TMI Tax Updates - e-Newsletter
October 21, 2019

Case Laws in this Newsletter:

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

Articles

1. LUT Facility extension for MSME and Small scale units who supply to primary suppliers supplying to Exporters or SEZ Units

   By: CASeetharaman KC

2. Reconciliation of ITC as per Notification no. 49/2019 – A New Compliance

   By: Anuj Bansal

3. FOR PRIOR PERIOD ITEMS REVENUE SHOULD CONSIDER GROUND REALITIES AND WORK OBJECTIVELY WITH RESULT ORIENTATION IN MIND TO AVOID COSTLY, WASTEFUL LITIGATION Honorable FM and CBDT are requested to issue guidelines.

   By: DEVKUMAR KOTHARI

News

1. Income Tax Department searches prominent business group in Hyderabad

2. Finance Minister Smt. Nirmala Sitharaman at the IMF - World Bank Annual Meetings 2019

3. Prescribing of certain electronic modes of payment under Section 269SU of the Income tax Act, 1961-lnvitation for application

Notifications

Companies Law

1. G.S.R. 794(E) - dated 15-10-2019 - Co. Law

Companies (Filing of Documents and Forms in Extensible Business Reporting Language), Amendment Rules, 2019

Customs

2. 77/2019 - dated 18-10-2019 - Cus (NT)

Seeks to amend Notification No. 63/1994-Customs (N.T.), dated the 21st November, 1994

FEMA

3. S.O. 3732 (E) - dated 17-10-2019 - FEMA

Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

4. FEMA 396/2019-RB - G.S.R . 796 (E) - dated 17-10-2019 - FEMA

Foreign Exchange Management (Debt Instruments) Regulations, 2019

5. 395/2019-RB - G.S.R . 795(E) - dated 17-10-2019 - FEMA

Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019

GST - States

6. 49/2019-State Tax - dated 16-10-2019 - West Bengal SGST

West Bengal Goods and Services Tax (Sixth Amendment) Rules, 2019.

7. 47/2019-State Tax - dated 16-10-2019 - West Bengal SGST

Seeks to make filing of annual return under section 44 (1) of CGST Act for F.Y. 2017-18 and 2018-19 optional for small taxpayers whose aggregate turnover is less than ₹ 2 crores and who have not filed the said return before the due date

8. 46/2019 – State Tax - dated 16-10-2019 - West Bengal SGST

Seeks to prescribe the due date for furnishing of return in FORM GSTR-1 for registered persons having aggregate turnover more than 1.5 crore rupees for the months of October, 2019 to March, 2020

9. 45/2019-State Tax - dated 16-10-2019 - West Bengal SGST

Seeks to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the quarters from October, 2019 to March, 2020

10. 44/2019 – State Tax - dated 16-10-2019 - West Bengal SGST

Seeks to prescribe the due date for furnishing of return in FORM GSTR-3B for the months of October, 2019 to March, 2020

Circulars / Instructions / Orders

SEBI

1. CIR/CFD/CMD1/114/2019 - dated 18-10-2019

Resignation of statutory auditors from listed entities and their material subsidiaries

Highlights / Catch Notes

GST

• Collecting Exam Fees Not Taxable Under GST; Applicant Qualifies as Pure Agent per Rule 33 CGST Rules 2017.

  Case-Laws - AAR : Taxable services or not - activity of collecting/ exam fee - the applicant satisfies all the conditions of the pure agent as narrated in the Rule 33 of the CGST Rules, 2017. Therefore amount of fee collected by the applicant from the student as exam fee which is remitted to the respective institute or college or universities is excluded from the value of supply.
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• Disposing of Building-Fastened Assets Without Consideration Is a GST Supply of Goods, Liable to Taxation.

  Case-Laws - AAR : Supply or not - disposing off assets (no CENVAT/VAT Credit was taken) fastened to the building on delivering possession to the lesser, on which no consideration will be received - such transfer or disposal would be a supply of goods by the applicant and it is immaterial whether the said transfer/disposal is for a consideration or not - liable to GST.
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• Sub-contracting Earthwork for Nagpur-Mumbai Expressway Construction Attracts 18% GST Rate.

  Case-Laws - AAR : Classification of goods/services - rate of GST - activity of sub-contract for earthwork in relation to construction of access controlled Nagpur-Mumbai Super Communication Expressway - The rate of GST on the work of earthwork will be 18%.
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• Technical Testing in Goa Classified as Zero-Rated Supply Under GST, Place of Supply Set as Goa per IGST Act Section 13(3.

  Case-Laws - AAR : Zero-rated supply - The activity of technical testing on goods is carried out in Goa, India. Hence the place of supply of service is rightly determined as per Section 13(3) of the IGST Act, 2017 which is the location of the supplier of the service i.e. Goa, India - liable to GST.
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Income Tax

• Cash Found with Employee Leads to Addition u/ss 69 or 40A, Offset Against Depreciation and Business Losses Claimed.

  Case-Laws - AT : Addition u/s 69 or 40A - Cash found with an employee of the appellant - said addition should be set off from the losses on account of depreciation and business loss. The said loss was claimed in the revised return.
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• Loss from Error Trade Recognized as Human Error, Not Speculative; AO's Additions Deleted.

  Case-Laws - AT : Disallowance on account of loss on error trade - due to human error in punching the wrong scrip code, or punching of wrong quantity or in punching buy order in place of sale order due to human error the mistake may occur, which may result in income or loss - instead of considering the loss on account of error trade, AO treated the same as speculative loss - Additions deleted.
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• Company Can't Claim Deductions for Late PF/ESI Deposits u/s 36(1)(va) of Income Tax Act.

  Case-Laws - AT : Additions towards Employees contribution on account of PF & ESI delayed payment - Assessee company is not entitled for deduction u/s 36(1)(va) claimed on account of depositing the employees contribution towards ESI & PF as per provisions contained u/s 2(24)(x) read with section 36(1)(va) after due date.
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Customs

• Collected 'Duty' Cannot Be Reclassified as 'Deposit'; Impacts Interest on Delayed Refunds.

  Case-Laws - HC : Interest on delayed refund - scope of 'duty' and 'deposit' - an amount determined as 'duty' by processing the Bill of Entry and collected by the Revenue can never be termed as a “deposit”, even assuming that such collection, later, is found to be either unlawful or excessive - the claim of the Revenue that the amount collected was only a “deposit” and not “duty”, is factually incorrect and thus liable to be rejected.
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FEMA

• Non-Debt Foreign Investment in India: Key Rules, Limits, and Procedures Under FEMA 2019 for Equity and Capital Instruments.

  Notifications : Foreign Exchange Management (Non-debt Instruments) Rules, 2019.
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• Regulations on Issuance and Transfer of Debt Instruments by Non-Residents Under FEMA, 2019.

  Notifications : Foreign Exchange Management (Debt Instruments) Regulations, 2019
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• New Regulations for Payment and Reporting of Non-Debt Instruments under FEMA Ensure Compliance and Transparency in Forex Transactions.

  Notifications : Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019
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• High Court Quashes FIR on FCRA Violations; Exceeded Powers u/s 482 Cr.P.C. in Review of CBI Allegations.

  Case-Laws - SC : Violation of provisions under FCRA, 1976 - foreign contribution received by the respondent-petitioner - HC quashed the FIR - The very fact that the High Court, in this case, went into the most minute details, on the allegtions made by the appellant-C.B.I., and the defence put-forth by the respondent, led us to a conclusion that the High Court has exceeded its power, while exercising its inherent jurisdiction under Section 482 Cr.P.C.
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Corporate Law

• New Amendments Require Companies to Use XBRL for Filing, Boosting Transparency and Efficiency in Financial Reporting.

  Notifications : Companies (Filing of Documents and Forms in Extensible Business Reporting Language), Amendment Rules, 2019
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Indian Laws

• Contract Termination Deemed Illegal Due to Non-Adherence to Required Procedures in Contract Provisions.

  Case-Laws - SC : Termination of contract - non-performance of the contract - the termination of the contract was illegal and without following due procedure as required under the relevant provisions of the contract.
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SEBI

• SEBI Issues Guidelines for Auditor Resignations to Enhance Transparency and Accountability in Listed Entities and Subsidiaries.

  Circulars : Resignation of statutory auditors from listed entities and their material subsidiaries
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Central Excise

• Thane Unit's PVC Sheets Final; Daman Unit's Cutting and Printing Not Manufacturing, No Duty on Printing Charges.

  Case-Laws - AT : Process amounting to manufacture - once it is held that PVC sheets cleared by Thane unit was a final product and activity of cutting/slitting and printing carried out at Daman unit did not amount to manufacture, then question of paying duty on printing charges by the Appellant did not arise.
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VAT

• Mosquito Repellent Classified as Insecticide for VAT and Sales Tax Purposes Due to Dual Repel and Kill Capability.

  Case-Laws - HC : Classification of goods - mosquito repellent - The mosquito repellent contains an insecticide and it not only repels the mosquito but also is capable of killing the mosquito, and therefore, is covered under the entry of insecticides and pesticides.
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• Mistake in VAT and service tax figures leads to reassessment by Assessing Officer for corrected orders.

  Case-Laws - HC : Rectification of mistake - the figures in respect of sale of products liable to VAT and sale of service liable to service tax had been interchanged inadvertently - matter restored before the AO as to enable the Assessing Officer to redo the assessment and pass fresh orders.
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Case Laws:

• GST

• 2019 (10) TMI 758
  Rate of GST - prepared and served food and drinks - input tax credit - HELD THAT:- The packaged goods enlisted by the applicant like loose leaf masala tea, Assam Premium Tea, etc are not articles of foods and drinks sand are covered under goods. The supplies of such commodities are supplies of goods. They are covered under Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and under Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017 - the transaction is covered under (c) as the transaction is supply of goods by a restaurant, eating joint including mess, canteen, etc. Since this notification is applicable only to supply of services and not supply of goods, only Notification No. 1/2017- Central Tax (Rate) is applicable and hence all the supply of goods which are enlisted in the list produced by the applicant are taxable as supply of goods and at rates applicable as per Notification No. 1/2017- Central Tax (Rate) dated 2806.2017 and amended from time to time. Input tax credit - HELD THAT:- Since the goods are supplied and output taxis payable on the same, the applicant is eligible to take applicable input tax credit which is admissible as per the GST Laws.

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• 2019 (10) TMI 757
  Taxable services or not - activity of collecting/ exam fee (charged by any university or institution) from the students and remitting to that particular university or Institution without any value addition to it - scope of educational institution - HELD THAT:- The applicant conducts the training or coaching classes for the Students, to guide or train or prepare them to take the exam in the respective institute or college or universities. It does not have any specific curriculum and do not conduct any examination or award any qualification. Hence the applicant does not qualify as educational Institution. The applicant is collecting the exact amount payable to institute or college or universities as exam fee from the students (service recipient) and remits the Same amount to the respective institute or college or universities (third party) without any profit element or additions, on the authorization of the student. This payment is Separately indicated in the invoice issued to the respective students. The applicant providing this kind of services to the student in addition to the services as training and coaching institute - Hence the applicant satisfies all the conditions of the pure agent as narrated in the Rule 33 of the CGST Rules, 2017. Therefore amount of fee collected by the applicant from the student as exam fee which is remitted to the respective institute or college or universities is excluded from the value of supply.

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• 2019 (10) TMI 756
  Government Authority - pure services or not - Project Management services provided by applicant to recipient - function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively - supervision fees received towards such services provided by the applicant - HELD THAT:- The applicant shall be responsible for overall management of all components of the project on technical, financial and contractual matters during implementation of the sewerage projects. The services shall include deployment of team of experts, Engineers and other support staff which shall remain involved till execution of the projects. The scope would broadly include appointments of contractors and consultants, review and finalisation of contractor s and consultant s submissions in relation to project planning and execution, periodic review of progress report, rendering advice on counter measures/corrective actions required for overcoming bottlenecks/problems encountered during the execution of the project. The services provided by the applicant appears to fall in the list of services enumerated under serial no. 6 of the 12th Schedule of Article 243 W of the Indian Constitution, thus qualifying the admissibility criteria. Any Pure Services are provided to a Governmental Authority by way of any activity in relation to any function entrusted to a Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India and that Governmental Authority is an Authority or a board set up by an Act of Parliament or a State Legislature or established by the Government with 90 percent or more participation by way of equity or control to carry out any function entrusted to a Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India, then the same is exempted vide SI. No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017.

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• 2019 (10) TMI 755
  Valuation - subsidy given by the Central Government or a State Government - Whether the subsidy received from the state government would form part of consideration under section 2(31) of the CGST Act? - HELD THAT:- T he amount of subsidy given by the Central Government or a State Government is not a part of the consideration as per the section 2(31) of the CGST Act - A Subsidy or government incentive is a form of financial aid or support extended to an economic sector generally with the aim of promoting economic and social policy. As per provisions of the 2(31) of SGST/CGST consideration received in the form of subsidy given by the State Government or Central Government for the supply of service of food and drinks to the end-user is excluded from the definition of consideration and hence would not form the part of the consideration and in consequence does not form the part of the turnover - But the amount collected for the supply from the beneficiaries, which is inclusive of tax, would form the consideration on which the turnover is to be calculated after deducting the proportionate tax as the collected consideration is inclusive of tax.

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• 2019 (10) TMI 754
  Input tax credit - GST Act, 2017 - goods and services tax paid on input invoices of goods or services procured or availed by a registered person before its effective date of registration under GST, where such inputs are eligible input credits and for the purpose of furtherance of business - HELD THAT:- A person who has been granted registration, where the person has applied for registration within 30 days from the date on which he became liable for registration, would be allowed to take credit of input tax in respect of goods held in stock which are intended to be used by that person in the course or furtherance of business. Hence there is no question of allowing credit on the input tax credit charged on the invoices dated prior to the effective date of registration relating to services and even in respect of goods, they must be available in stock as on the day prior to the effective date of registration. The applicant is not eligible to claim input tax credit of the tax paid on input invoices of goods or services procured or availed by a registered person before its effective date of registration under GST - further, in case of inputs being goods, the applicant is only eligible to claim input tax credit of the tax paid on such goods (inputs) lying in stock on the day previous to the effective date of registration, which are intended to be used in the course or furtherance of business, subject to other conditions and restrictions prescribed in the GST Act and in Rule 40 of the CGST Rules, in case the application for registration has been filed within thirty days from the date on which the applicant became liable for registration under the Act.

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• 2019 (10) TMI 753
  Supply or not - disposing off assets (no CENVAT/VAT Credit was taken) fastened to the building on delivering possession to the lesser, on which no consideration will be received - value appearing in the books as on the date of disposal - open market value - HELD THAT:- It is an admitted fact that the applicant had taken the building on rent or lease during the earlier regime for business purposes and has invested in the furnishing of the building to suit his requirements. They capitalised the assets as Office Equipment, furniture and fittings in their books of accounts. The applicant stated that they have not claimed any input tax credit under the earlier laws on the assets involved. The applicant is disposing off these assets so that they no longer would be a part of their assets and the same is for nil consideration. It is an admitted fact that the assets sought to be transferred are capitalised under the head Office equipment, furniture and fittings and forms the part of the assets of the business entity, i.e. applicant and these assets are sought to be transferred or disposed of by the applicant and they undoubtedly no longer form part of those assets, then such transfer or disposal would be a supply of goods by the applicant and it is immaterial whether the said transfer/disposal is for a consideration or not - they would be treated as supply of goods as per entry no. 4(a) of Schedule II to the CGST Act. Tthe transaction of transfer of ownership of business assets in the course or furtherance of business for a consideration (being the monetary value in relation to the transfer of such assets) would constitute a supply in accordance with the provisions of clause (a) of Section 7(1) of the CGST Act and the same would be the supply of goods in accordance with the entry no. 4(a) of the Schedule II to the CGST Act. Value of taxable supply - HELD THAT:- Since there is no price actually paid or payable for the said supply of goods, section 15(4) of the CGST Act would become applicable for determining the value of this supply - The value of the supply is prescribed in rule 27 of the CGST Rules, 2017 which is related to the determination of the value of supply of goods or services where the consideration is not wholly in money.

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• 2019 (10) TMI 752
  Classification of goods/services - rate of GST - activity of sub-contract for earthwork in relation to construction of access controlled Nagpur-Mumbai Super Communication Expressway (Maharashtra Samruddhi Mahamarg) - HELD THAT:- Earthwork involves the removal of topsoil, along with any vegetation, before scraping and grading the area to the finished formation level . This is usually done using a tractor shovel, grader or bulldozer. Below the formation level, the soil is known as the subgrade . Most earthworks are formed by cut-andfill, and the type of fill material must be considered, not only in terms of its physical properties, but on the conditions in which it is to be used, and the methods of compaction - Thus the activity to be carried out by the applicant is restricted to Earth Work only. The supply made by the applicant is a supply of construction service for Earth Work and related work and is of independent nature, and cannot be categorised as construction of road as classified under Entry number 3(iv) of the Notification No 11/2017-CT (Rate) dated 28.6.2017 (as amended). The activity carried out by the applicant does not involve supply of goods whatsoever in any manner and it s supply of services for Earth Work and other related works. Thus the said activity does not fall under either Composite Supply or Mixed Supply - as there is no involvement of transfer of property in goods in the above said activity; it cannot be classified under Works Contract Services also. The rate of GST on the work of earthwork will be 18%.

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• 2019 (10) TMI 751
  Zero-rated supply - Whether the activity of on the technical testing services carried out by the applicant be treated as zero-rated supply ? - HELD THAT:- In the instant case, the goods on which technical testing is carried out are made available to the applicant in India and are not exported back to the recipient. Hence the exclusionary clause under Section 13(3),(a) is not applicable to the instant case. The activity of technical testing on goods is carried out in Goa, India. Hence the place of supply of service is rightly determined as per Section 13(3) of the IGST Act, 2017 which is the location of the supplier of the service i.e. Goa, India - Since the place of supply of service is in India, condition (iii) under Section 2(6) of the IGST Act, 2017 is not fulfilled. Hence the service provided by the applicant doesn t falls within the definition of export of service as defined under Section 2(6) of the IGST Act, 2017. Since the supplier of service is in Goa, India and place of supply of service as determined under Section 13(3)(a) is also in Goa, India, the applicant is liable to pay CGST and SGST on the aforesaid supply of service.

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• 2019 (10) TMI 750
  Works Contract services - Sub Section 119 of the Section 2 and Sub Section 30 of the Section 2 of the CGST Act, 2017 - HELD THAT:- The applicant is liable to pay SGST CGST on the supply, erection, testing and commissioning of low voltage, high voltage, extra voltage overhead lines, cables, circuit breakers, voltage transformers, outdoor structure in sub stations and other arears, high voltage panels distribution boxes, ring main units, civil works for circuit breaker, transformer, bay panel installation, preventive maintenance of circuit breaker, transform, bay, panels etc., breakdown maintenance of circuit breaker, transformer, bay, panels, etc., supply erection testing and commissioning of street light poles and earthing as the same activities amounts to works contract. As per the provision of Sub Section 30 of Section 2 of the CGST Act, 2017 the above mentioned works contract amounts to composite supply and the composite supply of works contract is taxable @ 18% vide Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017. Hiring of vehicles - HELD THAT:- There are different provisions for vehicle hiring, for the purpose of transporting goods and for the purpose of transporting passengers. The applicant Chief Electrical Engineer, Goa is liable to pay CGST @ 9% SGST @ 9% on various works/activity undertaken by them except on hiring of the vehicles - The applicant is liable to pay CGST @ 2.5% SGST @ 2.5% or CGST @ 6% SGST @ 6% on hiring of vehicles subject to the conditions specified in Notification No. 20/2017-Central Tax(Rate), dated. 22nd August, 2017.

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• 2019 (10) TMI 749
  Extension of time period for filing of GST TRAN-1 - transitional credit - transition to GST regime - HELD THAT:- The respondents are directed to reopen the portal within two weeks from today. In the event they do not do so, they will entertain the GST TRAN-1 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. List this matter on 21.11.2019.

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• 2019 (10) TMI 748
  Detention Order - Section 129(1) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Issue Notice , returnable on 22nd October 2019 .

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• 2019 (10) TMI 747
  Filing of Form GST TRAN-1 - extension of time limit for filing of the form - transitional credit - transition to GST regime - HELD THAT:- The respondents are directed to reopen the portal within two weeks from today. In the event they do not do so, they will entertain the GST TRAN-1 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. List this matter on 20.11.2019.

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• 2019 (10) TMI 746
  Legality of decision in the case of REVENUE BAR ASSOCIATION VERSUS UNION OF INDIA, THE GOODS AND SERVICES TAX COUNCIL, THE STATE OF TAMIL NADU [ 2019 (9) TMI 983 - MADRAS HIGH COURT] - constitutionality of various provisions - Constitution of the Goods and Services Tax Appellate Tribunal and the qualification and appointment of members - Vires/Validity of Sections 109 and 110 of CGST Act, 2017 and Tamil Nadu Goods and Services Tax Act, 2017. HELD THAT:- Matter adjourned to 19.11.2019.

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• 2019 (10) TMI 745
  Inability to make an amendment on the GST portal - death of the erstwhile authorized signatory - HELD THAT:- The presence of GSTN is absolutely essential to resolve the dilemma in which the Petitioner has been placed. It is directed that the impleadment of GSTN as a party Respondent - Let the amended memo of parties be filed within a week along with process fee for service upon the newly impleaded Respondent returnable on 14.04.2020.

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• Income Tax

• 2019 (10) TMI 744
  Benefit u/s 12AA - petitioner received contribution from the public for providing funds to the people - petitioner made application for condonation of delay in filing such Form 10 before the first respondent - HELD THAT:- The petitioner is a Trust, seems to have been formed for rehabilitating the victims of communal violence in the city of Coimbatore during November-December 1997. It seems that the petitioner received contribution from the public for providing funds to the people. Though the petitioner did not get such registration u/s 12AA during the relevant assessment year 1998-99, such registration was subsequently granted to the petitioner by an order dated 02.02.2005 with retrospective effect from 10.12.1997 onwards. There is no dispute to the above said fact. Therefore, for all practical purposes, it is to be construed that for the AY 1998-99 also, the petitioner was enjoying the benefit u/s 12AA on getting such registration with effect from 10.12.1997. No doubt, for filing Form No.10, the due date is the last date for filing the return of income for the relevant assessment year. In this case, the relevant assessment year 1998-99 and the last date for filing such return was 31.10.1998. Consequently, the Form 10 ought to have been filed on or before 31.10.1998. But in any event, filing of Form No.10 would arise only when the petitioner enjoys the benefit of registration under Section 12AA. Admittedly, on the last date viz., 31.10.1998, the petitioner was not enjoying such benefit, however such benefit was granted with retrospective effect by order dated 02.02.2005. Once such an order is passed, the petitioner made application for condonation of delay in filing such Form 10 before the first respondent. Petitioner has explained the delay in filing the Form 10 satisfactorily. Therefore, the first respondent is not justified in rejecting the application for condonation of delay, simply by saying that the petitioner has not satisfactorily explained the delay. As rightly pointed out by the learned counsel for the Revenue, though the delay is condonable, it is for the petitioner to establish before the first respondent that accumulated income was utilised for the subsequent years only for the purpose for which the petitioner Trust was established. Therefore, such liability exists on the petitioner, which they have to discharge before the first respondent. Accordingly this writ petition is allowed and the impugned order of the first respondent is set aside. Consequently, the matter is remitted back to the first respondent with a direction to take Form 10 on file and thereafter, to conduct an enquiry as to whether the accumulated interest was utilised for the succeeding years by the petitioner for the purpose for which the petitioner Trust was established. Such exercise shall be made by the first respondent within a period of eight weeks from the date of receipt of a copy of this order

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• 2019 (10) TMI 743
  Reopening of assessment u/s 147 - as urged that in the entire reasons recorded for reopening of assessment, there is no application of mind as to why the transactions are sham. The reasons recorded are factually incorrect and are based on mere borrowed satisfaction without the Assessing Officer applying his mind to the facts of the case - HELD THAT:- Having regard to the submissions advanced by the learned advocate for the petitioner, issue Notice, returnable on 25th November 2019. By way of ad-interim relief, further proceedings pursuant to the impugned notice dated 28.03.2019 issued under section 148 of the Income Tax Act, 1961 for the Assessment Year 2012-13 are hereby stayed.

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• 2019 (10) TMI 742
  Penalty u/s 271D and u/s 271E - HELD THAT:- Exts.P11 and P12 orders of the First Appellate Authority have required the petitioner society to pay only Rs. 2.5 crores each as against penalty amounts of Rs. 48 crores and Rs. 44 crores (approximately), that were imposed on the petitioner. Under normal circumstances this would have been viewed as a reasonable and valid exercise of discretion by the First Appellate Authority that does not call for any interference by this Court in this proceedings under Article 226 of the Constitution of India. In the instant case, however, the financial position of the petitioner society is projected as weak, and more importantly, it has been more than 8 months since the Appeals have been filed before the Appellate Authority and the petitioner has been enjoying the benefit of a stay from this Court since January 2019. I deem it appropriate to dispose the Writ Petition with a direction to the 3rd respondent Appellate Authority, before whom the Appeals preferred by the petitioner against the orders of penalty are pending, to consider and pass orders in the said Appeals within a period of three months from the date of receipt of a copy of the judgment, after hearing the petitioner.

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• 2019 (10) TMI 741
  Exemption claimed u/s 10(23C) - HELD THAT:- Ext.P2 assessment order does not reflect an application of mind while dealing with the claim for exemption both u/s 12A as also under Section 10(23) C of the Act. A perusal of the reasoning of the Assessing Officer would clearly indicate that he has completely overlooked the impact of the first proviso to Section 12A as also the fact that the proviso to Section 10(23)C had no application to a case that was covered by Section 10(23)C (iiiab) under which category, the petitioner had claimed exemption. Ext.P2 assessment order cannot be legally sustained, and the same is accordingly quashed. The 1st respondent is directed to complete the assessment pertaining to the petitioner for the said assessment year afresh, after hearing the petitioner. To enable the 1st respondent to do so, I direct the petitioner to appear before the 1st respondent at his office at 11 am on 04.11.2019. The 1st respondent shall pass fresh orders of assessment as directed within a month thereafter.

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• 2019 (10) TMI 740
  Reopening of assessment u/s 147 - HELD THAT:- As submitted that after considering the submission made by the petitioner and duly examining all aspects of the matter, the then AO had allowed the claim for deduction u/s 80IB(10) while framing assessment u/s 143(3). As submitted that therefore, the respondent seeks to reopen the assessment merely on the basis of change of opinion. Reference was also made to the sanction given by the superior officer under section 151 to submit that the same has been granted mechanically without application of mind to the facts of the present case and is based merely upon the reasons recorded by the Assessing Officer. As submitted that in this case, the reopening of assessment is beyond a period of four years from the end of the relevant assessment year and hence, in the absence of any failure on part of the petitioner to disclose full and truly all material facts, the assumption of jurisdiction under section 147 of the Act by the respondent Assessing Officer is without authority of law. Having regard to the submissions advanced by the learned advocate for the petitioner, issue notice, returnable on 21.10.2019. By way of adinterim relief the respondent is restrained from proceeding further pursuant to the impugned notice dated 31.3.2018 issued under section 148 of the Act seeking to reopen the assessment of the petitioner for Assessment Year 2012-2013.

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• 2019 (10) TMI 739
  Reopening of assessment u/s 147 - eligibility of reasons to believe - HELD THAT:- The descriptive information provided in the reasons, is not so specific with partywise details and therefore, it is rightly contended by the petitioner that they were not in a position to file an effective objection against reopening of the assessment, as they were not in a position to reconcile their records. It is also stated that the petitioner Company is not in a position to download the details of Form 26AS in the absence of access to e-filing/TRACES portal, which document alone would reflect the partywise details. Therefore, it is necessary for the respondent to furnish those details to the assessee so as to enable them to file their objections in effective manner. It is relevant to mention at this juncture that in GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] has laid down the principles as to how the reopening of the assessment should be proceeded with, commencing from the issuance of notice u/s 148 onwards. It is made clear therein that the reasons for reopening must be provided to the assessee, who in turn is entitled to make his objections on such reasonings and that the AO has to pass a reasoned order on such objections. AO has proceeded to pass an order of assessment directly without following the procedures laid down in GKN Driveshafts (India) Ltd. case. It is true that the Assessing Officer has proceeded to issue 143(2) notice after waiting for sometime from the date of issuance of 148 notice. But at the same time, it is to be seen that before passing the impugned order of assessment, the above two communications of the petitioner were placed at the hands of the Assessing Officer. Therefore, in all fairness, the Assessing Officer should have given the material details, so as to enable the petitioner to file their objections and passed a speaking order on those objections thereafter. No such procedures are followed in this case impugned order of assessment dated 29.11.2018 cannot be sustained. Therefore, this Court is inclined to remit the matter back to the Assessing Officer for furnishing the details sought for by the petitioner through their communication dated 29.08.2018 and 17.09.2018 and thereafter to proceed in accordance with the procedure laid down in GKN Driveshafts (India) Ltd. case.

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• 2019 (10) TMI 738
  Assessibility of the amount received u/s 28 of the Land Acquisition Act - claim of the assessee is that such enhanced compensation was part of the compensation and was not taxable in his hands - HELD THAT:- In view of the categorical affirmation of the proposition laid down by the apex court in the case of Ghanshyam HUF [ 2009 (7) TMI 12 - SUPREME COURT] in its latest decision in the case of Hari singh [ 2017 (11) TMI 923 - SUPREME COURT] , we hold that there is no error in the order of the AO treating the interest received by them u/s 28 of the LAA,1894,as compensation following the proposition laid down by the apex court in Ghanshyam HUF(supra). The order passed by the Ld.Pr.CIT u/s 263 is therefore set aside. Appeal of assessee is allowed.

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• 2019 (10) TMI 737
  TP Adjustment - Comparable selection - HELD THAT: Assessee is engaged in rendering ITES services thus companies functionally dissimilar with that of assessee need to be deselected from final list.

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• 2019 (10) TMI 736
  Reopening of assessment u/s 147 - absence of approval u/s. 151 - addition u/s. 69A as alleged unexplained cash deposit in savings bank account - HELD THAT:- Addl. CIT, Range-65, New Delhi, I find that the approval granted by the Addl. CIT, Range-65, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings, because from the aforesaid remarks, it is not coming out as to which material; information; documents and which other aspects have been gone through and examined by the Addl. CIT, Range-65, New Delhi for reaching to the satisfaction for granting approval. AO has mechanically issued notice u/s. 148 Approval granted by the Addl. CIT,Range-65, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings issue of notice u/s. 148 of the I.T. Act, 1961 and is not in accordance with section 151 of the I.T. Act, 1961, thus, the notice issued u/s. 148 of the Act is invalid and accordingly the reopening in this is bad in law and therefore, the same is hereby quashed. Accordingly, the ground raised by the assessee is allowed.

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• 2019 (10) TMI 735
  Reopening of assessment u/s 147 - approval granted by the Ld. Pr. CIT-3, Delhi, New Delhi is a mechanical and without application of mind - HELD THAT:- After perusing the aforesaid remarks of the Pr. CIT-3, Delhi, New Delhi, I find that the approval granted by the Ld. Pr. CIT-3, Delhi, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings, because from the aforesaid remarks, it is not coming out as to which material; information; documents and which other aspects have been gone through and examined by the Pr. CIT-3, Delhi for reaching to the satisfaction for granting approval. AO has mechanically issued notice u/s. 148 of the Act. Reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Thus initiating the reassessment proceedings by issue of notice u/s. 148 is not in accordance with section 151 of the I.T. Act, 1961, thus, the notice issued u/s. 148 of the Act is invalid and accordingly the reopening in this is bad in law and therefore, the same is hereby quashed. - Decided in favour of assessee.

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• 2019 (10) TMI 734
  Assessment of income u/s 44AD or 44ADA - deduction of tax on fees paid to Assessee has been done u/s 194J as mandated by the Act - income adjustment done by the CPC in exercise of powers u/s 143(1)(a)(vi) - HELD THAT:- The disputed adjustment to the total income declared by the Assessee has been done by the CPC in exercise of powers u/s 143(1)(a)(vi) of the Act. It is not in dispute before us that the income of Rs. 15,00,000/- was offered to tax in the return of income. In the show cause notice issued by the CPC before making the adjustment, the CPC has proceeded on the basis that the sum of Rs. 15,00,000/- offered under section 44AD of the Act ought to have been offered to tax under section 44ADA. Accordingly, the sum offered to tax under section 44ADA was taxed under section 44ADA of the Act. As we have already seen the presumptive income under section 44AD is only 8% of the gross receipts, whereas under section 44ADA, 50% of the gross receipts is the presumptive income. It is thus clear from the show cause notice that the AO has not found income appearing in Form 26AS not having been included in computing the total income declared in the return of income field by the Assessee. The adjustment under section 143(1)(a)(vi) of the Act can be resorted to only when the sum of Rs. 15,00,000/- is not included in computing the total income declared in the return of income. The CBDT s instruction No.10/2017 dated 15.11.2017 has clearly laid down that only when receipts are completely omitted to be declared in the return of income can there be an addition for invoking 143(1)(a)(vi) of the Act. The submissions made by the Assessee in this regard have not been considered by the CIT(A) in the impugned order. The addition that the income appearing in Form 26AS not having been included in the return of income filed is sine qua non for invoking the provisions of section 143(1)(a)(vi) since the same is absent in the present case. We are of the view that the CPC ought not to have made the impugned adjustment. The addition made is liable to be deleted on this basis alone. The issue whether income earned by the Assessee has to be taxed u/s.44AD or Sec.44ADA of the Act cannot be subject matter of decision in processing u/s.143(1) (a) In view of the above conclusions, we are not going to the question whether the income of the Assessee is assessable under section 44ADA or 44AD of the Act. The issue is left open without any decision. Appeal by the Assessee is allowed.

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• 2019 (10) TMI 733
  Reopening of assessment u/s 147 - long term capital gains computed by authorities below and also claimed exemption/deduction under sections 54B and 54F - application for admission of the additional evidences - HELD THAT:- We are of the view that additional evidences goes to the root of the matter and in the case of co-owner Shri Dharm Chand, the same have been admitted for disposal of the matter and matter have been remanded to the file of A.O. Therefore, following the Order in the case of Shri Dharm Chand [ 2019 (10) TMI 573 - ITAT DELHI] we admit the additional evidences. Since the A.O. has no occasion to examine these additional evidences, we set aside the Orders of the authorities below and restore the matter in issue to the file of A.O. with a direction to re-decide the issue - Appeal of Assessee allowed for statistical purposes.

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• 2019 (10) TMI 732
  Revision u/s 263 - income from business or profession - earning income under different heads of income - assessee was bound by the employee- employer relationship and it was not possible for him to simultaneously have relationship with the institute as an independent consultant and hence the entire income of the assessee was to be treated as salary income - assessee is a Professor in the Department of Neuro Science at Sri Ramachandra Medical College and Research Institute, Chennai - assessee attained superannuation with effect from 28.02.2002. The assessee was reappointed by Trust with fixed salary with no incidental benefits such as PF or DA (the details of his reappointment with the Institute is placed on record) - HELD THAT:- The income derived through teaching and the income derived through professional consultancy had necessarily to be treated separately for the purpose of taxation. It is apparent from the nature of service rendered by the assessee as a consultant in the hospital, the hospital / trust did not have any control of the assessee as regards the number of hours of work or number of patients that he had to examine on any day. These matters were left to the discretion of the assessee and he could determine his hours of work and consultation fee. The fees paid by the patients consulting the assessee were collected by the hospital, which in turn paid over the same to the assessee after deducting there from charges due to the hospital for any service availed and the applicable TDS for professional charges was also deducted. As mentioned earlier, the provisions of the I.T.Act clearly contemplate a situation where the individual can earn income under the different heads and hence merely because the assessee was earning some portion of his income as `salary , it did not follow that he could not earn income under the head `professional income . As long as the professional income was not traceable to the obligations of the assessee under the employment contract, the income received for professional sources could only have been classified under the head `income from business or profession and not under the head `salary . In the instant case, on perusal of the letter of reappointment, Form No.16 and Form No.16A, it is clear that the assessee apart from earning salary income was also doing consultancy in the hospital for which there is no employee-employer relationship and the amount received for such consultancy was assessable as income from profession. The CIT in the impugned order had directed the A.O. to redo the assessment by disallowing the expenses claimed out of the professional income. The A.O. shall examine the allowability of the said expenses under the head `income from profession . Therefore, we set aside the findings of the CIT in the impugned order passed u/s 263 of the I.T.Act. We direct the A.O. to reexamine the claim of deduction whether it is allowable as a deduction under the head `income from business or profession . For the above said purposes, the issue is restored to the Assessing Officer. - Appeal filed by the assessee is allowed for statistical purposes.

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• 2019 (10) TMI 731
  Expenditure incurred towards business convention - Allowable revenue expenditure u/s 37 - HELD THAT:- Expenses were incurred by the assessee for accommodation of doctor. Similarly, MCM expenditure was incurred for conference. The stand of the assessee was that conferences were being organized for the purpose of business. When a large number of doctors assembled, they share their experience in day-to-day professional life and what type of hurdles they faced while treating patients, either by use of equipments or by pharma products. If a pharma-company wants to organize such type of conference or seminars then it will be quite reasonable to understand the deficiency in its products, and if the doctors were required to pay from their pockets, then probably some of them would not like to participate. At this stage, it is pertinent to visualize the provisions under the Income Tax Act for allowance of business expenditure. In order to claim expenditure under section 37(1) of the Income tax Act, the assessee is required to fulfill certain conditions viz. (a) there must be expenditure, (b) such expenditure must not be of the nature described in sections 30 to 36, (c) the expenditure must not be in the nature of capital expenditure or personal expenditure of the assessee, and (d) expenditure must be laid out or expended wholly and exclusively for the purpose of business or profession. The expression wholly employed in section 37 refers to quantification of expenditure while expression exclusively refers to the motive, objective and purpose of the expenditure. Thus, if the nature of this expenditure is being viewed with angle of commercial organization, then it would reveal that these were essential expenditure for the purpose of a pharmaceutical industry. The only caveat for their non-disallowance is Explanation 1 appended to section 37, which is applicable on the expenditure which are incurred for infringement of any law. This aspect has been elaborately discussed by the Co-ordinate Bench in the above cases, and therefore, respectfully following the decision of the ITAT in the case of Aristo Pharmaceuticals P.Ltd. [ 2019 (7) TMI 862 - ITAT MUMBAI] we allow the appeal of the assessee, and delete the disallowances. - Decided in favour of assessee.

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• 2019 (10) TMI 730
  Revision u/s 263 - lack of inquiry into certain vital aspects concerning eligibility of deduction under s.54F - HELD THAT:- Different Courts in different issues have echoed that expression a residential house would encompass different residential units located on the different floors of the same building. On facts, we note that all the three units are located on the different floors of the same structure and purchased by the assessee by a common deed of conveyance. In the facts and circumstances, plurality of opinion about the allowability of deduction surely exists even if it is presumed for a moment that view adopted by the AO in favour of the assessee is not singular or absolute. In the circumstances, where the language couched in Section 54F has been interpreted in a manner favourable to assessee and multiple residential units were included within the sphere of Section 54F, we see no wrong in the action of the AO in seeing the issue in a wider spectrum. When the issue of eligibility of deduction u/s 54F is tested on the touchstone of prevailing judicial dicta, the action of the AO cannot be discredited as incorrect application of law or wrong assumption of facts. Relevant facts concerning the purchase of super structure comprising of three different units were duly placed and available on record. AO was not found to be totally oblivious of the relevant facts. Thus, there is an apparent plausibility about the assent of mind of AO on admissibility of claim having regard to the law existing at the relevant time. In these circumstances, the AO can be safely presumed to have adopted a view which was plausible though not necessarily agreeable to the Revisional Commissioner. What is significant is the lack/inadequacy of inquiry should result in a substantive error or a visible abnormality resulting in loss of Revenue. The claim of the assessee towards deductibility under s.54F of the Act cannot be regarded to be erroneous in the light of judicial precedents and therefore lesser degree of inquiry made on the issue per se would not cover the situation in the sweep of expression erroneous . A plausible view admitted in assessment stage in exercise of quasi-judicial function cannot be dislodged in a light hearted manner in the name of inadequacy in inquiries or verification as perceived in the opinion of the revisional authority. Section 263 of the Act does not visualize a case of substitution of the judgment of the Revisional Commissioner for that of AO unless the decision of the AO is found to be erroneous. The claim under s.54F of the Act being plausible, the foundation for exercise of revisional jurisdiction in our view does not exist. We thus find merit in the plea of the assessee towards lack of authority of Pr.CIT to exercise jurisdiction conferred u/s 263 in the instant case. The revisional order is accordingly set aside and quashed.- Decided in favour of assessee

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• 2019 (10) TMI 729
  Penalty levied u/s.271F - non-compliance of the notice u/s.153A(1)(a) - assessee has not complied the notice issued by the AO even after issuance of reminders - HELD THAT:- The contention of the assessee that the AO is not empowered to issue notice u/s.153A(1)(a) and cannot levy penalty u/s.271F of the Act, is not accepted as it is mandatory and no directory. In the peculiar facts and circumstances of the case, the case law relied on by the AR of the assessee is not applicable in the present case. We also make it clear that the case law relied on by the AR of the assessee relates to Section 276CC of the Act which relates to prosecution, penalty and prosecution both are separate in nature, which cannot be equated with. With regard to the contention of ld. AR that there was a reasonable cause u/s.273B of the Act for immunity provided u/s.273B of the Act containing reasonable cause in which penalty cannot be imposed. From the above observations and on careful perusal of the orders of authorities below, specifically the assessment order, we find that the assessee has been given ample opportunities of hearing and the AO has mentioned the dates with regard to opportunity given to the assessee to represent his case, however, the assessee has not complied the notice issued by the AO even after issuance of reminders by the AO to the assessee, the assessee has not bothered to comply the same, which enabling the assessee to frame the assessment u/s.144 of the Act. Accordingly, the above contention of the ld. AR of the assessee that the assessee gets immunity from the provisions of Section 273B of the Act, is rejected. - Decided against assessee.

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• 2019 (10) TMI 728
  Addition u/s 69 or 40A - Expenses incurred in cash - Cash found with an employee of the appellant from his residence at the time of search operation - setoff of loss against the addition made u/s.68/69 - CIT (A) held that addition cannot be made u/s. 40A (3), because the hotel was under construction and no expenses have been claimed in the profit loss acount, however, he has made the addition u/s.69 on the ground that these payments towards capital-work-in-progress - HELD THAT:- From the documents placed in the paper book as well as observations noted in the impugned assessment order, it is an admitted fact that these seized documents was not found from the premises of the assessee company albeit it was from the premises of Shri Mandeep Singh in Goa, who was an employee of the assessee-company at the relevant time. The assessee had submitted that he had his own independent construction business also. However, neither the statement of Shri Mandeep Singh was recorded nor any evidence has been produced by the assessee that he carried on any independent construction business. However if one goes by the presumption under the law, then if the documents have not been found from the premises of the assessee, then presumption u/s.132(4A) r.w.s. 292C cannot be drawn against the assessee. Without going into the merits of the addition made u/s.69 and cash found with an employee of the assessee made u/s 68 of the Act, we find substance in the argument raised by the ld. counsel that said addition should be set off from the losses on account of depreciation and business loss. The said loss was claimed in the revised return and it consists of loss arising from depreciation put to use w.e.f. 01.03.2011 and business loss during the year. As per CBDT Circular No.11/2019 dated 19th June, 2019, Assessing Officer should allow the said loss against the addition made u/s.68/69 etc. and the amendment brought by the Finance Act, 2016 is w.e.f. 01.04.2017 and any denial of such set off is only applicable from the Assessment Year 2017-18; and assessment for the period prior to Assessment Year 2017-18, such set off would be allowed against income determined u/s.115BBE. Thus, in view of clear cut clarification by the CBDT, we hold that the addition made u/s. 69 and addition u/s.68 is liable to be set off from the loss. Accordingly, the additions made by the Assessing Officer and confirmed by the Ld. CIT (A) would be liable to be set off from such losses. With this direction, the appeal of the assessee is partly allowed

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• 2019 (10) TMI 727
  Accrued or a contingent liability - liability of the Assessee to pay enhanced licence fee - Revisions of licence fees - Tax treatment of claim of licence fee as deduction - whether licence fee payable to the Railways to be an accrued liability? - HELD THAT:- SLP dismissed.

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• 2019 (10) TMI 726
  Transfer pricing adjustment - selection of three comparables by the Transfer Pricing Officer - HELD THAT:- Companies functionally dissimilar with that of assessee as ITES service provider need to be deselected from final list.

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• 2019 (10) TMI 725
  Reopening of assessment u/s 148 - distinction between the acceptance of a return u/s 143(1) and an assessment which is framed u/s 143(3) - HELD THAT:- As decided in AVIRAT STAR HOMES VENTURE PRIVATE LIMITED [ 2018 (12) TMI 1397 - BOMBAY HIGH COURT] information supplied by the Investigation Wing to the Assessing Officer formed a prima facie basis to enable the Assessing Officer to form a belief of income chargeable to tax having escaped assessment. The Assessing Officer perused the information supplied by the Investigation Wing and having formed the belief that income chargeable to tax had escaped assessment, could not be stated to have acted mechanically. Further, the mere fact that the assessee had asked for certain information from the Assessing Officer, which at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the notice. The notice was valid AO has rightly issued notice u/s 148 for reopening the return of income processed u/s 143(1) of the Act. Therefore, the 1st ground of appeal is dismissed. Bogus purchases - CIT(A) confirming the order of the AO in disallowing the purchases made from two parties @ 12.5% of alleged bogus purchases - HELD THAT:- We direct the AO to restrict the additions limited to the extent of bringing the G.P. rate on disputed purchases at the same rate of other genuine purchases.

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• 2019 (10) TMI 724
  Assessment u/s 153C - whether no satisfaction have been recorded in the case of the person searched and that no incriminating material have been found to connect the assessee? - HELD THAT:- Since addition on merit have already been deleted and confirmed by us, therefore, this issue is left with academic discussion only. However, briefly, we may point-out that in this case satisfaction note have been recorded in the case of assessee instead of recording it in the case of person searched by A.O. of the assessee which is invalid. Further balance-sheet of the assessee have been referred to which was found during the course of search in the case of Triveni Group. Therefore, no satisfaction have been recorded in the case of the person searched and that no incriminating material have been found to connect the assessee with the impugned addition. It is balance-sheet of the assessee only which is already on the record of the Department as well in public domain. As relying on SINHGAD TECHNICAL EDUCATION SOCIETY [ 2017 (8) TMI 1298 - SUPREME COURT] there was no justification to assume jurisdiction under section 153C of the I.T. Act, 1961. In view of the above, we set aside the Orders of the authorities below and quash the assumption of jurisdiction under section 153C - Decided in favour of assessee

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• 2019 (10) TMI 723
  Disallowance u/s 14A - mandation of recording proper satisfaction by AO - HELD THAT:- The Hon ble Punjab Haryana High Court in the case of Abhishek Industries Ltd., [ 2015 (2) TMI 672 - PUNJAB AND HARYANA HIGH COURT] held that onus upon A.O. to record satisfaction that interest bearing funds used for investment to earn tax free income . The assessee in the present case has claimed that receipt of dividend income does not involve any expenditure since the dividend is directly credited through ECS in the Bank Account. The assessee has not borrowed any funds for investment in shares and mutual funds during assessment year under appeal and no fresh investments have been made, rather assessee repaid unsecured loans in assessment year under appeal. Therefore, it was incumbent on the part of the A.O. to record satisfaction that revised disallowance made by the assessee as per the direction of the A.O. at Rs. 62,701/- was unreasonable and improper. No compliance have been made by the A.O. Therefore, there was no justification for the authorities below to disallow the amount in question - set aside the Orders of the authorities below and delete the addition made by the A.O Disallowance of Office expenses and office maintenance expenses - A.O. disallowed the amounts in question by applying the provisions of Section 40A(2)(b) - HELD THAT:- even for applying the provisions of Section 40A(2)(b) it is for the A.O. to make out a case that expenditure incurred is excessive or unreasonable having regard to the fair market value of such services. No efforts in this regard have been made by the A.O. Therefore, there were no justification for the A.O. to divide the entire amount between 16 parties to make the disallowance. The method applied by the A.O. is not acceptable in view of the language prescribed under section 40A(2)(b) of the I.T. Act, in which A.O. has made disallowance. The Hon ble Supreme Court in the case of Upper India Publishing House Pvt. Ltd., [ 1978 (12) TMI 2 - SC ORDER] held that before applying the provisions of Section 40A(2)(b) the A.O. should have prove that the expenditure is excessive or unreasonable. It may also be noted here that A.O. disallowed both the expenses considering that expenses have not been incurred wholly and exclusively for the purpose of business. The assessee has filed return of income declaring net income of Rs. 27.86 crores. Therefore, there were no reason for the assessee company to have inflated the expenses which are connected wholly and exclusively for the purpose of business - authorities below were not justified in making the disallowance - Decided in favour of assessee

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• 2019 (10) TMI 722
  Deduction u/s 80IB(10) - assessee had not filed its return of income within the due date provided under section 139(1) as per section 80AC of the Act the assessee would not be eligible to claim deduction under section 80IB(10) - HELD THAT:- Considering the overall facts and circumstances of the case in the light of the decisions referred to above and more particularly applying the ratio of the decision of the Hon ble Supreme Court in Dilip Kumar Co. Ors. [ 2018 (7) TMI 1826 - SUPREME COURT] we hold that the condition imposed under section 80AC of the Act has to be fulfilled for claiming deduction under section 80IB(10) of the Act. Since, the assessee has not fulfilled the aforesaid condition, deduction claimed under section 80IB(10) of the Act has been rightly denied by the Departmental Authorities. - Decided against assessee.

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• 2019 (10) TMI 721
  Penalty u/s 271(1)(b) - Non compliance of notice under section 142(1) - HELD THAT:- When the AO has sought the information as in the query letter attached to the notice under section 142(1) dated 07.08.2015 and same was repeated in the subsequent occasions, then it will constitute only one default and not five defaults as the information sought by the AO is the same and non compliance by the assessee to furnish the said information would amount to one default. Accordingly, following the order of the Delhi Benches of the Tribunal in case of Smt. Rekha Rani vs. DCIT [ 2015 (5) TMI 1100 - ITAT DELHI] it will constitute only one default, hence, the penalty levied by the AO for five defaults is restricted to one default and the balance amount of Rs. 40,000/- is deleted. As regards the other pleas raised by the assessee, it is manifest from the record that the AO has clearly mentioned in the assessment order the default/non-compliance to the notice issued under section 142(1) and further in reply to show cause notice, the assessee has not taken this plea that it has not received the notice issued under section 142(1). As regards the reasonable and bonafide explanation, once the AO has sent the notice five times which means 1st notice and 4 reminders and all of these notices remained non-complied by the assessee, then this plea of bonafide and reasonable explanation cannot be accepted.

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• 2019 (10) TMI 720
  Validity of reassessment framed by the AO without issuing and service notice u/s 143(2) - HELD THAT:- It is clear that the alleged notice dated 11.12.2017 was not issued and even not served on the assessee. The alleged proceedings interjected in between two other proceedings that too subsequent proceedings clearly reveals this fact. Accordingly, it becomes manifest and clear that the reassessment was completed without issuing the mandatory notice u/s 143(2) of the IT Act and consequently the assessment was framed without assuming the jurisdiction as conferred by section 143(2) We do not find any merit in the assessment so framed u/s 143(3) without issue of notice U/s 143(2) of the Act. The reassessment framed by the AO without issuing notice u/s 143(2) is bad in law and same is quashed. Since the reassessment is quashed for want of notice issued under section 143(2) of the IT Act, therefore, the other ground raised by the assessee becomes infructuous and not taken up for adjudication. - Appeal of the assessee is allowed.

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• 2019 (10) TMI 719
  Addition u/s 68 - share application money received - unsecured loan received - HELD THAT:- So far as the amount of share application money received from M/s. Purushotam Vinnimay P. Ltd. is concerned we find neither the assessee nor the revenue authorities have the benefit of the decision of Hon ble Supreme Court in the case of NRA Ispat [ 2019 (3) TMI 323 - SUPREME COURT] and decision of the Hon ble Delhi High Court in the case of NDR Promoters [ 2019 (1) TMI 1089 - DELHI HIGH COURT] which specifically deal with the issue of share application money received from the companies which do not show sufficient income in the return of income filed by them. We, therefore, deem it proper to restore the issue of share application money received from M/s. Purushotam Vinnimay P. Ltd. to the file of the AO for fresh adjudication of the issue in the light of the decisions cited (supra). The AO shall decide the issue in accordance with law after giving a reasonable opportunity of being heard to the assesse. Amount received from M/s. Raffle Mercantile Private Limited - various details filed by the assessee as per paper book that the money was given by Raffle Mercantile Private Limited towards share application money whereas the addition has been made on account of unsecured loan. Further as stated by the Ld. Counsel for the assessee the amount has been refunded in the assessment year 2014-15. The facts are not coming out clearly from the submission made by the assessee vis-a-vis the order of the AO and the CIT(A) as to whether the same is towards share application money or unsecured loan. A perusal of the page-18 of the paper book shows that Land Craft Developers P. Ltd. has issued 14,80,000/- equity share of Rs. 10/- each. Therefore, if the shares have been allotted, how this could be refunded in A. Y. 2014-15 needs verification. If the same is unsecured loan and if the same has been refunded to the lender during A.Y.2014-15 i.e. much prior the completion of the assessment, the same also needs verification at the level of the AO and in that case it cannot be added in the light of various decisions cited by the Ld. AR. The decisions of the Hon ble Supreme Court in the case of NRA Ispat (supra) and NDR Promoters (supra) cited in the preceding paragraphs will also be equally applicable to the facts of the present issue - Thus restore the issue of unsecured loan received from Raffle Mercantile Private Limited to the file of the AO for deciding the issue afresh and as per fact and law after giving due opportunity of being heard to the assessee. Grounds raised by the revenue allowed for statistical purpose.

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• 2019 (10) TMI 718
  Assessment u/s 153A and 153C - HELD THAT:- As well as applicability of section 153A and 153C in case of assessee and his wife respectively where it has been alleged that search action under 132 itself was invalid. It has been submitted that search initiated was without assuming jurisdiction to make assessment under section 153A and 153C of the Act in respective cases. Admittedly, both sides submitted that this issue is no longer res integra, by virtue of Explanation to Section 132 (1), being introduced with retrospective effect by Finance Act 2017. Accordingly, grounds raised by both assessee challenging validity of search under section 132 stands dismissed. The issue raised by assessee is on merits is regarding peak credits in unaccounted bank accounts of assessee s. As submitted that peak credit has to be computed on the basis of actual deposits and withdrawal and not on the basis of cash deposit alone. Accordingly, we set aside the issue back to Ld. AO for re-computing peak credit, taking into account both deposits as well as withdrawal during relevant period for assessment years under consideration in case of both assessee is before us. Accordingly, grounds raised by assessee s on merits stands allowed for statistical purposes.

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• 2019 (10) TMI 717
  Disallowance under section 14A - HELD THAT:- Hon ble Supreme Court in a recent judgment, in group of cases titled as Maxopp Investment Ltd. Vs CIT [ 2018 (3) TMI 805 - SUPREME COURT] has decided vital issues concerning disallowance u/s 14A, the benefit of which was not available to the lower authorities at the time of adjudicating this issue. Therefore, respectfully following the judgment of co-ordinate bench of this Tribunal in earlier years and in the light of recent judgment by Hon ble Supreme Court, the matter stand remitted back to the file of Ld. AO on similar lines with similar conclusion. Disallowance to the book profit under section 115JB - HELD THAT:- Considering the fact that we have restored the ground of appeal related to the disallowance under section 14A to the file of Assessing Officer. Accordingly, this ground of appeal is also restored back to the file of Assessing Officer with the direction to compute the book profit under section 115JB by following the decision of special bench of Delhi Tribunal in ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . Hence, this ground of appeal is allowed for statistical purpose.

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• 2019 (10) TMI 716
  Penalty u/s 271AAA - @ 10% confirmed after the order of ITAT more so when the addition is based on estimation of trading profit by applying GP rate - HELD THAT:- It is not a case of mere estimation of gross profit rate on declared turnover of the assessee but the fact of the matter which is clearly emerging from the orders of the authorities below as well as decision of the Coordinate Bench is that such estimation of gross profit is on reported sales/turnover as well as the undisclosed sales/turn over which has not been disclosed by the assessee in its regular books of accounts which was surrendered on the basis of search carried out at the premises of the assessee. Therefore, to the extent of profit estimated on undisclosed sales/turn over which has been found in the course of search and which has not been disclosed/recorded in the books of accounts maintained in the normal course of business, it is clearly a case of undisclosed income as defined in explanation to section 271AAA. No infirmity in the findings of the ld CIT(A) where he says that such addition is also covered under the definition of undisclosed income being directly relatable to seized documents from the appellant of the specified previous year . The penalty so levied on undisclosed income of Rs. 61,19,120 is hereby confirmed. Before parting, we would like to state that the decisions of Hon ble High Court relied upon by the assessee are distinguishable on facts and doesn t support the case of the assessee. - Decided against assessee.

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• 2019 (10) TMI 715
  Unexplained Credit u/s 68 - HELD THAT:- From the perusal of record it can be seen that the Assessing Officer has not given proper opportunity to the assessee to reply the show cause notice dated 12.03.2012 issued by the AO and passed the Assessment Order on 18.03.2013. Before the CIT(A), the Assessee filed the rejoinder dated 23.02.2016 to the Remand Report dated 09.06.2015, but the CIT(A) has not considered the said rejoinder as well as not given the proper opportunity to the assessee. In fact, the CIT(A) has not considered the additional evidences filed by the assessee before arriving at the findings. Therefore, it will be appropriate to remand back all the issues to the file of the CIT(A) to be decided on merit. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice and the assessee is also directed to co-operate and attend the appellate proceedings, otherwise the CIT(A) is at liberty to decide the appeal on merit after considering the additional evidence filed by the assessee. The appeal of the assessee is partly allowed for statistical purpose.

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• 2019 (10) TMI 714
  Deduction u/s 10B - Denial of deduction as assessee has not followed rules and regulations for 100% export oriented unit (EOU) - also rejected the claim of deduction of duty drawback amounting to Rs. 42,80,369/- on the ground that such duty drawback are not eligible for deduction u/s. 10B - HELD THAT:- Order of the Development Commissioner, SEZ Noida raising certain serious objections were not before the AO or the CIT(A) or the Tribunal and, therefore, submission of the Ld. Counsel for the assessee that it is a covered matter in favour of the assessee cannot be accepted at this stage. However, considering the fact that the assessee has challenged the order of the Development Commissioner SEZ which is sub-judice and has not attained finality, therefore, we deem it proper to restore the issue to the file of the AO with a direction to give an opportunity to the assessee to substantiate as to what has happened to the outcome of the issues raised by the Development Commissioner, Noida SEZ and decide both the issues as per fact and law. While deciding the issues he shall also keep in mind the decision of the Tribunal and the Hon ble High Court in assessee s own case.- Appeal filed by the assessee is allowed for statistical purpose.

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• 2019 (10) TMI 713
  Validity of reassessment order passed by the AO for want of jurisdiction - Jurisdiction of ITO for issuing notice - assessment of long term capital gain arising from the sale of land - HELD THAT:- Mere participation by the party in the proceedings without jurisdiction will not bestow/confer jurisdiction on the authority. In the case in hand, it is clear that the ITO Ward 7(2) Jaipur was not having jurisdiction over the assessee when the return was already filed and processed by the ITO Ward -1 Hanumangarh. Accordingly, the initiation of proceedings u/s 147/148 as well as passing the reassessment order by the ITO Ward 7(2) Jaipur is bad in law for want of jurisdiction and thus the impugned order is quashed. Since the impugned reassessment order is quashed for want of jurisdiction, therefore, I do not propose to go into the other issues raised by the assessee in respect of the additions made by the AO. - Appeal of the assessee is allowed.

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• 2019 (10) TMI 712
  Bogus purchases - HELD THAT:- No sale without actual purchase of material keeping in view the assessee s nature of business. As noted by lower authorities, the assessee was in possession of primary purchase documents and the payments to suppliers were through banking channels. The sales turnover reflected by the assessee has not been disturbed / disputed by AO. At the same time, the assessee miserably failed to substantiate the purchases during assessment proceedings and could not produce any of the suppliers to confirm the transactions. Under such circumstances, the additions which could be sustained, 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 Ld. first appellate authority has rightly done. However, finding the estimated rate to be on the higher sider, we reduce the same to 12.5% of alleged bogus purchases. The same comes to Rs. 1,43,821/-. The balance addition stands deleted. The impugned order stand modified to that extent. Appeal stands partly allowed.

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• 2019 (10) TMI 711
  Addition u/s 68 - unexplained credit - HELD THAT:- The premise of the addition made by the Assessing Officer was that certain balances do not match with the accounts of the creditors. Now when the difference has been reconciled and balance has been explained and accounts got tallied, then where is the question of drawing any adverse inference. Even if in the first instance the balance was not tallying with the accounts of the creditors, then also, how the authenticity and credibility of third party accounts is given more precedence to the assessee s account when assessee has shown purchase bill wise details and corresponding sale and stock, matching with the bank accounts and entire transaction is through cheque. If the books accounts alongwith purchase and sales have not been doubted then account of sundry creditors cannot be doubted when there is running account and all the purchase have been settled either in this year or in subsequent year. Bogus purchases - ld. counsel before us has categorically pointed out that the assessee vide submission dated 17.09.2018 had specifically stated before the Ld. CIT (A) that all the bills of purchase and sales were available which were also produced before the Assessing Officer and same can also be produced once again if so desired for necessary verification. He especially drew our attention to the letter written to the Ld, CIT (A). Despite such a categorical averment, and without any such verification of the material on record, the addition has been confirmed. Addition on account of M/s. Arcotech Ltd . - assessee during the course of assessment proceedings had filed ledger account of the said party from which certain balance outstanding were noted by the Assessing Officer. At the fag end he had tried to send notice u/s. 133(6) to the said creditor but the response could not be received by the AO till the completion of the assessment. However, in the remand proceedings again inquiry was conducted by the Assessing Officer and the confirmations along with bank statements, ITR s and ledger account was received in response to notice u/s 133(6) and after verification he found that the credit balance have been reconciled or is matching with the books of account of the assessee. The assessee had also stated that bills of purchase and sales were available and are tallying with the accounts. Thus, when accounts and the amount stands reconciled and purchases are not in doubt, then no adverse inference can be drawn on the basis of finding given in the assessment proceedings that balance could not be reconciled. Under these circumstances, we do not find any reason as to how addition could be made or confirmed. Similarly, with regard to the A.V. Infraprojects Pvt. Ltd. and M/s. Progressive Alloys India Pvt. Ltd. also similar confirmations with the ledger account, bank statements, ITRs etc. have been received and Assessing Officer has found that the balance shown by the party and the assessee are tallying and all the transactions are matching from the bank statement. Thus, under these circumstances, no addition could have been made. Otherwise also, if the amount represents purchases made by the assessee on credit that does not mean that provision of Section 68 are attracted, if on inquiry made in the remand proceedings there is no adverse material against the assessee. Thus, no addition can be made. Accordingly, the additions made by the Assessing Officer and confirmed by the Ld. CIT (A) are directed to be deleted.

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• 2019 (10) TMI 710
  Validity of the re-opening of the assessment u/s 147 on account of change of opinion - Whether there was prima facie material on the basis of which the department could reopen the case? - HELD THAT:- The sufficiency and correctness of the material is not a thing to be considered as this stage. The decision relied by AR which justifiable on the facts are not applicable to the facts and the case as being justifiable, further the AR has not brought on record in contrary judgments in rebuttal to the contentions of the department. We hold that there is no sufficient material to establish that there was change of opinion on the part of the AO while recording reasons to believe u/s 147 of the Act. We find no merit and substance in the argument and in the absence of corroborative evidence to substantiate the contentions of the assessee on the change of opinion of the AO, the ld. Counsel, we approve the reason to believe that the income escaped assessment in the meaning of section 147. CIT(A) was justified in confirming the reopening of the assessment. Following the Hon ble Apex Court RAJESH JHAVERI STOCK BROKERS P. LIMITED [ 2007 (5) TMI 197 - SUPREME COURT] on the reopening of the assessment u/s 147 we uphold the order of the Ld. CIT(A) that the AO has reason to believe that the income had escaped assessment within the meaning of section 147. Interest income received from FDR s - Double addition being duly disclosed in the P L account and balance sheet in the return of income filed - We note that in the original assessment order the AO has applied net profit rate only on the contract receipts. AR has not brought on record any evidence to demonstrate either before the AO or the ld. CIT(A) or even in the appellate proceedings before us to show as to how the amount of interest income received from FDR s could be treated as part of assessee s business income or contract receipts when the net profit rate was applied by the AO on the contract receipts. Further the counsel has not established that whether there was a pre-condition to please the aforesaid the FDR s to procure business before applying for determination of contract tenders by the assessee. Assessee s claim to consider the interest on FDRs as part of his business income to give benefit of double taxation is not supported by a logical or cogent explanation. Accordingly, the ld. CIT(A) has rightly upheld the interest income from FDRs as other income of the assessee in the reassessment proceedings and confirmed the addition made by the AO.

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• 2019 (10) TMI 709
  Revision u/s 263 - disallowance of Nano Project related to expenses by treating the same as capital in nature - HELD THAT:- The company, however, has claimed only the revenue expenses incurred in relation to day to day operations at Singur, as deduction in its return of income and the relocation expenses have not been claimed as deductible expense. During the course of assessment proceedings these were examined by the assessing officer, the company has further furnished the details on the relocation expenses. Assessee made submissions that the AO had formed an opinion that these are revenue expenditure and assessee has rightly claimed the same. The AO has not disallowed these expenses while framing assessment under section 143(3) of the Act on this very reason and complete details were examined on various occasions as noted above. Hence, Revision on this count is bad. Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with rule 8D - HELD THAT:- We noted that complete details in respect to this filed before the AO during the course of assessment proceedings and the AO after examining the exempt income vis-a-vis expenses relatable to the same are already disallowed. In regard to propose exercise of revision with respect to working of disallowance made under section 14A of the Act Read with Rule 8D of the Rules relates to interest expenses paid for borrowings for R D expenses. We noted from the above details in respect to expenses related to Nano project and disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules relates to interest expenses paid for borrowings for R D expenses already examined by the AO during the course of assessment proceedings under section 143(3) of the Act. We noted that the provisions of section 263 of the Act for revising the assessment can be invoked only in a case wherein twin conditions i.e. order being erroneous and prejudicial to the interest of Revenue are cumulatively satisfied. This proposition has been settled by the Hon ble Supreme Court in the case of Malabar Industries Co. Ltd. vs. CIT [ 2000 (2) TMI 10 - SUPREME COURT] and CIT vs. Gabriel India Ltd. [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] . Similarly, where two views are possible and AO has adopted the one of the two possible views, even then the order cannot be held to be erroneous so as to prejudicial to the interest to the Revenue. Revision exercise carried out by the CIT is bad in law and hence, quashed. We quash the revision order passed by CIT under section 263 of the Act and allow the appeal of the assessee.

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• 2019 (10) TMI 708
  Reassessment proceedings u/s 147 - addition on account of bogus purchases from M/s AVI Exports - HELD THAT:- Hon ble Gujarat High Court in the case of Manzil Dinesh Kumar Shah [ 2018 (5) TMI 1176 - GUJARAT HIGH COURT] in which the AO in the reasons recorded that he reopened the assessment because it needs deep verification. The Tribunal had held that notice to be invalid. The Hon ble High Court confirmed the view of the Tribunal. The findings of the Hon ble High Court are reproduced above which clearly support the fact that reopening of the assessment in the matter is wholly illegal and invalid. The issue is, therefore, covered by above judgment of Hon ble High Court. Further, while granting sanction for reopening of the assessment, Ld. Addl. CIT Range-9, Surat has merely mentioned Yes, satisfied . In the same form for recording the reasons and approval the AO has wrongly mentioned that assessee has made transaction with M/s Gem Art instead of M/s AVI Exports. Such an approval u/s 148 was not considered favourably by Hon ble MP High Court in the case of CIT vs. S. Goenka Lime Chemicals Ltd. [ 2015 (5) TMI 217 - MADHYA PRADESH HIGH COURT] . I Initiation of reassessment proceedings as well as approval/sanction of Addl. CIT u/s 147/148 of the Act are invalid, illegal and against the provisions of law - Reopening of the assessment is invalid and bad in law and liable to be quashed. - Decided in favour of assessee.

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• 2019 (10) TMI 707
  Income from other sources - Valuing the share premium on the basis of book value of shares as reasonable value instead of valuing on the basis of Discounted Cash Flow (DCF) method and accordingly adding the share premium - HELD THAT:- We noted that in the case of Vodafone M-Pesa Ltd vs. PCIT [ 2018 (3) TMI 530 - BOMBAY HIGH COURT] held that in view of the Income Tax Rules, the method of valuation namely NAV method or DCF Method to determine the fair market value of share in terms of section 56(2)(viib) of the Act has to be done or adopted at the assessee s option. AO was undoubtedly entitled to scrutinize the valuation report and can tinker or determine a fresh valuation after confronting the assessee. However, the basis of valuation had to be DCF method and it is not open to the AO to change the method of valuation which the assessee has duly opted. Hon ble Bombay High Court has restored the matter back to the file of the AO. We noted that firstly in the present case the valuation done by the assessee for valuing its shares is on the basis of DCF method and the AO could not have substituted it by NAV method rather he should have arrived at another value, if any, by applying DCF method only. We also noted that the explanation and additional evidences produced before us shows that why projection has been made in that manner and have been substantiated by filing additional evidences/ 8. We noted that this issue has been considering by the Hon ble Bombay High Court and remanded back to the file of the AO the issue regarding considering the value of shares in term of section 56(2)(viib) of the Act on the basis of DCF method. Here, in this present case also, we direct the AO to consider these additional evidences and then can arrive at a correct value of share for charging of share premium in term of section 56(2)(VIIB) - Appeal of assessee is allowed for statistical purposes.

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• 2019 (10) TMI 706
  Addition on account of suppressed receipts - AO not considered the revised return of income - HELD THAT:- Allegation of assessing officer is that TDS disclosed in the return of income is only of Rs. 3.03 crore; whereas as per Form 26 AS is Rs. 5.18 crore. We have noted that in the ordinal return of income the assessee claimed TDS of Rs. 3.03 crore however, in the revised return of income filed by assessee on 5th November 2013, the assessee claimed TDS of Rs. 6.53(as per page 73 of paper book) . This fact clearly shows that the assessing officer has not considered the revised return of income. The revised return of income was filed within prescribed period of limitation under the Act. Considering the fact that the assessing officer has not considered the revised return of income filed by assessee within time, we restore this ground of appeal to the file of assessing officer to verify the fact and grant relief to the assessee in accordance with law. Disallowance of 25% of expenses - allegation of the Assessing Officer that the assessee has not maintained log books for use of expenses for business as well as for non-business purpose - HELD THAT:- AO has not called any specific voucher, bills or invoices before discarding the submission of the assessee. Commissioner (Appeals) confirmed the action of assessing officer with similar observation without specifying any reason or deficiency in the evidence furnish by assessee. The assessee is a corporate entity and engaged in the business of integrated financial services which consist of investment banking, portfolio, fund management, corporate advisory, institutional broking and distribution, retail brokering distribution in mutual advisory services and distribution etc. Since, none of the expenses claimed by assessee is disputed by the lower authorities. The lower authorities merely disallowed the expenses on ad-hock basis. Considering the fact that no deficiencies in the evidence furnish by the assessee was not specified nor any specific reason before making ad hoc disallowance was given by assessing officer therefore, we direct the assessing officer to delete the entire addition - Decided in favour of assessee Disallowance of computer maintenance expenses - HELD THAT:- Assessee has specifically stated in his reply dated 12th December 2014 that only system maintenance expenses were debited to the particular head. The assessee has not debited software charges in its profit and loss account. The assessee also stated that most of the expenditure is incurred on annual maintenance contract with a validity of one year only. The Hon ble jurisdictional High Court in CIT versus Raychem RPG Ltd [ 2011 (7) TMI 953 - BOMBAY HIGH COURT] held that even the expenditure is incurred for acquisition of software the same is allowable as revenue expenditure. Therefore, considering the decision of Hon ble Bombay High Court referred, we direct the assessing officer to delete the entire disallowance on account of computer maintenance expenses. In the result this ground of appeal is allowed. Disallowance of bad-debts - HELD THAT:- As perusal of those documentary evidence clearly establish that the assessee was able to recover only Rs. 20 lakhs and accordingly the remaining amount of Rs. 32.68 lakhs was claimed as bad-debts. Similar disallowance was made for Assessment Year 2010-11 and on in appeal before the ld. Commissioner (Appeals), the same was deleted. The assessee has specifically stated that income was duly accounted in earlier years. In our considered view, the assessee fulfilled all requisite condition prescribed under section 36(2) of the Act. Moreover, on similar set of fact, the similar disallowance was deleted by ld. Commissioner (Appeals) in appeal for Assessment Year 2010-11. Therefore, no justifiable reason for making disallowance of bad-debts written off, which has been sufficiently justified by assessee. Hence, we direct the Assessing Officer to delete the disallowance of bad-debts. Disallowance on depreciation on office equipment - @ 10% OR 15% - HELD THAT:- Assessing Officer restricted the disallowances to 10% on the air-conditioners, refrigerators, water heaters, communication equipment etc. instead of 15% as claimed by assessee holding that as per Appendix -1 the depreciation is allowable @ 10% only. We have noted that as per the rate of depreciation the 10% rate is applicable in respect of furniture and fittings including electrical fittings which consist of electrical wiring, switches, sockets and other fittings and fans. None of the item on which the assessee claimed is falls in the category-II of Appendix-1. Moreover, we find force in the submission of ld. AR of the assessee that the assessee correctly classified the items as a part of Plant Machinery block. We are also in full agreement with the submission of ld. AR of the assessee that once the assets form part of block of asset, the same cannot be interfered in any subsequent year. Hence, we direct the Assessing Officer to delete the disallowance Disallowance on account of loss on error trade - HELD THAT:- Assessee-company is engaged in the business of financial services, which consist of investment banking, portfolio and fund management, institutional broking and distribution, retail broking etc. The assessee in the show-cause notice issued by Assessing Officer has explained that due to human error in punching the wrong scrip code, or punching of wrong quantity or in punching buy order in place of sale order due to human error the mistake may occur, which may result in income or loss - assessee has sufficiently explained the trade loss. The Assessing Officer instead of considering the loss on account of error trade treated the same as speculative loss. We have further noted that the assessee has shown total receipt from operation of Rs. 74.24 crore and the trade loss claimed by assessee is miniscule. Explanation furnished by assessee, we direct the Assessing Officer to delete the disallowance on account of trade error - Appeal filed by assessee is allowed.

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• 2019 (10) TMI 705
  Approval u/s 10(23C)(vi) - educational institution - CIT(E) observed that assessee was not eligible for approval since it did not satisfy the conditions necessary for grant of approval being existing solely for education and not earning profits AND assessee had rented property from related parties thus attracting the provisions of section 13(1)(c) of the Act and on that certain information and submissions called for as being necessary for the grant of approval, were not filed by the assessee - HELD THAT:- A perusal of the order reveals that the Ld.CIT(E) has not carried out any investigation into the matter which are relevant for the grant of approval u/s 10(23C)(vi) - As pointed out by the CIT(E) himself in para 4 of the order, that for the purpose of grant of approval under the said section, the applicant needs to specify that it exists solely for educational purposes and not for the purpose of profit. From the entire order of the CIT(E) we find that there is no examination on the aspect of existence of the assessee for imparting education. There are no findings as to how the school was established by the society. Whether affiliation was granted to the school by any Board of Education, if so, the number of students being taught in the school and teachers therein, their qualifications and such other aspects to completely bring out the fact of the society existing solely for the purpose of education. We find that even the assessee has not brought out these facts in the letters submitted to the CIT(E). Restore the issue back to the CIT(E) for considering the approval afresh. The same was confronted to both the counsels who did not object to the same. - Appeal of the assessee stands allowed for statistical purposes.

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• 2019 (10) TMI 704
  Additions towards Employees contribution on account of PF ESI delayed payment - HELD THAT:- Hon ble jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. [ 2018 (9) TMI 798 - DELHI HIGH COURT] decided the identical issue qua delayed deposit of employees contribution on account of PF ESI against the assessee by holding that assessee would be entitled to deduction in terms of section 36(1)(va) of the Act to the extent if the employees contribution on account of PF ESI is deposited on or before the due date, and the employees contribution on account of PF ESI deposited beyond the stipulated period would not make the assessee company entitled to claim deduction from its return. Assessee company is not entitled for deduction u/s 36(1)(va) claimed on account of depositing the employees contribution towards ESI PF as per provisions contained u/s 2(24)(x) read with section 36(1)(va) after due date which is evident from table extracted in preceding para no.5. So, the case laws relied upon by the ld. AR for the assessee is not applicable to the facts and circumstances of the case.

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• 2019 (10) TMI 703
  Disallowance u/s 14A read with Rule 8D - disallowance of interest expenditure incurred by assessee for earning of exempt income - CIT(A) restricted the disallowance under Rule 8D(2)(iii) being 0.5% of average value of investments - HELD THAT:- Assessee s interest free funds available are more than the investment made in the instruments giving tax free income i.e. the dividend. It is also a fact that the assessee has earned dividend income. Hence, in view of the above fund position we are of the view that in view of the decision of Hon ble Bombay High Court in the case of HDFC Bank Ltd vs. DCIT [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] the presumption of investment in instrument giving rise to exempt income is out of interest free funds available with the assessee is in favor of assessee. Hence, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same. Disallowance of expenses relatable to exempt income under section 14A read with Rule 8D(2)(iii) of the Rules, being administrative expenses - HELD THAT:- We remand this issue back to the file of the AO, who will examine the facts of the case and will disallow the expenses relatable to exempt income by computing 0.5% of average value of investment under Rule 8D(2)(iii) of the Rules, only qua the investments which give exempt income. The AO will restrict the disallowance to that extent only. The issue of the assessee s appeal is restored back to the file of the AO. Addition made on account of interest income on accrual basis instead of due basis - HELD THAT:- CIT(A) allowed the claim of assessee by relying on the decision of Hon ble Bombay High Court on assessee s own case [ 2013 (2) TMI 893 - BOMBAY HIGH COURT ] as well as on various Tribunal judgments in assessee s own case Disallowance of broken period interest which was added as capital expenditure by the AO - HELD THAT:- Respectfully following the Tribunal decision in assessee s own case for earlier years, we upheld the order of CIT(A) deleting the disallowance of broken period interest. This issue of Revenue s appeal is dismissed.

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• 2019 (10) TMI 702
  Penalty levied u/s 158BFA(2) after the expiry of limitation period - period of limitation relating to the levy of penalty - change of jurisdiction of the concerned CIT / Principal CIT - HELD THAT:- The ITAT vide letter dated 27.1.2016 pointed out this fact to the CIT-I and requested that the copy of the order be sent to the concerned jurisdictional CIT. Thereafter, the orders were sent by the office of the Principal CIT-I to the office of the Principal CIT (Central). It is pertinent to mention here that change of jurisdiction of the concerned CIT / Principal CIT was the internal matter of the Department. No intimation was given to the Tribunal or placed on the file regarding the change of jurisdiction of the Principal CIT. The office of the ITAT Chandigarh sent the orders to the concerned Principal CIT as per the information regarding the jurisdiction available on the file / Form 36. Whether the limitation would start run from the ITAT had sent the order to the Principal CIT with whom the jurisdiction lied as per the record, though was transferred later on to another Principal CIT ? - As decided in ODEON BUILDERS PVT. LTD., GULBARGA ASSOCIATES (P) LTD. [ 2017 (3) TMI 1266 - DELHI HIGH COURT] once the ITAT sends a copy of an order to the Principal CIT / CIT and even the CIT (Judicial), going by the details as provided to it in the memo of parties and even if, therefore, there is a change concerning the jurisdiction of the CIT, it will not have the effect of postponing the commencing of the period of limitation in terms of section 260A(2)(a) of the Act. The Hon ble Delhi High Court while further answering the question No. (vii) has held that where there is a common order of the ITAT covering the several appeals, the limitation would begin to run when a certified copy is received first by either the CIT (Judicial) or one of the officers of the Department and not only when the CIT concerned receives it. The issue is squarely covered by the aforesaid decision of the Hon ble Delhi High Court. The penalty order in this case has been passed beyond the period of limitation, hence, the same is void ab initio and the same is accordingly set aside. - Decided in favour of assessee.

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• 2019 (10) TMI 701
  Addition u/s 68 - unexplained cash credit - HELD THAT:- We find that it is not in dispute that all the three loan creditors had sold three piece of land jointly held before advancing loan to the assessee company. Further, from the confirmation of account of Sh. Rajinder Singh, Sh. Raj Pal and Sh. Ramesh Yadav in the books of M/s EMM VEE Infrastructures (India) Pvt. Ltd. It is observed that opening balance of advance given by Sh. Rajinder Singh was Rs. 65,00,000/-, Sh. Raj Pal was Rs. 71,00,000/- and Sh. Ramesh Yadav was Rs. 50,00,000/-. Thus, in our considered opinion, creditworthiness of such a loan creditor cannot be doubted. In fact, in the instance case, actual creditworthiness of three loan creditors, namely, Sh. Rajinder Singh, Sh. Raj Pal and Sh. Ramesh Yadav was not impeached by the revenue by bringing on record any relevant material but addition was made by doubting the source of Rs. 18,00,000/- in the case of Sh. Rajinder Singh, Rs. 23,00,000/- in the case of Sh. Raj Pal and Rs. 13,00,000/- in the case of Sh. Ramesh Yadav. It is observed that no material has been brought on record to show that Rs. 18,00,000/-, Rs. 23,00,000/- and Rs. 13,00,000/- has flown from the exchequer of the assessee and was routed back by way of loan from Sh. Rajinder Singh, Sh. Raj Pal and Sh. Ramesh Yadav. It is an established position of law that u/s 68 of the Act in respect of loan creditor, the assessee is required to establish his source and not the source of the source. Therefore, the addition made of Rs. 18,00,000/- received from Sh. Rajnder Singh, Rs. 23,00,000/- received from Sh. Raj Pal and Rs. 13,00,000/- received from Sh. Ramesh Yadav by doubting their source cannot be sustained. - Decided in favour of assessee Addition on account of closing stock - AO was not satisfied with the explanation of the assessee and observing that the assessee has not explained the basis of allocation of opening WIP between cost and closing WIP, therefore, WIP transferred to cost is disallowed and added to income of the assessee CIT(A) reducing the addition made by the AO on account of closing stock - HELD THAT:- Both the parties before us could not point out any error in the order of the CIT(A), therefore, the grounds of appeal of the assessee as well as revenue are dismissed. Disallowance of cost on development of land claimed - addition made for the reason that from the sale and purchase document, it is not borne out that such expenditure was incurred on land and that no supporting bills and vouchers were produced by the assessee - HELD THAT:- CIT(A) deleted the addition on the ground that the said expenditure has been incurred by the assessee towards development cost of land at Rajpura in the immediately preceding assessment year 2011-12 and was accepted in the assessment year 2011- 12, in an assessment made by the AO u/s 143(3) of the Act. The DR merely relied on the order of the Assessing Officer. He could not bring any material on record to controvert the above findings of the CIT(A). No reason to interfere with the order of the CIT(A) which is confirmed and the ground of the revenue is dismissed.

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• Customs

• 2019 (10) TMI 700
  Interest on delayed refund - scope of duty and deposit - refund was rejected on the reason that no appeal was filed against the assessment order - whether the amount collected from the petitioner is a duty or deposit ? - HELD THAT:- No doubt, both duty and deposit are in the hands of the Revenue. At the same time, it is to be noted that right to credit or forfeit such deposit would arise only after determination of the liability to pay the duty . On the other hand, the right over the duty so paid is instant on the revenue and not a postponed entitlement - Therefore, an amount so determined as duty by processing the Bill of Entry and collected by the Revenue can never be termed as a deposit , even assuming that such collection, later, is found to be either unlawful or excessive - the claim of the Revenue that the amount collected was only a deposit and not duty , is factually incorrect and thus liable to be rejected. Whether the petitioner is entitled for interest on the amount refunded? - HELD THAT:- Liability to refund begins when it actually due and not when it is actually determined. At this juncture, it is worth to note that while adjudicating the duty liability, the Adjudicating Authority also imposes interest and penalty on such duty liability. It is not that duty alone is collected from the importer from the date of adjudication and on the other hand, such liability to pay duty is fastened on such importer from the date when it becomes due. Therefore, the Revenue collects the interest on such belated payment of duty and also penalty for not paying the same at the appropriate time. The same analogy is to be applied in the case of refund as well, while considering the payment of interest. Section 27A of the Customs Act was carefully coined for payment of such interest from the expiry of three months of the date of the application and not from the date of the order. The order of the respondent, impugned in this writ petition, cannot be sustained - Petition allowed - the respondent is directed to pay interest with permissible percentage under law, from the date of expiry of three months from the date of receipt of the refund application dated 20.09.2012.

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• 2019 (10) TMI 699
  Provisional release of detained goods - authorization for Import Clearance of Secondhand Digital Multifunction Print and Copying Machines - HELD THAT:- Writ Petitions are pending, however, by granting provisional release of the goods, so detained, by way of an interim measure. Since these writ petitions are filed only for provisional release of goods and in view of the fact that the Division Bench has granted such relief in those cases by way of interim order, subject to the condition imposed as stated supra, these Writ Petitions are disposed of. The petitioner in each writ petition shall pay the disputed amount in cash to the competent authority.

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• 2019 (10) TMI 698
  Smuggling - Betel nuts - Custom Officer believed that the betel nuts had been illegally smuggled, seized all four trucks along with the betel nuts - HELD THAT:- The finding recorded by the adjudicating authority is that there was a gap of one year and secondly, betel nuts in two trucks were whole whereas in two other were split when in the bills of entry, the betel nuts were whole. The issue of trade practice converting betel nuts from whole into spilt has not been looked into. The observation that the appellant could not purchase on credit from four unknown persons is misplaced, when four persons are admitting that they have sold the betel nuts on credit to the appellant, how can that be denied has not been looked into. That apart, four persons have filed four affidavits in this Court admitting that they have sold the betel nuts to the appellant. If any person has to sell his product to anyone and admits to have sold even abruptly creating buyer, that cannot be questioned, this aspect of the case too has not been looked into by the learned Tribunal. The learned Tribunal has not appreciated the contentions nor there is any logical reason recorded for agreeing with the findings recorded in the order in original. Whether dry betel nuts could be preserved for more than one year or not, no finding to that effect has been recorded except by showing that there is a gap of one year between import and sale, when according to learned counsel for the appellant dry betel nuts can be preserved after proper treatment for a longer period. Case remanded back to the learned Tribunal for deciding appeal filed by the appellant afresh - appeal allowed on remand.

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• 2019 (10) TMI 697
  Provisional release of imported goods - Ld. Principal Commissioner has directed to furnish bond of full value of the seized goods and bank guarantee of Rs. 85Lakh for provisional release - HELD THAT:- It appears that while passing the said order, the Principal Commissioner has not considered the amount of duty, interest and penalty of Rs. 87,05,435/- already deposited by the appellant. Therefore, the amount deposited by the appellant appears to be sufficient as security. However, on perusal of appellant s request for reconsideration of the condition for release of the goods vide letter dated 06.08.2019, we find that appellant themselves have proposed to give bank guarantee for 25% of the bond amount on the ground that major amount of Rs. 87Lakh has already been paid. It will be sufficient to safeguard the interests of the Revenue, if bank guarantee of 25% of the bond amount is furnished. Accordingly, the amount of bank guarantee reduced from Rs. 85 Lakh to 25% value of the seized goods. Appeal allowed in part.

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• 2019 (10) TMI 696
  Mis-declaration of imported goods - natural calcite powder - It was alleged that the goods had been mis-declared as the test results found the samples to be precipitated calcium carbonate and, thereby not eligible for exemption N/N. 21/2002-Cus dated 1st March 2002 - HELD THAT:- The contention of the appellant that oil absorption value and particle size are both critical in determining classification cannot be lost sight of. The test report does not refer to particle size and it has been officially admitted that the chemical facilities of the department is deficient in capacity to carry out that test. As the test result is faulty, we apply the principle laid down in M/S. GULSHAN POLYOLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, MEERUT [ 2018 (12) TMI 1573 - CESTAT ALLAHABAD] where it was held that appellant has correctly classified the Ground Natural Calcium Carbonate under chapter heading 25.30 of Central Excise Tariff Act, 1985 as Revenue has failed to produce any corroborative evidence in support of their classification. Appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 671
  Authorization for important clearance of secondhand digital multifunction print and copying machines - HELD THAT:- Writ petitions for similar prayer have been entertained and interim orders issued - Therefore, without going into the aspect of suppression and consequently maintainability of the writ petitions, and having regard to the main prayer sought for, and the interim orders granted earlier, we deem it fit to order provisional release of goods on the same terms, as done in the case of M/S. ASIAN COPIERS VERSUS THE COMMISSIONER OF CUSTOMS, ADDITIONAL COMMISSIONER, THE ASSISTANT COMMISSIONER, THE DIRECTOR GENERAL OF CUSTOMS, THE UNION OF INDIA [ 2019 (2) TMI 1659 - MADRAS HIGH COURT ] . It is directed that applicable duty on the enhanced value, as determined by the Chartered Engineer, would come to around Rs. 2 lakhs and above. Goods need not be detained for the disputed amount to be paid - Petitioners are directed to pay the duty applicable on the enhanced value, as determined by the Chartered Engineer. On payment of the same, goods detained in the Custom Fleet Stations, licensed by the Customs, be released. Till the date of release of goods, demurrage charges be waived. Other disputes raised in the writ petitions, would be decided. The request of the writ petitioners, is reasonable and therefore, hope that the respondents would implement the interim order of this Court, without any delay - petition dismissed.

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• Insolvency & Bankruptcy

• 2019 (10) TMI 695
  Admissibility of application - initiation of CIRP - Section 10 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The impugned order dated 15th March, 2019 is against the provision of law and cannot be sustained. It is not in dispute that the application filed under Section 10 is without approval of the Annual General Meeting / Extra-Ordinary General Meeting . Simultaneously a plan was submitted which is against the provision of Section 65 of the I B Code as it appears that it is filed with malicious intent for any purpose other than for the resolution of insolvency and liquidation. For this reason, we set aside the impugned order dated 15th March, 2019. The petition under Section 10 of the I B Code filed in Form 6 is dismissed.

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• 2019 (10) TMI 694
  Maintainability of application - Initiation of CIRP - Corporate Debtor defaulted in paying an amount - HELD THAT:- Since the Corporate Debtor has not even repaid the amount ordered to be recovered from the debtor even after lapse of almost two years, the Financial Creditor has now filed this Company Petition u/s. 7 of the Code on 10.04.2019 for initiation of CERP against the Corporate Debtor for making a claim of Rs. 135,65,99,352 as on 31.03.2019. The Corporate Debtor has stated that they have already submitted One Time Settlement proposal to the Financial Creditor (State Bank of India) authorities, thereby, the Corporate Debtor needs time to remain waiting for answer from the Creditor Bank (State Bank of India) - this Bench being satisfied that the Financial Creditor has proved the existence of debt of Rs. 135,65,99,352 and default as on 31.03.2019 against this Corporate Debtor. The Financial Creditor has also filed consent letter in form-2 given by the Insolvency Resolution Professional, In view of the same, we hereby admit this Company Petition. Petition admitted - moratorium declared.

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• FEMA

• 2019 (10) TMI 672
  Violation of provisions under FCRA, 1976 - foreign contribution received by the respondent-petitioner - HC quashed the FIR - HELD THAT:- The impugned order passed by the High Court is not sustainable. In a petition filed under Section 482 Cr.P.C., the High Court has recorded findings on several disputed facts and allowed the petition. Defence of the accused is to be tested after appreciating the evidence during trial. The very fact that the High Court, in this case, went into the most minute details, on the allegtions made by the appellant-C.B.I., and the defence put-forth by the respondent, led us to a conclusion that the High Court has exceeded its power, while exercising its inherent jurisdiction under Section 482 Cr.P.C. The assessment made by the High Court at this stage, when the matter has been taken cognizance by the Competent Court, is completely incorrect and uncalled for. The High Court has proceeded on the premise that the appellant has admitted the receipt of foreign contribution from his father Mr. Vipin Khanna, who is an Indian passport holder. Infact, it is not so. It is a case of the appellant-CBI, that the foreign contributions were received by the respondent from different entities in the foreign country, without permission from the Government. On the other hand, the case of the respondent, in defence, is that he has received such funds from his father Mr. Vipin Khanna. Appeal allowed.

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• Service Tax

• 2019 (10) TMI 693
  Denial of CENVAT credit on various inputs services which are consumed for construction of the building - HELD THAT:- There are no ground to entertain this appeal. Appeal dismissed.

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• 2019 (10) TMI 692
  Demand of Interest - Section 11AA of Central Excise Act - HELD THAT:- On identical issue, this Tribunal in the case of VIJAYA BANK VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH [ 2019 (3) TMI 975 - CESTAT BANGALORE ] has set aside the demand of interest - appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 691
  CENVAT Credit - input services - Errors and Omissions Policy and Transit Insurance - HELD THAT:- The issue decided in the case of M/S. SIFY TECHNOLOGIES LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI SOUTH [ 2019 (3) TMI 345 - CESTAT CHENNAI] where it was held that this insurance policy is taken to cover the risk of fixed assets and is eligible for credit. Hence the disallowance is unjustified - appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 690
  CENVAT Credit - input services - outdoor catering service - rent a cab service - rejection on the ground that it has no nexus with the output service of the Appellant - period in dispute is April, 2007 to March, 2010 - HELD THAT:- The services of outdoor catering are used by the appellant for its business activity during office hours and not as a personal or welfare measure for its employees nor it s a perk/ perquisite provided by the appellant to its employees. The Appellant is also not recovering the cost of the same from its employees. The said service has been debited to P L A/c of the Appellant, as a business expenses. Rent-a-cab service - HELD THAT:- It is the case of the appellant that the said cab service is utilized for providing facilities to the appellant s employees for travelling from office to client s place for business purpose. The said service is not being used for the personal use of the employees. Alongwith the Memo of Appeal, the Appellants have filed details of 75-100 invoices to establish the nexus between the aforesaid input service with the output service - Rent-a-cab service has been excluded from the definition of input service by the 2011 amendment w.e.f. 1.4.2011 and prior to that it was within the definition of input service. The services of outdoor catering service as well as rent-a-cab service are in relation to the business activity undertaken by the Appellant and the Appellant is eligible for Cenvat Credit of the aforesaid input services - submission of the Revenue that input services do not have direct nexus to the business activity of the Appellant is not sustainable - Appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 689
  Refund of Service tax - inclusion of cost of goods and materials supplied in assessable value - Rule 5 (1) of Service Tax (Determination of Value) Rules, 2006 - HELD THAT:- On identical set of facts for the earlier period, this Tribunal in the case of M/S. COIMBATORE ANAMALLAIS AGENCIES PVT. LTD., COIMBATORE VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, COIMBATORE [ 2019 (1) TMI 437 - CESTAT CHENNAI] has allowed the appeal, holding that cost of material reimbursed by the manufacturer cannot be subjected to levy of service tax under the provisions of Section 67 of the Finance Act, 1994. In view of the fact that on the identical facts, for the previous period, appeal of the appellant has already been allowed by the Tribunal, we do not find any justifiable reason to accept the prayer of Revenue in support of confirmation of the adjudged demand, especially in view of the fact that the issue arising out of the present dispute is no more open for any debate. Appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 688
  Levy of service tax - Intellectual Property Rights Services - Consulting Engineering Service - reverse charge mechanism during the period 2003-2008 - extended period of limitation - HELD THAT:- The entire amount of service tax demand along with interest has already been paid and the assessee has also availed CENVAT Credit of the service tax so paid - Ld. Counsel is not pressing for setting aside of the demand of service tax. Imposition of penalties - HELD THAT:- This is a case of revenue neutrality where the very same assessee would be entitled to CENVAT Credit of the service tax paid under reverse charge mechanism. There cannot be any motive to evade payment of service tax - penalties set aside. Appeal allowed in part.

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• Central Excise

• 2019 (10) TMI 687
  Maintainability of appeal - non-deposit of mandatory pre-deposit as envisaged under Section 35F of Central Excise Act, 1944 - HELD THAT:- Rule 3(1) of the 2004 Rules provides that a manufacturer or producer of final products or a provider of output service shall be allowed to take credit, which is called CENVAT Credit, in respect of the items indicated therein. Rule 3(4) provides that CENVAT credit may be utilised for payment in connection with the items indicated therein from (a) to (e). Rule 3(4) does not appear to be exhaustive and it does not impose any prohibition prohibiting an assessee from availing such credit for the purpose of pre-deposit. Appeal not maintainable and is dismissed.

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• 2019 (10) TMI 686
  Rejection of Settlement Application - non-cooperation as understood by the Settlement Commission - HELD THAT:- The Settlement Commission could not have held against the petitioner company on the ground that despite receiving all the Annexures sought by it, it was dragging its feet. In this regard, we may also note that the finding of the Settlement Commission that there was non-cooperation on the part of the petitioner company is not in keeping with the law laid down by a Division Bench of the High Court for the States of Telangana and Andhra Pradesh in ANIL RE-ROLLING MILLS V/s. COMMISSIONER OF CENTRAL EXCISE [2015 (7) TMI 751 - ANDHRA PRADESH HIGH COURT] . Therein, the Division Bench observed that the expression cooperation in the context of adjudication by the Settlement Commission would mean true and full disclosure of the facts pertaining to the assessee and non-cooperation would mean the opposite of it. The failure to submit its response and that too when the material sought by the petitioner company had not been provided to it would not amount to non-cooperation as understood by the Settlement Commission. The order dated 16.03.2018 passed by the Settlement Commission non-suiting the petitioner company on the ground of such non-cooperation therefore cannot be countenanced. The writ petition is accordingly allowed setting aside the order passed by the Settlement Commission and remitting the matter to it for consideration afresh.

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• 2019 (10) TMI 685
  CENVAT Credit - input services - sales commission given for sales promotion - extended period of limitation - HELD THAT:- The sales promotion relates to activities that stimulated sales achieved through contacts, advertisements, discounts, exhibition or trade show, commission, give away, merchandisation, special offer and similar activities that would act as incentive to get people to buy a product - This being the meaning of sales promotion, it is imperative to have a look at the agreement Exhibit-B to find out if the activities of appellant sales promotion agency would amount to pure sale or sales promotion. Extended period of limitation - HELD THAT:- The consistent judicial findings are available including the decisions in M/S BEDMUTHA INDUSTRIES LTD. VERSUS CCE ST, NASHIK [ 2019 (2) TMI 408 - CESTAT MUMBAI] , M/S ROSA SUGAR WORKS VERSUS CCE. ST. -LUCKNOW [ 2015 (5) TMI 381 - CESTAT NEW DELHI] and M/S. BIRLA CORPORATION LTD. VERSUS CCE, LUCKNOW [ 2014 (6) TMI 385 - CESTAT NEW DELHI] , to the effect that audit report cannot form the basis for invocation of extended period. Appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 684
  100% EOU - the impugned goods were proceeded against on the premise that these goods were being cleared into the domestic tariff area on which duty liability arises under section 3 of Central Excise Act, 1944, in show cause notice issued on 12th May 1994 - HELD THAT:- The appellant is a 100% export oriented unit entitled to duty-free clearance of raw materials, consumables and capital goods required for manufacture of the permitted products intended for export. The supply of impugned goods to a project funded by the International Development Agency, and against international competitive bidding is also undisputed. There is no doubt that such supplies do result in saving of foreign exchange, and for that reason, are extended the benefits of deemed export without having to leave the shores of India. However, these are prescriptions under the Export Import Policy and entitlements are restricted to the incentives enumerated therein. It is also not the case of the assessee that the central excise authorities or customs authorities are seeking to deny them the benefit granted at the time of import. In terms of Export Import Policy, the eligibility of inclusion of such clearances in the prescribed export obligation automatically derives for them the benefit of import duty exemption. The clearance have been effected to the domestic tariff area with permission accorded by the jurisdictional Development Commissioner in accordance with the prescription in the Export Import Policy. The benefits of various concessions available therein would apply if within the quantitative prescriptions in the Export Import Policy and the relevant notification - the impugned order has not examined the applicability of the said notification or the submission on the computation of the duty liability. Holding that the proviso in Section 3(1) of Central Excise Act, 1944 is applicable to the impugned goods, the matter is remanded back to the original authority for computation of the duty liability after applying eligible notifications and scrutinising the claim of the appellant to a lesser assessable value - appeal allowed by way of remand.

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• 2019 (10) TMI 683
  Process amounting to manufacture - whether the activity carried out in the Daman factory of cutting/slitting of jumbo rolls of plain PVC Sheets into smaller rolls and printing of the same amounts to manufacture or otherwise? HELD THAT:- Tribunal in the case of M/S BOMBAY KUNSTSTOFF PHARMA SUPPLIES P. LTD., JUSTIN MARTIN VERSUS C.C.E. S.T. DAMAN [ 2018 (8) TMI 14 - CESTAT AHMEDABAD] where it was held that the activities of printing of PVC sheet by the Appellant does not amount to manufacture. - once it is held that PVC sheets cleared by Thane unit was a final product and activity of cutting/slitting and printing carried out at Daman unit did not amount to manufacture, then question of paying duty on printing charges by the Appellant did not arise. The appeal filed by the department before the Supreme Court was dismissed in COMMNR. OF CENTRAL EXCISE, MUMBAI VERSUS M/S RAJPUROHIT GMP INDIA LTD. ORS. [ 2008 (10) TMI 7 - SUPREME COURT] . The Supreme Court while upholding the decision of the Tribunal held that the activity of cutting and slitting sheets/films did not amount to manufacture. Once it is not in dispute that the matter was transferred to Call Book awaiting the aforesaid decision of the Hon ble Supreme Court, the Adjudicating Authority was in error in ignoring the ratio laid down by the Hon ble Supreme Court. Valuation - inclusion of amount towards assessable value of goods - HELD THAT:- To include any amount towards assessable value of goods, there must first be manufacture to attract the charging section of the Central Excise Act and only then the valuation of goods under section 4 will have to be looked into - In the present case, since the activity of cutting/slitting and printing of PVC sheets does not amount to manufacture, the question of including any charges towards printing in the assessable value will not arise. In the present case as well the evidence relied upon in the form of price lists have been resumed from the residence of Mr. Omprakash who as per Appellant was never employed with them. Apart from that, the fact that cross examinations could not be conducted due to delay in adjudication cannot be overlooked - the price list and statements cannot be relied upon without being supported by direct evidence showing under valuation and receipt of cash as alleged and consequently it cannot be conclusively proved that the Appellant had received any amount in cash as alleged in the show cause notice. Be that as it may, the demand confirmed against the Appellant in any event is required to be set aside as the activity carried out at daman factory did not amount to manufacture. Time Limitation - HELD THAT:- The allegations made in the show cause notice on the basis of receipt of cash towards printing charges by the Appellant is not supported by any corroborative evidence - the extended period of limitation cannot be invoked in the facts of the circumstances of the present case. Appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 682
  SSI Exemption - N/N. 8/2003 - CE dt. 01.03.2003 - exemption denied to the Appellant on ground that the area falls under the jurisdiction of Jamnagar Development Authority (JADA) which is constituted for development of area falling outside the jurisdiction of Jamnagar Municipal Corporation - HELD THAT:- It is not in dispute that the area is falling under rural area of Jamnagar which is apparent from the certificate issued by the Revenue officer (Mamlatdar) who is having jurisdiction over the land. The Jamnagar Area Development Authority is only for the purpose of development of area and this in turn would not ipso facto change the status of land from rural to urban as apparent from Section 3 of Chapter - II of Gujarat Town Planning and Urban Development Act, 1976 as per which the State Government for the development of an area notify the same to be a development area. No evidence has been brought on record to show that the impugned area does not fall under rural area and therefore the denial of SSI exemption Notification is not based upon any evidence - This abundantly makes it clear that at the material time, the unit was situated in rural area and hence there is no reason to deny exemption benefit to Appellant. There is no reason to deny the SSI Exemption benefit to the Appellant and there is no reason to demand duty and penalty from Appellant unit - In case of co-appellants, we find that since the demand itself is not sustainable on merits, there is no reason to impose penalty upon them, Further there is no basis to impose penalty upon them when the Arbee Power is only owner of brand and Shri Kimjibhai is only raw material supplier. Appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 681
  Clandestine removal - handmade biris - it is alleged that appellant, a manufacturer of handmade branded biris, have clandestinely stored 1,72,300 nos. of handmade biris (including 1,01,800 from adjoining premises) - alleged removal of 1,87,20,615 nos. of biris clandestinely on the basis of private records - HELD THAT:- The quantum of biri entered in the stock account were cleared on payment of duty and the rest was cleared unaccounted, without payment of duty. Further, in the statement of the biri thekedar/ Abdul Salam he has stated that he has been supplying completely manufactured biris, and was not receiving any raw material from the appellant by way of job work. Further, other than the unaccounted stock of biris lying in the factory premises and in the adjoining premises of his uncle, there is no other evidence of clandestine manufacture and removal. There is no allegation that the stock of biri found in the adjoining premises (belonging to uncle of the appellant) were the branded goods of the appellant. Thus, the cogent explanation given by the appellant that such stock lying at the premises of his uncle were unbranded biris, purchased for trading, has not been found to be untrue. Further, there is no corroborative evidence brought on record by Revenue in support of clandestine manufacture and clearance of biris, although same was accepted by the Proprietor, who was not keeping good mental health. Further, it is also not the case of Revenue that the stock found in the factory premises was lying in complete manufactured stage, and properly packed with brand name. Confiscation with respect to 18,800 nos. of biris, which were found labelled and packed (10 biris x 20 katta x 94 pudas) upheld - So far the rest of the biris is concerned, the allegation is not substantiated and is based on presumption and assumption - appeal allowed in part.

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• 2019 (10) TMI 680
  Levy of Central Excise Duty - final products viz Zarda Scented Tobacco packed in pouches - Rule 6 of the Chewing Tobacco Rules - availability of CENVAT Credit - applicability of N/N. 17/2010 CE (NT) dt. 13.04.2010 - HELD THAT:- The Chewing Tobacco and Unmanufactured Tobacco Packaging Machines (Capacity Determination Collection of Duty) Rules which came into effect from 08.03.2010 were made applicable to Zarda scented Tobacco also. The chewing tobacco rules provided for availment of cenvat credit on chewing tobacco procured in bulk and used in packing of Tobacco pouches with the aid of packaging machines. When the Chewing Tobacco and Unmanufactured Tobacco Packaging Machines (Capacity Determination Collection of Duty) Rules also become applicable to Zarda scented tobacco, it was just obvious that the Zarda scented tobacco came at par with chewing tobacco in terms of levy of duty as well as availment of cenvat credit. The Appellant s representation to the authorities led to explicit mention of Zarda Scented Tobacco in Rule 16 so as to make it eligible for availing cenvat credit. In our view when the Chewing tobacco rules were made applicable to the Zarda Scented Tobacco, it explicitly meant that whatever duty liability and manner of levy alongwith facility of credit was applicable on chewing tobacco was also applicable to Zarda scented tobacco. Pertinently when the legislation wanted to keep Zarda scented tobacco in same category as chewing tobacco, it also meant that the cenvat credit as available to chewing tobacco would also be available to Zarda scented Tobacco. Extended period of limitation - HELD THAT:- There is no reason to allege malafide intention/ suppression or deliberate action on the part of Appellant to avail alleged ineligible cenvat credit. From the facts it is apparent that the Appellant were under bonafide belief that being their goods at par with the chewing tobacco, the cenvat credit is available to them. They even made representation with the department and ultimately the goods become eligible for cenvat credit. Therefore there is no reason to hold the Appellant responsible of any deliberate act to evade duty or avail ineligible cenvat credit. Penalty - HELD THAT:- Even if it was assumed that the Appellant are not eligible for credit than too, there was no reason to impose penalty upon them - Penalty set aside. Appeal allowed - decided in favor of appellant.

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• 2019 (10) TMI 679
  CENVAT credit - inputs - duty paying invoices - credit has been denied for want of register 23A only - HELD THAT:- The document is relevant piece of evidence - Also the ground for denying relief in the order under challenge is the presumption about no possibility of such huge quantity to be transported by one tractor cannot be the sole criteria to adjudicate the impugned issue. Thus, holding the document as prayed to be produced as an utmost important document and that the same was not produced earlier, the matter remanded to the original adjudicating authority with the direction to appellant to produce all relevant record including RG-23 (Part I II) before the authority within 15 days of receiving the notice of the subsequent adjudication - appeal allowed by way of remand.

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• 2019 (10) TMI 678
  Maintainability of appeal - Non-compliance with the pre-deposit - HELD THAT:- It is seen that as the appellant did not deposit the directed amount, the appeal was again dismissed by Commissioner (Appeals) for non-compliance with the directions of the Tribunal s order - It is seen that the appellant have not still deposited the amount as directed by the Tribunal, though they have deposited 10% of the penalty in terms of the amended provisions of Section 35F. In terms of the directions of the Tribunal the appellant was duty bound to deposit 75% of the penalty amount. Having not deposited the same, the appeal has rightly been rejected by Commissioner (Appeals). The delay in filing the appeal before the Tribunal is of 1174 days. No justifiable and reasonable cause stands advanced by the appellant for such a delay in filing the appeal. The huge delays, especially when the appellant s appeal has no merits, cannot be condoned. The appeal dismissed itself as barred by limitation as also by observing that inasmuch as, the appellant has not honoured the Tribunal s directions, nothing survives in the appeal.

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• CST, VAT & Sales Tax

• 2019 (10) TMI 677
  Refund claim - amount deposited towards its liability of turnover tax under Section 3-G of the U.P. Trade Tax Act, 1948 - period 24.01.2005 to 31.01.2005 - HELD THAT:- The fact that the assessee deposited that amount two days after withdrawal of the ordinance, would also be of no relevance as what is relevant to be seen is the date on which the liability arose and whether the withdrawal of the ordinance had any impact on the liability that stood crystallized. Examined in that perspective, the withdrawal of the offending ordinance was only prospective. There is no case of the assessee it was made with retrospective effect. Accordingly, the turnover tax liability existed in law up to 23.02.2005. The case of the assessee falls in the last category as discussed above, where the liability related to the period prior to 03.02.2005 but it stood realized and thus recovered. The assessee could not have claimed for refund either under the existing law or the administrative decision of the State contained in the communication dated 26.07.2005. There is no room to examine the issue any further, in the present revision application - revision dismissed.

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• 2019 (10) TMI 676
  Classification of goods - mosquito repellent - classification under Schedule II of entry tax Act within the meaning of Section 3 (1) (b) of Madhya Pradesh Commercial Tax Act, 1994 - whether mosquito repellent is insecticide or not? HELD THAT:- The mosquito repellent has been held to be an insecticide, not only by the Division Bench of Allahabad High Court but, also by the Kerala High Court in the case of TRANSELEKTRA DOMESTIC PRODUCTS PRIVATE LIMITED VERSUS STATE OF KERALA AND OTHERS [ 2000 (7) TMI 945 - KERALA HIGH COURT] and by the Madras High Court in the case of TRANSELEKTRA DOMESTIC PRODUCTS PVT. LTD. VERSUS COMMERCIAL TAX OFFICER, PORUR ASSESSMENT CIRCLE, MADRAS [ 1992 (4) TMI 225 - MADRAS HIGH COURT] . The mosquito repellent contains an insecticide and it not only repels the mosquito but also is capable of killing the mosquito, and therefore, is covered under the entry of insecticides and pesticides. Thus, the Madhya Pradesh Commercial Tax Appellate Board was justified in coming to the conclusion that the applicant / Company was liable to be taxed on the entry of mosquito repellent under Schedule II of the Madhya Pradesh Entry Tax Act, 1976 within the meaning of Section 3 (1) b of the said Act. Appeal dismissed - decided in favor of Revenue.

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• 2019 (10) TMI 675
  Rectification of mistake - the figures in respect of sale of products liable to VAT and sale of service liable to service tax had been interchanged inadvertently - principles of natural justice - HELD THAT:- It is seen that the Assessing Officer has passed the impugned order after providing sufficient opportunity to the petitioner. Going by the order impugned in this writ petition, it is seen that the petitioner was given several opportunities. However, considering the fact that the claim of the petitioner is that there is a genuine mistake committed in interchanging the figures relating to sale of products as well as sale of service and when such mistake is sought to be rectified and further considering the fact that the petitioner-Company is engaged in rendering maintenance service to highly sophisticated Cancer equipments at the Government Hospitals, this Court is of the view that an indulgence can be shown to the petitioner as a final chance before the Assessing Officer to place all the material documents in support of their contention so as to enable the Assessing Officer to redo the assessment and pass fresh orders. However, such indulgence can be shown only by putting the petitioner on some terms. The matter is remitted back to the Assessing Officer for redoing the assessment.

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• Indian Laws

• 2019 (10) TMI 674
  Termination of contract - non-performance of the contract - It was the specific case on behalf of the original claimants that the termination was absolutely illegal and not being in according with the terms of the contract - HELD THAT:- On appreciation of evidence and considering the various clauses of the contract, the learned Arbitral Tribunal has observed and held by giving cogent reasons that the termination of the contract was illegal and contrary to the terms of the contract and without following due procedure as required under the relevant clauses of the contract. The said finding of fact recorded by the learned Arbitral Tribunal is on appreciation of evidence. The said finding of fact has been confirmed in the proceedings under Sections 34 and 37 of the Arbitration Act. Thus, there are concurrent findings of fact recorded by the learned Arbitral Tribunal, First Appellate Court and the High Court that the termination of the contract was illegal and without following due procedure as required under the relevant provisions of the contract. In the present case, the categorical findings arrived at by the Arbitral Tribunal are to the effect that the termination of the contract was illegal and without following due procedure of the provisions of the contract. The findings are on appreciation of evidence considering the relevant provisions and material on record as well as on interpretation of the relevant provisions of the contract, which are neither perverse nor contrary to the evidence in record - as such, the First Appellate Court and the High Court have rightly not interfered with such findings of fact recorded by the learned Arbitral Tribunal. Once the finding recorded by the learned Arbitral Tribunal that the termination of the contract was illegal is upheld and the claims made by the claimants have been allowed or allowed partly, in that case, the counterclaim submitted by the petitioners was liable to be rejected and the same is rightly rejected. SLP dismissed.

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• 2019 (10) TMI 673
  Sealing of premises - Whether the Respondent is entitled to refund of the licence fee and the differential amount for the period during which the unit was sealed? - HELD THAT:- The Respondent is entitled for refund of licence fee and the differential amount. The High Court failed to notice that there is no prior adjudication in favour of the Respondent and the Respondent was given an opportunity to show cause as to why the premises should not be sealed. After considering the explanation submitted by the Respondent, the penalty was imposed on the Respondent and due to the failure of the payment of the amount of penalty, the premises were sealed. Appeal disposed off.

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