Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 24, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Detention of goods alongwith vehicle - Since the requirement of the E-way bill was not applicable for the petitioner during the above period, the seizure itself is bad in law.
Income Tax
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TDS u/s 195 - usance interest on delayed payment to its holding company - The assessees being responsible for paying to the non-residents usance interest which was chargeable under the provisions of the Income-tax Act, 1961, were liable to deduct income-tax thereon under section 195(1) thereof - TDS liability confirmed.
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Disallowance made u/s 40A(2)(a) - higher salary paid to Directors - Related party transactions - the concerned directors are assessed to tax at the maximum rate of 30% - the provisions of section 40A(2) are not attracted to the payment made to the directors
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Mutual benefit society - the transactions with the bank who is not even a member of the society cannot be considered as a transaction for which principles of mutuality will apply.
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TDS liability on Reimbursement of Salary paid to the seconded employees - reimbursement made by IBM India to IBM oversees entities - Since IBM Philippines did not have Permanent Establishment (PE) in India, the receipt was not chargeable to tax in India.
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Exemption u/s 11(2) - pursing these valid objects of general public utility through lawful statutory schemes cannot be considered as business activity, and, as a corollary thereto, exemption under section 11(2) cannot be declined by invoking proviso to Section 2(15)
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The penalty u/s 271AAA could be levied in specified previous year in respect of the undisclosed income unless admitted in a statement u/s 132(4) and specified the manner in which income is derived and the manner has to be substantiated - Since all the conditions are not fulfilled, no penalty.
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Penalty u/s 271(1)(c) - AO has levied penalty u/s 271(1)(c) only invoking the Explanation 5A below section 271(1)(c) and not held the assessee liable for concealment of particular of income or furnishing of inaccurate particular of income - No penalty.
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Waiver of penalty u/s 234B - Penalty u/s 271C - failure to deduct tds - The software was updated in the subsequent year with the result tax at source on interest income was deducted in the year 2011-12. Once the software was updated, there was no reason for any error in the subsequent year ie. 2012-13 and 2013-14 - No relief from penalty.
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Exemption U/s.54F - LTCG - the investment by the assessee of the capital gains in purchase or construction of a residential house in the name of his wife will not disentitle the assessee from exemption u/s 54F
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Allowable busniss expenses - expenditure incurred towards appointment of faculty doctor or assessee’s consultant doctor in a medical conference, out of conference expenses - these life saving devices necessary for the well-being of the society as a whole and it is in the interest of the patients that the doctors are trained.
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Allowability of foreseeable loss - Appellate Authorities have power to consider the claim even though not made in the return.
Customs
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Classification - polyester roller blinds fabric - PVC coated roller fabric - the GSM of the product is high and such types of fabrics found used as roller blend fabrics in the literature available. From the Test Report, it is evident that these goods are not fit for any other use in normal course.
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Classification - one unit of cutter suction dredger with suction/discharge pipe - the question of classifying these self-floating pipes under Chapter No 4009 4200 would not arise and the said pipes have to be considered as parts of dredger and benefit of Notification No 21/02-Cus needs to be extended.
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Refund - The concept of unjust enrichment has a serious impact and has to be weighed carefully by the revenue and it cannot be an automatic choice for the revenue to reject every claim and credit / deposit the amount into ‘Consumer Welfare Fund’ under the guise of unjust enrichment.
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Refund of SAD - cashew nut imported was subjected to processing and value addition which amounted to manufacture and the product had undergone change as to its identity - both cashew nuts and cashew kernels are classified as cashew nuts under CTH 0801. At the same time, it is not the case of Revenue that S.T./VAT/CST is different for cashew nuts and cashew kernel - Refund allowed.
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Refund of SAD - Unjust enrichment - In the Chartered Accountant’s Certificate produced by the Appellant it has been clearly stated that the amount claimed as refund has been shown in their books of account as receivable and the same has not been passed on to the buyers
Service Tax
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Valuation - commercial coaching and coaching institutes - the demands made on value of course material cannot sustain and will require to be set aside.
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Levy of service tax - reimbursement of electricity charges at 2% extra - renting of immovable property service - Not chargeable to service tax.
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Business Exhibition Service - place of provision/ supply of services - the exhibition was conducted abroad - When service is fully provided outside, there is no applicability of reverse charge mechanism
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Place of provision of services - Classification of services - educational consultancy services for prospective students who aspire to study abroad and assist them in the form of logistical support in getting admission into foreign universities - he appellant cannot be called as intermediary.
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Penalty - non-payment of Service tax on TDS amount deducted - case of appellant is that they had mistakenly believed that since the amount was already deposited with the Government, service tax was not payable on the same amount of TDS - No penalty.
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Demand of Service Tax - Outdoor Catering Services - By merely supplying the necessary staff for running a canteen, it may not be stated that the respondent had rendered any Outdoor Catering Service
Central Excise
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Clandestine removal - proper investigations not carried out - The adjudicating authority has blown hot and cold on the various issues raised in the Show Cause Notice. The conclusions have been arrived at without reasoned analysis or findings.
Case Laws:
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GST
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2018 (11) TMI 1130
Detention of goods alongwith vehicle - detention on the ground that the goods were not accompanied with the E-way bill - Held that:- This aspect of the matter has been considered by the Division Bench of this Court in M/S Godrej and Boyce Manufacturing Co. Ltd. vs. State of U.P. and two others [2018 (9) TMI 1261 - ALLAHABAD HIGH COURT] where it has been held that the goods were not covered with the requirement of E-way bill during 1.2.2018 to 31.3.2018. The goods in the present case were seized on 26.3.2018 that is only for the reason they were not accompanied with the E-way bill - Since the requirement of the E-way bill was not applicable for the petitioner during the above period, the seizure itself is bad in law - petition allowed.
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2018 (11) TMI 1129
Release of refund with Interest - petitioner moved a representation dated 30.8.2018 (Annexure P-14) to respondent No.2 for re-credit of Input Tax Credit in electronic credit ledger, but to no effect - Held that:- The petition is disposed off by directing respondent No.3 to take a decision on the representation dated 30.8.2018 (Annexure P-14) followed by the reminders (Annexures P-15 to P-18 respectively), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month
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Income Tax
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2018 (11) TMI 1128
Clubbing of matters - why should an Advocate be briefed when he is not available to appear, particularly when it was made clear on the 19 August 2016 that under no circumstances would these clubbed matters be adjourned bearing in mind that they relate to Assessment Year 1961-62 onwards - Held that:- Leave granted. The appeals are allowed and the common impugned judgment of the High Court is set aside in terms of the signed reportable judgment.
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2018 (11) TMI 1127
Condonation of delay - appeal was defective and the appellant took abnormal time of 1371 days in removing those defects - Held that:- Since there was abnormal delay, the Registrar/Prothonotary Senior Master of the Bombay High Court passed the Order dismissing the appeal for non-removal of office objections. The appellant herein took out a Notice of Motion against the aforesaid Order which has been rejected by the High Court vide the impugned Judgment. No doubt, there is a long delay in removing the objections, we are of the opinion that in a case like this the High Court should have condoned the delay in removing the office objections and heard the matter on merits. However, for the said delay caused by the appellant, the appellant shall pay cost of Rupees one lac within four weeks, which shall be deposited with the Supreme Court Bar Association Lawyers' Welfare Fund - we condone the delay in removing office objections and remit the matter to the High Court for consideration of the case on merits.
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2018 (11) TMI 1126
Waiver of penalty u/s 234B - Penalty u/s 271C - failure to deduct tds as contemplated by Section 194 A (1) and to deposit the same with the Central Government by assessee bank - eligibility of exemption from penalty by applying the provision of Section 273-B - Held that:- In the present case it is not disputed that tax at source was not deducted by the assessee Bank at the time interest income was credited to the income of the payee ie., Agra Development Authority but was deducted and deposited subsequently though before the close of the financial year. Thus, apparently on account of non deduction of the tax at source at the time stipulated under Section 194 (1) the assessee Bank became liable for penalty under Section 271C of the Act. Exemption from penalty by applying the provision of Section 273-B provided the assessee Bank is able to satisfy that there was a reasonable cause for failure to deduct tax at source on the interest income - assessee Bank contends that the failure to deduct TDS was due to the fact that the Agra Development Authority had obtained certificates under Section 197 of the Act permitting the assessee Bank not to deduct tax at source on its interest income - Held that:- Found no aforesaid cause to be reasonable as in the earlier year no certificate under Section 197 of the Act was submitted by the Agra Development Authority and in that year necessary feeding was done in the computer system and the deduction of tax at source was made on the interest income. Thus, there was no occasion to commit the mistake of not deducting tax at source on interest income in time in the relevant years. It is pertinent to point out that due to certificates under Section 197 of the Act furnished by the Agra Development Authority no tax was deducted at source on the interest income in the Financial Year 2010-11 . The software was updated in the subsequent year with the result tax at source on interest income was deducted in the year 2011-12. Once the software was updated, there was no reason for any error in the subsequent year ie. 2012-13 and 2013-14. The finding of the tribunal on the above aspect is a finding of fact and when the cause shown has not been found to be reasonable by the tribunal, it does not inhers this Court to take a contrary view and to accord the benefit of Section 273 B of the Act - Decided against assessee.
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2018 (11) TMI 1125
Addition in respect of retention money - assessee has neither claimed retention money in the return of income nor filed any revised return - Held that:- Issue covered against the Revenue by virtue of the judgment of this Court in the case of ASSOCIATED CABLES P. LIMITED. [2006 (8) TMI 135 - BOMBAY HIGH COURT] Allowability of foreseeable loss - ITAT restoring the matter back to the file of the AO - Held that:- Referring to main objection of the learned counsel for the Revenue is that the assessee had raised such a claim without the same being part of the return filed and without the assessee having filed a revised return. The Tribunal in this context, refereed to and relied upon the judgment of this Court in the case of Commissioner of Income Tax Vs. Pruthvi Brokers & Shareholders P Ltd reported in [2012 (7) TMI 158 - BOMBAY HIGH COURT]. In the said case, the Division Bench of this Court had taken a view that the Appellate Authorities have power to consider the claim even though not made in the return. This question, therefore, is not required to be entertained. Additional depreciation - Held that:- CIT (Appeals) had rejected the assessee's claim on the ground that the same did not pertain to the year under consideration. If that be so, the Tribunal should have given its opinion whether the CIT (Appeals) was correct in coming to such a conclusion. Mere remand to CIT (Appeals) for fresh consideration would be futile. In so far as this question is concerned, we are, therefore, of the opinion that the Tribunal may be requested to decide the ground of the assessee in his appeal.
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2018 (11) TMI 1124
Allowable busniss expenses - Disallowance of expenditure incurred towards appointment of faculty doctor or assessee’s consultant doctor in a medical conference out of conference expenses - AO has disallowed these expenditure by observing that these expenses are incurred by the staff on behalf of doctors and accordingly is a freebie which is not allowable in the light of circular - Held that:- Assessee's high end technological products and to carry out heart valve surgeries, which are very complex in nature, the doctors/surgeons also need training. In the medical conferences, the doctors are also provided skill set training wherein live surgeries are performed so as to educate the doctors about the use of the new technologically advanced products. Considering the need, the assessee nominates few selected doctors/surgeons to attend the training. These doctors/surgeons further provide training to other doctors so as to also make them also aware about the use of Assessee's product. It was also brought to our notice that these life saving devices necessary for the well-being of the society as a whole and it is in the interest of the patients that the doctors are trained. After going through the details of expenditure so incurred, we found that the expenditure incurred by the assessee is not in violation of the provisions of any statute so as to render it excessive and inadmissible. The expenditure incurred by the assessee is on account of business exigencies and not in violation of any statute. - Decided in favour of assessee.
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2018 (11) TMI 1123
Disallowance of exemption U/s.54F - investment by the assessee of the capital gains in purchase or construction of a residential house - property purchased in the name of wife - Held that:- Andhra Pradesh High Court in the case of Late Gulam Ali Khan vs. CIT [1984 (12) TMI 9 - ANDHRA PRADESH HIGH COURT] wherein it was held that the object of granting exemption u/s 54F of the Act, is that the house should have been purchased for residential purposes, must be given exemption so far as capital gains are concerned that the word "assessee" must be given a wide and liberal interpretation so as to include his legal heirs also and there is no warrant for giving too strict interpretation on the word "assessee" as that would frustrate the object of granting the exemption. In the case before us, the assessee and his wife are independent income tax assessee and the assessee already owned one house at Kilpauk, Chennai. The assessee therefore, cannot be said to have invested in order to avoid capital gains to tax in his hands, as u/s 54F(1) the assessee is entitled to exemption u/s 54F even if he already holds one property in his name. Therefore, the investment by the assessee of the capital gains in purchase or construction of a residential house at Alagappa Nagar, Chennai in the name of his wife will not disentitle the assessee from exemption u/s 54F of the Act. - Decided in favour of assessee.
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2018 (11) TMI 1122
Penalty u/s 271(1)(c) - reasonable cause in failure to report the income for the year under consideration - Held that:- Conduct of the assessee of not objecting the addition of income to the assessment year under consideration shows that the claim of income relevant to the year under consideration has been accepted by the assessee. In such circumstances, the assessee squarely falls under the deeming provisions of Explanation 5A below section 271(1)(c) and cannot escape from liability of penalty under section 271(1)(c). The decisions relied upon by the DR are in relation to Explanation 5 to section 271(1)(c) and not in relation to Explanation 5A. The Explanation 5 pertains to search initiated before first day of June, 2007 whereas Explanation 5A pertain to searches initiated on after first day of June, 2007. The main part of the Explanation 5 is pari materia with Explanation 5A except the conditions where levy of the penalty has been excluded. In the cases relied upon by the Ld. DR the penalty was held to leviable in terms of Explanation 5 to section 271(1)(c) despite the income was disclosed in the return filed consequent to the search proceeding. In the instant case, scenario is more worse and the assessee has even not disclosed the said income in the return of income filed for the year under consideration consequent to search proceeding. We are of the opinion that deeming provisions of Explanation 5A below section 271(1)(c) of the Act is attracted and for the purpose of imposition of the penalty under section 271(1)(c) of the Act, the assessee is deemed to have concealed particulars of his income or furnish inaccurate particulars of such income, thus the levy penalty by the Assessing Officer is accordingly upheld. The ground of the appeal raised by the assessee is accordingly dismissed. Penalty under section 271AAA - Held that:- The penalty under section 271AAA of the Act could be levied in specified previous year in respect of the undisclosed income unless admitted in a statement under section 132(4) and specified the manner in which income is derived and the manner has to be substantiated and tax has paid on the undisclosed income. In case any of the 3 conditions are not fulfilled, the penalty under section 271AAA would be levied. But, if the Assessing Officer has made any addition other than the undisclosed income stated under section 132(4) and find the assessee liable for concealment of particular of income or furnishing inaccurate particular of income, he may initiate penalty under section 271(1)(c) of the Act in respect of those additions. AO may levy penalty invoking the main provisions of the section 271(1)(c) of the Act and Explanation other than Explanation 5 and 5A, if applicable, but cannot take shelter of deeming provisions of Explanation 5/5A for levy of penalty under section 271(1)(c) of the Act. Because, the deeming Explanation 5A cannot be invoked for a specified previous year, which has been specifically barred by way of clause (a) or (b) of the Explanation 5A. In the instant case before us, the Assessing Officer has levied penalty under section 271(1)(c) of the Act only invoking the Explanation 5A below section 271(1)(c) of the Act and not held the assessee liable for concealment of particular of income or furnishing of inaccurate particular of income on the basis of Explanation other than Explanation 5A - the penalty levied by the Assessing Officer under section 271(1)(c) of the Act is cancelled and the action of the CIT(A) in deleting the penalty is upheld. The grounds of the appeal of the Revenue are accordingly dismissed.
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2018 (11) TMI 1121
Charitable activity - Exemption u/s 11(2) - valid objects of general public utility through lawful statutory schemes - objects of the Trust are covered by the objects of general public utility and the registration granted to the assessee trust is still valid - Held that:- There is no dispute that the objects of the Trust are covered by the objects of general public utility and the registration granted to the assessee trust is still valid. Clearly, therefore, pursing these valid objects of general public utility through lawful statutory schemes cannot be considered as business activity, and, as a corollary thereto, exemption under section 11(2) cannot be declined by invoking proviso to Section 2(15) which can only come into play in the event of the assessee pursuing the activities in the nature of trade, commerce or business or services thereto. We deem it fit and proper to hold that the authorities below were in error in invoking proviso to Section 2(15) and declining the benefit of Section 11 to the assessee. We see no point in remitting the matter to the file of the Assessing Officer for examination de novo, in the light of the above legal position-as was the decision of the coordinate bench in immediately preceding assessment year, since all the related facts are on record and, unlike in the immediately preceding assessment year, it is not a case of ex parte best judgment assessment order. Such an exercise will unnecessarily delay the matter reaching finality. In any case, no specific points, on which further examination is required, were pointed out to us. The grievances of the assessee are thus upheld and the Assessing Officer is directed to allow the benefits of exemption under section 11 to the assessee. The assessee gets the relief accordingly.
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2018 (11) TMI 1120
Determination of arm’s length price (ALP) in respect of an international transaction of rendering software development services by the assessee to its AE - comparable selection - Held that:- We uphold the order of the CIT(A) excluding companies by application of turnover filter. We also observe that the TPO has himself applied lower turnover filter of excluding companies with turnover of less than ₹ 1 Crore and in such circumstances, there is no reason as to why he should not apply the higher turnover limit. For the reasons given above, we uphold the order of the CIT(A). Indus Networks Ltd. cannot be regarded as a comparable as it fails the employee cost filter. The reasons given by the CIT(A) for not applying this filter are general and no instances of specific distortion of real employee cost in the comparable companies have been brought out. As already held that employee cost filter of more than 25% of the revenue is a valid filter. Following all we are of the view that inclusion of company should be directed to be considered afresh by the CIT(Appeals) and if the assessee satisfies this filter and otherwise found to be functionally comparable and not excludible on applying other filters, then company be adopted as a comparable. Deduction u/s. 10A - Held that:- The decision of the Hon’ble High Court of Karnataka in the case of Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT) on this issue holding that whatever is excluded from the total turnover while computing deduction u/s. 10A. Disallowance of software expenses on the ground that while making payment for use of software, no tax was deducted at source - Held that:- No merits in this ground raised by the assessee in view of the decision in the case of CIT Vs. Samsung Electronics Ltd. (2009 (9) TMI 526 - KARNATAKA HIGH COURT) wherein it was held that payments made for right to use software was payment in the nature of royalty and therefore there was obligation to deduct tax at source while making payment for such use and that the disallowance u/s.40(a)(ia) of the act for non deduction of tax at source was proper. Consequently the disallowance of expenses is upheld.
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2018 (11) TMI 1119
TDS liability on Reimbursement of Salary paid to the seconded employees - FTS - nature of payment in the form of reimbursement made by IBM India to IBM oversees entities - TDS liability u/s 192 or 195 - India-UAE DTAA provision applicability - Held that:- Article 24(1) of the India- Philippines DTAA, which is similar to Article 25(1) of the India-UAE Treaty, does not confer a right to invoke the provisions of domestic laws for classification or taxability of income which is governed by Article 6 to 23 of the India-Philippines Treaty and that Article 24(1) operates in the field of computation of doubly taxed income and tax thereon in accordance with the domestic laws of each contracting state and is not part of Articles 6 to 23 which deal with the classification of income into different heads. Even where royalties and fees for technical services receive separate treatment under a DTAA, it is the Article relating to computation of business income that would apply where such royalties or fees arise in the course of business carried on by the recipient. The Tribunal came to the conclusion that receipts were in the course of business of the Assessee and were therefore business income falling within Article 7 of the DTAA and would therefore not fall within the ambit of Article 23(1) of the DTAA. Since IBM Philippines did not have Permanent Establishment (PE) in India, the receipt was not chargeable to tax in India. As IBM Philippines received the monies in the course of their business and did not have PE in India and therefore the receipt in question cannot be brought to tax under Article 7 of DTAA as well. In the absence of the provision in the DTAA to tax Fees for Technical Services the same would be taxed as per the Article 7 of the DTAA applicable for business profit and in the absence of PE in India, the said income is not chargeable to tax in India. Consequently, we hold that there is no merit in the appeals by the revenue on this issue. Regarding rate of tax at which TDS has to be deducted in the event of the non-resident payee not obtaining Income Tax PAN in India has been settled by a Special Bench ITAT Hyderabad in the case of Nagarjuna Fertilizers & Chemicals and Another Vs. ACIT (2017 (3) TMI 81 - ITAT HYDERABAD) it is held that the non-obstante clause contained in machinery provision of section 206AA of the Act was required to be assigned restrictive meaning and same could not be read so as to override even relevant beneficial provisions of Treaties, which override even charging provisions of the Income Tax Act by virtue of section 90(2) of the Act. Therefore, an Assessee could not be held liable to deduct tax at higher of rates prescribed in section 206AA in case of payments made to non-resident persons having taxable income in India in spite of their failure to furnish Permanent Account Numbers. There is, therefore, no merit in appeals by the revenue on this issue also. - Decided against revenue
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2018 (11) TMI 1118
Charitable activity - applicability of provisions of section 2(15) - allegation of the AO that the assessee was established for the purpose of promoting Indian Industry and trade and to enhance its global competitiveness by conducting and participating in Industrial trade fairs and exhibitions Indian and abroad - Held that:- The assessee is not doing any activity in respect of its stated main objects i.e. to promote training and the diffusion of knowledge relating to standards in the manufacture of Tools and Gauges to improve the standards or the connected trade therewith or with allied industries and to impart relevant and appropriate training to all those engaged in the manufacture of tools and gauges. As seen that in the present case, the assessee has taken a hall on rent and the assessee is earning huge amount of income on account of Stall Space Charges and no expenditure is incurred for carrying out the said activities as per the objects of the assessee and therefore, in the present case, we hold this that the assessee is not eligible for exemption u/s. 11 and for this, help of any authority is not required and therefore, we do not enter into this aspect of examining the applicability of various judicial pronouncements cited revenue. This is a settled position of law that at the stage of granting registration u/s 12A, only the objects as per the relevant Deed i.e. Trust Deed etc. are required to be seen and if the objects are charitable, such registration has to be granted but granting of such registration is not final and binding for granting exemption u/s 11 in assessment proceedings. In course of assessment proceedings, actual activities are to be examined and if such actual activities are not found to be charitable, exemption u/s 11 is not allowable although registration u/s 12A was granted on the basis of stated objects. We have to examine as to whether the actual activities are charitable or not and when we do so, we find that the only activity undertaken by the assessee is to take a hall on rent for ₹ 125 lacs and realize huge amount of receipts for Stall space charges ₹ 4,82,47,599/-, power ₹ 18.99 Lakhs and ₹ 4,74,305/- from Directory, total ₹ 506,20,904/-. These activities cannot be said to be charitable particularly in the absence of its correlation with the stated main objects to promote training and the diffusion of knowledge relating to standards in the manufacture of Tools and Gauges to improve the standards or the connected trade therewith or with allied industries and to impart relevant and appropriate training to all those engaged in the manufacture of tools and gauges. In view of above discussion, we reverse the order of CIT(A) and restore that of AO. - Decided in favour of revenue.
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2018 (11) TMI 1117
TPA - comparable selection - functionally similarity - Held that:- The assessee is engaged in the business of rendering non-binding investment advisory services to its associated enterprises in respect of unlisted Indian equities. The services provided, inter-alia, include identifying and analysing potential investment opportunities; evaluating and making recommendations to the associated enterprise with respect to investment opportunities; making recommendations to the associate enterprise with respect to specified investments; and, any other advisory services as may be required from time to time. As assessee had pleaded for inclusion of IDC (India) Ltd as well as Informed Technologies Ltd. However, a pertinent plea was raised to the effect that once M/s Ladderup Corporate Advisory Private Limited is excluded and ICRA Management Consulting services Ltd., is included, the resultant margin of the comparables shall compare favourably with the margin of the assessee. Since we have accepted the pleas of the assessee for exclusion of M/s Ladderup Corporate Advisory Private Limited and inclusion of ICRA Management Consulting Services Ltd, the necessity for adjudication of the other pleas for inclusion of IDC (India) Ltd., and Informed Technologies Ltd has been rendered academic and is obviated. Thus, for the aforesaid reasons we do not deal any further. we hereby direct the Assessing Officer to re-determine the total income of the assessee, keeping in view our aforesaid decision. Before parting, we may also put on record another point made by the assessee. The Ld. Representative submitted a chart showing operating margins declared by the assessee from A.Y 2010-11 to A.Y 2015-16. It is pointed out that in the A.Y 2010-11 the margin was 20%, in A.Y 2012-13 the margin was 18.60%, in A.Y 2013-14 the margin was 17.21%, in A.Y 2014-15 the margin was 17.27% and in A.Y 2015-16 the margin was 20%. The aforesaid is sought to be presented to show that the current years margin of 17.41% is quite comparable and is also otherwise justified and does not require any interference. We do not find any reason to adjudicate on this aspect, since we have already adjudicated the specific points raised by the assessee regarding the determination of ALP of the instant international transaction.
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2018 (11) TMI 1116
Addition made in respect to difference between AIR details and the transactions disclosed in the income tax returns - AO treated 50% of the advances received by the assessee as income from other sources by invoking the provisions of Section 56(2)(vi) - AO also treated these advances received from buyers of the flats as business receipt by invoking the deemed provisions of Section 28(iv) - Held that:- We find that the assessee is promoter of the building ‘Harmony’ along with the other co-owner Shri Prithvijeet Rajaram Chavan and both as coowner has carried out this construction activity. We find from records that the assessee as well as Shri Prithvijeet Rajaram Chavan has offered the income from this project at ₹57,14,251/- in each case in respective returns of income for AY. 2011-12. We are of the view that the AO has not appreciated the AIR information which is merely carried out the details of receipts from the buyers. The property was sold in next year when the project got completed and both the joint co-owner has disclosed their respective income in their returns of income earned from this project. We have verified this fact as noted by the CIT(A) also that the income from this project has already been disclosed by assessee as well as Shri Prithvijeet Rajaram Chavan in their respective returns of income. We find no infirmity in the order of the CIT(A) in deleting the addition - decided against revenue
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2018 (11) TMI 1115
Assessment u/s 153A - proof of incriminating material found during the search - Held that:- As decided in many case laws without any incriminating material found during the course of search, no additional income can be brought to tax in the assessment u/s 153A of the Act even where earlier assessments were concluded u/s 143(3) of the Act. Respectfully, following all we hold that the assessments u/s 153A for all the A.Ys are not sustainable and they are accordingly set aside. - Decided in favour of assessee.
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2018 (11) TMI 1114
Addition towards income from other sources for interest income from bank - assessee is a Mutual benefit society - Income earned as exempt from tax on the principle of mutuality - Held that:- Even though the bank was having a corporate membership with the said club/society, the principle of mutuality does not arise. In assessee's case, the bank is not even a member of the society. The nature of the transaction between the assessee and the bank would disqualify application of the principle of mutuality. Therefore, the transactions with the bank who is not even a member of the society cannot be considered as a transaction for which principles of mutuality will apply. Not only on the principles laid down in the subject but also on the fact that the interest was received from a non-member, the principles of mutuality do not apply. The orders of the AO and CIT(A) are accordingly upheld both on facts as well as on principles of law. Thus find no merit in assessee's grounds and accordingly, the same are dismissed. - Decided against assessee.
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2018 (11) TMI 1113
Penalty u/s 271(1)(c) - disallowance made u/s 40A(2)(a) - higher salary paid to Directors - Related party transactions - Held that:- Undisputedly, the assessee had been paying remuneration to the concerned directors from past several years. Moreover, from the shareholding pattern of the company, it appears that the total share holding of the aforesaid three directors combined together constitutes only 15%. Therefore, it cannot be said that for escaping the rigors of section 2(22)(e) the assessee has paid remuneration to the directors. The object behind introduction of section 40A(2) is for preventing evasion of tax through shifting of profit by making payment to related parties. Therefore, it is of paramount importance to examine whether the assessee has made payment for evading tax through shifting of profit. In the facts of the present case, it is evident that the assessee had been showing loss continuously for past several years and the Assessing Officer has also accepted loss shown by the assessee. That being the case, there cannot be any intention on the part of the assessee to evade tax by shifting profit. It is equally important to note that the remuneration paid to the directors have been offered by them to tax while filing their individual tax returns for the respective assessment years. This fact is evident from the copies of the income tax returns of the concerned directors filed before us by the learned Sr. Counsel. It is also not disputed that the concerned directors are assessed to tax at the maximum rate of 30% - the provisions of section 40A(2) are not attracted to the payment made to the directors - we are of the view that the disallowance made under section 40A(2)(a) of the Act in the impugned assessment years are unsustainable. Accordingly, we deleted the disallowances made in all the assessment years under appeal. - Decided in favour of assessee.
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2018 (11) TMI 1112
Amount receive on liquidation of the stock held - short term capital gain - Held that:- It is obvious that the findings of the AO as well as that of the CIT(A) and their decision to treat the entire amount receive on liquidation of the stock held by him under the ESO scheme as perquisites under the head income from salary is erroneous. It is further pertinent to mention that the income should be assessed in the hands of the assessee not in accordance with what is stated in the Form 16 issued by the employer but only based on the actual facts and as per the provisions of the Act. As pointed out by AR we find that there is discrepancy in the observation made by the Ld.AO in his order and the return of income filed by the assessee. In the assessment order, the Ld.AO has mentioned that the assessee had claimed short term capital gain however as observed from the return of income, the short term capital gain earned by the assessee is stated as ₹ 8,14,232/-. It is further stated in the assessment order that the assessee had offered income as ₹ 4,18,23,600/- however in the return of income, the assessee has declared income from salary as ₹ 2,74,92,222/-, short term capital gain ₹ 8,14,232/-, and income from other source ₹ 9,705/-, thus the total income returned by the assessee was for ₹ 2,83,16,159/-. Since there is discrepancy with respect to facts observed by the Ld.AO and the return of income filed by the assessee, in the interest of justice, we hereby remit the entire matter back to the file of Ld.AO to verify the facts from the records and thereafter decide the matter in accordance with merit and law and as per our observations made herein above. Assessee allowed for statistical purposes
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2018 (11) TMI 1111
Disallowance u/s 14A read with Rule 8D - CIT(A) has directed the AO to exclude the investment made in growth funds while computing the average value of investments since the growth funds do not yield any dividend - Held that:- Assessee, by placing reliance on the Special Bench decision rendered in the case of Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has requested for exclusion of investments which did not yield dividend income during the year under consideration for the purpose of computing average investments. We find merit in the said request of the assessee as the said plea is in accordance with the decision rendered by the Special Bench referred supra. Accordingly we modify the order passed by the CIT(A) and direct the AO to exclude the investments made in growth funds as well as investments which did not yield dividend income during the year under consideration while working out average value of investments. The amount of ₹ 1,26,000/- voluntarily disallowed by the assessee should be given set off against the amount of disallowance computed under Rule 8D(2)(iii) of the I.T. Rules for the reasons discussed above. We order accordingly. AO has not recorded proper satisfaction as contemplated under Section 14A(2) of the Act. However, he did not press the same during the course of hearing and hence we decline to adjudicate the said plea of the assessee. Appeal filed by the assessee is partly allowed.
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2018 (11) TMI 1110
Addition as unexplained credit - identity, creditworthiness and genuineness of transactions - Held that:- AO should have compared the capital account of the Jay Jewellers, with the account of Jay jewellers in the hands of the assessee, it’s proprietor. We have compared these two accounts and these two accounts are actually mirror images of each other. As rightly accepted by the AO in the remand proceedings, the capital introduction of ₹ 1,85,65,955/- stands explained in the books of Jay Jewellers. CIT(A) has, however, given it a different twist. He has noted that the assessee has, in his personal books of accounts, accepted unsecured loans of ₹ 8,52,58,022/-, including an amount of ₹ 7,91,19,400/- from Harshad Jewellers, and “the assessee was required to have established their identity, creditworthiness and genuineness of transactions in respect of loans taken in the personal account.” That, however, was not the case of the AO nor any requisition in respect of the same was made at the assessment or appellate stage. The addition u/s 68, in such a case, should have been made for ₹ 8,52,58,022/-, and not ₹ 1,85,65,955/- - as is the situation in the present case. What is before us is the addition of ₹ 1,85,65,955/- and that credit is reasonably explained and even admitted to be so by the AO. CIT(A) has mentioned about the need of verification about the creditors of ₹ 8,52,58,022/- but made no additions in respect of the same. It cannot be open to us to enlarge the scope of proceedings at this stage, or deal with an aspect in respect of which no additions are made. So far as the addition impugned in this appeal is concerned, and that is what we are concerned with, it is explained and we delete the related additions of ₹ 1,85,65,955/-. - Decided in favour of assessee.
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2018 (11) TMI 1109
TDS u/s 195 - usance interest on delayed payment to its holding company - whether payment of usance interest is part of purchase cost as per the DTAA between India and Singapore - Held that:- It is undisputed fact that the Hon’ble Gujarat High Court in the case of Vijay Ship Breaking Corporation [2003 (3) TMI 91 - GUJARAT HIGH COURT] has decided the issue against the assessee as held The usance interest paid by the assessees was not any part of the purchase price of the ships and was interest within the meaning of the definition of the term "interest" under section 2(28A) of the Income-tax Act, 1961. The assessees who did not deduct tax at source under section 195(1) of the Income-tax Act, 1961, on the usance interest payable outside India and on which tax had not been paid, are not entitled to deduct the amounts of such usance interest in computing their income chargeable under the head "Profits and gains of business of profession". The Tribunal was, therefore, wrong in deleting the disallowance under section 40(a)(i) of the Act for failure on the part of the assessees to deduct tax at source, from usance interest paid to the non-residents, under section 195(1) of the Act. The assessees being responsible for paying to the non-residents usance interest which was chargeable under the provisions of the Income-tax Act, 1961, were liable to deduct income-tax thereon under section 195(1) thereof. The Tribunal was, therefore, wrong in holding that the usance interest partook of the character of purchase price and therefore, not liable to deduction at source under section 195(1) of the Act. Usance interest is "interest" within the meaning of the article concerning taxation of interest in the relevant Double Taxation Avoidance Agreements. The Tribunal was, therefore, wrong in holding that usance interest was not "interest" as envisaged in the Double Taxation Avoidance Agreements. - Decided in favour of revenue
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2018 (11) TMI 1108
Revision u/s 263 - allowance of amortisation of ESOP expenses - rectification proceedings u/s 154 initiated - Held that:- AO has not discussed the issue of ESOP at the time of original assessment proceedings, however, in the proceedings initiated under section 154 the assessing officer after examining the details of ESOP discount was satisfied and not disallowed it, being allowable expenses and the assessing officer has taken a possible view. Though, AO has not communicated his order, it should have been communicated to the assessee or the ld. PCIT ought to have confirmed from the assessing officer of his finding on proposed action initiated under section 154, before proceeding further in the matter. Hence, in our view the order passed by assessing officer is not erroneous and therefore the twin condition as enunciated under section 263 are not fulfilled. No revision under section 263 was warranted, on the facts of present case, when the assessing officer on the basis of the material available before him initiated action under section 154 and after examining the issue made no disallowance and taken a possible view in accordance with the law. It is settled law that every loss of revenue as a consequence of a view taken by the Assessing Officer cannot be treated as prejudicial to the interest of the revenue - where two views are possible and the Income-tax Officer has taken one view with which the Commissioner (PCIT) does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. - Decided in favour of assessee.
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2018 (11) TMI 1107
FTS - P.E. in India - “make available” any technical knowledge - payment of fees for the service as made directly by the subscribers to the assessee in foreign exchange - India-U.K tax treaty dealing with taxability of business profit - Held that:- We are of the considered view that the Reuters Dealing 2000-2 is an electronic deal matching system, enabling authorized dealers in foreign exchange such as banks etc. to affect deals in spot foreign exchange with other foreign exchange dealers. The system only provides a platform for the forex dealers to affect deals with other subscribers by entering orders into the system, which may be matched directly by the system with orders entered by other subscribers. We find that the assessee which operates its business through its branch in Geneva where its main server is located does not “make available” any technical knowledge etc. to its customers by rendering the services. We thus, are in agreement with the observations of the CIT(A) that as the rendering of the services by the assessee does not “make available” any technical knowledge etc. to the customers, hence the fees received from providing of such services would not fall within the sweep of the definition of FTS as per Article 13 of the India-U.K tax treaty. The Ground of appeal No. 1 of the revenue is dismissed in terms of our aforesaid observations. P.E in India - Held that:- For constituting a fixed place P.E, either the place should be owned or at the disposal of the assessee. However, in the case before us, as observed by the CIT(A), the assessee was carrying on its business from Geneva and the communication network in India was neither owned by it or at its disposal, but rather was owned by the independent service providers such as VSNL, DoT etc. Further, no personnel of the assessee had visited India during the year under consideration. CIT(A) had rightly concluded that as the assessee did not have a P.E in India during the year under consideration, hence, the fees received from rendering of the services which were not in the nature of FTS, in the absence of a P.E of the assessee in India would not be taxable in India. - Decided against revenue.
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2018 (11) TMI 1106
TPA - Adjustment made to the arm's length price of advertisement, marketing and promotional (AMP) expenditure incurred by the assessee in respect of consumer segment - whether AMP expenditure incurred in India gives rise to international transaction with the AEs? - Held that:- It is relevant to observe, the DRP has upheld the adjustment made by the Transfer Pricing Officer simply for the reason that the Department has no remedy available against an order of the DRP favourable to the assessee. As regards the decisions relied upon by the DR as noted herein before, on a careful analysis of each one of these decisions we are of the considered opinion that they will not be of any help to the Department, since, they were rendered prior to the decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (2015 (12) TMI 634 - DELHI HIGH COURT) and all of them proceeded on the basis of the decision rendered in Sony Ericson Mobile Communications (2015 (3) TMI 580 - DELHI HIGH COURT). We hold that the AMP expenditure incurred by the assessee not being an international transaction as defined under section 92B of the Act, no transfer pricing adjustment could have been made by the Transfer Pricing Officer. More so, when the method adopted by the Transfer Pricing Officer for making such adjustment is not provided under the statute. Before parting, we must observe that all other international transactions entered into between the assessee and its AE were found to be at arm’s length. It is also not disputed, if the international transactions are considered as a whole, the margin shown by the assessee is more than the margin shown by the comparables selected by the Transfer Pricing Officer. Grounds raised are allowed. Short TDS credit granted to the assessee - Held that:- We are inclined to restore the issue to the Assessing Officer with a direction to verify assessee’s claim and grant credit for TDS as per supporting evidence to be furnished by the assessee. This ground is allowed for statistical purposes.
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2018 (11) TMI 1105
Addition on account of directors’ remuneration paid to the directors made AO - AO disallowed the same on the ground that the assessee has shown the entire expenditure incurred under the head work in progress - Held that:- The remuneration paid to the directors is excessive or unreasonable. In absence of the same in my considered view the disallowance made cannot be sustained in law. Set aside the orders of the CIT(A) and vacate the disallowance on account of director’s remuneration and allow the grounds of appeal of the assessee. See CORONATION FLOUR MILLS VERSUS ASSTT. CIT. [2009 (3) TMI 61 - GUJARAT HIGH COURT] - Decided in favour of assessee.
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2018 (11) TMI 1104
Assess the rental income under the head ‘Income from House Property’ and not 'income from other sources'. Allowability of busniss loss - decision to prematurely cancel the forward contracts - 'speculation loss’ OR ‘business loss’ - Held that:- The entire conspectus of facts and circumstances show that merely because assessee took a decision to prematurely cancel the forward contracts cannot be a ground to say that it is a ‘speculation loss’ and not a ‘business loss’, when otherwise entering of forward contracts in order to hedge against foreign exchange fluctuations with respect to import and export is accepted to be an activity carried out in the course of business. In fact, in the present case, assessee has sufficiently demonstrated that the action of premature cancellation of forward contracts was to contain avoidable future loss on account of adverse movement in the value of foreign exchange and the circumstances under which such a decision was taken, has also been sufficiently narrated. In the absence of any controversion of the same, we find that the assessee has discharged the onus cast on it to explain the incurrence of loss in question and, therefore, we deem it fit and proper to allow the stand of the assessee of treating the amount of ₹ 3,55,95,000/- as a ‘business loss’. Thus, on this aspect, assessee succeeds. Addition u/s 14A - disallowance of interest expenditure - Held that:- In any case, in the earlier assessment year of 2009-10, no interest disallowance was made by the Assessing Officer himself qua the said investment. The said assertion of the appellant is borne out of record inasmuch as in the earlier paras we have already dealt with the disallowance u/s 14A of the Act for Assessment Year 2009-10 wherein the only investment was in the shares of BSE and the Assessing Officer himself has not made any disallowance out of interest expenditure. In such a factual background, the disallowance computed by the Assessing Officer out of interest expenditure by applying Rule 8D(2)(ii) of the Rules is misplaced and is hereby directed to be deleted. So far as the disallowance out of Administrative expenses made by the Assessing Officer by applying Rule 8D(2)(iii) of the Rules is concerned, no specific arguments have been raised before us and the same is hereby affirmed. Thus, on this aspect, assessee partly succeeds.
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Customs
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2018 (11) TMI 1102
Classification of imported goods - polyester roller blinds fabric - PVC coated roller fabric - classified under CTH 603900 and 590390 or under Chapter 54 of CTA 1975 under CTH 54077200 and 59039090? - Held that:- Revenue has taken only ground that since the imported goods are in Roll form and hence not made up to be classified under Chapter 63039200. This aspect has been examined in the impugned order at para 34.4, 34.5 and 34.6 (supra). In this case, the importer has imported the fabrics which is suitable for use as curtain blends only. The CTH Heading 5404 of Customs Tariff is for woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of Heading 5404 . This heading covers the General purpose fabric with some others like parachute fabrics and Tent fabrics. The test report also confirmed that the GSM of the product is high and such types of fabrics found used as roller blend fabrics in the literature available. From the Test Report, it is evident that these goods are not fit for any other use in normal course. Case of Revenue is devoid of merits - Appeal dismissed - decided against Revenue.
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2018 (11) TMI 1101
Classification of imported goods - one unit of cutter suction dredger with suction/discharge pipe dia 850 mm (named as DHARTI XII) with spare parts, pipeline and accessories - whether the two sets of self-floating pipes of 650 mm dia have to be classified under CTH 400942000 or under CTH 8905.10.00? - benefit of exemption under Notification No. 21/2002-CUS? - confiscation - penalty - demand of differential duty. Held that:- In the case in hand, the excerpts of the statements of the Executive Director and perusal of the documents filed along with bill of entry indicates that 650 mm and 850 mm dia self floating pipes were for exclusive use with the imported cutter suction dredger. If that be so, the question of classifying these self-floating pipes under Chapter No 4009 4200 would not arise and the said pipes have to be considered as parts of dredger and benefit of Notification No 21/02-Cus needs to be extended. The adjudicating authority has erred in not extending the benefit of Notification No. 21/02 to the pipes of 650 mm dia and 850 mm dia in question - impugned order not sustainable. Confiscation - penalty - Held that:- Since on merits it is held that self-floating pipes are eligible for exemption under Notification No 21/02, the confiscation of the said pipes as ordered by the adjudicating authority is unsustainable and liable to be set aside - confiscation redemption fine as well as penalty set aside. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1100
Refund of excess amount paid - amount credited to Consumer Welfare Fund - unjust enrichment - Held that:- The certificate of the Chartered Accountant referred, as submitted by the Ld. Advocate, is directed to be considered, forms the essential document per se. The other document namely the certificate from the statutory auditor as required by the Commissioner (Appeals) herein could only be considered at best a supporting evidence only if there was any iota of doubt on the primary evidence namely the Certificate of Chartered Accountant referred to and accepted by the Hon ble High Court. Therefore, the certificate of statutory auditor required and observed by the Commissioner (Appeals) as not furnished, could not be treated as a primary document itself, to deny any benefit in the nature of refund as in the case on hand. The concept of unjust enrichment has a serious impact and has to be weighed carefully by the revenue and it cannot be an automatic choice for the revenue to reject every claim and credit / deposit the amount into Consumer Welfare Fund under the guise of unjust enrichment - In the case on hand, the first certificate of Chartered Accountant accepted by the Hon ble High Court itself contained a specific plea that the assessee / appellant has not passed on the duty incidence to its customers, which fact has not at all been disputed by the authorities below. This itself carves the case of the appellant out of mischief of Section 11B and the scope of unjust enrichment . The rejection of refund by the revenue authorities is contrary to law and unsustainable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1099
Refund of SAD - rejection on the ground that Part of raw cashew nuts was sold as such, cashew nut imported was subjected to processing and value addition which amounted to manufacture and the product had undergone change as to its identity - Held that:- From the last Notification i.e., Notification No. 102/2007-Cus. dated 14.09.2007, the words as such have been omitted. Issue is covered by the case of M/s. Kanam Latex Industries (P) Ltd. Anor. Vs. Commissioner of Customs, Tuticorin [2018 (6) TMI 651 - CESTAT CHENNAI], where it was held that Apart from the fact that it is well settled principle of law that no extraneous conditions can be introduced in the notification which has to be interpreted on its own wordings, we also take note of the fact that though the earlier notification required the imported goods to be sold as such , there is no such condition in the present Notification No. 102/07, which only used the expression subsequently sold and refund remains allowed. It is also very useful to note that both cashew nuts and cashew kernels are classified as cashew nuts under CTH 0801. At the same time, it is not the case of Revenue that S.T./VAT/CST is different for cashew nuts and cashew kernel. Refund allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1098
Refund of SAD - rejection on the ground of non-mentioning of the fact of ineligibility of 4% SAD in the respective sales invoices - alleged violation of N/N. 102/2007-CUS dt. 14.9.2007 - Held that:- The issue is settled in favour of the respondent by the Larger Bench in Chowgule & Company Pvt. Ltd. [2014 (8) TMI 214 - CESTAT MUMBAI (LB)], where it was held that Condition relating to endorsement on the invoice was merely a procedural one and the purpose and object of such an endorsement could be achieved when the duty element itself was not specified in the invoice. Unjust enrichment - Held that:- In the Chartered Accountant’s Certificate produced by the Appellant it has been clearly stated that the amount claimed as refund has been shown in their books of account as receivable and the same has not been passed on to the buyers - No contrary evidence has been produced by the Revenue to contradict the said certificate nor the findings of the Ld. Commissioner(Appeals) has been rebutted with material particulars. Refund is to be allowed - Appeal dismissed - decided against Revenue.
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2018 (11) TMI 1097
Jurisdiction - appeals before the first appellate authority has been dismissed without going into the merits merely on the ground of jurisdiction - section 129A(3) of Customs Act, 1962 - Held that:- Unlike the scheme of assessment prevailing till then, reassessment, when self-assessment is disagreed with by the proper officer, would be completed only with the issue of a speaking order. It was incumbent upon the proper officer to issue the mandatory speaking order which, combined with the re-assessment in the bill of entry, constitutes the cause of action or appealable order. The failure on the part of the proper officer to comply with the legal provisions cannot be held to the detriment of the importer. Even assuming a determined obduracy on the part of the proper officer to defy this legal requirement, the period stipulated for issue of such speaking order is fifteen days from the date of reassessment. It has been noted by the first appellate authority that the appeals were filed on the 91st and 105th day from the date of assessment which, in the present instance, is re-assessment. The appeals would certainly be within the period permitted for doing so if the relevant date is construed as date on which the re-assessment is deemed to be completed with the expiry of the period stipulated for issue of speaking order. The impugned order as well as the assessments in the bills of entry is set aside - matter remanded back to the original authority to rectify the breach of law and issue a speaking order justifying the decision to re-assess the goods within fifteen days of receipt of this order - appeal allowed by way of remand.
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Insolvency & Bankruptcy
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2018 (11) TMI 1103
Corporate insolvency process - existence of dispute - claim as barred by limitation and there is delay and laches therefore, the application was not maintainable - Held that:- In the present case as we find that there is an 'existence of dispute' about arrears of salary and the Respondent has also failed to explain the delay in making claim of arrears alleged to be done since 1998 to 2016 (delay of about 18 years), we hold that the application under Section 9 preferred by the Respondent was not maintainable. Adjudicating Authority appointing 'Resolution Professional', declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, taken by the 'Interim Resolution Professional', including the advertisement, published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the 'I&B Code' is dismissed. Learned Adjudicating Authority will now close the proceeding. The 'Corporate Debtor' (company) is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect. The Adjudicating Authority will fix the fee of 'Resolution Professional', and the 'Corporate Debtor' will pay the fees of the 'Interim Resolution Professional', for the period he has functioned. The appeal is allowed with aforesaid observation. However, in the facts and circumstances of the case, there shall be no order as to cost
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Service Tax
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2018 (11) TMI 1093
Classification of service - Online Information and Database Access or Retrieval Services or not - infrastructure services availed from overseas group entity in the Netherlands - Held that:- The main take away from the definitions is that services provided should facilitate not only online information but also Database Access or Retrieval. From the facts on record, it appears to reason that the infrastructure services are nothing but a spider web group which connects Philips Netherlands to all its locations worldwide through the Wide Area Network (WAN) of internet protocol - all the infrastructure services are only in the nature of providing intra connectivity between Philips locations worldwide and the payments made are obviously then for sharing of the maintenance cost between the Philips’ units and not as fees for supply of online information or retrieval of data from the portal. The impugned infrastructure services cannot by any stretch of imagination be brought within the fold of “Online Information and Database Access or Retrieval” - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1092
Valuation - inclusion of value of course material supplied to appellants in assessable value - Held that:- It has been held in a number of Tribunal decisions that the value of such course material is not includible in the taxable value - the decision in the case of Cerebral Learning Solutions Pvt. Ltd. Vs CCE Indore [2013 (4) TMI 527 - CESTAT NEW DELHI] referred - the demands made in the respective SCNs on value of course material cannot sustain and will require to be set aside. Penalty - Held that:- As the major amount of demand involved has already been set aside and since in respect of the balance amount conceded by the appellant, the predominant portion was already paid up by the appellant on being pointed out, penalties are also set aside. In respect of the amounts related to Franchise service and short payment conceded by the appellant, the said demands as confirmed in the impugned order are not interfered with. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1091
Levy of service tax - reimbursement of electricity charges at 2% extra - renting of immovable property service - Held that:- Similar issue has been considered and addressed to by the Mumbai Bench of the CESTAT in the case of M/s. ICC Reality (India) Pvt. Ltd. [2013 (12) TMI 854 - CESTAT MUMBAI] wherein, the Hon’ble Mumbai Bench has, ruled that the electricity therefore would amount to ‘sale of goods’ and not ‘supply of service’ and that even Notification No. 12/2003-ST dated 20.06.2003 exempted from service tax any value of goods supplied by service provider to service recipient. The electricity charges paid by the appellant-assessee on behalf of its tenants could only tantamount to ‘service’ which cannot be brought under the purview of service tax - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1090
Demand of Service Tax - Outdoor Catering Services - Cleaning Services - Held that:- The respondent has supplied only qualified cooking supervisory staff etc., to M/s. BHEL. It is not coming out from the records or the agreement that the respondent had supplied any food/eatables to the premises of M/s. BHEL. By merely supplying the necessary staff for running a canteen, it may not be stated that the respondent had rendered any Outdoor Catering Service - the demand proposed in the SCN under Outdoor Catering Service and Cleaning Services cannot sustain - appeal dismissed - decided against Revenue.
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2018 (11) TMI 1089
Penalty u/s 78 of FA - non-payment of service tax - Business Auxiliary Service - Commission received - Held that:- The issue was interpretational that the appellant has failed to discharge service tax only because they entertained a bona fide doubt as to the taxable nature of the activity. Since the appellant has paid the entire demand along with interest and there being no evidence for suppression of facts, the penalty imposed under section 78 is unwarranted - penalty imposed under section 78 set aside without disturbing the demand or interest thereon - appeal allowed in part.
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2018 (11) TMI 1088
Penalty - non-payment of Service tax on TDS amount deducted - case of appellant is that they had mistakenly believed that since the amount was already deposited with the Government, service tax was not payable on the same amount of TDS - Held that:- The Tribunal in the case of C. Ramachandran Vs Commissioner of Service Tax, Chennai [2016 (7) TMI 1036 - CESTAT CHENNAI] had considered the issue as to the penalty imposed when the appellant had entertained a bonafide belief as to whether the TDS deducted has to be included in the taxable value of the services. In the said judgment, the penalty imposed under section 78 was set aside by the Tribunal. In the present case also, the appellant had no intention to evade payment of duty and the issue was only interpretational one - penalty not warranted - impugned order is modified to the limited extent of setting aside the penalty imposed - appeal allowed in part.
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2018 (11) TMI 1087
Business Exhibition Service - the exhibition was conducted abroad - reverse charge mechanism - Held that:- When service is fully provided outside, there is no applicability of reverse charge mechanism - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1086
Construction of a residential complex Service - non-discharge of service tax - Penalty - Held that:- Identical issue decided in the case of M/s. Aswini Apartments Vs. Commissioner of G.S.T. & Central Excise, Chennai South [2018 (10) TMI 404 - CESTAT CHENNAI], where it was held that the demand of service tax under commercial or industrial construction service (residential complex) cannot sustain after the period 1.6.2007. The levy of service tax prior to 1.6.2007 cannot also sustain by application of the decision of the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1085
Classification of services - educational consultancy services for prospective students who aspire to study abroad and assist them in the form of logistical support in getting admission into foreign universities - whether classified under Intermediary Agent or not - place of provision of services - material period involved in the instant appeal is 2014-15 and 2015-16 (up to September 2015) i.e. post negative list regime. Held that:- Appellant herein provides referral services to various foreign universities for which they receive an amount as commission/ referral fees. The activity of the appellant is to locate the candidates who wants to study abroad, make a data base and refer the student’s name to foreign universities; propagate to the future candidates the advantages of specific universities and studying in them. For rendering these services the appellant gets paid by the foreign universities as per the contractual agreement. The appellant is not collecting any amount from the candidates referred to foreign universities. The issue is no more resintegra - The Tribunal in the case of Sunrise Immigration Consultants Pvt Ltd [2018 (5) TMI 1417 - CESTAT CHANDIGARH], identical issue arose as to whether referring the students and the amounts received as referral commission would get covered for tax purposes under Rule 2(f) of point of provision of Service Rules 2012 and whether such services would fall under the category of intermediary services or otherwise. The Bench after considering the submissions made recorded the following order which covers the issue in favour of the appellant which are applicable in this case also - it was held in the case that As the appellant did not arrange or facilitate main service i.e. education or loan rendered by colleges/banks. In that circumstances, the appellant cannot be called as intermediary. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1084
Non-discharge of service tax - demand of service tax has been confirmed by the Commissioner in the revision order merely basing upon the documents recovered from SCV - Held that:- There is no evidence brought out that the appellant has provided services to 550 customers and no investigation has been done at the level of customers’ end. So also there is no document to show that the appellant has received charges for all the connections provided by him. Service tax can be demanded only on a consideration received by the service provider - Since there is no evidence to establish that the appellants have received consideration for all 550 connections, the demand raised by assuming that the appellant has provided 550 connections to various subscribers is without any factual basis. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1083
Works contract service or not - construction of water treatment plant, sewage treatment plant constructed by the appellant - service, non-commercial in nature - Held that:- The Tribunal in the case of Jyoti Buildtech (P) Ltd. [2017 (3) TMI 1100 - CESTAT ALLAHABAD], had occasion to analyze the demand of service tax on erection, commissioning and installation service on water treatment plant, sewage treatment plant etc. The Tribunal in the said decision followed the decision in the case of Lanco Infratech Ltd. [2015 (5) TMI 37 - CESTAT BANGALORE (LB)] and held that such constructions are not subject to levy of service tax under works contract service - demand do not sustain - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (11) TMI 1082
Maintainability of appeal - Time Limitation - issue based on valuation and / or rate of duty - assessment of goods - appeal under Section 35G of the Act - Difference of opinion - Held that:- Registry is directed to place the papers and proceedings of the present appeal before the Hon'ble the Chief Justice to obtain suitable directions to place the following questions of law before the larger bench.
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2018 (11) TMI 1081
Clandestine manufacture and removal - unaccounted purchase of raw materials - Department has heavily relied on the data retrieved from the pen drive and the CPU/HD of the PCs kept in the factory-cum-office - Section 36B of the Central Excise Act, 1944 read with Section 65B of the Evidence Act, 1872. Held that:- The appellant has no grouse that the condition in clause (1) of Section 36B for retrieving the data from the pen drive/computer is not complied with. The only grievance put forward is that these being private documents and not documents kept in ordinary course of business, cannot be relied. From the facts, it is brought out that Shri Vivek Agarwalla, CEO of the appellant-company has deposed on several occasions that the details were entered by him in the pen drive seized by officers and the same were maintained for the purpose of reporting to Ms. Uma, DGM (Finance) in their head office at Chennai. This being the fact, it cannot be stated that the data was not part of the day-to-day activities of the company. Section 36B does not mention the word “private documents”, but provides that 'the computer printout contained in the statement was produced by the computer which was used regularly to store or process information for the purposes of activities regularly carried over by the person having lawful control over the use of the computer'. It can be reasonably understood that in clandestine clearances, the assessee will have hidden or parallel transactions, which are not reflected in the statutory records or records submitted before the authorities. Merely because such accounts are hidden from the authorities would not make the records unreliable. It is also pertinent to mention that the pen drive etc., was submitted before Government Examiner of Questioned Documents and a report called for. It is not reported that the data contained therein was tampered in any manner - the contention of the appellant that the data retrieved from the pen drive is private records and, therefore, not admissible as per section 36B is unacceptable. Apart from the pen drive, the departmental officers also recovered spiral pad, my writing pad, notebook which were seized under a mahazar from the factory of the appellants. Shri Vivek Agarwalla stated that in spiral pad, bills for the period 01.01.2008 to 18.03.2008 were entered. The document, namely, 'my writing pad' and 'notebook' contained the bills for the period Jan'08, Feb. '08 and Mar, '08. He has admitted that these were handwritten by him - Another evidence, which is relied by the department is the weighment slip books, which contains details of inward movement of ingots/raw materials and outward movement for TMT bars end melting etc., and finished products. Shri Mantu is the person in-charge of weighment. It can be seen that apart from statements, the documents recovered from the appellant's-factory supports the case of clandestine clearance alleged in the show-cause notice. The argument of the learned counsel that the whole case is based on statements only and not supported by any corroborative evidence is, therefore, without any factual basis. Quantification of demand in SCN - Held that:- The appellants have adopted the opening balance of raw material from Form-IV register maintained by them. When the unaccounted purchase of raw materials has been brought to light from the data retrieved from pen drive as well as the data recovered from M/s. Hitech Industries P. Ltd., and other evidences, the strong inference that can be drawn is that the entries in the statutory register such as, Form-IV register cannot be relied or adopted. Therefore, the conclusion of the adjudicating authority that the worksheet prepared by the appellant adopting the figures of Opening Stock as in Form-IV cannot represent the actual receipt and issue of raw material finds favour. Time limitation - Held that:- The bench made a specific query as to whether the appellants contend that these are illegal gratifications made by appellant to the department. The learned counsel for the appellant opted not to answer to such query. If the appellant is not able to explain the figures, then there is no cause of alleging that these are amounts paid to the department and, therefore, department was in full knowledge of their clandestine activities. In any case, this is not sufficient ground to hold that the appellant has not suppressed any facts - the appellant has miserably failed to establish that the demand is ht by limitation. The demand of duty and interest thereon as well as equal penalty imposed under section 11AC does not call for interference - the penalty of ₹ 30,00,000/- imposed on Shri Vivek Agarwalla and ₹ 10,00,000/- imposed on Shri Sanjay Agarwalla under Rules 26 of Central Excise Rules, 2002 is on the higher side, and the same is reduced - appeal allowed in part.
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2018 (11) TMI 1080
CENVAT Credit - manufacture of dutiable as well as exempt goods - Bio-compost and Bio-super used as fertilizers, are classifiable under CETH 3101.00 attracting ‘Nil’ rate of duty as per Sl.No.63 of the Notification No.04/2006-CE dt.01.03.2006 - demand of an amount equal to 10% / 5% of the value of these goods when they were cleared - Held that:- The judgement of the Hon’ble Madras High Court in EID Parry (I) Ltd. [2013 (3) TMI 366 - MADRAS HIGH COURT] applies in the present case, where it was held that When spent wash and press mud had emerged as inevitable wastes during the process of manufacturing of final products viz., sugar and Denatured Ethyl Alcohol and the said wastes are combined and treated together to form another final product viz., bio-compost, the said final product cannot be brought under Rule 57CC - demand do not sustain - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1079
CENVAT Credit - certain goods purchased which were not used in the manufacture of their final products - Held that:- From perusal of the Show Cause Notice, it is found that there is no allegation of suppression or fraud or misstatement. In fact, the only strongest allegation against the appellant is that the fact of availing ineligible credit came to the knowledge of the Department only after the verification conducted by the internal audit wing of the Department on 03.01.2013 and 04.01.2013, which had been duly reciprocated in good faith by the appellant by accepting and filing its December 2012 ER-1 return which remains undisputed. Extended period of limitation - Held that:- The appellant had reversed the unutilized CENVAT Credit since it is nowhere disputed, either in the Show Cause Notice or in the Order-in-Original or in the impugned Order as to the availability of excess CENVAT Credit - invocation of extended period not justified. Both Interest u/s 11AA and Penalty u/s 11AC are deleted. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1078
Clandestine removal - proper investigations not carried out - Principles of natural justice - Held that:- The Ld. Adjudicating authority, on the one hand, has prejudged the matter by his ‚finding‛ that the invoices have been able to substantiate the claim by submitting documents of movement of goods showing that raw materials were supplied by assessee on behalf of the buyers. At the same time, in the same paragraph, the adjudicating authority also takes note that the documents retrieved by investigating agency were returned to the noticee after two years and that no investigation was conducted with regard to those papers The adjudicating authority has blown hot and cold on the various issues raised in the Show Cause Notice. The conclusions have been arrived at without reasoned analysis or findings. While in some cases, the adjudicating authority took into consideration various evidences produced by the concerned noticees, in many other cases the authority has rejected the allegations made in the Show Cause Notices without sufficiently countering them or giving reasons for their rejection. The interests of justice would be best served for all the appellants herein by remanding the matter back to the adjudicating authority for de novo consideration - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (11) TMI 1077
Recall of ex-parte order - Jurisdiction - scope of section 22 of the U.P. Trade Tax Act, 1948 - rectification under Section 22 of an ex-parte order passed in second appeal - Held that:- No grounds have been made out for rectification under Section 22. This Court has held that the Trade Tax Tribunal has jurisdiction to set-aside an ex-parte order and re-hear the matter - the learned Tribunal has failed to consider the complete judgment passed by this Court in the case of M/S Ram Sewak Coal Depot (Supra). It appears that learned Tribunal has considered only the answer to the first question but has not considered the answer to the second question while deciding the application of the revisionist. The order dated 09.07.2018 passed by the learned Tribunal in Misc Application No.4 of 2017 is not sustainable and liable to be set-aside - The Tribunal is directed to re-consider the application of the revisionist afresh - revision allowed.
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Indian Laws
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2018 (11) TMI 1096
Condonation of delay of 45 days in filing complaint - section 138 Negotiable Instruments Act, 1881 - Held that:- The delay in this case is not inordinate. Liberal approach has to be adopted while considering an application seeking condonation of delay. Respondent had rendered a reasonable explanation for the delay in filing the complaint. The delay is only of a few days. Nothing has been pointed out to show that there was negligence on the part of the respondent or that the delay lacks bona fide - In the facts of the present case refusing to condone delay of a few days would imply that a meritorious case is being thrown out by adopting a hyper-technical approach. In case delay is condoned no prejudice would be caused to the petitioner as petitioner would have an opportunity to defend the case on merits. The discretion has been exercised by the trial court in a positive manner to further the cause of justice - it is the settled proposition of law that when discretion is exercised by the trial court in a positive manner, the Superior Court is not to interfere with the same unless the same is contrary to the settled principles of law or is perverse, which is not so in the present case. There is no infirmity in the order of the trial court in exercising discretion in favour of the respondent and condoning the delay of 45 days in filing the complaint - there is no merit in the petition and the petition is dismissed.
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2018 (11) TMI 1095
Dishonor of Cheque - Section 138 of NI Act - the pivotal contention of the petitioner is that the respondent, being a partner and co-director, had access to all documents, including signed cheques of the petitioner, which he had misused and filed a false complaint against the petitioner. Held that:- Admittedly, in the case on hand, legal notice was issued by the complainant on 13.1.2004 and he had sent his reply on 29.1.2004. Thereafter, the respondent complainant filed a private complaint on 4.3.2004. There is a delay of three days. In the order of the Appellate Court, it has been categorically stated that the complainant had filed the complaint with delay and the same has been condoned by the trial court stating that the delay is well explained and bona fide on oral examination made on oath. It is clear that such condonation of delay was done by the trial Court without issuing any notice to the petitioner/accused. When the complainant is claiming that the petitioner is due and payable a sum to the tune of ₹ 60 Lakhs, it is not known as to how he was not diligent in filing the private complaint within the statutory period. That apart, no explanation whatsoever has been adduced by the respondent complainant for the delay. Unless and until the basis of existence of liability is set out by the complainant in the complaint and in the evidence, the Court would be loathe to raise a presumption regarding existence of a legally enforceable debt against the accused. A bald allegation that the accused who advanced the cheque was under an obligation to honour the same is unacceptable. The revision is allowed setting aside the order dated 9.2.2016 passed in Criminal Appeal No.2 of 2013 by the learned VI Additional Sessions Judge, Chennai.
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2018 (11) TMI 1094
Dishonor of Cheque - section 138 of Negotiable Instruments Act - failure to rebut the presumption under section 138 of Negotiable Instruments Act - only ground raised by the revision petitioner is that the cheques were given for security purpose and the same was however misused despite of receipt of entire sale consideration of ₹ 13,50,000/-. Held that:- The property was sold for a sum of ₹ 33,11,000/-. Therefore this court is not in a position to accept the case of the revision petitioner projecting as if the property was sold at ₹ 13,50,000/- and the entire sale consideration was paid - It is equally important to note that there is neither any evidence nor any documents put forth by the revision petitioner supporting his case. Though it is claimed by the revision petitioner that the entire sale consideration was paid as per his promise, absolutely there is no material or a piece of paper to support his claim. The statutory presumption raised under section 118 of Negotiable Instruments Act as against the revision petitioner as subject cheques were issued for the sum indicated in the cheque towards a legally enforceable debt and liability, which the revision petitioner had to repay to the original complainant towards the sale price received by him as power agent. In the case on hand admittedly while drawing a presumption in favor of the respondent as contemplated under section 139 of Negotiable Instruments Act, that the cheques were issued to the complainant for the discharge of debt or other liability, the fact remains that such presumption is not rebutted by the revision petitioner - there is no irregularity or infirmity over the findings of the courts below holding the revision petitioner guilty of offence under section 138 of Negotiable Instruments Act. This court had also ensured that all the statutory requirements falling under section 138(a-c) of NI Act is duly complied with before institution of the subject complaint. The Criminal revision fails and is dismissed.
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