TMI Tax Updates - e-Newsletter
October 16, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Wealth tax

TMI SMS

• Disallowance u/s 14A not to be made for the expenses i.e audit fees, ROC fee etc. required to maintain corporate identity of the appellant

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Articles

1. APPOINTMENT OF ADMINISTRATOR AND PROCEDURE FOR REFUNDING TO THE INVESTORS

   By: DR.MARIAPPAN GOVINDARAJAN

2. Deductor Registration procedure under GST Law- In five Steps

   By: Sandeep Rawat

News

1. 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

2. Top priority language localisation to bring government services closer to the people: Secretary Meity

3. India’s Merchandise Trade: April - September 2018 and September 2018

4. Index Numbers of Wholesale Price in India (Base: 2011-12=100) Review for the month of September, 2018

5. Shri Subhash Chandra Garg, Secretary, DEA: Stresses on the strengthening of the Multilateral Institutions like IMF; Calls for enhancement in the quantum of Quota Resources and realignment of voting shares so that Quota Shares of EMDCs increase in line with its growing relative economic position in the world; Welcomes the Bali FinTech Agenda; India has extensively used digital technologies to build FinTech, most prominently in the payment space.

6. C.R. Chaudhary Attends 6th RCEP Inter-sessional Ministerial Meeting in Singapore

Notifications

Customs

1. 52/2018-Customs - dated 15-10-2018 - ADD

Seeks to rescind Notification No. 58/2012-Customs (ADD) dated 24th December, 2012.

2. 86/2018-CUSTOMS (N.T.) - dated 15-10-2018 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver.

Indian Laws

3. 2(2)/2018-SPS - dated 10-10-2018 - Indian Law

Amendments in the Notification No. 2(2)/2018-SPS dated the 23rd April, 2018 - ‘Industrial Development Scheme for Jammu and Kashmir, 2017'.

4. SEBI/LAD-NRO/GN/2018/44 - dated 9-10-2018 - Indian Law

Securities and Exchange Board of India (Issue And Listing of Non-Convertible Redeembable Preference Shares) (Amendment) Regulations, 2018.

5. F.No. 20/6/2015–FT-Vol.III - dated 9-10-2018 - Indian Law

Amends the Gold Monetisation Scheme

6. 7/18/2018-DGAD - SSR-09/2018 - dated 9-10-2018 - Indian Law

Initiation of Sunset Review anti-dumping investigation concerning imports of Ductile Iron Pipes from China PR.

7. 14/3/91-TPD(Pt) - dated 9-10-2018 - Indian Law

Modification in the Notification No. I-34(7)/2018-O&M dated 17 May 2018.

8. 10(6)/2016-DBA-II/NER - dated 9-10-2018 - Indian Law

Amendments in the Government of India Notification No.10(6)/2016-DBA-II/NER dated the 12th April, 2018 titled ‘North East Industrial Development Scheme (NEIDS), 2017’.

Circulars / Instructions / Orders

Customs

1. 25/2018 - dated 28-8-2018

Cadre restructurinq and re-organization of Ahmedabad Customs—Reg

Highlights / Catch Notes

GST

• GST vs. VAT: Interim Relief Granted for Pre-July 2017 Work Contracts with Invoices Raised Under GST Regime.

  Case-Laws - HC : Levy of GST or VAT - Work Contracts executed up to 30.06.2017 - since the raising of invoices and payment for the supplies would be under the GST regime and the transaction were not accounted under the VAT - interim relief granted.
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• School Project Setup: Composite Supply of Goods & Services Not Naturally Bundled, Subject to GST Despite Government Funding.

  Case-Laws - AAR : Classification of supply - setting up a project in the school - Recipient of the service OKCL is a body corporate which cannot be regarded as Government - The supply undertaken by the applicant is in the nature of composite supply. It includes supply of goods and services which are not naturally bundled - Liable to GST even though funded by the Govt.
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Income Tax

• Court Rules Section 14A Disallowance Must Not Include Essential Corporate Expenses; Rule 8D(2)(iii) Applied Unreasonably.

  Case-Laws - AT : Disallowance u/s 14A - The expenses inter alia included items such audit fees, ROC expenses etc. which were required to be incurred to maintain corporate identity of the appellant. Such expenses were required to be incurred irrespective whether tax free or taxable income was earned - mechanical application of Rule 8D(2)(iii) in the present case leads to absurd results.
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• Inherited Property Gains Are LTCG: Include Previous Owner's Holding Period for Indexation and Section 54EC Benefits.

  Case-Laws - AT : LTCG - inherited property - the holding period of previous owner was includible in the assessee’s holding period. This being the case, we have no hesitation in holding that the nature of impugned gains was Long Term in nature and therefore, the indexation benefit as well as benefit of Section 54EC was available to the assessee.
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• Section 69C Additions Upheld: Cash Purchases and Hawala Dealer Bills Confirmed as Valid Evidence.

  Case-Laws - AT : Addition of peak credit u/s 69C on the premise that material was purchased in cash from the open market whereas the accommodation purchase bills were procured from the alleged hawala dealers - additions confirmed.
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• Book Adjustments u/s 115JB Should Be Independent of Calculations in Section 14A, Rule 8D.

  Case-Laws - AT : MAT - Book adjustments u/s 115JB - computation under clause (f) of explanation 1 to section 115 JB (2) of the Act is to be made without resorting to computation as contemplated u/s 14A of the Act r/w Rule 8D of the Rules.
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• Income Reclassified as 'Other Sources' u/s 68 Due to Unsubstantiated Agricultural Claims.

  Case-Laws - AT : Addition u/s 68 - assessee failed to prove that income is agriculture income as claimed - the sum that is credited to the book of account has to be necessarily added as income from other sources u/s 68
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• Section 153(2A) of Income Tax Act mandates 9-month limit for all remand assessments, ensuring uniformity in completion timelines.

  Case-Laws - HC : Assessment u/s 153A r.w.s. 254 - period of limitation u/s 153(2A) - period of limitation prescribed for completion of remand (nine months) constituted a special provision, which applies to every class of remand regardless whether they originate from assessments/re- assessments/revisions or search and seizure assessments.
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• Bus Shelter Contract Breach: Assessee Fails to Pay Rs. 4.09 Crores Monthly Concessionaire Fee, Revenue Expenditure Noted.

  Case-Laws - HC : Nature of expenditure - there was failure on the part of respondent-assessee to perform its part of the agreement including operation and maintenance of bus shelters and pay concessionaire fee of ₹ 4.09 crores per month. Any expenditure or payment of the said nature would necessarily be revenue in character.
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• Court Rules BSE Responsible for Security Transaction Tax Refunds, Not Petitioners, in Tax Dispute Case.

  Case-Laws - HC : Refund claim - deduction of tax known as security transaction tax by BSE - the stand of the Income Tax Department and from the pleadings in the writ petition itself is that it is the BSE who will have to seek refund and the petitioners cannot seek refund from the Income Tax Department is correct.
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Customs

• Penalty Upheld for Misdeclared High-End Car Imports Under Customs Act Sections 112(a) & 114AA.

  Case-Laws - AT : Penalty u/s 112(a) and 114AA of CA - import of High end cars / Sports Utility Vehicles - appellant admitted that the value of the imported goods had been mis-declared and paid the duty during investigation - the truth and the averments made therein cannot be altered at the appellate stage - penalty u/s 112(a) of the Act upheld.
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• Duty Liability for Imports Based on Entry Date; New Exemptions Post-Entry Not Applicable Per Bill of Entry.

  Case-Laws - AT : Benefit of exemption - The duty liability has to be determined on the date and time of entry of goods for importation into the country - Subsequent issuance of notification giving new exemption after the date of import (date of Bill of Entry) cannot be allowed.
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• Conversion of Shipping Bills for Drawback Doesn't Require Amendment u/s 149 of Customs Act, 1962.

  Case-Laws - AT : Conversion of Shipping Bills - The circular of 2004, and the subsequent circular of 2010, clarifies that there is no requirement of conversion of shipping bills through the amendment process envisaged under section 149 of Customs Act, 1962 for allowing drawback.
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Corporate Law

• Petitioner Accused of Misleading Court in Demerger Case to Bypass Voting Process, Raising Company Law Concerns.

  Case-Laws - HC : Scheme of demerger - the petitioner has not come with clean hands in the present application, since what could not be achieved directly by participating in the voting to be held in the impugned proposed meeting, the petitioner has sought to get by way of an order of the Court.
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IBC

• Applications u/ss 7 & 9 of Insolvency Code must be filed within 3 years of default per Limitation Act.

  Case-Laws - SC : Insolvency process - Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code - The right to sue accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application can be rejected unless condoned in deserving cases.
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Central Excise

• Exemption Allowed for Non-Manufacturing Process of Removing Unwanted Materials in Soap Stock and Fatty Acids.

  Case-Laws - AT : Waste/By-products - the removal of unwanted materials resulting in products like soap stock (gum), waxes and fatty acid with odour cannot be called as a process of manufacture of these gums, waxes and fatty acid with odour - Benefit of exemption allowed.
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• Allegations of Clandestine Goods Removal Unfounded Without Evidence Beyond Unpaid Invoices and Sales Figures, Court Rules.

  Case-Laws - AT : Clandestine removal - Merely on the ground that appellant has issued certain invoices on which no duty has been paid and sales figure from the bank cannot be the reason to allege clandestine removal of goods in the absence of the other related evidences, such as, electricity consumption, procurement of raw material, how the goods have been cleared etc.
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Case Laws:

• GST

• 2018 (10) TMI 779
  Levy of GST or VAT - Work Contracts executed up to 30.06.2017 - since the raising of invoices and payment for the supplies would be under the GST regime and the transaction were not accounted under the VAT - Held that:- In the consequence, because of such inaction on the part of the respondent Hailakandi Municipal Board, the petitioner is now being exposed to the risk of being subjected to some coercive action by the taxing authorities. In such view of the matter and being prima facie satisfied and also considering the balance of convenience and the irreparable loss the petitioner may suffer, it is provided that in the interim, no coercive action shall be taken by the respondent authorities against the petitioner regarding the payment of GST - List this matter on 28.11.2018.

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• 2018 (10) TMI 778
  Unable to upload GST TRAN-1 - transition to GST regime - Held that:- The respondents are directed to provisionally entertain the GST TRAN-1 and other returns of the petitioner either by way of opening the portal or manually.

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• Income Tax

• 2018 (10) TMI 810
  Extension of due date of filing of tax, Audit Report and Income-Tax Return - Seeks time for reconciling ITR with GSTR-9 - Held that:- This Court is of the view that this petition can be disposed of at this stage with the direction to the respondent authorities to consider on or before 25.10.2018 the representation submitted by the petitioners on 20.09.2018 for extension of due date for filing return, by issuing a speaking order so that in the event the petitioners are aggrieved by the order that may be passed, they would have the liberty to approach this Court again - Petition disposed off.

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• 2018 (10) TMI 809
  Refund claim - deduction of tax known as security transaction tax by BSE - ED directed the BSE to annul the trade in the shares of KRBL Limited and refund the money back to the petitioners - Held that:- The refund was made of the amount and forwarded for trading in the shares by the petitioners, by the BSE. It is the BSE, who, according to the petitioners, deducted the tax known as security transaction tax and refunded the balance amount to the petitioners. The amount of the security transaction tax deducted by the BSE has been remitted to the Income Tax Department by the BSE. Therefore, the stand of the Income Tax Department and from the pleadings in the writ petition itself is that it is the BSE who will have to seek refund and the petitioners cannot seek refund from the Income Tax Department and by impleading the BSE as party respondent. This stand taken by the Income Tax Department appears to be correct. Nothing more is required other than the pleadings in the writ petition to come to a conclusion that it is respondent no. 3 who will have to seek the refund, if at all it is of the view that the security transaction tax collected and remitted ought to be refunded. Presently, the stand of the Income Tax Department, based on the pleadings in the writ petition that it is not their obligation to refund any tax amount to the petitioners, as no tax is collected by the Department from the petitioners, is accurate. That justifies the disposal of the writ petition by holding that the petitioners have alternate efficacious remedies so as to recover the sum allegedly erroneously retained by the BSE. None prevents the BSE to adopt appropriate proceedings, including moving the Income Tax Department with the claim of refund.

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• 2018 (10) TMI 808
  Ad-hoc disallowance of expenditure - Held that:- Assessing Officer had made similar disallowances in other years. The Tribunal has held that the respondent-assessee had filed complete details of the said vendors, including their PAN, invoices raised, ledger accounts, etc. The Tribunal in these circumstances had followed earlier decision of the Coordinate Bench of the Tribunal in the case of the respondent-assessee for the Assessment Years 2006-07 and 2009-10. Accordingly, the appeal filed by the Revenue was dismissed and the appeal filed by the respondent-assessee has been allowed, directing deletion of the ad hoc disallowance of expenditure. - Decided in favour of assessee.

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• 2018 (10) TMI 807
  Nature of expenditure - revenue or capital - capital loss suffered by the assessee for failure to perform its part of the concessionaire agreement with the Delhi Transport Corporation - Held that:- The respondent-assessee was to construct, operate and maintain bus shelters. The respondent-assessee was also under an obligation to pay Rs. 4.09 crores per month to the Delhi Transport Corporation. The shelters were not owned by the respondent-assessee. The Central Board of Direct Taxes vide Circular No. 9/2014 has inter alia observed that under the BOT schemes the assessees are not entitled to depreciation as they are not owners of the project, which is only constructed by them. Ownership is vested with the Government or its agencies. Therefore, the respondent-assessee was entitled to amortize the amounts spent on construction over the tenure of the agreement. In the present case as noticed there was failure on the part of respondent-assessee to perform its part of the agreement including operation and maintenance of bus shelters and pay concessionaire fee of Rs. 4.09 crores per month. Any expenditure or payment of the said nature would necessarily be revenue in character. Even construction cost of the shelters had to be amortized over a period of 10 years. These would, therefore, not be expenditure of capital nature. The Assessment Order does not refer to the enduring or permanent benefit acquired by the respondent-assessee and therefore on default and failure to abide by the terms, the expenditure or loss incurred by the respondent-assessee was capital expenditure/loss. Cost of construction as recorded and held above was not capital expenditure. Further, the respondent-assessee was liable to pay monthly fee of Rs. 4.09 crores to the Delhi Transport Corporation, which is certainly revenue expenditure. Additionally, the respondent-assessee was under obligation to maintain and operate shelters which again would be revenue expenditure. - Decided in favour of assessee

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• 2018 (10) TMI 806
  Assessment u/s 153A r.w.s. 254 - period of limitation u/s 153 - Starting point of limitation with respect to any proceedings which are to be initiated by the revenue or any steps to be taken by it - Held that:- It is quite evident from the decision in Odeon Builders [2017 (3) TMI 1266 - DELHI HIGH COURT] that limitation begins (for any purpose under the Act) from the point of time when the departmental representative receives the copy of a decision or an order of the ITAT. The evidence on record in this case clearly establishes that the concerned DR (a Commissioner ranking officer) nominated by the revenue received a copy of the ITAT order dated 30.03.2016. The Starting point of limitation therefore was 31.03.2016. Whether the non-obstante clause under Section 153 which prescribes a specific period of limitation to complete a search assessment for the block period? - Held that:- The general provision of two years, in the opinion of the Court, has been provided with one important objective i.e. to cater to a specific situation where upon search and seizure operation, if new material is found, already completed assessments are revisited. Had Parliament not prescribed such a specific period of limitation, possibly, the assessee’s concern would have successfully urged that search and seizure proceedings would be confined only to the concerned year in which the search operation took place. It was proposed to tide over such situation. The only provision that prescribed a period of limitation in respect of remands at the relevant time at least in this case is Section 153(2A). In that sense, that period of limitation prescribed for completion of remand (nine months) constituted a special provision, which applies to every class of remand regardless whether they originate from assessments/re- assessments/revisions or search and seizure assessments. In these circumstances, completion of the assessment proceedings for the block period by the impugned order dated 22.12.2017 was clearly beyond the period of limitation. As noticed earlier, the last date by which the remand order could have been worked out validly was 31.12.2016. The petitions have to succeed. The impugned order pursuant to the remand dated 22.12.2017 and all consequential orders and actions are hereby quashed.

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• 2018 (10) TMI 805
  Eligibility to claim deduction u/s 80IC - assessee to be held to be manufacturing on item which an delineated in the negative list contained in the Thirteenth Schedule of the Act - Held that:- Since the CIT(A) followed the order of the Tribunal in assessee’s own case for A.Y 2008-09 in allowing the claim of the assessee and since the Revenue could not point out that the facts in current year are not similar/identical to the facts in earlier years, we do not find any valid reason to interfere with the decision of the Ld.CIT(A) in allowing the claim for deduction u/s. 80IC. - Decided against revenue.

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• 2018 (10) TMI 804
  Addition u/s 68 - AO treating the agricultural income as non agricultural income and invoking the provisions of section 68 - Held that:- Referring to assessee's own case for the assessment year 2009-2010 findings of the Assessing Officer was never dispelled by the assessee by placing contra evidence. Admittedly, the assessee was never the owner of the agricultural properties from where it is claimed that he was in receipt of agricultural income of Rs. 12,36,000. The assessee did not produce any documentary evidence to prove that he was in receipt of any agricultural income on account of any agricultural operation carried out by him. Therefore, we are of the view that the Income-tax Authorities have correctly held that the assessee was not in receipt of Rs. 12,36,000 as agricultural income. Having held Rs. 12,36,000 as not agricultural income, the sum that is credited to the book of account has to be necessarily added as income from other sources u/s 68 of the I.T.Act. Therefore, we see no reason to interfere with the order of the CIT(A) and we confirm the same - decided against assessee.

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• 2018 (10) TMI 803
  Penalty u/s 271(1)(c) - defective notice - non specification of charge - Held that:- From the perusal of the notice u/s 274 r.w.s. 271(1)(c ) of the Act dated 5.3.2014 we observe that both the charges have been mentioned in the notice i.e. “the assessee have concealed the particulars of income or furnished inaccurate particulars of such income”. View taken by the coordinate bench in the case of Keti Sangam Infrastructure (I) Ltd and others V/s DCIT [2018 (6) TMI 1525 - ITAT INDORE] holding that where the specific charge has not been mentioned in the notice u/s 274 r.w.s. 271(1)(c) of the Act i.e. when one of the charge is not striked off then such notice did not satisfy the requirement of law, therefore the penalty proceedings becomes void ab initio. - Decided in favour of assessee.

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• 2018 (10) TMI 802
  Disallowance u/s 14A - AO considering the professional charges paid to consultants and auditors as Indirect Administrative charges for the purpose of making the disallowance - Held that:- Since the expenditure under question was not exclusively incurred to earn the exempt income. As submitted by Ld. AR, the proportion of exempt income in total income reflected in the Profit & Loss Account was 37% and therefore, the impugned disallowance would be restricted to 37% of Rs. 5,13,281/-, which comes to Rs. 1,89,914/-. The disallowance to that extent stand sustained by us. Adjustment of disallowance u/s 14A while arriving at Book Profits u/s 115JB - Held that:- We find that this issue stood squarely covered in assessee’s favor by the judgment of ACIT Vs. Vireet Investment (P.) Ltd.[2017 (6) TMI 1124 - ITAT DELHI] held that computation under clause (f) of explanation 1 to section 115 JB (2) of the Act is to be made without resorting to computation as contemplated u/s 14A of the Act r/w Rule 8D of the Rules. - Decided against revenue

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• 2018 (10) TMI 801
  Addition at 12.5% of the alleged bogus purchases - Held that:- The assessee was in possession of primary purchases documents. At the same time, the assessee could not produce even a single party to confirm the transactions and even failed to provide the addresses of the suppliers so as to enable further investigation by AO. The delivery of the material could not be substantiated despite the fact that the assessee was dealing in item like steel. All these factors cast a serious doubt on assessee’s claim. Therefore the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which first appellate authority has rightly done. As assessee was dealing in price sensitive item like Steel, we find the estimation of 12.5% to be on the higher side. We restrict the same to 8% of alleged bogus purchases of Rs. 25,61,087/- which comes to Rs. 2,04,887/-. Ground number-1 stand partly allowed. Addition of peak credit u/s 69C on the premise that material was purchased in cash from the open market whereas the accommodation purchase bills were procured from the alleged hawala dealers - Held that:- CIT(A) while confirming the stand of AO, estimated the additions @12.5% instead of peak credit keeping in view several judicial pronouncements and therefore, there was no new addition made by Ld. CIT(A) as is alleged by Ld. AR before us. Only the method of estimation has been modified by Ld. CIT(A) and nothing more. Nevertheless, the addition as made by both the lower authorities spring out of the fact that the assessee, as per the information of Sales Tax Authorities, was found to be indulging in procuring accommodation bills from certain parties. Therefore, we do not find any substance in the legal arguments as raised by Ld. AR before us. Ground numbers 2 to 5 stand dismissed.

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• 2018 (10) TMI 800
  Assessment u/s 153A - Addition on account of share application money and share premium u/s 68 - incriminating material as found during the course of search - Held that:- Case of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] held that though Section 153A does not say that addition should be strictly made on the basis of the evidence found in the course of the search, or other post search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be made without any reference or establishing any nexus with the seized material. Thus, as per this judgment, the existence of the seized material found during search is a must for making addition in those assessment years which have not abated. Therefore, in view of the above judgment above, it is our considered opinion that no addition could have been made u/s 68 of the Act in view of the fact that no incriminating material was found during the course of search to which this impugned addition could be related. - Decided in favour of assessee

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• 2018 (10) TMI 799
  Ad-hoc disallowance of employee cost, administrative expenses, depreciation and interest expenses - Held that:- A.O loosing sight of the fact that expenses would also have been incurred by the assessee in earning of royalty income and undertaking marketing and business development activities, therein most arbitrarily related the entire employee cost (Rs. 4,59,46,708/-); 50% of administrative expenses (Rs. 95,26,140/-); Interest cost (Rs. 24,00,419/-);and depreciation (Rs. 49,726/-) to earning of service income by the assessee. As the A.O had without any basis dislodged the claim of the assessee, wherein he had related specific expense to earning of the service income, thus, his view cannot be upheld. Further, we find that the CIT(A) also failed to appreciate that the A.O had whimsically allocated the expenses to earning of the service income by the assessee. The CIT(A) adopting the amount of Rs. 5,79,22,993/- as the expenditure allocable to earning of the service income, as determined by the A.O, had thus on the basis of such misconceived facts drawn adverse inferences in the hands of the assessee. We thus, are unable to persuade ourselves to subscribe to the observations of the lower authorities. Still further, we find that as observed by the CIT(A), disallowances of expenses involving identical facts was made by the A.O in the case of the assessee for A.Y 2009-10 and A.Y 2010-11, which were upheld by the CIT(A). - Decided in favour of assessee. Computing the tax liability of the assessee - not allowing credit for the tax deducted at source - application under Sec. 154 seeking rectification of the said mistake with the A.O, however, the same despite a specific direction by the CIT(A) to dispose of the same, is still pending - Held that:- CIT(A) had vide his order dated 26.05.2016 directed the A.O to dispose off the rectification application of the assessee by way of speaking order in a time bound manner. We are of the considered view, that as the failure on the part of the A.O to comply with the directions of the CIT(A) emerges from the impugned order, and has been assailed by the assessee before us, thus, in all fairness direct that the A.O while giving appellate effect to our order shall allow credit of the TDS, if any, as per law.

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• 2018 (10) TMI 798
  Addition made towards bogus purchases - addition based on the information of the Sales Tax Department in their official website and the information from the Investigation Wing - CIT-A estimated the profit element @ 25% - Held that:- In similar type of cases the Coordinate Benches have taken a view that the percentage addition should be made ranging from 2 to 12.5% depending upon the facts and circumstances of the case in order to bring to tax the savings which the assessee has made by the reason of purchase of goods from grey market when the sales/consumption is undisputed. In the present case the sales were not disputed and the method of accounting followed by the assessee is project completion, therefore, we are inclined to estimate the profit on the above purchases at 3%. Accordingly appeal of the assessee is partly allowed without deciding the issue technically and legally. Thus we are inclined to follow the order of the Tribunal in assessee’s group case and direct the Assessing Officer to restrict the disallowance of purchases @3%. - decided partly in favour of assessee.

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• 2018 (10) TMI 797
  Disallowance of pre-operative expenditure - busniss not set up - Held that:- We find nothing on record which controvert the findings of both the lower authorities. The pre-operative expenditure could not be allowed to the assessee since it has been noted that the business was not set up by the assessee during impugned AY. Therefore, we find nothing perverse in the findings of lower authorities.

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• 2018 (10) TMI 796
  Disallowance of provision for leave encashment - Held that:- There is no bifurcation of the closing balance in the leave wage account. Unless yearwise bifurcation is furnished by the assesseee , it is not possible to disallow the exact amount of provisions for leave wages relating to the assessment year under consideration. The Assessing Officer has to disallow the provisions of leave encashment relating to the assessment year under consideration which shall be reduced by payment made after 31/03/2008 but before filing the return of income. Hence, the issue in dispute is remitted back to the file of the Assessing Officer with a direction to the assessee to furnish the exact amount of provisions towards leave wages relating to the assessment year under consideration. Disallowance on account of interest charged on the advances given to sister concern for non-business purposes - Held that:- The main plea of the Ld. AR is that the amount was advanced to sister concerns in view of the business transactions between the assessee and the sister concerns and it cannot be considered that the assessee had advanced loans to the sister concerns free of interest. In our opinion, the assessee has to establish the commercial expediency to advance money to the sister concerns and the assessee has to furnish details of the business transactions between the assessee and the sister concerns. This exercise has not been done. With this observation, we remit this issue to the file of the Assessing Officer for fresh consideration in accordance with law after giving reasonable opportunity of hearing to the assessee. This ground of appeal of the assessee is allowed for statistical purposes. Disallowance on account of interest on borrowed capital for capital work in progress - main plea of the assessee is that the assessee is having interest free funds to make investment in capital work in progress and the assessee has not put to use any borrowed funds for making the investment in capital work in progress - Held that:- The assessee has not established the availability of interest free funds for making investment in capital work in progress. The assessee has to prove the availability of interest free funds on the day of investment in capital work in progress and the funds have to be available with the assessee at the time of making investment and not at the end of the year. Accordingly, we direct the assessee to establish the availability of interest free funds at the time of making investment in capital work in progress. Hence, with this direction, we remit this issue to the file of the Assessing Officer for fresh consideration. Disallowance u/s. 14A - Held that:- As in the case of CIT vs. Catholic Syrian Bank Ltd. & Others (2010 (10) TMI 1068 - KERALA HIGH COURT) has held that disallowance u/s. 14A is to be made despite the fact that the assessees have not maintained separate accounts for the expenditure incurred towards interest paid on funds borrowed for investment in such securities and shares as well as overheads and administrative expenses. However, we make it clear that Rule 8D(iii) is applicable though, the assessee used its own funds in investment which yielded exempted income. This is so, because there was common administrative expenses incurred by the assessee. We also make it clear that if there is no exempt income, then there cannot be any disallowance u/s. 14A r.w. Rule 8D as held by the Supreme Court in the case of Maxopp Investment Ltd. vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA]. This ground of appeal of the assessee is partly allowed for statistical purposes.

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• 2018 (10) TMI 795
  Rectification of mistake - Allowability of provision for warranty - Held that:- The averments made in the present Miscellaneous Petitions that the Tribunal had failed to consider the chart showing the actual utilization in terms of percentage of sale of previous year is incorrect. Based on information contained in the very same chart, the Tribunal had come to the conclusion that the provision made was not based on the historical data or previous experience, inasmuch as, the chart shows that the percentage of provision for warranty varied from 2.16 to 9.89% which clearly shows that provision made is not based on the historical data. We further note that the averments in the Misc. Petitions that the Tribunal had failed to adjudicate ground relating to restriction of provision for warranty to the extent of 2.14% of sales is also incorrect. Thus, the averments made in the present Miscellaneous Petitions are factually incorrect and the petitioner had only attempted to re-argue the matter on merits which is not permissible in the jurisdiction vested u/s 254 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. The provisions of section 254(2) cannot be exercised to re-argue the matter afresh on different grounds or reasoning. Even the Hon’ble jurisdictional High Court in the case of CIT vs. McDowell & Co. Ltd., [2004 (3) TMI 41 - KARNATAKA HIGH COURT] held that the power u/s 254(2) of the Income-tax Act,1961 is only to amend the order to rectify any mistake apparent from record and the original should not be recalled for re-hearing the matter. Since in the present petitions, the assessee-company could not point out any mistakes which are capable of being rectified, the miscellaneous petitions cannot be entertained. Thus, in the light of the above legal position, the Miscellaneous Petitions are rejected.

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• 2018 (10) TMI 794
  Eligibility to claim deduction u/s 54EC - Long term capital - assessee has inherited the property from her grandmother who died intestate on 10/12/1999 - Held that:- Some undisputed facts are that the assessee has inherited the property from her grandmother who died intestate on 10/12/1999. Nothing on record suggest that the property was first acquired by the legal heirs and thereafter transferred to the assessee. Even assuming that the property first devolved on the legal heirs and thereafter the assessee acquired the property from those legal heirs under a gift, even then in terms of Section 2(42A) Explanation 1(b) read with Section 49(1)(ii), the holding period of donor was includible while counting the assessee’s holding period. Therefore, both the situation i.e. gift as well as inheritance stand on same footing and are respectively covered by Section 49(1)(ii) & Section 49(1)(iii)(a). Viewed from any angle, the holding period of previous owner was includible in the assessee’s holding period. This being the case, we have no hesitation in holding that the nature of impugned gains was Long Term in nature and therefore, the indexation benefit as well as benefit of Section 54EC was available to the assessee. The facts on record reveal that the assessee has invested an amount of Rs. 37 Lacs in the eligible bonds as against sale consideration of Rs. 36.56 Lacs and therefore, the value of investment itself nullifies the entire sale consideration reflected by the assessee against the sale of property. - Decided in favour of assessee.

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• 2018 (10) TMI 793
  Penalty under section 271(1)(c) - assessee had claimed interest expenses in contravention of the provisions of section 43B in the Return of Income - nature of mistake and quantum of accumulated and current losses - Bonafide mistake - Held that:- The details about unpaid interest to the GIC were available from the material placed before the Assessing Officer by the assessee on his own. The assessee had accumulated brought forward losses of Rs. 3.36 crores and, in the current year itself, the assessee had incurred a loss of Rs. 2.25 crores which was claimed for a carry forward. The assessee had subsequently closed down the business and the matter was before Board for Industrial and Financial Reconstruction (BIFR). The assessee’s claim of having missed adding back the inadmissible interest deduction on account of a bonafide and inadvertent mistake cannot be rejected as improbable. It is more of a silly mistake than an attempt to evade tax or furnish inaccurate particulars. The explanation of the assessee is thus a plausible explanation. We may also add that while examining the explanation of the assessee, one has to see is whether the explanation is an explanation acceptable to a fact finding authority and that while “an assessee is not to prove the explanation to the hilt positively but, as a matter of fact, materials must be brought on record to show that what he says is reasonably valid. See COMMISSIONER OF INCOME-TAX, BIHAR VERSUS NATHULAL AGARWALA AND SONS [1985 (3) TMI 57 - PATNA HIGH COURT] - Decided in favour of assessee.

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• 2018 (10) TMI 792
  Delay in filing appeals - reasons for delay - period of limitation - bonafide Mistake - fee for late filing of TDS return u/s. 234E - condonation of delay - reason for the delay in filing these appeals before the CIT(A) that the officer handling the TDS issues was transferred from the concerned Branch and subsequently, noticed by the Head Office and the appeals were filed - Held that:- The reason as come out from the condonation petitions filed by the assessee, as stated earlier, is that there was transfer of the officer who was handling the issue. We cannot accept such proposition as it cannot be considered as good and sufficient reason to condone the delay. As submitted that the delay is to be condoned since the issue on merit covered in favour of the assessee. This submission ignores the fact that the object of the law of limitation is to bring certainty and finality to litigation. This is based on the Maxim “interest reipublicae sit finis litium i.e. for the general benefit of the community at large, because the object is every legal remedy must be alive for a legislatively fixed period of time. The object is to get on with life, if you have failed to file an appeal within the period provided by the Statute. It is for the general benefit of the entire community so as to ensure that stale and old matters are not agitated and the party who is aggrieved by an order can expeditiously mover higher forum to challenge the same, if he is aggrieved by it. The assessee should be well aware of the statutory provisions and the period of limitation and should pursue its remedies diligently. It cannot expect their appeals be entertained because they are after all the assessee, notwithstanding the fact that delay is not sufficiently explained. Hence, the delay is not condoned and the appeals are unadmitted.

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• 2018 (10) TMI 791
  TDS u/s 194C - disallowance of labour charges and earth work charges for non deduction of tds - addition u/s 40a(ia) - Held that:- It is not in dispute that the assessee is engaged in road contract works in the remote parts of various villages. Obviously, for this purpose the assessee had to engage labourers from the nearby villages in view of the fact that there was no proper path way for rural work site. What assessee has actually done in the instant case is engaging various labourers for work at its site and for which payments are made to one labourer (labour heads) with a clear direction to distribute the same to various labourers either on daily or weekly basis , as the case may be. The assessee in the instant case had not engaged any labour contractor or any sub-contractor for making payment of labour charges and earth work charges. In this scenario, the provisions of section 194C cannot be made applicable in the facts and circumstances of the case. Accordingly, the ld. CIT(A) had rightly deleted the disallowance u/s 40a(ia) - Decided in favour of assessee. Disallowance u/s 40A(3) - payments made in cash - proof of business expediency/ business compulsions - Held that:- There is no dispute that the banking facilities are not available in some parts of these villages. The assessee had stated that the raw materials supplier insisted for making payments in cash in view of the fact that their residence are situated in the remotest villages where there are no banking facilities. Hence the assessee had to necessarily make payments only in cash out of business expediency/ business compulsions so as to ensure smooth supply of raw materials from the said supplier for the purpose of its road contract works in order to avoid any delay in execution of the said work allotted to the assessee by the Government and local authorities. There is no dispute that the payments were made on Sundays, public holidays etc by the assessee. None of the aforesaid findings given by CIT(A) have been controverted by the revenue before us. Hence we do not find any infirmity in the order of the Ld. CIT(A) by granting relief to the assessee - Decided in favour of assessee. Ad hoc addition towards work-in-progress - Held that:- The entire books of accounts together with requisite details with supporting evidences were duly submitted by the assessee before the ld. AO which is not disputed by the ld. AO. We find that no defects were pointed out by the ld. AO in the said accounts or in the vouchers and evidences submitted by the assessee. Without rejecting the books of accounts, the ld. AO cannot resort to make any addition on an estimated basis. We find that the assessee has not been showing opening stock of work-in-progress and closing stock of work-in-progress in its books of accounts for the past many years and this system of accounting has been accepted in the past by the revenue. In any case, the addition was made only on an estimation which cannot survive - Decided in favour of assessee.

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• 2018 (10) TMI 790
  Monetary limits for filing appeal - low tax effect for filing appeal - maintainability of appeal - Held that:- It is a settled law that the Circulars issued by CBDT are binding on the Revenue. This position was confirmed by the Apex Court in the case of Commissioner of Customs vs Indian Oil Corporation Ltd. [2004 (2) TMI 66 - SUPREME COURT OF INDIA] wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. The appeal under consideration has certainly been filed contrary to the Circular issued by the CBDT Circular No.3 dated 11.07.2018. The appeal filed by the Department, against the impugned order of the Ld. CIT(A), is contrary to the policy decision of the Department and as such the appeal filed by the Department is dismissed in limine.

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• 2018 (10) TMI 789
  Disallowance u/s 14A - Held that:- Expenses of Rs. 6, 000/- towards audit fee and expenditure by way of Professional Fee of Rs. 2100/- claimed as deduction u/s 37(1) which was claimed as deduction from income from commission and brokerage. We fail to understand that when only the assessee has effectively claimed deduction of expenses to the tune of Rs. 8, 100/- from its income as detailed above, how disallowance u/s 14A r.w.r. 8D(2)(iii) can be worked out to be Rs. 1, 50, 230/- . Keeping in view smallness of the expenses claimed vis-a-vis scale of operations of the assessee, we are accepting the claim of the assessee for deduction of aforesaid expenses as business expenses to the tune of Rs. 8, 100/- from income from commission and brokerage and direct that under these factual circumstances of the case based on material on record, no disallowance u/s 14A read with Rule 8D(2)(iii) of the 1962 Rules is warranted and we order for deletion of the disallowance of Rs. 1, 50, 230/- made by the AO u/s 14A read with Rule 8D(2)(iii) of the 1962 Rules which was later confirmed by learned CIT(A). Computation of income - assessee has adjusted interest on loan taken from LIC towards interest income received on capital with the partnership firm and net loss is shown under the head ‘income from partnership firms’- admission of additional ground - Held that:- The assessee did not raise this ground specifically in an appeal filed before the learned CIT(A) but raised this issue in written pleadings/submissions dated 06-06-2016 (placed in file) filed before learned CIT(A). The assessment order framed by the AO although dedicated para number 5 discussing this issue but separate additions were not made in the assessment order in computation of income but rather interest income of Rs. 59, 60, 000/- was reduced to NIL after allowing adjustment of Rs. 59, 60, 000/- towards interest expenditure as against claim of deduction of Rs. 62, 46, 604/- made by the assessee. Thereafter again a disallowance is separately made on account of interest payment made on borrowings which were purported to be utilised for granting interest free loans and advances to relatives and sister concerns. The manner in which computation of income is drawn by the AO in pursuance to assessment framed is definitely not free from state of confusion. This could possibly be the reason for the assessee not raising the specific grounds of appeal before learned CIT(A) in first appeal. The assessee is also contending the same before learned CIT(A) in its rectification application dated 12-09-2016 that the manner in which assessment is framed reflects confused state of mind of the AO. The assessee in our considered view is entitled to benefit of doubt which was created in the manner the computation of income was drawn by the AO in consequence of assessment framed. We direct admission of the grounds of appeal raised by the assessee with respect to disallowance of interest expenditure on LIC loans raised by it. Addition u/s 36(1)(iii) - Diversion of funds by way of loans and advances (interest free) to his relative and sister concerns - Held that:- The assessee has its own interest free capital of Rs. 11.40 crores and a claim is made that the assessee also has interest free borrowed funds to the tune of Rs. 1.21 crores. The claim is not controverted by Revenue even before the tribunal. There is no nexus of diversion of interest bearing borrowed funds for advancing interest free loans and advances to sister concerns and relatives are brought on record by Revenue. We are of the considered view that the presumption will apply that the assessee utilised its own interest free funds for the purposes of advancing interest free loans and advances to sister concerns and relatives and the decision of Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT)and HDFC Bank Limited v. DCIT [2016 (3) TMI 755 - BOMBAY HIGH COURT] - Addition to be deleted - Decided in favour of assessee.

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• 2018 (10) TMI 788
  Computation of Long Term Capital gains - benefit of indexation - selection of date - Held that:- Indexation benefit against the cost of acquisition shall be available to the assessee on the basis of index of the year in which the payments were actually made by the assessee. The payment made up-to the date of agreement i.e. 18/10/2007 shall be indexed by applying the index for Financial Year 2007-08. Accordingly, subsequent payments made in different financial years shall be indexed by applying the respective indexes of those years. Ground Number-1 stand dismissed. As a logical consequence, the directions of Ld. CIT(A) in not allowing the indexation benefits to payments of Rs. 18.32 Lacs & Rs. 13.44 Lacs in FY 2011-12 could not be sustained since the payments made within a period of 36 months before the date of transfer of asset could not alter the nature of gains earned by the assessee and the same remain Long Term Capital Gain in nature only. Ground Number-2 stand allowed. Non-adjudication of VAT paid - Held that:- Supporting documents, in this regard, have been placed on record. We find that this issue has not been considered even by AO. Therefore, the matter stand remitted back to the file of AO to consider this claim with a direction to the assessee to substantiate the same. This ground stand allowed for statistical purposes. It is also noted that the figures of stamp duty & Registration has wrongly been picked by AO as 18,32,137/- as against correct figures of Rs. 18,49,700/-.

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• 2018 (10) TMI 787
  Non fulfillment of conditions for grant of registration u/s 12AA and exemption u/s 80G - restriction of appointment of NRI as trustee - trustees are the non-resident and therefore, under the provisions of ‘Indian Trust Act, 1882’ they cannot be held to be a valid trustee; and when the trust and its structure itself is not proper, therefore, the condition precedent for grant of registration is not fulfilled - Charitable activities - Held that:- Section 10 of the Indian Trust Act provides for who can be the trustees and here is no specific bar under Section 10 of the Trust Act for an appointment of NRI as trustee of an Indian Trust. Section 73 deals with the appointment of a new trustee on death, or is absent from India for the period of more than 6 months or domiciled outside India, etc. This section merely provides that a new trustee may be unfit to be appointed in case the said person is domiciled abroad for a period of six months continuously; or leaves India for the purpose of residing abroad, etc. In such a case, it is considered that there is a personal incapacity to act in a Trust by such person.Section 73 per se cannot invalidate a Trust, but rather provides bar for appointment of non-resident as a trustee. Thus provisions of Section 60 and 73 of the ‘Indian Trust Act, 1882’ as relied upon by the ld. CIT(E) to hold that assessee Trust is not a valid Trust, and therefore, cannot be granted registration u/s.12AA cannot be held to be a valid reason. As pointed out by the learned counsel before the ld. CIT (E) in the application filed in ‘Form 10A’, assessee-applicant Trust has already given the list of the trustees and one of the trustee was citizen of India and domiciled in India, and therefore, it cannot be held that simply because other four trustees were non-resident and the assessee trust is not a valid trust. We accordingly, hold that assessee is a valid trust under the Indian Trust Act, 1882. Coming to the ‘objects’ as given in the ‘Trust Deed’, prima facie, it appears that all the objects are ostensibly for the charitable purposes. CIT(E) has not examined the objects and the genuineness of the activities of the assessee trust which is required to be examined while considering the registration u/s 12AA, and therefore, in all fitness of mater, we deem it proper that this matter of registration should be restored back to the file of the ld. CIT(E) who shall examine the ‘objects’ of the Trust as well as genuineness of its activities. Consequently, the application for exemption u/s.80G should also be examined in that light. - Appeal of the assessee is treated as allowed for statistical purpose.

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• 2018 (10) TMI 786
  Disallowance u/s 14A - working out of deduction - Held that:- We find that during the year under consideration the gross interest expense was Rs. 97,24,941/- and gross interest receipt was Rs. 65,00,064/-. Thereby the net interest expenditure was Rs. 32,24,877/-. This net expenditure in our considered view was relatable to earning dividend, derived from investments acquired out of borrowed funds. Accordingly we hold that the interest dis allowable under Section 14A should be Rs. 32,34,877/- instead of Rs. 89,46,546/-. As regards amount disallowance under Rule 8D(2)(iii), we agree with assessee's contention that in working out the common business establishment expenses the AO should have excluded the expenditure debited by way of interest bad debts written off & provision for NPA. Excluding these three items, the common business expenses which could be considered for disallowance under Rule 8D(2)(iii) amounted only to Rs. 16,86,399/-. This expenditure was much below Rs. 61,78,722/- worked out by the AO by applying the formula under Rule 8D(2)(iii). We therefore find that mechanical application of Rule 8D(2)(iii) in the present case leads to absurd results. The expenses inter alia included items such audit fees, ROC expenses etc. which were required to be incurred to maintain corporate identity of the appellant. Such expenses were required to be incurred irrespective whether tax free or taxable income was earned. It would be inappropriate to conclude that the entire expenditure of Rs. 16,86,399/- was relatable only to earning tax free income. To hold so would mean that the other taxable income was earned by the appellant without incurring even a single rupee expenditure and such conclusion would be anomalous. We find merit in the assessee's submissions that the disallowance out of common establishment expenses should be made in proportion of dividend income to gross receipts credited to P&L A/c. This methodology was also upheld by the coordinate Bench of this Tribunal in the case of Dy.CIT Vs S.G. Investment & Industries Ltd [2003 (5) TMI 198 - ITAT CALCUTTA-C] as affirmed by in the case of ISG Traders Ltd Vs CIT [2011 (9) TMI 58 - CALCUTTA HIGH COURT]. Applying the said pro-rata calculation, we find that the amount disallowable out of common administrative expenses works out to Rs. 8,74,170/-. - Decided partly in favour of assessee.

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• 2018 (10) TMI 785
  TDS liability on banks - Validity of assessment - period of limitation - whether CIT(A) has erred in holding that the assessment order passed by the Ld.AO is after the time lapse of four years when the order was issued on 28.03.2016 which is well within the time limit of six years from the financial year? - Held that:- The assessee is a nationalized bank who has preferred appeal against the demand notice issued against their four branches viz. Mint Street Branch, – Purasawakkam Branch, Nungambakkam Branch and Mahalingapuram Branch. In the case of all the above mentioned branches of the assessee bank, the Ld.AO has levied interest invoking the provisions of Section 201 & 201(1A) of the Act. On appeal, the Ld.CIT(A) relying on the decision of the Hon’ble Gujarat High Court in the case M.R. Shah J, S.H. Vora J 201, 201(3)(2016 (2) TMI 414 - GUJARAT HIGH COURT) held that since the appellant had filed the returns in time, the demand which has been raised beyond 4 years is invalid. Since the Ld.CIT(A) has only followed the ratio laid down by the Hon’ble Gujarat High Court, we do not find it necessary to interfere in his order. - decided against revenue.

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• 2018 (10) TMI 784
  Addition on account of unsecured loans - addition u/s 68 - Held that:- The transaction appearing in the bank passbook appears to be an accommodation entry and no evidence was filed by the assessee with regard to the credit worthiness of the person. In the case of P.Venkateswara Rao, though the assessee claimed to have earning agricultural income of Rs. 5 lakhs, no evidence was filed by the assessee for earning such huge sum. From the above details, the assessee failed to furnish any evidence with regard to the earning of such huge sums with tangible evidence such as household cards, bank pass book etc.. Since the Ld.AR did not controvert the findings given by the Ld.CIT(A) with reliable evidence, we do not find any reason to interfere with the order of the Ld.CIT(A) and we uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee.

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• 2018 (10) TMI 783
  Deduction u/s 80IA(4)(iv) - raising of additional claim - additional ground seeking claim of deduction of entire profit generated from windmill power project without reducing notional brought forward losses and depreciation - Held that:- It is well settled that the appellate authority is not precluded from adjudicating the additional claims of an assessee regardless of whether the return was revised or not. The Revenue is under duty to assess the true profits of an assessee and cannot take advantage of the ignorance of the assessee on the provisions of the Act. Thus, the action of the CIT(A) to this extent requires to be set aside and additional claim of the assessee amounting to Rs. 7,35,01,934/- requires to be entertained. We notice that the quantification aspects of additional claim flowing from notional set off / carry forward of losses of earlier years from eligible profits has not been examined by the authorities below. Accordingly, we set aside the issue to the file of the AO for the limited purposes of determination of correct quantum of deduction to be computed without setting off any notional losses of the windmill power project pertaining to the earlier assessment years as discussed. AO shall allow enhanced deduction under s.80IA(4) of the Act as eligible to assessee in accordance with law regardless of claim made by the assessee in this regard in its return of income. Ground No.1 of the assessee’s appeal is allowed for statistical purposes. Addition on account of differences in the closing balances of one of its party namely Associated Road Carriers Ltd. - Held that:- In the course of hearing, the learned AR for the assessee failed to support the aforesaid ground. A perusal of the order of the CIT(A) gives the impression that the CIT(A) has approached the issue correctly and in right perspective. Therefore, without reiterating the observations of the CIT(A) , we find ourselves in agreement therewith. - Decided against assessee.

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• 2018 (10) TMI 782
  Penalty u/s 271(c) - assessment of long term capital gain - Held that:- The assessee showed the long term capital gain in the next year whereas the sale has been completed on 31.08.2010. The assessee voluntarily furnished the detail in his return of income for the A.Y. 2012-13 in which the mater of controversy has been adjudicated above. All the facts show that the assessee was not having any intention to conceal the said income to avoid the tax, therefore, in view of the law settled in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT [2012 (9) TMI 775 - SUPREME COURT] we are of the view that the penalty is not liable to be sustainable in the eyes of law. Accordingly, we set aside the finding of the CIT(A) on this issue and delete the penalty. Accordingly, these issues are being decided in favour of the assessee against the revenue.

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• 2018 (10) TMI 781
  Addition u/s 40A(3) - expenses which has been incurred in cash - Held that:- The addition has been made as unexplained expenditure/payment outside books of account for which addition has been made by the Assessing Officer. There is no such disallowance made u/s 40A (3) made by AO which has been claimed by the assessee as an expenditure out of the income disclosed by him. The very basis on which the ground has been raised is erroneous as application of Section 40A (3) was never a dispute. As clearly brought on record by the assessee that not only during the course of assessment proceedings but also during the course of appellate proceedings, the entries in the said loose papers were, first of all shown to be belonging to M/s. Gahoi Builwell Ltd., in whose case during scrutiny proceedings, exactly the same documents have been examined and verified and no addition has been made in the case of the said company; and secondly, the contents noted in the loose paper were reflected in the books of K4U. Once these facts are undisputed, ostensibly these additions could not have been made in the hands of the assessee at all. CIT (A) was thus correct on facts in directing the Assessing Officer to verify these facts and delete the additions. - Decided against revenue.

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• Customs

• 2018 (10) TMI 771
  Leave of an order passed by this Court on 26th September, 2018 - holding of public auction within a week from the date of the order upon notice to all concerned parties - it is pleaded that plaint to be restricted to 256 containers - Held that:- The public auction should also have been restricted to that number. This has admittedly not been done, whatever the claims of the Customs against the defendant no. 1 may be. Counsel for the parties are in agreement that the notice of the auction will be served on the defendant no. 1 and the other concerned defendants by e-mail, particulars of which shall be provided to the Customs Authorities here and now. This matter be treated as day’s list.

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• 2018 (10) TMI 770
  Conversion of Shipping Bills - conversion of free shipping bills to drawback shipping bills - duty drawback - Held that:- There is no controversy on the factum of export. That there can be a substitution of goods does not appear to be probable considering that the shipment has been made in liquid bulk carrier and was not concealed from the sight of the officers of customs or the master of the vessel. The circular of 2004, and the subsequent circular of 2010, clarifies that there is no requirement of conversion of shipping bills through the amendment process envisaged under section 149 of Customs Act, 1962 for allowing drawback. The circumstances of lack of awareness of the existence of a drawback rate owing to the liberalization in the export of molasses after January 2007 has not been taken into account. It would also appear that the Commissioner has not established the appellant to have indulged in misrepresentation in the shipment. The decision of Commissioner of Customs declining the post-export inclusion of particulars pertinent for sanction of drawback enumerated in rule 12 of the Customs, Central Excise Duties and Service Tax Rules, 1995 is set aside - appeal disposed off.

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• 2018 (10) TMI 769
  Valuation of imported goods - telephone and other communication equipments - goods imported against various bills of entry, were allegedly found with stickers indicating a ‘retail selling price’ higher than that declared at the time of import - demand of differential duty - confiscation - redemption fine - penalty - Held that:- In the absence of any machinery provisions to alter the retail selling price declared by the importer, and the lack of provision for recovery in the event of any subsequent alteration of retail selling price, no proceedings can be initiated against the appellant in the circumstances narrated in the show cause notice as well as the orders of the lower authorities. Recovery of duties under section 28 of Customs Act, 1962 fails - Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 768
  Classification of imported goods - dredgers - benefit of N/N. 21/2002-Cus (Sr No 353) - Held that:- The duty liability has to be determined on the date and time of entry of goods for importation into the country. Undoubtedly the date of entry inwards of the vessel in this case is 25.11.2006 as is evident from the documentary evidences - N/N. 21/2002-Cus has been amended by the N/N. 20/2007-Cus dated 01.03.2007, by incorporating Sl No 353A in the said Notification, which prescribes nil rate of duty. The order of Commissioner holding that exemption under Notification 21/2002-Cus Sl No 353, is admissible in the present case is not sustainable and needs to be set aside for redetermination of the quantum of duty payable in terms of the said notification as it existed on the date of importation of the said vessel. Matter remanded to the adjudicating authority for redetermination of all issues including confiscation and penalty - appeal allowed by way of remand.

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• 2018 (10) TMI 767
  Penalty u/s 112(a) and 114AA of CA - import of High end cars / Sports Utility Vehicles - under-valuation and mis-declaration - rejection of declared value - Shri Qureshi, the importer herein, in his statement recorded under Section 108 of the Customs Act, 1962 had admitted that the actual cost of vehicle was Rs. 27 lakhs - Held that:- The statement of the appellant was recorded by the officers of the Customs on 24.12.2008 under Section 108 of the Act, wherein he had inter alia, stated that Shri Qureshi, importer of the vehicle agreed to pay Rs. 4 lakhs for customs clearance of the imported vehicle and that the value of the imported goods had been mis-declared - further, the truth and the averments made therein cannot be altered at the appellate stage - penalty u/s 112(a) of the Act upheld. Penalty under Section 114AA of the Act - Held that:- The appellant did not make, sign or used any declaration / statement in respect of importation of the vehicle. Thus, penal provisions contained in Section 114AA of the Act cannot attracted for imposition of penalty on the appellant. Appeal allowed in part.

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• 2018 (10) TMI 766
  Maintainability of appeals against the decision of Asst. Commissioner dated 3rd May, 2018 - Appealable order or not? - Section 129A of Customs Act - Held that:- In an identical set of facts, this Tribunal in the case of Delta Overseas [2015 (7) TMI 1091 - CESTAT NEW DELHI] has held that the letter of Assistant Commissioner (Adj.) cannot be considered as an appealable order for filing the appeal before the Tribunal. As the appeal not maintainable before Tribunal, the appeals filed by the appellants are also dismissed - appeal dismissed - decided against appellant.

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• Corporate Laws

• 2018 (10) TMI 774
  Scheme of demerger - plaintiff/petitioner's sufficient prima facie case to go for trial to entitle the petitioner to the interlocutory reliefs as sought for - Held that:- In the event the plaintiff as a shareholder of the defendant no. 11 company, was to participate in the voting for demerger, which is under challenge, the plaintiff would wield little or no power to exercise an option worth the name, in view of the shareholding of the plaintiff in defendant no. 11 company being only 0.06%. As such, the effect of the interlocutory orders prayed for, if granted, would confer upon the plaintiff a benefit with the blessings of the Court, which the plaintiff could not otherwise get in accordance with law. Consequently, in order to be elevated to the claim of derivative action, a mis-management and/or oppression of a higher plane ought to have been exhibited by the plaintiff. In the present case, the prayers sought in the interlocutory application are in apprehension of a particular way in which the shareholders of defendant no. 1 company might vote, which would, in turn, allegedly affect the interest of the defendant no. 1 company. Such cause of action, even if existent, would in the opinion of the Court be far too remote to entitle the plaintiff to get an injunction as sought for, more so in the nature of a derivative claim. Moreover, the present attempt borders on forum-shopping, since having failed to obtain a relief in a previous proceeding which went up to the Supreme Court where it was held that the plaintiff did not have qualifying shareholding in the defendant no. 11 company and other companies, the present attempt of the plaintiff at obtaining a related relief is improper, to say the least. Although the Supreme Court added a rider, while dismissing the appeals of the plaintiff previously, that the dismissal of those appeals would not stand in way of the present plaintiff (appellant therein) taking steps in appropriate proceeding in accordance with law, the present interlocutory application cannot be termed exactly as an ‘appropriate proceeding in accordance with law’, sufficient to entitle the plaintiff to the reliefs prayed for. Moreover, there is substance in the contention of the respondent no. 1 that the scope of the suit itself, from which the interlocutory application arises, is entirely different from the reliefs claimed in the said application. The primary reliefs claimed in the plaint relate to a cause of action previous to the notice and consequent meeting for demerger, impugned in the interlocutory application. In such view of the matter, this Court finds that the plaintiff/petitioner has not made out a sufficient prima facie case to go for trial to entitle the petitioner to the interlocutory reliefs as sought for. This apart, the petitioner has not come with clean hands in the present application, since what could not be achieved directly by participating in the voting to be held in the impugned proposed meeting, the petitioner has sought to get by way of an order of the Court. Accordingly, GA 2966 of 2018 is dismissed on contest without any order as to costs. It is made clear that, since the defendants/respondents were not invited to use any affidavit-in-opposition, the allegations made in the interlocutory application are deemed to be denied by the respondents.

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• 2018 (10) TMI 773
  Winding up petition - dishonour of cheques - Held that:- So far as Rs. 5,00,000/- against the dishonour of cheque is concerned, it was incumbent upon the said company to pay the same to the petitioner. Even though held that the alleged repayment by encashment of blank cheques requires to go to trial, we are inclined to grant the petitioner the benefit of the amount of Rs. 5,00,000/- against dishonour of cheques. If the company succeeds in proving that the blank cheques which they made over to the petitioner were filled in as “self” cheques and encashed, the said company will be at liberty to realise such sum from the petitioner in the suit. The argument as to the application of Section 269 T and 271 E of the Income Tax Act, 1961 is a matter of consideration in the suit wherein the balance claim of the petitioner aggregating to Rs. 20,00,000/- and the counter claim, if any, of the said company is relegated. The said company has no defence far less bona fide defence in respect of the petitioner’s claim for Rs. 12,00,000, that is, Rs. 5,00,000 for the dishonoured cheques and Rs. 7,00,000 being the balance which admittedly remains unpaid. The winding up petition is, therefore, admitted for the sum of Rs. 12,00,000/-. On the sum of Rs. 5,00,000/-, the petitioner is entitled to interest at the rate of eighteen per cent as per the provisions Section 80 of the Negotiable Instrument Act, 1882 as applicable for the dishonour of cheque being a negotiable instrument. The interest will be payable on the said sum of Rs. 5,00,000/- from the date of dishonour of the cheque, that is, 1st March, 2013. So far as Rs. 7,00,000/- is concerned, the petitioner is entitled to interest at the rate of ten per cent from the date of the winding up notice, that is, 11th January, 2014. Both the interest will be payable from the respective dates as above until realization. So far as the balance 20,00,000 is concerned the petitioner’s claim is relegated to suit. It will be open to the petitioner to file a suit in respect of the said sum and in the event such suit is filed within 25th November, 2018, the petitioner will have the benefit of the period from 5th May, 2014 (the date on which the winding up petition was presented) till the date of the judgment with regard to the limitation of its claim. The said company will also get such benefit as to limitation in the event they institute a suit or counter claim for Rs. 5,00,000/- on account of the amount covered under the dishonoured cheques. The company, if pays the said sum of Rs. 12,00,000/- with accrued interest by four monthly instalments starting from November15, 2018, the first three of which will be of Rs. 3,00,000 each and the fourth and the final instalment for the balance sum, the winding up petition shall remain permanently stayed. The payment are to be made by 15th of each successive month starting from 15th November, 2018.

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• 2018 (10) TMI 772
  Decree for recovery of suit - Recovery from the defendant together with interest @ 22% p.a. for the goods sold and delivered to the defendant - Plaintiff entitled to the suit claim - Whether the claim of the plaintiff for the materials sold and delivered are true and valid? - Held that:- From a perusal of Ex.P.4 and Ex.P.5, it could be seen that the defendant has specifically admitted his liability. Even though the defendant in his written statement stated that he has paid the entire outstanding amount to the plaintiff, in his cross examination, he has admitted that he has not produced any materials much less the statement of account to substantiate his contention. Even in his cross examination, he categorically admitted that he has not produced the invoices available in his office for which he alleged to have already made payment to the plaintiff. Considering Ex.P.3 Invoice (series) and the categoric statement made by the defendant in his cross examination admitting his liability under Ex.P.4 and P.5 and in the absence of any material to substantiate his contention regarding payment of outstanding amount, this court is of the considered view that the plaintiff has established its claim. Hence, the plaintiff is entitled for recovery of the suit amount together with interest. These issues are answered accordingly in favour of the plaintiff and against the defendant. Whether there was any payment of Rs. 5,00,000/- on 22.07.2009 as alleged by the defendant? - Held that:- Even though the defendant contended that the plaintiff had received a sum of Rs. 5,00,000/- by way of demand draft dated 22.07.2009 as final settlement, there is no material to substantiate his contention. However, from a perusal of Ex.P.2 statement of account coupled with Ex.P.3-Invoice (series), it could be seen that the plaintiff had adjusted the said sum of Rs. 5,00,000/- paid by the defendant towards outstanding dues on 23.07.2009 itself and still there was an outstanding of Rs. 19,65354.57 paise as on that date.The defendant did not produce any other materials to substantiate his claim that he had settled the entire outstanding dues. Thus, this is issue is also answered against the defendant and in favour of the plaintiff. Other relief the plaintiff is entitled - whether plaintiff is entitled to charge interest at the rate specified in the invoices on the overdue payments? - Held that:- Contention of the defendant is liable to be rejected for the simple reason that the private complaint filed under Section 200 of Cr.P.C. alleging offence under Section 138 of The Negotiable Instruments Act was relating to dishonor of cheque issued by the defendant for Rs. 9,71,400/- as against the actual outstanding of Rs. 19,65,354/-. Therefore, the plaintiff is entitled to claim interest on overdue payments. However, this court is of the view that the rate of interest claimed by the plaintiff appear to be exorbitant and considering the commercial relationship between the parties and the rate of interest prevailed during the relevant point of time, this court is inclined to order for interest @ 18% p.a. from the date of plaint till date of decree and thereafter 12% p.a. till date of realization. This court holds that the plaintiff is entitled for decree for recovery of suit amount against the defendant with interest as indicated above. This is answered accordingly and the plaintiff is not entitled for any other relief except the relief granted hereinabove.

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• Insolvency & Bankruptcy

• 2018 (10) TMI 777
  Applicability of Limitation Act, 1963 to applications made u/s 7 and/or Section 9 of the IBC Code on and from its commencement on 01.12.2016 till 06.06.2018 - scope of Section 238A of the Insolvency and Bankruptcy Code, 2016 as inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 with effect from 06.06.2018 - applications seeking to resurrect time-barred claims - dispute or default - Held that:- Given the fact that the procedure that would apply to the NCLT would be the procedure contained inter alia in the Limitation Act, it is clear that the NCLT would have to decide applications made to it under the Code in the same manner as it exercises its other jurisdiction under the Companies Act. This being the position in law, it is clear that when various provisions of the Companies Act were amended by the Eleventh Schedule to the Code, it was unnecessary to apply and adapt Section 433 of the Companies Act to the Code, as was done to various other Sections of the Companies Act. The amendment of Section 238A would not serve its object unless it is construed as being retrospective, as otherwise, applications seeking to resurrect time-barred claims would have to be allowed, not being governed by the law of limitation. As refer to a recent decision of this Court in SBI v. V. Ramakrishnan, (2018 (8) TMI 837 - SUPREME COURT OF INDIA) where this Court, after referring to the selfsame Insolvency Law Committee Report, held that the amendment made to Section 14 of the Code, in which the moratorium prescribed by Section 14 was held not to apply to guarantors, was held to be clarificatory, and therefore, retrospective in nature, the object being that an overbroad interpretation of Section 14 ought to be set at rest by clarifying that this was never the intention of Section 14 from the very inception. It will be seen from a reading of Section 8(2)(a) that the corporate debtor shall, within a period of 10 days of the receipt of the demand notice, bring to the notice of the operational creditor the existence of a dispute . As seen that dispute as defined in Section 5(6) includes a suit or arbitration proceeding relating to certain matters. Again, under Section 8(2)(a), the corporate debtor may, in the alternative, disclose the pendency of a suit or arbitration proceedings filed before the receipt of the demand notice. It is clear therefore, that at least in the case of an operational creditor, default must be non-payment of amounts that have become due and payable in law. The dispute or pendency of a suit or arbitration proceedings would necessarily bring in the Limitation Act, for if a suit or arbitration proceeding is time-barred, it would be liable to be dismissed. This again is an important pointer to the fact that when the expression due and due and payable occur in Sections 3(11) and 3(12) of the Code, they refer to a default which is non-payment of a debt that is due in law, i.e., that such debt is not barred by the law of limitation. It is well settled that where the same word occurs in a similar context, the draftsman of the statute intends that the word bears the same meaning throughout the statute (see Bhogilal Chunilal Pandya v. State of Bombay -1958 (11) TMI 31 - SUPREME COURT). It is thus clear that the expression default bears the same meaning in Sections 7 and 8 of the Code, making it clear that the corporate insolvency resolution process against a corporate debtor can only be initiated either by a financial or operational creditor in relation to debts which have not become time-barred We have held that at least insofar as the Code is concerned, the intention of the legislature, from the very beginning, was to apply the Limitation Act to the NCLT and the NCLAT while deciding applications filed under Sections 7 and 9 of the Code and appeals therefrom. Section 433 of the Companies Act, which applies to the Tribunal and the Appellate Tribunal, expressly applies the Limitation Act to the Appellate Tribunal, the NCLAT, as well. Also, the argument that the NCLAT is an appellate tribunal which is common to three statutes, under one of which, viz., the Competition Act, no period of limitation has been prescribed, would not lead to any anomalous situation. Merely because appeals under different statutes are sent to one appellate tribunal would make no difference to the position in law. Undoubtedly, if three separate appellate tribunals had been constituted under the three enactments in question, this argument would have no legs to stand on. Merely because, from the point of view of convenience, appeals are filed before one appellate forum would not mean that any anomalous situation would arise as each appeal would be decided keeping in mind the provisions of the particular Act in question. Therefore, this argument also must be rejected. Both, Section 433 of the Companies Act as well as Section 238A of the Code, apply the provisions of the Limitation Act as far as may be . Obviously, therefore, where periods of limitation have been laid down in the Code, these periods will apply notwithstanding anything to the contrary contained in the Limitation Act. From this, it does not follow that the baby must be thrown out with the bathwater. This argument, therefore, must also be rejected. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.

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• 2018 (10) TMI 776
  Corporate insolvency process - no demand notice given to the corporate debtor - Appellant enclosing terms of settlement which shows that the amount payable to the Respondent has been paid by draft dated 27th August, 2018 - Held that:- The impugned order passed by the Adjudicating Authority without taking into consideration the evidence that the demand notice under Section 8(1) was never served on the Corporate Debtor, we set aside the impugned order dated 14th June, 2018. The case is not remitted parties have settled the claim. In effect, order(s) passed by the Adjudicating Authority appointing ‘Resolution Professional’, declaring moratorium, freezing of account, and all other order(s) passed pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the I&B Code, 2016 is dismissed. The ‘Corporate Debtor’ is released from the rigours of law and is allowed to function independently through its Board of Directors from immediate effect.

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• 2018 (10) TMI 775
  Liquidation of corporate debtor - Application filed u/s. 33 of the Insolvency and Bankruptcy Code, 2016 praying for liquidation of the corporate debtor, Bajrangbali Alloys Private Limited - non-receipt of any Resolution Plan to takeover the stressed assets of the corporate debtor - Held that:- On a careful screening of the Progress Reports it is understood that the corporate debtor in the case in hand was non-operational even on the date of filing of this application by the financial creditor and is a closed entity. It has completely closed down its business with no workmen or employees. It is also understood that the Resolution Professional was unable to trace out the books of account and thereby constrained to prepare the Information Memorandum based on information sourced from public domain. However, upon invitation of Resolution Plan no resolution applicant showed any interest to participate in the CIRP and thereby the CoC after due deliberation and discussions decided not to extend the period of CIR P beyond 180 days which has been expired on 13/08/2018. Adjudicating Authority has no other alternative than to pass an order of liquidation requiring the corporate debtor to be liquidated in the manner as laid down in Chapter III of Part II read with Section 33(1) of the Insolvency and Bankruptcy Code, 2016. The Ld. RP was asked to submits his willingness to continue as the Liquidator and since he expressed his consent the RP is to be appointed as the liquidator. In the result the application is allowed by ordering liquidation of the corporate debtor, namely, Bajrangbali Alloys Private Limited in the manner laid down in the Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016,

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• Service Tax

• 2018 (10) TMI 765
  CENVAT Credit - input services - Professional Charges - Management & Business Consultancy Services - Rent-a-Cab Services - denial of credit on the ground that these are not input services. Professional Charges - Held that:- The appellants have availed such services which are necessary for their output services. The credit in respect of Professional Charges to the tune of Rs. 15,450/- is, therefore, allowed. Rent-a-Cab Services - Held that:- The appellants have not furnished any evidence to show that the motor vehicles used for such services are capital goods for the service provider. As per the exclusion clause in the definition of “input services”, the credit availed for Rent-a-Cab Service is not eligible - demand upheld. Local sales - The appellants originally availed credit to the tune of Rs. 2,34,918/- in respect of local sales and it is argued by learned consultant that they have reversed the credit coming to know that such credit is not eligible - Held that:- Even though, the appellants contend to have reversed such credit, this is not clearly brought out from the records - the said issue requires verification by the adjudicating authority - matter on remand. Appeal allowed in part and part matter on remand.

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• 2018 (10) TMI 764
  Refund of CENVAT Credit - section 11B of the Central Excise Act, 1944 - rejected for the reason that they have taken CENVAT credit of the amount which has been collected by Canara Bank - appellants have not produced necessary documents to show that the Canara Bank has collected service tax - Held that:- Appellants have replied to the SCN along with necessary documents to support that they have not taken any CENVAT credit and they have borne the tax incidence. However, it is borne out from the records that the authorities below have not considered these documents - the matter requires to be remanded to the adjudicating authority for considering the documents that are produced by the appellants for establishing their case - appeal allowed by way of remand.

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• 2018 (10) TMI 763
  Commercial Coaching Services - Failure to pay Service tax - intent to evade or not? - Extended period of limitation - Benefit of N/N. 9/2003 and N/N. 24/2004 up to 16/06/2005 - Held that:- The issue decided in the case of Sunwin Techno Solutions Pvt. Ltd. [2010 (9) TMI 71 - SUPREME COURT OF INDIA] wherein the Supreme Court has held that the Notification No.19/2005-ST dt. 07/06/2005 (effective from 16/06/2005) is merely clarificatory in nature and that the services provided by computer training institutes are liable to service tax w.e.f. 01/07/2004 only. Further, the entire demand is barred by limitation because the show-cause notice was issued on 23/03/2007 demanding the service tax for the period 01/07/2004 to 15/06/2005 by invoking the extended period of limitation. Tribunal in the case of Gargi Consultants Pvt. Ltd. [2013 (5) TMI 695 - CESTAT NEW DELHI], held that extended period of limitation cannot be invoked when the appellant was providing computer training services and had not paid service tax for the period July 2004 to March 2005. Appeal allowed - decided in favor of limitation.

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• 2018 (10) TMI 762
  CENVAT Credit - services received by BSNL (WTR) - whether the appellant is not entitled to take cenvat credit on the services received by BSNL(WTR) on the ground of having no interconnectivity between the appellant and the said unit & various regional service providing units of BSNL? Held that:- The said issue is no more res integra and decided in favor of appellant in the case of M/S BSNL, SALEM VERSUS CCE, SALEM [2013 (1) TMI 142 - CESTAT CHENNAI], where it was held that Basically the issue involved is one of procedures and not a case of mis-utilisation of any ineligible credit. Since MODVAT credit is a substantial benefit, the impugned credit should not be denied on account of procedural defects of minor nature as pointed out by the Revenue. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 761
  Penalty u/s 76, 77 and 78 of FA - Short payment of service tax - entire amount of service tax along with interest of Rs. 50,32,740/- stands paid by the appellant - invocation of section 80 - Held that:- The appellant received the service tax amount from the recipient of service and it is their duty to discharge the service tax in time - this is not a fit case to invoke Section 80 of the Finance Act, 1994 as there has been deliberate failure on the part of the appellant in not paying service tax in time and also non-disclosure of the receipt of the amount from the recipient of the service by filing periodical ST-3 returns with the department. Considering the entire amount of service tax with interest has been paid, therefore the penalty imposed under Section 78 of the Finance Act, 1994 is upheld and penalty imposed under Section 76 is set aside - appeal allowed in part.

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• 2018 (10) TMI 760
  Benefit of reduced penalty - Works Contract Service - appropriate service tax not paid till investigation - Held that:- Admittedly the appellant had failed to discharge service tax nor filed any intimation with the department about rendering of such services. However, the assessee-Appellant is entitled to discharge 25% of the quantum of penalty that in accordance with Section 78 of the Finance Act, 1994, subject to fulfillment of conditions laid down there under. The Ld. Commissioner(Appeals) has remanded the matter to re-compute the liability subject to verification of the claim of the assessee-appellant that in calculating the duty on the gross taxable value, erroneously certain amount received as hand loans has been included. Revenue has not produced any contrary evidence to be rebut the said claim - Revenue's appeal being devoid of merit is set aside.

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• 2018 (10) TMI 759
  CENVAT Credit - duty paying invoices - invoices did not contain the name of the appellant as the receiver of taxable service - Rule 9 of CENVAT Credit Rules, 2004 - Held that:- Sub-rule (2) of Rule 9 of CENVAT Credit Rules, 2004 mandates that the documents based on which credit has to be availed, should contain the requisite particulars provided under the Central Excise Rules, 2002 or the Service Tax Rules, 1994 - However, the proviso clause appended to the said sub-rule (2) relaxes the condition regarding the contents in the document, and it has been prescribed therein that if the document contains the information regarding service, registration number, name and address of the service provider, then the jurisdictional service tax authority may allow CENVAT credit subject to his satisfaction that the services covered by the said document have actually been received and accounted for in the books of account of the receiver of such service. On perusal of the documents submitted by the learned Consultant, it is found that there is nexus between the service provider and the appellant - However, considering the fact that the requirement of sub-rule (2) of Rule 9 of the Rules have not been complied with by the appellant, the matter should go back to the original authority for proper appreciation of the fact, whether the benefit provided in the proviso clause appended to sub-rule (2) of the Rule 9 ibid can be extended to the appellant for the CENVAT credit. Appeal allowed by way of remand.

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• Central Excise

• 2018 (10) TMI 758
  Clandestine removal - demand based on statement furnished to the bank for inflated sales figures, non-duty paying invoices recovered during the course of investigation and statement of one Shri Mahesh Tiwari - Held that:- During the impugned period, Shri Mahesh Tiwari was not related to the appellant, therefore, the statement of Shri Mahesh Tiwari cannot be the basis to allege clandestine removal of goods. Merely on the ground that appellant has issued certain invoices on which no duty has been paid and sales figure from the bank cannot be the reason to allege clandestine removal of goods in the absence of the other related evidences, such as, electricity consumption, procurement of raw material, how the goods have been cleared, how the extra labour has been employed and flow back of money - Admittedly, no effort has been made and the only effort has been made from the consignee who also stated that goods were not purchase from the appellant. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 757
  Valuation - inclusion of subsidy amounts in the value of the goods cleared by the appellants - Revenue was of the view that VAT liability discharged by the utilisation of the investment subsidy granted in Form 37B actually paid, for the purpose of Section 4 of the Central Excise Act - Held that:- Identical issue decided in the case of GREENLAM INDUSTRIES LTD [2018 (4) TMI 1552 - CESTAT NEW DELHI], where it was held that There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 756
  CENVAT Credit - area based exemption availed - credit denied on the ground that in terms of Rule 12 of Cenvat Credit Rules, 2004, the Cenvat credit of duty paid by units availing the benefit of Notification No.1/2010 was allowed only after the amendment of This rule w.e.f. 20.01.2014 - Held that:- The availment under Notification No.1/2010 is in dispute which is yet to be settled. However, the alternate plea that they would have been entitled to Notification No.56/2002 upto 05.09.2014 appears to have been considered and permitted by the jurisdictional Central Excise authorities. If that is so, then there will be no justification to deny the Cenvat credit availed by the appellant on goods received from M/s Ritzy Polymers. There will be no justification to deny the Cenvat credit availed by the appellant on goods received from M/s Ritzy Polymers - matter remanded to the adjudicating authority for passing de novo orders after verifying whether M/s Ritzy Polymers have been permitted to avail benefit of Notification no. 56/2002 during the period under dispute - appeal allowed by way of remand.

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• 2018 (10) TMI 755
  Valuation - related and interconnected companies - Rule 8 of the Central Excise Valuation Rules, 2004 - principles of natural justice - Held that:- There has been an apparent non-cooperation on the part of the appellant and till date there is no document on record which may help the adjudicating authority to decide the controversy as directed - it is a fit case to be sent for de novo adjudication about both the issues viz. of valuation of impugned goods and as to whether those documents prove the relationship between the appellant and M/s. Magnum Steels Ltd. as such so as to invoke Rule 8 of Central Excise Valuation Rules - appeal allowed by way of remand.

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• 2018 (10) TMI 754
  CENVAT Credit - input services - service tax paid to the service agent on sale commissions - period from April 2015 to November 2015 - Held that:- From the definition of input services, it becomes clear that the activity of sales promotion is specifically included in the definition of input services - similar view adopted in the case of CCE Ludhiana Vs. Ambika Overseas [2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT]. As per Circular No. 943/4/2011-CX dated 29.04.2011, also the cenvat credit of service tax paid on amount of commission paid to the commission agent is available to the assessee - Though the Commissioner (Appeals) vide order under challenge, has extended a retrospective benefit of notification no. 2/2016 dated 03.02.2016 but we are of the opinion that the said notification is nothing but the clarification of the said circular. Appeal dismissed - decided against Revenue.

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• 2018 (10) TMI 753
  Principles of Natural Justice - no proper opportunity of hearing granted - case of appellant is that appearance could not be made for personal hearing as all the documents were in the possession of Department - Held that:- It is evident that the adjudicating authority has granted three opportunities of personal hearing in a row i.e 06.06.2017, 07.06.2017 and 08.06.2018, which, prima facie, appears to be not logical and is a complete violation of settled proposition of law settled by this Tribunal in the case of Deepak Gupta vs CCE, Kolkata [2015 (11) TMI 1459 - CESTAT KOLKATA], where it was held that Granting three consecutive days of hearing i.e. at short intervals of a week or so cannot be considered as the reasonable opportunity afforded to the appellant before deciding the case. Matter to the original authority with a direction to decide the matter de novo by affording reasonable opportunity of hearing to the Appellants to defend their case - appeal allowed by way of remand.

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• 2018 (10) TMI 752
  Amount paid belatedly - penalty - Rule 8(3A) of the Central Excise Rules, 2002 - Held that:- The appellant is liable to pay the penalty amount for belated payment of duty on the basis of the month and the number of the days of delay - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 751
  Waste/By-products - benefit of N/N. 89/95-CE dated 18th February, 1995 - soap stock (gum), sludge, fatty acid oil, spent earth etc. arising during the course of manufacture of refined edible oils - Held that:- Identical issue has come up for consideration before the Tribunal in the Appellants’ own case M/s Udyog Mandir vs CCE&ST, Jaipur-I [2018 (5) TMI 1711 - CESTAT NEW DELHI], where by following the judgment of the Larger Bench in the case of M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD [2018 (2) TMI 1395 - CESTAT NEW DELHI], it was held that the removal of unwanted materials resulting in products like gums, waxes and fatty acid with odour cannot be called as a process of manufacture of these gums, waxes and fatty acid with odour. Benefit of notification cannot be denied - appeal allowed - decided in favor of appellant.

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• Wealth tax

• 2018 (10) TMI 750
  Escapement of income chargeable to wealth tax - validity of reasons for issuing the notice - non filing of return under the Wealth Tax Act - Petitioner raised objections to the impugned notice mainly contending that the assessee has no net wealth and in fact, the balance-sheet shows negative capital balance - Held that:- Section 17 of the Wealth Tax Act, 1957 enables the AO to assess or reassess the net wealth of the assessee by issuing notice if he has reason to believe that net wealth chargeable to tax in respect of such person had escaped assessment. In the present case, admittedly, the assessee had not filed his return under the Wealth Tax Act. The Assessing Officer, in all probabilities, from the return of income filed by the assessee under the Income Tax Act and the documents annexed therewith noticed that the assessee had sizeable investment in fixed asset valuation of which along with cash in hand showed by the assessee came to Rs. 2.30 crores (rounded off) after reducing the exemption wealth of Rs. 30 lacs. He prima facie believed that net taxable wealth of Rs. 2 crore had escaped assessment. After recording proper reasons, he issued the impugned notice/ We see no reason to interfere. The assessee's contention that the loans were raised to acquire such capital assets would require exemption and therefore assessment. While disposing of such an objection, the Assessing Officer correctly observed that the assessee had not showed co-relation between the borrowing and the acquisition of assets. He noticed that in the income tax return, the assessee had claimed interest expenditure in relation to income from other sources. - Decided against assessee.

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• 2018 (10) TMI 749
  Asset chargeable to wealth tax - Exemption u/s 2(ea)(i)(3) of Wealth Tax Act on share of property - commercial asset - whether asset has not fulfilled the conditions to be categorized as commercial establishment? - assessee and other co-owner had purchased a Cinema Theatre with the land and buildings appurtenant thereto - Held that:- As long as the assessee owns the commercial asset, which is capable of being put to productive use, the said commercial asset is not exigible to Wealth Tax. In this case, the assessee along with two other companies owns the theatre but could not run the theatre due to various reasons but that does not mean that the property has lost its character. Hence, we are satisfied that it is in the nature of commercial establishment, and the exclusion provided in section 2(ea)(i)(3) would be applicable. Therefore, we see no reason to interfere with the order of the CIT (A) which is on similar lines. - Decided against revenue.

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