TMI Tax Updates - e-Newsletter
October 21, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax CST, VAT & Sales Tax

News

1. Foreign Direct Investment Inflow

Notifications

Customs

1. 37/2020 - dated 20-10-2020 - Cus

Seeks to further amend notification no. 152/2009 dated 31.12.2009, regarding the rate of duty of customs on imports of "Polybutadiene Rubber" originating in Korea RP and imported under the India-Korea Comprehensive Economic Partnership Agreement.

2. 57/2020-Customs (N.T./CAA/DRI) - dated 16-10-2020 - Cus (NT)

Amendment in Notification No. 74/2016-Customs (N.T.) dated 18.05.2016

3. 56/2020-Customs (N.T./CAA/DRI) - dated 16-10-2020 - Cus (NT)

Appointment of CAA by DGRI

GST - States

4. 29/2020– State Tax - dated 19-10-2020 - Delhi SGST

Seeks to prescribe return in FORM GSTR-3B of DGST Rules, 2017 along with due dates of furnishing the said form for April, 2020 to September, 2020

5. CCT/26-2/2018-19/59/1505 - dated 17-10-2020 - Goa SGST

Seeks to amend Notification No. CCT/26-2/2018-19/56/255 dated 22nd May, 2020

6. 842-F.T. - dated 15-10-2020 - West Bengal SGST

Seeks to amend notification 442-F.T. dated 03.04.2020 to extend the date of implementation of the Dynamic QR Code for B2C invoices till 01.12.2020.

7. 841-F.T. - dated 15-10-2020 - West Bengal SGST

Seeks to amend notification no. 441-F.T. dated 03.04.2020 to specify that aggregate turnover of any preceding financial year from 2017-18 onwards shall be considered for the purpose of liability to issue e-invoice, and in addition to B2B supplies e-invoice has to be issued in case of export also.

8. 09/2020–C.T./GST - dated 15-10-2020 - West Bengal SGST

Seeks to grant waiver / reduction in late fee for not furnishing FORM GSTR-4 for 2017-18 and 2018-19, subject to the condition that the returns are filed between 22.09.2020 to 31.10.2020.

SEBI

9. SEBI/LAD-NRO/GN/2020/37 - dated 19-10-2020 - SEBI

Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2020

10. SEBI/LAD-NRO/GN/2020/36 - dated 19-10-2020 - SEBI

Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Second Amendment) Regulations, 2020

Circulars / Instructions / Orders

Customs

1. 47/2020 - dated 20-10-2020

Contactless delivery of international courier consignments

Highlights / Catch Notes

GST

• "Kavi Cut Tobacco" Classified as Manufactured Chewing Tobacco Under Tariff Heading CTH 2403 9910.

  Case-Laws - AAAR : Classification of goods - Chewing tobacco with the brand name “Kavi cut tobacco” - it is evident that the raw material undergoes a set of processes and emerges as a distinct product which makes it marketable/consumable for the chewing needs. - Once it is held that the product is ‘Manufactured Chewing tobacco’, the classification of the product is under CTH 2403 9910 which specifies ‘Chewing Tobacco’ - AAAR
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• US Client Services: Local or Export Under GST? AAR Upholds Zero-Rated Benefit Interpretation.

  Case-Laws - AAAR : Supply of services - local services or export of services - services provided to the US Client directly - benefit of zero-rated - The statute is unambiguous in as much as it says, the person liable to pay the consideration for supply of services is the ‘Recipient’ of such supply and ‘Consideration’ is any payment made whether by the recipient or any other person for such supply. - Order of AAR sustained - AAAR
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• TDS Provisions u/s 51 of CGST and KGST Act, 2017, Not Applicable to Non-Government Entities.

  Case-Laws - AAR : TDS liability under GST - The applicant is neither established by any Government with 51% or more participation by way of equity or control, to carry out its function nor is a Society established by the Central Government or the State Government or a local authority under the Society Registration Act, 1860. - the provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 are not applicable to the applicant. - AAR
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• Consultancy Services for Municipal Functions Exempt from GST; Services to Private Hospitals Taxable Under Article 243W.

  Case-Laws - AAR : Exemption from GST - pure consultancy services provided to the Municipalities and Corporations - he services provided by the applicant are in relation to the function entrusted to the Municipality under article 243W of the constitution. Hence the applicant is entitled to the benefit of exemption - However, pure consultancy service to private hospitals are taxable - AAR
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• Input Tax Credit Limited for Medicines and Food Supplied to Hospital Inpatients Under Healthcare Services Rules.

  Case-Laws - AAR : Input Tax Credit - medicines supplied to patients admitted in hospital - medicines supplied to patients treated as out-patients - medicines supplied to other than inpatients and out-patients - supply of food and beverages to the patients admitted in hospital. - The input tax credit is to be restricted when supplied to inpatients and is part of the health care services. - No credit in respect of exempted services - Otherwise, the ITC may be available - AAR
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• Liaison Office Activities Deemed Supply of Services; Classified as Intermediary Under IGST Section 2(13) and CGST Section 2(84.

  Case-Laws - AAR : Classification of supply - supply of services or not - Activities of a liaison office - The applicant has claimed that they are not “person” as per Section 2 (84) of CGST Act, 2017. However we find that the definition is very wide in scope and covers every artificial juridical person, not falling within any of the above - they are a distinct legal entity and are aptly covered under the definition of intermediary as per Section 2(13) of IGST Act, 2017. - AAR
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• Claim ITC on Capital Goods: Rule 43 GST Rules Explained. Use Rule 42 for Inputs & Input Services.

  Case-Laws - AAR : Input tax credit (ITC) - proportionate claim subject to the goods being capitalised in their books of account, the applicant is eligible to claim Input tax on such goods as ‘Capital Goods’ and the Provisions of Rule 43 of the GST Rules is applicable to determine the eligible credit in respect of the taxable supplies made by them. In respect of Inputs and Input services, the attributable credit is to be arrived at by applying Rule 42 of the GST Rules. - AAR
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• Sub-contractor's Metro project services classified as "Works Contract" under CGST Act; 12% GST rate applies.

  Case-Laws - AAR : Classification of services - rate of tax - sub-contractor - composite supply of services - works contract provided by way of construction, erection, commissioning, or installation of original works pertaining to Metro - the applicant provided the works contracted and undertaken by them satisfies the definition of ‘Works Contract’ as defined in clause(119) of section 2 of the Central Goods and Services Tax Act, 2017. - Applicable rate of GST is 12% - AAR
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• Association Activities Like Seminars and Newsletters Are Taxable Services Under GST Regulations.

  Case-Laws - AAR : Supply or not - conducting seminars, holding meetings, organizing events, publishing magazines and newsletters etc. - the mission of the applicant is to provide a forum for its members, to facilitate professional networking for mutual benefit in academic, professional, and/or business areas. This shows that the applicant provides a forum for useful knowledge exchange which definitely for the benefit for the members. The alumni subscribe to become a member of the association - The activity is supply of service and liable to GST - AAR
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• Court Rules Unutilized Education, Secondary, Higher Education, and Krishi Kalyan Cess Not Adjustable Against GST Liabilities.

  Case-Laws - HC : Whether the Assessee is entitled to utilise and set off the accumulated unutilised amount of Education Cess (EC), Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC), all jointly referred to as the "Cess" against the Output GST Tax Liability after the switch over of Indirect Taxation System to GST Regime with effect from 01.07.2017, which GST (Goods and Services Tax) levy subsumed within its fold 16 indirect taxes earlier leviable like Excise Duty, VAT, etc.? - Held No - HC
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Income Tax

• High Court Rules Against Revenue's Method of Income Calculation, Assessee Entitled to Section 10B Deductions Despite Depreciation Offsets.

  Case-Laws - HC : Deduction u/s 10B - Here in the case in hand, the total income was first arrived at by the Revenue through the AO in the Assessment Order by computing the total income by way of brought forward or carry forward the depreciation allowance of the earlier AYs and set off the unabsorbed depreciation first and making the return Nil, thereby leaving the Assessee in a position where it could not claim any deduction u/s 10B as there was no income after set off of carry forward depreciation and unabsorbed depreciation from earlier years. - This method of computing the income is totally against the said law - HC
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• High Court Emphasizes Adherence to Chapter X for Efficient Transfer Pricing Dispute Resolution in International Transactions.

  Case-Laws - HC : TP Adjustment - Pre-mature writ petition - Assessee's digression is self defeating and defeats the very purpose of quicker assessments sought to be achieved in the special law relating to international transactions envisaged in the Chapter X of the Income Tax Act provided for assessment of international transactions, so that an image of balanced approach by IT authorities can be projected on the international horizons. Many other developed countries provide for such quicker management of tax dispute resolution. - HC
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• Admission Fees to Stock Exchange Deemed Asset Acquisition, Not Business Expense for Profit Generation.

  Case-Laws - AT : Nature of expenditure - admission fees paid to Stock Exchange - Assessee has not been able to establish any special circumstances for an opposite conclusion in the present case - expenditure incurred was for acquiring and bringing into existence an asset or advantage of enduring benefit and not for running business to produce more profits. - AT
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• Taxpayer's Declared Income Accepted; AO's Additional Trading Income Assessment Deleted as Already Included in P&L Account.

  Case-Laws - AT : Estimation of income - Since the addition made by the AO on account of trading income based on net profit rate applied by the AO has been deleted and the income declared by the assessee is accepted while deciding the ground no. 1, then no separate addition on account of this income which are already part of the Profit & Loss account and considered in the total income declared by the assessee - AT
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• Unexplained investment u/s 69 reclassified as a gift u/s 56(2)(vi); addition deleted.

  Case-Laws - AT : Unexplained investment u/s 69 - Amount advanced by M/s. KSR Constructions to the assessee has to be construed as the amount given by M/s. KSR Constructions on behalf of the assessee’s spouse. Hence, the first proviso of section 56(2)(vi) shall come into operation in the case of the assessee and accordingly the amount received by the assessee shall be treated as a gift received by the assessee from her spouse. - Addition made u/s 69 deleted - AT
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• Funds from Sister Concerns Not Deemed Dividend; Used for Business, Repaid with 12.5% Interest per Section 2(22)(e).

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) - money received from the lending companies - Money advanced by two sister concerns to the assessee company which was repaid during the year along with interest @ 12.5% per annum and used for the purpose of business of the assessee is not a loan/deposit to be treated as deemed dividend. - AT
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• SBI Must Calculate Tax Relief for Salary Arrears or Advance Under Income Tax Act Section 89; Apply for Relief If Overdeducted.

  Case-Laws - HC : Grant of relief u/s 89 - Relief when salary, etc., is paid in arrears or in advance - On a reading of Section 192 (2A), we agree that the SBI should have computed the relief on the basis of the particulars and deducted income tax in accordance with Section 89. However, we see that the remedy of the undue deduction is provided under Section 89 of the I-T Act itself, where the assessee is required to apply to the Assessing Officer and avail relief under the Section. - HC
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Customs

• High Court Upholds CESTAT Decision: No Tax Concession for Goods Re-imported for Repair After One-Year Delay.

  Case-Laws - HC : Benefit of concession/exemption - re-export - Delay beyond the period of one year - goods re-imported for repair/reconditioning of the goods - The learned CESTAT was justified in denying the said exemption to the Assessee and also rejecting the Rectification Application filed by the Assessee. What Tribunal has done is nothing but asking the Assessee to comply with the law. - HC
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• Customs Failed to Justify Summoning Appellant for Gold Search, Making Seizure Invalid Under Law.

  Case-Laws - AT : Validity of Search and Seizure - Smuggling - Gold - As per the show cause notice, pieces of gold were found with the appellant at the Railway station as well as the Customs House. The reasons for summoning a person, instead of searching and seizing on the same spot and taking him to the Customs House for detailed search etc. has not been properly explained in the show cause notice and in the order-in-original. - the seizure of the impugned gold is not maintainable - AT
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• Customs Broker Cleared: No Liability Without Knowledge in Mis-Declaration Case, Court Rules.

  Case-Laws - AT : Levy of penalty on Customs Broker - no case is made out that the appellant CB have knowingly allowed the alleged mis-declaration by their client. It is established principle of law that mere facilitation without knowledge of consequences, would not amount to abetting an offence. - AT
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• High Court Orders Department to Disburse Refund with Interest in Four Weeks; Criticizes Delays in Appeal Process.

  Case-Laws - HC : Refund/rebate claim withheld - no stay order obtained - The petitioner cannot be made to wait indefinitely. The department cannot take its own sweet time to file the appeal and pursue the same. The department ought to have acted expeditiously in the matter - Department directed to disburse the refund within 4 weeks with interest - HC
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Corporate Law

• Director Removal Case Dismissed: Claims of Oppression and Mismanagement Barred by 5-Year Limit and Lack of Evidence.

  Case-Laws - Tri : Oppression and mismanagement - Removal of Director - Period of limitation - Time gap of 5 years - The petition filed by the petitioner is prima facie barred by limitation - Further, even on merits, the petitioner has failed to make out a case of oppression and mismanagement into the affairs of the 1st Respondent Company and the petitioner has only made sweeping allegations as against the Respondents and failed to corroborate the same with relevant material document- Tri
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Service Tax

• Court Rules TDS Deduction u/ss 194C and 194I Doesn't Automatically Indicate Service Tax Error.

  Case-Laws - HC : Rectification of error - Demand of service tax on the basis of TDS statements - The mere fact that Tax Deductions at Source (TDS) may have been made by some of the service recipients under Section 194C and some under Section 194I of the Income Tax Act, 1961, may, ipso facto would not justify the conclusion that there was the wrong Assessment/Demand of Service Tax. There is no error apparent on the face of record. - HC
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VAT

• Court Rules Online Booking Fees Exempt from Entertainment Tax; Only Ticket Cost Taxable for Cinema Entry.

  Case-Laws - HC : Levy of Entertainment Tax - “online booking charges” charged by a Cinema Hall Owner besides the “cost of ticket” for entry into the cinema hall - The measure of taxation, viz., the ticket cost of ₹ 190.78 for both the types of customers could only be held exigible to the Entertainment Tax. ₹ 30/- separately paid for online booking facility, is not sine qua non for having entry in the cinema hall and therefore, falls outside the scope of the term, 'payment for admission', defined in Section 3(7)(c) of the Act - Assessee has paid Service Tax - Assessment order set aside - HC
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Case Laws:

• GST

• 2020 (10) TMI 814
  Classification of goods - Chewing tobacco with the brand name Kavi cut tobacco - classifiable under CTH 2403 9910 or not - applicable rate of Compensation Cess - Sl. No. 26 of the Notification No. 01/2017-Compensation cess dated 28.06.2017 ct 160% - challenge to AAR decision. Chewing tobacco can be both unmanufactured and Manufactured . The question is whether the product of the appellant is unmanufactured or manufactured ? - HELD THAT:- The Lower Authority relying on the standards given by ICAR-CTRI, in para 6.3 of their ruling has established that the process undertaken by the appellant is not equivalent to that of curing/bulking done at farm which may be classified as unmanufactured Tobacco for chewing but is similar to the process undertaken in manufacture of Chewing tobacco as acknowledged by the ICAR-CTRI in as much as the raw tobacco is processed by smoking, stored and given jaggery water / salt water treatment. Customs Tariff which gives the classification for determination of rates of goods as per Notification No. 01/2017-C.T.(Rate) do not define what is Manufactured tobacco and Unmanufactured tobacco and hence we need to look into the interpretations of judiciary. Any process on the raw material resulting in emergence of a new product with a distinct name, character and use is defined as manufacture under GST. The appellant has stated to have purchased Raw dried tobacco leaves from wholesale dealers/farmers and then undertakes the process of grading, drying, dipping in jaggery water, stalking, semi-drying, mincing, subjecting to natural/agricultural preservatives, weighing and packing for supply. Thus, the raw material which is Raw dried tobacco leaves undergoes the above process and the end product Chewing Tobacco with distinct character and use emerges. This is established by the test reports furnished by the appellants before the lower authority. Thus, it is evident that the raw material undergoes a set of processes and emerges as a distinct product which makes it marketable/consumable for the chewing needs. Therefore, the product supplied by the appellant is Manufactured Tobacco product for Chewing . Once it is held that the product is Manufactured Chewing tobacco , the classification of the product is under CTH 2403 9910 which specifies Chewing Tobacco under the head 2403-Other Manufactured tobacco and manufactured tobacco substitutes as held by the lower authority and there appears to be no need for our intervention with the order of the Lower Authority.

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• 2020 (10) TMI 813
  Supply of services - local services or export of services - levy of GST on such services provided to the US Client directly - benefit of zero-rated supply - eligibility for refund of taxes already paid in the past if the refund is within the time limit provided under the GST Act. HELD THAT:- Recipient is defined based on whether a Consideration is payable or otherwise. When a consideration is payable for the supply of goods or services, as is the case in hand, the person who is liable to pay that consideration is the `Recipient of such Supply . The Statute is clear and unambiguous in defining the `Recipient when a consideration is payable - Thus, consideration in relation to a supply should include any payment made for such supply whether by the recipient or any other person. This definition states about what is to be the value/consideration for supply on which tax is liable to be paid. This definition do not speak or clarify on Recipient of supply but merely encompasses the elements of Consideration for a supply. The statute is unambiguous in as much as it says, the person liable to pay the consideration for supply of services is the Recipient of such supply and Consideration is any payment made whether by the recipient or any other person for such supply. It is not disputed that the appellant is under contractual obligation to Doyen Systems to provide services through Doyen Systems for which Payment is agreed to be made by Doyen Systems to the appellant after verifying the invoice and the client time-sheet as in the Contract Agreement. Further as observed by the lower Authority the payment of Consideration to the appellant is entirely with the Doyen Systems and the appellant cannot claim consideration directly with the client of Doyen Systems or the client of Doyen Systems is not the person liable to pay the appellant for the services supplied by the appellant. Thus, it is clearly evident that the recipient of Services of the appellant is Doyen Systems.

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• 2020 (10) TMI 812
  Taxable supply or not - transaction of supplying Kharif Arhar (Tur) Crops and Green Gram crops from farmers to NAFED - rate of tax to be charged for sale of Agricultural produce to NAFED - Input tax credit on GST paid on purchase of Gunny bags by KSCMFL - deduction of TDS - applicability of Section 51 and Notification 50/2018 - Central Tax dated 13 th September 2018. HELD THAT:- In the instant case, the applicant is involved in the supply of the Kharif Arhar (Tur) and Kharif Green Gram to NAFED procured from the farmers for which applicant receives consideration in the course or furtherance of business. Hence the supply of Kharif Arhar (Tur) and Kharif Green Gram to NAFED by the applicant amounts to supply in terms of Section 7(l)(a) of the CGST Act 2017. Exempted supply or not - HELD THAT:- The tariff item 0713 relating to Dried Leguminous Vegetables, shelled, whether or not skinned or split listed under the entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017. Hence the supply of tur dal and green gram without any brand name by the applicant to NAFED is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017. Input tax credit - HELD THAT:- The applicant purchasing gunny bags from third parties to pack the procured Kharif Arhar (Tur) and Kharif Green Gram from the farmers, by paying GST @ 5%. Since the supply of tur dal and green gram is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017 the input paid on purchase of gunny bags is ineligible to claim as input tax credit as per subsection 2 of section 17 of the CGST Act, 2017. The subsection 2 of section 17 of the CGST Act 2017 clearly says that, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero-rated supplies - hence, input tax paid on the purchase of gunny bags shall not be claimed as input tax credit as per subsection 2 of section 17 of the CGST Act 2017 as the applicant used the said gunny bags for packing and supplying exempted goods. Deduction of TDS - HELD THAT:- The applicant is neither established by any Government with 51% or more participation by way of equity or control, to carry out its function nor is a Society established by the Central Government or the State Government or a local authority under the Society Registration Act, 1860. Hence the applicant is not covered under the list provided either in the Notification 50/2018 - Central Tax dated 13/09/2018or under the list prescribed under Section 51 of CGST/KGST Act,2017.Therefore the provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 are not applicable to the applicant.

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• 2020 (10) TMI 811
  Exemption from GST - benefit of N/N. 12/2017-Central tax (Rate) dated 28.06.2017 - pure consultancy services provided to the Municipalities and Corporations - taxability of pure consultancy services provided to the private individuals - rate of tax - input tax paid on the purchase of capital goods like furniture, computer, lab equipments, drone cameras, total station, auto level instruments, etc., and on certain services. HELD THAT:- The applicant is involved in the rendering pure consultancy services like project management consultancy services including construction, supervision, quality control, rejuvenation and development of lakes. The applicant is also involved in the preparation of detailed project report for pumping treated water, scientific landfill at Bengaluru quarries, construction of Raja Nala and Other development civil works etc. The applicant provides these services mainly to the Municipalities, Corporations (i.e. local bodies) and to Government Departments and only in a few cases, a pure consultancy service is being provided to private parties - the work undertaken by the applicant reveals that he is providing majority of his services to the BBMP and Government Departments and to the smaller extent to the private individuals. The pure services provided to Central Government or State Government or to a local authority or Governmental authority in relation to any function entrusted to a Municipality under Article 243W of the Constitution is exempt from payment of tax - the BBMP and Sindhanur Municipality come under the definition of local authority and the service provided by the applicant to BBMP and Sindhanur Municipality is the service rendered to the local authority. The applicant providing pure services (without supply of goods) to the Local bodies and to the Department of the State Government. The services provided by the applicant are in relation to the function entrusted to the Municipality under article 243W of the constitution. Hence the applicant is entitled to the benefit of Sl. No. 3 of Notification No.12/2017-Central Tax (Rate), dated 28th June 2017. Benefit of Input Tax Credit - HELD THAT:- Sub-section 2 of section 17 of the CGST Act 2017 clearly says that, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero-rated supplies - Since the applicant providing both taxable and exempted supplies, applicant has to restrict the input tax paid on the capital goods to the extent of taxable supply of services.

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• 2020 (10) TMI 810
  Input Tax Credit - medicines supplied to patients admitted in hospital - medicines supplied to patients treated as out-patients - medicines supplied to other than inpatients and out-patients - supply of food and beverages to the patients admitted in hospital. Input tax credit - medicines supplied to patients admitted in hospital - restriction of credit on such supply - HELD THAT:- The treatment services for diseases are health care services as defined under Notification No.12/2017- Central Tax (Rate) dated 28.06.2017 and supply of health care services provided by a clinical establishment is exempt from the levy of tax as per entry No. 74 of the said notification supra. Since the output supplies are exempt, the applicant is not eligible to claim the input tax paid on the inward supplies of medicines that are used for providing health care services to the inpatients. Input tax credit - Supply of medicines to the out-patients - restriction on credit - HELD THAT:- The applicant, while providing treatment to the outpatients, uses certain consumables such as medicines, bandages, cotton, etc. Hence the medicines, cotton and bandages are consumed in the provision of health care services and the output is only health care services. Hence there is no separate / distinct supply of medicines, bandages, cotton etc., and since they are used in the supply of exempt health care services, the impugned supply can t be a composite supply. Therefore the applicant is not eligible to claim input tax credit on the taxes paid by the applicant on the inward supplies of such goods. Input tax credit - supply of medicine to the customers - restrictions on such credit - HELD THAT:- The applicant, with regard to the supply of medicines other goods to the customers, is selling the medicines as a trader and hence they are liable to collect and pay the applicable tax on the goods sold and also is eligible to claim input tax credit like any supplier of taxable goods, subject to any restrictions in Section 17 of the GST Act. Input tax credit - Supply of food beverages to the inpatients - restriction on such credit - HELD THAT:- It is pertinent to mention here that the Authorised Representative during the personal hearing has confirmed that the applicant do not allow the inpatients to consume outside food. Thus it is inevitable that the impugned supply becomes naturally bundled with the treatment service i.e. health care service and the supply becomes composite supply, which is an exempted supply, under entry No.74 of Notification No.12/2017- Central Tax (Rate) dated 28.06.2017. Thus the applicant can t claim the input tax credit - The input tax credit is to be restricted on supply of food beverages supplied to inpatients and is part of the health care services.

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• 2020 (10) TMI 809
  Classification of supply - supply of services or not - Activities of a liaison office - requirement of registration under CGST Act, 2017 - liability of liaison office to pay GST - HELD THAT:- The Applicant s HO is incorporated in Germany and is engaged in the business of promoting applied research. The HO has established their LO in Bangalore, India which is acting as an extended arm of the HO to carry out activities that are permitted by RBI. The RBI has stipulated certain conditions for the establishment of liaison office in India, which includes among other things, that LO will not generate income in India and will not engage in any trade/commercial activity, will represent in India the Parent Company, will promote technical/ financial collaborations and act as communication channel between the Parent Company and the Indian Company, the entire expenses of the office in India will be met exclusively out of the funds received from abroad through normal banking channels and it will not have any signing / commitment powers, except than those which are required for normal functioning of the office, on behalf of the HO/ Parent Company - The term Liaison Office is not defined under the CGST Act 2017. However it is defined under Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 and as per the said definition, primarily it is a place of business. The applicant has claimed that they are not person as per Section 2 (84) of CGST Act, 2017. However we find that the definition is very wide in scope and covers every artificial juridical person, not falling within any of the above; (Section 2 (84) (n) of CGST Act, 201 7. A juridical person is a non human legal entity recognized by law with duties and rights - the applicant falls under the definition of person in terms of Section 2 (84) of CGST Act, 2017. Further, Section 2(17)(a) of the CGST Act 2017 stipulates that business includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. Further business also includes any activity or transaction in connection with or incidental or ancillary to sub-clause (a), in terms of Section 2(17)(b) of the CGST Act 2017. The activities performed by the applicant falls under the scope of supply under Section 7 of CGST Act, 2017 read with schedule I of CGST Act, 2017 as it is in relation to furtherance of business. The applicant is involved in business and promotes the business, in India, of their HO situated outside India, in the course of business. Thus the activities of the applicant squarely fit to be treated as supply in terms of Section 7(1)(c) of the of CGST Act 2017, even in the absence of consideration. In the instant case the applicant has representational office i.e. LO in Bangalore, India and hence the applicant has an establishment in India. Further the applicant s head office is outside India and hence the applicant s head office has an establishment outside India. Thus the applicant (LO) and their head office (HO) shall be treated as establishments of distinct persons, in terms of Section 8. Therefore the applicant (LO) and their head office (HO) are distinct persons and the activities performed by them can t be called export of services. There is no doubt that the applicant is facilitating supply between the HO and Indian customers. They have a mandate from RBI for this purpose. Further, they are not making any supply on their own, which anyway is a restriction placed upon them by RBI. Their contention that they are not person has already been dealt in the above para. We find that they are a distinct legal entity and are aptly covered under the definition of intermediary as per Section 2 (13) of IGST Act, 2017. Lastly, in regard to the submissions made by the applicant in respect of valuation, we observe that Rule 28 to Rule 31 of the CGST Rules, 2017 have to be resorted for the purpose of determining tax liability. Need to take registration - HELD THAT:- The supply of services by the applicant amount to inter-state supply of services in terms of Section 7(5) of the IGST Act 2017. Further persons making any inter-state taxable supply shall be required to be registered compulsorily in terms of Section 24 of the CGST Act 2017 - applicant (LO) is required to be registered under CGST Act 2017 - applicant (LO) are liable to pay GST if the place of supply of services is India.

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• 2020 (10) TMI 808
  Input tax credit - proportionate claim - procurement of Inputs/Capital Goods and Input services for for setting up the Solar PV system and installation of the same - whether the goods/services procured can be considered as Capital goods ? - what should be considered as total Turnover for arriving at the attributable credit? HELD THAT:- As per Section 16 (1), it is evident that a registered person is entitled to take credit of Input Tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. Section 16 (2) provides that such person will be eligible for such credit only when he is in possession of a tax invoice, has received the goods or services, paid the tax charged on such supply and has furnished the returns. Section 16 (3) provides that if depreciation is claimed the ITC on the said tax component is not available. The plain reading of the above statute and applying to the case at hand, prima facie, it indicates that the credit of Input tax on the inputs/inputs services used in setting up of the Renewable Energy Generator in the furtherance of their business, is permitted under these provisions. The applicant has stated that they are in receipt of the goods/services, possess the invoices and paid the taxes and thus fulfills the conditions stipulated under Section 16(2) and have not claimed depreciation under Income-tax provisions, thus have fulfilled provisions of Section 16(3) of the Act. The taxes paid on Inputs/capital goods and Input services used in the course or furtherance of business are permitted to be availed as per Section 16 of the Act. Section 17 (2) provides for apportionment of credits pertaining to supply of taxable supply when the said Inputs, Capital Goods and Input services are used to make both exempted and taxable supply - the RE power generator is used in the business by the applicant and the output of such RE Power Generator is Electricity and Renewable Energy Certificate - the proportionate claim of Input Tax Credit is available for the applicant and the provisions of Section 17(2) applies to the case at hand. Whether they could consider the solar panels and its installation cost as Capital Goods used for both taxable and exempt purpose and claim the Input Tax as Prescribed in Rule 43 of the Act? - HELD THAT:- The applicant has furnished only the list(Statement) with the particulars as detailed above, Invoice No., Taxable Value, Tax Rate, Type of Tax and Total Tax Value. The said statement consists of both Goods and Services . While Goods if capitalised may be termed as Capital Goods , the services are in no way Capital Goods but are Input Services consumed by the applicant - the applicant has just furnished the list and has not furnished any documentary proof to establish that the goods listed in the statement furnished have been capitalised in their books of accounts - thus, subject to the goods being capitalised in their books of account, the applicant is eligible to claim Input tax on such goods as Capital Goods and the Provisions of Rule 43 of the GST Rules is applicable to determine the eligible credit in respect of the taxable supplies made by them. In respect of Inputs and Input services, the attributable credit is to be arrived at by applying Rule 42 of the GST Rules. The applicant has further sought to clarify as to whether they could apportion the common credit using total turnover of the registered person for the tax period, i.e., Turnover of the tax period of existing business + Turnover of the tax period of the new Power Generation business - it sis found that both under Rule 42 and Rule 43, the F in the Formula denotes the Total Turnover[in the State] of the registered person during the tax period . It is clear that the rule wants the total turnover to be considered against F in the formulae under Rule 42 Rule 43 of the GST Rules. In the applicant s case at hand, therefore, we clarify that the Total Turnover of the Registered Person should include the Turnover of Edible Oil Business and Total Turnover of Power Generation Business . Thus, the applicant is eligible for Proportionate claim of Input Tax Credit as per Section 17 (2) of the CGST/TNGST Act read with Rule 42/Rule 43 of CGST/TNGST Rules 2017 on the Goods/Services used in installation of Renewable Power Generation Plant under the REC Scheme .

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• 2020 (10) TMI 807
  Classification of services - rate of tax - sub-contractor - composite supply of services - works contract provided by way of construction, erection, commissioning, or installation of original works pertaining to Metro - applicability of N/N. 11/2017 amended vide Notification No.1/2018- Central Tax(rate) dated 25th January 2018. HELD THAT:- In the case at hand, it is seen that Siemens has secured the contract- the Signalling, Platform Screen Doors and Telecommunications works for Chennai Metro Rail Project Phase I from CMRL and has sub-contracted certain portion to the applicant. SAC 995421 covers General Construction services of highways, streets, roads, railways, airfield runways, bridges and tunnels which are Civil engineering related works which is not the work awarded to Siemens and therefore not undertaken by the applicant in the case at hand. SAC 995461 covers installation services of telecommunication wiring, telecommunication equipment, electrical installation services of illumination and signaling system for railways - the applicant undertakes Design, manufacture, supply, installation, testing and commission of Integrated Control and Management System, Public Address and Voice Alarm System, Driver Only Operation (DOO) CCTV System, Closed Circuit Television (CCTV) System, Access Control and Intruder Detection System, Passenger Information Display(PID) System, Office Telephone System, Operational Telephone System and Master Clock System. The works are supply and Installation of lines and equipments meant for telecommunication, signaling in the CMRL project and not related to any civil engineering work - thus, the supply of the applicant to Siemens is covered under SAC 9954, more specifically under 995461 and the first requirement of the entry stands satisfied. Composite Supply or not - HELD THAT:- In the case at hand from the Purchase Order furnished by the applicant it is seen that there is supply of goods (equipments, goods, etc)) and services (installation, testing, etc) for a particular cost center/Line and the work is considered to be done on that basis. Thus, there is a natural bundle of goods and services per cost center/Line and the supply is construed to be made when the entire supply of the line/cost center is made. Hence, the supply of the applicant is a composite supply and this criterion is satisfied. Works Contract or not - HELD THAT:- A work shall be treated as Works Contract if that work is done for land or earth or for immovable property and there is transfer of property in goods involved in the execution of such contract. Immovable property cannot be moved. It cannot be separated from the land or earth. If it is detached it shall have to destroy. In the case at hand, the Employer s Requirements, Particular Specifications-4B Telecommunication General Specification - Volume 4B Section 3 and 4 (furnished on 26.02.2020), gives the outline summary of the various systems and sub-systems which are applicable to the Telecommunication scope and Para 3.1.2 to 3.1.10 gives the outline description of the works said to be the works of the applicant. On going through these sections it is observed that the work involves installation of the individual systems at platforms, stations, other select locations along the corridor and is integrated at the Operation Control Corridor(OCC) at Koyambedu and the Telecommunications Infrastructure implementation is to be synchronized with the civil construction phases. The applicant has stated that in the Pre-GST regime, under Service Tax, the applicant being a supplier of Works Contract Service relating to infrastructure project of railways, in the capacity of Sub-contractor was exempted from service tax and had claimed the benefit of entry 3 (v) of Notification 11/2017-C.T.(Rate) dated 28.06.2017 as above. The definition of Works Contract as it existed in the Service Tax law is different from that defined under Section 2(119) of GST Act. Under GST, only those defined works carried out on any immovable property is covered under Works Contract . Thus without documentary proof of the works contracted/undertaken like related diagrams /plans /schedules/ Pictures/detailed write-up on the works, etc in the absence of submission of the entire sub-contract agreement, it is not possible for this authority to conclude that the works are done on the immovable property and once installed, the goods/equipments cannot be dismantled without damage so as to hold that the work undertaken is Works Contract as per Section 2 (119) of the Act. As the applicant has stated that it will not be possible for them to furnish the entire sub-contract agreement which contains the requisite details, we record that in the absence of the documentation we are not in a position to hold the works as Works Contract as per Section 2 (119) of the Act. Whether supply should be by way of construction, erection, commissioning, or installation of original works pertaining to railways, including monorail and metro? - HELD THAT:- The work of the applicant includes Installation of the various systems on designing, manufacture and supply and therefore is Original work as defined in the notification - The work of the applicant is on the lines, stations and locations of land appurtenant and therefore this criterion is satisfied. In the case at hand, the applicant is entrusted with certain works of design, manufacture, installation and commissioning of the Telecommunication systems including signaling system by Siemens who has been awarded the entire work relating to signaling and Telecommunication under CMRL project Phase-1 and from the preceding paragraphs it is seen that the works are composite supply of original work pertaining to railways and the only leg of the entry No. 3(v) of the Notification which has not been established is whether the works satisfies the definition of Works Contract under Section 2 (119) of the GST Act for which sufficient documentary proof is not furnished - considering all the submissions and that the application is pending before this authority for long, we find it appropriate to hold that the benefit of the entry at Sl.No. 3 (v) will be applicable to the applicant subject to the works undertaken by them being Works Contract as per Section 2 (119) of the Act and the applicable GST is @, 12% effective from 25.01.2018.

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• 2020 (10) TMI 806
  Scope of Advance Ruling application - Exempt from GST or not - upfront lease amount paid to M/s. RLDA for the development of Multi-functional complex (Operational building) at Erode railway Junction for Long term lease for 45 years - HELD THAT:- It is evident that advance ruling are decisions on questions specified in sub-section 97 (2) of the Act in relation to the supply of goods or services undertaken or proposed to be undertaken by the applicant seeking the same. Hence, supplies undertaken or proposed to be undertaken by the applicant alone are covered under the advance ruling as per Section 95(a) of the Act. In the instant case the applicant is not making the supply but RLDA. Accordingly, the application is not admitted and rejected without going into merits. The applicant has also contented that one of the questions permitted as per Section 97 (2) on admissibility of Input Tax Credit means that the recipient can seek a ruling on the admissibility of ITC for the supply - Section 95(a) by definition advance ruling has specified that the applicant can only be seek a ruling about the supplies undertaken or proposed to be undertaken by the applicant i.e. the applicant is the supplier in the supply in question. Accordingly, all the question the applicant can ask as specified in Section 97 pertain only to him. Specifically, Section 97 (2) (d) pertains to the admissibility of Input Tax Credit of tax paid of deemed to have been paid by the applicant (i.e. applicant as per the Act). This question would deal with the admissibility of ITC on all the inputs/input services/ capital goods etc. used by the applicant (i.e. applicant as per the Act) to make or propose to make the supply in question. Therefore, the question does not pertain to the recipient of the supply in question as contended by M/s Erode Infrastructures nor is there any dichotomy in stating that that as per the Act recipient of the supply in question cannot seek advance ruling under the Act. Accordingly, the application is not admitted and rejected without going into merits. Application dismissed being not admitted.

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• 2020 (10) TMI 805
  Supply or not - Money collected by IITMAA from its members and receiving donations/grants/subsidies/budgetary support from IIT, Madras to defray expenses incurred towards administering the association and other expenses related to its engagement activities initiated by members - existence of any liability to comply with GST law including registration and payment of tax or not? HELD THAT:- In the instant case, the applicant is a society registered under Tamilnadu Society Registration Act 1975 and is in effect an association with the alumni of IIT Madras as members and hence, the applicant is a person under CGST/TNGST Act as per Section 2(84) of the Act. The applicant has contended that the Principle of Mutuality applies in the case at hand and the applicant and its members are not distinct persons and therefore levy do not apply on the consideration. For the purposes of GST Law, the applicant being an unincorporated association or body of persons is a person under Section 2(84) (f) and their members being Individuals are also person as per Section 2(84) (a). Hence, there are two different persons , one of whom is the supplier and other the recipient. From the MOA of the applicant, the mission of the applicant is to provide a forum for its members, to facilitate professional networking for mutual benefit in academic, professional, and/or business areas. This shows that the applicant provides a forum for useful knowledge exchange which definitely for the benefit for the members. The alumni subscribe to become a member of the association and also contributes/makes payment for the events conducted by the applicant with a membership fees of Rs. 1000 for lifetime as per the Byelaws. The Byelaws of the applicant clearly states that members can use the services of the applicant, receive publications/newsletters, and attend alumni meetings and events, facilities at IIT Madras. In this case, the provision by the applicant of the benefits as above for a membership fees to the its members constitute business as per Section 2(17) of the Act. The applicant collects membership fee from the members and also collects charges for various events, activities which include conducting seminars, holding meetings, organizing events, publishing magazines and newsletters, maintaining websites, and technology infrastructure for the benefit of its members. Thus, the supply of the services of these activities by the applicant to its members for consideration either in form of membership fee or additional charges collected for specific activities constitute a supply of service under Section 7(1)(a) of CGST/TNGST Act as it is in the course of furtherance of business of the applicant as per Section 2(17) of the Act. The applicant provides supply of services under GST/TNGST ACT and their annual turnover is above the prescribed threshold as per Section 22 of CGST/SGST Act, they are liable to be registered under the Act.

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• 2020 (10) TMI 804
  Whether the Assessee is entitled to utilise and set off the accumulated unutilised amount of Education Cess (EC), Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC), all jointly referred to as the Cess against the Output GST Tax Liability after the switch over of Indirect Taxation System to GST Regime with effect from 01.07.2017, which GST (Goods and Services Tax) levy subsumed within its fold 16 indirect taxes earlier leviable like Excise Duty, VAT, etc.? HELD THAT:- Cess is not eligible for carry forward, transition and set off against the Output GST Liability under Section 140 of the CGST Act - Cess being a specially collected or enforced imposition or impost is slightly different from Tax or Duty, even though it may be collected in the form of Taxes or Duty under the parent law with which the charging provisions of Cess under the same Act or separate Act as they are read and applied mutatis mutandis, like Central Excise and Customs Duty Act. Even though the imposition and collection of Cess may be loosely termed as Tax or Duty, the collection of Cess remains distinct, inasmuch as Cess amount collected by the Government is liable to be spent for the avowed and dedicated purpose for which such imposition was made which is usually reflected in the name of the imposition itself like Education Cess, Secondary and Higher Education Cess etc. Mere facility of taking credit of Input Cess paid on Input goods or services just to avoid the cascading effect on the multiple transactions in the series does not militate or alter the character of the imposition of Cess itself. Like any other indirect taxes like Sales Tax, VAT, Excise Duty, etc., the removal of the cascading effect of Taxation in multiple transactions in series is provided by the Legislation to collect such taxes in a reasonable proportion to the value of the transactions, by removing the cascading effect by providing for Input Tax Credit (ITC) system. Section 140 of the CGST Act, 2017, with which we are concerned and which provides for transitional arrangement of Input Tax Credit, though comprises of 10 Sub-sections and the Explanations 1, 2 and 3 after such 10 Sub-sections, are commonly applicable tools of interpretation. The Explanation 1 refers to Sub-sections (1), (3), (4) and (6), because these four Sub-sections use and employ the term Eligible Duties and Explanation 1 confines Eligible Duties to 7 specified duties under that Explanation 1, namely Additional Excise Duty under Additional Duties of Excise (Goods of Special Importance) Act, 1957, Additional Duty under Custom and Tariff Act, 1975, Additional Custom Duty on Taxable Articles, Duty of Excise in the First Schedule to the Central Excise Tariff Act, 1985 and National Calamity Contingency Duty under Section 136 of the Finance Act, 2001, etc.- Therefore, only the seven specified duties as Eligible Duties in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock on the appointed date i.e. 01.07.2017 will be eligible to be carried forward and adjusted against GST Output Tax Liability. Apparently, Education Cess and Secondary and Higher Education Cess or Krishi Kalyan Cess are absent from the seven categories in Explanation 1. Therefore, on a plain meaning, such three Cesses in question cannot be inserted in Explanation 1 to cover them for being carried forward with reference to Explanation 1 which applies for specified four Sub-sections of Section 140 of the Act. Merely because the Assessee in the present case before us is a person having centralized registration has taken in his Electronic Credit Ledger the amount of such Education Cess and Secondary and Higher Education Cess, it does not entitle him to utilize the said unutilised amount of Education Cess and Secondary and Higher Education Cess against the Output GST Liability. The taking of the input credit in respect of Education Cess and Secondary and Higher Education Cess in the Electronic Ledger after 2015, after the levy of Cess itself ceased and stopped, does not even permit it to be called an input CENVAT Credit and therefore, mere such accounting entry will not give any vested right to the Assessee to claim such transition and set off against such Output GST Liability. Admittedly, since the cross utilization of Education Cess and Secondary and Higher Education Cess was not allowed against Excise Duty and other duties under existing law prior to GST Regime and they could be set off only against the Output Education Cess and Secondary and Higher Education Cess liability, once the levy itself ceased and dropped in 2015, the question of their carry forward and utilization becomes only academic. The learned Single Judge, with great respects, erred in allowing the claim of the Assessee under Section 140 of the CGST Act. The main pitfalls in the reasoning given by the learned Single Judge are (a) the character of levy in the form of Cess like Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess was distinct and stand alone levies and their input credit even under the Cenvat Rules which were applicable mutatis mutandis did not permit any such cross Input Tax Credit, much less conferred a vested right, especially after the levy of these Cesses itself was dropped; (b) Explanation 3 to Section 140 could not be applied in a restricted manner only to the specified Sub-sections of Section 140 of the Act mentioned in the Explanations 1 and 2 and as a tool of interpretation, Explanation 3 would apply to the entire Section 140 of the Act and since it excluded the Cess of any kind for the purpose of Section 140 of the Act, which is not specified therein, the transition, carry forward or adjustment of unutilised Cess of any kind other than specified Cess, viz. National Calamity Contingent Duty (NCCD), against Output GST liability could not arise. The Assessee was not entitled to carry forward and set off of unutilised Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess against the GST Output Liability with reference to Section 140 of the CGST Act, 2017 - Appeal allowed - decided in favor of Revenue.

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• 2020 (10) TMI 803
  Refund of GST - lifting of attachment - section 83 of CGST Act, 2017 - refund rejected in view of the proceedings being pending with the concerned Authority and not concluded so far - HELD THAT:- No significant interference is required in the directions given by the learned Single Judge, except for extending the time limit to comply with the directions given by the learned Single Judge and setting a new time frame for the said purpose. It goes without saying that the Assessee is bound to cooperate and present himself before the concerned competent Authority, whenever he is summoned for any enquiry in the matter. Of course, it is expected that the concerned Authority also was expected to comply with the directions of the learned Single Judge and issue the show cause notice within a period of two weeks from the date of the order of the learned Single Judge viz., 06.01.2020 - However, since that could not be done for some reasons beyond the control of either of the parties and a fresh attachment order has been made on 28.03.2020, the concerned show cause notice should be issued now by the competent Revenue Authority latest within a period of three months from today. This will be conditional upon the Assessee fully cooperating in the matter. The first respondent / Assessee is directed to appear before the concerned Authority in the first instance on 02.11.2020 and present himself with the relevant materials, information, submissions, on all such dates, when he is summoned by the concerned Authority - petition disposed off.

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• 2020 (10) TMI 802
  Refund of unutilized ITC - rejection on the ground that the address of the recipient is not mentioned on the invoices of M/s Adinath Industries - HELD THAT:- GSTIN of the recipient is not mentioned on the invoice of M/s OM Metals Auto Pvt Ltd. On the invoice of M/s Shri Sanwariya Trading Company, Fatehnagar also the address of recipient is not mentioned, Invoices submitted in reply to the deficiency memo are not acceptable as the details of address and GSTIN were not present on the invoices at the time of filing of refund claim and on the invoices submitted in reply to the deficiency memo the details of address and GSTIN have been typed later on the same original invoice copies. Thus, the appellant has contravened the provisions the Rule 46 and the Notification No.39/2018- Central Tax, dated 04.09.2018. The appellant has stated that now the invoices have already been rectified by the suppliers on the request of the appellant and the copies of the same have also been annexed with the appeal memo thus thereby complied Rule 46 of the CGST Rules, 2017. Refund claim rejected on payment voucher not provided by the assessee for the RCM invoice - HELD THAT:- As per the second proviso to Section 16 of the CGST Act. the recipient of supply will not lose the ITC of the tax paid under RCM even if payment to the supplier is not made within 180 days of the supplies - Circular No. 37/11/2018-GST dated: 15/03/2018 has been issued to clarify. various issue in relation to processing of claims for refund. In para 15 of the circular it is stated that it is also advised that refunds may not be withheld due to minor procedural lapse or non-substantive errors or omission-and requested for not to withheld refund claim due to minor procedural lapse or non-substantive errors or omission - the export related refunds should not be rejected due to minor procedural lapse or non-substantive errors or omission which can be rectified subsequently. The appellant is directed to submit the original rectified invoices duly authenticated by the suppliers before the adjudicating authority for verification who may sanction the refund involved therein if the same is found in order and admissible otherwise. Appeal disposed off.

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• Income Tax

• 2020 (10) TMI 801
  Refund along with interest u/s 244A - HELD THAT:- Respondents are directed to give credit of the challan in the relevant assessment year as expeditiously as possible. With the aforesaid direction, the present writ petition stands disposed of.

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• 2020 (10) TMI 800
  Disallowance u/s 36(1)(iii) - disallowing the proportionate part of the interest the Assessee Company paid to its Bank, under Section 36(1)(iii) - Assessee Company while having majorly only borrowed funds from its Banks and paid interest thereon, diverted substantial part of those funds to its Subsidiary Company and did not charge any interest thereon - HELD THAT:- Hon ble Supreme Court in the case of Commissioner of Income Tax v. Reliance Industries Limited [ 2019 (1) TMI 757 - SUPREME COURT ] in which held that if any Assessee has got Surplus Funds exceeding the advances made to its Subsidiaries, a presumption could be made that interest bearing Funds have not been diverted to its Subsidiary Company. Having heard the learned counsel for the parties, we are of the opinion that the matter is required to be remanded back to the Assessing Authority for holding enquiry into the matter as to whether the interest bearing borrowed funds were used for advancing loan to the Subsidiary Company or the Surplus Funds of the Company were so diverted. It was a case of unpaid sale price for transfer of of the Sodium Perborate Division made by the Assessee Company to its Subsidiary Company M/s.Chemasia Industries Limited and the outstanding loan liability to the 7.88 crores was also taken over by the Assessee Company. Therefore, even though borrowed funds might have been diverted, but the fact remains that the Assessee did not charge any interest on such unpaid price from the Subsidiary Company and even took over another loan liability of the Subsidiary Company. Matter deserves to be remanded to the Assessing Authority for holding an enquiry into this aspect of the matter and then consider the question of disallowance under Section 36(1)(iii).

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• 2020 (10) TMI 799
  Deduction u/s 10B - Whether the Tribunal was justified in holding that deduction u/s 10B of the Income Tax Act should first be excluded from the profits of the year, before set off brought forward unabsorbed depreciation as current year depreciation as per Section 32[2] pertaining to the said Export Oriented Unit? - HELD THAT:- As decided in M/S. COMSTAR AUTOMATIVE TECHNOLOGIES PRIVATE LTD., (FORMERLY KNOWN AS VISTEON POWERTRAIN CONTROL SYSTEMS INDIA PRIVATE LIMITED) [ 2020 (3) TMI 814 - MADRAS HIGH COURT] deductions either under Section 10A or 10B would be made while computing the gross total income of the eligible undertaking (like the Assessee) under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI of the Act. Here in the case in hand, the total income was first arrived at by the Revenue through the Assessing Officer in the Assessment Order by computing the total income by way of brought forward or carry forward the depreciation allowance of the earlier Assessment Years and set off the unabsorbed depreciation first and making the return Nil, thereby leaving the Assessee in a position where it could not claim any deduction under Section 10B as there was no income after set off of carry forward depreciation and unabsorbed depreciation from earlier years. This method of computing the income in the present case made by the Revenue is totally against the said law as has been declared in the aforesaid decision in Commissioner of Income-tax v. Yokogawa India Ltd., [ 2016 (12) TMI 881 - SUPREME COURT] Decision of the ITAT, which is impugned herein, would not stand in the legal scrutiny, in view of the law having been declared by the Hon ble Apex Court. Therefore, we are of the view that, the Substantial Question of Law in favour of assessee.

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• 2020 (10) TMI 798
  Contribution made towards superannuation fund - Whether to be treated as business expenditure and is to be allowed u/s.37 or as an unapproved Fund during the year and hit by the provisions of Section 36(1)(iv) r.w.s.40A(9)? - HELD THAT:- We need not labour much to go into the facts of the case as similar question has been decided by the Division Bench of this Court on identical facts in the case of Commissioner of Income Tax v. Kattabomman Transport Corporation Limited [ 1998 (9) TMI 2 - MADRAS HIGH COURT] in favour of assessee.

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• 2020 (10) TMI 797
  Disallowance u/s 14A - Whether Tribunal could have concluded that the appellant had incurred expenditure in relation to income not includable in the total income warranting application of the Section 14A read with Rule 8D? - HELD THAT:- Since both the learned counsel are agreeing that the matter should go back to the Assessing Authority for deciding the case again on the aspect of Section 14-A of this Court in M/s.Marg [2020 (10) TMI 102 - MADRAS HIGH COURT] the appeal is accordingly disposed of, by answering the questions of law in favour of the Assessee and against the Revenue and the matter is remitted back to the Assessing Authority for passing fresh orders on the limited issue u/s 14-A by complying with the directions of this Court in the aforesaid judgment with regard to the satisfaction, for invoking Section 14A read with Rule 8D also, in accordance with law.

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• 2020 (10) TMI 796
  TP Adjustment - DRP had made certain directions for the guidance of the TPO under section 144C(5) which are binding on the TPO who makes the TP adjustments - Single Judge has dismissed the Writ Petition as premature finding that against the order of the learned TPO when passed in consequence of the directions given by the DRP, there is an appeal remedy available to the Assessee before the learned Tribunal and therefore, the questions of facts coupled with the questions of law sought to be raised before the DRP and before this court under the Writ Jurisdiction, can be first agitated before the learned Tribunal as well - HELD THAT:- We cannot appreciate the arguments of the learned Senior Counsel for the Assessee that on the question of law, the DRP has disregarded the case laws of other High Courts. A mere discussion of such case laws but not applying to the facts cannot be said to be any disregard to the law laid down by the other High Courts in this respect. We cannot accept the submission of the learned Counsel further on the ground that merely because the order of the DRP may be binding on the Assessing Officer, against whose order, the appeal can be filed only before the learned Tribunal, a shortcut could be provided to the Assessee in such cases to invoke the Writ Jurisdiction, which itself has three tiers of remedies; before the High Court, two tiers, viz., the learned Single Judge dealing with the Writ Petition and the intra-Court Writ Appeal before Division Bench and then if the matter is taken up to the Hon ble Supreme Court by way of Special Leave Petition under Article 136 of the Constitution of India. His digression is self defeating and defeats the very purpose of quicker assessments sought to be achieved in the special law relating to international transactions envisaged in the Chapter X of the Income Tax Act provided for assessment of international transactions, so that an image of balanced approach by IT authorities can be projected on the international horizons. Many other developed countries provide for such quicker management of tax dispute resolution. In view of the undertaking given by the Respondents in paragraph 3 of the Affidavit of the Assistant Commissioner that they are going to apply for TP Adjustments only to international transactions, even the aforesaid unfounded apprehension of the Assessee is not justified.

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• 2020 (10) TMI 795
  Validity of reopening of assessment u/s 147 - Jurisdiction of AO - as argued notice u/s 148 issued by the AO Jaipur without jurisdiction - HELD THAT:- Notice u/s 148 was issued by the ITO, Ward 2(2), Jaipur on 10.04.2014 after recording reasons at that time ITO, Ward 2(2), was not having jurisdiction over the case of assessee as the Director of the assessee has informed the ITO Ward-2(2), through telephone which is recorded by ITO, Ward-2(2). The Director of the company informed the AO that he is filing his return at Delhi and has already shifted his office at New Delhi and got its address changed in his PAN data wise and the same was also communicated to the assessee by the Income Tax PAN Services Unit vide its letter dated 26.03.2014 for change of address at New Delhi. Assessee has filed proves of the same before the Assessing Officer. In spite of the same, the Assessing Officer completed the assessment which is contrary to the law and facts on file and deserves to be quashed - Decided in favour of assessee.

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• 2020 (10) TMI 794
  Assessment u/s 153A - Unexplained receipts from share transactions - sale of shares treated as unexplained receipts - case of the assessee that the additions/disallowances could not be made in the assessment framed u/s 153A de hors reference to any incriminating material found in the course of search in this regard - HELD THAT:- We find total absence of reference to any incriminating material which may have any bearing to impugn additions/disallowances. On the contrary, it is manifest that the impugned addition has been made based on appreciation of certain data routinely poured into the department system named as Individual Transaction Statement (ITS) unconnected to search. No error in the view taken by the CIT(A) that impugned addition made by the AO is clearly beyond the scope of authority vested u/s153A owing to absence of any incriminating material or evidence deduced as a result of search. CIT(A) has rightly adjudicated the legal issue emanating on the facts available on record that in the absence of incriminating material/evidence, the additions/disallowances cannot be sustained within the pale of Section 153A - See SAUMYA CONSTRUCTION PVT. LTD. [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] - Decided in favour of assessee.

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• 2020 (10) TMI 793
  Penalty u/s 271(1)(c) - Defective notice - Appellant was never communicated either of twin exact charge envisaged in section 271(1)(c) - undisclosed expenses - HELD THAT:- Failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty under Sec. 271(1)(c) was sought to be imposed on it in the SCN , dated 31.03.2016, had left the assessee guessing of the default for which it was being proceeded against. As the two defaults viz. concealment of income and furnishing of inaccurate particulars of income as contemplated in Sec.271(1)(c) are separate and distinct defaults which operate in their exclusive and independent fields, we, therefore, are unable to subscribe to the view taken by the CIT(A) that the A.O had validly imposed penalty for concealment of income and furnishing inaccurate particulars of income in respect of the solitary addition of Rs. 14.50 lacs made in the hands of the assessee. We thus in the backdrop of our aforesaid observations not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O. - Decided in favour of assessee.

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• 2020 (10) TMI 792
  Bogus Loss incurred in the commodity market transaction - addition on the basis of information received that the concerned broking concern M/s. Marigold Vanijya Pvt. Limited had allegedly provided entries of bogus loss - HELD THAT:- As decided in Navin Kumar Kajaria [ 2018 (5) TMI 2024 - ITAT KOLKATA] genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. through broker was duly established and the action of the authorities below in disallowing the claim of the assessee for the resultant loss in dealing in currency derivatives is not tenable. Therefore, delete the said disallowance and allow the appeal of the assessee.

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• 2020 (10) TMI 791
  Validity of reopening of assessment - as argued reopening on the basis of satisfaction recorded by some other authority (i.e. third party) like Sale Tax, Mumbai - non recording of own satisfaction - bogus purchases - HELD THAT:- After going through the judgment passed by the Hon ble Supreme Court of India in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007 (5) TMI 197 - SUPREME COURT ] we are of the view that the reopening of the assessment on the basis of the specific information is legally valid - Decided against assessee. Bogus purchases of material - Documentary evidences filed by the assessee for substantiating the claim of assessee and establishing the genuineness of purchase of packing material from the two parties which has not been falsified by the AO by making any enquiry or producing any documentary evidences contrary to the evidences filed by the assessee - DR has not filed any contrary evidences before us to falsify the claim of the assessee - Thus on the basis of the documentary evidences filed by the assessee for substantiating the claim and the genuineness of purchase packing material from two parties i.e. M/s DD Motors Corporation and M/s Amit Trading Co. are quite genuine. CIT(A) has wrongly dismissed the appeal filed by the assessee by upholding the order of the Assessing Officer on merits - Decided in favour of assessee.

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• 2020 (10) TMI 790
  Nature of expenditure - admission fees paid to Stock Exchange - Payment made to MCX-SX Stock Exchange towards admission fees and processing charges. revenue or capital expenditure - HELD THAT:-The Hon ble Apex Court in the case of Alembic Chemical Work Company Ltd. [ 1989 (3) TMI 5 - SUPREME COURT] had elucidated and affirmed that once and for all payment when it comes into existence, an asset or an advantage of enduring benefit in absence of special circumstances leading to an opposite conclusion is a capital expenditure and not attributable to revenue. This is the primary and basic test. Assessee has not been able to establish any special circumstances for an opposite conclusion in the present case - expenditure incurred was for acquiring and bringing into existence an asset or advantage of enduring benefit and not for running business to produce more profits. Hon ble Delhi High Court in the case of Abhipra Capital Ltd. v. DCIT (Investigation) [2018 (2) TMI 1294 - DELHI HIGH COURT] on identical facts had decided the issue in favour of the revenue. Cases relied on by the learned A.R., had proceeded on the basis that assessee on incurring the expenditure for acquiring membership of a stock exchange has not become owner of any asset and therefore cannot be said that any enduring benefit had accrued to the assessee. Whereas in light of Hon ble Supreme Court judgement in the case of Techno Shares and Stocks Limited [2010 (9) TMI 6 - SUPREME COURT] membership of stock exchange is to be treated as a capital asset. Therefore, CIT(A) has rightly treated the admission fee as a membership of the stock exchange capital asset and allowed alternative plea of assessee that depreciation is to be granted on the same. - Decided against assessee.

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• 2020 (10) TMI 789
  Assessment u/s 153A - undisclosed income of partner in assessee firm - incriminating material found in the course of search which belong or relate to the assessee or not? - satisfaction recorded by the AO before proceeding to invoke the provisions of section 153C in the case of assessee is not in accordance with law - protectively assessing the income in the hands of the Assessee - HELD THAT:- Scope of making assessment of total income u/s.153C of the Act in an unabated assessment proceedings is limited and can be only of assessing income that is not disclosed which is detected or which emanates from material found in the course of search of some other person and which relate to the Assessee. Since the impugned addition of disallowance of expenses are not based on any incriminating material found during the course of search, the additions are liable to be deleted. As far as the addition made on protective basis for AY 2008-09 to 2010-11 are concerned, the said addition was made not on the basis of any incriminating material found in the search of K.Mahesh Kumar which relate to the Assessee and therefore the said addition can also not be sustained as it is contrary to the provisions of Sec.153C - no basis for protectively assessing the income in the hands of the Assessee and substantively in the hands of K.Mahesh Kumar. There is no material to show that the income declared by K.Mahesh Kumar is either his income or that of the Assessee. From the fact that K.Mahesh Kumar was a Partner in the Assessee firm it cannot be concluded that the income declared by K.Mahesh Kumar in his hands was either his income or the income of the partnership firm in which he was a partner. The declaration of income by K.Mahesh Kumar is in his hands and not in the hands of the Assessee firm in his capacity as partner. Differences in the credits in the bank account which have to be regarded as undisclosed business receipts, such differences in the credits in the bank account was not found as a result of search in the case of K.Mahesh Kumar. Since the additions are deleted on merits, we do not wish to address the arguments made by the learned counsel for the Assessee that the condition precedent for initiating proceedings u/s. 153C of the Act have not been satisfied in the present cases and therefore the assessment is liable to annulled - Decided against revenue.

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• 2020 (10) TMI 788
  Disallowance of expenditure of TDS on export commission - discharge of the liability - as the case of the assessee that it has paid export commission as a gross amount which included applicable TDS and by mistake the assessee has separated the export commission and the TDS payable - HELD THAT:- No material has been brought on record to show that the assessee has to bear the TDS liability on account of the payees as per any contractual agreement. At least, no material evidence to indicate existence of such contractual terms and obligations has not been furnished either before the Departmental Authorities or even before us. In the absence of any evidence, no factual finding can be recorded to the effect that the assessee has incurred such expenditure in terms of any contractual obligation. If the assessee through proper evidence can prove that the TDS liability was incurred by it in terms of any contractual obligation, the ratio laid down in case of BOB Cards Ltd. [ 2012 (7) TMI 155 - ITAT, MUMBAI ] would be squarely applicable and the expenditure has to be allowed. However, the existence of a contractual obligation requires factual verification by the AO - we restore the issue to the Assessing Officer for factual verification and if it is found that the expenditure was incurred on account of contractual obligation, it has to be allowed. - Assessee Ground is allowed for statistical purposes.

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• 2020 (10) TMI 787
  Estimation of income - NP Determination - rejection of books of accounts - AO while estimating the income of the assessee has applied the Net Profit rate of 6.50% for the assessment year 2010-11, 8.50% for the assessment years 2012-13 and 13-14 - HELD THAT:- AO has not made any efforts to find out the comparable rate of NP in identical business or otherwise prevailing rate in this business as carried out by the assessee. Even the AO has not considered the assessee s own Net Profit declared in the preceding year which was not disputed by the Department, accordingly the adoption of NP rate @ 6.5% and 8.5% respectively without any basis or comparative instances is not justified. Hence, following case of M/s. Dynamic Engineers Ltd. Vs. ACIT [ 2020 (1) TMI 1104 - ITAT JAIPUR] the trading addition made by the AO is deleted. Addition under the head Income from Other Sources - HELD THAT:- Since the addition made by the AO on account of trading income based on net profit rate applied by the AO has been deleted and the income declared by the assessee is accepted while deciding the ground no. 1, then no separate addition on account of this income which are already part of the Profit Loss account and considered in the total income declared by the assessee in the return of income is called for. Hence the addition made on this account is deleted. - Decided in favour of assessee.

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• 2020 (10) TMI 786
  Unexplained investment u/s 69 - Material seized in survey action u/s. 133A - verify the source of the investment the case of the assessee was reopened and notice u/s. 147 - source of the fund invested by the assessee has flowed from the partnership firm M/s. KSR Constructions wherein the assessee s spouse is a partner - HELD THAT:- Assessee does not have any proximity with M/s. KSR Constructions other than the fact that her spouse is one of the partners in the firm. Amount advanced by M/s. KSR Constructions to the assessee shall be obviously treated as the amount withdrawn by the assessee s spouse from the firm which has to be debited to the assessee s spouse s capital account in the firm s books of account. Just because the books of accounts of the assessee s firm and the assessee s spouse has not been properly maintained or incomplete the nature of the transaction does not change. Amount advanced by M/s. KSR Constructions to the assessee has to be construed as the amount given by M/s. KSR Constructions on behalf of the assessee s spouse. Hence, the first proviso of section 56(2)(vi) shall come into operation in the case of the assessee and accordingly the amount received by the assessee shall be treated as a gift received by the assessee from her spouse. Direct the Ld. AO to delete the addition made in the hands of the assessee invoking the provisions of section 69 of the Act which is further confirmed by the Ld. CIT (A). - Decided in favour of assessee.

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• 2020 (10) TMI 785
  Penalty u/s 271(1)(c) - Defective notice - Addition u/s 68 as unexplained income - HELD THAT:- It is evident from the notice u/s 274 r.w.s. 271 of the Act for the impugned year that the Assessing Officer has not specifically mentioned as to under which limb of Section 271(l)(c) of the Act the penalty proceedings had been initiated by him, i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars of income - See SSA S EMERALD MEADOWS [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] AND M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2020 (10) TMI 779
  Maintainability of appeal - low tax effect - tax effect on account of the said alleged audit objection - HELD THAT:- Revenue stake in the present case is admittedly much below Rs. 10,00,000/-, and for High Court purposes, as per the latest CBDT Circular, the said limit is now Rs.One Crore Revenue could not produce any such audit objection for perusal of the Tribunal/ this court. Appellant Revenue only submitted that the Office File Noting provided to him shows that the appeal was preferred before the learned Tribunal on the basis of some audit objection. Tribunal has earlier permitted withdrawal of the appeal by the Revenue, as the Revenue stake was below Rs. 10,00,000/- which factual position is not disputed. The mere existence of the audit objection for the present AY 2003-04 does not change the Revenue stake at all. Appellant Revenue should appreciate and understand the letter and spirit of the CBDT Circular in the litigation policy issued by it, to withdraw, and not to press the appeal on merits, before the concerned forums viz. Tribunal or High Court, if the Revenue stake or tax effect is less than the prescribed limit.

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• 2020 (10) TMI 777
  Grant of relief u/s 89 - Relief when salary, etc., is paid in arrears or in advance - AO jurisdiction of the matter for the grant of relief - Retirement and pension benefits withheld - proceedings pending against the petitioner before the Railway Authority - petitioner submitted a request to not deduct income tax on the amount by treating it as income of the current year, to spread over/ distribute the payment over the period, under Section 89 of the I-T Act read with Rule 21A (2)(d) of the I-T Rules - Whether petitioner, being a senior citizen, was exempted from paying income tax in advance, under Section 207(2) ? - whether the SBI erred in not allowing the benefit of Section 89 while deducting TDS on a pension under Section 192 ? - whether this Court ought to direct the SBI or the I-T department to make a refund to the petitioner? - HELD THAT:- Section 89 is plain and clear. It provides that it is for the Assessing Officer of income tax to grant the relief under the Section and on application made before him. We further see that the Hon ble Apex Court has accepted this position in multiple cases. In the case of Sundaram Motors (P.) Ltd. v. Ameerjan [ 1984 (8) TMI 3 - SUPREME COURT] awarded the petitioners with compensation in place of reinstatement. Holding that since the amount would be paid in lump sum, for payment of income tax, the benefit of spread over must be provided to the petitioners. Accordingly, the Court directed the employee to make a necessary application before the I-T Officer to claim relief under Section 89, and the officer to act immediately in disposing of the said application. On a reading of Section 192 (2A), we agree that the SBI should have computed the relief on the basis of the particulars and deducted income tax in accordance with Section 89. However, we see that the remedy of the undue deduction is provided under Section 89 of the I-T Act itself, where the assessee is required to apply to the Assessing Officer and avail relief under the Section. Accordingly, the petitioner is directed to make a required application to the Assessing Officer having jurisdiction of the matter for the grant of relief under Section 89 of the Act in accordance with the provisions of the statute. The SBI is directed to extend all assistance to the petitioner to enable him to avail such relief. We also hope and expect that the Assessing Officer of the income tax considers and dispose of the matter expeditiously and within a period of three months from the date of receipt of application.

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• 2020 (10) TMI 774
  Deemed dividend u/s 2(22)(e) - money received from the lending companies - ICDs between the common group companies - HELD THAT:- Funds were diverted from its group companies to another group company, the assessee, for importing the products for trading purposes in order to realize higher profits and the funds were received on short term basis depending on the business requirements. The said money borrowed was repaid during the year itself and nothing was outstanding at the year end. Thus we can reasonably presume that these funds were moved from one company to another which are under the same management and the purpose is to deploy the funds more efficiently and profitably and thus there exists a business and commercial expediency for the same. We find merit in the contentions of the Ld. A.R. that these transactions being in the nature of current account between the group concerns which can not be treated as loans or advances to be treated as deemed dividend under section 2(22)(e) of the Act. ICDs between the common group companies can not be equated with the loans and advances for the purpose of deemed dividend under section 2(22)(e) of the Act. We further note that the money was not at all diverted for the benefit of shareholders by the assessee company but in fact used for its business. Money advanced by two sister concerns to the assessee company which was repaid during the year along with interest @ 12.5% per annum and used for the purpose of business of the assessee is not a loan/deposit to be treated as deemed dividend. - Decided in favour of assessee.

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• Customs

• 2020 (10) TMI 784
  Benefit of concession/exemption - N/N. 158/95/Cus - goods re-imported for repair/reconditioning of the goods, when again re-exported beyond the prescribed period of one year including the extension of six months permitted in the Notification - HELD THAT:- Since there is no dispute before us from the side of the Assessee that the reimport of the goods which had taken place to repair/recondition the goods in question were re-exported beyond the prescribed period of one year including the period of six months of extended period and therefore, the Assessee had admitted the breach of the condition of exemption from custody duty under the said Notification No.158/95/Cus. Merely because the Assessee could claim the duty drawback later on, and it may give rise to a revenue neutral situation, it cannot be said that the period of one year prescribed in the said Notification is without any meaning. Whether the Assessee/ Importer would actually get such duty drawback or not, is a question which was yet to be determined by the concerned Adjudicating Authority when such a claim of duty drawback was made by the Assessee. Therefore, that issue cannot be prejudged either by the Tribunal or by this Court. On the admitted breach of the Notification No.158/95/Cus, the Assessee/ Importer definitely became liable to pay the custom duty in question, denying the exemption under the said Notification in view of the admitted delay beyond the period of 12 months, for the re-export of the same goods. The learned CESTAT therefore in our opinion was justified in denying the said exemption to the Assessee and also rejecting the Rectification Application filed by the Assessee. What Tribunal has done is nothing but asking the Assessee to comply with the law. Duty Drawback - HELD THAT:- The question of claiming duty drawback by the Assessee was yet to arise, when such claim was made in accordance with law. This claim cannot be prejudged and holding it to be revenue neutral situation without that claim being examined would be premature and therefore, the learned Tribunal was justified in denying that relief to the Assessee. So also, we too cannot examine and decide the issue prematurely. Appeal dismissed.

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• 2020 (10) TMI 783
  Validity of Search and Seizure - Smuggling - Gold - cross examination of the panch witnesses - Whether the Revenue establish the existence of reasons to believe that the impugned gold was smuggled? - HELD THAT:- It was incumbent upon the Department to prove the smuggled nature of the gold also. The only effort revenue seems to have made is to mention in the show-cause notice that as no valid import documents could be produced by the person carrying the gold, the same are deemed to be smuggled goods. Show cause mentions that it seems settled fact that the seized gold were illegally brought into India from abroad by any route other than the route specified under Clause (c) of Section 7 of Customs Act, 1962. No meaningful inquiry and investigation appear to have undertaken to prove the smuggled nature of the gold; it is also not mentioned at least from which foreign country, the impugned golds have been illegally imported. Whether the impugned gold is liable to be categorized as gold of foreign origin? - HELD THAT:- There is no whisper in the entire show cause notice about the origin of the gold bars seized from the appellant. It is not mentioned as to where, how and by whom the said gold was smuggled into India. Therefore, the smuggled nature of the impugned gold is far from established. In such circumstances, the department appears to have attempted to cover up the inadequacies in the investigation with not so convincing reasons. No reference was made to experts in the field. Though Chemical examiners report indicated the purity of the Gold, it did not conclude that the impugned gold was of foreign origin - Department has not established that the seized gold is of foreign origin and has also not established that the same was smuggled in to India. As the reasons to believe that the impugned Gold is of foreign origin and is smuggled, benefit of doubt or benefit of any shortcomings in the investigation should accrue to the appellant and not to the Revenue. Whether the Customs have followed correct procedure vis- -vis search and seizure of the gold? - HELD THAT:- It is found that no proper search of the appellant was conducted at the Railway station. As per the show cause notice, pieces of gold were found with the appellant at the Railway station as well as the Customs House. The reasons for summoning a person, instead of searching and seizing on the same spot and taking him to the Customs House for detailed search etc. has not been properly explained in the show cause notice and in the order-in-original. The Revenue did not establish that the impugned gold was of foreign origin and was smuggled. Therefore, the seizure of the impugned gold is not maintainable - Appeal allowed - decided in favor of appellant.

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• 2020 (10) TMI 782
  Levy of penalty on Customs Broker - Regulation 20(7) and 22 of CBLR, 2013 - mis-declaration both at the time of import and again at the time of export as regards description, country of origin and value - HELD THAT:- The charge of violation under Regulation 11(n) as regards compliance of KYC norms is not established as admittedly the appellant have received several documents from their client viz. PAN card, KYC details in prescribed format, authorisation, self attested copy of IEC etc. which corroborate the genuineness of their client - M/s AAA Impex Services and their working at their given address. Further, there is no document which raises suspicion. Accordingly, the charge under Regulation 11(n) is not established. Charge under Regulation 11(e) - HELD THAT:- There is no act of omission or commission which indicates lack of due diligence to ascertain the correctness or any information imparted by the appellant to their client with reference to the work handled by them. Further, there is no case made out of any collusion or abetment. Further, no case of any illegal gains on the part of the appellant CB is made out, indicating their collusion as alleged. Further no case is made out that the appellant CB have knowingly allowed the alleged mis-declaration by their client. It is established principle of law that mere facilitation without knowledge of consequences, would not amount to abetting an offence. Appeal allowed - decided in favor of appellant.

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• 2020 (10) TMI 776
  Refund/rebate claim withheld - no stay order obtained - Circular bearing No.276/186/2015-CX.8A dated 01.06.2015 - HELD THAT:- If no interim order has been obtained by the department within a specified period, refund has to be allowed and of course the same will be subject to the outcome of the appeal. In the case on hand, the appellate authority passed the order dated 18.02.2020. We are now on 01.10.2020. More than seven full months have elapsed in the meanwhile. If the department was aggrieved, the department should have expeditiously filed an appeal and pursued the matter and obtained interim order. The petitioner cannot be made to wait indefinitely. The department cannot take its own sweet time to file the appeal and pursue the same. The department ought to have acted expeditiously in the matter. The respondents herein are directed to disburse the refund due to the petitioner at the applicable rates of interest. This refund shall be made within a period of four weeks from the date of receipt of a copy of this order - petition allowed.

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• Corporate Laws

• 2020 (10) TMI 781
  Reduction of share capital - Section 66 of the Companies Act, 2013 and NCLT (Procedure for Reduction of Share Capital of Company) Rules, 2016 - HELD THAT:- The present position of law, while dealing with the provisions of Section 66 is that if none of the shareholders are objecting for the proposed reduction, then after considering the merits of the case as also connected facts and circumstances such petition generally deserves to be admitted - Further, observed that while reducing the share capital, company can decide to extinguish some of its shares without dealing in the same manner as with all other shares of the same class. The company limited by shares is permitted to reduce the share capital in any manner, thereby a selective reduction is permissible within the framework of law. On the question of valuation as well, an observation was that valuation of shares is a technical matter, which requires considerable skill and experience. If the stakeholders are satisfied with the value, can approve the transaction of reduction of share capital which should not deemed to be inequitable or unfair transaction. In the present case, it can be seen that in the present case, exiting equity shareholders are being issued equivalent preference shares in order to fix their priority dividend over that of ordinary share dividend. Therefore, there is no need to furnish valuation report to the ROC because there is no change in the paid up share capital of the petitioner company post reduction of the capital in the present case. The petitioner company in the present case has already filed Form GNL-2 online on 04.05.2018 and the copy of the same is a part of Diary No. 7090 dated 13.12.2019. As the application for reduction of share capital under Section 66 of the Act has to be filed before this Tribunal, therefore, it is held that there is no need to file Form GNL-1 with the Registrar of Companies in respect of application of Reduction of Share Capital and filing of GNL-2 online would be sufficient in the present situation. It is hereby ordered to confirm the reduction of share capital of Petitioner Company by approving the minutes of the EOGM dated 30.05.2018, wherein the members of the Petitioner Company resolved for the reduction of share capital of the Company, as prescribed U/s 66 of the Companies Act, 2013, to reduce issued and paid up share capital from Rs. 61,67,000/- divided into 61670 equity shares of Rs. 100/- each to Rs. 37,17,000/- divided into 37,170 equity shares of Rs. 100/- each fully paid and simultaneously issue 24500 6% non-cumulative redeemable preference shares of Rs. 100/- each to the holder of equity share capital - the necessary alteration shall be made in the Memorandum of Association by the Petitioner Company for reduction of the amount of its share capital and of its shares. The issued, subscribed and paid-up share capital of Saraswati Offset Printers Private Limited as on 05.04.2019 is henceforth Rs. 1,66,00,770/-divided into 2,41,404 Equity Shares of Rs. 10/- each and 14,18,673 Preference Shares of Rs. 10/- each, reduced from Rs. 8,30,03,880/- divided into 12,07,022 Equity Shares of Rs. 10/- each and Rs. 70,93,366/- Preference Shares of Rs. 10/- each - Application allowed.

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• 2020 (10) TMI 780
  Approval of the Scheme of Amalgamation - Sections 230 and 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016 - HELD THAT:- Upon considering the approval accorded by the members and creditors of the Petitioner company to the proposed Scheme, and the report filed by the Regional Director, Northern Region, Ministry of Corporate Affairs, report filed by the official liquidator and also as no objection from any quarter against the Scheme has been received; there appears to be no impediment in sanctioning the present Scheme - sanction is hereby granted to the Scheme under Section 230 to 232 of the Companies Act, 2013 in respect of the Petitioner Company. The scheme is approved - application allowed.

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• 2020 (10) TMI 773
  Oppression and mismanagement - Removal of Director - nomination of a new director - submission of Audited Balance Sheet - time limitation - HELD THAT:- The averments made by the petitioner in the petition are not supported by relevant documents. In fact, the petitioner has not annexed any documents to support his case and prima facie we are of the view that the petitioner has failed to make out a case of oppression and mismanagement as against the Respondents. It can be seen that the averments made by the petitioner in the petition are that he had infused some funds into the 1st Respondent Company after which he had been tricked into by the Respondents and resigned as a Director of the 1st Respondent Company on 17.11.2012. Now, after the lapse of almost 5 years, the petitioner has filed the present petition to induct him as the Director of the 1st Respondent Company. It is evident from the records that the petitioner has acted in pursuance of the Share purchase agreement entered into between the parties on 04.07.2012 and has transferred 1,80,000 shares out of the 3,00,000 shares in favour of the 2nd and 3rd Respondents and has also received the consideration in relation to the same. However, now in the present petition, the petitioner claims that he still holds 3,00,000 shares in the 1st Respondent Company, which is more than the shares held by the 2nd and 3rd Respondent. Thus, the petitioner has suppressed the materials facts before this Tribunal and has not come with clean hands. Time Limitation - HELD THAT:- The cause of action for the petitioner to file this petition arose on the day on which he alleged to have been tricked by the Respondents to resign as a Director of the 1st Respondent Company i.e. on 17.11.2012. Admittedly, the petitioner has filed the present petition before this Tribunal on 30.11.2017, which is almost after a lapse of 5 years. Section 433 of the Companies Act, 2013 contemplates that the provisions of the Limitation Act, 1963 shall, as far as may be, apply to proceedings or appeals before the Tribunal or the Appellate Tribunal, as the case may be - the present Petition can also be construed as an application as defined under the Limitation Act, 1963. Thus, irrespective of whether a petition under Section 241 of the Companies Act, 2013 falls under Article 137 or under Article 113 of the Limitation Act, 1963, the time period specified is three years when the right to sue / right to apply accrues, as the case may be. The petition filed by the petitioner is prima facie barred by limitation - Further, even on merits, the petitioner has failed to make out a case of oppression and mismanagement into the affairs of the 1st Respondent Company and the petitioner has only made sweeping allegations as against the Respondents and failed to corroborate the same with relevant material document - Petition dismissed.

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• Insolvency & Bankruptcy

• 2020 (10) TMI 772
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Respondent has sent an email on 15.11.2018, complaining about the delay in completion of work and quality of service provided by the petitioner and on perusal of the E-mails sent by respondent to the applicant dated 02.11.2017, 20.11.2018 and 02.06.2018 it can be concluded that the respondent has requested several times to the applicant for the timely completion of work and has complained about the delay in the completion of work. The project hand over report dated 13.08.2018 submitted by the neutral third party to certify the construction site submitted by the applicant in the petition also contains the fact that major leakage has been found in the work as well as work was not found as per the satisfaction of the third party. The documentary evidence submitted by both the parties clearly establishes the pre-existence of dispute between the parties prior to the issuing of notice by the Petitioner. Application dismissed.

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• 2020 (10) TMI 771
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Financial Debt - existence of debt and dispute or not - HELD THAT:- Resolution Plan/Restructuring Package, which was submitted by the Corporate Debtor, was rejected, as is evident from the Minutes of the Consortium Meeting dated 28.03.2018, not only on account of the revised RBI Guidelines but also due to non-routing of sales of the Corporate Debtor through cash credit account. Details on record, more particularly the Minutes of the Meeting of the Consortium on 05.04.2019, wherein the forensic audit report of the account of Corporate Debtor were considered, various irregularities have been recorded. Thus, prima facie, the Financial Creditor has succeeded in establishing that the proceedings initiated by them against the Corporate Debtor under IBC 2016 is primarily due to failure of the Corporate Debtor to pay the outstanding amount dues as under taken in the loan agreement and not only on account of RBI Circular dated 12.02.2018. Thus, there being debt payable by the Corporate Debtor and having committed default, it is held that the Financial Creditor has made out a case for initiating of Corporate Insolvency Resolution Process against the Corporate Debtor , which needs to be decided on its merits. Application admitted.

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• 2020 (10) TMI 770
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT:- The corporate debtor has tried to create and establish a preexisting dispute by asserting that the materials were neither delivered nor received. However, no documentary evidence or correspondence is placed on record by the corporate debtor to support the contentions. No documentary evidence is placed on record to manifest that there is a pre-existing dispute but the said dispute was raised for the first time only after notice under Section 8 of IBC was issued. In reply only statements are made by Corporate Debtor which has not been substantiated with any proof. The corporate debtor has not placed on record any document which exhibits the plausible dispute between the parties. There is no merit in the so-called dispute raised by the corporate debtor as mere reply filed by the corporate debtor to the present application, is unable to establish any pre-existing dispute of genuine nature. This leaves no doubt that the default has occurred for the payment of the operational debt for which the invoices were raised by the applicant and the so called dispute raised by the corporate debtor is merely a moonshine dispute - it can be concluded that the dispute raised by the corporate debtor, is spurious, plainly frivolous, unable to categorize as genuine dispute as reproduced above and the contention of the corporate debtor, of a pre existing dispute without any evidence and merit is a clear after thought to defeat the claim of the applicant. Time Limitation - HELD THAT:- The date of default is 15.12.2017 and the present application is filed on 30.04.2019. Hence the application is not time barred and filed within the period of limitation. The present application is filed on the Performa prescribed under Rule 6 of the Insolvency and Bankruptcy Code, 2016 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 r/w Section 9 of the code and is complete. The applicant is entitled to claim its dues, establishing the default in payment of the operational debt. Hence, the application is admitted - application admitted - moratorium declared.

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• 2020 (10) TMI 769
  Approval of the sale of Corporate Debtor as a going concern to M/s. Geosoft Distributors Private Limited by way of private sale without any liabilities and with immunity from existing litigations, if any, against the Corporate Debtor - private sale be allowed to be distributed as per order of priority specified in Section 53 of the Insolvency and Bankruptcy Code, 2016 and remaining outstanding liabilities be extinguished - HELD THAT:- It is worth noting that no valuation by any of the valuers of licences/brand owned by the Corporate Debtor has been done although it is being sought to be transferred. Legal validity of the proposal made by the liquidator - HELD THAT:- First of all, sale of Corporate Debtor as a going concern without transfer of liabilities is not in consonance with the provisions of Regulation 32A(3) read with Regulation 32(e) (f), hence, for this reason alone it is not acceptable and thus, rejected. The pleas made by the Liquidator as regards the continuance of licences in the name of the Corporate Debtor, waiver of penalties/other penal actions in relation to non-compliance by the Corporate Debtor etc. are outside jurisdiction of Adjudicating Authority - Further, there are no specific provisions like Section 30 of IBC, 2016 as applicable to approval of resolution plan, hence, in liquidation, approval of sale of assets by Adjudicating Authority cannot empower the buyer of the assets to have such benefits. In this regard, we are further of the view that the moment liquidation is ordered, any proceedings under any law can continue which had been pending before the order of liquidation being passed. This is as per the provisions of Section 33(5) of IBC, 2016. Hence, such pleas made by liquidator are rejected. Sale as a going concern involves transfer of both assets and liabilities or group of assets or liabilities which are clubbed together. The purpose of such clubbing is that the business entity should continue along with its employees. Further, sale of a going concern essentially involves slump sale wherein no specific values are assigned to individual assets and undertaking is sold as a whole along with the liabilities. However, in the present case, only tangible assets have been valued on individual basis. Thus, from this angle also, the proposal made by the Ld. Liquidator is not in accordance with the generally accepted practices, hence, rejected. Further, if the liabilities are excluded and the valuation of the Corporate Debtor is done on the basis of only tangible assets, then, even though the consideration is apparently more than the reserve price, but in real sense, it is equivalent to giving the entity on a platter to the prospective buyer. In the present case, it is not in dispute that the valuation of the intangible assets i.e. licences has not been done at all. Considering the fact that no valuation has been done over intangible assets and proposal based upon the valuation of tangible assets and its reserve price to transfer the Corporate Debtor as a going concern when associated liabilities is not in consonance with the provisions of the IBC, 2016 read with Regulation made thereunder, this application filed by the Liquidator is rejected.

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• Service Tax

• 2020 (10) TMI 775
  Rectification of error - error apparent on the face of record - Section 74 of the Finance Act, 1994 - GTA service or Supply of Tangible Goods without transfer of right to use - reverse charge mechanism - summons issued for production of documents which were not done - evasion of pre-deposit - HELD THAT:- There are no grounds to substantiate that part of the service were that of goods transport agent services. The petitioner had also not co-operated during the investigation and therefore DRI was able to issue the Show Cause Notice only after procuring records through Income Tax/Service Tax Commissionerate its recipient of the recipient of services. If the petitioner is aggrieved, the petitioner should only file a statutory appeal. The petitioner cannot expect the court to exercise extraordinary jurisdiction under Article 226 of the Constitution of India to arrive at a conclusion as to whether there was any error apparent on the face of record as the order is detailed. By this Writ Petition, the petitioner has attempted to avoid payment of pre-deposit Section 35F of the Central Excise Act, 1944 as made applicable to appeals under the Finance Act, 1994. The petitioner has an alternate remedy before the Customs Excise and Service Tax Appellate Tribunal (CESTAT) which is a more effective remedy though it would involve a pre-deposit - The mere fact that Tax Deductions at Source (TDS) may have been made by some of the service recipients under Section 194C and some under Section 194I of the Income Tax Act, 1961, may, ipso facto would not justify the conclusion that there was the wrong Assessment/Demand of Service Tax. There is no error apparent on the face of record. Petition dismissed.

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• CST, VAT & Sales Tax

• 2020 (10) TMI 778
  Levy of Entertainment Tax - online booking charges charged by a Cinema Hall Owner besides the cost of ticket for entry into the cinema hall and enjoy the entertainment in the form of a movie - HELD THAT:- It is well, say, settled legal position that unless all the following four components are satisfied and clearly defined, the levy of tax would fail viz., (i) taxable event; (ii) object of taxation; (iii) rate of taxation; (iv) measure or value on which rate will be applied for computing the tax liability . Unless all the four parameters are clear and unambiguous and uniformly applied to the taxable event chargeable under a taxation enactment, the levy is bound to fail. Entertainment Tax was a State subject and before the said levy of Entertainment Tax being subsumed under the GST Laws enforced in the country with effect from 1 July 2017, was the payment for admission, which as per the definition given in the Tamil Nadu Entertainment Tax Act, 1939, as amended from time to time in Section 3(7)(c) of the Act is that the payment should be necessary condition to be complied with for gaining entry into the place for entertainment - The payment made for any other purpose connected with such entertainment will be taxable under the said Act, only if the person concerned is required to make such payment as a condition for entry. Obviously, the online booking charges or internet handling charges, as the name given by some other cinema theater owners is not a mandatory payment for gaining entry into the cinema hall. It is an additional payment for extra or other facility provided by the Cinema hall owner. With the advent of internet, much after the said enactment of 1939, even though amended from time to time, the said Act could not have provided for levy of tax on the service of internet provided by the cinema owner. The same could be a subject matter of levy of Service Tax by the Parliament in the erstwhile law regime, prior to GST, with effect from 1 July 2017. But the Entertainment Tax being a tax collected by State for the Local Administration or Municipal Administration, is leviable only on cost of ticket which entitles a person to gain entry into the cinema hall or theatre. There is considerable force in the submission made by Mr.Easwar, learned Senior counsel appearing on behalf of the Assessee. Unless such internet charges or online booking charges are uniformly charged from all the customers for having entry into the cinema hall, such extra service charges taken by the cinema owner to the extent of Rs. 30/- per ticket could not be made subject matter of Entertainment Tax. Even though such payment along with the cost of ticket at the rate of Rs. 190.78 in particular illustration, was part of the overall cost to the customer. The test is attending the entertainment or continuing to attend the entertainment. The mandatory requirement to fall within Section 3(7)(c) of the Act is that a person is required to make, as a condition to attend or continue to attend the entertainment - the words in the clause 3(7)(c) of the Act, any payment for any purpose whatsoever connected with an entertainment , in addition to the payment for any for admission to entertainment in clause (c) , will have to be read in conjunction and not without the context of the words, which a person is required (mandatorily) to make as a condition of attending or continuing to attend the entertainment . These words are not superfluous or without meaning and in fact, they provide the bedrock condition for applying Section 3(7)(c) of the Act. Unless such a conditional payment for any purpose is integrally connected with the entertainment is uniformly and mandatorily chargeable from all, who want to have entry in the place of cinema hall, in our opinion, Section 3(7)(c) cannot cover such payment made by the customer, for availing the facility of online booking of tickets. The measure of taxation, viz., the ticket cost of Rs. 190.78 for both the types of customers could only be held exigible to the Entertainment Tax. Rs. 30/- separately paid for online booking facility, is not sine qua non for having entry in the cinema hall and therefore, falls outside the scope of the term, payment for admission , defined in Section 3(7)(c) of the Act - Assessee has paid Service Tax under Finance Act 1994 on such online booking charge for the period from 01.07.2012. The Assessing Authority has also dealt with the definition of Section 3(7)(c) of the Act and has emphasized the words any payment for any purpose in addition to the payment for admission to the entertainment . The said reassessment order was passed exercising the powers under Section 7(2) of the Act 1939, and the Assessing Authority not only imposed tax at the rate of 30% on the online booking charges to the extent of Rs. 41,96,277/- but imposed penalty @ 150% under Section 7(3) of the Act to the extent of Rs. 62,94,416/- vide Assessment order dated 21 September 2015, for AY 2010-11. The said reassessment orders for all the years in question for AY 2007-08 to 2014-15 (upto December 2014) cannot be sustained and are hereby quashed - Appeal allowed.

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