TMI Tax Updates - e-Newsletter
October 14, 2017

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• On the recommendations of the GST Council, various Notifications under CGST, IGST and UTGST as on 13-10-2017 issued

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Articles

1. TDS IS PART OF SUM PAYABLE TO PAYEE and is trading liability- interest paid for delayed deposit of TDS is allowable expenditure

   By: DEVKUMAR KOTHARI

News

1. Advisory for claiming credit in TRAN-1 in respect of existing registrations.

2. Advisory for uploading invoice level data in GSTR-1 using Offline Tool.

3. Advisory Suppliers forgets to upload invoices issued to a Registered Recipient

4. News Notifications under CGST, IGST and UTGST as on 13-10-2017 issued

5. Insolvency and Bankruptcy Board of India announces essay competition for students of higher education through Institutes of Learning

6. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

7. RBI Reference Rate for US $

8. The Finance Minister, Shri Arun Jaitley holds bilateral meetings with his US counterpart and Treasury Secretary and the US Commerce Secretary; Discusses Indo-US Economic Cooperation, in particular, how bilateral trade and investment can be improved between the two countries among others

9. The Finance Minister, Shri Arun Jaitley: Indian economy is poised for strong, sustainable and balanced growth backed by the Government of India’s strong focus on implementing structural reforms;There is clear evidence now that slowdown effect of demonetisation and GST has now more or less played it out

10. The Finance Minister, Shri Arun Jaitley participates in the G-20 Finance Ministers and Central Bank Governors (FMCBG) Meeting in Washington D.C.; Calls for formulating G-20 response to address the challenges being faced by the Global Economy

Notifications

GST

1. 45/2017 - dated 13-10-2017 - CGST

Seeks to amend the CGST Rules, 2017

2. 44/2017 - dated 13-10-2017 - CGST

Seeks to extend the time limit for submission of FORM GST ITC-01

3. 43/2017 - dated 13-10-2017 - CGST

Seeks to extend the time limit for filing of FORM GSTR-6

4. 42/2017 - dated 13-10-2017 - CGST

Seeks to extend the time limit for filing of FORM GSTR-5A

5. 41/2017 - dated 13-10-2017 - CGST

Seeks to extend the time limit for filing of FORM GSTR-4

6. 40/2017 - dated 13-10-2017 - CGST

GST on receipt of advance - payment of tax to be made on issuance of invoice by registered persons having aggregate turnover less than ₹ 1.5 crores

7. 39/2017 - dated 13-10-2017 - CGST

Seeks to cross-empower State Tax officers for processing and grant of refund

8. 38/2017 - dated 13-10-2017 - CGST

Seeks to amend notification no. 32/2017-CT dated 15.09.2017 so as to add certain items to the list of “handicrafts goods”

9. 38/2017 - dated 13-10-2017 - CGST Rate

GST on Reverse Charge Mechanism (RCM) - payment of tax u/s 9(4) of the CGST Act, 2017 exempted till 30.09.2018

10. 11/2017 - dated 13-10-2017 - IGST

Seeks to cross-empower State Tax officers for processing and grant of refund under IGST

11. 10/2017 - dated 13-10-2017 - IGST

Persons making inter-State supplies of taxable services shall be exempted from registration u/s 23(2) where turnover is not exceeding ₹ 20 Lacs

12. 09/2017 - dated 13-10-2017 - IGST

Seeks to amend notification no. 8/2017-IT dated 14.09.2017 so as to add certain items to the list of “handicrafts goods”

13. 32/2017 - dated 13-10-2017 - IGST Rate

IGST on Reverse Charge Mechanism (RCM) - payment of tax u/s 5(4) of the IGST Act, 2017 exempted till 30.09.2018

14. 38/2017 - dated 13-10-2017 - UTGST Rate

UTGST on Reverse Charge Mechanism (RCM) - payment of tax u/s 7(4) of the UTGST Act, 2017 exempted till 31.03.2018

GST - States

15. 14-C.T./GST-44/2017-State Tax - dated 13-10-2017 - West Bengal SGST

Extension of time limit for making a declaration in GST ITC- 01 for the months of July, August and September, 2017

16. 13-C.T./GST-43/2017-State Tax - dated 13-10-2017 - West Bengal SGST

Further Extension of time limit for submitting GSTR-6 for the months of July, August and September, 2017

17. 12-C.T./GST-41/2017-State Tax - dated 13-10-2017 - West Bengal SGST

Extension of time limit for submitting GSTR-4 for the quarter July to September, 2017

18. 1736-F.T. - dated 25-9-2017 - West Bengal SGST

Corrigendum to Notification No. 1137-F.T. dated 28/06/2017 relating to Advocate Services

19. 1720-F.T. - dated 22-9-2017 - West Bengal SGST

Amendment of Notification No 1076-F.T. dated 21/06/2017

20. 1719-F.T. - dated 22-9-2017 - West Bengal SGST

Amendment of Notification No 1072-F.T. dated 21/06/2017

Circulars / Instructions / Orders

GST - States

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

Clarification on issues related to furnishing of Bond/Letter of Undertaking for exports

2. F. 17(134) ACCT/GST/2017/2634 - dated 29-9-2017

Corrigendum 2017/2634 of Circular No. 2/2017/2627 Dated 29 Sep 2017

Highlights / Catch Notes

GST

• New GST Notifications Issued for CGST, IGST, and UTGST to Streamline Tax Processes and Ensure Compliance.

  News : New Notifications under CGST, IGST and UTGST as on 13-10-2017 issued
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• Exemption from GST Registration for Inter-State Service Suppliers with Turnover Below Rs. 20 Lakhs u/s 23(2.

  Notifications : Persons making inter-State supplies of taxable services shall be exempted from registration u/s 23(2) where turnover is not exceeding ₹ 20 Lacs - Notification
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Income Tax

• Paddy Exempt from Cash Purchase Limits u/r 6DD; Revenue Can't Challenge Assessee's Pricing Without Market Rate Evidence.

  Case-Laws - HC : Cash purchase - Rule 6DD clearly exempts the agricultural produce paddy from the rigours of section 40A(3) - And on the pricing, the Revenue has no ground to suspect or disbelieve the assessee’ claim, for it has not ascertained the market rate prevailing then - HC
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• Industrial Gala Sale: Unused for Years, Short-Term Capital Gain u/s 50 Applied.

  Case-Laws - HC : Even in a case where there is evidence to prove that an industrial gala which was once used for business is not used for business for many years, the gain on sale thereof will attract the provisions of section 50 and will consequently be short term capital gain - HC
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• Tax Retention Money When Received; Deduction Claimable in Year of Retention or Upon Awareness of Deductions.

  Case-Laws - AT : Taxability of retention money - the assessee should be allowed deduction in the year of retention or in that year in which it comes to know about the said deductions nevertheless it is pertinent to say that retention has to be taxed as and when received by the assessee.
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• Employee Stock Option Scheme Costs Recognized as Deductible Expenditure for Tax Purposes Under Profit and Loss Account.

  Case-Laws - AT : Expenditure on account of employee stock option scheme is an ascertained liability for deduction - the expenses debited is cost of employee stock option plan in the profit and loss account is an allowable expenditure.
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• Tax Purchases Valid Despite Lack of Delivery Proof; Assumptions Alone Insufficient to Dismiss Transactions.

  Case-Laws - AT : The purchases made cannot be held as bogus merely on presumption and surmises and on the sole reasoning that the assessee was unable to produce delivery challan / angadia receipts.
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• Depreciation Allowed on Intangible Assets like "Right to Collect Toll" per Income Tax Act Section 32(1)(ii.

  Case-Laws - AT : Depreciation claim on the asset “Right to collect Toll” - section 32(1)(ii) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business.
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Service Tax

• Authority Reduces Penalty to 25% of Tax u/s 78; Full Waiver Request Denied but Reduction Valid.

  Case-Laws - HC : Levy of penalty at reduced rate of 25% of tax - assessee sought full waiver - The authority has used his discretionary power, which he is empowered u/s 78- The reduction of penalty from the original amount to 25% is not contrary to Section 78 and hence, it is valid - HC
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• Bus Services for Employees and Students Exempt from Tour Operator Service Tax Classification.

  Case-Laws - AT : Provided Bus/Minibus to for transporting employees, school children, families from various places to the place of their work, school etc. do not falling within the scope of Tour Operator Service.
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Central Excise

• Bulletproofing Vehicles Not Considered Manufacturing; No New Tax Classification Under Central Excise Laws.

  Case-Laws - AT : The Scorpio remain Scorpio and the Bus remains the Bus after bullet proofing and therefore, it cannot be said that the activity of bullet proofing amounts to manufacture
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• Cigarette packet slides/slits not excisable under Central Excise Tariff Act 1985; not marketable goods.

  Case-Laws - AT : Excisability/marketability - Whether parts of cigarette packets namely slides/slits (inner frame) are excisable goods within the meaning of CETA 1985? - slide/slits are not goods or product known in the market and hence not marketable.
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Case Laws:

• GST

• 2017 (10) TMI 602
  Imposition of 12% GST on sanitary napkins - Although the Petitioner has served the GST Council dasti, there is no appearance on its behalf today - the Court is constrained to direct the Secretary of the GST Council to remain present in Court on the next date of hearing.

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• 2017 (10) TMI 601
  Imposition of 12% GST on sanitary napkins - Service of notice - Mr. Vikram Jetly, the learned CGSC accepts notice for Respondent No.1 - Notice be issued to Respondent No.2 by all modes returnable on 9th October 2017

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• Income Tax

• 2017 (10) TMI 600
  Application to Income Tax Settlement commission [ITSC] - reasons given by the ITSC for rejection of the application that the questionnaire issued by the AO was not answered - Held that:- Insofar as the first reason is concerned, once the ITSC proceeds with the settlement application, as per Section 245D (4), the proceedings before the AO comes to a standstill. This is clear from a reading of Section 245F (2) of the Act. Thus, no adverse inference can be drawn from the fact that the questionnaire issued by the AO was not answered. Insofar as the second reason i.e. full and true disclosure is concerned, even the report of the CIT does not point to a great variance in the income disclosed. The difference between the two amounts as disclosed by the Petitioner and as deduced by the CIT from the documents seized is approximately Rs. 14,621,882/- which constitutes less than 1.5% difference in the amount disclosed and the amount computed by the CIT. It is possible that the said amount can be reconciled before the ITSC if the application is proceeded with and heard finally. The difference is too minimal when compared to the total amount disclosed, to constitute a failure to make full and true disclosure of the income Applicant has taken contradictory stand regarding whether it is a successor company or a new set up to explain the sale of assets - ITSC appears to have proceeded on a wrong premise. There is no doubt that Shetkari is an earlier avatar of the Petitioner. The Joint Venture Agreement clearly shows that 100% of shareholding of Shetkari was owned by Ridhi Sidhi and that was intended to be diluted with investments from the other companies including Enn Vee. The application of Enn Vee is pending before the ITSC. The primary ground for rejection is that Enn Vee is a conduit and that it has received the substantial amount of share capital from bogus/non-existent companies. If this is so, it would have consequences for Enn Vee as well. The dismissal of the Petitioner’s applications by the ITSC would result in a failure to examine the matter comprehensively and in entirety. It is not in dispute that the Petitioner company was undergoing restructuring. The restructuring of the shareholding is different from a company being newly setting up. The term 'process of setup' is merely a misdescription by the Petitioner of the restructuring process, in its response dated 1st April 2013, to the notice of the ITSC dated 8th February 2013. The ITSC appears to have borrowed this terminology from the said document and has non-suited the Petitioner on that ground. What indeed is clear from the facts is that the shareholding pattern of the Petitioner company was being restructured/changed and it was not an establishment of a new company. While the shareholding of any company is being changed, there is no bar on depreciation being claimed as permissible in law. Thus, this could not be a ground for rejection of the application We deem it appropriate to set aside the impugned order of the ITSC. It is clarified that this Court has not examined the merits of the dispute which shall be examined by the ITSC in accordance with law.

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• 2017 (10) TMI 599
  Addition u/s 69B - Assessee acquired 1.65 acre of land in excess for which no value was shown in the books of accoun - whether he benefit in question in any case covered under the head “Profits and gains of business or profession” in view of Section 28 (iv)? - Held that:- Shares were not exchange and there was exchanges of Land in the same locality and the duration of purchase of land and its exchange i.e. four-five months was very short. Furthermore, land rates are never uniform as in the share market and the A0 has not brought on record . - any allegation, material, evidence or document on record supported by proof of any rate variation resulting in a profit and addition has been made purely on the estimate basis. In absence of any material or evidence or documents to establish that the assessee has made investment and amount expended on making such investments or acquiring land exceeds the amount recorded in this behalf in the books of accounts, which has been properly audited and accepted by the department. - Decided against revenue

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• 2017 (10) TMI 598
  Debiting of bad debts relating to the non-rural branches in the provision for bad debt account created in accordance with the provisions of Section 36(1)(viia) - Held that:- Thus issue has already been considered and has been answered in favour of the Revenue in the judgment of this Court in The Commissioner of Income Tax v. Lord Krishna Bank Ltd.[2010 (10) TMI 860 - Kerala High Court]. Addition of interest accrued on Government securities - interest on Government securities does not accrue on a day-to-day basis but only on the due date - whether the interest for broken period is a capital expenditure or a revenue expenditure - ITAT deleted the addition - Held that:- The questions have also been considered by this Court and answered against the Revenue in the judgments in Commissioner of Income Tax v. Federal Bank Ltd.[2008 (1) TMI 195 - KERALA HIGH COURT] and Commissioner of Income Tax v. Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA High Court].

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• 2017 (10) TMI 597
  Addition u/s 40A - Cash purchase - Whether the assessee’s transactions are exempted under Rule 6DD - Paddy Purchase - Held that:- Section 40A(3) is a deeming provision; Rule 6DD clearly exempts the agricultural produce -paddy-from the rigours of section 40A(3) of the IT Act. As to the genuineness of purchases, the paddy quantity, believed by the Revenue for determining the yield, speaks volumes. And on the pricing, the Revenue has no ground to suspect or disbelieve the assessee’ claim, for it has not ascertained the market rate prevailing then. So we affirm the Tribunal’s findings on the disallowance: there should be no disallowance. The Yield we must observe that the issue of yield is a pure question of fact. And the Tribunal, indeed, has meticulously analysed the issue, leaving no room for doubt. Yet, we discuss the issue in brief. KNT Agro Mills disclosed the rice yield at 66.69% during the relevant period; KKR Agro Mills disclosed the yield of 68% on the turnover of 42.95 crores. But the record does not disclose that this yield includes discoloured, sprouted and weevilled grains, immature, broken and discoloured grain, or only the marketable rice. So, we cannot rely on the yield statics of these two mills. Tribunal has concluded that there was a maximum tolerance limit fixed for the rice yielded. Discoloured, sprouted and weevilled grains, immature, broken and discoloured grain, de-husked grain, moisture content, and so forth are the factors that have gone into making the total yield of 68%. The Tribunal has also found that the Kerala State Civil Supplies Corporation has expected the hullers to supply 60% return in sortex grade rice. The assessee’s yield of 62.66% is more than what was fixed by the Government.On this count, too, we concur with the majority of the Tribunal.

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• 2017 (10) TMI 596
  STCG - sale of depreciable assets - Applicability of provisions of section 50 on asset sold as ceased to be used for the purpose of the business - whether asset cannot move out of the ‘Block of Assets’? - Whether, the Tribunal was right in law in holding that an asset cannot move out of the ‘Block of Assets’, if depreciation was allowed to the asset some time in the past, even though depreciation was claimed for many years thereafter ? - Held that:- The assets being gala nos.210 and 211 were purchased as industrial galas together. The assessee claimed depreciation on the galas together and written down value was also shown together. Though depreciation has been allowed in the past on gala no.210 and plant and machinery in gala no.210 was shifted to gala no.211 and no depreciation was claimed thereon subsequently, nonetheless, the depreciation on block of assets stipulated in Section 2(11) is applicable. Both the galas are of the same nature. They form one class of assets. Once the depreciation has been granted on gala no.210 and even if business operations were not carried out therefrom, merely at the convenience of the assessee, it does not cease to be a business asset. The understanding of this provision and the concept, to our mind, conforms with the consistent view taken by the Tribunal earlier, and which has been upheld by this Court. We do not see how the provisions can be construed otherwise. To our mind, the Kerala High Court in case of Commissioner of Income Tax Vs. Sakthi Metal Depot (2010 (1) TMI 659 - Kerala High Court ), with respect, has rightly understood this concept and in the backdrop of the facts which are more or less identical. Section 50 has to be understood with reference to the general scheme of assessment on sale of capital assets. The Kerala High Court referred to the fact that the assets covered by Section 50 are depreciable assets forming part of block of assets, as defined in Section 2(11) of the I.T.Act. The components of Section 50 have also been, with respect, rightly understood in that decision. The Kerala High Court on reading of these provisions took the view that once the building was acquired by the assessee and in respect of which depreciation was allowed to it as a business asset, no matter the non­user dis­entitles the assessee for depreciation for two years prior to the date of sale, still, this asset does not cease to be a part of block of assets. The character of such asset is not lost, according to Kerala High Court. In our view, therefore, the questions proposed by the assessee and forwarded for our opinion, have to be answered in favour of the revenue and against the assessee. Tribunal was right in law in holding that even in a case where there is evidence to prove that an industrial gala which was once used for business is not used for business for many years, the gain on sale thereof will attract the provisions of section 50 and will consequently be short term capital gain

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• 2017 (10) TMI 595
  Stay the operation of 'Transfer Order' of the Petitioner - Held that:- In the instant case, the post of 'Commissioner of Income-Tax' at Gorakhpur is lying vacant on account of the Petitioner seeking relaxation from the 'Transfer Policy' in the last year and this year also. Therefore, sufficiently administrative exigency being made out and Petitioner's wife being very much present and available to take care of their daughter's education, we do not find any reason to invoke our extra-ordinary jurisdiction, which is for fair-play and equity, to stay the operation of 'Transfer Order', which prayer is rightly rejected by the Respondents-Authorities and the Tribunal.

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• 2017 (10) TMI 594
  Addition u/s 68 - unexplained cash credit - explanation to share capital and share premium receipts - Held that:- It is settled principle of law that for explaining any cash credit in the books of accounts of an assessee, the assessee is required to explain the identity and creditworthiness of the creditor and the genuineness of the transactions. In the instant case, the assessee has given certain details which according to the lower authorities are not sufficient to explain the share capital and share premium of Rs. 65 crores received by the assessee. In our opinion, the matter requires a re-visit to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the capacity of the two companies to purchase such shares and the genuineness of the transactions. Assessing Officer has calculated the fair market value of the shares of the assessee company at Rs. 35.76 per share and, therefore, he could not have rejected the entire share application money received by the assessee at the premium of Rs. 990/- per share. Thus the matter requires a re-visit to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate its case with evidence and the Assessing Officer is directed to decide the issue afresh as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

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• 2017 (10) TMI 593
  Compute the income from House Property on the basis of municipal value - Held that:- We find that the CIT(A) following the orders of the Tribunal in the assesses own case for A.Ys 2006-07 and A.Y. 2007-08 (which as on date had been upheld by the Hon’ble High Court), had directed the A.O to ascertain the municipal rateable vale of the property for the year under consideration and compute the income from house property by taking the ‘annual value’ of the property at such municipal rateable value. We find that the CIT(A) had also as a word of caution directed the A.O to keep in mind that though the market rateable value of the property was Rs. 12,60,000/- in the earlier year, however, the same pursuant to efflux of time might had changed. We have given a thoughtful consideration to the issue before us and are of the considered view that as the CIT(A) had merely followed the order of the Tribunal passed in the assesses own case for A.Y. 2006-07 and A.Y. 2007-08, which as on date had been affirmed by the Hon’ble High Court, therefore, no infirmity arises from his order in respect of the issue under consideration. We thus, in light of the aforesaid facts uphold the order of the CIT(A) in respect of the issue under consideration. The Ground of appeal No. 1 raised by the revenue before us is dismissed. Disallowance u/s 14A r.w Rule 8D - Held that:- The scope of disallowance of expenses incurred for earning of exempt incomes was required to be read and applied in context of Sec. 14A, which requires that the expenditure actually incurred in earning of such exempt income, and nothing more than such expenditure could be disallowed. We find ourselves to be in agreement with the contention of the ld. A.R that the very purpose sought to be achieved by the legislature by making available the machinery proviso, i.e Rule 8D, cannot be lost sight of while computing the disallowance under Sec. 14A. Disallowance under Sec. 14A cannot exceed the expenditure actually claimed by the assessee. We find ourselves to be in agreement with the aforesaid view taken by the Tribunal in the assesses own case, as well as the other cases on which reliance had been placed by the ld. A.R. We have given a thoughtful consideration to the order of the CIT(A) and do not find any infirmity in his order, to the extent the latter had reduced the further disallowance of Rs. 1,38,37,713/- made by the A.O u/s 14A to an amount of Rs. 15,41,788/-, with a consequential relief of Rs. 1,22,95,925/- [i.e Rs. 1,38,37,713 (-) Rs. 15,41,788/-] to the assessee. Increased the ‘book profit’ under Sec. 115JB by the amount of disallowance made under Sec. 14A. - Held that:- As the disallowance under Sec. 14A was already restricted by him to the extent of the actual expenses debited in the Profit & loss account, he therefore directed the A.O to increase the ‘book profit’ only to the extent of disallowance of Rs. 37,11,208/- sustained by him in the hands of the assessee under Sec. 14A.

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• 2017 (10) TMI 592
  Assessment made u/s 143(3) r.w.s. 153A - proof of incriminating material being seized/ found during the course of search - Held that:- It is the settled law that in a case of non-abated assessment addition can be made in the assessment completed under section 143(3) r.w.s. 153A on the basis of the material found/seized during the course of the search. So far the additions in respect disallowance of PF, ESIC, 5% of the expenses disallowed under section 35D and disallowance for depreciation on actual brand value we noted that the disallowances have been made by the AO in the respective assessment years without bringing out any seized material during the course of assessment proceedings. In view of above we are bound to follow we hold that these additions in each of the assessment years are made by the AO beyond his jurisdiction. We, therefore, delete all these additions in each of the assessment years. Additions in respect of disallowances on account of commission on purchases and sales - disallowances were made by the AO on the basis of the statement of Shri Murarilal Agarwal who is one of the Directors of the company recorded under section 132(4) - Held that:- The issue involved is duly covered by the decision of the Hon'ble Kerala High Court in the case of CIT vs. St. Francis Clay Decor Tiles [2016 (6) TMI 378 - KERALA HIGH COURT] wherein held that the statement recorded during the course of search is a valuable piece of evidence while interpreting the phraseology ‘incriminating’ is used by the Parliament. They have also clarified that neither under section 132 or under section 153A the phraseology ‘incriminating’ is used by the Parliament. Since the Hon'ble Kerala High Court has taken the recorded statement as a valuable piece of evidence and no contrary evidence was brought to our notice by the learned A.R. we, therefore, during the A.Y. 2007-08 upheld the addition of Rs. 9,57,372/- incurred by way of commission on purchases and Rs. 9,57,372/- incurred by way of commission on sales

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• 2017 (10) TMI 591
  Bogus purchases - addition upheld by CIT(A) by observing that the provisions of section 69C treating the purchases as unexplained expenditure was rightly applied - Held that:- AO doubted the entire purchases and added the same to the income of the assessee which was upheld by the ld. CIT(A) by observing that the provisions of section 69C of the Act treating the purchases as unexplained expenditure was rightly applied. In the case of bogus purchases, the practice followed by the beneficiaries are that the bills are prepared from the hawala dealers while purchases the goods from the grey market thereby making the saving of non-payment of VAT and other incidental charges. We are not in agreement with the conclusion drawn by the CIT(A) specifically when the assessee has filed the statement of receipt of materials and consumption thereof at the various sites and hence at the most a reasonable disallowance to cover the leakages of revenue and various types of savings made by the assessee by purchasing goods from the grey market could be made. In the similar cases, the Co-ordinate Benches of the Tribunal have taken a consistent view of directing addition ranging from 5% to 12.5% depending upon the facts of the case. In the present case, we are of the view that it would be fair and reasonable to make the addition towards gross profit at the rate of 12.5% of the said purchases. Accordingly, we set aside the order of CIT(A) on this issue and direct the AO to make addition at 12.5% of the bogus purchases. Addition in respect of retention money - Held that:- In the case of the assessee, most of the customers are government agencies where the exacts details of retention money are not even available with the assessee. We find merit in the contention of the assessee that the assessee has not received money retained by the contractees and also that some retention could not be accounted due to non availability of details and information with the assessee. It is only when these details were available with the assessee the necessary entries were made in the books of accounts. Therefore, though the mercantile system of accounting provides for accounting and taxing of income on accrual basis but in the instant case the assessee has no control over the retention money deducted by the contractees. Therefore, the assessee should be allowed deduction in the year of retention or in that year in which it comes to know about the said deductions nevertheless it is pertinent to say that retention has to be taxed as and when received by the assessee. Accordingly, we are not agreement with the conclusion of CIT(A) that the deduction of retention money which pertained to earlier years is not allowable and accordingly direct the AO to allow claim of retention money Disallowance of interest u/s 40(a)(ia) - Held that:- In our opinion the disallowance u/s 40(a)(ia) on account of interest can be made only if the payee has not offered the receipts in his return of income. We, therefore, feel that the issue has to be sent back to the file of the AO to verify the same in terms of second proviso to section 40(a)(ia) of the Act and accordingly the AO is directed to decide the same as per facts and law after giving reasonable hearing to the assessee. This ground is allowed for statistical purposes. Addition on TDS on VAT - Held that:- The customers normally intimate the assessee about the TDS on VAT vide certificate as per VAT rules but in many cases the contractors come to know when the payments are received from the customers after reducing the amount of TDS. Thus, the short recovery of bill amount due to deduction of TDS under VAT Act is accounted for in the books of account as and when it comes to the notice of the assessee and accordingly claimed as expenditure. Even otherwise the deduction of such type of taxes is available upon its payment as per the provisions of section 43B of the Act. If we consider the claim from another angle that the said claim crystallized during the year as the assessee came to know about the said deduction only during the year under consideration as the customer failed to issue any deduction certificate and as a result was not claimed by the assessee in those years. In our considered view the assessee should be allowed the claim in the year in which it first comes to know about the said deductions. In view of these facts, we are inclined to direct the AO to allow Rs. 39,87,561/- as admissible deduction while assessing the income. The ground raised by the assessee is allowed.

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• 2017 (10) TMI 590
  Bogus claim of expenditure in respect of purchase of blown bitumen and also transport expenses - Held that:- In respect of the observations of the Ld. CIT (A) that blown bitumen is not a suitable raw material for production of Crumb Rubber modifier, whereas its raw material is natural asphalt is concerned, record does not support this observation of the Ld.CIT (A). In our opinion on this aspect there should have some enquiry conducted by the authorities below as to whether the blown bitumen has got any role in the manufacturing of Crumb Rubber Modifier, let alone it is not a suitable raw material. Nextly, insofar as the existence or non existence of Mahesh Roadways is concerned, except the bald statement that was made by Bhupinder in the complaint that Mahesh Roadways does not exist at all, the AO did not make any enquiries on that aspect by taking steps under law. So also the AO relied upon the statement of Bhupinder on the aspect of any excessive expenditure. In all fairness the AO should have enquired the truth or otherwise of the statement of Bhupinder Kumar Sekhri instead of believing it to be a gospel truth. We, therefore, find that there is want of enquiry on the part of the AO in respect of the purchase of blown bitumen and also about the transport charges. Since we believe that the verification of the fact on this aspect has a bearing on the assessment of the income of the assessee for the relevant years, we deem it just and necessary to set aside these two issues to the file of the AO for ascertaining the truth by making enquiries by affording an opportunity to the assessee to produce the relevant documents, if any.

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• 2017 (10) TMI 589
  Disallowance of stock appreciation right - difference between the purchase price of stock appreciation right and the sale price of stock appreciation right at the time of the exercise by the employees holding the same to be capital loss and not allowable as business deduction - Held that:- According to the particular scheme the grant price was paid by the Granti who is an employee eligible to participate under the scheme. According to that scheme the 10 employees of the assessee company opted for the scheme and all of them exercised their stock appreciation rights. According to that Rs. 2505946 was sale proceeds of the stocks of the company, resulting into the loss of Rs. 1599362 which was claimed by the assessee as an employee compensation. Further, the company has purchased the shares of Religare enterprise Ltd, through a trust under that particular scheme at an average price of Rs. 503/– per share whereas the grant price of shared to the employees was Rs. 140/– per share. Therefore, the difference between the sale price of the share and the purchase price of the share was claimed by the assessee as deduction as employee compensation. In the identical circumstances. With respect to one of the group companies, Religare commodities Ltd for assessment year 2008 – 09 identical issue arose before the coordinate bench [2017 (1) TMI 783 - ITAT DELHI] claim of the assessee with respect to both the above items were allowed. The above expenditure on account of employee stock option scheme is an ascertained liability for deduction - the expenses debited is cost of employee stock option plan in the profit and loss account is an allowable expenditure. Deduction of expenditure incurred - Held that:- In the present case the business of the assessee was set up by employment of the employees as well as by hiring the requisite infrastructure which happened in the month of April 2007. The courts have held that there is a clear distinction between a person ‘commencing a business’ and a person ‘setting up a business’ and for the purposes of the Indian Income-tax Act the ‘setting up of the business’ and not the ‘commencement of the business’ that is to be considered for cut off of deductibility of expenditure. It is only after the business is set up that the previous year of that business commences and any expense incurred prior to the setting up of a business would not be permissible deduction. When a business is established and is ready to commence business then it can be said of that business that it is set up; but before it is ready to commence business it is not set up. There may however be an interval between the setting up of the business and the commencement of the business and all expenses incurred during that interval would be permissible deductions. We also draw support from the decision of CIT versus Axis Equity private limited [2017 (2) TMI 340 - BOMBAY HIGH COURT] wherein on identical facts, issue has been decided that the expenditure are allowable to the assessee after the businesses are set up. Therefore in view of this we are of the opinion that the assessee must be allowed the deduction of expenditure incurred w.e.f. 01/04/2007 when the employees were hired and the expenditure With respect to infrastructure was incurred by the assessee. In the result we reverse the finding of the lower authorities and direct the assessee officer to allow the expenditure of Rs. 9389552/– incurred by the assessee for the period from April 2007 to June 2007. Disallowance u/s 14A - Held that:- As decided in Cheminvest Ltd versus CIT [2015 (9) TMI 238 - DELHI HIGH COURT ], where the assessee has not earned any exempt income during the year there cannot be any disallowance under section 14 A of the income tax act. Undisputedly there is no exempt income during the year, earned by the assessee, therefore there cannot be any disallowance under section 14 A of the income tax act. Addition u/s 40(a)(ia) - Expenditure incurred towards reimbursement of expenses by the other group concern and it is sharing of cost of common services utilised by those companies - Held that:- The Hon’ble Delhi High Court in case of CIT versus Fortis healthcare Ltd [2009 (1) TMI 842 - HIGH COURT OF DELHI] has held that no tax is required to be deducted on the reimbursement of the expenses. The revenue could not point out any fact that these expenses are not reimbursement of the expenses but for the purpose of rendering specific services to the assessee. Additions deleted. Appeal of the assessee is allowed.

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• 2017 (10) TMI 588
  Disallowance made under Section 14A - Held that:- We find that the Assessing Officer, on being dissatisfied with the assessee’s computation of disallowance, embarked on his own computation under rule 8D(2)(iii) at Rs. 5,89,98,005/-. The assessee has not disputed any part of the calculation of such disallowance. This computation of disallowance, having been made in terms of rule 8D(2)(iii), is held to have rightly made. The assessment order making disallowance of Rs. 5.89 crore u/s 14A under the normal provisions of the Act is upheld pro tanto. As regards the adding back of the amount of disallowance under section 14A in the calculation of ‘book profit’ under section 115JB of the Act, we find that the issue is no more res integra in view of the decision of the Special Bench of the Delhi tribunal in ACIT Vs. Vireet Investments (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] holding that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules 1962. Respectfully following the Special Bench decision, we hold that no separate disallowance should be made under section 14A in the computation of book profits under section 115JB of the Act. Additional depreciation under section 32(1)(iia) - Held that:- The word “shall” is not always conclusive of the mandatory nature and can be read as the word “may” in certain circumstances. However, when we consider the text and the context of the word “shall” as employed in clause (iia), there remains no doubt whatsoever that the grant of additional claim at the rate of 20% has necessarily to be allowed as deduction under clause (ii). Once the claim of additional depreciation under clause (iia) is to be allowed as deduction under clause (ii), a fortiori, the command of Explanation 5 which applies to clause (ii) automatically becomes applicable to such a claim of additional depreciation. Once we hold that the claim for additional depreciation is allowable as deduction under Section 32(1)(ii), the writ of Explanation 5 providing for allowing depreciation mandatorily, gets magnetized. Explanation 5, even if placed under clause (ii), applies to sub-section (1) of section 32, which also covers clause (iia). We, therefore, hold that the Assessing Officer was fully justified in granting additional depreciation amounting to Rs. 538.66 crore under clause (iia) read with clause (ii) of section 32(1). Computation under section 115JB whereby the assessee is aggrieved against the disallowance and addition to the ‘book profit’ - Held that:- Assessee determined the amount of net profit as per its Profit and Loss account - both for the purposes of section 115JB and also for placing in the annual general meeting - after claiming Depletion (depreciation) at a higher rate than the one prescribed in Schedule XIV of the Companies Act, which is not forbidden in Parts II and III to Schedule VI of the Companies Act. It is further found that the audit report issued by the auditors of the assessee company is unqualified. The Annual accounts as prepared by the auditors are stated to have been approved by the company in its AGM and then registered by the Registrar of companies without any objection. Such a contention put forth on behalf of the assessee has not been disputed by the Revenue. When position is so, we fail to comprehend as to how the action of the AO in adding the alleged excess depreciation can be sustained. The impugned order is set aside pro tanto and the enhancement to the amount of net profit to the tune made for the purposes of section 115JB of the Act is hereby deleted. Transfer pricing adjustment from the international transaction of payment for intra group services in the nature of business planning and project review board - Held that:- The view point of the TPO that such services were duplicate in nature as the assessee was already in similar line of business, is not correct. The assessee undertook exploration work in Rajasthan oil wells in the later part of the preceding year. The assessee also explained to the TPO that it is a highly technical work requiring services of experts for optimising production. Such contentions have not been controverted with any cogent material. Thus, the claim of the Revenue that the assessee was already having personnel for doing similar work and the receipt of services was a case of duplication of services, is belied because of the magnitude and complexity of the work undertaken by the assessee during the year in Rajasthan. This proves that the assessee did receive services from its AE in the exploration, development and production of oil and such services are not duplicate in nature. When the fact of the assessee having received the services, which are not duplicate in nature, is proved, the authorities cannot determine nil ALP of the payment made for such services. Determination of the ALP of the international transaction of ‘Receipt of services’ - assessee aggregated the international transactions and determined ALP on the basis of TNMM - Held that:- By now, it is fairly settled through a catena of decisions that the CUP is the most appropriate method to determine the ALP of an international transaction because it seeks to compare the price charged or paid for property transferred or services rendered, provided proper comparables are available. It is under this method alone that the price charged or paid is directly compared with the price charged or paid in an uncontrolled comparable transaction. The remaining four specific methods seek to make comparison of the price charged or paid indirectly through the medium of normal profit arising in a comparable uncontrolled transaction. Further, the CUP method is a transaction specific method which strives to determine the ALP of an international transaction on a micro level, thereby lending more credibility to the ALP of a transaction. As such, we hold that the CUP is the most appropriate method for determining the ALP of the international transaction under the present circumstances and the TPO was fully justified in applying the CUP as the most appropriate method. Turning to the methodology adopted, we find that the TPO though applied CUP method but determined Nil ALP without making reference to any comparable uncontrolled transactions. It was on account of his having canvassed a view that either the services were not received by the assessee or were duplicate in nature. Such a view has been overturned by us in earlier paras. We are left with no option but to set aside the impugned order and remit the matter to the file of AO/TPO for a fresh determination of the ALP of the international transaction of ‘Receipt of services’ primarily under the CUP method. In case, the TPO finds that the CUP method cannot be applied either due to non-availability of the relevant data or for some other genuine reasons, he is free to apply any other appropriate methods for a fresh determination of the ALP of the international transaction of ‘Receipt of services’. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings. Addition being arm’s length interest on redeemable preference shares - Held that:- On a specific query, it was stated that the order of the AO making such addition for the preceding assessment year is still pending in appeal before the CIT(A) and there is no finality to the issue. Since the instant transfer pricing addition has its foundation in the immediately preceding assessment year in which re-characterisation of the transaction of investment in Redeemable preference shares was done, we are handicapped to independently decide the issue before us unless the preceding year on the same issue is decided. It is for the reason that if the re-characterization is held to be valid, then the addition will be required to be made in this year as well. If on the other hand, the re-characterization is held to be invalid, this addition will have to be deleted. Under these circumstances, we set aside the impugned order on this issue and remit the matter to the file of AO/TPO for deciding it afresh in conformity with the view of the higher appellate authority for the preceding year, available before them at the time of decision. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such proceedings. Not allowing credit for tax deducted at source and advance tax as claimed in the return of income - Held that:- AO is directed to allow necessary credit for the advance tax paid by the assessee and TDS paid on its behalf, after necessary verification.

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• 2017 (10) TMI 587
  Addition of excise duty to the closing stock - assessee has not followed the provision of section 145A - Held that:- following the provisions of section 145A of the Act, effect of taxes or duty etc. paid has to be given to purchase and sales of goods and inventory including, both the closing and opening stock, which the authorities have not considered. Accordingly, we feel it appropriate to restore the issue to the file of the Ld. CIT-(A) with the direction to adjudicate the issue of the effect of section 145A of the Act in the case of the assessee in a comprehensive manner on purchase, sales and inventory (both opening and closing stock) instead of applying selectively only on the closing stock. The assessee shall be afforded adequate opportunity of being heard. Accordingly, the grounds of the appeal from (b) to (f) are allowed for statistical purpose. Disallowance of the traveling expenses - addition as expenses were personal in nature - Held that:- As find that the Ld. CIT-(A) has not considered the objection of the assessee that there were no expenditure of personal nature in foreign travelling expenses. In our opinion, if expenditure has not been incurred wholly and exclusive for the purpose of business then said disallowance could be made under section 37(1) of the Act. Since the Ld. CIT-(A) has sustained the disallowance without taking into account objection of the assessee and verifying the factual claim of the assessee that no expenses of personal nature were incurred, we feel it appropriate to restore the issue to the file of Ld. CIT(A) to decide the issue-in dispute after taking into consideration objections of the assessee. The assessee shall be afforded adequate opportunity of being heard.

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• 2017 (10) TMI 586
  Penalty proceedings u/s 271(1)(c) - netting of interest on account of interest on income tax refund - Held that:- Assessee had furnished and disclosed the entire particulars of the claim for netting of the interest and also the said claim was backed by the aforesaid note. First appellate authority had allowed the netting-off of the interest, while computing the profits of business eligible for deduction u/s 10B. This order of the first appellate authority has been reversed by the Tribunal by holding that interest receipt from the department on the income tax refund, does not have any direct nexus with the business of the assessee and it cannot be linked with the business of the assessee. Therefore, it cannot be netted off with the other interest payment. Though this issue has been decided against the Tribunal in the quantum proceedings, however, in the penalty proceedings, one has to see, whether at the time of making the claim at the time of filing of return of income the assessee had any bonafide belief based on certain judicial precedence or not. Here in this case, such a bonafide belief has been accentuated by the fact that the Ld. CIT (Appeals) had allowed such netting off and decided the issue in favour of the assessee. Under these facts it cannot be held that the assessee had furnished any inaccurate particulars of income so as to warrant levy of penalty u/s 271(1)(c) read with Explanation 1. Appeal filed by the revenue is dismissed.

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• 2017 (10) TMI 585
  Addition on account of bogus purchases - onus on the assessee to prove the genuineness of purchases - Held that:- Primary onus cast upon the assessee to prove the genuineness of purchases has sufficiently been discharged. If the Assessing Officer still had doubt regarding the purchases made from the concerned parties, it should have triggered further enquiry or investigation at his end and he should have brought cogent evidence on record to establish the fact that purchases claimed to have been made from the concerned parties are not genuine. It is not a case where the sellers / suppliers are found to be non–existent or had not complied to the notices issued by the Assessing Officer by furnishing necessary information. In this case, the suppliers have come forward and have confirmed the sales effected to the assessee through proper documentary evidences. Thus, on the face of such evidences available on record, the purchases made cannot be held as bogus merely on presumption and surmises and on the sole reasoning that the assessee was unable to produce delivery challan / angadia receipts. In this context, assessee’s explanation that diamond did not require to be transported through vehicle appears plausible. In view of the aforesaid facts, we hold that, even, disallowance @ 2.5% as made by the learned Commissioner (Appeals) is also unjustified. - Decided in favour of assessee.

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• 2017 (10) TMI 584
  Bogus purchases addition - Sales Tax Department in its enquiry have found that parties to be providing bogus accommodation entries - Held that:- Facts and circumstances of the case clearly prove that assessee has booked bogus purchases. The assessee has made purchase from grey market. Making purchases from the grey market gives the assessee selling on account of non-payment of tax and others at the expense of the exchequer. In such circumstances, following the precedent from Hon’ble Gujarat High Court decision in the case of Simit P. Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) we are of the considered opinion that 12.5% disallowance in this case would serve the interest of justice. Accordingly, we modify the order of the learned CIT(A) and hold that disallowance in this case should be restricted to 12.5% of the bogus purchases.

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• 2017 (10) TMI 583
  Addition u/s 14A - expenses attributable to earning income on account of dividend and interest which does not from part of the total income - Held that:- In the case of "Godrej & Boyce Manufacturing Co. Ltd. V/s DCIT (2017 (5) TMI 403 - SUPREME COURT OF INDIA) wherein it has been held that the AO has to record the satisfaction that the assessee has incurred any expenditure in relation of the earning of earning income after examining the records and books of accounts maintained by the assessee and thus the AO has to be record his satisfaction with regard to the correctness of the claim of the assessee otherwise the provisions of section 14A can not be applied. We find merit in the plea of the ld.AR that in absence of any satisfaction recorded by the AO no disallowance could be made u/r 14A r.w.rule 8D. However, to maintain the consistency with the decision of the co-ordinate bench of the Tribunal, we think it fit and reasonable which has been an alternative prayer by the counsel during the course of hearing that the disallowance of 2% be made as has been made by the Tribunal in the assessment year 1998-99 and 1999-2000 Bad debts disallowance u/s 36(1)(vii) - Held that:- As decided in u/s Catholic Syrian Bank Ltd. Versus CIT [ 2012 (2) TMI 262 - SUPREME COURT OF INDIA ] 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year, while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2)(v) of the Act. if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii). Taxability of the interest relating to the broken period after due date of interest till the close of accounting year - Held that:- As perused the decision in the case of Director of Income tax (int.Tax. V/s Credit Suisse First Boston (Cyprus)ltd (2012 (8) TMI 17 - BOMBAY HIGH COURT) and find that the identical issue has been decided by holding that the said interest is not liable to tax qua the broken period

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• 2017 (10) TMI 582
  Sale of block of assets by the amalgamated entity - Excess of sales consideration received over Written Down Value (WDV) of the block of plant and machinery - Short Term Capital Gain - Held that:- There is no dispute that even after the transfer of the said assets the assessee was still having balance in the block of assets of plant and machinery. Therefore the conditions as stipulated under Section 50 of the Act have not been satisfied so that any capital gain arising in the hand of the assessee can be deemed as per the provisions of Section 50 of the Act. It is also not in dispute that the assessee while filing the revised return of income has claimed depreciation on the consolidated block of assets and thereby the claim of depreciation was reduced after giving effect to the transfer of the asset in question. Therefore though the transfer of block of assets by the erstwhile entity Makino Asia Pte Limited had resulted STCG in the hand of the said entity but it exists only so long there was no merger/amalgamation. Once the merger / amalgamation was effected from 1.4.2002 ail the transactions thereafter would be treated as transactions of the new entity post amalgamation. Thus when there is no extinguishment of block of assets of plant and machinery in the hand of the assessee then the transfer of assets in question after 1.4.2002 would not result in deemed capital gain under Section 50 of IT Act. The revenue has not disputed the facts relating to the transfer of the assets and therefore the question of invoking the provisions of Section 50 of the Act does not arise. We hold that the enhancement made by the CIT (Appeals) is not sustainable and accordingly the addition on account of enhancement being STCG is deleted. - Decided in favour of assessee.

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• 2017 (10) TMI 581
  Revision u/s 263 - claim of deduction under Section 54F - Held that:- The Hon'ble High Court in the case of Prin. CIT Vs. C. Gopalaswamy (2016 (6) TMI 643 - KARNATAKA HIGH COURT) has held that the condition precedent for claiming benefit under Section 54/54F is that capital gain realize from capital asset should have been invested either in purchase of residential house or in constructing the residential house. If after making the entire payment merely a registered sale deed has not been executed and registered in favour of the assessee before the period stipulated he cannot be denied the benefit under Section 54F of the Act. Similarly if he has invested the money in construction of residential house then merely the construction was not completed in all respects and it was not in fit condition to occupy within the period prescribed under Section 54F of the Act the benefit u/s.54/54F cannot be claimed. Once it is demonstrated that the consideration received on transfer of the asset has been invested either in purchasing a residential house or in construction of residential house even though the transactions are not complete in all respects as required under the law that would not disentitle the assessee from benefit. The assessee has established a prima facie case of claim of deduction under Section 54F. Therefore when the CIT has not afforded an effective opportunity of hearing and the Assessing Officer has not conducted a proper enquiry, then in the facts and circumstances of the case we set aside the impugned revision order passed under Section 263 and remit the matter to the record of the Assessing Officer for considering the relevant record in support of the claim that the assessee has finally constructed the residential house. - Decided in favour of assessee.

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• 2017 (10) TMI 580
  Disallowance of the expenditure equal in percentage of reduction in the revenue recognized - Held that:- In the present case, it appears that the AO made the disallowance of the expenses only on this basis that there was reduction in the sharing of the revenue in comparison to the earlier years, no other reasons has been given. In the instant case, it is also noticed that there was increase in the income earned by the assessee in comparison to the earlier year i.e. 53% more than the preceding year as is evident from the chart furnished by the assessee before the ld. CIT(A), which shows that even after reduction in the percentage of share, the assessee earned more revenue in comparison to the earlier year. In the present case, the AO did not point out any defect in the books of account maintained by the assessee in the regular course of business, it was also not brought on record that any of the expenses was not incurred wholly and exclusively for the purpose of the business. The AO made the disallowance only on the basis of surmises and conjecture which is not tenable in the eyes of law. Moreover, the AO did not bring anything on record to substantiate that by reducing the percentage of share of fee, the assessee was looser in terms of earning the revenue and that the extra expenses were incurred by the assessee in the same ratio in which the revenue sharing was reduced. The contention of the assessee that the reduction in the fees from leasing of equipments/maintenance of the office building was on account of business exigency, had not been rebutted at any stage. - Decided against revenue

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• 2017 (10) TMI 579
  Depreciation claim on the asset “Right to collect Toll” - Depreciation on intangible asset - Held that:- The issue raised in the present appeal is squarely covered by the order of Tribunal in sister concern’s case i.e. Ashoka Infrastructure Ltd. Vs. ACIT [2013 (8) TMI 588 - ITAT PUNE] the 'Right to collect the Toll' is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of 'intangible asset' falling within the purview of section 32(1)(ii) of the Act and has been found eligible for claim of depreciation - section 32(1)(ii) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. Thus the assessee is entitled to claim the depreciation on intangible assets as provided under section 32(1)(ii) of the Act. The second part of the order of Assessing Officer in amortizing the expenditure over the period of facility and allowing the same stands reversed. The Assessing Officer is thus, directed to allow the claim of assessee vis-à-vis depreciation on intangible asset under section 32(1)(ii) of the Act. - Decided in favour of assessee.

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• 2017 (10) TMI 578
  Compensation for issuing delayed refund - Claim of interest payable by the Revenue - Held that:- Section 214 does not provide for payment of compensation by the Revenue to the assessee in whose favour a refund order has been passed. See Gujarat Flouro Chemicals case [2012 (8) TMI 740 - SUPREME COURT] - Decided against assessee.

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• Customs

• 2017 (10) TMI 577
  Freezing of Bank Account of petitioner - non-issuance of SCN - Held that: - Without there being any authority in law to justify the freezing of the bank accounts, requiring the Petitioners to furnish security for de-freezing such bank accounts would be unjustified. It is always open to the DRI to conclude the investigation and issue a SCN in accordance with law. Statutory authorities have to exercise their powers strictly according to the Act under which they function - the Court directs that the bank accounts of all the Petitioners, shall be defreezed forthwith - petition allowed - decided in favor of petitioner.

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• 2017 (10) TMI 576
  Maintainability of petition - Time limitation for filing appeal petition - The petitioner's contention is that limitation should be calculated only from the date, on which, the petitioner received copies of the adjudication orders from the office of the first respondent i.e. 28.8.2015 and if that date is reckoned, the petitioner's appeal petitions filed on 28.9.2015 are well within the period of limitation - Held that: - the petitioner has submitted the applications for redemption along with the bank realization certificates to the first respondent on 25.9.2015. If such, is the case, it would be appropriate for the first respondent to consider the applications regardless of the fact that an Orders in original, levying penalty were passed in the year 2008. If the petitioner has fulfilled the export obligations and produced necessary documents to prove the same, nothing prevented the first respondent from taking into consideration such applications and examine as to whether the petitioner has fulfilled their obligations - petition maintained.

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• 2017 (10) TMI 575
  Refund of SAD - service of order of original - appellant claimed that there was a delay in filing appeal on the ground that they did not receive copy of the Order-in-Original since the same might have been sent to their old address - Held that: - the Order-in-Original sent to the appellant's address has not been returned as undelivered - also, they did not intimate the change of address to the department and have not pursued the next hearing date of the refund claim after filing a letter of adjournment. Therefore, the contention of the appellant that they have not received the copy of the Order-in-Original and had obtained the duplicate copy of the order only on 25.06.2013 and the appeal was filed before the Commissioner (Appeals) within time when computed from 25.06.2013 cannot be accepted. In the case of Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT OF INDIA], the Hon ble Apex Court has categorically held that the Commissioner (Appeals) cannot condone the delay of more than 30 days which is the condonable period prescribed by the statute. The Commissioner (Appeals) has rightly rejected the appeal on the ground of being time barred - appeal dismissed - decided against appellant.

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• 2017 (10) TMI 574
  Valuation of imported goods - price variation clause - the department filed appeal before the Commissioner (Appeals), who vide the impugned order observed that the sale agreement indicated additional amounts and remanded the matter for reconsideration - Held that: - Article 19 appears to be nothing but a standard clause so as to fix the liability for discharging taxes/government dues. We do not find anything in such clause so as to enter a finding that it is a condition of sale etc. The discussion or the observation made appears to be too flimsy. Further, such ground was not raised in show-cause notice or in the appeal filed by department and, therefore, cannot be a ground for remand of the matter - the impugned order directing remand is unsustainable - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 573
  Valuation - imported Rechargeable Lamps PRL 228 - RSP - rejection of declared value - Held that: - the appellant had based their assessable value on invoice price of US$ 0.75 per piece. However, no grounds have been evidenced for rejecting the said declared value as not being transaction value - instead of following the sequences laid down in the Valuation Rules for redetermination of value, the department, for some reason, found it appropriate to work out the assessable value on the basis of market prices of the impugned item obtained through market enquiry. The enhancement is then certainly not based on sufficient reasons for rejection of transaction value and redetermination of value thereupon being based on contemporaneous imports of identical goods - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 572
  Non-speaking order - reassessment of Bills of Entry - Valuation of imported goods - defective tinplates - misprinted sheets - section 17(5) of the Customs Act, 1962 - Held that: - the Assessing Officer had done re-assessment, but no speaking order on the re-assessment was issued within 15 days from the date of re-assessment of the Bill of Entry. In such situation, the Hon’ble Calcutta High Court in the case of Sigma Power Products (P) Ltd. v. The Commissioner of Customs(Port) and Others [2017 (3) TMI 497 - CALCUTTA HIGH COURT], set aside the re-assessment order as the proper officer had not passed a speaking order on the re-assessment within 15 days of the re-assessment of the Bills of Entry. The Commissioner(Appeals) has no power to condone the delay beyond the stipulated period - In the present case, the appellant filed the appeals before the Commissioner(Appeals) without the speaking order, as required to be passed under section 17(5) of the Act - it is clear that the appellant should have filed the appeal after obtaining the speaking order against the Bills of Entry under the provisions of the Customs Act, 1962. The assessing officer would pass the speaking order as required under section 17(5) of the Customs Act, 1962 forthwith and thereafter the appellant is at liberty to challenge the re-assessment made by the assessing officer in the Bills of Entry - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2017 (10) TMI 570
  Compromise Petition - Held that:- Each party as Petitioner and Respondent out of their own free will have the authority and capacity to enter into the Compromise and execute the Settlement Deed and perform their respective obligations under the Settlement Deed and the same would be binding and enforceable against such person under all applicable laws; and that each of the Petitioners and Respondents has full power and authority to grant the releases to the other as contemplated in the Settlement Deed. The Petitioners and Respondents have wholeheartedly jointly and severally agreed, confirmed and affirmed the terms of this Compromise Petition. The Settlement Deed is herewith produced as Annexure A to this Compromise Petition under Memo to the Honourable Tribunal. The Board Resolution by circulation passed by the Respondent No. 1 is herewith produced as Annexure B to this Compromise Petition under Memo to the Honourable Tribunal. The Petitioners and Respondents agree that the Honourable Tribunal may on an application filed by either the Petitioners or Respondent or the Company institute an execution proceeding to enforce the consent order passed pursuant to this Compromise Petition. The parties in person informed the Tribunal that they are accepting the terms of the compromise and that they have signed in the compromise settlement noting the contents. The Compromise is recorded. The petition is disposed of in terms of compromise settlement and the terms of the compromise are part and parcel of the order. In the result the petition is disposed of in terms of compromise settlement dated 16th August, 2017

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• Insolvency & Bankruptcy

• 2017 (10) TMI 571
  Winding up of the company for its inability to pay the debt - Held that:- Since there is a default committed by the respondent as proved from the aforesaid discussion and the application being complete in all respect, the resolution professional has also been proposed, the instant petition deserves to be admitted. In view of the above, the instant petition is admitted and the moratorium is declared for prohibiting all of the following as provided in section 14(1) As directed that the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. The provisions of sub-section (1) shall however not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. That the order of moratorium shall have effect from the date of this order till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub- section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33 as the case may be. The matter is adjourned to 14.09.2017 for passing formal order to appoint Interim Resolution Professional with further directions.

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• 2017 (10) TMI 569
  Corporate Insolvency Resolution Process - Whether it is mandatory for a 'Financial Creditor' to propose the name of 'Interim Resolution Professional' in an application under section 7 of the 'I&B Code'? - Held that:- While we uphold the decision of the Adjudicating Authority that proposal of name of 'Interim Resolution Professional' in terms of clause (b) of sub-section (3) of Section 7 is mandatory, but in the facts and circumstances of the case, as the name of 'Interim Resolution Professional' has already been proposed by the Appellant-'Financial Creditor', the impugned order dated 22nd June, 2017 cannot be upheld. Further, we are of the view that if the application filed by 'Financial' Creditor' or 'Corporate Applicant' is defective in absence of name of an 'Interim Resolution Professional', then in such case in terms of proviso to Section 7 and Section 10, the Adjudicating Authority is required to give a notice to the applicant to rectify the defect within seven days of the receipt of such notice.

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• 2017 (10) TMI 568
  Insolvency and Bankruptcy Code invoked to prohibit the supplier from terminating or suspending services - Held that:- Electricity, water and telecommunication services and Information Technology service are to be considered as essential as long as these services are not a requirement to the output produced or supplied by the Corporate Debtor. Under this regulation, an illustration also been given saying that water is to be considered as essential service as long as it is used for drinking purpose and sanitization purpose but not for generating electricity. If the same electricity is used as input for manufacturing purpose making huge bill of lakhs of rupees to get output from that industry, then to our understanding, supply of electricity is used as input for manufacturing purpose to get output from the factory and it obviously to make profits. Essential service is a service for survival of human kind, but not for making business and earn profits without making payment to the services used. When company is using it for making profit, then the company owes to make payment to the services/goods utilized in manufacturing purpose. Since it is not the defense of the debtor company that this electricity is used for lighting purpose, and admittedly using for running manufacturing business, those service will not fall within the ambit of Section 14(2) of moratorium. Every month, since this company has been consuming electricity for almost one crore of rupees, such supply will not be treated as supply for meeting essential requirements of the company. Therefore, this Bench hereby clarifies that the electricity supplying to the debtor company will not fall within essential supplies classified in Regulation 32 of IBBI (CIRP) Regulations, therefore, section 14(2) of Insolvency and Bankruptcy Code shall not be invoked to prohibit the supplier from terminating or suspending services

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• PMLA

• 2017 (10) TMI 567
  Insolvency and Bankruptcy procedure - provisional attachment order - maintainability of petition - Held that:- The provisional attachment order not be interfered with by this Tribunal as validity of the provisional attachment order is to be determined by the Adjudicating Authority, who has the competent jurisdiction to decide the issue. Accordingly the appeal is not maintainable before this Tribunal We are of the view that the above submission of learned Mr. Pankaj Vijayan, IRP has a force . However, we are of the view that all the issues raised by the parties are to decided by the Adjudicating Authority after hearing. Under these circumstances, the present appeal is disposed of with the direction that the parties shall appear before the Adjudicating Authority on 10th October, 2017, the date already fixed. The Adjudicating Authority shall hear all the parties on all the issues raised by the appellant and Mr. Pankaj Vijayan, IRP before us and pass the final order but positively before expiry of 180 days from the date of PAO.

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• Service Tax

• 2017 (10) TMI 564
  Business Auxiliary service - empanelment fee - charge-ability to service tax - the decision in the case of Air Force Auditorium Versus C.S.T. Delhi [2017 (4) TMI 702 - CESTAT NEW DELHI] contested, where it was held that the amounts collected as empanelment fee would be chargeable to service tax under BAS - Held that: - the decision in the above case upheld - there is no merit in this appeal - appeal dismissed.

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• 2017 (10) TMI 563
  Jurisdiction - case of petitioner is that as for a composite contract involving material supply and provision of service, service tax can be demanded only on the service portion and the respondent does not have a jurisdiction to levy service tax on the value of the materials - maintainability of petition - Held that: - The High Court only in exceptional cases can invoke its extraordinary jurisdiction under Article 226 of the Constitution, when there is an adequate effective and efficacious alternate remedy available to the litigant - The points canvassed here, are not pure questions of law, but intricate factual issues, which cannot be adjudicated in a Writ Petition - Writ Petition dismissed as not maintainable.

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• 2017 (10) TMI 562
  Levy of penalty at reduced rate of 25% of tax - Principles of Natural Justice - The appellant stated that the service tax and interest had been deposited prior to issuance of Show Cause Notice and Adjudication Order; the penalty under Sections 76 and 77 of the Finance Act is not mandatory Whether the Show Cause Notice dated 29.09.2010 and the Order-in-Original dated 04.05.2012, wherein the Additional Commissioner reduced the penalty to 25% of the imposed penalty of Rs. 13,36,869/-, if the same is paid within 30 days, which came to be confirmed by the order impugned in the present appeal, are sustainable? Held that: - the appellant had contravened the provisions of Section 68 of the Finance Act, 1994, read with Rule 6(1) of the Service Tax Rules, 1994 and short- paid the interest for the earlier period also. The appellant has collected the tax amount from their customers, but had not paid the same to the Government Exchequer and only after pointing out by the Audit authorities, they have paid Service Tax vide five challans dated 31.12.2009, 06.01.2010, 07.01.2010, 01.01.2010 and 19.02.2010 along with Rs. 1,72,273/- towards interest and a sum of Rs. 71,566/- through utilization of CENVAT Credit towards their service tax dues - Moreover, though the appellant has collected the service charges along with the service tax amount during the period April 2008 to December 2009, appellant had not deposited such service tax into the Government Exchequer in time nor had intimated the department the details of such receipts in their ST3 Returns filed during the material period, which is not disputed by the appellant herein. Therefore, the appellant has contravened Section 70 of the Finance Act,1994 read with Rule 7 of Service Tax Rules, 1994 - the appellant has intentionally suppressed the service tax collected from its customers and failed to remit the same in the Central Government's Account for the period 2008-09, with an intention to evade payment of tax. In the Order-in-Original, the Additional Commissioner, only on the fact that the appellant herein have made payments during different periods within a span of four months that too, after the audit conducted by the Officers of the Internal Audit, Commissionerate of Chennai, had taken a lenient view by reducing the penalty to 25% of the imposed penalty amount of Rs. 13,36,869/- if the same is paid within 30 days. The Additional Commissioner has used his discretionary power, which he is empowered under Section 78 of the Act - The reduction of penalty from the original amount to 25% is not contrary to Section 78 and hence, it is valid. The appellant is directed to remit 25% of Rs. 13,36,869/- within 30 days from the date of receipt of this order, failing which interest of 12% p.a should be levied till the date of payment - petition dismissed.

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• 2017 (10) TMI 561
  Rectification of mistake - Principles of Natural Justice - Several material facts covered by the SCN were not considered - Held that: - On perusal of the final order passed by the Tribunal, it is seen that after consideration of all the arguments advanced on behalf of the appellants, the impugned orders have been set aside and matter remanded for a denovo decision on the subject in the light of the law laid down by the Hon'ble Apex Court in the case of Larsen & Toubro [2015 (8) TMI 749 - SUPREME COURT]. It is settled position of law that it is not necessary to mention the specific words of the counsel in the order/decision. The decision should only be the cumulative effect of all the arguments. The normal principle of law is that once a judgment is pronounced or order is made by the court, Tribunal or adjudicating authority, it becomes functus officio and hence cannot re-decide the matter in the light of fresh arguments - The points advanced in the ROM are those which require re-appraisal of the evidence and law which is not allowed by way of rectification of mistake. ROM application dismissed.

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• 2017 (10) TMI 560
  Port Services - CHA/Stevedoring service - demand of service tax - Held that: - The appellant is not contesting the liability to pay the demand of service tax but has only requested for remand to consider the eligibility of credit on input services in relation to stevedoring services - in case the appellant has paid service tax on input services in relation to stevedoring services, the same is eligible for credit - to verify the same, matter requires to be remanded - matter on remand. Penalties - Held that: - the issue was an interpretational one - penalties deserves to be set aside. Appeal allowed in part by way of remand.

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• 2017 (10) TMI 559
  CENVAT credit - car rented on lease during the period April 2005 to March 2010 - It is the case of the Revenue that since the cars are put to use by the company for individual consumption, CENVAT credit is not available on such service tax paid, as it has no nexus with the manufacturing activity - Held that: - The service provider has leased out the cars to the appellant for his deployment, which the appellant has done so to enable the Senior Officials of the company to travel from their residential premises to the office and vice versa - Similar issue came up before the Tribunal in the case of Steria India Ltd. [2013 (12) TMI 212 - CESTAT NEW DELHI], where it was held that since the several services in respect of which cenvatable tax was remitted by the appellant and these are input services having a proximate nexus with the software exports service provided by the appellant, the appellant is legitimately entitled to avail cenvat credit and is also entitled to refund of cenvat credit. Since the period involved in this appeal is prior to 1.4.2011, the impugned order set aside - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 558
  Refund claim - rejection on the ground of limitation - The appellant had filed refund claim for this amount on 30.6.2008. The lower authorities have held that the refund is in respect of excess tax paid during the period March 2005 to May 2005, hence it is hit by limitation - Held that: - It can be seen that the adjudicating authority has disposed of the proceedings initiated by the show-cause notice which was demanding tax liability from the appellant. During the adjudication proceedings, appellant had discharged various amounts through TR6 and CENVAT account and there has been an excess payment of the service tax liability, which is correctly claimed by the appellant on 30.6.2008 by filing a refund application. When the adjudicating authority has himself held that tax liability for the period October 2004 to May 2005 has been paid in excess, and passed an adjudication order on 11.4.2008, both the lower authorities, in this case, cannot hold that the appellant has filed a refund claim belatedly. It is very clear from the adjudication order that the tax liability of the appellant has been finalized by the authorities on 11.4.2008 and having filed the refund claim on 30.6.2008 to my mind it is within three months from the date of adjudication - refund is rightly filed within time as provided under Section 11B of the Central Excise Act, 1944 which is made applicable to the refunds under Finance Act, 1994. Reliance placed in the case of CCE, Thane-I vs. Clariant (I) Ltd. [2015 (8) TMI 1121 - BOMBAY HIGH COURT], where it was held that The only requirement is that the refund must be sought within the specified period and the limitation is provided by the second proviso to Section 11B. Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 557
  GTA Service - reverse charge mechanism - assessee had purchased salt, coal and lime from various places and paid transportation charges - Held that: - the entire adjudication needs to be revisited to confirm or otherwise the veracity of the submissions and contentions of the appellant. That would be in the interests of justice - on the aspect of calculation of service tax liability, we remand the matter back to the adjujdicating authority for denovo consideration. Penalty - Held that: - there has been no allegation of separation, fraud, misstatement of facts on the part of the assessee with an intention to evade discharge of service tax liability - penalty set aside. Appeal allowed in part and part matter on remand.

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• 2017 (10) TMI 556
  Classification of services - Tour Operator Service or otherwise - the appellants had provided Bus/Minibus to M/s Indian Petrochemicals Corporation Ltd. (IPCL) for transporting their employees, school children, families from various places to the place of their work, school etc. and received payments thereof from them during 01/04/2002 to 31/03/2006 as intimated by IPCL - whether the Learned Commissioner (Appeals) is correct in holding that the appellant have not provided service under the category of Tour Operator Service as defined in Section 65(115) of the Finance Act, read with Section 65(113) and (114) of the Finance Act? Held that: - the activity done by the respondent does not come under the definition of tour operator, which means any person engaged in the business of planning, scheduling, organising or arranging tour (which may include arrangement for accommodation, site seeing or other similar services) by any mode of transport and includes any person engaged in the business of operating tours in a tourists vehicle covered by a permit as granted under the Motor Vehicle Acts and Rules thereunder - it is nowhere case of the Revenue that respondents have used a tourist vehicle as defined under the provisions of the Finance Act read with the Motor Vehicles Act. Merely because the respondents are holding the permit, they do not become liable to service tax for Tour Operator Service. Appeal dismissed - decided against Revenue.

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• 2017 (10) TMI 555
  Short payment of service tax - case of appellant is that the quantification in this case has not been properly done by the authorities - Held that: - figures furnished by the appellant now were not the part of the records available with the authorities below, which is evident from the fact that there is no such discussion about such reconciliation statement either in the adjudication or in the impugned order - the matter should go back to the original authority for verification of the reconciliation statement to be furnished by the appellant - appeal allowed by way of remand.

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• Central Excise

• 2017 (10) TMI 554
  Manufacture - bullet-proofing activity undertaken by the appellant - job-work - It was alleged that as the bullet proofing was done by a division of Mahindra & Mahindra, the cost of bullet proofing should be included in the value of base vehicle cleared by Mahindra& Mahindra in terms of Rule 10A of the Central Excise Valuation Rules, 2000 as the said activity amounts to manufacture. It was alleged that the activity amounts to manufacture and cost of bullet proofing was to be added to the cost of base vehicle paid by Mahindra & Mahindra - case of appellant is that the process does not amount to manufacture and duty cannot be charged on the value addition carried outside the factory of clearance on account of certain processes not amounting to manufacture. Whether the bullet proofing amounts to manufacture or not, and whether the extended period of limitation is invokable or not? - Held that: - Bullet Proofing of Mahindra Bolero and Mahindra Rakshak does not amount to manufacture and no duty is payable by the appellant. With regard to Mahindra Scorpio and Mahindra Bus, we find that the process undertaken by the appellant involves the removal of body shell of the vehicle and reinforcing the same with bullet proofing sheets from the inside, strengthening the platform by welding iron studs on the weak joints of the platform and replacement of coils and shock absorbers so as to enable the platform to bear the increased weight of the base vehicle after bullet proofing. The body shell is then reinstalled on the platform and the floor is covered with a ballistic carpet. The glass is also changed to thicker bullet proof glass. We have seen that Mahindra Scorpio remains as Mahindra Scorpio and Mahindra Bus remains as Mahindra Bus before and after the bullet proofing and the use of the vehicles also remains same to carrying the passengers and the character of vehicle also do not change on accessories being added to these vehicles - in this case the Scorpio remain Scorpio and the Bus remains the Bus after bullet proofing and therefore, it cannot be said that the activity of bullet proofing amounts to manufacture. Accordingly, the activity undertaken by the appellant does not amount to manufacture. Merely few additions do not constitute a production or manufacture - activity undertaken by the appellant does not amount to manufacture. The adjudication order is beyond the scope of show cause notice with regard to the classification proposed in the show cause notice. Accordingly, the adjudication orders are set-aside. Penalties also set aside. Extended period of limitation - As we have decided the issue on merit, in favor of the appellant, therefore, we are not going into the issue of limitation. Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 553
  Clandestine removal - MS ingots, CTD bars and TMT bars - it appeared that more than one invoice was issued under the same serial number - Department took the view that the invoices seized from the premises of Mr. Koteeswaran are the parallel set of invoices of assessee used for clearing bars and rods without accounting and without payment of Central Excise duty, involving evasion of duty of Rs. 16,18,197/- - major grievance that has been voiced by the assessee right from the adjudication stage is that copy of the Statement of Shri Koteeswaran was not supplied to them - Held that: - there has been no role ascribed to Mr.Koteeswaran in the whole modus operandi. Neither is there any charge or allegation in the body of the SCN that he has aided or abetted in facilitating clandestine removals/unaccounted clearances by the assessee and consequent evasion of central excise duty. On the other hand, specific contraventions have been listed in respect of other noticees like S/Shri C.Sukumaran and Rangarajan that they were concerning themselves in the activities of clandestine production, removal and suppression of facts and in the case of Shri Saranana Sankar, that he was concerned with purchasing and dealing with excisable goods which he knew or reason to believe are liable for confiscation under Central Excise law. When the department themselves did not find any infraction, abetment or implicatory role on the part of Mr.Koteeswaran, his non-inclusion as a noticee in the Show Cause Notice cannot be touted as a ground by the assessee to set aside the entire proceedings ab initio. The contention of the assessee on this point will therefore not succeed. Another contention of appellant is that the when the notice states that invoices recovered from the premises of Mr. Koteeswaran are parallel sets of invoices and relied upon the statement given by him has also been relied upon, however no notice was issued to Mr. Koteeswaran - Held that: - The SCN not only encloses the mahazar drawn at the residence of Mr.Koteeswaran on 1.7.2005, but also the statement recorded from Mr.Koteeswaran and the made up file recovered under mahazar from his residence. The claim of the assessee that statement of Mr.Koteeswaran was not received by them does not merit acceptance since in their response to the SCN vide letter dt. 18.1.2007 of the assessee, referred to in para-10 of the order of adjudicating authority, they have made reference to the claims made by Shri Koteeswaran in his statement dt. 2.7.2005. Evidently, such a contention would not be able to be made without having received a copy of statement of Mr. Koteeswaran. Cross-examination of Shri Koteeswaran - Held that: - Facts on record brings out that in their own letter dt. 8.1.2007, in response to SCN, assessee had inter alia requested for cross examination of 9 persons, however they had not sought such cross examination of Mr.Koteeswaran. It is also seen that in response to the said request, cross examination of the witnesses was permitted and done by the counsel for the assessee on 12.2.2007 of all the 9 persons as per the request of the assessee. This being so, the lower authorities cannot be faulted for not having cross examination of Mr. Koteeswaran. Coming to the demand of differential Central Excise duty, it is seen that whereas the SCN had proposed total demand of Rs. 39,85,598/- on various counts, each of these allegations have been analyzed in detail by the adjudicating authority. In fact, the adjudicating authority has taken note of the retraction of the earlier statements by various persons during the cross examination. After detailed analysis, the adjudicating authority has found that the charge of unaccounted procurement of raw material is not sustainable since they have been based only on the statement of scrap dealers, which have been retracted in cross examination, without any other evidence to corroborate such allegations. Extended period of limitation - penalty u/s 11AC - Held that: - the extended period of limitation is very much invokable in this case and accordingly, the demand of duty of Rs. 14,20,482/- under Section 11A (2) of the Central Excise Act, 1944 will sustain - So also penalty imposed under Section 11AC of the Act read with Rule 25 of Central Excise Rules, 2002 will also sustain. Decided against appellant.

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• 2017 (10) TMI 552
  Parts of cigarette packets - excisability/marketability - Whether parts of cigarette packets namely slides/slits (inner frame) are excisable goods within the meaning of CETA 1985? - Natural Justice. Held that: - The ruling in the case of M/s Zupiter Printing versus Union of India [1991 (3) TMI 394 - DELHI HIGH COURT] supports the case of the appellant herein, as the issue therein was taxability of cigarette shells only manufactured by M/s Zupiter Printing by way of job work for the cigarette manufacturer. The question in that case was limited to whether the cigarette shells are excisable if they are considered as a box. the findings of the Apex Court in the case of M/s Sonic Electrochem Private Ltd. (2002 (9) TMI 104 - SUPREME COURT OF INDIA) are squarely applicable, wherein the Apex Court held that the plastic body of the EMR is specific to a particular manufacturers as per their design and logo and as such is not marketable or a product known in the market, hence not marketable. In the facts of the present case slide/slits are not goods or product known in the market and hence not marketable. The slide/slits in the facts of the present case are specific to the appellant as manufactured by them for their own brand separately and cannot be inter-used by other cigarettes manufacturers for their brands. In the facts of the case that the slides/slits are also not interchangeably usable by the appellant itself for its various cigarettes being manufactured under different brands. These slides/slits are not manufactured separately and or purchased from outside by any of the cigarette manufacturers including the appellant. These are manufactured in a continuous process at the stage of packing of the cigarettes by automatic machines in the course of packaging of cigarettes. There is no output which can be called as slide/slits cleared by the appellant or any cigarettes manufacturer. Accordingly, appeals are allowed with consequential benefits by holding that slides/slits are not capable of being marketable and accordingly are not excisable/dutiable. Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 551
  Demand of interest and penalty - payment of duty by utilization of CENVAT credit account - Rule 8(3A) of Cenvat Excise Rules, 2002 - Held that: - although the decision in the case Indsur Global Limited [2014 (12) TMI 585 - GUJARAT HIGH COURT] has been stayed by the Hon’ble Apex Court in the case of Union of India Versus Indsur Global Ltd. [2014 (11) TMI 1101 - SUPREME COURT], but the said decision, unless until decided by the Hon’ble Apex Court, holds the field as on date and the Court is not persuaded to take a view different from those already taken - the Hon'ble High Court holds that the impugned order and the reasoning of the CESTAT does not call for any interference - proceedings against the appellant are not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 550
  Valuation - Physician samples - cost construction method - extended period of limitation - Held that: - Surely, there has to be wilful misstatement or suppression or fraud with evidence that same was deliberate and was designed only with intent to evade payment of duty. This is certainly not the case - the matter was already in litigation with the department concerning refund application filed for the same clearances. In any case, there definitely had been considerable confusion in the method and manner of clearance of physician samples - demand hit by limitation - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 549
  Benefit of N/N. 30/2004-CE dated 09.07.2004 - yarn cleared for captive consumption prior to 01.08.2005, when the yarn was dutiable - whether the appellants are correct in reversing the CENVAT credit attributable to the inputs used in the manufacture of the yarn, which in turn had been used in the manufacture of fabrics? - Held that: - In the case of K.G. Denim Ltd. Vs. CCE [2005 (9) TMI 127 - CESTAT, CHENNAI], the Tribunal held that since the assessee reversed the entire Cenvat credit on inputs, correctable to the finished products cleared by them, they are eligible for the benefit of N/N. 30/2004 ibid - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 548
  Clandestine manufacture and removal - electricity consumption - Held that: - In several judgments, it has been held that consumption pattern of electricity alone cannot be the basis for allegation of clandestine clearance - Admittedly, there is no discrepancy found in the records maintained by the respondent - charge of clandestine manufacture cannot be established - appeal dismissed - decided against Revenue.

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• 2017 (10) TMI 547
  Penalty u/s 117 of CA, 1962 - Held that: - It is indeed a fact that during the disputed period, the maximum penalty that could be imposed under section was only Rs. 10,000/-. Only with effect from 18.05.2008, the penalty under this provision was increased to Rs. 1,00,000/-. However, the adjudicating Commissioner had imposed a penalty of Rs. 2,50,000/-, which is without legal basis and thus requires interference - penalty u/s 117 is required to be reduced to Rs. 10,000/-. Penalty u/r 25 - Held that: - there was no malafide intention to evade payment of duty and that the duty along with interest has already been paid. However, even taking into consideration the violation of the conditions of the notification - the ends of justice would be adequately met by reducing the penalty u/r 25 to Rs. 1,00,000/-, without disturbing the confirmation of duty payment and interest thereon. Appeal allowed in part.

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• 2017 (10) TMI 546
  Excess stock - Molasses - said excess quantity was arrived by at officers by adopting Dip Reading method of all the stock of the molasses in the storage tank, which the appellant claims to be incorrect - confiscation - penalties - Held that: - I do find strong force in submissions that the stock of molasses on the Dip Reading method is incorrect, as the same has been settled by the Tribunal in the case of Ghatampur Sugars Co. Ltd., [1994 (12) TMI 237 - CEGAT, NEW DELHI] and U.P. State Sugar Corporation Ltd., [1999 (12) TMI 219 - CEGAT, NEW DELHI] - on the issue arriving at the book stock Dip Reading is incorrect, both the lower authorities have incorrectly arrived at the conclusion that the stock taken by the officers in the case in hand by Dip Reading is correct and there was excess - there is no correct and clear picture actual of molasses stock. The movement molasses is always under physical control of State Excise Authorities. Identical issue decided in the case of TRIVENI ENGG. & INDS. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT [2006 (6) TMI 404 - CESTAT, NEW DELHI], where it was held that the case made out of the Revenue is on wrong footing on the fact that the State Excise departments record and the record maintained by the appellant-company are tallying. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (10) TMI 545
  Validity of notice of attachment/garnishee order - tax arrear - case of petitioner is that on account of severe financial crunch and since the policy of the Government with regard to liquor trade is in a nebulous state, the petitioner is unable to raise finances from the open market and therefore, pleads that the petitioner may be granted sufficient time to pay arrears with interest in equated monthly instalments - Held that: - this Court is inclined to grant some indulgence to the petitioner considering the fact that the petitioner is undergoing severe financial crisis - petition allowed.

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• 2017 (10) TMI 544
  Cancellation of registration - TNVAT Act - opportunity of being heard - Held that: - the revisional authority accepts the fact that the registering authority did not afford an opportunity for personal hearing to the petitioner when Sections 39(14) and 39(15) of TNVAT Act, 2006, mandates that an opportunity of personal hearing should be granted to the dealer before cancellation. Therefore, the revisional authority fell in error in holding that since the petitioner themselves filed an application for cancellation, the failure to afford an opportunity for personal hearing by the registering authority is not fatal. With regard to the cancellation of the petitioner's registration, the same is vitiated on two grounds, namely, the same has been passed without affording an opportunity of personal hearing, which is mandatorily required to be provided and secondly, the cancellation has been done with retrospective effect which is also illegal. Therefore, on these two grounds, the registration cancellation order dated 13.04.2017 calls for interference. Petition allowed - decided in favor of petitioner.

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• 2017 (10) TMI 543
  Validity of assessment order - TNVAT Act - rectification of assessment u/s 84 - purchase from Registration Certificate cancelled dealers - purchase omissions - assessment for the year 2014-15 - Held that: - the respondent while completing the assessment pointed out that as per the web report, the registration was cancelled prior to the date of purchase and therefore, the Input Tax Credit claimed by the petitioner from registration cancelled dealer is liable to be reversed. The legal position which has been settled by this Court is that the retrospective cancellation of the registration cannot be a reason to deny Input Tax Credit for a purchasing dealer. There may be cases where a selling dealer might have suppressed the fact of cancellation of registration. So far as the purchase omission is concerned, the petitioner's explanation is that there is a small error in Annexure I filed by the petitioner wherein at Serial Nos.26 and 27, the name of the selling dealers had got interchanged, as a result of which there is a mismatch of the TIN Number. This being a factual position, the petitioner has to raise the same before the Assessing Officer for which liberty is granted to the petitioner to file an application under Section 84 of the Act - liberty to the petitioner to file an application under Section 84 of TNVAT Act - the assessment under the head purchase from registration cancelled dealer is set aside - appeal allowed in part.

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• Indian Laws

• 2017 (10) TMI 566
  Arbitration and Conciliation proceedings - whether the two Courts below were justified in rejecting the application filed under Section 8 of the Arbitration and Conciliation Act, 1996 in a pending civil suit filed by the respondent seeking appellant s eviction from the premises in question and for claiming some ancillary reliefs therein - Held that:- Both the Courts below were right in dismissing the appellant s application filed under Section 8 of the Act and thereby were justified in holding that the civil suit filed by the respondent was maintainable for grant of reliefs claimed in the plaint despite parties agreeing to get the disputes arising therefrom to be decided by the arbitrator.

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• 2017 (10) TMI 565
  Disciplinary proceedings instituted against petitioners Chartered accountants - Eligibility of subsequent action - Held that:- Merely because the petitioners have now acquired further information pursuant to their request under the RTI - which, at best, provides them with additional pleas in support of their earlier challenge - does not mean that the subject matter of the present petition was not included in the matter before the Bombay High Court. The petitioners had challenged the formation, interalia, challenging that the prima facie opinion was not valid. The present petition seeks to re-agitate the same issue albeit on the basis of additional information claimed to be have been received subsequently. Plainly, the petitioners cannot be permitted to do so. This Court is of the view that the petitioners' contention that they had recently acquired the information as to how the prima facie opinion was formed is a mere ruse intended to delay and obstruct the disciplinary proceedings, which cannot be permitted.

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