TMI Tax Updates - e-Newsletter
November 16, 2019

Case Laws in this Newsletter:

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

Articles

1. Reversal of credit as per rule 42 for ongoing real estate projects

   By: Shilpi Jain

2. Extension & Relaxation of GSTR 9 & 9C

   By: Ashwarya Agarwal

News

1. Racket of issuance of fake invoices involving GST of ₹ 22 crores busted

2. MCA notifies Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (Rules)

3. First ever International Buyer- Seller Meet in Arunachal Pradesh

4. RBI releases guidelines on the criteria for registering institutions, organisations and associations ‘on tap’ for grant of financial assistance from the Depositor Education and Awareness Fund

5. CCI approves the acquisition of shareholdings in Mumbai International Airport Limited (“MIAL”) by Adani Properties Private Limited (“APPL”)from Bid Services Division (Mauritius) Limited (“BSDA”) and ACSA Global Limited (“ACSA”), under Section 31(1) of the Competition Act, 2002 (“Act”)

6. CCI approves merger of the BNP Paribas (BNPP) Mutual Fund and the Baroda (BOB) Mutual Fund, under Section 31(1) of the Competition Act, 2002

7. CCI approves investment in Ecom Express Private Limited (Ecom) by CDC Group plc (CDC), under Section 31(1) of the Competition Act, 2002

8. CCI approves the secondary acquisition in Delhivery Private Limited (DPL) by SVF Doorbell (Cayman) Ltd. (SVFD),under Section 31(1) of the Competition Act, 2002

9. Norms of Aadhaar KYC are eased, not of the Change of Address in Aadhaar

Notifications

Customs

1. 82/2019 - dated 15-11-2019 - Cus (NT)

Seeks to amend Notification No. 95/2018- Customs (N.T.), dated the 6th December, 2018

GST

2. Order No. 08/2019 - dated 14-11-2019 - CGST

Central Goods and Services Tax (Eighth Removal of Difficulties) Order, 2019.

3. 56/2019 - dated 14-11-2019 - CGST

Central Goods and Services Tax (Seventh Amendment) Rules, 2019

4. 55/2019 - dated 14-11-2019 - CGST

Seeks to extend the due date for furnishing of return in FORM GSTR-7 for registered persons in Jammu and Kashmir for the months of July, 2019 to September, 2019

5. 54/2019 - dated 14-11-2019 - CGST

Seeks to extend the due date for furnishing of return in FORM GSTR-3B for registered persons in Jammu and Kashmir for the months of July, 2019 to September, 2019

6. 53/2019 - dated 14-11-2019 - CGST

Seeks to extend the due date for furnishing of return in FORM GSTR-1 for registered persons in Jammu and Kashmir having aggregate turnover more than 1.5 crore rupees for the months of July, 2019 to September, 2019

7. 52/2019 - dated 14-11-2019 - CGST

Seeks to extend the due date for furnishing FORM GSTR-1 for registered persons in Jammu and Kashmir having aggregate turnover of up to 1.5 crore rupees for the quarter July, 2019 to September, 2019

IBC

8. S.O. 4126(E) - dated 15-11-2019 - IBC

Central Government appoints the 1st day of December, 2019 as the date on which provisions of Insolvency and Bankruptcy Code, 2016 shall come into force

9. G.S.R. 852 (E) - dated 15-11-2019 - IBC

Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

Circulars / Instructions / Orders

GST - States

1. 2880/GST-2 - dated 7-11-2019

Clarification on scope of support services to exploration, mining or drilling of petroleum crude or natural gas or both.

2. 2883/GST-2 - dated 7-11-2019

Clarification on issue of GST on Airport levies.

3. 2886/GST-2 - dated 7-11-2019

Levy of GST on the service of display of name or placing of name plates of the donor in the premises of charitable organisations receiving donation or gifts from individual donors.

4. 2890/GST-2 - dated 7-11-2019

Clarification on applicability of GST exemption to the DG Shipping approved maritime courses conducted by Maritime Training Institutes of India.

5. 2893/GST-2 - dated 7-11-2019

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

6. 2896/GST-2 - dated 7-11-2019

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

7. 2899/GST-2 - dated 7-11-2019

Clarification on the effective date of explanation inserted in Haryana Government, Excise and Taxation Department, notification No.46/ST-2, dated 30.06.2017, serial number 3(vi).

8. 2902/GST-2 - dated 7-11-2019

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

Highlights / Catch Notes

GST

• Supply to Foreign Vessels Not Zero-Rated Under GST; Not Considered Export Without Specific Designation Outside India.

  Case-Laws - AAR : Zero rated supply or not - The supply of stores imported or otherwise, to foreign going vessels cannot, therefore, be construed as export unless it is marked specifically for a location outside India. It is not a zero-rated supply.
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• Biscuits and soaps labeled 'FOR PDS SUPPLY ONLY' are subject to GST when supplied to fair price shops.

  Case-Laws - AAR : Exemption from GST - Supply of biscuits, soaps etc. earmarked ‘FOR PDS SUPPLY ONLY’ to fair price shops/PDS distributors - Supply of goods through PDS is not exempted
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• Detention of Goods Unjustified Due to Non-Statutory Transport Certificate Discrepancy u/s 129(1) of CGST Act.

  Case-Laws - HC : Detention of goods - the conveyance in question has been detained on the ground of discrepancy in transport certificate which is not a requirement prescribed under the statute. Under the circumstances, the second respondent was not justified in passing the order of detention under section 129(1) of the CGST Act.
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• Government Ordered to Reopen Portal or Accept Manual Submission for Corrected FORM GST TRAN-1 by Nov 30, 2019.

  Case-Laws - HC : Input tax credit - shifting to GST regime - transitional credit - The respondents (Govt) are directed to either open the online portal so as to enable the petitioner to again file the rectified FORM GST TRAN-1 electronically or accept the manually filed FORM GST TRAN-1 with corrections on or before 30th November, 2019
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Income Tax

• Reversal of Profits for Expected Losses Challenges Accounting's Matching Principle, Impacting WIP Valuation and Financial Reporting.

  Case-Laws - AT : Reversal of profits declared in earlier years on account of estimated loss expected - valuation of work in progress (WIP) - The matching principle requires recording expenses in the same accounting period in which the revenues were earned as a result of the expenses. Expense recognition, similar to revenue recognition, has a balance sheet effect. - The action of the assessee upsets the applecart of mercantile system of accounting, the matching principles.
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• TDS Order u/s 195(2) Appealable by Payer, Not Assessee, as Per Section 248 of Income Tax Act.

  Case-Laws - AT : TDS u/s 195 - appealable order u/s 246A - there being a specific provision under section 248 of the Act for filing appeal against order passed u/s 195(2) of the Act, that too by payer / deductor of tax at source the said order cannot be challenged under section 246A of the Act by the assessee.
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• Court Dismisses Appeal Due to Ill-Conceived Arguments and Absence of Appellant; Costs Imposed for Judicial Misconduct.

  Case-Laws - AT : Not only that the appeal is ill conceived, but, even after pointing out the legal position, rather than explaining his stand or expressing remorse for having filed this appeal, the assessee did not even bother to attend the court proceedings any further, and submitted this note pointing out, on the basis of, what appears to be, fallacious logic, as to why special bench is required to be constituted in this case. Such an approach cannot meet any judicial approval, including by this forum. - Appeal dismissed with cost.
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• Assessing Officer wrongly rejected taxpayer's accounts, violating section 145(3) and section 144 of Income Tax Act.

  Case-Laws - AT : Rejection of books of account - Instead of making the assessment by considering the provisions of section 145(3) read with section 144, the AO has proceeded to make specific disallowance after rejection of books of account. This action of the AO is not permitted under law
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• Finance Act Amendment Can't Penalize Assessee as Default Under Sec 195; No Retroactive Penalties Allowed.

  Case-Laws - AT : TDS u/s 195 - Retrospective amendment - The amendment brought in by the Finance Act with retrospective effect, which was passed in the year subsequent to the year under consideration, should not be considered for penalizing the assessee by treating him as an Assessee in default.
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• Simulator Training Fees Not Classified as Royalty Under TDS Section 195; Payment Tied to Instructor-Led Training.

  Case-Laws - AT : TDS u/s 195 - Royalty - The fact that the charges for use of the simulator is separately quantified on hourly basis does not mean that the Assessee is hiring the same or making payment for a right to use the same. Without the imparting of training by the instructors, the hiring of simulator on its own does not have any purpose. It cannot therefore be said that the Assessee paid royalty for use of simulator.
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Customs

• Quasi-Judicial Orders Under Repealed Imports Control Can't Contradict 1992 Act's Liberalization Intent, Clause 8(1) Discussed.

  Case-Laws - SC : Prohibited goods or not - powers conferred by Clause 8(1) of the Imports (Control) Order, 1986 - For, a quasi judicial order passed in exercise of powers under the Statutory Order which stands repealed along with the repealed Act, is not saved especially when it will be per se repugnant to 1992 Act and defeat the spirit of opening of the import regime for the stated goods
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• Appellant's Livelihood Impacted by Seizure of Working Capital; Gold Stock Released Under Advance Authorisation and Exhibition Export Schemes.

  Case-Laws - AT : Provisional release of gold stock in trade - Advance Authorisation Scheme - Exhibition Export Scheme - Due to seizure of almost the whole working capital (Goods, raw material, W.I.P.), for over 6 months, the appellant is facing difficulty of livelihood, it’s workmen, and others too. - The provisional release of goods allowed on certain terms.
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Indian Laws

• Court Rejection of Arbitration Applications May Limit Access to Justice in India: Importance of Careful Consideration.

  Case-Laws - SC : Rejection of Arbitration application - If the court were to take a contrary approach and minutely examine the plea and judge its credibility or reasonableness, there would be a danger of its denying a forum to the applicant altogether, because rejection of the application would render the finding (about the finality of the discharge and its effect as satisfaction) final, thus, precluding the applicant of its right event to approach a civil court.
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Service Tax

• Appellant complied with Rule 6 (3A) by reversing input service credit before Show Cause Notice, extending limitation period.

  Case-Laws - AT : Extended period of limitation - the appellant itself has chosen to follow the procedure laid down under Rule 6 (3A) on and from 01.04.2014 by reversing the proportionate input service credit attributable to the exempted service of trading, which clearly shows the knowledge of the appellant as to the requirement of law, which was also done prior to the issuance of the Show Cause Notice - extended period rightly invoked.
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• Demand Set Aside: ECIS Contract Cannot Include Material Component Without Breakdown of Service and Material Costs.

  Case-Laws - AT : Erection, Commissioning or Installation Service (ECIS) - Had there been a break up of the material and the service components in the contract itself, the demand would have been raised on the service component ignoring the material. - it is found that the contract in question is a composite works contract - The demand in this case has been made under Erection, Commissioning and Installation Service. ECIS does not include the contract where transfer of materials is involved. - Demand set aside.
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Central Excise

• Show Cause Notice Issuance u/s 11A: No Preliminary Manufacturing Determination or Hearing Required.

  Case-Laws - SC : Scope of SCN - Manufacturing activity taking place or not - the scheme of Section 11A does not contemplate that before issuance of any show cause notice, there must, prima facie, be: (a) a preliminary determination that the process or activity undertaken in the matter amounts to manufacture; and (b) before arriving at such preliminary determination, any hearing to the concerned person is contemplated.
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• Eligibility Confirmed for Notification Benefit; Liberal Procedure Allowed to Ensure Benefits Aren't Denied for Procedural Errors.

  Case-Laws - AT : In the present case, eligibility to benefit of the notification is not in dispute and therefore the strict interpretation of the notification is not to be followed because once the appellant is found to be eligible for the benefit of the notification thereafter liberal procedure to be followed, is permissible - the substantive benefit should not be denied for procedural infractions
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• Central Government's 6% interest rate on duty refund is mandatory; errors in adjudication must not recur.

  Case-Laws - AT : Rate of Interest on Refund of duty paid - once there is a notification of Central Government fixing 6% as the rate of interest same has to be followed as having power of statute. - The error of adjudication which is very much apparent irrespective once committed cannot be repeated.
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VAT

• Bona Fide Purchaser Exempt from Third Party Tax Arrears Under Securitisation Act; No Liability for Prior Debts.

  Case-Laws - HC : Recovery of outstanding tax arrears from the purchaser of the property - The petitioner being a bona fide purchaser who has purchased the subject property in sale proceedings under the Securitisation Act prior to any charge having been created in favour of the first respondent has no liability to discharge the debts of the third respondent.
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Case Laws:

• GST

• 2019 (11) TMI 715
  Levy of GST - Zero rated supply or not - supply of foreign going vessels stores like paint, rope, spare parts, electronic equipment etc. - HELD THAT:- A foreign going vessel anchored within the territory of India is not a place outside India and taking the stores on board such a vessel does not amount to supply to a location outside India. Section 69 of the 1962 Act cannot, therefore, cover within the ambit of export the case where the warehoused goods are taken on board a foreign going vessel. A special provision needs to be made under section 88(a) of the 1962 Act to extend the facility of exemption from import duty to such imported stores. The Applicant does not claim that its supplies of stores to the foreign going vessels are restricted to warehoused goods. In any case, at the time of supply, both the supplier (the Applicant) and the recipient (the foreign going vessel) are located in India. The supply of stores imported or otherwise, to foreign going vessels cannot, therefore, be construed as export unless it is marked specifically for a location outside India. It is not a zero-rated supply. The Applicant is, therefore, liable to pay tax on such supplies under the GST Act or the IGST Act, as the case may be - However, the Applicant s supplies to the foreign going vessels shall be treated neither as a supply of goods nor services in terms of paragraph 8(a) of Schedule III under section 7(2)(a) of the GST Act if such stores are warehoused goods supplied to the recipient before clearance for home consumption.

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• 2019 (11) TMI 714
  Exemption from GST - Supply of biscuits, soaps etc. earmarked FOR PDS SUPPLY ONLY to fair price shops/PDS distributors - N/N. 2/2017 - CT (Rate) dated 28/06/2017 - HELD THAT:- Supply of goods through PDS is not exempt under Notification No. 2/2017 - CT (Rate) dated 28/06/2017, as amended from time to time (reference to which includes reference to State Notification No. 1126 - FT dated 28/06/2017) or any other notification. Activities or transactions of the Applicant are not included in Schedule III either. The Applicant is, therefore, liable to pay GST at the applicable rate on his supplies of goods through PDS.

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• 2019 (11) TMI 713
  Extension of time period for filing of GST Tran-1 - transitional credit - transition to GST regime - HELD THAT:- The respondents are directed to reopen the portal within two weeks from today. In the event they do not do so, they will entertain the GST TRAN-1 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. They will also ensure that the petitioner is allowed to pay its taxes on the regular electronic system also which is being maintained for use of the credit likely to be considered for the petitioner. List this matter on 16.12.2019.

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• 2019 (11) TMI 712
  Prayer for withdrawal of petition - SCN issued by the Joint Commissioner under Section 73(1) of CGST Act - HELD THAT:- Petition is dismissed as withdrawn.

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• 2019 (11) TMI 711
  Detention of goods alongwith the vehicle - Section 129 of GST Act - detention on the ground that the transport receipt was a photocopy and the details filled in the transport receipt were handwritten - case of petitioner is that, there being no format prescribed for transport receipt under the GST Acts, there was no question of there being any breach of the provisions of the GST Acts - Circular No.64/38/2018-GST dated 14.9.2018 - whether the second respondent was justified in exercising powers under section 129(1) of the CGST Act? HELD THAT:- The documents which were required to be kept while transporting the goods are prescribed under rule 138A of the CGST Rules, 2017 - On a plain reading of the above rule, it is evident that the documents which are required to be kept by the person in charge of a conveyance while transporting goods are (i) the invoice or bill of supply or delivery challan, as the case may be; and (ii) a copy of the e-way bill - In the present case, admittedly when the trucks in question came to be intercepted, the concerned driver had produced the invoice as well as the eway bill in respect of the goods which were being transported. In order to ensure uniformity in the implementation of the provisions of the CGST Act across the field formations, the Central Board of Indirect Taxes and Customs in exercise of the powers conferred under section 168(1) of the CGST Act, has issued Circular No.41/15/2018-GST dated 13.4.2018, laying down the procedure for inspection of conveyance for inspection of goods in movement and detention, release and confiscation of goods and conveyances and has issued certain instructions - the instructions issued by the Board are binding upon all the officers discharging duties under the GST Acts. Though the person in charge of the conveyance had produced the documents which were statutorily required to be kept with him during the course of transportation of the goods, the vehicle in question was detained on extraneous grounds namely that the lorry receipt issued by the transporter was a photocopy without computerised serial number and contact number details - In terms of the instructions contained in the above circular dated 13 April, 2018, the proper officer, empowered to intercept and inspect a conveyance, may intercept any conveyance for verification of documents and/or inspection of goods. In the present case, since no FORM GST MOV-02 has been issued, no Part A of Form GST EWB-03 has been uploaded on the common portal, no FORM GST MOV-04 has been issued and no Part B of Form GST EWB-03 has been uploaded on the common portal, it is clear that the conveyance has been intercepted for verification of documents and not for physical verification inasmuch as, if the officer intended to undertake an inspection he was required to issue an order for physical verification/inspection of the conveyance, goods and documents in FORM GST MOV-02 and thereafter upload Part A of Form GST EWB-03 on the common portal, prepare a report in FORM GST MOV-04 and furnish the same to the petitioner and to upload the final report of the inspection in Part B of Form GST EWB-03 on the common portal. It is abundantly clear that both the documents prescribed under rule 138A of the CGST Rules, viz. the invoice and the e-way bill, were produced by the person incharge of the conveyance. The proper officer, upon verification of these two documents has not found any discrepancies therein. Hence, in terms of the instructions contained in paragraph 2(b) of the above circular, the proper officer was required to allow the conveyance to move further. However, the proper officer has issued an order of detention under section 129(1) of the CGST Act on the ground that the lorry receipt was a photocopy and did not bear a computerised serial number or contact number details - Thus, the impugned order has been passed contrary to the statutory requirements which do not require production of a lorry receipt by the person in-charge of a conveyance as well as contrary to the instructions issued by the Board in the above referred circular. Insofar as the second ground based on a subsequent socalled statement of driver of one of the conveyances bearing No.GJ-04-AT-9302 is concerned, it may be noted that such statement is said to have been recorded on 2.4.2019, wherein the driver has stated that he had loaded the goods at Sihor in Bhavnagar and was to unload them at Aurangabad - Thus, in the statutory form, the statement of the driver has been recorded stating that the goods were being transported from Bhavnagar to Virar, Thane, but the respondents seek to place reliance upon some unverified statement produced on record with the affidavit-in-reply, which is not permissible in law. Besides, there is force in the submission made by the learned advocate for the petitioner that the destination of the goods will have no bearing on the tax liability of the petitioner, provided the destination is outside the State of Gujarat and, therefore, no mala fide intention can be imputed to the petitioner as the petitioner as well as the recipient of goods, are registered under the GST Acts and both the invoice and e-way bill are found to be in order. It is evident that the person in-charge of the conveyance carrying the goods in question had in his possession, the invoice as well as the e-way bill in respect thereof, and both such documents were produced before the proper officer when the conveyance in question came to be intercepted. It is not the case of the respondents that any discrepancy was found in the aforesaid two documents - Under the circumstances, in the light of the instructions contained in Circular dated 13.4.2018 issued by the Board, it was incumbent upon the second respondent to issue a release form in FORM GST MOV-05 and allow the conveyance to move further - However, the conveyance in question has been detained on the ground of discrepancy in transport certificate which is not a requirement prescribed under the statute. Under the circumstances, the second respondent was not justified in passing the order of detention under section 129(1) of the CGST Act. The impugned orders of detention dated 2.4.2019 as well as the impugned notices dated 2.4.2019 in each of the petitions, are hereby quashed and set aside - Petition allowed.

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• 2019 (11) TMI 710
  Input tax credit - shifting to GST regime - transitional credit - section 140 of the CGST Act - rectification of mistake in the declaration filed in FORM GST TRAN-1 - case of Revenue is that the petitioner, after the expiry of approximately two months from the last date of filing FORM GST TRAN-1 viz. 27th December, 2017, had requested the department on 19th February, 2018, to correct the mistake in the declaration filed in FORM GST TRAN-1 - non-compliance with the rule 117 of the CGST Rules - HELD THAT:- In terms of rule 117 of the CGST Rules, FORM GST TRAN-1 was required to be filed within the prescribed time limit. Such time limit was extended by the Central Government from time to time and was lastly extended till 27th December, 2017. It is an admitted position that the petitioner had filed the FORM GST TRAN-1 within the time prescribed in the rules. However, there was an inadvertent mistake on the part of the petitioner in not mentioning the details of Rs. 83,99,136/- in column 6 of Table 5a and instead of which the petitioner had uploaded the details in column 5 of Table 5a due to misunderstanding of the form - It is only when it was noticed by the petitioner that due to inadvertent error, the form had not been correctly filled in, resulting the petitioner being denied input tax to the extent of Rs. 83,99,136/-, that the petitioner sought to revise the form and sought the advice of the department. The petitioner, accordingly, addressed several communications to the respondents in respect of his genuine grievance; however to no avail. In the case of Bhargava Motors v . Union of India [ 2019 (5) TMI 899 - DELHI HIGH COURT ], where the Delhi High Court is satisfied that the Petitioner s difficulty in filling up a correct credit amount in the TRAN-1 form is a genuine one which should not preclude him from having his claim examined by the authorities in accordance with law. Adverting to the facts of the present case, considering the averments made in the affidavit-in-reply filed on behalf of the respondents, it is manifest that it is an admitted position that the petitioner was entitled to credit of Rs. 83,99,136/- in addition to credit of Rs. 8,64,055/- (which came to be allowed as it was correctly mentioned). The only reason for denying credit of such a huge amount of Rs. 83,99,136/- is that the time limit for filing a revised TRAN-1 form has elapsed on 27th December, 2017 - the substantive right of the petitioner to claim transitional credit of such amount is sought to be denied on the ground that the time limit for filing revised FORM GST TRAN-1 has elapsed. In the opinion of this court, the respondents ought to have provided in the system itself a facility for rectification of such errors which are clearly bona fide. Besides, although the system provided for revision of a return, the deadline for making the revision coincided with the last date for filing the return, that is, 27th December, 2017. Thus, such facility was rendered impractical and meaningless - This court is further of the view that retention of the amount of Rs. 83,99,136/- by the respondents which the petitioner is otherwise entitled to get by way of transitional credit would be directly hit by article 265 of the Constitution of India which provides that no tax shall be levied or collected except by authority of law. The action of the respondents in denying transitional credit of the sum of Rs. 83,99,136/-, which even according to the respondents, the petitioner is otherwise entitled by way of transitional credit, cannot be sustained - The respondents are directed to either open the online portal so as to enable the petitioner to again file the rectified FORM GST TRAN-1 electronically or accept the manually filed FORM GST TRAN-1 with corrections on or before 30th November, 2019 - petition allowed.

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• Income Tax

• 2019 (11) TMI 709
  Fixation of the rate of TDS as sought by the petitioners u/s 197 - @1.5% OR 0.17% - petitioner states that against the said fixation, the petitioner had preferred a Revision under Section 264 of the Act before respondent No.2 but the same has not been decided despite being preferred on 16.05.2019 - HELD THAT:- It is pointed out by the learned counsel for the petitioner that the said information has been already supplied vide letter dated 24.10.2019. In view of aforesaid, we dispose of the writ petition with direction to the Revisional authority to consider the petitioner s revision and pass a reasoned order thereon within next three weeks. We make it clear that we have not examined the merits of the petitioner s claim. Accordingly, present writ petition stands disposed of.

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• 2019 (11) TMI 708
  Assessment u/s 153A - assessee obtained accommodation purchase bills of high magnitude so as to evade taxes which stood corroborated by the statements of various suppliers / associated persons as recorded u/s 132(4) - HELD THAT:- We are unable to subscribe to approach adopted by first appellate authority in deleting the impugned additions. It is noted that the additions were deleted merely on the basis of remand report that no incriminating material was found during the search operations overlooking the fact that computer back up was seized during the search operation along with incriminating material. Nothing has been brought on record regarding the content of the seized material which would corroborate the findings that no incriminating material was found for the year under consideration. Search proceedings were triggered against the assessee in the background of the fact that the assessee obtained accommodation purchase bills of high magnitude so as to evade taxes which stood corroborated by the statements of various suppliers / associated persons as recorded u/s 132(4) on the date of search. Nothing on record would suggest that any of such statement was ever retracted by any one of them subsequently and therefore, these statements, in our considered opinion, had substantial evidentiary value and the onus was squarely on assessee to prove that the transactions were genuine. No such onus was ever discharged by the assessee. Assessee failed to produce books of accounts and file requisite documentary evidences at the time of search proceedings, assessment proceedings as well as during appellate proceedings and merely harped on the point that no incriminating material was found in the search proceedings. The incriminating material was always to be seen with reference to the books of account being maintained by the assessee and the books of accounts were never produced. The findings of AO that few bank accounts were not even reflected in the financial statement, would also assume importance, in this regard. Director of the assessee company, in statement u/s 132(4), sought time to furnish requisite information / documentary evidences to prove the genuineness of the transactions but failed to produce the same also could not refute the allegations that it obtained bogus bills from various suppliers. Therefore, we are unable to subscribe to the approach adopted by learned first appellate authority. Hence, we deem it fit to setaside the order of learned first appellate authority and restore the matter back to Ld. CIT(A) for appreciation of factual matrix in the light of investigation being carried out by Ld. AO and re-adjudicate the same in accordance with law. The assessee, in turn, is directed to substantiate its claim that no additions would be warranted for the year under consideration.

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• 2019 (11) TMI 707
  Levying fees under section 234E - A.O. passed the intimation u/s 154 levying the late fees under section 234E - assessee contended before the Ld. CIT(A) that A.O. has erred in making intimation under section 154 without any intimation under sub-section (1) of Section 200A in respect of TDS return - HELD THAT:- No justification to sustain the Orders of the authorities below. Amendment to Section 200A of the I.T. Act in which sub-clause (c) have been inserted in the Section w.e.f. 01.06.2015 which includes that while processing of the statement of tax deducted at source the fee, if any, shall be computed in accordance with the provisions of Section 234E. Further, no order of intimation under section 200A(1) have been brought on record and virtually the A.O. has shown his inability in giving any factual position in this regard. Therefore, contention of assessee is justified that no intimation under section 200A(1) have been issued in the present case. Therefore, there is no question of making any rectification in any of the orders. Since rectification under section 154 could be made in some order already existing, therefore, in the absence of any Order or intimation under section 200A(1) of the I.T. Act, no amendment under section 154 could be done by the authorities below. Section 154(3) provides that an amendment which has the effect of enhancing the assessment or reducing refund or otherwise including liability of assessee or the deductor or the collector, shall not be made under this Section unless the authority concerned has given notice to assessee or deductor or collector or of its intimation to do so and he shall allow the assessee or the deductor or the collector a reasonable opportunity of being heard. In the present case, the intimation u/s 154 have been issued automatically without giving any opportunity of being heard to the assessee. Therefore, there is violation of principles of natural justice as well as violation of Section 154(3)

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• 2019 (11) TMI 706
  Rejection of books of accounts - Estimation of income - HELD THAT:- It is an admitted fact that assessee did not produce books of account, bills and vouchers before the authorities below and even same are also not produced before the Tribunal. Therefore, rejection of books of account is justified in the matter. The A.O. while estimating income of assessee, has applied net profit rate of 12%. Assessee has filed chart of net profit rate for earlier year as well as subsequent years which shows that in subsequent assessment year assessee has declared 8.134% as net profit rate, however, in A.Y. under appeal, net profit rate is 3.014%. Considering the non-cooperation from the side of the assessee and non-production of the books of account and that assessee declared net profit rate of 8.134% in subsequent assessment year, we are of the view that application of net profit rate of 12% by the authorities below is excessive and unreasonable. Therefore, considering the history of the assessee, we direct the A.O. to apply net profit rate of 8% against the total turnover and made addition accordingly. Unexplained cash credit - The assessee stated that these are the amounts which were received from M/s. Om Track Builders and M/s. Shiv Ram Construction. The assessee also submitted before the Ld. CIT(A) that these amounts were security released from these firms, for which, assessee could not produce any evidence. Therefore, these are not part of the receipts pertaining to the contract business. Therefore, same could not be included in the total turnover for the purpose of application of net profit rate. These are in the nature of unexplained cash credit, which, assessee has not shown to the Revenue Department and has also not explained.Therefore, addition of Rs. 4,50,000/- is maintained. With respect to addition of Rs. 1,06,400/- assessee merely contended that this amount was never received by him. However, A.O. found from Form 26AS downloaded from the system that assessee has received this amount of Rs. 1,06,400/- from M/s. Mukand Engg. Ltd. Assessee has not explained at all as to on what account the amount have been received. Assessee submitted that this amount have not been received by the assessee. Therefore, it is also unexplained credit in nature and authorities below have correctly made the addition of Rs. 1,06,644/-. This ground of appeal of Assessee is dismissed.

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• 2019 (11) TMI 705
  Transfer Pricing Adjustment - ALP adjustment - assessee has benchmarked the transaction on TNMM basis - HELD THAT:- As decided in MERCK LIMITED VERSUS DY. COMMISSIONER OF INCOME TAX, RANGE 6 (3) , MUMBAI AND VICA-VERSA [ 2016 (3) TMI 1105 - ITAT MUMBAI] We do not think benefit test has too much relevance in the arm s length price ascertainment. When evaluating the ALP of a service, it is wholly irrelevant as to whether the assessee benefits from it or not; the real question which is to be determined in such cases is whether the price of this service is what an independent enterprise would have paid for the same. In case TPO can demonstrate that the consideration for similar services, under the CUP method, is NIL, he can very well do so. That s not, however, his case. He only states that these services are not worth the amount paid by the assessee. Such band statements and sweeping generalizations cannot help the case of the revenue authorities. The assessee has benchmarked the transaction on TNMM basis, and unless the revenue authorities can demonstrate that some other method of ascertaining the arm s length price on the facts of this case will be more appropriate a method of ascertaining the arm s length price, the TNMM cannot be discarded. In the present case, though a finding is given to the effect that no services are rendered, in the light of the contradictions in this finding and the observations above, it is clear that in effect commercial expediency of this payment is questioned. That exercise, in our considered view- particularly in the light of Hon ble Delhi High Court s judgment in the case of EKL Appliances [ 2012 (4) TMI 346 - DELHI HIGH COURT] , cannot be conducted in the course of ascertaining the arm s length price. In view of the above discussions, as also bearing in mind entirety of the circumstance, it is clear that the impugned ALP adjustment is contrary to the scheme of the Act. The authorities below have been swayed by the considerations which were not germane to the issue. We, therefore, uphold the grievances of the assessee and direct the Assessing Officer to delete the ALP adjustments in respect of the payment of fees for technical services. The assessee gets the relief accordingly. Disallowance u/s 14A r.w.r. 8D - assessee had offered suo-moto disallowance - After adjusting the suo-moto disallowance of Rs. 1.13 Lacs as made by the assessee, Ld. AO proposed additional disallowance - HELD THAT:- Additional disallowance as made by Ld. AO would not be sustainable in view of the fact that the assessee had already offered suo-moto disallowance in its computation of income which far exceed the exempt income earned by the assessee during the year under consideration. Therefore, by deleting the impugned addition of Rs. 2,404/-, we allow this ground of appeal. Depreciation on Fictitious assets - HELD THAT:- Upon perusal of chart, we find that this issue would go back to the file of Ld.AO for re-adjudication de-novo on similar lines as directed by coordinate bench of this Tribunal in assessee s own case for AYs 2007-08 2008-09, ITA No. 3943-44/Mum/2013 order dated 25/01/2017. The Ld. AO is directed to re-adjudicate the same in the light of stand taken in AYs 2007-08 2008-09 pursuant to the aforesaid directions of the Tribunal. Disallowance u/s 145A - HELD THAT:- Upon perusal of chart, we find that this issue would also go back to the file of Ld.AO for re-adjudication de-novo on similar lines as directed by co-ordinate bench of this Tribunal in assessee s own case for AYs 2007- 08 2008-09. AO is directed to re-adjudicate the same in the light of stand taken in AYs 2007-08 2008-09 pursuant to the aforesaid directions of the Tribunal. The ground stand allowed for statistical purposes. Disallowance u/s 43B - provision for leave encashment - AR had drawn attention to para 12.2 of the Ld. DRP s order to submit that there was actually a write-back of Rs. 7.55 Lacs during the year and therefore, no disallowance would be warranted - HELD THAT:- Keeping in view the submissions made, we direct Ld. AO to re-adjudicate the same de-novo in the light of submissions made by Ld. AR. The ground stand allowed for statistical purposes. Interest u/s 234 and initiation of penalty - HELD THAT:- These grounds being consequential, would not require any specific adjudication. The Ld. AO is directed to compute interest in accordance with law.

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• 2019 (11) TMI 704
  Addition on account of suppression of gross turnover - assessee has claimed benefit of TDS made against the said amount - HELD THAT:- We find that CIT(A) after considering various decisions cited in his order has deleted the addition made by Assessing Officer. Before us, the Revenue could not point out any fallacy in the findings of CIT(A). In view of this, we find no reason to interfere with the order of CIT(A) and thus, the ground No.1 of Revenue is dismissed. Addition u/s 43B - auditor had reported being the amount of professional tax deducted from the employees but was not deposited till the date of filing the return of income - HELD THAT:- Appellant was prevented by reasonable cause due to which professional tax deducted from the salary of the employees could not be deposited to the Government Exchequer. It is also an undisputed fact that the appellant had credited the amounts so deducted to a separate account, secondly, undisputedly, debit to Profit Loss A/cis on account of Salary and not Professional Tax. Section 43B does not include in its ambit expenditure in the nature of salary which is distinct from bonus and leave encashment, therefore, there is no question of disallowance of expenditure in the nature of salary debited to Profit Loss A/c. Hence, the disallowance made by the A.O is deleted Disallowance u/s. 40(a)(ia) - HELD THAT:- No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. What is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. Addition on account of service tax collected but not deposited - HELD THAT:- We find that no order has been passed on the M.A. whereby the original order of the Tribunal has been recalled by the Tribunal. In such a situation, we are of the view that the original order of the Tribunal for earlier year is a valid order and in that case the Tribunal on identical facts, has decided the issue in favour of assessee. We further find that Hon bleDelhi High Court in the case of CIT Vs. Noble Hewitt (India) (P) Ltd. [ 2007 (9) TMI 238 - DELHI HIGH COURT] has held that when assessee has not debited the amount of service tax to the P L A/c and has not claimed it as expenditure, the question of disallowance does nor arise. Before us, the Revenue has not placed any contrary binding decision in its support. In view of this, we find no reason to interfere with the order of CIT(A) and thus, the ground No.4 of Revenue is dismissed.

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• 2019 (11) TMI 703
  Revision u/s 263 - limited scrutiny case - foreign exchange loss claimed as revenue expenditure is to be disallowed - whether the AO having failed to convert limited scrutiny into a complete scrutiny, the assessment order would be rendered erroneous and prejudicial to the interests of the Revenue? - HELD THAT:- In a case of limited scrutiny assessment, the Assessing Officer is duty bound to make a prima facie enquiry as to whether there is any other item which requires examination and in the assessment, the potential escapement of income thereof exceeded Rs. 10 lakhs. He ought to have sought the permission of CIT/DIT to convert the limited scrutiny assessment into a complete scrutiny assessment . If there is no escapement of income, which would have been more than Rs. 10 lakhs, the Pr. CIT could not exercise jurisdiction u/s. 263 of the I.T. Act. In the present case, the assessee itself agreed that the Pr. CIT is justified in giving direction to rework MAT income after adding back the provision for doubtful debts. Now, the argument of the Ld. AR that in case of limited scrutiny assessment, the Pr. CIT could not exercise jurisdiction u/s. 263 of the Act, is devoid of merit. Accordingly, the ground relating to challenging of the exercise of jurisdiction by the Pr. CIT u/s. 263 is rejected. Whether gain on account of foreign exchange fluctuation can be reduced from the cost of assets as per the provisions of section 43(1)? - main contention of the Ld. AR is that loss arising on account of fluctuation of exchange rate with regard to loan availed for acquisition of fixed assets is a revenue loss and not a capital loss - HELD THAT:- In view of revision made in AS-11, now treatment shall be as per revised AS-11 (2003). Exchange gain or loss on foreign currency fluctuations in respect of foreign currency loan acquired for acquisition of fixed asset should be allowed as revenue expenditure. However, in the Preamble of AS-11 (Revised 2003), it was stated that the Revised Standard supersedes AS-11 (1994) except that in respect of accounting for transactions in foreign currencies entered into by the reporting enterprise before the date of AS-11 (2004) comes into effect, AS 11 (1994) will continue to be applicable. In our opinion, sec. 43A is only relating to the foreign exchange rate fluctuation in respect of assets acquired from a country outside India by using foreign currency loans which is not applicable to the indigenous assets acquired out of foreign currency loans. Further, the Revised Standard supersedes AS 11 (1994), except that in respect of accounting for transactions in foreign currencies entered into by the assessee before the date of AS-11 (2004) comes into effect, AS-11 (1994) will continue to be applicable. Foreign exchange loss arising out of foreign currency fluctuations in respect of loan in foreign currency used for acquiring fixed assets should be allowed as revenue expenditure by charging the same into the Profit and Loss account and not as capital expenditure by deducting the same from the cost of the respective fixed assets. Hence, in our opinion, there is no potential escapement of income on the issue relating to allowability of foreign exchange loan taken for the construction of new building and additional equipment. Accordingly, this ground of appeal of the assessee is allowed.

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• 2019 (11) TMI 702
  Disallowance u/s 14A read with Rule 8D - HELD THAT:- In the case of Pr. CIT vs. Nirma Credit Capital (P.) Limited [ 2017 (9) TMI 485 - GUJARAT HIGH COURT] as held that amount of expenditure by way of interest would be interest paid by assessee on borrowings minus taxable interest earned during the financial year, for the purposes of applying factors in Clause (ii) of Sub Rule (2) of Rule 8D where assessee pays interest on borrowings, as also earns taxable interest on investments. Same view has also taken by Coordinate Benches of ITAT in the case of DCIT vs. DLF Asset Pvt. Ltd. [ 2018 (9) TMI 1624 - ITAT DELHI] , DCIT vs. Machino Finance Limited [ 2016 (9) TMI 1541 - ITAT KOLKATA] and DCIT vs. Trade Apartment Limited [ 2012 (3) TMI 421 - ITAT KOLKATA] copies of these precedents were filed by the learned counsel for the assessee, and are placed on record. We decide the issue in dispute in favour of the assessee and direct the AO to complete disallowance under Rule 8D of I.T. Rules r.w.s. 14A of the I.T. Act by considering net interest (interest paid by the assessee on borrowings minus taxable interest earned during the year) for purpose of Clause (ii) of Sub Rule (2) of Rule 8D. Disallowance of deduction u/s 80-IC - HELD THAT:- CIT(A) on this issue is just and fair and in accordance with law, having regard to the facts and circumstances of the case the learned counsel for the assessee has also not brought any further materials for our consideration to persuade as to take a view different from the view taken by the learned CIT(A). The order of the learned CIT(A) is well reasoned, detailed and speaking order. No such infirmity in the order of ld. CIT(A) has been brought to our notice by ld. Counsel of the assessee, warranting any interference by us. In fact, no specific submissions were made by the ld. Counsel for the assessee, except that this ground of appeal was consequential to ground no. 2 of appeal.

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• 2019 (11) TMI 701
  TP Adjustment - adjustment made u/s 92CA(3) on account of interest on loan and on account of corporate guarantees - HELD THAT:- There is no dispute that the CIT(A) has adopted judicial consistency in following his findings on the every issue in earlier assessment years attending finality upto this tribunal as well. There is no distinction on facts or law indicated at the Revenue s behest in the impugned assessment year. We therefore affirm the CIT(A) s findings under challenge deleting corporate guarantee s arm s length price adjustment(s) in both the impugned assessment years Transfer pricing adjustments, interest on loan advanced to payee - HELD THAT:- The matter is well covered by the general consensus among the Hon ble ITAT Benches that international transactions involving cross- border country loans to AE can be bench marked against LIBOR, as also supported by the RBI s circular that a spread ranging from 1 % - 2% over LIBOR is reasonable (or advancing loans. Therefore, in deciding the matter, it is held that an interest rate of LIBOR plus 2% can ,be held to be Arm s length rate of interest, and as for the case at hand, the interest charged by the assessee from its AE is higher than LIBOR plus 2%, the adjustment made by the Ld. TPO in the case is held to be unjustified and not sustainable. CIT(A) has followed the propositions of law laid down by different benches of the Tribunal on this issue, we find no infirmity in the same. The Kolkata Bench of the ITAT has in a number of cases including M/s. EIH Ltd. vs. DCIT [ 2018 (1) TMI 1372 - ITAT KOLKATA] followed the same principles. Hence the order of the Ld. CIT(A) on this issue is upheld and Ground No. 1 of the revenue is dismissed Adjustment of interest on a loan issue by AE - HELD THAT:- In subsequent FYs balance 0.4% of the FCCBs were also converted to equity. Hence, it stands established that cost investment in 6.5% bonds is 1% as opposed to 6.5% worked out by the TPO. Thus, 100% of the FCCBs were converted to equity when the order of TPO was passed i.e. 31.10.2011. In view of the above discussion and the fact that the ALP rate of 13.95% computed by the TPO cannot be compared with that charged by the assessee from its AE, we uphold the deletion of the addition by the ld. CIT(A) and dismiss this ground as well as the appeal of the Revenue. Additional depreciation - @ 20% u/s 32(1)(ii) on the plant and machinery including electrical installations acquired during the year - HELD THAT:- 20% u/s 32(1)(ii) of the Act, on the plant and machinery including electrical installations acquired during the year - Electrical installation was a part of the plant machinery newly installed. Section 32(1)(iia) of the Act specifically mentions those items of plant and machinery on which additional depreciation could not be claimed. In view of the above submission, it stands clear that electrical installation is not a prohibited item. In the present case, there is no dispute that the assessee is engaged in the manufacturing of low ash metallurgical coke Employees contribution towards PF - We find that the ld. CIT(A) has followed the judgement of the Hon ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT] and judgement of the jurisdictional High Court in the case of ACIT vs. M/s. Vijay Shree Ltd. [ 2011 (9) TMI 30 - CALCUTTA HIGH COURT] and in the case of CIT, Central II vs. M/s. R.E.I. Agro Ltd. [ 2013 (12) TMI 1517 - CALCUTTA HIGH COURT] and deleted the disallowance. We find no infirmity in the same. Computation of book profit u/s 115JB of the Act with respect to disallowance u/s 14A Rule 8D - HELD THAT:- This issue as to whether the disallowance u/s 14A r.w. Rule 8D of the Act has to be made while computing book profits u/s 115JB of the Act is covered by the decision of the special Bench of the ITAT (Delhi) in the case of ACIT vs. Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] wherein it was held that: The computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w. Rule 8D of the Income Tax Rules 1962. Respectfully following the same we uphold the order of the ld. CIT(A) and dismiss this ground of the Revenue. Transfer pricing adjustment on bank guarantee commission - For the AY 2009-10 the very same issue was adjudicated by us, at ground no. 1 of this order. We have held that the transaction in question is not an international transaction as defined in Section 92B of the Act. Consistent with the view taken therein, we uphold the deletion of the transfer pricing adjustment by the ld. CIT(A) for the very same reasons given for the AY 2009-10. Transfer pricing adjustment on loan advanced to AE - TPO made a Transfer pricing adjustment of interest receivable amounting to Rs. 34,46,885/-. Similar issue was dealt by us for the earlier year as ground no. 2. We have held that international transaction involving cross-border loan to AE can be benchmarked against LIBOR. The RBI Circular states that the range from 1-2% for LIBOR is reasonable for advancing loans. Interest rate of LIBOR +2% can be held as an arm s length rate of interest. As the assessee has charged an interest higher than LIBOR +2%, the ld. CIT(A) has held that the same is at arm s length and deleted the adjustment. We find no infirmity in this order. Even otherwise the loan transaction can be benchmarked against the credit facilities provided to the AE by SBI, Sidney. Though the credit facilities were guaranteed by the assessee, such guarantee did not have any bearing on the facilities and rate of interest charged by the bank. Hence, this rate is an independent benchmark. When this benchmark is applied to the facts, no adjustment is called for. Thus for these reasons this ground of the Revenue is dismissed.

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• 2019 (11) TMI 700
  Rejection of books of accounts - NP determination - AO applied 8.5% Net profit rate - HELD THAT:- CIT (A) followed the finding of the ITAT Jodhpur based on past history. Department of Income Tax also preferred an appeal against the order of the ITAT before the Hon ble Jurisdictional High Court which was dismissed by the Hon ble High Court. The ITAT Jodhpur mentioned From the above chart it is clear that for A.Y. 2010-11, the assessing officer had applied N.P. Rate at 8.50%, however, the ITAT Jodhpur Bench has accepted the declared result of 1.85%, which was also approved by the Hon ble Jurisdictional High Court. AO has not referred any example of other businessmen or traders. So, past history of the assessee is best example. So far Grounds (i) and (ii) are concerned, Ld. CIT(A) rightly applied Net Profit Rate 1% by increasing from 0.92% to 1% N.P. Rate. Accordingly, we do not find any infirmity in the order of the ld. CIT(A) for applying the NP rate of 1%. In the result, grounds taken by the revenue are dismissed. Addition made U/s 40(a)(ia) and 40A(3) - payment made for JCB hire charges - HELD THAT:- In this Act, the JCB is included in Goods Carriage. According to Section 194C (6), no deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of contract during the course of business of plying, hiring or leasing goods carriage, on furnishing of his PAN Number to the person paying or crediting such sum so that assessee company was not liable to deduct TDS as the JCB owner has submitted his PAN for non-deduction of TDS. Coordinate Bench in various cases have held that when the profit is estimated by rejecting books of account, no disallowance U/s 40(a)(ia) of the Act is to be made. Disallowance made u/s 40A(3) we found that the assessee has made the payment to the parties as they insist for payment on the very day. Due to genuine hardship of the parties, assessee has to pay in cash. Technically, the payment are covered by the provisions of Section 40A(3) but the same was considered along with Rule 6 DD (b) as it existed then which duly provided for the genuine hardship that may be caused to the taxpayer. Nowhere the A.O. found that the payment was not genuine or that the payment was not for the purpose of business. In the case of CIT vs Smt. Santosh Jain [ 2006 (8) TMI 167 - PUNJAB AND HARYANA HIGH COURT] , it was held that where the income of the assessee has been computed by applying a Gross Profit Rate, there is no need to look into the provisions of Section 40A(3) of the Income Tax Act, 1961, as applying the Gross Profit Rate takes care of expenditure otherwise than by way of crossed cheques also. Following the above judicial pronouncements, we do not find any merit in the addition made by the A.O. U/s 40(a)(ia) and 40A(3) of the Act. Accordingly, we confirm the action of the ld. CIT(A) in deleting the disallowance so made by the A.O.

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• 2019 (11) TMI 699
  Depreciation on goodwill - HELD THAT:- As decided in own case from the above advantages accrued by the assessee is nothing but various intangible assets and business advantages, this is nothing but an intangible asset as enumerated in S.32 as per this definition, it includes know-how, patents, copyrights, trademarks, licenses, franchises, etc., any other business or commercial rights of similar nature. Therefore, all the rights are similar to the rights mentioned in section 32 is acquired by the assessee in this case. Thus goodwill is a business or commercial rights of similar nature and the assessee is benefited by amalgamation by acquiring that commercial value being intangible assets which the assessee has paid on amalgamation i.e excess consideration over and above the excess of assets over liabilities is a goodwill which is an asset entitled for depreciation u/s 32. As such, assessing officer is justified in granting the depreciation on goodwill Excess claim of depreciation on printer and scanner holding that same constitutes integral part of computer system for granting higher rate of depreciation - HELD THAT:- CIT(A) allowed the appeal of the assessee following the order of the ITAT, Hyderabad Bench in assessee s own case and also the decision of the ITAT, Kolkatta Bench in the case of Samiran Majumdar [ 2005 (8) TMI 293 - ITAT CALCUTTA-B] Computer consists of input devices, connecting wires, the CPU assembly along with memory and various data processing cards and output devices. It is not logical to treat one part of the computer for 60% depreciation and another part as plant and machinery - assessing officer is incorrect in denying proper depreciation on computer systems and he is directed to allow the same Claim made u/sec. 80IA for the steam generated out of steam and used for captive consumption - assessee claimed that the power generated using the steam is also eligible for deduction u/sec. 80IA of the act - HELD THAT:- Steam generated by the appellant and used for captive consumption in various processes is also entitled for the aforementioned deduction. The assessing officer is however directed to quantify the value of steam at an arm s length price as has to be done in the case of electricity generation and as discussed in the various judgments supra. I m also fortified in my view by the decision of the Hon ble ITAT, Jaipur B Bench in DCIT vs. Maharaja Shree Umaid Mills [ 2008 (6) TMI 255 - ITAT JAIPUR-B] subject to the aforementioned calculations. In the case of electricity generation and also about and also subject to the direction of carry forward losses etcetera as discussed supra, deduction u/s 8OIA is allowed to the appellant with respect to steam generation. Foreign exchange liability and application of section 43A - HELD THAT:- The coordinate Bench of ITAT, Chennai in the case of SCM Garments (P) Ltd. [ 2015 (8) TMI 366 - ITAT CHENNAI] considered the identical issue and held that any loss or gain arising out of foreign currency fluctuation during any previous year shall be deducted or added from the actual cost of the asset of asset on actual payment or repayment of loan. The ITAT, Visakhapatnam Bench in the case of Andhra Petrochemicals Ltd., [ 2008 (5) TMI 340 - ITAT VISAKHAPATNAM] expressed the view that the amended provisions of section 43A are not clarificatory in nature and applicable from 01/04;2003. Thus it clear that as per section 43A of the act, the increase or decrease in foreign exchange fluctuation with regard to purchase of asset required to be considered on actual payment basis. In the instant case, the Assessing Officer proposed to make the adjustments as at the end of the year as per the system of account followed by the assessee instead of making the adjustment at the time of actual payment. Case law relied on by the ld.AR supports the decision of the ld.CIT(A). No other case law was brought on record by the Revenue to controvert the case-law relied on by the ld.AR. Therefore, we do not find any infirmity in the order of the ld.CIT(A) and the same is uphold. Disallowance u/sec. 14A r.w.r. 8D - HELD THAT:- As per Rule 8D(2)(iii), the disallowance required to be made is 0.5% of the investments which worked out to Rs. 8,32,000/- against the addition, confirmed by the ld. CIT(A) for Rs. 8,00,000/, the difference was only Rs. 32,000/-. In the instant case, the assessee has not disputed with regard to earning of income u/sec. 14A of the Act. As per Rule 8D(2)(iii), the disallowance required to be made is 0.5% of the investments which the Assessing Officer rightly disallowed. Therefore, we set aside the order of the ld.CIT(A) and uphold the addition made by the Assessing Officer. Computation of income as per normal provision after making the necessary adjustments of mark to market gains in respect of fluctuation for foreign exchange on acquisition of capital assets - HELD THAT:- In revenues appeal we, have upheld the order of the Ld.CIT(A) for making adjustments of the cost of asset on actual payment of loan. Accordingly we, direct AO to make necessary adjustments to the cost of the asset on actual payment basis and recompute the income after allowing the correct depreciation under the normal provisions. Thus, this ground of cross objection of the assessee is allowed. Carry forward of unabsorbed depreciation consequent to making adjustments to the cost of assets as a consequence to making adjustments under section 43A - Assessing Officer is directed to determine the correct unabsorbed depreciation and allow the same to be carried forward for the subsequent years Revised computation of income submitted by the company at the time of assessment proceedings - HELD THAT:- The assessee did not chose to file appeal before the ld.CIT(A) with regard to non-acceptance of second revised return of income. As per the provisions of Income-tax Act, the assessee required to file the revised return of income as provided u/sec. 139(4) of the Act within one year from the end of the relevant assessment year. There is no provision in the Income-tax Act to file the revised computation of income reducing the income returned by the assessee during the pendency of income tax proceedings after expiry of the time limit allowed under the act. The second revised return was filed beyond the time limit allowed under the act as observed from the assessment order. Therefore the AO did not consider the revised computation of income which was beyond the limitation allowed under the Act. The said ground was not raised before the ld.CIT(A) and the assessee did not file any petition for admission of additional ground, therefore, this ground raised by the assessee in this cross objection is not maintainable, hence, dismissed. Computation of normal income after giving effect to the foreign exchange gain or loss after making necessary adjustments u/sec. 43A - HELD THAT:- The assessee requested for making necessary adjustments in depreciation schedule and to compute the normal income after determining the correct amount of depreciation as per the normal provisions of Income-tax Act. In the instant case, the Assessing Officer proposed to make adjustment in respect of depreciation after giving effect to the provisions of section 43A of the Act. The ld.CIT(A) has directed the Assessing Officer to make necessary adjustments of foreign exchange gain or loss on actual payment basis which we have upheld. Therefore, we direct the Assessing Officer to make necessary adjustments and recompute the income as per the normal provisions after allowing the correct Depreciation and make necessary rectifications. This ground of CO of the assessee is allowed. Granting of short credit of tax deducted at source while determining the balance income tax payable or refundable to the assessee - HELD THAT:- It is the obligation of the Assessing Officer or the Income Tax Authorities to determine the correct amount of tax and allow due credit for taxes paid or tax deducted/collected at source. The assessee should not be forced to knock the doors of courts for their legitimate rights. Therefore, we, direct the Assessing Officer to allow the credit for the taxes paid/ TDS made while determining the tax liability Charging of interest u/sec. 234C and section 244 - HELD THAT:- The similar issue is involved in the A.Y. 2009-10 also. Charging correct interest on taxes payable and refund due is the statutory obligation of the Income-tax Authorities, therefore we direct the Assessing Officer to charge the interest correctly u/sec. 234C and allow the due interest against the amounts due to the assessee. Exemption of income under the normal provisions in respect of dividend income received by the assessee - assessee contended that the Assessing Officer did not allow exemption u/sec. 10(34) - HELD THAT:- Assessing Officer is directed to verify the claim of the assessee with regard to dividend income received and allow exemption u/sec. 10(34) of the Act after considering the disallowance u/s 14A of the act. Thus, this ground of cross objection raised by the assessee is allowed for statistical purpose. Not providing depreciation on assets capitalised vide assessment order dated 2008-09 - HELD THAT:- The Assessing Officer disallowed which was claimed as revenue expenditure by the assessee. However as per the computation of income, it is seen that the Assessing Officer had allowed the depreciation Rs. 9,56,068/- on the purchases capitalized by the assessee. Ld.AR did not bring any error in the order of the Assessing Officer at the time of presenting the appeal, no such ground was raised by the assessee before the ld. CIT(A). The assessee also did not file any petition for admission of additional ground, therefore, we do not find any reason to interfere with the order of the ld. CIT(A) and hold that the ground raised by the assessee is not maintainable and is dismissed accordingly. Non adjustment of exempt income u/sec. 10(34) while computing the income u/sec. 115JB - HELD THAT:- This ground was not raised before the ld. CIT(A) and no petition for admission of additional evidence is filed, therefore this ground raised by the assessee is not maintainable and hence dismissed. MAT liability consequent to the adjustments made - HELD THAT:- This ground was not raised before the ld. CIT(A). Since the issue is factual issue and consequential in nature, we direct the Assessing Officer to verify the same and decide the issue afresh on merits. This ground stands allowed for statistical purpose. Short credit of tax deducted at source and not allowing the credit for the advance tax paid - HELD THAT:- AO is directed to verify the taxes paid by the assessee or taxes deducted at source and allow the due credit for the taxes paid/deducted/collected while giving effect to the order of this tribunal. Accordingly, cross objection on this ground is remitted back to the file of the Assessing Officer for limited purpose of verification of taxes paid/deducted/collected and allow the credit. These grounds of cross objection filed by the assessee are allowed for statistical purposes.

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• 2019 (11) TMI 698
  Reversal of profits declared in earlier years on account of estimated loss expected - valuation of work in progress (WIP) - percentage completion method basis - Addition stating that that an enterprise may choose to apply this guide note from an earlier date provided - HELD THAT:- An examination of the working of total estimated loss on the project S.S. House as worked out by the assessee clearly indicates that it suffers from basic deficiencies viz. (i) total cost incurred till 31/03/2014 Rs. 91,07,85,390/ or Rs. 978,886,048/- is not a reliable one, as the assessee is sticking to two figures, without supporting computation, and (ii) total estimated loss of Rs. 3,95,51,736/- or Rs. 108,431,736/- is not a reliable one, as the assessee is sticking to two figures, without supporting computation, (iii) there is no prudent estimate of additional cost for completion of the project. The matching principle requires recording expenses in the same accounting period in which the revenues were earned as a result of the expenses. Expense recognition, similar to revenue recognition, has a balance sheet effect. In this view, expense recognition is simultaneous with a decrease in an asset or an increase in a liability. In such a scenario, reversal of profits declared in the earlier years on account of estimated loss expected of Rs. 6,81,13, 166/- in WIP for the impugned assessment year by the assessee upsets the applecart of mercantile system of accounting, the matching principles. Therefore, no reliance can be placed on the above workings of total estimated loss as on 31.03.2014 of project S.S. House arrived at by the assessee, which are nothing but bald statements. As the order passed by the Ld. CIT(A) is not based on proper appreciation of facts and law, we set it aside. Resultantly, the order passed by the AO is restored.

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• 2019 (11) TMI 697
  TDS u/s 195 - maintainability of the appeal filed by the respondent company before learned Commissioner (Appeals) - non tds deduction - PE in India - appealable order u/s 246A - HELD THAT:- As decided in own case [ 2016 (6) TMI 728 - ITAT MUMBAI] Order appealed against is an order passed under section 195(2) against ONGC requiring it to deduct tax at source on payments made to the assessee. Further, there is no final determination of liability under the Act as far as the assessee is concerned which can only be determined when assessment is framed against the assessee. That besides, there being a specific provision under section 248 of the Act for filing appeal against order passed under section 195(2) of the Act, that too by payer / deductor of tax at source the said order cannot be challenged under section 246A of the Act by the respondent. We are of the considered opinion that the appeal filed by the respondent assessee before the learned Commissioner (Appeals) against the order passed under section 195(2) in the case of ONGC is not maintainable. Commissioner (Appeals), in our view, was not competent under the provisions of section 246A of the Act to entertain such an appeal. We, therefore, set aside the impugned order passed by the learned Commissioner (Appeals) and restore the order of the Assessing Officer under section 195(2). - Decided in favour of revenue

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• 2019 (11) TMI 696
  Reopening of assessment u/s 147 - absence of cumulative satisfaction of reason to believe -HELD THAT:- In the present case, the notice of reopening the assessment u/s 148 of the Act is on account of change of opinion by the AO, which is not permissible as per law. We are therefore of the view that the impugned notices cannot be sustained and the same deserves to be quashed and set aside. We therefore quash the impugned reassessment proceedings for A.Y. 2006- 2007 are thus set aside the same. Since we have hereinabove set aside the assessment framed u/s 143(3) r.w.s 147 of the Act and held it to be void therefore the issue on merits have been rendered academic and requires no adjudication. Thus, the grounds of Assessee are allowed.

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• 2019 (11) TMI 695
  Cash deposits in the saving bank account of assessee - HELD THAT:- It is the case of the assessee that he had received loans aggregating to Rs. 25 lakhs from outsiders for purchasing of shipping boat for business purpose. It is also a fact that on such cash deposits which have been received by the assessee, AO vide order dated 22.12.2016 passed u/s 271D had levied penalty on Rs. 13 lakhs which is the unsecured loan to have been received by the assessee by cash from those persons. In such a situation, find force in the argument of the Ld.A.R. that to the extent of Rs. 13 lakhs, the parties have been identified and no addition is warranted to that extent. With respect to the balance amount, no plausible information has been furnished by the Ld.A.R. and nor was he in a position to controvert the findings of AO and Ld.CIT(A). Therefore direct the deletion of addition to the extent of Rs. 16,50,000/- and the balance amount of addition is confirmed. Thus, the ground of the assessee is partly allowed.

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• 2019 (11) TMI 694
  Stay petition rejected - appeal maintainable before this Tribunal or not - appellant directed to pay 20% of the demand as per Circular No. 1914 r.w. on dt. 29-02-2016 - HELD THAT:- The question of stay application before the Tribunal thus normally comes into play only when the demands in question are impugned in appeal before us. That apart, the stay under section 220(6) can only be granted by the Assessing Officer, and not by his supervisory authorities such as the Principal Commissioner of Income Tax. As a matter of fact, an order passed by the Principal Commissioner of Income Tax, declining grant of stay during the currency of appeal before the first appellate authority i.e. CIT(A), is only an administrative order. The occasion to seek invocation of such an administrative indulgence comes after the Assessing Officer declines to exercise his powers of granting stay under section 220(6), and, perhaps for this reason, it is somewhat inappropriately described as an order under section 220(6). Such an order is not an appealable order before this Tribunal; the law does not provide so. The only possibility of the Tribunal coming into picture, so far as the stay of demands during the pendency of first appeal before the CIT(A), is in a situation in which the CIT(A) rejects the stay petition filed by the assessee. That proposition too is highly contentious, to say the minimum, but let s not bother about that hypothetical situation as on now. Present appeal is not an appeal maintainable before this Tribunal. Not only that the appeal is ill conceived, but, even after pointing out the legal position, rather than explaining his stand or expressing remorse for having filed this appeal, the assessee did not even bother to attend the court proceedings any further, and submitted this note pointing out, on the basis of, what appears to be, fallacious logic, as to why special bench is required to be constituted in this case. Such an approach cannot meet any judicial approval, including by this forum. We deprecate this kind of an approach.

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• 2019 (11) TMI 693
  Rejection of books of account - Additions made on account of difference in the closing balance on account of purchases in comparison to the assessee s account in the books of supplier as well as adhoc disallowance made by the AO on account of Coal and Fuel expenses - HELD THAT:- AO rejected the books of account of the assessee by invoking the provisions of section 145(3). Thus once the AO has invoked the provisions of section 145(3), the only course of action left with the AO to proceed with the assessment on best judgment basis and the income of the assessee ought to have been estimated on some reasonable and proper basis. It is also not in dispute that the past history i.e. the GP/NP declared by the assessee is the proper and reasonable basis and guidance for estimation of income of the assessee for the year under consideration. Instead of making the assessment by considering the provisions of section 145(3) read with section 144, the AO has proceeded to make specific disallowance after rejection of books of account. This action of the AO is not permitted under law as the book results were rejected by the AO then the items which are part of the trading account cannot be disallowed but the income of the assessee was required to be estimated. The assessee has pointed out that the AO has not pointed out any decline in the GP rate of the assessee for the year under consideration but the income declared by the assessee shows a better GP and NP rate in comparison to the preceding years. He has referred to the comparative chart of the preceding years as well as for the year under consideration showing the GP declared by the assessee. Thus having regard to the fact that the AO has rejected the books of account and the GP declared by the assessee for the year under consideration is 17.88% in comparison to the average of 3 years at 17.76%, the rejection of books of account under section 145(3) would not ipso facto lead to an addition if the assessee has declared the results either better or in line with the preceding years. Therefore, once the assessee s GP declared for the year under consideration is better than the average of the preceding year, then inspite of rejection of books of account, no addition is called for. Even otherwise, the AO has not attempted to make any trading addition but made specific disallowance after rejection of books of account which is not permissible. Accordingly, additions made by the AO on account of some discrepancies in the balance sheet on account of Coal and Fuel expenses are deleted. Appeal of the assessee is partly allowed.

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• 2019 (11) TMI 692
  Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D2 of the Rules while computing book profit under section 115JB - HELD THAT:- CIT(A) noted that the AO has rightly disallowed expenses relatable to exempt income amounting to Rs. 2,03,95,311/- by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules, while computing book profit under section 115JB of the Act in view of provision of clause (f) of explanation (1) to section 115JB of the Act. We noted that this issue is squarely covered by the decision of special bench of this tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] wherein, it is held that the provisions of section 14A read with Rule 8D of the Rules does not apply while computing book profit under section 115JB of the Act. Hence, respectfully following Special Bench decision in the case of Vireet investment (supra), we delete the disallowance and allow this issue of assessee s appeal. Disallowance u/s 14A - HELD THAT:- We noted that the CIT(A) has categorically admitted that here is no satisfaction recorded in the assessment order while referring to the provisions of section 14A of the Act read with Rule 8D(2) of the Rules. We noted that this issue is squarely covered in favour of assessee and against Revenue by the decision of Supreme Court in the case of Maxopp Investment Ltd. vs. CIT [ 2018 (3) TMI 805 - SUPREME COURT] . However, this issue also covered by the decision of Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Company Ltd vs. DCIT [ 2017 (5) TMI 403 - SUPREME COURT] . As this issue is squarely covered in favour of assessee and against the Revenue, hence, we delete the disallowance only on the issue of non-recording of satisfaction for invoking the provisions of section 14A of the Act read with Rule 8D of the Rules. Hence, this issue of assessee s appeal is allowed. Depreciation of UPS @ 15% treating the same as part of plant and machinery, as against the claim of depreciation of the assessee @ 60% as part of the computer - HELD THAT:- Depreciation allowed at the rate of 60% on UPS Deduction u/s 80IA as certified in form No. 10 CCB in respect of infrastructure facility in the nature of Rail System developed, operated and maintained by assessee - HELD THAT:- Additional grounds relating to Sale tax exemptions, income from receipt of sale of carbon credit which arising out of the accounts of the assessee are part of the proceedings of the assessment with regard to the accounts of the assessee including the audit report. Further, in regard to claim of deduction under section 80IA of the Act i.e. regarding infrastructure facility development, operated and maintained by the assessee in regard to the development of integrated Rail System between its system manufacturing plant and the nearest railway station of the Indian Railways for inward and outward movement of goods for efficient and cost effective transportation to and from various destination is also part of the audit report which is also part of the assessment records. In our view these additional grounds are to be admitted and to be adjudicated. Since, the below authorities have not gone into the details and verification of documents, these are admitted and set aside to the file of the AO for adjudication in term of the law. Hence, these three additional issues are admitted and the matter remanded back to the file of the AO.

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• 2019 (11) TMI 691
  Validity of exercise of jurisdiction u/s 263 - whether the AO has conducted an enquiry on these two issues i.e. applicability of provisions of section 40A(3) as well as allowability of deduction u/s 80C? - HELD THAT:- We find that though the AO has passed a very lengthy order running into 43 pages, however, the issue of applicability of section 40A(3) as well as the correctness of the claim of deduction under section 80C were not taken up for verification by the AO. Thus the assessment order is completely silent on these issues and there is nothing on record to suggest that the AO has even raised any query on these two issues. Thus, the case of the assessee falls in the category of complete lack of enquiry on these two issues. Therefore, we do not find any merit or substance in ground no. 1 of the appeal of the assessee. The lack of enquiry on the part of the AO renders the assessment order erroneous in so far as prejudicial to the interests of the revenue. Accordingly, the exercise of jurisdiction under section 263 of the IT Act is valid and proper. Disallowance u/s 40A(3) in respect of the payment made in cash - HELD THAT:- Once the assessee has filed the return of income declaring the income based on the business results shown in the books of account then the AO is required to examine the correctness of the return of income and claim of the assessee in the context of business results shown as per the books of account. The assessee did not claim the applicability of the provisions of section 44AD either before the AO or before the ld. PCIT. Even otherwise, this plea of the assessee is also required to be verified based on the relevant facts as recorded in the books of account. Therefore, merely because the turnover of the assessee for the year under consideration is less than the limit provided under section 44AD, would not preclude the PCIT to exercise his jurisdiction under section 263 regarding violation of provisions of section 40A(3). The payment of cash for purchase of plots of land shown as stock-in-trade is not in dispute, therefore, the explanation furnished by the assessee are required to be examined in the light of the relevant provisions of the Act and Rules. Though the ld. PCIT has observed that the cash payment is not allowable under section 40A(3), however, we direct the AO to verify the explanation of the assessee and then decide the issue of disallowance under section 40A(3) Disallowance of deduction under section 80C - HELD THAT:- Since the assessee has now filed the receipt of payment of premium towards Life Insurance which was not filed either before the AO or before the ld. PCIT, therefore, we direct the AO to consider the claim of deduction under section 80C after verification of the payment of life insurance premium. Accordingly the impugned order of the ld. PCIT is modified.

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• 2019 (11) TMI 690
  Revision u/s 263 - Denial of claim u/s 80(P)(2)(d) - HELD THAT:- In the instance case, there is no dispute that Ajmer Central Cooperative Bank Ltd is a co-operative society. Therefore, in light of the aforesaid discussions, for the purposes of section 80P(2)(d) it shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. Whether by virtue of provisions of Section 80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) can be denied to the assessee society ? - HELD THAT:- By virtue of provisions of Section 80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) cannot be denied to the assessee society as the deposits have been placed by the assessee co- operative society with Ajmer Central Co-operative Bank Ltd which is registered as a co-operative society and retains the same character even though it is carrying on the banking business. Even though the AO has not examined the matter relating to deduction so claimed by the assessee, the order passed by the Assessing officer wherein he has allowed the deduction u/s 80(P)(2)(d) on interest on FDRs placed with Ajmer Central Co- operative Bank Ltd cannot be held as erroneous in view of the aforesaid discussion wherein there cannot be any dispute regarding claim of the deduction u/s 80(P)(2)(d) of the Act. In light of the same, the impugned order passed by the Pr CIT passed u/s 263 of the Act is set-aside and matter is decided in favour of the assessee.

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• 2019 (11) TMI 689
  TDS u/s 195 - Payments made to non residents - fees for technical services as per the provisions of section 9(1)(vii) of the Act as well as relevant Double Taxation Avoidance Agreement (DTAA) - whether the part of the consideration which is attributable to imparting of training outside India could be taxed as FTS. i.e., the payment made to M/s. Lufthansa, Germany and M/s. Alteon, Singapore? - HELD THAT:- We need to notice is as to what is simulator fee. A flight simulator is a device that artificially re-creates aircraft flight and the environment in which it flies, for pilot training, design, or other purposes. It includes replicating the equations that govern how aircraft fly, how they react to applications of flight controls, the effects of other aircraft systems, and how the aircraft reacts to external factors such as air density, turbulence, wind shear, cloud, precipitation, etc. Flight simulation is used for a variety of reasons, including flight training (mainly of pilots), the design and development of the aircraft itself, and research into aircraft characteristics and control handling qualities. Therefore flight simulator is essential part of training imparted to the pilots and crew of aircraft. The fact that the charges for use of the simulator is separately quantified on hourly basis does not mean that the Assessee is hiring the same or making payment for a right to use the same. Without the imparting of training by the instructors, the hiring of simulator on its own does not have any purpose. It cannot therefore be said that the Assessee paid royalty for use of simulator. CIT(A) has rightly held that the action of the AO in treating the payments to non-residents and any part of it as royalty is unsustainable. As far as payment to M/s.CAE Aviation Dubai, is concerned, the CIT(A) held that the payment is not in the nature of Royalty. The question whether it is FTS does not arise because of the absence of a clause relating to FTS in the DTAA regarding FTS and the settled position of law that in the absence of a clause in a treaty not dealing with a particular item of income, the same should not be regarded as residuary income but income from business and in the absence of Permanent Establishment in India (PE) of the non-resident in India, the same cannot be taxed. We have already made a reference to the decision of the ITAT Bangalore in the case of ABB FZ-LLC Vs. ITO (IT) Ward-1(1) Bangalore, [ 2016 (11) TMI 368 - ITAT BANGALORE] which was a case rendered in the context of DTAA between India and UAE. The decision of the CIT(A) is in line with the decision referred to above and is a correct interpretation of the treaty. We find no grounds to interfere with the decision of the CIT(A) on this issue. The appeals of the revenue are accordingly dismissed. Retrospective amendment to the law - The law is by now well settled that tax deduction at source obligation cannot be fastened on a person on the basis of a retrospective amendment to the law, which was not in force when the payments were made. The revenue seeks to rely upon the Explanation inserted as Explanation 2 to section 195 by the Finance Act of 2002 w.r.e.f 1-4-1961. The aforesaid amendment lays down that even if the payment by a resident in India to a non-resident constitutes business income in the hands of the non-resident then irrespective of the existence or non-existence of a permanent establishment of the non-resident in India, tax is liable to the deducted at source by the resident in India making payment to non-resident. Admittedly, for the A.Y. 2007-08 2008-09, such provision did not exist. At the time when the Assessee made payments to the non-resident such a provision did not exist. It is not possible for the Assessee to foresee an obligation to deduct tax at source by a retrospective amendment to the law. In such circumstances, the question that arises for consideration is as to, whether a liability to deduct tax at source can be fastened on an assessee on the basis of a retrospective amendment to the law. The amendment brought in by the Finance Act with retrospective effect, which was passed in the year subsequent to the year under consideration, should not be considered for penalizing the assessee by treating him as an Assessee in default. CIT(A) erred in holding that FTS was taxable in India only because of the retrospective amendment to the law and he erred in not holding that the liability to deduct tax at source arises at the time of making payment and therefore there would be no obligation to deduct tax at source. Accordingly, the order of the CIT(A) holding Assessee to be an Assessee in default u/s.201(1) of the Act to the extent of the payment relating to FTS and consequent liability towards interest u/s.201(1A) of the Act is hereby cancelled. The appeals of the Assessee are allowed.

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• Customs

• 2019 (11) TMI 688
  Scope of Section 20 of the Foreign Trade (Development and Regulation) Act, 1992 - Prohibited goods or not - powers conferred by Clause 8(1) of the Imports (Control) Order, 1986 - HELD THAT:- The appellants are not in a position to point out as to how the subject order dated 14-11-1986 would be covered by the savings clause under sub-sections (2) or (3) of the Section 20 of the Act. Even the saving provision under the General Clauses Act will be of no avail to the appellants for the reasons mentioned hitherto. For, a quasi judicial order passed in exercise of powers under the Statutory Order which stands repealed along with the repealed Act, is not saved especially when it will be per se repugnant to 1992 Act and defeat the spirit of opening of the import regime for the stated goods - appeal dismissed.

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• 2019 (11) TMI 687
  Provisional release of gold stock in trade - Advance Authorisation Scheme - Exhibition Export Scheme - no reason given for refusal to release the goods provisionally - principles of natural justice - HELD THAT:- No cogent reason given for refusal to release the goods provisionally. Rather the impugned order is non-speaking and cryptic. This is clearly a case of non exercise of discretion vested in him fairly, by the Revenue Authority, rendering the provision of Sec.110A of the Act, practically otiose. The Department has not adduced any evidence to contradict the fact that the same jewellery has been imported by the appellant which had been exported for exhibition purpose - At this juncture, we are only examining whether the import of the subject seized gold jewellery was in violation of any of the provision of Customs Act, 1962 and Import-Export Policy of 2015-2020 or whether it was a legitimate re-import of exported goods? It is found that the Assessing Officer after scrutiny of all the relevant documents and on satisfaction has allowed the clearance of re-imported gold jewellery and had endorsed that the imported gold jewellery was same which had been exported under the two shipping bills - the Department has not adduced any evidence to establish that the re-imported gold jewellery is not which have been exported by the appellant for exhibition purpose - also there might have been certain violations in following the procedure for proper importation of these goods, however, same will also not make the Indian made gold jewellery as prohibited goods as per the provision of Customs Act, 1962 read with the provisions of the Import-Export Policy 2015-2020. It is also matter of record that documents as required for re-import of the exported goods as provided under Notification No. 45/2017 dated 30 June 2017, read with the clarification No. 21/2019 dated 24 April 2019 is that the goods should be same as has been exported for the exhibition purpose and in the present case it is not mentioned by the Department that re-imported goods are not the same which have been exported vide above-mentioned two shipping bills for the exhibition purpose - the appellant has a strong case for provisional release of re-imported jewellery as per the provisions of Section 110A of Customs Act, 1962. It is also a matter of record that the main Karigar of the appellant who was supervising manufacturing of gold jewellery has categorically mentioned that from the imported gold bars he has made jewellery of 7 kg. and certain other jewellery and certain quantities were work-under progress in the form of gold, dust and other pieces of jewellery at different stages of manufacturing - also the appellant have also made certain purchases of the gold from the local market and for which he has necessary purchase invoices and this gold has also been used for manufacture of gold jewellery. Under the facts and circumstances, the appellant is an established business concern registered with the Customs dept, DGFT, Income Tax, GST, etc. Due to seizure of almost the whole working capital (Goods, raw material, W.I.P.), for over 6 months, the appellant is facing difficulty of livelihood, it s workmen, and others too. The appellant is also incurring regular fixed cost or establishment cost, unable to fulfill its time-bound export obligation, resulting in irreparable loss and civil consequences. The balance of convenience lies in allowing provisional release in favour of the appellant. The provisional release of goods allowed on certain terms - appeal allowed.

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• Insolvency & Bankruptcy

• 2019 (11) TMI 686
  Liquidation order - liquidation of Corporate Debtor - section 33 of Insolvency Bankruptcy Code, 2016 - HELD THAT:- It is seen that the RP has filed an application for Liquidation of the Corporate Debtor as the CoC has rejected the Resolution Plan submitted by Taguda with 77.61% voting share against the above mentioned resolution plan. This decision of CoC is being challenged by (i) Lodha (one of the Financial creditor of the Corporate Debtor having 1.03% share in CoC), (ii) the Promoters of the Corporate Debtor, (iii) the employees of the Corporate Debtor and the (iv) Resolution Applicant itself. The objection raised is regarding the justification of the alleged commercial wisdom claimed to be exercised by the CoC. Canara Bank is supporting the decision of CoC for liquidation as it has given its own reasons for rejection of Resolution Plan. Having a supervisory jurisdiction over the CIRP proceedings it is desirable to examine whether due procedure of law has been followed or not. Under supervisory jurisdiction the job of the Adjudicating Authority is not merely a stamping authority to approve each and every decision of the CoC, but to test decision on three parameters i.e. (i) it s feasibility, (ii) it s viability , and (iii) it s effective implementation. If no Viability and no feasibility is demonstrated by CoC , then automatically such a decision is flawed one, as happened in this case. There was no sensible examination of facts figures by CoC, rather a senseless decision of liquidation was adopted - Liquidation has to be a last resort , that too in Public interest which ought to be fair and just, only in the absence of a Resolution Plan. Therefore the decision of CoC, which is adversely effecting so many lives, be based upon common judicious prudence coupled with commercial viability, and lack of these criteria is nothing but a bad exercise of a non-commercial decision. Recovery of existing receivables - HELD THAT:- Any cash recoveries made by the Resolution Applicant and/or the Company after the expiry of 3 years from the Transfer Date (including cash recoveries from the Existing Receivables) shall be retained by the Company and shall be available for use at its discretion at all times including to pay such amounts to the Resolution Applicant. In order to make recoveries from the Existing Receivables, the Company shall be entitled to execute power of attorney in favour of the Resolution Applicant in the form proposed by the Resolution Applicant - All cash recoveries and costs and expenses shall be routed through a separate bank account opened by the Company with any of the scheduled bank who is a part of the Financial Creditors; however, it is clarified that the Financial Creditors shall not have any lien or charge, including bankers lien, on such bank account. The Resolution Plan is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the Moratorium imposed under section 14 of I B Code shall not have any effect henceforth. The Resolution Professional shall submit the records collected during the commencement of the Proceedings to the Insolvency Bankruptcy Board of India for their record and also return to the Resolution Applicant or New Promoters. Certified copy of this Order be issued on demand to the concerned parties, upon due compliance. The Resolution Professional is further directed to handover all records, premises/factories/documents to Resolution Applicant to finalise the further line of action required for starting of the operation. The Resolution Applicant shall have access to all the records/premises/factories/documents through Resolution Professional to finalise the further line of action required for starting of the operation. Application for liquidation is hereby rejected.

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• 2019 (11) TMI 685
  Maintainability of application - initiation of CIRP - alleged default on the part of the Corporate Debtor (Respondents) in repaying the loan amount - existence of dispute or not - whether the amount paid by the Applicant comes under the definition of Financial Debt as defined in the Code? - HELD THAT:- There is no document or agreement which shows the terms on which the money was given by the Applicant to Rl and specifically that any interest was payable on the money. We are unable to persuade ourselves that the advance paid by the Applicant to Rl has commercial effect of borrowing. It is noteworthy that in the Balance Sheets for the F.Ys 2014-15 and 2015-16 of the Applicant it is clearly indicated that the money paid by the Applicant to Rl is Advance to others and not a loan. In view of the fundamental flaws in the arguments advanced by the Applicant we find that the application is devoid of merit and does not warrant admission - Application dismissed.

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• 2019 (11) TMI 684
  Approval of Resolution plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - Appellant has challenged the order of approval on the ground that one of the Resolution Applicant is related party to one Mr. B. Sriramulu, Director of the Corporate Debtor and thereby the Resolution Applicants are jointly ineligible under Section 29A of the I B Code - HELD THAT:- In the present case, the resignation was submitted by Mr. B. Srinamulu on 19th March, 2018, i.e. much before initiation of the Corporate Insolvency Resolution Process . Thereby, Mr. B. Srinamulu having ceased to be a Director or Shareholder of the Corporate Debtor , the Resolution Applicants cannot be held ineligible as on the date of submission of Resolution Plan . Appeal dismissed.

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• 2019 (11) TMI 683
  Restraint on Appellant from taking any action in relation to A Wing premises pursuant to the notices - Section 13(4) of the SARFAESI Act - HELD THAT;- The Resolution Professional / Liquidator in its reply has accepted that both A and B Wing premises of Lakshmi Towers do not belong to the Corporate Debtor . However, it is stated that the office of the Corporate Debtor is running from the said premises and it was the employees of the Corporate Debtor who have been evicted persons under Section 13(4) of the SARFAESI Act. Although A and B Wings premises of Lakshmi Towers do not belong to the Corporate Debtor , in view of Section 14(1) (d), the Corporate Debtor cannot be ejected or disturbed from the premises, in question, during the Moratorium - thus the Adjudicating Authority has rightly directed the Appellant to hand over the possession of B Wing premises of Lakshmi Towers and rightly prohibited the Appellant from evicting the Corporate Debtor from A Wing premises of Lakshmi Towers. Who is the owner of A and B Wings premises of Lakshmi Towers? - whether the Appellant has any right over the said property? - HELD THAT:- Such questions are not required to be determined in the proceeding under the I B Code - If the Corporate Debtor is saved during the liquidation proceeding pursuant to Section 230 of the Companies Act, 2013 or if it is sold to a third party along with the employees then, in such case, one may move before the Competent Court of law for appropriate decision. Appeal disposed off.

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• Service Tax

• 2019 (11) TMI 682
  Taxability -Transfer of of Land Development Rights - Tri-partite agreement - HELD THAT:- The appeal is admitted.

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• 2019 (11) TMI 681
  Demand of service tax - amounts received as consideration i.e. on the deployment charges - period April 2009 to June 2012 - demand of interest as well - HELD THAT:- The appellants are providing security services to various Central Government organizations. The service recipient gives various facilities to the staff of the appellant like Accommodation, Medical facility, Vehicle, POL and Petrol, Telephone, Stationary, Newspaper, Transportation, the value of which was not included in the cost of deployment charges and the Department entertained a view that cost of all these facilities should be included and service tax is required to be paid on that - Further the appellant is a service unit of the Union of India to protect the sovereign property i.e. the property belonging to the Union which includes its undertakings - the activity of the appellant does not attract service tax. Liability of Interest - HELD THAT:- Once it has been consistently held by the Department as well as the Tribunal that the appellant is not liable to pay service tax and they have paid the service tax in ignorance, then they are not liable to pay the interest also though the appellants are not claiming refund of amount already paid by them. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 680
  Levy of service tax - Steamer Agent Service - appellant is engaged in providing services in the nature of clearing and forwarding, business auxiliary and logistics management pertaining to import and export of cargo - Business Auxiliary services - HELD THAT:- Revenue has failed to bring any evidence on record while issuing the SCN and while passing the impugned order which justifies the categorization of appellant in the definition of Steamer Agent . Further, the impugned order is contradictory because Learned Commissioner (A) in the impugned order has, in fact, admitted that the appellant has not provided any Steamer Agent Service but still confirms the demand on the ground that the appellants are carrying out ancillary activity, that of a steamer agent - Also, with regard to the same nature of service, the Department has classified under two different services, namely, Steamer Agent Service and Business Auxiliary Service which is also not tenable in law. Further, the Department is seeking to demand Service Tax on the freight element also which is not tenable in law . Business Auxiliary Service - HELD THAT:- Learned Counsel has stated that they have paid the Service Tax along with interest therefore they did not press the demand under this Head. Service Tax demand of Steamer Agent Service is set aside and Service Tax demand of Business Auxiliary Service is upheld - penalty imposed under Business Auxiliary Service is set aside as they have paid the tax along with interest - appeal allowed in part.

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• 2019 (11) TMI 679
  Construction services - Construction of Complex Service - appellant had a strong belief that they are not liable to pay service tax but still they calculated the service tax liability and interest for the period from 16.6.2005 to 31.3.2006 after applying the abatement provided under Notification No.1/2006-ST for Construction of Complex Service - demand of service tax - Health Club and Fitness Centre Service - Real Estate Agent Service - Interior Decoration Service - Maintenance or Repair Service - CENVAT credit - credit utilization in excess of 20% or not. HELD THAT:- It is not in dispute that the entire activity of the appellant is construction of residential apartments and such activity is in the nature of indivisible works contract involving transfer of property in goods along with provision of service. The appellants are paying VAT under the State Government by treating the said transaction as works contract - it is settled law that indivisible works contract is taxable only with effect from 1.6.2007 with the introduction of separate taxable service of works contract under Section 65(105)(zzzza). The Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] had held that prior to 1.6.2007, there was no charging section to specifically levy service tax on works contract on service and in the present case, the entire period is prior to 1.6.2007 - therefore, the appellants are not liable to pay service tax on the entire activity of raising the construction and providing the various category of services viz., Health and Fitness Centre Service, Maintenance or Repair Service or Real Estate Agent Service. CENVAT Credit - demand of excess 20% as per rule 6 - Applicability of Rule 6 of CCR - contention of the Department in demanding excess of 20% is that the appellants are providing both taxable as well as exempted service and therefore, hit by Rule 6(3)(c) of CENVAT Credit Rules, 2004 - HELD THAT:- In the present case, the appellant give full constructed apartment to the owner of the land and this by no stretch of imagination can be seen as a service provided by the appellant to the land owners. Co-developers do not provide any service to each other and this has further been clarified by the CBEC in Circular No.108/02/2009 dated 29.1.2009 - the preliminary requirement to fall within the definition of exempted service is that the activity undertaken should be service whereas the activity undertaken by the appellant in the present case is not defined to be a taxable service. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 678
  Classification of services - Construction Services or Works Contract Services? - Valuation - Benefit of abatement claim - N/N. 15/2004-ST dated 10.09.2004 and Notification No. 01/2006-ST dated 01.03.2006 - It was observed that the appellant did not pay service tax on TDS deducted from the payments released by various parties, amount adjusted on account of electricity charges, water expenses and ESI expenses, retention money and mobilisation advance for the period 10.09.2004 to February 2006 - denial of abatement on the ground that the appellant has availed cenvat credit on Telecom Services. Classification of services - Whether the activities of construction of complex developed by Nagar Panchayat, building of private college and boundary wall of different parties undertaken by the appellant and are liable to be taxed under Construction Services or Works Contract Services as same has been provided alongwith material? - HELD THAT:- The issue has already been settled by the decision of the Hon ble Apex Court in the case of Larson Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT ] wherein it has been held that prior to 01.06.2007, if service is provided alongwith material, no service tax is payable by the assessee. Further, for the period, post 01.06.2007, the demand of service tax can be made only under Works Contract Services - Admittedly, in the case in hand, for the period prior to 01.06.2007, the appellant is providing construction services alongwith material, therefore, the appellant is not liable to pay any service tax. For the period, post 01.06.2007, there is no proposal made by the revenue under works contract service - for services provided by the appellant construction of complexes developed by Nagar Panchayat, Building of private college and boundary wall of the different parties, the appellant is not liable to pay service tax under construction service but merit classification is Work Contract Service - decided in favor of appellant. Valuation - Whether free supplies of material is required to be included in the assessable value of services provided by the appellant or not?? - HELD THAT:- The said issue has been settled by the Hon ble Apex Court in the case of Bhayana Builders (P) Ltd. [ 2018 (2) TMI 1325 - SUPREME COURT ] where it was held that - the appellant is not liable to pay service tax on the value of free material supplied by the service recipient - this issue is also answered in favour of the appellant. Whether the appellant is entitled for the benefit of Notification No. 01/2006-ST dated 01.03.2006 when they have reversed the cenvat credit availed on input services alongwith interest before issuance of the show cause notice or not? - HELD THAT:- The appellant has already reversed the cenvat credit availed on Telecom Services alongwith interest before issuance of the show cause notice, in that circumstances, we hold that the appellant is entitled for the benefit of Notification No. 01/2006-ST dated 01.03.2006. The appellant is not liable to pay service tax - Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 677
  CENVAT Credit - common input services utilised for taxable as well as exempt activity - reversal of proportionate credit - non-maintence of separate records - common input service tax credit availed by them in respect of Telephone and Renting of Immovable Property Service, since the consumables sold by the appellant while rendering service was alleged to be a trading activity - Rule 6 (3) of the CENVAT Credit Rules, 2004 - C.B.E.C. Circular No. 699/15/2003-CX - extended period of limitation. HELD THAT:- The C.B.E.C. Circular No. 699/15/2003-CX has clarified the issue regarding Service Tax on Authorized Service Station during the course of providing service, wherein such ASS replaces engine oil, gear oil, coolants, etc., as per the request of the customer that the sale of consumable during the course of providing service is akin to sale of parts and accessories and therefore value of such consumables is not includible in the value of taxable services, provided value of such consumables is shown separately - however, The law underwent a change with effect from 20.06.2012 with the inclusion of exempted service under Rule 2 (e) of the CENVAT Credit Rules, 2004, which under its ambit covered trading of goods. The above Circular dated 05.03.2003 is therefore issued much earlier, obviously without having the benefit of the subsequent development. The issue on hand is squarely covered by the dictum of the Hon ble High Court in M/s. Lally Automobiles Pvt. Ltd. [ 2018 (7) TMI 1679 - DELHI HIGH COURT ] where it was held that . - there are no merit in the appellant s claim - appeal dismissed on this ground. Extended period of limitation - HELD THAT:- It is a fact borne on record that the appellant itself has chosen to follow the procedure laid down under Rule 6 (3A) on and from 01.04.2014 by reversing the proportionate input service credit attributable to the exempted service of trading, which clearly shows the knowledge of the appellant as to the requirement of law, which was also done prior to the issuance of the Show Cause Notice - extended period rightly invoked. Appeal dismissed - decided against appellant.

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• 2019 (11) TMI 676
  Valuation - Commercial and Industrial Construction Service - benefit of N/N. 1/2006-ST (Abatement) - It appeared to Revenue that appellant have wrongly availed benefit of Notification No. 1/2006-ST (Abatement) and that they have undervalued the gross value of service. Revenue was of the view that appellant should pay service tax on the gross value (including the material components) - extended period of limitation. HELD THAT:- The admitted fact is that the contracts executed by the appellant, the copies of which were scrutinised by the Department, are composite, or to be performed alongwith supply of material. No separate cost of material to be supplied was shown. The invoices raised, also contained classification of the material as sales-tax free , sales against D-Form etc. Further in para 9 of the SCN, it is recorded that on scrutiny of the balance- sheet and profit and loss Account of the appellant for the period under dispute, it is revealed that Shri Raman Raina is the Proprietor of Cosmos Collection, is also Proprietor of M/s. Dream home during the Financial year 2005-06. Hon ble Supreme Court have held in the case of Larsen Toubro vs. Union of India [ 2015 (8) TMI 749 - SUPREME COURT ] that prior to 1st June, 2007, in any contract which is composite in nature, wherein both supply of material and labour is involved, such contract cannot be chargeable to service tax prior to 1st June, 2007, when work contract was introduced, as a taxable head providing for segregation of the material and labour component, so as to tax the labour component under Service Tax - Accordingly, for the period 1st October, 2004 to 30th May, 2007, no service tax can be demanded from the appellant. Period 1st June, 2007 to 31st March, 2009 - Change of opinion - extended period of limitation - HELD THAT:- Under the fact and circumstances, there is no case made out of any fraud , suppression, or falsification of account or the returns on the part of the appellant. The show cause notice is primafacie, based on change of opinion on the part of the Revenue. For such change of opinion, extended period of limitation is not available. SCN is bad and not tenable - appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 675
  Erection, Commissioning or Installation Service - Composite works contract or not - Demand of service tax - project which they have undertaken for construction of floodlighting along the Indo-Bangladesh Border - Benefit of N/N. 45/2010-ST, dt. 20.07.2010 and 11/2010-ST, dt. 27.02.2010 - demand of mobilization advance which they have received from their clients which was subsequently adjusted in the final bill - service tax under reverse charge mechanism on the freight paid to the vendors under GTA services - extended period of limitation - penalties. Project for construction of floodlighting around Indo Bangladesh Border in the State of Tripura - demand of service tax - HELD THAT:- It is evident from the records before us that the project was awarded by Ministry of Home Affairs to M/s Coastal Projects Private Limited, A Government of India Enterprise, who have further subcontracted the same to the appellant on back to back basis. The contract involved both supply of material and installation and commissioning of the equipment with no clear demarcation/vivisection between the service component and the material component thereof - We, therefore, do not agree with Ld. DR that the contract can be vivisected, in this case and the demand has been raised on the entire value of the contract including the material part of it because the appellant failed to provide the break up. Had there been a break up of the material and the service components in the contract itself, the demand would have been raised on the service component ignoring the material. There is nothing on record which is placed before us which shows that there are two different contracts or a single contract with two separate distinct components for supply of material and rendition of services - In view of the above, it is found that the contract in question is a composite works contract. Composite works Contract involve both rendition of service and deemed sale/sale of the materials used in rendering such services. The Hon. ble Apex Court has observed in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] that works contract is a separate specie of contract known to the trade and commerce distinct from a contract for supply of goods or a contract for supply of services - In view of the above, there is no hesitation in concluding that the contract in question is a composite works contract and could have been taxed only under the head of Works Contract Services post 01.06.2007 - It is not in dispute that the entire period in question is post 01.06.2007. Therefore, the demand if any could have been raised under the Works Contract Service. The demand in this case has been made under Erection, Commissioning and Installation Service. ECIS does not include the contract where transfer of materials is involved. Since the demand has been raised under ECIS and the nature of contract does not fall under this category, the demand on this head it has to fail. Benefit of N/N. 45/2010-ST, dt. 20.07.2010 and 11/2010-ST, dt. 27.02.2010 - Case of appellant is that since the floodlighting along the Indo Bangladesh Border also involves transmission and distribution of electricity, it should be treated as exempted under Notifications - HELD THAT:- This argument, however, is not correct. Evidently, from a bare perusal of the contract, it is evident that the purpose of the contract is for providing floodlighting along the Indo Bangladesh Border in the State of Tripura and NOT for transmission and distribution of electricity. Merely because electricity is used in the flood lighting, it does not a project for transmission and distribution of electricity. If this logic is accepted, there could hardly be any service which is rendered by any service provider without use of electricity in some form and for this purpose being connected to the power grid - Merely because they are connected to a grid, the service does not become transmission and distribution of electricity. Extended period of limitation - HELD THAT:- It is not necessary to go into the question of limitation since it is found that the demand is not sustainable on merit itself being in the nature of Works Contract Service and being charged under Erection, Commissioning and Installation Service. Goods Transport Agency Service - demand has been computed on the freight expenses incurred by the appellant during various years - HELD THAT:- The appellant have conceded and paid service tax amounting to Rs. 3,34,653/- . The remaining amount of freight paid, according to the appellant, was paid to their vendors towards freight. The vendors in turn had availed the services of GTAs and paid them. In other words the appellants claim that they have only reimbursed to their vendors for the goods transport agencies services which they had paid. The department s contention is that they have not produced any evidence to substantiate this fact - Having accepted the assessee s records that amounts have been paid towards goods transport, the department cannot reject the contention that a part of it was paid directly to their vendors and in the absence of any evidence to the contrary. In view of the above, the contention of the department is not sustainable and the demand on this ground must also fail. Demand of interest on the delayed payment of service tax - tax on mobilization advances - it is the case of the department that an amount has been paid as advance towards rendition of service and service tax should have been paid as soon as the amount has been received - HELD THAT:- It is the case of the appellant that it is not an advance for rendition of service but is in the nature of mobilization advance which is backed by bank guarantee and on such an advance they have paid interest to their customers. Therefore, it is nothing but a secured loan which has no nexus to the service provider. The amount so received is a mobilization advance which has been adjusted against total bill, on which they have discharged full amount of service tax - the demand under this head also needs to fail. Interest and penalties - HELD THAT:- Since the demand on all three accounts is not sustainable, interest and penalties also needs to be set aside. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (11) TMI 674
  Clandestine removal - clearance of duty free POY - demand on the basis of the statements of the third parties - HELD THAT:- The Special Leave Petition(s) are dismissed on the ground of delay as also on merits.

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• 2019 (11) TMI 673
  Scope of SCN - Manufacturing activity taking place or not - Respondent manufactured Foots Oil, Pressed Wax, Pressed Paraffin Wax without observing the mandatory procedure and clearing Excise Duty - demand of Central Excise duty under the extended proviso to Section 11A of the said Act - interest under Section 11 AB of the said Act - recovery of duty - scope of SCN. HELD THAT:- Section 11A deals with various facets including non-levy and non-payment of excise duty and contemplates issuance of a show cause notice by the Central Excise Officer requiring the person chargeable with duty to show cause why he should not pay the amount specified in the notice. In terms of sub-section 10 of said Section 11A, the concerned person has to be afforded opportunity of being heard and after considering his representation, if any, the amount of duty of excise due from such person has to be determined by the Central Excise Officer. If the process or activity undertaken does not amount to manufacture or if no duty is payable for any reason including the benefit under any scheme of exemption holding the field, it shall always be open to the concerned person to project such view point while making any representation in response to the show cause notice - the scheme of Section 11A does not contemplate that before issuance of any show cause notice, there must, prima facie, be: (a) a preliminary determination that the process or activity undertaken in the matter amounts to manufacture; and (b) before arriving at such preliminary determination, any hearing to the concerned person is contemplated. In the present case, the respondent had not registered itself and was not paying any excise duty on the products that it was manufacturing. The search conducted by the Department at the registered office and the factory premises of the respondent led to the recovery of certain material on the basis of which the Department was considering the matter - the provisions of the Act do not contemplate any such prima facie determination to be arrived at and requiring that a copy of such determination to be submitted to the concerned person and only thereafter to proceed in the matter. Since the provisions of the Act do not contemplate any prima facie determination which must be communicated to the concerned person, the Department was justified in not communicating the Internal Order on its own. The matter was correctly assessed by the High Court on the next occasion when in spite of having directed that a copy of the Internal Order be supplied, it acknowledged that the remedy of the respondent lied in submitting reply to the show cause notice, in which reply it would be open to the respondent to take objections to the jurisdiction of the appellant to proceed against the respondent under the provisions of the Act. Scope of SCN - HELD THAT:- In the present case, there was no assessment and computation of any duty element. The matter had not gone beyond the Show Cause Notice. The questions in the matter pertained to the correctness of the view whether there was any adjudication in the matter and whether the appeal at the instance of the Respondent was maintainable. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 672
  Levy of penalty - Whether learned Commissioner, in the facts and circumstances of the case, was right in exercising his discretion, which otherwise is not contemplated, for not imposing penalty as stipulated under section 11AC of the Central Excise Act despite he has held liability under section 11A of the Act? - reasons for upholding the order of the learned Commissioner not assigned - Principles of natural justice. HELD THAT:- On a plain reading of the provisions of section 11AC of the Act, it is evident that the condition precedent for invoking the said provision is that there should be fraud, collusion or any mis-statement or suppression of facts or contravention of any of the provisions of the Act or the rules made thereunder with intent to evade payment of duty - In the facts of the present case, in the light of the concurrent findings of fact recorded by the adjudicating authority the condition precedent for invoking the provisions of section 11AC of the Act is not satisfied. Appeal dismissed.

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• 2019 (11) TMI 671
  Benefit of exemption under N/N. 6/2003 - Procedural lapse - relevant date for calculation of benefit of notification - from which date KPCL is entitled to the exemption notification? - principles of unjust enrichment - HELD THAT:- KPCL filed an application for availing the benefit of Notification on 04/03/2003 itself but the Department wanted certain clarification as to whether the validity of the certificate issued as per Section 44 of the Indian Electricity Act, 1948 is still valid and the same was also verified vide letter dt. 24/04/2003 and 09/05/2003 - also except for this clarification, there is no dispute regarding the eligibility and other conditions to be satisfied by the appellant. Once the clarification was given by KPCL and finally edibility certificate was issued, the said certificate relates to the date of application i.e. 04/03/2003 filed by KPCL. The contention of the Revenue that KPCL is entitled to the exemption notification from 08/07/2003 is not tenable in law. The Commissioner(Appeals) has not considered the legal submissions submitted by the appellant whereas the original authority has relied upon certain decisions but the said decisions are distinguishable inasmuch as the ratio of those decisions was as to how the notification has to be interpreted. But whereas in the present case, eligibility to benefit of the notification is not in dispute and therefore the strict interpretation of the notification is not to be followed because once the appellant is found to be eligible for the benefit of the notification thereafter liberal procedure to be followed, is permissible - the substantive benefit should not be denied for procedural infractions Unjust enrichment - HELD THAT:- Appellant has also established that the incidence of duty has not been passed on to anyone else. Further, the duty amount borne by KPCL has been reimbursed by the appellant and such amount has been show as loans and advances in the books of accounts which clearly shows that the duty amount has not been shown in the income and expenditure in the balance sheet. Hence, duty burden does not arise since the refund amount claimed will be adjusted towards loans and advances. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 670
  Interest on delayed refund - Section 11BB of the Central Excise Act - relevant time for calculation of interest - HELD THAT:- In the impugned order, no reasons have been given for not granting interest on the delayed refund. Further, it is found that admittedly, there is a delay in disbursal of the refund amount in the present case. Further, notwithstanding the fact that the sanctioned refund is merely belatedly paid but instead, first adjusted against some other demand and then later on disbursed to the assessee. Further, even the Board has clarified vide various circulars that the interest becomes payable after the expiry of a period of three months from the date of receipt of the application under sub-section 1 of Section 11BB of the Act. The original authority is directed to quantify the interest for the period after the expiry of 3 months from the date of filing the refund application till the amount is paid - appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 669
  Valuation - related party transaction - applicability of section 4 (1) (b) of Central Excise Act, 1944 read with Central Excise Valuation Rules, 2000 - short payment of duty - Scope of SCN - HELD THAT:- The show cause notice has been issued to the appellant on the basis of cost data that the appellant is selling the goods below the cost price, therefore, the selling price cannot be the assessable value of the goods in question. The appellant is located in the State of Jammu and Kashmir taking self credit/ refund of duty paid in cash. The duty paid in cash is an incentive to the appellant and if the same is taken into account then the appellant has earned the profit on the goods sold. In fact, cash incentive was given by way of duty paid in cash has been shared with their buyers. Therefore, the appellant earned profit on the goods sold by them. In that circumstance, the whole case of the Revenue alleged in the show cause notice is not sustainable. Scope of SCN - HELD THAT:- Moreover, the Commissioner in the adjudication order has treated buyer as related person as there is no allegation in the show cause notice that the appellant has sold the goods to the buyer, who is related person of the appellant. Therefore, the Commissioner has travelled beyond the scope of the show cause notice in the eyes of law. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 668
  Rate of Interest on Refund of duty paid - Section 11B (1) of Central Excise Act, 1944 - Revenue has taken a stand that there has already been a notification No. 67/2003 dated 12.09.2003 by which the rate of interest has been fixed at 6% - however, the section records the range for rate of interest i.e. from 5% to 30% but section itself specifies that the rate within such range as for the time being fixed by the Central Government by notification in the official gadget - HELD THAT:- In section 11BB, to clarify the rate of interest in the range of 5% to 30%, the statute itself has empowered the Central Government to fix any rate of interest for the time being by way of a notification. This clarifies that once there is a notification of Central Government fixing 6% as the rate of interest same has to be followed as having power of statute. Thus, it is clear that previous final order of this bench has apparent error on face of its record. The error of adjudication which is very much apparent irrespective once committed cannot be repeated. Appeal dismissed.

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• CST, VAT & Sales Tax

• 2019 (11) TMI 667
  Imposition of penalty on the assessee under Section 54(1)(14) of the U.P. Value Added Tax Act, 2008 - Whether authorities are justified in imposing penalty under Section 54 (1) (14) of the U.P. Value Added Tax Act, 2008 without assigning reasons to support the finding of intention to evade payment of tax? - principles of natural justice - HELD THAT:- The finding of intention to evade tax had been recorded by the assessing authority on account of various fields of Import Declaration Form being found blank and the vehicle description being overwritten on that Form. The assessing authority also disbelieved the explanation furnished by the assessee on the strength of the excise documents and the fact that the assessee was a manufacturer. It is material to note that, in the present case, undisputedly, the assessee is a manufacturer who is found to have paid excise duty and additional duties and cess at the rate of 10.30 percent amounting to Rs. 20,630.85 against invoice no. 687. Similarly, duty had been paid against the other invoice - Again, it is undisputed that the assessee was a manufacturer of excisable goods for which the goods forming subject matter of penalty proceedings were raw material. Therefore, it cannot be disputed that the assessee would have been entitled to avail CENVAT with respect to the duty paid on such raw material. It is not the case of the revenue that the assessee was engaged in clandestine import and sale of sponge iron. In absence of such allegation, the explanation offered by the assessee merited very serious consideration than has been offered by the assessing authority or the Tribunal. The Tribunal has merely rejected the explanation and relied heavily on the fact that the Import Declaration Form was left blank in material fields. Once it was not disputed that the excise documents were accompanied with the goods which disclosed payment of excise duty and it was also admitted to the revenue that the assessee was engaged in manufacture of goods wherein the goods being imported were to be used as raw material, the Tribunal ought to have given more meaningful consideration to this material and its consequences, before dismissing the appeal filed by the assessee - before reaching a positive conclusion as to existence of mens rea or guilty intention of mind, the Tribunal must carefully weigh all material available on record and examine their consequence in light of the law laid down by this Court and in the context of the fact allegations made by the revenue. The matter is remitted to the Tribunal to decide the appeal afresh, preferably within a period of three months from today on the strength of the evidence available on record - revision allowed by way of remand.

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• 2019 (11) TMI 666
  Revision of assessment - levy of purchase tax - challenge to the revision notices was on the ground that the goods dealt with by the appellants were classified under 4th schedule and therefore, exempted from levying tax under Section 15 of the Act - section 27 of TNVAT Act - whether Section 15 of the Act exempts from tax both on sale and purchase of pulses and grams covered by Entry 68 of 4th schedule by specifying the turnover limit of Rs. 500/- crores in a year? HELD THAT:- The matter pertains to rate of tax and particularly on the classification of goods and these are the issues to be decided by the Assessing Officer at the first instance. The appellants/petitioners should not be permitted to by-pass the normal procedure and the writ Court cannot exercise its jurisdiction against the proposal to revise the turnover. It is true that the appellants/petitioners are aggrieved by certain circulars issued by the Commissioner of Commercial Taxes, which may bind the Assessing Officer not the dealer, who was not a party to the circular. In fact, there is also a power for the Commissioner to revise the circular, when a third party files a revision petition stating that the circular should not be applied to their case - There are several decisions of the Division Bench of this Court, which have clearly held as to how the Assessing Officer has to independently proceed with the matter. The apprehension of the appellants is that the Assessing Officer will not do so blindly following the circular. Further, the learned counsel for the appellants would contend that there are other circulars issued by the Commissioner, which are in favour of the assessee. If so, it is well open to the dealers to rely upon those circulars. While holding that the writ petitions filed against the revision notices are premature and liable to be dismissed, we vacate the finding rendered by the learned Single Judge in the impugned order with a direction to the appellants to file their objections to the revision notices within 30 days from the date of a copy of this judgment and on receipt of objections, we direct the respective Assessing Officers to adjudicate the revision notices based on the contentions advanced by the dealers in their objections and the documents that may be produced at the time when personal hearing is offered to the dealers - Appeal dismissed.

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• 2019 (11) TMI 665
  Withdrawal of charge and attachment on property - alleged dues of the erstwhile owners of the property - Gujarat VAT Act - HELD THAT:- In this case no charge was created prior to the subject property being transferred in favour of the petitioners. Section 48 of the GVAT Act bears the heading Tax to be first charge on property and which lays down that notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case may be, such person, would not come into play. Thus, the section envisages a first charge on the property of the dealer on account of tax, interest or penalty which he is liable to pay to the Government. In the present case, the petitioners are not liable to pay any tax, interest or penalty to the Government and therefore, would not fall within the ambit of the expression any other person as contemplated in section 48 of the GVAT Act. The subject property was transferred in favour of the petitioner, prior to the order of attachment and creation of a charge thereon. Therefore, as on the date when the subject property came to be attached and a charge came to be created thereon, it did not belong to the dealer viz. Varun Filaments Pvt. Ltd. The provisions of section 48 of the GVAT Act, therefore, would clearly not be attracted in the facts of the present case. Apart from the fact that the impugned order dated 9.9.2011 is invalid as it has been passed in respect of property in which the defaulter had no right, title or interest; as noticed earlier, the assessment order, which formed the basis for passing the impugned order came to be set aside by the Tribunal and the matter was remanded. Therefore, the very substratum of the order dated 9.9.2011 was lost and hence, such order was rendered ineffective. The impugned order of attachment dated 9.9.2011, made by the second respondent cannot be sustained. However, the right of the department to have the transfer declared as void under section 47 of the GVAT Act is not thereby taken away - Petition allowed.

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• 2019 (11) TMI 664
  Recovery of outstanding tax arrears - Dues related to the property which the petitioner has purchased - encumbrance on the property or not - whether the petitioner is liable to discharge the tax dues of the third respondent on account of having purchased the subject property which belonged to the third respondent, in the auction sale held by the second respondent bank? - HELD THAT:- On the date when the impugned notice dated 18.7.2018 came to be issued directing the petitioner to pay a sum of Rs. 17,67,45,934/- with interest at the rate of 18% per annum, being the outstanding tax arrears of the third respondent, the petitioner should have been a debtor of the third respondent, namely that a sum of money should have been payable or would become payable by the petitioner in future to the third respondent by reason of an existing obligation - In the present case, it is not the case of the first respondent that the petitioner is a debtor of the third respondent. The first respondent seeks to recover the above amount from the petitioner as it has purchased the properties belonging to the third respondent in an auction sale held by the second respondent bank on as is where is and whatever is basis . On the date when the sale notice was issued, the assessment orders in the case of the third respondent, on the basis of which recovery is sought to be made from the petitioner, were not even passed. Therefore, the petitioner had purchased such property without any encumbrance. The petitioner being a bona fide purchaser who has purchased the subject property in sale proceedings under the Securitisation Act prior to any charge having been created in favour of the first respondent has no liability to discharge the debts of the third respondent. Therefore, it cannot be said that the petitioner was holding any amount on behalf of the third respondent on account of having purchased the subject property in the auction sale held by the second respondent under the provisions of the Securitisation Act - Since the petitioner herein does not owe any amount to the third respondent and does not hold any monies on account of the third respondent, the provisions of section 44 of the GVAT could not have been invoked against the petitioner. Under the circumstances, the State Tax Officer was not justified in issuing the impugned notice dated 18.7.2018 to the petitioner under section 44 of the GVAT Act. Service of notice - Garnishee proceedings - section 44 of the GVAT Act - HELD THAT:- The third respondent in the affidavit-in-reply filed by it has not made reference to any such notice having been issued to it nor has any averment to that effect been made in the affidavit-in-reply filed on behalf of the first respondent. Therefore, the basic requirement for invoking the provisions of section 44 of the GVAT Act, viz. service of notice to the dealer under sub-section (1) thereof, has not been satisfied. Neither the impugned notice dated 18.7.2018 issued to the petitioner nor the impugned order dated 26.9.2018 issued to the second respondent bank by the State Tax Officer is sustainable in law - impugned notice dated 18.7.2018 as well as the impugned order dated 26.9.2018 (Annexure-A collectively to the petition) are hereby quashed and set aside - Petition allowed.

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• Indian Laws

• 2019 (11) TMI 663
  Appointment of an independent arbitrator for adjudication of disputes between the parties, instead of directing appointment of arbitrator as per Clause 64 of General Conditions of Contract (GCC) which stipulates that Railways Officers should be appointed as Arbitrator - HELD THAT:- Admittedly, the request for referring the dispute was made much prior to the Amendment Act, 2015 which came into force w.e.f. 23.10.2015. Since the request for appointment of arbitrator was made much prior to the Amendment Act, 2015 (w.e.f. 23.10.2015), the provision of the Amended Act, 2015 shall not apply to the arbitral proceedings in terms of Section 21 of the Act unless the parties otherwise agree. As rightly pointed out by the learned counsel for the appellant, the request by the respondent(s)- contractors is to be examined in accordance with the Principal Act, 1996 without taking resort to the Amendment Act, 2015. Applicability of the provisions of the Principal Unamended Act, 1996 - Clause 64 of the General Conditions of Contract (GCC) - HELD THAT:- Under Clause 64(1) of GCC, if there is any dispute or differences between the parties or the respective rights and liabilities of the parties on any matter in question or any other ancillary dispute arising from the terms of the contract or if the railway administration fails to make a decision within the time stipulated thereon, then in any such case, but except in any of the excepted matters , the General Manager may nominate the officer by designation as referred to under Clause 64(3)(a)(i) and a(ii) respectively with further procedure being prescribed for the sole arbitrator or the Arbitral Tribunal to adjudicate the dispute/differences arising under the terms of the contract between the parties. In Union of India and another v. M.P. Gupta [ 2004 (2) TMI 725 - SUPREME COURT ], Union of India v. Singh Builders Syndicate [ 2009 (2) TMI 794 - SUPREME COURT ] and in a catena of judgments, the court held that whenever the agreement specifically provides for appointment of named arbitrators, the appointment of arbitrator should be in terms of the contract. The court, however observed in para (6) that in the case of public institutions which are slow in responding to the request made by the contractor for appointment of an arbitrator, the power of the High Court to appoint an arbitrator under Section 11 is not taken away - The failure of the authorities in appointing an arbitrator and when the contractor approached the court for appointment of an arbitrator under Section 11 of the Act, it will then be in the discretion of the Chief Justice/designated Judge to appoint a railway officer as per the contract or a High Court Judge. When the agreement specifically provides for appointment of named arbitrators, the appointment should be in terms of the agreement. The High Court, was not right in appointing an independent arbitrator ignoring Clause 64 of the General Conditions of Contract. We are not inclined to go into the merits of the contention of the parties. It is for the arbitrator to consider the claim of the respondent(s) and the stand of the appellant-railways. This contention raised by the parties are left open to be raised before the arbitrator. Appeal allowed.

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• 2019 (11) TMI 662
  Rejection of Arbitration application - Section 11(6) of the Arbitration and Conciliation Act, 1996 - The insurer s objection about maintainability of the application on the ground that the respondent (Dicitex) had signed the discharge voucher and accepted the amount offered, thus, signifying accord and satisfaction, which in turn meant that there was no arbitrable dispute, was rejected - main theme of the appellant s argument in this case is that Dicitex could not have invoked the arbitration clause, since it had fully and finally accepted the amount offered (i.e..) and withdrawn its protests and reservations, by the letter dated 06.06.2014. HELD THAT:- A close look at the facts in the present case would show that though the pleadings in the initial application under Section 11(6) are weak, nevertheless, the materials on the record, in the form of copies of the inter se correspondence of the parties which span over 2 years, clearly show that Dicitex kept repeatedly stating that it was facing financial crisis; it referred to credits obtained for its business and the urgency to pay back the bank. It is a matter of record that the Surveyor s report, dated 14.08.2014, recommended payment of Rs. 12,93,26,704.98/to Dicitex. Equally, it is a matter of record that the appellant referred the matter to a chartered accountant s firm, to verify certain inventory and sales figures. It went by the report of the latter, who stated that the estimate of loss could not be more than Rs. 7,16,30,148/. This is what was offered to Dicitex, by May, 2014. Dicitex s application under Section 11(6) is replete with references to the number of letters written to the appellant, seeking release of amounts; it also averred to inability to pay its income tax dues, the pressure from bankers (in support of which, copies of letters of bankers were produced along with the application). An overall reading of Dicitex s application (under Section 11(6)) clearly shows that its grievance with respect to the involuntary nature of the discharge voucher was articulated. It cannot be disputed, that several letters spanning over two yearsstating that it was facing financial crisis on account of the delay in settling the claim, were addressed to the appellant. This court is conscious of the fact that an application under Section 11(6) is in the form of a pleading which merely seeks an order of the court, for appointment of an arbitrator. It cannot be conclusive of the pleas or contentions that the claimant or the concerned party can take, in the arbitral proceedings. At this stage, therefore, the court which is required to ensure that an arbitrable dispute exists, has to be prima facie convinced about the genuineness or credibility of the plea of coercion - If the court were to take a contrary approach and minutely examine the plea and judge its credibility or reasonableness, there would be a danger of its denying a forum to the applicant altogether, because rejection of the application would render the finding (about the finality of the discharge and its effect as satisfaction) final, thus, precluding the applicant of its right event to approach a civil court. This court is of the opinion that the reasoning in the impugned judgment cannot be faulted - Appeal dismissed.

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