Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 7, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Reopening of assessment - There was a specific information available with the authorities. The reasons to believe had been properly understood by the authorities and there was material on the basis of which, notice was issued.
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Penalty u/s 271B - failure to file the audit report - sthe explanation offered by the assessee can be accepted as a reasonable cause for his failure to file the audit report within time and the case on hand is not a fit case for imposing penalty on the appellant
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Profit on the sale of agricultural land - merely because for whatever reason, the assessee has earned sufficiently huge amount of profit cannot be a ground to treat the profit earned by the assessee on sale of agricultural land as business income.
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Deduction u/s. 35D - eligibility - Share Issue Expenditure - Once the assessee is claiming that there was an expansion of industrial undertaking, onus lies on the assessee to prove such claim.
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Addition u/s 68 - Rejection of claim of LTCG - the transactions of the assessee were bonafide and genuine and therefore the AO was not justified in rejecting the assessee’s claim of exemption under section 10(38)
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Disallowance on account of Sponsorship of Doctor’s Overseas Tours - there is no need to make the said disallowance simply because in some other case, a disallowance made had been upheld.
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Capital gain - tax liability - transfer u/s 2(47) of asset - the assessee neither received any consideration nor possession is handed over to the GPA holder, therefore, section 2(47)(vi) has no application
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Charging of interest u/s 234B for non payment of advance tax - assessment framed u/s 147 - additions made towards unexplained - Liability of interest confirmed.
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Addition on the basis of cheques found during survey u/s 133A - Since the validity period of six months from the date of issuance of cheques has already been expired, no addition can be made.
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Penalty u/s 271D - loan accepted in cash - The cash loans in question cannot be said fall within the mischief of Section 269SS as near relatives cannot be said to be “Other person” within the meaning of Sec.269SS.
Customs
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Valuation - rejection of transaction value - although the supplier and the respondent were ‘related persons’ for the purpose of Customs Valuation Rules but the relationship between them had not influenced the price - declared value accepted as the transaction value.
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Project import - classification of the project - Water Supply Project or not - it clearly shows that the water being channelized through treatment and certain process before being released as fit for irrigation and therefore the revenue is not justified in denying the benefit of exemption notification.
Service Tax
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Entry fees and Toll fees are in relation to the goods and persons attending to vessel and/ or goods only. Thus, this service can be covered under the definition of Port Service.
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Refund of service tax paid - SEZ unit - even if the services are not mentioned in the Unit Approval Committee’s list, refund is to be sanctioned.
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Rejection of VCES Declaration - the part remaining dues alongwith the interest, which was liable to be paid by 31st December, 2014, could not be paid by 31.12.2014 due to some technical issue with online payment link of CBEC and could finally been paid on 01.01.2015 - Benefit of VCES allowed.
Central Excise
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Imposition of penalty u/r 26 of CER - fraudulent availment of CENVAT Credit - Knowing the activities of supplier they made a false representation to the authorities to avail of CENVAT credit. The are liable for such fraudulent activities
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Classification of goods - Mixed Fuel Oil - the product has not been tested for its suitability for use in admixture with any substance other than mineral oil as required - Not to be classified as motor spirit under heading 2710.99 or 2710 19 90
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CENVAT Credit - project imports - before availing the cenvat credit the appellant had applied for common registration and it is seen that no response was given by the Revenue on the application for common registration made by the appellant - Credit allowed.
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CENVAT Credit - duty paying invoices - the supplementary invoices have been issued by the Coal Companies, which are the undertakings of the Government of India, there can be no presumption, unless rebutted, of any alleged suppression or collusion - credit allowed
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CENVAT Credit - input services - Forwarding and Cargo Handling services - the place of removal is the port not the customers’ premises as claimed by the appellant and the Commissioner (A) has rightly held and demanded the service tax.
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CENVAT Credit - input service - period from April 2005 to October, 2006 - denial on account of nexus - whether the construction of staff colony in the present case is a welfare activity of the appellant or is an activity in relation to its business? - Credit allowed.
VAT
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Benefit of concessional rate of tax under CST Act, 1956 - Inter-state procurement of goods for use in mining - there could be no restrictive meaning applied to the term "goods for sale" - Benefit of Central Sales Tax allowed. - Benefit is available even in GST regime.
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Reversal of Input tax credit - mismatch of return - The web report or the data maintained by the Department is only a starting point, based on which, the authority has to enquire and proceed further. - Assessee must be given an opportunity to explain.
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Reversal of input tax credit - n cases of mismatch, as per the Circular, the Assessing Officers are directed to enclose full particulars, invoice-wise, either in printed form or CD or email.
Case Laws:
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GST
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2019 (1) TMI 195
Seizure/ retention order - Section 129(3) of the U.P. GST Act - Held that:- The petitioner is the owner of the goods and as such it is directed that the goods so detained and the vehicle shall be released to the petitioner, on furnishing security in terms of Clause (C) of Section 129(1) of the Act for the amount as indicated under Section 129(1)(a) of the Act forthwith - petition allowed.
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Income Tax
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2019 (1) TMI 230
Charitable activity - approval u/s 80G denied as activities of the respondent-society were not for charitable purposes and 50% of the donations was from the trustees themselves in the absence of any documentary evidence - corpus donation for land building - Held that:- No good ground to interfere with the impugned order passed by the High Court. The special leave petition is, accordingly, dismissed.
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2019 (1) TMI 229
Entitlement to deduction under Section 80-IB(10) - AO declined the claim as assessee company did not develop and build any housing project of its own but merely executed the contract work awarded to it by the principals, i.e DDA and IRWO - ITAT and HC allowed the assessee’s claim - Held that:- Special Leave Petitions are dismissed in view of the low tax effect.
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2019 (1) TMI 228
Entitlement to deduction u/s.10B -‘Deemed Export’ of goods made during the period in question through a third party - assessee were entitled to deduction u/s.10B of the Act in respect of the “Deemed Export” - Held that:- SLP dismissed.
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2019 (1) TMI 227
Addition u/s 68 - unexplained cash credit - Held that:- The impugned order is modified. The following question which may also be considered in the appeal:- (i) Whether on facts and circumstances of the case and in law, the Tribunal was justified in deleting the addition of ₹ 7,53,50,000/- u/s.68 of the Act, being share capital share premium received during the year when the Assessing Officer held the same as unexplained cash credit.
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2019 (1) TMI 226
Applicability of provisions of Section 80DD - payment of annuity of lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual or the member of the Hindu Undivided Family (HUF) in whose name subscription to the scheme stipulated in the said provision has been made - Petition is stated to be filed in the interest of handicapped children whose parents have taken Jeevan Aadhar Policy (Table 114) from the Life Insurance Corporation of India (for short, ‘LIC’) for the livelihood of their children - grievance of the petitioner is that benefit of Jeevan Aadhar policy should not be deferred till the death of the assessee/life assured and it should be allowed to be utilised for the benefit of the disabled person even during the lifetime of the assessee. Held that:- As noted from the provisions of Section 80DD as well as from the explanatory memorandum of the Finance Bill, 1998, by which this provision was added, the purpose is to secure the future of the persons suffering from disability, namely, after the death of the parent/guardian. The presumption is that during his/her lifetime, the parent/guardian would take care of his/her handicapped child. The prayer is that Section 80DD of the Act be suitably amended. This Court cannot give a direction to the Parliament to amend or make a statutory provision in a specified manner. The Court can only determine, in exercise of its power of judicial review, as to whether such a provision passes the muster of the Constitutional Scheme. Though, there is no specific prayer in this behalf, but in the body of writ petition, argument of discrimination is raised. Here, we find that the respondents have been able to successfully demonstrate that the main provision is based on reasonable classification, which as a valid rational behind it and there is a specific objective sought to be achieved thereby. The petitioner may be justified in pointing out that there could be harsh cases where handicapped persons may need the payment on annuity or lumpsum basis even during the lifetime of their parents/guardians. Where guardian has become very old but is still alive, though he is not able to earn any longer or he may be a person who was in service and has retired from the said service and is not having any source of income. In such cases, it may be difficult for such a parent/guardian to take care of the medical needs of his/her disabled child. Even when he/she has paid full premium, the handicapped person is not able to receive any annuity only because the parent/guardian of such handicapped person is still alive. There may be many other such situations. It is for the Legislature to take care of these aspects and to provide suitable provision by making necessary amendments in Section 80DD. In fact, the Chief Commissioner for Persons with Disabilities has also felt that like other police holders, Jeevan Aadhar policy should also be allowed to mature after 55 years of age of the proposer and the annuity amount should be disbursed through the LLCs or National Trust. Writ petition by urging upon respondent No.1 to have a relook into this provision by taking into consideration all the aspects, including those highlighted by the Court in this judgment, and explore the possibility of making suitable amendments
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2019 (1) TMI 225
Revision u/s 263 - incurring of trading loss - as per CIT-A AO has failed to make any enquiry as regards the huge duty drawback claimed by the assessee and the modus operandi of the assessee - Held that:- No good ground to entertain this petition. The Special Leave Petition is dismissed.
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2019 (1) TMI 224
Addition of provision for the enhanced compensation - AO passed the order under Section 154 deleting wrong amount - Held that:- We find that the error, which has crept in the impugned order dated 12.7.2017, is on account of the fact that the Tribunal failed to take into consideration the specific ground raised by the assessee pertaining to the provision for the enhanced compensation of ₹ 25.66 Crores. To be noted that at the relevant time, when the appeal was filed before the Tribunal against order passed by the CIT(A) dated 28.2.2017, the appeals filed before the Tribunal in respect of the assessment years 2009-10 and 2010-11 were pending. Unfortunately, the Tribunal, while passing the impugned order, though noted the said argument of the assessee in paragraph 9.2, failed to take into consideration the said amount. Therefore, in our considered view, the assessee is right in contending that if ₹ 16.77 Crores was never claimed as a deduction, then obviously the said amount could not be treated as income by the assessee. On account of two orders passed by the Tribunal, the impugned order dated 12.7.2017 and the subsequent order dated 24.1.2018, which granted relief to the assessee by allowing the provision of ₹ 25.66 Crores, it appears that a confusion has arisen, as a result of which, the Assessing Officer, passed the order under Section 154 of the Act dated 03.4.2018, stating that the amount of ₹ 16.77 Crores was wrongly deleted instead of ₹ 3.52 Crores. Assessing Officer cannot be blamed because the confusion has arisen on account of the impugned order passed by the Tribunal dated 12.7.2017, in which, this issue relating to ₹ 16.77 Crores was, though raised by the assessee stating that this was never claimed as a deduction, not dealt with by the Tribunal. Hence, the matter has to be redone by the Assessing Officer. The matter is remanded to the Assessing Officer to give effect to the order passed by the Tribunal dated 24.1.2018 and verify as to whether the amount of ₹ 16.77 Crores was claimed as deduction and if it is found that it was not claimed as deduction, the same cannot be added to the income of the assessee. The substantial questions of law are left open.
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2019 (1) TMI 223
Reopening of assessment - reasons to believe - bogus share capital/share application money - sufficiency of reasons to be considered in a writ petition - communication of reasons for reopening - Held that:- In the present case, the reasons recorded in the matter were certainly communicated to the petitioner. The objections of the petitioner have been properly dealt and it is not a case of mere suspicion, it is a case, wherein the competent authority was having reason to believe to reopen the assessment. There was a specific information available with the authorities. The reasons to believe had been properly understood by the authorities and there was material on the basis of which, notice was issued. In exercise of the jurisdiction under Article 226 of the Constitution of India, the sufficiency or insufficiency for the formation of the reason to believe cannot be considered, as held in AGR INVESTMENT LTD VERSUS ADDL. COMMISSIONER OF INCOME TAX AND ANOTHER. [2011 (1) TMI 48 - DELHI HIGH COURT]. It is certainly open to the assessee to participate in the reassessment proceedings and to put forth its stand in detail to satisfy the Assessing Officer that no escapement of income has taken place. At this stage, this Court does not find any reason to interfere with the notice as well as with the order passed by the respondents. No case for interference is made out in the matter. - deided against assessee
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2019 (1) TMI 222
Penalty u/s 271B - failure to file the audit report - sufficient cause for not filing the audit report before the last date for filing the same namely 30.9.2012 - power to condone the delay in filing the audit report u/s 273B - appellant submited that during the said assessment year namely 2011-12, the assessee's father and mother passed away, as a result of which, the audit report could not be filed - Held that:- Admittedly, the reasons assigned by the assessee have not been found to be false nor with any mala fide intention, the reasons were assigned. Therefore, this Court is of the view that the explanation offered by the assessee can be taken as a reasonable cause for his failure to file the audit report within time. We are also aware that the assessment was completed under Section 143(3) only on 29.3.2015 and on that date, the audit report was very much available with the Assessing Officer. We find that the non filing of the tax audit report before 30.9.2012 is a technical breach and admittedly, the assessee filed the audit report along with the return of income on 31.3.2013 and that the assessment was framed by the Assessing Officer only on 29.3.2015, on which date, the audit report was very much on the file of the Assessing Officer. Thus, we are of the view that the explanation offered by the assessee can be accepted as a reasonable cause for his failure to file the audit report within time and the case on hand is not a fit case for imposing penalty on the appellant. - Decided in favour of assessee
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2019 (1) TMI 221
Reopening of assessment - TDS certificate on which the petitioner relies upon are invalid certificates and have no legal standing - also as doubted to whether the amounts covered under the TDS were deposited with the government or not? - Held that:- Ernst & Young Pvt. Ltd. (2004 (12) TMI 39 - GUJARAT HIGH COURT) is of the view that, where, the issue of TDS was dealt with by the Assessing Officer, the department had no ground to invoke provisions of Section 147 and 148 of the Act of 1961. M/s. Phool Chand Bajrang Lal and Another (1993 (7) TMI 1 - SUPREME COURT) lays down what can be construed as a true and full disclosure. In the facts of that case, the Supreme Court did not find the assessee to have made a full and true disclosure for the authorities not to invoke the provisions of Section 147 and 148 of the Act of 1961. S.K. Tekriwal (2012 (12) TMI 873 - CALCUTTA HIGH COURT) deals with the provisions of Section 40(A)(ia) of the Act of 1961. It notes that a portion of the judgment and order was under challenge. The judgment and order under challenge finds that there was no allegation that the Tax Deducted at Source was not deposited with the government account. The department is doubting the deposit of the TDS amount with the government. It is, therefore, imperative that such issue is looked into under the provisions of Section 147 and 148 of the Act of 1961. In the facts of the present case, therefore, not minded to find that, the authorities have acted beyond jurisdiction in invoking the provisions of Section 147 and 148 of the Act of 1961
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2019 (1) TMI 220
Profit on the sale of agricultural land as exempt u/s 2(14) - nature of land sold - profit earned by the assessee on sale of agricultural land as business income - Held that:- On appreciation of evidence, Tribunal has specifically observed and held that the transaction carried out by the assessee was not "adventure in the nature of trade" and therefore, profit earned was not required to be taxed as business income. The aforesaid is the finding recorded by the learned Tribunal on appreciation of evidence. The land was sold as an agricultural land and in fact, what was sold was agricultural land. What was the intention of the purchaser cannot be the determinative factor to treat the profit earned by the assessee on sale of agricultural land as business income. Similarly, merely because for whatever reason, the assessee has earned sufficiently huge amount of profit also cannot be a ground to treat the profit earned by the assessee on sale of agricultural land as business income. Tribunal has not committed any error in directing the Assessing Officer to treat the profit of ₹ 1,20,21,138 earned by the assessee on the sale of agricultural land as exempt under section 2(14) of the Income tax Act. - Decided in favour of assessee
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2019 (1) TMI 219
Transfer pricing adjustment relating to international taxation of the Investment Banking Division - Held that:- We find that in the first year of operation of the company, when this issue arose, which has already been set aside to the file of the AO/ TPO for fresh determination of Transfer Pricing adjustment after giving proper opportunity to the assessee. As the issue in first year has already been set aside, we in this year also, setting aside the same on similar directions to the file of the AO/ TPO. As the above issue has already been set aside for the reason that the TPO/ AP/ DRP in the absence of details furnished by assessee proceeded to apply ALP to broking transaction and we have already set aside the first issue exactly on identical reasoning’s, we restore this second issue to the file of the AO/ TPO exactly on similar directions. Hence, this issue of the assessee’s appeal is also set aside to the file of the AO /TPO.
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2019 (1) TMI 218
Addition of cash credits - Held that:- Explanation of the assessee was not found satisfactory on the basis that before advancing money to the assessee, there were cash deposits in the account of the creditors. CIT(A) has admitted the factum of earning of agricultural income. Therefore, inference that the entire amount was not belonging to the creditors would be fallacious. We therefore, looking into the facts and material available on records, hereby delete 50% of the addition of ₹ 17,51,000/-. The ground of the assessee’s appeal is partly allowed.
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2019 (1) TMI 217
Addition u/s 41 - credit balances treated as the assessee’s income from undisclosed sources and added back the same to the income of the assessee for continuous & willing failure of assessee to get the same verified - Held that:- From the perusal of the records it can be seen that the Assessing Officer has not established with evidence that the liability in respect of the above outstanding balances has ceased to exist. The case laws referred by the Ld. DR are factual distinguished by the Ld. AR and will not be applicable in the present case. Case THE PR. COMMISSIONER OF INCOME TAX-6 VERSUS NEW WORLD SYNTHETICS LIMITED [2018 (9) TMI 230 - DELHI HIGH COURT] to be followed. The appeal of the assessee is allowed.
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2019 (1) TMI 216
Deduction u/s. 35D - eligibility - Share Issue Expenditure - whether the expenditure incurred in increasing the Share capital is not deductible u/s 35D? - Held that:- For its claim that there was substantial expansion of the industrial undertaking, assessee has relied on its audited accounts for the year ended 31st December, 2006. Assessee for its accounting purpose was following calendar year as its financial year - AR was unable to clarify whether the expansion claimed by the assessee had happened before 1st April, 2006 or after the said date. Once the assessee is claiming that there was an expansion of industrial undertaking, onus lies on the assessee to prove such claim. Assessee having failed to do so, we are of the opinion that lower authorities were justified in denying the claim u/s.35D - Decided against assessee Disallowance of excise duty element on warranty - Held that:- It might be true that warranty goods manufactured by the assessee, on which it had claimed excise duty as allowable u/s.43B of the Act, remained with the assessee till the warranties were invoked by the customers. However, it is not disputed that warranty goods stood manufactured by the assessee. Assessee had also paid the excise duty thereon to the exchequer. Once the assessee had effected payment of the excise tax, in our opinion assessee could not have been denied the claim u/s.43B. Disallowance of Prior period Items - Held that:- Assessee did not provide any details. Now the claim before us is that part of the expenditure was sales tax dues actually paid during the previous year relevant to the impugned assessment year. Considering the facts and circumstances, we are of the opinion that the issue can be verified afresh by the ld. Assessing Officer. We set aside the orders of the authorities on the issue of allowability of the claim of prior period expenditure of C3,92,473/- and remit it back to the file of AO for consideration afresh in accordance with law. Appeal of assessee is allowed for statistical purposes. Disallowance of expenditure towards gift - Held that:- CIT(Appeals) has specifically noted that except for the list of the debit entries, assessee did not produce any evidence to show that the expenditure was incurred wholly and exclusively for the purpose of business. In other words assessee could not show the business expediency of the gifts, nor could identify the recipients. In such circumstances, the claim was rightly disallowed by the AO. - decided against assessee.
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2019 (1) TMI 215
Levy of penalty u/s.271(1)(c) - additional income offered in return of income in response to notice u/s.153A and unexplained capital - Held that:- While initiating penalty, the AO has not specified any of the charge u/s.271(1)(c). However, while passing the order levying penalty, the AO has mentioned both the limbs. The relevant extract of penalty order (para No.8) has already been reproduced hereinabove. The Hon’ble Karnataka High Court in the case of CIT & Another Vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] held that the assessee should know the grounds which he has to meet specifically.Otherwise, the principles of natural justice is offended. On the basis of such proceedings no penalty could be imposed on the assessee. Also see CIT VERSUS SHRI SAMSON PERINCHERY [2017 (1) TMI 1292 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2019 (1) TMI 214
Stay of demand - recovery proceedings - Held that:- If entire demand is recovered against the assessee, the purpose of the filing of the appeal would be frustrated. The interest of Revenue is also protected because the assessee has already paid substantial demand to the Revenue against the outstanding demand. The appeal of assessee is pending for disposal and appeals of assessee for another years on the same issue are also pending for disposal. Therefore, considering the totality of the facts and circumstances of the case, we stay the entire outstanding demand for a period of six months or disposal of the appeal whichever may expires earlier, subject to the condition that assessee shall not seek unnecessary adjournment in the matter. The Office is directed to fix the appeal of assessee for final hearing on 14.01.2019 the day when other appeals of the assessee on the same issue are fixed for final hearing.
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2019 (1) TMI 213
Addition u/s 68 - sale proceeds of shares of M/s Kailash Auto Finance Limited (KAFL) treating the same as income from undisclosed sources - rejecting the assessee’s claim of Long Term Capital Gains (LTCG) on sale of those shares - scrips of M/s. KAFL was artificially rigged to provide LTCG to the assessee which cannot be allowed - Held that:- Referring to case of Manish Kumar Baid case [2017 (10) TMI 522 - ITAT KOLKATA] the enquiry by the Investigation wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not implicate the assessee and/or his broker. It is also a matter of record that the assessee furnished all evidences in the from of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act. AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. - Decided in favour of the assessee. Unexplained expenditure towards commission charges of sale of such shares by the operator - Held that:- As have already held that the transactions relating to LTCG were genuine and not the accommodation entries as alleged by the AO. Consequently the addition is hereby directed to be deleted. - Decided in favour of the assessee.
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2019 (1) TMI 212
Deduction claimed u/s 80P - Deduction in respect of income of co-operative societies - assessee is co-operative society and registered under Multi-State Cooperative Societies Act, 2002 - Held that:- Ratio laid down by the Hon’ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd (2010 (2) TMI 3 - SUPREME COURT) cannot be applied to the facts of the credit society and accordingly deduction under section 80P of the Act has been allowed against interest income from deposits with nationalized banks As this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in assessee's own case. In this regard we would like to place reliance upon the decision of the Hon'ble Apex Court in the case of CIT vs. Excel Industries [2013 (10) TMI 324 - SUPREME COURT] wherein the principle of consistency has been reiterated. Hence when the issue has been decided by the Jurisdictional High Court no convincing reason has been pointed to take a different view, any deviation is not permitted. - Decided in favour of assessee
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2019 (1) TMI 211
Benefit of deduction u/s 80P(2)(a)(i) - interest income received on investment of their surplus funds - denial the claim of the Assessee on the ground that interest income earned by making investment of surplus funds has to be assessed under the head income from Other Sources and not income from business - Held that:- The claim of the Assessee was that Co-operative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2) of the Act. As decided in the case The Totgars Co-operative Sales Society Ltd. (2017 (7) TMI 1049 - KARNATAKA HIGH COURT) held that interest earned from Schedule bank or co-operative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d)of the Act was not applicable to such interest income. It is thus clear that the source of funds out of which investments were made remained the same in AY 2007-08 to 2011-12 and in AY 1991-92 to 1999-2000 decided by the Hon'ble Supreme Court. Therefore whether the source of funds were Assessee's own funds or out of liability was not subject matter of the decision of the Hon'ble Karnataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Co-operative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT] still holds good. Hence, on this aspect, the issue should be restored back to the AO for a fresh decision after examing the facts in the light of these judgment of the Hon'ble Apex Court rendered in the case of The Totgars Cooperative Sale Society Ltd. (supra) and of Hon'ble Karnataka high Court rendered in the case of Tumukur Merchnts Souharda Cooperative Ltd.[2015 (2) TMI 995 - KARNATAKA HIGH COURT] - Assessee's appeal allowed for statistical purposes.
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2019 (1) TMI 210
Disallowance on account of Physician Samples distributed free of cost - allowable business expenditure u/s 37 - Held that:- As decided in assessee's own case it is a known fact that the free sample of medicines supplied to the doctors is done for the promotion of the product of the company. Even when a new product is launched, the doctors are given necessary inputs regarding the use and effects etc. of the product and which also contributes imparting knowledge to the doctors about the new medicine/product coming into the relevant for practice of their profession. The genuineness of the transactions has not been doubted by the A.O. We do not find any infirmity in the well reasoned order passed by the CIT(A) holding that the expenses were incurred for the business promotion activity of the assessee. We therefore do not find any merit in the appeal filed by the Revenue Disallowance on account of Sponsorship of Doctor’s Overseas Tours - Held that:- As the appellant has been able to prove the genuineness of expense, proper recording in its books of accounts of the expenses, and the relationship of the expense with the business of the appellant, I find there is no need to make the said disallowance simply because in some other case, a disallowance made had been upheld. The case laws relied by the appellant also helps its case. The addition made is, therefore, deleted and the ground of appeal allowed. Disallowance of Sales promotion - busniss expenditure - Held that:- In the instant case, the expenditure incurred is not capital in nature or in the nature of personal expenses of the appellant. In fact, it has been incurred on account of commercial expediency and has facilitated the appellant in carrying on its business. A perusal of the accounts of the earlier years shows that the total turnover and net profit of the appellant company have been increasing over the years which shows that the sales promotion activities have led to higher sales and better financial results for the company. Considering the discussion the expenditure claimed by the appellant was entitled to deduction u/s. 37(1) Exemptions u/s. 54EC against deemed Short Term Capital allowability - Held that:- In CIT vs. Aditya Medisales [2013 (11) TMI 576 - GUJARAT HIGH COURT] assessee transferred an asset held by it for more than 36 months i.e. a long term capital asset and invested an amount of ₹ 50 lakhs in bonds issued by NHAI which is long term specified asset as per clause (b) sub clause (i) of the explanation to section 54EC. In the above said case, in similar circumstances, Hon’ble Gujarat High court granted relief in favour of the assessee. Therefore, in such circumstances, we do not want to interfere in the order passed by the ld. CIT(A). In our considered opinion, ld. CIT(A) has passed detailed and reasoned order and same does not require any kind of interference at our end. - Revenue appeal dismissed.
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2019 (1) TMI 209
Capital gain - tax liability - transfer u/s 2(47) of asset - whether transfer has taken place as on the date of execution of GPA dated 29/05/2002 or as on the date of registration of sale deed dated 20/11/2006 - Held that:- We find that the assessee executed GPA on 29/05/2002 and in the GPA there is no sale consideration and not handed over the possession, it is only general GPA, therefore it cannot be said that on the date of execution of GPA, the assessee has transferred the property. Therefore, the Assessing Officer has rightly held that the property is transferred only on 20/11/2006 on the date of registration of sale deed by GPA holder on behalf of the assessee. CIT(A) has considered the GPA and remand report and gave a categorical finding that the transfer of the property is taken place only on 20/11/2006 and upheld the order of the Assessing Officer. Therefore, it cannot be said that the transfer has taken place through GPA on 29/05/2002. Thus find no reason to interfere with the order passed by CIT(A). Argument of the assessee that on the date of execution of GPA dated 29/05/2002, the transfer has taken place in the light of section 2(47)(vi) we find that the assessee’s case does not come under the purview of section 2(47)(vi), and therefore, it cannot be said that the assessee along with Smt. Adhikari Syamala has transferred the property on 29/05/2002 on the date of execution of GPA. In the case of C. Sugumaran [2014 (11) TMI 320 - MADRAS HIGH COURT] has considered the provisions of section 2(47)(vi) and held that, to attract the above section, two conditions must be fulfilled, assessee must have received consideration and possession should be given. If the above two conditions are not fulfilled, it cannot be said that there is a transfer of property as per section 2(47)(vi) of the Act. In the present case, the assessee neither received any consideration nor possession is handed over to the GPA holder, therefore, section 2(47)(vi) has no application.- Decided against assessee
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2019 (1) TMI 208
Disallowance of interest u/s 244A - maintainability of appeal - Held that:- As the issue has already been adjudicated by the co-ordinate Bench in the case of Sandvik Asia Limited [2015 (11) TMI 752 - ITAT PUNE] and held that non granting of interest under section 244A of the Act is appealable. Hence, we direct the AO to compute the interest applicable to assessee under section 244A of the Act as per the Provisions of the Act. We direct the AO accordingly. Disallowance of interest expenditure on advances - advances were made in contravention of RBI directions - Held that:- As decided in assessee's own case nothing has been brought on record to indicate that the assessee has incurred an expenditure of ₹ 57.79 crores in contravention of RBI guidelines which comes within the ambit of Proviso to section 37(1) - AO has not brought any materials against the assessee to prove that the RBI has passed any orders imposing fine or penalty - the assessee has filed enough evidence before the AO to prove that the guidelines issued by the RBI is only advisory in nature and any contravention of such guidelines can be cured by making an application before RBI for condonation of such violations using its powers. Therefore, we are of the considered view that disallowing notional interest on borrowings for the simple reason that the assessee has violated directives issued by RBI without any contrary materials to prove that the assessee has incurred such expenditure for contravention of the provisions of the Act is incorrect. - decided in favour of assessee Disallowance of club fee - assessee had failed to prove the nexus of these expenses to the business - Held that:- As the issue is squarely covered in favour of assessee in assessee’s own case for the AY 1996-97 respectfully following the same, we confirmed the order of CIT(A) deleting the addition. Disallowance u/s 14A - Held that:- As assessee has its own funds available in the shape of share capital plus reserves at ₹ 35897.69 lakhs as against the investment in equity shares at ₹ 3501.05 lakhs, which is much below the own funds. Once this is the position, respectfully following the Hon’ble Bombay High court decision in the case of HDFC Bank Ltd.[2014 (8) TMI 119 - BOMBAY HIGH COURT], we delete the addition made by AO of interest expenses but sustained the disallowance at the rate of 2% of dividend income estimated by AO at ₹ 2,90,440/-. We allow this issue of assessee’s appeal partly.
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2019 (1) TMI 207
Penalty u/s 271(1)(c) - as per AO interest paid on the unsecured loan should be capitalized and the same cannot be allowed as deduction u/s 36(1)(iii) - whether the assessee has furnished inaccurate particulars of income by claiming a deduction on account of interest expenses on the loan which was utilized for investing in the properties? - Held that:- It is a settled law that the interest on loan used for investment purposes should be capitalized. Thus, interest expenses claimed in the Profit and Loss Account was added to the value of the investment. Accordingly, the value of the investment was enhanced. If investments are subject to depreciation, then the assessee will be entitled to claim the deduction of the interest in the form of depreciation u/s 32 of the Act. If the investments are not subject to depreciation, then the assessee will be entitled to deduction of interest expenses at the time of sale of such investment in the market. Therefore, in either case, the assessee was eligible for the deduction of the expenses in the different form. It could not be concluded that the assessee deliberately claimed the interest as revenue expenditure. The assessee has filed its return of income declaring loss of ₹ 8,52,704/-. Therefore if the assessee treats the interest expenses as capital in nature then also there was also no tax liability on the part of the assessee. Therefore, we are of the view there was no deliberate act on the part of the assessee to escape from the tax liability by claiming interest expenses as revenue. The claim made by the assessee in the return of income on account of interest expenses can be an inaccurate claim which cannot be equated with the inaccurate particulars of income - No penalty to be imposed u/s 271(1)(c) - decided in favour of assessee.
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2019 (1) TMI 206
Addition on account of bad debts - condition laid down in section 36(2) of the Act was not satisfied - Held that:- Identical ground of bad debt was raised in appeal for AY 20010-11 where the issue was decided in favour of the assessee by deleting addition made on account of disallowance of bad debts. Since similar bad debts were allowed in earlier year, showing consistency the ld. CIT(A) gave relief to the assessee. As decided in SHRI SHREYAS S. MORAKHIA [2012 (3) TMI 103 - BOMBAY HIGH COURT] the requirement which has been imposed by Parliament in Section 36(2)(i) is that a deduction on account of a bad debt can be allowed only where such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of the debt is written off - The brokerage having been credited to the profit and loss account of the assessee, it is evident that a part of the debt is taken into account in computing the income of the assessee - Since both form a component part of the debt, the requirements of Section 36(2)(i) are fulfilled where a part thereof is taken into account in computing the income of the assessee - Decided in favor of the assessee. Disallowance on account of loss on trading - AO disallowed it treating the same as speculation loss as per section 73 - Held that:- The loss claimed by the assessee does not fall within the purview of section 73 of the Act. On the identical issue the decision of Ahmedabad ITAT in the case of ITO vs. Rajvi Securities Pvt. Ltd. [2012 (4) TMI 207 - ITAT AHMEDABAD] supports the contention of the assessee - Decided against revenue Addition on account of prior period expenses - such expenses are to be considered in the year in which it pertains - Held that:- CIT(A) was of the opinion that the assessee has rightly claimed the said expenditure in the year under consideration as it was crystallized in the year under consideration only and also it is following the said accounting practice consistently. Accordingly, the disallowance made by the Assessing Officer was deleted by the ld. CIT(A).- Decided against revenue
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2019 (1) TMI 205
Revision u/s 263 - enhanced deduction of section 80P - provision for bad and doubtful debts and provision for gratuity fund are to be disallowed in computing the total income of the assessee - Held that:- Referring to CBDT vide circular no. 37/2016 dated 02.11.2016 in the context of enhanced claim of deduction u/s 80IA any disallowance even if it is to be made towards provision for gratuity fund and provision for bad and doubtful debts would only go to increase the business income of the assessee society and in turn, automatically result in enhanced claim of deduction u/s 80P of the Act. Hence it becomes revenue neutral. Accordingly, it could be safely concluded that there is no prejudice that is caused to the interests of the revenue. Even if the order of the ld. AO in not enquiring about these two issues, becomes erroneous, we hold that twin conditions of section 263 of the Act is not cumulatively satisfied in the instant case. Reliance is made on the decision of Hon’ble Apex Court in the case of Malabar Industries Ltd. (2000 (2) TMI 10 - SUPREME COURT). Accordingly, we have no hesitation in quashing the revision proceedings initiated u/s 263 of the Act in the facts of the instant case by the ld. Administrative CIT. Accordingly, grounds raised by the assessee are allowed.
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2019 (1) TMI 204
Unexplained income u/s 69A - Held that:- We agree with the contention of the ld. AR that the foundation itself is weak and the addition should not survive. AO made the addition on the strength of the statement of Shri Rohtash wherein he has admitted that ₹ 1 crore has been received. Exhibit 85 of the paper books reveals that on the date of receipt of the impugned amount, the same was returned back to Amrapali Group by M/s Bihariji group. The entries of ₹ 50 lakhs each on 11.12.2012 and 01.02.2013 can be seen from the said Exhibit 85 of the paper book. This means that the date on which the alleged ₹ 1 crore was received, on the very same day the same was returned back. There is no mention of the assessee’s name in the impugned document. AO has simply assumed that the reference to the impugned amount is in relation to the assessee. No addition can be made on the basis of presumptions and surmises. Assuming, yet not accepting that the amounts were received by the assessee, the same were returned back on the very same date as per Exhibit 85 of the paper book. Even on this count, addition is uncalled for. - Decided against revenue. Unexplained share application money - Held that:- There is no dispute that the purchase of shares of the aforesaid companies has been accepted by the Assessing Officer. Assuming, yet not accepting that the sale consideration is bogus, then the question which has to be answered by the Assessing Officer is that where did the purchase money go since he has accepted the purchase of shares of two companies? Considering the facts of the case in hand in totality, we do not find any error in the findings of the CIT(A). This ground is also dismissed. Rent payment expenditure - Held that:- DR also could not demonstrate that the assessee has actually made any payment to M/s Trinity Shipping and Allied Services Pvt Ltd. That being the fact of the matter, no interference is called for. This ground is dismissed.
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2019 (1) TMI 203
Charging of interest u/s 234B for non payment of advance tax - assessment framed u/s 147 - additions made towards unexplained investment in partnership firm - Held that:- No taxes had been paid initially by the assessee and the addition made u/s 147 of the Act was on account of unexplained investment made by the assessee in partnership firm. The said addition cannot be said to be on account of an issue on which there existed a bonafide dispute. The assessee therefore was liable to include the same while estimating his income for payment of advance tax and having not done so the assessee had defaulted initially in the payment of advance tax and was thus liable to pay interest when the said amount was added to his income in reassessment proceedings as per section 234B(3) of the Act. - decided against assessee
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2019 (1) TMI 202
TPA - selection / rejection of certain comparables - Held that:- Assessee is a captive service provider and is engaged in providing back office support services and information technology (I.T) support services to its overseas Associated Enterprise (A.E) thus companies being functionally dissimilar to the assessee, cannot be treated as a comparable. Company cannot be rejected as a comparable merely because it has accounting period ending in December.
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2019 (1) TMI 201
MAT - Computation of Book profit under section 115JB - claims made during the course of assessment proceedings Other than by filing revised return of income to be allowed - Held that:- Whether the claim made during assessment proceedings can be considered by AO when no such claim was made in return of income, is covered by the decision of the co-ordinate bench of Delhi in the case of The Kangra Cooperative Bank Ltd. vs. JCIT in [2015 (11) TMI 270 - ITAT DELHI] in favour of assessee - we remit this issue back to the file of the ld.CIT(A) to adjudicate the claim in accordance with law after affording due opportunity of being heard to the assessee.
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2019 (1) TMI 200
Penalty u/s 271(1)(c) - reopening of expenditure - Disallowance of capital loss treated as revenue expenditure - Held that:- No new tangible incriminating material was received by the AO as the reopening was done based on the material already on record while framing original assessment u/s 143(3) and in first round the claim of the assessee was allowed when the original assessment u/s 143(3) was framed on 30-03-2013. No doubt the Revenue can rightfully open concluded assessment u/s 147 under the prevailing circumstances of the case as the reopening was done within four years from the end of the assessment year and first proviso to Section 147 is not applicable . There is no estoppels against law. So far as penalty u/s 271(1)(c) levied by Revenue is concerned in the instant case, the decision in the case of Reliance Petroproducts Private Limited [2010 (3) TMI 80 - SUPREME COURT] is relevant as the assessee lodged its legal claim for allowability of loss on fixed assets written off as the said assets became unusable / damaged on a bonafide belief but the said claim was not accepted in reopening proceedings u/s 147 in the midst of concept of Block of assets u/s 32(1)(ii) read with Section 50 of the 1961 which was applicable to the instant case as the assessee is engaged in the business of shipping. As already seen above that there is lack of clarity in the placement of section 32 and its subsections. Merely because the legal claim filed by the assessee is not accepted by Revenue will not automatically make tax-payer liable for penalty u/s 271(1)(c). The assessee had a bonefide belief that its claim is allowable keeping in view provisions of Section 32(1)(iii) albeit assessee was governed by Block of assets as per provision of Section 32(1)(ii) and 50 of the 1961 Act but no doubt explanation offered by the assessee was bonafide and Explanation 1 to Section 271(1)(c) will be applicable which takes assessee out of penalty provisions as are contained in Section 271(1)(c). - Decided in favour of assessee.
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2019 (1) TMI 199
Penalty u/s 271(1)(c) - working of capital gains arising on sale of Gobi unit at Erode considered the book value of assets sold for working out the net worth in place of written down of assets as provided by section 50B due to a bonafide error - Held that:- We noticed that after the sale of the Gobi unit by the assessee, the assessee has shown the book value for the purpose of calculating the LTCG whereas the assessee should claim written down value of the unit for the purpose of assessing the LTCG. Undoubtedly, as per the Section 50B the written down value is required for the purpose of assessing the long term capital gain on account of sale of Gobi unit. The assessee has shown the book value of asset and has also shown the written down value required as per the purpose of section 50B. The claim of the assessee was not allowable. There was a bonafide mistake on the part of the assessee for calculating the LTCG. The assessee has filed the revised return of income which has been accepted by the Department. In view of the revised return of income, we nowhere find any concealment of income or furnishing the inaccurate particulars of income. See PRICE WATERHOUSE COOPERS (P.) LTD. VERSUS COMMISSIONER OF INCOME-TAX, KOLKATA - I [2012 (9) TMI 775 - SUPREME COURT] - Decided in favour of assessee.
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2019 (1) TMI 198
Disallowance u/s 43B - Addition on account of excise duty on closing stock - disallowance triggered based on the observations made by the tax auditor in the tax audit report - Held that:- We find that the tax auditor had duly observed that the assessee had not provided for excise duty on closing stock of finished goods, meaning thereby, no debit to profit and loss account has been made for the same. While it is so, it could be concluded that no deduction had been claimed by the assessee towards excise duty on closing stock of finished goods in the Asst Year 1996-97. When there is no claim of deduction, there cannot be applicability of provisions of section 43B - Decided in favour of assessee. Disallowance of depreciation - AO had disallowed only 50% of depreciation claimed by the assessee as the assessee could not furnish separate list of assets - Held that:- It is not in dispute that the depreciation on assets is allowable on the basis of block of assets with effect from 1.4.1988. Hence for the assessment years under consideration, the principle of ‘block of assets’ would be applicable. It is now well settled that once an asset enters the particular block of assets and depreciation granted thereon for the whole block as such, the concerned asset loses its identity - condition of ‘put to use’ should be tested only in the year of installation or purchase and not thereafter. Hence we hold that the depreciation is allowable on the entire block of assets in the instant case. In any case, the basis adopted by the authorities below of disallowing 50% of depreciation claimed is not in accordance with law.- Decided in favour of assessee. Disallowance of miscellaneous expenses - assessee company was declared as a sick industrial company - Held that:- We find that the mistake committed in the annual report had been duly pointed out and brought to the notice of the AO in the original assessment proceedings itself vide written submissions dated 26.10.1998, which has been summarily ignored by the AO. We find that the same had been duly appreciated by the CIT-A by holding that the correct printing charges is only ₹ 7.76 lakhs and that the same is not to be considered as abnormally very high. As argued that since the assessee is already declared as a sick industrial company and most of its units are closed , the papers containing documents and evidences are dislocated and hence the evidences could not be furnished before the AO. CIT-A had taken due cognizance of the same and had deleted the disallowance of miscellaneous expenses on an estimated basis , which requires no interference.- Decided in favour of assessee. Disallowance of legal and professional expenses - Held that:- We find that the CIT-A had granted relief to the assessee to the tune of ₹ 21,84,986/- for which details in the form of ledger accounts were produced before the AO, since it could be deciphered from the same that the same were paid by account payee cheques. But for the remaining sum of ₹ 9,87,014/-, no evidence whatsoever was furnished by the assessee. Hence the same has been rightly confirmed by the CIT-A, which in our considered opinion, does not require any interference
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2019 (1) TMI 197
Addition on account of alleged House Property income at accrual basis - the possession of the property was given to the lessee in which it started carrying out the structural changes - Held that:- Proposed lessee had treated the amount of ₹ 2.10 crores given to the proposed lessor during the impugned period as "advance" and that AO during last year in scrutiny assessment accepted the claim of the assessee that the amount received was only an "advance" and did not form taxable income. AO also did not consider the fact that only advance of ₹ 2.10 crores has been received during the impugned period and no further advance was received after 30.06.2012. The AO did not take into consideration the confirmation given by the proposed lessee that amount given pending compliance of conditions precedent (obtaining of approval from MOEF and later OC from MCGM) has been treated in its (lessee) books of accounts as "advance". As conditions precedent have not been complied with, so nothing has become due to the proposed lessor. In this background, finding of the AO that amount of compensation / advance/ revised advance was due to the lessor at the rate of ₹ 4.20 crores per quarter is not tenable. The addition made by AO on selective reading of the proposed lease agreement was not justified. The detailed finding so recorded by CIT(A) are as per material on record which do not require any interference on our part. Furthermore the finding so recorded are supported by our above observation, which has not been controverted by bringing any positive material on record. - Decided against revenue
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2019 (1) TMI 196
Addition on the basis of cheques found during survey u/s 133A - whether no any loans / advances were given by the appellant against the said cheques and that no any Hundi papers were found as regards these cheques? - Held that:- The modus operandi of the business as per assessee is that money is advanced to the parties on the basis of hundis/promissory notes and as a security cheques are taken. However, no corresponding promissory notes or hundis from the above mentioned six persons issuing cheques were recovered. The assessee has filed affidavits from all the persons whose cheques were found admitting that no loan was taken by them from the assessee. The aforesaid persons also appeared before the Assessing Officer and their statements were recorded. All of them corroborated with the submissions of assessee and stood fast to the affirmations made in the affidavits filed. Once the affidavit and statement of Shri Shete Rameshwar Ganpatrao has been accepted the same affidavit and statement cannot be disbelieved in the case of person who has allegedly advanced cash loan. On all the cheques allegedly received as security there is no mention of date, except the cheque issued by drawer. The cheque issued by him bears the date 07-06-2006 i.e. period relevant to the assessment year 2007-08. As per the Negotiable Instrument Act, 1881 (as was applicable during the relevant period) validity of cheque was six months from the date mentioned thereon. Hence, the said cheque had become invalid and could not have been encashed by the assessee in the period relevant to the assessment year under appeal. On some of the cheques even the name of assessee is not mentioned. The additions have been made merely on the initial statement of the assessee without there being any corroborative material. There is no material on record to show that the assessee has extended loan to the parties named. - Decided in favour of assessee.
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Customs
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2019 (1) TMI 193
Called out for speaking to the minutes of order dated 16th October, 2018 - corrections be made in the original order dated 16th October, 2018 - Office to carry out the necessary corrections in the original orders.
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2019 (1) TMI 192
Valuation - rejection of transaction value - related party transaction - whether the relationship between the parent company i.e. the supplier from abroad and their subsidiary company i.e. the respondent herein, has influenced the import price or not? - Revenue also argued that the margin of profit is more than 11% and therefore a further loading of 5% has to be allowed by the authorities below. Held that:- There is no specific reason for the revenue for disregarding the transaction value, other than the suspicion that the profit margin is more than 11%. The Revenue failed to produce any evidence before any of the authorities below in support of its contention. Nor they produced any evidence in that regard. They also did not produce any document about contemporaneous import at a higher price. Whereas the respondent had submitted documents such as the Contract Agreement between the respondent and the foreign supplier which provides a basic idea about the terms of sale and payment, copies of invoices etc. The Adjudicating Authority analysed these documents and accepted the declared value as the transaction value. The Revenue has not brought out any evidence in its appeal to cast any doubt on the genuineness of the documents produced by the respondent before the Adjudicating Authority or first Appellate Authority nor provided any contrary information to about sale/purchase of identical/similar goods at higher prices or any evidence of payment over and above the invoice value. Thus, although the supplier and the respondent were related persons for the purpose of Customs Valuation Rules but the relationship between them had not influenced the price - The allegation of the revenue that the margin of profit is more than 11% is without any basis and therefore rejection of transaction value by the revenue cannot be approved. Allegations of mis-declaration of value also cannot be sustained. Appeal dismissed - decided against Revenue.
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2019 (1) TMI 191
Project import - classification of the project - Water Supply Project or not - denial of benefit of Notification No. 14/2004 dated 8.1.2004 - According to Revenue, an irrigation project such as the present one, which finds a specific entry under CTH 98010012, ‘for irrigation plant’ cannot be considered for registration as a water supply project under the general entry under CTH 98010020, ‘for other projects’. Held that:- The Notification No. 14/2004-Cus., dated 8.1.2004 granted exemption from payment of CVD on ‘water supply project’ falling under Tariff Heading 9801 of First Schedule to the Customs Tariff Act, 1975 as well as exemption from payment of basic customs duty leviable thereon. An “explanation” to the notification defined ‘Water Supply Project’ thus: “Water Supply Project includes a plant for desalination, demineralisation or purification of water or for carrying out any similar processes intended to make water fit for agricultural or industrial use.” In the present case, the import by the respondent was made for setting up a ‘water supply project’ for agricultural and industrial use. The importer furnished the requisite certificate from the Sponsoring Authority viz. the District Collector, Mahbubnagar as required under Notification No.14/2004 dated 8.1.2004, who certified that the goods were to be used at the initial setting up of a water supply project, for Agricultural and industrial use - It is not disputed that the Sponsoring Authority’s revised certificate/letter dated 15.5.2007 had clarified that the project in question is a water supply project and the said project goes through a process of making the water fit for agricultural use and thereby making them qualify as a process plant which is within the inclusive clause of the notification. Had the said letter dated 15.05.2007 been not there, still the certificate of the year 2006 issued by the Sponsoring Authority is sufficient for availing the exemption under the said notification. The Hon’ble Supreme Court in the matter of M/s. Zuari Industries Ltd. Vs. Commissioner of Central Excise & Customs [2007 (3) TMI 12 - SUPREME COURT OF INDIA] has laid down that once the project has been approved as a water supply project by the Sponsoring Authority, the Revenue cannot go beyond such certificate and deny the benefit of the notification. From the impugned order, it is clear that the respondent exhibited their site plans and flow charts before the ld. Commissioner and the said Commissioner was of the opinion that it clearly shows that the water being channelized through treatment and certain process before being released as fit for irrigation and therefore the revenue is not justified in denying the benefit of exemption notification to the respondent - appeal dismissed - decided against Revenue.
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Corporate Laws
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2019 (1) TMI 194
Typing error in the operative order - Validity of allotment of shares - petitioner claims that deposits made by him to the extent of ₹ 1.54 crores in the account of Respondent No.1 Company was in the nature of loan paid to save mortgaged properties and not for allotment of shares as was done by the Company - Held that:- There is typing error in Operative Order (Para – 17) in direction – 3 which is apparent on the face of record. Although we are proceeding to dismiss the Appeal and also propose to saddle the Appellant with costs, we are also correcting direction – 3 of the operative Order regarding the typing error in operative order of para – 17 of the Impugned Order under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 to meet the ends of Justice. In the Impugned Order para – 17(3) at both places where it is mentioned “Rs.1,50,00,000/-” read “Rs.1,54,00,000/-”. The Impugned Order is approved with this correction of typing error. The Appeal is dismissed with costs. The Appellant will pay ₹ 1,50,000/- as costs to Respondent No.1 – LVN Muralidhar. Other Respondents to bear their own costs.
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FEMA
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2019 (1) TMI 190
Approval of RBI for transfer of technology in excess of USD 1,00,000 - rectification of the advance payment - invocation of provisions of FERA - Held that:- The whole case hinges on the RBI’s approval for the excess amount not being available. From the RBI’s letter dated 18.11.2002, it is apparent that the RBI was seized of the matter and had not rejected their case. It would be in the fitness of things to have consulted the RBI before the impugned order was passed more so because the genesis of the case was an information received from the RBI. The matter is remanded back to the original authority to get the necessary response/reply from the RBI and pass a fresh speaking order after giving the appellants an opportunity of being heard.
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PMLA
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2019 (1) TMI 189
Smuggling - illegal possession of Heroin - illegal possession of an amount of ₹ 9 lacs recovered from underneath the rear seat of the vehicle - procceds of crime - pendency of attachment proceedings - Whether prosecution for offence under Section 3 of PMLA can be initiated during the pendency of attachment proceedings or before the attachment confirmation attains finality or before the conviction of the petitioner under the NDPS Act attains finality? Held that:- As is evident from the scheme of the PMLA, the proceedings for attachment are separate and in the nature of interim measures required to be taken to avoid a situation where proceedings are rendered redundant on account of the property being squandered away. If the designated officer has reason to believe, based on the material in his possession, that a person is in possession of proceeds of crime and, such proceeds, are likely to be concealed, transferred or dealt with in any manner which may result in frustrating proceedings relating to confiscation of 'proceeds of crime', he may proceed to attach the property in question. In fact it is in anticipation of prosecution that attachment proceedings are initiated. The second proviso to Section 5(1), when read alongwith first proviso, would itself make it clear that attachmant or pendency of attachment proceedings would not affect filing of a complaint under PMLA. While the first proviso to Section 5(1) envisages the provisional attachment being made simultaneously with the filing of the challan in the criminal Court for offences under Sections 3 and 4 of PMLA, the second proviso carves out an exception by providing that in case the Director or any other authorised officer has reason to believe that if such property involved in moneylaundering is not attached immediately the non-attachment of the property is likely to frustrate any proceeding under this Act, the attachment may be made prior to initiation of criminal proceedings. While proceedings under Sections 5 and 8 of PMLA are conducted by Enforcement Authorities, a complaint for offence under section 3 of PMLA is dealt with by a Special Court presided over by a judicial officer. Needless to mention that the Special Court is neither bound not governed not influenced by any order passed by the Enforcement Authorities and has to act independently on the basis of evidence led before it. It is thus evident from the provisions of PMLA itself that there is no statutory bar for initiating prosecution under PMLA in case it is prima facie found that an offence under Section 3 of PMLA has been committed. Attachment proceedings are initiated simply with the purpose of ensuring that the recovered amount is kept intact - The maxim "sublato fundamento cadit opus", has no application to the present case for the reason that it is not the order of attachment which is foundation for lodging a complaint under section 3 of P MLA but it is the factum of recovery of the amount of ₹ 9 lakhs, primafacie believed to be 'proceeds of crime' which forms the foundation for prosecuting the accused for offence under section 3 of PMLA. There is no ground either for quashing the complaint filed against petitioner under Prevention of Money Laundering Act, 2002 or the summoning order or even for staying the proceedings of complaint during pendency of the appeal against attachment before the Appellate Authority - petition dismissed.
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2019 (1) TMI 188
Provisional attachment - attachment of Penthouse No. 2001/2101 jointly owned by Bimal Ramgopal Agarwal and his wife, Barkha Bimal Agarwal on the alleged ground that Bimal Agarwal derived or obtained proceeds of crime as a result of criminal activity relating to a scheduled offence by assisting the Joint Director in taking bribes/illegal gratifications - Held that:- The Appellant-Bank is an innocent party which is not involved in the money laundering directly or indirectly or assisted in any manner, any party or the said Predicate Offender-Bimal Ramgopal Agarwal and others; that the mortgaged property was also not purchased from the proceeds of crime; that the said property not being owned by Bimal Agarwal, cannot form the value of proceeds of crime. Thus, the question of provisional attachment order and confirmation thereof, does not arise and the Bank being the legal owner. Thus, the appellant is entitled to recover the amount if not paid, the same can be recovered from mortgaged of the said property by disposing the same as per court of law. The ED and Adjudicating Authority did not understand the real issue of the mortgages executed in favour of the Appellant - Bank by its Customer. The Bank had, while executing the mortgages in its favour, already parted with its own money as loans to its Customer-Shri Bimal Ramgopal Agarwal and his wife-Barkha Bimal Agarwal. The Impugned Order as well as the Provisional Attachment Order are set-aside qua the present appellant as the same are bad and passed against the law - appeal allowed - decided in favor of appellant.
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Service Tax
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2019 (1) TMI 186
Taxability - Banking and other financial services - consideration received from lessees and hire-purchasers - scope of Operating Lease - benefit of N/N. 4/2006-ST dated 1st March 2006 - Held that:- Issue notice, returnable in six weeks. Stay of the impugned order is declined.
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2019 (1) TMI 185
Levy of Service Tax - Sundry Handling - the appellant has argued that amount of ₹ 33,33,333/- is not taxable as the same is appropriation of reimbursement of ₹ 10,00,00,000/- received as upfront fee for the period of 30 years for the lease granted to ABG Kandla Container Terminal Limited - principles of natural justice - Held that:- The reasons given by the appellant was not properly dealt with by the Adjudicating Authority and therefore, the same was not considered and the observations of the Adjudicating Authority against this head are vague and without any authority of law - demand cannot be set aside. Toll Collection and Entry Fee collected from any person/ vehicles carrying goods within the port area - Circular F. No. 354/27/2012-TRU dated 22.02.2012 - Held that:- The entry charges and toll charges can be in the ambit of term Port Service only with effect from 01.07.2010 - In this case, the Entry fees and Toll fees are in relation to the goods and persons attending to vessel and/ or goods only. Thus, this service can be covered under the definition of Port Service. Therefore, the demand in respect of Toll charges and Entry Fees charges is upheld. Demand of service tax - Royalty for containers and Income from 11th and 12th cargo berth - Held that:- Identical matter was decided in the case of Cochin Port Trust vs. CCE, Cochin [2010 (5) TMI 495 - CESTAT, BANGALORE], where it was held that Letting out the port premises for operation by IGTPL does not amount to rendering of port service. In any case, if at all any service tax is paid on this amount, the same would be available to IGTPL as Cenvat credit, which can be used for paying service tax on port services rendered by it - the demand under the head of Royalty for containers and Income from 11th and 12th cargo berth cannot be sustained and is set-aside. Demand of service tax under the head of renting of immovable property services - Township income - Held that:- There is no discussion on the nature of service against which this amount is received, who is the person who paid the amount and what is the arrangement between the appellant and the person paying for such amounts. In these circumstances, we find that the impugned order is not a speaking order on this issue and therefore, the same needs to be set-aside and issue needs to be remanded for determining the exact grounds and arguments on the basis of which the demand under the head of township income was confirmed - matter on remand. CENVAT Credit - input services - Telephone used by various officers installed at their residential premises - Held that:- The Port operates 24x7 at 365 days and there can be any emergency and all the officers needs to be accessible all time. In this circumstance, telephones at the residential premises are essential ingredient for provision of service and thus, credit on the Telephone installed at the residential premises cannot be denied - credit allowed. CENVAT Credit - input services - taxi and bus services used for movement of the employees to various places - Held that:- The taxi and bus services are used for movement of the employees to various places and the credit cannot be denied. Extended period of limitation - penalty - Held that:- Most issues in dispute are either contentious or decided in favor of the appellant. In these facts and circumstances, there is no merit in invocation of extended period or in position of penalty under Section 78. Appeal allowed in part and part matter on remand.
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2019 (1) TMI 184
Recovery of amount of refund wrongly sanctioned - section 84 of the Finance Act, 1994 - Held that:- Once an Order-in- Appeal has been passed, the original order ceases to exist as it merges with the Order-in-Appal and therefore no portion of that original order can be revised. In this case, since the Commissioner (Appeals) has passed Order-in-Appeal, the Commissioner could not have, thereafter, passed an order in revising the Order-in-Original passed by the Asst. Commissioner. The Order-in-Revision No. 2/2010 is therefore unsustainable and needs to be set aside. Adjustment of a refund sanctioned against the aforesaid demand - Held that:- At the time of passing the order, no appeal was filed by the appellant against Order-in- Original No. 2/2010 ST, dt. 26.02.2010. The Order-in-Original adjusting the amount was passed on 27.09.2010 and the appeal has been filed by the appellant only in October 2010. Further, a period of six months had already elapsed and the appellant had not submitted any documents to show that an appeal has been filed against Order-in-Original No. 2/2010 ST, dt. 26.02.2010. However, we have now set aside Order-in-Original No. 2/2010 ST, 26.02.2010 in appeal No. ST/2530/2010. Therefore, the amount of refund so adjusted is now payable to the appellant. Appeal disposed off.
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2019 (1) TMI 183
Classification of service - convention service or Hotel and Fitness Services - Further, the Revenue entertained a view that the appellants are engaged in providing the services under the category of ‘Convention Services’ and are evading the payment of service tax - Held that:- The appellant is running an international golf resort and star hotel with various facilities and these rooms are let-out to employees of corporates who pay room tariff and use facilities for outing and formal meetings. These corporates are also allowed to use the mandap and conference facilities free of charges on complementary in order to attract customers as was stated by the General Manager Shri Mathew during the course of investigation - further, it is found that appellants have produced the bills which have been issued to various customers during the impugned period and we find that appellants have not charged any tariff for conference halls and they have only charged for renting of the rooms. Further, we find that the hotels are totally kept out of renting of immovable property service by Section 65(105)(zzzzw) vide Explanation 1(d) which excluded building used for the purpose of accommodation including hotels/hostels, etc. The Hon’ble High Court of Delhi and Kerala in various decisions have held that levy was covered by Entry 62 of List II of VII Schedule of the Statute relating to luxury tax which the appellants are paying in the present case - Revenue has not been able to bring on record any evidence to show that the appellants are charging service tax on convention service. The impugned order is not sustainable in law - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 182
Rectification of Mistake - appellant has submitted that this Hon’ble Tribunal while passing Final Order dated 13.02.2018, has failed to consider various vital points which were duly argued by the counsel for the appellant during the course of hearing - Held that:- The appellant could not have again transferred the material, supplied under the supply contract, by way of works contract or service contract. Thus, we find that there is error in the Final Order passed by this Tribunal, whereby it has been considered that supply & transfer to the principal is by way of accretion under the erection contract. We find that the facts are otherwise, therefore the findings in the Final Order are perverse. We recall the Final Order dated 13.02.2018 - further, it is also held that the appellant is not liable to Service Tax on the goods supplied under the separate supply contract, as the ownership was already with the principal at the time of execution of erection contract. Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 181
GTA Service - non-payment of service tax - demand confirmed on the ground that the appellants have not produced the ledger accounts and the worksheets showing the correlation - Held that:- The appellants are paying service tax on the services received from GTA under reverse charge mechanism and they are maintaining the books of accounts and the ledger wherein they have shown the amount of GTA received and paid on reverse charge mechanism. The duty liability has been confirmed on the ground that the appellants have not produced the ledger accounts and the worksheets showing the correlation whereas as per the appellant he has already furnished the correlation and worksheets and ledger accounts but the same has not been considered by both the parties. The appellant has produced the worksheets before this Tribunal showing the payment of GTA on reverse charge basis but the same has not been considered by both the authorities below. This case needs to be remanded back to the original authority - appeal allowed by way of remand.
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2019 (1) TMI 180
Refund of service tax paid - SEZ unit - specified input services used for the services exported by them during the period from January 2016 to March 2016 - denial of refund on the ground that approval of the list of taxable services from Unit Approval Committee is mandatory and the said input services have not been approved by the Unit Approval Committee of SEZ - Held that:- The appellant is a SEZ unit and as per Section 26 read with Rule 31 of SEZ Rules 2006 along with Section 51 of SEZ Act, the SEZ Act has overriding impact over other laws and SEZ units are exempt from payment of service tax for any service which is used for their authorized operations. This issue is no more res integra and has been settled by Tribunal in the case of Mast Global Business Services India Pvt. Ltd. [2018 (9) TMI 258 - CESTAT BANGALORE], wherein on similar set of facts, this Tribunal held that even if the services are not mentioned in the Unit Approval Committee’s list, refund is to be sanctioned. Refund allowed - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 179
Non-payment of Service tax - the appellant required finance in the year 2006-2007 and they raised capital by issuing external commercial borrowing and foreign currency convertible bond (FCCB) and by offering share to procure subscribers for Global, Depository Receipt (GDR) - appellant did not pay any service tax being under the belief that the service s have been received and consumed outside India - reverse charge mechanism - Held that:- Neither the transaction is relating to the Bhiwadi Unit nor there were any account of said transaction maintained in the books of accounts maintained at Bhiwadi factory office. The Audit objection was raised on the basis of the annual accounts or report, a copy of which was available at the Bhiwadi Unit and the said audit objection was raised as per the balance sheet and Director report, etc. Further, the provisions of Central Excise and Service Tax Act Rules thereunder do not provide for multiplicity of the proceedings. The ld. Commissioner has rightly dropped the demand and erred in upholding the part of the show cause notice and also erred in objecting the part of the show cause notice relating to the suo moto taking of the re-credit by the appellant - this appeal is allowed for statistical purposes only as the main issue having been held against the appellant/assessee.
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2019 (1) TMI 178
Rejection of VCES Declaration - the part remaining dues alongwith the interest, which was liable to be paid by 31st December, 2014, could not be paid by 31.12.2014 due to some technical issue with online payment link of CBEC and could finally been paid on 01.01.2015 - Section 107 (4) of the VCES Scheme - case of appellant is that the late payment was due to the reason beyond the control of appellant - Held that:- In accordance of sub-Section (3) of Section 107, it was mandate for declaring under VCES 2013 Scheme to pay not less than 50% of the declared tax dues under the Scheme on or before 31st December, 2013. In furtherance of sub-section (4) thereof the tax dues or part remaining to be paid after the aforesaid declaration was mandatorily to be made on or before 30.06.2014 or latest by 31.12.2014. There is nothing contrary produced on record by the Department rather the adjudicating authority has considered the bonafide of the appellant. In the given circumstances, the rigid interpretation given to the word “shall” of Section 107 (4), to my opinion, is not justified. Since Department itself acknowledges that the appellant bonafidely attempted to deposit the part amount of their declaration on 31.12. 2014 the rigid interpretation given by the Department do not justify the circumstances. Since the admitted effort of the appellant to make the payment on the day prescribed in the Scheme is an admitted fact and had the link been functional, the payment would have been made on 31st of December, 2013 within minutes thereof. It is opined that since there is bonafide on part of the appellant and it was the technical defect beyond control of appellant that led the mandatory date for deposit to pass, the payment was made as per the dictate of the scheme - Admittedly, the entire amount in this case stands paid by 01.01.2015. Nothing stands recoverable from the appellant any more. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (1) TMI 177
Imposition of penalty u/r 26 of CER - fraudulent availment of CENVAT Credit - petitioners are seeking to contend that, although they made a fraudulent representation before the authority in obtaining SENVAT credit, then when the authority found the actual fact that, the petitioners did not indulge in any manufacturing activity, there is no reason for imposition of penalty under the Act of 1944 - Held that:- Such a contention is downright dishonest. The petitioners were well aware about the benefits of CENVAT credit under the provisions of the Act of 1944. It was within their personal knowledge that, the legal entity viz., V.K. Udyog Ltd., was not carrying on any manufacturing activity. In fact, V.K. Udyog Ltd. is under the control and management of the three petitioners before me. These three petitioners cannot feign ignorance of the activities of V.K. Udyog Ltd. Knowing the activities of V.K. Udyog Ltd. they made a false representation to the authorities to avail of CENVAT credit. The are liable for such fraudulent activities - petition dismissed - decided against petitioner.
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2019 (1) TMI 176
Principles of natural justice - opportunity of being heard not provided - condonation of delay in filing appeal - Whether in the absence of the appellant-assessee being heard by the Tribunal the final order dated 01.05.2017 is in accordance with the principles of natural justice? Held that:- On a bare perusal of Paragraph No.2 of the impugned order, it is noted that department representative had appeared and was heard, but none appeared on behalf of the respondent , the respondent being the appellant herein. It is also noted that the appellant herein had filed cross objection dated 28.11.2003, being aggrieved by the order in Appeal No.100/2003 dated 29.04.2003. Both in the appeal filed by the department and in the cross objection filed by the assessee, there was no representation on behalf of the assessee. Consequently, the assessee has not been heard in the matter. In the absence of hearing the assessee, the impugned order has been passed. It is not forthcoming as to why the assessee did not appear before the Tribunal, it would not be necessary to go into the said reasons also. But what follows is the fact that the assessee was not heard by the Tribunal either in the appeal filed by the respondent-department or on the cross objections filed by the assessee. The matter is remanded to the Tribunal for a fresh adjudication in accordance with law after giving an opportunity to both parties - appeal allowed by way of remand.
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2019 (1) TMI 175
CENVAT credit - common input services - Insurance Service - Telephone Service - Audit Charges etc. - these services are used for mining as well as manufacturing process carried at factory - it is alleged that that the Low Grade Bauxite is an exempted product under Notification No. 4/2006-CE - Rules 6(3) of Cenvat Credit Rules, 2004 - demand of 10%/ 5% of the value of exempted goods - Held that:- From the facts it is undisputed that the appellant have been reversing cenvat credit proportionate to the credit on input service used for exempted goods along with interest, therefore, first the credit though availed at the time of receipt of input service but after reversal thereof along with interest the position is if credit was not availed. This issue has been consistently considered in various judgments wherein it was held that if the assesse reversed the cenvat credit in respect of common input service used in the manufacture of dutiable and exempted goods the demand equal to 10%/ 5% will not sustain - reliance paced in the case of M/S. MERCEDES BENZ INDIA (P) LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [2015 (8) TMI 24 - CESTAT MUMBAI]. Thus, once the appellant have opted reversal of the credit in respect of service attributed to the exempted goods and in case of delay, the interest is also paid then the demand of 5% / 10% under Rule 6(3) cannot be made - In the present case since the Ld. Commissioner has demanded 5% / 10% of the value of exempted goods, he has not verified the correctness of actual cenvat credit attributed to exempted goods as reversed by the assesse. Therefore, only for the purpose of verification of such quantification of reversal, the matter in case of assessee s appeals is remanded to the original authority - issue of penalty is also to be considered - appeal allowed by way of remand.
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2019 (1) TMI 174
Classification of goods - Mixed Fuel Oil - Revenue is seeking to classify the product as motor spirit under heading 2710.99 (prior to 31.03.2005) and under tariff Heading 2710 19 90 (after 31.03.2005) - Held that:- The definition of motor spirit essentially remains the same prior to and after 01.03.2005. Earlier the specific requirements of motor spirit were part of the heading 2710 but after 1.3.05 the same were incorporated in supplementary note (a) to Chapter 27 - To qualify for the phrase suitable of use as motor spirit the product needs to be tested in admixture with anything other than mineral oil - In the instant case, letter of the Superintendent (prev.) dated 20.04.2006 suggests that the product has been tested in admixture with motor gasoline in the ratio of 10% V/V. The said letter of the Superintendent is in respect to subsequent query of the appellant seeking this information. In this background, it is seen that the product has not been tested for its suitability for use in admixture with any substance other than mineral oil as required - Thus Revenue has not produced the necessary evidence to classify the product as motor spirit falling under heading 2710.99 (prior to 31.03.2005) and under tariff Heading 2710 19 90 (after 31.03.2005). Demand set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 173
CENVAT Credit - project imports - concessional rate of duty - Revenue issued the SCN seeking to deny the re-credit availed by the appellant invoking Rule 3(1) of the Cenvat Credit Rules on the ground that the credit was taken without having receipt / possession of the said capital goods - Held that:- Similar issue decided in the case of COMMISSIONER OF C. EX., COIMBATORE VERSUS HABASIT IAKOKA (P) LTD. [2011 (2) TMI 1345 - MADRAS HIGH COURT], where it was held that the essential condition for availment of credit as interpreted by various courts is that the capital goods should be used in or in relation to manufacture of the final product and even if the same are used outside the factory for the said purpose the credit cannot be denied so long as the said capital goods are not alienated by the appellant. In the instant case, before availing the cenvat credit the appellant had applied for common registration and it is seen that no response was given by the Revenue on the application for common registration made by the appellant. The said application was neither accepted nor rejected - In these circumstances, it is apparent that the appellant had sought to follow all the requirements of the cenvat credit Rules, before availing the cenvat credit. Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 172
Clandestine removal - demand based on assumptions and presumptions - alleged parallel invoices - the proposed confiscation of the stock and the penalties confirmed on the Director of the appellant Company on the ground of unaccounted production and clearances being evidenced by the categorical admission of the Director and Supervisor of the appellant Company - Held that:- Bare reading of provisions of Rule 25 and 26 of CER, 2002, makes it clear that the confiscation and penalty can be imposed subject to the provisions to Section 11AC of Central Excise Act, 1944 i.e. first of all it need to be seen as to whether the act of the appellant are that of fraud, collusion, wilful misstatement suppression of fact or any contravention of the provisions of law and that too with an intention to evade duty - Thus, it becomes clear that the Commissioner (Appeals) has committed an error while holding that mensrea is not required to Order confiscation under Rule 25. Whether the documents recovered vide Panchnama dated 01.06.2016 and the statements of the Company’s Director allegedly being an admission are sufficient for proving the alleged clandestine removal? - Held that:- Though mere irregularity and even illegality in case of search and seizure cannot by itself render the documents seized in the case of such search or seizure to be inadmissible in evidence but the fact of the present case is that the Panchnama merely records that the officers on search found certain records which does not give the description of so called record except saying that the same are described in the annexure to SCN. All this information was absolutely necessary to give credibility to the Panchnama particularly when the entire proceedings in that record are sought to be challenged and disputed and also particularly when the permission to cross examine the witnesses of Panchnama was sought however was not granted for. Further basis of confirming the confiscation has been the evidence as that of eye estimation for determination of stock but it has been a settled principle that the allegations of clandestine removal of eye estimation is not correct. The alleged admission of the Director of appellant - Held that:- The allegations of clandestine removal are serious in nature and the clandestine activities are quasi criminal hence the revenue alleging the same is required to prove it by sufficient corroborative evidences - there is nothing on record to show that the officers of revenue had done anything for the weightment of the stock as arrived by them. They have not even produced any inventory to show that the stock was physically verified by them. Nor it is the case of the Revenue that the alleged excess stock was not entered in the RG Register deliberately and with malafide intent to remove goods clandestinely. The findings of adjudicating authority for the confiscation of the impugned stock and the imposition of the penalty upon Mr. Bharat Shukla are the findings without any basis and without any cogent and corroborative evidence - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 171
CENVAT Credit - duty paying invoices - denial of credit availed on the basis of supplementary invoices issued by the manufacturer - Held that:- Suppression being altogether contradictory to confusion cannot be made applicable in the given circumstances, unless and until there is some apparent positive act of the appellant on the record. Mere failure of ascertaining about the exclusion part of Rule 9 (1) (b) cannot be held to be the act of suppression or collusion on part of the appellant. Above all, the supplementary invoices have been issued by the Coal Companies, which are the undertakings of the Government of India, there can be no presumption, unless rebutted, of any alleged suppression or collusion - credit allowed - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 170
CENVAT Credit - outward freight services - Department entertained a view that in view of the Circular dated 23.8.2007, since the outward freight charges do not form an integral part of the price of the goods, the appellant is not eligible to avail and utilize the credit of service tax paid on freight. Held that:- The appellants as per the contracts entered into with their customers, they are supplying the goods on FOR basis and are availing the credit of the service tax paid on the GTA services to the extent that such services are used for transportation of goods to the customer premises - vide various circulars issued in 2007, 2014, 2015 by the Board, the Board has clarified that the place where the sale takes place is the place of removal because the property in goods passes at the place of the buyer. There were decisions which have specifically held that the place of removal needs to be ascertained in terms of provisions of Central Excise Act, 1944 read with provisions of Sale of Goods Act, 1930 and the terms of contract between the parties - thus, the appellant is not entitled to CENVAT credit on GTA services. Penalty - Held that:- Since the issue relates to interpretation of the definition of ‘input service’, therefore, suppression cannot be alleged against the appellant and penalty cannot be imposed. Appeal dismissed - decided against appellant.
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2019 (1) TMI 169
CENVAT Credit - input services - car repairing services - outdoor catering services - Held that:- The Ld. Advocate is correct in her assertion that there was no restriction or bar in the definition of ‘input services’ in Rule 2 (l) ibid prior to 1.4.2011 - a number of Tribunal decisions have consistently upheld the eligibility of such input credits prior to 1.4.2011 - reliance placed in the case of M/S. SCOPE INTERNATIONAL PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, CHENNAI [2018 (7) TMI 1007 - CESTAT CHENNAI] - credit allowed - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 168
CENVAT Credit - input services - upto the place of removal - Forwarding and Cargo Handling services - Repair and Maintenance of ETP - Extended period of limitation - Held that:- No doubt as per the purchase order issued by the customers, the property in the goods will transfer at the customers’ premises when the goods are delivered to the buyer - the place of removal is the port not the customers’ premises as claimed by the appellant and the Commissioner (A) has rightly held and demanded the service tax. Extended period of limitation - Held that:- Since the appellant has not concealed any facts from the department with an intent to evade payment of duty and they have regularly filed the ER-1 returns disclosing the availment of credit and the demand was raised on the basis of audit objection - the extended period cannot be invoked - the demand is confirmed for the normal period of limitation of one year and the demand for the period June 2009 to May 2013 is barred by limitation. Denial of CENVAT credit on Repair and Maintenance - Held that:- In view of the explanation given by the appellant that the said credit has been availed on reverse charge basis and they have shown the payment vide monthly challan produced on record, therefore, denial of CENVAT credit of ₹ 35,535/- is set aside. Demand of Interest - Held that:- Since the appellants have proved that they have availed the credit but have not utilized the same and they had sufficient balance in their CENVAT account till the date of reversal of the wrongly availed credit, the appellants are not liable to pay interest and penalty. The case remanded back for proper computation of demand of CENVAT credit of service tax for the normal period and interest and penalties are set aside - appeal allowed in part and part matter on remand.
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2019 (1) TMI 167
CENVAT Credit - input service - construction service - period from April 2005 to October, 2006 - denial on account of nexus - whether the construction of staff colony in the present case is a welfare activity of the appellant or is an activity in relation to its business? - Held that:- It is very much apparent from the reply of the appellant as was given to the show cause notice that the impugned construction has been made within the factory premises of the assessee/ appellant and the very object of the construction of these buildings for staff and labour in factory compound itself is to ensure the availability of the labour at the spot of manufacture for maintaining continuous manufacturing process of the plant. Thus, the said construction is opined to be an activity intended to seek enhancement of the productivity of the plant. Commissioner (Appeals) has failed to appreciate the fact on record creating nexus between the impugned input service and the business activity of the appellant and has wrongly held the same to be a welfare activity - The construction of houses since has been raised with the main objective of enhancement of the business, the same is held as the input service were upon the appellant is entitled to avail the Cenvat Credit. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (1) TMI 166
Validity of assessment order - the authorities are taking coercive steps before the appellate authority - Held that:- The petitioner has exercised on time its statutory remedy of filing an appeal. It appears that it has also filed a stay petition. Procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition - writ petition disposed off directing the respondent authority to defer coercive steps until the second respondent considers the stay petition.
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2019 (1) TMI 165
Benefit of concessional rate of tax under CST Act, 1956 - Inter-state procurement of goods for use in mining - interpretation of word 'mining' - Whether the activity of quarrying carried on by the petitioner/assessee can be termed “mining” as referred to in Section 8(2) (b) of the Central Sales Tax Act, 1956? - Held that:- The provisions of the Mining Act, 1952 actually aids the petitioner. The intention is to provide the concessional rate in inter-state trade where the specific goods are purchased for re-sale or for use inter alia in the manufacture or processing of goods, in mining, telecommunications and generation or distribution of electricity or any other form of power. The essential object is to lessen the tax burden when there is a further sale by itself or after manufacture or processing. In mining on the excavation of minerals, they are taxable at the next instance of sale. We have no doubt that with respect to the goods being intended for re-sale, one has to look at the definition under Section 2(d). However, when the use is in the manufacturing or processing of goods for sale or in the telecommunication network or in mining or in the generation or distribution of electricity or any other form of power; there could be no restrictive meaning applied to the term "goods for sale". The "goods for sale" in the second limb of the provision has to be taken as referring to a common category, which is exigible to tax under one or other enactment within a State in the Country. Concessional rate of duty - inter-State purchases - migration to GST Regime - whether after the introduction of the goods and services tax enactments and the restrictive meaning of goods adopted under the CST Act, the petitioner/assessee can be allowed to have continued; HSD, in his certificate of registration under the CST Act, enabling him to claim concessional rate? - Held that:- The provisions are in pari materia in so far as the legislation of the State of Kerala and Haryana. The reference herein above is to the Haryana Goods & Services Tax Act, the provisions of which are similar to the KG&ST Act; both having adopted mutatis mutandis the provisions of the CG&ST Act. The contention there, of the State, was also that Section 8 of the CST Act would be applicable only if the subsequent sale, by way of resale or of manufactured goods, are the goods seen under the definition clause 2(d) of the CST Act, and are taxable under the state VAT Act. In the State of Kerala petroleum products always remained under the Kerala General Sales Tax Act and the contention is identical, only with the difference that here the State asserts applicability of CST Act only if the subsequent sale of goods, even after manufacture is under the KGST Act ie: of the goods under the KGST Act. The action of the lower authorities and the impugned orders to be illegal and arbitrary - It is directed that the Certificate of Registration under the CST Act to be restored but amended, including 'HSD' substituting the words 'fuel elements-all fuels' The assessee would be entitled to concessional rate for the inter-state purchases made by it for use in its quarrying activity, which has abeen found by us to be mining as included under Section 8(3)(b) of the CST Act. Revision allowed.
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2019 (1) TMI 164
Whether the Tribunal was right in confirming the assessment which estimated the sale price by the C&F Agent of the assesse-manufacturer to the distributor on the mere ground that the stock transfer value was higher than the sale value? - Held that:- The transaction was at a time when there was a single point levy of tax and there could not be a sale price fixed lower to that shown in the stock transfer forms. In such circumstances, the question is answered against the assessee and in favour of the revenue. Whether the Tribunal was correct in having rejected the proof produced by the assessee showing stock transfer, for reason only of absence of F forms, since in the subject assessment year there a requirement to prove the movement of the goods from one State to another and F form was not mandatory? - Held that:- In fact, there is absolutely no sustainable evidence seen produced by the assessee as we see from the extract of the objection in the assessment order itself. The assessee's case before the Assessing Officer itself was that the transfer invoices, copy of Form 27B declaration and the communications issued to the check post are available with the assessee. However, these are all documents generated by the assessee and this alone without a proper authentication of the same by the Department or by seal of the check post authorities can be relied on to prove the movement of goods - the F Forms were not mandatory in the said year, the same having been made so from February 2002 onwards. But that is of no consequence, when the movement of goods by other mode of evidence has not been proved. The position is not different insofar as the proof required for the movement of goods. Revision dismissed - decided against assessee.
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2019 (1) TMI 163
Levy of tax - maintenance work - payment of wages for maintaining the canal which is pure labour work - imposition of penalty - opportunity of personal hearing not provided - scope of Circular No.7 of 2014 - principles of natural justice - Held that:- Needless to say that when a notice of proposal was given in writing, it is for the petitioner to give a reply in writing - In this case, the petitioner has not made any such reply. However, apart from imposing tax, the Assessing Officer has also imposed penalty at the rate of 150% under Section 22(4) of the said Act. It is true that the notice of proposal indicated that the petitioner may appear before the Assessing Officer at his office on the date of filing their objection and failure to file the written objection or to appear for personal hearing within the specified date, will result in passing orders confirming the proposal. Therefore, it is evident that the Assessing Officer has not indicated any date of personal hearing even in the absence of any reply filed by the petitioner, more particularly, when the Assessing Officer has chosen to impose penalty. Circular No.7 of 2014 - Held that:- This Court has considered the scope of the above circular in very many cases and observed that it is the duty of the Assessing Officer to provide such personal hearing. In this case, as it has not been done, this Court is inclined to remit the matter back to the Assessing Officer for redoing the assessment, however, subject to the condition that the petitioner shall pay 15% of the tax liability. Petition allowed by way of remand.
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2019 (1) TMI 162
Reversal of Input tax credit - mismatch of return particulars between Annexure I and Annexure II of selling and buying end dealers - opportunity of personal hearing not allowed - principles of natural justice - Held that:- The show cause notices are bereft of particulars regarding the name and/or trade identification number (TIN) number of the dealer at the other hand. It is stated that cross verification of buyer and seller is made through Web. But, web report was not enclosed. Unless the intranet web report along with all details are furnished, the purchaser would not be in a position to reconcile the mismatch. Therefore, the manner on which the show cause notices issued deserves interference. It is very unfortunate that the assessing officers have either totally ignored the Circular issued by the Commissioner of Commercial Taxes and the procedures - If the selling dealer fails to pay tax, action has to be taken only against the selling dealer and not against the purchasing dealer. The web report or the data maintained by the Department is only a starting point, based on which, the authority has to enquire and proceed further. They have to call for objections by giving the requisite details, give an opportunity of personal hearing, verify the records maintained by the dealers on either side as well as the records of the Department. Without doing so, the Department cannot fasten the liability on any one of the arm of a sale proceeding. This Court is of the view that all the matters should be remanded for fresh consideration - petition allowed by way of remand.
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2019 (1) TMI 161
Reversal of input tax credit - impugned order passed without providing an opportunity of personal hearing to the petitioner - principles of natural justice - mismatch of particulars between Annexure I and Annexure II of seller and buyer end - scope of SCN - Held that:- It is not in dispute that the petitioner was served with pre-revision notices dated 25.01.2018, inviting objections and the petitioner has also responded by way of reply dated 12.02.2018. This Court has perused the said pre-revision notices dated 25.01.2018. It is seen that one of the grounds raised in the pre-revision notices, as confirmed in the final impugned orders, is with regard to mismatch of particulars between Annexure I and Annexure II of seller and buyer end. But, it is seen that the show cause notice is bereft of particulars regarding the name and/or trade identification number (TIN) number of the dealer at the other hand. It is stated that cross verification of buyer and seller is made through Web. But, web report was not enclosed. In cases of mismatch, as per the Circular of the Commissioner of Commercial Taxes in Circular No.10 of 2015 dated 01.04.2015, the Assessing Officers are directed to enclose full particulars, invoice-wise, either in printed form or CD or email. It is very unfortunate that neither the Circular issued by the Commissioner of Commercial Taxes nor the procedures, which were elaborately discussed in M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [2017 (3) TMI 536 - MADRAS HIGH COURT], were scrupulously followed by the Assessing Officer in the present case on hand. This Court is of the view that the matter should be remanded for fresh consideration - petition allowed by way of remand.
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Indian Laws
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2019 (1) TMI 187
Jurisdiction - appointment of the nominee arbitrator on behalf of the State prior to the expiry of the 30 days’ period requested by the Petitioner - supersession of the arbitration clause in the agreement which provided for a three-member arbitration panel - Held that:- The present case is governed by the pre-amended 1996 Act. Even as per the 2015 Amendment Act which has inserted the Fifth Schedule to the 1996 Act which contains grounds to determine whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Entry 1 of the Fifth Schedule and the Seventh Schedule are identical. The Entry indicates that a person, who is related to a party as an employee, consultant, or an advisor, is disqualified to act as an arbitrator. The words “is an” indicates that the person so nominated is only disqualified if he/she is a present/current employee, consultant, or advisor of one of the parties - An arbitrator who has “any other” past or present “business relationship” with the party is also disqualified. The word “other” used in Entry 1, would indicate a relationship other than an employee, consultant or an advisor. The word “other” cannot be used to widen the scope of the entry to include past/former employees. It is also relevant to state that the appointment had been made prior to the 2015 Amendment Act when the Fifth Schedule was not inserted. Hence, the objection raised by the ICA was untenable on that ground also. The mandate of the three-member arbitral tribunal constituted under the ICA Rules on 05.12.2015 stands terminated. The Sole Arbitrator shall proceed in continuation of the previously constituted arbitral tribunal. The material already on record shall be deemed to have been received by the Sole Arbitrator - appeal disposed off.
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