TMI Tax Updates - e-Newsletter
November 19, 2019

Case Laws in this Newsletter:

GST Income Tax Customs PMLA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. APPELLATE ADVANCE RULING ON TAXABILITY OF SPECIALIZED TRAINING

   By: Dr. Sanjiv Agarwal

2. INTERPRETATION OF STATUTES

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. ADB, India Sign $91 Million Loan for Comprehensive Water Management in Karnataka

2. Company Law Committee-2019 submits its report to Finance Minister

3. Govt considering to reintroduce restrictions on royalty payments

4. Inauguration of KPCS Plenary 2019

Highlights / Catch Notes

GST

• Petitioner Allowed to Submit GST TRAN-1 Form Offline Due to Technical Glitch Before December 27, 2017.

  Case-Laws - HC : GST TRAN-1 - The present writ petition is disposed of with the direction to the respondents to permit the petitioner to submit offline GST TRAN-1 form, subject to furnishing a proof that he had tried to upload GST TRAN-1 form prior to 27.12.2017 and such attempt failed due to technical fault/glitch on the common portal.
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• Refund of IGST on Export: Addressing Complications from Rate Variations in System-Managed Processes. Parties Must Anticipate Solutions.

  Case-Laws - HC : Refund of IGST paid - export of goods - additional tax paid due to variation of rates - When the process is completely system managed, the respondents are supposed to visualise the complications and provide solutions to do away with the anomalies.
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Income Tax

• Advertisement Space Purchase Ruled as Sale Contract; Section 194C TDS Provisions Not Applicable.

  Case-Laws - HC : TDS u/s 194C - expenditure for purchase of advertisement space - whether contract in question is a contract for work? - the contract in question is a contract for sale - the provisions of Section 194C do not apply to the case of the assessee.
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• Tax Authorities to Limit Disallowance of Sales Promotion Expenses to 10% for Business Accommodation at Lodhi Hotel.

  Case-Laws - AT : Assessee had taken the accommodation in Lodhi Hotel for business purposes only and used it for wholly and exclusively for the business purposes - authorities below directed to restrict the disallowance out of total sale promotion expenses in 10% only.
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• Interest Deduction Allowed for Investment in Group Companies u/s 36(1)(iii) as Legitimate Business Expense.

  Case-Laws - AT : Disallowance u/s 36(1)(iii) - deduction of the interest - The assessee made investment in the group companies to take controlling interest in the group company - assessee made investment utilizing the borrowed funds for strategic business purposes - claim of deduction allowed.
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• EU Levy's Business Purpose Questioned: Disallowance Applies Only to Indian Law Contraventions, Not Foreign, per Explanation 1, Sec 37(1).

  Case-Laws - AT : Expenditure incurred towards levy by EU Commission - whether incurred for the purpose of carrying on its business - What has to be disallowed under Explanation 1 to Sec.37(1) is a payment made, for contravention of laws in force in India and not of any foreign country.
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• Tax Commissioner's Revision u/s 263 Overturned; Assessment on Section 80-IC Deductions Quashed as Jurisdiction Lacked.

  Case-Laws - AT : Revision u/s 263 - deduction claimed u/s 80-IC - gain from exchange fluctuation - gain on account of unclaimed balance - nature of Insurance claim and export incentives - the action of Ld. Pr. CIT was without jurisdiction and all subsequent actions are 'null' in the eyes of law - order quashed.
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• Termination Compensation of 99-Year Lease Exempt from Section 50C of Income Tax Act, Presumed Actual Consideration Stands.

  Case-Laws - AT : Nature of compensation received - termination of long term lease of 99 years -Provisions of Section 50C of the Act have no application. It is settled proposition of law that there cannot be any presumption of receipt of consideration over and above apparent consideration stated in registered sale deed. What is apparent should be believed to be real in the absence of any material to contrary on record
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Customs

• Export Benefits Denial Under MEIS Shouldn't Be Automatic Due to Exporter's Technical Oversight on Web Portal.

  Case-Laws - HC : Benefit of the Merchandise Exports from India Scheme [MEIS] - the denial of a claim for export benefit could not have been done in a mechanical manner merely because there was a technical lapse on the part of the exporter concerned in not checking a particular box in the web portal.
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PMLA

• PMLA Investigations Post-2009 Not Retrospective, Even if Illicit Wealth Predates Amendment.

  Case-Laws - HC : Money Laundering - The investigation under PMLA after the year 2009 would not be treated as applying the Act retrospectively for the reason of ill gotten wealth being generated prior to the amendment coming into force because accused at the time of investigation under PMLA was in possession, acquisition and projecting such proceeds of crime as untainted
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Service Tax

• Appellant Denied SSI Exemption for Mandap Keeper's Services Due to Use of Another's Brand Name under Notification 6/2005-ST.

  Case-Laws - AT : SSI exemption - use of brand name while providing Mandap Keeper’s Services - N/N. 6/2005-ST - Lower Authorities have rightly held that the appellant was using the brand name of another person while providing services and as such was not entitled to SSI exemption benefit.
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Central Excise

• CENVAT Credit Allowed Due to Investigation Errors; Reliance on Photocopies and Missing Originals Deemed Unsustainable.

  Case-Laws - AT : CENVAT Credit - invoices issued by the scrap dealers - Merely on the basis of the photocopies of documents whose original are not available which has been recovered from bushes in the godown of Scrap Dealers, the allegation is not sustainable against the appellants - there are several discrepancies in the investigation as well as in the adjudication. - Credit allowed.
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• CENVAT Credit Valid Despite Target Plus Scheme Abolition; Effective Under Notification No. 32/2005-Cus, Condition No. 7 Applies.

  Case-Laws - AT : CENVAT Credit - Target Plus Scheme - credit was challenged by the Revenue on the ground that since Target Plus scheme is discontinued with effect from 01.04.2006, benefit of such scheme was not available - Notification No. 32/2005-Cus is continue even after abolition of Target Plus scheme under condition No. 7 clearly permits availment credit of addition duty paid.
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Case Laws:

• GST

• 2019 (11) TMI 821
  Release of detained goods alongwith vehicle - case of Revenue is that the respondents have no objection if the petition is disposed of as not pressed - HELD THAT:- The petition is disposed of as not pressed by clarifying that, it shall be open for the respondent authorities to take appropriate action in connection with the goods seized by them on 31.07.2019, since the owner of the goods has not come forward for release of the goods.

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• 2019 (11) TMI 820
  Direction to the respondents to accept its GST TRAN-1 form offline or by opening portal - CGST Rules, 2017 - HELD THAT:- Section 140 of the Central Goods and Service Tax Act, 2017 confers a right to a registered dealer to take credit of eligible duties of the amount lying unutilized on the day immediately preceding the appointed day, in the manner prescribed. First proviso to sub-section (8) of Section 140 postulates that such credit will be admissible subject to a condition that the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day. Rule 117(1) of the Rules of 2017 mandates that every registered person entitled to take credit of input tax under Section 140 of the Act will be required to file a declaration electronically in Form GST TRAN-1, within ninety days of the appointed day, specifying therein, the amount of input credit to which he is entitled. Notification dated 10.9.2018 a new proviso sub-rule (1A) was introduced, while the provision contained in sub-rule (1) remained unaltered. A careful reading of sub-rule (1A) shows that it is not an extension of time of furnishing return or GST TRAN-1; it is rather an enabling provision providing further opportunity to the registered person who could not submit the said declaration by the due date on account of technical difficulties on the common portal. The present writ petition is disposed of with the direction to the respondents to permit the petitioner to submit offline GST TRAN-1 form, subject to furnishing a proof that he had tried to upload GST TRAN-1 form prior to 27.12.2017 and such attempt failed due to technical fault/glitch on the common portal.

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• 2019 (11) TMI 819
  Refund of IGST paid - export of goods - additional tax paid due to variation of rates - petitioner claimed refund of Rs. 94,42,39,026/- along with the additional tax paid due to variation of rates in London Metal Exchange - respondents have refunded Rs. 94,42,39,026/-. But they are not in a position to refund the balance amount of Rs. 2,02,94,956/- as the entire process is system managed - Circular No.40 of 2018-Customs F.No.450/119/2017-Cus-IV, dated 24.10.2018 - HELD THAT:- The present case on hand is also similar to that of the problem which was faced by the respondents in similar circumstances. When there is no provision in the electronically managed system, they should have visualised the situation prior to its introduction to do away with these anomalies and provided solution to the same. When the issue of refund like the present one was dealt with by the Hon ble High Court of Gujarat at Ahmedabad in M/S AMIT COTTON INDUSTRIES THROUGH PARTNER, VELJIBHAI VIRJIBHAI RANIPA VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS [ 2019 (7) TMI 472 - GUJARAT HIGH COURT] , the High Court has given a direction to the respondents to refund the IGST paid in regard to the goods exported i.e., Zero rated Supplies , with 7% Simple Interest in view of circular dated 09.10.2018 and Rule 96 of Central Goods and Services Tax Rules, 2017. When the process is completely system managed, the respondents are supposed to visualise the complications and provide solutions to do away with the anomalies. The very object of encouraging exporters and augmenting the foreign currency will be defeated by such hiccups. Therefore, considering the judgment of Hon ble High Court of Gujarat as well as the circular issued by the fourth respondent dated 24.10.2018, a direction is given to the respondents to refund the additional IGST paid by the petitioner to the tune of Rs. 2,02,94,956/- within a period of four weeks from the date of receipt of a copy of this order. Petition disposed off.

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• 2019 (11) TMI 818
  Profiteering - purchase of Flat No. 2204 in Tower B2, in the Respondent s project, Runwal My City - benefit of Input Tax Credit (ITC) had not been passed on to him by the Respondent by way of commensurate reduction in the price of the above flat - contravention of provisions of section 171 of CGST Act - HELD THAT:- This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 30.06.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The Commissioners CGST/SGST shall ensure that the above benefit is passed on to the eligible buyers. The Applicant No. 1 as well as the other flat buyers will also be at liberty to maintain proceedings against the Respondent for violation of the provisions of Section 171 of the CGST Act, 2017, in case the benefit of additional ITC is not passed on to them. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Runwal My City Project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered an amount of Rs. 3,20,49,507/- from his customers, hence he has committed an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he is liable for imposition of penalty under the provisions of the above Section - Accordingly, a SCN be issued to him directing him to explain why the penalty prescribed under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off.

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• Income Tax

• 2019 (11) TMI 817
  Computation of Income Doctor s Profession - Disallowance of expenses IVP as a Capital Assets Ignorance of Decisions of Supreme Court - Government security is not comparable to IVPs - HELD THAT:- Learned counsel for the appellant, on instructions, seeks permission to withdraw these appeal(s) along with pending application (s) therein. Permission granted. The appeal(s) and pending application(s) are dismissed as withdrawn.

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• 2019 (11) TMI 816
  Capital gain - period of holding - whether the assets sold by assessee, viz., the hospital building and land on April 18, 2001 is a short-term capital gain or a long-term capital gain as claimed by him? - HELD THAT:- Counsel for the appellant submits that the sole appellant has expired and he is not in a position to state the exact date on which the appellant has expired as no instructions are forthcoming for quite some time. In that sense, the appeal may be treated as abated. Ordered accordingly.

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• 2019 (11) TMI 815
  Unexplained cash credits u/s 68 - HELD THAT:- As extracted the findings returned by the Assessing Officer as well as by the ITAT, only to demonstrate that there is in-depth consideration of all the facts circumstances as emerging from the record, and it is absolutely clear and evident that the appellant assessee failed to discharge the onus placed upon it u/s 68 to establish the genuineness of the transaction and the creditworthiness of the investors/ creditors. The assessee had only disclosed the identity of the investors, who too remained faceless despite notices to them. No question of law

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• 2019 (11) TMI 814
  Assessment u/s 153C - Additions u/s 68 - unexplained cash credit - HELD THAT:- There are concurrent findings of fact to the effect that the additions made by the AO u/s 68 are not based on any incriminating document found/seized during the search action under Section 132 of the Act. In this view of the matter, the assumption or jurisdiction under Section 153C by the AO was not justified and accordingly the additions made under Section 68 cannot be sustained. The concurrent factual position is squarely covered by the decision of this Court in CIT v. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] . Thus, the present appeal does not raise any substantial question of law and we therefore are not inclined to entertain the present appeal and accordingly the same is dismissed.

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• 2019 (11) TMI 813
  Reopening of assessment u/s 147 - assessment on the basis of an information received from the Office of the ADIT (Inv) II Faridabad, premised on Survey operation conducted on the assessee on 26.03.2015 - assessee during the Financial Year 2008-2009 was engaged in the sale of Aluminum Dross, which emerged during the manufacture of Aluminum alloy ingots in the guise of Ash and Residue , with the intention to suppress the actual value of aluminum dross and to evade payment of appropriate duty on the actual value thereof - CIT (A) noticed that the CESTAT had set aside the findings in the adjudication order holding that the revenue had failed to bring out any corroborative evidences in the form of any cash transaction, or other evidences to support its findings confirmed by Tribunal - HELD THAT:- We answer the question framed in favour of the Revenue, and we direct that the appeal preferred by the revenue before the Tribunal is deemed as disposed of with liberty to both sides to seek revival in case need arises. We make it clear that, in case, the order, which forms the basis of issuance of the notice under Section 148, is upheld and sustained, eventually, then the Revenue shall be entitled to revive its proceedings pursuant to notice u/s 148 and the assessee shall not take up the plea of limitation. As of now, the re-assessment proceedings initiated by virtue of the notice under Section 148 do not survive due to the subsisting order of the CESTAT. We make it clear that we have not expressed any opinion with regard to any aspect on merits of the case.

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• 2019 (11) TMI 812
  Income Tax Settlement Commission order u/s 245D(4) - undisclosed foreign income and assets - whether the Settlement Commission lacked the jurisdiction to decide the applications under section 245C? - HELD THAT:- As compared to the amount of income disclosed, the additional amount offered was only Rs. 8.64 crores which comes to approximately 6.7% of the total amount of income disclosed and is, therefore, only a fraction of the total income disclosed. This offer to pay additional amount by the contesting respondents has to be considered keeping in mind the fact that the proceedings before the Settlement Commission are in the nature of settlement proceedings. If for the reason that in respect of issues which pertained to very old period and could not be reconciled due to lack of want of further evidence, the contesting respondents, with a view to bring about a settlement, agreed to pay a higher amount as proposed by the revenue, it certainly cannot be termed as a revision of the original disclosure made under section 245C inasmuch as, there is no further disclosure but an acceptance of additional liability based on the disclosure already made before the Settlement Commission. On a conjoint reading of section 3 and section 2(9) of the Black Money Act, one thing is clear namely that undisclosed foreign income or asset become chargeable to tax from assessment year 2016-17. However, insofar as undisclosed foreign asset is concerned, while it becomes chargeable to tax from assessment year 2016-17 onwards, the date of acquisition of such asset may relate to any assessment year prior to assessment year 2016-17. Therefore, even after the coming into force of the Black Money Act, insofar as assessment years prior to assessment year 2016-17 are concerned, the undisclosed foreign income would be chargeable to tax under the relevant provisions of the Income Tax Act. Adverting to the facts of the present case, as noticed earlier, the contesting respondents have not resiled from their stand in the application made under section 245C of the IT Act. The contesting respondents have also not made any further disclosure during the course of settlement proceedings but have only agreed to pay additional tax on the basis of the computation made by the revenue in respect of the disclosure made by them. In the present case, it is not possible to state that the impugned order passed by the Settlement Commission is in any manner contrary to any provisions of the IT Act. Insofar as the findings of fact recorded by the Settlement Commission to the effect that there has been no wilful attempt to conceal material facts in these cases are concerned, the same cannot be gone into by this court while exercising writ jurisdiction in absence of any challenge to such findings on the ground of perversity. Under the circumstances, there is no warrant for exercise of powers under articles 226 or 227 of the Constitution of India. Another aspect of the matter is that it is an admitted position that prior to the presentation of this petition, the order of the Settlement Commission came to be fully implemented. Though the Settlement Commission had granted one year s time to pay the amount determined by it, after the order of the Settlement Commission was given effect to, the revenue authorities issued notices of demand and recovered the same from the contesting respondents. At the time when the petition came to be filed, the order of the Settlement Commission has been fully implemented. However, there is not even a whisper in this regard in the memorandum of petition. Not only that, despite having fully executed the impugned order, by way of interim relief it has been prayed that the execution and operation of the order dated 30.1.2019 passed by the Settlement Commission under section 245D of the IT Act be stayed. The learned counsel for the contesting respondents is, therefore, wholly justified in contending that the petition suffers from suppression of material facts. In the light of the above discussion, this court does not find any infirmity in the impugned order passed by the Settlement Commission so as to warrant interference. The petition, therefore, fails and is, accordingly, dismissed. Notice is discharged with no order as to costs. The interim relief granted earlier stands vacated. At this stage, the learned advocate for the petitioner has requested that the operation of this judgment be stayed for a period of two weeks so as to enable the petitioner to approach the higher forum.

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• 2019 (11) TMI 811
  TDS u/s 194C - expenditure for purchase of advertisement space - whether contract in question is a contract for work ? - as per revenue expenditure incurred for purchase of bulk advertisement space ought to be disallowed, since assessee had not deducted at source thereon - HELD THAT:- If the order passed by the Commissioner of Income Tax as well as the order passed by the Income Tax Appellate Tribunal are read in conjunction in the light of the Circular No.13 of 2006 issued by the Central Board of Direct Taxes, it is axiomatic that provisions of Section 194C would apply to a contract for work and not to a contract for sale. The contention of the learned counsel for the Revenue that the Tribunal ought to have restricted its scrutiny with regard to the validity of the order of remand passed by the Commissioner of Income Tax, appears to be attractive at first blush, however, in peculiar facts of the case, we are not inclined to accept the aforesaid submissions as both the authorities on the basis of the materials available on record has recorded the finding in favour of the assessee that the contract in question is a contract for sale and is not a contract for work. Therefore, such an exercise in the fact of the case would be an exercise in futility. We are inclined to answer the additional substantial question of law framed by us today in the affirmative. Order passed by the Income Tax Appellate Tribunal as well as by the Commissioner of Income Tax insofar as it holds that for the assessment year 2007-08, the amount has to be disallowed under Section 40a(ia) of the Act is hereby set aside and it is held that the provisions of Section 194C do not apply to the case of the assessee. In the result, the appeal is allowed.

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• 2019 (11) TMI 810
  Application under the Direct Tax Dispute Resolution Scheme, 2016 - Petitioner on 9th August, 2016 filed an application before the authority under the Scheme, 2016, seeking its benefit. However, by an order dated 22nd September, 2016, the same came to be dismissed, as there was no appeal pending on the date when the Petitioner made an application under the Scheme, 2016 as not satisfying the qualifying condition to avail of its benefit - HELD THAT:- We find that the Petitioner s appeal before the CIT(A) was dismissed on 31st March, 2016. The Petitioner s application admittedly made on 9th August, 2016 after the Appeal was dismissed. This application came to be rejected on 22nd September, 2016, as there was no appeal pending. The order of CIT(A) which the Petitioner seeks to set aside, is an order dated 31st March, 2016. Thus, the Petition suffers from laches as the orders were passed as far back in 2016 and relief is being sought in 2019.Besides, the Scheme 2016 under which the Petitioner seeks benefit, is also not shown to be available today. In the above view, no occasion to examine the merits of the Petitioner s claim, can arise. Therefore, only on the ground of laches/ delay, the Petition is dismissed.

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• 2019 (11) TMI 809
  Procedure for Recovery of Tax - Arrest and Detention of the Defaulter under the Income Tax Act, 1961 - defreeze the savings bank account of the petitioner standing in his name at HDFC Bank Limited, Nandidurga Main Road Branch, Jayamahal Extension, Bangalore - HELD THAT:- It is not in dispute that pursuant to the show-cause notice impugned dated 28.03.2018 relating to the assessment years in question, the petitioner has submitted the detailed reply dated 31.03.2018. In terms of Rule 73 of Schedule II, show-cause notices have been issued calling upon the petitioner to appear before the Tax Recovery Officer on the dates specified in the notices. The apprehension of the petitioner that he may be committed to the civil prison on the date of appearance can be allayed with, directing the Tax Recovery Officer to consider the reply submitted by the petitioner and to take a decision in accordance with law after providing reasonable opportunity of hearing to the petitioner. Petitioner shall appear before the respondent on 14.10.2019 without waiting for any further notice and respondent shall consider the explanation of the petitioner in terms of the reply submitted and after providing reasonable opportunity of hearing shall take a decision in the matter in accordance with law in an expedite manner. All rights and contentions of the parties are left open.

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• 2019 (11) TMI 808
  Reopening u/s 147/148 - addition as deemed income u/s 69A - HELD THAT:- Comparing the reasons for reopening of the assessment for A.Y. 2007-2008 and 2012- 2013 [ 2017 (9) TMI 1229 - ITAT DELHI] , it is clear that A.O. has recorded incorrect facts in the reasons for reopening of the assessment which are factually incorrect, contradictory and vague. A.O. did not verify the report received from Investigation Wing and did not apply his mind to the information as well as facts of the case. In A.Y. 2007-2008 on the identical reasons, the Division Bench of the Tribunal did not approve the reopening of the assessment in the matter and quashed the same vide Order Dated 19.09.2017 (supra). The issue is, therefore, covered in favour of the assessee by the Order of the Tribunal in the case of same assessee for A.Y. 2007-2008 (supra). There is no link between material and formation of opinion that income escaped assessment. There is no independent application of mind to the information received from Investigation Wing and no prima facie opinion have been formed, therefore, re-assessment is invalid - all the additions stand deleted. Appeal of the assessee allowed.

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• 2019 (11) TMI 807
  Short term capital gain - Applicability of the proviso to section 50C - adopting deemed sale value of Karol Bagh property u/s. 50C as per circle rate applicable as on 30.11.2011 against correctly claimed u/s. 50C as per the circle rates applicable as on 05.08.2011 (which is also the actual and apparent sale consideration) - HELD THAT:- In terms of section 50C in cases where the consideration received on transfer of the capital asset being land or building, is less than the value adopted, assessed or assessable by stamp valuation authority for the purpose of the payment of a stamp duty in respect of such transfer, then the value so adopted, assessed or assessable shall for the purpose of computing capital gain be deemed as full value of consideration received as a result of transfer. In the case of the assessee Stamp Valuation Authorities valued the property for the purpose of a stamp duty at Rs. 1,84,50,000/-, therefore invoking the section 50C, the AO took the amount of full value consideration at Rs. 1,84,50,000/-as against value of Rs. 1,10,00,000/- declared by the assessee as actual sale consideration. It is also evident that before the CIT(A) assessee has not made any claim of existence of any such agreement dated 28/07/2011, a copy of which has been produced before us for the first time. As the copy of agreement has been produced before us for the first time, in the interest of substantial justice, we admit the same as additional evidence and restore the matter to the learned Assessing Officer afresh for deciding applicability of the proviso to section 50C. The assessee is directed to produce original copy of the agreement before the AO who may carry out inquiries as deemed fit for verifying genuineness or authenticity of the agreement. AO may, if required, verify the date of purchase of stamp used for the agreement purchase date from the register of the stamp vendor or attestation of the agreement from the register of Notary Public, who has attested the agreement or may examine the purchaser of the property and witness(es) who has signed on the copy of the agreement. It will be the responsibility of the assessee to produce all the necessary document or witnesses for carrying out necessary inquiries for verification of the genuineness or authenticity of the agreement. Upon verification, if the AO finds that the agreement is a genuine one, he may decide applicability of first proviso to section 50C of the in accordance with law. - Appeal of the assessee is allowed for the statistical properties.

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• 2019 (11) TMI 806
  Disallowance being 6/7 portion claimed as business promotion expenses - HELD THAT:- The assessee produced all the bills/vouchers etc., that assessee made genuine payment to Lodhi Hotel which are not in dispute. Considering the totality of the facts and circumstances of the case and in the light of long staying guest agreement and other material on record which is also confirmed by the owner of the property in question, it is clear that assessee had taken the accommodation in Lodhi Hotel for business purposes only and used it for wholly and exclusively for the business purposes. In preceding A.Y. 2013-2014 A.O. disallowed 10% out of total expenses only. Therefore, considering the rule of consistency, the A.O. at best should have disallowed 10% out of sale promotion expenses instead of making the impugned addition in the assessment year under appeal. Set aside the Orders of the authorities below and restrict the disallowance out of total sale promotion expenses in 10% only. The addition is restricted to Rs. 4,10,534/-. Appeal of assessee is partly allowed.

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• 2019 (11) TMI 805
  Exemption u/s 11 - application of the assessee for registration u/s 12AA of the trust as well as approval under section 80G - HELD THAT:- All the activities of change of land use (CLU), construction of the building, getting franchisee of established organisation, obtaining secured and unsecured loan etc. are in furtherance of the object of providing education by way of running the schools. The information regarding PAN, details of unsecured loan provider etc can be obtained, and same cannot be ground for holding that the activity is not transparent. Similarly the activities cannot be held as non-transparent due to giving personal guarantee by the trustees for getting secured loan. Similarly, projection of quality of education not clear or method of recruitment of teachers or their qualifications etc not clear, can not be basis for holding the activities as non genuine. Nowhere CIT(E), has brought on record any non-genuine activity carried by the assessee. If any further information was required in the case, he could have carried further enquiries but rejection of registration on presumption is not justified. CIT(E) has not examined the activities of the assessee in the right perspective. As the assessee has filed additional evidence before us including the affiliation granted by the central board of education, we feel it appropriate to set aside the order of the Ld. CIT(E) and restore the matter back for deciding the application of registration under section 12AA of the Act as well as the application for approval under section 80G of the Act afresh, in accordance with law. The assessee shall be afforded adequate opportunity of being heard. -Appeals of the assessee are accordingly allowed for statistical purposes.

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• 2019 (11) TMI 804
  Disallowance u/s 36(1)(iii) - deduction of the interest - HELD THAT:- Object of the assessee company for which it was established are, to carry on business in Hotels also. The assessee during the year under consideration has earned interest on loan only. The assessee claimed that in pursuance of the objects, the assessee made investment in M/s. Minor Hotels Pvt. Ltd. The assessee company is holding 32% of equity share capital and 100% of preference share capital issued by Minor hotels. The assessee was in the process of establishing hotel project, but, due to some litigation it was delayed. It is not always necessary that assessee should earn profit in assessment year under appeal in order to claim deduction of the expenditure. The assessee made investment in the group companies to take controlling interest in the group company. The assessee for that purpose has joined the JV and SVP also. It is not in dispute that assessee has borrowed money for business purpose and made investment in M/s. Minor Hotels Pvt. Ltd., and paid interest also. The genuineness of the payment of interest is not in dispute. Therefore, assessee is entitled for deduction of the interest in assessment year under appeal. The assessee made investment utilizing the borrowed funds for strategic business purposes and the amount borrowed have been utilised for business purpose only. Assessee has satisfied the conditions of Section 36(1) (iii) - Decided in favour of assessee.

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• 2019 (11) TMI 803
  Expenditure incurred towards levy by EU Commission - whether incurred for the purpose of carrying on its business and, therefore, it cannot be disallowed u/s 37(1) ? - HELD THAT:- What has to be disallowed under Explanation 1 to Sec.37(1) of the Act is a payment made, for contravention of laws in force in India and not of any foreign country. The laws are specific to each of the countries according to their rules and regulations and an offence in one country may not be so in another country. Therefore, we agree with the contentions of Ld.Counsel for the assessee that it is only payment made for contravention of laws in force in India that disallowance under Explanation 1 to Sec.37(1) of the Act is to be made. Whether the payment is compensatory or penal in nature? - We find that the European Commission had required the assessee to pay 1.18 crores of GBP which is equivalent to 141,50,90,000 INR which is the exact amount received by assessee from Niche. The assessee had claimed it to be disgorgement/compensatory, whereas the Revenue had pleaded that it is only by coincidence that the penalty levied by EU is also exactly the same amount which is received by the assessee. Ld.DR argued that it is not disgorgement because though the receipt is from Niche, the payment by the assessee is to European Commission. Therefore, we agree with the Ld.DR that it cannot be treated as disgorgement or compensatory in nature. The next contention of the assessee is that without such payment and without such agreement, the assessee could not have carried out its business in EU and therefore it is towards commercial expediency and to carry on business of assessee, and, therefore, it is business loss. However, we find that the authorities below have not examined this aspect of the issue. Therefore, we are of the opinion that the question as to whether it is to be allowed as business loss particularly when assessee has offered the receipt as income in earlier AY and the revenue has accepted it as business income is to be examined by the AO. Therefore, for this limited purpose, we set aside the issue to the AO with a direction to allow it as business loss if the income has been offered to tax in the earlier A.Y. In the result ground no.2 of the assessee is partly allowed for statistical purposes. Disallowance of depreciation claimed on goodwill arising out of scheme of amalgamatio n - HELD THAT:- l. In the case before us, the goodwill on which depreciation is claimed by the assessee is arising out of the amalgamation scheme, but is not solely the self-generated goodwill as alleged by the AO. Further, the AO followed the decision Of United Breweries [ 2016 (9) TMI 1527 - ITAT BANGALORE] to disallow the claim of depreciation on goodwill. The Tribunal had considered the judgment of the Hon ble Supreme Court in the case of Smiffs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT] and has held that the Hon ble Supreme Court has only held that goodwill is an intangible asset and that depreciation is allowable thereon, but, that it does override the provisions of 5th Proviso to section 32(1) of the Act. We find that the facts of United Breweries [ 2016 (9) TMI 1527 - ITAT BANGALORE] are distinguishable from the facts of the case before us, as in the case of United Breweries, there was a merger with its Wholly owned Subsidiary, whereas in the case of the assessee, it is amalgamation by purchase. Therefore, the decision in the case of United Breweries is not applicable to the case before us. Enhancement made by the Ld. CIT(A) u/s 68 - HELD THAT:- We find that u/s 251(1) of the Act, the CIT(A) has the power to confirm, reduce, enhance or annul the assessment in an appeal against an order of assessment. In the case before us, the AO did not examine the allowability of the sum paid to settle the liabilities of Agila and Onco as part of the sale consideration. In fact, the AO accepted the payment. If the CIT(A) was of the opinion that the AO ought to have verified the genuineness of the same, the option available to the Department are under section 147 or under section 263 but, CIT(A) could not have embarked on bringing a new source of income to tax. Therefore we delete the income enhanced by the CIT(A) and brought to tax. The ground No. 4 is allowed. Disallowance of expenditure u/s 14A - HELD THAT:- We find that the assessee has earned exempt income of Rs. 3,86,52,685/- during the relevant AY whereas the disallowance made by the AO is of Rs. 3,11,70,470/- and, therefore, as held by the Hon ble Delhi High Court in the case of Joint Investments (P) Ltd. Vs. CIT, [ 2015 (3) TMI 155 - DELHI HIGH COURT] that the disallowance u/s 14A rwr 8D is to be restricted to the exempt income earned during the year. The AY before us is AY 2014-15 and therefore, Rule 8D is very much applicable to the assessee. Further, in a number of cases, it has been held that only the average of the investments which have yielded exempt income is to be considered for computation of 14 A disallowance. Finding of the CIT(A) that goodwill has to be amortized over a period of 5 years cannot be sustained. Particularly, when there is no provision for such amortization of goodwill and allowability of depreciation thereon over a period of 5 years. Thus, revenue appeal is dismissed.

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• 2019 (11) TMI 802
  Claim of deduction of the interest paid to DHFL and its associate concern on such borrowed funds which were invested with its associate concerns under Sec. 57(iii) - HELD THAT:- As long as it is established that the Interest paid by the assessee on the loans raised from DHFL as per the mandate of Sec. 57(iii) was an expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning of the Interest income from the associate concerns to whom interest bearing loans were given, then such Interest paid would be eligible for deduction against the Interest received by the assessee company. As the factual position as to whether the assessee satisfies the requisite conditions envisaged in Sec. 57(iii), therein making it eligible to claim deduction of the Interest paid on the loans raised from to DHFL against the Interest income received from the associate concerns to whom interest bearing loans were given cannot be safely gathered from the records before us, and would require verification, therefore, the matter in all fairness is restored to the file of the A.O - A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate its claim as regards its eligibility towards claim deduction under Sec. 57(iii) of the Act Entitlement of the assessee towards claim of deduction of interest paid on the loan raised from its associate concern - HELD THAT:- A.R has filed before us a Chart , wherein it is claimed that the interest bearing loan received from M/s Skylark Buildcom Private Limited was advanced by way of interest bearing loans to its associate concerns during the year under consideration. As the claim of the assessee requires to be verified in the backdrop of the facts projected in the Chart filed by the assessee before us, therefore, in all fairness we restore the matter to the file of the A.O. The A.O is directed to verify the veracity of the claim of the assessee that the amount received by it as interest bearing loans from M/s Skylark Buildcom Private Limited was utilised for providing interest bearing advances to its associate concerns. In case the aforesaid claim of the assessee is found to be in order and as per the mandate of Sec. 57(iii), then the A.O shall allow deduction of the Interest paid by the assessee to M/s Skylark Buildcom Private Limited against the correlating Interest income received by it from its associate concerns Claim of expenses viz. other expenses and amortization expenses against the Interest received - HELD THAT:- As observed by us hereinabove, as the said expenses had not been incurred by the assessee for earning of Interest income , therefore, the same would not fall within the realm of the deductions envisaged in Sec. 57(iii) of the Act. Accordingly, finding no infirmity in the order of the CIT(A), we uphold the disallowance of the aforesaid expenses. Resultantly, in terms of our aforesaid observations the matter is restored to the file of the A.O. As observed by us hereinabove, the A.O shall in the course of the set aside proceedings, after making necessary verifications, as he may deem fit,

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• 2019 (11) TMI 801
  Rejection of books of accounts - Addition on account of under billing of sales done by the assessee - discrepancies in the value of stock - HELD THAT:- In the present case it is noticed that there were various discrepancies in the value of stock worked out on the basis of books of accounts and the stock inventorised during the course of survey. There were certain other discrepancies in the books of accounts which could not be explained by the Assessee either to the A.O. in the assessment proceedings or to the Ld. CIT(A) in the appellate proceedings. Therefore the books were rightly rejected by the Ld. CIT(A) under section 145(3) of the Act and this action of the Ld. CIT(A) has not been challenged by the department in the grounds of this appeal. It is well settled that in case the books of accounts are rejected the income of the business in which the Assessee was engaged can be determined by estimating the profit rate. In the present case the Ld. CIT(A) after considering the gross profit rate of the assessee for the various Assessment Years i.e; from 2006-07 to 2017-18 applied the GPR of 7.5% on the sales outside the books of accounts. The said GPR applied by the CIT(A) was better than the GPR disclosed by the Assessee and accepted by the Department for the Assessment Year 2014-15 at 6.97% in the scrutiny assessment. The Ld. CIT(A) also mentioned that if the disclosure of the Assessee amounting to Rs. 24,56,010/- is taken into account, the declared GPR rises to 11.75% which was reasonable by considering the history of the GPR declared by the Assessee. No valid ground to interfere with the findings given by the Ld. CIT(A) for modifying the various trading additions made by the A.O. by considering the entire sales outside the books of accounts as undisclosed income of the Assessee. Addition of notional interest - It is noticed that the Ld. CIT(A) after examining the records categorically stated that the Assessee was having regular business dealing with M/s Garg Trading Company of Phillaur till the F.Y. 2008-09 and the said concern was appearing as a sundry debtors. Therefore the amount outstanding in the name of M/s Garg Trading Company amounting to Rs. 2,64,755/- was a trading debit balance on account of business expediency. A.O. was not justified in making the disallowance under section 36(1)(iii) of the Act, because the aforesaid outstanding amount was not an interest free advance rather it was a debit balance in the normal course of business and due to a dispute between the Assessee and M/s Garg Trading Company, Phillaur the amount remained outstanding. We, therefore, are of the view that the Ld. CIT(A) rightly deleted the impugned addition made by the A.O. - Decided against revenue

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• 2019 (11) TMI 800
  TP Adjustment - CIT(A) in directing the AO/TPO to work out the ALP of interest by applying only LIBOR instead of LIBOR + credit spread on account of the risk profile of the borrower - HELD THAT:- ALP rate of interest in case of loans advanced to Associate Enterprises would be determined on the basis of rate of interest being charged in the country where the loan is received / consumed. Similar is the ratio of several other judgments rendered by various benches of Tribunal which have already been enumerated in the impugned order. Therefore, the conclusion to the extent that the loan to AE was to be benchmarked on the basis of LIBOR would not require any interference on our part. Now the only question that survives for our consideration is the determination of ALP rate keeping in view the facts and circumstances of the case. FAA has confirmed the determination of ALP on the basis of LIBOR only without any spread-over. However, the said rate, in our opinion, represent interbank rates which are applicable in case of entities having highest credit rating. The same is also fortified by the fact that the assessee, itself, has assigned a rating of Baa1 / BBB+ to its AE while benchmarking the transactions. The said rating represents lower medium investment grade rating. Therefore, the determination of ALP merely on the basis of LIBOR, in our considered opinion, would not be justified. During the course of proceedings before Ld. TPO, the assessee had arrived at mean spread of 243.83 basis points over LIBOR which is evident from page nos. 5-6 of Ld. TPO s order. The computation of the same has nowhere been disputed by the revenue. Applying LIBOR + spread-over, ALP interest has been worked out to be Rs. 1,64,13,241/-. We are of the considered opinion that this spread over as computed by the assessee was undisputed, quite fair and reasonable and the same was to be accepted. Accordingly, we confirm the ALP rate of LIBOR + 2.4383% as computed by the assessee in the alternative submissions made before Ld. TPO. The impugned order stand modified to that extent. The Ld. TPO / Ld. AO is directed to recompute the income of the assessee in terms of our direction. Disallowance u/s 14A - HELD THAT:- The undisputed position, as in AY 2011-12, that emerges is the fact that no exempt income has been earned by the assessee during the year under consideration. Facts being pari-materia the same, our observations and conclusions as given for AY 2011-12 in revenue s appeal, shall mutatis-mutandis apply to this year also. Accordingly, the additional disallowance of Rs. 1033.95 Lacs as made by Ld. AO in the final assessment order while computing income under normal provisions stand deleted. Also, the adjustment of Rs. 1047.22 Lacs as made by Ld. AO, while computing Book Profits u/s 115JB. Deduction u/s 80-IA - HELD THAT:- We hold that the assessee was entitled to claim deduction u/s 80-IA with respect to unit SBU-II. Accordingly, we direct lower authorities to grant the same to the assessee and recompute its income, as per law. Ground Nos. 3 to 5 stands allowed. Short credit of TDS - HELD THAT:- Keeping in view the same, it would suffice on our part to issue directions to Ld. AO to verify the TDS credit claim of the assessee and grant the due credit, as per law. This ground stand allowed for statistical purposes. Recovery of Expenses - HELD THAT:- The undisputed fact that emerges are that the said expenditure was incurred by the assessee in earlier AY 2011-12 and the payment was made to third party consultants / experts. No payment was made directly to its AE. The said transactions were already benchmarked in AY 2011-12 using CUP method. It is also evident from the order of learned TPO for AY 2011-12 that no adjustment has been proposed against this expenditure in that year. The transactions reported in year under consideration is mere reversal of those book entries. Another fact is that even though the assessee has not benchmarked the same during the year, learned TPO has also not benchmarked the same using any of the prescribed methods. Domain of learned TPO was limited to determination of ALP of the international transactions and it was not for learned TPO to decide whether the expenditure was eligible for deduction or not. So far as the directions of learned DRP, invoking the provisions of Section 37(1) is concerned, it is evident from perusal of final assessment order that the said provisions have not been invoked by learned AO while making the disallowances. This being so, the action of lower authorities in making the said adjustment, could not be upheld.

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• 2019 (11) TMI 799
  Addition u/s 68 - Cessation of liability i.e. the sundry creditors for milk purchase u/s.41(1)(a) - HELD THAT:- AO has made additions for all milk purchases which are outstanding for payment for more than one week , while learned CIT(A) gave part relief by accepting the purchases which were outstanding for payment for one more week and entire purchases outstanding for payment more than two weeks stood added to the income of the assessee by learned CIT(A). There could be some cases wherein genuinely the assessee had not made payments to these milk suppliers creditors and the assessee continued to be liable to these milk supplies vendor , albeit is payment is pending for more than one/two weeks. This requires enquiry and verifications of these milk supplies creditors. The authorities below have however made no enquiry with milk supplies creditors. No summons u/s 131 or notices u/s 133(6) were issued by AO/learned CIT(A) to these milk supplies creditors to verify about their genuineness and bonafide rather the entire sum wherein the payments were outstanding for more than one week stood added by the AO while CIT(A) gave part relief to the assessee by accepting creditors which were outstanding upto two weeks. The assessee has also to rebut said presumption by bringing on record complete details of each of these milk suppliers creditors such as name, address, PAN, reasons for non payments, any dispute with these milk suppliers, communication with these milk suppliers, claims filed by these milk suppliers with any court etc. . In our considered view based on facts and circumstances of the case and in the interest of substantial justice to both the parties, the assessee deserves one more opportunity and the matter needs to be set aside and restored to the file of the AO for framing fresh assessment denovo on merits in accordance with law. We have already explained the onus which lay on both the parties. The assessee is directed to produce complete details of milk suppliers to the AO in set aside proceedings for making necessary enquiries and verifications, if deem fit by the AO in set aside proceedings . AO is directed to provide proper and adequate opportunity of being heard to assessee in accordance with principles of natural justice in accordance with law. AO shall admit evidences/explanations filed by the assessee in its defense in set aside denovo assessment proceedings in the interest of justice and then adjudicater on merits in accordance with law . Thus appeal filed by both the parties on this issue stand allowed for statistical purposes. Difference in physical cash found during the course of survey operations conducted by Revenue u/s 133A - HELD THAT:- The cash in hand was physically found to be Rs. 26,35,769/- during the course of survey operations conducted by Revenue on 06.11.2013 u/s 133A of the 1961 Act and it is the assessee s Managing Partner Mr. S.P.Loganthan in his statement recorded u/s 133A on 06.11.2013 in reply to question number 28 stated that cash book maintained by assessee is tallying with physical cash found during the course of survey operations on 06.11.2013 , except difference of Rs. 684/- which was explained to be difference in petty cash. Now, the assessee is claiming cash balance in its books of accounts to be Rs. 56,33,311/- as on 06.11.2013 as against physical cash found during survey operations u/s 133A on 06.11.2013 of Rs. 26,35,769/- and hence onus is on assessee to bring out reconciliation statement before the authorities to reconcile justly the variation of Rs. 29,97,542/- and to explain that income component , if any arising due to aforesaid variation under the provisions of the 1961 Act has been offered to tax and due taxes paid to Revenue - matter needs to be set aside and restored to the file of the AO for framing fresh assessment denovo on merits in accordance with law. Denial of depreciation on Buildings and Plant Machinery with respect to its Karur Chilling Plant - HELD THAT:- The authorities below did not get an opportunity to verify these documents nor any enquiries could be made by authorities below in the context of these additional evidences to arrive at conclusion whether the new Karur Chilling Plant commenced operations until the end of previous year or not and hence accordingly, whether the assessee would be entitled to get depreciation on Building and Plant Machinery for the year under consideration In all fairness to both the parties and in the interest of justice, we set aside and restore this matter to the file of the AO for framing fresh assessment denovo on merits in accordance with law. The assessee is directed to produce these additional evidences before the AO in set aside proceedings for making necessary enquiries and verifications, if deem fit by the AO in set aside proceedings . The AO is directed to provide proper and adequate opportunity of being heard to assessee in accordance with principles of natural justice in accordance with law. Disallowance of interest on term loans borrowed for incurring capital expenditure for installing Karur Chilling Plant - HELD THAT:- Addition on the grounds that the said Karur Chilling Plant had not commenced commercial operations and the assets thereof were not put to use. The decision by the AO as to whether the assessee did commence commercial production and put to use assets before the end of previous year relevant to impugned ay or not as per our decision in preceding para 12 was set aside to the AO and the decision of the AO in set aside denovo proceedings shall have direct bearing on the allowability of interest on term loans availed for incurring capital expenditure for installing Karur Chilling Plat. Thus, this matter is also remitted back to the file of the AO for framing denovo assessment. Allowability of additional depreciation u/s 32(1)(iia) on both the new plants at Aaiyilapatti and Karur - HELD THAT:- No grounds of appeal are raised by assessee in context thereof with respect to denial of claim of additional depreciation u/s 32(1)(iia) by learned CIT(A) and hence we are afraid that in the absence thereof, we cannot entertain this issue at this stage. We can only decide the issue which are specifically raised before us and we cannot venture into an unchartered territory to do fishing expeditions. This plea raised by assessee is not accepted and stand rejected.

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• 2019 (11) TMI 798
  Revision u/s 263 - deduction claimed u/s 80-IC - gain from exchange fluctuation - gain on account of unclaimed balance - nature of Insurance claim and export incentives - HELD THAT:- The present case that the AO had specifically enquired about the allowability of the deduction claimed u/s 80-IC in respect of the profits derived from manufacturing unit situated in EldecoSidcul Industrial Park of State of Uttaranchal, and upon examining the reply furnished by the assessee AO framed the assessment order u/s. 143(3) dated 28.03.2016. In view of judicial pronouncements discussed supra, we thus note that the AO has passed the assessment order after calling for details on the issues found fault by the PCIT and after considering the reply and documents filed before him passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. CIT s finding fault with the order of the AO as erroneous as well as prejudicial to the interest of revenue on account of lack of inquiry has to fail. Whether the decision of the AO, after perusal of the reply of the assessee in respect of deduction u/s. 80IC of the Act, can be held to be unsustainable in law or whether can it be said to be a plausible view? - HELD THAT:- Export incentives, by whatever name called, given by the Government is with a view to incentivize and reduce the effective cost of production of the assessee. There is essentially no element of profit derived from export incentives, but it is meant to reduce the cost of production. Case of CIT Vs Meghalaya Steels Ltd [ 2016 (3) TMI 375 - SUPREME COURT] wherein one of the questions before the Apex Court was whether insurance subsidy received from the Government could be said to be derived from the industrial undertaking and hence considered for the purposes of computing deduction u/s 80IC as observed that the insurance subsidy was given to subsidize the cost of insurance premium incurred by the assessee in relation to the premises as well the stock manufactured at the eligible Unit. Accordingly the Court observed that such subsidy being relatable to the cost of production of the Unit had direct first degree nexus with the business of the eligible undertaking and therefore was held to be eligible for computation of deduction u/s 80IC We are of the considered opinion that while passing the assessment order allowing the deduction u/s 80IC in respect of items of other income and export incentives, the AO did not follow a view which can be said to be unsustainable in law . In the circumstances therefore, the jurisdictional facts for usurping the jurisdiction, being absent, we hold that the action of Ld. Pr. CIT was without jurisdiction and all subsequent actions are null in the eyes of law. We therefore quash the order impugned before us. - Decided in favour of assessee

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• 2019 (11) TMI 797
  Compensation received for loss on account of non-exercise of commercial exploitation/ development rights on account of 99 years lease to run the company - revenue or capital receipt - HELD THAT:- Admittedly, in the present case property was sold to the same party who was enjoying the property as lessee on long term lease of 99 years and the property was sold for a consideration not below the guideline value prescribed for stamp duty purpose. Provisions of Section 50C of the Act have no application. It is settled proposition of law that there cannot be any presumption of receipt of consideration over and above apparent consideration stated in registered sale deed. What is apparent should be believed to be real in the absence of any material to contrary on record. Apparently, the compensation was paid towards termination of long term lessee, in terms of MOU entered between parties on 29.03.2012. The Assessing Officer doubted the genuineness of the term of MOU. He should have examined the other parties to find out the purpose of the impugned payment, which the Assessing Officer had chosen not to do so. Therefore the MOU has to be believed and the amount received should be held to be compensation towards termination of long term lease. Then the question boils down to whatever compensation received on account of termination of long term lease of 99 years can be treated as revenue receipts and liable to tax. Any compensation received towards loss of source of income cannot be treated as Revenue receipts but capital receipts which is not liable to be taxed. - Decided in favour of assessee.

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• Customs

• 2019 (11) TMI 796
  Seizure of contraband Gold - whether seized goods or not - confiscation - burden of prove - section 123 of CA - HELD THAT:- The appellant was unable to explain the source of the gold which was confiscated. Appeal dismissed.

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• 2019 (11) TMI 795
  Benefit of the Merchandise Exports from India Scheme [MEIS] - denial of export benefit on the ground that the exporter not having indicated its intention of claiming the benefit under the MEIS Scheme, the necessary verification of the export consignment was not done prior to its export, and a verification of the export consignment is now not possible - HELD THAT:- A perusal of the screen shot produced indicates that there are separate columns wherein the description of the goods, and the intention of the exporter to claim the export benefit, can be entered. Over and above this, there is another column requiring the exporter to indicate whether he intends to avail the benefit of the Export Benefit Scheme against which the default setting reads as No - the default setting in respect of a claim for the benefit of an Export Promotion Scheme is always in the negative, and it requires a positive act on the part of the exporter to uncheck the box reading No and check the box reading Yes , for the purposes of claiming the benefit. While the exporter did not check the box concerned to read Yes , in the column meant for the description of the goods he had clearly indicated his intention to avail the benefit of the Export Promotion Scheme - Under such circumstances, the denial of a claim for export benefit could not have been done in a mechanical manner merely because there was a technical lapse on the part of the exporter concerned in not checking a particular box in the web portal, more so when there was sufficient indication from the other details entered therein that pointed to the exporter s intention to claim the reward. The writ petitions disposed of with a direction to the respondents, including the additional 5th respondent in both the writ petitions, to consider the claim of the petitioners for export benefit, afresh, and to grant the export benefits, if on an overall consideration of the details furnished by the petitioner, the intention to claim the benefit of the MEIS Scheme was seen manifested at the time of export.

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• PMLA

• 2019 (11) TMI 794
  Money Laundering - proceeds of crime - grant of anticipatory bail - attachment proceedings - scheduled offences - HELD THAT:- The endeavour under the Amendment Act, 2013, vis-a-vis Sections 5 8 is to enable attachment proceedings against the persons who are accused of a scheduled offence; persons who have been accused of money laundering alone; persons who have come in possession of the proceeds of crime. It is evident that in view of the 2013 Amendment to the PML Act, a person can be tried for an offence of money laundering alone without restricting the meaning attributable to it as being with reference to a scheduled offence alone - Hence, section 8, as amended by the Amendment Act of 2013, cannot be said to be arbitrary and violative of the fundamental right of a person if the proceedings are continued under the PML Act, even if the trial of a scheduled offence results in an acquittal and the alleged proceeds of crime pertained to that scheduled crime. The offence of money laundering is a continuing offence, inasmuch as, by its very definition, the offence continues as long as accused is in possession, acquisition of the ill gotten wealth since the projection is not one time offence and continues till such time person is in possession of ill gotten wealth. Thus the time of its generation is of no consequence but the possession, acquisition and its projection as untainted is as long as the projection as untainted continues, the offence will continue and cannot be said to have been applied retrospectively - The investigation under PMLA after the year 2009 would not be treated as applying the Act retrospectively for the reason of ill gotten wealth being generated prior to the amendment coming into force because accused at the time of investigation under PMLA was in possession, acquisition and projecting such proceeds of crime as untainted. Prima facie, allegations are serious in nature and the petitioner has played active and key role in the present case. It cannot be disputed that entire community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book, as such offences affects the very fabric of democratic governance and probity in public life. No doubt, bail is right and Jail is exception, but, if bail is granted in such case, a wrong message goes to the public at large. The petitioner is not entitled for grant of bail - bail application dismissed.

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• Service Tax

• 2019 (11) TMI 793
  Cancellation of Bail - certain stated documents have not been supplied by the petitioner-Rajender Singh for conduct of proper investigations - evasion of service tax - HELD THAT:- Keeping in view of the fact that a period of more than 04 years has expired, within which the adjudication process in the alleged evasion of service tax would have been completed, the aforesaid order dated 29.05.2015 granting interim bail to the petitioner is hereby confirmed. Petition disposed off.

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• 2019 (11) TMI 792
  Refund of unutilized CENVAT credit - input services - renting of immovable property service - rejection also on the ground that certain invoices were not produced by the appellant before the authorities below - HELD THAT:- Rejection of refund claim on the ground of non-mentioning of address of the premises in the registration certificate is not sustainable in view of the decision of the Karnataka High Court in the case of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX [2011 (9) TMI 450 - KARNATAKA HIGH COURT] - Further, in the present case, availment of services and its utilization for providing output services has not been disputed and the service tax paid at the landlord s end for renting of immovable property service is also not disputed - the rejection of the refund on the ground of non-registration of the other floors within the same building is set aside. Rejection of refund in respect of certain activities on the ground of non-production of invoices - HELD THAT:- The case remanded back to the original authority to quantify the refund on the basis of the documents which may be produced by the appellant and thereafter, decide the refund. The appeal is partially allowed and the matter is remanded back to the original authority for the purpose of verification of the refund claim on the basis of the documents which may be produced by the appellant.

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• 2019 (11) TMI 791
  Refund claim - Time Limitation - relevant date in respect of service tax paid on the transportation of Gas through pipeline by Gas Authority of India Ltd. - HELD THAT:- From the impugned Order-in-Appeal it is noted that learned Commissioner (Appeals) has not accepted 29/04/2011 as the date of filing of application for refund whereas he has treated the date of filing of refund claim as 21/06/2011 for the reason that application on 29/04/2011 was filed before Assistant Commissioner of Central Excise, Allahabad whereas as per common understanding the refund application should be filed before jurisdictional Assistant Commissioner, Allahabad and the same was filed before jurisdictional Assistant Commissioner at Agra on 21/06/2011 and considering said date as date of filing dealt with the issue - We are not in agreement with the said argument of the learned Commissioner (Appeals). The refund is sought from the Department of Revenue and both Assistant Commissioner, Allahabad and Assistant Commissioner, Agra are representing Department of Revenue. Assistant Commissioner, Allahabad on receipt of said application on 29/04/2011 instead of rejecting the same should have forwarded the same to the Assistant Commissioner of Central Excise, Agra. We, therefore hold that appellant had filed application for refund on 29/04/2011. Matter remanded to the learned Commissioner (Appeals) to decide the issue taking 29/04/2011 as the date of filing of refund application - appeal allowed by way of remand.

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• 2019 (11) TMI 790
  Imposition of penalty u/s 78 of FA - valuation - inclusion of conservation charges recovered from the employees, in respect of residential accommodation provided to them, for which the appellant company recovered licence fee - HELD THAT:- There is no case of having collected the service tax and not paid. Further, it is evident that appellant is a Public Sector Undertaking and maintained the proper record of their transactions. Further, the levy of service tax on lease rent from education institution was wholly exempt. It was only by a subsequent modification of the mega exemption notification (w.e.f. 11.07.2014) the service tax became chargeable on the said lease rent. On this score also it is evident that there is no malafide on the part of the appellant, as such changes were brought about in the middle of the financial year, could have escaped the notice of the appellant. The conservancy charges are in the nature of recovery for municipal services provided by the town administration department of the appellant, for maintaining the industrial township. In this view of the matter also it prima facie appears that no case of imposing penalty is made out under Section 78 - appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 789
  Imposition of penalty u/s 78 - tax alongwith interest paid before issuance of SCN - Security Agency Service - reduction of penalty - HELD THAT:- The second proviso to Section 78 bid provides that where such service tax and the interest payable thereon is paid within thirty days from the date of the communication of the order determining the liability, the amount of penalty liable to be paid by such person under the first proviso to Section 78 shall be 25% of such service tax - From a perusal of the impugned order it is clear that the demand has been reduced by the learned Commissioner to Rs. 12,48,822/- from Rs. 14,38,822/- on the ground that the service tax on the amount of Rs. 3,19,607/- was not received by the Appellant from M/s. Radission Resort and Spa Ltd. till the date of passing of the impugned order. The provision of Service Tax point of Taxation Rules prevailing during the relevant period specifically provides that the service tax was required to be paid on receipt basis and since this amount of Rs. 3,19,607/- was not received by the Appellant, therefore there Appellant was not required to pay the said amount and hence the learned Commissioner was justified in extending the benefit of point of taxation (till June, 2011) proportionately to the extent of Rs. 1,89,241/-. Reduction of penalty - HELD THAT:- The learned commissioner reduced the amount of Service Tax demanded by the amount of Rs. 1,89,241/- alongwith reduced penalty by the same amount. So the amount can be said to be re-determined by the learned commissioner and since the appellant has paid the complete reduced amount of service tax with complete interest and 25% of the amount of reduced penalty as determined by the ld. Commissioner, within thirty days from the date of passing of the impugned order, therefore in the peculiar facts of the case the benefit of second proviso to Section 78(1) of the Finance Act, 1994 can be extended to the Appellant - the impugned order modified to the extent of reducing the amount of penalty to 25% while maintaining the impugned order in all other aspects. Appeal allowed in part.

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• 2019 (11) TMI 788
  Services provided to Governmental Authorities - Business Auxiliary Service - Works Contract Service - proviso to Section 73(1) of Finance Act - HELD THAT:- The authorities below have given a specific finding that MNNIT, MLNMC, IIIT and RGIPT were governmental authorities as they were set up by Acts of Parliament and State Legislature and the said finding has not been controverted by Revenue in appeal. The Commissioner (Appeals) has given a detailed finding on all the aspects and Revenue has not raised any ground to interfere in the impugned order of the authorities below. The Commissioner (Appeals) has relied upon the Hon ble Patna High Court decision in the case of Shapoorji Paloonji Company Pvt. Ltd. vs. CCE, Patna [ 2016 (3) TMI 832 - PATNA HIGH COURT ] - Revenue s ground is that the said decision of the Hon ble Patna High Court stands challenged by them before the Hon ble Apex Court. However, we note that there is no stay of operation of the said order and as such the same still holds the fields. There are no justifiable reasons to interfere in the impugned order of the authorities below - appeal dismissed - decided against Revenue.

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• 2019 (11) TMI 787
  SSI exemption - use of brand name while providing Mandap Keeper s Services - N/N. 6/2005-ST dated 01 March, 2005 - Revenue entertained a view that inasmuch as the present appellant M/s Amit Resorts were providing services under the brand name of M/s Hotel Garg, the benefit of SSI Exemption Notification cannot be availed by them in terms of proviso to Para 1 of the Notification - extended period of limitation - HELD THAT:- In the present case M/s Hotel Garg is not using expression Garg which is their family surname but a specifically designed G is being used by them thus indicating a connection between Hotel Garg and general public. As such, the Lower Authorities have rightly held that the appellant was using the brand name of another person while providing services and as such was not entitled to SSI exemption benefit. Extended period of limitation - the demand stands raised for the period 2009-10 - penalty - HELD THAT:- The issue involved is a bona fide issue of interpretation and there being no positive evidence indicating any mala fide on the part of the assessee, we are of the view that the demand is required to be restricted to the normal period of limitation - For the same reason, there are no justification for imposition of penalties upon the assessee. The matter is remanded to the Original Adjudicating Authority for re-quantification of the demand falling within the limitation period.

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• 2019 (11) TMI 786
  Recovery of inadmissible credits - non-registration of other premises of the respondent - sub-Rule (2) of Rule 9 of CCR - Section 73 (1) of Finance Act 1993 along with interest and equivalent penalty - HELD THAT:- Rule 4 (2) service tax Rule had not expressly stated that Cenvat Credit is not admissible without such registration of units, there is no reason to depart from the judicial president set by this Tribunal which has been consistently in favour of allowing Cenvat Credit utilised for such other unit/premises of a registered service provider. There is no irregularity in the reasoned order of the Commissioner (Appeals) - appeal dismissed.

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• 2019 (11) TMI 785
  Imposition of simultaneous penalty u/s 76 78 - HELD THAT:- This issue has been settled by the Hon ble High Court of Gujarat in the case of M/S RAVAL TRADING COMPANY VERSUS COMMISSIONER OF SERVICE TAX [ 2016 (2) TMI 172 - GUJARAT HIGH COURT] according to which when the penalty under section 78 was imposed, no penalty should be imposed under section 76. Considering the aforesaid judgment, we are of the view that Adjudicating Authority has rightly not imposed penalty under section 76. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2019 (11) TMI 784
  Clandestine removal - cotton yarn - Department was of the view that the assessee removed cotton yarn on cheese in the guise of hank yarn with an intent to evade the payment of excise duty and clandestinely cleared the same - HELD THAT:- There is no merit in the SLP - SLP dismissed.

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• 2019 (11) TMI 783
  Valuation - manufacture of motor vehicles parts and clearance to own other unit - valuation done as per the valuation Rules 6b(ii) of erstwhile Central Excise (Valuation) Rules, 1975 - revenue neutrality - HELD THAT:- The finding on point of revenue neutrality has been correctly arrived at by the Learned Tribunal - We, therefore, do not entertain the present appeal. The appeal is dismissed.

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• 2019 (11) TMI 782
  CENVAT Credit - duty paying documents - Whether on the basis of documents recovered and various statements recorded during the investigation, the cenvat credit can be denied to the furnace units who has taken cenvat credit on the strength of the invoices issued by the scrap dealers, namely, M/s SST, M/s SMM and M/s YT? - imposition of penalties. HELD THAT:- The documents recovered from the bag which was found are photocopies and no original documents have been placed on record. Further, we find that that pen drive resumed from the godown of M/s SST on 27.11.2012 did not contain any incriminating documents. Moreover, the rolling mills who are alleged to be received goods without cover of invoice were not made part to the show cause notice. Reliability on statements - denial of cross-examination - HELD THAT:- During the cross examination, Shri Avtar Singh, Manager has stated that no bag was recovered in his presence, but, the visiting team has informed him that one bag is recovered from their premises. Further, he stated that the statements dated 22.05.2013 and 21.11.2012 were not voluntary but forced to give statements - Further, Shri Sanjay Kumar Goel, during the course of adjudication was cross examined and has stated that all the statements were given under pressure and threat and also stated that no original documents were shown to me while recording my statement. As, Shri Avtar Singh in his cross examination has stated that he was working on his table at office at the time of visit and he alone was present and there was no other person present in the godown. The godown is in 8 bighas area, there are four rooms and rest of the area is open. No recovery of bag was made in his presence, the visiting staff informed him recovery of bag from the godown, the visiting staff also did not offer their personal search, therefore, the recovery of cloth bag containing documents pendrive is doubtful - the panchas to the panchnama dt. 27.11.2012 are not independent witnesses, but, they are under active influence in the Central Excise Department, as Shri Sachin Brar S/o Shri Dalip Brar R/o House No. 92, Sector 5, Block A, Prem Nagar, Mandi Gobindgarh was working in Central Excise Department, Mandi Gobindgarh on 27.11.2012 as an recruit of Manpower Contractor even upto 01.07.2017, whose cross examination was not allowed. The above facts are on record and are not denied by the revenue though any corroborative evidence. The denial of cross examination of the Panch Shri Sachin Brar (who was working with the department) create doubt on the truthfulness of the panchnama dated 27.11.2012, therefore, the documents recovered through the said panchnama are not admissible. Reliability on photocopies of documents - HELD THAT:- The photocopies of the documents recovered during the course of search in the premises of M/s SST cannot be relied upon documents. Moreover, the recoveries of these documents also create doubts; as these documents were found in the bushes. As there is an open area in the godown having 6 feet boundary wall and the documents recovered in the back area of godown in bushes in a cloth bag whereas as per the panchnama it has been recorded that M/s SST is keeping their records in Almirahs for the rooms in their office, therefore, the recovery of the documents from the premises of M/s SST is in doubt. Further, no demand is based on the registered resumed from the office of Motia Khan. Rather, the demand has been raised on the basis of comparison of photocopies of the documents resumed in cloth bag which are photocopies from the godown of M/s SST - the whole effort made by the Ld. Commissioner in the impugned order to corroborate the photocopies of documents (of whom originals are not available is in vain). Merely on the basis of the photocopies of documents whose original are not available which has been recovered from bushes in the godown of M/s SST, the allegation is not sustainable against the appellants - there are several discrepancies in the investigation as well as in the adjudication. In the absence of any documentary/tangible evidence on record, the allegation of diversion of goods by the scrap dealers is not sustainable. Consequently, the cenvat credit taken by furnace units on the strength of invoices issued by M/s SST, M/s SMM and M/s YT cannot be denied. Accordingly, no recovery of cenvat credit can be made as per the impugned order - Therefore, as the charges alleged by the revenue against the appellant remain unproved, no penalty is imposable on the appellants. Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 781
  CENVAT Credit - Styrene Monomer and Acrylonitrite - Target Plus Scheme - credit was challenged by the Revenue on the ground that since Target Plus scheme is discontinued with effect from 01.04.2006, benefit of such scheme was not available - HELD THAT:- Revenue has essentially related the observation that since the Target Plus scheme was abolished, the certificates issued during the currency of the said scheme cannot be used thereafter. It is seen that utilization of certificates issued under Target Plus scheme is a matter which falls under the jurisdiction of Customs Authority and not under Central Excise authorities. The Customs authorities have allowed the certificates issued under Target Plus scheme and no demand of duty has been raised by the customs authorities in respect of such imports. Notification No. 73/2006-Cus has been issued after withdrawal of Target Plus scheme which permits utilization of duty credit certificates issued under the scheme on the basis of incremental growth of FOB value of exports made during the year 2005-06. The said certificates were issued after abolition of Target Plus scheme. The said certificates have even been issued in August 2007 and February 2008, then respondent could not have used the certificate after abolition of scheme does not have any force. Moreover, Notification No. 32/2005-Cus is continue even after abolition of Target Plus scheme under condition No. 7 clearly permits availment credit of addition duty paid. Appeal dismissed - decided against Revenue.

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• 2019 (11) TMI 780
  CENVAT Credit - duty paying documents - validity of documents on the basis of which the appellant has availed Cenvat credit - Rule 9 of the Cenvat Credit Rules reads with Rule 4A of the Service Tax Rules, 1994 - HELD THAT:- As is seen from the provisions of Rule 4A itself provides that in case of banking services invoice shall include any document by what so ever name called whether or not serial numbered or whether or not containing address of the person receiving taxable services. In the absence of any dispute of the tax paid and utilization of the said service we find that Commissioner (Appeals) has rightly allowed the credit to the respondent - there are no merits in the Revenue s appeal - appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2019 (11) TMI 779
  Refusal of registration -non-compliance with the pre-deposit - non-deposit of ten per cent of the disputed amount now mandated under the amended provision of Section 26 of the Act - Maharashtra VAT Act - Whether the State of Maharashtra, after the 101st constitutional amendment dated 16 September 2016, has legislative competence to amend the MVAT Act to enact the mandatory condition of pre-deposit of the disputed amount for filing appeal regarding the goods? - Whether the explanation to section 26 of the MVAT Act takes away the right of the assessee to file an appeal without statutory deposit in respect of assessment orders passed before 15 April 2017? HELD THAT:- The Registry is directed to place papers and proceedings of the present two writ petitions before the learned Chief Justice to obtain suitable directions to place the questions of law for the opinion of the Larger Bench of this Court. Place the petitions on board after 12 weeks under the caption for directions.

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