Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 29, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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M/s Uranium Corporation of India Ltd has 100% of equity held by the President of India, hence, M/s Uranium Corporation of India Ltd is a government entity. - Rate of GST is 5% since the activity constitute of more than 75% of "earth Work"
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Profiteering - Failure to reduce Maximum Retail Prices (MRPs) - Petition against the decision of NATIONAL ANTI-PROFITEERING AUTHORITY - HUL directed to pre-deposit ₹ 90 Crores.
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Classification of services - "Works Contract" or "Composite Supply" - rate of GST - Central GST authorities and State GST authorities have expressed two different views on classification of services and applicable rate of tax - Matter referred to Appellate Authority for Advance Ruling.
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Condonation of delay - period of limitation in filing first appeal before fist appellate authority - Section 107 of the UPGST Rules, 2017 - appeal filed beyond 3 months plus 1 month cannot be condoned.
Income Tax
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Assessment of trust - Benefit of section 112 read with section 164 - The assessee trust is not free or authorized to sell the shares, held by it on behalf of the settler company, to any person in the free market at fair market price - The shares held by the assessee trust cannot be categorised as 'stock-in-trade' of the assessee trust.”
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Exemption claimed u/s 54F - LTCG - The vast open land with naturally grown grass, a grossly asymmetric consumption of land for construction of superstructure (cost less than 1% of total costs), the occupation of the superstructure by a watchman/caretaker clearly indicates that such superstructure cannot be mechanically reckoned as a residential house. - No exemption .
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Denial of depreciation on goodwill and intangibles - the excess consideration paid over and net asset value of the business acquired shall be goodwill being ‘any other business or commercial rights of similar nature’ and will be entitled for depreciation u/s 32
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MAT - computation of book profit u/s 115JB - The claim of the assessee that the starting point of computation of ‘book profit‘ under Sec. 115JB should be the profit as per the profit & loss account after making all provisions, transfers to various reserves, appropriations and transfer from various reserves does not find any support from the mandate of law.
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Non deduction of TDS on guarantee commission paid to Bank - CBDT Circular removing the hardship in favour of the assessee has to be treated as retrospective - No disallowance u/s 40(a)(ia) can be made for non deduction of TDS.
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Correct Head of income - sale of land - the order of the CIT (A) in treating it as a business income is reversed and the assessee’s claim for taxability of such gain on sale of land under the head capital gain is affirmed.
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Disallowance of Contribution to Environmental Relief Fund u/s 43B - assessee has collected the contribution to the ERF from the owner (insured) - If the amount is not routed through Profit and Loss Account, then there is no question of applicability of provisions of section 43B - Further, ERF was neither fee, tax or cess and, hence, do not come within the ambit of section 43B.
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Levy of penalty u/s. 271B - the assessee had committed only technical venial breach for which he cannot be penalized - No loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings.
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Penalty u/s 271B - The assessee was very casual and did not enter appearance for the show cause notice issued for imposition of penalty. The assessee has not made out a reasonable cause as mentioned u/s 273B for non-furnishing of audit report u/s 44AB.
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Penalty levied u/s.271(1)(c) - The details of the transactions through which the income has been received, was there in the P & L Account of the assessee, which inadvertently not there in the original return of income, however, those were again filed in the revised return of the assessee - No penalty.
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Entitlement towards general accumulations to the extent of 15% contemplated u/s 11(1)(a) - amount applied for the object of Trust already surpassed income derived from property held under trust - exemption u/s 11(1)(a) of the Act i.e. 15% of the income is unfettered and not subject to any conditions.
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Addition of bogus share capital u/s 68 - rotation of money - the contention of the assessee that there was rotation of money and the much lesser amount of bogus share capital should have been added as undisclosed credit u/s 68 is not acceptable.
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Reopening of assessment - material already on record - AO now cannot contend that this issue is debatable or is a factual aspect. The material on record would clearly suggest that on this ground, he had proceeded on erroneous footing.
Customs
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Detention of imported item - prohibited goods or not? - The High Court rightly held that the MFDs having a utility period, the Extended Producer Responsibility would arise only after the utility period was over - there is no error in the penultimate direction to the respondents for deposit of bond without sureties for 90% of the enhanced valuation of the goods leaving it to the DGFT to decide.
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Right to appeal against the CHALR, 1984 before the Tribunal is only available to the CHA and Revenue cannot be termed as an “aggrieved party” against the decision concerning the licensing regulations for filing appeal before the Tribunal
IBC
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Corporate insolvency process - Merely grant of loan and admission of taking loan will ipso facto not treat the 2nd and 3rd Respondents as ‘Financial Creditors’, till they show that it complies with the substantive definition or any one or other clause of Section 5(8).
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Corporate insolvency process - refund of service tax does not fit into the definition of operational debt. Thus, the petitioner is not an operational creditor - petition rejected.
Service Tax
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Benefit of reduced penalty - reduced penalty amounts were not deposited by the assessee u/s 78 within stipulated time, which is a statutory mandate. No doubt they were paid in the interregnum, at a later stage, pursuant to the permission granted by this Court, however, that did not in any manner mitigate the appellant’s liability
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It would be unfair and improper to demand service tax alleging that every services which is provided within the airport area would fall under airport services.
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Valuation - Security Deposit - without investigation as to whether appellant has refused to refund security deposit to any person who has terminated services, it cannot be presumed that the said amount collected as security deposit, should be treated as consideration.
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Valuation - Outdoor Catering Services - Outdoor Catering is a composite but divisible contract of service under Article 366(29)(a)(f) of the Constitution of India; hence, sale of goods has to be bifurcated from service provided.
VAT
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Penalty u/s 10-A of the Central Sales Tax Act - misuse of C forms - items were not included in the registration certificate - the subsequent conduct of the assessee in including the three items in the Registration Certificate also fortified the stand of the Petitioner. Therefore, penalty is warranted.
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Imposition of penalty - Misutilization of Form-C - Mere narration of wrong representation or utilisation of Form-C without a clear cut finding about the false representation did not fulfil the requirement of law. Though the assessee may not have been strictly entitled to use the declaration Form- C, that fact alone could not result in an automatic levy of penalty
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Restoration of appeal - appeal was dismissed for non-compliance with pre-deposit - the interests of justice would be met with if the appeal is restored at the stage of the first appellate authority by directing the petitioner to make a pre-deposit
Case Laws:
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GST
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2019 (1) TMI 1369
Government Entity - rate of GST - works contract for raising of western site tailing dam at Turamdih - N/N. 39/2017 - time and value of supply of goods or services or both - Held that:- Government entity means- (i) set up by an Act of Parliament or State Legislature, or. (ii) established by any government, with 90% or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government or a local authority - In the instant case, the 100% equity of M/S Uranium Corporation of India Ltd is held by the President of India. Accordingly, M/s. Uranium Corporation of India Ltd. is a government entity. What will be the rate of GST on the said work order? - Held that:- The works contract has been defined in Section 2(119) of the CGST Act, 2017 as “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.” - In the instant case the applicant applicant has been awarded works contract for raising a Dam as per the requirement/specifications provided by the recipient. Whether the benefit of the N/N. 39/2017 will be available in the present case? - Held that:- It is evident that the work order is for supply of services with material. It is also seen from the work order that the first four part of the work order is related with clearing of earth, excavation, supplying & laying of earth and impervious clay. The major part of the contract involves earth work i.e., more than 75% of the work involves earth work - Since the major part of the work order, i.e., about 96%, is ‘Earth Work’, the said work order qualifies for the benefit of Serial No 3 of notification 39/2017 dated 13.10.2017 issued under the GST Act, being Composite supply of works contract as defined in clause 119 of sec-2 of the CGST Act, 2017, involving pre dominantly earth work i.e. constituting more than 75% of the value of work in contract) provided to Central Government, State government, Union Territory, Local authority, a government authority or a Government Entity - GST will be applicable at the rate of 5%. Ruling:- M/s Uranium Corporation of India Ltd has 100% of equity held by the President of India, hence, M/s Uranium Corporation of India Ltd is a government entity. The work order no. T-964 dt. 20.06.2017 awarded by M/s Uranium corporation of India Ltd, to applicant M/s P. K. AGARWALA constitute of more than 75% of "earth Work", the rate of GST would be 5%.
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2019 (1) TMI 1368
Profiteering - Failure to reduce Maximum Retail Prices (MRPs) - Petition against the decision of NATIONAL ANTI-PROFITEERING AUTHORITY - CENVAT Credit - TRAN-2 credit - it is the contention of the petitioner that TRAN-2 credit was made available in March, 2018 - Area based exemption - Loss in North East Exemption being denied - case of respondents is that the documents on the amount refunded to Modern Trade Dealers have not been duly certified - Held that:- The petitioner is directed to deposit ₹ 90 crores with the Central Consumer Welfare Fund in two instalments of ₹ 50 crores and ₹ 40 crores which would be paid on or before 15th March, 2019 and 15th May, 2019 respectively - the said direction is given after being informed that the petitioner has already deposited ₹ 160 crores. Subject to the said deposit, no coercive steps would be taken in proceedings pursuant to the impugned order. Penalty proceeding would be kept in abeyance - Re-list on 16th April, 2019.
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2019 (1) TMI 1367
Classification of services - "Works Contract" or "Composite Supply" - rate of tax - combination of services of excavation of sand including loading with machinery at reach, formation of Ramps and maintenance of Roads, transportation charges for the tractors/ tippers of sand from reach to stockyard and loading cost of sand from stockyard to lorries - difference of opinion. Held that:- Since there is no uniform opinion arrived by the Members representing Central Tax and State Tax and they have expressed two different views on classification of services and applicable rate of tax on the services rendered by the applicant, the application filed by M/s. R. Vidyasagar Rao Constructions, Plot No. 98 & 99, Lumbini layout, near Euro School, Gachibowli, Hyderabad-36 (GSTIN No. 36AAGFR6627L12Q), is being referred to the Appellate Authority for Advance Ruling for the State of Telangana in terms of Section 98(5) of the CGST Act, 2017 for hearing and decision on the question on which advance ruling is sought. Matter referred to the Appellate Authority for Advance Ruling.
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2019 (1) TMI 1347
Maintainability of condonation of delay application - period of limitation in filing first appeal - Section 107 of the UPGST Rules, 2017 - Held that:- In the instant case, there is no dispute as to the date of the communication order passed by the Assessing Authority which may be relevant for the purpose of start point of period of limitation to file an appeal - Consequently and clearly the first appeal filed by the petitioner against the order dated 03.12.2018 was beyond the period for which delay may have been condoned, by about nine days - there is no error in the order of the appellate authority dismissing the appeal as time barred. Process amounting to manufacture or not - activity of running a brick klin and that the entire production of bricks - Held that:- In the very nature of the activity of running that business, various qualities of bricks emerge in the manufacturing process, for various reasons - matter requires consideration - Notices issued.
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Income Tax
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2019 (1) TMI 1366
Project risk expenses - consideration is in the nature of liquidated damages and is allowable deduction in the A.Y. 2007-08 - Held that:- The facts on record would show that the agreement contained a clause under which, the assessee would have to pay 0.5% of the total contract value for every week or part thereof for the delay in execution of the work subject to ceiling of maximum 5% of the total contract value. The fact that there had been delay in execution of the work of the assessee is not in dispute. Under the circumstances, the liability of the assessee to pay the sum to the HPCL as per the said clause had arisen. The liability thus, had crystallized and cannot be said to be a contingent liability. The objection of the Counsel for the Revenue on the basis of Sections 73 and 74 of the Contract Act also is not valid. Section 74 of the Contract Act does not limit its applicability to a penalty stipulated in the contract but covers the case where any amount is agreed to be paid in case of breach of contract. In that view of the matter, reference to Section 73 of the Contract Act would not be necessary at all. In any case, what Section 73 provides is that when a contract has been broken, the party who suffers by such breach, is entitled to receive compensation for any loss or damages caused to him which naturally arose in the usual course of things from such contract. The question of applicability of Section 73 in the present case in view of the situation being covered by Section 74, would not apply. In any case, the provision of Section 73 would come into play if in case of breach of the contract, any party were to resile from the terms of the Contract envisaging payment of liquidated damages as agreed in the contract. In the present case, the assessee who was liable to pay the said amount, had neither disputed nor refuted its liability. This question, therefore, does not require consideration. - Decided in favour of assessee. Computing income u/s 10A - expenses incurred in foreign exchange towards technical services provided outside India if reduces from the export turnover should also be excluded from total turnover? - Held that:- Issue squarely covered by the judgment of this Court in case of CIT Vs. Gems Plus Jewellery India Ltd.[2010 (6) TMI 65 - BOMBAY HIGH COURT] in which the Court held that the amount of freight and insurance have to be excluded for the purposes of computation of export turnover, which would also be excluded while computing total turnover of the assessee. This question is also therefore not entertained. - Revenue appeal dismissed.
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2019 (1) TMI 1365
Stay Petition - Held that:- AO had to necessarily apply his/her mind to the application for stay of demand and pass appropriate orders having regard to the extant directions and circulars including the memorandum of 29.02.2016. This in turn meant that AO could not have imposed a precondition of the kind that has been done in the impugned order. Consequently, the impugned order is hereby set aside. The AO shall consider the application for stay of demand made by the AO in its letter dated 04.05.2018 and pass necessary and appropriate orders, and exercise his discretion having regard to the facts and circumstances of the case, within three weeks from today. In the meanwhile, the respondents are directed not to take any coercive action for enforcing the demands.
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2019 (1) TMI 1364
Addition u/s 40A - deduction towards contribution made by assessee to various clubs meant for the staff and their family members - Held that:- This Court in the case of Gujarat State Export Corporation Ltd. [1993 (9) TMI 52 - GUJARAT HIGH COURT] has held that payment of surtax was not an allowable deduction and that by paying the entrance fee to the sports club the assessee had no intention to acquire any capital asset or take advantage for the enduring benefit of the business and that by common sense standards, it could be stated that it was for running the business or for bettering the conduct of its business and therefore, the amount paid as entrance fee was deductible. In view of the said decision, we find that the question raised is required to be answered in favour of the assessee. Nature of receipt - subsidy in the form of Sales Tax Exemption as 'capital receipt' or 'revenue receipt - Held that:- When one High Court has examined the scheme and in the case of this very assessee held that, the sales tax waiver benefits were in the nature of capital receipts, no further question of law would arise Addition u/s. 145A - difference between the closing balance and the opening balance of CENVAT credit - Held that:- The Tribunal by the impugned judgment while rejecting Revenue's appeal and confirming the view of the Commissioner of Income Tax relied on its earlier decision in case of this very assessee for earlier Assessment Years. In such decision, the Tribunal had referred to and relied upon the decision of this Court in case of CIT v/s. Mahalaxmi Glass Works Pvt. Ltd. [2009 (4) TMI 182 - BOMBAY HIGH COURT] and CIT v/s. Mahavir Alluminium Ltd. [2007 (11) TMI 41 - HIGH COURT OF DELHI] - Revenue appeal dismissed.
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2019 (1) TMI 1363
Addition on account of bad debts - AO disallowed on the ground that the bad debt figure had not been finally crystallized as there were claims and counterclaims between the parties and the Arbitration Proceedings were pending - CIT(A) on facts found that the amount has been crystallized as there was no counterclaim filed by the parties concerned and the Arbitration Award has also been passed. Thus, allowed the appeal also confirmed by tribunal - Held that:- On facts the impugned order of the Tribunal found that letters were addressed by the parties admitting their liabilities with a request for settlement. Thus, there was no issue of counterclaim. Further, it also found the dispute a facts had settled in Arbitration and the respondent had received some amount in terms of Award. It was only the remaining amount of ₹ 12.58 crores which has been allowed as bad debt. Thus, dismissed the Revenue's appeal. We find that both the CIT (A) and the Tribunal have rendered a concurrent finding of fact holding that the amounts written off as bad debts had been crystallized. This finding of fact has not been perverse in any manner. In the above view, the question as proposed does not give rise to any substantial question of law.
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2019 (1) TMI 1362
Assessment of trust - Benefit of section 112 read with section 164 - proceeds received from the employees - income assessable under the head capital gain - whether the share held by the assessee trust and transferred to the employee were in the nature of capital asset and not stock in trade? - Held that:- The assessee trust is like a Special Purpose Vehicle (SPV) of the settler company, which has been formed for the special purpose of holding the shares of the settler company and issuing the same to the eligible employees, interalia, for the benefit of settler and its employees. It is acting as an extended arm of the settler company. It is not holding the shares in its own absolute rights, as has been contended by the Revenue also. Under these circumstances, it will be very difficult to categorise these shares as business assets, meant for trading by the assessee trust. In the case of a trader, the motive is to maximize the profits, as the main object of the proper is mechanized the profits by doing the business of trading. The attributes available in the transaction of the assessee trust are unlike that of a trader and are more like that of an investor. The assessee trust is not free or authorized to sell the shares, held by it on behalf of the settler company, to any person in the free market at fair market price. Under such circumstances, the assessee trust is not in a position to earn maximum profits. Thus, it could be safely said that certainly assessee trust is not in the business of trading of shares. The shares held by the assessee trust cannot be categorised as 'stock-in-trade' of the assessee trust.” - No question of law.
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2019 (1) TMI 1361
Gain arising from the sale of capital asset as Long Term Capital Gain - exemption u/s 54F entitlement - when the assessee can be stated to have acquired the capital asset? - Held that:- The date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by D.D.A.. In that view of the matter, CIT appeals of the Tribunal correctly held that the assessee had acquired the property in question on 31st December, 2004 on which the allotment letter was issued. Revenue has also argued that in any case the assessee was not entitled to exemption under Section 54F. Since the assessee had held multiple residential units which would disqualify the assessee from claiming the exemption on it as was held by the Assessing Officer. From the record we notice that before the CIT appeals the assessee had produced additional evidence to suggest that the other units previously held by the assessee were discarded earlier and that at the relevant time the assessee did not hold any other residential unit. Quite apart from it being a pure question of fact, we do not find any indication in the impugned judgment of the Tribunal though the revenue had argued such a contention in its appeal before the Tribunal.
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2019 (1) TMI 1360
Reopening of assessment - non-genuine expenditure - assessment beyond a period of four years - information received information from Addl. Director of Income Tax - Held that:- AO had received information from Addl. Director of Income Tax (Inv.) after the Assessment was framed that, ₹ 90 lacs paid to M/s. S N Enterprises through bank transfers and that, M/s. S N Enterprises in turn, withdraw a sizeable amount from said payments in order to make cash payments to farmers – owners of buffalo. This information by itself, cannot ultimately lead to the inference that, said payment was for non-genuine expenditure. Merely because M/s. S N Enterprises made cash payments for purchase of buffalos, would not destroy genuineness of the expenditure made by the assessee. There had to be some additional material which would establish the live-link for the formation of belief by the Assessing Officer that, income chargeable to tax has escaped assessment. AO in the present case, neither had time to carry out any follow up enquiries nor had he, in fact, carried out any such enquiry. As per the reasons, the information received from the Investigation Wing, was placed before him at 6.30 p.m. on 31st March, 2017, which was the last date for issuing notice of reopening of an assessment. He, therefore, apparently, acted under great constraint of time. This by itself, in appropriate case may not be fatal the notice of reopening, if the Assessing Officer can otherwise, point out that he had examined information placed before him before forming belief that, on the basis of information, it can be stated that, income chargeable to tax has escaped assessment. Additionally, we also find that, the entire issue was examined by the AO during the original assessment proceedings. Along with letter, Petitioner supplied full breakup of its account with the said M/s. S N Enterprises. It was after such detailed scrutiny, the Assessing Officer passed order of assessment on 5th March, 2013 in which, he made certain observations but had not disturbed the Petitioner's claim of expenditure, particularly, in relation to the payments made to said M/s. S. N. Enterprises. After such minute scrutiny, the AO could not have reopened the assessment beyond a period of four years from the end of the relevant Assessment Year on the basis of information supplied to him and the reasons recorded by him. In the result, impugned notice is quashed and set aside. - Decided in favour of assessee.
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2019 (1) TMI 1359
Dis-allowance of delayed payments made to Employees' Provident Fund and Employees' State Insurance, etc. - Held that:- Since they relate to employees' contributions which the assessee had deducted from the monthly salary payable to them, the issue stands covered against the assessee and in favour of the Revenue by our decision reported in Popular Vehicles Services Pvt. Ltd. v. The Commissioner of Income Tax, Ernakulam [2018 (8) TMI 133 - KERALA HIGH COURT]. Hence, we answer question No. (ii) in favour of the Revenue and against the assessee. The Tribunal's order to that extent stands deleted and the AO's dis-allowance stands restored. Sale of Grevellea trees - AO taking 30% of the sale proceeds of Grevellea trees as cost and balance sale proceeds brought to tax as capital gains - Held that:- We have considered the issue in the Revenue's appeal in assessee's own case as held Tribunal had considered the facts and had held that the order of the CIT (Appeals) directing deletion of such deduction in the capital gains has to be set aside, on facts. The Tribunal has also held that it being long term capital loss, is entitled to be carried forward. We do not see any question of law arising from the order of the Tribunal and, hence, uphold the order to that extent - Decided against revenue Disallowance of slump sale - sale of two estates as going concerns - claim of agricultural income - levy under Section 50B - Held that:- We found on a reference to the agreement of sale that there was a transfer as a going concern and it does not change by the mere fact that the employees were taken over by the purchasing company as a measure to avoid any retrenchment compensation being paid. We had specifically referred to the terms of the agreement and the Tribunal too in the present case does refer to the facts here, which we find to be similar to the earlier sale. The fact finding authorities also notice that the terms of the agreement are identical with that entered into in the earlier year. The issue being on facts as to the specific terms of the agreement and not giving rise to a question of law we refuse to answer question No.(iv). The order of the Tribunal to the extent of deleting the levy under Section 50B is confirmed. MAT - adding back the provision for gratuity in computing the income under Section 115JB - Held that:- As relying on The Fertilizers Chemicals Travancore Ltd. v. CIT, Kochi [2018 (10) TMI 1303 - KERALA HIGH COURT] he same would be an ascertained liability and, hence, would be capable of being deducted from computation of the Minimum Alternate Tax (MAT) under Section 115JB. We, answer question in favour of the assessee Addition on account of interest dis-allowance made by the assessing Officer - business for which the funds have been utilised is the business of the sister concerns and not the business of the assessee itself - Held that:- The assessee was flushed with non-interest bearing funds as found by the first appellate authority also. Looking at the manner in which the proportion was computed by the AO itself, we find that the assessee had more than ₹ 30,000 lakhs of non-interest bearing funds. The loans which were said to be interest free, granted to its subsidiary Companies came to only ₹ 21,221.04 lakhs. Hence, the assessee is deemed to have granted the interest free loans to its subsidiary Companies from its non-interest bearing funds available with it, which was also in excess of the total loans granted by the assessee to the subsidiary companies. There was absolutely no warrant for applying the proportion between interest bearing funds and non-interest bearing funds to make a disallowance of the interest liability satisfied by the assessee for the assessment year which was claimed as an expenditure in the said year. - Decided in favour of the assessee Applicability of Rule 7A to the sale of old and unyielding rubber trees - Held that:- As relying on Commissioner of Income Tax v. Thiruvambadi Rubber Co.Ltd.[2011 (6) TMI 452 - KERALA HIGH COURT], wherein a Division Bench of this Court had clearly found that sale of old and unyielding rubber trees would not give rise to an agricultural income. If there is no agricultural income, then there is no question of application of Rule 7A. In such circumstances, question No.(vii) is answered in favour of the assessee MAT computation - sale of agricultural land - Held that:- The consideration received on sale of agricultural land in rural area, not coming under Section 2(14)(iii)(a) and (b) would not be income or revenue derived from land. But it has to be added to the profit and loss account and would be reflected in the book profits, for assessment under Section 115JB. There is no statutory provision enabling a downward adjustment of the said sum from the book profits in the computation as provided in Section 115JB. Also in the relevant year, there was The Kerala Agricultural Income Tax Act, 1991 (AIT Act) applicable to the State and there is no contention raised by the assessee that the amounts received as consideration on sale of estate was offered under that enactment. We also notice the levy under the AIT Act of the State to be 60% for the relevant year, which is a lot higher than the levy under the Income Tax Act. We, in such circumstances, answer question in favour of the Revenue and against the assessee.
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2019 (1) TMI 1358
Sale of shares - Capital gain or busniss gain - company’s main object is of trading in equity shares and NSE derivatives - Held that:- Hon’ble jurisdictional High Court in the case of CIT V/s Commissioner of Income Tax Vs Om Prakash Suri [2013 (12) TMI 418 - MADHYA PRADESH HIGH COURT] wherein held that “a tax payer can use two portfolios which are to be treated as capital assets and trading portfolio comprising the securities which are to be treated as capital assets and portfolio comprising of stock in trade has to be treated as trade assets”. Gain from sale of equity shares of M/s. FCS Software Ltd at ₹ 1,09,16,692/- has been rightly claimed by the assessee as Long Term Capital Gain exempt u/s 10(38) as the assessee is consistently carrying out such transactions of purchase and sale and equity shares under the investment portfolio and separate details are maintained for the trading of shares on behalf of the customers. We therefore find no merit in the appeal raised by the revenue and the same deserves to be dismissed for the Assessment Year 2010-11. Now we take up the appeal raised by the Revenue for the Assessment Year 2011-12. Both the parties have not disputed the fact that the issues raised for Assessment Year 2011-12 is similar to that of 2010-11 which relates to taxability of capital gain from sale of equity shares of M/s. FCS Software Ltd. As the facts and as issues remain the same, we are of the considered opinion that the decision given by us in preceding para while adjudicating the issue for 2010-11 in the case of assessee shall apply mutatis mutandis on the appeal for Assessment Year 2011-12. Therefore no interference is called for in the finding of CIT(A) holding that the gain has been rightly shown by the assessee as Short Term Capital Gain and is not taxable as business profit. The appeal raised by the revenue for Assessment Year 2011-12 also deserves to be dismissed.
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2019 (1) TMI 1357
Disallowance of relief claimed u/s 90 - tax paid in Thailand by its subsidiary, from whom assessee received dividend which was offered for taxation as per provisions of Indian I.T. Act - Assessee is an Indian company and has 100% holding in its subsidiary, situated in Thailand - ‘tax sparing credit’ - Taxability of dividend income under Thailand Revenue Code - DTAA between India and Thailand - Held that:- From co-joint reading of taxability of dividend income under Thailand Revenue Code, which has been exempted as per Investment Promotion Act, it is clear that exemption is available to assessee on dividend received from its subsidiary in Thailand, which would have been otherwise taxable as per Thailand Revenue Code @ 10%. Meaning thereby, assessee was not liable to pay any tax in Thailand by virtue of exemption granted as per Investment Promotion Act, and therefore assessee would be entitled to credit of such taxes deemed to have been payable in Thailand under article 23 (3) of DTAA between India and Thailand. From records placed before us, it is noted that assessee has sought credit at 10% on dividend received by it from its Thailand subsidiary, which is the tax that would have been otherwise payable by assessee in Thailand as per section 70bis of Thailand Revenue Code. The tax paid by assessee on dividend income in India is at 30%, which is more than tax payable in Thailand and therefore, we do not find any violation of requirements of Paragraph 2 of Article 23 of DTAA between India and Thailand. - Decided in favour of assessee.
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2019 (1) TMI 1356
Penalty u/s. 271(1)(c) - whether framing assessment order has not given clear direction for initiation of levy of penalty u/s. 271(1)(c) but simply has made an endorsement at the end of the assessment order that “penalty u/s. 271(1)(c) is initiated separately? - Held that:- We find that the direction for initiation of penalty proceedings could not be gathered from the assessment order, Since in the assessment order the AO at the end the AO has merely stated “penalty u/s. 271(1)(c) are separately initiated” do not comply with the meaning of the word direction as contemplated even as per the amendment inserted u/s. 271(1B). In the absence of clear and unambiguous direction as contemplated under law by the AO in the assessment order, it cannot be considered as direction as per law to initiate penalty u/s. 271(1)(c) of the Act. In the aforesaid factual scenario, and the law as laid in MWP Ltd. (2013 (12) TMI 1214 - KARNATAKA HIGH COURT) we cancel the penalty levied by the AO. Therefore, we cancel the penalty imposed u/s. 271(1)(c) of the Act. This ground of appeal of assessee is allowed.
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2019 (1) TMI 1355
Intimation issued u/s 200A - penalty u/s 234E for the delay in filing the TDS return - Held that:- AO has acquired the jurisdiction to levy the fees as on 1.06.2015 and therefore, any return filed and processed after 1.6.2015 will fall within his jurisdiction where on occurrence of any default on part of the assessee, he can levy fee so mandated u/s 234E. Therefore, irrespective of the period to which the quarterly return pertains, where the return is filed after 1.6.2015, the AO can levy fee u/s 234E. In terms of determining the period for which fees can be levied, only saving could be that for the period of delay falling prior to 1.06.2015, there could not be any levy of fees as the assumption of jurisdiction to levy such fees have been held by the Courts to be prospective in nature. However, where the delay continues beyond 1.06.2015, AO is well within his jurisdiction to levy fees under section 234E for the period starting 1.06.2015 to the date of actual filing of the TDS return. In light of the same, in the instant case, the levy of fees under section 234E is upheld for the period 1.06.2015 to the date of actual filing of the TDS return which is 22.07.2015 and the balance fee so levied is hereby deleted. - Decided in favour of assessee.
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2019 (1) TMI 1354
Rectification of mistake - levy of penalty under section 271(1)(c) - Held that:- We find that the additions / disallowances for which penalty under section 271(1)(C) was levied; have either been deleted or set aside to the file of AO for fresh adjudication vide Tribunal’s order. In this view of the matter, the penalty levied under section 271(1)(C) of the Act for Assessment Year 2007-08 is not sustainable in the eyes of law. We, accordingly, set aside the order of the CIT(A) and delete the said penalty. - Decided in favour of assessee.
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2019 (1) TMI 1353
Exemption claimed u/s 54F - LTCG - nature of property acquired - residential house contemplated u/s 54F or acquisition of land per se - construction cost of superstructure constructed on the land is very marginal - whether the co-owned superstructure on a combined adjoining plots of land can be regarded as ‘residential house’ for the purposes of Section 54F? - Held that:- In the instant case the dominant object of the deployment of consideration is to acquire land parcel and not to enjoy the residential house per se. We are at loss to understand as to how the factual aspects like lack of basic amenity and a non-descript temporary makeshift shelter/superstructure of insignificant worth can convert a land into a residential house. The vast open land with naturally grown grass, a grossly asymmetric consumption of land for construction of superstructure (cost less than 1% of total costs), the occupation of the superstructure by a watchman/caretaker clearly indicates that such superstructure cannot be mechanically reckoned as a residential house. The existence of vast parcel of open land is a reality. We thus find it utterly difficult to put blinkers on tell-tale facts. The superstructure claimed to be a residential house is clearly superficial and does not go hand in hand with ground realities. It is totally unconceivable that a token and symbolic superstructure of temporary nature involving insignificant construction costs or land occupying negligible space (created with an object to typically accommodate a watchman to safeguard the land) would convert huge parcel of land into a residential house. As we see in nutshell, cost of land exceeds 99% of the total cost of new investment in so called residential house. Likewise, land used for construction of superstructure is less than 1% of total area. The superstructure is jointly owned and devoid of basic amenities and actually used by the caretaker of lands. The unflappable facts narrated above when seen cumulatively seals the narrative against the assessee. The sale consideration is thus essentially appropriated towards purchase of land per se and not towards construction of residential house as enjoined by S. 54F. We thus find no plausible reason to interfere with the conclusion drawn by the Revenue authorities. In the result, the grievance of the assessee towards disallowance of deduction under s.54F dismissed - Decided against assessee.
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2019 (1) TMI 1352
TPA - Comparable selection - rejection on functional difference - Held that:- Assessee-company is engaged in providing Information Technology enabled services (ITes), Web enabled services and Business Process Outsourcing services to its Group company in nature of call centre and back office support (BPO) services. It also provides in-house software support services and knowledge process outsourcing services to its Group Company. The assessee company is a captive unit remunerated at cost plus mark up to 15% by its Group Company, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Treat the foreign exchange gain/loss as part of operating income of the assessee. Risk adjustment - We direct the Assessing Officer to allow risk adjustment in turn relying on the proposition laid down by the Delhi Bench of Tribunal in the case of Sony India Pvt. Ltd. [2008 (9) TMI 420 - ITAT DELHI-H] , wherein it was allowed @ 20%, and compute the TP adjustment, if any, in the hands of assessee.
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2019 (1) TMI 1351
TPA - ALP determination - rejecting transactional net margin method (TNMM) adopted by the assessee as the most appropriate method (MAM) - Held that:- TPO has made the transfer pricing adjustment purely on estimation basis without any supporting material. Though the TPO has mentioned that arms length price has determined by applying CUP method but in fact the TPO has not come up with any comparables to justify the application of cup method. TPO has not brought on record any material to substantiate that the AE provided the similar services to an independent enterprise in comparable circumstances. The Ld. TPO has also not brought on record any instance where comparable services were provided to an independent enterprise in the recipient market. So in view of the fact that the TPO has, in fact, not applied the CUP method to determine the arm’s length price of the transaction, there is no reason to reject the TNMM method applied by the assessee. Law does not permit the TPO to determine the arm’s length price on estimation basis. We are therefore, of the considered view that the arms length determined by the Ld. TPO is not in accordance with the provisions of the Act and the ratio of law laid down by the Hon’ble jurisdictional High Court. On the other hand the intra group services are closely linked to the business of the assessee and the assessee’s benchmarking approach is based on TNMM. Whether the legal infirmity in the impugned order can be cured by restoring the issue to the Ld. TPO? - Held that:- We hold that since the TPO has not made the transfer pricing adjustment by following the mandatory provisions of the law and determined the same on estimation basis, action of the Ld. DRP in upholding the TP adjustment so made by the TPO is bad in law. So far as the cases relied upon by the Ld. DR is concerned, we are of the considered view that the facts of the said cases are different from the facts of the present case. Since, the Ld. TPO has not determined the arm’s length price in accordance with the provisions of law, there is no reason to hold that the TNMM method applied by the assessee is not the most appropriate method within the meaning of section 92C of the Act. - Assessee appeal allowed.
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2019 (1) TMI 1350
Addition u/s 68 - bogus Long term capital gain on sale of shares - exempt from taxation u/s 10(38) claimed - price rigging - Held that:- The Assessing Officer has doubted the transaction since the selling broker was subjected to SEBI’s action. However, the demat account given the statement of transactions from 01.04.2004 to 31.03.2005 i.e. relevant for the assessment year under appeal (2005-06) are before us. There cannot be any doubt about the transaction as has been observed by the Assessing Officer. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through demat format. Hence, we agree with the given findings of the Ld. Commissioner of Income Tax (Appeals ) in accepting the transactions as genuine too. Addition made by the Assessing Officer u/s 68 of the Act which has been sustained by the CIT(A) is not justified under the facts and circumstances of the present case. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. - Decided in favour of assessee.
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2019 (1) TMI 1349
Denial of depreciation on goodwill and intangibles - excess of consideration paid for acquisition of Pharma and Food division of L&T - assessee company is engaged in the business of Engineering, Procurement and Construction(EPC) of Food, Diary, Chemical and Pharma Plants - Held that:- The assessee while acquiring Food and Pharma division of L& T vide agreement dated 26.05.2005 had paid consideration in excess of net asset value of the said divisions of L&T as on the date of takeover and consequently, the excess was reflected as Goodwill in the books of accounts of the assessee under the head ‘Intangibles’ and we are of the considered view that the assessee will be entitled for claiming depreciation on the said excess consideration being Goodwill as the same being ‘any other business or commercial rights of similar nature’ as defined in Explanation 3 to Section 32(1) of the 1961 Act , keeping in view ratio of decision of Hon’ble Supreme Court in the case of CIT v. Smifs Securities Limited [2012 (8) TMI 713 - SUPREME COURT] as held that the excess consideration paid over and net asset value of the business acquired shall be goodwill being ‘any other business or commercial rights of similar nature’ and will be entitled for depreciation u/s 32 - Decided in favour of assessee
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2019 (1) TMI 1348
MAT - computation of book profit - Not excluding waiver of principal and interest under one time settlement with lender while computing the book profit under section 115JB - Held that:- When the auditors of the assessee company had disclosed all the particulars and had qualified the crediting of the amount of ₹ 162,30,33,516/- in the profit & loss account by way of ‘notes' to the accounts, therefore, it was obligatory on the part of the A.O to have considered the same while determining the ‘book profit‘ under Sec. 115JB. We are unable to persuade ourselves to subscribe to the reading of the profit & loss account in isolation by the A.O, de hors qualification of the same by way of ‘notes‘ of the auditors to the financial statements. We thus in all fairness are of the considered view that as the A.O had failed to consider the crediting of the waiver of the loan of ₹ 162,30,33,516/- in the profit & loss account in the backdrop of the qualification of the auditors by way of ‘notes‘ to the accounts in context of the same, therefore, the matter requires to be restored to his file for fresh adjudication. The A.O shall in the course of the ‘set aside‘ proceedings readjudicate the claim of the assessee that the waiver of loan was not liable to be included while determining the ‘book profit‘ under Sec. 115JB after taking cognizance of the aforesaid qualifications of the auditors. Interest on delayed payment of TDS - Rejecting of claim in respect of deduction of interest paid to the income-tax department - Held that:- The provisions of imposition of penalty and interest are distinct from the provisions for imposition of tax. In the backdrop of the aforesaid settled position of law, we are of the considered view that the interest on delayed payment of TDS cannot be disallowed under Sec. 40(a)(ii) of the Act. In our considered view as the interest on delayed payment of TDS is not on the personal tax but is attributable to the tax which the assessee has deducted in respect of payment to others, therefore, the same would be allowable u/s 37. Thus conclude that interest on delayed payment of TDS would be allowed as a deduction while computing the income of the assessee under the head “Business or Profession”. However, as the said issue was never contested by the assessee before the A.O, therefore, we restore the matter to his file for verifying the veracity of the claim of the assessee that the amount was paid towards interest on delayed payment of TDS. In case the claim of the assessee is found to be in order, then the A.O shall give consequential effect in terms of our aforesaid directions. Non granting deduction in respect of prior period adjustments (net) while computing the ‘book profit‘ under Sec. 115JB - Held that:- Starting point for determining the ‘book profit‘ under Sec. 115JB is the ‘net profit‘ shown in the profit & loss account for the relevant previous year prepared as per Part II and III of the Companies Act, 1956 (1 of 1956), which is further subject to the adjustments contemplated in Explanation 1 of Sec. 115JB. The claim of the assessee that the starting point of computation of ‘book profit‘ under Sec. 115JB should be the profit as per the profit & loss account after making all provisions, transfers to various reserves, appropriations and transfer from various reserves does not find any support from the mandate of law. We thus in terms of our aforesaid observations find no infirmity in the order of the CIT(A), and are of the considered view that he had by declining to accept the interpretation accorded by the assessee to Sec. 115JB had rightly upheld the order of the A.O in context of the issue under consideration. We thus in terms of our aforesaid observations uphold the order of the CIT(A) as regards rejecting of the claim of the assessee for deduction in respect of prior period adjustment (net)
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2019 (1) TMI 1346
Addition on account of unmatured forwarded foreign exchange transaction being an unascertained liability - Held that:- The issue arising herein stands concluded against the Revenue and in favour of the respondent - assessee by the decision of this Court in the case of Director of Income Tax (IT)-1, Vs. Deutsche Bank [2016 (11) TMI 1600 - BOMBAY HIGH COURT] rendered wherein an identical question raised by the Revenue was dismissed by following the earlier decision of this Court in the case of CIT Vs. Bank of India [1995 (11) TMI 78 - BOMBAY HIGH COURT]. Thus, this question as proposed does not give rise to any substantial question of law, hence, not entertained. Non-resident assessee exercise an option to be assessed under provisions of the Income Tax Act (or) as the came may be the provisions contained in the applicable DTAA - whether the non-resident assessee can exercise this option for each issue / item of income separately or he has to exercise the option for all the contents of income together? - Held that:- This question does not arise from the impugned order of the Tribunal. Mr. Tejveer Sing, the learned counsel for the Revenue is unable to point out consideration of this question by the Tribunal. It appears that this question was not even urged before the Tribunal. Thus, no occasion to consider the aforesaid question, hence, not entertained. Appeal is admitted only on Question No. 1 which is a substantial question of law - Whether on the facts and circumstances of the case and in law, the Tribunal was correct in holding that Section 44C is not applicable in respect of Head Office Expenses and such expenses are to be dealt with as per Article 7?
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2019 (1) TMI 1345
Reopening of assessment - reopening beyond the period of four years - addition under capital gains - rectification application as Amount of capital gains wrongly considered - Held that:- The assessee had furnished the necessarily details before the Assessing Officer of the said amount having been shown in Profit Loss A/c but not offering it to tax. If during the original assessment proceedings, the AO desired to inquire further into such claim of the assessee, nothing prevented him from doing so. At any rate, he cannot do so in the assessment proceedings which are sought to be commenced beyond the period of four years from the end of relevant assessment year. Short term capital gain - gain accrued on account of non-STT paid venture capital fund - Held that:- Addition suffers from factual error and non application of mind on his part. In the return itself, the assessee had showed short term capital gain of ₹ 3.79 crores and further gain of ₹ 89.67 lacks total of which came to ₹ 4.68 crores which was duly offered to tax. AO had in the order of assessment actually erroneously taxed a sum of ₹ 44.68 crores which was clearly an error. The assessee brought this error to the notice of the Assessing Officer by filing an application for rectification. AO had made contradictory statements. In the first part, he has recorded that the assessee had offered such sum to tax on short term capital gain. In the later part, he contradicts himself by saying that the assessee had not offered it to tax. AO now cannot contend that this issue is debatable or is a factual aspect. The material on record would clearly suggest that on this ground, he had proceeded on erroneous footing. AO has proceeded solely on the basis of material already on record clearly debarring his jurisdiction for issuing notice of reassessment beyond the period of four years from the end of relevant assessment year. In that view of the matter, it is not necessary for us to decide the contention of the assessee's counsel that such income was not taxable at all. In the result, impugned notice is quashed. - Decided in favour of assessee.
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2019 (1) TMI 1344
Addition of bogus share capital u/s 68 - rotation of money - rectification mistake - Held that:- The bogus share capital received on different days amounted to ₹ 5.72crores. The amount paid was not returned and refunded. This being the position, we are not inclined to accept the contention of the appellant-assessee that there was rotation of money and only bogus share capital of ₹ 1.55 crore should have been added as undisclosed credit under Section 68. The appellant-assessee states that ₹ 62 lacs was added as undisclosed cash credit for Assessment Years 19992000 to 2002-03. It is stated that the appellant-assessee has filed an application under Section 254(2) of the Act before the Tribunal on the said aspect. We would on the said aspect give liberty to the appellant-assessee to file an appeal after disposal and decision of the application under Section 254(2) of the Act. This would not bar the appellant from filing an appeal against the decision of the aforesaid miscellaneous applications.
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2019 (1) TMI 1343
Disallowance of provision made for project expenses - contingent liability - assessee had pointed out that the provision had been made in view of the work done by the contractor in its on-going project and work had been completed by the contractor, but bills were not raised in wake of some dispute with the contractor for the quality of construction - Held that:- The liability in respect of work already done had been determined on the basis of contract/prevalent rates and past experience, asserted the assessee. In view of the facts obtaining in the present case, as long as as work done is not in dispute, the assessee was justified in making estimation of work already done and make a provision in this regard. It is also to be noticed that the said amount of ₹ 4.87 crores has duly been included in the closing stock of the assessee. As such the amount of ₹ 4.87 crores, which had been debited in the profit and loss account, as “provision for project expenses” has duly been credited in the profit and loss account in the closing stock at ₹ 12,47,37,972/- under the caption of building project expenses, which stood increased as a result of inclusion of this amount. That apart the assessee had deducted TDS on the amount/provision made, hence it cannot be said that the liability was a contingent liability. - Decided against revenue
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2019 (1) TMI 1342
Accrual of income - Interest income based on the tax deduced at source (TDS) effected for the broken period - constructive receipt - assessee contended that as per the terms and conditions of the term deposit, the right to receive the interest and the principal would get crystallized at the end of the term of the respective deposits and the assessee has offered the interest income of the respective deposits on the maturity/end of the term of such deposits which happened to be the subsequent assessment year - Held that:- The matter requires fresh examination, in the light of the fact that the amount which have been matured along with interest had been offered to tax during different period for the assessment years 2012-13 and 2011-12. Though this aspect was pointed out to the Tribunal by way of the Miscellaneous Petition, the Tribunal pointed out that this mistake pointed out by the assessee is not apparent on the record to revise the order of the Tribunal by following the decision of this Court in the case of Express Newspapers Ltd. Vs. DCIT [2009 (11) TMI 15 - MADRAS HIGH COURT]. The above reconciliation given by the assessee, in our considered view, needs to be looked into because the matured amount along with interest has been offered to tax during the relevant assessment year. Thus for the above reason we are inclined to remand the matter to the Assessing Officer for fresh decision - Appeal of the assessee is allowed for statistical purposes.
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2019 (1) TMI 1341
TPA - BLT method for proposing adjustment for AMP expenditure - Held that:- In present facts of the case, substantive as well as protective assessment both has been made in the hands of same assessee for same year under consideration on AMP expenditure by learnt TPO. On objection being raised by assessee before DRP against the adjustment proposed, a direction was issued to AO/TPO to make adjustment to in respect of AMP expenditure by following intensity method, being the plausible method. DRP has followed view in case of CIT vs. Sony Ericson Mobile Communication India Pvt.Ltd., (2015 (9) TMI 483 - ITAT DELHI) to reject BLT method for proposing adjustment for AMP expenditure. Thus respectfully following Hon’ble Delhi High Court, we hold that adjustment made on protective basis by following bright line test is not sustainable.
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2019 (1) TMI 1340
Entitlement towards general accumulations to the extent of 15% contemplated u/s 11(1)(a) - amount applied for the object of Trust already surpassed income derived from property held under trust - Held that:- The identical issue cropped up in assessee’s own case in AY 2010-11 as well, wherein no error was found in the action of the CIT(A) for granting accumulation or set apart of income already applied in this year to the extent of 15% of the receipt and consequently, the deficit was suitably enhanced. CIT(A) was justified in admitting the claim of the assessee for accumulation of income. The CIT(A) has rightly viewed that exemption under s.11(1)(a) of the Act i.e. 15% of the income is unfettered and not subject to any conditions. Hence, we do not see any perceptible reason for our indulgence with the order of the CIT(A). We thus decline to interfere. - Decided against revenue.
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2019 (1) TMI 1339
Penalty levied u/s.271(1)(c) - because of the questionnaire issued by the Assessing Officer asking the assessee to file revised return that all the details of the transactions was incorporated therein which was not there in the original return of income by the assessee - Held that:- In the penalty order, we find that it is admitted by the Assessing Officer himself that from transactions the income received has been credited to the P & L Account of the assessee. This facts signifies that the intention of the assessee was never to defraud the Revenue. The details of the transactions through which the income has been received, was there in the P & L Account of the assessee, which inadvertently not there in the original return of income, however, those were again filed in the revised return of the assessee. There was no deliberate intention from the facts on record which can even hint that the assessee was trying to conceal his income. The books of account especially P & L Account were already filed with the Department. All the transactions from which income earned was mentioned therein. Penalty order is liable to be quashed. - Decided in favour of assessee
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2019 (1) TMI 1338
Penalty u/s 271(1)(c) - disallowance of long term capital loss claimed intra-head against short term capital gains - Held that:- We find that the AO has allowed the set off of brought forward long term capital loss and short term capital loss pertaining to the AY 2009-10 to the extent income available i.e. ₹ 5,46,720/-. The AO passed the penalty order on 30.07.2013. The Ld. CIT(A) passed the appellate order on 18.09.2017. Thereafter, the AO passed a rectification order u/s 154 on 06.11.2017 allowing the above set off of ₹ 5,46,720/-. Therefore, the penalty confirmed by the Ld. CIT(A) does not survive.- decided in favour of assessee
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2019 (1) TMI 1337
Deduction u/s. 54F - mandate of investing of money for acquiring new asset (residential property) within a year from the sale of the original asset - Held that:- CIT(A) is clear that the assessee had bought new property beyond one year prior to the sale of original asset against which the assessee wanted to take deduction u/s. 54F. The language of the Act is very clear that the assessee should purchase/invest in new house within one year prior to the date of sale of original asset. The assessee has sold the property on 30.05.2011 on the date the sale deed was executed and purchased property at CB-6A, Munirka on 09.04.2010 which is beyond one year as prescribed u/s. 54F for getting deduction u/s. 54F. Therefore, the lower authorities are justified in rejecting the claim of assessee. - Decided against assessee.
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2019 (1) TMI 1336
Disallowance of provisions made in the accounts for leave salary payable - Held that:- As decided in MUTHOOT VEHICLES AND ASSET FINANCE LTD., VERSUS ACIT [2013 (12) TMI 1662 - ITAT COCHIN] it is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns. We set aside the order of CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh in accordance with the decision rendered by Hon’ble Supreme Court in the case of M/s Exide Industries Ltd COMMR. OF INCOME TAX & ORS Versus M/s EXIDE INDUSTRIES LTD. & ANR. - [2009 (5) TMI 894 - SUPREME COURT] - Appeal filed by the assessee is treated as allowed for statistical purposes.
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2019 (1) TMI 1335
Penalty imposed u/s 271B - assessee has not filed the Audit Report as mandated u/s 44AB - assessee is a Primary Agricultural Credit Society registered under the Kerala Co-operative Societies Act, 1969 claiming deduction u/s 80P(2)(a)(i) - Held that:- In the instant case for the relevant assessment year the Co-operative Department had audited the assessee s case and submitted a report on 24.09.2014. The assessee had sufficient time to file audit report u/s 44AB of the I.T.Act within the specified date, which is 30th day of December, immediately following the financial year, i.e. 30.09.2014. However, for the relevant assessment year the Central Board of Direct Taxes vide its order dated 20.08.2014 had extended the due date of filing of the audit report from 30.09.2014 to 30.11.2014. The assessee had not filed the audit report in this case. The assessee was very casual and did not enter appearance for the show cause notice issued for imposition of penalty. The assessee has not made out a reasonable cause as mentioned u/s 273B for non-furnishing of audit report u/s 44AB. Hence, we are of the view that the penalty u/s 271B has been rightly imposed - decided against assessee.
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2019 (1) TMI 1334
Levy of penalty u/s. 271B - delayed filing of return and audit report before the AO - Held that:- The assessee got his books of accounts audited on 25/01/2014 which was made available To the Assessing Officer and no prejudice has been caused to the Revenue The assessee had only committed technical venial breach which has not created any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. In the case of CIT vs. A.N. Arunachalam (1994 (1) TMI 65 - MADRAS HIGH COURT) in the context of filing of audit report for claiming deduction u/s. 80J observed that once audit report has been made available before the AO before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Hence, the said analogy can very well be drawn and used in the penalty proceedings like that of the assessee. To sum up, we hold that the assessee had committed only technical venial breach for which he cannot be penalized - Decided in favour of assessee. - Decided in favour of assessee.
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2019 (1) TMI 1333
Penalty u/s 271B - assessee did not get its account audited - Held that:- The issue relating to maintenance of books of account is pending before the CIT(A) in quantum appeals for the year under consideration was not controverted by the Ld. Sr. DR. It is also noticed that the Assessing Officer in the penalty order under section 271B has mentioned that the assessee did not maintain the books of accounts, this fact requires verification and moreover the Assessee stated at Bar that the issue relating to the maintenance of books of account is pending before the CIT(A), we therefore, by considering the totality of the facts deem it appropriate to remand these cases to the file of Ld. CIT(A) to be adjudicated afresh - Decided in favour of assessee for statistical purposes.
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2019 (1) TMI 1332
Disallowance of Contribution to Environmental Relief Fund u/s 43B - case of the assessee is that the amounts collected towards ERF were specifically identified in the policy schedule issued by it - Held that:- Here the assessee has collected the contribution to the ERF from the owner (insured) then he is only acting as a custodian of the said fund and the said amount cannot be regarded as income of the assessee. In case the amount is not the receipt of the assessee, not routed through Profit and Loss Account, then there is no question of applicability of provisions of section 43B. The absence of a mechanism of making contribution to ERF; though under the Act, the assessee has collected the amount from the owner (insured), but in the absence of the fund being created, the assessee was handicapped in transferring the amount so collected to the fund. The manner of remittance was prescribed in December 2008 and the assessee has paid the accumulated balance on 2.9.2009. In the absence of the creation of fund, the assessee had no means of depositing the said amount and the assessee in such circumstances cannot be held responsible for non-depositing the contribution to ERF. As already held in the above paras that the assessee was only the collector of funds of the amount which was to be deposited on behalf of the owner (insured), when the mechanism was provided for such deposit. Thus allowing the claim of the assessee, we hold that the fund collected by the assessee was neither fee, tax or cess and, hence, do not come within the ambit of section 43B of the Act. Determination of income of the insurance companies as prescribed under rule 5 of Schedule 1 of the Act - The Profit and Loss Account disclosed by the assessee i.e. its annual accounts are sacrosanct. The said rule provides that the income to be determined is subject to clause 8 i.e. if any expenditure is debited to the Profit and Loss Account, then the same can be added back. As pointed out in the paras above, the assessee had not debited the aforesaid amount to the Profit and Loss Account, but shown as Current Liabilities and consequently, the same cannot be added back to the profits of the business for the year of Insurance Business. Accordingly, the disallowance made by the Assessing Officer is hereby deleted. - decided in favour of assessee.
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2019 (1) TMI 1331
Mistake apparent on record to be reviewed under section 254(2) - difference of expenditure claimed and bill amount as per the loose papers - Held that:- Tribunal found it proper that the freight charges paid to one party in respect of which the impounded material has shown the difference of expenditure claimed and bill amount as per the loose papers, the same difference can be applied in respect of the total freight charges paid to the same party and not to the other parties, hence the issue was again set aside to the AO for proper verification and then decide the same after giving an opportunity to the assessee. These findings of the Tribunal are based on due analysis of the facts as well as the evidence which is not in dispute. Therefore, it is a decision of the Tribunal which is now sought to be reviewed or revised in the present proceedings under section 254(2). Hence the relief sought by the assessee in the Miscellaneous Application is beyond the provisions of section 254(2) as the jurisdiction of the Tribunal is very limited and circumscribed to rectify the apparent mistake on record and not to review or revise the order passed on merit. Even otherwise, the impugned order challenged by the assessee may be an error of decision but it is not a mistake apparent on record to be reviewed under section 254(2). - Miscellaneous Application filed by the assessee is dismissed.
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2019 (1) TMI 1330
Correct Head of income - Treating the long term capital gain shown from sale of land as business income - Held that:- This issue becomes a binding judicial precedent and no contrary view can be taken in this year. Moreover when in all the years, the assessee has been showing the land which is in dispute as a part of fixed assets which stood accepted year after year as an investment / fixed assets, then sale of such land will only give rise to capital gain chargeable u/s 45(2). Thus, the order of the AO and CIT (A) in treating it as a business income is reversed and the assessee’s claim for taxability of such gain on sale of land under the head capital gain is affirmed. In the result, ground raised by the assessee on this score is allowed. Addition u/s 40(a)(ia) on account of non deduction of TDS on guarantee commission paid to Bank - Held that:- On perusal of the CBDT Circular No. 56/2012 it is seen that CBDT has clarified that no TDS is required to be deducted on bank guarantee Commission, etc. Such a circular was brought to reduce the hardship and the compliance cost of the assessee. Once a benevolent circular has been issued to remove the hardship for the assessee then it cannot he held that any such payment made prior to the said circular which was causing hardship to the assessee should continue. It is a well settled proposition that CBDT Circular removing the hardship in favour of the assessee has to be treated as retrospective and accordingly, we hold that no disallowance u/s 40(a)(ia) can be made for non deduction of TDS. In the result this issue is decided in favour of the assessee. Disallowance u/s 14A - Held that:- Admittedly there is no dividend on exempt income earned by the assessee and accordingly no disallowance u/s 14A can be made in view of the issue in the case of Cheminvest vs. ITO. [2015 (9) TMI 238 - DELHI HIGH COURT] wherein as held that once there is no exempt income earned by the assessee, then no disallowance u/s 14A can be triggered. Accordingly, in view of the binding judicial precedent in the case of Cheminvest Ltd. (SUPRA), we hold that in absence of any exempt income earned by the assessee, no disallowance can be made u/s 14A. Thus, this issue is allowed in favour of the assessee.
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2019 (1) TMI 1329
Rectification of mistake - applicability of section 194J and 195 - short of deduction - Held that:- When the payment details are furnished by the assessee vide letter dated 06.07.2012, the Department ought to have taken up the issue of applicability of section 194J and 195 of the I.T.Act before the first appellate authority or before the Tribunal. On perusal of the grounds of appeal, the Department’s only plea is provisions of section 194-I has application instead of section 194C of the I.T.Act, as claimed by the assessee. The Revenue does not have the case before the CIT(A) nor before the ITAT that provisions of section 194J and 195 of the I.T.Act has application. The Tribunal is expected only adjudicate the issue that are raised before it. The issue of applicability of section 194J of I.T.Act and 195 of I.T.Act was never subject matter of adjudication before the Tribunal. Since section 194J and 195 of the I.T.Act was not subject matter of adjudication before the Tribunal in the Income Tax Appeal [2015 (11) TMI 1765 - ITAT COCHIN], it cannot be stated that the order of the Tribunal dated 20.11.2015 suffers from a mistake apparent from record, warranting our interference u/s 254(2) of the I.T.Act.
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2019 (1) TMI 1328
Unexplained cash credit u/s 68 - Addition made towards share premium - notice issued u/s 133(6) to the share subscribers independently - Held that:- All the share subscribers are duly assessed to income tax and the transaction with the assessee company are duly routed through banking channels and are duly reflected in their respective audited balance sheets which are also placed on record before us. In any case, once the receipt of share capital has been accepted as genuine within the ken of section 68 there is no reason for the AO to doubt the share premium component received from the very same shareholders as bogus. We held that all the three necessary ingredients of section 68 had been duly complied with by the assessee with proper documentary evidences. We find that notices issued u/s 133(6) have been duly complied with. The only grievance of the AO was that the assessee could not produce the directors of the share subscribing companies. In our considered opinion, for this reason alone, there cannot be any addition u/s 68 as held by the Hon’ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. [1986 (3) TMI 3 - SUPREME COURT]. - Decided in favour of assessee.
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2019 (1) TMI 1327
Delay in filing appeal before the Tribunal - Reasons for delay - Reopening of assessment - as per delay in filing of appeal before the Tribunal was not due to any carelessness and it was beyond the control of the assessee as he was under belief that the appeal before the Ld. CIT(A) is still pending - Held that:- An examination of the affidavit filed by the assessee and extracted at para 2 hereinbefore indicates that the nature and source of knowledge has not been disclosed with sufficient particularity by the deponent (the assessee). He could have mentioned the name of his friend’s son. He could have mentioned the date in the month of July and December 2017 referred by him. The deponent (assessee) has not done so. In the instant case the assessee has not disclosed with sufficient particularity the nature and source of knowledge. Thereby, the other side is precluded to verify it and make an effective answer. delay in filing appeal before the Tribunal - decided against assessee
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2019 (1) TMI 1326
TPA - international transactions entered into with its associated enterprises in respect of provision of IT enabled and marketing support services - Comparable selection - employees cost to sales ratio analysis - Held that:- As directed in assessment year 2012-13 to verify the claim of the assessee whether in case employees cost to sales ratio was less than 25%, then both the concerns [Ninestar Information Technologies Limited and Universal Print Systems Limited have to be excluded from final set of comparables. So far as Excel Infoways Ltd. is concerned, the Tribunal has held that same is not comparable on account of its fluctuation margins. With regard to Universal Print Systems Ltd., it also needs verification and in case it is less than 25% then the said concern is not be included in the final list of comparables. Thus we restore the matter for verification to the Assessing Officer to adjudicate this issue afresh after providing reasonable opportunity of hearing to the assessee. Thus, ground raised in appeal by assessee is allowed for statistical purposes.
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2019 (1) TMI 1325
Reopening of assessment - notice beyond the period of four years - allegation of failure on the part of the assessee to disclose fully and truly all material facts - Held that:- A bare perusal of the reasons recorded shows that there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. In absence of such allegation of failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, the reassessment proceedings have been held to be invalid by various decisions. The Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [2004 (2) TMI 41 - BOMBAY HIGH COURT] has held that where reasons recorded by the Assessing Officer nowhere stated that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of that assessment year and notice was clearly beyond the period of four years, reassessment was barred by limitation - decided in favour of assessee.
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2019 (1) TMI 1294
TDS u/s 194C OR 195 - payments made to the consortium - Short deduction of tax u/s 201(1) and Interest u/s 201 (1A) - Held that:- As decided in DCIT (TDS) ACIT, TDS AND JCIT, TDS, DEHRADUN VERSUS THE JOINT SECRETARY ORGANIZING COMMITTEE FOR WINTER GAMES [2018 (10) TMI 1174 - ITAT DELHI] in so far as the payments made to various parties which are public sector undertakings, the Tribunal dealt with such an issue at length and reached a conclusion that the matter needs to be set aside to the file of the learned AO with a direction to assessee to produce the bills etc. before the learned AO , who will examine them. It cannot be a reason for non-deduction of tax at source that recipient of the income have onward distributed the work to the sub contractors and recipient of the income have in turn deducted the tax at source on payment made by them to those sub- contractors. According to the provision of 194C of the Act even, the contractor is also required to deduct tax at source on payment made to their sub contractors. Thus we hold that payment made to the above parties are subject to tax deduction at source u/s 194C of the Act and assessee is liable to deduct tax at source u/s 194C of the Act. Therefore, to this extent we uphold the order of lower authorities. We direct the learned AO to delete the addition made u/s 195 of the Act in respect of the payments made to Snow Star SPA and M/s Pomagalski SA France We set aside the order u/s 201 of the Act with a direction that assessee may submit the requisite prescribed detail in specified manner before the ld Assessing Officer and then ld AO may decide the issue and, if found in accordance with the law, shall not treat the assessee in default u/s 201 of the Act. With respect to the interest u/s 201(1A) of the Act similar proviso is also added and AO may work out, based on the details furnished by the assessee, appropriate interest in accordance with law. Appeal of the assessee is partly allowed for statistical purposes.
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Customs
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2019 (1) TMI 1324
Detention of imported item - prohibited goods or not? - import of Multi-Function Devices (Digital Photocopiers and Printers) - violation of the Foreign Trade Policy, 20152020 framed under Sections 3 and 5 of the Foreign Trade Act and the Wastes Management Rules - penultimate direction for deposit of Bond without sureties - Held that:- Indisputably, the respondents did not possess the necessary authorisation for their import. The customs authorities therefore prima facie cannot be said to be unjustified in detaining the consignment. Merely because earlier on more than one occasion, similar consignments of the respondent or others may have been cleared by the customs authorities at the Calcutta, Chennai or Cochin ports on payment of redemption fine cannot be a justification simpliciter to demand parity of treatment for the present consignment also. The defence that the DGFT had declined to issue such authorisation does not appeal to the Court. Section 3(3) of the Foreign Trade Act provides that any order of prohibition made under the Act shall apply mutatis mutandis as deemed to have been made under Section 11 of the Customs Act also. Section 18A of the Foreign Trade Act reads that it is in addition to and not in derogation of other laws. Section 125 of the Customs Act vests discretion in the authority to levy fine in lieu of confiscation. The MFDs were not prohibited but restricted items for import - A harmonious reading of the statutory provisions of the Foreign Trade Act and Section 125 of the Customs Act will therefore not detract from the redemption of such restricted goods imported without authorisation upon payment of the market value. The High Court therefore rightly held that the MFDs having a utility period, the Extended Producer Responsibility would arise only after the utility period was over. In any event, the E-waste Rules 2016 certificate had since been issued to the respondents by the Central Pollution Control Board before the goods have been cleared. In the statutory scheme of the Foreign Trade Act, there is no error in the penultimate direction to the respondents for deposit of bond without sureties for 90% of the enhanced valuation of the goods leaving it to the DGFT to decide whether confiscation needs to be ordered or release be granted on redemption at the market value, in which event the respondents shall be entitled to set off - appeal dismissed.
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2019 (1) TMI 1323
Monetary amount involved in the appeal - Section 130(1) of the Customs Act, 1962 - Held that:- The tax effect involved in these eight appeals is only ₹ 3,09,998/- - In view of the order of the Apex Court in 'Commissioner of Income Tax Vs. Dhanalekshmi Bank Ltd., [2015 (8) TMI 474 - SUPREME COURT], where the Supreme Court had dismissed the appeal without going into the merits of the appeal due to low tax effect leaving the question of law open - the present appeals are also dismissed.
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2019 (1) TMI 1322
Monetary limit of amount involved in the appeal - the tax effect involved in the present appeal is ₹ 5,04,428/- - Section 130(1) of the Customs Act, 1962 - Held that:- The instructions issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes & Customs (Judicial Cell), dated 11th July, 2018, whereby, the monetary limit has been fixed for filing the appeals in the High Courts at ₹ 50,00,000/-. In Para No.3 of the aforesaid instruction, it has also been stated that wherever, monetary limit is less, the appeal shall be withdrawn and the said instruction is applicable to all the pending appeals in the High Courts. Furthermore, the tax effect involved in the present case is very small i.e. ₹ 5,04,428/- - The Apex Court in 'Commissioner of Income tax Vs. Dhanalekshmi Bank Ltd., [2015 (8) TMI 474 - SUPREME COURT], where the tax effect was low, had dismissed the appeal without going into the merits of the appeal leaving the question of law open. Appeal dismissed.
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2019 (1) TMI 1321
Misdeclaration of imported goods - LPG Genset - case of Revenue is that the appellant had declared the consignment “LPG Generator” but in fact imported Gasolene (petrol) Driven Generator - Held that:- The learned Commissioner observed that even though there is no substantial violation of the Policy, however, the declaration furnished by the importer is not correct, therefore, the goods imported needs to be confiscated. Consequently, analyzing the gravity of offence, directed confiscation but imposed nominal fine and penalty under Sections 111(m) and 112(a) of the Customs Act, 1962 respectively - there are no justification advanced by the appellant to disturb the findings recorded by the learned Commissioner, which is based on evidence on record. Appeal dismissed - decided against appellant.
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2019 (1) TMI 1320
Scope of SCN - Classification of imported goods - Jet Flash - whether classifiable under CTH 8542 or under classifiable under CTH 85235100? - benefit of N/N. 06/2006-C Ex dated 01.03.2006 - case of Revenue is that Commissioner (Appeal) has traveled beyond the scope of appeal filed by revenue before him, but to substantiate the same have not filed the appeal filed by them before the Commissioner (Appeal) - Held that:- In the appeal filed by the revenue not a single ground has been mentioned stating as to why the classification of the goods as held by the Commissioner (Appeal) under heading 8542 is not correct - Since no ground has been stated by the revenue in their appeal as to how such classification is erroneous, we are not inclined to take up the issue of classification - appeal filed by the revenue is dismissed as unsubstantiated.
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2019 (1) TMI 1319
Suspension of CHA License - forfeiture of security deposit - DEPB Claim - misdeclaration of an export consignment of “rubber strips” - case of Revenue is that though the adjudicating authority has held that the CHA (the respondent herein) was guilty of non-observance of the procedures laid down in the CHALR, 2004, but has taken a lenient view of ordering only forfeiture of security deposit and allowed the licence to become operative on making fresh deposit - Held that:- The present impugned order was passed by the learned Commissioner of Customs in his administrative capacity and not in context with matter relating to levy of tax. Since such order was passed under the CHALR, 1984, the author of such order cannot be termed as an adjudicating authority, whose order can be appealed against before the Appellate Tribunal. Therefore, in absence of any specific provisions made in the Customs statute, the present appeal filed by Revenue is not maintainable before the Tribunal. Under the identical situation, the Tribunal in the case of COMMISSIONER OF CUSTOMS (GENERAL) , MUMBAI VERSUS MUKADAM FREIGHT SYSTEMS PVT LTD [2017 (5) TMI 798 - CESTAT MUMBAI] has held that right to appeal against the CHALR, 1984 before the Tribunal is only available to the CHA and Revenue cannot be termed as an “aggrieved party” against the decision concerning the licensing regulations for filing appeal before the Tribunal - Revenue’s appeal is not maintainable before this Tribunal for consideration of the grounds urged therein. The appeal filed by Revenue is dismissed on the grounds of maintainability.
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2019 (1) TMI 1318
Suspension of CHA License - forfeiture of security deposit - smuggling of prohibited goods - Red Sanders woods - forged documents - the permission granted to the appellant to operate as CHA in Mumbai Customs under Regulation 10(2) of CHALR, 2004 was placed under suspension - Held that:- The inquiry officer vide his letter dated 18.04.2011 had furnished the report, stating inter alia that with regard to contravention of Rule 13(a), no independent evidence was brought on record to prove the charges against the appellant. However, with regard to the charges framed under Regulation 13(b), such officer had held that the conditions prescribed therein have been violated by the appellant. On the basis of inquiry report and upon analysis of the records, the Learned Commissioner (Appeals) has recorded the findings in support of forfeiture of security deposit amount and for making fresh deposit by the appellant. Filing of shipping bills - claim of appellant is that the shipping bills were not filed by it - Held that:- The Learned Adjudicating Authority at Para 2 has furnished the reference of shipping bills, which were filed on behalf of the CHA-appellant. Thus, it cannot be said that no shipping bills were filed in respect of export of Red Sanders. Since the appellant is strictly guided under such instructions, in order to safeguard the revenue and misuse of license by the offenders, non observance of such facility Notice cannot be termed as a technical breach of law and thus, forfeiture of the security deposit amount and ordered for making fresh security deposit in terms of the CHALR, 2004 by the adjudicating authority cannot be interfered with at this juncture There is no infirmity in the impugned order, so far as it forfeited the entire security deposit amount and directed for making fresh security deposit in terms of CHALR, 2004 - appeal dismissed - decided against appellant.
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Corporate Laws
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2019 (1) TMI 1317
Winding up petition - existence of disputed debt - Held that:- In this case there exists no substantial dispute about existence of debt and liability. In a case of this nature, where debt is not disputed, the Court shall pass a winding-up order. Even if exact amount of debt is disputed, a winding-up order needs to be passed. Where there exists no dispute that the respondent-company has passed the creditor a debt which entitle him for a winding-up order, appropriate order can be passed. The respondent-company after having issued the confirmation slip and filling up the statutory forms, cannot take a defence that the amount is disputed. Hence, this Court is unable to hold that defence of respondent-company is in good faith. Therefore order that the respondent-company be wound up.
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Insolvency & Bankruptcy
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2019 (1) TMI 1316
Corporate Insolvency Resolution Process - proof of debt payable - Held that:- Debt in question is not only in serious dispute, but it is also barred by laches and limitation, and the petitioner, in fact seeking recovery of alleged debt under the provisions of code. We have gone through the citations given by the learned Counsel for the Petitioner, and found that ratio given in those judgments is not applicable to the facts and circumstances of the instant case. Therefore, it is not a fit case to initiate CIRP as prayed for, and thus it is liable to be rejected.
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2019 (1) TMI 1315
Corporate insolvency process - debt due payable by the Corporate Debtor - Held that:- Tribunal observes that there is a debt due payable by the Corporate Debtor and that a default has occurred for which the Corporate Debtor was responsible to pay. Therefore, we are of the opinion that the Applicant has established that the amount in default committed by the Corporate Debtor is a fact and it is supported by the documentary evidence placed before this Adjudicating Authority. Therefore, the instant petition is admitted and we order the commencement of the Corporate Insolvency Resolution Process which shall ordinarily get completed within 180 days, reckoning from the day this order is passed.
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2019 (1) TMI 1314
Corporate insolvency process - corporate debtor failed to refund the service tax even though there was an obligation under the undertaking memorandum to refund service tax - whether failure to refund the service tax received from Government authorities falls within the meaning of operational debt as contained in section 5(21) of the Code - Held that:- May be petitioner sold its shares to Techwave Holdings P. Ltd., which the petitioner is having in the corporate debtor-company. Now the question whether there is liability on the part of purchaser Techwave Holdings P. Ltd., to discharge, as far as the petitioner is concerned, in respect of sale of shares. The corporate debtor is not purchaser of shares. Techwave Holdings P. Ltd., is the purchaser. There is no dispute between the petitioner who is seller and Techwave Holdings P. Ltd., who is the purchaser in respect of sale of shares. Thus, the present dispute is not in any way connected to the transaction of sale of shares. There is a separate undertaking memorandum under which the corporate debtor undertakes to refund the service tax if any refunded by the Government authorities for the past period. This is a separate undertaking not connected to the sale transactions but it is an independent undertaking given by the corporate debtor. The dispute is not in connection with any liability to discharge in connection with sale of shares. Even though definition of goods as contained in the Sale of Goods Act includes shares, but from the facts of the case, there is no dispute with regard to sale transaction of shares between the petitioner and the purchaser, i.e., Techwave Holdings P. Ltd. Thus, undertaking given by the corporate debtor in pursuant to the undertaking memorandum for refund of service tax does not fit into the definition of operational debt. Thus, the petitioner is not an operational creditor and failure to refund service tax is not an operational debt. Therefore, the petitioner cannot maintain this petition under section 9 of the Code. The petition therefore deserves to be rejected
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2019 (1) TMI 1313
Corporate insolvency process - financial creditor - grant of loan and admission of taking loan - Held that:- In absence of any authorization letter given by either 2nd or 3rd Respondent to file a joint petition on behalf of 2nd and 3rd Respondents, we hold that the application under Section 7 of the ‘I&B Code’ at the instance of 2nd and 3rd Respondents was not maintainable. There is nothing on the record to suggest that 2nd and 3rd Respondents had given the loan in favour of the ‘Corporate Debtor’ which can be termed to be ‘disbursement of an amount for consideration for the time value of money’ as required under Section 5(8). Merely grant of loan and admission of taking loan will ipso facto not treat the 2nd and 3rd Respondents as ‘Financial Creditors’, till they show that it complies with the substantive definition or any one or other clause of Section 5(8). Mere fact that the company paid interest @ 12% p.a. during certain period cannot be the ground to hold that the ‘debt’ comes within the meaning of ‘Financial Debt’ to treat the 2nd and 3rd Respondents as ‘Financial Creditors’. As we find that 1st Respondent who signed and filed the application under Section 7 of the ‘I&B Code’ was not eligible to file the application not being a ‘Financial Creditor’, as held by the Adjudicating Authority, we hold that the petition at the instance of 2nd and 3rd Respondents were also not maintainable.
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PMLA
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2019 (1) TMI 1312
Offence under PMLA - Prevention of corruption - Proceedings adopted by the Anti Corruption Bureau under Section 13(1)( e) of the Prevention of Corruption Act, 1988 - attachment of properties - Held that:- The Appellant / SPCL had advanced to the Nilesh Thakur Group a total sum of ₹ 141.50 Crores from September 2007 to August 2009. A sum of ₹ 111.50 crores was advance between the period 26.9.2007 to 1.6.2009 while the remaining ₹ 30 Crores was advance after 1.6.2009. It is the case and contention of the ACB that the advances / payment by SPCL of the said amount of ₹ 141.50 Crores to the Nilesh Thakur Group, constitutes an offence committed by Nilesh Thakur and Ors. under the provisions of Section 13 of the POC Act. Pertinently, the said offence under the POC Act came to be notified as a scheduled offence under paragraph 5 of Part A of the Schedule of the PMLA only by way of the PMLA Amendment Act of 2009 which was brought into force only on 1.6.2009. The legal position is that the purported offence under Section 13 of the POC Act was not a predicate / scheduled offence under the PMLA prior to 1.6.2009 and since the Appellant / SPCL had advanced monies to Nilesh Thakur Group to the tune of ₹ 111.50 Crores prior to 1.6.2009, the provisions of PMLA could not have been applied to the said monies or the properties acquired out of the same and the said monies / properties cannot be treated as proceeds of crime for the purposes of the PMLA. Thus, it was beyond the jurisdiction of the authorities under the PMLA to issue PAO‟s or file Original Complaints in respect of the said monies of ₹ 111.50 Crores or the properties acquired out of the same. It is evident that the action of the Directorate of Enforcement is in violation of Article 20(1) of the Constitution of India which protects a citizen from being subjected to any penalty greater that what might have been inflicted under the law in force at the time of the commission of offence. Thus, issuance of PAO‟s or attachment in respect of the said monies of ₹ 111.50 Crores or properties acquired out of the same was clearly beyond the power of authority and the Directorate of Enforcement and the said PAO‟s and the Original Complaints in connection therewith are null and void, a nullity and of no legal effect whatsoever. There is absolutely no connection between the monies paid by the Appellant to Nilesh Thakur and the discharge of public duties by the brother of Nilesh Thakur [Nitish Thakur]. Nitesh Thakur had effectively not discharged any public duties since 2002. The Enforcement Directorate has incorrectly attached the properties standing in the name of Ni lesh Thakur Group only by making a bald statement that they are disproportionate assets of Nitesh Thakur. The said properties are of beneficial ownership of the Appellant. The Appellant is entitled to the said properties to ensure that the said properties come back to the Appellant and has f i led Execution Application for enforcement of the Consent Decree. However, the attachment made by the Enforcement Directorate is coming in the way of the Appellant enforcing the said Decree against Nilesh Thakur. Therefore, all appeals f i led by the appellants are allowed, all orders under appeal are set -aside. The provisional attachment orders are also quashed. Al l the attached properties, movable and immovable properties, are released forthwith.The entire amount detained by ED shal l be refunded to the appellant with interest already accrued forthwith.
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Service Tax
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2019 (1) TMI 1311
Imposition of penalty u/s 73(4) read with Section 78 of the Finance Act, 1994 - non-payment of service tax - it was alleged that for certain period starting from 2006-07, 2007-08 to 2008-09 [April to September] the appellant had not paid the entire service tax liability but only discharged a part thereof and also did not pay the amounts due in time - suppression or mis-representation of facts - Held that:- This Court is of the opinion that the impugned order is justified and warranted in the circumstances. Whatever be the constraint, the assessee was faced with, it was duty bound to remit amounts collected by it towards service tax, in a planned manner, and as required by law. The deposit belatedly, by it, on the ground that the amounts were deposited on adhoc basis due to operation of a centralised system, cannot be a legitimate excuse. What is evident is that the assessee/appellant withheld the amounts collected from the service recipient as tax liability. As the remitter, assessee/appellant was duty bound to comply with the terms of the Finance Act and Rules, which prescribed not only filing of returns but also periodic deposit of these amounts. The delay in deposit of these amounts spanned over a period of two and half years and therefore, amounted to misreporting of true and correct facts. To that extent, the Show Cause Notice was justified. The finding of misreporting too was warranted. As far as the penalty goes, the provision under Section 78 of the Act, and also even Section 73(4), leave no manner of choice; it is a matter of course. Benefit of reduced penalty - Held that:- The only mitigating circumstances whereby the penalty could be reduced might have been if the assessee had deposited the reduced amounts within 15 or 30 days of receipt of the Show Cause Notice as indicated in proviso 1 and 2 to Section 78 - In the present case, concededly, reduced penalty amounts were not deposited by the assessee, which is a statutory mandate. No doubt they were paid in the interregnum, at a later stage, pursuant to the permission granted by this Court on account of pre-deposit order made by the CESTAT [after 03.10.12, having regard to the order in CEAC 8/2012], however, that did not in any manner mitigate the appellant s liability; it ought to have deposited the reduced penalty amounts within the time stipulated by law. Appeal dismissed - decided against appellant.
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2019 (1) TMI 1310
Renting of Immovable Property Services - non-payment of service tax - appellant paid up the entire service tax liability which was, however, not considered by the authorities below holding that the appellant has not produced the challan copy - principles of natural justice - penalty - Held that:- The Finance Act, 2012 introduced Sub-Section 2 of Section 80 in order to waive penalties in cases where service tax on Renting of Immovable Property was paid within the prescribed time. The issue whether Renting of Immovable Property is subject to levy of service tax was contentious for a long time. There were several litigations pending before various High Courts. Being an interpretational issue and also taking into consideration the fact that the appellants have discharged a substantial portion of the service tax liability, this is a fit case to invoke Section 80 of the Finance Act, 1994 - penalty in its entirety is set aside. The impugned Order is modified to the extent of setting aside the penalties imposed and also remanding the matter to the adjudicating authority for the limited purpose of re-quantification of the service tax demand after looking into the aspect whether the appellant has discharged the amount of ₹ 52,932/- towards the said liability - appeal partly allowed and partly remanded.
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2019 (1) TMI 1309
Valuation - Outdoor Catering Services - inclusion of cost of items and service charges in assessable value - the bill amount showed the total cost of sale without showing the cost of items and service charges separately - appellants had paid service tax on 50% of the cost by availing the benefit of N/N. 01/2006-ST. Whether the differential service tax of ₹ 47,81,657/- with interest demanded on entire value of food and service charges is correct or whether the service tax liability is required to be calculated only on the service charges? - Held that:- The issue is no longer res integra and is covered by the decision of the Hon ble Karnataka High Court alluded to by the Ld. Advocate in C.S.T., Bangalore Vs. The Grand Ashok [2011 (4) TMI 210 - KARNATAKA HIGH COURT]. The Hon ble High Court of Karnataka has held that Outdoor Catering is a composite but divisible contract of service under Article 366(29)(a)(f) of the Constitution of India; hence, sale of goods has to be bifurcated from service provided - the demand amounting to ₹ 47,81,657/- with interest thereon and also the imposition of penalties on that score cannot sustain and will require to be set aside - demand set aside. Whether the amount of commission, consultancy fees and housekeeping and pantry management charges received by the appellant are required to be included in the value of taxable service under Outdoor Catering category or otherwise? - Held that:- There are no corroborative evidence in the Show Cause Notice or the impugned Order to shore up the Department s allegation that these charges actually relate to Outdoor Catering Service only - The clarifications of appellant in this regard have also not been addressed or rebutted by the adjudicating authority - this demand with interest and penalty also does not have any basis to sustain - demand set aside. Appeal allowed in toto.
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2019 (1) TMI 1308
Valuation - Broadcasting Service - inclusion of amount received by the appellant and subsequently disbursed to the dealers in assessable value - Rule 5 of Service Tax (Determination of Value) Rules, 2006 - Held that:- Hon ble Supreme Court in the case of Union of India Vs Intercontinental Consultants Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] has held that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider for such service and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service - the demand of ₹ 24,57,55,162/- along with interest and equal penalty is set aside. Security Deposit collected from distributors - Held that:- As per the terms and conditions entered into between the subscriber and the appellant through subscriber s application form, the appellant is bound to refund security deposit of ₹ 400/- per viewing card if it is claimed within 15 days from the end of the service and if it is returned in functional condition. We also find that said amount is treated as security deposit in the books of account of the appellant. The learned Commissioner has held that there was no evidence of return of any security deposit and hence service tax was payable - Revenue should have investigated as to whether any subscriber had returned the viewing card within 15 days of end of the service and whether the appellant have refused to return the deposit. We do not find any such investigation carried out by revenue. Therefore, the presumption of revenue that there was no evidence of return of any security deposit was not sufficient ground to conclude that the said amount of deposit was liable to be subjected to service tax - thus, without investigation as to whether appellant has refused to refund security deposit to any person who has terminated services, it cannot be presumed that the said amount collected as security deposit, should be treated as consideration - demand set aside. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1307
Non-payment of service tax - airport services - renting of immovable property service - BAS - Commercial Coaching and Training services - demand of service tax - Held that:- The demand is made under four categories of services namely Airport services, Commercial Coaching and Training services, BAS and renting of immovable property services. The charges collected by appellant for various activities like charter of aircrafts, hangar charges, repair charges etc. have not been specifically mentioned. In other words, the split up details in each category is not available. Interestingly, there is no annexure to the show cause notice showing the quantification of demand. Airport services - Held that:- Without properly mentioning the different charges which fell under this category of airport service and also without verifying whether the same amount has spill over into other category of services, it would be unfair and improper to demand service tax alleging that every services which is provided within the airport area would fall under airport services - the said issue requires reconsideration by the adjudicating authority. Business Auxiliary Services - the commission received from CESSNA, USA for the activity carried out by the appellant in sales / marketing of aircrafts - export of services or not - Held that:- The Tribunal in the case of Commissioner of Service Tax Vs. Blue Star [2018 (9) TMI 1421 - BOMBAY HIGH COURT] has held that in cases of sales promotion on behalf of foreign principal, the benefit of services accrues outside India even if the activity is performed in India. For these reasons, the first limb of the requirement for export of service is satisfied. The second requirement is that the payment should be received in foreign exchange. In the present case, the appellant has adjusted the amount received by them in their accounts after deducting the expenses - thus, the activity tantamounts to export of service and therefore not liable to service tax. Business Auxiliary Services - goods supplied to Vikram Sarabhai Space Centre, Hindustan Aeronautics Ltd., Bharath Electronics Ltd. etc. - Held that:- The process undertaken by the appellant amounts to manufacture. For these reasons, the demand of service tax under BAS for the job work done by the appellant cannot sustain and requires to be set aside - demand set aside. Commercial Coaching and Training Services - Held that:- The appellant has produced documents showing the details of these courses which help the students / candidates obtain employment after the course. The courses are in the nature of aviation science, maintenance and repair of aircraft etc. The said issue stands decided in the case of Institute of Aeronautics Engineering [2017 (12) TMI 1378 - CESTAT NEW DELHI]. Following the said decision, we are of the opinion that the demand under this category cannot sustain and requires to be set aside. Penalty - Renting of Immovable Property service - Held that:- The issue whether Renting of Immovable Property is subject to levy of service tax was contentious during the disputed period. There were litigations pending in various High Courts as well as in the Tribunal. Thereafter, the legislation was amended in 2010 with retrospective application to bring the activity within the contours of service tax. Being an interpretational issue, we are of the opinion that the penalty imposed in this regard is unjust and requires to be set aside. Penalties imposed on airport services - Held that:- Though this issue is remanded for verification, we find that the appellant having maintained proper accounts and the demand having been quantified on the basis of figures maintained in the accounts, we are of the opinion that in the absence of suppression of facts with intention to evade payment of tax, the penalty imposed under section78 for airport services cannot sustain - penalty set aside. The appeal is partly allowed and partly remanded.
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2019 (1) TMI 1306
Levy of tax on State Police - person discharging a sovereign function - Security Agency Services or not - 2018 (6) TMI 479 - CESTAT NEW DELHI - Held that:- For a person to be liable under this service, foremost, it has to be a business - The appellant herein is the Superintendent of Police, the in-charge of the services as under a sovereign act for discharge of the sovereign function. i.e. the Rajasthan Police Act - police officer is by law bound to maintain law and order and it cannot be considered as an agency engaged in business of providing security. Also for the reason that amount so collected by the appellant was deposited to Government Treasury, it was not the income in its hand. Commissioner(Appeals) has failed to appreciate the difference between a person doing a business and a person discharging a sovereign function under a statutory mandate - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1305
Business Auxiliary Service - distribution of the products of M/s. Conybio Healthcare (India) Pvt. Ltd. by the appellant under the Direct Selling Concept commonly known as “Multi-level Marketing” - time limitation - Held that:- The appeal does not survive on merits since the Delhi Bench has considered the identical issue and ruled in favour of Revenue - But however, on limitation we are allowing the assessee’s appeal on the consideration that the issue in dispute was mired in litigation and was put to rest only by the Tribunal decision in Charanjeet Singh Khanuja [2015 (6) TMI 585 - CESTAT NEW DELHI] on 09.06.2005 in a batch of 38 appeals. While confirming that the activity involved would fall within the scope of BAS, the Tribunal however set aside the longer period of limitation. The extended period cannot be invoked here also. Hence, the proceedings and consequential demand get hit by limitations - Impugned order cannot then survive - appeal allowed on the grounds of limitation.
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2019 (1) TMI 1304
CENVAT Credit - capital goods - angles, beams, channels etc., which are used to install the towers and the pre-fabricated buildings and panels which are used in connection with providing of output services - input services - telephoning services - input services which were required for installing and erection of such towers and pre-fabricated buildings - period involved is 2004-05 to 2007-08 - time limitation - Held that:- This entire case can be disposed of on the question of limitation only. During the relevant period, different views were expressed by the adjudicating authority as well as the Tribunal, the appellant could have entertained a bonafide belief as to eligibility to avail CENVAT Credit on angles, channels and beams and pre fabricated buildings as also various input services - impugned order is set aside only on the ground of limitation - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 1303
CENVAT Credit - input services - services of personal insurance of employees - security agency services in respect of the guest house - Held that:- In view of the embargo created in the definition of input service, service tax paid on insurance service for insuring the employees should not be considered as input service for the appellant - credit cannot be allowed. Security service availed by the appellant for its guest house, which is located outside the factory - Held that:- There is no nexus between such disputed service with the output service provided by the appellant. Hence service tax paid on the security service should not be considered as input service for the purpose of availment of Cenvat benefit - Credit cannot be allowed. Demand of interest and penalty - irregularly availed CENVAT Credit, not utilized - Held that:- The irregularly availed Cenvat Credit had not been used/utilized by the appellant for payment of service tax on the output services provided by it. In absence of utilization of Cenvat Credit, it cannot be said that there is loss of revenue to the Government exchequer, which can be compensated by way of payment of interest. Further, the Cenvat Credit particulars availed by the appellant were reflected in the books of accounts, which were verified by department for confirming the adjudged demand - Since the appellant had not suppressed any material particulars with regard to availment of Cenvat benefit, the provisions of Rule 15 (3) read with sub-Section (1) of Section 78 of the Act cannot be invoked for imposition of penalty - Demand of interest and penalty do not sustain. Appeal allowed in part.
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2019 (1) TMI 1302
Management Consultancy Service - non-payment of service tax - no discussion made out on the merits of the case - Held that:- The learned Commissioner of Service Tax has not discussed the merits of the case in respect of the demand proposed for recovery under the show-cause notice dated 03.04.2009 - Since the appellant specifically did not contest the demand as per the show-cause notice dated 03.04.2009 and accepted its liability, the amount paid by the appellant and appropriated in the impugned order towards the respective liabilities cannot be interfered. Reverse charge mechanism - demand as per the show-cause notice dated 17.03.2009 - Held that:- The appellant was not liable to pay any service tax, as a recipient of taxable service under reverse charge mechanism, in terms of Section 66A of the Act, which was inserted in the statute book only with effect from 18.04.2006. By referring to the statutory amendments and various judgments of Hon'ble Supreme Court, the CBEC vide Circular No. 276/8/2009-CX., 8A dated 26.09.2011 has clarified that service tax liability on any taxable service provided by a non-resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.04.2006, i.e. the date of enactment of Section 66A of the Act. Non-submission of break-up of amount from the total service tax liability cannot be a defensible ground to demand service tax, for which no sanctity was provided in the statute. Valuation - reimbursement of expenses made by the appellant to its over-seas clients in respect of various charges incurred by the latter - Held that:- The law is well settled that under both the un-amended and amended provisions of Section 67 of the Act, gross amount charged by the service provider for providing only such service should be considered as taxable value for payment of service tax. Since reimbursement of expenses cannot qualify as a separate taxable service, such amount should not be included in the gross value for payment of service tax - the impugned order confirming the service tax demand on the appellant on reimbursement of expenses is not legally sustainable. Appeals disposed off.
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Central Excise
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2019 (1) TMI 1301
Clandestine removal - case of appellant is that the order was passed by the learned Commissioner ex parte and the appellant have not filed detailed reply to the show-cause notice - principles of natural justice - Held that:- The learned Commissioner has afforded sufficient opportunities to the appellant to present their case, but the appellant did not avail such opportunities on the ground that the matter was pending before the Hon'ble Bombay High Court - However, in the interest of justice, the appellant should be allowed one more last opportunity to present their case before the Commissioner - appeal allowed by way of remand.
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2019 (1) TMI 1300
CENVAT Credit - inputs/capital goods - M.S. Steel Sections such as Beam, Plates, Joists, Angles, Channels and GP sheets etc. used in the fabrication of structural ducts etc. - Held that:- The actual use of the items could not be verified either by any Central Excise officer or any evidence available on record to establish that these items were used in the fabrication of capital goods and structures. To ascertain the said fact, the matter needs to be remanded to the adjudicating authority. The matter remanded to the adjudicating authority only for the purpose of ascertaining the use of the aforesaid items as claimed by the assessee - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2019 (1) TMI 1299
Restoration of appeal - appeal was dismissed for non-compliance with pre-deposit - sub-section (4) of section 73 of the Gujarat Value Added Tax Act, 2003 - Stay of recovery - Held that:- As is evident from the order dated 10.05.2018 passed by the Tribunal, the Tribunal had admitted the second appeal and had directed the petitioner to deposit rupees thirty lakhs for stay of recovery proceedings. Therefore, the question of dismissing the appeal on the ground of non-payment of pre-deposit would not arise. Since the Tribunal itself had directed the petitioner to deposit a sum of rupees thirty lakhs for the purpose of staying the recovery proceedings, the court is of the view that when the petitioner is coming forth to offer the land described hereinabove which worth approximately rupees two crore by way of security and is also ready and willing to execute a bond in respect of the said property, which is more than sufficient to secure the interest of the revenue and is also ready and willing to make a pre-deposit of rupees two lakhs, the interests of justice would be met with if the appeal is restored at the stage of the first appellate authority by directing the petitioner to make a pre-deposit of rupees two lakhs and to execute a bond in respect of the said property, together with an undertaking of the owner of the property to the effect that he shall not in any manner transfer, alienate or encumber the said property. The appeal is restored at the stage of appellate authority.
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2019 (1) TMI 1298
Imposition of penalty - Misutilization of Form-C - import of plastic crates and air conditioners - Whether the assessee who is a manufacturer of milk and milk products had made any false representation in utilising Form-C to import plastic crates and air conditioners? Held that:- In the first place, the burden to establish existence of false representation was on the revenue. Merely because Form-C had been utilised to import a different item was not enough to conclude making of a false representation. Such fact may only give rise to an inquiry in that regard. As to the inquiry made, it is seen admittedly, the assessee is a manufacturer of milk and milk products and also there is no material or reasoning given in the order passed by the Tribunal that the assessee had not utilised the goods imported against Form-C for the purpose of its business. In fact, impliedly, the Tribunal admits that the plastic crates would have been used for the transportation of the goods. Similarly, with respect to the air conditioners that had been imported by the assessee, undisputedly, the assessee was entitled to purchase machinery, machinery parts, etc to run its plant for manufacture of milk and milk products. No finding was recorded by any of the authorities that the air conditioners so imported were not used at the factory premises or in the running of the plant and machinery - it appears that the authorities had accepted the contention of the assessee that the air conditioners had been utilised in the running of the plant operated by the assessee to manufacture milk and milk products. This being a case of penalty and not of assessment of tax, the outcome of the discussion made above has to be that an independent and reasoned finding of false declaration submitted or misrepresentation made by the assessee was necessary to be recorded to impose a valid penalty. Such finding is absent in the present case - the ingredients necessary to establish existence of reason to believe or a false representation were not established by the revenue. Mere narration of wrong representation or utilisation of Form-C without a clear cut finding about the false representation did not fulfil the requirement of law. Though the assessee may not have been strictly entitled to use the declaration Form- C, that fact alone could not result in an automatic levy of penalty. The question of law is answered in the negative i.e. in favour of the assessee and against the revenue.
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2019 (1) TMI 1297
Whether upon completion of the assessment under Section 7(3) of the U.P. Trade Tax Act, 1948, the assessing authority had any surviving jurisdiction to pass an order under Section 7(D) of that Act? Held that:- In the first place, no clause of the compounding scheme/directions issued by the State Government (under Section 7D of the Act), have been shown as may allow for both for compounding as also regular assessment of the same tax liability. In fact there can be only one assessment of liability either by way of regular assessment or in the alternative, by way of compounding, in lieu of assessment, subject to directions issued by the State Government. The option with the assessee to seek the alternative mode of determination of its tax liability-by way of compounding on contractual basis, cannot survive the stage of assessment. Once the tax liability stood precipitated i.e. determined upon the regular assessment order being passed, the reagent of option lost its freedom to cause a different result of compounding of that tax liability - there existed no circumstance or occasion for the assessing officer to have considered the application under Section 7D of the Act, thereafter. Whether by way of compounding or regular assessment, the liability of tax to be determined always remained one. Once that liability stood determined through regular assessment method, no duplication of such determination was contemplated or permitted. The fact contingency in which such dual method may be adopted is only one :- where value of imported goods (against the work contract in question), is beyond a certain value (5% of the value of the contract). Even then, the assessment is split up in two parts without any duplication. One in respect of the whole contract (excluding value of imported goods exceeding 5% of the value of the contract), to be concluded under compounded method and the other with respect to value of imported goods exceeding 5% of the value of the contract, to be concluded under regular assessment method. This too is possible only because the contract for compounding permits or so stipulates and not otherwise - Such is clearly not the case here in as much as the regular assessment procedure was adopted for the entire liability of the assessee and not with respect to goods imported by the assessee in excess of 5% of the contract value. Once the assessment proceedings had been first concluded by the order of regular assessment passed under Section 7(3) of the Act, no assessment proceedings survived before the assessing officer as may have required or permitted any consideration by way of application under Section 7D of the Act. The assessment having been completed by regular method, the alternative method to determine the tax liability of the assessee lost its maintainability, rationale, availability or utility/purpose - The application, irrespective of its status (whether defective or proper), was necessarily rendered infructuous by the action of the assessing authority in having framed the regular assessment order. Therefore, the assessing officer lost his jurisdiction to consider that application under Section 7D of the Act. The question of law is answered in favor of the assessee and against the revenue - revision allowed.
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2019 (1) TMI 1296
Penalty u/s 10-A of the Central Sales Tax Act - absence of finding of falsely represented - levy of penalty when packing material itself is eligible to be purchased as provided under Section 8(3)(b) of the Central Sales Tax Act - requirement of mens rea for imposing penalty - Held that:- In Sanjiv Fabrics, the question, which fell for consideration, was whether the requirement of mens rea is an essential ingredient for the levy of penalty under Section 10(b) read with Section 10(A) of the CST Act. The Hon'ble Supreme Court referred to the meaning of the word, which defines the word 'false' - it can ce construed that the word 'false' includes intentionally or knowingly or negligently untrue and a thing is called false when it is done, or made, with knowledge, actual or constructive, that it is untrue or illegal. In the instant case, the assessee was initially registered with Triplicane Assessment circle and it is stated that at the relevant point of time, these items were mentioned in the Registration Certificate - Subsequently, the assessee shifted his business operations to Coimbatore and obtained a Certificate of Registration from the Commercial Tax Officer, Coimbatore, which was issued on 02.05.2005, wherein, these items were included. Thus, the assessee, which is a Private Limited Company, was fully aware of the fact that the items mentioned in the above were not included in the certificate issued by the Commercial Tax Officer and were included only on 02.05.2005 when the certificate stood amended. Thus, false representation is writ large from the conduct of the assessee and with full knowledge they had purchased these items, which were not included in the Form B Registration Certificate by using Form C declarations. Therefore, the levy of penalty in the instant case is warranted and the mens rea or false representation is clearly made out by the conduct of the assessee. Furthermore, the subsequent conduct of the assessee in including the three items in the Registration Certificate also fortified the stand of the Petitioner. Therefore, penalty is warranted. - However, levy of penalty confirmed @10% as against 50%. Tax case revision dismissed.
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Wealth tax
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2019 (1) TMI 1295
Addition by WTO on account of land u/s 2(ea) of the Wealth Tax Act - asset under the Wealth Tax Act for the purpose of levy of Wealth Tax - urban land would exclude land on which construction of a building is not permissible - Held that:- The provisions of Karnataka Land Revenue Act are similar to provisions contained under the Delhi Land Reforms Act which provides that the agricultural land could be used only for agricultural purposes otherwise the Bhumidhar or an Asami shall be liable for ejectment from agricultural land. In the sale deeds in questions filed on record, it is nowhere mentioned, if there was any violation by the owner of the agricultural land for raising any construction thereon. The issue is, therefore, covered in favour of the assessee by judgment of Karnataka High Court in the case of M.R. Raghuram [2013 (7) TMI 1116 - KARNATAKA HIGH COURT]. It may also be noted here that no evidence has been brought on record that the land in question was not used for agricultural purposes. Thus, the case of the assessee would fall within the exception to the Rule and as such, the same could not be considered as an asset under the Wealth Tax Act for the purpose of levy of Wealth Tax on the same. We, accordingly, set aside the orders of the authorities below and delete the additions. - Decided in favour of assessee.
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