TMI Tax Updates - e-Newsletter
January 13, 2018

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws PMLA Service Tax Central Excise

Articles

1. GST SINCE ITS INTRODUCTION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Sharp increase in prosecutions of tax evaders by Income Tax Department

2. RBI Reference Rate for US $

Notifications

Customs

1. 03/2018 - dated 12-1-2018 - Cus

Inclusion of Dhamra and Dighi Ports in the list of ports mentioned in Export Promotion (EP) Schemes Notifications

GST - States

2. 01/2018-State Tax - dated 1-1-2018 - Gujarat SGST

Amendments in the Notification No.(GHN-27)/GST-2017-S.10(1)-TH, dated 23rd June, 2017, Notification No.8/2017- State Tax. - Reduction in Rate of tax for composition for manufacture.

3. 75/2017-State Tax - dated 29-12-2017 - Gujarat SGST

The Gujarat Goods and Services Tax (Fourteenth Amendment) Rules, 2017.

4. 74/2017-State Tax - dated 29-12-2017 - Gujarat SGST

Appointed day for e-Way bills.

5. 73/2017-State Tax - dated 29-12-2017 - Gujarat SGST

Waiving Late fee for GSTR 4

6. 71/2017-State Tax - dated 29-12-2017 - Gujarat SGST

Recommendations of the Council, notifies the registered persons having aggregate turnover of upto 1.5 crore rupees in the preceding financial year.

7. 70/2017-State Tax - dated 22-12-2017 - Gujarat SGST

The Gujarat Goods and Services Tax (Thirteenth Amendment) Rules, 2017.

8. 63/2017-State Tax - dated 15-11-2017 - Gujarat SGST

Amendments in the notification No. 53/2017-Central Tax, dated the 28th October, 2017,

9. 56/2017-State Tax - dated 15-11-2017 - Gujarat SGST

Last date for filing of return in FORM GSTR-3B.

10. 46/2017-State Tax (Rate) - dated 15-11-2017 - Gujarat SGST

Amendments in the Government Notification, Finance Department No.(GHN-32)GST-2017/S.9(1)(2)-TH dated 30th June, 2017.

11. 45/2017-State Tax (Rate) - dated 15-11-2017 - Gujarat SGST

2.5% concessional rates supplies to specific public funded research institute.

12. 44/2017-State Tax(Rate) - dated 15-11-2017 - Gujarat SGST

Amendments in the Government Notification, Finance Department No. (GHN-44)GST-2017/S.54(3)(1)-TH dated 30th June, 2017, Notification No.5/2017-State Tax (Rate) - To block refund of ITC on certain goods.

13. 42/2017-State Tax (Rate) - dated 15-11-2017 - Gujarat SGST

Amendments in the Government Notification, Finance Department No. (GHN-36)GST-2017/S.11(1)(1)-TH dated 30th June, 2017, - Exempts certain goods.

14. KA. NI-2-1936/XI-9(42)/17 - dated 26-12-2017 - Uttar Pradesh SGST

Waives late fee for July, 2017 in FORM GSTR-3B

15. KA. NI-2-1845/XI-9(52)/17 - dated 6-12-2017 - Uttar Pradesh SGST

Amendment Notification No. KA.NI.-2-1014/XI-9(52)/17-U.P. Act-1-2017-Order-(31)-2017 dated July 21, 2017

16. KA. NI-2-1827/XI-9(47)/17 - dated 4-12-2017 - Uttar Pradesh SGST

Amendment in Notification No. KA.NI.-2-836/XI-9(47)/17 Dated: 30-6-2017

17. KA. NI-2-1826/XI-9(47)/17 - dated 4-12-2017 - Uttar Pradesh SGST

Amendment in Notification No. KA.NI.-2-837/XI-9(47)/17 Dated 30 June 2017

18. KA. NI-2-1825/XI-9(47)/17 - dated 4-12-2017 - Uttar Pradesh SGST

Amendment in Notification No. KA. NI.-2-851/XI-9(47)/17 Dated 30 June 2017

19. KA. NI-2-1824/XI-9(47)/17 - dated 4-12-2017 - Uttar Pradesh SGST

Amendment in Notification No. KA.NI.-2-842-/XI-9(47)/17 dated 30 June 2017

20. 29/2018/9(120)/XXVII(8)/2017/CT-1 - dated 4-1-2018 - Uttarakhand SGST

Amendment in rate of tax for composition scheme w.e.f. 01st Jan, 2018

21. 08/2018/9(120)/XXVII(8)/2017/CT-75 - dated 1-1-2018 - Uttarakhand SGST

The Uttarakhand Goods and Services Tax (FOURTEENTH Amendment) Rules, 2017

22. 07/2018/9(120)/XXVII(8)/2017/CT-74 - dated 1-1-2018 - Uttarakhand SGST

Implementation of Rule 138 and Rule 138A from 01st Feb 2018 with respect to E-way bill which was amended by notification 792 Dated 10.10.2017 (Sixth Amendment Rules)

23. 06/2018/9(120)/XXVII(8)/2017/CT-73 - dated 1-1-2018 - Uttarakhand SGST

Late fee for filing GSTR 4, in excess of ₹ 25 per day and for NIL GSTR 4 ₹ 10 per day has been weived off

24. 05/2018/9(120)/XXVII(8)/2017/CT-71 - dated 1-1-2018 - Uttarakhand SGST

Dates for filing GSTR-1 for those taxpayers having turnover upto 1.5 Crore. 10 Jan 2018 for JUL-SEP, 15 Feb 2018 for OCT-DEC and 30 Apr 2018 for JAN-MAR quarter

Circulars / Instructions / Orders

GST - States

1. 10/2017-GST - dated 15-11-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Gujarat Goods and Service Tax Rules, 2017.

2. 09/2017-GST - dated 15-11-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Gujarat Goods and Service Tax Rule, 2017

3. 08/2017-GST - dated 31-10-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Gujarat Goods and Service Tax Rules, 2017

4. 07/2017-GST - dated 31-10-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Gujarat Goods and Services Tax Rules, 2017.

5. 06/2017-GST - dated 31-10-2017

Extension of time limit for submitting application in FORM GST REG-26

6. 05/2017-GST - dated 31-10-2017

Extension of time limit for intimation of details of stock held on the date preceding the date from which the option for composition levy is exercised in FORM GST CMP-03

DGFT

7. 52/2015-2020 - dated 12-1-2018

Amendments in ANFs 4A, 4E, 4F, 4G, 4H & 4I of Handbook of Procedures 2015-20 - reg.

Customs

8. 06/2018 - dated 9-1-2018

Subject :- Procedure for drawal of samples of Toys after amendment in Policy condition No. 2 to Chapter 95 of ITC (HS), 2017 –Schedule – 1.

9. 04/2018 - dated 5-1-2018

Sub: Amendment in Para No 6(iii) vide the Public Notice No 147/2017 dated 16.11.2017 for the procedure for self sealing and e-sealing of containerized cargo at factory/approved warehouse premises - reg.

10. 01/2018 - dated 2-1-2018

SUB : Passbook Scheme by Textile Committee for payment of testing charges - reg.

11. 02/2018 - dated 2-1-2018

Subject: Export Policy of Onions- Imposition of Minimum Export Price (MEP).

12. 162/2017 - dated 29-12-2017

Subject: - Pilot implementation of paperless processing under SWIFT — Uploading of supporting documents regarding -Reg.

13. 160/2017 - dated 27-12-2017

SUB : Implementing Electronic Sealing for containers by exporters under self-sealing procedure by Circular 26/2017-Customs dated 01.07.2017, 36/2017 dated 28.08.2017, 37/2017 dated 20.09.2017, 41/2017 dated 30.10.2017 and 44/2017 dated 18.11.2017–reg.

Highlights / Catch Notes

Income Tax

• No TDS liability for assessee u/s 194J in Haldia water supply rights case; only license fee recognized as income.

  Case-Laws - AT : TDS u/s 194J - awarding right to supply water to consumers in Haldia - scheme of sharing of amount deposited in the revenue collection account, the assessee is taking and accounting only license fee as income in its books of account - No TDS liability - AT
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• High Court Criticizes Assessing Authority's Hasty Use of Section 142(2A) for Special Audit on Tax-Exempt Government Entity.

  Case-Laws - HC : Special Audit u/s 142(2A) - The hot-haste, the casual and cavalier attitude of the Respondent Assessing Authority in which he is invoking a serious provision of the Act against an assessee which is a Government Undertaking engaged in a public purpose of Industrial Development and being exempt from Income Tax under the KIADB Act itself, are very telling facts - HC
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• Court Rules Communication Charges Must Be Deducted from Export and Total Turnover for Section 10A Deductions.

  Case-Laws - AT : Disallowance of communication charges while computing deduction u/s. 10A - communication charges etc., attributable to the delivery of the computer software outside India which are to be reduced from the export turnover should be reduced from the total turnover as well, while computing the deduction u/s. 10A. - AT
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Customs

• Toy Sample Collection Updated: Amendment to Policy Condition No. 2, Chapter 95, ITC (HS) 2017 - Schedule 1.

  Circulars : Subject :- Procedure for drawal of samples of Toys after amendment in Policy condition No. 2 to Chapter 95 of ITC (HS), 2017 –Schedule – 1. -
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• Dhamra and Dighi Ports Now Eligible for Export Promotion Schemes, Boosting Trade Efficiency and Market Access.

  Notifications : Inclusion of Dhamra and Dighi Ports in the list of ports mentioned in Export Promotion (EP) Schemes Notifications - Notification
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• Countervailing Duty Imposed on Rutile Ore Leucoxene Sand Imports as Concentrate Under Chapter Note 4, Chapter 26.

  Case-Laws - AT : Levy of CVD on import of goods - Manufacture - case of Revenue is that in terms of Chapter Note 4 of Chapter 26, which brings the imported goods Rutile Ore Leucoxene Sand as appearing in Bill of Entry, is concentrate being converted from ore amounting to manufacture, shall be liable to duty - demand confirmed - AT
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PMLA

• High Court mandates compliance with Section 5(1) safeguards in PMLA for 'reasons to believe' to prevent arbitrary enforcement.

  Case-Laws - HC : PMLA - The expression ‘reasons to believe’ has to meet the safeguards inbuilt in the second proviso to Section 5(1) PMLA read with Section 5(1) PMLA. - HC
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• High Court Confirms Single-Member Benches Allowed Under PMLA, Can Include Judicial or Administrative Members.

  Case-Laws - HC : PMLA - Constitution of tribunal - There can be single-member benches of the AA and the AT under the PMLA. Such single-member benches need not mandatorily have to be JMs and can be AMs as well - HC
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Central Excise

• Demand Notices Require Independent Assessment Beyond Audit Objections by Adjudicating Authority, Not Justified Solely by Audit Party's Concerns.

  Case-Laws - HC : Validity of demand / show cause notice - Merely because an audit party had raised an objection, ipso facto, that cannot be the sole reason for issuing the show cause notices, as the Adjudicating Authority is a Quasi Judicial Authority and is legally bound to adjudicate the case independently and judiciously - HC
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• Laptops: Repacking, relabeling, testing, and software loading qualify as deemed manufacture u/s 2(f)(iii) of Central Excise Act.

  Case-Laws - AT : Deemed Manufacture - laptops - All the processes which are involved are repacking of goods in or into the unit container, and in addition relabeling, testing, and loading of software without which the laptops would not be fully functional and would not be accepted by ELCOT. The ingredients of Section 2 (f) (iii) of the Act will definitely get attracted - demand confimred - AT
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Case Laws:

• Income Tax

• 2018 (1) TMI 549
  TDS u/s 194J - awarding right to supply water to consumers in Haldia - scheme of sharing of amount deposited in the revenue collection account, the assessee is taking and accounting only license fee as income in its books of account - Held that:- The assessee did not engage HWML to render any service. Under the said agreement, dt. 18th July, 2008, the assessee transferred to HWML, for an agreed consideration and for a specified period, its right to supply water to consumers in Haldia and conferred the right to HWML to charge and collect the charge thereto directly from the consumers. The terms 5 Crores. The assessee was also to share the increase in the power cost over the base power tariff, equally with HWML. During the currency of the agreement, the assessee was to receive only license fee and an agreed share in additional revenue from HWML. The revenue from Water Bills raised belonged to HWML. Thus there is no payment of any amount of any kind for any service by the assessee to HWML. Under these circumstances, the conclusion of the Assessing Officer that Section 194J of the Act, applies, is bad in law. - Decided in favour of assessee.

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• 2018 (1) TMI 548
  Penalty u/s. 274 r.w.s.272(2)(c) - not furnishing the information called for u/s 133(6) - Held that:- The assessee has not offered any valid reason for not furnishing the information called for u/s 133(6) of the Act. Many of the notices issued by the ITO (Intelligence) were never responded to by the assessee. In many instances the Assessing Officer has mentioned that when they had approached, the assessee Society, for seeking information u/s 133(6) of the Act, there was total lack of co-operation on the part of the assessee society as well as threat (reference order imposing penalty u/s 272A(2)(c) in appeals. Since there is no reasonable cause furnished by the assessee as mentioned u/s 273B of the IT Act for non furnishing of information sought by the ITO(intelligence) u/s 133(6) of the Act, the order imposing penalty cannot be quashed. - Decided in favour of revenue.

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• 2018 (1) TMI 547
  Carry forward depreciation for a number of years - whether the interpretation of Section 32(2) of the Income Tax Act, 1961 (‘the Act’) as amended by Finance Act, 2001, could be given effect to beyond the period of eight years, prior to its commencement? - Held that:- In General Motors India Pvt. Ltd. (2012 (8) TMI 714 - GUJARAT HIGH COURT) the entire history of the legislation was considered by the Gujarat High Court including the reasons for the Finance Act No.2 of 1996, the amendment of 2001-brought into force with effect from 01.04.20002 as well as the circular of the Central Board of Direct Taxes (Circular No.14 of 2001). This Court is in agreement with the reasoning of the Gujarat High Court. The rationale for the amendment appears to be that the restriction against set off and carry forward limited to 8 years, beyond which the benefit could not be claimed under provisions of the Income Tax Act, was for the reasons deemed appropriate by the Parliament. The limit was imposed in 1996 through Finance Act No.2. As the Gujarat High Court observed, Had the intention of Parliament being really to restrict the benefit (of unlimited carry forward prospectively), there were more decisive ways of doing so-such as, an expressed provision or an exception or proviso etc. The absence of any such legislative devise meant that provisions had to be construed in its own term and not so as to restrict the benefit or advantage, it sought to confirm. The reasoning in Motor & General Finance Ltd. (supra) does not call for reexamination.

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• 2018 (1) TMI 546
  Revision u/s 263 - addition u/s 14A of the Act with regard to certain shares which had been issued in their favour individually as member of the firm and had not been issued to the firm itself - capital assets in the shape of shares were in the name of the partnership himself - Held that:- One thing which is clear that the assessee was not trading in shares. The business was a different nature and it was to sale motorcycle and its parts. It is admitted to the assessee that the amount which was received as capital assets in the shape of shares were in the name of the partnership himself and did not form any part of the capital account of the firm and, therefore, the claim made by the firm under Section 36(1)(iii) read with Section 14-A was not allowable in favour of the partners as such deduction can only be granted to a firm. Thus since the assessee failed to establish that the capital assets which had received were ever part of the firm's capital account. The deduction which had been allowed to them under that head could not have been allowed. It has rightly been disallowed. Insofar as the other aspects are concerned, the Tribunal has recorded that the assessee is a firm and is also assessed as a firm. - Decided against assessee

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• 2018 (1) TMI 545
  Correctness of the ‘Special Audit’ u/s 142(2A) ordered by the Respondent Authority - Held that:- The reasons recorded and communicated to the assessee for such ‘Special Audit’ prima facie indicate that the Assessing Authority has merely quoted the observations and objections of the Comptroller and Auditor General of India, its Audit Paras and its explanation and reply by the petitioner assessee Board and adding a few lines of his own as Assessing Authority’s observations, the said Respondent has directed the ‘Special Audit’. The orders impugned before this Court neither disclose the discussion on the objections of the assessee for there being no justification for ‘Special Audit’ and at least in one case for assessment year 2013-14, the said Respondent Assessing Authority did not even wait for the objections to be placed on record and before they were furnished on 29/03/2016, the said Respondent had already passed the impugned order on 28/03/2016 while the limitation for passing the assessment order was expiring on 31/03/2016. The hot-haste, the casual and cavalier attitude of the Respondent Assessing Authority in which he is invoking a serious provision of the Act against an assessee which is a Government Undertaking engaged in a public purpose of Industrial Development and being exempt from Income Tax under the KIADB Act itself, are very telling facts, in the perspective of which, invoking of these provisions of Section 142 (2-A) of the Act in this manner was absolutely not called for. This Court is, therefore, of the opinion that the impugned orders under Section 142(2-A) of the Act cannot be sustained. While quashing the two orders under Section 142 (2-A) of the Act for the Assessment Years 2013-14 and 2014-15, this Court would however give one more opportunity to the Respondent Assessing Authority to reconsider the matter in the light of the aforesaid at its own level and consider the objections and written submissions filed by the petitioner assessee Board in the correct perspective and pass fresh orders.

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• 2018 (1) TMI 544
  Validity of assessment u/s 153A - cash seized during the course of search of the vehicle of the petitioner - issuance of notices by the competent authority - Held that:- Admittedly, the cash amounting to 2,76,35,500/- was seized on 19.5.2015 during the course of search of the vehicle of the petitioner. The amount was in the possession of the petitioner though the petitioner claimed that it was the money belonging to the company. At this stage, there is no material on record to establish the truthfulness of the assertion of the petitioner except reliance has been placed on the statement of the petitioner recorded under Section 132(4) of the Act or the sale deed executed by the company. The petitioner from whose possession the money was seized has been issued notice under Section 153A for the assessment years 2010-11 to 2015-16 and under Section 143(2) of the Act for the assessment year 2016-17 where he would get sufficient opportunity to establish his version. The warrant of the authorization was in the name of the petitioner and the seizure was also from his possession of cash amounting to 2,76,35,500/-. In such circumstances, the issuance of notices by the competent authority under Sections 153A and 143(2) of the Act as noticed above cannot be held to be without jurisdiction so as to be amenable to challenge under Articles 226/227 of the Constitution of India.

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• 2018 (1) TMI 543
  Reopening of assessment - Held that:- Having heard the parties and considering the materials placed, this Court is satisfied that complete disclosure sought to be labored by the learned Counsel for the petitioners in an assessment proceeding under Section 147 is not the sole duty of the revenue / respondents alone but, equally, lies at the door step of the petitioners/ assessee company. This Court is also satisfied that the reasons for harbouring the belief of the income having escaped assessment have been clarified in the reply dated 26th /27th July, 2017 and, the process of answering the evidence in detail can start only after the reassessment exercise takes place on the basis of the required disclosures which lie at the door step of the petitioners /assessee company. In the backdrop of above discussion, this Court finds no useful purpose to admit the writ petition.

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• 2018 (1) TMI 542
  Accrual of income - interest accrued to the assessee in respect of the loan given to Method - Whether the finding of the Tribunal that the claim of the assessee that no income accrued to it in respect of the loan given to ‘Method’ could not be allowed on the basis of resolution of its Board of Directors on the ground of the subsequent fact of passing of decree by the Hon’ble High Court against the Bank and the appeal filed therefrom is vitiated by reason of inter alia of consideration of irrelevant materials and/or is otherwise perverse ? Held that:- We find from the impugned order, the Tribunal restored the matter of interest to the Assessing Officer on the ground that C.I.T.(A) had not taken note of the subsidiary having had filed the suit and obtained a decree, which though stayed was so on condition of furnishing bank guarantee. However, in doing so, the Tribunal had not referred to the reasoning of the Assessing Officer. Since the suit having been filed and decree obtained being the basis of the Tribunal’s reasoning is no longer in existence, the decree having been set aside, we find that the assessee had by Board resolution adopted, prior to the previous year to the assessment year in the reference, decided to waive interest on the loan. That position having been restored it cannot be said there was accrual of interest income in the assessment year. We therefore answer the questions in this reference as follows: a) Question no.1 in favour of the assessee in view of the decree having been set aside as brought to our notice though the same was not disclosed to the Tribunal. b) Question no.2 is accordingly answered in the negative and in favour of the assessee.

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• 2018 (1) TMI 541
  Deemed dividend u/s 2(22)(e) - Held that:- Assessing Officer had not examined the question whether assessee had given the same collateral security for loans raised by the assessee from SIDBI and State Bank of Hyderabad and how far the claim was correct. Much more facts have to be brought on record before the question whether the loans taken by the assessee could be deemed as dividend can be properly addressed. Considering these circumstances, it is of the opinion that issue requires a fresh look by the ld. Assessing Officer. Thus set aside the orders of the lower authorities and remit the issue regarding addition u/s.2(22) (e) of the Act back to the file of the ld. Assessing Officer for consideration afresh in accordance with law. In the result, appeal of the assessee is allowed for statistical purpose.

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• 2018 (1) TMI 540
  Rejection of books of account and trading addition - Held that:- It is not in dispute that this Tribunal in assessee’s own case for the A.Y. 2006-07 has upheld the rejection of books of account on the similar defects found by the Assessing Officer in the books of account, therefore, following the earlier order of this Tribunal in assessee’s own case for the A.Y. 2008-09 and 2009-10, the action of the Assessing Officer in rejecting the books result is upheld. As regard the G.P. rate applied by the Assessing Officer @ 17% as against the G.P. rate declared by the assessee at 15.36%, there is no dispute that after rejection of books of account, the income of the assessee is required to be estimated on best judgment of the Assessing Officer. Thus, it is settled proposition of law on the point that while estimating the income after rejecting the books of account, the average G.P. of the past years, which has attained the finality or accepted by the revenue would be a proper and reasonable basis for adopting the G.P. for the current year. Accordingly, we set aside this issue to the record of the Assessing Officer for computing the average G.P. of past years to be adopted for the year under consideration to estimate the income of the assessee. Addition on account of interest charged from the related parties @ 6% as against the interest paid by the assessee @ 12% - assessee has given loan to relatives and charged 6% interest as against the interest paid by the assessee on borrowings @ 12% - Held that:- Assessee has raised various contentions before the ld. CIT(A) including the contention that the assessee’s own interest free funds are more than the advance given to the related parties and therefore, no disallowance on account of interest is called for due to short charging of interest. Further the assessee has pointed out before us that out of five debtors to whom the advance was given. The assessee charged the interest @ 12% from one Shri Rahul Bhandari and therefore, to the extent of loan given to that person, no disallowance is called for. All these facts and contentions were not properly examined by the authorities below, therefore, this issue requires a proper verification and afresh adjudication at the level of the Assessing Officer.

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• 2018 (1) TMI 539
  Disallowance u/s. 14A - Held that:- The calculation u/s. 14A requires re-examination by the AO. In fact, as seen from the order, AO did not verify whether there is any direct expenditure or not. Assessee states that there is direct expenditure by way of cost of one employee at 2,30,000/-. Ld.CIT(A) without examining the issue has accepted the contention. Moreover, it is also noticed that the average of investments as stated by the AO seems to be not correct. The average of opening investment at 44,49,44,803/- and closing balance at 16,14,79,458/- results in average value of 30,32,12,130/- as against 17,17,32,670/- stated by the AO in the order. 0.5% thereon at 7,08,664/- was not correctly worked out. Therefore, without going into merits of the addition, we accept the Revenue’s ground and restore the issue of entire disallowance u/s. 14A to the file of AO to be considered afresh, after giving due opportunity to assessee. Deduction claimed u/s. 80IB(8A) - Held that:- In the light of the decision of the ITAT in assessee’s own case for earlier years, which the Ld.CIT(A) has followed, we do not see any reason to differ from the order of the CIT(A). It is true that ITAT has stated that the claim has to be examined in each of the years and left a note of caution that the view taken therein may not apply to subsequent years, if there are change of facts. However, as seen from the approval granted, there are no change of facts and assessee is found to be eligible for deduction u/s. 80IB. In view of that, as the issue is squarely covered by the earlier decision, we uphold the order of CIT(A) and dismiss the Revenue grounds Deduction towards ESOP - Held that:- Issue of allowability of ESOP expenses on the date of exercising of option by the assessee was held to be an ascertained liability and not contingent liability by the Special Bench of Bangalore Tribunal in Biocon Ltd. Vs. DCIT (2013 (8) TMI 629 - ITAT BANGALORE). The Special Bench held the said discount on ESOP was to be allowed as deduction under section 37(1) of the Act, during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option - Decided against revenue Disallowance of communication charges while computing deduction u/s. 10A - Held that:- Assessee failed to furnish the amount of internet charges or any expenditure under this head. When this was pointed out, assessee’s Counsel accepted for alternate contention that whatever is excluded from the export turnover should also be excluded from the total turnover on the principles laid down by the Hon'ble Bombay High Court in the case of CIT Vs. Gem Plus Jewellery India Ltd., [2010 (6) TMI 65 - BOMBAY HIGH COURT]. This alternate contention is squarely covered by the above decision and also Special Bench decision of the ITAT, Chennai in the case of ITO Vs. Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D], wherein it has been held that communication charges etc., attributable to the delivery of the computer software outside India which are to be reduced from the export turnover should be reduced from the total turnover as well, while computing the deduction u/s. 10A. Therefore, following the ratio laid down in the aforesaid cases, we direct the AO to exclude the same amount from Total Turnover as well and re-workout the disallowance u/s. 10A. Grounds are partly allowed. Disallowance of entire claim u/s. 10A - Held that:- The claim u/s. 10A on the similar facts was allowed by the AO in the assessments made u/s. 143(3) for AYs. 2005-06, 2006-07 and 2008-09. Similar computation of income and copies of report in Form 56F were filed by assessee. Even in AY. 2009-10, which is also in appeal before us, the claim was allowed. Therefore prima-facie the claim of deduction u/s. 10A is allowable. However, the AO made out a new case that the remittances were for ‘research services’. The FIRC issued by the bank cannot be taken as a conclusive evidence, unless supported by actual research for which remittances are made. This aspect has not been examined by the AO at all. Moreover, the detailed explanation made before the CIT(A) has not been examined by the CIT(A). He has summarily rejected assessee’s contentions stating that ‘it does not hold water’. We are of the opinion that this issue requires re-examination by the AO based on the invoices raised and corresponding amounts remitted, so that whether assessee has indeed exported software services or the amounts remitted were indeed for research services as stated in the certificate. Since the invoices are required to be examined, the issue of deduction u/s. 10A is restored to the file of AO to examine afresh and allow the claim, if assessee satisfies the provisions of Section 10A

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• 2018 (1) TMI 538
  Addition of purchase of housing in joint name as unexplained investment - using past savings - explanation of the taxpayer that half of the amount was paid by his wife - Held that:- The explanation of the taxpayer that half of the amount was paid by his wife where she was an independent taxpayer in her own right deserves to be accepted and consequently the assessee in those peculiar facts and circumstances cannot be saddled with the addition of 7.50 which has been owned up by the wife; the property as per record is in the joint name of the husband and wife and the bank loan is also in their joint name. Accordingly the explanation that the wife contributed 7.50 Lacs from her past savings and her Stridhan is accepted. Qua the remaining amount of 7.50 lacs remand is directed and the issue is set aside back to the file of the Ld. CIT(A). The CIT(A) is directed to examine the taxpayer’s claim in regard to the payment of 7.50 Lacs by the assessee which is stated to be from his past savings. Accordingly, the impugned order to this limited extent is set aside back to the file of the CIT(A) with the direction to pass a speaking order in accordance with law after considering the assessee’s explanation to the extent of 7.50 Lacs as the explanation qua his wife for the remaining portion for the reasons given hereinabove is accepted. Appeal of the assessee is allowed for statistical purposes.

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• Customs

• 2018 (1) TMI 537
  Levy of CVD on import of goods - Manufacture - case of Revenue is that in terms of Chapter Note 4 of Chapter 26, which brings the imported goods Rutile Ore Leucoxene Sand as appearing in Bill of Entry, is concentrate being converted from ore amounting to manufacture, shall be liable to duty - Held that: - the amendment which was carried out in the year 2011 basically related to addition of Chapter Note 4 as per which the process of converting Ores into Concentrates is treated as ‘manufacture’ - appeal dismissed - decided against appellant.

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• 2018 (1) TMI 530
  Interest liability for overstay of goods beyond warehousing period - time limitation - Refund of interest - consequences of reduction of warehousing period from one year to six months on existing goods - Section 27 of the Customs Act, 1962 - Held that: - A reading of Section 59 (1) shows that an importer who seeks to have the imported goods warehoused has to first have the goods assessed under Section 17 or Section 18, as the case may be, and then execute a bond binding himself to pay double the amount of duty assessed on the said goods and undertaking to pay on or before a date specified in a notice of demand all duties, rent and charges claimable on account of such goods under this Act, together with interest on the same from the date so specified at the rate of six per cent per annum or such other rate as is for the time being fixed by the Board. In Commissioner of Customs, Chennai Vs. Lakshmi Electrical Control Systems Ltd. [2016 (4) TMI 767 - MADRAS HIGH COURT], it was held that in so far as Section 61(2) is concerned, it refers only to the interest that becomes payable under Section 47. As a matter of fact, the present Sub-Section (2) of Section 61, was amended only by Act 27 of 1999. The amendment, on which, strong reliance is placed by the department, to Section 27(1), came in 1991. Yet, Section 61(2) does not refer to Section 27. Appeal dismissed - decided against Revenue.

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• Corporate Laws

• 2018 (1) TMI 536
  Validity of transfer of shares - Non-registration of pledged shares or subsequent registration - sanctioned scheme for compromise with creditors - Held that:- The sanctioned scheme for compromise with creditors of Royal Airways Limited filed in Company Petition No.385/2003 noted the principal amount due to the respondent No.1 as 5.00 Crores. This scheme was also upheld and it attained the finality. The Division Bench of this Court in its judgment dated 09.11.2012 rejected the pleas of respondent No.1 challenging the scheme and therefore, the contention of respondent No.1 viz. the liberty granted by the Division Bench was only to determine the dues to respondent No.1 under the scheme is misleading. Admittedly, the scheme, as sanctioned on 15.07.2005, records the principal amount payable to the respondent No.1 as 5.00 Crores. The respondent No.1’s plea before the Division Bench of this Court, as recorded in its order dated 09.11.2012 was the respondent no.1 has been wrongly categorized as an unsecured creditor in the scheme and now that an amount of 1.39 Crores has been received as a sale’s consideration it need to be reduced from the principal amount of 5 crore as recorded in the scheme. Such plea was ignored. The scheme has now attained finality. The debt of respondent No.1 as recorded in the scheme is 5.00 Crores and 70% amount payable to respondent No.1 has been deposited by the applicant: but the respondent No.1 admittedly is not withdrawing said amount and continue to withhold the pledged shares, hence is acting contrary to the sanctioned scheme. The transfer of 40,48,200 shares by respondent No.1 appears to be fishy and hence its transfer is declared as non-est. Hence the remaining pledged shares above of the applicant be released to the registered owners - the investment companies. The respondent No.1 is also directed to collect the principal amount of 3.5 Crores already lying deposited with the Registrar General of this Court pursuant to the sanctioned scheme of compromise, including any interest accrued thereupon, if any. Further, the balance amount deposited in this Court be distributed for second tranche under the scheme of the compromise be also refunded to the applicant together with interest and respondents No.2 to 4 to accept the shares or the amount as the case may be and hence the CA No.1540/2013 stands allowed in terms of above directions.

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• PMLA

• 2018 (1) TMI 535
  Declaration to the second proviso to Section 5 (1) of PMLA as ultra vires Article 14 of the Constitution of India - Held that:- (i) The second proviso to Section 5(1) PMLA is not violative of Article 14 of the Constitution of India; the challenge in that regard in these petitions is hereby negatived. (ii) The expression ‘reasons to believe’ has to meet the safeguards inbuilt in the second proviso to Section 5(1) PMLA read with Section 5(1) PMLA. (iii) The expression ‘reasons to believe’ in Section 8(1) PMLA again has to satisfy the requirement of law as explained in this decision. (iv) There has to be a communication of the ‘reasons to believe’ at every stage to the noticee under Section 8(1) PMLA. (v) The noticee under Section 8(1) PMLA is entitled access to the materials on record that constituted the basis for ‘reasons to believe’ subject to redaction in the manner explained hereinbefore, for reasons to be recorded in writing. (vi) If there is a violation of the legal requirements outlined hereinbefore, the order of the provisional attachment would be rendered illegal. (vii) There can be single-member benches of the AA and the AT under the PMLA. Such single-member benches need not mandatorily have to be JMs and can be AMs as well. As already pointed out, the challenge to the maintainability of the writ petitions on other grounds, and to the ECIR and to the OCs, the SCNs, the provisional attachment orders and to all further proceedings arising therefrom which have been challenged in the individual writ petitions, shall be decided by the learned Single Judge of this High Court. It will be open to the Respondents to raise all pleas, including that of maintainability, before the learned Single Judge. No opinion is expressed with regard thereto.

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• 2018 (1) TMI 534
  Continued detention of the Petitioner by denying him the right of default bail under Section 167(2) of CrPC and without formal cognizance taken of the offence committed by him in the said FIR - maintainability of petition - offence under PMLA - Held that:- Here we are concerned in the present case which deals with the life and liberty of a citizen. Therefore, the present petition is maintainable. In the present case, on 24th June 2017, the competent court, viz. the Special Judge (PC Act) took cognizance of the offences under FIR No.205/2016. Every time a supplementary charge-sheet was filed thereafter, there was no need for the Court to again take cognizance of the same offences qua the additional accused. The Court further notices that the Petitioner was himself aware of his inclusion in the supplementary charge sheet which is why he applied for statutory bail under Section 167 (2) Cr PC. He has been in custody in this case from 18th July 2017 onwards and therefore, was aware of developments at every stage. Therefore, the question of his being in continued detention without cognizance being taken of the offence qua him does not arise. This submission of the Petitioner is accordingly negated. The Court disagrees with the learned Special Judge, PMLA that since the charge sheet had already been filed in a proper Court on 14th October, 2017 i.e. prior to the expiry of 90 days, the Petitioner was not entitled to the statutory bail under Section 167(2) Cr PC. The said order dated 30th November, 2017 of the Special Judge, PMLA to that extent is hereby set aside. The plea of the Petitioner that since no cognizance has yet been taken of the offence qua the Petitioner, the continued detention of the Petitioner in the judicial custody is illegal, is rejected. The failure by the Investigating Agency to file a supplementary charge-sheet qua the Petitioner before the Court having jurisdiction i.e. the Court of the Special Judge, PMLA, before the expiry of 90 days i.e. on or before 16th October, 2017, would entitle the Petitioner to the relief of the statutory bail/default bail under Section 167(2) Cr PC. Accordingly, the Petitioner is directed to be released on bail in FIR No.205/2016, subject to his furnishing a personal bond in the sum of Rs. one lac with one surety of the like amount to the satisfaction of the Special Judge, PMLA with specified conditions.

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• Service Tax

• 2018 (1) TMI 533
  100% EOU - Refund of unutilized CENVAT credit - rejection on the ground that refund claims have been filed prior to the registration of the particular services exported - Held that: - reliance placed in the case of mPortal India Wireless Solutions P. Ltd.[2011 (9) TMI 450 - KARNATAKA HIGH COURT], wherein it is held that registration of a unit which exports the services is not required for claiming the refund of the cenvat credit lying in balance - appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 532
  Penalty - non-payment of service tax - Held that: - the reason for setting aside the penalty by the appellate authority is lack of evidence reflecting upon the malafide intention of the respondent. Revenue in their memo of appeal has not produced sufficient evidence to rebut the above finding of the Commissioner(Appeals) - appeal dismissed - decided against Revenue.

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• Central Excise

• 2018 (1) TMI 531
  Validity of demand / show cause notice - SCN issued based on audit objections - Benefit of N/N. 29/88 Central Excise dated 01.3.1988 - Clearance of Tablets - Held that: - Admittedly, the reason for impossibility of adjudicating the show cause notices cannot be put against the assessee, as the Department was contesting the audit objections. Therefore, this Court is convinced that the reasons contained in the counter affidavit as well as in the additional counter affidavit do not justify the action in keeping the impugned show cause notices pending without being adjudicated for 22 years. Merely because an audit party had raised an objection, ipso facto, that cannot be the sole reason for issuing the show cause notices, as the Adjudicating Authority is a Quasi Judicial Authority and is legally bound to adjudicate the case independently and judiciously taking into consideration the audit objections by the CERA/CRA, reply of the Department, reply of the party, relevant legal provisions, case laws on the subject and relevant circulars of the Board, if any. Petition allowed.

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• 2018 (1) TMI 529
  Deemed Manufacture - laptops - It appeared that as per Note 6 to Section XVI of the first schedule to the Central Excise Act, 1985 and also as per Section 2 (f) (iii) of the Central Excise Act, 1944, the processes carried out on the imported laptop computers amounted to manufacture - Held that: - It is not disputed that the imported laptops are subsequently sent to Supreme in their individual packings, ie., in unit containers. It is not the case that the purpose of sending these laptops to Supreme is only for quality control checks, or for that matter, to ensure that the imported laptops are in working condition - the master hard disk drive is totally dismantled and removed from the laptops and various softwares are loaded on them, only after which the HDDs are fixed back into the laptops. All the processes which are involved are repacking of goods in or into the unit container, and in addition relabeling, testing, and loading of software without which the laptops would not be fully functional and would not be accepted by ELCOT. The ingredients of Section 2 (f) (iii) of the Act will definitely get attracted in respect of processes undertaken, hence the impugned activity will definitely fall within the legal definition of manufacture under the said Section 2 (f) (iii) ibid. Confiscation - Penalty - Held that: - the sum of the components of SAD and CVD exceed the duty liability demanded in this case - the ingredients of Section 11 AC will not be attracted in this case, hence, no penalty under that Section can be imposed - penalties set aside - confiscation and redemption fine also set aside. Appeal allowed in part.

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• 2018 (1) TMI 528
  CENVAT credit - not just maintenance and operation but also for collection of fly ash and transportation of the same to the appellants manufacturing premises - Held that: - On very similar facts as in the case of these appeals, the Tribunal in Ultratech Cement Ltd. Vs. CCE, Jaipur [2013 (7) TMI 637 - CESTAT NEW DELHI] has held that credit availed on service tax paid for removal of non-excisable coal fly ash emerging from captive power plant is admissible. Penalty - Held that: - the appellants had only availed the credit for services under the bonafide belief that the same are eligible input services - penalties not justified. Appeal allowed.

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• 2018 (1) TMI 527
  Penalty - Section 11AC of the Central Excise Act, 1944 read with Rule 15(2) of the Cenvat Credit Rules, 2004 - Held that: - from the facts of this case, when there was also always sufficient excess balance in the cenvat credit account of the respondent herein of the amounts which were found to be ineligible were reversed, there cannot be any mala fide intention attributable to the respondent for availment of cenvat credit twice or in one case, thrice - appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 526
  Refund claim of amount paid under protest - unjust enrichment - Held that: - It has to be seen as to whether the deposits were made by the appellant subsequent to the sale invoices and at the instance of their jurisdictional central excise authorities - There is also no finding in respect of bar of unjust enrichment being not applicable in respect of refund of amounts in terms of rule 6 of CCR - the matter remanded to original adjudicating authority for fresh consideration - appeal allowed by way of remand.

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• 2018 (1) TMI 525
  CENVAT credit - input/input services - whether the cenvat credit is admissible on the input used in the exempted goods which has been exported? - Held that: - Rule 5 refund can only be sanctioned if the assessee is entitled for the cenvat credit. Therefore in one hand, the department has sanctioned the refund claim under Rule 5 and on the other hand, they are denying the cenvat credit which is contrary to their own stand - appeal allowed.

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• 2018 (1) TMI 524
  Area based exemption - N/N. 50/2003 dated 10.6.03 - appellant has expanded the factory 25% and claimed area based exemption on expansion which was denied by the lower authorities for want of certificate issued by the Chartered Accountant and other information - Held that: - identical issue in assessee’s own case, for the earlier period, has came up before the Tribunal as Kotdwar Steels Ltd. vs. CCE, Meerut I [2016 (10) TMI 385 - CESTAT NEW DELHI], where it was held that The proceedings by the department and the impugned orders heavily relied on certain suspicion and doubts raised against the claims by the appellant without due counter verification to categorically establish the correct expanded capacity by the Revenue - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 523
  Classification of goods - printing of various materials on orders like letter head, certificates, diaries, registers labels, answer sheets, envelopes, calendars etc - Held that: - The goods which have been manufactured by the appellant are in the nature of labels, envelopes, answer copies etc. Such goods, even though printed, are intended for further use by way of printing or writing - in the light of Chapter Note 14, such goods will remain classified under Chapter 48 inspite of printing which can further use for writing. It is also seen that printing which is carried out by the appellant is merely incidental to the primary use of the goods. Consequently, the goods manufactured by the appellant will continue to remain classified under Chapter 48 from the date, Chapter note 14 has been inserted. The demand has been confirmed only for the period after the insertion of Note 14 to Chapter 49. Appeal dismissed - decided against appellant.

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• 2018 (1) TMI 522
  Implementation of order - Held that: - it is considered appropriate that in view of the remand of the appeals of Shree Sanand Textile Industries Ltd., and Karan Fibres & Fabrics Ltd (respondents at Serial 6 & 7), all appeals listed at Serial from 9 to 41 of the cause list of 25.10.2017 are required to be remanded to the learned adjudicating authority for analogous hearing of all the appellants - Learned adjudicating authority shall grant fair opportunity of hearing to the appellants to defend their case and reach to a proper conclusion on the basis of their pleading and evidences.

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• 2018 (1) TMI 521
  CENVAT credit - Cement - rejection on the ground that cement is no way required or connected either directly or indirectly in the manufacture of lead, zinc or sulphuric acid, in the factory of the appellant - Held that: - in an entirely identical set of facts, in the case of the appellant itself, M/s Hindustan Zinc Ltd Versus Commissioner of Central Excise And Service Tax, Jaipur [2015 (10) TMI 1558 - CESTAT NEW DELHI], this Tribunal has allowed cenvat benefit on cement, holding that use of cement for stabilization of hazardous waste jarosite as toxic effluent at secured landfill is part and parcel of their manufacturing activity - credit allowed - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 520
  100% EOU - Refund of CENVAT credit - Rejection on the ground that they have filed one common application for refund for the six-month period October, 2010 to March, 2011 instead of application for each calendar month in view of Clause 2(b) of N/N. 5/2006-CE-(NT)? - Held that: - the word ‘may’ in Clause 2(b) of the said notification is by way of giving an option to assessee to file refund claims on monthly basis. Being an EOU by way of facilitation, it does not put any embargo debarring the assessee for making a quarterly/half yearly/annually refund claim - appeal allowed - decided in favor of appellant.

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