07.1996 as amended - OEM suppliers of imported equipments - HELD THAT:- The Appellant is before us but not OEM suppliers of the Appellant. The relevant contract/ agreement/ purchase order of the Appellant with the OEM supplier, purchase order of the OEM supplier with the overseas supplier, import documents such as invoice, bill of lading, and import general manifesto are not part of the Appeal Memorandum. In the absence of such documents, it is not possible on our part to examine the status of the Appellant vis- -vis the OEM supplier, when import undertaken through such supplier. Further, OEM suppliers of the Appellant are not party to this appeal. Therefore, we are refraining ourselves to pass any specific order with respect to import by such OEM supplier. The AAR, Odisha in their rulings ordered in favour of the Appellant that Notification No-51/ 1996-Customs, dated 23.07.1996 read with Notification No-43/2017-Customs dated 30.06.2017 is applicable to the Appellant for import of specified goods as listed under column (3) of the aforesaid notifications. The Rulings pronounced by the Advance Ruling Authority, Odisha is thus correct and justified - appeal dismissed.

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• 2019 (7) TMI 46
  Classification of goods - Gudakhu - levy of compensation cess - liability of NCCD - whether classified under CETH 2403 99 90 or under the tariff item 24031110 ? - rate of tax - HELD THAT:- By applying the interpretative rules, which are statutory guidelines for interpreting the tariff and taking into consideration the relevant sub-heading note, we are in agreement with the rulings of the Advance Ruling Authority that Gudakhu being manufactured by the Appellant for use as a tooth paste is appropriately classifiable under residuary tariff item 2403 9990. Neither in the appeal petition nor during the hearing of the case, the appellant could produce any case law/judgments of High Court/order of CESTAT, where-in products manufactured by the appellant was ordered for classification under Tariff item 240311. Scope of the forum - higher rate of Compensation Cess for sub-heading 2403 9990 vis-a-vis 2403 11 10 - HELD THAT:- The fixation of rate of duty is beyond the scope of this forum. The Ruling pronounced by the Advance Ruling Authority, is thus correct and justified - appeal dismissed.

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• 2019 (7) TMI 45
  Classification of supply - Job-work - supply of services or not - composite supply or not - building of body after utilizing and consuming owned materials and providing labour and further amounting the same on chassis of the principal - whether classified as supply of service under HSN. 9988? - Sec. 8(a) of the CGST Act. HELD THAT:- The applicant intends to execute a contract of fabrication of body to be mounted on the chassis by a job worker. As per the term of the contract the chassis will be delivered by the applicant(Principal) for the purpose of carrying out the body building on the chassis on delivery challan to the job worker. The job worker shall procure various goods such as metal sheets, plywood, seats, glasses, aluminium sections etc. as inputs for fabricating the bus body besides fabrication services. Once the body is built and mounted on the chassis by the job worker, the vehicle will be sent back to the Principal/the Applicant of the chassis after raising tax invoice towards body building charges on which GST will be charged separately. At no stage the ownership of the chassis will be transferred by the Principal to the job worker and body built thereon will be nature of job work - The job worker will claim the credit of GST paid on the material used as input against Output liability of GST on body building activity carried out by it. The consideration received by the job worker will be towards the manufacturing of the body on the chassis supplied by the Applicant (Principal). Whether the nature of the work falls under the purview of Job work or not? - HELD THAT:- Once the body is built and mounted on the chassis by the job worker, the vehicle will be sent back to the Applicant/Principal after raising tax invoice towards body building charges on which GST will be charged separately. At no stage the ownership of the chasis will be transferred by the Applicant to the job worker. The job worker will claim the credit of GST paid on the material used as input against output liability of GST on body building activity carried out by it. The consideration received by the job worker will be towards the manufacturing of the bus body on the chassis supplied by the Principal. GST Law does not distinguish between raw material, finished goods and semi-finished goods. It talks about input and Capital goods. Even Semi-finished goods or intermediate are goods and in turn Input by the Principal or by the worker - So the argument of the applicant that the nature of the work stated in the application should be falls under job work is tenable under the provision of the Law. Whether mounting of Bus/ Truck [Ambulance Body by the job worker on the chassis supplied by the principle for which the job worker charged fabrication charges including cost of certain material that was consumed during the process of job work. would amount composite supply in which supply of service being principal supply therefore on the basis of provision of Sec. 8(a) of the CGST Act the same would be classified as supply of service under HSN 9988? - HELD THAT:- The activity and question raised before us has been suitably clarified and dealt with Circular no. 52/26/2018-GST issued by Government of India, Ministry of Finance, Department of Revenue dated 9th August, 2018 - It is clarified that the supply made is that of vehicle, and accordingly supply would attract the GST applicable to the vehicle @28%. In the case as mentioned at Para 12.2(b) above, fabrication of body on chassis provided by the principal (not on account of body builder), the supply would merit classification as service, and 18% GST as applicable will be charged accordingly. Thus on mounting of Bus/ Truck /Ambulance body on the chassis to be supplied by the Principal on delivery challan or any other owner of the chassis on which Bus/ Truck /Ambulance body will be fabricated by collecting job work charges including inputs required for such fabrication work and in no case the ownership of the chassis will be transferred by Applicant to the job worker will be taxable under SAC 998881 - Motor vehicle and trailer manufacturing services and under entry no. 26(ii) as - Manufacturing services on physical inputs (goods) owned by other it is taxable @18%(9% under CGST and 9% under SGST Act).

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• 2019 (7) TMI 44
  Applicability of Reverse Charge Mechanism - Ocean Freight - IGST is paid by the importer on Goods Imported on CIF Basis - Whether the applicant /importer is again required to pay IGST on the component of ocean freight under RCM mechanism on deemed amount which will amount to double taxation of IGST on the deemed component of ocean freight of the imported goods? - HELD THAT:- The Applicant is engaged in trading of various edible oils. It has been mentioned in the application that the applicant intends to import crude Soyabean Oil on CIF (Cost+Insurance+Freight) basis, which includes the component of ocean freight in the price of imported goods. Obviously, in case of such imports the seller being located in non-taxable territory, the ocean freight is collected by the seller from the importer located in the taxable territory. As per Notification 10/2017-lntegrated Tax (Rate) dtd.28.06.2017, [Sr.No.10], the Services supplied by a person located in non-taxable territory by way of transportation of goods be a vessel from a place outside India up to the customs station of clearance in India have been put under Reverse Charge Mechanism and the recipient of service viz. Importer, as defined in clause (26) of Section 2 of the Customs Act 1962 (52 of 1962), located in the taxable territory - Further, in terms of Notification No.8/2017-lntegrated Tax (Rate) dtd.28.06.2017, read with Corrigendum dtd.30.06.2017, the taxable value in respect of ocean freight has been defined as, Where the value of taxable service provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India is not available with the person liable for paying integrated tax, the same shall be deemed to 10% of the CIF value (sum of cost, insurance and freight) of imported goods . In view of the above two notifications we do not find any ambiguity, whatsoever, regarding payment of IGST on ocean freight. As per existing law, IGST on ocean freight has to be paid by the importer under reverse charge mechanism, irrespective of the fact that such freight charges are included in the intrinsic CIF value. It is thus clear that any notification is issued only as per recommendations of the GST Council, and the law laid down is binding upon the concerned. We find that the applicant has questioned the levy under RCM as being without jurisdiction. As already spelt out, this Authority does not have the jurisdiction or authority to dwell into this question, in terms of Section 97(2) of the Act ibid - the applicant is liable to pay IGST on ocean freight under RCM as provided under Notification No. 10/2017-IT (R) read with Notification No.8/2017-lT(R).

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• 2019 (7) TMI 43
  Liability to pay tax under IGST Act or CGST and SGST? - Nature of supply - interstate or intra-state supply? - services provided to foreign clients i.e. situated outside India and for which the place of supply is in the taxable territory - Place of provision of services - HELD THAT:- Though the location of the recipient is outside India, the services supplied are in respect of goods which are made physically available by the recipient of the services to the supplier of the services for the services to be performed. Thus the provisions of sub-section (3)(a) of Section 13 of IGST Act, 2017 are squarely applicable for the supply in the instant case - Since the place of supply is in taxable territory it is clear that the provisions of Section 2(6) of the IGST Act are not fulfilled in this case and therefore their supply cannot be considered as Export of Services as per the GST Law. Since the place of supply and the service provider are in the same State, CGST and SGST are payable for this transaction. In case it is ruled that IGST is payable, the procedure to be followed for payment of IGST as the GST portal does not permit the payment of IGST where the place of supply is indicated as state of Maharashtra? - HELD THAT:- This question is not answerable as IGST is not applicable.

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• 2019 (7) TMI 42
  Exemption from GST - activity of providing Skill development training in different sectors/courses under Uttar Pradesh Skill development Mission (UPSDM) to train the youth of Uttar Pradesh for gainful employment of the candidates. - HELD THAT:- The intent of the legislature is to exempt services provided to the Central Government, State Government or Union Territory Administration under any training program for which total expenditure is borne by such Governments. In the instant case, though, we find that the service is being provided by the applicant to a Society namely Uttar Pradesh Skill Development Society. Although, we have been given to understand that the entire training program would be fully funded by Central and State Governments, but nothing has been brought on record to prove that UPSDC can be construed as Central or State Government. The exemption under Sr.No.72 of the Notification No.12/2017-CT(R) and parallel notification issued for State Tax exemption, shall be available only if the service is provided to the Central Government, State Government or Union Territory Administration under any training program for which total expenditure is borne by the Government. We thus hold that the said exemption shall not be applicable/available to the applicant.

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• 2019 (7) TMI 41
  Classification of supply - supply of goods or supply of services - Job-work or not - activity of building and mounting of the body by the applicant on the chassis provided by the Principle - whether it amounts to supply of goods under HSN 8707 or supply of services under HSN 9988 taxable @ 18% irrespective of end use by the principle who shall effect the sale of Bus ? - HELD THAT:- In the instant case the Applicant shall procure various goods such as metal sheets, plywood, seats, glasses, aluminium sections etc. as inputs for fabricating the bus body besides fabrication services. Once the Bus body is built and mounted on the chassis by the Applicant, the vehicle will be sent back to the OEMs/customers after raising tax invoice towards body building charges on which GST will be charged separately. At no stage the ownership of the chasis will be transferred by the OEMs to the Applicant. The applicant will claim the credit of GST paid on the material used as input against output liability of GST on body building activity carried out by it. The consideration received by the applicant will be towards the manufacturing of the bus body on the chassis supplied by the Principal. GST Law does not distinguish between raw material, finished goods and semi-finished goods. It talks about input and Capital goods. Even Semi-finished goods or intermediate are goods and in turn Input by the Principal or by the worker - So the argument of the applicant that the nature of the work stated in the application should be falls under job work is tenable under the provision of the Law. Whether the activity of building, fabricating and mounting of the bus body by the applicant on the chassis provided by the Principle will result in supply of goods under HSN 8707 or supply of services under HSN 9988 taxable @ 18% irrespective of end use by the principle who shall effect the sale of Bus? - HELD THAT:- The activity and question raised before us has been suitably clarified and dealt with Circular no. 52/26/2018-GST issued by Government of India, Ministry of Finance, Department of Revenue dated 9 th August,2018 wherein it is clarified that the supply made is that of bus, and accordingly supply would attract GST @28%. In the case as mentioned at Para 12.2(b) above, fabrication of body on chassis provided by the principal (not on account of body builder), the supply would merit classification as service, and GST as applicable will be charged accordingly. Thus on fabrication of bus body on the chassis to be supplied by the OEMs(Principal) on delivery challan or any other owner of the chassis on which bus body will be fabricated by collecting job work charges including inputs required for such fabrication work and in no case the ownership of the chassis will be transferred by Principal to the applicant will be taxable under SAC 998881 - Motor vehicle and trailer manufacturing services and under entry no. 26(ii) as Manufacturing services on physical inputs (goods) owned by other it is taxable @18%(9% under CGST and 9% under SGST Act).

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• 2019 (7) TMI 40
  Maintainability of Advance Ruling application - scope of advance ruling - Input tax credit - capital goods received prior to 01 July 2017 - outward supplies - adjustment of input tax credit in respect of the capital goods procured by it prior to 01 July 2017 - HELD THAT:- From the collective readings of provisions viz. - Clause (63) and (62) of Section 2 of the CGST Act that, the question enumerated at (d) of Section 97(2), does not deal with the admissibility of the credit of taxes paid other than the taxes mentioned in the Clause (62) of Section 2 of the CGST Act, 2017, which has been cited herein above - Section 97(2), which encompasses the questions, for the ruling by the AAR does not deal with the input tax credit of the service tax or VAT paid under the erstwhile laws. Since the Appellant has raised questions on the admissibility of the credit of the CENVAT paid, under the pre-GST regime, on capital goods, it is held that this authority does not have jurisdiction to pass any ruling on such matters. The application for advance ruling is rejected, being non-maintainable.

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• 2019 (7) TMI 39
  Scope of GST - development of land and construction of flats to be given out on lease as per the Agreement of Lease entered by them with the customers - classification of Supply - appropriate rate of tax - transaction in immovable property or not - Works contract or not - composite supply - HELD THAT:- As per Schedule II (5)(a), renting of immovable property shall be treated as a supply of services and as per Schedule II (5)(b), construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, shall be treated as a supply of services. In the subject case we find that there is a composite supply of works contract in relation to construction of a complex, building, etc. which is intended to be handed over to the buyer, where the transaction is shown as a lease transaction and not, sale. The entire consideration will be received by the applicant before issuance of completion certificate by a competent authority which does not generally happen in a lease transaction - there is not a very large difference between the lease price and the ready reckoner rates of the properties in that area (as submitted by the applicant). We find that the transaction of sale of flats in a building under construction is being projected as a lease transaction of residential units by the applicant. There is a taxable supply in the subject case, which is a supply of services in the form of construction of a complex, building, civil structure or a part thereof, including a complex or building to their prospective lesses, a part of which i.e. flats are intended to be handed over to the buyer, for which consideration is received by the applicant in installments, on completion of work, slab wise viz. the developed units will be transferred to prospective customers through an agreement wherein the allotment is given to their customers. In the form of construction service, a composite supply of works contract as defined in clause 119 of Section 2 of the CGST Act, 2017, is provided to prospective lessee in compliance of an agreement and the same is taxable under GST Laws. Thus, the transaction between Applicant and lessee is taxable under GST. It is not a transaction in immovable properly - the transaction is a composite supply of works contract as defined in clause 119 of Section 2 of the CGST Act, 2017 and classifiable under CH 9954 (ii) and will attract tax @ 18%.

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• 2019 (7) TMI 38
  Classification of goods - Hydraulic Kits - kits were supplied to dealers / distributors or body builders as such from the factory of applicant under CGST Act - HELD THAT:- The Hydraulic Kit is specifically excluded by Note 2(e) to Section 17 which provides that the expression parts and parts and accessories do not apply to machines or apparatus of heading 8401 to 8479 or parts thereof, other than radiators or articles of Section 8481 or 8482 or provide constituting integral parts for engines or articles of Heading 8483, whether or not they are identifiable as goods as per the goods of this section. In the present case, the product in question hydraulic cylinders/hydraulic kits is squarely/specifically covered under Heading No.84.12 and hence the condition (a) mentioned above stands not satisfied in the present case. Hydraulic Kit is more specifically included in Heading No.84.12 and is more specifically covered under said heading - all the 3 conditions mentioned in Heading No.8708, 8714 and 8716 are not satisfied in the present case and hence, the product in question i.e. Hydraulic Kit will not be covered under Headings No. 8708, 8714 and 8716. The hydraulic kits are appropriately classifiable under heading 8412 by application of HSN Explanatory Notes to headings 8412, 8708, 8714 and 8716 and Section Note 4 to Section XVI and Exclusion Note 2 to Section XVII.

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• Income Tax

• 2019 (7) TMI 26
  Penalty u/s 271(1)(c) - Appellant failed to disclose the details and source of cash deposits in its bank account - Investigation carried out for cash deposit as per AIR information - explanation offered in the penalty proceedings has to be considered - claim of business deposit in penalty proceeding claiming assessee is a labour contractor - HELD THAT:- Assessee needs to demonstrate that these were business receipts. In order to address the issue, it may be appropriate to address the past history of the assessee on his nature of activity etc. over the years. In case the assessee is able to demonstrate by way of supporting evidences etc. for instance filing affidavits etc. of responsible people where and for whom he is stated to have performed his work, the tax authorities in such an eventuality can then well consider the feasibility of allowing relief in the penalty proceedings. As such an eventuality will enable the tax authorities to consider the prayer consistently made that the amount should have been taxed u/s 44AD. In such an eventuality, the prayer in the penalty proceedings may qualify to be a valid argument justifying the quashing of the penalty orders. However, the occasion to make such a prayer would only arise after the assessee meets the bar first i.e. the assessee needs necessarily to demonstrate that these were contract receipts. Accordingly, in the interest of substantial justice, accepting the prayer of the ld. AR made on behalf of the assessee, the impugned order is set aside back to the file of the CIT(A). While so doing it is made clear that in the eventuality of abuse of the trust reposed in the assessee, the CIT(A) would be at liberty to pass an order on the basis of material available on record. Any fresh evidence the assessee seeks to file is directed to be admitted and in case it is found to be not sufficient or incomplete, the CIT(A) would be free to give any suitable direction for production of necessary evidences considered relevant for addressing the issues. - Appeals of the assessee are allowed for statistical purposes.

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• 2019 (7) TMI 25
  Depreciation on Goodwill - depreciation on Customer Relationship (CR) Vendor Relationship (VR) considering them to fall under Any other business or commercial rights of similar nature - treatment as asset under Explanation 3(b) to Section 32(1) - impact of non claiming in return of income - HELD THAT:- As decided in SMIFS SECURITIES LTD. [ 2012 (8) TMI 713 - SUPREME COURT] Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). In the circumstances, we are of the view that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) - Decided against revenue

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• 2019 (7) TMI 24
  TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Inclusion of concern Excel Infoways Ltd. - where a concern is selected was showing low employee cost to sales ratio, then such concern cannot be selected while benchmarking international transactions of assessee in ITES segment, which is an employee oriented segment. Hence, we find no merit in the order of Assessing Officer/TPO/DRP to include Excel Infoways Ltd. in the final list of comparables, hence we direct to exclude the same. Universal Print Systems Ltd. - We have already decided similar issue in Emerson Climate Technologies (India) Pvt. Ltd. Vs. DCIT [ 2018 (4) TMI 1635 - ITAT PUNE] wherein vide para 19 vis- -vis Universal Print Systems Ltd., it was held that employee cost ratio versus sales needed verification at the end of Assessing Officer / TPO and it was directed that in case same was less than 25%, then the same is not to be included as comparable in the final list of comparables. Following the same parity of reasoning, we direct the Assessing Officer / TPO to verify the claim of assessee and after giving reasonable opportunity of hearing to the assessee, determine arm's length price of international transactions, if any. Hence, ground of appeal No.2 raised by assessee is allowed. Depreciation on wireless devices - @ 25% OR 60% - HELD THAT:- The claim of assessee before us is that the said devices were multipurpose devices used in BPO industries and since it was supposed to be intelligent wireless systems, which were ideal for BPO office professionals and the said devices were compatible with certain types of PCs only, could be connected to computers via Bluetooth and similar technology, hence claim of depreciation @ 60%. We find no merit in the plea of assessee in this regard. The systems / devices are helping the assessee undoubtedly, but the same are to be connected with computers and mere connection with computers would not make it part of computers eligible for deduction under section 32 of the Act. Accordingly, we direct the Assessing Officer to allow depreciation on the said devices under the head plant machinery @ 25%. The plea of assessee is thus, partly allowed. Disallowance of repairs maintenance expenses - HELD THAT:- assessee has failed to file any breakup of expenditure or furnish any evidence vis- -vis same. In such circumstances, we uphold the order of authorities below in disallowing repairs maintenance expenses. The onus is upon the assessee to establish its claim of repairs maintenance by way of supporting documents. In the absence of same being filed even before us, except referring to the Note before the DRP, no other details were provided.

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• 2019 (7) TMI 23
  Disallowance @ 10% of the bogus purchases - HELD THAT:- Addition should be restricted to the extent of difference between the gross profit rate on genuine purchases and gross profit rate of hawala purchases . For these purposes, the matter stands remanded to the file of the Assessing Officer. Considering the commonality of the facts, we are of the opinion the issue under consideration should also be remanded to the file of the AO with similar direction as given in para 4 of the order of M/S. CHHABI ELECTRICALS PVT. LTD. [ 2017 (6) TMI 514 - ITAT PUNE] AO is also directed to examine the arguments relating to the change of opinion while passing a speaking order on technical ground after granting reasonable opportunity of being heard to the assessee. Accordingly, all the issues raised by the assessee in this appeal both on legal as well as on merits are allowed for statistical purposes.

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• 2019 (7) TMI 22
  Assessment of income - bifurcation of income as business income capital gain - mistakenly assessee shown entire income as business income - sale of agricultural land kept as investment in earlier year after converted into stock-in-trade - HELD THAT:- The first point which is to be kept in mind is that the investment in different plots of land have not been shown as stock in trade by assessee in earlier years and if that be so, then the gain arising therefrom cannot be assessed as business income. But the assessee has declared profits on sale of land as its business income. So the exercise of working fair market value as on the date of conversion into stock in trade and consequent capital gains to be assessed on the date of conversion and the business income to be assessed on the date of sale of stock in trade need to be computed and assessed in the hands of assessee. The assessee also claims that since it is the agricultural land which is converted into stock in trade, then capital gains is assessable u/s 45(2). This aspect also needs verification by Assessing Officer. Consequently, we remit this issue back to the file of Assessing Officer to carry out necessary verification Disallowance u/s 40A(3) - payments made for purchase of land before sub-registrar i.e. Govt. Authority on the ground that the said payments were not covered under the exceptions specified u/r 6DD of the I.T. Rules - HELD THAT:- Admittedly, purchase price of various plots of land was paid before the Registering Authorities on different dates and none of the same fall within accounting period except the one on which the assessee had incurred loss. In such circumstances, where the amount of cash has been paid for purchasing plots of land in earlier years, then no disallowance can be made u/s 40A(3) during the year, as no such purchases were made during the year. In any case, purchase price has been paid before the Sub-Registrar and the transaction being genuine, there is no merit in making any disallowance u/s 40A(3). Accordingly, we reverse the order of CIT(A) in this regard and delete the addition made u/s 40A(3). Grounds of appeal raised by assessee are thus, allowed.

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• 2019 (7) TMI 21
  Reopening of assessment u/s 147 - approval of the higher authority u/s 151 - reason was recorded independently upon application of mind - HELD THAT:- The relevant documents being the reason recorded by the AO or the issuance of notice u/s 148 does not give any indication of obtaining sanction from the ACIT/JCIT by the AO for reopening the assessment of the assessee u/s 148 of the Act though in terms of the provision of section 151 it is the pre-condition for initiating proceeding u/s 148. Non-compliance of the same remains a defect which is admittedly not curable. We find that the Learned DR failed to controvert this particular aspect of the matter at the time of argument advanced before us during hearing. In that view of the matter in the absence of the very basis or foundation of the reopening being the sanction of the higher authority renders the entire proceeding void in law and thus liable to be set aside. Thus in our considered view, the Learned AO has made reopening on the dictates of superior authority and not of his own and without any application of mind; the same was done in tutored manner. AO admittedly failed to comply with the provision of Section 151. It appears from the records that he himself has accepted in assessment year 2010-11 that income was chargeable at the time of execution of sale deed. When in the original assessment the AO accepted the matter, reassessment proceeding cannot be initiated indicating a mere change of opinion. There must be a tenable material on the basis of which an assessment is sought to be reopened even within a period of four years is now well established in view of the judgment passed by the Hon ble Supreme Court in the matter of CIT-vs-Kelvinator of India Ltd [ 2002 (4) TMI 37 - DELHI HIGH COURT] . The reason for reopening also indicates that time limit for issuance of such notice u/s 148 for A.Y. 2007-08 expires on 31.03.2014 which strengthen the case of the assessee showing that in order to reopen the assessment by hook and crook without the approval and/or sanction of the higher authority in terms of the provision of Section 151 AO in hot haste issued such notice for reopening that too in absence of any evidence to be relied upon to form such belief relating to the particular issue involved. Such action is erroneous, arbitrary and without due process of law and hence the entire proceeding initiated without any solid foundation of law is vitiated. Further that on the basis of the above discussion and observation we find the entire proceeding is void ab initio i.e. invalid from the very outset and therefore is liable to be quashed and hence the entire proceeding under section 148 as initiated by the revenue against the assessee is hereby quashed. Thus, assessee s appeal is allowed.

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• 2019 (7) TMI 20
  Addition of premium paid to LIC under group gratuity scheme - scheme had been approved by Commissioner vide its order dated 17.03.2017 w.e.f. 01.01.2000 - HELD THAT:- Similar issue arose in assessee s own case in [ 2017 (6) TMI 869 - ITAT PUNE], the said issue has been decided in favour of assessee. We find merit in the plea of assessee that once the Commissioner has approved group gratuity scheme of employees of assessee, then the assessee is entitled to the deduction on account of premium paid to LIC group gratuity fund. - ground of assessee is allowed. Disallowance of legal professional charges - alternative plea to allowabilty of dedction u/s 10B - any addition made to the computation to the total income needs to be allocated over Mahad EOU Pirangut EOU units, which are eligible for exemption / deduction u/s 10B - HELD THAT:- Tribunal in assessee s own case in assessment year 2009-10 and vide para 10 the grounds of appeal raised by Revenue in respect of legal and professional charges paid to SRG Consultancy Pte Ltd. were adjudicated. The said issue of payment to SRG Consultancy Pte Ltd. has been allowed by CIT(A) in the instant assessment year and the Revenue is not in appeal. - We find merit in the alternate plea raised by assessee and allowability or its disallowance becomes academic. The deduction under section 10B of the Act merits to be allowed on the enhanced profits of business. - grounds of appeal is allowed Reduction of claim u/s 10B of interest received from MIDC MSEB - deposits are made for the purpose of carrying on business - HELD THAT:- We find merit in the plea of assessee that interest received from MIDC and MSEB is to be assessed as business income in the hands of assessee, on which deduction u/s 10B is to be allowed. Deduction u/s 10B - deduction reduced invoking of provisions of section 10B(7) r.w.s. 80IA(7) - no transfer of any raw material from Mahad EOU unit and Pirangut EOU unit to Pirangut DTA unit and hence, provisions of section 10B(7) r.w.s. 80IA(8) were not attracted - separate stock records were maintained - finished products were transferred at cost plus 10% as per Excise rules - non of goods transferred at less than market value - HELD THAT:- First step which needs to be met is the transfer of goods or services from one unit to other unit in order to attract provisions of section 10B(7) . The AO has failed to meet the said plea of assessee, which was repeatedly raised before him. In the absence of any arrangement, provisions of section 10B(7) of the Act are not attracted. Assessee has filed tabulated details of receipts and expenditure on year-wise basis. The AO has not disturbed the said allocation of expenses but has restricted the disallowance made on account of employees cost and total intra unit purchases. The assessee has been consistently following this method of allocation of expenses. In assessment year 2007-08, the assessee had made aforesaid allocation of expenses which has not been disturbed by AO in assessment order passed u/s 143(3). Accordingly, we find no merit in the order of AO in this regard and reversing the finding of CIT(A), we allow the claim of assessee in entirety.

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• 2019 (7) TMI 19
  Claim of tax credit for Alternate Minimum Tax (AMT) u/s 115JD - set off of AMT Tax credit for the tax liability for next assessment year while filing revised computation during the assessment proceedings u/s 143(3) - HELD THAT:- CIT(A) was justified in allowing the assessee s claim by examining the facts of the case in the light of the provisions of Section 115JC of the Act, 115JC of the Act and also that provisions of Section 115JD of the Act which provides for tax credit of the AMT. We therefore find no insistence in the finding of Ld. CIT(A) allowing the assessee s claim for set off of AMT Tax credit for the tax liability for Assessment Year 2014-15 and 2015-16. Penalty u/s 271(1)(c) - making wrong claim u/s 80IB in place of deduction u/s 80JJA - HELD THAT:- We find that this is purely a case of incorrect claim by the assessee. However all the details necessary for computing the deduction were filed. No particulars filed by the assessee were found to be incorrect by the Ld. A.O relating to the computation of claim of deduction. It is also on record that during the course of assessment proceedings itself assessee made it clear that it has wrongly claimed the deduction u/s 80IB. As decided in RELIANCE PETRO PRODUCTS PVT. LTD. [ 2010 (3) TMI 19 - SUPREME COURT] mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - CIT(A) has rightly deleted the penalty levied u/s 271(1)(c) as the assessee has disclosed all the facts relating to the particulars of computing the profits eligible for deduction in the return of income duly supported by Audit Report. We therefore confirm the view of Ld. CIT(A) and dismiss the revenue s sole ground of appeal

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• 2019 (7) TMI 18
  Penalty u/s 271(1)(c) - excess deduction under the said Chapter VI of the Act - assessee claimed the entire such expenditure as the expenditure of the ineligible unit in original return - revised return filed correcting allocation of the said generation expenses - HELD THAT:- Penalty levied by the Assessing Officer and confirmed by the CIT(A) is unsustainable in law. The facts that the assessee filed the revised statements and his attempt to file the revised return, the payment of relevant taxes on the said additional/corrected income demonstrate the good faith of the assessee and the same shall shield the assessee from rigors of the penalty provisions u/s 271(1)(c). As such, the details of general expenditures are borne out of the return of income. The revised computation with correct allocation of the said expenditure between the eligible and ineligible undertakings cannot be directly attributable to the efforts of the Assessing Officer as no show cause was issued to the assessee on this issue of incorrect allocation of the said expenses. Thus, the grounds raised by the assessee should be allowed in favour of the assessee.

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• 2019 (7) TMI 17
  Penalty u/s 271(1)(c) - non disclosure of income as sum as received from General Electoral Trust - Defective notice - HELD THAT:- Assessee is a Member of Legislative Assembly. In order to contest the elections she received ₹ 2,00,000/- from General Electoral Trust, Mumbai which was used by her in incurring expenses towards the elections but she did not include the same in her income under a belief that the said amount is not taxable since it was already been spent during the election process. However during the course of assessment proceedings initiated by issuance of notice u/s 148 of the Act and the assessee agreed to include the said amount as income. We find that both the charges i.e. concealment of particulars of income as well as furnishing incorrect particulars of income are mentioned. A.O has failed to level specific charge against the assessee as to whether she has concealed particulars of income or furnished inaccurate particulars of income. In case of such failure the impugned notice issued u/s 274 r.w.s. u/s 271(1)(c) of the Act suffers from a technical defect and as held in the case of PCIT Vs Kulwant Singh Bhatia [ 2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT] such proceedings initiated by issuance of defective notice u/s 274 r.w.s. 271(1)(c) are liable to be quashed. - Decided in favour of assessee.

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• 2019 (7) TMI 16
  TDS u/s 194H - advertising agency commission - addition made u/s. 40(a)(ia) - net revenue from advertisement was booked after adjusting of advertising agency commission - assessee has not claimed advertising agency commission expenses as separate expenses in its books of accounts and in P L account prepared by it. - HELD THAT: - Decision of Hon‟ble Supreme Court in the case of Director, Prasar Bharati [ 2018 (4) TMI 201 - SUPREME COURT] held that Section 194H are applicable to the appellant because the payments made by the appellant pursuant to the agreement in question were in the nature of payment made by way of commission and, therefore, the appellant was under statutory obligation to deduct the income tax at the time of credit or/and payment to the payee. The judgment was rendered 3rd April, 2018 and Hon‟ble Supreme Court has held that applicability of provisions of Section 194H will depend upon facts and circumstances of each case and hence it was held that there is a need to evaluate the factual matrix of each case before applying provisions of Section 194H to advertising agency commissions paid by Media/Broadcasting companies including evaluating commercial terms and conditions of the contract existing between and inter-se all the relevant parties to this process of advertisement in Media/Broadcasting companies. The Hon‟ble Supreme Court has laid down tests to determine as to applicability of Section 194H to advertising commission paid by Media /Broadcasting companies to advertising agencies. The aforesaid decision of Hon‟ble Supreme Court was rendered on 03.04.2018, while Mumbai-tribunal passed an orders in assessee‟s case for AY 2011-12 and 2012-13 [ 2017 (3) TMI 427 - ITAT MUMBAI] which was pronounced prior to the aforesaid judgment of Hon‟ble Supreme Court. Thus, tribunal did not had the benefit of judgment of Hon‟ble Supreme Court in the case of Director, Prasar Bharati(supra) - Thus issue needs to be restored to the file of the AO to determine applicability of Section 194H to advertising commission paid by assessee to advertising agencies keeping - Decided in favour of Revenue for statistical purposes. Allowability of website development expenses - revenue expenses u/s 37(1) - HELD THAT:- As in the case of Polyplex Corporation Limited v. ITO [ 2008 (8) TMI 400 - ITAT DELHI-F] and R.R.Kabel Limited v. Addl.CIT [ 2012 (6) TMI 513 - ITAT MUMBAI] wherein website development expenses were held to be Revenue expenses. Respectfully following the foresaid decisions, we decide this issue in favour of the assessee by holding these website creation charges as revenue expenses and are allowed u/s 37(1). We uphold the appellate orders of learned CIT(A) Excess commission paid to BCCL - disallowance by the AO to the tune of 50% being 2.5% of the commission expenses paid to BCCL on business procured by BCCL for the assessee - HELD THAT:- This issue was decided by tribunal in assessee‟s own case AY 2008-09 and 2009-10 as held commission @ 5% was paid to BCCL. The range of commission in such type of business varies from 5% to 20%. - Decided in favour of assessee. Disallowance of interest u/s. 36(1)(iii) - investments/loans to subsidiary at low interest rate - sufficiency of own funds - HELD THAT:- The interest free own funds available with the assessee were higher than investments/loans made by the assessee and in the absence of any specific findings that interest bearing borrowed funds were used for making investments/loans, the presumption shall apply that the assessee invested its own interest free funds for making investments in securities. Case of CIT v. Reliance Utilities and Power Limited [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT v. HDFC Bank Limited [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] are relevant. However, this claim of the assessee that interest free funds available with it are more than investments/loans made by it requires verification of facts from records and for this very limited purposes, we are remitting the issue back to file of the AO for verification from records that its own interest free funds were higher than investments/loans made by it as there are no categorical finding of fact recorded by authorities below on these facts which are contended by assessee before the Bench Disallowance of business promotion expenses u/s. 37(1) - addition to 20% of the expenses incurred on the ground that the assessee could not prove business nexus of these expenses - HELD THAT:- We donot find any reason to deviate from the aforesaid decision of ITAT, Mumbai in assessee‟s own case for AY 2008-09 and 2009-10,, which we Respectfully follow. The decision of Hon‟ble Supreme Court in the case of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] is relevant. Thus, ground number 1 of the assessee‟s appeal is allowed. Disallowance u/s 14A r.w. Rule 8D(2)(ii) and 8D(2)(iii) - HELD THAT:- As relying on BALLARPUR INDUSTRIES LIMITED [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT] no disallowance of expenditure purported to be incurred for earning of an exempt income be made u/s 14A in view of the claim that no exempt income being earned by the assessee. However, this claim of the assessee that it did not earn any exempt income and also that interest free funds available with it are more than investments made by it requires verification of facts from records and for this very limited purposes, we are remitting the issue back to file of the AO for verification from records that no exempt income was earned by the assessee and secondly that its own interest free funds were higher than investments made by it as there are no categorical finding of fact recorded by authorities below on these two facts which are now contended by assessee before the Bench. Disallowance u/s. 14A r.w.s. 115JB to compute book profit on which MAT - HELD THAT:- This issue is required to be restored to the file of AO to be decided afresh in accordance with ratio of law laid down by Hon‟ble Special Bench of Delhi Tribunal in the case of ACIT v. Vireet Investment Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI] . This ground of appeal filed by the assessee is allowed for statistical purposes. Depreciation on software expenses which were capitalised in AY 2007-08 - HELD THAT:- Prayers are made by learned counsel for the assessee to restore this issue back to the file of the AO for necessary verifications and grant of appropriate depreciation on merits in accordance with law after due verifications. The learned DR did not object if the issue is restored back to the file of the AO for necessary verifications and fresh adjudication on merits in accordance with law. Non grant of credit of TDS - HELD THAT:- Prayer are made by learned counsel for the assessee to restore this issue back to the file of the AO for verification and grant of appropriate credit for TDS after due verification. The learned DR did not object if the issue is restored back to the file of the AO for necessary verifications and grant of appropriate credit for TDS on merits in accordance with law.

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• 2019 (7) TMI 35
  Constitutional validity of clause (iii) of Explanation 1 of section 115JB - non availability to claim brought forward loss where either loss brought forward or unabsorbed depreciation is nil - the provision has been challenged as being discriminatory towards those assessees, who do not have capital asset based infrastructure and as such would not have any unabsorbed depreciation. Thus, despite having substantial brought forward loss, the petitioner in the light of the provisions of clause (iii) of the Explanation to section 115JB of the Act is still liable to pay tax on the book profit without the same being reduced by the amount of brought forward loss. HELD THAT:- As in CAIRN EXPLORATION (NO. 7) LTD 1 VERSUS UNION OF INDIA 2 [ 2010 (10) TMI 1182 - GUJARAT HIGH COURT] Court does not find the impugned provision to be in any manner unconstitutional, hence, the question of reading it down to save its constitutional validity does not arise. Besides, the provisions of clause (iii) of the Explanation to section 115JB are clear and ambiguous and it is not possible to take two views as to the meaning of the statutory language. Hence, the request to read down the provision also does not merit acceptance. Consequently, the question of directing the respondents to allow reduction of the brought forward losses of the petitioner company from the net profit in order to compute book profits under section 115JB of the Act in absence of any unabsorbed depreciation in the assessment year under consideration, also cannot be accepted.

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• 2019 (7) TMI 34
  Assessment u/s 153C - whether of notices were barred by the limitation? - Effect of amendment in Section 153C w.e.f .1st June, 2015 - can notice u/s 153C under amended provision be issued in relation to searches carried out till 31st May 2015 - HELD THAT:- With regard to the first question, the coordinate bench of this court in ANILKUMAR GOPIKISHAN AGRAWAL VERSUS ACIT, [ 2019 (6) TMI 746 - GUJARAT HIGH COURT] took the view that the writ-applications were maintainable. With regard to the second question regarding impact of amendment, the Court took the view that the Legislature has specifically made the amended provisions of Section 153C applicable with prospective effect from 01.06.2015. The Court held that if such amended provisions are not made applicable to the searches carried out prior to 01.06.2015, they would affect the substantive rights of the persons who are brought within the ambit of Section 153C by virtue of such amendment. So far as the third question is concerned with regard to the limitation, the Court took the view that when the statute itself provides for an alternative period of limitation, merely because the period of limitation is provided under the first part has elapsed; it cannot be said that the notices were barred by the limitation on such ground. It had been stated that in terms of clause (b) of subsection (1) of section 153A, the six years assessment years would be the six assessment years preceding assessment year relating to the previous year in which search is conducted or requisition made and in case any notices u/s 153C which have been issued for assessment years beyond the six assessment years referred to hereinabove, such notices would be beyond jurisdiction as the same do not fall within the six assessment years as contemplated under section 153A. The petitions succeed, and are accordingly, allowed. The impugned notices issued u/s 153C in each of the petitions are hereby quashed and set aside. In cases where the assessment orders are subject matter of challenge, the impugned assessment orders are hereby quashed and set aside on the ground that the very initiation of proceedings u/s 153C was without jurisdiction. Rule is made absolute accordingly in each of the petitions

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• 2019 (7) TMI 33
  Addition u/s 14A - determining the book profit under Section 115JB - HELD THAT:- We are of the view that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in dismissing the appeal filed by the Revenue. The Tribunal in our opinion is justified in applying the ratio of the decision of this court in the case of UTI Bank Ltd. [ 2013 (8) TMI 238 - GUJARAT HIGH COURT] where in we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] We also note that there is no mechanism given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/determine the disallowance. Therefore in the given facts circumstances, we feel that adhoc disallowance will service the justice to the Revenue and assessee. - Decided against revenue

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• 2019 (7) TMI 32
  Power of AO in remanded matter - impact of direction of Tribunal - direction to compute interest payable u/s 244A - writ jurisdiction - alternate remedy - HELD THAT:- Interest u/s 244A following the principles laid down by the Delhi High Court in case of India Trade Promotion Organisation [ 2013 (9) TMI 451 - DELHI HIGH COURT] . It was not open for the AO thereafter to dissect the ratio of the decision of the Delhi High court in case of India Trade Promotion Organisation and came to the conclusion that further interest u/s 244A is not payable. His role was limited to giving effect to the directions of the Tribunal. The question whether the interest is or is not payable was already decided by the Tribunal. Undoubtedly, if the Department had any legal dispute with the decision of the Tribunal, it was always open to the Department to challenge the same in accordance with law. Department has infact exercised such option by first filing an application for rectification before the Tribunal and when such rectification application came to be dismissed, by filing income tax appeal before the High Court. We are informed such appeal is pending. Limited role of the AO was to implement the directions of the Tribunal. In the process, in our opinion, he exceeded his brief virtually coming to the conclusion that the Tribunal was not justified in issuing such directions and distinguishing the ratio of the decision of the Delhi High Court in case of India Trade Promotion Organisation (supra). We would not relegate the petitioner to alternate remedy. Availability of appeal is not an absolute bar on the High Court exercising its jurisdiction under Article 226 of the Constitution. When we find that the order passed by the Assessing Officer is palpably bad in law and exceeds its jurisdiction, relegating a litigant to appeal remedy will be wholly futile and in facts of the present case also lead to undue hardship.

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• 2019 (7) TMI 31
  Liability of directors of private company u/s 179 - recovery of unpaid tax dues of a private company from its directors - attaching the petitioner's bank accounts for recoveries - HELD THAT:- Action of respondent No. 1 cannot be sustained. Section 179 of the Act undoubtedly authorizes the Department to recover unpaid tax dues of a private company from its directors, however, this is subject to certain legal requirements contained in the said provision. First requirement for application of sub-section (1) of Section 179, therefore, is that the tax dues in question could not be recovered from private company. Even if this requirement is satisfied, it is open for the concerned director to prove that such non-recovery cannot be attributed to any gross negligence, misfeasance or breach of duty on his part in relation to the affairs of the company. On all these counts, therefore, the petitioner had a right to oppose and resist the proposal of the Assessing Officer. It is not even averred that the dues of the company should not be recovered form the said Company and that therefore, the onus would be on the director to prove that the same could not be attributed to his gross neglect, misfeasance or breach of duty. The action of the AO to order recovery of the unpaid tax dues of the company from the petitioner, thus, was without the foundation of the necessary facts in show-cause notice. In the context of establishing that such recovery cannot be attributed to his gross neglect, misfeasance or breach of duty, the petitioner had made a detailed representation. The Assessing Officer passed the order without considering such representation. When this was pointed out to him, he passed a further order describing it as one of the 'Corrigendum'. This was also impermissible. Without recalling the earlier order, his action to dispose of the petitioner's objections would amount to nothing more than post-decisional consideration. Under these circumstances, both the orders dated 18.9.2018 and Corrigendum dated 8.3.2019 are set aside. The order of attaching the petitioner's bank accounts for such recoveries is also set aside.

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• 2019 (7) TMI 15
  Block assessment u/s 158BD - compliance of the provision u/s 127 by not issuing notice intimating the assessee regarding transfer of jurisdiction - recording of satisfaction by concern AO or any other AO - HELD THAT:- This is the settled principle of law that the notice u/s 158BD r.w.s. 158BC is required to be issued only upon being specified that the undisclosed income belongs to the appellant only by the concerned AO and not by any other authority having the same rank. The judgment as discussed above in the matter of ACIT-vs-Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] reiterates the same principle. Section 158BD further provides the books of account or other incriminating documents or assets ceased or requisitioned u/s 132A shall be handed over to the Assessing Officer having jurisdiction of such other person. In the instant case, the same was also not complied with by the statutory authorities. The entire proceeding has been initiated by the authorities by not applying the provision u/s 127 by not issuing notice intimating the assessee regarding transfer of jurisdiction of the Learned AO and further by not applying the provision of Section 158BC r.w.s. 158 BD by not recording the satisfaction by the jurisdictional AO. In that view of the matter, we find when the very foundation of the block assessment is not stable in the absence of compliance of the statutory provisions as discussed above, the entire proceeding initiated against the assessee is vitiated. Upon considering all the aspect of the matter, we find no merit in the order passed by the authorities below. Further that on the basis of the above discussion and observation we find the entire proceeding is void ab initio i.e. invalid from the very outset and therefore is liable to be quashed and hence the entire proceeding under section 158BD of the Act as initiated by the revenue against the assessee is hereby quashed. - Decided in favour of assessee.

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• 2019 (7) TMI 30
  Capital gain computation - year of taxation - transfer u/s 2(47) - Tribunal held that capital gain is taxable in the assessment year 2010-11 only because sale deed executed on 27.4.2009 ignoring part performance of a contract u/s 53A of TPA - HELD THAT:- Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A. Explanation 2 makes it abundantly clear that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India. The above Explanation comes to the aid and assistance of the assessee and in the instant case, the assessee has received consideration, handed over possession of the property, executed registered Power of Attorney in favour of the holder empowering him to absolutely deal with the property and the arrangement is covered by an agreement for sale. Thus, the agreement for sale should not be read in isolation, but should be read in conjoint with the power of attorney which in sum and substance is irrevocable. We find from the circular issued by the CBDT in Circular No.495 dated 22.09.1987, which is Explanatory Notes on the provisions relating to direct taxes and in the said circular, the Board discusses about the definition of transfer which had been widened to include paragraph 11.2. In terms of the above circular, the newly inserted sub-Clause (vi) of Section 2(47) of the TP Act has brought into the ambit of transfer , practice of enjoyment of property rights through what is commonly known as Power of Attorney arrangements. Tribunal committed an error in holding that the transfer took place only on the date of sale deed which was executed on 27.04.2009. As observed earlier, in respect of the other co-owners, they have succeeded either before the CIT(A) or before the Tribunal and those orders are attained finality. Order passed by the Tribunal calls for interference. - Decided in favor of assessee.

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• 2019 (7) TMI 29
  MAT computation - whether the provision made by the assessee for purchase tax, purchase tax on cane subsidy and wealth tax are not to be added while computing the book profits u/s 115JA? - HELD THAT:- Notification for payment of additional cane price etc., would not arise in the Assessment Years under consideration and only in the next year. In the absence of any data to show that scientific method was adopted, we are of the considered view that the provisions made by the assessee towards purchase tax, purchase tax on cane subsidy and wealth tax are to be treated as unascertained liability. Therefore, the factual finding recorded by two authorities and the Tribunal is fully justified. So far as the wealth tax is concerned, the decision relied on by the assessee in the case of Shree Sajjan Mills Ltd [ 1985 (10) TMI 2 - SUPREME COURT] was rightly distinguished by the authorities below and the Tribunal has held in the said case that the amount on wealth tax, which was paid should not be added to the net profit. Accordingly, the substantial questions of law nos.2, 3 and 4 are answered against the assessee. Provision of Bad Debts , this arises in two of the Assessment Years, namely, 1997-98 and 1998-99 - This issue came up for consideration in the assessee's own case in [ 2012 (7) TMI 698 - MADRAS HIGH COURT] wherein it was held that the provisions for doubtful debts and provision for doubtful advances, which are nothing but provision for diminution in the value of the asset, are specifically covered under Clause (g) of the said Explanation and the provision for gratuity could not be added to the book profits while computing the income of a Company u/s 115JA. Unabsorbed depreciation and expenditure in connection with Euro issue allowable as deduction u/s 35D - I t is not in dispute before us that the said question has been decided by the Division Bench of this Court in the assessee's own case for the Assessment Years 1994-95 and 1995-96, in the decision of EID Parry (India) Limited vs. Deputy Commissioner of Income Tax [ 2012 (7) TMI 698 - MADRAS HIGH COURT] - decided in favour of the assessee Disallowance of provisions for payment of purchase tax and wealth tax in computing the book profits u/s 115JA while processing return u/s 143(1)(a) - debatable issue - HELD THAT:- As rightly pointed out by Mr.T.Ravikumar, learned Senior Standing Counsel for the Revenue that this cannot be considered as a debatable issue because of the law laid down by the Division Bench of this Court in the case of Dy CIT vs. Beardsell Ltd. . [ 2000 (3) TMI 37 - MADRAS HIGH COURT] In the said decision, it was held that if a debt had become irrecoverable the same could be written off and deducted from the profit of the business. A debt, the recovery of which was doubtful could not be termed to be an ascertained liability as mentioned u/s 115J of the Act and could not be excluded from the book profits. Thus, AO was fully justified in coming to the conclusion that the issue pointed out by the assessee is not a debatable issue and there were no two opinions possible at the relevant point of time. - Decided against assessee.

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• 2019 (7) TMI 28
  Penalty u/s 271(1)(c) - furnishing of income under an incorrect head - assessee shown stock appreciation rights (ESOP) and gain as capital gain in place of perquisites under salary - concealment of income or furnishing of inaccurate particulars of income - Tribunal deleted penalty - HELD THAT:- The assessee, who is a salaried employee, had disclosed the value of the stock appreciation rights and gain thereof and claimed the same as capital gain. However, the Assessing Officer treated the gain as a revenue receipt and levied tax. In such circumstances, whether it could have been stated that there was concealment of income or whether the assessee furnished inaccurate particulars of income. In our considered view, the Tribunal rightly held that it is nobody's case that the assessee concealed the allotment of stock appreciation rights or gain arising out of such appreciation. In fact, there had been a difference of opinion or difference in interpretation of the manner, in which, the assessee interpreted the returns. Therefore, when there were two opinions possible, it cannot be stated that the conduct of the assessee amounted to deliberate concealment of income with certain mala fide intentions. Revenue has not made out any case to interfere with the order passed by the Tribunal - Decided against revenue.

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• 2019 (7) TMI 27
  LTCG v/s STCG - sale of industrial sheds - the assessee was put in possession of the sheds soon after it was allotted - date of allotment or date of registration is relevant for period of holding - CBDT Circular No.471, dated 15.10.1986 - HELD THAT:- Our view is strengthened by the decision of the Karnataka High Court in the case of Income Tax Officer Ward 6(1) vs. R.Sathyanarayana, [ 2007 (12) TMI 468 - KARNATAKA HIGH COURT] wherein, the Court took note of the fact that the assessee was put in possession of the property in 1992 and was enjoying the property as that of an absolute owner except to fulfill the terms and conditions of the lease-cum-sale deed. Assessee was enjoying the property as an owner and that he was put in possession of the property in terms of the agreement and such possession has to be treated as if he was enjoying the property under the part performance of the contract as defined under Section 53A of the TP Act. Thus, the Court held that if the assessee was enjoying the property under the provisions of the TP Act, it has to be considered the date of ownership from the date on which he was put in possession of the property. Accordingly, the Court held that the transaction has to be treated as a long term capital gains, as the assessee was enjoying the property for more than 36 months. We note from the circular is that the Board held that the date of allotment of the flat should be reckoned for the purposes of computing the capital gain. We would be well justified in applying the said decision of the Board to the case on hand also, though the present case does not relate to a residential accommodation. In any event, the terms and conditions of the agreement are more or less similar and both are wholly owned Government of Tamil Nadu Undertakings which have allotted the properties, that is, in the case of the assessee which has been allotted by the SIDCO and in the circular issued by the Board, it is an allotment by the Delhi Development Authority. Order passed by AO treating the industrial sheds as a short-term capital asset is incorrect and it should be treated as a long term capital asset and the gains arising therefrom should be assessed as low tax effect. - Decided in favour of the appellant/assessee.

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• 2019 (7) TMI 14
  Depreciation on wheel loaders and wheel graders - @ 40% OR 25% - plant and machinery - HELD THAT:- As decided in case of M/s. Quippo Construction Equipment Ltd [ 2019 (6) TMI 1343 - ITAT HYDERABAD] moreover the wheel loaders and Graders are Motor vehicles and is certainly eligible for depreciation at 40% as per schedule and the case law on the subject. In view of this, no reason to interfere with the well reasoned order of the CIT(A), both on the issue of reopening and as well as allowance of depreciation at 40% on wheel loaders. Tribunal in the case of Ansari Holdings Investments (P) Ltd vs. DCIT [ 2006 (3) TMI 670 - ITAT HYDERABAD] wherein mobile cranes registered as heavy motor vehicles were held to would fall within the expression of motor lorries and hence eligible for depreciation @ 40%. Disallowance of claim of leave encashment on provision basis - HELD THAT:- Though the issue is covered in favour of the assessee by the decision of the Hon'ble Calcutta High Court in the case of Exide Industries Ltd vs. Union of India [ 2007 (6) TMI 175 - CALCUTTA HIGH COURT] and the Coordinate Bench of the Tribunal in the case of DCIT vs. A.P Seeds Development Corporation Ltd [ 2014 (3) TMI 1004 - ITAT HYDERABAD] has followed the same to hold that the provisions made towards leave encashment is allowable as a deduction, he submitted that the decision of the Hon'ble Calcutta High Court has been stayed by the Hon'ble Apex Court [ 2008 (9) TMI 921 - SC ORDER] and the issue is pending for adjudication. He prayed that the issue may be remanded to the file of the AO to pass the final order after the Apex Court decides the issue - we deem it fit and proper to remand the issue to the file of the AO with a direction to give effect to the Hon'ble Supreme Court s decision in the case of Exide Industries Ltd (Supra). Thus, ground treated as allowed for statistical purposes

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• 2019 (6) TMI 1381
  Addition on account of hawala purchases - HELD THAT:- The issue of bogus purchases has recently come up for consideration in Pr.CIT Vs. Mohommad Haji Adam Co. Vide [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] held that no ad hoc addition at the rate of 10% of bogus purchases is warranted. Rather the addition should be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate of hawala purchases. Such details are not readily available with the AR as well to facilitate the calculation of gross profit rates of genuine and hawala purchases. Set-aside the impugned and remit the matter to the file of AO for applying the ratio laid down by the Hon ble Jurisdictional High Court in the above noted case and recompute the amount of addition, if any, after allowing a reasonable opportunity of hearing to the assessee. - Appeal is allowed for statistical purposes.

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• 2019 (7) TMI 13
  Penalty imposed u/s 271G - assessee has not maintained information/documents required under section 92D(1) r/w rule 10D - assessee applied TNMM for determining of ALP - AO required information/documents for determining of ALP as per CUP method - assessee not able to submit - TPO accepted benchmarking under TNMM - HELD THAT:- The assessee has maintained books of account and other information to benchmark the international transaction with AE by applying TNMM and the transfer pricing study report containing such benchmarking was furnished before the TPO along with various other details. It is not a fact that the assessee has not maintained any information as required under section 92D(1) r/w rule 10D(1). The facts on record clearly indicate that the assessee indeed has maintained a number of information/documents as required under the statutory provisions.The assessee has also explained why it is not possible to furnish certain information sought by the TPO qua applicability of CUP method. Detailed written submission has been filed by the assessee before the TPO which has been properly evaluated by Commissioner (Appeals) and the difficulty in maintaining the information sought by the TPO has been well explained and analysed. It is also necessary to observe, ultimately TPO had accepted the benchmarking done by the assessee under TNMM and no variation/adjustment was made by him to the arm's length price. Assuming that the assessee has not maintained documents as required or was unable to support the benchmarking done by it under TNMM, nothing prevented the TPO in discarding the benchmarking done by the assessee and determining the arm's length price of the international transaction with the AE independently by applying any one of the prescribed method. When the statutory provisions confer enough power on the TPO to benchmark the international transaction as per the provisions of the Act, the allegation of the TPO that by non furnishing of documents by the assessee he was prevented from determining the arm's length price under CUP method is unacceptable. Therefore, when the TPO has accepted the benchmarking of the assessee, the imposition of penalty under section 271G is unsustainable. The decisions relied upon by the learned AR dealing with identical issue of imposition of penalty u/s 271G are squarely applicable to the facts of the present appeal. - Revenue s appeal is dismissed.

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• Customs

• 2019 (7) TMI 12
  Classification of imported goods - Aluminium Profiles - whether classified under heading CTSH 7604 (subjected to duty @ 5%) or under CTSH 7610 (liable to duty @ 10%)? - extended period of limitation - HELD THAT:- While CTH 7604 1031 covers Aluminium profiles as claimed by the appellants Heading No.7610 9030 covers Aluminium plates, rods, profiles, tubes and the like prepared for use in structures. Explanatory Notes to Heading 7610 under HSN referred to Note to Heading 73.08, as per which the Heading also covers parts such as flat rolled products, wide flats including so called universal plates, strips, rods, angles, shapes, sections and tubes, which have been prepared (Eg. Drilled, bent or notched). The suppliers of the appellants do not describe the impugned goods to be profiles; the importers do not place an order describing the goods to be profiles and the customers of the importers also do not describe them to be profiles in general. Going by the product catalogues, technical write-up, it is seen that each profile is made specifically for certain purpose and designed to it with specific size of glasses or doors. It could be that they are required to cut, drilled or punched on site to give them a finished touch or to adjust to the condition. However, for this very reason, they do not seize to be already prepared for use - the impugned goods are assigned a specific product code which also appear on the designs and BOQs; and they are described as glazing frame, doorjamb, snap-in, flush panel and wielding snap-in pocket, etc. Nowhere the goods are described as Aluminium profiles per se. it is seen that the impugned goods are identifiable as items prepared for use in structure as the supplier himself identifies the same with code numbers corresponding to a particular partition system and supplies them as such. Therefore, the only conclusion that can be drawn is that the impugned goods are prepared for use in structures which are known to the foreign supplier, importer and their customers. The end-use i.e., the articles prepared for use being specially finding a mention in the Tariff are required to be classified accordingly - the goods are classifiable under CTH 7610 9030 as contended by the Revenue. Extended period of limitation - HELD THAT:- Having issued a show-cause notice in 2010 on the same proposition, department cannot plead that there is suppression of fact, etc., necessitating invocation of extended period - the extended period cannot be invoked. Penalties set aside. The demand is restricted to the normal period - penalty set aside - matter remanded to the original authority with a direction to quantify the duty for normal period giving allowance to the Bills of Entry wherein duty has been paid correctly - appeal allowed by way of remand.

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• 2019 (7) TMI 11
  Refund of amount paid by assessee as late filing charges - filing of bills of entry - delay in filing due to bonafide reasons - HELD THAT:- There is no doubt that imposition of late filing charges is not mandatory but it is only subject to non-satisfaction as to the sufficiency of reasons. It is a matter of record that the appellant made its first import and accordingly filed the Bill of Entry on an earlier occasion dated 28.07.2017, which was appellant s first import. It is also an undisputed fact that the appellant was regularly importing cut and polished diamonds through Mumbai Airport - Considering the difficulties faced by the importers which had resulted in delayed presentation of Bill/s-of-Entry, the CBEC has issued instructions from time to time and both Section 46 and the instructions of the Board do not prescribe the late filing charges as mandatory, but is subject to the guidelines in Board instructions. When an item is imported at a notified airport, the authorities cannot find fault with such import for want of proper officers, which is not the concern of the importer. Statute notifies an airport and through law requires appointment of appraising staff and if no such officers are appointed, then such deficiency which is not attributable to an importer cannot force an assessee to search for alternate options and in any case, the appointment or otherwise as above of proper officers is not the choice of the importer - In this case, it is a fact borne on record that the importer made sincere efforts and even went to the extent of requesting for engaging an appraiser, at its cost, which is undisputed by the Revenue. There is no delay on the part of the appellant in filing the Bill of Entry; and if there is no delay, the same cannot be attributed to the appellant - demanding late filing charges cannot sustain - appeal allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2019 (7) TMI 10
  Declaration sought that the Scheduled property of 7.5 cents as DISCLAIMED - Section 36(3) (c) and (h) of the Insolvency and Bankruptcy Code, 2016 - whether the property admeasuring 7.5 cents under survey No. 243/6 can be declared as Disclaimed under rule 10 (1) (a) and (c) of the IBBI (Liquidation Process) Regulations 2016 for being treated as part of the liquidation estate? HELD THAT:- In order to maximise the value of the landed property of the Company under liquidation, it is essential that the property having onerous characteristics admeasuring 7.5 cents should form the part of the liquidation estate of the Company. Therefore, the property admeasuring 7.5 cents under survey No. 243/6 is declared as Disclaimed under Regulation 10 (1) (a) and (c) of the IBBI (Liquidation Process) Regulations 2016 and is being treated as part of the liquidation estate of the Company - Thus, as per Regulation 10 (5) of the Liquidation Regulations, the Respondents being affected by the disclaimer shall be deemed to be a creditor of the Corporate Debtor for the amount of compensation or damages payable in respect of such effect, and maybe paid as a debt in liquidation under Section 53(l)(f). The Respondents are directed to immediately handover the title deed and all concerned paper of the property admeasuring 7.5 cents under survey No. 243/6 to the Liquidator along with power of attorney authorising the sale of the property so that the sale proceeds of whole of property of the Company under liquidation could be appropriated to the account of the Company for being dealt under Section 53 of the IBC, 2016. Application disposed off.

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• Service Tax

• 2019 (7) TMI 9
  Valuation - Renting of Immovable Property Service - renting the factory with plant and machinery to JV - Section 67 of Finance Act 1994 - demand of interest and penalty as well - extended period of limitation - HELD THAT:- The Joint Venture has come into existence from the date of agreement i.e. 14.10.2009. The Appellant have rented out its machinery and building to the joint venture against payment of lease rent of ₹ 5.50 Crore per annum during the period of continuance of this agreement. The appellants are not entitled to receive any other amount except those specified in the agreement from the joint venture. Joint Venture is not responsible for any past or existing liabilities of the Appellant. In term of clause 5 of the agreement dated 14.10.2009, the consideration in form of lease rent agreed between appellant and joint venture, for providing the machinery and buildings on rent was ₹ 5.50 Crore per annum. Thus in terms of Section 67(1) the value of taxable service provided by the Appellant, will be ₹ 5.50Crore per annum - However in the present case the agreement was in continuance only during the period October 2009 to May 2010. Hence the gross consideration needs to be taken on pro-rata basis for the period when the agreement was in force. After considering the agreement dated 14.10.2009 we do not find any reasons to differ with the determination made by Commissioner (Appeals). As per the clause 19 of the agreement, the Joint Venture is not responsible for any past or existing liability of the appellant. The temporary loan, sugar pledge loan and revised restructuring loans are the liability of the appellant and cannot be termed as liability to be met by the Joint Venture. The payments made in the loan account, by the Joint Venture can never be termed as payments made towards these liabilities of the appellant, which existed even prior to coming into existence of the Joint Venture or have arisen on account of the current operations of the appellant. Commissioner appeal has examined the documents and have allowed deductions in respect of the expenses incurred by the appellant towards the advances made by them to the sugarcane harvesting and transport contractors (clause 23); and payments received towards the sale of sugar to the joint venture - We do not have any reason to differ with the findings of Commissioner. In terms of clause 12 of the agreement we are also not in agreement with the appeal filed by the revenue seeking to add the expenses incurred by the Joint Venture towards repair and maintenance of the machinery/ building in the payment made by the Joint Venture to the appellants. Time Limitation - HELD THAT:- There is no reason to differ with the findings of the Commissioner (Appeal) as appellant had never disclosed the facts about receiving the lease rent and renting of the building/ machineries to Joint venture to the department. Also they had not failed to take registration and file the relevant ST-3 returns as required under law - extended period cannot be invoked. Demand of interest - HELD THAT:- Since the demand of service tax is upheld, the demand of interest under Section 75 is natural corollary - demand of interest upheld. Penalty u/s 70, 77 and 78 - HELD THAT:- Since service tax has been demanded invoking extended period of limitation under Section 73 of Finance Act, 1994, penalty under Section 78 will follow - Since appellant have failed to take registration and pay the service tax, penalties under section 77(1)(a) of Finance Act, 1994 to are justified and sustained. Also for delay in filing the ST-3 returns the fees imposed by the adjudicating authority in terms of Section 70 ibid too is justified. Appeal disposed off.

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• 2019 (7) TMI 8
  Renting of immovable property service - constitutional levy of service tax - services provided by local body ( Municipality) created under the constitutional provisions - absence of profit motive - difference between the Licence fee and the income from commercial activity - HELD THAT:- The argument of the AR for Revenue, with regard to renting of immovable property is acceptable. We find that the constitutional validity of the same is upheld by Delhi High Court in the case of HOME SOLUTIONS RETAILS (INDIA) LTD. VERSUS UNION OF INDIA ORS [ 2011 (9) TMI 46 - DELHI HIGH COURT] - Madras High Court has upheld the applicability of the same to Municipalities in the case of R. NAMBI VERSUS TENKASI MUNICIPALITY [ 2014 (9) TMI 968 - MADRAS HIGH COURT] - There is dispute regarding the quantification of duty and the nature of renting of immovable property and leasing out/sale of space for advertising as to whether are not for the purposes of furtherance of business interest or otherwise. Principles of natural justice - HELD THAT:- While the appellants contend that they have not been given enough opportunity to explain, the department contends that no proper bifurcation was given. The appellants submitted that vide letter, dated 24/7/12, they have requested that four weeks time to file their submissions. Oder was passed on 30/8/2012 before they submitted their records - It is not forthcoming from the OIO whether the appellants were put to sufficient notice before finalisation. This is certainly against the principles of natural justice. It is quite possible that contradictory and different figures are submitted at different times - Considering these circumstances and facts of the case, we find that the matter requires going back to the original authority for reconsideration of the issue afresh in the light of submissions of the appellants, in the interest of justice. Appeal allowed by way of remand.

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• 2019 (7) TMI 7
  100% EOU - Refund of unutilized CENVAT Credit - export of output service - Rule 5 of Cenvat Credit Rules 2004 - Section 11B of Central Excise Act, 1944 - HELD THAT:- It is clear that the refund claim was of input service credit taken on input or input services, in providing input services, i.e., export without payment of Service Tax, meaning no refund of duty was ever claimed. Clearly, therefore, there is no dispute as to the applicability of Rule 5 and hence, the authorities have no choice but to go by the formula prescribed thereunder and workout a refund. Once both assessee and the Revenue agree that a case under Rule 5 ibid is made out, then, the denial of refund claim of the assessee should only be as per the said Rule alone and as provided in the proviso below Rule 5. We have Notification No.5/2006-CE (NT) dated 14.03.2006 and Notification No. 27/2012-CE (NT) dated 18.06.2012 laying down procedures, safeguards, conditions and limitations for the guidance of the officers working out such refund - Considering the period involved, there is no doubt that it is Notification No. 27/2012-CE (NT) which applies and therefore, the above notification should be applied in full by the authorities while working out the refund - In the case on hand, the authorities have rejected the refund claim holding that the claims for refund were time barred which is one of the sub-clauses under clause 3.0 of Notification No. 27/2012 ibid. The refund claim of the appellant is not a claim under Section 11 B per se and therefore provisions of 11 B cannot be blindly applied in this case because, there is no disputes that the refund claim was under Rule 5 and the allowability or otherwise could only be as per the guidelines or the proviso under Rule 5 ibid - Rule 5 extracted supra prescribes the formula for determination of refund of Cenvat credit, subject to procedure, safeguards, conditions limitations as may be specified by the Board; and it is that Notification which refers to Section 11 B as one of the conditions which is not the only condition. This may not be without a reason. The ruling in the case of CCE CST, BENGALURU SERVICE TAX-I VERSUS M/S. SPAN INFOTECH (INDIA) PVT. LTD. [ 2018 (2) TMI 946 - CESTAT BANGALORE] squarely applies to the facts of the present case where it was held that in respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis - thus the relevant date as also the time limit specified in the above case is required to be applied in the present case as there is no disputes that the application for refund was very much within one year from the date of BRC in this case. In the impugned order, Ld. Commissioner (Appeals) has, however, remanded one of the issues, i.e., for re-quantification of total turnover, which is one of the key component in the formula prescribed under Rule 5, ibid. Therefore, when one of the components itself is not clear then it is not practical to workout the refund and therefore, the above appeals are also required to be remanded to the file of the original authority for this limited purpose of working out the refund. Appeal allowed in part and part matter on remand.

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• Central Excise

• 2019 (7) TMI 6
  Clandestine removal - case against the Appellant unit is mainly booked on the basis of records of transporter M/s Rajasthan Goods Carrier and statements of its employee - inspection sought by the appellant - principles of natural justice - HELD THAT:- The Panchnama and other records of which inspection has been sought by the Appellant should have been provided to the Appellant. The documents relied upon in the show cause notice also should have been provided to the Appellant to prepare their case - it is considered fit remand the case back to the adjudicating authority to provide the copies of records as pleaded by the Appellant and to decide the case thereafter expeditiously after granting them opportunity of being heard - appeal allowed by way of remand.

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• 2019 (7) TMI 5
  CENVAT Credit - inputs - Copper Ingots / imported Ingots / Bars - demand of ₹ 18,39,876/- has been made on the ground that the Appellant has availed credits on the basis of invoices issued by M/s AIPL, Ludhiana - transporters refused transportation and reports from check-posts of Commercial Tax and Transport Departments - demand of ₹ 64,57,520/-, the imported goods, which were purchased by the Appellant on high sea sale basis from Sri Lanka were alleged to have not been received and credit was availed without receipt of goods - HELD THAT:- In case of goods received from M/s AIPL, the transporters were engaged by M/s AIPL and the Appellant had made all inclusive payments to the suppliers, as per the understanding. There is no dispute about the fact that the Appellant had made payment to M/s AIPL through banking channels and the goods were duly entered in the accounting and statutory records of the Appellant. Similarly, in case of imported ingots purchased on high seas sale basis, payment was made to the importers through banking channels and even the payment to CHAs for clearance of goods was made by the Appellant. In case of such imported goods, the goods were transported by the importers as the Appellant has made all inclusive payments to them. Similar is the situation in case of 26 consignments purchased by the appellant from M/s Shri Vaishnudevi Metals, Jammu. The statutory and private records maintained by the Appellant clearly show the payments towards the goods as well as accounting of goods in their records and further usage and use in production. The finished goods manufactured out of such inputs have been cleared on payment of duty. The appellants were not concerned or engaged in deputing the transporters. We find that though the reports from transport or commercial department check post states that the goods did not crossed the border posts, however in case of 24 trucks the documents bears stamp of check post. Thus for the reasons that the LRs do not bear the check-post stamp, it cannot be concluded that the goods did not pass through the transit state. The third party records, i.e. transporters record or their statements, cannot be made basis for alleging contravention by the Appellant. In a plethora of cases relied upon by the appellant, it has been held that the statements of transporters being merely third party / co-accused cannot be solely relied upon to confirm serious charges and merely because the said check-post records do not show movement of vehicles from its record. Revenue has also alleged that the payment received by the sellers / suppliers of the goods were received back by the appellant. However, there is no evidence of flow back of funds to the appellant. There is no whisper about the person who has given any amount on such alleged fictitious purchases back to the appellant nor any evidence of such flow back has been found. Shri V.K. Gupta, director of the appellant company, in his statement has categorically stated that they have received the goods and the same were used by them in the production of finished goods. There is no admission by any of the employees of the appellant or directors that they did not receive the impugned goods. The Revenue did not conduct any investigation to ascertain if the goods allegedly not received by the appellant were diverted elsewhere - The Revenue has asked for the information from one or two check-posts, whereas during the transfer of goods from Jammu / Ludhina, ICD Tuglakabad, the trucks passed through various check posts. It is common that some of the truck drivers in order not to pay local tax or/ toll tax for some other reason, take their vehicle through alternate routes. In such case, only on the basis of check-post report, it cannot be concluded that the trucks did not transport the goods to the appellant factory. In case of M/S MOTABHAI IRON STEEL INDUSTRIES AND OTHERS VERSUS CCE AHMEDABAD-II [ 2014 (2) TMI 63 - CESTAT AHMEDABAD] , the Tribunal in similar situation has held that the demands are not sustainable. The demands and penalty made against the Appellant, M/s Gujarat Victory Forgings Pvt Ltd and penalty imposed on Shri V.K. Gupta are not sustainable - Appeal allowed - decided in favor of appellant.

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• 2019 (7) TMI 4
  100% EOU - education cess and secondary and higher education cess - Rule 3(7)(a) of Cenvat Credit Rules, 2004 - HELD THAT:- The issue has already been considered and laid to rest by many Co-ordinate Benches of the Tribunal and hence the same is no more res integra. In a recent decision, Ahmedabad Bench of the Tribunal in the case of M/S JINDAL SAW LTD. VERSUS COMMISSIONER (APPEALS-III) OF CENTRAL EXCISE RAJKOT [ 2018 (3) TMI 693 - CESTAT AHMEDABAD] has held that Since the restriction under the said sub-rule (7) is worded in such a ways to restrict credit of Basic Customs Duty but allow credit of Additional Customs duty, the appellants are within their rights to take credit of an amount equivalent to the Additional Customs Duty inclusive of excise duty as well as the amount of cess on such excise duty. Credit allowed - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (7) TMI 3
  Classification of goods - Uninterrupted Power Supply (UPS) and battaries thereto - while these products, according to the writ petitioners, are UPS and battaries thereto, according to the respondent, they are voltage stabilizers - Rate of tax - opportunity of personal hearing not provided - principles of natural justice - HELD THAT:- A perusal of the case of CANON INDIA PRIVATE LIMITED VERSUS STATE OF TAMIL NADU THROUGH SECRETARY, MINISTRY OF EDUCATION AND COMMERCIAL TAXES, COMMERCIAL TAXES DEPARTMENT [2013 (8) TMI 569 - MADRAS HIGH COURT] reveals that it is a matter touching upon classification of a undisputed product and not on the question of a factual dispute as to what the product itself is - In the instant case, as already alluded to supra, the central issue is the factual dispute as to what the product is? i.e., whether it is Voltage Stabilizer or UPS. Be that as it may, it may not be necessary to advert to this aspect further and make any discussion on this aspect of the matter as this Court considers it appropriate to direct the respondent to give one more personal hearing owing to 25.02.2019 communication and 08.04.2019 reply thereto. Assessment Orders are set aside only on the ground of further personal hearing (post 25.02.2019 communication from Revenue and writ petitioner's reply to same) not being given - matter remanded for reconsideration - appeal allowed by way of remand.

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• 2019 (7) TMI 2
  Reversal of ITC at 1% on burning loss in the manufacturing process - Section 19(9)(iii) of TNVAT Act - According to writ petitioner uniform 1% is incorrect - Opportunity of personal hearing not provided - principles of natural justice - HELD THAT:- There is no disputation or disagreement before this Court that the Circular No.7/14 is operating and binding on the respondent - If Circular No.7/14 is operating, it is necessary to give a personal hearing to the writ petitioner giving the date, time and venue with specificity and clarity. Learned counsel for writ petitioner, on instructions, submits that if a personal hearing is given giving the date, time and venue with specificity and clarity, the writ petitioner company's duly authorised representative or advocate will go before the respondent and furnish quantitative details for all the eight assessment years regarding burning loss - the impugned orders are set aside solely on the ground of personal hearing not being afforded. Matter remanded for reconsideration - appeal allowed by way of remand.

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• 2019 (7) TMI 1
  Condonation of delay of 5 years in filing appeal - time limitation - permissible limitation cap - First Proviso to Section 51(1) of TNVAT Act - HELD THAT:- The period of limitation prescribed for preferring an appeal is 30 days and the Appellate Authority has power to admit an appeal, presented after the expiry of the period of 30 days, if sufficient cause is shown subject to the rider that it is within a further period of 30 days - the time period prescribed for the appeal is 30 days and the Appellate Authority is vested with power to condone delay, but with rider that the delay should not be more than 30 days. In simpler terms, the maximum time limit available for an assessee to prefer an appeal under Section 51 of TNVAT Act is 30 + 30 = 60days as there is a cap qua delay condonation period. In Section 35-H, there is no provision for condonation of delay at all. Even in such cases i.e., cases where there is neither provision for delay condonation nor cap, the Hon'ble Supreme Court has held that the period of limitation prescribed is absolute and cannot extended. In the case of SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [ 2007 (12) TMI 11 - SUPREME COURT] , Hon'ble Supreme Court dealt with a case, where there is a provision of condonation of delay, but subject to a cap of 30 days. Dealing with this cap, Hon'ble Supreme Court held that in cases, where such condonation of delay is provided, there is a complete exclusion of Section 5 of the Limitation Act. Therefore factual matrix in Singh Enterprises and case on hand mirror each other. Petition dismissed - decided against petitioner.

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