TMI Tax Updates - e-Newsletter
October 29, 2018

Case Laws in this Newsletter:

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

TMI SMS

• Addition u/s 56(2)(vii)(c) - drawing up the balance sheet of GEPL as on that date for determining of FMV of shares is proper U/r 11U

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Articles

1. Implication of GST on Transfer of Business - At Glance

   By: Dinesh Kumar

2. RECENT ADVANCE RULINGS IN GST (PART-8)

   By: Dr. Sanjiv Agarwal

3. LLP Registration Delhi

   By: kanika khare

4. APPEAL TO SECURITIES APPELLATE TRIBUNAL UNDER INSURANCE ACT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Repayment of 12.60% Government Stock 2018- Issue of Press Communique

Notifications

Customs

1. 23/2018-Customs (N.T./CAA/DRI) - dated 26-10-2018 - Cus (NT)

Appointment of Common Adjudicating Authority by DGRI

2. 22/2018-Customs (N.T./CAA/DRI) - dated 26-10-2018 - Cus (NT)

Appointment of Common Adjudicating Authority by DGRI

GST - States

3. S.O. 266 - dated 26-10-2018 - Bihar SGST

Seeks to provide taxpayers whose registration has been cancelled on or before the 30th September, 2018 time to furnish final return in FORM GSTR-10 till 31st December, 2018

4. S.O. 265 - dated 24-10-2018 - Bihar SGST

Amendment in Notification No. S.O.- 238 dated the 13th September, 2018

5. 57/2018—State Tax - dated 25-10-2018 - Himachal Pradesh SGST

Amendment in Notification No. 50/2018- State Tax dated the 17th September, 2018

6. 56/2018—State Tax - dated 25-10-2018 - Himachal Pradesh SGST

Supersession of the notification No. 32/2017–State Tax, dated the 9th October, 2017

Income Tax

7. 74/2018 - dated 25-10-2018 - IT

Income–tax (Eleventh Amendment) Rules, 2018

Circulars / Instructions / Orders

Customs

1. 71/2018 - dated 27-9-2018

Withdrawing of 24X7 Customs clearance operations from M/s A. S. Shipping Agencies Pvt. Ltd., M/s Continental Warehousing Corporation (Nhava Seva) Limited, CFS, Red Hills & M/s Container Wareshousing Corporation CFS, madhavaram - reg.

Highlights / Catch Notes

GST

• Strike Delays Goods Delivery, Questions Arise Over Constitutionality of Sections 129 & 130 of GST Rules.

  Case-Laws - HC : E-way bill - Goods did not reach destination within prescribed time on account of strike - constitutional validity of portions of Sections 129 and 130 of the Central Goods and Services Tax Rules - Notices issued.
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Income Tax

• Amendments to Rules on TDS/TCS: Lower Rate or Exemption Certificates Updated in Income Tax Regulations.

  Notifications : Grant of certificates for TDS at lower rates or no TDS - Certificate for collection of tax (TCS) at lower rates - Substantial amendment in the Rules
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• Hindu Undivided Family can't be a working partner in firms; tax return due date is fixed under Sec 139(1).

  Case-Laws - AT : The HUF itself cannot become a working partner in the partnership firm. Therefore, there is no question for the HUF to become a working partner - Due date of filing of return in case of HUF cannot be extended as per the Section 139(1) Explanation 2(iii).
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• Section 10A Deduction Valid if Export Proceeds Realization Parameters Met per Competent Authority.

  Case-Laws - AT : Deduction under s.10A of the Act cannot be denied where the extended parameters for realization of export proceeds as set out by the competent authority has been duly met.
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• Court Rules on Share Valuation: Use Balance Sheet as of Valuation Date u/s 56(2)(vii)(c) Income Tax Act.

  Case-Laws - AT : Addition u/s 56(2)(vii)(c) - determination of FMV of shares - drawing up a balance sheet as on valuation date or previous audited balance sheet is to be taken as the base - there was nothing preventing the appellant from drawing up the balance sheet of GEPL as on that date for the limited purpose.
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• Court Orders Detailed Inquiry into Unexplained Cash Credit u/s 68; Validity of Source Lacks Supporting Documents.

  Case-Laws - AT : Addition u/s 68 - Unexplained cash credit - CIT(A) accepted the source of cash deposits without any supporting documents, the issue require detailed enquiry with regard to the source of cash deposits.
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• Appellant's Inconsistent Financial Disclosures Lead to Additions u/s 69A for Unexplained Cash Deposits.

  Case-Laws - HC : Addition u/s 69A - source of cash deposits - Before the AO the stand taken was that the appellant was not maintaining books of account, on the other hand with the VAT return, the appellant had filed Trading and Profit & Loss Account and the balance sheet. - Additions confirmed.
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• Unjust Denial of 80G Approval: Registration Under 12AA Alone Insufficient, But Society's Aims Meet Statutory Requirements.

  Case-Laws - HC : Grant of approval u/s 80G (5)(vi) - No doubt registration u/s 12AA by itself would not entitle the assessee for approval u/s 80G but in the absence of any dispute regarding the aim and objects of the assessee Society, denial of approval u/s 80G cannot be sustained.
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• Fertility Program Costs for Milk Animals Classified as Revenue Expenditure, Eligible for Income Tax Deduction.

  Case-Laws - HC : Nature of expenditure - fertility improvement program amongst milk animals - The expenditure was general in nature and to be allowed as revenue expenditure.
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• Late EPF and ESI contributions before tax filing governed by Section 36(1)(va) and Section 2(24)(x), not Section 43B.

  Case-Laws - HC : Additions towards the amount of Employees Provident Fund and ESI beyond the due date, but prior to filing of return - Employee's contribution - application of Section 36(1)(va) r.w.s. 2(24)(x) alone is the proper course and any other interpretation would only defeat the object and scope of both the provisions viz., 43B and 36(1)(va).
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Service Tax

• Cash Refund as Export of Services: Testing and Consultancy Services Qualify as Exports u/s Rules.

  Case-Laws - AT : Cash refund - export of services or not - the technical and consultancy service, commences from the stage of undertaking the test on the goods procured and the service is completed on delivery of the test report/certificate to the overseas client - benefit of export allowed.
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• No Penalty Imposed for Delayed Service Tax Payment Due to Financial Hardship u/ss 76 and 78.

  Case-Laws - AT : Penalty u/s 76 and 78 - service tax alongwith interest paid on being pointed out - The reason of financial crunch given by the appellant should be given some credence, particularly in view of the mitigating factor that it is not a case of absolute non-discharge of tax liability but delayed payment of tax, that too with interest paid thereon - No penalty.
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• Service Tax Refund Allowed If No Credit Availed; Mere Record-Keeping Doesn't Count as Availing Cenvat Credit.

  Case-Laws - AT : Refund of service tax paid subject to the condition that no credit has been availed - A mere maintenance of an account showing the total quantum of service tax paid by the assessee cannot be held to be availment of cenvat credit.
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• Department Can't Re-examine Same Issue u/s 73; Overlapping Timeframe Limits Extended Period of Limitation.

  Case-Laws - HC : Extended period of limitation - The period of time for which the impugned show-cause notice has been issued overlaps with the period of time for which either a proceeding is pending or stands concluded. The department cannot be allowed to revisit the same issue under the garb of exercise of powers u/s 73 of the Act of 1994
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Central Excise

• Excise Duty Applies Only to Manufacturing, Not Purchase or Supply of Goods, as Clarified in Case Laws.

  Case-Laws - AT : Valuation - Moreover the excise duty is a tax on manufacture of goods. Mere purchase and supply of bought out goods with excisable cannot make them liable to excise.
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• Sub-contractor ineligible for Central Excise exemption when independently procuring materials and paying excise for SEZ projects.

  Case-Laws - HC : SEZ Unit - sub-contract - benefit of exemption from Central Excise to the sub-contractor - If the sub-contractor has procured raw material and paid excise and raised a claim for reimbursement, will not clothe such an entity to claim exemption, under the guise of it supplying goods to a Unit, through the main contractor.
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VAT

• Jurisdictional Authority in Tax Assessments: Interstate Vehicle Sales and CST Act Section 27 Assessment Reopening.

  Case-Laws - HC : Interstate sale under the CST Act or not - sale of motor vehicles to the purchase outside state - When admittedly the goods have moved from the territorial jurisdiction of the respondent, he is certainly, vested with jurisdiction under section 27 to reopen the assessment for deciding such issue, when he finds sufficient materials to do so.
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Case Laws:

• GST

• 2018 (10) TMI 1389
  E-way bill - Goods did not reach destination within prescribed time on account of strike - constitutional validity of portions of Sections 129 and 130 of the Central Goods and Services Tax Rules - Held that:- Prima facie we do not find the statutory provisions brought to our notice, its a situation of automatic imposition of tax and penalty at the rate of 100% on such tax. At this stage, we are not inclined to examine the vires of the statutory provisions. We would instead try to address the petitioners grievance within the statutory frame work. Let there be notice to the respondents returnable on 05.12.2018.

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• 2018 (10) TMI 1388
  Unable to upload GST TRAN-1 - input tax credit - extension of time to upload form - Held that:- The power can be exercised by the Commissioner on the recommendation of the Council - in case the petitioner represents to the Council, his grievance shall be redressed by the Competent Authority after affording him opportunity of hearing upto November 30, 2018 - petition disposed off.

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• 2018 (10) TMI 1387
  Penalty u/s 129 of the Punjab Goods and Services Tax Act, 2017 and Haryana Goods and Services Tax Act, 2017 - detention of goods - Held that:- Considering the fact that the legal issues sought to be raised by the petitioners need examination in detail by the GST Council and the goods detained are still in custody of the Departments concerned, we deem it appropriate to direct the respondents to release the goods on furnishing of security other than bank guarantee or cash - appeal disposed off.

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• Income Tax

• 2018 (10) TMI 1405
  Assessment u/s 153A - undisclosed income as advances received - identity of the creditor was not proved and the addition was property made by the AO - Held that:- AO in his remand report has stated that he has verified all the documents and evidences furnished by the assessee in support of its claims. No adverse observations were made by the AO in the remand report. The claim of the assessee was accepted as correct. Under the circumstances, the ld. CIT(A) based on this remand report by the A.O, granted relief in this case. From the report it is also clear that the balance of advance existed at the end of the financial year was sufficient to acquire assets existing in the right side of the balance sheet in each case and in each assessment year. Keeping in view the categorical findings given by the AO after due verification of papers and details filed and after proper investigation and report by the inspector attached to the AO in the remand proceedings, the issue involved in this case has been adequately discussed and elaborated by the AO. - Decided in favour of assessee.

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• 2018 (10) TMI 1404
  Validity of order passed under section 201(1)/201(1A) - order passed after 4 years from the end of the financial year under consideration - period of limitation - non deduction of tds - Held that:- There are series of decisions of Hon’ble High Courts on this issue wherein it was held that when no limitation provided for initiating the action by the AO and passing the order under the particular provisions of the Act, then a reasonable time limit for such action is 4 years from the end of the relevant financial year. Further, after the decisions of the Hon’ble High Courts on this issue, the legislatures have amended the provisions of section 201 of the Act and thereby provided the limitation of 2 years and 4 years respectively in specific cases for passing the order under section 201(1)/201(1A) of the Act. Having regard to the binding precedents as well as amended provisions of the Act, the impugned order passed by the AO is barred by limitation as it was after 4 years from the end of the financial year under consideration. Accordingly, we hold that the impugned order passed under section 201(1)/201(1A) of the Act is invalid being barred by limitation. Hence the same is quashed.

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• 2018 (10) TMI 1403
  Rectification of mistake u/ 154 - Claim of benefit of section 40(b) being HUF as a working partner in the partnership firm - due date of filing of return in case of HUF claiming partner in the firm whose accounts are liable to be audited - filling of belated return - Held that:- We observe that the assessee has claimed HUF as a working partner which is not correct as per many judicial precedents as relied by the ld. CIT(A) in the impugned order. This issue has been settled in Coal India Ltd. vs. M/s. Continental & Eastern Agency (RFA) OS [2011 (12) TMI 711 - DELHI HIGH COURT] considered the earlier judgments and concluded that the HUF itself cannot become a working partner in the partnership firm. Therefore, there is no question for the HUF to become a working partner. The due date of filing of return of income will be 31st July of the relevant assessment year as per section 139 of the Act and the due date for filing of return for working partner has been mentioned in Section 139(1) Explanation 2(iii). The benefit of extended date by the CBDT will not help the assessee as contended by him that due date for filing of income-tax return cannot be 15th October, 2010. In our considered opinion, AO has rightly invoked section 154 because the assessee wanted to take benefit of the notification issued by the CBDT. In the present case, as per judicial precedents, the HUF itself cannot become a partner in the partnership firm and as such the HUF can also not be a working partner in partnership firm as defined u/s. 40(b) Expln. 4 of the IT Act. The due date of filing of IT return will be 31st July and in the given case, the assessee has filed his return on 01.10.2010 which has been later on revised and claimed deduction u/s. 80C of Rs. 1 lakh which was accepted by the Assessing Officer in the original assessment proceedings. The return cannot be revised because the assessee had filed belated return. Therefore, there was a mistake apparent from the record. Accordingly, this issue is rejected. Disallowance of deduction claimed u/s. 80C - Held that:- Assessing Officer is always required to assess correct income of the assessee even if the claim was not made in the original return. For this, he has referred to CBDT circular No. 14 dated 11.04.1955 and also relied on the decision of Co-ordinate Bench of Delhi Tribunal in the case of ACIT vs. Technofab Engineering Ltd. (2009 (7) TMI 1345 - ITAT DELHI). He has also relied on a judgment in the case of CIT vs. Remco International, [2008 (12) TMI 413 - PUNJAB AND HARYANA HIGH COURT] and decision of Goetz India Ltd.[2006 (3) TMI 75 - SUPREME COURT]. Respectfully following the above judgments, cited by the assessee, we allow the appeal of the assessee and the assessee will get deduction of Rs. 1 lakh claimed u/s. 80C of the Act. - Decided in favour of assessee.

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• 2018 (10) TMI 1402
  Recovery proceedings - attachment orders - garnishee order on the bank - use of petitioner's account for causing the recovery of the tax dues of DPS Commodities - Held that:- The situation as it stood on that date was that the petitioner had a balance in excess of Rs. 1 crore in the said account; that the department had already issued a garnishee order on the bank asking the bank to pay to the department any sum to the ceiling of Rs. 2 crores which the petitioner owed to DPS Commodities. If therefore, the bank had carried out such instructions, sum of Rs. 75 lacs had to be paid over from such account to the department which was a sum which the petitioner still owed to DPS Commodities when the impugned communication was issued by the department to the bank. By combination of bank not carrying out such instructions forthwith, the petitioner repaying sum of Rs. 75 lacs after such order was passed utilising some other bank account, this Court thereafter passing interim order dated 25.9.2018 allowing the petitioner to operate the bank account lifting the rigors of attachment and the petitioner making false declaration on oath stating that on 22.9.2018, the petitioner owed no sum to DPS Commodities, the situation has come about where such sum of Rs. 75 lacs which the department could have accessed from the petitioner's balance to recover part of the tax dues of DPS Commodities, was thwarted. If such amount had been paid by the petitioner to the incometax department, its dues of DPS Commodities to that extent would have been squared up. In any case, the petitioner cannot take a stand that he utilised another bank account which was unattached by the department. The stand flies on the face of the record particularly when the petitioner was fully aware about order of attachment and had made a specific wrong declaration on oath stating that he owed no money to DPS Commodities. The petitioner however submitted that this would amount to double payment of Rs. 75 lacs by the petitioner to DPS Commodities. This would be for the petitioner to sought out with the said entity. Under the circumstances, respondent no.2 bank shall release sum of Rs. 75 lacs in favour of respondent no.1 Tax Recovery Officer towards the dues of DPS Commodities and its proprietor Mahesh Gandhi. For the rest obviously, the department cannot chase the petitioner. Subject to payment of said sum, attachment order would be lifted.

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• 2018 (10) TMI 1401
  Accrual of income - method of account - construction project - although 100% advance had been received during the year, the sales was not recognized - CIT(A) while allowing the assessee’s appeal by deleting the addition made u/s 68 enhanced the assessee’s appeal by Rs. 1,27,07,336/- by invoking provisions of section 251(1)(a) - method of accounting followed by the Assessee is project completion method - Held that:- Neither any defect has been pointed out in the method of accounting being followed by the assessee nor any concrete finding has been given that correct profits cannot be computed following the method of accounting adopted by the assessee. The main thrust of the Ld. CIT (A) seems to be that the assessee is deferring the payment of taxes. But this inference of the Ld. CIT (A) cannot be accepted as the assessee has been consistently following one method of accounting which has been accepted by the Department in earlier assessment years. In the present case, there was therefore no good reason for the ITAT to have reversed the finding of the CIT (A). The only reason given in the impugned order of the ITAT is that 'risks and rewards' of ownership were transferred to the buyers who had paid the booking advance amounts and in some cases these rights were transferred to third parties. However, this does not in any manner affect the treatment of the said amounts in the books of the Assessee. As noted hereinbefore, the expenses of construction were not debited to the P & L account of the Assessee. It was shown as cost of construction or block of buildings. It is only as and when a conveyance deed was executed or possession delivered that the receipt was shown as income. The explanation added by way of Notes to the Accounts was not taken note of by the ITAT when it came to the conclusion that the percentage completion method should apply to the Assessee. The other aspect that appears to have escaped the attention of the ITAT is that the Assessee offered to tax in the subsequent FY the amounts received and therefore there was no actual loss to the revenue. In similar circumstances, the Supreme Court in CIT v. Excel Industries Limited [2013 (10) TMI 324 - SUPREME COURT] observed that the dispute if any raised at the instance of the Revenue would be at best academic. The stand of the Assessee in the present case also finds support in the decision of the Gujarat High Court in CIT-IV v. Shivalik Buildwell (P) Ltd. [2012 (10) TMI 1019 - GUJARAT HIGH COURT]. It was held that the Assessee in that case, who was a developer, was entitled to book the amount received as booking advance as income on transfer of the property. Till then the advance booking amounts could not be treated as his trading receipt. The High Court recognized that the Assessee in that case was entitled to apply the project completion method in terms of the applicable AS. Accordingly we set aside the order of the Ld. CIT (A) making the impugned enhancement and also direct the Assessing Officer that the income as declared by the assessee in its Return of Income be taken as the figure for the purpose of calculation of the tax liability. - Decided in favour of assessee.

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• 2018 (10) TMI 1400
  Addition u/s 68 made on account of allotment made of share by the assessee - assessee has submitted copy of the board resolution, ITR, audited financial statement, PAN, bank statement, confirmation, company master data, allotment letter and allotment return of share capital and further stated that source of source was also filed during the assessment proceedings - assessee did not get proper opportunity of producing the directors of the investors company before the assessing officer - Held that:- AR repeatedly stated that assessee did not get proper opportunities of producing the directors before the AO and therefore now case of the assessing officer is that non production of the directors of the investor companies have made all the evidence produced by the assessee redundant, he repeatedly offered to produce the directors of the investor companies. We are of the opinion that assessee has submitted enough evidences to prove their identity, creditworthiness and genuineness of the transactions. Further if assessee produces the directors of the investor companies before the Lord assessing officer and they are examined by Ld. assessing officer, it will conclusively decide the whole issue. Accordingly, on the request of both the parties, we set aside the first issue covering ground number one of the appeal back to the file of the Learned AO with a direction to the assessee to produce the directors of the investor companies for examination before the assessing officer. The AO is also directed to examine them on the basis of documents submitted by the assessee. Accordingly, ground number one of the appeal of assessee is allowed with above direction. Addition u/s 56(2)(viib) on protective basis - as the assessee has received share capital of Rs. 20 crores of the face value of Rs. 10 each at a premium of Rs. 1990 per share therefore, AO held that the provision of section 56(2)(viib) are attracted - Held that:- The assessee has claimed that its investment in coal mines in USA is based on certain proposals, due diligence report, coal lease agreement , agreement for transfer of lease rights, engineering service agreement, consulting agreement, approval from environment Ministry and approval of reserve Bank of India for making an overseas investment. Therefore the valuation report submitted by the assessee is required to be objectively evaluated based on these evidences. It is apparent that lower authorities have not given any credence to these details. It is further not possible to ascertain what happened in subsequent years to the business of the coal mine. It is neither found from the assessment orders or appellate orders or submission of the assessee about the cash flow generated by the coal mine business of the LLC. We set aside the whole issue of tax ability under section 56 (2)(viib) back to the file of the assessee for the reason that that original addition made by AO u/s 68 is also set aside to the file of the AO and further the lower authorities have failed to objectively evaluate the valuation report submitted by the assessee of a chartered accountant based on discounted cash flow method. The assessee is directed to show the details of the valuation made by the assessee on the basis of discounted cash flow methods along with the supporting evidences to substantiate the estimate of the cash flow for respective years. Based on the submission of the assessee, the learned assessing officer is directed to examine the same and decide the issue of tax ability under section 56(2)(viib) of the act after affording proper opportunity of hearing to the assessee. According to this, ground number two of the appeal of the assessee is allowed. Appeal filed by the assessee is allowed for statistical purposes.

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• 2018 (10) TMI 1399
  Rectification of mistake - additions u/s 69C - powers of the tribunal u/s 254(2) - disbelieve to the alleged business of gold bars conducted by the assessee - Held that:- Solitary transaction was conducted in the month of July 2005 of Rs. 18.50 lacs and the concern of the assessee stood closed. The assessee did not had any infrastructure and experience to deal in huge quantities of gold bars. The VAT registration also stood cancelled by Gujarat VAT authorities in short span of time. The assessee also could not evidence movement of gold bars with respect to its alleged business. The alleged sales of more than Rs. 55 crores were made in cash to undisclosed customers and cash got deposited in assessee’s bank account from undisclosed persons. The alleged sales per invoice were for more than Rs. 3.00 crores per invoice which were allegedly cash sales to undisclosed customers. AS referred to provisions of Section 106 and 114(g) of Indian Evidence Act,1872 to come to conclusion that the assessee is withholding evidences and preventing enquiry wherein presumption will be drawn against the assessee in these circumstances. The tribunal has inherent powers to pass such orders as it deemed fit within mandate of Section 254(1) of the 1961 Act and confirmation of additions u/s 69C read with its proviso was justified and was within powers of the tribunal keeping in view entire factual matrix of the case before it. The powers of the tribunal u/s 254(2) is limited and is restricted to correcting mistakes apparent from records and this powers do not extend to reviewing its own order. Thus, this contention of the assessee with respect to invocation of provisions of Section 69C by tribunal in this MA also stood rejected.Both the MA’s filed by the assessee stood dismissed

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• 2018 (10) TMI 1398
  Disallowance of deduction claimed u/s 43B - duties so paid include excise duty, custom duty on import/ purchase of inputs/components and also amount of duty paid in PLA account - AO disallowed claim on the ground that deduction under Section 43B of the Act is allowable only where the amount claimed as deduction on actual payment basis is charged to the P&L Account - whether he assessee is in the nature of advance payment of duty, liability in respect of which has not accrued/ crystallized ? - Held that:- ITAT under similar set of facts has decided an identical issue after discussing in detail and following the decision cited before it including the decision of special Bench of the ITAT in the case of DCIT vs. Glaxo Smith Klin Consumer Health Care Ltd. [2007 (7) TMI 334 - ITAT CHANDIGARH] holding that the excess amount of excise duty reflected in the account-current is nothing but actual payment of excise duty even though mentioned as advance payment and hence allowable as deduction under sec. 43B of the Act in the year of payment. The special bench has further clarified that the allowing of deduction on payment basis could not result in double deduction under any circumstance. We thus respectfully following the above decision set aside the matter to the file of the Assessing Officer to decide the issue afresh after affording opportunity of being heard to the assessee as per the decision cited above in the case of assessee itself for the assessment year 2006-07. Customs duty included in closing inventory - Held that:- It is clarified by the Assessee that the amount of Rs. 69,12,41,610/- represents customs duty included in closing stock and Rs. 50,28,051/- represents customs duty on tools imported by the Assessee which were made available by it to its contract manufacturers, also. described as vendors in the question of law framed on the same issue in subsequent AY 2001-02. In view of the decision in Berger Paints Limited v. CIT [2004 (2) TMI 4 - SUPREME COURT] question (ix) is answered in the affirmative i.e. in favour of the Assessee and against the Revenue. In this regard, the observations of the ITAT in para 41 of the impugned are reiterated, viz. that the AO should, while giving effect to the ITAT’s order, ensure that no double deduction is allowed. Therefore, he will ensure that the deduction allowed in this year under Section 43B of the Act is included in the income of the next year when such opening stock is disposed of. Nature of receipt - subsidy - revenue or capital - Held that:- Subsidy given to the assessee post accomplishment of the project or expansion there, without any obligation to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business, or to liquidate the cost incurred in creating the capital asset or its expansion, is only in the nature of the revenue receipt and is liable to be brought to tax. We, therefore, uphold the addition on this count. Disallowance of royalty paid - nature of expenditure - Held that:- The amount of royalty considered by the Assessing Officer as capital expenditure should be allowed as a revenue expenditure, and at the same time, depreciation allowed by the Assessing Officer on this amount should be taken back. Disallowance of expenditure incurred on Corporate Social Responsibility - Held that:- The words, “for the purpose of business” should not be limited to the meaning of “earning profit alone”. It is also important to note that the purpose has to be seen from the point of view of the businessman and should not be seen with reference to narrow objective of earning profits immediately. Certain expenditure may not reap profits immediately, but may be advantageous in the long run, by creating goodwill and brand image. These submissions of the Ld. AR are supported by the Income Tax statute. But at the same time, it can be seen that Explanation 2 has been inserted in section 37 of the Act by the Finance (No.2) Act, 2014 w.e.f. 1.04.2015 to provide that CSR expenses referred in section 135 of the Companies Act, 2013 shall not be deemed to be incurred for the purpose of business. The aforesaid Explanation inserted w.e.f. 1.04.2015. Therefore, in the present assessment year the said explanation will not be applicable. Hence, the expenditure has to be allowed because ultimately the assessee was publicizing its product at the prominent places by maintaining them such as parks and this has direct impact on the sales promotions of the assessee company. Disallowance of club expenditure - Held that:- The aforesaid expenditure has been incurred for business purposes on the grounds of commercial expediency and there is no element of any personal benefit being granted either to the employee or director. The Tax Auditors have amply clarified this position vide clause 17(b) of the Tax Audit Report. The aforesaid expenditure is, thus, allowable as deduction. See COMMISSIONER OF INCOME-TAX VERSUS SAMTEL COLOR LIMITED [2009 (1) TMI 26 - DELHI HIGH COURT]. Adjustment on account of payment of royalty for use of brand name - Held that:- There is a direct nexus between the revenue of the taxpayer and the payment of royalty. Therefore, the Revenue cannot dispute the benefit derived by the taxpayer from payment of such royalty. Not allowing credit of TDS Certificates - Held that:- Assessee has submitted the TDS certificates which has to be considered by the Assessing Officer. Therefore, we restore this issue to the file of the Assessing Officer and direct the Assessing Officer to verify the additional TDS certificates produced by the Assessee and thereafter allow the credit of the same. Needless to say, the assessee be given the opportunity of the hearing by following the principles of the natural justice. Hence, Ground No. 18 is partly allowed for statistical purpose. error in computation of interest u/s 234B - Held that:- The Assessing Officer is, directed to recompute interest under section 234B of the Act, as aforesaid. As per section 234C of the Act, interest is required to be calculated on the basis of returned income and not on the basis of assessed income. The Assessing Officer erred on facts and in charging interest u/s 234C on assessed Income instead of returned Income as per the provisions of Act. The aforesaid issue is now covered in favour of the assessee by the Delhi Bench of the Tribunal in assessee’s own case for AY 2007-08 and 2008-09. Therefore, we remand back this issue to the file of the Assessing Officer and direct the Assessing Officer to recomputed interest under section 234C of the Act, as aforesaid - Appeal of assessee is partly allowed for statistical purpose.

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• 2018 (10) TMI 1397
  Computation of short term capital gains and its adjustment against brought forward depreciation loss and / or business loss - Set off of current year’s business loss and brought forward depreciation loss and brought forward business loss against current year’s short term capital gain arising on sale of business asset i.e. party hall - Held that:- The said short term capital gain arises on sale of business assets on which the assessee was claiming depreciation and in view of section 50 the gain was held to be deemed short term capital gain, though the assessee was holding the asset for long time and had fulfilled the conditions of long term capital gain. The learned Authorized Representative for the assessee also placed reliance on the decision of Tribunal in Digital Electronics Ltd. Vs. Addl.CIT (2010 (10) TMI 722 - ITAT, MUMBAI) and pointed out that the issue was decided in favour of assessee, which was followed in M/s. Hickson & Dadajee Pvt. Ltd. Vs. ACIT [2014 (2) TMI 1293 - ITAT MUMBAI] also approved by the Hon’ble Bombay High Court in CIT Vs. M/s. Hickson & Dadajee Pvt. Ltd.[2017 (3) TMI 274 - BOMBAY HIGH COURT]. Since the issue has been settled by the Hon’ble Bombay High Court, we find no merit in the order of CIT(A) in relying on another decision of Mumbai Bench of Tribunal and holding the issue to be against the assessee. Unabsorbed depreciation which has been carried forward from preceding year is to be set off against the income shown by assessee under the head ‘short term capital gain’ under section 50 of the Act. Set off of adjustment on account of brought forward business loss which was not claimed in the return of income - Held that:- Referring to ratio laid down in CIT Vs. Pruthvi Brokers & Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] wherein it has been held that any claim can be made before appellate authorities, which need to be adjudicated while determining income of assessee. We find merit in the plea of assessee in this regard and hold that business loss carried forward from earlier year of Rs. 8,65,154/- needs to be adjusted against income assessed under the head ‘short term capital gain’ under section 50 of the Act. Similarly, current year business loss is to be set off against the said income. Accordingly, we allow the claim of assessee.

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• 2018 (10) TMI 1396
  Assessment framed u/s 147 - penny stock - assessee has made transactions through M/s. AINPL which was not a registered broker - Treatment of Long Term Capital Gains as undisclosed income - Held that:- If the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. Identical facts and circumstances in the case of Shri Pratik Suryakant Shah vs ITO [2017 (2) TMI 463 - ITAT AHMEDABAD] the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. AO is directed to treat the surplus as Long Term Capital Gains and allow the exemption as claimed by the assessee. The re-assessment proceedings initiated u/s 147 of the Act is not sustainable. Accordingly, we quash the order framed u/s 147 of the Act. Decided in favour of assessee.

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• 2018 (10) TMI 1395
  TPA - determining the Arm’s Length Price (ALP) u/s. 92CA(3) in respect of international transactions entered by the assessee with its AE - foreign exchange gain earned by the assessee is generated from the services rendered to AE - Held that:- We find that the AO was not justified in not following the directions given by the ld. DRP. We, therefore, remit this matter back to the AO/TPO to consider the foreign exchange gain as operating income of the assessee while working out the operating profit margin of the assessee, as directed by the ld. DRP. We further direct that the AO/TPO should calculate operating profit margin as per Rule 10B(1)(e) of the Income Tax Rules, 1963, if the assessee satisfies the conditions as per rules. Needless to say, the assessee shall be given reasonable opportunity of being heard. Accordingly, these grounds are allowed for statistical purposes. Rejection of comparable companies on the basis of additional filter of export sales less than 75% of the total income - Held that:- No justification to discard the conclusion reached by the authorities below while considering this filter as appropriate filter for comparability analysis in the facts of the present case. The ld. AR of the assessee failed to rebut the finding of the ld. DRP that more than 86% of the operating revenue is earned by assessee out of export sales. Therefore, considering the quantum of export gross revenue of the assessee, the authorities below have rightly applied this filter as an appropriate filter for comparability analysis. Accordingly, this ground of assessee has no merit and is liable to fail. Companies functionally dissimilar with that of assessee as engaged in BPO/KPO services need to be deselected from final list. The company is not passing on the filter of related party transaction in excess of 25%, applied by the TPO to be rejected.- Any extraordinary events like amalgamation occurred during the year, the financial result is affected

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• 2018 (10) TMI 1394
  Deduction u/s.80P(2)(c)(ii) - interest from nationalized bank - Held that:- We have perused the relevant materials available on record. It is a settled principle of law that the assessee is not entitled to deduction of the interest income accrued from the fixed deposit lying with the nationalized bank out of his surplus fund. Such was not required for business purposes. The said ratio has been upheld by the Jurisdictional High Court in the case of State Bank of India vs. CIT (2016 (7) TMI 516 - GUJARAT HIGH COURT). The assessee disputed the quantum of addition of Rs. 14,62,750/- as interest income instead of Rs. 9,64,984/-. Since the assessee in appeal before us disputed the quantum of addition, we find it fit to send the matter back to the file of AO to re-compute the disallowance of the interest income on the fixed deposit of the assessee lying with the nationalized bank. However, we further direct the AO to exclude and/or deduct the amount of interest expenditure incurred by the assessee on such deposits with the nationalized bank. The assessee be given an opportunity of being heard by AO and also to be allowed to rely upon the evidences in support of his case to be considered by the Ld. Assessing Officer. Appeal of the assessee is partly allowed for statistical purposes.

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• 2018 (10) TMI 1393
  Addition of excess premium received by the assessee on issue of preference shares u/s. 68 - Held that:- We are of the view that the “nature” of the transaction has been explained by the assessee as Share Premium, which could not be contradicted by the revenue with any other material. There is no dispute with regard to the “Source”. Hence, in effect, the conditions prescribed in sec. 68 of the Act has been fulfilled by the assessee. With regard to the basis for excess premium, we have noticed that the AO has considered the share premium amount as excess in nature, only for the reason that it is in excess of Book value of shares. We have noticed that the “book value” of shares would value only “Equity shares” and not “Preference shares”. Hence, the very basis on which the AO determined the excess premium” should, in our view, is not sustainable. The assessee has shown that the transaction is a commercial transaction involving receipt of money @ Rs. 500/- per share and repayment of the same @ Rs. 750/- per share after a period of five years. Yet another point, which supports the case of the assessee is that the assessee had received funds in the earlier years and not during the year under consideration. During the year under consideration, the assessee has transferred the funds to “preference shares account” and “shares premium” account by passing journal entries. There should not be any doubt that the provisions of sec.68 shall apply only in the year in which the cash credit was found. There is no justification in assessing the alleged excess premium as income of the assessee. Accordingly we are of the view that the CIT(A) was justified in deleting the impugned addition and accordingly we uphold his decision. - Decided against revenue.

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• 2018 (10) TMI 1392
  Exemption/deduction u/s 10A - sale proceeds of convertible foreign exchange as received or brought into India after six months from the end of the financial year but within the extended period allowed by the competent authority namely RBI in terms of Master Circular of general nature - Held that:- Sale proceeds of convertible foreign exchange have been received or brought into India after six months from the end of the financial year but within the extended period allowed by the competent authority namely RBI in terms of Master Circular of general nature. A perusal of the Master Circular clearly shows that the competent authority has extended the period of obligation cast upon the exporters to receive and bring convertible foreign exchange in India within twelve months from the date of export. Thus, deduction under s.10A of the Act cannot be denied where the extended parameters for realization of export proceeds as set out by the competent authority has been duly met. Therefore, the claim of the assessee towards exemption/deduction under s.10A of the Act requires to be upheld on first principles. However, it will be open to the AO to verify whether the export proceeds have been received within twelve months from the date of export in tune with Master Circular. The issue is therefore resolved in favour of the assessee on principles. Appeal of the assessee is allowed for statistical purposes.

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• 2018 (10) TMI 1391
  Addition u/s 56(2)(vii)(c) - receiving shares and securities and the consideration for the same is less than the aggregate Fair Market Value (FMV) of these shares and securities - determination of FMV as per Rule 11UA(1)(c) r.w. Rule 11U - drawing up a balance sheet as on valuation date or previous audited balance sheet is to be taken as the base. - CIT-A held that AO has done the next best thing by adopting a pro rata average of valuation of shares of GEPL as on 31.03.2010 and 31.03.2011 and upheld the order of the AO in taxing the differential amount of Rs. 1.05/- per share totaling to Rs. 31,50,000/- u/s 56(2)(vii)(c). Held that:- CIT(A) has rightly observed that “there was nothing preventing the appellant from drawing up the balance sheet of GEPL as on that date for the limited purpose”. As GEPL is a closely held company, we concur with the above finding of the Ld. CIT(A). The meaning of “balance sheet” has been given in Rule 11U(b) of the Rules and the same has been substituted by the IT (15th Amendment) Rules, 2012, w.e.f. 29.11.2012 AO has rightly arrived at the FMV per share as on 22.06.2010 at Rs. 31.05/- as worked out by the assessee. Also he has rightly followed Rule 11U as applicable for the FY 2010-11 relevant to the AY 2011-12. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose. - Decided against assessee.

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• 2018 (10) TMI 1390
  Addition u/s 68 - Unexplained cash credit - failure to establish the source with documentary evidences - CIT(A) deleted the addition - Held that:- The assessee has not established the fact that he has given the loans to various persons, which were recovered in cash and deposited the same. The assessee also did not admit any interest on loans as observed from the orders of lower authorities. Since the assessee failed to establish the source with documentary evidences and had accepted the addition before the A.O. and has taken U-turn and the Ld. CIT(A) accepted the source of cash deposits without any supporting documents, the issue require detailed enquiry with regard to the source of cash deposits. The assessee required to submit the evidences having given the loans to the various persons and the same was recovered in cash. He cannot get away simply by saying that the cash deposit represent recovery of loans. It is obligation on the part of the assessee to furnish the details and cooperate with the department. Therefore, we remit the entire matter back to the file of the A.O. to conduct detailed enquiries and to redo the assessment de-novo. - Decided in favour of revenue for statistical purposes.

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• 2018 (10) TMI 1386
  Additions towards EPF and ESI u/s 36(1)(va) - employee's contribution - sum paid towards Employees Provident Fund and ESI beyond the due date, but prior to filing of return - “employees” and “employers” cannot be brought under the same scope and ambit of Section 43B to claim deduction - Held that:- The scope of Section 43B and Section 36(1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether the assessee is entitled to deduction in respect of the sum belatedly paid towards such contribution, especially when such sum is, admittedly, a sum received by the assessee/employer from his employee. Therefore, for considering such question, application of Section 36(1)(va) r.w.s. 2(24)(x) alone is the proper course and any other interpretation would only defeat the object and scope of both the provisions viz., 43B and 36(1)(va). Thus we are in full agreement with the decisions in Commissioner of Income Tax-II vs Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] and Commissioner of Income Tax vs Merchem Ltd [2015 (9) TMI 560 - KERALA HIGH COURT]. Consequently, with great respect, in agreement with the other decisions rendered by the High Courts of Karnataka, Punjab and Haryana and Allahabad, which in my view, did not consider the distinction of the scope and ambit of Section 36(1)(va) and Section 43B. Accordingly, find no error apparent on the face of the order passed by the Assessing Authority, based on the admitted facts. Accordingly, the writ petition fails and the same is dismissed.

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• 2018 (10) TMI 1385
  Nature of expenditure - fertility improvement program amongst milk animals - revenue or capital - Held that:- Unfortunately, neither Commissioner of Income Tax (Appeals) nor the Tribunal addressed the question of expenditure being capital in nature and focused entire attention on the allowability of the expenditure as business expenditure. Even the Assessing Officer has not cited detailed reasons as to why in his opinion the expenditure was capital in nature. We may note that the activities carried on by GCMMF under the said programme were all aimed at fertility improvement amongst milk animals. As part of the programme, the GCMMF would address the typical reasons for infertility such as improper practice in calf rearing, low body weight of animals, lack of nutrition/mineral, poor health condition, lack of awareness amongst farmers about improved breeding practices etc. The expenditure was general in nature and aimed at improving the practices for better fertility amongst milk animals by addressing the issues which caused infertility. The expenditure therefore was for the purpose of its business and would not be co-relatable to any tangible returns which can be expected out of such expenditure. There is therefore no reason to believe that such expenditure was revenue in nature - Decided against revenue.

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• 2018 (10) TMI 1384
  Grant of approval u/s 80G (5)(vi) - Procedure for registration - Tribunal took into consideration the fact that the assessee-society has already been granted registration u/s 12AA of the Act and its activities have been found to be charitable thus allowed approval u/s 80G (5)(vi) - Held that:- It is pertinent to note that while granting registration under Section 12AA of the Act, Commissioner of Income Tax, Faridabad considered the fact that the assessee-society was engaged in providing training of art and painting to under privileged children. It was further held that raising of funds from sale of art work was only incidental to main activity of the appellant. The Tribunal noted the fact that CIT(E) had not raised any question regarding the genuineness of the activity of the assessee-society. No doubt registration under Section 12AA of the Act by itself would not entitle the assessee for approval under Section 80G of the Act but in the absence of any dispute regarding the aim and objects of the assessee Society, denial of approval under Section 80G of the Act cannot be sustained. Appellant has neither been able to show that the view taken by the Tribunal is erroneous nor produce any material on record to show that the view taken by the Tribunal is legally unsustainable. - decided against revenue

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• 2018 (10) TMI 1383
  Revision u/s 263 - Held that:- For the assessment year 2002-03 the assessee had gone in appeal before the Tribunal against the order of the CIT passed under Section 263 of the Income Tax Act by which the CIT had held that the regular assessment order dated 31.12.2007 passed by the ITO was erroneous and prejudicial to the interest of the revenue. However, upon perusal of the record as well as the orders passed by the authorities concerned reflect that in fact the AO had given notice to the assessee once again and had examined the entire benami transactions. Nothing had been left to imagination or to the realm of speculation. The verification had duly been made by the AO and then only the addition had been made. The CIT in fact sought to reach to the exercise without leading to any different results. The Tribunal has, therefore, made a categorical finding of fact in paragraph no.6 of the judgement that it could not be said that the AO had passed any order, which was either erroneous or prejudicial to the interest of revenue in order to revoke the provisions of Section 263 of the Act. - Decided in favour of the assessee

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• 2018 (10) TMI 1382
  Addition u/s 69A - source of cash deposits - entries made in the cash flow charts were not substantiated by any evidence - Held that:- The contention raised by learned counsel for the appellant that the authorities have not considered the figure of purchase and closing stock as per the VAT return deserves rejection. The assessee filed an income tax return showing the gross receipts of Rs. 9 lakhs, on the other hand, there were cash deposits made of more than Rs. 37 lakhs in the savings bank account. The assessee tried to explain the source of cash deposits by taking a stand that the actual sales were of Rs. 29 lakhs but were wrongly mentioned as Rs. 9 lakhs in the income tax return. The details of the purchases and copy of VAT return were withheld by the assessee on the excuse that same were not available. The AO got the copy of the VAT return from the Sales Tax Office in which the sales were mentioned amounting to Rs. 9,65,170/-. Before the AO the stand taken was that the appellant was not maintaining books of account, on the other hand with the VAT return, the appellant had filed Trading and Profit & Loss Account and the balance sheet. The appellant had withheld the material information available with him. All the three authorities below have recorded consistent findings of facts. The appellant has not been able to dispute the findings of facts much less to prove perversity. - Decided against assessee.

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• 2018 (10) TMI 1361
  Transfer pricing adjustment - Comparable selection - functinal similarity - Held that:- The assessee is providing software development services to its AEs thus concerns as not functionally comparables need to be excluded from the final set of comparables. Not allowing of working capital adjustment - Held that:- AR for the assessee fairly submitted that in case the two concerns i.e. Bodhtree Consulting Ltd. and Kals Information Systems Ltd. are excluded from the final set of comparables and working capital adjustment is allowed to the assessee, then the transactions with its AEs would be at arm’s length price and no other issue needs to be adjudicated. Accordingly, we do not address the non-inclusion/exclusion of PSI Data Systems Ltd. in the final list of concerns.

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• Customs

• 2018 (10) TMI 1380
  Withdrawal of earlier affidavit - The deponent of the above affidavit earlier filed reply affidavit dated 08.07.2015 on behalf of respondent Nos.2 and 3 when she was working as Assistant Commissioner of Customs, ICD Khodiyar, District Gandhinagar - we do not propose to take any further action in this regard. Learned Senior Standing counsel also produces on record communication dated 23.10.2018 addressed by Deputy Commissioner, Customs, ICD Khodiyar, Ahmedabad stating to withdraw its earlier affidavit in reply filed in this petition. Copy of communication dated 23.10.2018 is ordered to be taken on record. The respective respondents are at liberty to file appropriate affidavit in reply.

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• 2018 (10) TMI 1379
  Seizure of goods - seeking release of bank guarantee furnished for release of goods and refund based on subsequent circular - Held that:- For one or the other reasons, the matter is not heard effectively and subsequently, Circular No.22/2009-Cus dated 19.08.2009 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, Directorate General of Export Promotion, to all Chief Commissioners of Customs/Central Excise and all Commissioners of Customs/Central Excise, with regard to subject viz. use of duty free raw material for capital goods manufactured within EOU for captive use. Mr.Parth Divyeshwar, learned advocate states that on the next date of hearing, he will argue the case on merits, if any.

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• 2018 (10) TMI 1378
  Pre-deposit - dismissal of appeal on the question of pre-deposit - matter pending before Supreme Court - principles of natural justice - Held that:- The Tribunal was conscious that final disposal of all the appeals rest on the judgment of the Hon'ble Apex Court on the classification issue of ‘Steam Coal' and ‘Bituminous Coal'. Thus, the present petition shall also be governed by the formula provided by the Tribunal in the above noted para 7 of the order and upon judgment of the Apex Court is available, the petitioner would be at liberty to request for revival of their appeals before the Tribunal. The impugned orders passed by the Tribunal dismissing the appeals of the petitioner on the question of predeposit would not survive - decided in favor of petitioner.

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• Corporate Laws

• 2018 (10) TMI 1381
  Conversion of the status of the company - Seeking approval to the conversion by altering the Articles of Association - Special Resolution passed at the Extraordinary General Meeting (EOGM) for the change of status of the Company from “Public Limited Company” to “Private Limited Company” - Held that:- Since all the requisite statutory compliance has been fulfilled, the conversion of the status of the company from “Public Limited” to “Private Limited” as per Special Resolution passed at the EOGM held on 27.01.2017 is hereby approved in the interest of the company and such change of status of the company shall not cause any prejudice either to the members or the creditors of the petitioner company. The Petitioner shall, however, remain bound to comply with the statutory requirements in accordance with law. The Petitioner is hereby directed to file with the Registrar of Companies, West Bengal, a certified copy of the order of this Tribunal in the prescribed e-form together with a printed copy of the altered Articles of Association accompanied by requisite fee, within a period of 15 days in terms of the provision of sub-section (2) of Section 14 of the Companies Act, 2013, read with Rule 161, of NCLT Rules, 2016.

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• Service Tax

• 2018 (10) TMI 1376
  CENVAT Credit - ineligible availment of CENVAT Credit - Rule 6 (3B) of the CENVAT Credit Rules, 2004 - no suppression of facts - extended period of limitation - invocation of Section 73(1) of the Act of 1994, read with Rule 14 of the CENVAT Credit Rules, 2004. Held that:- The allegation of suppression contained in the impugned show- cause notice against the petitioners, for the purpose of invoking the extended period of limitation, requires consideration. It is a fact which constitutes the assumption of jurisdiction by the respondents. Notwithstanding the existence of statutory alternative remedy, a writ petition directed against a show cause notice is maintainable, if it can be established, after taking the statements made in the impugned show-cause notice to be true and correct, that the same do not constitute requisite facts to assume jurisdiction by the authority issuing the impugned notice. In the facts of the present case, the issue of jurisdiction is a pure question of law. The facts stated in the impugned show-cause notice have to be assumed as correct for the purpose of deciding the issue of jurisdiction. The issue of limitation has to be adjudicated on the same principles, so far as this case is considered. The period of time for which the impugned show-cause notice has been issued overlaps with the period of time for which either a proceeding is pending or stands concluded. The department cannot be allowed to revisit the same issue under the garb of exercise of powers under Section 73 of the Act of 1994. The petitioners are not guilty of omitting or failing to disclose wholly or truly all materials required for verification of the assessment under Section 71. Facts constituting the assumption of jurisdiction under Section 73 of the Act of 1994 are lacking. The impugned show-cause notice is, therefore, without jurisdiction. Petition allowed.

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• 2018 (10) TMI 1375
  Refund of service tax paid subject to the condition that no credit has been availed - benefit of Notification No. 17/2011-ST dated 1.3.2011 as also a subsequent identical Notification No.40/2012-ST dated 20.6.2012 - Revenue entertained a view that they have availed the cenvat credit of service tax so paid by them and as such, the condition of the notification stands violated by them - what exactly is the meaning of the expression “taken” appearing in sub-clause (g) of Explanation (2) appended to the notification in question? Held that:- The notification debars taking of cenvat credit of service tax paid on the specified services used for the operations in SEZ unit. A mere maintenance of an account showing the total quantum of service tax paid by the assessee cannot be held to be availment of cenvat credit. The mere entries in such records which are not even prescribed statutory records, cannot lead to the inevitable conclusion that the assessee has taken the credit. Similarly, the reflection of such account in the ST-3 returns so as to let the department know about the total service tax quantum earned by the assessee will also not amount to the fact that as if the assessee has taken and utilized the credit. Not only that the appellant in their subsequent ST-3 returns has again shown the opening balance of such account maintained by them as zero and has reflected the total service tax earned by them in that period. The appreciation of all the above facts leads to only one inevitable conclusion that no cenvat credit was availed by the assessee and as such, there was no violation of the condition of the notification. The lower authorities in their impugned orders have nowhere disputed the fact that such amount of service tax reflected by them in their ST-3 returns was utilized by them. The condition of the notification, which grants refund of service tax paid on various services utilized for authorized operations on SEZ, is that no cenvat credit would be availed by the assessee. Such availment cannot be held to be there unless such service tax accumulated in the accounts of the assessee stands utilized by them. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 1374
  Penalty u/s 76 and 78 - service tax alongwith interest paid on being pointed out - invocation of Section 73 (1) of FA - Held that:- The appellants were paying service tax regularly upto August 2010 except for few days delay; that from September 2010 to December 2010, the delay ranges from 30 to 40 days for each month; that however they paid appropriate amount of interest for such delayed payment - even in respect of December 2010 covered in the SCN, the due date for payment of SCN was on 06.01.2011, the audit was conducted on 01.02.2011 and the assessee paid entire amount of service tax of Rs. 1,05,84,653/- on 07.02.2011 after a delay of 32 days. There appears to no malafide intention on the part of assessee to evade payment of service tax and that ST-3 returns had also been filed without delay - ingredients of proviso to Section 73 (1) are not present in this case and in consequence there is no scope for imposition of penalty under Section 78 ibid. Penalty u/s 76 - Held that:- The reason of financial crunch given by the appellant should be given some credence, particularly in view of the mitigating factor that it is not a case of absolute non-discharge of tax liability but delayed payment of tax, that too with interest paid thereon - There is reasonable cause for failure to discharge the tax liability and hence we hold that imposition of penalty under Section 76 ibid also is not justified and requires to be set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 1373
  Cash refund - export of services or not - Rule 5 of CENVAT Credit Rules, 2004 - rejection on the ground that the services since performed in India, therefore, do not fall under the scope of export of service - Held that:- In their own case Fertin Pharma Research Development Pvt. Ltd. [2017 (7) TMI 1238 - CESTAT MUMBAI], this Tribunal has already taken a view that the services rendered by the appellant are in the nature of export service and hence eligible to cash refund of accumulated CENVAT Credit. There are no merit in the contention of the learned AR for the revenue that the ratio laid down by the Hon ble Bombay High Court in M/s SGS India Ltd. s case [2014 (5) TMI 105 - BOMBAY HIGH COURT] cannot be made applicable to the facts of the present case on the ground that in the said case, the Place of Provision of Service Rules,2012 was not considered - This Tribunal while interpreting the provisions of new Rules, that is, Place of Provision of Service Rules, 2012 followed the ratio laid down in the said case in reiterating the basic principle of levy of service tax and observed that it is a consumption-based levy, accordingly, the technical and consultancy service, commences from the stage of undertaking the test on the goods procured and the service is completed on delivery of the test report/certificate to the overseas client - The appellants are eligible to cash refund of the accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004. The matters are remanded to the adjudicating authority to calculate the admissibility of refund amount except the credit availed on input services viz. Building maintenance charges and rent-a-cab service - Appeal allowed by way of remand.

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• Central Excise

• 2018 (10) TMI 1372
  SEZ Unit - sub-contract - benefit of exemption from Central Excise to the sub-contractor - case of petitioner is that merely because the manufacturer s dispatch to the SEZ is linked through a chain of which a sub-contractor is a party, the benefit of exemption from Central Excise should not be denied to the contractor. Held that:- From reading of the Statement of Objects and Reasons of the Special Economic Zones Act, 2005, it is evident that one of the prime objectives of creation of such zones was to make available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism. For such implementation, Units were to be set up in such zones. The term Unit as defined under Section 2(zc) of the Act would mean a Unit set up by an entrepreneur in such Special Economic Zone. From the facts on hand, it is evident that Torrent Energy Limited was the SEZ Unit and the identity entitled to exemption. Reading Section 26 with Rule 27 of the Rules suggests that, when raw materials are procured for such a unit, such exemptions shall be allowed to a Unit and such benefit shall be available to contractors and for the purposes of such exemption a joint document is to be filed. This Rule i.e. Rule 27 falls under the Chapter prescribing procedure for establishment of a Unit. The privity of contract for claiming the benefit of exemption is strictly between Torrent Energy Limited, the Unit and available contractor, the petitioner. If respondent No.4, Simplex has procured such raw material and paid excise and raised a claim for reimbursement, will not clothe such an entity to claim exemption, under the guise of it supplying goods to a Unit, through the petitioner. Merely because Siemens, as a Contractor has been saddled with a liability to reimburse the excise duty to Simplex Limited, respondent No.4, in itself, will not make the petitioner to avail the benefit of exemption, de-hors the mandate of Rule 27 read with Rule 30. In fact, the benefit of the Act is to a Unit who in turn by deeming fiction passes it on to a Contractor who has produced goods and services for manufacture etc., i.e. raw materials. It cannot, through the cloak of a sub-Contractor Simplex Ltd., respondent No.4, approach this Court, in a petition to seek exemption, which is not otherwise available to Simplex Industries respondent No.4. What cannot be done directly cannot certainly be done indirectly - No petition would therefore be maintainable at the instance of the petitioner Siemens Ltd. The petition, therefore, is accordingly dismissed. The petitioner as a Contractor is not entitled to the benefit of exemption of Central Excise - petition dismissed.

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• 2018 (10) TMI 1371
  Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the appellant did not have sufficient unutilised credit balance during each of the months for which the demand is raised in the face of the Chartered Accountant's certificate on record? - Held that:- The impugned order of the Tribunal has disregarded the Chartered Accountant's certificate and without giving any reasons came to the conclusion that the appellant did not have excess unutilised credit available during the month for which demand was issued. Thus, this makes the order bad as being an order without reasons - the appeal is restored to the file of the Tribunal. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that interest is payable to the extent of credit taken even when the unutilised credit available during the entire period of demand till reversed was in excess of credit taken? - Held that:- The answer to the question would only arise, if factually the Tribunal on remand comes to the view that excess unutilised cenvat credit is available. The appeal is restored to the Tribunal for fresh consideration after considering the evidence already on record, including Chartered Accountant's certificate.

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• 2018 (10) TMI 1370
  Monetary amount involved in the appeal - permission to withdraw the Motion - Held that:- The tax effect in the accompanying Appeal is less than Rs. 50.00 Lakh. Therefore, she has been instructed by Shri. Bhupendra Singh, Assistant Commissioner of CGST, ST & Central Excise, Raigad Commissionerate to withdraw the Appeal - Appeal is restored, it would be ultimately withdrawn.

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• 2018 (10) TMI 1369
  Invocation of extended period of limitation - Circular 1063/2/2018 – CX dated 16.02.2018 - Held that:- Instant three appeals are taken up for final disposal at the admission stage. Same are allowed

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• 2018 (10) TMI 1368
  100% EOU / STP - CENVAT Credit - inputs removed as such - Rule 3 (5) of Cenvat Credit Rules (CCR) 2004 - Department took the view that an user industry in STP / 100% EOU could bring excisable goods without payment of duty under CT-3 certificates only from the factory of manufacturer of the goods and such manufacturer should have followed procedures contained in Central Excise Rules 2002 - N/N. 22/2003-CE dt. 31.03.2003. Held that:- Larger Bench in Lakshmi Automatic Loom Works Ltd. [2008 (10) TMI 57 - CESTAT CHENNAI] had held that condition of direct procurement from factory of DTA manufacturer to EOU / EHTP units etc. is not merely procedural, that inputs cleared as such by such DTA assessee to 100% EOU cannot be deemed to have been manufactured by them, hence such assessee was not entitled to remove the inputs without reversal of credit or payment of equivalent amount of duty - the said decision is overturned by Hon’ble High Court of Karnataka in CCE Bangalore Vs Solectron Centum Electronics Ltd. [2014 (10) TMI 596 - KARNATAKA HIGH COURT], where it was held that credit could not be denied on the ground that the EHTP unit concern was not procuring the excisable goods directly from the factory of manufacturer or warehouse. The provisions and conditionalities of Rule 3 (5) ibid will apply to both ‘inputs’ and ‘capital goods’, unless otherwise qualified in the said sub-rule. The Ld. Advocate is correct in his assertion that the ratio laid down by the Tribunal Larger Bench in the case of Lakshmi Automatic Loom Works Ltd. Vs CCE Trichy has surely been overturned and set aside by the Hon’ble High Court of Karnataka in judgment - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 1367
  CENVAT Credit - time limit of invoices raised - the invoices, on the basis of which the credit was availed, was older than six months - N/N. 21/2014-CE(NT) dated 11.07.2014 made effective w.e.f. 01.09.2014. CENVAT Credit - capital goods - availment of credit of 50% of the balanced credit required to be availed in the subsequent financial year - Held that:- Even though there is no such amendment in Rule 4 for availing the Cenvat credit of duty paid on the capital goods within a period of six months, the same stands denied by Commissioner (Appeals) even after observing that there is no such requirement of law - there is no justification for denial of credit - credit allowed. Whether the demand is barred by limitation? - Held that:- The entire credit was availed by the appellant by reflecting the same in their Cenvat credit records. As such, there cannot be held to be any suppression or misstatement on their part with a malafide intention so as to invoke the longer period of limitation - the demand having been raised beyond the normal period of limitation is barred. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 1366
  Irregular availment of CENVAT Credit - Rule 4(1) of the Cenvat Credit Rules - The denial is basically on the ground that Notification No. 21/2014-CE dated 11.07.2014 amended Rule 4 by inserting a proviso after the second proviso in sub rule (7), which prescribed time limit for availing credit - Held that:- It is an admitted position of law that prior to 01.09.2014 there was no time limit prescribed to avail cenvat credit - It can be safely assumed that the amendment would apply to invoices raised on or after the said date of amendment. In the light of the later amendment vide Notification No. 06/2015, the period of six months has been extended to one year and if the Notification 21/2014 (supra) were to operate retrospectively, then the same effect would have been provided to the Notification No. 06/2015 as well. The Revenue authorities have erred in denying the benefit of cenvat credit on inputs and input services - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 1365
  Valuation - inclusion of bought out items cleared along with sizing machine in assessable value - exemption on Warping head stock, a part of the Warping Machine denied - benefit of cum duty. Held that:- Reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, DELHI VERSUS M/S. FRICK INDIA LTD. & ANOTHER [2007 (9) TMI 6 - SUPREME COURT OF INDIA], where Hon’ble Apex Court directed inclusion of the value of bought out items for the purpose of assessment. Hon’ble Apex Court merely remanded the matter for re-determination of value from the point of value addition and possibility of invocation of Section 14A of Central Excise Act, 1944 which deals with special audits - in the present case, the decision of Hon’ble Apex Court in case of Frick India Ltd. does not help the case of Revenue. Moreover the excise duty is a tax on manufacture of goods. Mere purchase and supply of bought out goods with excisable cannot make them liable to excise. There could have been a possibility of demanding tax on the full machine manufactured at buyers premises, however, the present proceedings cannot succeed on that also on grounds of lack of jurisdiction. Appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2018 (10) TMI 1364
  Principles of natural justice - Jurisdiction - Revision of assessment order - Interstate sale under the CST Act or not - sale of motor vehicles to the purchase outside state - exemption under section 6(2)(b) of the Central Sales Tax Act - Assessing Officer found that the disputed sale falls under section 3(a) of the Central Sales Tax Act and consequently, such sale is not exempted under section 6(2) of the Central Sales Tax Act - Maintainability of petition - availability of alternative remedy. Jurisdiction - Held that:- While the petitioner claims the disputed sale as the one falling under Section 3(b), the Revenue claims the same as the one under section 3(a). Needless to say that whether the disputed sale would fall under section 3(a) or section 3(b), is purely a question of fact which needs to be considered and decided, by appreciating factual aspects of the matter and by considering the relevant documents in support of such sale - the nature of the disputed sale has to be ascertained and determined going by the manner in which it had taken place. It is evident that the nature and manner, in which, the sale was effected by the petitioner to the purchaser at the other State are certainly, crucial factors to be considered and decided as to whether the turn over has escaped assessment. Such scope of consideration, undoubtedly, is not outside the jurisdiction of the respondent, merely because the marketing Companies have got the benefit of exemption under section 6(2)(b) of the Central Sales Tax Act at the hands of their Assessing Officer at Chittoor, Andhra Pradesh. When admittedly the goods have moved from the territorial jurisdiction of the respondent, he is certainly, vested with jurisdiction under section 27 to reopen the assessment for deciding such issue, when he finds sufficient materials to do so. Power of enhancement of turn over by 25% by treating the same as sales turn over of the marketing Companies - Held that:- When such issue requiring probing is within the domine of the respondent as conferred under section 27 of the Tamil Nadu value Added Tax Act, I do not think that the petitioner is justified in contending that the respondent lacks jurisdiction to pass the present impugned order. Principles of natural justice - Held that:- It is evident that though the respondent indicated in the said notice as though the petitioner has to pay the tax, in effect, it is evident that it was only a proposal and not a demand as such. Therefore, it cannot be stated that the said notice was issued with pre-determination. Even otherwise, the fact remains that the petitioner has not come before this Court and challenged the said notice by raising the above issue. On the other hand, the petitioner, admittedly, submitted to the jurisdiction of the respondent, filed their objection and participated in the assessment proceedings - the above objection raised by the petitioner on the maintainability of notice of proposal, could not in anyway be construed as violation of principles of natural justice. There is no presumption that the issue dealt with in the impugned order have not been discussed at the time of personal hearing. On the other hand, the very fact that the petitioner was issued with a notice of proposal, followed by furnishing the reply by them and affording an opportunity of personal hearing twice, would only drive this Court to arrive at a reasonable presumption that the issues discussed and decided in the impugned proceedings are the issues within the knowledge of the petitioner and that those issues have been discussed at the time of personal hearing as well - there is no justification on the part of the petitioner in contending that the respondent has not followed the principles of natural justice in any manner, before passing the impugned order. Maintainability of petition - Held that:- Since the disputed question of fact is to be considered and decided only by the next fact finding authority, the petitioner has to agitate the matter only by way of filing regular statutory appeal without insisting upon this Court to decide the matter as an appellate authority - this Court is of the view that the present writ petitions are not maintainable against the orders of assessment. Petitions are disposed of by granting liberty to the petitioner to file a statutory appeal before the Appellate Authority within a period of 30 days from the date of receipt of a copy of this order by observing all other statutory requirement for filing such appeal.

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• 2018 (10) TMI 1363
  Payment of deficit tax - Samadhan Act 2010 - application filed by the petitioner was rejected after a period of nearly 8 years without any communication made when application was filed - Held that:- The very notice of proposal to reject the petitioner's application itself was issued after nearly 5 years that is on 12.01.2015, that too by the first respondent. It is further seen that thereafter the notice of personal hearing was given by the first respondent, before whom the petitioner appeared and explained - the second respondent has chosen to pass the impugned order, which is not only outside his jurisdiction and also is unsustainable on the reason that such rejection cannot be made after a period of nearly 5 years especially, when the Revenue is bound to inform the petitioner to make the deficit Tax if any, to be paid within a period of 10 days. In the absence of any such communication, the petitioner cannot be faulted on any account. It is also an admitted fact that the first respondent has not passed any order so far. The matter is remitted back to the first respondent to consider the application filed by the petitioner and pass appropriate orders on merits - petition allowed by way of remand.

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• 2018 (10) TMI 1362
  Validity of assessment order - assessment year 2011-2012 - mis-match, based on the sales details gathered from the Departmental Website - Held that:- The issue is covered by the decision in the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [2017 (3) TMI 536 - MADRAS HIGH COURT], where it was held that this Court is fully convinced that the procedure adopted by the respondent, Assessing Officers in all these cases are half baked attempts, which have not yielded results and these cases are before this Court or before the Appellate Authorities and all that the Assessing Officers can record is that they have issued show cause notices or passed orders reversing the Input Tax Credit with no appreciable impact on the revenue collection. Thus, this Court is of the view that the Assessing Officer has to re-do the issue, by following certain guidelines/procedures issued in the above said decision of this Court - petition allowed by way of remand.

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• Indian Laws

• 2018 (10) TMI 1377
  Tender of rates for supplying three meals a day to the students of residential schools and two meals a day for non residential schools - rejection of petitioner's tender on the ground that the petitioner did not fulfill several essential requirements of the tender - Held that:- The petitioner did not satisfy as many as five eligibility criteria: 1) The petitioner does not possess service tax registration number, 2) The petitioner does not have certificate of Commercial Tax department, 3) Whether enjoys professional tax registration or not, is not clear, 4) TIN/VAT number is obtained on 25.5.2016. There is no VAT clearance of past two years and 5) The petitioner had to obtain GST number in July 2017 which the petitioner obtained only on 26.1.2018. Thus the application of GST is not made within time. The main difficulty that the petitioner would face is with respect to VAT registration and VAT clearances for past two years. Condition no.2. of the eligibility criteria specified, besides other things, the requirement that tenderer must produce certificate of registration of GST, Sales tax, Incometax, etc. Condition no.5 provided that the tenderer must have minimum of three years of experience of similar work. The documents were not before the authorities when the petitioner's tender was examined and rejected as per communication dated 13.7.2008. Nevertheless, the objections of respondent no.2 at serial no.4 regarding not obtaining VAT registration for the past period and not showing VAT clearance for the past two years needs to be appreciated in light of these documents and facts. One of the important conditions of eligibility was that the tenderer must have minimum turn over of Rs. 6 crores in one of the two immediately preceding years. If the petitioner claims that it fulfills such requirement, immediate question of registration under the VAT Act would become germane - The authorities were therefore, correct in not accepting the petitioner's declaration that it fulfilled the necessary requirements merely based on said certificate dated 6.6.2018 issued by the Assistant Commissioner of State Tax, Vadodara. Petition dismissed.

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