Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 30, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
News
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Goods and Services Tax Council – Journey so far;
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Auction for Sale (Re-issue) of Government Stocks
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Amendment of Rules 2C, 2CA and 11AA and Form Nos 10G, 56 and 56G of the Income-tax Rules, 1962-draft notification for inputs from the stakeholders and the general public – Draft Notification
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Amendment of Rules 2C, 2CA and 11AA and Form Nos 10G, 56 and 56G of the Income-tax Rules, 1962 - draft notification placed in public domain
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Maharashtra Coast to be Developed as Tourism hotspot: Suresh Prabhu
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Commerce Minister meets Russian Delegation
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On the Importance of Independent Regulatory Institutions – The Case of the Central Bank
(Dr. Viral V Acharya, Deputy Governor, Reserve Bank of India - October 26, 2018 - Delivered as the A. D. Shroff Memorial Lecture, Mumbai)
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Electoral Bond Scheme 2018
Notifications
Highlights / Catch Notes
GST
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Goods and Services Tax Council – Journey so far - GST Council met 30 times, took 918 decisions since its Constitution - 96% of decisions already been implemented through 294 Notifications
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Large scale of bogus billing activities - Validity of provisional orders of attachment - By freezing the petitioner's bank accounts and attaching the properties, the petitioner is temporarily rendered penalized - Provisional attachments suspended subject to fulfillment of certain conditions
Income Tax
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Addition made u/s 68 in respect of LTCG on sale of shares - transactions of purchase and sale of shares happen in the secondary market based on the prevailing market prices through the registered stock brokers in the concerned stock exchange. This is how the transactions happen across the world
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TDS u/s 195 - payment made towards web hosting charges to Amazon Web Services LLC (USA) - Indo-US DTAA - Even if the retrospective amendment is held to be applicable, the case of assessee of payment to Amazon being outside the scope of said Explanation 2(iva) to section 9(1)(vi) cannot make the assessee liable to deduct tax at source.
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Exemption u/s 10(37) - the entire procedure prescribed under the Land Acquisition Act was followed, only price was fixed upon a negotiated settlement - benefit of exemption allowed.
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If the Ld.CIT(A) is allowed to make the enhancement on a new source of income which was not considered by the AO, the provisions of section 147, 148 and 263 would become redundant.
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Addition u/s 40A(3) - cash payments made through the agents of suppliers - purchase of building materials for the purpose of construction - assessee is able to provide the bonafide and genuineness of transaction - No additions.
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Addition of excess share premium u/s 68 - AO was not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business - AO was not justified in partially not accepting the share premium.
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Penalty u/s 271(1)(c) - Mere claiming of deductions under the relevant provisions of law and as per RBI Guidelines does not and cannot amount to furnishing of inaccurate particulars of income.
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Deduction u/s. 80(P) - Co-operative Agricultural and Rural Development Bank - Since the assessee’s area of operation was not confined to a Taluk for the relevant assessment year, we hold that it was not entitled to the benefit of deduction u/s. 80P(2) of the Act.
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Assessment u/s 153C - the bank accounts found during the course of search are not declared by the assessee and constitute the incriminating material for the purpose of initiating the proceedings u/s 153C
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Deduction u/s. 80P(2)(a)(i) - a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2).
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Reopening of assessment - the scrutiny assessment got time barred and notice u/s 148 was issued for the sole reason that no return of income was filed for the assessment year 2006-2007. This reason stated for reopening the assessment is on wrong assumption of jurisdiction and not based on relevant material.
Customs
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Jurisdiction - Proper Officer - power to issue SCN - merely because the judgment is stayed, the other Division Bench cannot take a contrary view.
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Import of yellow peas - restricted item or not? - Under the interim orders, the petitioners thus got final relief, which obviously cannot be taken back now.
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Import of Aircraft - charter operation - violation of import conditions - the demand as per the SCN has been dropped but duty has been confirmed by way of enforcement of the bond, in absence of any such proposal in the show cause notice, the demand is bad and fit to be set aside.
FEMA
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Once the issue of SCN of the offence completed in FERA regime no SCN can be issued after 1.6.2002 under FEMA,1999 because of the statutory bar under FEMA, 1999.Accordingly, in the light of the above, the appeal is allowed.
Corporate Law
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Repayment of deposits - Fresh Scheme filed to re-fix schedules/instalments - We cannot read or add words like “from time to time” in the provision as no such multiple applications are provided for. Else, the provision will become a tool to stall recovery suits and Insolvency Proceedings, which cannot be allowed.
Service Tax
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Classification of services - agreeing to provide space in backside of the bill for commercial advertisement - the saving of Re.0.10 p per bill is nothing but a consideration or indirect income for allowing 1/5th of the telephone bill space to the printer to put in advertisements.
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CENVAT Credit - credit of 100% of service tax paid on works contract service instead of 50% under partial reverse charge basis - on the service tax paid by the appellant credit is legally available and it cannot be said that amount paid by the appellant is not service tax and on this ground, credit cannot be denied.
Central Excise
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Although the Tribunal is undoubtedly entitled to remand a matter for fresh consideration, the same cannot be at its whim and fancy or mere ispi dixit but a conclusion based on reasons.
Case Laws:
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GST
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2018 (10) TMI 1454
Validity of provisional orders of attachment - attachment of petitioner's factory premises, stock and bank accounts - alleged large scale bogus billing activities - Held that:- At the prima facie stage, the department contends strongly that the petitioner has indulged into revenue defalcation. Possible tax and penalty liabilities are substantial. At the same time, it is not disputed that the petitioner is also involved in legitimate business activities. By freezing the petitioner's bank accounts and attaching the properties, the petitioner is temporarily rendered penalized. The petitioner cannot operate the business, cannot move the stock and cannot make payments. Provisional attachments suspended subject to fulfillment of certain conditions - petition disposed off.
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Income Tax
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2018 (10) TMI 1453
Claim for written back of excess provision for bad and doubtful debts - excess provision written back in the profit and loss account as allowed as deduction in the previous years - Held that:- SLP dismissed.
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2018 (10) TMI 1452
Addition u/s 68 - claim towards trade credit unexplained - enhancement of licence fee - Held that:- SLP Dismissed.
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2018 (10) TMI 1451
Levy of penalty u/s 271(1)(c) - defect in the notice - assessee contended that the notices issued under Section 274 r/w. Section 271 are vitiated since it did not specifically state the grounds mentioned in Section 271(1)(c) - Held that:- SLP dismissed.
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2018 (10) TMI 1450
Exemption under Section 11 denied - assessee did not maintain books of account as stipulated under the Income Tax Act, 1961 which was stated by the auditor itself and the assessee therefore not satisfying the necessary conditions - Held that:- Since the assessee categorically submits that books of accounts have been duly maintained and can be produced for verification along with the audit reports and also the arguments of the Ld. DR that if the books are maintained, they are required to be examined by the primary authority i.e. the Assessing Officer for the limited purpose of passing an order denovo with regard to this ground only and with directions to the assessee to produce books of accounts promptly before the Assessing Officer. Thus it would be appropriate to remit the matter back to the AO to decide the same afresh.
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2018 (10) TMI 1449
Assessment u/s 153C - not providing the seized material to the assessee well in advance to analyze and file the return of income - Held that:- Assessing Officer (AO) had issued the notice u/s 153C on 13.08.2013 calling for the returns of income for the A.Y.2007-08 to 2011- 12, but there was no response from the assessee. Subsequently, the AO issued a letter calling for information and there was no response from the assessee for the letter also. The assessee has requested for copies of the seized material on 11.03.2014 and the AO supplied the copies of the seized material on 13.03.2014 within two days of time, thus we do not find any lapse from the AO.. During the appeal hearing before the Ld. CIT(A) also, the assessee did not analyze the seized material taken by her and presented the case. This ground was not raised by the assessee before the Ld. CIT(A) and during the appeal hearing, the Ld AR did not make any argument to support this ground.- Decided against assessee Cash deposits made in the bank account of Late Shri D.. Krishnamachary father of D. Sampath - Held that:- As evident from the bank account, there are frequent cash deposits and withdrawals which required to be considered in the totality of the facts, but not the deposits alone. Since the assessee has assured that they would submit the entire information required for the purpose of completion of the assessment, in the interest of justice, the issue should be remitted back to the file of the AO to arrive at the true and correct income. The assessee should submit the necessary information explaining the sources of deposits, application of money and arrive at the peak deposit before the AO to consider the same as income. Accordingly we set aside the order of the lower authorities and remit the matter back to the file of the AO for fresh consideration. Unexplained cash deposits - Held that:- The assessee explained the sources for the deposit for the AY 2007- 08 & 2008-09 as pension deposit and for the AY. 2009-10 the source was stated to be out of pension and agricultural income. Since the cash deposits in ground No. 2 and 3 are remitted back to the file of the AO, we are of the view that it is also required to be considered along with cash deposits discussed in ground No. 2 and 3 of this order. Thus, we remit the matter back to the file of the AO for fresh consideration. Additions based on bank deposits instead of seized material - Held that:- In this case, the assessee has not filed the regular return of income and no assessments were made u/s 143(3) / 143(1) for the impugned assessment year. Thus, the bank account found during the course of search was not declared by the assessee. Therefore, the bank accounts found during the course of search constitutes the seized material capable of initiating proceedings u/s 132. Accordingly, we uphold the action of the AO for initiating the proceedings u/s 153C and the legal validity of consequent additions made by the AO and dismiss the appeal of the assessee on this ground. Unexplained expenditure - source of the expenditure for construction / renovation of the house - Held that:- During the search and seizure operations conducted in the premises of Shri D. Sampath, the AO found the material marked as Annexure A/DS/12 at page Nos.. 198-200 and noticed that Late Shri D. Krishnamachary has made notings with regard to the house construction at Warangal. The same was confirmed by his son Shri D. Sampath in the statement recorded on 01.08.2011. However, neither Shri D. Sampath nor Shri D. Sriramulu has explained the source. The source was stated to be from the amounts received from U Rajya Lakshmi, but no evidence was furnished with regard to the receipt of money from U Rajya Lakshmi. During the appeal hearing, before the CIT(A) and before us, the assessee failed to furnish any evidence to explain the source of the expenditure for construction / renovation of the house
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2018 (10) TMI 1448
Stay of demand - TPA adjustment - Held that:- As prayed in nutshell that assessee is willing to deposit ₹ 3.8 crore on or before 30.11.2018 and prayer was made to stay balance outstanding demand of tax and interest due thereon Stay the balance outstanding demand against the assessee with the condition that ₹ 3.8 crores will be deposited by the assessee to the Credit of Central Government on or before 30.11.2018, and paid challan will be produced by the assessee before the AO immediately therafter as a pre-condition for the stay of balance outstanding demand of tax and interest. On production of paid challan of ₹ 3.8 crore by the assessee before the AO , balance outstanding demand of tax and interest will be stayed for the period of 180 days or disposal of the appeals, whichever is earlier
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2018 (10) TMI 1447
Estimation of net profit @ 5% - rejection of books of accounts - AO has rejected the books of accounts on the ground that he was not satisfied about the correctness or completeness of the accounts - Held that:- In our opinion, for rejection of the books of accounts on the ground of non-satisfaction of correctness or completeness, it is essential for the Assessing Officer to point out the specific defects. Merely increase in expenses, cannot be ground for rejection of books of accounts unless the assessee failed to explain or justify increase in expenses. CIT(A) has made detailed verification of invoices and vouchers in respect of the expenses claimed by the Assessing Officers as excessive. The Ld. DR could not controvert the finding of the CIT(A) on justification of increase in expenses in question. No error in the action of the Ld. CIT(A) in cancelling the rejection of books of accounts by the Assessing Officer and estimation of the profit. - Decided against revenue
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2018 (10) TMI 1446
Reopening of assessment - validity of reasons to believe - no return of income was filed - allotment of new pan - Held that:- It is only subsequent to the filing of the return of income, the new PAN was allotted. Pursuant to the notice issued u/s 148, assessee made attempts to e-file its return of income for the assessment year 2006-2007, which was unsuccessful. The relevant screen-shot is attached as annexure A1 to the paper book. The assessee cannot be faulted that it had quoted the PAN AAJFS9814M, which was duly allotted by the Department and valid as on the date of filing of return of income (i.e. 29.11.2006). The returns of income were filed for assessment year 2006-2007 and earlier assessment years quoting the PAN AAJFS9814M. For the earlier assessment years, returns of income were duly accepted and the assessments were completed. It is not the case of AO that the return for the assessment year 2006-2007 was not filed at all. The assessee has duly paid the advance tax and also claimed TDS and self-assessment tax. The scrutiny notice u/s 143(2) was duly issued to the assessee quoting the old PAN. However, the scrutiny assessment got time barred and notice u/s 148 was issued for the sole reason that no return of income was filed for the assessment year 2006-2007. This reason stated for reopening the assessment is on wrong assumption of jurisdiction and not based on relevant material. CIT(A) was justified in cancelling the reassessment order passed u/s 144 r.w.s. 147. Consequently, the additions made in the reassessment does not survive and has been rightly deleted by the CIT(A). - Decided in favour of assessee.
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2018 (10) TMI 1445
Entitlement to deduction u/s. 80P(2)(a)(i) - assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 - denial of claim as assessee was primarily engaged in the business of banking - Held that:- Admittedly, the assessee is primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The Hon'ble High Court of Kerala in the case of Chirakkal Service Co-op Bank Ltd. (2016 (4) TMI 826 - KERALA HIGH COURT) had held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2). Thus we hold that the assessee-society is entitled to the benefit of deduction u/s. 80P - decided against revenue
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2018 (10) TMI 1444
Assessment u/s 153C - not providing the seized material to the assessee well in advance to analyze and file the return of income - Held that:- There is no mention with regard to the date of requesting the seized material and supply of the seized material by the AO. AR did not furnish the date of requisition of the copies of the seized material and the date of supply of copies of the seized material to the assessee. Having received the copies of the seized material from the AO during the assessment proceedings, at the time appeal also the assessee did not make any effort to analyse the seized material and to present his case before the CIT(A) is the assessee who has not cooperated with the department and failed to furnish the required information in spite of several notices and opportunities provided by the AO as well as the CIT(A). This ground was not raised by the assessee before the CIT(A) and during the appeal hearing, the AR did not make any argument to support the ground. Therefore, we do not find any merit in the ground raised by the assessee and this ground is dismissed. Cash deposits made in the bank account unexplained - there was no compliance from the assessee to explain the sources of cash deposits made in the bank account - assessee contended that the deposits were made out of the withdrawals - Held that:- As evident from the bank account, there are frequent cash deposits and withdrawals which required to be considered in totality of the facts but not the deposits alone. Since the assessee has assured that he would submit the entire information required for the purpose of completion of the assessment, we are of the considered opinion that in the interest of justice the issue should be remitted back to the file of the AO to arrive at the true and correct income. The assessee must submit the necessary information explaining the sources of deposits, and the application of withdrawals before the AO to consider the issue on merits. Assessment made on the basis of bank deposits instead of the seized material - assessee submitted addition made on the basis of deposits made in the bank accounts without having any seized material - Held that:- In this case, the assessee has not filed the regular returns of income. During the appeal hearing the Ld.A.R did not furnish any evidence having filed the regular returns of income by the assessee. No assessments were made u/s 143(3)/143(1) in the hands of the assessee. Thus, the bank accounts found during the course of search are not declared by the assessee and constitute the incriminating material for the purpose of initiating the proceedings u/s 153C. Accordingly, we uphold the action of the AO in initiating the proceedings u/s 153C and the resultant actions of the AO and dismiss the appeals of the assessee on this ground. - Appeal decided partly in favour of assessee.
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2018 (10) TMI 1443
Revision u/s 263 - entitled for deduction u/s 80IA/80IC - disallowance of depreciation - Held that:- If we consider the facts and circumstances of the present case, then it would reveal that the assessee is entitled for deduction under section 80IA/80IC. The moment depreciation is being disallowed, it will be added to the total income of the assessee, and accordingly enhanced deduction would be given to the assessee. Therefore, order of the Commissioner is not sustainable on this issue. The assessee has raised specific plea before the Commissioner also, but without recording any logical finding the Commissioner just simply ignored it. He observed that it was not relevant in the present context, whereas, fulfillment of one of the conditions, which was very much relevant. No doubt the AO has issued a questionnaire inviting explanation of the assessee with regard to the details of the assets added in the block of assets. But he failed to conduct an inquiry whether the plant was put to use or not installed in the first half for granting of depreciation. As far as contentions of the assessee that proceedings had merged with proceedings pending before the ld.CIT(A) relating to computation of deduction admissible under section 80IA/IC is concerned, we are of the view that both the issues are separate issues. The eligible profit for grant of deduction under section 80IA/80IC could have many components viz. rental income, interest income, scrap sales, job charges whose exclusion or inclusion would lead to a controversy, which might be pending before CIT(A). How, the resolving of that controversy would give an idea to the ld.CIT that the issue of depreciation deserves to be examined and certain depreciation has to be disallowed to the assessee. This is a peripheral issue, not directly linked which could be construed as merged in that proceeding. No merit in this fold of contentions. Perusal of the show cause issued under section 263 does not indicate that it was issued on the instructions of audit report. It was issued on application of independent mind upon the record. The auditor could be an informer. Had it been treated as gospel truth and action under section 263 is being taken, then, the assessee would be justified. But where on an information of the auditor or from any other source, the competent authority, applied his independent mind and then taken action under section 263, then such action would not be declared illegal on the ground that it was taken on the auditor’s objection. The requirement under the law is that on the information come to the possession of the competent authority ought to be construed by him and mind should be applied independently. It should not be under tutelage of any other authority. Therefore, we reject all other alternative contentions of the assessee. However on non-fulfillment of twin conditions, i.e. no prejudice is being caused to the Revenue on account of grant of deprecation, we allow this ground of appeal and quash the order passed under section 263 of the Income Tax Act, 1961. - Decided in favour of assessee.
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2018 (10) TMI 1442
Deduction u/s 80IA computation - AO not being satisfied with the allocation made by the assessee after going through the assessee’s record comparable cases, estimated the cost of consumption @ 55% of the total husk to the power generation plant and accordingly recomputed the deduction u/s 80IA - Held that:- AO has not given the details of the initial assessment year in which the deduction u/s 80IA was claimed and the expiry of time limit for claiming the deduction in the assessment orders. As per the information available on record, the assessee had installed the power plant in the assessment year 2003-04 and started claiming the deduction u/s 80IA from the assessment year 2004-05. As per section 80IA, the assessee is entitled for deduction u/s 80IA for 10 consecutive years which expires in 2014-15, whereas the assessee claimed the deduction in 2015-16 also. Therefore, the AO is directed to verify and allow deduction u/s 80IA correctly for the period for which the assessee is entitled. With the above observation we dismiss the appeals of the revenue.
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2018 (10) TMI 1441
Non prosecution of appeal - Rule 19 of the ITAT Rules, 1963 - Held that:- As the assessee has chosen to be neither present nor represented, it can be concluded that the assessee is not serious in pursuing the appeal filed. Therefore, in our view, the appeal filed by the assessee is liable to be dismissed in limine for non-prosecution. See COMMISSIONER OF INCOME-TAX. VERSUS MULTIPLAN INDIA (PRIVATE) LIMITED. [1991 (5) TMI 120 - ITAT DELHI-D]. Thus we dismiss the appeal of the assessee in limine for non-prosecution
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2018 (10) TMI 1440
Deduction u/s. 80(P) - assessee is a Co-operative Agricultural and Rural Development Bank, registered under the Kerala Co-operative Societies Act, 1969 - Held that:- We find that an identical issue has been considered by the Tribunal in case of M/s.Kottayam Cooperative Agricultural & Rural Development Bank Limited v. ITO (2018 (10) TMI 1121 - ITAT COCHIN), wherein the Tribunal held that the assessee was not entitled to the benefit of deduction u/s 80P(2) of the I.T.Act. The mischief of sub-section (4) will not fall on a primary cooperative agricultural and rural development bank provided it’s operation is limited to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities. Since the assessee’s area of operation was not confined to a Taluk for the relevant assessment year, we hold that it was not entitled to the benefit of deduction u/s. 80P(2) of the Act. - Decided against assessee.
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2018 (10) TMI 1439
Penalty u/s 271(1)(c) - addition on account of disallowances made in relation to the alleged incorrect claim of deduction u/s 36(i)(viia) and disallowance on account of alleged incorrect claim of deduction of interest paid by the assessee to the head office - Held that:- Perusal of the aforesaid substantial questions of law framed by Hon’ble High Court of Delhi in the appeal against the assessment order on the basis of which this penalty has been levied shows that it is still debatable if the disallowance of ₹ 4,88,61,772/- u/s 36(i)(viia) and disallowance of the interest payment made by the assessee to its head office by following the special bench order in case of ABN AMBRO BANK vs. ADIT (2010 (12) TMI 340 - CALCUTTA HIGH COURT) is sustainable or not. So when the issue as to disallowances is still debatable no penalty can be levied and as such penalty imposed in this case is liable to be deleted on this score only. Even on merit when we examine the assessment order as well as penalty order, the revenue has not come up with any allegation that there is concealment of income or furnishing of inaccurate particulars of income rather simple allegation made by the revenue is that the assessee has claimed incorrect deduction u/s 36(i)(viia) out of which ₹ 4,88,61,722/- has been disallowed and that the assessee has claimed deduction on account of interest payment of ₹ 32,20,00,000/- paid to its head office which has also been disallowed. Mere claiming of deductions under the relevant provisions of law and as per RBI Guidelines does not and cannot amount to furnishing of inaccurate particulars of income. More over it is not case of the revenue that the assessee has not claimed the deductions as per law nor it is claim of the revenue that the assessee has made a double claim of such deductions. - penalty levied by AO and confirmed by CIT(A) is not sustainable in the eyes of law - Decided in favour of assessee.
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2018 (10) TMI 1438
Addition of excess share premium u/s 68 - share premium when receipts of premium over and above the DCF valuation report - whether the Share premium can be considered as income taxable under the Act? - Held that:- There is no dispute with regard to the fact that the assessee has received the impugned funds by way of “Share Premium” on issue of preference shares. In the books of accounts also, the assessee has credited “share premium account” only with the amount received. The investor has also given the funds only towards share premium. Hence, according to the assessee as well as investor company, the nature of receipt/payment is “Share premium” on the preference shares. Since the revenue is contending that the “nature” of excess amount of premium is not proved, we shall examine the meaning or context in which the word “nature” is used in sec.68 of the Act. The courts have time and again held that if an assessee proves three essential ingredients with regard to cash credits, viz., the identity of the creditor, credit worthiness of the creditor and genuineness of transactions, then the “nature and source” of cash credit stands proved. In that case, the said cash credit cannot be assessed as income of the assessee. As observed earlier, if any cash credit is offered as income by the assessee himself, the question of applying sec.68 does not arise. The requirement of applying provisions of sec.68 shall arise only if any cash credit is not offered as income by the assessee. There is merit in the contention of the Ld A.R that the share premium amount worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee and hence there is no bar on collecting higher amount as share premium. CIT(A) has rightly observed that there are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds. CIT(A) has also noticed that the actual financial results achieved by the assessee has exceeded the financial projections. Accordingly he has held that the premium of ₹ 1030/- was determined between the parties on the basis of commercial considerations and agreed to by them, which cannot be questioned by the tax authorities. It is well settled proposition of law that the AO was not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business. Hence, in our view, the AO was not justified in holding that he will accept the share premium amount only to the extent of Rs,672/- only. Hence the AO was not justified in partially not accepting the share premium and accordingly he could not have doubted the genuineness of transactions on this reason. AO himself has accepted the quantum of share premium in AY 2014-15 and further the actual financial results have far exceeded the financial projections. We also notice from the agreement entered between the parties, the investor is entitled to a particular rate of return in case the call option/put option is exercised. It also provides for the manner of conversion of preference shares into equity shares etc. In any case, the question of present book value shall apply only to equity shares and not to preference shares - Decided in favour of assessee.
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2018 (10) TMI 1437
Addition u/s 40A(3) - cash payments made through the agents of suppliers - purchase of building materials for the purpose of construction - Held that:- The primary object of enacting section 40A(3) were two folds, firstly, putting a check on trading transactions with a mind to evade the liability to tax on income earned out of such transaction and, secondly, to inculcate the banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to fall on account of non-observation of Section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions being free from vice of assessment any device of evasion of tax is relevant consideration. The assessee being a contractor frequently purchased building materials from various suppliers through their agents. The agents have flexibility to the assessee to make payments in installments. However, for giving such facility they required payments to be made in cash only. The assessee was compelled to make cash payments in excess of ₹ 20,000/-. In the instant case, the assessee had also established the circumstances under which the payment in the manner prescribed in section 40A(3) of the Act was not practicable or would have caused genuine problems and hence the business expediency is proved beyond doubt. This has not been controverted by the ld DR before us. Thus we direct the ld AO to delete the disallowance made u/s 40A(3). - Decided in favour of assessee. Disallowance u/s 40(a)(ia)- non deduction of tds on account of carriage inwards - retrospectivity of amendment - Held that:- In view of the amendment to second proviso to section 40(a)(ia) read with section 201(1) of the Act, if the payees have included the subject mentioned receipts in their returns and paid taxes thereon, if any, then the disallowance u/s 40(a)(ia) of the Act would not operate in the hands of the payer. This second proviso though introduced by the Finance Act 2012 w. e. f. 1. 4. 2013 had been held to be retrospective in operation in the case of Principal CIT vs Tirupati Construction [2016 (8) TMI 1310 - CALCUTTA HIGH COURT]. Hence in the interest of justice and fairplay, we deem it fit and appropriate, to remand this issue to the file of the ld AO for denovo adjudication of the issue in the light of second proviso to section 40(a)(ia) - Decided in favour of assessee for statistical purposes.
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2018 (10) TMI 1436
Estimation of income - Rejection of books of accounts - assessee failed to produce the stock register, sale bills with the quantity of sales item wise and the quantitative details of valuation of closing stock etc. - AO estimated the net profit at 20% of the purchases put to sale - Held that:- Neither the AO, nor the CIT(A) has analyzed the books of accounts and brought on record the specific defects found during the course of assessment proceedings to resort for higher estimation. The AO rejected the books of accounts because of non production of stock register, sale bills, quantitative details of stocks sold and the valuation of closing stock with the details. AR submitted that the defects pointed out by the AO are common in all the IMFL cases and argued that the assessee’s case cannot be given a separate treatment for resorting to higher estimation of income as held by the CIT(A). The above submission was not controverted by the Revenue, hence we do not find any reason to resort for higher rate of profit. We are of the view that the assessee’s case is squarely covered by the decision of this Tribunal in Tangudu Jogisetty cited [2016 (7) TMI 379 - ITAT VISAKHAPATNAM] hence, we set aside the order of the Ld.CIT(A) and direct the AO to estimate the income @5% of the goods sold. Addition u/s 68 - revision u/s 263 - reopening of assessment - Held that:- In the instant case, the AO has examined the issue, satisfied with the correctness with regard to the identity, genuineness and credit worthiness of the capital introduction, unsecured loans and the sources of investments and accepted the same as genuine. By enhancement notice, the CIT(A) intended to redo the assessment and reexamine the issue which was already examined by the AO. It is not the case of non causing enquiries by the AO as evident from assessment order in para No.2.1. AO has called for the details and examined the issue in detail. CIT(A) is not empowered to enhance the assessment by discovering the new source of income. For escapement of income, there are remedial measures provided u/s 147 and 148 of the Act. If the order passed by the AO is erroneous and prejudicial to the interest of the revenue, the alternative remedy is provided u/s 263 of the Act. Similarly, if a mistake is committed by the AO, which is apparent form the record, remedial measures are provided u/s 154 of the Act. If the Ld.CIT(A) is allowed to make the enhancement on a new source of income which was not considered by the AO, the provisions of section 147, 148 and 263 would become redundant. Therefore, we are of the considered opinion that the Ld.CIT(A) is not permitted to make the enhancement on completely new source of income, which was not considered by the AO.
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2018 (10) TMI 1435
Entitlement to benefit of section 10(37) in respect of the land which was acquired - non granting of benefit in respect of acquisition of urban agricultural land that it was not a compulsory acquisition, but only executed through a negotiated sale deed - Held that:- The Hon’ble Apex Court in the case of Balakrishnan v. Union of India & Others (2017 (3) TMI 745 - SUPREME COURT OF INDIA) had categorically held merely because the sale price is fixed through a negotiated settlement will not take away the proceedings from the Land Acquisition Act when the relevant provision of the Act are invoked. In the instant case, the entire procedure prescribed under the Land Acquisition Act was followed, only price was fixed upon a negotiated settlement. Therefore, in view of the above judgment of the Hon’ble Apex Court (supra), we hold that the acquisition of the urban agricultural land was a compulsory acquisition and the same would be entitled to the benefit enumerated in section 10(37) of the I.T.Act. - Decided in favour of assessee.
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2018 (10) TMI 1434
TDS u/s 195 - Disallowance of payment made towards web hosting charges to Amazon Web Services LLC (USA) - Indo-US DTAA - whether the assessee is liable to deduct withholding tax out of such payments made to Amazon on account of web hosting charges? - retrospective amendment - Held that:- Disallowance of expenditure under section 40(a)(i) could only be made if the payment was royalty in terms of Explanation 2 to section 9(1)(vi) but where the payment was not royalty in terms of said Explanation, then no disallowance of expenditure under section 40(a)(i) could be made in the present facts. Accordingly, we hold that amendment, if any, to the scope of royalty by an amendment in 2012 by Finance Act with retrospective effect cannot fasten the assessee with liability to withhold tax for the years which have already been closed prior to insertion of amendment. Hence, the assessee has not defaulted in not deducting withholding tax and for such non acts, the payment made cannot be disallowed as provisions of section 40(a)(i) of the Act are not attracted. Whether retrospective amendment in Income Tax would override the Treaty Laws where no amendment has been made? - Held that:- There is no merit in holding that the assessee was liable to deduct withholding tax out of such payments made to Amazon and for such non-deduction or withholding of tax, the assessee can be held to be at default and the payment made by assessee being not allowed as deduction in its hands, in view of provisions of section 40(a)(i). We reverse the orders of authorities below in this regard. We are not going into the issue raised by assessee that Amazon is not having PE in India and hence, no liability to deduct tax in India. Whether charges paid to Amazon for various services provided by it are in the nature of royalty, if any, or not? - Held that:- In the facts of present case, looking at the documentation, the billing is segregated into various services i.e. AWS services, storage services, etc. and the assessee before us has filed a chart of summary of services availed. The first such services are on account of service charges for Elastic Compute Cloud. As per clause 1, it is on account of use of service provider Linux; as per clause 1.2, Windows and as per clause 1.3, Windows & SQL Server stanard and clause 1.4 of Bandwidth. The total service charges for Elastic Compute Cloud are USD 40,253.17. The month-wise details of said payments made by assessee from September, 2009 to March, 2010 reflected that in the first month, charges totaled to USD 4269.02, in October at USD 5599.36 and there on. Main provisions of section 9(1)(vi) are not attracted as the payment made by assessee is not in the nature of royalty. In any case, Explanation 2(iva) of section 9(1)(vi) covers cases of royalty i.e. consideration paid for the use or right to use any industrial, commercial or scientific equipment but not including the amount referred to in section 44BB of the Act. The assessee in the present case did not use or acquire any right to use any industrial, commercial or scientific equipment while using the technology services provided by Amazon and hence, the payment made by assessee cannot be said to be covered under clause (iva) to Explanation 2 of section 9(1)(vi) of the Act. Even if the retrospective amendment is held to be applicable, the case of assessee of payment to Amazon being outside the scope of said Explanation 2(iva) to section 9(1)(vi) cannot make the assessee liable to deduct tax at source. The assessee is not liable to deduct withholding tax and such non deduction of withholding tax does not render the assessee in default and consequently, no disallowance of amount paid as web hosting charges is to be made in the hands of assessee for such non deduction of withholding tax and hence, provisions of section 40(a)(i) of the Act are not attracted. The grounds of appeal raised by assessee are thus, allowed.
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2018 (10) TMI 1433
Transfer pricing adjustment - Selection of comparable - applying turnover of ₹ 1 crore to 300 crores while selecting the concerns as comparables - Held that:- The issue of selection of suitable turnover to be applied has been adjudicated in series of cases and following the same parity of reasoning, we uphold the directions of DRP in applying turnover of ₹ 1 crore to 300 crores while selecting the concerns as comparables. Accordingly, we find no merit in the ground of appeal No.1 raised by the Revenue in this regard. Hence, five concerns are to be excluded from final set of comparables. Transfer pricing provisions to the segment of provision of software development services by the assessee to its associated enterprises in selection of three new concerns by the assessee during TP proceedings - Held that:- The concerns which were found to be functionally comparable though selected during TP proceedings, then the same need to be considered in case they fulfill all the other filters, by the TPO. Accordingly, we uphold the directions of DRP in this regard and dismiss the ground of appeal No.2 raised by Revenue. Adjustment made to provision of intra-group cost - Held that:- The case of assessee before us was that theses costs had been recovered on cost plus markup from associated enterprises and hence, there is no merit in adopting the same at Nil. The Tribunal in assessment year 2009-10 had also remitted the issue back to the file of TPO. Accordingly, we remit this issue to the file of TPO/Assessing Officer to adjudicate the issue after affording reasonable opportunity of hearing to the assessee in line with directions of Tribunal in earlier years. The TPO/Assessing Officer shall also consider the plea of assessee in recovering intra-group cost at cost plus markup and decide the issue in accordance with law.
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2018 (10) TMI 1432
Addition made u/s 68 in respect of LTCG on sale of shares - assessee claimed exempt income u/s 10(38) - AO sought to treat the LTCG reported by the assessee as bogus as according to him, the scrip did not justify such a huge increase in its sale price and that the increase in share price thereon was only artificial and due to price rigging carried out by some persons in the market. - Held that:- With regard to the arguments of the ld DR that at the time of purchase of shares of Trinity Tradelink Limited by the assessee, the shares of STFL were very much available in the stock market and the assessee could have very well bought the shares of STFL from the open market. He need not have resorted to purchasing the shares of Trinity Tradelink Ltd and later on pursuant to demerger, get the shares in STFL. In this regard, we find from the materials available on record, that the assessee was not the director or promoter of either M/s Trinity Tradelink Ltd or STFL. Assessee was only a shareholder in Trinity Tradelink Ltd and pursuant to the demerger of that company with another company, the assessee was allotted shares in STFL, which cannot be faulted with by the revenue by mere surmise and conjecture and without bringing any evidence on record. Moreover, it is for the assessee to chose whether to buy a particular scrip and the department cannot step into the shoes of the assessee in this regard and participate in the business and investment decisions of the assessee. The transactions of purchase and sale of shares happen in the secondary market based on the prevailing market prices through the registered stock brokers in the concerned stock exchange. This is how the transactions happen across the world. For these events, the documents are furnished by the stock brokers in the form of contract notes, delivery instructions submitted by the parties for effecting the sale through the recognized stock exchange and transactions of movement of shares from one person to another are recorded in the respective demat statements issued by the concerned Depository Participant. These documents cannot be disbelieved as not giving any credence to the share transactions as they had happened in the open market. In any case, it is for the revenue to bring out any other extraneous material to prove that these documents are fabricated with the connivance of assessee, registered stock broker and recognized stock exchange. It cannot be brushed aside that these transactions in the open market had duly suffered STT which is also reflected in the contract notes issued by the stock broker and the revenue had already been enriched by the STT component. Hence it would not be proper for the ld DR to state that these documents cannot be relied upon. We hold that the CIT-A had rightly deleted the addition made u/s 68 of the Act in respect of LTCG on sale of shares. Accordingly, the grounds raised by the revenue are dismissed.
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2018 (10) TMI 1431
Addition made u/s 68 in respect of LTCG on sale of shares of KAFL - claimed as exempted income u/s 10(38) - whether the LTCG on sale of shares of KAFL earned through sale in recognized stock exchange and subjected to payment of STT through a registered share broker, could be treated as genuine or not? - Held that:- As find that SEBI vide its order dated 21.9.2017 had revoked the restraint order banning 244 entities and persons from trading and dealing in securities by giving a categorical finding that they had no role in the manipulation of the scrip of Kailash Auto Finance Ltd. We find that the AO had grossly relied on the interim order passed by SEBI on 29.3.2016 to address the issue before us. In the said interim order of SEBI, restraint orders were issued. Now in the final order dated 21.9.2017, such restraint orders and other bans had been revoked by SEBI itself. Hence the primary reliance placed on a document by the ld AO while framing the assessment goes against the revenue now. We direct the ld AO to delete the addition made u/s 68 of the Act in respect of LTCG on sale of shares of KAFL. Accordingly, the grounds raised by the assessee are allowed.
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2018 (10) TMI 1430
Addition u/s 68 - sum received by sale of an asset i.e. shares held by the assessee as investments from earlier years - Held that:- As there was no compliance this addition u/s 68 is made. In our view this is against the proposition of law laid down in the case of CIT vs Orissa Corporation(P)Ltd (1992 (7) TMI 5 - CALCUTTA HIGH COURT). We find that the share purchasers are all income tax assesses and they have filed return of income and the payments were made through account payee cheques and the share purchasers have confirmed purchase of the shares. There is no evidence with the revenue that the sale in question is a bogus sale. Under the circumstances the issue is whether addition can be made u/s 68. We are of the opinion that no addition can be made u/s 68. The assessee has discharged the burden of proof that is on it. There is no contrary evidence brought on records by the AO to disprove the claim of the assessee. Addition has been made on suspicion and surmises. - Decided in favour of assessee.
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2018 (10) TMI 1429
TPA - Exclusion of comparables from final set of comparables being functionally not comparable - Exclusion of SIP Technologies and Exports Ltd. on the ground that it was persistent loss making concern - Held that:- The assessee was engaged in providing software development services to its associated enterprises. The total international transactions undertaken by assessee were ₹ 48.29 crores. The assessee had applied TNNM method and there is no dispute about application of said method, thus companies functionally dissimilar with that of assessee need to be deselected from final list. SIP Technologies and Exports Ltd. - If we look at the details filed by assessee i.e. summary of operating profit margins for three years of SIP Technologies and Exports Ltd., then in assessment year 2007-08, unadjusted operating margins were to the tune of 10.19%; in assessment year 2008-09, it was (-)33.20% and in the year under appeal, it was (-) 19.33%, The assessee in support has furnished the audit report along with attachments to establish its case that the said concern SIP Technologies and Exports Ltd. was not persistent loss making.
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2018 (10) TMI 1428
Addition on account of incorrect depreciation claimed - depreciation includes depreciation claimed on the Written Down Value of machinery and claimed on the WDV on the factory building - Held that:- As far as the contention of the assessee that the claim of depreciation is eligible in the income tax return even if the same has not been claimed in the books of accounts certainly has merits as the issue is squarely covered by the decision of Co-ordinate Bench in the case of Sudha Devi Oswal Vs JCIT Ratlam [2015 (11) TMI 1760 - ITAT INDORE] wherein similar facts held that depreciation on the building and Warehouse was not claimed in the balance sheet but the claim for depreciation was lodged by the assessee before the A.O during the assessment proceedings. Tribunal after examining the facts concluded that the warehouse building was in existence and was also used for business activities, therefore the assessee is entitled to depreciation. In the instant appeal the facts are quite similar as the depreciation on machinery and factory building have not been claimed in the balance sheet i.e. not debited to the Profit & Loss Account but while preparing the computation of income the depreciation of ₹ 26,82,229/- has been claimed. In the Tax Audit Report u/s 44AB of the Act, at the relevant column of Form 3CD. Auditor has given the details of depreciation calculated on the written down value of the machinery as well as factory building. There is no dispute at the end of Revenue about the WDV of Machinery and Factory Building. We are also satisfied that the impugned assets are being regularly used for business purposes. The assessee has rightly claimed the depreciation and Ld.CIT(A) made no error in allowing the claim of the assessee. - Decided against revenue.
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2018 (10) TMI 1427
TDS u/s 194H - Disallowance u/s 40(a)(ia) in respect of payment of commission - Held that:- Identical issue was considered by the Tribunal in assessee’s own case for the assessment year 2011-12 [2018 (7) TMI 1852 - ITAT JAIPUR] as Tribunal has been taking a consistent view that when the assessee is only an intermediatory between the cellular/mobile operator and retailer and the payment of commission was directly made by the cellular/mobile operator companies to the retailer/sub-dealer after deduction of TDS then, the assessee is not required to deduct any TDS on the said amount directly paid by the company and only the accounting entries were carried out by the assessee. Therefore, we delete the disallowance made by the AO u/s 40(a)(ia). We delete the disallowance made by the AO under section 40(a)(ia) - Decided in favour of assessee.
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2018 (10) TMI 1426
Disallowance of Bad Debts written off - AO observed that the aforesaid claim was not a bad debt at all and that it had been wrongly categorized by the appellant as a bad debt - what has happened to the delivery of the goods purportedly obtained on purchase as per the contract note which has given rise to the present unrealized debt in question? - Held that:- The integral aspect about the fate of delivery of commodity acquired and retained in the warehouses by the intermediatories purportedly on behalf of the assessee is required to be necessarily examined. A perusal of the order of the lower authorities gives an infallible impression that such crucial aspect has not been addressed. Without understanding the fate of the goods purchased purportedly in the custody of or on behalf of the assessee, it will not be possible to determine the issue. Where the purchase with delivery is settled by cross contract of sale with delivery at future date against sale proceeds, the entire debt turning bad is rather innocuous. We therefore consider it expedient to remit the matter back to the file of the AO to ascertain as to whether the transaction of purchase and sale were backed by actual delivery as claimed or not and a fair value of stock lying undelivered against unrealized sale is thus required to deducted from the quantum of debt. The solemn duty requires us to direct the AO to examine the issue after taking note of crucial aspect of actual delivery of commodity, if any, as claimed and to ascertain as to how the entire debt has turned bad when the assessee was purportedly in possession of the goods purchased. The matter is remanded back to the file of AO accordingly. - Appeal of the assessee is allowed for statistical purposes.
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Customs
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2018 (10) TMI 1424
Import of yellow peas - restricted item or not? - Trade Notice No.12/2018 - Interim relief availed - Held that:- In the present case, however in almost all cases under interim orders of the Court, imports have been allowed and cleared except in the first petition where out of total quantity of 25,000 MT of peas for which the order was placed, all but 177 MT of peas arrived and got cleared, which would neither be possible nor feasible. Under the interim orders, the petitioners thus got final relief, which obviously cannot be taken back now. There is nothing on record to suggest that between the date of registration of the import and before the registration was cancelled, the goods were already put in transit. Petition disposed off.
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2018 (10) TMI 1423
Jurisdiction - Proper Officer - power to issue SCN - Whether Commissioner of Customs (Preventive), who is jurisdictional Commissioner also for whole state of Rajasthan, is proper officer in view of Section 2(34) of the Customs Act, 1962 for assessment under Section 17 and Re-assessment/recovery of duty under Section 28 of the Customs Act, 1962? - Applicability of case of M/s Mangali Impex vs. CCE [2016 (5) TMI 225 - DELHI HIGH COURT]. Held that:- Since the issue is pending before the Supreme Court against both the judgments of Bombay High Court as well as Delhi High Court and the view taken by the another Division Bench, the decision of the Tribunal is proper inasmuch as merely because the judgment is stayed, the other Division Bench cannot take a contrary view - no substantial questions of law arises - Appeal dismissed.
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2018 (10) TMI 1422
Import of Aircraft - violation of import conditions - whether the appellant importer of aircraft, have violated the post imports condition for availing the concession in the custom duty under N/N. 21/2002-Cus. as amended by N/N. 61/2007-Cus. read with condition No. 104, rendering it liable to payment of duty on import of aircraft? - scope of SCN. Held that:- It is evident that the appellant have not used the said aircraft in contravention of the permit granted by the DGCA to operate as a NSOP. Admittedly, DGCA has not cancelled the permit and admittedly same stands renewed from time to time - in the precedent order of this Tribunal in Global Vectra [2015 (6) TMI 151 - CESTAT MUMBAI] it has been held that issue of ticket is not an essential condition, not required in case of charter operation. Admittedly, appellant have operated their aircraft mainly for charter operation, which is permissible under the NSOP. The ld. Commissioner has traveled beyond the scope of the show cause notice as the duty was demanded under Section 28 of the Act whereas the demand under the said Section has been dropped but duty has been confirmed by way of enforcement of the bond, in absence of any such proposal in the show cause notice, the demand is bad and fit to be set aside. The appellant had rightly availed the benefit of concession/ exemption under Notification No. 21/2002 Cus. read with Notification No. 61/2007-Cus as amended - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1421
Pre-deposit - Rule 41 of CESTAT Procedure Rules, 1982 - consideration of ₹ 35 Lakh already deposited for execution of bank guarantee for provisional release of the seized goods - Held that:- The respondent Commissioner shall accept the bank guarantee of 100% unpaid differential duty after adjusting the deposit already made by the applicant. Accordingly, the respondent Commissioner shall release the goods provisionally within 15 days of this order - application allowed.
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Corporate Laws
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2018 (10) TMI 1425
Repayment of deposits - Fresh Scheme filed to re-fix schedules/instalments - Held that:- Here is an Appellant who just before stringent provisions of new Act are to be enforced, rushes to CLB under the old Act and gets a comfortable scheme settled for repayment of deposits which were due and would become due within one year and then under the new Act declares to the ROC that maturity of all the outstanding FDs has been extended. We do not think that such Appellant deserved indulgence from NCLT, even if it was to be held that such second application could be maintained. If Section 74 is seen, where in respect of any deposit accepted by a Company before the commencement of the Act, the amount of such deposit or part thereof or interest due thereon remains unpaid on the commencement (that is w.e.f. 01.04.2014) or becomes due at any time thereafter, the Company shall repay within one year from such commencement or from the date on which such payments are due, whichever is earlier. This is clear from Section 74(1)(b). This provision grants one year’s time from the date of commencement of the Act or date when the repayment is due, whichever is earlier. It is obvious that all deposits accepted before commencement of the new Act are required to be paid not later than one year from the date of commencement of the Act irrespective of whether such deposits had fallen due for payment or not and whether or not the Company was regular in payment of interest/deposit or not. Considering these provisions, it appears to us that Section 74(1)(b) was attracted and when it appears from record that the Appellant defaulted, the penal provisions would get attracted. We are not convinced with the argument of the learned counsel for the Appellant that the reference to the matter of “Jainendra Sahai Sinha” [2017 (3) TMI 1716 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] helps the Appellant to state that multiple applications for extension of time could be filed. When once a scheme had been got settled, from CLB, default on the part of the Appellant would attract penal provisions as the earlier scheme itself laid down. If we accept the argument of Appellant that more than one application could be filed under Section 74(2) of the Companies Act, it would be like rewriting the Section to read that “The Tribunal may on an application made by the company, from time to time, after considering the financial condition of the Company” allow further time to the Company. We cannot read or add words like “from time to time” in the provision as no such multiple applications are provided for. Else, the provision will become a tool to stall recovery suits and Insolvency Proceedings, which cannot be allowed. No substance in this Appeal.
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FEMA
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2018 (10) TMI 1420
Contravention of section 8 read with section 42 of FEMA, 1999 - Penalty imposed - Directorate has no jurisdiction to issue of the offences allegedly committed during the FERA regime after the repealing of FERA after the expiry of sunset clause on 31.5.2002 - Held that:- Admittedly the Company through which exports were made during 95-96 and as the company has become defunct no exports were made thereafter besides the buyers had gone under ground , auction at the Turkey port following change in the quota system etc.( i.e. letters dt.27.4.2010 and 6.12.2010 as replies to the show cause notice. These replies were not at all considered as could be seen from the findings and order of the Adjudication order. In the present appeal both the parties had made their submissions on 16th May, 2018 and the order was reserved. On the said date, two weeks time was granted to the parties to file their written submissions. The written argument of the appellant was received however no written submissions has been filed by the respondent. Even after waiting for the considerable period for the written submissions on behalf of the respondent, when the same was not filed, we proceeded to pass the present order on the basis of the written arguments filed by the appellant and the materials available on record. Once the issue of SCN of the offence completed in FERA regime no SCN can be issued after 1.6.2002 under FEMA,1999 because of the statutory bar under FEMA, 1999.Accordingly, in the light of the above, the appeal is allowed. The entire proceedings based on the illegally issued SCN (assuming jurisdiction under FEMA, 1999) is null and void ab-initio and therefore the penalty imposed is untenable by the force of law.
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Service Tax
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2018 (10) TMI 1419
Classification of services - Selling of Space or Time for advertisement, other than print media - agreeing to provide space in backside of the bill for commercial advertisement - appellants have profited at ₹ 0.10 per bill - whether the activity is liable to service tax under the head Selling of Space or Time for advertisement, other than print media? Held that:- The appellant BSNL have a very large number of subscribers to whom all the periodical telephone bills are sent. No doubt, BSNL have opted for lower tender of ₹ 0.58 per A-4 image whereby they have saved some of their printing cost. Quite obviously, the printer puts in the advertisements for commercial benefit. This being the case, the saving of Re.0.10 p per bill is nothing but a consideration or indirect income for allowing 1/5th of the telephone bill space to the printer to put in advertisements - The differential amount saved would very much then become the value of taxable service under the category of ‘sale of space for advertisement service’ in terms of section 65 (105) (zzzm) of the Act. Appellants are liable to pay service tax on the sale of space - appeal dismissed - decided against appellant.
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2018 (10) TMI 1418
CENVAT Credit - credit denied on the ground that the Input Service received by the appellant does not fall under the definition of Input Service - Held that:- The issue of admissibility of input service has been settled in the order-in-original which has been accepted by the Revenue, as no appeal has been filed against the said finding. Once it is accepted that input service received by the appellant falling under definition of input service, there is no reason to deny the Cenvat credit. Classification of services - Works Contract Service or not - N/N. 30/2012-ST dated 20.06.2012 (Serial No. 8) - liability of 50% of tax - reverse charge mechanism - it was alleged that appellant was not liable to pay service tax, therefore credit is not admissible - Held that:- No proceeding was initiated against the service provider. If the contention of the Revenue is accepted then there is short payment on the part of the service provider and in such case, proceeding for demand of 50% service tax should have been initiated against the service provider. In any case, the total service tax paid by either party i.e. by the service provider or service recipient is legally payable on the said service. The actual liability of service tax was discharged though 50% by service provider and 50% by the appellant. Therefore, on the service tax paid by the appellant credit is legally available and it cannot be said that amount paid by the appellant is not service tax and on this ground, credit cannot be denied. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1417
CENVAT Credit - input services - Chartered Accountants Service - Repairs and Maintenance and AMC service - Advertisement and Membership service - Travelling Services - Held that:- On the same services this tribunal has already taken a decision in the appellant’s own case in M/s Neutral Glass & Allied Industries Pvt Ltd : Versus C.C.E. & S.T. Surat - II [2017 (7) TMI 1239 - CESTAT AHMEDABAD], where except the CENVAT credit on various general insurance the credit on all other services have been allowed. General insurance services - Held that:- Ld. C.A. has fairly agreed that those general insurance services are not admissible to them. Hence, they are not contesting for an amount of ₹ 4,15,822/-. Accordingly, the demand of ₹ 4,15,822/- is upheld. Demand of Interest - Held that:- The appellant have not utilized the credit of ₹ 4,15,822/- as they have maintained the credit balance approx. ₹ 40 lakhs during the relevant period - In terms of amended rule 14 of CCR, 2004 with effect from 01/04/2012, the interest is chargeable only in case the assessee avail and utilize the credit - demand of interest not sustainable. Penalty - Held that:- There is no suppression of fact or malafide intention on part of the appellant. Moreover, even though services on which the appellant have conceded the demand, the issue appears to be debatable - penalty set aside. Appeal allowed in part.
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Central Excise
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2018 (10) TMI 1416
Demand barred by limitation - remand of the matter - Section 35G of the Central Excise Act, 1944 - Whether in the facts and circumstances of the case and in law, the Tribunal was correct in remanding the matter to the adjudicating authority? Held that:- The impugned order even does not record whether any of the parties at the hearing urged that the order dated 7th June, 2013 of the Commissioner was impossible to understand, therefore, making it difficult to challenge. It cannot be disputed that in the facts of a particular case, the Tribunal may refer/ restore the case to the adjudicating authority for fresh consideration. In fact, Section 35C of the Act, while dealing with the orders of the Tribunal does provide that it may if it thinks fit, refer the case back to the authority which passed the order in appeal. However, the word “may if it thinks fit”, is not an arbitrary or subjective satisfaction of the Tribunal but a satisfaction reached through the filter of reasons in the context of the grievance of the parties before it - In the impugned order, we find that the Tribunal has concluded that the order of the Commissioner in appeal is, incapable of understanding without itself referring to the dispute and any part of the finding of the order which are impossible to understand. Therefore, although the Tribunal is undoubtedly entitled to remand a matter for fresh consideration, the same cannot be at its whim and fancy or mere ispi dixit but a conclusion based on reasons. The substantial questions of law is answered in negative i.e. in favor of the Appellant and against the Respondent Revenue. - Matter restored before tribunal.
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2018 (10) TMI 1415
Refund of excess duty paid - rate of Central Excise duty reduced - time limitation - refund rejected for the reason that it had been filed beyond the period prescribed of one year as contemplated for under Section 11 (B)(1) of the Central Excise Act, 1944 - denial also on the ground of unjust enrichment. Time Limitation - Held that:- The appellant had paid the Central Excise duty on 5 February, 2009 or on subsequent dates. This would be in accordance with Section 11 (B) of the Act. The application seeking refund was filed on 22 January, 2010. Section 11(B) of the Act deals with the period of limitation. It provides that any person claiming refund of any duty of Excise may make an application for refund of such duty before the expiry of one year from the ‘relevant date’. Relevant date has been defined in Explanation (B) of Sub-Section 5 of Section 11(B) of the Act. Clause (f) provides that the date of payment in any other case would be the date of payment of duty. The limitation for filing the refund application would start from the date of payment of duty, which date was 5 February, 2009 or any subsequent date. The refund application was filed by the appellant on 22 January, 2010 - It was, therefore, within time - refund cannot be rejected on this ground. Unjust enrichment - Held that:- In the present case, the Appellant had sold the goods to M/s P.N. Saftech Pvt. Ltd. It had charged excess duty and it is not in dispute that the Appellant had issued a credit note for this excess amount in favor M/s P.N. Saftech Pvt. Ltd. - Such being the position, there is no unjust enrichment. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1414
Rectification of Mistake - the said order dated 08.05.2017 permits adjustment of credit only in respect of certain invoices which was denied by the lower authorities, however, no findings was given in respect of cenvat credit lying in their account which also should have been adjusted against the demand of duty - Held that:- Apart from the cenvat credit denied to the appellant on account of defective gate passes in case of M/s Mayank Rotoplast Industries, the appellant had pleaded they had other credit in the credit of the appellant. It was argued that the amount of demand needs to be finalized after considering the amount of cenvat credit available with the appellants in their credit duly substantiated by necessary documentary evidence. In view of above, the order dated 08.05.2017 is modified - ROM application allowed.
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2018 (10) TMI 1413
Valuation - includibility - For the purpose of manufacture of raw casting, they have got some patterns manufactured on job work basis from the job worker and paid for such pattern to the job worker. Subsequently, said patterns were sold to the buyer of raw casting - whether amortization cost of such patterns would be included in assessable value or not? - time limitation. Held that:- There is no dispute in the fact that the appellant have used the pattern which belong to the buyer of the goods, which means the appellant have manufactured final product by the use of patterns, supplied free of cost by the buyer to the appellant - As per Rule 6 of Central Excise valuation Rules, 2000, the consideration equal to the value of the goods supplied free of cost has to be included in the assessable value - the amortization cost of pattern was rightly included by the lower authority in the assessable value of final product. Time Limitation - validity of second SCN - Held that:- The appellant has shown income from sales of patterns in the balance sheet from which no one can make out that whether the sales of pattern is related to those patterns which were used in the manufacture of final product for buyer by using pattern belonging to the buyer. Therefore, there is a clear suppression of facts and mis-declaration on the part of the appellant - the second Show Cause Notice is for the period which is prior to the period of first Show Cause Notice. Since, there is a clear suppression of facts in both the show cause notice, 5 years period is available to the Revenue for issuing the sub-Show Cause Notice. Appeal dismissed - decided against appellant.
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2018 (10) TMI 1412
Rectification of Mistake - consideration of submissions made by applicant - Held that:- The submission which, as per the applicant, not considered has been recorded by the Tribunal and after considering the same, finding was given in sub-para (d) of Para 1 wherein the demand of ₹ 1,67,117/- was upheld. With this fact, it cannot be said that the submissions made by the appellant either in the appeal memo or during the hearing was not considered by the Tribunal - ROM Application dismissed.
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2018 (10) TMI 1411
CENVAT Credit - input services - rent a cab service - courier service - Hotel Accommodation Services - denial on account of nexus - Held that:- The services of Rent a cab and Hotel Accommodation are services are used for overall business activities of the appellant. The only business carried out by the appellant is manufacturing of excisable goods and sale thereof. Therefore, these services are actually related to the manufacturing activities of the appellant - credit allowed. Courier service - Held that:- As per Hon’ble Supreme Court judgment in the case of Ultratech Cement Ltd. [2018 (2) TMI 117 - SUPREME COURT OF INDIA] credit is admissible only in respect of services used for the removal of goods upto the place of removal - From the perusal of the records, it is not clear that whether all the courier services is used for removal of goods - As per the submission of Ld. Counsel, the courier service is used for sending documents or inward transportations as well as for outward transportation. Time Limitation - Held that:- he issue of service used for removal of goods there was a serious doubt. There were various conflicting judgments on the said issue - malafied intention cannot be attributed to the appellant. Therefore, the demand for extended period is hit by limitation - For the normal period in respect of courier services the demand will sustain only in respect of courier services which is used for removal of excisable goods beyond the place of removal. The demand in respect of CENVAT credit on Rent a Cab service, Hotel Accommodation and demand of extended period in respect of courier service is set aside and for remaining portion, the matter is remanded for requantification to the Adjudicating Authority - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (10) TMI 1410
Imposition of penalty - section 56 of the VAT Act - penalty imposed on the ground that it was not entitled to issue Form-C for purchase of 'dumper', yet it has issued Form-C - Defence of the assessee was that purchase of dumper, therefore, was clearly permitted in view of the registration certificate and that penalty proceedings are unsustainable. Held that:- In view of the fact that the registration certificate has not been taken note of, which clearly shows that the registration of the assessee under the Central Sales Tax Act is also for purchase of dumper, the argument advanced on behalf of the assessee that the tribunal has failed to take note of the materials brought on record is liable to be accepted. The order of tribunal dated 11.10.2018 is not liable to be sustained inasmuch as it omits to take note of the material facts/documents brought on record - matter is remitted to tribunal for a fresh consideration of cause.
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2018 (10) TMI 1409
Pre-deposit - Application for stay of the order - Section 26(6) of the Maharashtra Value Added Tax Act, 2002 - classification of aluminum composite panel - Held that:- The impugned order of the Tribunal dated 30th January 2018 is a reasonable order. It is an order which has been passed after taking into consideration, the submissions of the parties and finding that the issue is debatable directed the Petitioners to deposit 25 percent of the duty as a condition precedent to the stay of the order dated 30th January 2018. There is no reason to interfere with the impugned order dated 30th January 2018 passed by the Tribunal - petition dismissed.
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2018 (10) TMI 1408
Principles of natural justice - writ petition is filed by contending that the petitioner was not given opportunity of personal hearing as directed by this Court - Held that:- Perusal of the order passed by the respondent, impugned in this writ petition would show that such opportunity was given to the petitioner not only on 15.02.2018 and also on 22.02.2018 - this Court is not convinced that the petitioner was not afforded with any opportunity of personal hearing. The entire issue was raised by the petitioner before this Court in this writ petition pertains to factual aspects of the matter, which has to be gone into and considered by the next fact finding authority viz., the Appellate Authority. It is for the petitioner to work out their remedy before the Appellate Authority by filing regular appeal, since those authorities are also the fact finding authority. Petition disposed off.
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2018 (10) TMI 1407
Validity of assessment order - assessment years 2011-2012 to 2016-2017 - issue involving mis-match - grievance of the petitioner is that the Assessing Officer has not followed the directions and guidelines issued by this Court, while dealing with mis-match issue in the case of JKM Graphics Solutions Vs. CTO, [2017 (3) TMI 536 - MADRAS HIGH COURT]. Held that:- There is no dispute to the fact that except for assessment year 2016-2017, in all other assessment years, one of the issue pertains to mis-match. The said issue was already considered by this Court and a common order was passed, wherein, certain guidelines and directions were issued as to how the mis-match issue has to be dealt with by the Assessing Officer, by adopting centralized mechanism, in JKM Graphics Solutions. It is evident that any order passed without complying with the above directions or guidelines, cannot be sustained, if the issue involved pertains to mis-match. Therefore, this Court is of the view that the matter has to go back to the Assessing Officer to re-do the assessment, once again on merits and in accordance with law, by following the procedures and guidelines issued in mis-match cases - petition allowed by way of remand.
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2018 (10) TMI 1406
Rejection of application for settlement - rejection on the ground that the petitioner is not a registered dealer under the provisions of the Tamil Nadu General Sales Tax Act, 1959 - the petitioner did not have any opportunity to submit their defenses - principles of natural justice - Held that:- Admittedly, before the impugned orders are passed, the petitioner did not have any opportunity to submit their defenses. This opportunity ought to have been provided by the second respondent since there is a reference to the recommendation made by the first respondent stating that the petitioner is not eligible for enrollment under the Settlement Act. The other reason given is that the orders have been passed by the Commercial Tax Officer concerned based on the calculations made by the officers of the Enforcement Wing. In the considered view of this Court, if the same is true, it would amount to abdication of statutory duties by the Assessing Officer by merely following the proposals made by the Enforcement Wing officials. Petitioner not a registered dealer - Held that:- It is seen that the respondent – Department issued notices to the petitioner calling upon them to avail the benefit under the Settlement Act and intimating them that the last date for filing the applications was 31.12.2010 - The petitioner also presented the applications and remitted tax. After the applications were processed, the second respondent (predecessor officer) issued the communications dated 08.2.2011 to the Assessing Officer calling upon various details to be produced. Thus, the petitioner has been led to believe that their applications have been entertained and would be processed. Hence, the impugned orders rejecting the applications of the petitioner are not tenable. The matters are remanded to the second respondent for a fresh consideration - petition allowed by way of remand.
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