TMI Tax Updates - e-Newsletter
October 26, 2019

Case Laws in this Newsletter:

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

Articles

1. Penalty u/s 271.1.c for disallowance u/s 14A.

   By: DEVKUMAR KOTHARI

2. Understanding Deposit Insurance

   By: G Binani

News

1. EXAMINATION FOR CONFIRMATION OF ENROLLMENT OF GST PRACTITIONERS

2. President of India to Present National CSR Awards to Select Companies on Tuesday for their Outstanding Contribution in Area of CSR

Notifications

GST

1. 50/2019 - dated 24-10-2019 - CGST

Seeks to extend the last date for filing of FORM GST CMP-08 for the quarter July-September 2019 by four days from 18.10.2019 till 22.10.2019

GST - States

2. 20/2019– State Tax (Rate) - dated 22-10-2019 - Delhi SGST

Seeks to amend Notification No. 11/2017-State Tax (Rate), dated 30.06.2017

3. 18/2019-State Tax (Rate) - dated 22-10-2019 - Delhi SGST

Seeks to amend Notification No. 02/2019-State Tax (Rate), dated the 12.09.2019

4. 10/2019 – State Tax (Rate) - dated 22-10-2019 - Delhi SGST

Seeks to amend Notification No. 11/2017- State Tax (Rate), dated the 30th June 2017

5. 09/2019– State Tax (Rate) - dated 22-10-2019 - Delhi SGST

Seeks to amend Notification No. 02/2019- State Tax (Rate), dated the 12th September, 2019

6. 07/2019-State Tax (Rate) - dated 22-10-2019 - Delhi SGST

Payment on Basis of Reverse Charge Mechanism for supply of Goods and Services

7. Removal of Difficulty Order No. 07 State Tax - dated 21-10-2019 - Jharkhand SGST

Jharkhand Goods and Services Tax (Seventh Removal of Difficulties) Order, 2019.

8. 36/2019 – State Tax - dated 21-10-2019 - Jharkhand SGST

Seeks to amend Notification No. 22/2019- State Tax, dated the 11th June, 2019

9. 35/2019 - State Tax - dated 21-10-2019 - Jharkhand SGST

Seeks to amend Notification No. 21/2019- State Tax, dated the 28th June, 2019

10. 34/2019 - State Tax - dated 21-10-2019 - Jharkhand SGST

Seeks to amend Notification No. 21/2019- State Tax, dated the 28th June, 2019

11. 33/2019 – State Tax - dated 21-10-2019 - Jharkhand SGST

Jharkhand Goods and Services Tax (Fifth Amendment) Rules, 2019.

12. 3240/CTD/GST/2019/7 - dated 18-10-2019 - Puducherry SGST

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

13. 3240/CTD/GST/2019/6 - dated 18-10-2019 - Puducherry SGST

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

14. G.O. Ms. No. 51 - dated 14-10-2019 - Puducherry SGST

Seeks to amend Notification G.O. Ms. No. 34, dated the 5th August, 2019

15. G.O. Ms. No. 50 - dated 14-10-2019 - Puducherry SGST

Puducherry Goods and Services Tax (Fifth Amendment) Rules, 2019

16. G.O. Ms. No. 44 - dated 1-10-2019 - Puducherry SGST

Seeks to amend Notification G.O. Ms. No. 26, dated the 13th March, 2019

17. G.O. Ms. No. 43 - dated 1-10-2019 - Puducherry SGST

Lieutenant-Governor, Puducherry, appoints the 24th day of September, 2019, as the date from which the provisions of rules 10, 11, 12 and 26 of the Puducherry Goods and Services Tax (Fourth) Amendment Rules, 2019

Circulars / Instructions / Orders

SEZ

1. Instruction No. 100 - dated 25-10-2019

Single letter of approval (LoA) for all categories under Chapter 71 of ITC HS

GST - States

2. TRADE CIRCULAR No. 39/2019 - dated 17-10-2019

Clarification regarding determination of place of supply in case of software/design services related to Electronics Semi-conductor and Design Manufacturing (ESDM) industry.

3. TRADE CIRCULAR No. 40/2019 - dated 17-10-2019

Clarification regarding taxability of supply of securities under Securities Lending Scheme, 1997

4. TRADE CIRCULAR No. 41/2019 - dated 17-10-2019

Clarification on the effective date of explanation inserted in notification No. 1135-F.T. [11/2017- CTR] dated 28.06.2017, S. No. 3(vi).

5. TRADE CIRCULAR No. 42/2019 - dated 17-10-2019

GST on license fee charged by the States for grant of Liquor licences to vendors

Companies Law

6. 11/2019 - dated 25-10-2019

Relaxation of additional fees and extension of last date of filing of form IEPFA-1A and form IEPF-2

7. 12/2019 - dated 24-10-2019

Relaxation of additional fees and extension of last date of filing of CRA-4 (cost audit report) for FY 2018-19 under the Companies Act, 2013

Highlights / Catch Notes

GST

• Wind Mills and Accessories Sold Together Classified as Composite Supply with 5% GST Rate Under GST Regulations.

  Case-Laws - AAR : Classification - rate of GST - Wind Mills and accessories are proposed to be sold for a single price and hence it amounts to a composite supply with the supply of wind mills being the principal supply - Taxable @5% of GST
  Visit to Get Source

  ---

• Pure Agent Role Exempts Applicant from GST on Payments Between Job Trainee and Trainer Under GST Law.

  Case-Laws - AAR : Levy of GST - On Job trainee - applicant acts as a pure agent - the applicant is only a conduit for the payment and the actual service is by the trainee to the trainer. Therefore this amount is not taxable in the hands of the applicant.
  Visit to Get Source

  ---

• Pooja Oil Listed Under Schedule II, Sl. No. 27, Subject to 12% GST Rate.

  Case-Laws - AAR : Classification of goods - Pooja oil - the product “pooja oil’ finds a very specific entry in Schedule II. Thus it is more appropriately covered under Sl. No. 27 in Schedule II of the said Notification and accordingly taxable at 12% GST.
  Visit to Get Source

  ---

Income Tax

• Reassessment u/s 147 with Section 143(3) continues despite stay on final order, lawful under statute.

  Case-Laws - HC : Reassessment u/s 147 r.w.s 143(3) - continuance of assessment proceedings during stay period - The stay is operating against passing of the final assessment order. That does not mean that the continuation of the reassessment proceedings, in the mean time would be contrary to the statute.
  Visit to Get Source

  ---

• Court Upholds Reassessment Validity Under Income Tax Act, Sections 147 and 143(3), Despite Limitation Period Challenge.

  Case-Laws - HC : Reassessment u/s 147 r.w.s 143(3) - period of limitation - issuing another notice after issuing notice u/s 143(2) within prescribed period of limitation - exclusion of certain period u/s 153 while passing order - All the contentions of the assessee rejected.
  Visit to Get Source

  ---

• Reopening Tax Assessment u/s 147 Invalid Without Proof of Artificial Share Premium Inflation.

  Case-Laws - HC : Reopening of assessment u/s 147 - there is no basis to proceed on the premise that the allocation of shares was at an artificially high premium. Merely because a sizeable sum was received in the nature of share premium during the year under consideration, would not automatically mean that the same was artificially increased.
  Visit to Get Source

  ---

• Expenditure Claims Valid if Work Completed, Not Dismissed for Minor Billing Issues.

  Case-Laws - AT : Once the claim of expenditure is not found to be excessive or inflated then having regard to the fact that the actual work has been carried out at the site, the claim cannot be disallowed on minor irregularities or defects in the bills/invoices produced by the assessee.
  Visit to Get Source

  ---

• Section 40(a)(iib) Addition Confirmed: Surcharge on Sales Tax Not Limited to Quid Pro Quo Payments for State Business Benefits.

  Case-Laws - AT : Addition u/s. 40(a)(iib) with regard to surcharge on sales tax - contention of the Ld. AR is that expenditure mentioned in section 40(a)(iib) covers only expenditure which is incurred in consideration of obtaining some benefits or rights or license by the State Government in connection with conduct of business - element of quid pro quo in payments - the contention rejected - Additions confirmed.
  Visit to Get Source

  ---

• Penalties u/ss 271D and 271E not applicable for cash loans between family members without bank accounts.

  Case-Laws - AT : Levy of Penalty - receipt and repayment of loan in cash - When the three persons who are close family members of the assessee were not having any bank account in their names, then the provisions of section 271D and 271E cannot be attracted.
  Visit to Get Source

  ---

• Penalty u/s 271(1)(c) Not Applicable for Disallowed Deductions u/s 43B; No Concealment or Inaccuracy Found.

  Case-Laws - AT : Levy of penalty imposed u/s 271(1)(c) - disallowance of deductions u/s 43B - the same cannot be amounted to concealment of particulars of income or furnishing of inaccurate particulars of such income. - Merely because of the fact that the deductions claimed by the assessee have been disallowed the provisions contained u/s 271(1)(c) are not attracted.
  Visit to Get Source

  ---

• Company Seeks Tax Deduction for Business Loss Due to Director's Misappropriation of Funds in Regular Operations.

  Case-Laws - AT : Claim of expenses / loss towards misappropriation of funds by the director - misuse of the authority by the director of the company - the aforesaid loss has incurred in the course of business of the company and therefore should be allowed as a business loss.
  Visit to Get Source

  ---

• Penalty Imposed u/s 271(1)(c) for Lack of Vouchers Deleted After Business Closure in India.

  Case-Laws - AT : Penalty levied u/s 271(1)(c) - the disallowances of expenses have been made by the revenue merely on the reason that the assessee could not produce the relevant vouchers & bills owing to closure of the business in India - Penalty deleted.
  Visit to Get Source

  ---

• Income Tax Act Section 37(1): Avoid Double Taxation on Employee Benefits; CIT(A) Deletes Additions for Revenue Neutrality.

  Case-Laws - AT : Deduction of expenses u/s 37(1) - employee’s benefit expense - tax revenue neutrality - if the income is being charged in the hands of the directors in the highest rate bracket taxing the same in the hands of the company would amount to double taxation - CIT(A) rightly deleted the additions.
  Visit to Get Source

  ---

Customs

• Court Dismisses PIL Alleging Revenue Loss from DFIA Scheme Due to Alleged Collusion and Duty Exemptions Misuse.

  Case-Laws - HC : PIL against the DFIA Scheme - unwarranted loss of public money - case of petitioner is that respondents have failed to discharge their obligations and inaction of the respondents is resulting in loss of public revenue in the form of duty exemption being availed by unscrupulous exporters and importers, wherein the likelihood of connivance of exporters and importers with the officials of the respondents cannot be ruled out - PIL dismissed.
  Visit to Get Source

  ---

• Duty Drawback Recovery Demands Invalid Due to Lack of Mechanism in Duty Drawback Rules, 1995, Rule 16.

  Case-Laws - HC : Recovery of duty drawback already granted - mechanism is absent in Duty Drawback Rules, 1995 thus demand under Rule 16 of Drawback Rules, 1995 is not sustainable.
  Visit to Get Source

  ---

• 10% Weighment Discrepancy in Export Goods Not Enough for Confiscation or Penalty Under Advance License Scheme.

  Case-Laws - AT : Difference in weighment of export goods - Advance license scheme - appreciating the fact that such difference was only 10%, there is no justification for the confiscation of goods or imposition of penalty.
  Visit to Get Source

  ---

IBC

• Bank's Property Charge Doesn't Affect Corporate Debtor's Pre-Assigned Rights in Insolvency Proceedings.

  Case-Laws - Tri : CIRP - Right to claim over property - Maybe it is true that the charge was created over this property by the Bank with the consent of the Government, but that consent will not make any difference to the rights already crystallized by virtue of assignment made in favour of the Corporate Debtor.
  Visit to Get Source

  ---

SEBI

• Penalty Reduced to Rs. 2,50,000 for Missing Audit Report in XBRL Due to Human Error.

  Case-Laws - AT : Financial results uploaded in XBRL mode did not contain the audit report - The violation, if any, appears to been done by inadvertent mistake, by a human error -in the interest of justice the penalty is reduced to ₹ 2,50,000/-
  Visit to Get Source

  ---

• Off-Market Share Transfers Raise Suspicions of Manipulation Due to Matching Quantities in Under a Minute.

  Case-Laws - AT : Off market transfer of shares - intra group transfers - it cannot just be a coincidence that exact quantity of buy and sell would match within a time difference of less than one minute - The trades also points toward the one and only fact that the trades entered into by the appellant alongwith other group members was not a genuine transfer.
  Visit to Get Source

  ---

• Adjudicating Officer Exceeded Authority: Misinterpretation of SAT Order Leads to Unwarranted Maximum Penalty in Disclosure Case.

  Case-Laws - AT : Non-disclosure of certain material information in the offer documents - This is a fit case where no penalty could be imposed and the question of imposing the maximum penalty in the given facts and circumstance does not arise. The AO has clearly exceeded its power in imposing the maximum penalty. The AO has misinterpreted the order of Securities Appellate Tribunal (SAT).
  Visit to Get Source

  ---

• SEBI Uncovers Cals Refineries' US$ 92 Million Unlawful Gains from GDR Issuance, Orders Recovery with Interest.

  Case-Laws - AT : Unjust/ unlawful gains to the tune of US$ 92 million - violations noticed by SEBI relating to the issue of Global Depository Receipts (“GDRs”) by Cals Refineries Limited (“Cals”), a listed Indian company - the appellants have made unjust/ unlawful gains to the tune of US$ 92 million beyond any doubt - Recovery of amount alongwith interest confirmed.
  Visit to Get Source

  ---

Service Tax

• Reopening VCES proceedings needs proof of substantial misdeclaration; no evidence found against respondent in this case.

  Case-Laws - AT : VCES Declaration - reopening of proceedings/VCES Assessment on the basis of declarations made - There should be substantial and conscious misdeclaration for reopening a matter for which discharge certificate is issued - There is no evidence to show that there is any conscious and substantial misdeclaration on the part of the respondent.
  Visit to Get Source

  ---

• CENVAT Credit Available on Voluntary Compliance Scheme Tax Once Accepted by Department and Documentation Issued.

  Case-Laws - AT : CENVAT Credit - credit taken after availing the benefit VCES - The Board’s Circular also clarifies that Cenvat credit is eligible on the tax paid under VCES. As discussed, only when the tax is finally accepted by department and the document is issued, the assessee would be able to avail the credit.
  Visit to Get Source

  ---

Central Excise

• Coal Tar Distillation: "Pitch" is a Distinct Product, Not Classified Under Tariff Item 27.06, Affecting Excise Duties.

  Case-Laws - AT : Classification of goods - Coal Tar Partially Distilled (CTPD) - Once “pitch” is obtained, it is a completely different product from “Tar”. Once a product is “Pitch”, it is no longer “Tar”. Pitch can, under no circumstances, fall under the Tariff Item 27.06.
  Visit to Get Source

  ---

• Export Unit Wins Duty-Free Radio Modem Procurement, Air Conditioner and Ducting System Exemption Denied.

  Case-Laws - AT : 100% EOU - procurement of items duty free - use in manufacture and packing of goods - The appellants are eligible for exemption for Radio Modem and are not eligible for exemption for the 3.0 ton air conditioner and the ducting system.
  Visit to Get Source

  ---

Case Laws:

• GST

• 2019 (10) TMI 1094
  Classification of supply - rate of tax - local sale of used second hand Wind Turbine Generator (WTG) / (Wind Mill) with accessories - N/N. 10/2017 - Central Tax (Rate) dated 28.06.2017 - HELD THAT:- This Notification is issued under Section 9(4) of the CGST act, 2017 and applies in situations where the supplier is an unregistered person and the registered recipient is required to discharge tax on reverse charge basis. In the instant case the applicant is the supplier and is a registered person. Therefore this Notification is not relevant to the transaction in hand. Wind Mills and accessories are proposed to be sold for a single price and hence it amounts to a composite supply with the supply of wind mills being the principal supply. Wind Mills are covered under entry 234 of Schedule I of Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 and the supply of the same is liable to CGST at the rate of 2.5%. Similarly, the supply of wind mills is taxable at 2.5% under the Karnataka GST Act, 2017.

  ---

• 2019 (10) TMI 1093
  Levy of GST - On Job trainee - pure agent - It will be paid monthly stipend amount determined by the client and Trust. The Trust is expected to collect stipend amount from the client and transfer the entire amount to the trainee - Does this stipend reimbursement attracts GST or not? - HELD THAT:- The activities of the applicant are not related to any activity listed under charitable activities , the activities of the applicant cannot be covered under entry no.1 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - The applicant is a facilitator under NEEM and this scheme is envisaged by the Government of India in collaboration with AICTE. But he has not given evidences on the issue whether he is a training partner approved by the National Skill Development Corporation or Sector Skill Council or is a training provider under Deen Dayal Upadhyaya Grameen Kaushalya Yojana. Hence he is not covered by any exemption entries in Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. Taxation of stipend - HELD THAT:- The company which is providing on the job training to the trainees is required to pay the stipend to the trainees and the applicant is only acting as an intermediary in collecting the same from the trainer companies to the students. The service is provided by the trainees to the trainer as the trainer is liable to make payment of the consideration. This consideration is paid through the applicant and the applicant is not allowed to make any deductions in that amount. Hence the applicant is only a conduit for the payment and the actual service is by the trainee to the trainer. Therefore this amount is not taxable in the hands of the applicant. The Trust is expected to keep training the trainee for acquainting the skills and enhancement of employability. The Trust will charge a predetermined training charges - Does this attract GST or not? - HELD THAT:- The applicant is providing additional training to the trainees and the consideration for the same is charged to the companies where the trainees will go for on-job training and skill development. This consideration is not exempted under Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and hence is taxable under entry no. 35 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 and liable to tax at the rate 9% under CGST Act and similarly taxable at 9% under the Karnataka Goods and Services Tax Act, 2017 under entry no.35 of Notification (12/2017) No.FD 48 CSL 2017 dated 29.06.2017. The Trust also obtains Group Health Insurance Policy and Workman Compensation Policy for the trainee s deployed at client place. Trust recovers this amount on monthly basis, the rate which is determined based on the premium amount. - Does this attract GST or not? - HELD THAT:- If any tax is liable on this transaction, it shall be collected by the insurance company, and the insurance company would be the service provider and the applicant will be the service recipient. If the same is reimbursed to the applicant by the trainer company as per the terms of the contract, this amounts to reimbursement of the premium paid and hence this amount reimbursed would not be taxable in the hands of the applicant. The Trust is also obliged to recover the expenditure, then against on boarding the trainee - Does this attract GST or not? - HELD THAT:- The applicant is also collecting certain amount from the trainer company for the purposes of sourcing trainees. This amount is a mutually agreed amount as per the contract between the applicant and the trainer company and is a supply of service by the applicant to the trainer company. This supply is covered under SAC 998519 and is liable to tax at 9% CGST under entry no. 23(ii) of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. Similarly it is taxable at 9% under the Karnataka Goods and Services Tax Act, 2017 under entry no. 23(ii) of Notification (12/2017) No.FD 48 CSL 2017 dated 29.06.2017. If client finds our trainee suitable for absorption of the roles of the Company, trust would like to charge certain amount on-Rolls conversion charges - Does this attracts GST or not? - HELD THAT:- The applicant collects a onetime charge if a trainee sourced by the applicant is selected and absorbed by the company into regular employment. This service is also covered under SAC 998519 and is liable to tax at 9% CGST under entry no. 23(ii) of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. Similarly it is taxable at 9% under the Karnataka Goods and Services Tax Act, 2017 under entry no. 23(ii) of Notification (12/2017) No. FD 48 CSL 2017 dated 29.06.2017.

  ---

• 2019 (10) TMI 1092
  Classification of service - service provided by Sri DMS Hospitality Private Limited to Sodexo Food Solutions India Private Limited - service provided by the Building owner to Sri DMS Hospitality Private Limited - Applicability of GST Notification No. 12/2017-Central tax (Rate) dated 28th June 2017 - Applicability of GST on EMI per month charged from Sodexo Food Solutions India Private Limited and security services provided by Sodexo Food Solutions India Private Limited. HELD THAT:- The supply of services, in the facts and circumstances of the case, are classifiable as Rental or leasing services involving own or leased non-residential property under Service Code (Tariff) 997212. It is taxable in the hands of the landlord and is liable for GST at the rate of 18 percent - the applicant company has subleased the premises to M/s. Sodexo Food Solutions India Private Limited based on leave and license agreement dated 02-04-2018 for a rent of Rs. 5,25,000.00 per month. The supply of services is considered as rental or leasing services involving own or leased non-residential property and is liable for GST at the rate of 18 percent of HSN 997212. Providing of additional facilities like Dining Tables/ Chairs, Partitions, Water purifiers, Bunk beds with lockers, TV with DTH Connection - HELD THAT:- The entire investment made is recovered with 12% interest per annum at the rate of Rs. 1,22,893/- per month. This amounts to supply of goods as per entry no. 1(c) of Schedule II to the Central Goods and Services Tax Act which reads any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of the full consideration as agreed, is a supply of goods . Accordingly it is liable to tax at the rate applicable to each of the goods at the time the delivery of the goods is given to Sodexo Food Solutions India Pvt. Ltd. Providing security services - HELD THAT:- The supply is liable to tax as applicable under SAC 998529 and is liable to tax at 18% under entry 23(ii) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 and is payable under Reverse Charge Mechanism by the recipient of service, if he is registered, as per Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.29/2018- Central Tax (Rate) dated 31.12.2018 (effective from 1.1.2019).

  ---

• 2019 (10) TMI 1091
  Classification of supply - supply of goods or service? - royalty payments in respect of quarrying /mining lease as per the MMDR Act read with the KMMC Rules - quarrying / mining royalty - whether royalty payment in respect of quarrying/mining lease as per the MMDR Act read with KMMC Rules is in the nature of Licensing services for the right to use minerals falling under the heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods involving transfer of title in goods or renting of immovable property under the heading 9972 attracting GST at the rate of 18% or residual entry other services nowhere else classified-999799? - applicability of GST - Reverse charge mechanism - contributions to DMF as per the MMDR Act read with KDMF Rules. HELD THAT:- The applicant has obtained Government land on lease for quarrying Building Stone and in turn applicant pays Royalty along with payment made to District Mineral Foundation of the district and National Mineral Exploration Trust as specified by the Government. The leasing of the Government land to the applicant is considered as supply of service as per sub section (1) of section 7 of the CGST/ KGST Act 2017 - from the leasing of the Government land to the applicant to carry out the activity of the mining is a supply of service to the applicant. Whether the amount paid as royalty and amount paid to the District Mineral Foundation of the district and amount paid to the National Mineral Exploration are to be included in the value of the service provided? - HELD THAT:- The value of the taxable supply of service includes the amount paid as taxes, duties, cesses, fees and charges levied under any law. Therefore the royalty paid @ Rs. 60 per MT of building stones as per the Mines and Minerals (Development Regulation) Act, 1957 (MMDR Act) read with Karnataka Minor Mineral Concession Rules, 1994 (KMMC Rules) and amount paid to District Mineral Foundation (DMF) equal to 30% of royalty as per the MMDR Act read with Karnataka District Mineral Foundation Rules, 2016 (KDMF Rules) to the Government are to be included in the value of the service provided to the applicant as these payment are made under the statutory requirements of the Mines and Minerals (Development and Regulation) Act, 1957 which is taxable under GST. The applicability of GST rate for the aforementioned service is based on the classification of service. In the present case, the mining rights so granted is covered under the sub heading 997337 that specifies - Licensing services for the right to use minerals including its exploration and evaluation . Rate of tax applicable on the above supply N/N. 11/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT:- Since the services covered under the license to extract mineral ore and also the right to use such minerals extracted is not covered under any of the sub-entries (i) to (v) of Serial No. 17, it needs to be seen whether the same is covered under entry no. (vi) of Serial No. 17 attracting the tax rate which is same as that applicable on the supply of like goods involving transfer of title in goods or under the Serial No. 35 which is related to the other miscellaneous services including services nowhere else classified. Whether the license to extract mineral ore and also the right to use such minerals extracted is a leasing or rental service? - HELD THAT:- It is clear that what is supplied by the Government is the lease of the right to extract and use mineral ores and that is not covered by any specific entries in the serial no. 17 of the Notification and hence falls under the residual entry. Upto the amendment of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 by the Notification No. 27/2018 - Central Tax (Rate) dated 31.12.2018, the tax rate for the above service is fixed at the rate of tax which was applicable on supply of like goods involving transfer of title in goods - In the pertinent case, there was a transfer of title in goods involved in the activities of the applicant and that was of the extracted building stone on which the royalty was paid and hence the tax rate applicable on the service is that rate of tax applicable on the building stone, the transfer of title of which was happening in the transaction. The leasing or renting of goods was made taxable at the rate of tax which was applicable on supply of like goods involving transfer of title in goods and all other leasing or rental services have been made taxable at 9% CGST. Since the transaction of the applicant is not leasing of goods but license to extract and use mineral ore, which involves leasing of land, the transaction is covered under the residual entry (viii) of Serial Number 17 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by the Notification No. 27/2018 - Central Tax (Rate) dated 31.12.2018 and is taxable at 9% CGST - Similarly, for the same reasons, the transactions are taxable under SGST at 9% on or after 31.12.2018 and at the rate applicable to the mineral ore extracted prior to 31.12.2018. On plain reading of section 15 of the CGST / SGST Act along with the rule 27, it says that any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient is includible. Further, in section 15(2) of the CGST Act, it is clearly seen that any amount of any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than the GST related Acts are includible in the value of supply. There is no doubt that the amount payable by way of DMF is on account of supply made and is directly linked to the royalty payable and is also computed as a fixed percentage of royalty. The service provided is only the license to extract building stone and also the right to use such goods extracted is a single service where the consideration is payable under different heads and in case any one of the payments is not made, the service provider, that is the Government would not issue the permit to use the building stone so extracted. Hence it forms the value of the supply under section 15 and the charges for DMF being compulsory payment, would only amount to application of the amounts paid and still would form the value of the taxable services - It is also inferred that the service is a single service, there are no separate service providers for royalty and DMF and in all cases the Government, which has provided the license to mine and permitted the use of such building stone mined, would be the person who has supplied the service.

  ---

• 2019 (10) TMI 1090
  Classification of goods - rate of tax - components, spares and accessories with HSNs applicable to Tractors, Tillers and other farm equipments - Whether the applicant is right in classifying certain components, spares and accessories with HSNs under reference applicable to Tractors, Tillers and other farm equipments though such goods are sold to them under different HSNs attracting peak rate due to certain constraints? HELD THAT:- The applicant is a manufacturer of tractors and tillers and he purchases the said components and parts to be used in the manufacture of the tractors and tillers and their suppliers, who are the manufacturers of such parts which are not specific to tractors and tillers, are charging them the rate applicable to the specific part and not as Tractor or tiller parts - the above commodities, if they are for tractors, would be liable to tax at the rate of 18%, else would be liable to tax at the rate appropriate to the classification of the commodity as per the HSN in the Customs Tariff Act. The N/N. 19/2017 - Central Tax (Rate) dated 18 th August 2017 clearly mentions the products, their HSN Codes and if for tractors are taxed at 9% (CGST) and if not then they are taxed at appropriate rates for the said HSN. The notification reduces the rate of tax based on the usage and it is incumbent upon the supplier of these products to prove that they are for tractors only to take advantage of the said notification. The Rotary tiller is covered under HSN 8432 80 20 and the parts of these tillers are generally covered under 8432 90 90. Section Note 2, to Section XVI, provides at (b) that parts which are suitable for use solely or principally with a particular kind of machine or with a number of machines of the same heading are to be classified with the machines of that kind or in heading or 8538 as appropriate. Further (c) provides that all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548. The section Notes, are thus very clear that if the tiller parts are of specific use in tillers only then the classification would be 84329090. If the parts do not answer to this then they are liable to classified as Section Note 2(c). Since no specific parts are mentioned, specific ruling cannot be given for this question.

  ---

• 2019 (10) TMI 1089
  Classification of goods - Pooja oil - classified under tariff item 1518 of Schedule-I (taxable at 5%.) or Schedule-II (taxable at 12) of N/N. 01/2017-CT(R) dated 28.06.2017, as amended from time to time - HELD THAT:- It is an admitted fact that the said product is manufactured by mixing 5 edible oils i.e. rice bran oil, coconut oil, castor oil, mahua oil and Gingely Oil, in an agreed percentage and then blended with fragrance. The process of addition of perfume to the mixture of edible oils converts the said mixture into an inedible mixture. An inedible mixture of vegetable oils are specifically mentioned by and covered under Sl. No. 27 in Schedule II. The entry at Sl. No. 90 in Schedule I applies to vegetable oils which have been subject to processes like boiling, oxidation, dehydration, sulphurisation, blowing, polymerization and by heat in vacuum or in inert gas or otherwise chemical modification. The resultant product remains edible despite undergoing the aforementioned processes. However once fragrance has been added to the mixture of several edible oils, the resultant product becomes inedible and entry at Sl. No. 27 of Schedule II specifically covers inedible mixtures of vegetable oils. Therefore the product pooja oil finds a very specific entry in Schedule II. Thus it is more appropriately covered under Sl. No. 27 in Schedule II of the said Notification and accordingly taxable at 12% GST.

  ---

• 2019 (10) TMI 1088
  Appealable order or not - Section 112 of the U.P. G.S.T. Act - in absence of the Constitution of the Tribunal, the petitioner is constrained to file this petition before this Court - HELD THAT:- The matter requires consideration.

  ---

• 2019 (10) TMI 1087
  Release of confiscated goods alongwith the vehicle - section 130 of CGST Act - HELD THAT:- Issue rule , returnable on 28th November 2019. By way of interim relief, the second respondent is directed to forthwith release the conveyance together with the goods contained therein.

  ---

• 2019 (10) TMI 1086
  Release of confiscated goods alongwith conveyance - section 130 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Issue Rule, returnable on 28.11.2019. By way of interim relief, the respondent is directed to forthwith release the conveyance subject to the petitioner depositing the amount of fine in lieu of confiscation of conveyance, as computed in the order dated 04.06.2019 made under section 130 of the Central Goods and Services Tax Act, 2017.

  ---

• 2019 (10) TMI 1085
  Cancellation of registration of petitioner under GST scheme - HELD THAT:- At the time of resuming hearing today, learned counsel for the parties are agreed that the present writ petition has become infructuous in view of the registration of the petitioner having been restored. The present writ petition is disposed of as having become infructuous.

  ---

• 2019 (10) TMI 1084
  Filing up TRAN-I Form - carry forward of transitional credit - transition to GST regime - HELD THAT:- Admittedly there has been a typographical/ clerical error on the part of the petitioner which the petitioner is entitled to correct while filling up the TRAN-I Form. The writ petition is disposed off by directing the Respondents to either open the online portal so as to enable the Petitioner to again file the rectified TRAN-I Form electronically or accept the manually filed TRAN-I Form with the correction on or before 25.10.2019.

  ---

• 2019 (10) TMI 1083
  Profiteering - purchase of a flat in the Respondent s project ROF Aalayas in Sector-102, Gurgaon, Haryana - benefit of input tax credit not passed by way of commensurate reduction in price at the time of introduction of GST w.e.f. 01.07.2017 - contravention of provisions of Section 171 of the CGST Act, 2017 - Penalty - HELD THAT:- The provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has profiteered an amount of Rs. 2,47,48,549/- which includes GST @12% or 8% as applicable on the base profiteered amount of Rs. 2,28,05,373/- from all the 731 residential units for the period w.e.f. 01.07.2017 to 31.09.2018 as per Annexure- 13 of the Report. Accordingly, the above amounts shall be paid to the above Applicants and the other eligible house buyers by the Respondents along with interest @18% from the date from which these amounts were realised from them till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers - it is clear that the Respondent has profiteered an amount of Rs. 2,47,48,549/- for the period of investigation. Therefore, in view of the above facts the Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce/refund the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him As far as the total additional input tax credit that will be available to the Respondent is concerned it cannot be determined at this stage when the construction of the project is yet to be completed and the DGAP is directed to carry out a comprehensive investigation at the time of issue of occupancy certificate. Penalty - HELD THAT:- It is evident from the above that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171(1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed should not be imposed on him. Application disposed off.

  ---

• Income Tax

• 2019 (10) TMI 1082
  Depreciation on the assets of assessee trust - HELD THAT:- The substantial question of law, which has been framed in these appeals, has been answered against the Revenue by the Hon ble Supreme Court in CIT vs. Rajasthan and Gujarati Charitable Foundation [ 2017 (12) TMI 1067 - SUPREME COURT] in which held that the assessee Trust is entitled to depreciation on the assets acquired by the expenditure incurred for acquisition of the assets by way of application of income for charitable purposes under Section 11(1)(a) - Decided in favour of assessee.

  ---

• 2019 (10) TMI 1081
  Reopening of assessment u/s 147 - deduction claimed u/s 80IA of the Act in the revised return of income - HELD THAT:- As submitted that the petitioner had furnished an explanation and after going through the issue, the Assessing Officer had accepted the explanation given by the petitioner and had allowed the deduction claimed under section 80IA of the Act. As submitted that, therefore, the Assessing Officer seeks to reopen the assessment on a mere change of opinion, which is not permissible in law. It was submitted that even on merits, the reopening of assessment is bad. Having regard to the submissions advanced by the learned counsel for the petitioner, issue Notice, returnable on 03.12.2019. By way of ad-interim relief, the respondent is restrained from proceeding further pursuant to the impugned notice dated 25.03.2019 issued under section 148 of the Act for the assessment year 2012-13.

  ---

• 2019 (10) TMI 1080
  Reassessment u/s 147 r.w.s 143(3) - continuance of assessment proceedings during stay period - period of limitation - issuing another notice after issuing notice u/s 143(2) within prescribed period of limitation - exclusion of certain period u/s 153 while passing order - HELD THAT:- The return in the present case was filed on 12.09.2018. Accordingly, the six months envisaged under the proviso to Section 143 (2) of the Act would expire on 30.09.2019 and thus the notice was necessarily required to be issued under the said provision prior to the said date. In the present case, a notice under Section 143 (2) had already been issued prior to the filing of the present petition, and if another notice has been issued, we do not see any reason to stay the same. No law has been shown which restricts the issuance of more than one notice. The issuance of the notice under Section 143 (2) is essential for the Assessing Officer to embark upon scrutiny assessment, however it does not mean that once a notice has been issued, another notice could not be issued thereafter. Certainly, after 30.09.2019, the Respondents cannot issue a fresh notice. The limitation provided under Section 153 (2) of the Act, pertains to the issuance of the order of assessment, reassessment or recomputation. The Explanation 1 (ii) of Section 153 provides that the period during which the assessment proceedings is stayed by an order or injunction of any court shall be excluded for the purpose of computing the period of limitation. Further, Section 153 (2) read with First proviso to Explanation 1 provides that immediately after the exclusion of the aforesaid period, where the period of limitation available to the assessing officer for making an order of assessment, reassessment or recomputation is less than sixty days, then such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly. In the present case, the reassessment proceedings had to be concluded before 31.12.2018. However, before the expiry of the said period, on 12.12.2018, the Court had restrained the Respondents from passing the final order. Thus in case the Petitioner was not to succeed in the present case, the Respondents would then have to complete the reassessment proceedings in terms of Section 153(2) read with First proviso to Explanation 1 within a period of sixty days from the date of the final decision of the writ petition, assuming the same is against the Petitioner. However, this does not mean that the Respondents are granting themselves endless time for completion of reassessment proceedings. The stay is operating against passing of the final assessment order. That does not mean that the continuation of the reassessment proceedings, in the mean time would be contrary to the statute. Needless to say, if the Petitioner were to succeed, such proceedings would be infructuous and the same are being conducted at the risk and peril of the Respondents. Accordingly, we also do not see any prejudice being caused to the Petitioner in any manner. Decided against the assessee.

  ---

• 2019 (10) TMI 1079
  Reopening of assessment u/s 147 - validity of the notice issued by the respondent u/s 148 - reopening the assessment beyond the period of 4 years - HELD THAT:- Indisputably, the impugned notice issued by the AO itself is beyond the period of four years from the end of the relevant assessment year and did not comply with the requirements of the proviso to Section 147. AO had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of the assessment u/s 143(3) and therefore, on this short count alone, the impugned notice is liable to be quashed and set-aside. We have reached to the conclusion that there is no basis to proceed on the premise that the allocation of shares was at an artificially high premium. Merely because a sizeable sum was received in the nature of share premium during the year under consideration, would not automatically mean that the same was artificially increased. The duty on the part of the assessee to explain the nature of credits and genuineness and justification of the share premium would arise when called upon during the assessment or validly reopened assessment. At any rate, the reopening of assessment which was framed after the scrutiny would not be permissible for a fishing or roving inquiry. As observed by this Court in Pushpak Bullion (P.) Ltd. [ 2016 (7) TMI 176 - GUJARAT HIGH COURT] this is not to suggest that after the original assessment was completed, if the Assessing Officer has tangible material to form a belief that the allocation of shares at a premium was a mere device to route some unaccounted money of the company or that the genuineness and creditworthiness of the investors was doubtful, the reopening could not have been resorted to. In the case on hand, we find the vital link missing from the reasons recorded, such link being the material at the command of the Assessing Officer to form such a belief. - Decided in favour of assessee.

  ---

• 2019 (10) TMI 1078
  Interest levied u/s 234A, B and C - order passed charging interest u/s 220(2) - HELD THAT:- We find that the interest u/s 220(2) which has been charged in the initial consequential order passed by the AO has been waived by the CIT(A)-V, Hyderabad. Subsequently, pursuant to directions of ITAT to treat the advance amount paid by assessee, as advance tax for the A.Y. 1995-96, the AO has passed the consequential order. We find that in the case of Bakelite Hylam Ltd. [ 1988 (2) TMI 46 - ANDHRA PRADESH HIGH COURT] was considering the case of an assessee wherein while giving effect to the order of the ACIT in the quantum appeal, the interest on refund was not allowed u/s 244. The Hon ble High Court held that the order passed by the ITO giving effect to the decision of appellate authority is as much an assessment order as the one passed by him by way of regular assessment u/s 143 of the Act. As held that in the absence of specific right of appeal conferred by S.246, no appeal lies to the appellate authority against refusal to grant interest, but where there is total denial of liability to pay interest, the order is liable to be challenged in an appeal although there can be no appeal if dispute is only regarding the quantum of interest payable. There is a distinction between the principle of law, i.e. where there is total denial of assessee s claim, it is open to him to show that the claim for interest was well founded. The Tribunal granted certain reliefs to the assessee and in giving effect to the Tribunal s order, the Income tax Officer passed a modification order granting refund to the assessee. The assessee preferred an appeal to the Commissioner (Appeals) against the modification order and claimed that the Income tax Officer was in error in not granting interest on refund under section 244 of the Income Tax Act, 1961. Commissioner (Appeals) held that no appeal lay against an order giving effect to the appellate order of the Tribunal and that, in any event, no right of appeal was provided against the Income tax Officer s omission to grant refund u/s 244. The Tribunal upheld the view taken by the Commissioner (Appeals). On a reference: Held - (i) that the assessee had a right of appeal against the modification order as if it were an assessment order itself and the appellate authority was bound to entertain the appeal and decide it on merits. (ii) That since there was total denial of liability on the part of the Revenue to pay interest on the refund, an appeal lay to the next appellate authority.

  ---

• 2019 (10) TMI 1077
  Weighted deduction u/s. 35(1)(ii) - revenue withdrawing the recognition with retrospective effect - HELD THAT:- We find that there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. In this regard, the recent decision in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior [ 2018 (2) TMI 1220 - SUPREME COURT] held that the power of cancellation of registration us 12A of the Act was conferred by the Act on the ld CIT w.e.f. 1.10.2004 and the Hon ble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act . Hence, we hold that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(ii) - CIT-A had wrongly confirmed the disallowance as made by the AO u/s 35(1)(ii) Addition of proportionate interest expenditure - assessee had given interest free advance - HELD THAT:- Since the assessee has own funds of Rs. 148.27 cr. plus Rs. 28 cr. this year in its possession and the interest free advance amount is only to the tune of Rs. 4.51 cr. which is less than 3% of its own funds means, the presumption that has to be drawn in such a scenario is that the interest free advance has been made by the assessee from its own fund and, therefore, no disallowance was warranted and, therefore, we direct deletion of the disallowance confirmed by the Ld. CIT(A) to the tune of Rs. 40,65,156/-. This ground of appeal of assessee is allowed. Ad-hoc disallowance on the expenditure claimed - HELD THAT:- AO is at liberty to disallow the expenditure if there is any deficiency in the vouchers or bills supporting the incurrence of an expenditure on the reason that expenditure are non-genuine and can be disallowed item wise. However, the action of the AO to disallow the expenditure on ad-hoc basis without rejecting the books of account cannot be accepted, since the action of AO smacks of arbitrariness and cannot be allowed to sustain, therefore, all the ad-hoc disallowances made by the AO and confirmed the Ld. CIT(A) are deleted.

  ---

• 2019 (10) TMI 1076
  TDS u/s 194C - addition u/s 40(a)(ia) - HELD THAT:- Issue of disallowance of expenses by invoking provisions of Section 40(a)(ia) read with provisions of Chapter XVII-B for both the ay s : 2013-14 and 2014-15 needs to be restored to the file of Ld.CIT(A) for fresh adjudication . The assessee has made statement before us that if given one more opportunity, the assessee will produce all the necessary and relevant evidences/ certificates as required under the statute/rules to substantiate that the payees have duly included the aforesaid amounts as income in their return of income filed with Revenue and paid due taxes to the credit of Central Government. Now, the onus is entirely on the assessee to produce all relevant evidences/ certificates as are required under the law before learned CIT(A) in set aside proceedings for both the ay s to justify that no additions are warranted in the case of the assessee u/s 40(a)(ia) of the 1961 as these payees have included aforesaid amounts paid by the assessee in return of income filed with Revenue as their income and paid due taxes to the Credit of Central Government. CIT(A) is directed to verify these evidences/certificates and accordingly adjudicate the issue on merits in accordance with law , keeping in view ratio of decision of Hon ble Delhi High Court in the case of Ansal Land Mark Township [ 2015 (9) TMI 79 - DELHI HIGH COURT] and Hindustan Coca Cola [ 2007 (8) TMI 12 - SUPREME COURT]

  ---

• 2019 (10) TMI 1075
  Quantum of Deduction u/s 80-O - HELD THAT:- After going through the cited order of Tribunal, we find that the factual matrix in those years was different since the relevant agreements were approved by Chief Commissioner of Income Tax Act as opposed to the facts of present year in which Ld. AO has noted that agreements were not approved by Chief Commissioner of Income Tax or by the Board. Secondly, as noted by first appellate authority in the impugned order, the assessee could not provide the requisite details to establish the exact nature of services being rendered by the assessee and failed to demonstrate that the said receipts squarely fall within the ambit of Section 80-O. Nevertheless, keeping in view the submissions made, we restore this matter back to the file of Ld. first appellate authority to adjudicate the same de-novo after reappreciating the factual matrix including the stand taken by the department in earlier years. The assessee, in turn, is directed to substantiate his claim with requisite details and evidences that the receipts qualified for deduction u/s 80-O. Thereafter, the question of allocation of expenditure against the same may be adjudicated as per factual matrix including the basis of allocation mechanism devised / adopted in earlier years. Accordingly, this ground of appeal stands allowed for statistical purposes. Disallowance of entertainment expenditure - HELD THAT:- We no infirmity in the order of first appellate authority in restricting the same to 50% and therefore, confirm the same. Similarly, no serious arguments have been advanced with respect to disallowance of local travelling expenses u/r 6D and therefore, we confirm the order of Ld. AO, in this regard. Ground Nos. 3 4 stand dismissed. Deduction non-compete fees - HELD THAT:- It is quite evident from records that the assessee has paid a sum of Rs. 8 Crores to DSP primarily as non-compete fees under an agreement. In its books of accounts, the assessee has written-off the same in 5 equal installments and accordingly, the assessee had debited a sum of Rs. 1.60 Crores in the Profit Loss Account during the year under consideration. The said write-off was suo-moto disallowed and added back by the assessee while computing the income for year under consideration. The assessee, by way of note to computation of income, asserted that the said expenditure, being revenue in nature, was allowable in full during the year itself. The Ld. first appellate authority, after examining assessee s claim, observed that as per the terms of the agreement, it was quite clear that that the benefit which accrue to the assessee was ever lasting since there was no time stipulation. In the above factual matrix, the decision in Hindustan Pilkington Glass Works [ 1981 (4) TMI 26 - CALCUTTA HIGH COURT] was found to be squarely applicable to the facts of the case wherein Hon ble Court had observed that the profit-making apparatus had improved. The improvement was to last beyond the year in question and the business was to be carried on unfettered by rival competitors which would endure and the benefit would last beyond five years. Since the assessee had already acquired the membership of NSE in 1994 to undertake the Competing business, the assessee had not acquired any new business. The profit-making apparatus had remained the same, the assets used to run the business remained the same and there was no new business or no new source of income, which accrue to the assessee on account of the payment of non-compete fee. The payment of the non-compete fee would only enable the existing business of the appellant to run smoothly and to remove difficulties which may arise. The payment was expected to result in synergy and in turn lead to profitability for the business. Upon careful consideration of the terms of agreement, undisputedly the agreement is for perpetuity and the covenantor i.e. M/s DSP is restrained forever from carrying out its business in the segment of broking in wholesale market and distribution of units of mutual funds and there is complete annihilation of competitive business in a particular segment. Upon consideration of Rectial-5 of the agreement, it also transpires that M/s Merrill Lynch Co. Inc. USA agreed to acquire the shares representing 40% of assessee s capital at a substantial value, inter-alia, on the condition that the covenantors refrain from carrying on the competitive businesses. The terms of the agreement would establish that the benefits of restrictive covenants were foreseen over a longer period of time rather than immediate benefits which would justify the investment at substantial value. This would also negate the arguments of Ld. AR that the assessee would receive immediate benefit by avoiding possible competition from DSP and the benefit would not endure for a longer period of time. If that be so, there would have been no necessity for the assessee to put restrictions on competitor in perpetuity rather the benefits were perceived to have accrued to the assessee over longer period of time. Therefore, we find the arguments of Ld. AR to be contradictory to the terms of the agreement. Moreover, nothing emanates as well as nothing has been brought on record by the assessee to fortify the submissions of immediate benefit and therefore, this argument could not be termed as more than mere submissions. Therefore, we do not find much force in the theory of immediate benefit as advanced by Ld. AR before us. Rather, we are of the considered opinion, that by entering into the said agreement, the assessee acquired valuable business right in perpetuity which was designed to bring enduring benefits to the assessee over indefinite period of time. The same was the perception while entering the said agreement. It is also noted that the assessee had recently acquired the membership of NSE and it was contemplating entering into a particular segment of business. This activity proposed to be carried out by the assessee was at nascent stage and the terms of the agreement led to complete annihilation of its competitor business segment forever. Therefore, we find substantial force in the arguments of Ld. DR, in this regard. Non-compete fees paid by the assessee to ward-off the rival competition in perpetuity would partake the character of capital expenditure in the hands of the assessee and the deduction of the same has rightly been denied by the lower authorities. This ground stands dismissed.

  ---

• 2019 (10) TMI 1074
  Rate of commission on the business of providing accommodation entry - assessee company is an entry provider - Commission on credit entries appearing in the bank account of the assessee - HELD THAT:- Assessees case is almost similar to the facts of the case relied upon by the Ld. Counsel for the assessee passed in the case of M/s Sorus Power Pvt. Ltd. [ 2018 (11) TMI 787 - ITAT DELHI] Directing the AO to estimate the average commission @ 0.30% (30 paise to Rs. 1 per Rs. 100) on credit entries appearing in the bank account of the assessee. In the result, the appeal filed by the assessee is partly allowed

  ---

• 2019 (10) TMI 1073
  Disallowance of development expenditure towards road construction etc. - development expenditure was due but paid in next year - AO conducted the enquiry from these parties by calling the information under section 133(6) - HELD THAT:- When the assessee has produced all the documentary evidences to establish the carrying out the development work and the claim of expenditure is not found to be excessive in consonance with the development work actually done at site, then the disallowance is uncalled for and the same is deleted. Disallowance of 50% development expenses on account of contract work given - ocumentary evidence was not accepted by the ld. CIT (A) on the ground that break up of various items is not given in these quotations and estimations - 50% of the claim is disallowed due to some irregularities in the documents produced by the assessee - HELD THAT:- When the work is actually carried out at the site and it is also certified by the JVVNL, then even if there are some irregularities in the bills and vouchers produced by the assessee in not giving the break-up of the items, the claim of the assessee cannot be disallowed. Only in case if it is found that the assessee either made a bogus claim or inflated the expenditure then to the extent of such bogus or inflated claim can be disallowed. Once the claim of expenditure is not found to be excessive or inflated then having regard to the fact that the actual work has been carried out at the site, the claim cannot be disallowed on minor irregularities or defects in the bills/invoices produced by the assessee. Hence the disallowance made by the authorities below is deleted.

  ---

• 2019 (10) TMI 1072
  Addition u/s 68 in respect of the loan received from 9 persons - assessee has not proved the creditworthiness of these persons even when all the persons are regularly assessed to tax - amount advanced by them to the assessee in the statement recorded u/s 131 by the AO - HELD THAT:- The deposits of the cash in the bank accounts is certainly a relevant aspect and strong reason to conduct an enquiry and to verify the transaction but the deposit itself cannot be a ground to hold that the transaction is not genuine and the loan creditors were not having the capacity to grant the loan. Accordingly, when the assessee has produced all the documentary evidence to dispel the doubts of the AO, then the transaction cannot be held as non-genuine without bringing any material or fact to show that the assessee s own unaccounted money has routed through the bank accounts of the loan creditors. The last loan credit is Ms Neha Jain of Rs. 5 lacs - source of income of Ms Neha Jain is not in dispute as she was having income from bank interest, advances, tuition fees as well as salary income. Thus when the assessee has explained the source of deposit of cash in the bank account then mere fact of deposit in bank cannot be a ground for rejecting the claim. As per the books of account of Ms Neha Jain, the opening cash balance of Rs. 7,61,376/- was not doubted and hence if the cash deposit is less than the said opening cash balance, then the creditworthiness and genuineness of the transaction is duly established. Accordingly, when the identity and creditworthiness of the creditor is established then the genuineness of the transaction cannot be disputed merely because of deposit of cash. In view of the above facts and circumstances as well as the documentary evidence produced by the assessee, the addition made by the AO and sustained by the ld. CIT (A) is not justified and the same is deleted. Addition on account of capital introduced by the assessee - HELD THAT:- On careful consideration and analysis of the details as appearing in the personal balance sheet of the assessee, it is clear that there is a matching of each and every item of the cash balance with in-flow as well as out-flow for each of the years including the assessee s capital balance in the proprietorship concern M/s. Leela Kothari. These documents were produced by the assessee before the authorities below and particularly when the ld. CIT (A) referred all these details to the AO for verification and to submit the remand report then in the absence of finding any discrepancy or irregularity in the details given in the personal capital account and balance sheet of the assessee along with the balance sheet of the proprietorship concern, the rejection of the claim merely because the personal balance sheet was not part of the assessment record is not justified. Once the assessee has established the availability of the opening cash balance of more than Rs. 44 lacs as on 1st April, 2014, then the source of introduction of capital of Rs. 14,25,000/- is duly explained and established and the same is deleted. - Appeal of the assessee is allowed.

  ---

• 2019 (10) TMI 1071
  Disposal of appeal by CIT(A) without giving proper opportunity to the assessee - HELD THAT:- CIT(A) posted the present case for hearing on two occasions. But, the assessee did not appear before the CIT(A) and there was no response from the assessee on both the occasions. On third occasion, the assessee has requested for adjournment. Subsequently, the assessee neither appeared personally nor made any written submissions. Hence the CIT(A) disposed-of the appeal on merits. Since the CIT(A) has given sufficient opportunity by posting the case for hearing on three occasions, we do not find any error in disposal of appeal by the CIT(A). Hence, we dismiss this Ground raised by the assessee. Addition u/s 68 - subscription of share capital received in the earlier years - HELD THAT:- We have gone through the Balance Sheet and also the list of shareholders and change in pattern of shareholding, furnished in the statement of facts and find that there is no fresh share capital introduced in the company for making addition u/s.68 - For the purpose of making addition u/s.68 of the Act, any credit found during the year, for which the source was not explained required to be considered for addition. In the instant case, there is no credit found to be credited in the books of account for which the source remained un-explained. Thus, there is no case for making the addition u/s.68 of the Act. Hence, we set aside the order of Ld.CIT(A) and delete the addition made by the AO. Addition relating to difference in payments of subcontracts - HELD THAT:- CIT(A) decided the appeal ex-parte, without going into the facts of the case. The fact whether the amount charged to P L A/c represented Rs. 1,65,92,944/- or Rs. 1,73,82,082/- was not clearly discussed in the assessment order. Therefore, in the interest of justice, we are of the considered view that the issue needs to be verified at the end of the AO. Hence, we remit the matter back to the file of AO and direct the AO to reconsider the issue and decide the same afresh on merits, after giving due opportunity of hearing to the assessee. This Ground raised by assessee is treated as allowed for statistical purposes. Addition relating to additional profit - HELD THAT:- It is true that there was a closing balance relating to finished goods of flats. Sale consideration was declared in the P L A/c. AO has simply taken the closing balance of the earlier year and sale consideration of the flats and brought the difference as income, which was incorrect. The AO also required to consider the expenditure incurred and accounted relating the marketing and distribution and administrative expenses to determine the profit. In the instant case, the assessee has maintained the books of account, which were duly audited by the qualified accountant u/s.44AB of the Act as well as the Companies Act. No defects were pointed out by the AO in spite of production of books of account during the assessment proceedings - no reason to make the addition, without having considered the expenditure. Hence, we set aside the order of CIT(A) and delete the addition made by the AO - Ground raised by assessee is allowed.

  ---

• 2019 (10) TMI 1070
  TP adjustments - advertising, marketing and promotion expenses (AMP Expenses) - international transaction - HELD THAT:- The issue in hand is squarely covered by the decision of this Tribunal, in assessee s own case [ 2019 (9) TMI 1065 - ITAT KOLKATA] wherein the Tribunal by order dated 28.08.2019 has held that that the AMP expenses cannot be regarded as an international transaction as per section 92 B of the Act in the case of the assessee, so as to invoke provisions of section 92 of the Act. And since the AMP expenditure is not an international transaction, the TP adjustment made in this regard need to be deleted - Thus we hold that the AMP expenditure in question is not an international transaction, therefore, the TP adjustment made in this regard is hereby directed to be deleted and this ground of appeal of assessee is allowed. TP adjustment with respect to research and training expenditure (R T Expenditure) - HELD THAT:- As in assessee s own case [ 2019 (9) TMI 1065 - ITAT KOLKATA] held that the expenses in question covered under R T Expenses relate to, service fee paid by the company for R T Services obtained by the company, from another group company of the assessee i.e., ICT India Research Technology Centre (ICI). ICT is a company registered u/s 25 of the Act as a not for profit organization. ICT provides manufacturing and training support services to the assessee on cost to cost basis. Accordingly, the expenses covered under the head R T expenses pertain to the fee paid to ICT. ICT provides technical support and training to the manufacturing and marketing operations of Paints Business Division. The Tribunal after examining the services rendered by the ICT has given a factual finding that the assessee has not carried out any R T activities. The expenditure in question is incurred only for its manufacturing operations and local environmental compliance from HSE perspective. The assessee submitted that ICT also does not carry out any research and development activities for development of any new project/technology. It is primarily a captive support centre for the local India operation of the assessee. Thus, considering these facts, the Tribunal held that the expenditure on research and training does not constitute any international transaction, therefore, the TP adjustment made in this regard is hereby directed to be deleted and this ground of appeal of assessee is allowed. Determining arm s length price of intra-group services in respect of support services received from its AEs as nil - Enhancement of income - HELD THAT:- As in assessee s own case [ 2019 (9) TMI 1065 - ITAT KOLKATA] though the DRP observes that nature of service provided by ANCR are in the nature of service for strategic and operations and helps in achieving corporate objectives by aligning workforce and organizational objectives in the field of marketing HR, Finance, Management Services, Purchases etc., held it as stewardship services. We note that TPO has not carried out any exercise to determined the arms length price of benefit, service etc. as per the most appropriate method as envisaged in sec. 92C(1) of the Act. Since the TPO has not carried out the exercise which he ought to have carried out as envisaged by the Act on the erroneous plea that agreement between assessee and ANCR was not placed before him, we set aside the order of ld. DRP/AO TPO and remand the matter back to TPO for fresh consideration - we restore this issue back to the file of the AO for fresh adjudication in accordance to law. Accordingly, this ground of appeal of assessee is allowed for statistical purposes. Adjustment towards contract research and development services rendered to AE - HELD THAT:- Adjustment made by TPO towards contract Research Development Service (Contract R D) rendered to the AE is erroneous for not taking into consideration the Tribunal s decision in assessee s sister concern M/s. Akzo Novel Car Refinishes India Pvt. Ltd. wherein the Tribunal while adjudicating similar issue has excluded Pharma Companies from the list of comparables and which action of Tribunal has been followed by the Ld. DRP in assessee s own case for AY 2014-15. If that is the case, then we are inclined to set aside the impugned order and remand the issue back to the Ld. TPO for fresh consideration Disallowance of cash discount on sales and disallowance of publicity and advertisement expenses - assessee failed to produce enough documentary evidence to substantiate the same - non rejection of books of accounts - HELD THAT:- AO has resorted to ad hoc disallowance of expenditure claimed by the assessee without rejecting the books of account which is undisputedly statutorily audited. According to us, the AO cannot resort to estimation of disallowance without satisfying the condition laid down under sec. 145 of the Act. And, we do not countenance the ad hoc disallowance which action itself is per-se arbitrary in nature and has no sanction of law. Having said so, we are of the opinion that the AO is empowered to disallow the expenditure claimed by the assessee if there is deficiency in the vouchers or the bills supporting the incurrence of expenditure. AO atleast on test-check basis can verify the veracity of the expenditure and examine whether the claim made are allowable as per law, and the assessee to produce supporting bills/vouchers/proof of the expenditure, which the AO calls specifically for examination. Thus as discussed, once the assessee submits the details before the AO, then he can verify the veracity of the expenditure and if allowable by law, then it should be allowed in accordance to law. So, we set aside the impugned action of Ld. DRP/AO on this issue and remand the issue back to the file of AO for de novo adjudication - Appeal of the assessee is partly allowed for statistical purposes.

  ---

• 2019 (10) TMI 1069
  Disallowance u/s 14A r.w. Rule 8D - HELD THAT:- In the present case the AO was not satisfied with the claim of the assessee. The AO, having regard to the accounts of the assessee has arrived at a finding that it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. Only thereafter, the AO has made the disallowance u/s 14A r.w. Rule 8D. Therefore, we are not inclined to agree with the contentions of the Ld. counsel that no satisfaction has been recorded by the AO in an objective manner. In MAXOPP INVESTMENT LTD. [ 2018 (3) TMI 805 - SUPREME COURT] held if expenditure in incurred on earning dividend income, that much of the expenditure which is attributable to dividend income has to be disallowed and cannot be treated as business expenditure. In those cases, where shares are held as stock-in-trade, main purpose is to trade in those shares and earn profits therefrom, in the process, certain dividend is also earned, though incidentally, which is also an income. This triggers applicability of section 14A which is based on theory of apportionment of expenditure between taxable and non-taxable income. Therefore, to that extent, expenditure incurred in acquiring those shares will have to be apportioned In Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] held that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. We are of the considered view that the ratio laid down in the above decision is squarely applicable in the instant case. Therefore, we set aside the order of the Ld. CIT(A) for the impugned assessment years and restore the matter to the file of the AO to make a de novo order after following the ratio laid down in Vireet Investment (P.) Ltd.(supra). We direct the assessee to file the relevant documents/evidence before the AO. Needless to say, the AO would give a reasonable opportunity of being heard to the assessee before finalizing the order.

  ---

• 2019 (10) TMI 1068
  Disallowance of deposits with the Madhavpura Mercantile Co. Op. Bank Ltd . - HELD THAT:- This is a settled principle of law that once it is established the appellant is a scheduled bank in terms of the notification of the RBI and interest accrued on NPA and has been classified by the RBI, the benefit of section 43B ought to have been applicable to the appellant and the same cannot be added under section 145 of the act as has been rightly considered by the Learned CIT(A) without any ambiguity so far as to warrant interference. Hence, we confirm the order of the Learned CIT(A). Thus the order is in favour of the assessee against the Revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- The issue is squarely covered in favour of the assessee and thus we find no ambiguity in the order passed by the Learned CIT(A) in deleting the addition made by the Learned AO u/s 14A r.w.r. 8D. Hence, this ground of appeal preferred by the Revenue is dismissed. Addition amortization of premium on Govt. Securities - revenue or capital expenditure - HELD THAT:- It appears that the Hon ble Court has taken care of that the order passed by the Hon ble Jurisdictional High Court in the case of CIT, Rajkot-2 vs. Rajkot Dist. Co-op. Bank Ltd. [ 2014 (3) TMI 110 - GUJARAT HIGH COURT] where it was held that the CBDT instruction providing for amortization of premium paid on securities when the same were acquired at the rate higher than the face value, such amortization would have to be for the remaining period of maturity.

  ---

• 2019 (10) TMI 1067
  Addition u/s. 40(a)(iib) with regard to surcharge on sales tax - contention of the Ld. AR is that expenditure mentioned in section 40(a)(iib) covers only expenditure which is incurred in consideration of obtaining some benefits or rights or license by the State Government in connection with conduct of business - element of quid pro quo in payments - HELD THAT:- In our opinion, the assessee has been granted FL 9 license under the Abkari Act and the assessee is liable to pay surcharge to the State Government. This surcharge is exclusively levied only on State Government undertaking and the FL 9 license was not given to any undertaking other than the assessee for carrying on business. Being so, the payment was incurred for obtaining specific benefits from the State Government and it cannot be said that there is no element of quid pro quo in the payments. With regard to the additional evidence filed by the assessee on levy of surcharge in respect of assessees mentioned in para 2 above, these assessees are not granted FL 9 license under the Abkari Act and only the assessee before us is granted FL 9 license under the Abkari Act. Hence, the additional evidence is of no assistance to the assessee and the same is rejected. Thus, the argument of the assessee s Counsel is rejected. Surcharge is nothing but sales tax paid by the assessee to the State Government. - In our opinion, this argument of the Ld. AR has no merit on the reason that sales tax is collectable or recoverable from the customers to whom the goods are sold or services are rendered. In the present case, there is prohibition on collection of surcharge from the customers and it should be borne by the assessee itself. As per the Kerala Surcharge on Taxes Act, 1957, there is prohibition for levy of surcharges on certain taxes. Hence, it cannot be said that surcharge is equivalent to sales tax. This argument of the Ld. AR is rejected. Surcharge is not exclusively levied by State Government on the assessee - In our opinion, FL 9 license under the Abkari Act was exclusively given to the assessee and no other undertaking has been granted such license. Being so, it is exclusively levied on the assessee. This argument of the Ld. AR is rejected. Surcharge is charged to the P L account and not to the appropriation of P L account - it is a flow back of the profits of the assessee by way of payment of surcharge to the government account which is nothing but a colourable device used by the State Government so as to reduce the taxable profits of the assessee. Thus, it amounts to appropriation of the profits of the assessee directly or indirectly to the State Government. The word appropriation used in section 40(a)(iib) of the Act does not mean that it should be charged to P L appropriation account. In the present case it was charged to P L account by way of colourable device, hence, the provisions of section 40(a)(iib) of the Act are applicable. It is evident from the budget speech and explanatory note, as above, that the surcharge levied under section 3(1) of the Kerala Surcharge on Taxes Act, 1957 is an exclusive levy by the State Government on a State Government undertaking and the same is covered by the provisions of section 40(a)(iib) - Decided against assessee.

  ---

• 2019 (10) TMI 1066
  TDS u/s 194C - obligation to deduct tax at source on the reimbursements made by it to its Affiliates - HELD THAT:- The appellant claims it as reimbursements, whereas the revenue disputes it. Therefore, it would be pertinent to examine below the co-ordinates of reimbursements . In Bovis Lend Lease (I) P. Ltd. v. ITO [ 2009 (8) TMI 853 - ITAT BANGALORE ] it is observed that the following parameters are essential for a payment to be regarded as reimbursement:- (a) The actual liability to pay should be of the person who reimburses the money to the original payer. (b)The liability should be clearly determined, it should not be an approximate or varying amount. (c)The liability should have crystallized. Reason given that payments that were never required but were made just avoid a potential problem may not qualify. (d)There should be a clear ascertainable relationship between the paying and reimbursing parties. Therefore, reimbursement by an unconnected person may not qualify. (e)The payment should first be made by somebody whose liability it never was and the repayment should then be made to that person to square off the account. (f)Three parties should exist in a case of reimbursement-a payer, a payee and a reimburser (i.e. the person reimbursing the amount of the payer). Further it is well settled that the basic ingredient is that there is no profit element in the amount reimbursed. Some examples of documents to be considered in the context of transactions involving reimbursements , which are Written agreement between the parties, Invoices or debit notes raised by the parties and Agreement entered by lead company with third parties and invoices raised by the third parties towards reimbursable expenses incurred by the lead company. Having examined the materials available on record, we find that the parameters as mentioned above have not been examined by the AO or the CIT(A). Further, it is observed that the documents which could lead to it have not been filed completely by the appellant before the AO or the Ld. CIT(A). Therefore, we set aside the order of the CIT(A) and restore the matter to the file of the AO of make a de novo order after giving reasonable opportunity of being heard to the appellant. We direct the appellant to file the relevant documents/evidence before the AO. - Decided in favour of assessee for statistical purposes.

  ---

• 2019 (10) TMI 1065
  Disallowance of write off of advances given to wholly owned subsidiary claimed as business deduction - HELD THAT:- No documentary evidence in the form of any communication or resolution of Board of Director is placed on record. The assessee though filed a number of decisions in support of his submission; however, the ld. AR of the assessee mainly relied upon the decision of Mumbai Tribunal in Jackie Shroff [ 2019 (1) TMI 400 - ITAT MUMBAI] and ACIT vs. OSN Infrastructure Projects Pvt. Ltd. [ 2018 (4) TMI 1125 - ITAT DELHI] In our view, both the decision are distinguishable on the facts of the present case in Jackie Shroff (supra) case the money was advanced for business expediency, however in the case in hand the assessee funded the capital working requirement of CAL. Further, in ACIT vs. OSN Infrastructure Projects Pvt. Ltd. (supra), the said assessee was engaged in the business of development of infrastructure, construction and real estate trading, advance/ money to various parties to buy land, the said parties failed to buy land and pay money, however in the case in hand the assessee funded the capital working requirement. Thus, the advance was made for business expediency. Thus, both the case is based on peculiar facts of those cases and is not applicable on the present case. Therefore, in view of the aforesaid discussion, we do not find any illegality or infirmity in the order passed by lower authorities, which we affirmed.- Decided against assessee. Addition of interest income - year of assessment - HELD THAT:- During the assessment, the assessee was asked to reconcile the entries in Form 26-AS. The assessee filed its reply dated 22.07.2016 wherein the assessee stated that accept the amount as the TDS was received in subsequent F.Y. i.e. F.Y. 2014-15, the assessee offered the same on the basis of accrual basis due to non-availability of exact figure. The Assessing Officer on the basis of details of Form 26- AS made the addition - CIT(A) upheld the action of Assessing Officer holding that the non-receipt of TDS does not holding any ground and confirmed the action of Assessing Officer. We direct the Assessing Officer to verify the fact, if the interest is offered in the subsequent year then the same be deleted from the year under consideration. However, if any difference is found in offering the interest income, the same be taxed in the year under consideration and corresponding set of remaining amount offered in subsequent year be given to the assessee. Hence, Ground No. 3 4 are allowed for statistical purpose.

  ---

• 2019 (10) TMI 1064
  Unaccounted sale - Addition on account of Gross Profit made due to alleged theft of electricity - AO made the addition on the basis of alleged unmetered electricity consumed at 181498 units - HELD THAT:- The assessee itself worked out that considering the calculation error made by the MGVCL the unaccounted production works out to only 2125 MT and if it is taken as the basis the unaccounted sales would arriving at 22598 units and applying the average sale price at Rs. 905/- the unaccounted sales would work out 19,23,231/-. Perusal of records also shows that the basis of the addition by the AO was un-metered electricity whereas CIT(Appeals) has taken the basis of lower Gross Profit/Net Profit rate. Except for the electricity units issue no other mistake has been pointed out in the books of account regularly maintained that audited. Except the submission of the assessee accepting the excess units of 22598 units and working out the unaccounted sales all the charges levelled against the assessee by both the lower authorities have no sound basis and they are moving here and there. Sometimes the un-metered units are taken as a basis and sometimes lower Gross Profit/Net Profit rate is taken as a basis to complete the addition even when books of account stands not rejected. Most addition for undisclosed Gross Profit at the average Gross Profit rate of 11.28% on the unaccounted sales accepted by the assessee at Rs. 19,23,231/- can be sustained. We accordingly, confirm the addition at Rs. 2,16,940/- for undisclosed Gross Profit, delete the addition for 13,08,432/- and partly allow the assessee s appeal.

  ---

• 2019 (10) TMI 1063
  Penalty u/s 271E and 271D - receipt and repayment of loan in cash - contravention of provisions of section 269SS and 269T - A/R submitted that even the said sum taken by the assessee from his close relatives is exempt under section 56 of the Act - HELD THAT:- AO has not disputed the fact that the assessee has received these amounts from these agriculturists and also repaid the same to them in cash. The assessee has filed the affidavits of these three persons wherein they have affirmed on oath that they are not having any PAN or any bank account in their names. Once this fact of not having any PAN and bank account by these three close relatives of the assessee is not in dispute, then the receipt of the amount and repayment of the same in cash falls in the exception as the transaction cannot be completed through banking channel, as well as in the category of reasonable and bonafide explanation under section 273B When the three persons who are close family members of the assessee were not having any bank account in their names, then the provisions of section 271D and 271E cannot be attracted. - Decided in favour of assessee.

  ---

• 2019 (10) TMI 1062
  Levy of penalty imposed u/s 271(1)(c) - disallowance of deductions claimed by the assessee u/s 43B - HELD THAT:- Following the decisions rendered in the cases of CIT vs. Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT]. CIT vs. SSA s Emerala Meadows 2016 (8) TMI 1145 - SC ORDER] and Pr. CIT vs. Sahara India Life Insurance Company Ltd. [ 2016 (8) TMI 1145 - SC ORDER] , we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Even, on merits, it is not in dispute that the assessee has disclosed all the deductions claimed u/s 43B of the Act which leads to the conclusion that there is no concealment, no malafide or false representation as the case may be on the part of the assessee in claiming deductions u/s 43B of the Act and as such, the same cannot be amounted to concealment of particulars of income or furnishing of inaccurate particulars of such income. Merely because of the fact that the deductions claimed by the assessee have been disallowed the provisions contained u/s 271(1)(c) are not attracted. - Decided in favour of assessee

  ---

• 2019 (10) TMI 1061
  Deduction u/s 10AA - profit earned from derivative transactions claimed as hedging transactions by way of forward contracts - assessee is a partnership firm and engaged in the business of manufacturing and trading of jewellery - assessee having 100% export oriented unit (EOU) at SEZ, Sitapura, Jaipur. In the return of income, the assessee has claimed entire income under the head business and profession and claimed exemption/deduction U/s 10AA - HELD THAT:- There is no dispute that the forward contracts entered into by the assessee in respect of the purchase of gold and silver are without actual delivery of goods and therefore, except to the extent of such contracts are entered into to cover or safeguard the future loss due to price fluctuation in respect of actual transaction of sales/export, the same would be speculative transaction in terms of Section 43(5) of the Act. Thus, if the forward contract is entered into as an integral or incidental to the activity of actual export of goods then as per the exceptions provided under proviso to Section 43(5) of the Act, the same would not be treated as speculative transaction. A forward contract is regarded as hedging transaction only when it is entered into with a view to safeguard the losses in respect of a contract for actual sales or purchase of goods in future. Any profit or loss arising from such hedging transaction will be treated as business profit or allowable business loss. Since in the case in hand, the assessee has entered into forward contract only in respect of price of the gold and silver and not in respect of foreign exchange rate which is directly affecting the export proceeds or import outgo in foreign exchange. Therefore, the profit or loss arising from such forward contracts cannot be treated as integral or incidental to the export activity but it is certainly an integral part of business activity of the assessee. Since the assessee is purchasing raw material in local market, therefore, such profit or loss shall have a bearing on the cost of raw material and consequently the profits and gain from the export of the jewellery is directly affected by the profit or loss of forward contract. In order to hold that the forward contracts entered into by the assessee are hedging transaction to hedge the loss due to fluctuation of the price of gold and silver it is required to ascertain whether the forward contracts are covering the quantity to the extent of the order for export in hand of the assessee during the year under consideration. Since the purpose of hedging transaction was to minimize the assessee s risk on account of fluctuation of prices in future and covered by these contracts was limited to the extent of actual exposure in respect of purchase of raw material and export of finished goods. The assessee has claimed that the total quantity under the forward contract during the year never exceeds the quantity of export or purchases made by the assessee. Assessee has entered into the forward contracts for purchase as well as sale of gold and silver, however, the exact details are required to be verified which has not been considered either by the A.O. or by the ld. CIT(A) but the deduction U/s 10AA has been denied by the authorities below only on the observation that the assessee has failed to demonstrate that the transactions which have yielded profit were hedging transactions. It is the duty of the A.O. to first ascertain whether the forward contracts are only in respect of covering the actual transaction of purchase and sale and not beyond actual transaction of purchase and sale then such forward contracts would be regarded as hedging transaction and cannot be treated as speculative transaction. Accordingly, the rulling relied upon by the ld. AR of the assessee is not in dispute as far as the principle laid down in the case of Pankaj Oil Mills Vs CIT [ 1976 (5) TMI 3 - GUJARAT HIGH COURT] but the facts remained unverified whether the forward contracts entered into by the assessee during the year are covering only actual transaction of purchase and sale so as to refer the hedging transaction to safeguard the future loss due to fluctuation of prices. Accordingly, this issue is set aside to the record of the A.O. to verify the actual details of forward contract as well as the actual transaction of purchase and sale made by the assessee during the year. Denial of deduction U/s 10AA of the Act on the interest received from JVVNL/RESB - HELD THAT:- There is no dispute that the interest was earned by the assessee from the security deposits with JVVNL for getting the electricity connection, therefore, the said interest income is integral part of the business of the assessee for availing the electricity connection for its manufacturing activity. Hence, the interest received on security deposit with JVVNL will be included in the business profits of undertaking for the purpose of computing the deduction U/s 10AA of the Act in terms of sub-Section (7) of the said provision. Consequently, the deduction will be computed as per the formulae given in sub-Secdtion (7) of Section 10AA of the Act and the profits of the business undertaking includes said interest income and the profits derived from the export of the articles or things of services shall be computed in proportionate to the export turnover to total turnover. This amount will be part of the business profits undertaking but shall not be part of the export turnover. The A.O. is directed to recompute the deduction as per the formulae given in sub-section (7) of Section 10AA Disallowance of deduction U/s 10AA of the Act in respect of miscellaneous income - HELD THAT:- Assessee has not advanced any argument as to why the disallowance of deduction U/s 10AA of the Act in respect of Misc. income is not justified. In absence of any explanation or argument on this issue, we do not find any reason to interfere with the orders of the authorities below qua this issue. Hence, this ground of appeal is dismissed.

  ---

• 2019 (10) TMI 1060
  Claim of expenses / loss towards misappropriation of funds by the director - misuse of the authority by the director of the company - allowable business loss or not - HELD THAT:- As per material placed on record, we found that the claim is made on account of misappropriation of funds by the ex-director of the company. The said director misused his authority while holding the position and incurred various expenses from the company s funds which were of personal in nature. The fact that out of Rs. 95.44 lakhs, the assessee company is claiming only Rs. 55.18 lakhs proves the bonafideness of the assessee in recovering part of the money and writing off the balance. Thus we found that the aforesaid loss has incurred in the course of business of the company and therefore should be allowed as a business loss. Addition being arbitration award granted in favour of Advani group by the Arbitral Tribunal constituted by NSE - HELD THAT:- One of the procedure is by filing an arbitration claim by the parties to the dispute. Pursuant thereto Advani group filed arbitration proceedings against the assessee company for recovery of the shares belonging to the Advani group and held by the assessee company. The Arbitral Tribunal vide its order dated 13th December 2011 allowed the claim of the Advani group. In para 6 of the said Award the Tribunal has given a finding that the transaction in dispute arises from the business of the assessee company. The Tribunal directed the assessee company to pay a sum of Rs. 20,15,097/- to the Advani group along with interest of Rs. 83,959/-. The said Arbitral Award became final by the assessee company withdrawing its arbitration petition before the Hon ble High Court on 28th August 2012 by entering into consent terms with Advani group. We direct the A.O. to allow a sum as business loss arising out of business of the assessee company. It has been very well discussed in the arbitration award under NSE Act and Rules. Accordingly the A.O. was not justified in coming to the conclusion that the said claim is not arising out of the business of the assessee company.

  ---

• 2019 (10) TMI 1059
  Penalty u/s 271C - No deposit of TDS on the rent-free accommodation provided to the employees - limitation of order passed by the A.O. which was alleged to be beyond limitation period - HELD THAT:- Non-deduction of TDS has not resulted into any kind of benefit to the assessee, the non-deduction was only due to bonafide belief of the assessee. Further, that perquisite is taxable in the hands of employees, hence neither assessee get benefitted nor the employees. The TDS alongwith interest under consideration was also immediately deposited. As found that the assessee was deducting TDS from salary without including perquisite in form of rent free/concessional accommodation, therefore, it is a case of short deduction of TDS. The assessee was not willfully disobedient to the authority otherwise assessee would not have deducted TDS on entire salary being issue under consideration is just one item forming part of salary or any other payment It is also clear from the record that the assessee has compiled the TDS provision on almost all payments or heads except not including said perquisite in form of rent free accommodation in salary due to bonafide belief, which itself shows that assessee is law abiding and not having contumacious conduct, hence penalty should not be sustained In view the provisions of Section 273B of the Act, hold that there was a reasonable cause for the failure of the assessee, therefore, no penalty should be imposed - There is no merit in penalty so imposed U/s 271C - Decided in favour of assessee

  ---

• 2019 (10) TMI 1058
  Validity of assessment proceedings u/s 147 - reopening undertaken on a mere change of opinion or audit objection raised by the internal auditors of the Department - not allowing the deduction claimed in respect of provision for EDM and advances written off - HELD THAT:- Letter of the AO to the Director of Audit shows that the AO has not mechanically accepted the objection of the audited party and he has applied his mind and as per this letter, he was of the opinion that there is no escapement of income on this account. But this does not mean that any opinion framed at any point of time and intimated to the audit party is final and is binding on the AO. But notice u/s. 148 was issued by the AO on 28.02.2013 which is after more than one month from the date of this letter and in his period, the AO can come to a different conclusion after understanding the facts and therefore, because of this letter, it cannot be said that the reopening is not valid. Hence, we find no merit in this objection of the assessee and ground no. 2 of assessee s appeal regarding validity of reassessment is rejected. Deduction claimed in respect of provision for EDM and advances written off - The claim of the assessee is this that this amount of EMD has become bad in the present year and therefore, this write off should be allowed in the present year. Writing of bad debts is allowable on mere write off but in respect of write off of advances / deposits, the assessee has to establish that the same has become bad and it can be allowed in the year only in which it has become bad. In the present case it is stated by the AO that the assessee does not desire to be heard on the issue and the assessee has nothing to say and no evidence to furnish in connection with the amount of Rs. 3,50,76,954/- debited to P L account on account of provision for EMD deposits and advances. Hence it is seen that as per the assessment order, this is the case of the AO that the assessee has not furnished any detail. Regarding granting of opportunity to the assessee by the AO, it is seen that notice u/s. 142(1) was issued by the AO on 17.01.2014, date of hearing was fixed on 24.01.2014. It is noted by the AO that none appeared on that date and the assessment order was passed on 31.01.2014 without granting any further opportunity to the assessee and when some details were furnished before the CIT(A), it is noted by him that these are additional evidences and the same is not admissible under Rule 46A as the assessee has deliberately chosen to not comply with the notice u/s. 148 and did not file any details or submission before the AO. Under these facts we feel it proper to restore back this matter to the file of CIT(A) for fresh decision after admitting the evidences which the assessee may like to bring on record. We order accordingly. We set aside the order of CIT(A) on this issue on merit and restore the matter back to his file for fresh decision after allowing sufficient opportunity to both sides and if the AO or assessee brings any additional evidence on record, the same should be admitted and examined and thereafter, necessary order should be passed as per law by CIT(A). Grounds are allowed for statistical purposes.

  ---

• 2019 (10) TMI 1028
  TDS u/s 194C or 194J - short deduction of TDS - amounts paid by the assessee towards operation maintenance of windmill machines - HELD THAT:- The provisions of law is provided u/s 194C 194J of the Act, we are of the considered view that the alleged payment made for operation maintenance of the wind mills paid by the assessee company to various payees was under a composite contract and the deduction of tax on such payment was required to be made u/s 194C of the Act @ 2%. The revenue authorities have failed to refer to any of the specific clause of the agreement which could show that the amount has been paid towards taking the technical services through which the assessee has acquired certain rights which could be used in the future. Therefore, there remains no dispute that the alleged payment is a payment for contractual payment of labour for operations and maintenance work liable for deduction of tax at source u/s 194C of the Act and not 194J Default in collection of TCS - HELD THAT:- We find that the figure of sale of scrap of Rs. 21,36,296/- is not undisputed. The Assessing Officer has computed the non collection of TCS on the amount of sale of scrap of Rs. 9,59,608/- which is the difference between the total sale of scrap of Rs. 21,36,296 less Rs. 11,76,688) on which TCS has been collected. The ld. AO has not doubted on the collection of TCS of Rs. 11,76,688/- paid by the assessee for sale of scrap but failed to give credit for the TCS claimed to have been deposited of Rs. 9596/-. In our view this issue needs to restored back to the file of Ld. AO so that the assessee can prove the payment of tax deducted at source at Rs. 21,363/- which inter alia includes the TCS payment of Rs. 9596/-. If the Ld. AO is satisfied with the necessary supporting evidence, the alleged demand of Rs. 9596/- and the interest charged thereon may be deleted after giving reasonable opportunity of being heard to the assessee.

  ---

• 2019 (10) TMI 1027
  Allowable business expenditure u/s 37(1) - closer of the business - assessee due to slow down in information technology sector globally the company decided to postpone the commencement of its software development activities, thus, leading to a conclusion that though business was set up the business activities have not been commenced - HELD THAT:- Expenditure not incurred wholly for the purpose of the business can be disallowed. We also find that the relevant bills vouchers for the expenses have not been produced before the Assessing Officer in order to prove that the genuineness and allowability of the expenses. Thus, the expenditure incurred before commencement of business have been rightly segregated by the CIT (A) under the head salaries, recruitment relocation, common services, travelling conveyance, legal professional charges as pre-commencement expenditure which are hereby confirmed. Expenses of business promotion, sales commission, communication, travel conveyance, repair maintenance, legal professional fee, contribution to PF, the assessee could not submit any voucher before the assessing authorities. It is the primary duty of the assessee to produce the basic evidences in relation to the expenses claimed, so as to allow the expenses u/s 37 of the Income Tax Act. Since, no details could be produced as to the expenses claimed, no allowance can be given by the revenue. Hon ble Bombay High Court in the case of ALD Automotives Pvt. Ltd. [ 2018 (3) TMI 534 - BOMBAY HIGH COURT] wherein it was held that where assessee failed to produce necessary evidence to prove that business was set up and it was ready to commence, expenditure incurred by assessee prior to setting up of business could not be allowed. Disallowance out of the salary, we find that the assessee could provide the PAN number of only three employees correctly out of the 28 employees on the list. The assessee could not furnish the details of salary payment even through the bank statement or by any documentary evidence regarding the rendering of the services by the employees to support the claim. Hence, based on the judgment of Hon ble Apex Court in the case of Swadeshi Cotton Mills [ 1966 (9) TMI 30 - SUPREME COURT] in the absence of any other evidence produced by the assessee, we decline to interfere in the order of the ld. CIT (A). Rent claimed for the year ending 31.03.2001, the same is allowed as the expenses is related to setting up of the business notwithstanding the fact that the revenue earning business activities have not been commenced. Rental expenses claimed by the assessee for the subsequent period are not allowable as they do not pertain to the assessment year in question. Regarding the claim of business loss on account of rent, the ld. AR s contentions that the expenses was incurred during the year as the liability for payment of which in terms of lease deed has accrued and arisen during the year under consideration. Since, we have already allowed the rent paid for the current year, no future allowance for the rent can be allowed during the year even it is deemed to have accrued by the virtue of leased deed entered during the year. Penalty levied u/s 271(1)(c) - HELD THAT:- The assessee owing to closure of the business could not furnish the details which certainly have not been proved by the revenue as bogus in nature. Further, no case has been made by the revenue to prove that the claim of the assessee is ex-facie bogus has held in the case of Escort Finance Ltd [ 2009 (8) TMI 677 - DELHI HIGH COURT] relied upon by the Ld.CIT(A). Hence, keeping in view the peculiar facts and circumstances of the case that the disallowances have been made by the revenue merely on the reason that the assessee could not produce the relevant vouchers bills owing to closure of the business in India, we hereby delete the penalty levied u/s 271(1)(c) - Decided in favour of assessee.

  ---

• 2019 (10) TMI 1026
  Assessment u/s 153C OR 147/148 - HELD THAT:- The amended provisions of section 153C of the Act w.r.e. from 2013, apply to the year under consideration. Considering the above settled legal proposition on this issue (common in both the appeals), we do not find force in the order of the CIT(A). The issue raised in the present appeal is squarely covered by the issue before the Tribunal in Joshi Wadewale Hadapsar Vs. DCIT [ 2018 (3) TMI 1583 - ITAT PUNE] and following the same parity of reasoning, we hold that re-assessment proceedings initiated against the assessee under section 147 / 148 of the Act are not warranted. The Assessing Officer after receipt of information belonging to the assessee should have invoked provisions of section 153C of the Act and not section 147 / 148 of the Act. Accordingly, we hold so. Consequently, re-assessment order passed under section 148 of the Act does not stand.

  ---

• 2019 (10) TMI 1025
  Exemption u/s 54F - quantum of deduction allowable under section 54F - dispute is regarding the amount of payment made for purchase of the residential flat (new asset) before the due date of the filing of return of income - contention of the assessee is that the due date of the filing of the return of income should be reckoned as under section 139(4) of the Act, whereas according to the Revenue, the due date of the filing of the return of income should be as per section 139(1) - HELD THAT:- In the case of the assessee, due date of the filing of return of income in terms of section 139(1) of the Act is 31/07/2012 and due date for filing return of income in terms of section 139(4) of the Act is 31/03/2014 (i.e. one year from the end of relevant assessment year or completion of assessment, whichever is earlier). As far as payment made for purchase of new asset before 31/07/2012 is concerned AO has also accepted in remand proceeding allowability of the sum of Rs. 50,36,422/- and thus, we hold that this amount is undisputedly allowable for considering deduction under section 54F of the Act. Regarding the payment made by the assessee before 31/03/2014, Hon ble High Court of Rajasthan in the case of Shankar Lal Saini [ 2018 (1) TMI 1000 - RAJASTHAN HIGH COURT ] held that, where assessee, an individual deposited unutilized sale consideration in capital gains scheme within the due date of filing of belated tax return under section 139(4), the capital gains relief under section 54F of the Act would be allowable The payment made by the assessee towards purchase of residential house up to the due date of filing of the return of income prescribed under section 139(4) of the Act i.e. 31/03/2014 is allowable for considering deduction under section 54F of the Act. Respectfully, following the above decisions, we accordingly direct the Assessing Officer to consider amount utilized by the assessee for purchase of the house till 31/03/2014(which includes the payment of Rs. 50,36,422/- made up to 31/07/2012) for deduction under section 54F of the Act. - Decided partly in favour of assessee

  ---

• 2019 (10) TMI 1024
  Deduction of expenses u/s 37(1) - employee s benefit expense - sharp increase in salary expenses as compared to the turnover - HELD THAT:- Appellant justified that the turnover of the appellant has increased by an amount of Rs. 1,10,79,362/- over the previous year which has been verified from the financial statement by the Learned CIT(A). So far as the increase of the salary of the employees namely Himanshu Shah being the Chief Financial Officer, Mr. Suresh Ramu being the Chief Executive Officer the assessee has been able to show that both the employees were paid salary only for a part of F.Y. 2011-12 whereas they were employed for full part of F.Y. 2012-13. The payment made to Shri Lalti Pai to the tune of Rs. 65,00,000/- has also been justified by the assessee taking into consideration his academic background and immense experience in this field. The payment made to Bhavesh Acharay having 19 years of experience in clinical data management and 4 years in site management was also explained by the assessee relying upon his rich qualifications and experience. All this doubts/points raised by the Learned AO were carefully considered by the Learned CIT(A) while deleting addition made by AO. We have also carefully considered the judgment relied upon by the Learned AR. We find from the judgment passed by the Hon ble Apex Court in the matter of Sassoon J. David and Co (P) Ltd.-vs-CIT [ 1979 (5) TMI 3 - SUPREME COURT] that reasonableness of employee s expenses is not relevant to claiming deduction of expenses under section 37(1) of the Act. Additionally commercial expediency/business rational of a particular expenditure incurred by an assessee for the smooth running and furtherance of its business is its prerogative and hence the same cannot be questioned by the Revenue. The question regarding tax revenue neutrality on the fact that if the income is being charged in the hands of the directors in the highest rate bracket taxing the same in the hands of the company would amount to double taxation as has been decided in the judgment of PWS Engineers Ltd.-vs-DCIT [ 2016 (6) TMI 596 - GUJARAT HIGH COURT] has been duly taken care of by the first appellate authority. Hence taking into consideration the entire aspect of the matter, we find no infirmity in the order passed by the Learned CIT(A) in deleting the addition applying the ratio laid down by the Juridical pronouncement as mentioned above so as to warrant interference. Thus, the question is accordingly answered in the affirmative i.e. in favour of the assessee

  ---

• 2019 (10) TMI 1023
  Depreciation on assets of assessee trust - HELD THAT:- The learned Senior Standing Counsel appearing for the Revenue fairly submits that the substantial question of law, which has been framed in these appeals, has been answered against the Revenue by the Hon ble Supreme Court in CIT vs. Rajasthan and Gujarati Charitable Foundation [ 2017 (12) TMI 1067 - SUPREME COURT ] Following the same, these appeals stand dismissed and the substantial question of law is answered against the Revenue.

  ---

• Customs

• 2019 (10) TMI 1057
  PIL against the DFIA Scheme - unwarranted loss of public money - case of petitioner is that respondents have failed to discharge their obligations and inaction of the respondents is resulting in loss of public revenue in the form of duty exemption being availed by unscrupulous exporters and importers, wherein the likelihood of connivance of exporters and importers with the officials of the respondents cannot be ruled out - principles of natural justice - HELD THAT:- Directions are being sought by the petitioner against the respondents without any justifiable grounds. The DFIA Scheme as also the earlier Transferable DEEC Schemes are based on the Standard Input Output Norms. In any event, there is no need to go into the issue of applicability or otherwise of the various judgments referred by the petitioner. In Pushpanjali Floriculture Pvt. Ltd. Vs. Union of India, [ 2016 (7) TMI 628 - PUNJAB HARYANA HIGH COURT ], a Division Bench of the Hon ble Punjab and Haryana High Court has already considered the DFIA Scheme and has observed that The Commissioner of Customs, ICD Ludhiana, is directed to allow exemption of basic customs duty in respect of the import of Soda Ash by the petitioner by debiting the DFIA licence under Bill of Entry no. 7080616 dated 16.10.2014. There are no reason to take a different view to take away the benefits otherwise available under the DFIA Scheme under the Foreign Trade Policy, whether of 2009-14 or 2015-20, merely to satisfy the petitioner. The aforesaid judgments of the Punjab and Haryana High Court still hold the field, so far as permitting duty-free imports under DFIA are concerned. The contention of the petitioner that duty free import of any goods under DFIA cannot be permitted unless each of the above-mentioned three essential conditions are satisfied, clearly runes counter to the above judgments which are binding on the authorities - Neither the officers of the respondents can be proceeded against for following such binding precedents nor can the exporters or importers be subjected to any onerous conditions, declaration, bond or undertaking contrary to these binding precedents, which if taken would be non-est. There is no merit in any of the prayers of the petitioner - petition dismissed.

  ---

• 2019 (10) TMI 1056
  Recovery of duty drawback already granted - declared FOB value of the goods already exported has been proposed to be rejected - maintainability of petition - HELD THAT:- In the present writ petitions, concededly identical questions as raised in Famina Knit Fabs Jairath International [ 2019 (9) TMI 970 - PUNJAB AND HARYANA HIGH COURT ] are raised - In both judgments, we have held that inspite of availability of alternative remedy available under 1962 Act, writ petition is maintainable in view of involvement of pure questions of law as well jurisdiction and law enunciated by Hon ble Supreme Court and followed by this court time and again. While taking cue from Sections 28, 28AAA 75 of 1962 Act and relying upon judgment of Hon ble Supreme Court in the case of Commissioner of Central Excise versus Larsen and Toubro [ 2015 (8) TMI 749 - SUPREME COURT ] as well this court in the case of Laqshya Media Pvt. Ltd. Vs State of Punjab and Others [ 2016 (8) TMI 1460 - PUNJAB AND HARYANA HIGH COURT ] we have held that mechanism is absent in Duty Drawback Rules, 1995 thus demand under Rule 16 of Drawback Rules, 1995 is not sustainable. Petition allowed.

  ---

• 2019 (10) TMI 1055
  Difference in weighment of export goods - Advance license scheme - export fulfillment obligation - appellant filed shipping bill on 27.01.2016 for export of these Stainless Steel Seamless Pipes by declaring a weight of goods as 33.478 MT. However, on actual weighment the goods were found to be 30.740 MT, thus there was a difference of 2.738 MT - Confiscation - penalty - HELD THAT:- Appreciating the fact that such consignments were being exported in fulfilment of the export obligation, and the weight declared by the appellant was found to be slightly on the higher side and there being no difference in the earlier consignments and appreciating the fact that such difference was only 10%, there is no justification for the confiscation of goods or imposition of penalty. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (10) TMI 1054
  Refund of Safeguard Duty - proviso to Section 8C (2) of the Tariff Act - the amount that was earlier deposited by the appellant towards provisional Safeguard Duty imposed by Notification dated 19 June, 2009 - appellant claims that the goods imported by it during the relevant period fell under the excluded category (f) of B in the Notification dated 19 June, 2009 and, therefore, was exempted from levy of Safeguard Duty and therefore claimed refund of duty. HELD THAT:- Section 8C(2) provides for refund of provisional Safeguard Duty so collected, if the Notification issued after final determination exempts payment of duty. All that has to be seen, therefore, is whether the product exported by the appellant is exempted under (f) of B in the Notification dated 19 June, 2009. It is a fact that the appellant did not specifically describe the product that was imported from China in the bill of entry and only referred to the bill of lading and the invoices. Learned Counsel for the appellant has submitted that it was not considered necessary by the appellant at that time to specifically describe the product because provisional Safeguard Duty under the Notification dated 23 March, 2009 was levied at the rate of 35% on all goods falling under Heading No.7607 (Aluminium foil) - The order passed by the Deputy Commissioner (Refund) mentions that it is not necessary to examine the technical specification provided by the appellant for the reason that the goods had been cleared from Customs and were not available for cross checking the authenticity of the technical specification. It has also been observed that there was no documentary evidence to verify the technical specification prescribed in the Notification at the time of import, particularly when the thickness specified was an important aspect to be considered. It is seen from the order of the Commissioner (Appeals) that the supporting documents have been examined but no specific reasons have been assigned as to why the chemical property do not satisfy the requirement of (f) of B of the Notification dated 19 June, 2009 and only a bald statement has been made. The supporting documents filed by the appellant do require an examination so that a finding can be arrived at as to whether the product imported by the appellant would fall under the exemption specified in (f) of B of the Notification dated 19 June, 2009 - It is, therefore, considered necessary to remand the matter to the Commissioner (Appeals) to specifically record a finding as to whether the product imported by the appellant, for which the appellant claims who have paid Safeguard Duty, would fall under the exempted category specified in the Notification dated 19 June, 2009. The matter is remitted to the Commissioner (Appeals) who shall record an independent finding on the issue without being influenced by any of the observations made in this order - Appeal allowed by way of remand.

  ---

• Securities / SEBI

• 2019 (10) TMI 1053
  Financial results uploaded in XBRL mode did not contain the audit report - Imposition of a fine for violation of Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015 - HELD THAT:- Regulations and the circular require the financial results to be disseminated to the public for a desired purpose so that the investors are made aware of the financials of the Company. Thus, the limited audit report alongwith the financial results are required to be uploaded within 30 minutes of the conclusion of the Board of Directors. The financial results have price sensitive information and cannot remain unpublished and, therefore, the said price sensitive information is required to be disseminated within 30 minutes alongwith an audit report. This was not done. The financial results uploaded in XBRL mode did not contain the audit report which is a vital element and, therefore, filing of the financial result in XBRL mode is not compliance of Regulation 33 read with circular of 30th March, 2017. Thus, when a particular act is required to be done in a particular manner the same is required to be done in that manner alone and not in any other manner. in the given case the imposition of fine is excessive. There is no doubt that the limited audit report alongwith the financial results in PDF form was uploaded on the NSE website as well as on the Company s website within 30 minutes of the conclusion of the Board meeting. The financial results were also published in the newspapers. Thus, there was no deliberate intention on the part of the appellant to violate Regulation 33 of the Listing Regulations. The violation, if any, appears to been done by inadvertent mistake, by a human error. Considering the aforesaid we are of the opinion that in the given circumstances and in the interest of justice the penalty is reduced to Rs. 2,50,000/- which the appellant shall pay to the respondent within four weeks from today. In the circumstances of the case, the appeal is partly allowed

  ---

• 2019 (10) TMI 1052
  Non-disclosure of a tax demand under Clause 36 of the Equity Listing Agreement prescribed by the Stock Exchange (hereinafter referred to as Listing Agreement ) by the Company - appellant is a private Company and is a minority shareholder in New Delhi Television Ltd. made a complaint to the stock exchange as well as to the Securities and Exchange Board of India based on which adjudication proceedings were initiated by the Adjudicating Officer under Sections 23A and 23E of the Securities and Exchange Board of India Act, 1992 read with 23-I of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as SCRA ) - as contented the penalty of Rs. 2 crores should not have been imposed upon the Company but should have been imposed on the Key Managerial Personnel of the Company who took a conscious decision of not disclosing the event under Clause 36 of the Listing Agreement HELD THAT:- We find that parallel proceedings for the same offence, namely, violation of Clause 36 of the Listing Agreement was also initiated against Key Managerial Personnel which also culminated into an order dated 16th March, 2018 being passed by the Adjudicating Officer under Section 15A(b) of the SEBI Act as well as under Section 23A(a) and Section 23E of the SCRA for violation of Regulation 13(6) of SEBI (Prohibition of Insider Trading) Regulations ( PIT Regulations for convenience) read with Clauses 2.1 and 7.0(ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading specified in Schedule II read with Regulation 12(2) of PIT Regulations as well as violation of Clause 36 of the Listing Agreement imposing penalties against the Key Managerial Personnel. Thus, the grievance of the appellant to the extent that the Key Managerial Personnel should be penalized has now been set at rest. The contention of the appellant that the remaining seven alleged violations should also be considered as they were part of the appeal that was filed before this Tribunal is patently misconceived - learned counsel tried to impress upon the Tribunal by placing reliance on the additional affidavit dated 17th November, 2015 contending that the said affidavit was part of the record of the Tribunal which contained the allegations and, therefore, the said allegations were required to be considered by the WTM. Contention of the appellant is patently misconceived and cannot be accepted. The order of the Tribunal dated 12th October, 2017 clearly rejected the contention of the appellant for making the representation on issues other than the issue which related to the order dated 4th June, 2015. The Tribunal rejected the modification application holding that permitting the appellant to make a representation on issues which are not the subject matter of appeal would amount to enlarging the scope of the representation beyond the grievances set out in the memo of appeal. Thus, the allegations made in the additional affidavit could not be considered. In any case, we find that the additional affidavit on which reliance has been made was filed on 17th November, 2015 much after the disposal of the appellant s appeal on 10th October, 2017 and disposal of his modification application dated 12th October, 2017. Any additional affidavit filed after the disposal of the appeal cannot form part of the memo of appeal.

  ---

• 2019 (10) TMI 1051
  Off market transfer of shares - intra group transfers - Violation of the provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ( PFUTP Regulations ) - Penalty imposed - HELD THAT:- So far as the appellant Mr. G. Moorthi is concerned his own submission would show that he had transferred substantive shares to Mr. Sudhir and Mrs. Madhu Jhunjhunwala off market without any consideration for management of portfolio by promising a commission of 15 percent. The record would show that Mr. Sudhir and Mrs. Madhu Jhunjhunwala had another story to tell. Be that as it may. It is clear from the records that the share were not transferred with an intention to transfer the beneficial ownership. The record would show that during the same period Mr. Sudhir and Mrs. Madhu Jhunjhunwala as well as the present appellant Ritika had purchased bulk of shares from the platform of BSE and NSE and thereafter the same were sold in different quantities. More notably the percentage of trading of this group would show that they have contributed substantially in the buying and selling during that period i.e.8,34,472. Similarly, the sale was also of the substantive proportion i.e. 14,55,160. Most important factor is the intra group transfers between appellant Ritika and Mr. Sudhir and Mrs. Madhu Jhunjhunwala on BSE platform, which occurred within less than a minute which has been highlighted by the Adjudicating Officer Analysis of the trading of Mr. Sudhir and Mrs. Madhu Jhunjhunwala with appellant Ritika would clearly show that it cannot just be a coincidence that exact quantity of buy and sell would match within a time difference of less than one minute. The trades also points toward the one and only fact that the trades entered into by the appellant alongwith other group members was not a genuine transfer. In that view of the matter, the order of the Adjudicating Officer in this regard requires no interference. Both the appeals are thereby dismissed with no order as to costs.

  ---

• 2019 (10) TMI 1050
  Non-disclosure of certain material information in the offer documents - Diversion of IPO proceeds and other funds to entities which purchased the appellants shares to ensure full subscription to the IPO of the appellants - Penalty for contravention where no separate penalty has been provided u/s 15HB - HELD THAT:- The Tribunal while considering the aforesaid two charges found that the appellant had partially failed to ensure proper disclosure of material information in the prospectus. It was not a case of complete non-disclosure of material information and, as we have found that the partial nondisclosure, was at best, a technical violation. In one instance, the information was given to the Merchant Banker who failed to disclose it in the RHP and, in the two other instances, the disclosure was made in the prospectus but not at the relevant place. Thus, it cannot be said that there was complete nondisclosure of material information in the prospectus. Insofar as the second charge of diversion of IPO proceeds is concerned the Tribunal in its earlier order held that the charge of violating PFUTP Regulations was not established by any cogent reasoning or convincing evidence. The Tribunal also found that the purchase of land by the appellant was genuine and not illegal or fabricated Since the appellant had already undergone a considerable period of debarment pursuant to the order of SEBI, the Tribunal reduced the debarment from ten years to seven years for the partial disclosure of information in the prospectus. In the ultimate analysis, the order of debarment was for violation of partial disclosure in the prospectus and not for violation of PFUTP Regulations. The AO while imposing the penalty has not factored this debarment while fixing the quantum of penalty. Further, in our opinion, the factors contemplated under Section 15J was also not considered by the AO in the right perspective. Penalty can be imposed for failure to carry out a statutory obligation under the SEBI s Act. Factors contemplated under Section 15J are required to be taken into consideration before imposing a penalty. If it is found that a party has not acted deliberately, then the authority has a discretion, to be exercised judicially, whether in a given case, after taking into consideration of all the relevant circumstances, as to whether a penalty should be imposed or not. Even if a minimum penalty is prescribed, the authority, after considering the circumstances of the case and other factors enumerated in Section 15J would be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act. The direction of the AO to penalize all the directors is wholly unwarranted. Merely because the appellants are directors does not make them liable. The AO must give a specific finding that all the appellants as Directors were responsible for the alleged violation and were in charge of the affairs of the Company. In the instant case, there is no shred of evidence to show that the alleged act was committed by any of the Directors from which a reasonable inference could be drawn that the said Directors could also be vicariously liable. Vicarious liability can be inferred against a Company and its Directors only if the requisite assertions / allegations are averred in the Show Cause Notice so as to make the Company and its Directors vicariously liable for the violation of the provisions of the Act and its Regulations. The assertions / allegations should also include that the Director / Directors were in charge of and responsible for the business of the Company and by virtue of their position they are liable for penalty. In the instant case, no such allegations has been made in the SCN. This is a fit case where no penalty could be imposed and the question of imposing the maximum penalty in the given facts and circumstance does not arise. The AO has clearly exceeded its power in imposing the maximum penalty. The AO has misinterpreted the order of Securities Appellate Tribunal (SAT). Maximum penalty of Rs. 1 crore each imposed upon the appellants is grossly disproportionate to the violation. In our view the order of debarment which was reduced by this Tribunal from ten years to seven years was more than sufficient penalty to cover the technical violation for imposition of penalty for violating the provision of Section 11C of the SEBI Act, 1992 and the ICDR Regulations. 23. In the light of the aforesaid, the appeal is allowed. The imposition of penalty of Rs. 1 crore each on the appellants is set aside

  ---

• 2019 (10) TMI 1049
  Belated disclosures under the PIT and SAST Regulations - an attempt was made to justify the disclosures made belatedly on the strength that the appellants were unaware of the sale of its shares made by the lenders and that the delay if any, was thus, liable to be condoned - penalty of Rs. 40 lacs imposed for violation of Regulations 13(3), 13(4), 13(4A) and 13(5) of SEBI PIT Regulations read with Regulations 29 and 31 of the Securities and Exchange Board of India SAST Regulations - HELD THAT:- Appellants were duty bound to make the necessary disclosures within the stipulated period under the PIT and SAST regulations. Non-disclosures within the stipulated period violated the provisions of the aforesaid regulations and, consequently, the penalty became leviable. Thus, to that extent, the order of the AO holding the appellants guilty of violating the provisions of the PIT and SAST Regulations cannot be faulted and is upheld. Considering the factors enumerated under Section 15J of the SEBI Act, we find that there was no disproportionate gain or unfair advantage gained by the appellants as a result of the default nor anything has come on record to indicate that the delayed disclosures resulted in a loss caused to an investor. However, considering the repetitive nature of the default and the fact that the company has now been wound up and taking into consideration all the facts and circumstances of the case, we think that in the larger interest of justice, the quantum of penalty should be reduced from Rs. 40 lacs to Rs. 30 lacs would meet the ends of justice.

  ---

• 2019 (10) TMI 1048
  Condonation of delay in filing appeal - Show cause notice not served on appellant - HELD THAT:- We find that due procedure for serving the show cause notice was duly followed by SEBI in accordance with the Rule 7 of the Inquiry Rules. The summons was sent at the address that was obtained by SEBI from the stock exchange. However, the fact remains that the appellant had resigned and left the service of Pioneer Securities Pvt. Ltd. in 2006 and thereafter joined Elite. The fact that the appellant had joined Elite and was working till 2017 when the attachment order was served cannot be disputed by the respondent as attachment order was served through his employer which formed the basis of his termination from his service. When the appellant came to know about the impugned order sometime in May 2017, he made an attempt to find out the matter and took steps to file a complaint before the EOW and representation before SEBI. We are constraint to observe that satisfactory explanation has not been given by the appellant for the period from May 2017 till September 2018 that is the date when the appeal was eventually filed, Appellant has made out a case that the show cause notice was not served upon him. Since the appellant had left the last known address available with SEBI and was working with another company and at another place, we are of the opinion that affixation of the show cause notice at the last known address, in the given circumstances does not amount to sufficient service and, thus, a benefit of doubt has to be given to the appellant. An opportunity should be given to the appellant to contest the matter on merits especially when a huge penalty has been imposed upon him and when there is an allegation that a fraud has been played upon the appellant by his ex-employer. We are of the opinion that the appellant is entitled to contest the matter on merits. We are also of the opinion that the delay of five years should be condoned on payment of costs. Sufficient cause has been shown by the appellant for condoning the delay. We are also of the opinion that in the larger interest of justice the delay should be condoned and the appellant should be allowed to contest the matter on merits. Consequently, for the reasons stated aforesaid, the delay in filing the appeal is condoned on payment of costs of Rs. 2 lacs which shall be paid by the appellant to the respondent on or before August 10, 2019.

  ---

• 2019 (10) TMI 1047
  Unjust/ unlawful gains to the tune of US$ 92 million - violations noticed by SEBI relating to the issue of Global Depository Receipts ( GDRs ) by Cals Refineries Limited ( Cals ), a listed Indian company - HELD THAT:- Appellants claim that they were not associated with the GDR issue is untenable. An issue process is over only when the proceeds from the issue is fully utilized as planned. GDR issue is akin to an IPO or FPO, except that in this case of GDR it is issued to investors abroad. In the case of IPO/FPO utilization of proceeds are also monitored by SEBI and in case of violation penal and remedial action are taken. We agree with the submission (as well as the judgments relied on by the appellants) that equitable remedy demands that disgorgement has to be made from the point of unjust enrichment or where the chickens come to roost. We cannot accept the arguments that no such unjust enrichment has been made by the appellants nor disgorgement has to be made from where the unjust enrichment rests finally. If one entity who has unjustly enriched knowingly transferring those proceeds further to some other entity does not prevent the authorities from disgorging the same from the original beneficiary of unjust enrichment. The choice is clearly that of the authority to pursue and disgorge an illegal gain from any point of a chain, if such a chain exists. Tracing to the last point of the chain is an exercise in futility and is not needed. When the proof of unjust enrichment is right before the eyes of an authority chasing the mirage of further transfers itself cannot be supported. Apart from submitting that US $ 92 million just got transferred from one account to another and to a third party on the same day, appellants have no real explanation as to how 25 million GDRs of Cals worth US $ 92 million has come to rest on Asia Texx account and why it was further transferred and that too free of cost to Gagan Rastogi. It is also on record that Gagan Rastogi has sold a part of these GDRs, 2.8 million, and received US$ 8.96 million in November 2011. This finding and now admitted fact is against the stand of the appellants in their reply to SEBI dated October 9, 2013 that neither him (Gagan Rastogi) nor Asia Texx had ever converted a single GDRs of Cals into equity shares and continue to hold the entire 25 million GDR. Therefore, it is clearly evident and admitted that GDRs worth US $ 92 million was transferred by Honor to the account of Asia Texx on March 26, 2009, who in turn transferred the same to the account of Gagan Rastogi free of cost on July 9, 2009. Accordingly, the money transferred from the account of Cals to the account of Asia Texx got accrued to Asia Texx and in turn to Gagan Rastogi in the form of 25 million GDR to the tune of the same value of US $ 92 million with each GDR being worth US$ 3.68 at that time. Since the amount involved was US $ 92 million which come into the hands (account) of the Asia Texx and thereafter to Gagan Rastogi this amount is unjust enrichment in their hands. Therefore, direction to disgorge this amount jointly and severally from the appellants as held in the impugned order does not suffer from any legal infirmity. In the matter before us we hold that the appellants have made unjust/ unlawful gains to the tune of US$ 92 million beyond any doubt. Given the circuitous scheme adopted by the appellants using the proceeds of the Cals GDR issue and in making unlawful gain the finding in the impugned order that the appellants have violated Section 12A of SEBI Act and PFUTP Regulations, 2003 cannot be faulted. In the instant matter it is quite clear from the fact that the appellants have made wrongful gain in terms of the US$ 92 million received as advance from Cals since the Agreement to supply refinery machinery was not implemented nor the said amount was returned to Cals, by Asia Texx. US$ 92 million is exactly the same amount of wrongful gain made which has been directed to be disgorged by the entities who directly benefited from the wrongful gains. Therefore, there is no conflict between the explanation under Section 11B of the SEBI Act and what is directed by the impugned order. Argument of the appellant that the economic reality needs to be considered while imposing penalty or directing disgorgement etc. because the GDRs have declined in value over time as the market conditions, including that of Cals, have changed over the years. While on the face of it, it appears a sound argument, such an argument cannot be accepted for reason that if the economic conditions had changed positively more than the unlawful gained could not be disgorged. Such an approach would vitiate the very foundation of disgorgement as an equivalent amount of unlawful gain to be disgorged which itself is one of the defenses put forth by the appellants. Therefore, changes in the economic conditions in the given context has to be accepted as a business risk of the appellants, not to be vitiated in the application of the legal principle on disgorgement. Hence the submission of the appellants that they are willing to surrender the remaining GDRs or the underlying shares, instead of US$ 92 million cannot be accepted. Finding that the agreement between Cals and Asia Texx dated February 05, 2009 is nothing but a scheme or artifice to siphon off the funds of Cals for the unlawful gain of Gagan Rastogi and Asia Texx, entities related to Cals stands fully sustained. Here it is pertinent to reiterate that the appellant Gagan Rastogi was a promoter of Cals through his 33% holdings in SRM Exploration Pvt. Ltd. as well as being son of Deep Rastogi, who was a Director of Cals at the relevant time. Given the above facts and position of law we uphold the impugned order. Both the Appeals are dismissed with no orders on costs. Consequently, appellants are directed to jointly and severally pay SEBI an amount of US$ 92 million, along with simple interest at the rate of 6% per annum from March 27, 2009 till the date of payment, within 30 days from today.

  ---

• Insolvency & Bankruptcy

• 2019 (10) TMI 1046
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to repay the debt - Adjudicating Authority dismissed the Application holding that the claim made by the Appellant (Financial Creditor) is not a financial debt - Section 7 of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Appellant, who claims to be a Financial Creditor, however, claims made by it, is not a Financial Debt. It is reiterated that in the marketing agreements and subsequent correspondence exchanged between the Appellant and the Respondent, no way it is mentioned that the amount paid by the Appellant to be repayable along with interest over a period of time in a single or series of payments in future. However, we are of the firm opinion that the Appellant has not disbursed money against the consideration for the time value. The claim of the Appellant is not a Financial Debt within the meaning of Section 5(8) of IBC. Appeal dismissed.

  ---

• 2019 (10) TMI 1045
  Valuation - determination of liquidation value - initiation of CIRP - It is the case of the Applicant Bank that it is one of the Financial Creditors of the Corporate Debtor making a claim of Rs. 33,86,46,611.84 as financial debt against the Corporate Debtor before the Resolution Professional. Admission of claim over Series-I Debentures for setting aside the claim rejected by the RP - HELD THAT:- ince the Applicant Bank itself is not in a position to place proof before the RP to determine the rejected claim of the Applicant Bank and despite the RP made an attempt to locate the records of the company, since he is also unable to get any material supporting the claim of the Applicant Bank, the RP rejected the claim over Series-1. In view thereof, I am of the considered opinion that unless proof is placed before the RP, it is not possible under law to admit this claim, thereby, I have not found any merit in the argument of the Applicant Bank seeking directions against the RP to admit its claim. As to other relief in respect to the valuation of around 16 grounds of land assigned to the Corporate Debtor by the Government of Tamil Nadu through Assignment Deed in the year 1989, the Applicant Bank counsel says that the liquidation value determined by theJRP over the aforesaid land is decimal in value against the approximate value of Rs. 18.74 crore given by valuer of the Applicant Bank on 24.06.2019 - As property rights have not been conferred upon the Corporate Debtor, this land will only fetch the same money from Tamil Nadu Government that was paid to the Government in the event this property has been taken back by the Government. In view thereof, the Valuer as well as the RP, the RP counsel says, determined liquidation value that was shown at the time of assignment. It is also an admitted fact that this land cannot be used for any other purpose other than the purpose mentioned in the Assignment Deed and there is also no provision entitling the Corporate Debtor to create third party rights, therefore, the value of the property cannot be ascertained basing on the market value prevailing in the vicinity around this land. Maybe it is true that the charge was created over this property by the Bank with the consent of the Government, but that consent will not make any difference to the rights already crystallized by virtue of assignment made in favour of the Corporate Debtor. The valuation given by the Valuers and the determination of the liquidation value of the asset by the RP cannot be re-examined by looking at the allegation made by this Applicant Bank - Application dismissed.

  ---

• Service Tax

• 2019 (10) TMI 1044
  Permission for withdrawal of appeal - monetary amount involved in the appeal - Refund of service tax - refund which was beyond one year is denied - HELD THAT:- The appellant admits that in view of instructions dated 22.8.2019 issued by Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (Judicial Cell) the instant appeal would not be maintainable before this Court, as refund amount i.e. 42, 39, 625/- is below the monetary limit of Rs. 1 Crore. Appeal dismissed as withdrawn.

  ---

• 2019 (10) TMI 1043
  VCES Declaration - reopening of proceedings/VCES Assessment on the basis of declarations made - HELD THAT:- The discharge certificate is issued by the department on 11.04.2014 and the show cause notice is subsequently issued on 29.12.2014 - The Tribunal in the case of Ashok Kumar Kesharwani [ 2019 (5) TMI 1247 - CESTAT ALLAHABAD ] had occasion to analyse similar situation wherein the Tribunal held that after acceptance of the declaration and issuance of discharge certificate the department cannot reopen the proceedings in respect of the declarations made. It would result in deviation from the immunity provided under section 108 of the Finance Act 2013 and would render the scheme redundant and meaningless. When the declaration is filed, the department gets sufficient time to enquire and satisfy as to the category of service and value declared. On entertaining a different view the department cannot allege misdeclaration. There should be substantial and conscious misdeclaration for reopening a matter for which discharge certificate is issued - There is no evidence to show that there is any conscious and substantial misdeclaration on the part of the respondent. The Tribunal in the case of Sravanthi Contractors and Developers [ 2019 (9) TMI 648 - CESTAT HYDERABAD ] had followed the decision in the case of Frontline Builders Developers reported in [ 2017 (12) TMI 1440 - CESTAT BANGALORE ] to hold that unless there is substantial misdeclaration, the VCES assessment cannot be reopened. Appeal dismissed - decided against Revenue.

  ---

• 2019 (10) TMI 1042
  CENVAT Credit - disallowance of credit taken by the appellant after availing the benefit VCES - credit dined on the ground that, the availment of credit on the basis of the discharge certificate dated 02.07.2014, is incorrect and also time-barred. - HELD THAT:- While understanding the VCES, we have to note that the admitted liability is paid by the assessee vide challans even before making the application. The department has to scrutinize the application and, thereafter, only if satisfied as to the declaration made, the discharge certificate is issued. In case there is any discrepancy or if the department is not satisfied with the liability declared, the application is liable to be rejected. Thus, the tax paid by the appellant becomes final under VCES, only when the discharge certificate is issued. The appellants can then take the credit on the basis of discharge certificate only. Under VCES, the challans being an intermediary payment, such documents cannot be a conclusive document for availment of credit. Further, the assessee cannot be found fault with when the department vide Circular dated 20.01.2014 has shied away from unequivocally clarifying as to whether the asssessee can avail credit on challan for tax paid before filing VCES application or the discharge certificate issued after acceptance of declaration - the credit availed on the discharge certificate is legal and proper. The Board s Circular also clarifies that Cenvat credit is eligible on the tax paid under VCES. As discussed, only when the tax is finally accepted by department and the document is issued, the assessee would be able to avail the credit. For these reasons, the credit availed on the discharge certificate is legal and proper. The disallowance of credit is unjustified. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (10) TMI 1041
  Imposition of penalty u/s 77 and 78 of FA - the entire amount of service tax along with interest was paid by the appellant before issuance of SCN - benefit of sub-section (3) of Section 73 ibid - Suppression of facts/intent to evade or not - HELD THAT:- It is an admitted fact on record that the diamond manufacturing unit, including the appellant herein have challenged the constitutional validity of Section 66A ibid before the Hon ble Bombay High Court and also made representation to the Finance Minister of Government of India regarding the clarification on the issue, whether customs duty or service tax to be levied on such type of transaction. Thus, under such circumstances, it cannot be said that non-payment of service tax during the relevant period was owing to the reason of suppression or misstatement of facts etc. Since, the appellant had deposited the service tax along with interest before issuance of the show cause notice, in my considered opinion, the benefit of sub-section (3) of Section 73 ibid should be available to the appellant for non-issuance of any show cause notice, especially seeking for imposition of penalties. Penalties set aside - appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2019 (10) TMI 1040
  Permission for withdrawal of application - imposition of personal penalty on petitioner-Sh.Rajender Monga, authorised signatory of M/s Parle Biscuits Pvt.Ltd. - HELD THAT:- The counsel has written instructions from the office of Commissioner of Central Goods and Service Tax, Rohtak vide letter dated 16.9.2019(P-1) to withdraw the present appeal as the duty involved in this appeal is Rs. 79, 26, 630/-. The application is supported by an affidavit of the counsel for the petitioner. Appeal dismissed as withdrawn.

  ---

• 2019 (10) TMI 1039
  Permission for withdrawal of application - imposition of personal penalty on petitioner-Sh.Rajender Monga, authorised signatory of M/s Parle Biscuits Pvt.Ltd. - HELD THAT:- The counsel has written instructions from the office of Commissioner of Central Goods and Service Tax, Rohtak vide letter dated 16.9.2019(P-1) to withdraw the present appeal as the penalty involved is Rs. 2 lacs only. The application is supported by an affidavit of the counsel for the petitioner. Appeal dismissed as withdrawn.

  ---

• 2019 (10) TMI 1038
  Refund of CENVAT Credit - rejection on the ground that they should have availed credit only on the strength of invoices issued by the ISD as pointed out by the audit and not otherwise - scope of SCN - HELD THAT:- The SCN was issued only on the ground that the CENVAT credit has been availed on the basis of challan and not on the basis of invoices issued by the ISD. The Commissioner (A) has travelled beyond the show-cause notice and has also questioned the eligibility of credit availed by the appellant and has also remanded the case to the original authority to examine the question of eligibility of credit which in view of the decision of the Hon ble Supreme Court in the case of Toyo Engineering India Ltd. [ 2006 (8) TMI 184 - SUPREME COURT ] is not tenable in law. Further, it is not in dispute that the services availed by the appellant falls in the definition of input service and the said service was availed and service tax was paid and the said service was utilized by the appellant and once this is admitted and undisputed, then, in my view CENVAT credit cannot be denied. Further, the Commissioner (A) himself in para 10 has admitted that certain input services were received by Biakampady Unit and invoices were raised in their name and it appears that Biakampady Unit is entitled to CENVAT credit on the same. Once this finding is recorded, there is no justification for denial of CENVAT credit and consequently, the refund. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (10) TMI 1037
  CENVAT credit - inputs used in the manufacture of exempt goods, Animal Driven Vehicle Tyres (ADV tyres) - Allegation based on assumptions and presumptions - HELD THAT:- In the premises the Cost Audit report submitted by Birla Tyres in terms of the direction of the predecessor Commissioner in the present proceedings, as well as the certificate of the Cost Auditor, submitted as per his direction in the proceedings are to be relied upon. They establish that the subject materials were never used as input materials, either directly or indirectly, in or in relation to the manufacture of ADV tyres. The charts submitted by Birla Tyres, the contents whereof are with reference to the documents on record and the correctness of which has not been disputed on behalf of the Revenue, also evidences this. The findings in the impugned order are based on, besides uncorroborated statements, derived figure of numbers, assumptions, presumptions and on unintelligible, theoretical calculations. It is a settled principle of law that in the absence of sufficient, positive and tangible evidence on record, findings based on inferences as in the impugned order are unsustainable - however, the burden of proof that assessee had availed modvat/cenvat credit is that on the Revenue. The impugned order, to the extent it confirms the duty demand of Rs. 78,57,625/-, interest thereon and the penalty imposed upon Birla Tyres, is set aside and the dropping of the demand of Rs. 24,53,668/- is confirmed, with consequential relief to Birla Tyres - appeal allowed - decided in favor of appellant.

  ---

• 2019 (10) TMI 1036
  Classification of goods - Coal Tar Partially Distilled (CTPD) - whether classifiable under Tariff Heading 27060090 or under Tariff Heading 27081010 of the Central Excise Tariff? - HELD THAT:- The Tar is distilled from coal and from coal or from other minerals while pitch is obtained by blending with creosote oil or other coal tar distillates and both the goods are distinct and different in nature. Coal Tar Pitch is a residue product when the solvent has been completely extracted out of Tar whereas Pitch is the last residue in the process of destructive distillation of coal and in this process the distilled products like High and Low Naphtha, High Creosote Oils are obtained. Once a product is Pitch, it is no longer Tar. The Hon ble Apex Court in the case of the COMMISSIONER OF C. EX., BOLPUR VERSUS STEEL AUTHORITY OF INDIA LTD. [ 2004 (1) TMI 399 - SUPREME COURT] has held that Pitch Creosote Mixture is a pitch and not a partially distilled tar , hence it is classifiable under sub-heading 2708.11 of the Central Excise Tariff and not under Heading 27.06. Tar and Pitch are covered under separate tariff headings after 1.3.1986, Tar is classifiable under Heading 27.06 and Pitch under heading 27.08. Pitch is derived by distillation of Tar wherein the oils Light oil, Naphthalene oil, Creosote oil and other residual oils are removed. Depending on the extent of oil removed Pitch may be soft pitch or medium soft pitch or medium hard pitch or hard pitch . Once pitch is obtained, it is a completely different product from Tar . Once a product is Pitch , it is no longer Tar . Pitch can, under no circumstances, fall under the Tariff Item 27.06. SAIL, DSP has contended that they are not having pitch plant and have submitted photographs to prove this. It is also their contention that they never manufactured pitch of any type since 1987 nor had any facility to manufacture pitch. - The facts need to be verified. It is also found that no independent evidence has been disclosed in the adjudication orders to discharge the onus cast upon the Revenue to establish the correct classification of the impugned goods, as contended by them, and is covered by the Apex Court s decision in CCE Vs. SAIL (supra). The matters need to be remanded back to the Adjudicating Authority for fresh de novo decision upon due consideration of the evidences produced and to be further produced by SAIL, DSP and upon following the principles abovestated laid down by the Apex Court and observing the principles of natural justice and affording SAIL, DSP a personal hearing - Appeal allowed by way of remand.

  ---

• 2019 (10) TMI 1035
  100% EOU - procurement of items duty free under N/N. 53/97-Cus, dated 03.06.1997 read with N/N. 1/95-CE, dated 04.01.1995 - denial of exemption on the ground that the items in question have not been used in connection with manufacture and packing of goods - HELD THAT:- Hon ble Apex Court after analysing in the case of COMMISSIONER OF C. EX., ALLAHABAD VERSUS GINNI FILAMENTS LTD. [ 2005 (2) TMI 116 - SUPREME COURT] has held that the exemption notification has to be read strictly so far as the eligibility is concerned - Though the Apex Court decision is rendered in the context of N/N. 123/81-CE, we find that the central issue of nexus has been dealt by the Apex Court. The appellants are eligible for exemption for Radio Modem and are not eligible for exemption for the 3.0 ton air conditioner and the ducting system - appeal disposed off.

  ---

• 2019 (10) TMI 1034
  CENVAT Credit - input services - showroom maintenance charges - hotel management charges - photocopier charges - place of removal. Showroom maintenance charges - HELD THAT:- Admittedly, the appellants are selling the goods from their showrooms. If the goods are sold from the showrooms, in that circumstance, the showrooms are the place of removal. But the ld. Commissioner (Appeals) lost the sight to consider the fact to say which is the place of removal. When the appellants are selling their goods from showrooms only, therefore showrooms maintenance expenses are entitled for avail the Cenvat credit in terms of amended definition of input services w.e.f. 01.04.2011 - credit allowed. Hotel expenses - HELD THAT:- The hotel expenses have been incurred by the appellants for the salesmen who were visiting various cities to sell of the product. Admittedly, without selling of goods, the question of payment of duty or manufacture of goods have no value. Any goods manufactured and sold attracts duty. Therefore, the goods manufactured by the appellants are required to be sold and the expenses incurred by the appellants upto selling of the goods are entitled as input services, therefore, on hotel expenses charges, the appellants are entitled to avail the Cenvat credit - there is no question of place of removal of the goods, but ld. Commissioner (Appeals) illegally held that this service has been availed beyond the place of removal - credit allowed. Photocopy service - HELD THAT:- The appellants have availed the Cenvat credit for photo copies of the documents which are relevant for maintaining their accounts. Admittedly, the services relating to the accounts have been incorporated in definition of input services, but ld. Commissioner (Appeals) failed to examine the said issue - As the photocopies service has been availed by the appellants for photo copies of their various documents for accounting and selling purposes; therefore, the appellants are entitled to avail the Cenvat credit thereon - credit allowed. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (10) TMI 1033
  CENVAT Credit - input services, being used outside their factory premises, i.e. at the place of job workers - whether the Appellant are eligible to avail Cenvat Credit of Service Tax paid on input services, namely on the supply of tangible services used in the premises of job workers in relation to conversion of raw material sent by the Appellant following Rule 4(5) (a) of Cenvat Credit Rule 2004? HELD THAT:- The issue is no more res-integra as decided in the case of M/S. TATA MOTORS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAMSHEDPUR [ 2016 (9) TMI 1240 - CESTAT KOLKATA] where it was held that the appellants are the receiver of the services rendered by the 3rd party job worker and the said services have been used directly or in directly in or in relation to the manufacture of motor vehicles chassis. Hence, the appellants are entitled to credit of service tax paid on the input services. There is no merit in the impugned order to the extent of confirming recovery of credit and penalty on input services used in the job workers premises . Consequently, the same is set aside - amount of Cenvat Credit of Rs. 9491/- pertaining to outdoor catering services being not disputed is accordingly upheld - appeal allowed in part.

  ---

• 2019 (10) TMI 1032
  CENVAT Credit - input services - case of the department is that the services were used for setting up of a new plant - It was contended that with effect from 01.04.2011, the setting up of factory has been removed from the inclusive clause of the definition of the Input Service. HELD THAT:- There is no dispute that the appellant have an existing manufacturing factory wherein many other plants and machinery and two furnace were already setup and with the said existing facility, the appellant are manufacturing excisable goods for last many years. For enhancing their production, the appellant set up a new furnace, it cannot be said that they have setup a new factory. It is merely an expansion of the existing factory and therefore, even if the term setting up of factory is removed from the inclusion clause of definition of input service, it does not adversely affect the appellant to avail Cenvat credit on various services - Moreover, as per the amendment in Rule 2(l) of Cenvat Credit Rules, 2004 certain services were excluded from the definition of Input Service and only those services were not be eligible for Cenvat credit. The services in question in the present case, do not fall under the exclusion clause. For this reason, the appellant s claim for availment of Cenvat credit cannot be rejected - appeal allowed - decided in favor of appellant.

  ---

• 2019 (10) TMI 1031
  Cenvat Credit - 100% EOU - inputs which was stored outside the factory premises, however the same was accounted for in their books of accounts. - Commissioner (Appeals) rejected the appeal on the ground that the appellant being a 100% EOU was not entitled to cenvat credit prior to issuance of Board Circular No. 799/32/2004-CX dated 23.09.2004 HELD THAT:- The Commissioner has not denied the cenvat credit on the ground of suppression. Moreover, the appellant has claimed that they have recorded the goods, which was lying outside the factory premises, in their books of accounts, therefore, it cannot be said that there is suppression. - the Board is not the authority to make law whether the credit is admissible or not. The Board has only clarified the existing law regarding entitlement of the cenvat credit, therefore, the Board clarification is a retrospective and not the prospective. Since the lower authorities have not verified the records that whether the goods had been recorded in the books of accounts and other excise records by the appellant, the matter needs to be remitted back only for verification purpose. Appeal allowed by way of remand.

  ---

• 2019 (10) TMI 1022
  Demand of interest on delayed payments - applicability of time limitation - HELD THAT:- The provisions of limitation are equally applicable to the demand of interest. In the present case, the proceedings stand initiated against the appellant by invoking longer period of limitation. There is neither any allegation nor any evidence of misstatement or suppression etc. with an intent to evade payment of duty. In fact, the differential duty was paid by the appellant suo motu on raising of supplementary invoice. In such a scenario, no mala fide can be attributed to the appellant. In such circumstances, the demand of interest has to be held as barred by limitation but the same is being confirmed to the extent of Rs. 13,88,390/- as the appellant is not contesting the same on account of having deposited the said amount. Accordingly, the confirmation of interest amount to the extent of Rs. 13,88,390/-. Penalty - HELD THAT:- There is a finding recorded of absence of any mala fide on the part of the assessee, thus not calling for imposition of any penalty upon them. Accordingly, the same is set aside. Appeal disposed off.

  ---

• CST, VAT & Sales Tax

• 2019 (10) TMI 1030
  Refund alongwith interest - period fourth quarter of Financial Year 2014-2015 - DVAT Act, 2004 - HELD THAT:- It appears that the respondent has not yet finally decided the aforesaid claim of refund raised by this petitioner. The concerned respondent authority are directed to decide the aforesaid claim of refund of this petitioner in accordance with law, rules, regulations and Government policy applicable to the facts of the present case - petition disposed off.

  ---

• Indian Laws

• 2019 (10) TMI 1029
  Jurisdiction of arbitrator to consider the counter claim relating to CENVAT credit - dispute arose between the parties when the appellant raised a claim for interest for the delayed payments of the fuel supplied during the period from 01.04.2009 to 31.03.2011. Whether the counter claim regarding CENVAT invoices was beyond the scope of reference to arbitration? - whether the High Court was right in holding that the learned Arbitrator had jurisdiction to consider the counter claim regarding CENVAT invoices raised by the respondent? HELD THAT:- The respondent did not make any claim of CENVAT invoices and only for the first time on 05.05.2010 that is after the commencement of the arbitration proceeding, the respondent called upon the claimant to issue CENVAT invoices. According to the appellant, as per the terms of the agreement, the appellant was not bound to issue CENVAT invoices to the respondent and levy of service tax on domestic air travel came into force only by the Finance Act, 2010 and therefore, the learned Arbitrator has rightly held that the counter claim is beyond the specific reference and would not fall within the jurisdiction of the Arbitrator. The questions whether the issue regarding CENVAT invoices was outside the terms of agreement or whether CENVAT invoices relates to the agreement dated 01.01.2007 and 01.04.2009 and whether it is arbitrable and whether it falls beyond the scope of reference to arbitration and such other related questions, are to be determined only during the enquiry. It may be that after enquiry, the Arbitrator might reject the counter claim for CENVAT invoices as not arbitrable and the counter claim beyond the scope of reference to arbitration. But to reject the counter claim at the threshold on the ground that the Arbitrator has no jurisdiction would not be proper. The High Court has rightly set aside the order of the learned Arbitrator dated 18.04.2011 - the impugned judgment of the High Court of Bombay is affirmed - Appeal dismissed.

  ---