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TMI Tax Updates - e-Newsletter
January 11, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Major Decisions taken by the GST Council in its 32nd Meeting held today under the Chairmanship of the Union Minister of Finance & Corporate Affairs, Shri Arun Jaitley
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Input tax credit (ITC) - The lease rental paid during the pre-operative period should be treated as part of the cost of goods and services received for the purpose of constructing an immovable property (other than plant and machinery) on the Applicant’s own account - Input tax credit is, therefore, not admissible on such lease rental in terms of section 17(5)(d) of the GST Act.
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PP Non-woven Bags, specifically made from non woven Polypropylene fabric are plastic goods to be classified under Sub Heading 3923 29 and taxed at 18 % rate of GST
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TDS liability - Specified person u/s 51(1) - The Central and the State Governments, therefore, acting through the government companies, are in a position to indirectly control the management or policy decisions of the Applicant. The Central and the State Governments, therefore, “control” the Applicant within the meaning of Section 2(27) of the Companies Act, 2013.
Income Tax
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Disallowance u/s 80IA - the late payment charges or cheque bounce charges were relatable and directly linked with the telecommunication business of the assessee.
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U/s 144 book results cannot be rejected only on the ground of decrease or difference in gross profit rate compared to other years or another assessee. Neither can the book results be rejected for the reason that gross or net profit rates in the two lines of business are different
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TDS u/s 195 - amount paid are either annual maintenance charges or for the use of software or for software maintenance or the payments were made for antivirus software, anti spam software etc. - Payments for software and license renewal is not royalty.
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Eligibility for deduction u/s. 80IC on additional income - Since the assessee has failed to explain the availability of funds with him to explain the entries made in the seized material pertaining to the speed money so as to work out as to which of the amount pertains to a particular assessee in group cases on account of speed money, the benefit of telescoping cannot be given to it.
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Additions u/s 68 being share application money received - such amount invested by the farmers cannot be said to be non-genuine transactions. - the IDBI had given loan to farmers against sale proceeds receivable by them from BTCL on sale of the crops. Therefore, the creditworthiness of the farmers is proved beyond doubt.
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Penalty orders passed u/s 271D and 271E - Violation of provisions of section 269SS and 269T while taking/returning the loan in cash - the nature of transaction is not loan but a business advance for purchase of machinery - No penalty.
Customs
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Advance Licence - Actual user condition - object of both notifications is different and as long as there is no amendment to the notification No. 56/2003, the assessee is not eligible for exemption from the levy of anti-dumping duty.
Service Tax
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Demand of Service Tax - T.V. and Radio Programme Production Service - they are producing the programmes as a part of joint venture which are telecast and the revenue is shared - any possible suspicion which is not brought out in the show cause notice substantiated by evidence cannot form the basis for confirming the demand.
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CENVAT Credit - distribution of credit by ISD in respect of capital goods - the procedural inadequacies will not be enough to deny the availment of credit by assessee in respect of various equipments etc. imported by their head office and distributed to the former by way of M.R.Os.
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Auction Income - whether chargeable to tax under Storage and Warehousing Service or not? - Merely for the reason that Section 150 provides for distribution of the amount of proceed of auction that will not empowered the government to recover service tax on the auction proceeds.
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Business Auxiliary Service - notional surplus charged for ocean freight is not subject to levy of service tax
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Club or Association Service - Admission Fee, Membership Fee, Establishment Expenses, collected by the appellant from its members - amount retained for earning ‘carbon credits’ - doctrine of mutuality - Not liable to service tax.
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Reverse charge mechanism (RCM) - remuneration paid to the Directors - Directors who are concerned with the management of the company and who were employee of the company cannot be chargeable to service tax. No question of RCM.
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CENVAT Credit - input services or not - consultancy service, construction service etc. - Providing output services of renting of immovable property services - Services used for constructing materials which were then rented out are very much eligible input service.
Central Excise
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Classification of goods - Dena Ji Brand Satritha shampoo - Dena Ji Brand Harbal shampoo - the product in question was not used as ayurvedic medicine but was a “shampoo”.
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CENVAT Credit - input services - lease rentals and operations and maintenance of windmills situated far away from their factory - Rule does not say that input service received by a manufacturer must be received at the factory premises - Credit allowed.
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Adjustment of excise duty short paid with the excise duty paid in excess - finalization of provisional assessment - adjustment allowed.
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CENVAT Credit - availing 50% credit on capital goods after absolute exemption - Restriction of availment of 50% in the first financial year and the balance subsequently, is only a procedural compulsion brought about by sub-ordinate legislation. However that cannot take away the right of availment of credit that is vested with the appellant at the time when goods were received in the factory.
Case Laws:
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GST
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2019 (1) TMI 488
Input tax credit - lease rent paid during pre-operative period for the leasehold land on which the resort is being constructed to be used for furtherance of business, when the same is capitalised and treated as capital expenditure - Held that:- The prohibition from availing input tax credit, as provided under section 17(5)(d) of the GST Act, is not limited to the civil structure being constructed. It extends to the immovable property in general (other than plant and machinery), which includes the supplies received for retaining the right to use and develop the land. Such supplies are essential for construction of the civil structure on the piece of land - The Applicant will admittedly capitalize the lease premium. The property is, therefore, admittedly being constructed on the Applicant’s own account and treated as fixed asset, including the lease rental paid. Whether the lease rental paid for the pre-operative period is capitalized under the head ‘Leasehold Land’ or ‘Building Block’ is of little significance in this context. The lease rental paid during the pre-operative period should be treated as part of the cost of goods and services received for the purpose of constructing an immovable property (other than plant and machinery) on the Applicant’s own account - Input tax credit is, therefore, not admissible on such lease rental in terms of section 17(5)(d) of the GST Act. Ruling:- Input Tax Credit is not available to the Applicant for lease rent paid during pre-operative period for the leasehold land on which the resort is being constructed on his own account to be used for furtherance of business, when the same is being capitalised and treated as capital expenditure.
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2019 (1) TMI 487
Classification of goods - PP Non-woven bags - whether classifiable under Tariff Head 6305 90 00 of the GST Tariff which is aligned to the First Schedule of the Customs Tariff Act, 1975 or otherwise? - Held that:- The IOSR Journal of Polymer and Textile Engineering (IOSRJPTE), Volume 3, Issue 5 (Sep-Oct, 2016), PP 08-14 [www.iosrjournals.org] explains that Polypropylene (PP) is the homo-polymer that is widely used for the production of non woven fabric. Polypropylene sheets are stitched into bags. Note 1 to Chapter 39 of the GST Tariff clarifies that throughout the nomenclature the expression plastics means those materials of headings 39.01 to 39.14 (Primary forms of Polypropylene is classified under HSN 3902) which are or have been capable, either at the moment of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which are retained on the removal of the external influence. Polypropylene sheets are, therefore, plastic, bags made from Polypropylene sheets are to be classified as plastic goods under Chapter 39. Sub-heading 3923 29 covers articles of conveyance or packing of goods, namely sacks and bags, made of plastics other than polyethylene. Polypropylene Non-Woven Bags that the Applicant manufactures are, therefore, classifiable under Sub-heading 3923 29. Ruling:- PP Non-woven Bags , specifically made from non woven Polypropylene fabric are plastic goods to be classified under Sub Heading 3923 29 and taxed at 18 % rate under Serial No. 108 of Schedule III of Notification no. 01/2017-C.T (Rate) dated 28-06-2017 under the CGST Act, 2017 Notification No. 1125-FT dated 28/06/2017 under the WBGST Act, 2017.
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2019 (1) TMI 486
TDS liability under GST - Specified person u/s 51(1) - supplies from a public sector undertaking to another public sector undertaking - Public Sector Undertaking or not?. - Held that:- The Applicant has nowhere disputed that it has been established by the Government. The Application is silent on this issue. Section 51(1) of the GST Act, read with the Notification as amended from time to time, mandates that certain categories of recipients shall deduct tax at source at a percentage while making payments to the suppliers above a threshold. Such recipients include inter alia an authority or a board or any other body set up by an Act of Parliament or a State Legislature or established by any Government with 51% or more participation by way of equity or control to carry out any function - As the GST Act does not define “Control”, it should be construed as defined under the Companies Act, 2013. Section 2(27) of the Companies Act, 2013 defines “Control”. It includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. Neither the Central Government nor the State Government has any direct equity participation. But the “Government Companies”, as defined under section 2(45) of the Companies Act, 2013, together hold 62.29% of the paid up share capital and majority of the directors in the Board. WBIDC alone holds 49.46% of the shares, and enjoys four votes (including the casting vote of the Chairman) in a nine member Board. The Central and the State Governments, therefore, acting through the government companies, are in a position to indirectly control the management or policy decisions of the Applicant. The Central and the State Governments, therefore, “control” the Applicant within the meaning of Section 2(27) of the Companies Act, 2013. Clause a (ii) of the Notification is, therefore, applicable for the Applicant if he is established by government notification. Ruling:- The Applicant, if established by government notification, is liable to deduct tax at source under section 51(1) read with Notification No. 1344-FT dated 13/09/2018, being a company controlled by the Central and the State Governments.
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2019 (1) TMI 485
Works contract service - construction of a multi-modal IWT terminal at Haldia on EPC basis - applicability of Notification No. 24/2017-CT (Rate) dated 21/09/2017 and 31/2017 – CT (Rate) dated 13/10/2017 - rate of GST - Held that:- The IWAI is clearly not the Government of India, but a Government Entity having no sovereign authority to collect Government revenue. Moreover, contrary to what the Applicant claims, the user fees that IWAI collects is not credited to the Consolidated Fund of India and is, therefore, not revenue but proceeds from business as defined under section 2(17) of the GST Act. The Applicant is supplying works contract service for an original work that is meant for commerce and business. It does not, therefore, satisfy the conditions laid down under Serial No. 3(vi)(a) of the Rate Notification - The Applicant’s supply of works contract service for construction of the Multi-modal IWT Terminal at Haldia, therefore, attracts GST at 18% rate under Serial No. 3(xii) of the Rate Notification. Ruling:- Amendments to Serial No. 3(vi) of Notification No. 11/2017–CT (Rate) dated 28/06/2017, brought about by Notification No. 24/2017-CT (Rate) dated 21/09/2017 and 31/2017 – CT (Rate) dated 13/10/2017, are not applicable to the Applicant’s supply of works contract service for construction of the Multi-modal IWT Terminal at Haldia. It will attract GST at 18% rate under Serial No. 3(xii) of 11/2017–CT (Rate) dated 28/06/2017.
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2019 (1) TMI 484
Classification of goods - Solar Evacuated Tube Collector (ETC) - whether the goods fall under CETH 8419 19 or otherwise? - benefit of Sl.No.234, Schedule-I of Notification No.1/2017 Integrated Tax (Rate) dated 28.06.2017 - Held that:- The solar water heater and system (domestic type) has been classified under heading 8419 19 20 and the parts of instantaneous or Storage Water heaters (domestic type) are covered under heading 8419 90 10 - The product in the instant case is part of the solar water heater system, which basically comprises of the said tubes and an insulated tank - the instant product merits to be a part of solar water heater systems under the chapter heading 8419. Whether the product of the applicant is entitled for concessional rate under SL.No.234 of the Notification supra or not? - Held that:- The solar water heater in question does not appear to be a ‘Solar Power Based Device’. ‘Solar Power based Devices’ would be such a devices which are operated by electricity generated out of solar energy. In such devices first the solar energy.’ gets converted to electric energy and then the electricity so generated runs the appliance / device - In the instant case the product ETC does not generate electricity at any stage and hence can not be construed as either Solar Power based device or part thereof. Therefore the product “ETC” is not entitled for concessional rate of 5% IGST under SI.No.234 of Schedule-I of the Notification 01/2017-lntegrated Tax (Rate) dated 28.06.2017, effective from 01.07.2017. Ruling:- The product Evacuated Tube Collector (ETC) though falls under Chapter 84 heading 19 but is not covered under SL.No.234 of Schedule-I of the Notification 01 (2017-lntegrated Tax (Rate) dated 28.06, 2017, effective from entitled for concessional rate of 5% IGST.
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2019 (1) TMI 483
Filing of GST TRAN-1 GST TRAN-1 - The case of the petitioner is that electronic portal was not functioning because of some technical glitches in the GST portal and therefore, she could not file her returns - Held that:- Learned counsel for the respondents, however, states that the portal is now open till 30.03.2019 and the petitioner may file her GST TRAN-1 application electronically - Both the counsels may verify if the portal is working and inform the Court on the next date. Put up as fresh on 10.01.2019.
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Income Tax
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2019 (1) TMI 482
Amount received from the State Government in the form of grant-in-aid - whether to be treated as revenue receipt, on the basis of application of funds so received, which was utilized for clearing salary, Provident Fund dues and flood relief? - Held that:- Special Leave Petition is dismissed. Pending applications, if any, stand disposed of.
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2019 (1) TMI 481
Disallowance u/s 14A - whether the explanation of the assessee and the amount offered to tax under Section 14A could not have been rejected by the AO in the manner that he did? - Held that:- Special Leave Petition is dismissed. Pending applications, if any, stand disposed of.
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2019 (1) TMI 480
Penalty u/s 271(1)(c) - deduction u/s 80IA - Held that:- Tribunal accepted the assessee's contention that certain direct expenses were reduced from CFS income inadvertently. As pointed out that the expenses pertaining to indirect expenditure, interest on term loan and depreciation were missed out while claiming original deduction under Section 80IA of the Act. Similarly, inadvertent errors were also made by the auditors who were issued the audit report in prescribed format. However, upon realizing the error, the assessee issued suo motu revised computation of income before the assessing officer during the course of the assessment proceedings. The Tribunal accepted the assessee's contention of bonafide and referred to the decision of the Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd (2012 (9) TMI 775 - SUPREME COURT) and held that the penalty was wrongly imposed - the Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt Ltd [2010 (3) TMI 80 - SUPREME COURT] has held that every case of rejection of claim would not give rise to penalty proceedings. - Decided in favour of assessee.
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2019 (1) TMI 479
Interpretation of Section 2(ea) of the Wealth Tax Act, 1957 defining the term “assets” - single unit cannot be excluded since in the exception clause, the word used is “commercial establishments” as in plural - Held that:- Any property in the nature of commercial establishments or complexes would be excluded from the definition of term “assets” even if otherwise it falls under clause (i) of the said definition clause. Thus, as long as the property in question is a commercial establishment or complex, this exclusion clause would apply. This exclusion clause nowhere requires that to fall within this exception, the property in question must have multiple units in the nature of commercial establishments. The revenue's stress on the word “establishments” used in plural, is not quite acceptable. The term “commercial establishments” is used to exclude all commercial establishments and is not meant to restrict the application of exclusion clause only to commercial establishments which have multiple units.
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2019 (1) TMI 478
Exemption u/s 54F when property which was transfered was residential house - Held that:- The assessee had booked a flat on 15.1.1981. The builder failed to complete the construction and the scheme ran into multiple legal disputes. These disputes travelled to the Bombay High Court. The Bombay High Court appointed a committee in the nature of Receiver and was asked to observe the completion of the construction. Under such circumstances, the construction was completed sometime on February, 2011. In the meantime, the assessee had sold the flat in the year 2005 which she had booked. The same was still under construction. The same resulted into long-term capital gain. It was in such peculiar facts that the Tribunal held that the assessee cannot be said to have transfered a capital asset in the nature of residential house. We may recall that the assessee had booked the flat far back in January 1981 and till the time, she sold for the same in the year 2005, completion of Constitution was nowhere in the sight. It was only with the intervention of the High Court and the steps taken by the Committee appointed by the High Court that the construction could be completed much later in the year 2011 - Decided against revenue
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2019 (1) TMI 477
Interest of refund u/s 244A - responsibilty for delay in the refund claim - Held that:- As per sub-section (2) of Section 244A, if the proceedings resulting in refund are delayed for the reasons attributable to the assessee, whether wholly or in part, the period of delay so attributable shall be excluded from the period for which the interest is payable. In the present case, the assessing officer was wholly incorrect in invoking sub-section (2) of Section 244A since we do not find any reasons attributable to the assessee which delayed his refund claim. During the assessment proceedings itself, relying on the note to the return filed, the assessee had argued that certain interest income had not accrued and therefore, not chargeable to the tax. AO did not accept this stand. CIT(A), however, allowed the claim of the assessee which resulted in the refund claim of the assessee. In plain terms, the assessing officer was incorrect in holding that the assessee was responsible for delay in the refund claim. Gujrat High Court in the case of Ajanta Manufacturing Ltd Vs. Deputy CIT [2016 (8) TMI 165 - GUJARAT HIGH COURT] as observed that the act of the assessee revising the return or the fact that the claim was allowed by the Commissioner in Appeal would not be a ground for holding that it was for the reasons attributable to the assessee that the refund was delayed.
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2019 (1) TMI 476
Disallowance u/s 14A r.w.r 8D - best judgment determination - Held that:- Rule 8D cannot be invoked and applied unless the Assessing Officer records his dissatisfaction regarding correctness of the claim made by the assessee in relation to expenditure incurred to earn exempt income. This is the mandate and precondition imposed by sub-section (2) to Section 14A. Rule 8D is in the nature of best judgment determination i.e. determination in default and on rejection of the explanation of the assessee in relation to expenditure incurred to earn exempt income. Rule 8D is not applicable by default but only if and when the Assessing Officer records his satisfaction and rejects the explanation of the assessee regarding the disallowance of expenditure. In the present case the assessment order proceeds on a wrong assumption that Rule 8D would applies to all cases and is mandatory. Finding of the Tribunal affirming the order of the Commissioner of Income Tax (Appeals) is in accordance with the law. Legal principle and ratio is no longer res integra and is settled by the judgment of the Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. Deputy Commissioner of Income-Tax and another [2017 (5) TMI 403 - SUPREME COURT OF INDIA] determination is to be made on application of the formula prescribed under Rule 8-D or in the best judgment of the assessing officer, what the law postulates is the requirement of a satisfaction in the assessing officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Sections 14-A(2) and (3) read with Rule 8-D of the Rules or a best judgment determination, as earlier prevailing, would become applicable.
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2019 (1) TMI 475
Depreciation on valuation of investment portfolio - treating the investments held by the assessee bank as stock-in-trade once the RBI Master Circular read with CBDT Circular No.665 came into force - Held that:- This Court in the case of KARNATAKA BANK LIMITED VS. ASSISTANT COMMISSIONER OF INCOME TAX (2013 (7) TMI 656 - KARNATAKA HIGH COURT), wherein the very same questions of law were answered in favour of the assessee and against the revenue. Addition representing expenditure relating to earning of exempt income u/s 14A(1) - Held that:- Issue covered by the judgment of this Court in the case of COMMISSIONER OF INCOME TAX vs. KARNATAKA BANK LIMITED [2014 (11) TMI 179 - KARNATAKA HIGH COURT] wherein the very same question of law was answered in favour of the assessee and against the revenue Addition representing excess claim of bad debts written off under Section-36(1)(vii) exceeding the credit balance of the provision made u/s 36(1)(viia) - Held that:- Issue covered by the judgment of this Court in the case of COMMISSIONER OF INCOME TAX vs. KARNATAKA BANK LIMITED [2014 (11) TMI 1192 - KARNATAKA HIGH COURT] in favour of assessee.
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2019 (1) TMI 474
Disallowance of the entire business expenditure - whether the assessee company has to necessarily and directly operate the businesses as mentioned in the Memorandum of Association so as to qualify as carrying out business activity or whether making of investment in subsidiaries which in turn are operating in the business as referred in the Memorandum of Association of the appellant company? - Held that:- Acquisition of controlling interest in the companies can be in furtherance of business purpose of the assessee. In the case in question, the assessee has made investments in the companies which are in the same and specified line of business, in terms of the objective. Schedule 3 of the balance sheet refers to the details of the said companies. This is not in dispute. During the course of hearing, the assessee has placed before us copy of the assessment orders passed under Section 143(3) for the assessment years 2009-2010 and 2010-2011 wherein the Assessing Officer has not disputed and challenged that the assessee was engaged in business, though there was no change in the nature of business activity undertaken by the assessee. There is no merit in the present appeal and the same is dismissed.
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2019 (1) TMI 473
Interest on the Fixed Deposits Receipts (‘FDRs’) in bank and Inter-Corporate Deposits (‘ICDs’) with sister concerns earned by assessee - taxable under the head ‘income from other sources’ OR ‘business income’ - not allowing deduction of the interest paid from interest received - Held that:- Papers and documents referred to in the impugned order, have not been filed before us to show any incongruity and perversity in the factual and consequently in the legal finding. Accordingly, we do not think that the Assessing Officer and the First Appellate Authority were justified in not allowing deduction of the interest paid from interest received. Interest of ₹ 1,78,03,962 /- cannot be deducted/set-off from interest paid at the performance guarantees for the two blocks were given by the respondent- assessee. Interest earned on the FDRs obtained to procure the performance bank guarantees was connected with the two oil blocks. The Tribunal has mentioned that the Commissioner of Income Tax (Appeals) had allowed deduction under Section 35D thereby indirectly accepting that assessee had commenced business. the assessee had advanced more than ₹ 12.11 Crores to M/s Jubilant Capital Private Limited in furtherance to the business transfer agreement to meet the cash calls for participatory interest in the Ankleshwar Block. Thus, the finding that the business was ‘set up’ has sufficient backing and support from the material and evidence referred to in the impugned order. In any case, this objection regarding ‘commencement of business’ loses much significance and importance in view of the direct nexus between interest paid and interest received on ICDs. Interest paid to earn interest has to be allowed as a deduction under Section 57 of the Act. - Decided against revenue.
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2019 (1) TMI 472
Disallowance u/s 80IA - income from sharing fibre cables and cell sites is not derived from the undertaking of telecommunication business - Held that:- In view of language of clause (ii) to sub-section (4) to Section 80IA, which states that for the purpose of the said clause an undertaking shall be treated as providing telecommunication services, if it is engaged in basic or cellular, including radio paging, domestic satellite services, network of trunking, broadband network, and internet services within the two dates, the income by the assessee from third parties who had availed of the telecommunication services, in the form of payments received by the assessee from third persons for using fibre cables and cell towers network qualifies for deduction under Section 80IA. This income or receipts have to be treated as income earned by the undertaking from telecommunication services . Assessee had also paid bank charges as cheques issued by some of the customers had been dishonoured. The cheque bounce charges were also levied to the customers but entire amount could not be recovered. AO held that late payment charges or cheque bouncing charges was in the nature of penalty and was not income derived from telecommunication business by referring to the judgments defining the scope and ambit of the expression income derived from . We have already noted that the said expression is missing and is not the mandate of the legislature in sub-section (2A) to Section 80IA. As held that the late payment charges or cheque bounce charges were relatable and directly linked with the telecommunication business of the assessee. Further, as noted above, the expression derived from is not relevant for claim for computation of deduction under sub-section (2A) to Section 80IA of the Act as held by the Delhi High Court in the case of Bharat Sanchar Nigam Limited [2016 (8) TMI 270 - DELHI HIGH COURT]. We uphold the finding of the Tribunal that income from sharing of fibre cables and cell-sites qualify for deduction under Section 80IA(2A). Tribunal was also right and justified in upholding the reasoning and order of the Commissioner of Income Tax (Appeals) on cheques bouncing and late payment charges.
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2019 (1) TMI 471
Exemption u/s 10A - Separate and segregated accounts - profit margin of the STPI unit was higher than the profit margin of the non-STPI unit - book results rejection - Held that:- On the substantive aspect and reasoning, the Tribunal agreed with the findings recorded by the CIT (A) that AO was not justified in transposing expenditure from non-exempt to exempt unit on the general assumption that net profit in distinct lines cannot be different and must be the same. Separate and segregated accounts cannot be rejected on the ground that the profit margin of the STPI unit was higher than the profit margin of the non-STPI unit, without pointing out any discrepancy, error or mistake in the accounts. The findings are unchallengeable. AO was unable to point out any defects, deficiencies or wrong entry in the books of accounts for the exempt and non-exempt unit. The Act does not prohibit an assessee from having non-STPI unit and STPI unit. This is not the case and the allegation made by the Revenue. It is also not the case and allegation of the Revenue that the business or orders undertaken by the non-STPI unit were transferred to the STPI unit. The two lines of business were separate. The finding that the two lines of business were separate has not been questioned. Expenditure declared and disclosed as incurred for non-exempt unit cannot be treated and transposed as expenditure incurred on exempt unit, on assumptions and surmises by referring to difference in turnover, expenses and net profit rate of exempt and non-exempt units. This cannot justify the AO’s direction to shift 90% of the expenditure from the non-exempt unit and treat it as expenditure of the exempt unit, thereby reducing the profit in the STPI unit. Inference and deduction solely based and predicated on net profit rate is nothing but a surmise and conjecture. U/s 144 book results cannot be rejected only on the ground of decrease or difference in gross profit rate compared to other years or another assessee. Neither can the book results be rejected for the reason that gross or net profit rates in the two lines of business are different. The difference can be the starting point of investigation and verification but not the essence to reject the book results and make best judgment assessment. No substantial question of law arises for consideration
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2019 (1) TMI 470
Addition u/s 40A(2)(b) - payment made to TACO, a related concern - assessee claimed that sum was paid to TACO in view of the services rendered by them under the Administrative Services Agreement (ASA) - Held that:- On going through the nature of services, it becomes patent that there has to be substantial evidence in the form of e-mails and other documents for rendition of such services. In the absence of the assessee having produced any evidence to demonstrate that it availed the services provided by TACO, we cannot accept the claim of the assessee. As AR contended that though the evidence was not available at the material time during the course of proceedings before the authorities below, such evidence could be now furnished to the AO, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this score is set-aside and the matter is restored to the file of AO. We order accordingly and direct the AO to examine the assessee’s claim in respect of evidence of services. In case, the assessee still fails to furnish the evidence to the satisfaction of the AO, the Assessing Authority would be fully justified in making addition - Appeal allowed for statistical purposes. Addition of reimbursements to related parties u/s. 40(a)(ia) - Held that:- We find that the addition sustained by the CIT(A) is in respect of certain items mentioned on page 12 of the impugned order which were claimed as reimbursement of Jamshedpur office expenses incurred during June to September 2008 and the claimed reimbursement of expenses of M/s. Shinohar Consultant. The first sum of ₹ 1,97,406/- is the claim by the assessee to be reimbursement of Jamshedpur office expenses during the months mentioned above. Except for invoices, the assessee has placed nothing on record to demonstrate that these were in the nature of reimbursement of expenses not having any profit element therein. Similar is the position regarding expenses of Shinohar Consultant. The ld. AR requested that one more opportunity be given to the assessee for furnishing the necessary evidence to prove that these were mere reimbursement of expenses and did not involve any profit element. Thus set-aside and the matter is restored to the file of AO. - Appeal allowed for statistical purposes. Disallowance of expenditure towards interest to bank u/s.43B -Held that:- no evidence could be filed to show that firstly, the interest of ₹ 25.52 lakhs pertained to its own ‘Power train application unit’ and not to the demerged unit of ‘Lighting system unit’ for which demerger got completed w.e.f. 01-04-2009 and secondly, such amount of interest was actually paid well within the time even by its sister concern. As AR submitted that the entire details were available with the assessee but were not handy with him. A request was made that the AO be directed to examine the assessee’s claim along with the evidence afresh. In the given facts and circumstances of the case, we are of the considered opinion that it would be just and fair if the impugned order on this score is set-aside the matter is restored to the file of AO. We order accordingly and direct him to decide this issue afresh as per law - Appeal allowed for statistical purposes.
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2019 (1) TMI 469
Assessment u/s 153A - Unexplained investment in jewellery - Jewellery recovered from her locker belong to other individuals - benefit of circular of CBDT Instruction No.1916 prescribes the limit that “gold jewellery and ornaments to the extent of 500 grams per married lady, 2520 grams per unmarried lady and 100 grams per male member of the family - Held that:- CIT(A) gave benefit of CBDT circular to the extent of 700 gms. only. Rest of the addition was sustained. It is undisputed that before A.O., the assessee had stated that the jewellery recovered from her locker belong to other individuals. A.O. rejected the contention on the basis that no return was being filed. No documentary evidence was submitted in respect of gifts, etc. No evidence was produced to prove that jewellery is related to other individuals namely Smt. Mandakini Roy and Smt. Mansi Roy Srivatsav. A.O. ought to have made enquiry from other persons. No such enquiry was made. Ld. CIT(A) also in a mechanical manner without conducting any enquiry from the other members of the family proceeded to give benefit to the extent of 700 gms. only. A.O. ought to have made enquiries from the other persons. In the absence of such enquiry, in our view, addition so made is not justified. It is also common practice in Indian household that ladies share their locker for storing ornaments with other family members. The jewellery is received in the form of gift, then the A.O. should have atleast made enquiries from the persons from whom such gift was received. Therefore, considering the totality of the facts, addition made by the A.O. is not sustained. We direct the A.O. to give benefit of the circular of CBDT and delete the addition. Grounds raised in this appeal are allowed.
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2019 (1) TMI 468
TDS u/s 195 - payments made by the assessee in respect of travel expenses, research expenses, seminar, training and conference expenses - tds liability - Held that:- Since, facts on record alongwith the relevant documentary evidence clearly show that the payments are just reimbursements made by the assessee which do not contain any profit element the same cannot be treated as FTS as nothing has been made available to the assessee. No hesitation in holding that the payments made by the assessee in respect of travel expenses, research expenses, seminar, training and conference expenses are nothing but reimbursements of expenses without any profit element and therefore the assessee is not liable for withholding tax u/s 195.- Decided in favour of Assessee. Reimbursement of software and licenses renewal - payments for software and license renewal as royalty - Held that:- On perusal of the invoices supported by the certificate from a Chartered Accountant show that amount paid are either annual maintenance charges or for the use of software or for software maintenance or the payments were made for antivirus software, anti spam software etc. The invoices clearly show that the payments have been made for the use of copy righted article. In the case of Infrasoft Limited [2013 (11) TMI 1382 - DELHI HIGH COURT] has held that amount received by the assessee a non-resident company for granting license to use its copyrighted software for licensee own business purpose only could not be brought to tax as royalty under article 12 (3) OF India-US DTAA. Payments for software and license renewal is not royalty. Thus we hold that the payments for software and license renewal is not royalty. - Decided in favour of Assessee.
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2019 (1) TMI 467
Eligibility for deduction u/s. 80IC on additional income - speed money/bribe paid by the assessee out of sale of scrap - Held that:- When it is not in dispute that the assessee has been making payment on account of speed money varying from 0.8% to 2.58% of the project value/contract value, the AO has rightly assessed the amount of ₹ 30,85,500/- @ 0.75% of ₹ 41.14 crores for AY 2003-04 and ₹ 43,37,000/- @ 0.75% of ₹ 61.83 crores for AY 2004-05 by treating the same to have been paid out of unaccounted income generated from scrap of sale. Since the assessee has failed to explain the availability of funds with him to explain the entries made in the seized material pertaining to the speed money so as to work out as to which of the amount pertains to a particular assessee in group cases on account of speed money, the benefit of telescoping cannot be given to it. CIT (A) has erred in reversing the order of the AO in assessing the speed money at ₹ 30,85,500/- & ₹ 43,37,000/- for AYs 2003-04 & 2004-05 respectively. So, the findings returned by the ld. CIT (A) on this ground are hereby reversed and findings of AO are restored Unvouched expenses as per findings returned by the AO, addition of ₹ 3,00,000/- made in the assessment u/s 143 (3) was confirmed vide impugned order only remaining addition of ₹ 1,00,000/- was to be explained by the assessee who has not preferred to produce the account books supported with bills and vouchers to explain the genuineness of the expenses. So, we are of the considered view that this issue also requires to be sent back to the AO to decide afresh after providing an opportunity of being heard to the assessee. Disallowance of deduction u/s. 80IC of ₹ 1,55,96,115/- made by the Assessing Officer, we observe from the records that AO while calculating the disallowable profit of eligible units, has computed the claim u/s. 80IC on the basis of turnover of eligible units and non-eligible units. AO has not made any examination in depth as to the veracity of expenditure declared by the assessee to have been incurred on eligible and non-eligible units, particularly when the assessee could not be able to produce the books of accounts as well as bills and vouchers before the Assessing Officer so as to deduce correct profits eligible for deduction u/s. 80IC. We observe that for want of supporting documentary evidence or books of account, the doubt of the AO that the profit of non-eligible units was diverted to the eligible units with objective to claim deduction u/s. 80IC, cannot be said to be completely wrong. CIT(A) has only analysed the details furnished by the assessee and did not make any verification or examination thereof on the anvil of basic accounts or bills or vouchers so as to belie the contention of the Assessing Officer regarding diversion of profit of non-eligible units to the eligible units. CIT(A) has thus wrongly allowed the claim of assessee only on the basis of submissions made by it and the financial documents furnished by it without verifying the expenditure etc. from the books of account. We deem it expedient in the interest of justice to remit the matter back to the file of Assessing Officer for deciding the issue afresh Additional deduction bogus sales of scrap and bogus purchases admitted by the assessee itself - Held that:- The assessee is maintaining both eligible and non-eligible units. Had the above said purchases and sales been proved to be made for his eligible units and accounted for in its profit and loss account, then the above said disallowance would have been eligible for deduction u/s. 80IC as it would have increased the eligible profit. But no such situation is existing in the instant case. The assessee has neither recorded the amounts of bogus purchases and bogus sales into its books of account, and it was only when the search took place, the assessee admitted them to be bogus. Thus, their disallowance cannot be used to increase such profit which is eligible for deduction u/s. 80IC of the Act. In view of this, the conclusion reached by the CIT(A) while considering the above disallowances for the purpose of deduction u/s. 80IC cannot be supported. Income of the appellant as included twice in the income - Held that:- No justification to interfere with these findings of the ld. ACIT(A) as no litigant can be taxed twice on the same amount. On perusal of the financial statements and notes on accounts, we find that the amount of ₹ 1.75 crores had already been considered as income in the original return of income. However, the said amount was again included in the revised computation given during the assessment proceedings by mistake. We, therefore, do not find any mistake in the conclusions reached by the CIT(A) as above. Bogus purchases - rectification application - Held that:- CIT(A) while deleting the addition has considered the rectification order u/s. 154 made by the Assessing Officer and the details of total purchases made by assessee and has rightly considered the actual bogus purchases at ₹ 78,82,615/- during the year. He, therefore, rightly directed the Assessing Officer to allow relief of remaining amount of ₹ 65,83,385/- by restricting the addition on account of bogus purchase of ₹ 78,82,615/- instead of ₹ 1,44,66,000/- considered by the Assessing Officer. Finding no infirmity in the impugned order, we uphold the same - Appeals of the Revenue partly allowed.
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2019 (1) TMI 466
Levy of penalty u/s 271(1)(c) - addition on account of unverifiable purchases @ 25% - Held that:- There is no dispute that while completing the assessment U/s 143(3) of the Act, the Assessing Officer rejected the books of account of the assessee U/s 145(3) of the Act and consequently the income in respect of unverifiable/bogus purchases was estimated @ 25% of such purchases. The said addition made by AO was restricted by the CIT(A) to 7% to those purchases as against 25% addition made by the Assessing Officer. Thus, it is clear that the addition sustained by the ld. CIT(A) is nothing but is based on the estimation of income by taking 7% of such unverifiable purchases. The Coordinate Bench of this Tribunal have taken a consistent view on this issue of levy of penalty against the addition made by the Assessing Officer by taking the income @ 25% of the unverifiable purchases holding that the penalty levied against the addition based on estimation of income is not sustainable In view of the decision of the CIT Vs Mahendra Singh Khedla (2012 (3) TMI 568 - RAJASTHAN HIGH COURT), the levy of penalty against the addition made on the basis of estimation of income by taking 25% of the unverifiable purchases which was reduced in the said case to 15% was found to be not sustainable. This view has been consistently taken even in other decisions - Decided in favour of assessee.
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2019 (1) TMI 465
Disallowance of deduction claimed u/s 80IB - claim of the assessee on “pro rata” basis - requirement of section 80IB (10)(c) is not satisfied with respect to the specified area of the residential units - AO held that only 72 out of 122 residential units in one project and 128 out of 154 residential units in another projects satisfy that condition - Held that:- The assessee has constructed two housing projects which are eligible for deduction u/s 80 IB. In the “Impression Vasundhara” project there were 122 residential unit out of which 50 units has the built up area exceeding 1000 ft². In the project “Impressions 58” has 154 residential units out of which 26 units exceeds the built up area of 1000 ft². Therefore the learned assessing officer was of the view that assessee is not eligible for deduction u/s 80 IB of the income tax act. Hence, disallowance of INR 19887408 was made. CIT(A) allowed the claim of the assessee following the decision of the coordinate bench in assessee”s own case for assessment year 2009 – 10, which has also been upheld by the Hon”ble Delhi High Court in [2015 (7) TMI 1302 - DELHI HIGH COURT] as held that the provision is capable of being construed in a manner that is beneficial to the assessee by allowing the deduction on “pro rata” basis to the number of residential units that have complied with the requirement of section 80 IB of the maximum built up area. No infirmity in the order of the learned CIT(A) and direct the learned assessing officer to allow the claim of the assessee on “pro rata” basis as directed by the Hon”ble Delhi High Court in assessee”s own case for earlier years. - Decided against revenue
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2019 (1) TMI 464
Depreciation on POS Terminals - depreciation claimed by assessee company at a higher rate of 60% - Classification of computer peripherals and accessories for the purpose of depreciation - Held that:- We find the Hon’ble Delhi High Court in the case of Pr. CIT Vs. Connaught Plaza Restaurant [2016 (9) TMI 1485 - DELHI HIGH COURT] has considered the issue i.e. Higher rate of depreciation on POS TERMINALS and has upheld the decision of the Tribunal where it has been held that assessee is entitled to depreciation @ 60% on POS TERMINALS. - Decided against revenue Expenditure on account of legal, professional and consultancy expenses - business expenditure OR expenses incurred in the nature of capital expenditure - Held that:- We find the Hon’ble Delhi High Court in the case of CIT Vs. ACL Wireless Ltd. [2013 (12) TMI 1160 - DELHI HIGH COURT] has held that expenditure incurred in ordinary courses of business on upgradation, improvement, removal of glitches of existing or already developed software to improve its product is to be treated as revenue expenditure. Also in the case of Oriental Bank of Commerce Vs. Additional CIT reported [2018 (4) TMI 1534 - DELHI HIGH COURT] has held that expenditure incurred by assessee on acquiring licenses to use software which did not confer any enduring benefit on assessee was to be allowed as deduction u/s 37 (1). Since the Ld. CIT (A) in the instant case has given a finding that the expenditure is recurring in nature and not a onetime expenditure, therefore, in absence of any contrary material brought to our notice on this factual finding, the order of the CIT(A) on this issue is justified - decided against revenue
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2019 (1) TMI 463
Deduction u/s 80P - Held that:- As relying on M/S. UDAYA SOUHARDA CREDIT COOPERATIVE SOCIETY [ 2018 (8) TMI 1063 - ITAT BANGALORE] we set aside the order of the CIT(A) and restore the matter to the file of the AO to readjudicate the claim of the assessee in the light of aforesaid order of the Tribunal to ascertain as to whether the assessee is entitled for deduction u/s 80P or not before going on merit.
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2019 (1) TMI 462
Additions u/s 68 being share application money received from four parties - Held that:- The provisions of Section 68 provide that an assessee shall provide explanation in relation to the credit in its books of accounts. Once it has discharged its obligation to prove the said credit, it is not required to prove the source of funds of its source of share application money. An assessee is not required to provide details about its source's source. We notice that Ld CIT(A) therefore, concluded that the loan given to the farmers by IDBI for supply of material like cotton to BTCL was ghastly misused and were diverted back to BTCL in the form of share application money by using the conduit of banking channel in a circular rotation by using colourable devise. CIT(A) has accepted that the source of the funds invested by the farmers is the loan given by IDBI through BTCL. Therefore, such amount invested by the farmers cannot be said to be non-genuine transactions. Secondly, the IDBI had given loan to farmers against sale proceeds receivable by them from BTCL on sale of the crops. Therefore, the creditworthiness of the farmers is proved beyond doubt. We have also noticed from the details that the assessee had refunded the share application of the said three farmers in the month of March 2011 i.e. 2011-12. All other allegations of the Ld. CIT(A) are not relevant for deciding that the receipt of the share application money is genuine and the creditworthiness of the parties investing in share application is proved. The provisions of sec.68 places initial burden of proof upon the shoulders of the assessee, i.e., the assessee is required to prove three main ingredients viz., the identity of the creditor, the creditworthiness of creditor and genuineness of transactions. Once the assessee discharges the initial burden placed upon its shoulders, then the burden would shift upon the shoulders of the assessing officer, i.e., it is the AO who has to disprove the submissions made by the assessee. We notice that the assessee has discharged the initial burden of proof placed upon its shoulders by proving the identity of the share applicants, their sources and the genuineness of transactions. Referring to various documents furnished in the paper book. However, we notice that the AO could not disprove the same, meaning thereby, the AO has failed to discharge the burden placed upon his shoulders. CIT(A) was not justified in confirming the addition made by the AO u/s 68 - decided in favour of assessee.
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2019 (1) TMI 461
Addition on the basis of lower gross profit margin - Held that:- What has been stated to be reason for Gross Profit addition is fall in the Gross Profit rate vis-a-vis previous year without any other specific reasons. The very approach so adopted by the Assessing Officer is devoid of legally sustainable basis. The business has been never so static so as to ensure same G.P. rate from year to year particularly when the assessee is dealing in such products as electric goods where Gross Profit margin not only varies from item to item but from season to season. The impugned addition thus not deserves to be sustained on merits. As regards the stand of the DR that the assessee himself has agreed to the impugned addition and thus prevented the Assessing Officer from further enquiries, no merit in this plea either. The mere fact that the assessee has agreed to the suggestion of the Assessing Officer cannot constitute estoppel against his rights to challenge the same on merits. In any case, the amount involved being small and in view of this discussion and bearing in mind entirety of the case, fit and proper to delete the impugned addition in respect of low Gross Profit margin. Disallowing various expenses - Held that:- It is sufficient to take note of the fact that the impugned disallowance has been made out of several expenses such as telephone expenses, vehicle expenses misc. expenses and office expenses. After some discussions, for the assessee fairly submitted that he does not wish to pursue this issue further but prayed that this fact should not be put against him in the penalty proceedings or in the subsequent proceedings.
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2019 (1) TMI 460
Deduction u/s 10B - Held that:- We find from the records that even after being required to file the details in respect of bank realization of the export proceeds, the assessee furnished a bank realization certificate for an amount of ₹ 7,21,88,815/- as against total export turnover of ₹ 10,82,68,158/-. Therefore, in the absence of any documentary evidence, the revenue allowed deduction of ₹ 1,03,25,457/- in place of ₹ 1,52,42,322/- as claimed by the assessee. CIT(A) has rightly rejected the claim of the assessee in absence of documentary evidence. No new facts or contrary judgments have been brought on record in order to controvert or rebut the findings so recorded by CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the CIT(A). Hence, we are of the considered view that the findings so recorded by the CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the assessee stands dismissed.
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2019 (1) TMI 459
Penalty orders passed u/s 271D and 271E - Violation of provisions of section 269SS and 269T while taking/returning the loan amount of ₹ 7,00,00,000/- in cash - CIT(A) has deleted the addition mainly on the ground that AO has made addition on the basis of rough noting recovered from the possession of Tara Health Foods Ltd. during search conducted by the department - Held that:- In the present case, except the presumption drawn by AO from the rough sheet containing the questioned entries, there is no other direct or circumstantial evidence to substantiate the conclusion of AO that the assessee has accepted loan or deposit in cash from Tata Health Food Ltd. within the meaning of section 269SS of the Act. We further notice that Sh. Balwant Singh, MD of Tata Health Food Ltd. has sworn an affidavit stating that the company Tata Health Food Ltd. had neither given any cash loan to the assessee company nor any amount was received by Tata Health Food Ltd. Sh. Balwant singh has further stated that only in the financial year 2008-09, the Tata Health Food Ltd had purchased Machinery from the assessee company. AO has wrongly arrived at the conclusion that the assessee had obtained the amount in question in violation of section 269SS of the Act, on the basis of loose papers containing the questioned entries, without pointing out any corroboration. In any case, even if one is to go by this documents found by the search tem, the Ld. CIT (A) has rightly inferred that, the nature of transaction is not loan but a business advance for purchase of machinery. As per the settled principles of the law, penal provisions are required to be construed strictly. Hence, in our considered view, the material on record is not sufficient to sustain penalty imposed by the assessment officer u/s 271D read with section 269SS of the Act. Section 271E makes a person liable for penalty for repayment of loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the said section. Since, we have dismissed the appeal of the revenue and upheld the findings of the Ld. CIT (A), holding that the assessee has not violated the provision u/s 269SS of the Act, there is no reason to hold the assessee liable for penalty u/s 271E of the Act for violation of the provisions of section 269T of the Act. We therefore, agree with the Ld. CIT (A) and delete the penalty - Decided in favour of assessee.
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2019 (1) TMI 458
Eligible for deduction u/s 80IA - income derived from business activities - Held that:- CIT(A) has decided the identical issue in favour of the assessee in assessee’s own appeal for the assessment year 2010-11 holding that the income from rent received by the assessee is directly related to the main business of the assessee and the amount is eligible for deduction u/s 80IA. DR did not point out any difference of facts in the assessee’s case for both the years. Admittedly, the issues involved in AY 2010-11 and the assessment year under consideration are identical. Moreover, the CIT(A) has not given any reason for taking a view inconsistent with the view taken in the earlier year on the identical issue. No reason to agree with the Ld. CIT(A). Moreover, the facts relied upon by the CIT(A) is different from the facts of the present case. The assessee had to make deposits under business compulsion. The revenue has not brought to our notice any decision contrary to the findings aforesaid rendered in similar set of facts. Hence, we respectively following the decision of the Cuttack Bench of the Tribunal allow this ground of appeal and direct the AO to allow the interest so earned by the assessee for the purpose of deduction u/s 80IA. AO is further directed to compute the amount after netting off the interest paid and interest received by the assessee during the year relevant to the assessment year under consideration. As regards sundry credit balance written off AO has rejected the claim of the assessee without giving any reason as to how the amounts in question are not eligible for the claim u/s 80IA. Similarly, the CIT(A) has affirmed the findings of the AO discussing the general principles of the law without giving specific reasons as to why the amounts in question cannot be treated as profits and gains derived from the eligible business of the assessee. Moreover, CIT(A) has not given any reason for taking a view contrary to the view already taken in the assessee’s appeal pertaining to the assessment year 2010-11 in the similar set of facts. Therefore, we are of the considered view that the findings of the Ld. CIT(A) are not based on cogent and convincing reasons. Hence, keeping in view the nature of income earned by the assessee in this case i.e., balance written back and miscellaneous income, we hold that the said amounts should be treated as profits and gains derived from the eligible business. Accordingly, we set aside the findings of the CIT(A) and direct the AO to treat the said amounts as profits and gains derived from the eligible business of the assessee. Interest received by the assessee on the TDS refund should be netted off against the interest expenditure for the purpose of computing profits and gains derived from the eligible unit of the assessee.
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2019 (1) TMI 457
Determination of the income u/s 44B - DRP has directed the AO not to include the service Tax collected by the assessee in the gross receipts for the purpose of computing presumptive income u/s 44B - Held that:- We notice that the directions of the DRP are based on the findings in the case of DDIT vs. Mitchell Drilling International Pvt. Ltd. ( [2015 (10) TMI 259 - DELHI HIGH COURT]). Moreover, the issue involved in the present case is covered in favour of the assessee by the order of the coordinate Bench rendered in the assessee’s own case for the A.Y. 2007-08 and 2008-09. Since, the directions of the Ld. DRP are based on the principles of law laid down by the Hon’ble Delhi High Court and further covered by the decision of the coordinate Bench in assessee’s own cases for the assessment years 2007-08 and 2008-09, we do not find any reason to deviate from the view taken by the Ld. DRP. Hence, we uphold the DRP directions issued u/s 144C (5) of the Act holding that the same does not suffer from any factual or legal infirmity to interfere with.
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2019 (1) TMI 456
Monetary limits - Low tax effect - maintainability of appeal - Held that:- CBDT has rightly taken a decision to revise the monetary limits in tune with the present value of money and with a view to reduce the litigation and offering relief to small tax payers. This is also in view of the fact that time and energy of the department could be used more productively and efficiently to catch hold of big fishes, who in turn would contribute more to the development of the country. On perusal of the Circular No. 3/2018 dated 11.07.2018 and the materials available on record, we do not see these cases falling under any of the exceptions contemplated in the said circular per se. We also find that this circular makes it very clear that the revised monetary limits shall apply retrospectively to pending appeals as well. In Commissioner of Customs vs Indian Oil Corporation Ltd (2004 (2) TMI 66 - SUPREME COURT OF INDIA) has settled the law that CBDT’s circulars are very much binding on revenue authorities. We thus hold that all these Revenue’s appeals deserve to be dismissed in terms of low tax effect. We make it clear that it shall very much open for the Revenue to seek necessary rectification in case it is found that any of these appeals involve operations of exception clauses in the tax effect circular as per law.
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2019 (1) TMI 421
Netting of profits and losses of the eligible units of the assessee for the purpose of calculating deduction u/s 80IC - Held that:- The section provides for different rates of deduction of profits for different years in case of specific undertakings and if netting of profits and losses of all eligible undertakings are resorted to, as laid down in the decision of Him Teknoforge Ltd. [2012 (9) TMI 162 - HIMACHAL PRADESH HIGH COURT] in a situation where the different eligible units are entitled to different rates of deduction of profits, it would be difficult to determine the rate to be applied to the remaining profits since there is no section or provision in the entire Act dealing with such a situation. We therefore, agree with assessee that the decision in the case of Him Teknoforge Ltd. (supra) having been rendered in the context of section 80IA does not apply in the present case which deals with deduction u/s 80IC and since as per section 80IC it is the profit on each undertaking which is to be treated as separately, the profits and losses of all the eligible undertakings are not to be netted for the purpose of calculating deduction u/s 80IC and are to be taken on a stand alone basis - We direct the A.O. to allow deduction to the assessee u/s 80IC with respect to the profits earned by the assessee from the eligible undertakings ignoring the losses from other eligible undertakings. Ground of appeal No.1 raised by the assessee is allowed. Benefit of MAT credit as eligible and allowable u/s 115JAA - The limited prayer of the Ld. Counsel for the assessee was that the A.O. be directed to granted the same as per law.
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Customs
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2019 (1) TMI 451
Advance Licence - assessee's case is that notification No. 43/2002 Cus dated 19.04.2002 speaks of exemption to import against advance licence issued under duty exemption/remission scheme - whether the appellant/assessee is entitled for exemption from the whole of the duty of customs, additional duty, safeguard duty and anti-dumping duty. Held that:- It is not in dispute that pursuant to the said communication dated 02.09.2008, the Ministry of Finance has not amended the Notification No.56/2007 and the same stands as such. In the light of the said position, if the imports have been made against the advance licence for annual requirement in terms of paragraph 4.1.7A of the Export and Import Policy, the importer is exempt from the whole of the duty of Customs leviable thereon as specified in the First Schedule to the Customs Tariff Act and from the whole of the additional duty leviable thereon under Section 3 of the Customs Tariff Act only and the said notification does not exempt the importer from the levy of anti-dumping duty. Further more, Notification No. 56/2003 was issued on 04.01.2003 and it is not an amendment to Notification No. 43/2002 which deals with a separate category of imports namely against advance licence issued in terms of subparas (a) and (b) of paragraph 4.1.1 of the Export and Import Policy. Tribunal was fully justified in stating that the object of both notifications is different and as long as there is no amendment to the notification No. 56/2003 dated 01.04.2003, the assessee is not eligible for exemption from the levy of anti-dumping duty. There is no error in the order passed by the Tribunal and the manner in which they have interpreted both the notifications - we cannot substitute words in an exemption notification, more particularly, when the exemption notification No.56/2003 specifically states that it pertains to advance licence for annual requirement with actual user addition issued in terms of paragraph 4.1.7A of the Export and Import Policy. Appeal dismissed - decided against assessee.
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2019 (1) TMI 450
Penalty u/s 112 of CA - Smuggling - 1 KG gold bar - illegal possession and transaction of smuggled foreign gold bars - penalty upheld on the ground that appellant had not proved beyond doubt that gold bar is a legally imported one - Held that:- The gold bar in question was not seized in a customs area. However, as per the provisions of Section 123, which inter alia apply to gold, where any goods specified therein are seized under reasonable belief that they are smuggled goods, then the burden of proving that they are not smuggled goods shall be either on the person from whose possession the goods were seized or the person, if any, who claims to be the owner of the gold - The only fly in the ointment is that there is a definite discrepancy in the markings found on the impugned gold bar vis- -vis markings on the gold bars imported by MMTC Ltd., Chennai. The claim of having acquired and being in possession of legally imported gold bar, will surely crumble - based on the facts on record, the burden of proving that the gold is not smuggled is inter alia on the appellants herein and secondly, such a burden has not been satisfactorily cast off - imposition of penalty under Section 112 of the Customs Act, 1962 on the appellant is very much justified - quantum of penalty reduced from ₹ 1,50,000/- imposed to ₹ 50,000/- - appeal allowed in part.
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2019 (1) TMI 449
Valuation of imported goods - rejection of declared value - absence of NIDB data - reliance placed on contemporaneous imports - Held that:- Admittedly, there is no documentary evidence placed on record or any contemporaneous import relied on by the lower authorities, to justify valuation at a much higher rate - It is a settled position of law that the law only recognizes an expert’s opinion as an evidence and undoubtedly, data available on the internet is not the one. The Revenue can rely on contemporaneous imports alone and since the same having not been done, the impugned Order becomes unsustainable and liable to be set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 448
Maintainability of appeal - refund claim - Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Held that:- The first appellate authority has proceeded on the basis that the appellant had not questioned the assessment before the lower authority which, according to us, is not proper - We also take note of the pleading that MRP comes into the picture only after the gloves are sterilized and repacked - matter requires to be re-adjudicated by the adjudicating authority - appeal allowed by way of remand.
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Insolvency & Bankruptcy
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2019 (1) TMI 455
Admission of petition under Insolvency and Bankruptcy Code, 2016 - Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - it was alleged that the Corporate Debtor has defaulted in making payment of ₹11,20,124/-which is due for payment for supply of cement to Hiranandi Palace Gardens (HIRCO) project in Oragadam, Kanchipuram Dist. Tamil Nadu between 05.5.2012 and 17.9.2012 - Held that:- Tere is a clear default on the part of the Corporate Debtor in payment of outstanding amount to the petitioner, and there was no existing dispute regarding the same - The operational creditor had recommended name of Interim Resolution Professional (IRP) with his consent however the consent was withdrawn subsequently and no new name is recommended by the Operational Creditor. The present case is fit for Admission under the Insolvency and Bankruptcy Code, 2016.
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2019 (1) TMI 454
Rejection of application under Section 9 of the ‘I&B Code’ - scope of Operational Creditor - the amount due has not been regarded as an ‘Operational Debt’ within the meaning of Section 5(21) of the ‘I&B Code’ - execution of decree - legality and viability to decide foreign decree - applicability of Foreign judgment - maintainability of application - Held that:- The Adjudicating Authority not being a Court or ‘Tribunal’ and ‘Insolvency Resolution Process’ not being a litigation, it has no jurisdiction to decide whether a foreign decree is legal or illegal. Whatever findings the Adjudicating Authority has given with regard to legality and propriety of foreign decree in question being without jurisdiction is nullity in the eye of law. Applicability of Foreign judgment - judgement not pronounced by a Court of competent jurisdiction and founded on an incorrect view of international law - Held that:- The debt due to the Appellant does not come within the meaning of ‘Operational Debt’ and thereby, the Appellant cannot be held to be the ‘Operational Creditor’ within the meaning of Section 5(20) read with Section 5(21) of the ‘I&B Code’. The money claim do not relate to supply of goods or services and, therefore, the application under Section 9 by the Appellants against the ‘Corporate Debtor’ was not maintainable. The Adjudicating Authority has no jurisdiction to decide the question of legality and propriety of a foreign judgment and decree in an application under Sections 7 or 9 or 10 of the ‘I&B Code’ - question relating to maintainability is answered against the Appellants, they being not the ‘Operational Creditor’ - Appeal dismissed.
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2019 (1) TMI 453
Maintainability of petition - Failure to make payment on the part of Corporate Debtor - Held that:- As per the Section 7 of IBC provides, a petition has to be admitted if a default has occurred, no dispute has been raised with regard to the debt due, application filed is complete and no disciplinary proceedings are pending against the proposed resolution professional - This Petition clearly reveals that there is a debt as defined in Section 3(11) of IBC, also there is default in this case within the meaning of Section 3(12) of IBC and no evidence of dispute with regard to the claim amount has been raised by the Corporate Debtor. The application of the Financial Creditor is complete and there are no disciplinary proceedings pending against the proposed resolution professional. Therefore, this petition is to be admitted. This Bench hereby admits this petition filed under Section 7 of IBC, 2016, declaring moratorium with consequential directions.
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2019 (1) TMI 452
Admission of petition under Insolvency and Bankruptcy Code, 2016 - Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - the Corporate Debtor committed default on 01.10.2014 in repayment of facilities granted to the Corporate Debtor to the extent of 32,95,42,170/-, under Section 7 of Insolvency and Bankruptcy Code, 2016 - Held that:- The Corporate Debtor defaulted in repaying the loan availed and has also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional and there being no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of section 7 is taken as complete. This Petition is admitted.
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Service Tax
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2019 (1) TMI 445
Demand of Service Tax - T.V. and Radio Programme Production Service - sharing of revenue - case of the department in this appeal is that the Commissioner s finding is not correct as a perusal of the contract shows that the respondent was receiving a consideration in the form of a share of income from M/s UEL - Held that:- The arrangement in this specific case can be seen from the MOU entered into between the respondent and M/s UEL. The obligations and rights of the respondents are in Clause 1 of the agreement while those of UEL are in para 2 and sharing advertisement revenue is in clause 3 - In this case there is no evidence of whatsoever that the respondent is producing the programmes on behalf of M/s UEL but the evidence in the MOU show that they are producing the programmes as a part of joint venture which are telecast and the revenue is shared. The argument in the appeal that the department could have continued further investigation to attain the facts of ownership and consideration paid, does not carry their case any further. This only suggests that they could have suspicions about the arrangements made as per the MOU but any possible suspicion which is not brought out in the show cause notice substantiated by evidence cannot form the basis for confirming the demand. Appeal dismissed - decided against Revenue.
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2019 (1) TMI 444
CENVAT Credit - distribution of credit by ISD in respect of capital goods - denial of credit on the ground that equipments being in the nature of capital goods credit of duty paid on such equipments cannot be passed on by an ISD - Held that:- The distribution of capital goods credit by the head office prior to introduction of Rule7(a) of the CCR 2004, or, for that matter, the transfer of credit availed on the basis of a M.R.O which is not listed as an acceptable document for the purpose of Rule 9 of the CCR cannot be disallowed only on the basis of such procedural infractions - the procedural inadequacies will not be enough to deny the availment of credit by assessee in respect of various equipments etc. imported by their head office and distributed to the former by way of M.R.Os. The ratio laid down in Cosmos Casting India Ltd. [2011 (2) TMI 511 - CESTAT, NEW DELHI] will apply on all fours in favour of the appellant, where it was held that When there is no dispute about the realisation of the demand by the exchequer, the technicalities shall not be a bar to deny credit to the assessee. Appeal dismissed - decided against Revenue.
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2019 (1) TMI 443
Valuation - Construction services - inclusion of materials required for such construction service supplied free of cost by the clients in assessable value - period from June, 2005 to March, 2008 and April, 2009 to March, 2010 - Held that:- The issue under dispute has been finally laid to rest by the Hon’ble Supreme Court judgment in Bhayana Builders (P) Ltd. [2018 (2) TMI 1325 - SUPREME COURT OF INDIA], where the Apex Court has held that the goods/materials supplied free of cost by the service recipient and used for providing taxable service of construction of Commercial or Industrial Construction is not to be included “gross amount charged” for the purpose of arriving tax liability - the impugned orders cannot be sustainable and requires to be set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 442
Classification of services - construction activities - whether classified under Construction of Complex Services or not - benefit under works contract - N/N. 18/2005-ST 1/2006-ST - period in dispute is 16.06.2005 to 31.03.2009 - Held that:- Reliance placed in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [2018 (9) TMI 1149 - CESTAT CHENNAI], where it was held that the services provided by the appellant in respect of the projects executed by them for the period prior to 1.6.2007 being in the nature of composite works contract cannot be brought within the fold of commercial or industrial construction service or construction of complex service. For the period after 1.6.2007, service tax liability under category of commercial or industrial construction service‟ under Section 65(105)(zzzh) ibid, Construction of Complex Service‟ under Section 65(105)(zzzq) will continue to be attracted only if the activities are in the nature of services‟ simpliciter. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 441
Demand of service tax - Auction Income - whether chargeable to tax under Storage and Warehousing Service or not? - Held that:- Admittedly, “Auction Income” is nowhere defined under the statute and at the most what could have been sought to be taxed, instead of the so- called Auction Income, is the service element relating to the services of Storage and Warehousing, if any. Hon’ble Mumbai Bench of the CESTAT has decided identical issue in COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, RAIGAD VERSUS M/S. BALMER LAWRIE AND CO LTD. [2015 (11) TMI 902 - CESTAT MUMBAI], where it was held that Merely for the reason that Section 150 provides for distribution of the amount of proceed of auction that will not empowered the government to recover service tax on the auction proceeds - demand do not sustain - appeal dismissed - decided against Revenue.
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2019 (1) TMI 440
Business Auxiliary Service - collection of amounts in the nature of ocean freight - levy of service tax - Held that:- The said issue has been analysed by the Tribunal in the case of Bax Global India Ltd. (supra). Following the decision in the case of Greenwich Meridien Logistics (I) Pvt. Ltd. v. Commissioner of Service Tax Mumbai [2016 (4) TMI 547 - CESTAT MUMBAI] the Tribunal held that notional surplus charged for ocean freight is not subject to levy of service tax - demand cannot sustain - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 439
Construction of Residential Complex Services - non-payment of service tax - irregular availment of abatement as per Notification 1/2006-ST dt.1/3/2006 - period involved is from 2007 to March 2010 - Held that:- It is very much clear from the facts that the contracts are composite in nature - The Tribunal in the case of Real Value Promoters Pvt. Ltd. and Others [2018 (9) TMI 1149] has analysed the issue, whether the levy of service tax under Construction of Residential Complex Services or Commercial or Industrial Construction Services would be sustainable in the case of composite contracts which involve both element of services as well as supply of goods - demand set aside. Management, Maintenance and Repair services - amounts collected by the appellant from customers - Held that:- The appellants have collected the amounts from their customers for providing maintenance and repair services - the levy of service tax under this category does not call for any interference. Appeal allowed in part.
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2019 (1) TMI 438
Liability of Service Tax - services rendered as a co-loader - penalty - Held that:- This issue has already been considered and laid to rest by the decision of this very Bench of the Tribunal in the case of M/s. Concord Express Logistics India Pvt. Ltd. [2018 (8) TMI 255 - CESTAT CHENNAI], wherein this Bench after considering the applicability of the Board Circular dated 01.11.1996 as well as the judgement in the case of United Business Xpress India P. Ltd. [2016 (12) TMI 440 - CESTAT NEW DELHI] has set aside the demand of service tax with respect to co-loader - the demand raised in respect of the services rendered as a co-loader cannot sustain and is required to be set aside. With regard to the demand for the period post 22.08.2007, however, the Ld. Advocate has conceded the same - The same is therefore upheld with interest thereon. Penalty - Held that:- There being no suppression of facts on the part of the appellant to evade payment of service tax - penalty is set aside. It is deemed proper to remand the case to the file of the adjudicating authority who shall work out the demand for the period post 22.08.2007; and it is for the assessee thereafter to convince the adjudicating authority with regard to its claim of payment of tax - appeal allowed by way of remand.
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2019 (1) TMI 437
Valuation - expenses incurred for providing free services are reimbursed by the manufacturers - taxability - Held that:- The issue as to taxability of the reimbursible expenses has finally been laid to rest by the Hon’ble Supreme Court in the case of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA], where it was held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 436
Franchise services - use of logo and study material to their USA based franchiser, namely, M/s. Crest Com International Limited, USA - Held that:- While appellants have been consistently contending that the amount sent to Crest Com International Ltd., U.S.A has already suffered, both the lower authorities have chosen to disregard the same on the grounds that such claim is not backed up with necessary documentation. On the other hand, appellant has argued that they have supplied necessary evidence to substantiate their averment before both the lower authorities, however the same has not been adequately considered - the matter requires to be remanded to original authority to cause necessary verification. Penalty u/s 78 - Held that:- Penalty imposed under Section 78 is an overkill and requires to be set aside. Appeal allowed in part and part matter on remand.
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2019 (1) TMI 435
Club or Association Service - Admission Fee, Membership Fee, Establishment Expenses, collected by the appellant from its members - amount retained for earning ‘carbon credits’ - doctrine of mutuality - service by an association to its own members - service or not? - liability of service tax - Held that:- The Division Bench of CESTAT Chennai in a recent decision, in M/S. COSMOPOLITAN CLUB VERSUS CCE & ST, MADURAI [2018 (2) TMI 1052 - CESTAT CHENNAI] has held that if a Club provides any service to its members may be in any form, then it is not a service by one to another in the light of decisions as foundational facts of existence of two legal entities in such transactions is missing The appellants were an organization and hence the service provided to its own members cannot come within the scope of taxable services for the purpose of Finance Act, 1994. The demand of service tax in respect of membership fee, admission fee, establishment expenses, membership renewal fee etc. as also amount retained in connection with service provided by appellants to its members for earning ‘carbon credits’ will not be liable to service tax - demand set aside. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 434
Refund of accumulated CENVAT Credit - export of services or not - Rule 5 of Cenvat Credit Rules, 2004 - It appeared to revenue that appellants were providing taxable services to M/s Jubilant Biosys Ltd. and such services were classified by revenue under the category of Scientific or Technical Consultancy Services - Held that:- Similar issue decided in appellant own case M/S JUBILANT CHEMSYS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE& SERVICE TAX, NOIDA [2018 (4) TMI 1399 - CESTAT ALLAHABAD] where it was held that The appellant have satisfied both the conditions for export of service, namely rendering of service from India and receipt of the service by the client outside India of consideration in convertible foreign currency in India. The issues involved in the present appeal are already decided in respect of the same appellant for the earlier period in favour of the appellant - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 433
Levy of Service Tax - remuneration paid to the Directors - reverse charge mechanism - N/N. 45/2012-ST dated 7.8.2012 and 46/2012-ST dated 7.8.2012 - service or not - employer-employee relationship - Held that:- The Appellant have placed on record the Form-16 issued by the appellant indicating deduction of income tax at source on the salary paid to each of the Directors. Besides, the appellant had also produced the contribution made to the Employees Provident Fund for each of the Directors, as required in case of other employees under the relevant Laws - Similarly, the Form-32 as required to be filed under the Companies Act, with the Registrar of companies, the four directors are shown as executive directors indicating that they are employees of the company. It is the agreement between the employer i.e. company and the Director would reveal the exact relationship between them - In the present case, no such agreement exists between the employer and the Directors, hence there exists no employer-employee relationship. All the necessary deductions on account of Provident Fund, Professional Tax and TDS under Section 192 of the Income Tax Act are made as applicable; also they were issuing Form-16 like it is issued to all other employees. Even in the salary return filed by the appellant company before the Income Tax authorities, the director s names have been included. The company does not pay the director s sitting fee to any of the directors. To discredit the said statement, no contrary evidence was produced by the Revenue to establish that the directors are not involved in the day to day function of the Company, but participate only in Board Meetings and consequently paid remuneration. Also, from the documents produced by the Appellant it is crystal clear that the Directors who are concerned with the management of the company, were declared to all statutory authorities as employees of the company and complied with the provisions of the respective Acts, Rules and Regulations indicating the Director as an employee of the company - No contrary evidence has been brought on record by the Revenue to show that the Directors, who were employee of the appellant received amount which cannot be said as salary but fees paid for being Director of the company - The Income Tax authorities also assessed the remuneration paid to the said directors as salary, a fact cannot be ignored. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 432
CENVAT Credit - input services or not - consultancy service, construction service etc. - Department took the view that appellants did not provide any taxable output service using said inputs services and hence they were not entitled to take impugned cenvat credit - Held that:- Services used for constructing materials which were then rented out are very much eligible input service - Hon’ble High Court of Chattisgarh in CCE & ST Raipur Vs Vimla Infrastructure India P. Ltd. [2018 (3) TMI 1493 - CHHATTISGARH HIGH COURT] has held that the 'Inputs' have been used for providing output services which is taxable, therefore, by erecting the Railway Siding, the respondent is providing a taxable service for providing an output service, therefore, it is entitled to avail Credit under Rule, 2004 - credit allowed - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (1) TMI 431
Classification of goods - Dena Ji Brand Satritha shampoo - Dena Ji Brand Harbal shampoo - Dena Ji Brand Neem shampoo - whether classifiable under heading 3003.20 or otherwise? - Held that:- the product in question was not used as ayurvedic medicine but was a “shampoo”. - Decision of lower authority sustained. The decision in Meghdoot Gramodyog Sewa Sansthan vs. C.C.E., Lucknow [2004 (10) TMI 93 - SUPREME COURT OF INDIA], is on facts of the said case, where it was held that the products are properly classified under Tariff Heading 3303.031, not applicable in the present case - SLP disposed off.
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2019 (1) TMI 430
CENVAT Credit - input services - lease rentals and operations and maintenance of windmills situated far away from their factory - case of Revenue is that the windmill is situated far away from the manufacturing plant, there is no nexus and the type of transaction between the assessee - interpretation of Rule 2(l) of CENVAT Credit Rules. Held that:- There is no dispute that the electricity generated by the windmills are exclusively used in the manufacturing unit for final products, there is no nexus between the process of electricity generated and manufacture of final products and there is no necessity for the windmills to be situated in the place of manufacture. The definition of input service is wider than the definition of input . Furthermore, if one takes a look at the Rules, more particularly Rule 2(k), as it stood prior to 01.04.2011, which defines input , the words within the factory of production has been specifically inserted - However, these words are physically missing in Rule 2(l), which defines input service and it would mean any service used by a provider of taxable service for providing an output service or used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal. Though the definition of input service has to be widely construed, and in terms of Rule 3, which allows the manufacturer of final products to take the credit of service tax inputs or capital goods received in the factory of manufacture of final products, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of final products - Therefore, this would be the correct manner of interpreting Rule 2(l) of the Rules. The decision of the High Court of Bombay in Endurance Technology Pvt. Ltd. [2015 (6) TMI 82 - BOMBAY HIGH COURT], which has been followed by the Larger Bench of the Tribunal in Parry Engg. Electronics P. Ltd. [2016 (1) TMI 546 - CESTAT AHMEDABAD], where it was held that Management, maintenance and repair of windmills installed by the respondents is input service as defined by clause l of Rule 2. Rule 3 and 4 provide that any input or capital goods received in the factory or any input service received by manufacture of final product would be susceptible to CENVAT credit. Rule does not say that input service received by a manufacturer must be received at the factory premises. Appeal dismissed - decided against Revenue.
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2019 (1) TMI 429
Clandestine manufacture and removal - TMT bars - certain documents resumed from the premises of M/s Pahalwan Goods Carrier - on the basis of records resumed from the premises of transporter and the statement of the proprietor of the transport firm - denial of cross-examination of Shri Mahipal Yadav, Proprietor of M/s Pahalwan Goods Carrier - principles of natural justice. Whether the charge of clandestine removal can be made on the basis of documents resumed from the premises of a third party without independent corroboration? Held that:- Neither the factory premises of the Appellants has been searched nor any discrepancy in the stocks of finished goods & raw materials has been found by the Central Excise Officers. No investigation has been conducted by the officers at the Appellant’s end, as to whether they have the capacity to produce the alleged quantity of TMT bars, electricity consumption, purchase of raw materials, its transportation and payment to the suppliers. There is no investigation about the buyers of goods involving duty of more than ₹ 4.53 Crores. The entire case has been made upon the recovery of some documents from the third party premises. It is well settled law that allegations and findings of clandestine removal are required to be made upon cogent and positive evidence which corroborate unaccounted production and clearance of finished goods - In the present matter, no such evidence is available on record at all, except the third party records which cannot be relied upon as admissible piece of evidence. The allegation of clandestine manufacture and removal of finished goods cannot be proved merely on the basis of third party records without independent corroboration. Cross-examination of statements denied - principles of natural justice - Held that:- The impugned Order has been passed in gross violation of the principles of natural justice inasmuch as the cross-examination of Shri Mahipal Yadav, Proprietor of transport firm was not allowed though the statement recorded from him has been relied upon by the learned Adjudicating Authority - demand on this ground also not sustainable. Demand not sustainable - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 428
Adjustment of excise duty short paid with the excise duty paid in excess - finalization of provisional assessment - Held that:- Issue decided in the case of Hindustan Zinc Ltd. Vs CCE Jaipur [2015 (11) TMI 953 - CESTAT NEW DELHI (LB)], where it was held that appellant is entitled for adjustment of excess paid duty with the short paid duty during the financial year 2006-07 - appeal dismissed - decided against Revenue.
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2019 (1) TMI 427
CENVAT Credit - input services - Classification of services - outward transport / GTA services or hiring services? - It appeared to the department that CHEP had been employed only to deliver the appellant’s finished goods i.e. various automobile parts to their customer situated at various places - Held that:- The services provided by CHEP, appellants were nothing but hiring of specialized packing equipment to the appellant to enable safe and secure transportation of the goods manufactured by them and not for transportation of the finished goods per se - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 426
CENVAT Credit - capital goods - simultaneous availemnt of credit and Depreciation - violation of Rule 4(4) of the CENVAT Credit Rules (CCR), 2004 - Credit of Education Cess on CVD and Secondary and Higher Education Cess on CVD - Rule 3(1) of CCR, 2004 - Held that:- The documents placed on record namely, the Demand Notice under Section 156 of the Income Tax Act after taking cognizance of the revised return for the assessment year 2013-14, would satisfy the legal requirements of law - Further, the fact that the revised return was acted upon by the Income Tax Department and a consequent demand was raised under Section 156 ibid even though for the subsequent period, evidences the fact that the wrong claim made by the assessee during the previous year was wiped out thereby entitling the assessee to the benefit of availing CENVAT Credit of duty on the capital goods - credit allowed. Credit of Education Cess and Secondary and Higher Education Cess on CVDCredit of Education Cess and Secondary and Higher Education Cess on CVD - contravention of Rule 3(1) of CCR - Held that:- Rule 3(1)(vii) specifically allows the manufacturer or producer of final products to avail Credit including Education Cess on excisable goods and the Secondary and Higher Education Cess on excisable goods and the claim of the assessee, therefore, appears to be correct - The denial, if at all, of the CENVAT Credit, could only be in accordance with the provisions of law for any violation or contravention, etc. The authorities having not pointed out any such thing, the denial is held to be incorrect and unsustainable for which reason, the same is set aside - credit allowed. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 425
CENVAT Credit - capital goods - MS Angles, Plates, etc. - welding electrodes - insertion of Explanation -2 to Rule 2(k) of CCR, 2004 i.e., 07.07.2009 - Held that:- Non’ble Madras High Court in the case of M/s. Thiru Arooran Sugars [2017 (7) TMI 524 - MADRAS HIGH COURT] has held that MS Angles, Channels, etc., being an integral part of capital goods and manufacturing of final goods, are eligible for credit - the denial of Credit on MS Angles, Plates, etc., is not sustainable - credit allowed. CENVAT Credit - Welding Electrodes used for repair and maintenance purposes - Held that:- An identical issue has already been considered and laid to rest by this Bench of the Tribunal in the case of M/s. UltraTech Cements Ltd. [2018 (7) TMI 677 - CESTAT CHENNAI], where it was held that the appellants are eligible for credit on same issue - credit allowed. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 424
CENVAT Credit - various input services - Auction Services - Courier Services - Information Technology Services - Photography Services - Rent-a-Cab Services - Travel Booking Services - Business Exhibition - AMC for Weigh Bridge - Held that:- The dispute relates to the period prior to 01.04.2011 when the definition of “input service” had a wide ambit and included any service used by a manufacturer in or in relation to the manufacture of final products and clearance of final products from the place of removal - credit allowed - appeal dismissed - decided against Revenue.
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2019 (1) TMI 423
CENVAT Credit - availing 50% credit on capital goods after absolute exemption - manufacture of cotton yarn - appellant availed exemption under Notification No.29/2004-CE dt. 09.07.2004 which provides 4% duty advalorem and also under Notification No.30/2004-CE dt. 09.07.2004 which provides for Nil rate of duty - denial of credit on the ground that cotton yarn was therefore absolutely exempted during the period from 07.12.2008 to 06.07.2009, and the assessees were prohibited from paying duty on their own and hence the assessees were not entitled for Cenvat Credit during this period. Held that:- No doubt, as per sub-rule (4) of Rule 6 of Cenvat Credit Rules, 2004, availment of cenvat credit is barred in respect of capital goods which are used captively in the manufacture of exempted goods. However, when the manufacturer was entitled to take credit on the duty paid capital goods at the time of their receipt it would be unjust and beyond the provisions of law to deny availment of remaining amount of credit only on the grounds that at the time of taking the second instalment the final goods were exempted. What is important to be seen is the eligibility or otherwise availment of credit, at the time of receipt of the goods in the factory. Restriction of availment of 50% in the first financial year and the balance subsequently, is only a procedural compulsion brought about by sub-ordinate legislation. However that cannot take away the right of availment of credit that is vested with the appellant at the time when goods were received in the factory. Appeal dismissed - decided against Revenue.
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Indian Laws
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2019 (1) TMI 447
Dishonor of Cheque - insufficient funds - acquittal of the respondent in the complaint instituted by him - rebuttal of presumptions - Section 138 of the Negotiable Instruments Act - Held that:- In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words “proved” and “disproved” have been defined in Section 3 of the Evidence Act - Applying the said definitions of “proved” or “disproved” to the principle behind Section 118(a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon. In M.S. Narayana Menon alias Mani versus State of Kerala and another [2006 (7) TMI 576 - SUPREME COURT], the Hon’ble Supreme Court while dealing with a case under Section 138 of the Act held that the presumption under Sections 118(a) and 139 were rebuttable and the standard of proof required for such rebuttal was “preponderance of probability” and not proof “proved beyond reasonable doubt”. It cannot be said that the Court below has not correctly appreciated the evidence on record or that acquittal of the respondent has resulted into travesty of justice. No ground for interference is called for - appeal dismissed.
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2019 (1) TMI 446
Dishonor of Cheque - Section 138 of the Negotiable Instruments Act - whether a compromise, at this stage, can be permitted to be effected between the parties where the petitioner has been charged under Section 138 of the Act? Held that:- This court is not powerless in such situation and adequate powers have been conferred upon it not only under sections 397 read with Section 401 or Section 482 Cr.P.C. but also under Section 147 of the Act for accepting the settlement entered into between the parties and to quash the proceedings arising out of the proceedings, which have consequently culminated into a settlement. This power has been conferred to subserve the ends of justice or/and to prevent abuse of the process of any Court - Though, such power is required to be exercised with circumspection and in cases which do not involve heinous and serious offence of mental depravity or offences like murder, rape, dacoity etc. Since, the petitioner has paid the entire compensation amount, therefore, quashing of the complaint initiated at the instance of complainant/respondent would be a step towards securing the ends of justice and to prevent abuse of process of the Court, especially, when the petitioner is facing pangs and suffered agony of protracted trial and thereafter appeal/revision for the last more than four years and has paid the entire compensation amount. The impugned substantive sentence of simple imprisonment imposed in this case shall stand modified and substituted in lieu of the compensation amount of ₹ 2,70,000/- that stands already deposited/paid by the petitioner - amount deposited before the Registry of this Court be released in favour of the respondent/complainant by remitting the same to his bank account - petition disposed off.
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2019 (1) TMI 422
Hearing of the petition is adjourned in order to enable respondent to produce for the perusal of this Court the relevant original file - In view of the urgent reliefs prayed for in the present proceedings, the same be listed for hearing before the Vacation Bench on 24th December, 2018.
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