TMI Tax Updates - e-Newsletter
August 26, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Rate of GST - Royalty in relation to mining lease - Excess Royalty Collection Contracts (ERCC) - the rate under pre-revised entry No. 8 does not apply to “Licensing services for the right to use intellectual property’ and similar products other than IPR” - taxable @ 18% under entry No. 17(viii) of the Notification No. 11/2017
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GST:
Input Tax Credit (ITC) - applicant is not paying the full consideration of the transaction - As per proviso to Section 16(2), the applicant will not be eligible for full input tax credit as they are not paying the full amount to their supplier, even in the case of IGST and RCM
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GST:
Collection of amount (GST) under coercion - disallowance of Input Tax Credit - the respondents should at the earliest frame the assessment in accordance with law.
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Income Tax:
Income accrued in India - Executive search fee - neither taxable in the nature of ‘fee for technical services’ under Article 12(5)(a) or (b) nor as ‘Royalty’ under Article 12(4) of the India-Netherlands Tax Treaty read with clause (iv) of Explanation-2 to Sec. 9(l)(vi)
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Income Tax:
Dropping of re-assessment proceedings u/s 147 - the proceedings for reassessment u/s 147 of the Act is for the benefit of the Revenue, hence, dropping of re-assessment proceedings by the AO even in the absence of the assessee challenges the notice u/s 147/148, is justified
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Income Tax:
Addition on the basis of income disclosed u/s 245C(1) before Settlement Commission - there was no occasion of conducting any proceedings or enquiry or recording any evidence as the application was rejected for want of any supporting material - in the absence of any material much less the incriminating material, no addition can be made on the basis of income offered in the application u/s 245C(1)
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Income Tax:
Addition u/s 68 - recovery of the sale consideration - the notices issued u/s 133(6) were returned - once the assessee sold the goods, the buyer of the goods becomes the debtor of the assessee and any receipt of money from him is the realisation of such debt - therefore on recovery of sale consideration, Section 68 cannot be applied
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Income Tax:
Penalty u/s. 271(1)(c) - inadvertent omission of not excluding the short term loss u/s. 94(7) - AO has completed the assessment on the basis of details furnished by the assessee wherein he has paid voluntary taxes on disallowance u/s 94(7) - the assessee fully disclosed all the information asked for and has nowhere furnished any inaccurate particulars and since AO has not brought enough incriminating material then penalty is not leviable
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Income Tax:
Owner of Cash found and seized in course of search - Undisclosed income - presumption u/s 292C - if money is found in possession of any person in course of search u/s 132, it may in any proceeding under the Act be presumed that such money belongs to such person - since the money/seized cash was found in possession of Deo Lal Sah,father in law, it could not have been presumed to belong to the appellant
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Income Tax:
Waiver or reduction of interest u/ss 234A, 234B and 234C - rejection of one's legal contention cannot be characterised as an unavoidable circumstance - If adverse judicial or quasi judicial decisions are to furnish a cause for seeking waiver of interest, it would have been expressly stated in clause 2(e) as in clause 2(d) - unless the case fall under clause 2(a) to d) of the notification, there is no waiver
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Income Tax:
Validity of proceedings u/s 153A - abatement of the proceedings before the ITSC - the order passed by the ITSC on 4th August, 2016 is an order u/s 245D(4) it enlarges the period of extension of limitation by one year in terms of further proviso to Section 153 below Explanation 1 that would apply - hence the notices issued on 6th April, 2017 cannot be said to be time barred
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Income Tax:
Raising of Demand u/s 115-QA in order passed u/s 143(3) - buy back of equity shares - the question regarding the interpretation of Section 115-QA, as it stood at the relevant time, can definitely be gone into by the CIT(A) - directed to file an appeal before the CIT (A) to challenge the impugned assessment order only insofar as it creates a demand u/s 115 QA - order shall be passed by CIT(A) not later than 31st October, 2019
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Income Tax:
Addition of deemed dividend u/s 2(22)(e) - advances by the company was for purchase of land - when the transaction does not fall in the category of loan or advance in terms of section 2(22)(e) but the same is a business transaction, then the addition made by the AO is not sustainable
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Income Tax:
Deduction u/s 54B - sale consideration received through post-dated cheques - the period of six month or condition of investment prior to the filing of ROI is applicable only in the cases where sale consideration has been received before filing of ROI - the assessee has invested the wholesale consideration in purchase of another agriculture land within two days of receipt in bank - deduction allowable
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Income Tax:
Disallowance of the year end provision - non deduction of TDS - mere passing of the book entries, which are reversed on the 1st day of the subsequent year, would not give rise to an obligation to deduct TDS, as clearly, there is no debt that can be said to be acknowledged by the Assessee - no such disallowance can be made
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Income Tax:
Addition u/s 68 - unexplained cash credit - even if the creditworthiness of the investors is not proved, even then it will not automatically give license to the AO to make additions in the hands of the recipient u/s 68, unless that is proved that it is the unexplained and unaccounted money of the assessee which has been introduced in its books of account in the name of bogus/non-existent entities - no addition
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Income Tax:
Registration u/s.12AA - when the objects of the Assessee are charitable in nature being solely for the purpose of education and all activities spring from and are to be read in conjunction with clause 2 (b) of the Deed of Trust and there is nothing brought on record by the CIT(E) to show the objects of the Assessee are not charitable or that its activities are not genuine then registration ought to have been granted
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Customs:
EPCG Scheme - denial of benefit on the ground that coverage under two benefits was claimed. - there is no reason that the benefit of exemption under notification no. 97/2004-Cus dated 17th September 2004 should be rejected peremptively merely because coverage under two benefits was claimed.
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Customs:
Imposition of penalties u/s 114 of the Customs Act, 1962 - illegal exports of rice from India - the entire case of the Revenue is based upon the statements for which cross-examination was not allowed, without any further corroboration and that too in respect of past activities, the imposition of penalties upon the appellants is not justified
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Corporate Law:
Restoration of name of Company in the Register of Companies maintained by ROC - Non filing of returns - No response to the notices issued by the ROC - no valid ground for restoration of the name of the company for the reason that it caused great hardship to the directors of other companies as they have come to this situation because of their own inaction and non-compliance.
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Corporate Law:
Oppression and Mismanagement - it will be detrimental to the interest of the company if litigation is continued on one pretext or other either by one group or the other. To save the company from litigating shareholders divided in groups and appellant group being too small in minority (holding 500 shares each), it would be desirable that an exit route is provided to the appellants.
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Corporate Law:
Oppression and mismanagement - removal of minority directors - the second respondent, though holding 70 per cent. of shareholding, cannot act arbitrary against the interests of minority shareholders (petitioners), who are none else than his family members.
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Indian Laws:
Presentation made by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman on measures to boost Indian Economy
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Indian Laws:
Dishonor of Cheque - appropriate forum for recovery of money - the court cannot be used by either side to protract and prolong the proceedings as if it were executing the settlement that may have been arrived at outside the court without the proceedings in the complaint case having been brought to an end.
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IBC:
Initiation of CIRP - financial creditor or not - Validity of cash transactions - ‘if a statute provides for a thing to be done in a particular manner, then it has to he done in that manner and in no other manner’ - the cash transactions claimed to have been made by the Applicant are sham, fraudulent and the same are declared as null and void.
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Service Tax:
Levy of service tax - on Surrender Charges, which are deducted from fund value, as per policy provisions for pre-mature withdrawal from the scheme - no service can be leviable for the period 2011-12 also as surrender charges towards renting of service being penalty.
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Service Tax:
Confirmation of demand of service on the basis of earlier period - The demand for period may not necessarily be confirmed on the basis of the demand for earlier period being confirmed, as there could be a change in law and/or the fact which the Petitioner would be able to point out at the time of personal hearing, which the Petitioner has specifically asked for.
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Service Tax:
Scope of SCN - The SCN has raised objection only with regard to aspect of unjust enrichment, Whereas, the Adjudicating Authority as well as the Ld. Commissioner (Appeals) had gone into the aspect of nature of services, whether the services fall under works contract service or otherwise - Such an important issue cannot be dealt without making any allegations in the SCN - not permissible
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Central Excise:
Time Limitation - demand of interest - even where no period of limitation is provided for recovery of interest, yet a reasonable period has to be read into the provision - the extended period of limitation provided under the Act cannot apply as to yardstick of reasonable period.
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Central Excise:
Revival of abandoned SCN - gap between 14 to 17 years - even if, notices can be kept in the call book to avoid multiplicity of the proceedings, yet the principle of natural justice would require that before the notices are kept in the call book, or soon after the petitioners are informed the status of the show cause notices so as to put the parties to notice that the show cause notices are still pending - Show cause notices quashed.
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Central Excise:
CENVAT Credit - duty paid on exempted goods - Classification of inputs - the ‘Shrink Sleeves’ which were inputs of the Respondents are chargeable to duty and not classifiable under Chapter 40 heading 4001.90 of the Tariff Act to attract ‘Nil’ rate of duty as urged by the Revenue.
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Central Excise:
Levy of interest on differential duty - the consideration for sale of goods is received through a retrospective increase in the price of the goods - the interest has to be paid on the amount of Central Excise duty discharged latter due to retrospective increase in the price of the goods
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Central Excise:
Demand of duty on differential value - processed fabrics was sold by the ‘job-worker’ to the principal manufacturer who sold them to other buyers - having accepted the duty liability discharged by the ‘job-worker’, it is not open to the authorities to take an entirely different stand to fasten liability for the same duty paid goods on the principal manufacturer
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Central Excise:
CENVAT Credit - commission paid to the Del Credere Agent - the services provided by Del Credere Agents is Business Auxiliary Service and the same is for the promotion of the business of the Appellant and therefore it is an ‘input service', hence Appellant is entitled for Cenvat Credit
Notifications
News
Case Laws:
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GST
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2019 (8) TMI 1010
Classification of services - Rate of GST - Royalty in relation to mining lease - Excess Royalty Collection Contracts (ERCC) - services provided by the State of Rajasthan to M/s. Aravali Polyart Private Limited for which royalty is being paid - classified under SAC 9973 specifically under 997337 as Licensing Sendees for the right to use minerals including its exploration and evaluation or as any other Sendee? - reverse charge mechanism - N/N. 11/2017-Central Tax (Rate) dated 28.06.2017 - challenge to AAR decision. HELD THAT:- The Service has been rightly classified under the Service Code 997337 [Licensing services for the right to use minerals including its exploration and evaluation (entry No. 257)] falling under the Group 99733 [Licensing Services for the right to use intellectual property and similar products (entry No. 250)] falling under the Heading 9973 [Leasing or rental services with or without operator (entry No. 232)]. Determination of the rate of tax on the impugned Service - HELD THAT:- The entry No. 17 of the Notification No. 11/2017 - Central Tax (Rate), deals with the Heading 9973 (Leasing or rental services with or without operator). Since the discussion under the agenda covers Group 99733, it is wholly applicable on the activity under consideration i.e. impugned Service. From perusal of point No. 1 of the Discussion, it is very much clear that the impugned Service is not classifiable under entry No. (iii) and (iv) of the Notification No. 11/2017- Central Tax (Rate). Perusal of point No. 2 of the Discussion makes it clear that the rate under pre-revised entry No. 8 does not apply to Licensing services for the right to use intellectual property and similar products other than IPR . Since the impugned Service is also the Licensing services for the right to use intellectual property and similar products other than IPR , the rate under pre-revised entry No. 8 is not applicable on it. Since the rate under newly created entry No. (viia) is same as that of pre-revised entry No. (viii), the impugned Service would not attract this rate and so would also not merit classification under the entry No. (viia). Even, the description of the Service under the entry No. (viia) i.e. Leasing or renting of Goods by no stretch of imagination covers the impugned Service i.e. Licensing services for the right to use intellectual property and similar products other than IPR . It is crystal clear that neither entry No. (iii) nor (iv) nor (viia) would cover the impugned Service. Point No. 2 ibid clearly mentions that for this Service (Licensing services for the right to use intellectual property and similar products other than IPR) ,the GST council has carved out a new entry No. (viii) with the Service description Leasing or rental services, with or without operator, other than (i), (ii), (iii), (iv), (v), (vi), (vii) and (viia) above with rate of tax as 18%. AAR ruling upheld - appeal dismissed.
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2019 (8) TMI 1009
Input Tax Credit - applicant is not paying the full consideration of the transaction - receipt of cranes for further supply on hire charges - reverse charge mechanism - inter-state movement of cranes by the supplier - HELD THAT:- The customer has placed a service order for Crane hiring, based on which the applicant has placed a work order on SML and Tax invoice is raised by SML on the applicant and thereupon by the applicant on the customer. The applicant states that in each transaction a tax invoice is raised and the goods are received by SML who further leases them out to its (SML s) customers. The applicant has also submitted sample copies of GST returns filed by them with payment to GST. However, it is seen from the MOU itself (Para 10) that the applicant is not paying the full consideration of the transaction to SML HO but the same is being netted off against the receivable by SML for the upkeepment charges that SML HO has to pay to the applicant as per the MOU. As per proviso to Section 16(2), the applicant will not be eligible for full input tax credit as they are not paying the full amount to their supplier SML HO as seen in the MOU where payments are netted off against receivables. The applicant in his application has stated that as per proviso to Rule 37, the condition to make actual payment to supplier within 180 days is not applicable to the applicant. However, the proviso clearly states that, the value of supplies made without consideration as specified in Schedule I shall be deemed to have been paid as per second proviso to Section 16(2). In the instant case, there is a consideration to be paid by SML to SML HO as per Para 10 of the MOU and the consideration in specified in the invoices raised by SML HO on the applicant. Hence, proviso to Rule 37 i.e. exemption from making full payment, will not be applicable to the applicant. Accordingly, the applicant will not be eligible for the full ITC as per the inward supplies received from SML HO as they would be required to reverse such ITC if taken as per second proviso Section 16(2) of CGST Act and Rule 37 of CGST Rules - In the instant case, the transaction is an inter-state supply as the supplier is in a different state from the place of supply, the applicant would be paying IGST on their inward supplies from SML HO. As per Section 20 (iv) of IGST Act, provisions of Central Goods and Services Tax Act relating to input tax credit shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act. Thus, the applicant is not eligible for the full ITC on the inward supplies received from SML HO, but only to the extent specified in the restrictions as per second proviso Section 16(2) of CGST Act and Rule 37 of CGST Rules read with Section 20(iv) of IGST Act.
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2019 (8) TMI 1008
Collection of amount under coercion - disallowance of Input Tax Credit - case of the writ-applicant that the amount, which came to be recovered from him, is without any authority of law or without following any due procedure in that regard - HELD THAT:- Having heard the learned counsel appearing for the parties and having gone through the materials on record, more particularly, the grounds of challenge which have been raised in the memo of writ-application, we are of the view that the respondents should at the earliest frame the assessment in accordance with law. Let this exercise be completed within a period of three months from the date of receipt of this order. Once the assessment is framed, it shall be open for the writ-applicant to thereafter proceed further in accordance with law.
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Income Tax
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2019 (8) TMI 1011
Non following the mandate as laid down u/s 144C - TP adjustment - contention of the assessee is that the impugned assessment order should be set aside because the statutorily prescribed procedure was not followed in as much as the AO issued final assessment order in place of draft assessment order followed by issuing notice of demand and also initiating penalty proceedings u/s.271(1)(c) - HELD THAT:- it is found as an admitted position that the AO, on receipt of an order from the TPO, did not pass any draft order u/s 144C(1) of the Act. He directly proceeded to pass an `Assessment order u/s. 144C(3) of the Act on 27.12.2011 determining the total income at ₹ 17.82 crore. Not only that, he also issued demand notice on the same date, namely, 27-12-2011 Moreover, in our considered opinion, the real issue is whether the statutorily laid down procedure was followed or not. Any lapse in such a procedure, as is instantly the case, cannot save the final assessment order. The competent authorities of both the countries have resolved the issue concerning international transactions of the assessee with YCJ. A copy of such a Resolution dated 10-09-2015 has been placed on record. It states the amount of total transfer pricing adjustment as per the rectification order dated 21-03-2013 at ₹ 16.43 crore, having transfer pricing adjustment relating to YCJ at ₹ 9,85,89,000/- and the remaining amount of ₹ 6,57,81,925/- on account of transactions with non-YCJ AEs. As per the Resolution, the amount of transfer pricing adjustment corresponding to transactions with YCJ has been reduced to ₹ 5,78,23,800/-, thereby giving relief of ₹ 4.07 crore and odd. Such a Resolution has been admittedly accepted by the assessee. Having accepted the MAP order, the assessee cannot agitate such an issue in the appellate proceedings. In the extant case, the assessee admittedly accepted the Resolution under the MAP. Once the assessee has accepted such a Resolution as per which the amount of transfer pricing adjustment, corresponding to transactions with YCJ, has been restricted to ₹ 5,78,23,800/-, the assessee now cannot resile from such Resolution and is bound by the same. AR fairly admitted that the Resolution has been accepted by the assessee. In that view of the matter, the amount of transfer pricing addition sustained under the MAP proceedings will be considered as a part of total income returned by the assessee, which cannot be assailed in any appellate proceedings. However, all other remaining additions, including the balance of transfer pricing addition in respect of transactions with non-YCJ AEs would stand deleted because of the illegality occurring due to not following the statutorily prescribed procedure u/s 144C of the Act. We, therefore, overturn the impugned order on this legal issue itself but direct to adopt total income at ₹ 5,78,23,800/-, being, the amount of Nil income originally returned as added by the amount of transfer pricing adjustment accepted by the assessee under MAP.
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2019 (8) TMI 998
Reopening of assessment u/s 147 - change of opinion - addition in respect of the transaction as to the receipt of advances as well as repayment of the same - HELD THAT:- AO after due consideration of the details and information furnished by the writ applicant from time to time, consciously chose not to make any addition in respect of the transactions as to the receipt of ₹ 6 crore as well as the repayment of the same while framing the assessment under Section 143(3) of the Act. Thus, the issue on hand had been minutely scrutinized by the then Assessing Officer at the stage of the original assessment. Now, the respondent is looking forward to touch the very same issue by re-opening the writ applicant s case which is nothing but change of opinion. The action of re-opening the writ applicant s case under Section 147 merely based on change of opinion is not tenable in the eye of law. - Decided in favour of assessee.
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2019 (8) TMI 997
Validity of Demand raised u/s 115-QA in order passed u/s 143(3) - buy back of equity shares - tax on distributed income to shareholders - maintainability of writ - alternative remedy - HELD THAT:- The impugned order is not challenged on the ground that it is wholly without jurisdiction . What is sought to be urged is that the point involved a pure question of law concerning the interpretation of Section 115-QA and therefore this Court should entertain the present writ petition. Since the Assessee had already been heard on more than one occasion by this Court, it should not have at the stage of final hearing, be rejected only on the ground of maintainability. The question regarding the interpretation of Section 115-QA, as it stood at the relevant time, can definitely be gone into by the CIT (A). This Court has in fact not expressed any view yet on the maintainability of the petition, although as rightly pointed out the matter was heard on this aspect earlier as well. The fact remains that the Respondent raised the objection at the first available opportunity. Due to reasons noted hereinbefore, the issue could not be decided till now. It would, however, not be correct to state that this Court has impliedly overruled such an objection and decided to hear the petition on merits. Court also notes in this context that the Assessee has in fact succeeded in its appeal before the CIT (A) on other issues arising out of the same impugned assessment order and it is the Revenue which is now in appeal before the ITAT. There is no reason why this one other issue arising from the impugned assessment order cannot also be examined by the CIT(A). The Court is conscious that nearly three years have elapsed since the passing of the impugned assessment order. However, in view of the statement made on behalf of the Revenue that they would raise no objection regarding maintainability of the appeal u/s 246A before the the CIT (A) and would also not raise any objection regarding limitation, the Court sees no prejudice being caused to the Assessee by being relegated to the CIT (A). Most importantly, with the Revenue agreeing not to enforce the demand till the conclusion of the appellate proceedings before the CIT (A), the Assessee is not going to be inconvenienced. Moreover, this Court proposes to issue directions for a time bound disposal of the appeal by the CIT (A). Accordingly, the writ petition is disposed of with the following directions: (i) The Court declines to entertain this writ petition under Article 226 of the Constitution against the impugned demand raised by the Revenue by way of the impugned assessment order under Section 115-QA against the Assessee. (ii) The Assessee is granted an opportunity to file an appeal under Section 246-A before the CIT (A) to challenge the impugned assessment order only insofar as it creates a demand under Section 115 QAt. (iii) If such an appeal is filed within ten days from today, it will be considered on its own merits and a reasoned order disposing of the appeal will be passed by the CIT (A) on all issues raised by the Assessee, not limited to the issues raised in the present petition as well as on the response thereto by the Revenue in accordance with law. (iv) The reasoned order shall be passed by the CIT (A) not later than 31st October, 2019. It will be communicated to the Petitioner within ten days thereafter. For a period of two weeks after the date of such communication of order, the demand under the impugned assessment order, if it is affirmed by the CIT (A) in appeal, will not be enforced against the Assessee. (v) The Court places on record the statement of the Revenue that it will not raise any objection before the CIT (A) as to the maintainability of such an appeal and as to the appeal being barred by limitation. The Court also takes on record the statement of the Revenue that it will not enforce the demand in terms of the impugned assessment order till the disposal of the above appeal. All of the above is subject to the Assessee filing the appeal before the CIT (A) within ten days from today. (vi) It is made clear that this Court has not expressed any view whatsoever on the contentions of either party on the merits of the case.
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2019 (8) TMI 996
Validity of proceedings u/s 153A - validity of order passed by ITSC u/s 245 D (4) - after abatement of the proceedings before the ITSC by virtue of an order passed u/s 245D (4) - limitation - HELD THAT:- No inconsistency between Clause (v) of Explanation 1 below Section 153 read with the second proviso thereto as they stood prior to 1st April 2017 and Section 153 B read with Clause (iv) below the Explanation thereto read with the first proviso which only dealt with the abatement of proceedings before the ITSC as a result of an order u/s 245 D (1) and not, as in the present case, an order u/s 245 D (4). In the instant case the order passed by the ITSC on 4th August, 2016 is an order under Section 245D (4) it enlarges the period of extension of limitation by one year in terms of further proviso to Section 153 below Explanation 1 that would apply. In terms thereof the notices issued to the Petitioners on 6th April, 2017 cannot be said to be time barred. Consequently, the objection raised by the Petitioners to the said notice was rightly rejected by the Respondent No.2 by the second impugned order dated 4th July, 2017. The ground on which the impugned orders dated 4th August 2016 of the ITSC are assailed are that they did not account for the numerous interlocutory orders earlier passed by the ITSC in the same matter that prima facie found in favour of the Petitioners. As already discussed earlier, the impugned final order dated 4th August 2016 of the ITSC u/s 245 D (4) was passed after a detailed report was received from the PCIT. This was a comprehensive report which provided more than adequate justification for the decision of the ITSC to conclude that there had not been a full and true disclosure by the Petitioners of all relevant facts. The impugned order dated 4th August 2016 of the ITSC calls for no interference. The period during which the present petitions were pending in this Court shall stand excluded for calculating the period within which the impugned assessments have to be completed.
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2019 (8) TMI 995
Dropping of re-assessment proceedings - grievance of the petitioner that once the Assessing Officer has issued a notice for reassessment under Section 147/148 and the assessee has not opposed the same, then it is not open to the Assessing Officer to drop the same - HELD THAT:- It is an agreed position between the parties that the issue raised herein stands concluded by the decision of this Court in case of K. Sudhakar S. Shanbhag Vs. Income Tax Officer [ 1999 (8) TMI 36 - BOMBAY HIGH COURT] in favour of the respondent. In the above case, this Court has held that dropping of re-assessment proceedings by the Assessing Officer under Section 147 of the Act, even in the absence of the assessee challenges the notice under Section 147/148 of the act, is justified. This Court emphasized that the proceedings for reassessment under Section 147 of the Act is for the benefit of the Revenue. - Decided in favour of revenue
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2019 (8) TMI 994
Waiver or reduction of interest u/ss 234A, 234B and 234C - waiver on account of subsequent adverse decision - reliance on press release instead of formal circular - HELD THAT:- In judicial and quasi judicial proceedings, the possibility is that one's contention may be either accepted or rejected. Rejection of one's legal contention cannot be characterised as an unavoidable circumstance. The decision of the adjudicator is something that is always beyond the control of the assessee and it cannot be foreseen unless of course there is something like match-fixing! The expression unavoidable circumstance occurring in clause 2(e) of the circular dated 23.05.1996 cannot obviously encompass outcomes of judicial and quasi judicial proceedings. This is all the more so because, clause 2(d) deals with arising of liability on account of a subsequent decision of the Hon'ble Supreme Court. If adverse judicial or quasi judicial decisions are to furnish a cause for seeking waiver of interest, it would have been expressly stated in clause 2(e) as in clause 2(d). When a person embarks on the journey of litigation, one should always be prepared for an adverse verdict. Therefore, there is nothing unforeseeable about the outcome of judicial or quasi judicial proceeding. As the preambular paragraph of the notification dated 23.05.1996 states, reduction or waiver of penal interest charged under Sections 234 A, 234 B and 234 C can be made only in the classes of cases or classes of income tax specified in paragraph 2 of the order. Unless the case of the assessee can be brought within one of the five clauses, there can be no scope for claiming reduction or waiver. It is not the case of the petitioner that his case will fall under clause 2 (a) or (b) or (c) or (d) of the notification. His case will have to fall only within clause 2(e). That is why, even though the petitioner talks about clause (v) in the earlier part of ground (d) of his affidavit filed in support of the writ petition, he would contend in the very same ground a little later, that he had satisfied the conditions laid under clause (e) of the Board's circular. Rejection of one's stand in a legal proceeding cannot be construed as an unavoidable circumstance . The case on hand clearly falls outside the scope of clause 2(e) of the circular dated 23.05.1996. The impugned order is sustained. I find no merit in this writ petition. It stands dismissed.
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2019 (8) TMI 993
Owner of Cash found and seized in course of search - Undisclosed income - presumption in terms of section 292C - block assessment - Whether cash found was held to be the amount belonging to the assessee - appellant and not of his father-in-law ? - refusal of the respondents to not accept the entire cash found in course of search to be the undisclosed income of Deo Lal Sah - HELD THAT:- Section 110 of the Evidence Act stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, onus of proving that he is not the owner is on the person who affirms that he is not the owner. It was observed that it is well settled principles of law, unless contrary is established, that title always follows possession. The cash found and seized in course of search on 29.01.2002 at the East Lohanipur residential premises of Deo Lal Sah (father-in-law of the appellant) belongs to Deo Lal Sah alone and not the appellant. The respondent authorities in drawing presumption in terms of section 292C that the cash found and seized belongs to the appellant, have committed serious error in law as section 292C provides that if money is found in possession of any person in course of search u/s 132, it may in any proceeding under the Act be presumed that such money belongs to such person and thus in the instant case since the money/seized cash was found in possession of Deo Lal Sah, it could not have been presumed to belong to the appellant. The cash was found at the residence where not only Deo Lal Sah was residing but he also claimed the said cash and thus it will necessarily have to be presumed to be his undisclosed income in terms of section 292C. In view of the fact that Deo Lal Sah filed return of income for block assessment along with the cash flow statement explaining the seized cash, there remains no doubt that the refusal of the respondents to not accept the entire cash found in course of search to be the undisclosed income of Deo Lal Sah, in absence of any material to the contrary, is illegal. The substantial questions of law so framed, are answered accordingly.
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2019 (8) TMI 992
Addition u/s 68 - unexplained Cash credit - HELD THAT:- The assessee could not explain as to reasons for the said creditor to have extended interest free unsecured loans . The assessee also did not explained as to when these loans were finally paid off/squared by the assessee. CIT(A) merely accepted confirmation filed by the assessee and did not made any enquiry/verification himself to come to conclusion whether all the ingredients of Section 68 were satisfied cumulatively. Powers of ld. CIT(A) are co-terminus with powers of the AO. In our considered view, the assessee has not fully discharged its onus u/s 68 completely and cumulatively as to all the three ingredients and in our considered view , this matter need to be restored to the file of the AO for fresh adjudication wherein one more opportunity is granted to the assessee to adduce evidences to substantiate satisfaction of all the three ingredients of Section 68. The assessee is directed to file necessary evidences before the AO in set aside proceedings to discharge its onus/burden as is cast u/s 68 - AO is directed to give proper and adequate opportunity of being heard to the assessee in denovo assessment proceedings. Bogus purchases - AO made additions to the tune of 100% of aforesaid alleged bogus purchases to the income of the assessee - HELD THAT:- The incriminating information was received from Sales Tax Department as well Investigation Wing, Mumbai that these parties are indulging in issuing bogus purchases invoices without supplying any material physically wherein these parties have deposed before Maharashtra Sales Tax Authorities that they are indulging in issuing bogus invoices and the assessee is stated to be beneficiary of these alleged bogus purchases. The assessee could not produce these parties before AO as well learned CIT(A) for verification, enquiry and recording of their statement . The notices issued u/s 133(6) by the AO to these parties for verification returned unserved. The proof of transportation and delivery of the material was not filed by the assessee. The consumption/utilisation details of the material is also not filed. In this case, the material under these invoices was intended to be utilised for executing contracts with Municipalities of Greater Mumbai / Thane by assessee as sub-contractor. The onus was very heavy on assessee to prove consumption/utilisation of material, which it could not discharge as no consumption/utilisation details were furnished. Appellate order passed by learned CIT(A) cannot be upheld/sustained and we set aside the appellate order passed by learned CIT(A) and upheld/sustain the assessment order passed by the AO as it is a fit case for sustaining additions to the tune of 100% of alleged bogus purchases - Decided in favour of revenue
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2019 (8) TMI 991
Levy of penalty u/s 271(1) (c) - as during the survey assessee had admitted to disclose additional income on account of bogus purchases - survey was included in the return of income filed by the assessee in response to notice u/s 148 - HELD THAT:- The perusal of statement recorded during the course of survey also reveals that it was stated that assessee firm had made actual purchases from the market for which it had received the bills from the parties and had also made payments through account payee cheques but since assessee was unable to prove the genuineness of the purchases to the extent required by the Revenue, and in order to avoid litigation and buy peace of mind, the income was offered by the assessee. It is a fact that the income declared during the course of survey was included in the return of income filed by the assessee in response to notice u/s 148 of the Act. Thereafter in the assessment order passed u/s 143(3) r.w.s. 147 of the Act the AO had accepted the return of income filed by the assessee and no addition was made therein. In such a situation, we relying on the decision of CHETAS CONTROL SYSTEMS PVT. LTD. [ 2019 (3) TMI 1632 - ITAT PUNE] and for similar reasons are of the view that there is no question of levying penalty on account of concealment on the assessee. Hence, we direct to delete the penalty levied by the AO and which was confirmed by Ld.CIT(A). Thus, the grounds of assessee are allowed.
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2019 (8) TMI 990
Unexplained receipt of u/s 68 - no findings or any material to show that assessee's own unaccounted money have come back in the shape of alleged advance - HELD THAT:- The existence of the agreement is not in dispute as found during the course of search and the payment was made through banking channel. Thus in the absence of any findings or any material to show that assessee's own unaccounted money have come back in the shape of alleged advance the genuineness of the transaction cannot be doubted merely on suspicion. Therefore, the reliance placed by the AO on the report of Investigation Wing, Calcutta itself is not a conclusive evidence to contradict or disprove the evidence produced by the assessee to prove the identity, creditworthiness of the purchaser and genuineness of the transaction. Once the assessee has discharged her onus to prove the identity and creditworthiness of the creditor/ purchaser and genuineness of the transaction, the burden is shifted on the AO to prove the contrary with some tangible material. AO has not conducted any independent inquiry except the Commission issued to Calcutta Wing which has resulted nothing but reported that the company was not found at the address which is otherwise not disputed by the Revenue as the assessment was completed and statement of the director of the said company was recorded by the Investigation Wing in earlier investigation proceedings. Therefore, the said report of the Commission issued by the AO is contrary to the earlier investigation report to dispute the identity and existence of the said company. Enhancement of assessment on the basis of the application made u/s 245C(1) before Settlement Commission - application for want of any conclusive proof or document disclosing undisclosed income offered by the assessee - HELD THAT:- There is no quarrel that the material and other information produced by the assessee before the Settlement Commission or any evidence recorded by the Settlement Commission in the proceedings before it can be used by the AO as well as other income tax authority for the purpose of assessment. However, when application filed by the assessee u/s 245C(1) itself fails for want of any material supporting the additional income disclosed then mere disclosure of income in the application u/s 245C(1) cannot be a basis of addition to the income of the assessee. What is provided u/s 245HA(3) is the evidence which may be in the shape of material, information or result of the enquiry held or evidence recorded by Settlement Commission in the course of proceedings. However, in the case in hand, there was no occasion of conducting any proceedings or enquiry or recording any evidence as the application of the assessee was rejected for want of any supporting material. The ld. CIT(A) has also not referred to any incriminating material to disclose the income which was offered by the assessee in the said application filed u/s 245C(1) but disclosure made in the application itself was considered as an evidence. Once the application or proceedings before the Settlement Commission fails, the AO is required to adjudicate upon the entire proceedings and show cause notice. In the case in hand, in the absence of any material much less the incriminating material, no addition can be made on the basis of income offered in the application u/s 245C(1) which was rejected by the Settlement Commission. Accordingly, the enhancement made by the ld. CIT(A) is deleted. Cases followed M/S. ANANTNADH CONSTRUCTIONS AND FARMS PVT. LTD. [ 2017 (5) TMI 1692 - ITAT MUMBAI] and MARUTI FABRICS [ 2014 (7) TMI 926 - GUJARAT HIGH COURT]
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2019 (8) TMI 989
Penalty u/s. 271(1)(c) - inadvertent omission of not excluding the short term loss u/s. 94(7) though the computation of income - HELD THAT:- AO has issued various notices u/s 143(2)/142(1), but has not made any enquiry for the disallowance in the case of the assessee u/s. 94(7). AO on the basis of the query for dividend income on 07.12.2017 issued a notice u/s. 142(1) and asked the assessee to file the detail of all dividend / bonus income earned by the assessee in a specified format and filed all the details in the original return of income. In compliance of the same on 13.12.2017 Ld. Counsel for the assessee appeared and took adjournment for 15.12.2017 and examined all details of dividend / bonus income and found that there is an inadvertent clerical error committed by the Chartered Accountant and on the advice of Senior Chartered Accountant, the assessee filed voluntary revised computation of income wherein a Long Term Capital Gain (LTCG) of ₹ 1,43,53,921/- has been increased to ₹ 3,42,05,795/- due to the disallowance of ₹ 1,98,51,874/- u/s. 94(7) at the first opportunity as soon as it came to the notice of the assessee. Assessee has committed this mistake for furnishing of inaccurate particulars in the return due to the inadvertent bonafide error in the claim due to one entry by the accounts staff posted at wrong date due to huge voluminous transactions and dividend coupons for dividend from same security punched at one voucher i.e. entry of two dividend received on same security (₹ 1,98,51,874/- received on 28.1.2015 and ₹ 3,38,62,717/- received on 25.3.2015 made cumulatively on 26.3.2015 i.e. date of sale of investments (26.3.2015) and receipt date of second dividend. AO has completed the assessment on the basis of details furnished by the assessee, hence, under the circumstances assessee has not furnished inaccurate particulars of income. Assessee has paid voluntary taxes on disallowance u/s. 94(7) and not filed the appeal against the assessment order passed by the AO. It is an admitted fact that assessee has not filed any false claim. We further note that the assessee fully disclosed all the information asked for and has nowhere furnished any inaccurate particulars. We find that there is no conclusive proof that the assessee has furnished inaccurate particulars of income. The AO has not brought enough incriminating material for furnishing of inaccurate particulars and there is no material for establishing the same and therefore in the given facts and circumstances of the penalty is not leviable, because all the documents submitted by the assessee were neither rejected by the AO as false or incorrect facts nor AO had clinched any further evidence for furnishing of inaccurate particulars of income. Section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee s conduct cannot be said to be contumacious so as to warrant levy of penalty. Levy of penalty in this case is not justified - Decided in favour of assessee.
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2019 (8) TMI 988
TP adjustment - rejection of cost allocation as per the master service agreement of the assessee between various segments - business of the company is divided into 3 statements and in the master service agreement the assessee is providing services on cost +12% mark up - HELD THAT:- Assessee has failed to substantiate its cost base. Further the learned AO also appropriated on ad hoc basis 50% of the total indirect cost of ₹ 270490602/ of non-MSA segment as cost incurred by the assessee for MSA segment. Even otherwise such percentage also does not have any sanctity. It is the primary duty of the assessee to substantiate the cost base of its revenue model before the AO completely. When the assessee has failed to substantiate 68% of non salary cost and 83% of salary cost before the lower authorities, we are unable to agree with the argument of the learned authorised representative that cost base of the assessee for deriving the revenue from associated enterprises is correct. We set aside the whole issue back to the file of the learned AO, with a direction to the assessee to substantiate it cost base with respect to the segment, which has been challenged by special auditor and the learned AO to derive at the correct income of the assessee - ground number 2 of the appeal of the assessee is set aside to the file of the learned AO with a direction to pass a draft assessment order after incorporating all the arguments of the assessee so that assessee gets an opportunity to file objections before DRP. Foreign exchange cost incurred on salaries of the expat employees - according to AO should have been charged with a markup of 12 % thereon - HELD THAT:- No infirmity in the order of the learned DRP in their direction to the AO to include the same for working out the correct revenue of the assessee. Admittedly even before us the assessee did not show any clauses in the agreement, which even remotely suggest that only operating cost , are to be charged to the AE. According to us the assessee is to be reimbursed on cost plus basis with 12% mark up. In the agreement there is no reference to exclusion of any foreign exchange loss or gain or same is not to be considered as cost . It was not denied that the expat of salary was not related to the impugned segment and also foreign exchange loss was also on account of the salary payment. We also agree with the finding of the ld DRP with respect to applicability of safe Harbour rule. Naturally assessee has not opted for it and so cannot claim so. Further in many judicial precedents, the Forex gain and loss were held to be operating income/ loss. In view of this we do not find any infirmity in the order of the learned assessing officer. Decided against assessee Addition on account of non charging of the markup on support service charges billed to AGNS - HELD THAT:- The issue squarely covered in favour of the assessee in assessee s own case for earlier years by the order of the coordinate bench, therefore we have no reason to deviate from the same and accordingly respectfully following the decision of coordinate bench, ground number 5 of the appeal of the assessee is allowed. Disallowance of the year under accrual is on account of excess provisioning, non-submission of the supporting documents or non-deduction of TDS thereon u/s 40 (a) - HELD THAT:- With respect to the year and accrual is the issue squarely covered in favour of the assessee by the decision of the coordinate bench in assessee s own case for assessment year 2010 11 wherein on identical facts and circumstances the addition was deleted. Similar is the decision for assessment year 11 12 and 12 13. In view of this we do not find any reason to deviate from the same and respectfully following the same we hold that the disallowance made by the learned assessing officer on account of year and accrual is not sustainable in law. With respect to the issue of tax deduction at source on the year and accrual is the issue has been decided in in the sister concern of the assessee for assessment year 2010 11 [ 2017 (9) TMI 1153 - ITAT DELHI] wherein identical disallowance has been deleted. Therefore respectfully following the decision of the coordinate bench we also hold that no such disallowance can be made for non deduction of tax at source when the year and provisioning are made by the assessee which are reversed on the 1st day of the subsequent year. Non-grant of full credit in respect of the TDS - HELD THAT:- We direct the learned AO to verify and grant the credit of the tax deduction at source to the assessee, as claimed, if the certificates are in proper form. The learned AO may examine them and allow the credit in accordance with the law. Accordingly, ground number 7 of the appeal of the assessee is allowed.
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2019 (8) TMI 987
Reopening of assessment u/s 147 - as alleged notice u/s 148 was issued without proper sanction - Borrowed satisfaction - deemed dividend addition u/s 2(22)(e) - HELD THAT:- AO has not applied his mind independently while forming the belief that income has escaped assessment but the reopening is based on the information received from the AO wherein a definite opinion or expression by the AO of M/s. Saj Properties Pvt. Ltd. is given then the case falls in the category of borrowed satisfaction as the reasons failed to demonstrate the link between the material and formation of reason to belief that income has escaped assessment. Accordingly, we hold that the initiation of proceedings u/s 148 is not sustainable in law and the same is quashed. Addition of deemed dividend u/s 2(22)(e) - as per assessee advances by the company was for purchase of land - contended that there was no accumulated profits at the time of alleged transaction - HELD THAT:- The assessee explained the facts regarding the loan given by the assessee to the company and which was also received during the year under consideration along with the interest, the details of which has been reproduced by the AO at pages 8 9 of the impugned order. Second transaction of payment of ₹ 11.70 crores was shown separately being advance given for purchase of land. Therefore, these are two separate transactions, first one is the loan earlier given by the assessee to the company was repaid during the year under consideration along with the interest and second transaction was the advance given for purchase of land as per the agreement dated 28th October, 2009. Thus when the transaction does not fall in the category of loan or advance in terms of section 2(22)(e) but the same is a business transaction, then the addition made by the AO is not sustainable. Availability of accumulated profits with the company as on the date of alleged transaction and, therefore, in any case the addition made by the AO of the full amount is not sustainable when the AO has not computed the accumulated profits as on date of transaction and then reducing the brought forward losses to the tune of ₹ 2,55,34,499/-. After considering all these relevant aspects if something is still found to be accumulated profits as on the date of transaction, the addition can be made only to the extent of such amount. AO has not conducted any such exercise and thus the assessment was framed in a mechanical manner without even considering the relevant provisions of the Act as well as the binding precedents. Accordingly, in view of the above discussion, the addition made by the AO is not sustainable and liable to be deleted. - Decided in favour of assessee.
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2019 (8) TMI 986
Condonation of delay - delay of 277 days - assessee submitted, though the DRP has held that the assessee comes within the purview of Knowledge Process Outsourcing (KPO) Company and since due to the relief granted by the DRP on other issues, assessee s margin came within the acceptable range of the margin of the comparables requiring no further adjustment, assessee was advised not to file any appeal or cross objection initially but subsequently, on professional advice, assessee filed the present cross objections - HELD THAT:- Delay in filing the present cross objections is due to reasonable cause. Accordingly, we condone the delay and admit the cross objections for adjudication on merit. TP Adjustment - comparable selection - HELD THAT:- Coral Hubs Ltd. - as seen from the materials available on record that the personnel cost as a ratio of the total cost works out to 4.40% as against assessee s personnel cost of 36.37% - unlike the assessee, this company is not providing services itself, but has employed third party vendors to do the work. Thus, the business model of the company is totally different from the assessee. Considering the aforesaid aspect, the Tribunal in Cummins Turbo Technologies Ltd. [ 2018 (3) TMI 1588 - BOMBAY HIGH COURT] has excluded this company as a comparable. The aforesaid decision of the Tribunal was approved by the Hon'ble Jurisdictional High Court in the decision cited supra. Since the aforesaid decisions are for the very same assessment year, respectfully following them, we hold that the Coral Hubs Ltd. was rightly rejected as a comparable. e Clerx Services Ltd - it is seen that during the year under consideration, it has acquired a U.K. based company which has not only provided a large existing customer base in Europe, but by virtue of such acquisition, the company has been provided a platform in the European market to expand its business. Thus, the aforesaid acquisition during the year certainly has impacted the profitability of the company which is evident from the super normal profit earned by it during the year. Considering the aforesaid factual aspect, the Tribunal in Goldman Sachs Pvt. Ltd. [ 2015 (4) TMI 911 - ITAT MUMBAI] and Hyundai Motors India Engineering Pvt. Ltd. [ 2014 (3) TMI 680 - ITAT HYDERABAD] has excluded this company as a comparable - we uphold the decision of learned DRP in excluding e Clerx Services Ltd. as a comparable. Mold Tech Technologies Ltd. - During the year under consideration, there was not only an amalgamation of Techman Tools Pvt. Ltd. but there was a demerger with Mold Tech Plastics Ltd. Thus, due to amalgamation and demerger, there is a definite impact on the profitability of the company, which is reflected in the super normal profit earned by it. Looking at the aforesaid factual position, the Tribunal in Goldman Sachs Services Pvt. Ltd. [ 2015 (4) TMI 911 - ITAT MUMBAI] and Transcent M.T. Services Pvt. Ltd. [ 2016 (4) TMI 356 - ITAT DELHI] has excluded this company as a comparable. As these decisions of the Tribunal are for the very same assessment year and there being no material difference in fact, respectfully following the aforesaid decisions of the Tribunal, we uphold the decision of learned DRP in excluding the Mold Tech Technologies Ltd. as a comparable. Grounds raised are dismissed. Revenue s appeal is dismissed.
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2019 (8) TMI 985
Reopening of assessment u/s 148 - validity of reasons to believe - HELD THAT:- AO has reopened assessment beyond the period of four years from the end of relevant assessment year. AO has power to reopen the assessment after the expiry of four years from the end of relevant assessment year if, the income has escaped assessment by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. In the instant case, we observe that reassessment proceedings have been initiated by the Assessing Officer on reappreciation of facts and documents already on record. In the instant case, we find that the AO has resorted to provisions of section 148/147 merely on change of opinion after reappreciation of facts that were available before him in proceedings u/s. 143(3) of the Act. We find no reason to interfere with the well reasoned findings of First Appellate Authority. Accordingly, the impugned order is upheld and the appeal of Revenue is dismissed sans merits. reappreciation of facts that were available before him in proceedings u/s. 143(3) of the Act. We find no reason to interfere with the well reasoned findings of First Appellate Authority. Accordingly, the impugned order is upheld and the appeal of Revenue is dismissed sans merits.
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2019 (8) TMI 984
Addition u/s 68 - Recovery of the sale consideration of the goods sold by the assessee - the notices issued u/s 133(6) were returned with the postal remarks left or not existence - human probability - HELD THAT:- There is no dispute with regard to purchase and import of mobile phones by the assessee from China. The major portion of the imported mobile phones was sold when the goods were in transit by way of high sea sales. Such sale is supported by the sales agreement duly attested by Notary Public. The custom authorities have approved the high sea sales agreement. The custom clearance documents of such goods show that the delivery of goods was taken by the buyer on high sea sales. On these surrounding circumstances, the only conclusion based on human probability that can be drawn is that the buyer of goods on high sea sales who has already taken the delivery of goods from custom authorities would make the payment for such goods. AO was not right in concluding that the high sea sales are not genuine. Section 68 would also not be applicable in respect of recovery of sales consideration. Once the assessee sold the goods, the buyer of the goods becomes the debtor of the assessee and any receipt of money from him is the realisation of such debt and therefore, we are of the opinion that in respect of recovery of sale consideration, Section 68 cannot be applied. No justification for upholding the addition of ₹ 59,51,29,517/-. The same is deleted. Addition u/s 68 - appellant company failed to prove the genuineness of the unsecured loans - HELD THAT:- AO has made the assessment in a hurried manner. No discussion with regard to the evidences filed by the assessee i.e., the confirmation of the creditors and their income tax details. The assessee has agreed before us to produce Shri Dharmender Rathee before the AO. It would meet the ends of justice if the orders of authorities below on this point are set aside and matter is restored to the file of the AO. We order accordingly and direct the AO to consider all the evidences produced by the assessee in this regard. We further direct him if after considering the evidences produced by the assessee he requires the presence of Shri Dharmender Rathee, he will give a suitable date and direct the assessee to produce him. Thereafter, he will re-adjudicate the matter in accordance with law after considering all the evidences as have been produced or as may be produced by the assessee before him.Needless to mention that he will allow adequate opportunity of being heard to the assessee. Disallowance of petty cash expenses - HELD THAT:- Section 69C would come into play only when the AO doubts the source of incurring such expenditure. In this case, there is no doubt with regard to the source of such expenditure because the same is duly debited in the assessee s books of account. Therefore, Section 69C is wrongly applied by the AO for the purpose of disallowance of expenditure. Now coming to the allowability of the expenditure, it was stated by the learned counsel that the AO has never asked the assessee to produce the vouchers of the expenditure. He did not raise any query before making above disallowance and no adequate opportunity of being heard was allowed to the assessee - it would meet the ends of justice if the orders of authorities below on this point are also set aside and restored to the file of the AO.
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2019 (8) TMI 983
Deduction u/s 54B - sale of agriculture land - sale conditions were such that post-dated cheques were received by assessee - HELD THAT:- The contention of the DR is not acceptable on the ground that the amount of capital gain can be invested in purchase of land only on receipt of the sale consideration and the intention of the legislature is that the amount of sale consideration should not be utilized otherwise other than purchase of agriculture land and in the instant case the assessee has invested the wholesale consideration in purchase of another agriculture land within two days which is clear from the bank statement of the assessee. The period of six month or condition of investment prior to the filing of ROI is applicable only in the cases where sale consideration has been received before filing of ROI. When the sales consideration itself was received after filing of ROI then the case law relied upon by the AR is squarely applicable in the instant case. Specially the case of CIT Vs Jagriti Aggarwal [ 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT] wherein it has been held. That the assessee is entitle to claim benefit u/s 54, if the investment was made in purchase of new assets or deposit in account before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier under sub-s. (4) of s. 139. Contention of the ld CIT-DR that the second proviso to section 54E is also relevant, But this is not a case of compulsory acquisition where second proviso to section 54E is applicable similarly the provisions of section 54 and 54B are pari materia, but the provision of section 54E / 54EC are not pari materia with 54B / 54F. We found that the case law cited by the learned AR in the case of Chanchal Kumar Sircar Vs ITO [ 2012 (2) TMI 363 - ITAT KOLKATA] is applicable because of the circumstances in that case it was held that the period of limitation for making deposit or investment in new assets should be reckoned from the date of actual receipt of the consideration- If period is reckoned from date of agreement and receipt of part payment at the first instance, then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same. Likewise in other cases it was held by the various authorities that the liberal interpretation should be considered in case of exemption. The case of Jyotindra H Shodhan Vs ITO [ 2003 (7) TMI 255 - ITAT AHMEDABAD] is also not applicable because the case is related to the provision of section 54E and not 54B. We direct the AO to allow the assessee s claim of deduction U/s 54B on sale of agricultural land. Sold agriculture and was capital assets or not - Other grounds raised by the assessee with regard to the fact that agricultural land so sold by the assessee are not an asset U/s 2(14)(iii)(a) or (b) as these provisions stood then and therefore no capital gains are leviable. The assessee had also raised a ground that the agricultural land sold by the assessee is not urban but rural agricultural land. As we have already decided the issue for granting deduction U/s 54B we are not going into the grounds taken by the assessee with regard to nature of land so held and sold by the assessee being in the nature of agricultural land or not.
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2019 (8) TMI 982
Deduction u/s 80IC - definition of the initial assessment year contained in clause (v) of sub-section(8) of section 80IC can lead to a situation where there can be more than one assessment year within the said period of ten years - HELD THAT:- It is now settled law that even a new undertaking, which has claimed deduction of its eligible profits @ 100% thereof for the first five years, is entitled to claim deduction @ 100% of its profits thereafter on account of substantial expansion undertaken by it. Since in the present case, the fact that the assessee had undertaken substantial expansion in A.Y. 2010-11 is not disputed, the assessee, we hold, is entitled to claim deduction @ 100% of its eligible profits even if it has already claimed deduction of its profits at the said rate for five years, in view of the law laid down by the apex court in this regard in its decision in the case of M/s Aarham Softronics [2019 (2) TMI 1285 - SUPREME COURT]. Uphold the order of the Ld.CIT(A) on merits. All the appeals of the Revenue,challenging the order of the Ld.CIT(A) on merits are therefore dismissed. Now taking up the assessee s appeals against the action of the CIT(A) in not disposing off the legal ground raised by it, challenging the validity of assessment framed under section 147 of the Act, the Ld. Counsel for the assessee stated that it do not wish to press the grounds raised.
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2019 (8) TMI 981
Addition u/s 68 - enquiry investigation made by the AO as well as Investigation Wing of the department, the parties from whom the assessee had received unsecured loan were mere accommodation entry providers - HELD THAT:- In this case, there is an important undisputed fact that the unsecured loan had already been repaid and in this respect, documents were placed on record by the AO. We are also relying upon the judgment of Hon ble Apex Court in the case of Lovely Exports Pvt Ltd. [ 2008 (1) TMI 575 - SC ORDER] , wherein it was held that the AO is at liberty to bring to tax the amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved. In this case, the creditworthiness of the investors even if is not proved, even then it will not automatically give license to the assessing authority to make additions in the hands of the recipient u/s 68, unless that is proved that it is the unexplained and unaccounted money of the assessee which has been introduced in its books of account in the name of bogus/non-existent entities. In the instant case, the AO had not made any dent on these lines. On the other hand the appellant has filed all the details and supporting documentary evidence to prove the identity, genuineness and creditworthiness of these three unsecured loan parties No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these ground raised by the revenue stands dismissed.
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2019 (8) TMI 980
Reopening of assessment u/s 147 - reasons to believe - revenue recognition of PSG fees - change in the basis of revenue recognition of fees from PSG by the assessee - HELD THAT:- In a case where the purchase of flat would either not materialize or stood terminated, no fees on account of PSG in respect of such contract would be receivable by the assessee from its builder clients, as a result whereof the assessee would have to write off the receivables in its books of accounts . Be that as it may, the aforesaid bonafide change in the method of recognizing the fees from PSG by the assessee from the year under consideration onwards had brought the same in conformity with AS-9, which had resulted into facilitating the accounting of its true income during a year. Now when the change in the method of accounting by the assessee is a bonafide change, which thereafter had been consistently followed by it in the subsequent years, therefore, no addition could have been made by the A.O on account of such change in the method of recognizing the fees from PSG by the assessee. See M/S. MODERN TERRY TOWELS LTD., [ 2012 (8) TMI 776 - BOMBAY HIGH COURT] CIT(A) even in the case of an assessee following mercantile system of accounting, an item would be regarded as accrued income only if there was certainty of receiving it and not when it had been waived. We find that a coordinate bench of the Tribunal in the case of Addl. CIT Vs. Hill County Properties Ltd. [ 2015 (5) TMI 930 - ITAT HYDERABAD] had after deliberating on somewhat similar facts as are involved in the case of the assessee before us, observed that where some extraordinary events created uncertainty with regard to completion of project by the assessee, which resulted in cancellation of property booking/filing of legal cases, the assessee who was a property developer was justified in changing the method of recognition of income and adopting registration of agreement for sale or handing over of possession of flats and bungalows as the basis for recognition of income, as against execution of agreement for sale that was adopted in the earlier years - Decided in favour of assessee.
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2019 (8) TMI 979
Income accrued in India - Executive search fee - nature of fee for technical services under Article 12(5)(a) as well as 12(5)(b) of the India-Netherlands Tax Treaty - HELD THAT:- As in Assessment Year 2008-09 as well as in Assessment Year 2009-10, the assessing authority itself accepted the stand of the assessee that the Executive search fee was not taxable in India. Factually speaking, the aforesaid stand of the Assessing Officer is manifested in the scrutiny assessments finalised under Section 143(3) of the Act continues to hold the field. Thus, in this background it was all the more incumbent upon the Revenue in this year to discharge its onus as to why a different stand is being adopted, especially considering the fact that the nature and the sources of income in question remains the same. Therefore, on this aspect also, we are not inclined to uphold the stand of the assessing authority. The payment of said Royalty has been factually found to be at arm s length price for the period under consideration as would be borne out of the order of TPO dated 09.06.2017 in the case of SS India. Therefore, once the payments in terms of the Licence Agreement, i.e. Royalty, has been found to be at arm s length price, no further amount can be attributable for using the Spencer Stuart s Worldwide Client List Database, Spencer Stuart s Mailing List Database, Spencer Stuart s Knowledge Management Resources Pages, Spencer Stuart s Board of Director s Database and other data base as per schedule B to the agreement which SSI has procured from SSI BV as part of Licence Agreement (supra) as sought to be made out by the Assessing Officer in order to invoke clause (iv) of Explanation-2 to Sec. 9(l)(vi) of the Act read with Article 12(4) of the India-Netherlands Tax Treaty. Therefore, in our view, the said action of the Assessing Officer is completely misconceived and is liable to be set-aside and we hold that no charge can be made out under Section 9(l)(vi) read with Article 12(4) of the India-Netherlands Tax Treaty qua the impugned sum of Executive search fee. We conclude by holding that the Assessing Officer erred in holding that the Executive search fee was in the nature of fee for technical services under Article 12(5)(a) as well as 12(5)(b) of the India-Netherlands Tax Treaty and also erred in his alternative conclusion that the same was taxable as Royalty under Article 12(4) of the India-Netherlands Tax Treaty read with clause (iv) of Explanation-2 to Sec. 9(l)(vi) of the Act. Taxability of reimbursement of expenses received by the assessee - AO and DRP have held that the reimbursement of expenses received by the assessee in question are liable to be treated as fee for technical services within the meaning of Article 12(5)(a) of the India-Netherlands Tax Treaty - HELD THAT:- We notice that the DRP relied upon the directions of its predecessor DRP in Assessment Year 2011-12 in concluding that the said amount is liable to be taxed in India as fee for technical services . At the time of hearing, it was a common ground between the parties that the said stand of the DRP for Assessment Year 2011-12 has since been negated by the Tribunal in assessee s own case vide order dated 01.06.2018 [ 2018 (6) TMI 359 - ITAT MUMBAI] and the said order continues to hold the field. - Decided in favour of the assessee
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2019 (8) TMI 978
Disallowance u/s. 14A r.w. Rule 8D - sufficiency of own funds - HELD THAT:- Facts demonstrate that assessee company had sufficient own fund for making investment in the shares. After placing reliance on the decision for Mumbai High Court in the case of Reliance Utilities and Power [2009 (1) TMI 4 - BOMBAY HIGH COURT with regard to investment in tax free securities out of assessee s own fund and considering the other judicial decisions referred by the assesssee, we are not inclined with the decision of ld. CIT(A) in sustaining the impugned addition made by the assessing officer without giving reason for its justification, therefore, we are of the view that no interest expenditure should be disallowed u/s. 14A r.w. rule 8D in the case of the assessee. Regarding administrative expenditure, we are of the view that no exempt income can be earned without incurring any administrative expenditure, therefore, we restore this issue of computing administrative expenditure incurred for earning exempt income to the file of assessing officer and direct the assessing officer to compute administrative expenditure @ 0.5% of investment from which the assessee has earned the tax free income. Therefore, the appeal of the assessee is partly allowed.
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2019 (8) TMI 977
Condonation of delay of 52 days - refusal of registration u/s.12AA - Assessee was not aware of the fact that the impugned orders were appealable and approached a consultant to make another application for grant of registration u/s.12AA and 80G - HELD THAT:- Reasons given in the petition for condonation of delay in filing appeals which is duly supported by an affidavit of P.R. Ramakrishnan, one of the Trustee of the Assessee. Under similar circumstances, delay in filing appeal was condoned by the Hon ble Madras High Court in the case of United Christmas Celebrations Committee Charitable Trust Vs. ITO ( 2017 (3) TMI 1519 - MADRAS HIGH COURT ) Hosanna Ministries Vs. ITO ( 2017 (3) TMI 1387 - MADRAS HIGH COURT ). We are of the view that the delay in filling the appeal is not deliberate or wanton, but due to bona fide circumstances set out above. We therefore condone the delay in filing the appeals. Registration u/s.12AA refused - author is property developer and trust deed also have clauses that Trustees had powers to sell and convert trust funds into any other property - HELD THAT:- None of the reasons given for refusing registration to the Assessee are acceptable. The objects of the Assessee are charitable in nature being solely for the purpose of education and all activities spring from and are to be read in conjunction with clause 2 (b) of the Deed of Trust, which we have extracted in the earlier part of this order. The Hon ble Karnataka High Court in the case of DIT(E) Vs. D.R. Ranka Charitable Trust ( 2018 (12) TMI 220 - KARNATAKA HIGH COURT ) has laid down that at the time grant of registration u/s.12A the charitable object of the Assessee and genuineness of its activities has to be seen and it is only in assessment the actual activities, whether charitable or not, has to be seen. There are sufficient safeguards in the Act in the event of the object not being carried out in accordance with the deed of trust or wherever there is personal benefit. There is nothing brought on record by the CIT(E) to show the objects of the Assessee are not charitable or that its activities are not genuine. In the circumstances, we are of the view that the Assessee ought to have been granted registration u/s.12AA. We direct that the registration u/s.12A being allowed to be Assessee. Grant of registration u/s 12A of the Act, does not automatically enable an assessee to claim exemption u/s 11 12 of the Act. The AO even in a case, where a trust or charitable organization for which registration u/s 12A subsists has to go in to the question, as to whether the income has been applied for charitable purposes and to the extent contemplated by Sec.11 12 of the Act. Even in a case, where the trust or charitable organization applies its income for charitable purposes, but does not have registration u/s 12A, such trust or charitable organization cannot claim the benefit of Sec.11 12. Thus, this appeal by the assessee is allowed.
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Customs
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2019 (8) TMI 1007
Reduced penalty - Appellant was not involved in the clearance of the impugned offending consignment of M/s Planet Overseas - It is the case of the Appellant that despite there being no material to connect the Appellant with the consignment containing offending goods, the Appellant was served a SCN proposing penalty under Section 114AA and 117 of the Customs Act, 1962 - HELD THAT:- This Court is of the view that a Customs House Agent s duty is that of a mere agent rather than as a Revenue officer who is empowered to investigate and enquire into the veracity of documents. As to whether in reality, such an exporter in a given case exists can hardly be the subject matter of due diligence expected of a Customs House Agent unless there are factors which ought to have alerted him/her to make a further inquiry. In other words, in the absence of any indication that the Customs House Agent concerned was complicit in the facts of a particular case, it cannot ordinarily be held liable. However, in the present case, in view of the statement given by the Appellant under Section 108 of the Customs Act, which has not been retracted till date, this Court is of the view that the Appellant has admitted his lapse in not verifying essential facts - Keeping in view the aforesaid, this Court is of the view that the end of justice would be met if a penalty equivalent to the duty involved in the present case is imposed upon the Appellant, that is ₹ 1,77,401/-. Appeal disposed off.
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2019 (8) TMI 1006
Rejection of benefits of duty credit scrips available under the Merchandise Exports from India Scheme - suspension of IES (Import Export Code) No.3115905611 - Whether the petitioner is entitled to the benefit of MEIS scheme for exports made through FTWZ, when it is not a unit in FTWZ? HELD THAT:- It is evident from the impugned communication dated 18th July, 2019 of the Deputy Director General of Foreign Trade, issued with the approval of respondent no.3, that it does not take into account the clear words of 3.06(vii) of the FTP which excludes only exports made by units in FTWZ. In this case, the petitioner's contention is that it is not a unit in FTWZ but a unit in DTA. Therefore the exports in this case was not by unit in FTWZ but by a DTA unit. This aspect has not been considered at all in the impugned communication dated 18th July, 2019. The communication dated 18th July, 2019 and direct the respondent no.3 Director General of Foreign Trade to examine this issue in the context of the petitioner's claim is set aside - petitioner to make a fresh representation about its claim for the benefit of paragraph 3.06 of the FTP to the respondent no.3 the Director General of Foreign Trade who would consider the same and pass appropriate order thereon. This it would do as expeditiously as possible and preferably within 12 weeks from the date this order is uploaded on the High Court website - petition disposed off.
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2019 (8) TMI 1005
Smuggling - Gold Bars - It appeared to revenue that the said gold was smuggled in to India from Nepal through off-route in violation of Notification No.09/1996-Cus dated 22.01.1996 and therefore, the said gold was liable for absolute confiscation - penalties - HELD THAT:- The appellants had produced documents through which appellants obtained legal possession of gold within India. Neither the investigating agency produced any evidence on inquiry from Embassy of India in Kathmandu, Nepal nor they have produced any evidence of the so called off-route taken by the appellant to allegedly smuggle gold into India from Nepal. Further, the Original Adjudicating Authority has not caused any inquiry with M/s Saakshi Securities Ltd. and without causing any investigation with M/s Saakshi Securities Ltd. who had issued documents to the appellants for legally handing over the gold to them simply did not accept the documents only for the reason that they were not produced before the investigating authorities. It was obvious that the documents were produced before the Original Adjudicating Authority as evidence of legal possession of gold by the appellants. The Original Adjudicating Authority has rejected the documents only for the reason that they were not produced before the investigating authorities - We are constrained to observe that the Original Adjudicating Authority has not understood the process of adjudication. Since it has not been established that the documents issued by M/s Saakshi Securities ltd. for handing over 8 Kgs gold to Shri Vinod Kumar Verma are not fake and also it has not been established that said gold was brought into India through off-route, we do not find any merit in upholding the impugned order. Appeal allowed - decided in favor of appellant.
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2019 (8) TMI 1004
EPCG Scheme - denial of benefit on the ground that coverage under two benefits was claimed. - Exemption under notification no. 21/2002-Cus dated 1st March 2002 along with notification no. 6/2002-C.Ex dated 1st March 2002 - it is alleged that the duty of ₹ 4,42,56,732/- foregone on these cranes had not been debited in the licence issued under the export promotion capital goods scheme of the Foreign Trade Policy HELD THAT:- As the two exemptions which were cited in the bill of entry are mutually exclusive, only the eligible concession/exemption could have been made extended to the import by the assessing officer. From the records, we find that such an elimination has not been carried out despite which the adjudicating authority has proceeded on the assumption of lack of eligibility for exemption under notification no. 21/2002-Cus dated 1st March 2002 along with notification no. 6/2002-C.Ex dated 1st March 2002. It also appears that the absence of debit of the entire duty saved in the licence issued under the export promotion capital goods scheme was held to suffice for recovery of differential duty - The impugned order reasons that the amended licence was not produced before the assessing officer with deliberate intent to evade liability. That conclusion, however, did not prevent the adjudicating authority from taking notice that the importer did not utilize the unutilized amount of duty saved limits for effecting any other import or was deficient in fulfilling export obligation to the extent of duty actually saved by resort to the scheme. We find ourselves unable to concur with the adjudicating authority that the benefit of exemption under notification no. 97/2004-Cus dated 17th September 2004 should be rejected peremptively merely because coverage under two benefits was claimed. It was for the adjudicating authority to determine, in the absence of such exercise by the assessing officer at the time of clearance, the eligibility for import under the scheme for which licence of competent authority was furnished. Any consequence, in terms of duty, confiscation or penalty, should have emanated from conformity, or lack thereof, with the said scheme - matter remanded back to the original authority to complete the process of adjudication on the lines indicated.
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2019 (8) TMI 976
Imposition of penalties u/s 114 of the Customs Act, 1962 - illegal exports of rice from India - Non-Basmati Rice - prohibited item - Corroborative evidences or not - cross-examination of statements - HELD THAT:- Admittedly the offence against the appellants relates to the past transactions inasmuch as it is the Revenue s own case that the present three appellants have procured rice in India from M/s.Ganesh Agro Product and has exported the same illegally to Nepal. The said allegations stand made on the basis of the statements of the appellants recorded during investigations. The said statements have not been further corroborated by the Revenue by producing any independent evidence. No export based as admitted as having purchased the goods from the said deponents, neither the vehicles used for such export stand identified. Not only that even off-routes, alleged to have been adopted by the present appellants for illegal exports to Nepal have been identified. Cross-examination - HELD THAT:- The deponents of the said statements have not been allowed to be cross-examined. It is well settled law that statements alone cannot be held to be the admissible evidence for the purpose of holding against the assesses without allowing cross-examination of the same. Inasmuch as in the present appeal, the entire case of the Revenue is based upon the statements, without any further corroboration and that too in respect of past activities, the imposition of penalties upon the appellants is not justified - appeal allowed - decided in favor of appellant.
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2019 (8) TMI 975
Levy of Export Duty - Iron Ore - tampering with the documents - It is alleged that the appellants connived to ante-date the survey report and other records pertaining to shipment and payment of cess despite non-availability of the vessel till 1st March 2007 with intent to evade the new duty that had been imposed - HELD THAT:- The correctness of the demand can be adjudged only in the context of the facts and circumstances coupled with the provisions of law defining the completion of export. Duties of customs are levied through notifications which generally come into force on the midnight of the day of imposition. The process of imports and exports is, invariably, attended by a gap between the loading/landing of goods and their exit/clearance and, in the interregnum, new duties and levies could come into force. Likewise, is the scope for enhancement, or reduction, of duties. It is for that very reason that section 15 and section 16 of Customs Act, 1962 have enshrined, in law, that certain actions and events determine the applicability of new, or altered, levies. In the present context, in connection with the goods entered for export against a shipping bill, it is the date of permission granted for loading that is relevant and is contingent upon compliance with section 51 of Customs Act, 1962. There can be no doubt that date of the initial draft survey, which is contractually necessary to establish quantity loaded, has been overwritten. We have also noted that entry inwards , granted on 28th February 2007 by the proper officer, has also been taken into account though discarded as irrelevant by the adjudicating authority. The adjudicating authority has failed to render a finding on the validity of entry inwards in the circumstances supra and we find no record for ascertainment of the date of entry outwards. Even though these would not, in any way, detract from the sanctity of validly granted let export order , the validity itself could be called into question on findings of facts and circumstances. It is also seen that no conclusions have been drawn from the circumstances in which the demand draft for payment of cess was not deposited on 28th February 2007 despite which let export order was granted. We, therefore, find ourselves unable to decide upon the validity of the let export order granted by the proper officer of customs. Being a controversy over facts, those should have been addressed in the impugned order - matter remanded back to the original authority to ascertain those facts before coming to a conclusion on the veracity of the claim of the appellant that the let export order of 28th February 2007 is valid in law. Appeal disposed off.
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Corporate Laws
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2019 (8) TMI 1003
Time limitation - oppression and mismanagement - Respondents have neither appeared before this Appellate Tribunal in compliance to notices served upon them to contest the grounds urged for reversal of the impugned order nor appear to have produced any document before the Tribunal in support of their plea that whenever they acquired shares from other parties - whether the petition before the Tribunal was barred by limitation? - HELD THAT:- While it cannot be disputed that the restrictions imposed upon Private Companies in regard to transfer of shares enjoins upon the Shareholder desirous of selling away his share to follow the procedure laid down in the Articles of Association of the Company, the issue of limitation affecting the very jurisdiction of the Tribunal has to be addressed irrespective of the fact that the same has been set up as a defense or not. It is well settled that a plea of limitation is a mixed question of law and fact. The case setup by the Appellants before the Tribunal clearly indicates that Appellant No. 1 had received a special notice on 23rd February, 2006 for his removal from Directorship of the Company to which he responded. Finally he was removed from Directorship of the Company and same was notified to ROC by filing Form No. 32. This instance, though not the solitary one, in itself knocks the bottom of the contention raised on behalf of Appellants that they were not aware of the alleged acts of oppression at the hands of Respondents. It would be absurd to entertain the plea that after removal of Appellant No. 1 from Directorship of the Company, the Appellants should be waiting for its long term effects to file a Company Petition alleging oppression and mismanagement. Even if cause of action is assumed to be continuing till 2009, though we don t hold so, the Company Petition filed by the Appellants is hit by limitation. The impugned order not shown to be erroneous, muchless perverse, does not warrant interference - appeal dismissed.
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2019 (8) TMI 1002
Restoration of name of Company in the Register of Companies maintained by ROC - no returns were filed for the period beginning from 2014-2015 till 2017-2018 - section 252(1) of the Companies Act, 2013 - HELD THAT:- It is conclusively established that the company cannot be considered to be in operation. Further, merely some unsecured loans/investment in private companies have been made in earlier years and which have remained static, the continuity of the company as a going concern as per established business norms and accounting framework cannot be said to be in existence. Further, in view of the specific provisions of section 248(6), the liability to pay unsecured loans remain on the part of directors / other persons in the charge of the management of the company and the assets of the company are also available for the discharge of all its liabilities and obligation - Hence, the removal of the company's name from the Register of Companies cannot be a constraint / impediment for removal of the name of the company and therefore, the same cannot become a ground for restoration of the company. In the present case, it is not in dispute that company has failed to file the returns and annual financial statements and has also not obtained the status of a dormant company prior to striking off the name of the company from the register of companies. The company and/or its directors have also not responded to the notice issued by Registrar of Companies under section 248(1) of the Companies Act, 2013 - There is also no valid ground for restoration of the name of the company for the reason that it caused great hardship to the directors of other companies as they have come to this situation because of their own inaction and non-compliance. Appeal dismissed.
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2019 (8) TMI 1001
Confirmation of the Scheme of Arrangement between New Kenilworth Hotel Private Limited (NKHPL) and KHR Hospitality India Limited (KHIL) and their respective Shareholders and Creditors - Sections 230 to 232 of Companies Act, 2013 - HELD THAT:- From the record it appears that the convening of meetings of equity shareholders of the NKHPL and the KHIL were dispensed in as much as they had given their no-objection to the Scheme by way of Affidavits. The proposed Scheme does not seem to be contrary to the public policy, nor prejudicial to the interest of its Shareholders or detrimental to public interest at large. In addition to the above, all statutory compliance have been complied with or further undertaken for making compliance by the Petitioner Companies. Therefore, the present Company Petition deserves to be allowed. Petition allowed.
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2019 (8) TMI 1000
Oppression and Mismanagement - time limitation - applicability of Limitation Act - applicability of provisions of Section 397 and 309 of the Companies Act, 1956 - principles of res-judicata - HELD THAT:- It is natural that the notice for the Meeting is issued before the date of the Meeting and the Minutes of the Meeting are prepared either on the date of Meeting or on subsequent date and normally confirmed in the next Meeting. Even the Expert Forensic Report stated that the Minutes of the Meeting have been prepared after alleged dates (date of the Meeting). We do not see any fundamental flaw as they are normally prepared after Meeting is over. On going through the documents argued by the Learned counsel for Respondent, we noted that 1st appellant was very well aware that 2nd respondent has been appointed on the basis of the documents placed before us. We have also noted that the parties have been in litigation for a long period. It is also noted that a number of cases have been instituted by appellant group as well as the respondent group. The very fact that there have been a lot of litigation resulting in removal of directors of petitioners group (before CLB/NCLT), it will be detrimental to the interest of the company if litigation is continued on one pretext or other either by one group or the other. To save the company from litigating shareholders divided in groups and appellant group being too small in minority (holding 500 shares each), it would be desirable that an exit route is provided to the appellants. The allegations of the appellants are pertaining to and arising out of the Agreement dated 7.9.1991. Appellants under the garb of the petition before NCLT and appeal before Appellate Tribunal are seeking specific performance of the Agreement dated 7.9.1991. We also noted that the appellants have launched various litigations before the various forums and have not succeeded. Since the dispute is contractual in nature, Company Petition under Section 397 and 398 was not maintainable - It is admitted by the Respondent that the amount infused by the appellants is unsecure loan on which the Respondent were paying interest @ 15% p.a. and TDS was also being deducted. Further the documents placed before us by the Respondent establishes that the Respondent has discontinued payment of interest on the contractual rate to the appellants for which no reasons has been given by the Respondents. 1st Respondents will pay the appellants their balance of unsecured loan with interest at agreed rate which Respondents have discontinued providing since 1.4.1999 within one month of this order - The Respondent No.1 company will get the price of each share determined by registered valuer who will act as per Section 247 of the Companies Act, 2013. Respondent No. 1 Company will ensure compliance within one month of the date of this Judgement. After getting report of Registered Valuer, Board of Directors of 1st Respondent will offer shares of 1st and 2nd appellant to the existing shareholders adopting procedure akin to Section 62 of the Companies Act, 2013 within one month of the offer given by the company. In case none of the existing shareholders purchase the shares of 1st and 2nd appellant, in that event 1st respondent will purchase the shares of 1st and 2nd appellant within one month thereafter.
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2019 (8) TMI 999
Oppression and mismanagement - removal of minority directors - appointment of his wife as director and transfer of 10 shares to her, etc. - HELD THAT:- The petitioners and the second respondent are first and permanent directors of the company. Therefore, they cannot be removed by the impugned proceedings and the alleged resignation of the first petitioner is also denied. In this regard, the first petitioner, namely, Puttanarayanappa Nadikeraiah, has addressed a letter dated September 18, 2014 to Mr. Nagaraj P. (respondent No. 2), by, inter alia, intimating that he came to know about his alleged resignation when he made a public inspection of documents of the company, with the Registrar of Companies on August 30, 2005 - the second respondent, though holding 70 per cent. of shareholding, cannot act arbitrary against the interests of minority shareholders (petitioners), who are none else than his family members. It is settled principle of law that affairs of company will be run basing on majority rule and courts/Tribunal, as a general principle, do not enter into internal affairs of the company unless a serious prejudice is caused to minority shareholders, contrary to law. Therefore, in order to strike a balance between majority and minority shareholders, it is necessary to intervene in the issue to the extent of removing the petitioners from the position of directors of the company. It is a fit case to exercise powers conferred on the Tribunal, under section 402 of the Companies Act, 1956 read with section 241/242 of the Companies Act, 2013 to pass appropriate orders in order to put an end to the affairs of the company. We hereby set aside the removal of the petitioners from the position of directors of respondent No. 1-company, and consequently their positions as directors are hereby restored - respondents are hereby directed to convene a board meeting of the company, within a period of two months, after duly serving appropriate notices to all petitioners, and to transact usual business by resolving their other issues if any.
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Securities / SEBI
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2019 (8) TMI 974
Buyback of shares at a grossly understated valuation - breach of the minimum public share holding requirement as specified in Rule 19(2) and Rule 19 (A) of the Securities Contracts (Regulations) Rule 1957 - grievance of the petitioners that the process of buyback is being undertaken when investigation in respect of the promoters of respondent No.2 is pending - Whether the Circular dated July 25, 2017 issued by the SEBI is non-est in law? - HELD THAT:- Vide the said circular SEBI permitted a Company to buy-back the shares so as to provide an exit to the public shareholders. At the outset, it must be stated that the circular has been challenged after two years of its coming into existence. Within these two years, it has been made operational / implemented. It is quite late in the day for the petitioners to challenge the circular on the ground that the company cannot be allowed to buy back shares. Even otherwise, the impugned circular has to be read in conjunction with Section 68 of the Companies Act as it stipulates buyback of shares in a particular manner. Any reading of the circulars in the manner stated by the petitioners shall be in violation of the Companies Act creating an anomalous situation whereby the buy-back of shares while the Company is on the Dissemination Board shall be contrary to the Companies Act which allows buy-back as a legitimate and legal corporate action. Having said that, this court proceeds to deal with the submissions of the counsel for the parties on the premise that the company can buy back shares. The exit circulars nowhere expressly state that all the public shareholders need to be given complete exit. The reliance was placed on the words number of outstanding public shareholders in clause (VII) of Annexure A of 2016 circular. The words have to be read in the context when exit offer is given an escrow account shall be opened in favour of the valuer / designated stock exchange wherein, deposit of the amount on the basis of exit price and number of outstanding public shareholders shall be made. This is keeping in view, all the public shareholders shall be given option to sell their share but it is not necessary all the public shareholders shall opt to sell their shares. It was rightly pointed out by Mr. Sethi that shareholder is also free to reject the buy-back offer and continues to be a shareholder. So, it follows the circulars do not contemplate the exit of all public shareholders. The plea of Mr. Vashisht that the impugned circular does not give timelines and road map is concerned, the same is also without merit. Also the plea that the impugned circular does not protect the interest of the investors is concerned, as stated above there is no compulsion for the investors to sell or not to sell his share. So, it cannot be said that the petitioners interest has been put in jeopardy. The issue of identifying the promoters has no effect on a company giving an exit to its public shareholders, as the option to buy back the shares of the public shareholders is available through a promoter or through the company itself. It is the case of the respondent no.2 BNL that it has no promoters and it has decided to buy-back the shares itself. Assuming promoter / promoter groups are identified, then also the discretion / right of the company to buy-back shares cannot be interdicted / curtailed as is clear from the impugned circular which provides for such an option to a Company. This conclusion also answer the plea of Mr. Vashisht that failure on the part of the promoters to give full and fair exit to public shareholders shall entail penalties as being without merit inasmuch as, when there is no obligation, there is no question of penalties. Circular of 2016 stipulates action against a company, its director on their failure to provide exit to the shareholders, which includes the action stated therein. It is not the case of the petitioner that respondent no.2 company has failed to provide exit to its shareholders. So, it follows, the postal ballot dated July 13, 2019 is in that direction, which cannot be faulted. One of the pleas of Mr. Vashisht was that the price offered for share is not the fair value, and amongst other factors, market value of investments made by the respondent No.2 have not been considered and even the valuation report dated June 6, 2019 issued by Corporate Professionals Capital Private Limited does not reveal the fair value of the shares of the Respondent No.2 and in fact admits lack of information and documents, is concerned, if the petitioners are not satisfied with the valuation, they are within their right not to accept the offer of buy-back at that rate. I note, respondent no.2 has justified share value by stating that under Section 68 (2)(c) of the Companies Act, 2013, a company can buy-back 25% of the Company s full paid up equity share capital and free reserves and as per the last unaudited stand alone financial statements for the year ending March, 2019, the aggregate paid up share capital and free reserves of the company amounted to ₹ 97,87,99,681/- and 25% of the amount would be ₹ 24.46 Crores and with each share valued at ₹ 11,229/-, the total number of shares that would be offered is 21,791/- equity shares. If that be so, there is some justification of the respondent no.2 to value the share @ ₹ 11,229/-. In any case, this court does not have necessary wherewithal to determine the share value and surely the determination shall be beyond the scope of judicial review. We agree with the submission made by Mr. Sethi that Prayer (2) of the writ petition challenging the Postal Ballot and Notice and PA of the respondent no.2, shall not be maintainable as their issuance is purely an action of the company incorporated under the Companies Act. It is not the case of the petitioners that the same have been issued contrary to the circulars issued by SEBI or provisions of the Companies Act. That apart through this writ petition, the petitioners who are two shareholders holding a miniscule number of shares cannot interdict the process of buy back. Viability of buy-back needs to be decided through the special resolution, passed at the general meeting of the company through the postal ballot, wherein it is clearly mentioned that a shareholder can vote for or against the resolution. This court is of the view that the impugned circular dated July 25, 2017 is in accordance with the law and the prayer made at serial no.2 of the writ petition cannot be granted as being not maintainable. In so far as the prayer no.3 is concerned, there is no dispute that the SEBI is investigating the issue of breach of MPS norms by respondent no.4, which has no connection with the issue of buy back of shares by the Company.
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Insolvency & Bankruptcy
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2019 (8) TMI 973
Permission for withdrawal of the company petition - Section 12A of IBC Code - HELD THAT:- It is clear from section 12A of the Code that the Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10 on an application filed by the applicant with the approval of 90% voting share of the Committee of Creditors. Thus it is clear if 90% voting share of Committee of Creditors approves application for withdrawal then Adjudicating Authority to allow for withdrawing the application filed under section 7 or section 9 or section 10 of the Code. It is the case of applicant/IRP that 100% voting share of Committee of Creditors approved the withdrawal application. The minutes of the meeting of Committee of Creditors dated 27.06.2019 is annexed at Pg no. 14-18 in the application. Present application is filed by RP before this Tribunal for approval of the withdrawal application. It is clear that Regulation 30A of IB (Corporate Insolvency Resolution Process) regulation 2016, are complied - By virtue of provisions of sec 12 A, Tribunal is empowered to approve the application for withdrawal. This Tribunal by exercising powers under section 12 A of the Code r/w regulations 30A of IBC (Corporate Insolvency Resolution Process) Regulations 2016, approved the application for withdrawal - Application allowed.
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2019 (8) TMI 972
Initiation of CIRP - financial creditor or not - Validity of cash transactions - finalization of resolution plan - Default in repayment of short term loans - Financial Debt - Whether the claims of the Applicant based on the cash transactions are admissible in the absence of any entry in the Books of Account of the Corporate Debtor? HELD THAT:- The recitals of the agreements show that the Applicant agreed to provide the loan. In other words, it did not provide that the loan has been granted. Moreover, the Applicant claims that the loan has been paid in cash. There is nothing on record to suggest that the Books of Account of the Corporate Debtor are containing any of the entries in relation to the loan alleged to have been advanced to the Corporate Debtor. The narrations of the loan agreements and the MoU only promise to advance the loan. The Cash Vouchers and the Promissory Note are not corroborated with the Books of Account of the Corporate Debtor and it is also not known as to who has authorised the Internal Auditor of the Corporate Debtor viz., Mr. Golakh Parida to approach the Applicant for grant of the loan as claimed. It is also not understandable as to why the MoU, which is a promise to advance loan and render services to the Corporate Debtor, provides that even if the entire Stock of Iron Ore could not be liquidated still the Applicant will be entitled for the share of ₹ 3.60 Crores. It is noted that huge amount is stated to have been advanced to the corporate debtor in cash, which is in violation of Section 269SS of the Income-tax Act, 1961. In the case on hand the Applicant /financial creditor had submitted Form C and Affidavit alone to the Resolution Professional through electronic mode and all other documents were submitted by hard copy, which is in contravention to the requirements of Form- A Therefore, the claims filed by the Applicant/financial creditor before the Resolution Professional have rightly been rejected, as it is well settled proposition of law that if a statute provides for a thing to be done in a particular manner, then it has to he done in that manner and in no other manner . Thus, the documents placed on record and the submissions made by the applicant through her counsel, do not inspire the confidence of this tribunal to reach to the conclusion that any money except ₹ 90 Lakhs, has been advanced to the corporate debtor by the applicant. Therefore, the cash transactions claimed to have been made by the Applicant are sham, fraudulent and the same are declared as null and void - application dismissed.
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FEMA
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2019 (8) TMI 971
Non-compliance with the direction for pre-deposit - Offence under FEMA - HELD THAT:- The learned counsel for the respondent had earlier taken exception to the maintainability of these appeals at the outset, his submissions having been recorded in the proceedings on 11.07.2019 to the effect that the appellants are belated with reference to the order dated 15.11.2018 which, even otherwise, had not been challenged, the orders sought to be impugned by these appeals being only consequential. At the hearing, the counsel for the appellants was asked if they are now willing to make the pre-deposits as was directed by the appellate tribunal by its order dated 15.11.2018. The counsel answered in the negative taking the position that the appeals at hand raise questions of law. The order dated 15.11.2018 having attained finality, the appellate tribunal had no option left but to dismiss the appeals on account of non-compliance with the condition of pre-deposit. The impugned order dated 08.05.2019 does not give rise to any question of law.
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Service Tax
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2019 (8) TMI 970
Validity of ST-3 return revised after 2 years - Whether the Tribunal was right in not considering the decision of coordinate bench passed in M/S CEOLRIC SERVICES VERSUS COMMISSIONER OF SERVICE TAX, BANGALORE. [ 2011 (2) TMI 764 - CESTAT, BANGALORE] to hold that the revised ST3 returns filed by the appellant could not be considered as the same were filed after two years of filing the original ST-3 returns? - HELD THAT:- The appeal is admitted on the substantial question of law. We fix the final hearing of this appeal on 21st October, 2019 at 3.00 p.m.
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2019 (8) TMI 969
Confirmation of demand of service on the basis of earlier period - import of services - reverse charge mechanism - case of petitioner is that the submission of the Petitioner were not appropriately considered by the impugned order dated 29th June, 2018 of the Respondent No.2 - HELD THAT:- This grievance of the Petitioner in the facts of the present case is debatable and the same could be considered appropriately by the Appellate Authority under the Act. Thus, there is no reason to entertain that the impugned order dated 29th June, 2018 to the extent it has confirmed the show cause notice dated 9th June, 2017. Validity of SCN - Opportunity of personal hearing not provided - HELD THAT:- The Commissioner has admittedly given no personal hearing to the Petitioner before he has confirmed the show cause notice dated 9th April. 2018. Even if, the learned ASG is correct in stating that both the show cause notices are identical. The demand for period may not necessarily be confirmed on the basis of the demand for earlier period being confirmed, as there could be a change in law and/or the fact which the Petitioner would be able to point out at the time of personal hearing, which the Petitioner has specifically asked for. Petition disposed off.
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2019 (8) TMI 968
Scope of SCN - Refund of service tax - unjust enrichment - HELD THAT:- The SCN that refers to refund application filed by the appellant has raised objection only with regard to aspect of unjust enrichment. Whereas, the Adjudicating Authority as well as the Ld. Commissioner (Appeals) had gone into the aspect of nature of services, whether the services fall under works contract service or otherwise. Such an important issue cannot be dealt without making any allegations in the show cause notice. Both the authorities have travelled beyond the scope of show cause notice which is legally not permissible for the authority to deal with at such stage of adjudication as well by Commissioner (Appeals) as this is a settled law in various judgements - reference can be made to the case of PRINCE KHADI WOOLLEN HANDLOOM PROD. COOP. INDL. SOCIETY VERSUS CCE. [ 1996 (11) TMI 72 - SC ORDER] - thus, both the authorities who have decided the issue that the services provided by the appellant is not of works contract and consequently rejected the refund claim, is absolutely illegal and incorrect. Whether there is unjust enrichment or otherwise? - HELD THAT:- The appellant has not passed the incidence of refund amount of ₹ 14 lakhs to any other person. Against this finding no challenge was made by the department. Therefore, this issue on unjust enrichment attained finality in favour of the appellant - It is also observed that appellant have issued credit note to M/s Malani Construction for an amount of ₹ 14 lakhs towards Service Tax which was initially charged in the bill. There is absolutely no doubt that the appellant have not passed on the incidence of Service Tax paid by them to any other person. Therefore, not only on the basis of evidence but as per clear concluding finding given by the Commissioner (Appeal) in his order in para 10, the issue of unjust enrichment does not exist. Appeal allowed - decided in favor of appellant.
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2019 (8) TMI 967
Levy of service tax - Management of Investment under ULIP service - Surrender Charges, which are deducted from fund value, as per policy provisions for pre-mature withdrawal from the scheme - Link between consideration and taxable event - extended period of limitation - HELD THAT:-The surrender charges are permitted to be levied by IRDA, by way of penal charges towards recovery of initial expenses incurred by the insurer in marketing and distribution of the policy. As IRDA has fixed limits as to recovery, which can be made from time to time from the initial cost, accordingly, IRDA have permitted to recover surrender charges in case of pre-mature policy, as per the table given hereinabove, so as to enable the insurer to recoup the cost incurred by them. Further, the legislature have clarified by substituting clause (ii) in Explanation to Section 65(105)(zzzzf), clarified that service tax is leviable only on the management fee or charges which are either fixed by IRDA or actually levied by the insurer, whichever is higher by substituting the explanation w.e.f. 01.07.2010. An Explanation is meant for clarifying the provision of the main section and accordingly has retrospective effect and is normally effective from the date of the statute, unless otherwise provided in the amending Act or notification - the clarification by way of substitution of Explanation-II, service tax is not leviable on surrender charges by any stretch of imagination. It has also been clarified by the CBEC vide TRU No. 334/1/2010, that the charge pertaining to asset management alone should form the value for taxation in case of ULIP policy. Accordingly, we hold that no service can be leviable for the period 2011-12 also as surrender charges towards renting of service being penalty. Appeal allowed on merits itself.
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2019 (8) TMI 966
Refund of service tax - rejection on the ground that the input services are commonly used for both SEZ and DTA operations - HELD THAT:- The issue decided in appellant own case M/S MANGALORE SEZ LTD VERSUS C.E,S. T-COMMISSIONER OF CENTRAL EXCISE CENTRAL TAX, MANGALORE COMMISSIONERATE [ 2019 (8) TMI 490 - CESTAT BANGALORE] wherein the refund has been allowed - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (8) TMI 965
CENVAT Credit - duty paid on exempted goods - Classification of inputs - Shrink Sleeves received from M/s. Paper Products Pvt. Ltd. - classifiable under Chapter 39 heading 3920.19 of the Tariff Act, 1985 or under Chapter 40 heading 4901.90 of the Tariff Act, 1985? - HELD THAT:- The Tribunal in the case of PAPER PRODUCTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, VAPI [ 2005 (9) TMI 133 - CESTAT, MUMBAI] held that Shrink Sleeves had been correctly declared by M/s. Paper Products Ltd., as classifiable under Chapter 39 heading 3920.19 of the Tariff Act, 1985. Therefore, the Shrink Sleeves which were inputs of the Respondents are chargeable to duty and not classifiable under Chapter 40 heading 4001.90 of the Tariff Act to attract Nil rate of duty as urged by the Revenue. In view of the Revenue s appeal to the Supreme Court in COMMISSIONER OF CENTRAL EXCISE, VAPI VERSUS M/S. THE PAPER PRODUCTS LTD. [ 2015 (9) TMI 467 - SUPREME COURT] upholding the classification of the inputs under Chapter 39 of the Tariff Act, 1985 as claimed by M/s. Paper Products Ltd., and not under Chapter 40 of the Tariff Act, 1985 as claimed by the Revenue. Appeal dismissed - decided against Revenue.
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2019 (8) TMI 964
Principles of Natural Justice - impugned orders admittedly passed without hearing the petitioner - HELD THAT:- Both the impugned orders have been passed in the absence of the petitioner. This non-representation of the petitioner undisputedly was because notice of hearing issued by the registry of the Tribunal was sent to the old address and not the correct address. Thus, the petitioner had no notice of the fact that the Revenue s appeal was scheduled for hearing on 18 November 2016. The notice of the hearing was not served at the existing address of the petitioner by the Registry leading to order dated 25 May 20188 without hearing the petitioner. Thus both the impugned orders are in breach of principles of natural justice. The process of taking decisions having civil consequences include in it certain requirements such as an opportunity to party to put up its case. This is absent in respect of both the orders. Therefore we exercise our extra ordinary jurisdiction under Article 226 of the Constitution by not relegating the petitioner, in the peculiar facts of this case, to the remedy of appeal provided under the Act. Petition allowed.
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2019 (8) TMI 963
Recovery of duty - imposition of penalty - finalization of assessments - Jurisdiction of assessments - HELD THAT:- It is an admitted position between the parties that for the Financial Years 2013-2014 and 2014-2015 the petitioner's request for provisional assessment was allowed by the respondent-Deputy Commissioner of Central Excise-Respondent No.5. This was on the petitioner furnishing bond and bank guaranties to the satisfaction of the Revenue. The assessments of both the financial years 2013-2014 and 2014-2015 continued to remain provisional till the passing of the impugned orders dated 25th September 2018. Therefore, neither the impugned show cause notices nor the impugned order had occasion to invoke Section 11A of the Act while finalising of the assessment. In fact a plain reading of the section 11A of the Act clearly provides that the time to recover the duty under the above provision would commence from the relevant date. The relevant date as defined in Section 11A, in case of duty of excise which is provisionally assessed, would be the date of final assessment. So also, penalty under Section 11A of the Act consequent to the above demand would not arise at the stage as the provisional assessment continues. Impugned order set aside - petition allowed.
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2019 (8) TMI 962
Revival of abandoned SCN - gap between 14 to 17 years - grievance of the petitioner is that by issuing notices for personal hearing long after the impugned show- cause notices i.e. between 14 to 17 years of its issue and after 15 years of the last hearing in 2003 in respect of some of the impugned notices, is bad in law - HELD THAT:- In the present facts, it is the case of the petitioner that because of long delay, papers and proceedings relevant to meet the show-cause notice are not available. Thus, seriously hampering the petitioners to appropriately meet the show cause notice. This delay in taking up the adjudication of the show -cause notice (in the absence of any fault on the part of the party complaining) is a facet of breach of principles of natural justice. It impinges on procedural fairness, in the absence of the party being put to notice that the show cause notices will be taken up for consideration, after some event and / or time, when it is not heard in a reasonable time. In the absence of the above, particularly as in this case, long delay has resulted in papers being misplaced. The reasonable period may vary for case to case. However, when the notices are being kept in abeyance (by keeping them in the call book as in this case), the Revenue should keep the parties informed of the same. This serves two fold purpose One it puts the party to notice that the show cause notice is still alive and is only kept in abeyance. The party can then safeguard its evidence, till the show cause notice is taken up for adjudication. Secondly, if the notices are being kept in the call book for some reason, the party gets an opportunity to point out to the Revenue that the reasons for keeping it in call book are not correct and the notices could be adjudicated upon immediately. This is the transparent manner in which the State administration must function. It was reasonable for the petitioners to proceed on the basis that the department was not interested in prosecuting the show cause notices and had abandoned it. These proceedings are now being commenced after such a long gap, after having led the petitioner to reasonably expect that the proceedings are dropped. Therefore, even if, notices can be kept in the call book to avoid multiplicity of the proceedings, yet the principle of natural justice would require that before the notices are kept in the call book, or soon after the petitioners are informed the status of the show cause notices so as to put the parties to notice that the show cause notices are still pending. Giving notices for hearing after gap of 17 years, as in this case, is to catch the parties by surprise and prejudice a fair trial, as the documents relevant to the show-cause notices are not available with the petitioners. Show cause notices quashed.
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2019 (8) TMI 961
Time Limitation - demand of interest - Section 11A of the Central Excise Act, 1944 - HELD THAT:- An identical issue viz. issue of limitation in respect of interest under Section 11AB of the Act has been considered by the Tribunal on identical facts in the case of EMCO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI [ 2011 (6) TMI 567 - CESTAT, MUMBAI] , after placing reliance upon the decision of the CCE VERSUS TVS WHIRLPOOL LTD. [ 1999 (10) TMI 701 - SC ORDER] and GOVERNMENT OF INDIA VERSUS CITEDAL FINE PHARMACEUTICALS [ 1989 (7) TMI 100 - SUPREME COURT] noted the fact that even where no period of limitation is provided under Section 11AB of the Act for recovery of interest, yet a reasonable period has to be read into the provision. It was thus, incumbent upon the Revenue to issue show cause notice within a reasonable period demanding interest. This not having been done by alleging suppression etc., the extended period of limitation provided under the Act cannot apply as to yardstick of reasonable period - the demands for interest was held to time-barred. Appeal dismissed - decided against Revenue.
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2019 (8) TMI 960
CENVAT Credit - cenvatable invoices of non ferrous metals to the manufacturers of excisable goods without physical delivery of the goods - HELD THAT:- In the present case, the Department has simply relied upon the information as received from DRI. The only investigation is the statement of Shri Amit Gupta, Director of BCCPL. No other investigation as mentioned in the above decision got conducted. Appeal allowed - decided in favor of appellant.
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2019 (8) TMI 959
Clandestine removal - demand based on diaries/private records allegedly recovered from the premises of the broker Mr. Himanshu Nandlal Jagani and Shri Yogesh R. Sanghvi - corroborative evidences or not - Cross-examination not granted - HELD THAT:- The entire case was made out on the basis of search conducted with the third party which is the broker and the records recovered the from the broker. The records of the broker bearing some entries related to some of the goods. Some statement was recorded from the broker. Despite the appellant requested for cross examination, the lower authorities have rejected the request. In the present case, the entire evidence was relied upon are documents recovered from the brokers and their statement. In this case, no evidence was found with M/s Bansal Casting Pvt. Ltd. It was incumbent on the Ld. Commissioner to grant the cross examination of the broker as it is mandatory under section 9D. Without cross-examination of the evidence, their statements cannot be relied upon. Since in the present case witnesses, i.e. brokers and transporters were not allowed for cross examination, their statements cannot be relied upon. In such a case, the only evidence left is the diaries/private records of the brokers. Since the statements cannot be relied upon, these records in isolation has no evidentiary valued particularly when the same was not corroborated with the statutory records of the appellant. Appeal allowed - decided in favor of appellant.
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2019 (8) TMI 958
Clandestine Removal - basis of demand is the data contained in pen drive - Also it is alleged that the Partner accepted the removal of goods - variation in electricity consumption - HELD THAT:- At the time of the visit of the officers, no discrepancy in raw material or finished goods were found. There is no evidence of any excess raw material purchased by the Appellant and the correlation of production and clearance is not appearing with such procurement of raw material. The statements of Partners though relied upon, but only on the basis of such statements, the charges of clandestine removal cannot be substantiated unless supported by corroborative evidences. Moreover, such statements were recorded on the basis of production note book, diaries but since the demand is not based on pen drive data as computation was done only on the basis of pen drive data that too containing intermediate product casting, the statements are of no help to revenue. The Revenue could not produce any evidence regarding variation in consumption of electricity nor there is any allegation of disproportionate consumption of electricity - This Tribunal in case of AUM ALUMINUM PVT. LTD. VERSUS COMMISSIONER OF C. EX., VADODARA [ 2012 (4) TMI 557 - CESTAT AHMEDABAD] held that when there is no evidence of clandestine manufacture, clandestine/dis-apropriate/unaccounted purchase/receipt and consumption of raw material and packing material, required for manufacturing alleged quantity of final product clandestinely removed from the factory. The freight payment for any such movement, un authorized payment for procuring unaccounted raw material and packing material, disproportionate power consumption, capacity utilization and labour employed, unaccounted sales proceeds in substantial cash from factory or other premises or any other else in direct control of assesses, backed by any confirmation oral or written from person giving such cash against goods removed in clandestine manner without payment of duty from the factory, there cannot be case of clandestine removal. In the present case also all the above element are absent as the investigating agency could not established the excess production, excess raw material purchase, payment there against, receipt of sale proceeds against such huge alleged quantity of clandestine removal of goods, therefore, the demand merely based on data retrieved from pen drive cannot be sustained. The department has taken the quantity of casting from the pen drive, however, the clandestine removal of casting was neither alleged not established. The pen drive data contained the quantity of job work goods carried out by the appellant which is otherwise not liable to duty but department has not bothered to verify the same despite a categorical submission made by the appellant before the lower authority. It is also fact that appellant could not have been produced such huge quantity during the relevant period. Penalty on partners - HELD THAT:- When demand itself not sustainable, penalties are also not maintainable - Moreover, as of now, it is settled law in the judgments of Jurisdiction High Court in case of PRAVIN N. SHAH VERSUS CESTAT [ 2012 (7) TMI 850 - GUJARAT HIGH COURT] and COMMISSIONER OF CENTRAL EXCISE VERSUS JAI PRAKASH MOTWANI [ 2009 (1) TMI 501 - GUJARAT HIGH COURT] that in case of partnership concern, a separate penalty on partners cannot be imposed. The demand and penalties imposed by the impugned order against the Appellant unit is not sustainable - appeal allowed - decided in favor of appellant.
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2019 (8) TMI 957
CENVAT Credit - input services - commission paid to the Del Credere Agent - case of Department is that the services provided by the Del Credere Agent are utilized by the Appellants for post removal activities and as such they are not covered within the definition of input service - HELD THAT:- It is clear that the Del Credere Agents are evaluating the prospective customers and also guarantee the collection for the dues. As per the agreement, the Del Credere Agent at its own cost and expenses appoint subagents/ employees, wherever required, for the business of the Appellant and for canvassing upto date information of the existing and anticipated buyers with whom the Appellant has dealt or intend to deal. The agreements further provides that the Del Credere Agent will be solely responsible for guaranteeing the solvency of the buyers and will effectively guarantee for the value of bad doubtful debts arising out of such sales made by them and as such will guarantee to compensate the whole amount of doubtful recovery within the normal credit period assigned by them. A reading of the agreement between Appellant and Del Credere Agent would establish that it is related to the sales promotion. Only because some clause of the agreement mentioned that they won t provide any guarantee where the recoveries are held up due to poor quality or quantity of the product supplied by them, does not take it outside the purview of Business Auxiliary Service and in view of that it cannot be said that the services of the Del Credere Agents were exclusively utilized by the appellants for post removal activities only. If that is the situation then it can very well said to be the input service as per Rule 2(l) ibid. Reference made to the Tribunal in JODHANI PAPERS LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE-II [ 2015 (10) TMI 51 - CESTAT BANGALORE] where it was held that the words upto the place of removal has been used only in respect of few input services in the definition under Rule 2(l) and this restrictive clause cannot be applied to all the cases. The services provided by Del Credere Agents is Business Auxiliary Service and the same is for the promotion of the business of the Appellant and therefore it is an input service . The Appellant is therefore entitled for Cenvat Credit and the impugned order is liable to be set aside - appeal allowed - decided in favor of appellant.
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2019 (8) TMI 956
Valuation - related party transaction - job-work - processed fabrics was sold by the job-worker to the principal manufacturer who, in certain cases, sold them to other buyers and, in certain other cases, retained them for manufacture of garments for which the processed fabrics were again sent to M/s Just Textiles Ltd. - deemed exercise of option - applicability of rule 9 of the Central Excise (Determination of Price of Excisable Goods) Rules 2000. HELD THAT:- There is no prescription of form for exercise of option which would create said person for undertaking the discharge of duty liability. Moreover, deemed exercise of option cannot be a ground for procedural infringements. Having accepted the duty liability discharged by the job-worker , it is not open to the central excise authorities to take an entirely different stand to fasten liability for the same duty paid goods on the principal manufacturer. Under rule 12B of Central Excise Rules, 2002, the said person can only be one or the other and, if the stand of the lower authority is accepted, there is an inherent contradiction in the demand; implied in the proposal for demand of differential duty is the acceptance of the validity of partial liability already discharged by the job-worker with the principal manufacturer called upon to pay only that portion arising from application of the provisions in the rules of valuation pertaining to sale to unrelated person - In view of this contradictory stand adopted by the original authority, and sustained in the order of the first appellate authority, rule 12B of Central Excise Rules, 2002 has been completely and totally mis-interpreted - the deemed exercise of option is upheld and the duty liability limited to such as already been discharged by M/s Just Textiles Pvt Ltd. Valuation - goods cleared by M/s Just Export Pvt Ltd to M/s Just Textiles Ltd for further manufacturing - HELD THAT:- Once the duty liability has been discharged on the goods as a finished product and no new product comes into existence in the hands of M/s Just Exports Pvt Ltd, the transfer thereof to M/s Just Textiles Ltd for manufacture of other garments cannot be subject to duty liability under Central Excise Act, 1944. On the garments manufactured by the latter, there is no evidence that this has been done on job-work basis - the scope for fastening duty liability on M/s Just Exports Pvt Ltd for such production effected by M/s Just Textiles Ltd does find the sanction of law. Appeal allowed - decided in favor of appellant.
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2019 (8) TMI 955
Demand of duty - Manufactured goods or supply of bought out items - Fitting and Points Crossings - case of respondents is that Fittings and PCs were not manufactured item but the same were various bought out and were transferred to the site, where the same were used for making the Fittings and PCs. HELD THAT:- The main ground for dropping the demand by the Adjudicating Authority is that there are no goods called Fitting and Points Crossings. The same refer to the fabrications done in the rail tracks by various types of items, which facilitate the smooth movement of the rails. We note that subsequent to the demand order, the report of the Superintendent, Central Excise, Meerut, obtained by the adjudicating authority is to the clear effect that the respondents had purchased the various items like Flats, Bars, Rounds, Squares, Shapes and Sections, Fish Plates, Sheets, Channels, Angles, Nuts and Bolts, Washers, Clips etc. of different shape and size during the period in question, which stands reflected in their books of accounts. As per the Assessee the said goods stand further transferred to railways under their delivery challans accompanying the invoices which refer to the said items collectively as fittings. Admittedly, duty cannot be demanded on the items not manufactured by the Assessee and in the absence of any facts indicating that Fittings as also Points Crossings are items or refer to any goods, mere mention of the same in the invoices, while clearing the various items collectively meant for such fittings etc, the demand cannot be upheld on the same. Further, the Revenue s objection that the Tribunal only remanded the matter for supply of the report of the Assistant Commissioner, in which case it was not open to the Adjudicating Authority to go to the merits of the case cannot be appreciated inasmuch as there is no debarring in the Tribunal s order to consider the merits of the case and to re-decide the same. It is only that on the first principle of violation of principles of natural justice that the matter was remanded. It cannot be held to be a restricted remand and we fully agree with the learned advocate appearing for the respondents that the Adjudicating Authority was within his rights to deal with the merits of the case after supplying the report of the Assistant Commissioner. As such the Revenue has no case on merits. Appeal dismissed - decided against Revenue.
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2019 (8) TMI 954
SSI Exemption - clubbing of clearances - dummy unit - it was alleged that no manufacturing activity had taken place in the factory premises of Siddanth - all the issues raised were not considered - principles of natural justice - HELD THAT:- All the issues raised by the appellants have not been considered by Commissioner (Appeals). There is no finding on the issue of theft; on purchasing the CNC machine by M/s Siddanth; on the issue of the goods having been sent on job work; on the financial intertwining between the two units; on M/s Siddhant, being independently registered with other government departments etc. In the absence of these findings on the factual aspects, the impugned order is set aside and matter of all the four appeals remanded to the original adjudicating authority for fresh decision after taking into consideration each and every issue raised by the appellants - appeal allowed by way of remand.
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2019 (8) TMI 953
Levy of interest on differential duty - Section 11AB of CEA - Price escalation clause - the consideration for sale of goods is received through a retrospective increase in the price of the goods - HELD THAT:- The issue decided in the case of M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [ 2019 (5) TMI 657 - SUPREME COURT] where the demand of interest was upheld. The interest has to be paid on the amount of Central Excise duty discharged latter due to retrospective increase in the price of the goods - Appeal dismissed - decided against appellant.
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CST, VAT & Sales Tax
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2019 (8) TMI 952
Classification of goods - Himani Boroplus Antiseptic Cream - Himani Navratna Oil - Himani Boroplus Prickly Heat Powder - Himani Gold Turmeric Cream - Himani Nirog Dant Powder Lal - whether the above products manufactured and sold by the applicant company are classifiable under the Entry relating to 'Drugs and Medicines' i.e. Entry 11 Part IV of Schedule II? It was held in the case that the products manufactured by the applicant company as it falls in Schedule II Part III at Entry No.41 and 49, tax has to be levied at 12% as it does not fall under Schedule II Part IV at Entry 11, the duty is certainly not at all levied at 8%. HELD THAT:- There is no ground to interfere with the impugned order(s) passed by the High Court. SLP dismissed.
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2019 (8) TMI 951
Stay on recovery - transfer of the attached property by way of relinquishment - Whether the relinquishment of the share in the attached property by the husband in favour of the writapplicant could be termed as fraudulent transfer or not - HELD THAT:- will be looked into by the first appellate authority. The fact remains that as on date the first appeal is pending and the matter is being looked into on the merit. The recovery has also been stayed. Rule be issued to the respondents returnable on 16/10/2019 .
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2019 (8) TMI 950
Principles of Natural justice - non-speaking order - availability of alternative remedy - CST Act - HELD THAT:- This manner of disposal of the appeal without addressing the various issues raised before the authority is not a manner in which a quasi-judicial order should be passed. The necessity for giving reasons to reach a particular conclusion is not only to make the parties concerned aware of the reasons why their appeal has been allowed or disallowed, but also gives an opportunity to the appellate authority to know the reasons which led the lower authority to reach a particular conclusion. It is only when the authorities adhere to the cardinal rule of giving reasons for their orders, would the parties have the satisfaction of having received justice at the hands of the authorities - We find that the impugned order is without any reasons, and, therefore, cannot be sustained. The Petitioner s appeal restored from the order dated 3 November 2017 of the Deputy Commissioner of State Tax to the Joint Commissioner (Appeals) Respondent No.3 for a fresh consideration and disposal after following the principles of natural justice - petition allowed by way of remand.
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2019 (8) TMI 949
Principles of natural justice - grievance of the Petitioner is that the impugned orders have been passed in breach of principles of natural justice inasmuch as no sufficient opportunity to present their case was given to the Petitioner - HELD THAT:- It is an undisputed position that the Petitioner s documents relating to the period 2014-2015 and necessary for the Petitioner's assessment in particular to support its claim for branch transfer and exhibition activity were in the possession of the department with effect from 18 April 2017. In spite of the Petitioner s seeking copies of the same, the same were not granted by the Assessing Officer, as he did not call for the necessary proceedings and papers from the Assistant Commissioner of Sales Tax, Investigation Branch, Bhayander, who was in possession of the papers relating for the Assessment Year 2014-15 - It was impossible for the Petitioner to establish its claim for branch transfer as also the exhibition activity as the documents relevant, according to the Petitioner, in support of its two claims, were amongst the documents which were in possession of the Assistant Commissioner of Sales Tax, Investigation Branch, Bhayander. This non-giving of documents certainly handicapped the Petitioner in the assessment proceedings - This certainly amounts to a breach of principles of natural justice. There is a flaw in the decision making process which goes to the root of the matter - impugned order set aside - petition allowed.
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2019 (8) TMI 948
Refusal to issue necessary C-Form under Section 8 of the CST Act, 1956 - purchase of high speed diesel from outside the State of Maharashtra for use in machinery, which in turn is used for mining - grievance of the Petitioner is that there is no authority with Respondent No.3 or any officer of the State Tax under the CST Act to reject the application for C-Form filed by a dealer - HELD THAT:- If the mere declaration by a Petitioner that he is carrying out mining activities is prima facie not found to be acceptable, then it is not necessary for the Sales Tax Authorities to first issue C-Form and then start an inquiry - In such circumstances, it would inquire into the correctness of the Petitioner s claim, however, the same should be done expeditiously as delay in issuing C-Form lead to increase in costs for the Petitioner. It is, in these circumstances, that it would be appropriate that Respondent No.3 would hear the Petitioner before taking view on the eligibility of the Petitioner for the C-Form as claimed by them. Petition disposed off.
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2019 (8) TMI 947
Validity of assessment order - Principles of natural justice - orders are ex-parte because petitioner did not respond to the notice - Bihar VAT Act - HELD THAT:- There is no dispute that the petitioner was served through e-mail in compliance of the provision present in rule 50(1)(d) of the Rules framed under the Act which, inter alia, also provides other forms of service. It is again not in dispute that there is no physical service of notice as per the other modes so prescribed under the Rules . It is also not borne from the records that the petitioner was deliberately avoiding a service of notice. We have thus, no reasons to disbelieve the petitioner of having overlooked his e-mail because it has only enhanced his taxing liability. The case in hand is with an exception because in the present case, form C was available with the petitioner and it is but for the ex parte hearing, that the assessee could not produce the required form C in support of his plea of inter-State sales - While thus noting the submission of Mr. Vikash Kumar that it is in the circumstances as existing on the date of passing of the assessment order that the taxable turnover was assessed, we are yet persuaded to quash the said assessment orders not because it suffers from any infirmity on merits because we have not examined the assessment order on merits rather because of the availability of the form C and which requires to be taken into account before the assessment orders are passed. Petition allowed.
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Indian Laws
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2019 (8) TMI 946
Dishonor of Cheque - insufficiency of funds - section 138 of NI Act - HELD THAT:- In the present case, Respondent No.1 Complainant in his affidavit in reply has specifically stated that though the order of the learned Magistrate served upon the Petitioner, she did not appear before the trial Court, but since the bailable warrant was issued by the trial court against the Petitioner, then the Petitioner appeared before the trial court to obtain the bail, and her plea was recorded. It is also specifically stated that at the time of recording of plea, there was no defence raised by the Petitioner before the trial court to prove her innocence. It is informed that the matter is fixed for recording of evidence. This court is of the considered view that filing of present Petition is nothing but an attempt to prolong the matter. No case is made out to cause interference in the order of issuance of process - Petition dismissed.
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2019 (8) TMI 945
Validity of proceeding with the complaint filed by the Respondent Bank due to pendency of proceeding under the SARFEASI Act - HELD THAT:- It appears that before passing the impugned order the Magistrate has followed the procedure as contemplated under Sections 200 and 202 of Cr.P.C, and thereafter issued summons under Section 204 of the Cr.PC. - No case is made out to cause interference in the impugned orders. Petition dismissed.
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2019 (8) TMI 944
Dishonor of Cheque - appropriate forum for recovery of money - failure to make the payment of the requisite amounts pursuant to notices on demands that had been issued by the said parties in the wake of return of cheques by the bank upon presentation - compounding of offences - HELD THAT:- The court of Metropolitan Magistrate is not a forum for recovery of money. It is a criminal court which is called upon to adjudicate on the complaint alleging offence under section 138 of the Negotiable Instruments Act, 1881. Undoubtedly, the said offence is compoundable. No doubt, if the parties are so inclined the court encourages settlement of dispute in such matters. But then, the court cannot be used by either side to protract and prolong the proceedings as if it were executing the settlement that may have been arrived at outside the court without the proceedings in the complaint case having been brought to an end. Since the respondents have failed to abide by the terms of the settlement, they cannot derive any benefit of the settlement agreement. In these circumstances, it is the obligation of the petitioner to prosecute the complaint cases further in accordance with law. The view taken by the Metropolitan Magistrate that the cases have to be brought to trial, thus, cannot be faulted. Petition dismissed.
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