TMI Tax Updates - e-Newsletter
November 25, 2019

Case Laws in this Newsletter:

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

TMI SMS

• Introduction of the GST Act has not taken away the power of the Municipality to collect the entertainment tax

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• Sanitary Napkin - GST - Profiteering is established - Manufacturer had increased the base price more than what he was entitled to increase

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Articles

1. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. Income Tax Department creates Exchange of Information Portal for dissemination of information to all stakeholders

2. NITI Aayog Discusses Challenges and Opportunities in Assistive Devices Industry

Notifications

GST - States

1. 956/2019/10(120)/XXVII(8)/2019/CTR-25 - dated 14-11-2019 - Uttarakhand SGST

Seeks to notify the grant of alcoholic liquor licence neither a supply of goods nor a supply of service as per Section 7(2) of UKGST Act, 2017

2. 954/2019/10(120)/XXVII(8)/2019/CTR-23 - dated 14-11-2019 - Uttarakhand SGST

Amendment in Notification No. 140/2018/18(120)/XXVII(8)/2017/CTR-4 dated 02nd February, 2018

3. 950/2019/10(120)/XXVII(8)/2019/CTR-20 - dated 14-11-2019 - Uttarakhand SGST

Amendment in Notification No. 525/2017/9(120)/XXVII(8)/2017 dated 29th June, 2017

4. 949/2019/10(120)/XXVII(8)/2019/CTR-19 - dated 14-11-2019 - Uttarakhand SGST

Seeks to exempt supply of goods for specified projects under FAO

5. 948/2019/10(120)/XXVII(8)/2019/CTR-18 - dated 14-11-2019 - Uttarakhand SGST

Amendment in Notification No. 281/2019/4(120)/XXVII(8) /2019/CTR-2 dated 09th April, 2019

6. 945/2019/10(120)/XXVII(8)/2019/CTR-15 - dated 14-11-2019 - Uttarakhand SGST

Amendment in Notification No. 518/2017/9(120)/XXVII(8)/2017 dated 29th June, 2017

7. 944/2019/10(120)/XXVII(8)/2019/CTR-14 - dated 14-11-2019 - Uttarakhand SGST

Amendment in Notification No. 514/2017/9(120)/XXVII(8)/2017 dated 29th June, 2017

SEBI

8. SEBI/LAD-NRO/GN/2019/41 - dated 21-11-2019 - SEBI

Notification under Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007

Circulars / Instructions / Orders

FEMA

1. 10 - dated 22-11-2019

Re-export of unsold rough diamonds from Special Notified Zone of Customs without Export Declaration Form (EDF) formality

2. 09 - dated 22-11-2019

Non-resident Rupee Accounts – Review of Policy

Customs

3. 38/2019 - dated 21-11-2019

Amendment in Import policy of Iron & Steel and incorporation of policy condition in Chapter 72, 73 and 86 of ITC(HS), 2017 Schedule-1

Highlights / Catch Notes

GST

• Municipality Retains Authority to Collect Entertainment Tax Under PGST Act, Section 173(2) Doesn't Restrict Collection from Petitioner.

  Case-Laws - HC : Levy of entertainment tax post GST - introduction of the PGST Act has not taken away the power of the Municipality to collect the entertainment tax. To put it specifically, Section 173(2) of the PGST Act, does not debar the Municipality, in any manner, from collecting the entertainment tax from the petitioner.
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• Court Orders Correction of GST TRAN-1 Filing Error to Restore Credit Distribution Rights by December 30, 2019.

  Case-Laws - HC : Rectification of bona fide error occurred while filing Form GST TRAN -1 - the availment of credit by the petitioner, and its entitlement to distribute the credit to its various branches is not disputed. The 5th respondent should either permit the petitioner to file a rectified TRAN-1 Form electronically in favour of each of its branches in the country, or accept manually filed TRAN -1 Form with the appropriate corrections, on or before 30.12.2019.
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• Sanitary Napkin Manufacturer Found Guilty of Profiteering by Raising Prices Beyond Limits, Violating Section 171.

  Case-Laws - NAPA : Profiteering - Sanitary Napkin - Respondent No. 1 (manufacturer) had increased the base price w.e.f. 27.07.2019 more than what he was entitled to increase, which clearly shows that he had deliberately in conscious disregard of the provisions of Section 171 of the above Act had resorted to profiteering.
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• Sanitary Napkin Seller Not Guilty of Profiteering; Section 171(1) Inapplicable Due to Excess ITC Reversal on Stock.

  Case-Laws - NAPA : Profiteering - Sanitary Napkin - Respondent No. 2 i.e seller of the product has clearly increased the base price of the product - as seen from the records reversal of ITC by him is more than excess realisation on closing stock after deniel of ITC benefit w.e.f. 27.07.2018, therefore no profiteering can be concluded on his part and hence, section 171(1) does not hold good in respect of the respondent.
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Income Tax

• Income-Tax Act: Tax Liability Arises Only When Income Accrues or is Received, Not When No Actual Income Results.

  Case-Laws - HC : Income recognition - No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax.” - income accrues when there is a corresponding liability on the other party.
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• Trip to Switzerland Disallowed: No Business Justification Found for Foreign Travel Expenses by Assessing Officer.

  Case-Laws - AT : Disallowance of the foreign travelling expenses - visit to Switzerland - during the year under consideration the assessee had paid commission to foreign agents and none of them were in Switzerland but were based in UAE, Kuwait, Saudi Arabia and Lebanon. As the assessee failed to justify the business exigency of the foreign travel, the AO has rightly made a disallowance
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• Charitable Activities Verified by Donors Can Still Qualify for Tax Exemption u/s 11 of the Income Tax Act.

  Case-Laws - AT : Exemption u/s 11 - charitable purpose u/s 2(15) - profit motive - supervision of activities by the Donor - it is quite normal that the donor want to verify whether the grants have been incurred for the intended purpose, which in our opinion, is in any manner does not establish that the activities of the assessee is business activity.
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• Section 40a(ia) Additions Upheld for Late TDS Deposit on Rental Payment; Deduction Possible in Subsequent Year.

  Case-Laws - AT : Additions u/s 40a(ia) - Failure to deposit TDS before the due date for filing the return of income. - The said TDS was deducted on rental payment and paid to Government account on 05.10.2009 after the due date for filing the ITR - Deduction may be allowed during the next year but for the current year, additions confirmed.
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• Holding Company Can Sell Shares to Subsidiary Without Time Gap, Exempt from Long-Term Capital Gains Tax.

  Case-Laws - AT : Long term capital gain - process of sale of shares by holding company to the subsidiary company - time can gap between the formation of the companies and the transfer of shares to them - law does not require any time can gap - Benefit of exemption from LTCG allowed u/s 45 r.w.s 47(iv)
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• Transfer Pricing Adjustment on Interest Under India-Mauritius Tax Treaty Deemed Unsustainable Due to No Actual Interest Income Received.

  Case-Laws - AT : TP Adjustment - interest on debentures invested in the Associated Enterprise (AE) - India–Mauritius tax treaty - the addition made on account of transfer pricing adjustment is unsustainable as the assessee has actually not received any interest income.
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• Court Allows Taxpayer's Claim on Captive Power Plant Profits; Misapplication of 2 Paise Rate Corrected u/s 80-IA.

  Case-Laws - AT : Deduction u/s 80-IA - captive power plant - scope of the word "derived from" - CIT(A) was right in granting part relief to the assessee but was not correct in confirming part addition considering the factum of 2 paise per unit for working out eligible profits u/s. 80IA of the Act. - Claim of the assessee allowed.
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Customs

• Iron and steel import policy amended, new conditions in ITC(HS) Chapters 72, 73, 86 to enhance regulation.

  Circulars : Amendment in Import policy of Iron & Steel and incorporation of policy condition in Chapter 72, 73 and 86 of ITC(HS), 2017 Schedule-1
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• Amend Shipping Bill to Rectify Missing 'Y' for MEIS Benefits Eligibility on Reward Column.

  Case-Laws - AT : MEIS benefits - Amendment in shipping bills - Failure to mention 'Y' in the reward column of the shipping bill for availing the benefit under MEIS scheme can be corrected by amending the shipping bill.
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FEMA

• India Expands Special Non-Resident Rupee Accounts for Overseas Individuals, Easing Restrictions for Greater Accessibility.

  Circulars : Non-resident Rupee Accounts – Review of Policy - scope of SNRR Account extended by permitting person resident outside India to open such account for specific purposes. - Certain restriction removed.
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Indian Laws

• Cheque Dishonor Not a Legally Recoverable Debt for Housing Society u/s 138, Negotiable Instruments Act.

  Case-Laws - HC : Dishonor of Cheque - legally recoverable debt or not - society was constituted for the welfare of its members who were interested in getting their houses constructed by the respondent - Even if it is presumed that the said amount was paid to the respondent as advance money, even then there appears to be no criminal liability or any liability which is recoverable under provisions of Section 138 NI Act.
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SEBI

• SEBI Updates Certification Requirements for Associated Persons in Securities Markets to Boost Professionalism and Investor Confidence.

  Notifications : Notification under Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007
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Service Tax

• CENVAT Credit Claimable on Shared Services via Debit Notes with Required Details u/r 9 of CCR.

  Case-Laws - AT : CENVAT credit - input services - shared service expenses - debit note issued by the sister concerns is a valid document under Rule 9 of CCR to avail cenvat credit if it contains all the details of the service as well as tax amount as required under rule 9.
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• Commercial Coaching Providers Must Pay Service Tax for MBA and PGP Programs; Not Authorized to Confer Degrees.

  Case-Laws - AT : Commercial Coaching and Training Services - appellants are engaged in imparting courses such as MBA, PGP programme (industry integrated) - appellants themselves are not recognized by law to grant any degree - they are liable to pay service tax on the service
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Central Excise

• Flavored Milk Classified Under Chapter Tariff Item 0404 90 00 Instead of CETA 22029030.

  Case-Laws - AT : Classification of goods - flavoured milk - whether classified under CETA 22029030 of CETA or to be classified under 04049000? - the appropriate classification for the impugned product will be under Chapter Tariff Item 0404 90 00.
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VAT

• Entry 18 of Notification No. 306 doesn't affect tax on motor bodies; only adds "and harvester combines.

  Case-Laws - HC : Liability of tax - sale of motor bodies - component parts - The reference to Entry 18 of Notification No. 306 dated 29.01.2001 is found to be irrelevant, inasmuch as, by that notification, only the words 'and harvester combines' had been added but there was no amendment to subject motor bodies or bodies of motor vehicles to tax as motor vehicles.
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Case Laws:

• GST

• 2019 (11) TMI 1087
  Levy of entertainment tax - Maintainability of petition - Petition submitted that, in view of Section 173(2) of the Puducherry Goods and Services Tax Act, 2017, Section 118(1)(b)(ii) of the Puducherry Municipalities Act, 1973, stands annulled - Refund the entertainment tax paid from 01.07.2017 to till date - 25% of entertainment tax being collected by the 5th respondent Municipality - Collection of entertainment tax over and above the GST - Compliance with Sections 118 and 161 of the Puducherry Municipalities Act, 1973 HELD THAT:- It is not in dispute that the Puducherry Municipalities Act, 1973, is an enactment, which is still in force and thus, the authorities competent under the above enactment are bound and entitled to act in accordance with the relevant provisions made thereunder - Section 118(1)(b)(ii) of the Puducherry Municipalities Act, 1973, empowers the Municipal Council to impose a tax on entertainment. It is to be noted at this juncture, that this power conferred on the Municipal Council under Section 118 to collect various taxes has not been totally taken away or subsumed under the PGST Act and on the other hand, it is apparent that only the power to collect tax on a particular subject viz., advertisements other than advertisements published in the newspapers alone has been taken away or omitted by way of imposition made under Section 173(1)(a) of the PGST Act = A careful perusal of Section 173, Sub-Clause 1 of the PGST Act, would undoubtedly, indicate that the Legislature have consciously retained the power of the Municipal Council to collect tax on all other subjects except the collection of tax on advertisements other than advertisements published in the newspapers. In other words, even after introduction of the PGST Act, in view of the specific provision made under Section 173(1) therein, what was omitted from the purview of the Municipal Council is only a tax on advertisements other than advertisements published in the newspapers and not in respect of other taxes such as property tax, professional tax, duty on certain transfer of immovable property in the form of additional stamp duty and the Tax on Entertainment . Therefore, it is very clear that the powers of the Municipal Council to collect the tax on entertainment, is retained, even after introduction of the PGST Act - in view of Section 173(2) of the PGST Act, power to collect entertainment tax by the Municipality stands annulled. This Court is of the considered view that the general provision made under Section 173(2) of the PGST Act cannot override or include a specific provision made under Section 173(1) of the PGST Act. In other words, it is to be noted that Section 173(1) of the PGST Act is a stand alone provision unaffected by Sub-Section 2 of Section 173 of PGST Act - the collection of the entertainment tax by the 5th respondent Municipality is within their power, competence and with authority of law. This Court is also of the view that introduction of the PGST Act has not taken away the power of the Municipality to collect the entertainment tax. To put it specifically, Section 173(2) of the PGST Act, does not debar the Municipality, in any manner, from collecting the entertainment tax from the petitioner. Maintainability of petition - HELD THAT:- The present writ petition filed against the impugned demand is not maintainable not only on the reasons and findings rendered supra, on the merits of the matter and also on the reason that the challenge made is only against a consequential proceedings arising out of the powers vested on the 5th respondent under Sections 118 and 161 of the Puducherry Municipalities Act - the challenge made against the consequential proceedings without challenging the original/main proceedings or relevant provision of law, is not maintainable. Therefore, on this ground also, this Court finds that the present challenge is not maintainable. Refund of tax collection - HELD THAT:- In view of the fact that the petitioner has already collected the entertainment tax from the Cinema viewers and thus, it is impossible to return the same to such viewers in the event of order for refund. In any event, the question of considering the consequential prayer does not arise in this case, as this Court found that the impugned challenge of the petitioner against the collection of entertainment tax itself is not maintainable. Petition dismissed.

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• 2019 (11) TMI 1086
  Accumulation of input tax credit - rectification of bona fide error occurred while filing Form GST TRAN -1 - HELD THAT:- It is not in dispute in the instant case that the input tax credit accumulated in the account of the petitioner was validly taken during the pre-GST period. The returns filed by the petitioner during the relevant period have all been accepted by the revenue authorities and, in the absence of a requirement to migrate to the GST regime, the petitioner would have been able to distribute the credit to its various branches through the input service distribution mechanism that was in place prior to the introduction of the GST Act. Although the petitioner has since obtained a registration as an input service distributor under the GST Act, the non-availability of the details of the purchase invoices, on the strength of which the input credit was availed, virtually prevents the petitioner from pursuing the Form GST TRAN -1 already filed by it before the 5th respondent. However, if the petitioner is permitted to file individual Form GST TRAN-1 in respect of each of the recipient branches, then the accumulated credit could be distributed to its various branches without having to furnish details of the invoices, on the strength of which the credit was taken during the relevant time before the introduction of GST. In effect, this procedure would facilitate the transfer of credit in a situation where the accumulation of credit as also the entitlement of the petitioner to distribute the credit to its various branches is not in dispute. Delhi High Court in M/S. BLUE BIRD PURE PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2019 (7) TMI 1102 - DELHI HIGH COURT] , where, taking note of the contention of the respondents regarding the technical difficulty in permitting assessees to transfer accumulated credit to the GST regime, it was observed that the Department should either open the online portal so as to enable the assessee to file rectified TRAN -1 Form electronically or accept manually filed TRAN-1 Form with correction before a specified date so as to render justice to the assessees. In the instant case, the availment of credit by the petitioner, and its entitlement to distribute the credit to its various branches is not disputed. The 5th respondent should either permit the petitioner to file a rectified TRAN-1 Form electronically in favour of each of its branches in the country, or accept manually filed TRAN -1 Form with the appropriate corrections, on or before 30.12.2019. The time limit specified shall be strictly adhered to, so that the petitioner will be able to distribute the accumulated credit to its branches immediately thereafter. Petition disposed off.

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• 2019 (11) TMI 1085
  Profiteering - purchase of a flat in the Respondent s project Synera , situated at Sector-81, Gurugram, Haryana - benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in price not passed on - contravention of Section 171 of the Central Goods and Services Tax Act, 2017 - penalty - HELD THAT:- It is clear that the ITC as a percentage of the turnover that was available to the respondent during the pre-GST period from April, 2016 to June, 2017 was 4% and during post-GST period from July, 2017 to December, 2018, it was 6.61% and hence it is established that the respondent had benefitted from the benefit of additional ITC to the extent of 2.61% (6.61% - 4%) of the turnover. It is also clear from the record that the Central Government, on the recommendation of the GST council, had levied 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the construction service, vide N/N. 11/2017-Central Tax (rate) dated 28.06.2017 which was reduced in the case of affordable housing from 12% to 8%, vide N/N. 1/2018-Central Tax (rate) dated 25.01.2018. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project Synera in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section - a Show Cause Notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.

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• 2019 (11) TMI 1084
  Profiteering - Sanitary Napkin - reduction in the rate of GST - benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT:- The respondent had not disputed the fact that the denial of ITC based on the turnover arrived at the DGAP was 9.4% - on perusal of the invoices on the basis of which complaint has been made clearly shows that the base price has increased even though the MRP remained the same. It is established beyond any doubt that the Respondent No. 1 (manufacturer) had increased the base price w.e.f. 27.07.2019 more than what he was entitled to increase, which clearly shows that he had deliberately in conscious disregard of the provisions of Section 171 of the above Act had resorted to profiteering. - the profiteered amount by the Respondent No.1 is determined as Rs. 42,70,18,5811- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 as the said Respondent has failed to pass on the benefit of rate reduction to his customers. The respondent no. 2 who is the seller of the product has clearly increased the base price of the product. But as the benefit of ITC was not available to him post 27.07.2018, so the reversal of ITC on the closing stock was extra cost to him - as seen from the records reversal of ITC by him is more than excess realisation on closing stock after deniel of ITC benefit w.e.f. 27.07.2018, therefore no profiteering can be concluded on his part and hence, section 171(1) does not hold good in respect of the respondent. - This authority accepts the report of DGAP and holds that anti-profiteering provisions contained in section 171(1) of CGST Act is not attracted in case of Respondent no. 2 (who is seller) Penalty - HELD THAT:- It is also evident from the above narration of facts that the Respondent has denied benefit of rate reduction to the buyers of the product Sanitary Napkin in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering, which is an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he will be apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.

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• 2019 (11) TMI 1083
  Profiteering - purchase of a flat in project Risington OMR, Karapakkam - benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT:- It is established from the perusal of facts of the case that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the respondents as he has failed to pass on the benefit of additional ITC to his customers. Accordingly, he is directed to pass on an amount of Rs, 41,434/- to the above applicant and an amount of Rs. 1,01,09,156/- (Rs. 1,01,50,590 - Rs. 41,434/-) to the other flat buyers who are not applicants in the present proceedings. It is clear that the respondent has profiteered by an amount of Rs. 1,01,50,590/- during the period of investigation from 01.07.2017 to 31.08.2018 - therefore, this authority u/r 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. The present investigation is only up to 31.08.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the respondent as per provisions of sections 171 (1) of CGST Act, 2017. Penalty - HELD THAT:- The Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171(1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore he is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - Therefore, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-section read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.

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• 2019 (11) TMI 1082
  Profiteering - purchase of flats in the Respondents project Green Court situated in Sector 90, Gurugram, Haryana. Sh. Shaurabh Prabhakar - it is alleged that the Respondent had not passed on the benefit Of Input Tax Credit (ITC) to them by way of commensurate reduction in the price of the flats - contravention of the provisions of 171 of CGST Act - penalty - HELD THAT:- As per the provisions of section 171 of the CGST Act, 2017, the benefit of the additional ITC which was accrued to the respondent in the post-GST period is required to be passed on to the applicants as well as the other home buyers. Based on the amount collected by the respondent from the applicants and the other home buyers during the period from 01.07.2017 to 24.01.2018, the amount of benefit of ITC which is required to be passed on by the respondents to the recipients or in other words, the profiteered amount comes to Rs. 2,68,17,079/- which includes 12% GST on the base profiteered amount of Rs. 2,39,43,820/-. Penalty - HELD THAT:- It is evident that the respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of section 171(1) of the CGST Act, 2017 and has thus committed as per the provisions of section 171 (3A) of the CGST Act, 2017 - a SCN be issued to him directing him to explain why the penalty prescribed under the above provision should not be imposed.

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• Income Tax

• 2019 (11) TMI 1081
  Failed auctions - Property acquired by the Union of India in 1994 under Section 269UD(1) of the Income Tax Act, could only be sold in 2018 - appellant made an offer to the Central Board of Direct Taxes (hereinafter referred to as CBDT ) to purchase the aforesaid property for a sum of Rs. 32.11 crores - HELD THAT:- As has been pointed out, several auctions were conducted from the year 1994, including an auction as recent as 27.03.2017 which failed to elicit a response from any buyer. Ultimately, the auction with the reserve price of Rs. 30 crores, on which the appellant bid was Rs. 30.21 crores, was kept in abeyance. The reason that is available from the record is in a Report dated 26.09.2017 in which it was pointed out that this figure was considerably lower than the figure offered by the appellant itself at Rs. 32.11 crores and that, therefore, a fresh auction be held. We cannot say that the aforesaid reason can be said to be, in any manner, arbitrary. After all, it was in public interest to see that the highest possible price be fetched for such properties. Further, we have also seen how at every stage valuation reports were submitted by reputed Valuers, first from Mumbai, and then from Chennai, and have no reason to doubt what has been stated to be the Fair Market Value in any of these reports. It may also be pointed out that though the appellant was given several opportunities to bid in the fresh auction conducted, ultimately, for reasons best known to him, he chose to refrain from participating in the fresh auction that was conducted. Reasons disclosed both in the Report dated 26.09.2017 and the letter dated 06.04.2018 from the Government of India, Ministry of Finance, to the Chief Commissioner of Income Tax, make it clear that there is no arbitrariness that is discernible in the entire auction process. This being the case, we dismiss this appeal and hold Shri Kavin Gulati, learned senior counsel, to the offer very fairly made to us. We may indicate that from the figure of Rs. 35 crores, which will be paid within a period of 12 weeks from today directly to the Union treasury, a sum equivalent to interest of 9 per cent on the amount of Rs. 7.78 crores, that is lying with the Union, calculated from the date on which it was deposited with the Union till today be substracted, and the net figure be handed over as aforesaid.

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• 2019 (11) TMI 1080
  Income recognition - year of assessment - sale of land - HELD THAT:- We note that the finding of fact arrived at by the Tribunal that the Respondent was not able to comply its obligations under the MOU in the previous year relevant to the subject assessment year so as to be entitled to receive Rs. 20 crore is not shown to be perverse. In fact, the issue is covered by the decision of the Apex Court in the case of CIT v. Shoorji Vallabdas Co. [1962 (3) TMI 6 - SUPREME COURT ] wherein it is held that Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax. So also in Morvi Industries Ltd. [1971 (10) TMI 5 - SUPREME COURT ] has held that income accrues when there is a corresponding liability on the other party. In the present facts, in terms of the MOU, there is no liability on the other party to pay the amounts. In any event, the amount of Rs. 20 crore has been offered to tax in the subsequent assessment year and also taxed. In the aforesaid circumstances, the view taken by the Tribunal on facts is a possible view and calls for no interference. In any event the tax on the amount of Rs. 20 crore has been paid in the next year. No substantial question of law

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• 2019 (11) TMI 1079
  Penalty u/s 271(1)(c) - addition u/s 68 - HELD THAT:- The assessee has not given any explanation. It has just submitted that it has received share application money from 272 parties. It has given their names. But the addresses given by the assessee were found to be incorrect because notices were returned. Apart from that the assessee has not given any details. Monies have been taken in cash and not through banking channel. Therefore, neither it has proved the genuineness of the transaction nor credit-worthiness of the alleged applicants; rather to say their identities also doubtful. In such circumstances, it has to be construed that the explanation offered by the assessee has been proved as false by the AO Assessee has relied upon above six judgments. Out of that in the first two, in the case of National Textiles [ 2000 (10) TMI 19 - GUJARAT HIGH COURT] and Jalaram Oil Mills [ 2001 (6) TMI 15 - GUJARAT HIGH COURT] assessment year involved is 1971-72 and 1974-75. Explanation- 1 to section 271(1)(c) of the Act has been appended in the present form w.e.f. 1-4-1976. Therefore, these judgments are of no help to the assessee. As far as the last judgment of Hon ble Supreme Court in the case of Reliance Petroproducts P.Ltd. [ 2010 (3) TMI 19 - SUPREME COURT] the assessee has made some claim which was found to be not admissible as per the position of law. The assessee has not withheld information. Hon ble Supreme Court was of the view that unless some claim is made, how the assessee would explain his case before tax authorities. In the present case no such facts are there. The assessee has not made any claim admissible in law, which has been disallowed on account of difference of opinion between him and the tax authorities. Similarly, as far as the facts of other three decisions are concerned, they are quite distinguishable with the facts in the present case. Therefore, we do not find any error in the order of the ld.CIT(A) and the appeal of the assessee is dismissed.

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• 2019 (11) TMI 1078
  Correct head of income - Income from House Property or Income from Business and Profession - consideration received by the assessee for commercial space given in the mall to various persons - characterization of income - HELD THAT:- Both the Revenue authorities gone to record a finding that there is no change in the facts and to maintain consistency with the earlier years, income of the assessee is to be treated as income from house property. Since identical issue was dealt with by the Tribunal in earlier years, in the assessee s own cases, following the principle of consistency, we direct the AO to treat the impugned income earned by the assessee under profit and gains from business or profession . Restricting the deduction towards interest on borrowed funds and not allowing the same to be set off against the income from business - As held that income earned by the assessee is to be treated under the head profits and gains from business or profession , as a consequence thereof, this expenditure is also to be considered from that angle. Accordingly, this ground is allowed.

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• 2019 (11) TMI 1077
  Revision u/s 263 - entitled for deduction while computing book profit u/s 115JB being 60% of the proportionate profit relating to the activity of growing, manufacturing and selling of tea made from its own grown tea leaves - CIT(A)computing book profit by considering 60% of adjusted income instead of 60% of composite income - HELD THAT:- The common issue involved in these two appeals thus is squarely covered in favour of the assessee by the order of the Tribunal [ 2017 (2) TMI 1439 - ITAT KOLKATA] and respectfully following the same, we uphold the impugned orders of the Ld. CIT(A) allowing the claim of the assessee for deduction of 60% of adjusted income while computing the book profit u/s 115JB of the Act for both the years under consideration.

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• 2019 (11) TMI 1076
  Net interest income for deduction u/s. 80 IA - Allowable expenditure u/s. 57 (iii) - netting of off interest expenditure and interest income - HELD THAT:- We find merit in the arguments advanced by the assessee that such interest expenditure is an allowable expenditure u/s.57 (iii) even if the said interest income is considered as income from other sources by deviating from the stand of the department in the preceding as well as subsequent assessment years when such interest income has been treated as business income. A perusal of the order of CIT(A) shows that assessee had given the bifurcation of interest income on loans and advances to parties and the interest expenditure on such borrowings and has shown net interest income of Rs. 7,85,61,480/- on which no deduction u/s. 80 IA has been claimed. There is a direct nexus between the interest income of Rs. 23.96 lakhs and interest expenditure of Rs. 20.30 lakhs. We find the Hon ble Delhi High Court in the case of Vodafone South limited Vs. CIT [ 2015 (10) TMI 22 - DELHI HIGH COURT] after considering the decision of Tuticorin Alkai Chemicals and Fertilizers Ltd. [ 2015 (10) TMI 22 - DELHI HIGH COURT] has held that where assessee having availed of loan from HSBC, advanced said amount to its holding company, i.e. SCL and since there was a direct nexus between earning of interest on loan advanced by assessee to SCL and payment of interest to HSBC on loan drawn in terms of sanction letter, assessee s claim for netting off of interest in terms of section 57 (iii) was to be allowed. The various other decisions relied by the ld. Counsel for the assessee also support his case that such interest expenditure has to be allowed as deduction from such interest income if such interest income is treated as income from other sources. We, therefore, hold that the assessee is entitled to netting of off interest expenditure and interest income. Even if the proposition laid down by the CIT(A) that principle of rejudicata is not applicable to the income tax proceedings is accepted, however, the rule of consistency has to be followed. Since the revenue in the preceding as well as subsequent years has accepted such netting off of interest expenses from such interest income, therefore, on this score also the assessee is entitled to netting off. We, therefore, set aside the order of the CIT(A) and allow the grounds on this issue.

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• 2019 (11) TMI 1075
  TP Adjustment - international transaction involving provision of support/broker services to the overseas Associated Enterprise (AE) - applying TNMM as the most appropriate method - HELD THAT:- Neither the assessee has provided same or similar service to third parties, nor the AE has entered into same or similar transaction with independent service provider and further, there is no publicly available information on price charged in independent transactions of similar or identical nature that are comparable to the transaction between the assessee and the AE. However, in the very same transfer pricing study report, the assessee did provide an alternative benchmarking under CUP method by applying the price at which the assessee has chartered ships from third parties as internal CUP to benchmark the price charged by the assessee to the AE for voyage charter of the very same vessels to the AE. A perusal of the impugned order of the Transfer Pricing Officer makes it clear that only because the assessee had treated TNMM as the most appropriate method over CUP, he has rejected CUP as the most appropriate method. No further reasoning has been provided by the Transfer Pricing Officer to strengthen his case that CUP cannot be applied as the most appropriate method. We hold that CUP is the most appropriate method in the present case to benchmark the transaction with the AE. relating to the provision of support/broker service. The internal CUP applied by the assessee being a valid CUP, no further adjustment can be made to the price charged to AE. The addition made should be deleted. Selection of comparable - From the website extracts of the company as submitted before us, it is noticed that the company provides services relating to DGFT, customs / excise duty and service tax. It also appears from the facts on record that the company is engaged in the business of trading in digital certificate. Considering the aforesaid factor, the Co ordinate Bench in Li Fung (I) Pvt. Ltd. (supra) has held that the company is not a comparable to a business support service provider. It is also relevant to observe, while excluding this company the Bench also took note of the fact that the finanacial statements of the company were not available in the public domain when the company was selected as a comparable. Before us also, AR has specifically submitted that the financial statements of the company were not provided to the assessee. In case of Li Fung (I) Pvt. Ltd. [2018 (5) TMI 1009 - ITAT DELHI] the Bench also observed that even under TNMM, the requirement for selection of comparable transaction cannot be diluted. Axis Integrated Systems Ltd. cannot be treated as a comparable to the assessee, hence, should be excluded from the list of comparables. In the course of hearing, it was submitted by the learned Authorised Representative that on exclusion of this comparable, the margin shown by the assessee would be within the tolerance range of the average margin of the rest of the comparables, requiring no further adjustment. Thus, he had submitted that there is no need to consider the acceptability or otherwise of the other two comparables. We do not intend to venture into the comparability issues of Cyber Media and Adecco India Pvt. Ltd. for the present and leave it upon for adjudication if the issue arises in any other assessment year in future. Thus, looked at from any angle, the addition made on account of transfer pricing adjustment is unsustainable. Accordingly, it is deleted.

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• 2019 (11) TMI 1074
  TDS u/s 194C OR 194I - short deduction of TDS - payment of the facility fees - HELD THAT:- In S.K. Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] where tax was deducted by the assessee, though under a bonafide wrong impression under wrong provisions, the provisions of section 40(a)(ia) could not be invoked and that if there was any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various tax deduction at source provisions, the assessee could be declared to be an assessee in default u/s 201 but no disallowance could be made invoking the provisions of section 40(a)(ia) of the Act. On appeal, the Hon ble High Court held that no substantial question of law arose from the said order of the Tribunal - we delete the disallowance made by the AO u/s 40(a)(ia) and allow the 1st ground of appeal. TDS u/s 195 - Commission paid to foreign parties - HELD THAT:- In the case of GE India Technology Centre (P.) Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] it is held that a person paying interest or any other sum to a non-resident is liable to deduct tax u/s 195 only if such sum is chargeable to tax in India and not otherwise. In the instant case, following the above decision we delete the disallowance made by the AO and allow the 2nd ground of appeal. TDS u/s 194C - labour charges payment - HELD THAT:- We find that the expenses disallowed by the AO are not debited to the P L account. In fact these expenses are capitalized. As held in case of S.K. Terkriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] , if there was any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various tax deduction at source provisions, the assessee could be declared to be in default u/s 201 but no disallowance could be made invoking the provisions of section 40(a)(ia) of the Act. In view of the above position of law, we delete the disallowance. Disallowance of loss on sale of returned goods - HELD THAT:- The fact remains that during the AY 2010-11, the assessee had sold goods to the Karnataka Police in February 2010 for Rs. 192,95,306/-. However, the said consignment was rejected by the client vide letter dated 01.03.2010. As the assessee is following the mercantile system of accounting, the AO has rightly made a disallowance of Rs. 12,94,653/- on account of loss on sale of goods returned in AY 2010-11. Thus the 4th ground of appeal is dismissed. Disallowance of the foreign travelling expenses - Allowable revenue expenses - HELD THAT:- in the instant case, the assessee failed to file any evidence that it was due to Shri Shambhukumar S. Kasliwal s visit to Switzerland along with his wife to finalize a deal for purchase of Spinning Machinery from M/s Klopman International. Further, we find that during the year under consideration the assessee had paid commission to foreign agents and none of them were in Switzerland but were based in UAE, Kuwait, Saudi Arabia and Lebanon. As the assessee failed to justify the business exigency of the foreign travel, the AO has rightly made a disallowance

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• 2019 (11) TMI 1063
  Determination of rate of Gross Profit - notice u/s 153A - Assessee showed its gross profit at 4.75% during the Financial Year 2010-11 - AO consequently, recalculated the gross profit @ 6% - HELD THAT:- The Tribunal has rejected the appeal preferred by the Revenue on the premise that the Assessing Officer has not doubted and, therefore, not rejected the books of accounts presented by the assessee. Consequently, it was not open to the AO to proceed to make an assessment of the net profit of the assessee on the basis of the comparison made with the industry trade. In our view, the reasoning adopted by the Tribunal appears to be sound, and therefore, no question of law arises for our consideration in the present appeal.

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• 2019 (11) TMI 1057
  Nature of Land sold by the assessee - agriculture land or residential land - HELD THAT:- Assessee has treated the land as agriculture land whereas the revenue authorities are harping upon to treat it as residential plot of land, the issue needs fresh examination by the A.O and for doing so the additional evidence filed by the assessee seems to be relevant as they go to the root cause of the issue. We, thus admit the additional evidence and direct the Ld. A.O to examine the issue afresh in light of the additional evidence filed by the assessee and our discussions herein above and to decide the issue in accordance with the law after providing reasonable opportunity of being heard to the assessee.

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• 2019 (11) TMI 1056
  Revision u/s 263 - as per CIT AO did not examine the issue related to the depreciation and the late deposit of the EPF in respect of employees contribution - HELD THAT:- Assessee has claimed only book depreciation of Rs. 9,59,353/- which has been added back in computation of income causing no revenue loss. In support of this contention, assessee has drawn our attention to profit loss account. The fact that the assessee has disclosed the depreciation as other income is not controverted by the revenue nor the Ld. Pr. CIT has brought any contrary material on record. Therefore, CIT was not justified in revising the assessment order on this ground. Late deposit of EPF of employees contribution - It is stated by the assessee that all the amounts have been paid in EPF account before the due date of filing and filing of return of income - We find merit into the contention of the assessee as the law is settled by the judicial pronouncements that if assessee has deposited EPF, which is before the due date of filing of return, there should not be any disallowance. Hence, there is no prejudice caused to the revenue in this respect as well. Therefore, on both the issues invoking of provisions u/s 263 is not justified. We therefore, quash the impugned order being contrary to the settled principle of law. - Appeal filed by the assessee is allowed.

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• 2019 (11) TMI 1055
  Valuation of closing stock - HELD THAT:- Once the AO agreed that the figures of production and sales furnished originally out of total production as per assessee s register is only 90,620 kgs. as on 31.3.2011, still he sustained the addition of Rs. 13,47,71,926, which is not proper. AO, though, himself satisfied about the correctness of the value of stock shown by the assessee in its return of income, he still wants to sustain the addition on the basis of the objections raised by the Tax Auditors, which is improper and unjustifiable. Accordingly, we agree with the finding of the CIT(A) in deleting the addition on this count.

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• 2019 (11) TMI 1048
  Exemption claim u/s 10(38) - genuineness of the transactions - HELD THAT:- It is noticed the assessee has not been given a fair opportunity to prove the genuineness but the assessment has been made primarily, based on the evidences collected by the Revenue in the course of the investigation conducted by them on the brokers / share broking entities etc. This is not permissible. This being so, in the interests of natural justice, the issue of the gC require re-adjudication. Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion. AO must keep in mind that the onus of proving the exemption rests on the assessee. If the AO does have any evidence to the contrary, it is to be put to the assessee for his rebuttal. The internal communications of the Revenue are evidences for drawing an opinion on possible wrong claims but they are not the final evidence. We deem it fit to remit the issue of exemption in this appeal back to the file of the Assessing Officer for re-adjudication. Therefore, the Assessing Officer concerned shall require the assessee; to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. The assessee shall comply with the Assessing Officer s requirements as per law. AO is also free to conduct appropriate enquiry as deemed fit. The Assessing Officer shall also bring on record the role of the assessee in promoting the company and relationship of the assessee with other promoters, role of the assessee in inflating the price of shares, etc. as had been held by the Co-ordinate Bench of this Tribunal in the case of Kanhaiyalal Sons (HUF) v. ITO [ 2019 (2) TMI 1640 - ITAT CHENNAI] . AO shall furnish adequate opportunity to the assessee on the material etc to be used against him and on appreciation of all the aspects, the Assessing Officer would decide the matter in accordance with law. Thus, the issue of exemption claim u/s 10(38) is restored to the file of the Assessing Officer for re-adjudication - Assessee s appeal is treated as partly allowed for statistical purposes.

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• 2019 (11) TMI 1046
  Disallowance to 10% of the total expenses on adhoc basis by the CIT(A) - Business connection - Earlier AO has disallowed these expenses on the ground that they do not have any business connection with the assessee - Held that:- the CIT(A), inter alia, observed that such expenditures were incurred by the assessee in order to maintain cordial and harmonious industrial relations amongst the works for better and smooth running of business without direct benefit to any individual employee or any specific group of employees, the assessee company being located in remote area naxal affected area where are no recreational facilities in around the nearby locality; providing the officer and staff of the company in the form of tea, snacs, stitching of official uniform, subsidy given to canteen , puja expenses, etc. Hence, from the above findings of the CIT(A), we are of the view that the CIT(A) has not disputed the nature of expenses incurred by the assessee. - Entire expenditure allowed. Deduction u/s 80-IA - captive power plant - scope of the word derived from - reason/justification of valuation of power produced on the basis of JSEB rate - Held that:- even at the time of framing of assessment order and making addition, the AO was not sure about the cost of production of power and he assumed the same at Rs. 2.5 per unit with a rider that same may be revised later if the assessee furnishes details of cost of production of power alongwith necessary evidence. - the CIT(A) was right in granting part relief to the assessee but was not correct in confirming part addition considering the factum of 2 paise per unit for working out eligible profits u/s. 80IA of the Act. - Claim of the assessee allowed. Disallowance of expenses related to exempted unit - AO has apportioned 45.68% of the claim of the assessee pertaining to Director sitting fees and business head office expenses pertaining to exempt unit - Held that:- the Directors sitting fees of Rs. 1,60,000/- and head office expenses of Rs. 72,00,000/- need to be apportioned on the basis of turnover of the assessee and the authorities below has done on the same line. Regarding sales promotion expenses, no allocation of marketing expense is required to be made as no marketing efforts are required for sale of products of such captive units. Decided partly in favor of assessee. Claim of expenditure - whether unascertained liability and a provision - the assessee claimed that the claim is not a provision but crystallised liability. It was also submitted that the rebate and claim account has been debited for rate differences, shortage of material at customer end, loss to customer due to delay in supply of caustic, poor quality of the product for which deductions have been made by the customers. - Held that:- CIT(A) after considering the remand report and the credit note issued by Hindalco, proving that the liability was ascertained in financial year 2005-06, deleted the addition. - order of CIT(A) sustained - Decided against the revenue. Additions u/s .40(a)(ia) - non deduction of TDS u/s 194J instead of 194C - Held that:- if there was any difference of opinion between the assessee and the AO regarding relevant provisions of TDS, then also it cannot be said that the assessee has not complied with the provisions of TDS. - Decided against the revenue.

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• 2019 (11) TMI 1045
  TP Adjustment - interest on debentures invested in the Associated Enterprise (AE) - India Mauritius tax treaty - HELD THAT:- No doubt, Chapter X containing the TP provisions is in the nature of anti avoidance provision to prevent avoidance/evasion of tax in relation to transaction between related parties. However, when the income itself is not chargeable to tax by virtue of the provision contained in the Tax Treaty, there is no occasion for any tax avoidance/evasion. In a recent decision in case of DCIT (International Taxation) Vs. M/s TMW ASPF i Cyprus Holding Company Limited [ 2019 (8) TMI 1430 - ITAT DELHI] the Coordinate Bench while considering identical issue of taxability of interest income on accrual basis by applying TP provisions held only the interest which has actually been received can only be subject matter of taxation and no TP adjustment can be made on some hypothetical receivable amount which was contingent upon certain event which has actually not been taken place during the year. The aforesaid decision of the Coordinate Bench squarely applies to the assessee s case, since, not only the facts involved are more or less common but the relevant provisions of the applicable DTAAs i.e. Article 11(1) of both India Mauritius and India Cyprus treaties are identically worded. No contrary decision has been brought to our notice by the learned Departmental Representative. Even, the Revenue is unable to prove that interest on CCDs was actually received by the assessee. Therefore, we hold that the addition made on account of transfer pricing adjustment is unsustainable as the assessee has actually not received any interest income, hence, would be protected by Article 11(1) of India Mauritius tax treaty. Since, the treaty provision is more beneficial to the assessee as per section 90(1) of the Act, it will override all other provisions of the Act. Additions made are deleted. - Decided in favour of assessee.

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• 2019 (11) TMI 1044
  Setting off of unabsorbed business losses before allowing deduction u/s.10A - HELD THAT:- A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in ss. 80C to 80U. S. 80B(5) defines for the purposes of Chapter VI-A gross total income to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the context of the deduction which is allowable u/s 10A. which would not be permissible unless a specific statutory provision to that effect were to be made. In the absence thereof, such an approach cannot be accepted. ITAT was correct in holding that the brought forward unabsorbed depreciation and losses of the unit the Income which is not eligible for deduction u/s 10A of the Act cannot be set off against the current profit of the eligible unit for computing the deduction under s. 10A of the IT Act. Hon ble Supreme Court of India in the case of CIT Anrs. Vs. Yokogawa India Ltd. [ 2016 (12) TMI 881 - SUPREME COURT] held that from a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. Hon ble Apex Court is the view that the deduction u/s.10A of the Act should be allowed qua the eligible undertaking standing on its own without reference to the other eligible or non-eligible unit or undertakings. To put it simply, the profits of the eligible units should be considered on standalone basis. It is undisputed fact that otherwise, the assessee is eligible for claiming deduction u/s.10A of the Act. The dispute was at what stage this could be provided to the assessee. That now we have taken guidance from the binding judicial pronouncements as mentioned herein above and accordingly following the view as aforesaid, we allow the appeal of the assessee and direct the AO to allow deduction u/s.10A to the assessee before allowing set off of unabsorbed business loss. - Appeal of the assessee is allowed.

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• 2019 (11) TMI 1043
  Revision u/s 263 - as per CIT AO while granting exemption u/s 10(37) failed to notice that the land acquired compulsorily was not situated in an area referred to in Item (a) or item (b) of sub clause (iii) of clause (14) of section 2 but situated within the limits of Trivandrum Municipal Corporation, and hence, capital gain could not be exempted u/s 10(37) - HELD THAT:- The land in question is classified as Purayidam in Thandeperu Register of the Revenue records. It doesn t mean that agricultural operation could not be carried out in the said land. The Agriculture Officer and the Spl. Tahsildar (L.A) had certified the presence of agricultural plantation in the land. AO, in the course of assessment proceedings, had conducted enquiries which is possible at that point of time in order to find out the utilisation of the land for agriculture purpose for two years immediately preceding the date of transfer and found that the land was used for agriculture purpose till it was acquired in 2007. Moreover the land acquired was a small piece of land. It formed part of 15.35 ares (about42 cents) of land owned by the assessee in sy.no. 186/7. Jurisdiction for setting aside the order of the AO by invoking revisionary power u/s 263 of the Act could not be assumed by the Commissioner of Income-tax (CIT) in this case. This is because the issues considered by the CIT for directing to conduct further inquiries in this respect were subject matter of inquiry by the AO and the AO had accepted the assessee s contentions and formed a possible view in light of the facts of the case. The Tribunal in the case of K Rajendran Vs ITO Ward [ 2017 (7) TMI 1337 - ITAT COCHIN] had held on the basis of certificate of Agriculture Officer that 4.4 ares of land acquired for Trivandrum air port was agriculture land in which agriculture operation was carried out till the date of acquisition and, therefore, the capital gains arising from the transfer was exempt u/s 10(37) of the Act. Further, in the case of ITO, Ward 2(1) Tvm v. G.S.Lekha [ 2019 (4) TMI 1783 - ITAT COCHIN] Cochin Bench of the Tribunal (order dated 29.03.2019), on identical facts, held that assessee was entitled to deduction u/s 10(37) of the I.T.Act. Order of the CIT passed u/s 263 of the I.T.Act is set aside. - Decided in favour of assessee.

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• 2019 (11) TMI 1042
  Long term capital gain - process of sale of shares by holding company to the subsidiary company - time can gap between the formation of the companies and the transfer of shares to them - HELD THAT:- It could be seen from the impugned order that the CIT(A) adverted to this aspect and made an observation that nowhere in the Act it is provided that certain time difference is required before which the provision of section 47(iv) could not be invoked with reference to the case of the assessee. It was the observation of the CIT(A) that sale of shares by holding company, i.e. the assessee company to the subsidiary companies is not in the nature of a transfer as provided by section 47(iv). Therefore, the same cannot be subjected to capital gain as per provision of section 45 of the Act. A bare reading of the provision of section 45 and 47(iv) clearly shows that the law does not require any time can gap between the formation of the companies and the transfer of shares to them. However, the suspicion of the AO that inasmuch as the company was formed in the month of October, 2007 and within the span of three months in January, 2008 the shares were transferred, the same was construed as a same transaction. But in the absence of any law such finding is unwarranted and the finding of the Learned AO on this aspect cannot be sustained. No illegality or irregularity in the finding of the Learned CIT(A) that in view of the provision of section 47(iv) the process of sale of shares by holding company to the subsidiary company cannot be subjected to capital gain u/s 45. We, therefore, do not find anything illegal or irregular in the finding of the CIT(A) and accordingly they are confirmed. Addition in respect of the professional expenses those are not verifiable - HELD THAT:- By placing reliance on the report of the auditors in form 3CD, AO were called for the details of the professional expenses and held that if the liability of these expenses was received by the assessee on transfer from its sister concern M/s. Sahara India, the assessee company which is claiming the expenses in its profit and loss account was required to substantiate its claim by production of relevant bills, vouchers along with justification for the expenses and since same was not being done, mere production of form 16A is not assessee s claim. CIT(A) recorded that assessee argued before him that at no stage of proceedings the AO required the assessee to produce such material, and as a matter of fact the assessee produced all the materials like certificate from M/s. Sahara India showing that they have deducted tax at source on the payments and they have not claimed the expenditure in their books of accounts, and the claim which was not made in respect of expenses incurred by them for and on behalf of the assessee company and, therefore, no disallowance was called for in this respect. CIT(A) considered the material and opined that obviously when the payment was made by account payee cheque, due tax was deducted at source and was squarely proved that the payment was made on behalf of the assessee by M/s. Sahara India who also claimed the payment as an expenditure in their account. No material is brought on record by the Revenue running contrary to this factual findings written by the CIT(A) on verification of the record. Since it is a factual finding basing on the material proceed by the assessee like the certificate from M/s. Sahara India and in the absence of any contrary allegation made by the Revenue, we are of the considered opinion that no interference is warranted with such finding. We, accordingly find this ground of appeal is devoid of any merit and is liable to be dismissed. Addition u/s 14A - AO disallowed 10% of the dividend income earned by the assessee as expenditure relatable to earning of such income by invoking the provisions of section 14A - HELD THAT:- CIT(A), however, observed that since the assessee had already disallowed the relatable expenditure voluntarily, the same cannot be disallowed. On the fact of voluntary disallowance made by the assessee, no further disallowance is warranted. We agree with the Learned CIT(A) and dismiss this ground of appeal. Claim of expenses - HELD THAT:- CIT(A), on a consideration of this submission made by the assessee, directed the Learned AO to allow the expenditure of Rs. 34,90,243/- after verification of the fact that the same relates to the previous year relevant to the A.Y. 2008-09 which is under appeal. Since the Learned CIT(A) gave a direction to allow such an expenditure only after verification, no prejudice is caused to Revenue and it is always upon for the Revenue to verify whether are not such expenditure relate to the previous year relevant to the A.Y. 2008-09. Hence, we do not find any merit in this ground and same is accordingly dismissed.

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• 2019 (11) TMI 1041
  Disallowance of claim u/s 80IA on ICDs/CFS which are Inland ports - HELD THAT:- Issue is covered in favour of the assessee in assessee s own case by the decision of the Hon ble Supreme Court [ 2018 (5) TMI 359 - SUPREME COURT] Disallowance being the claim of deduction on account of advance lease rent paid for the land taken on long terms lease for business purposes on pro rata basis - similar claim had been allowed in earlier years - HELD THAT:- It is pertinent to note here that the Revenue has allowed this claim of deduction on account of advance lease rent paid for the land taken on long term lease for business purposes on pro rata basis in the earlier assessment years i.e. 2009-10 and 2007-08 where the tribunal has remanded back the matter on this issue. AR also requested to remand back this issue for verification by the Assessing Officer. From the perusal of the Assessment Order, it can be seen that the Assessing Officer has followed the principle of consistency in respect of earlier years assessment orders which now stands allowed in favour of assessee as per the directions of the Tribunal for A.Y. 2009-10 and 2007- 08. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for proper adjudication Disallowance of deduction u/s 80IA on Rail System (Rolling Stock) - HELD THAT:- CIT(A) has correctly noted that the issue in respect of disallowance of the claim of deduction u/s 80IA of the Act on rail system (rolling stock) is decided in favour of the assessee by the Tribunal in A.Y. 2003-04, 2004-05 and 2005-06 which is now confirmed by the Hon ble Apex Court [ 2018 (7) TMI 1244 - SC ORDER] . The facts are identical in the present assessment year as well and no distinguishing facts were pointed out by the Ld. DR. Therefore, Ground No. 1 of Revenue s appeal is dismissed. Disallowance of depreciation on the assets retired from active use - HELD THAT:- It is pertinent to note that the Tribunal for A.Y. 2010- 11 has followed the order for A.Y. 2008-09 which is approved by the Hon ble Delhi High Court [ 2017 (10) TMI 1324 - DELHI HIGH COURT] confirmed by [ 2018 (7) TMI 640 - SC ORDER] Depreciation on assets not registered in assessee s name - AO disallowed the claim on the ground that the depreciation is allowable on assets owned by the assessee and as the assessee did not own the building, the depreciation was not allowable - HELD THAT:- It is pertinent to note that the issue is already decided in favour of the assessee in earlier Assessment years by the Revenue authorities. The CIT(A) rightly allowed the claim as there is no distinguishing facts in the present assessment year. Therefore, Ground No. 3 of the Revenue s appeal is dismissed.

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• 2019 (11) TMI 1039
  Additions u/s 40a(ia) - TDS on rent u/s 194I - Failure to deposit TDS before the due date for filing the return of income. - The said TDS was deducted on rental payment and paid to Government account on 05.10.2009 after the due date for filing the ITR - the assessee canvassed the argument of using infrastructure facilities, discussed in the assessment order and argued that there is no case for application of provisions of TDS and the disallowance of expenditure u/s 40(a)(ia) of the Act are uncalled for. Held that:- Since the assessee is using the land and building as well as the other furniture and fixtures available to the company, the Ld.AR contended that it is using infrastructure facilities. However, fact remains that the company, VEIL has given its premises along with the furniture and machinery, fittings etc as available in the Balance Sheet to the assessee for it s use and receiving rent monthly/or yearly from the assessee. In the books of accounts of payee, the receipt was accounted for under the head rent account . - Since the assessee is making the payment of composite rent for the purpose of use of the land and buildings and other equipment, the payment made to the company is squarely covered by the definition of 194I for the purpose of rent. Having deducted the TDS, but not remitted to the Government account before the due date of filing the return of income, the provisions of section 40(a)(ia) attracts. There is no dispute that the assessee has deducted the tax and the payee did not dispute the deduction of tax. Thus, the payment made to the VEIL is nothing but the rent and having failed to remit the TDS to Government account, the provisions of section 40(a)(ia) are squarely applicable - Additions confirmed - Decided against the assessee. Disallowance u/s 40A(2) - amount paid to related / specified persons - substantial increase in payment of rent - Held that:- the issue needs detailed verification at the end of the AO in the light of the above discussion. The assessee is directed to furnish the details of other payments made to VEIL with nature and purpose and the detailed inventory of items for which the items are leased to the assessee in the earlier year and the year under consideration with proper evidence. - additions set aside on the disallowance u/s 40A(2) for denovo consideration of the AO. Disallowance of 20% of the miscellaneous expenses - the expenses were mostly made out of self made vouchers - Held that:- Since the assessee is a society and claimed to be non profitable organization, it is not expected to incur public relations expenses which are not verifiable with the documentary evidence. However considering the arguments made by the Ld.A.R, we consider it is reasonable to restrict the disallowance to the extent of 5%. - Decided partly in favor of assessee.

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• 2019 (11) TMI 1037
  Valuation of closing stock - GP estimation - AO has applied Percentage Completion Method (PCM) and estimated @15% profit on the entire value of closing stock(WIP) as declared by the assessee in his profit and loss account and balance sheet - HELD THAT:- It is undisputed that the assessee has taken advance from customers i.e. the final sale value has not been recognized. We also notice from the order of AO that the assessee did not cooperate during the course of assessment proceedings for substantiating the valuation of closing stock(WIP) as shown in the profit and loss account. As per the profit and loss account filed before us by the assessee we find that the gross profit of the assessee comes to 6.45% on the assessee s business for the year under consideration. Therefore, authorities below should apply the GP rate on the impugned amount @6.45%. Accordingly, we restrict the addition estimating @6.45% on the value of closing stock(WIP) as shown by the assessee in his profit and loss account. Hence, the profit on the closing stock of Rs. 1,88,08,700/- estimated @15% by the CIT(A) without any basis, is restricted to 6.45% and the profit is directed to be taxed in the impugned assessment year on the closing stock at Rs. 12,13,161/-. In regard to the contention of ld. AR that the assessee will get benefit of opening work-in-progress in the next year, it is made clear that the assessee has not cooperated during the course of assessment stage for substantiating the value shown in the profit and loss account of work-in-progress. The AO has added as unexplained closing stock (WIP) and the CIT(A) has observed that percentage completion method (PCM) has not been followed. Therefore, the contention of the assessee is not accepted. Accordingly, the grounds of appeal of the assessee are partly allowed.

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• 2019 (11) TMI 1036
  Exemption u/s 11 - charitable purpose u/s 2(15) - profit motive - supervision of activities by the Donor - Whether the activities of the assessee involved rendering of services in relation to carrying on of a commerce or business and hence, proviso to Section 2(15) is clearly applicable in case of the assessee - contention of the assessee is that the activity of the assessee falls under the main limb of definition of the charitable purpose of relief to poor - alternative contention of the assessee is that even if the activities of the assessee are considered under the limb of advancement of general public utility, same is not in the nature of trade, commerce or business as no profit motive is involved in providing the services and no extra fee is charged from the clients except cost of the projects - HELD THAT:- As far as the activity of the assessee under the limb of advancement of general public utility is concerned, we find that AO has not brought on record any evidences which could suggest that the activities of the assessee have been carried out with profit motive. DR also even could not controvert the fact that the assessee has not charged any fee from the clients except the cost of project actually incurred. In the sanction letter of grant to the assessee, there is mention of supervision or monitoring of the activities by the donor, but that in itself is not sufficient to hold that any profit motive is involved. It is quite normal that the donor want to verify whether the grants have been incurred for the intended purpose, which in our opinion, is in any manner does not establish that the activities of the assessee is business activity. Assessee is not engaged in any trade, commerce or business and thus mischief of proviso of section 2(15) is not attracted in the case of the assessee. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute. In the assessment years 2009-10 and 2010-11, the Assessing Officer has held the assessee as engaged in providing relief to poor within the meaning of section 2(15) of the Act. The assessee has claimed that its activity during the year under consideration has remained same and there is no change as compared to assessment years 2009-10 and 2010-11. In such circumstances, in view of the rule of consistency also the exemption granted under section 11 of the Act should not have been denied to the assessee. - Appeal of the Revenue is dismissed.

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• 2019 (11) TMI 1035
  Penalty u/s.271(1)(c) - addition of leasehold improvement which was claimed as Revenue expenditure and treated as capital in nature by the Assessing Officer - HELD THAT:- As decided in own case [ 2012 (9) TMI 261 - ITAT DELHI] it was a clear case of difference of opinion with respect to claim of assessee. Mere non filing of appeal by assessee against the additions made by AO cannot be said to be admission by assessee of having submitted wrong claim. In view of the above, we are of the considered opinion that penalty imposed by AO and upheld by the Ld. CIT (A) is not justified. - Decided in favour of assessee.

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• 2019 (11) TMI 1034
  Disallowance u/s 40A(2)(a) - salary to the directors - HELD THAT:- In sofaras salary of Rs. 22.00 lakh to Shri Rojit J. Kshirsagar is concerned, it is seen recorded in para no.4.8 of the assessment order that Shri Rohit J. Kshirsagar completed his Bachelor of Production Engineering in 2004 from MIT College, Aurangabad and the Masters in Manufacturing Engineering in the year 2005 from Royal Melbourne Institute of Technology, Melbourne, Australia. His statement was also recorded during the course of assessment proceedings, from which it is gathered that he worked for 18 months in Arcelor Mittal Steel GMBH, Hemburg, Germany and got salary of 4000 Euros per month, which is equivalent to Rs. 2.00 lakh per month. Considering the qualification, experience and his past salary, we are satisfied that remuneration of Rs. 22.00 lakh paid to Shri Rohit J. Kshirsagar is reasonable. It is further observed that the assessee paid remuneration of Rs. 24.00 lakh to Shri Rohit J. Kshirsagar during the immediately preceding year, which was uncontrovertedly stated to have been allowed. - order to delete the addition made in respect of salary paid to Shri Rohit J. Kshirsagar. As regards the salary of Rs. 22.00 paid to Smt. Pratibha Kshirsagar, it is seen that the AO recorded her statement during the assessment proceedings. She is a founder director of the assessee-company. As per the statement, she was engaged in areas like Production, Despatch and Feedback. It is further noticed that she was paid remuneration of Rs. 24.00 lakh during the immediately preceding assessment year which was stated to have been allowed in entirety. Such a contention of the assessee has not been disputed by the ld. DR. Remuneration paid to Smt. Pratibha Kshirsagar is also reasonable and does not call for any disallowance u/s.40A(2)(a) .Delete the entire addition. - Decided in favour of assessee.

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• Customs

• 2019 (11) TMI 1060
  Continued possession/indefinite retention of Accumulated stock of Shark Fins - utilization for permitted domestic use or otherwise the stock is to be destroyed - HELD THAT:- While use of Shark Fins for certain permitted activity (other than as the ingredient in Shark Fins soup), may be possible, the technology for such usage is still in the process of development. Thus, there is an element of uncertainty as to the time frame within which, the petitioner can legally utilize the accumulated stock of Shark Fins in India. If the technology for high value product is currently not available in India, the indefinite retention of the perishable stock, may not be justified. In this context, the petitioner had voiced concern about the costs involved in keeping the accumulated stock of Shark Fins in India, without being permitted to export the same - This Court cannot be unmindful of the fact that the Shark Fins were procured by the petitioner during the period when there was ban on export. Such ban imposed by the Indian Government has since been upheld by the Courts. The Learned Counsel for the petitioner however submits that the Shark Fins were procured with the hope that there will be a change of policy of the Government but it did not happen. Therefore, it is apparent that the product in question was accumulated at the risk and cost of the petitioner in the hope of change of Governmental policy. While the petitioner is seeking a direction for indefinite retention of the Shark Fins without exploring the option of permitted use based on the technology currently available, it has to be borne in mind that the product itself is perishable - particularly because the petitioner has failed to indicate any time limit for utilizing the stock of Shark Fins, for permitted domestic use, we feel that indefinite retention cannot be allowed. Review petition dismissed.

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• 2019 (11) TMI 1052
  MEIS benefits - Amendment in shipping bills - rejection of request of the appellants for no objection certificate for claiming MEIS by amendment of reward option from No to Yes in shipping bills - HELD THAT:- The Commissioner has failed to notice that the appellants have declared their intention to claim MEIS benefits in two cases out of three cases, the shipping bills which have been produced on record. The only lapse on the part of the appellant was that they have mentioned in the reward column as N instead of Y , which is only a procedural defect. Further, it is also found that otherwise the appellant is entitled to claim MEIS benefit as per the export policy. Failure to mention Y in the reward column of the shipping bill for availing the benefit under MEIS scheme can be corrected by amending the shipping bill. Hon ble Delhi High Court in the case of KEDIA (AGENCIES) PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS [ 2017 (1) TMI 203 - DELHI HIGH COURT] has also allowed the amendment even in a situation where there was no declaration of intention whereas in the present case, the appellants have made the declaration on the front page of the shipping bills regarding their intention to claim the MEIS benefit except in the case of M/s. Kuruwa Enterprises. The rejection of request for amendment of shipping bills by the Commissioner is not sustainable in law - appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 1038
  Liability of interest under section 28AB of Customs Act, 1962 - Imposition of penalty u/s 114A of CA - duty liability has been fastened on the transferor of tradeable scrip - HELD THAT:- The liability of transferees, limited to detriment of interest and penalty, when acceptance of application for settlement, under a statutory process that is restricted to only to specified persons, implicitly declares such person to be liable to duty within the meaning of section 28 of Customs Act, 1962 has not been adjudicated upon in the impugned order. In the absence of any finding, we are unable to subject the said order to the test of being legal and proper. In order that the adjudication proceedings be completed, we set aside the impugned order and remand the matter back to the original authority for a fresh decision in accordance with law - appeal allowed by way of remand.

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• Insolvency & Bankruptcy

• 2019 (11) TMI 1073
  Maintainability of application - initiation of CIRP - application has been filed in Form-5 as prescribed in Rule 6(1) of the Rules - HELD THAT:- We have perused the application in Form-5, which is complete in all respects. The petitioner-operational creditor has filed this petition in prescribed form after expiry of 10 days of service of demand notice and thereby, complying with the requirement of sub-sections (1) and (2) of Section 9 of the Code. The petitioner has also complied with various requirements of sub-clauses of sub-section (3) of Section 9 of the Code. The bank statement issued by HDFC Bank, where the petitioner is maintaining its account is also filed, the same is at Annexure A-7. All the ingredients of clause (i) of sub-section (5) of Section 9 of the Code stand fulfilled as the application is found to be complete in all respects - application admitted - moratorium declared.

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• 2019 (11) TMI 1051
  CIRP - Approval of Resolution plan - exemption from delisting of shares - HELD THAT:- In the present appeal, the Appellant raised only one issue with regard to the exemption from delisting of shares on the ground that it was permitted by the Securities and Exchange Board of India (SEBI) on 31st May, 2018. According to the Appellant it has been overlooked by the Adjudicating Authority and no specific order has been passed - Securities and Exchange Board of India (SEBI) 3rd Respondent was noticed and on appearance it has filed an affidavit. Referring to the said Affidavit, the learned counsel for the Appellant submits that there is no requirement for permission of SEBI which stands dispensed with as per regulations mentioned therein. In view of the specific plea taken by the SEBI - 3rd Respondent, no further clarification is required. The Resolution Applicant will act in accordance with the stand taken by the SEBI and in accordance with law, if not yet taken - the order dated 26th July, 2019 passed by the Adjudicating Authority (Ahmedabad Bench) stands clarified/modified. Appeal disposed off.

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• Service Tax

• 2019 (11) TMI 1072
  Condonation of delay of 468 days in filing appeal - no reasonable reasons for condonation of delay produced - HELD THAT:- It appears that there are no reasonable reasons for condonation of delay. This aspect of the matter has been properly appreciated by CESTAT, New Delhi while deciding the delay condonation application of this appellant vide order dated 23rd July, 2019 (Annexure A-1) - We are in full agreement with the reasons given by the CESTAT, New Delhi for not condoning the delay vide order dated 12th September, 2019, we see no reasons to take any other view. Hence, no substantial questions of law is involved in this appeal. Appeal dismissed.

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• 2019 (11) TMI 1071
  CENVAT credit - input services - shared service expenses based on the debit notes issued by the sister concerns - Revenue was of the view that the input services were provided by other service providers and not by any of the sister concerns and therefore the availment of cenvat credit based on debit notes issued by the sister concerns is incorrect - Rule 9 of CCR - HELD THAT:- The appellant had rightly classified the credit under the heading 1.3.2.2.3- on input services received directly from April 2012 onwards. Since the appellant have rectified the bona fide mistake on being pointed out by the audit, we do not find any mala fide intention that the appellant have suppressed the facts - Further in view of the various decision relied upon by the appellant, it has been consistently held by the Tribunal that debit note issued by the sister concerns is a valid document under Rule 9 of CCR to avail cenvat credit if it contains all the details of the service as well as tax amount as required under rule 9. The impugned order denying the cenvat credit on shared expenses is not legally sustainable - Appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 1070
  Refund of unutilized CENVAT credit paid - export of services - input services used for providing the Consulting Engineering Services exported during the impugned period - N/N. 5/2006-CE dated 14.3.2006 - Denial on the ground of nexus of input services with the output service - HELD THAT:- Commissioner (A) has rejected the refund claims on certain services on the ground that there is no direct nexus between the input service and the output services which is not legally sustainable. The appellant have produced various decisions cited supra wherein all these services have been held to be input services and has nexus with the output service, therefore, the denial of refund on lack of nexus is not sustainable in law and therefore, the appellants are entitled to the refund on these input services - the appellant is also entitled to refund of CENVAT credit in respect of Commercial and Industrial Construction Service, Company Secretary and Public Relation Management Service being essential for rendering output service. Refund has been rejected on the ground of non-production of documents - HELD THAT:- Case remanded back to the original authority who will examine the documents which may be produced by the appellants in support of their refund claims. Denial of refund on the basis of debit notes - HELD THAT:- As far as denial of refund on the basis of debit notes in which the amount paid and services received are not clear. In view of the decisions, the debit note is a valid document for claiming CENVAT credit under Rule 9 of the CENVAT Credit Rules, 2004. Denial of refund on other procedural irregularities viz., that invoices does not contain address of the appellant - HELD THAT:- Denial of refund on other procedural irregularities viz., that invoices does not contain address of the appellant is also not sustainable in law because the appellant is engaged in export of service and these services are essential for rendering output service. The matter is remanded back to the original authority for verification of the documents, invoices as well as the details in the debit notes; and thereafter, pass a fresh order and determine the eligible refund claim of the appellant - appeal allowed by way of remand.

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• 2019 (11) TMI 1058
  Commercial Coaching and Training Services - appellants are engaged in imparting courses such as MBA, PGP programme (industry integrated) - benefit of N/N. 10/2003 dated 20.06.2003 - HELD THAT:- The appellants themselves are not recognized by law to grant any degree and therefore, the service provided by the appellant qualifies as Commercial Coaching and Training. Benefit of N/N. 10/2003 dated 20.06.2003 - HELD THAT:- It is seen that to claim the Notification benefit, the appellant have to establish that the charge for such services are not paid by the service recipient to the service provider - In the instant case, the order in original as well as the impugned order record that the payment has been made to the appellants by the service recipient and thus, the benefit of Notification 10/2003-ST is not available. Also, in view of the decision of Tribunal in case of SRI CHAITANYA EDUCATIONAL COMMITTEE (SCEC) VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, GUNTUR, COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, GUNTUR VERSUS SRI CHAITANYA EDUCATIONAL COMMITTEE (SCEC) [ 2015 (6) TMI 627 - CESTAT BANGALORE (LB)] , the appellants are liable to pay service tax on the service provided by them as the appellants are not falling under any category excluded from the definition of Commercial Coaching and Training. The demand of duty, interest and penalty under Section 77 and 78 are upheld - appeal dismissed.

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• 2019 (11) TMI 1033
  Liability of service tax - reverse charge mechanism - appellant procured services from their foreign sister concern - case of appellant is that they have not paid for the said services to the foreign service provider and only a provision to that effect stands made in their balance sheet. As they have not actually made any payment to the foreign sister concern, from whom services stand availed, no tax liability would fall upon them - interpretation of statute - with effect from 10/05/2008, an explanation was introduced in Rule 6 of Service Tax Rule 1994. HELD THAT:- The Tribunal has held that such rule would operate only prospectively and not retrospectively, we are of the view that the confirmation of demand by the authorities below on the sole ground that the appellant made has made provision for payment in the books of account, have rendered themselves liable to service tax, is unsustainable. Extended period of limitation - HELD THAT:- The demand relates to the period October, 2005 to March, 2008. Admittedly during the said period, the tax liability would arise against the assessee only of the payment have been made for the services so received by him - The show cause notice stands issued on 20/04/2011 by invoking longer period of limitation. In the absence of any mala fide on the part of the assessee for non-payment of duty during the relevant period, the invocation of longer period cannot be upheld. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (11) TMI 1059
  CENVAT credit - inputs - MS Angles, Channels, Beams, Plate, Welding Electrodes, Paints and Lubricants used in the fabrication of plant and machinery and for smooth functioning of such plant - period 2010-11 to 2014-15 - HELD THAT:- The Ld. Commissioner (Appeals) has not disputed the usage of the steel items in the installation of Plant and Machinery. The Ld. Chartered Accountant during the course of hearing made the Bench go through the Chartered Accountant s Certificate certifying the CENVAT Credit of Rs. 23,22,138/- and also confirmed excess availment of CENVAT Credit of Rs. 56,028/- - Further, the Chartered Engineer had duly certified the detailed use of steel items in the fabrication of plant/machinery. Therefore, there was no reason for separately certifying that the said steel items were not used in the laying of foundation or making of structure for support of plant/machinery - also the correctness of Chartered Engineer s Certificate and Chartered Accountant s Certificate has not been disputed by the Revenue even at the appeal stage. Hence, relying upon these certificates, CENVAT Credit of Rs. 22,66,110/- is allowed. Balance disputed CENVAT Credit on Welding Electrodes, Paints and Lubricating Oil, the Commissioner (Appeals) - denial of credit on the premise that the same are not mentioned in the Chartered Engineer s Certificate - HELD THAT:- The issue is no more resintegra and stands settled by the decision of Hon ble Rajasthan High Court in the case of HINDUSTAN ZINC LTD. VERSUS UNION OF INDIA [ 2008 (7) TMI 55 - RAJASTHAN HIGH COURT] wherein the Hon ble High Court have allowed CENVAT credit on Welding Electrodes as inputs/capital goods for used in fabrication or repair of plant/machinery - the Appellant had rightly availed CENVAT Credit on welding electrodes. CENVAT Credit on Lubricating Oil and Paints - HELD THAT:- The said items were specifically covered under the definition of Input under Rule 2(k) of the Cenvat Credit Rules, 2004 upto 31.03.2011. Further, the scope of said definition was enlarged with effect from 01.04.2011 to allow credit on all goods used in the factory by the manufacturer unless the same falls under the exclusion clause - Since, there is nothing contrary on record to suggest that the said goods were not used in the upkeepment and smooth functioning of plant and machine, CENVAT credit on Lubricating Oil and Paints is allowed. Appeal allowed in part.

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• 2019 (11) TMI 1054
  Classification of goods - flavoured milk - whether classified under CETA 22029030 of CETA or to be classified under 04049000? - M.R.P basis assessment in terms of N/N. 49/2008-CE (NT) dt. 24.12.2008 as amended by N/N. 11/2011-CE (NT) dt. 24.03.2011 read with Rule 8 of CCR 2002 - HELD THAT:- The Co-ordinate Bench of the Tribunal has already decided the issue in favour of the appellants. The Tribunal in the case of NESTLE INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE (LTU) , DELHI [ 2017 (3) TMI 1636 - CESTAT NEW DELHI] where it was held that the appropriate classification for the impugned product will be under Chapter Tariff Item 0404 90 00 of the Central Excise Tariff Act, 1985. Thus, the impugned goods are classifiable under Heading 0404 of CETA - appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 1053
  Captive consumption/intermediate products - manufacture of plastic sacks / fabrics (finished goods) cleared without payment of duty - whether duty payable on PP bags / strips captively consumed in the manufacture of plastic sacks / fabrics cleared without payment of duty? - HELD THAT:- The issue is decided in the case of SOUTHERN BAGS AND CHEMICALS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TIRUNELVELI [ 2017 (12) TMI 6 - CESTAT CHENNAI] where it was held that the input was thereby an intermediate manufactured in the factory of the appellant and was not at all covered by the barring clauses contained in (i), (ii) and (iii) and (iv) of Col.2 of the Table appended to the N/N. 67/95-CE dated 16.03.1995 - demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2019 (11) TMI 1050
  CENVAT Credit - input services - outward freight for transporting finished goods from the factory to the buyers premises - Place of removal - Department alleged that since the factory gate is the place of removal for the goods cleared by the assessee and the outward freight which is used for clearance of final products beyond the factory gate did not fall within the purview of definition of input service - HELD THAT:- In view of the decision of the Madras High Court in the case of BATA INDIA LIMITED, HOSUR VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, CHENNAI-III [ 2019 (3) TMI 519 - MADRAS HIGH COURT] and also in view of the Board Circular No. 1065/4/2018-CX dated 08/06/2018, the matter needs to be remanded to the original authority to verify certain factual aspects such as whether the sale is on FOR basis, whether the freight is integral part of the sale price, whether the duty paid on the value inclusive of freight amount etc. The matter is remanded back to the original authority to pass a fresh order after examining the various documents for the disputed period - appeal allowed by way of remand.

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• 2019 (11) TMI 1049
  CENVAT credit - input services - outward freight - place of removal - Department alleged that since duty was discharged at factory gate point, the factory gate becomes the place of removal and the outward freight which is used for clearance of final products beyond the factory gate did not fall within the purview of definition of input service - HELD THAT:- In view of the decision of the Madras High Court in the case of Bata India Limited [ 2019 (3) TMI 519 - MADRAS HIGH COURT ] and also in view of the Board Circular No. 1065/4/2018-CX dated 08/06/2018, the matter needs to be remanded to the original authority to verify certain factual aspects such as whether the sale is on FOR basis, whether the freight is integral part of the sale price, whether the duty paid on the value inclusive of freight amount etc. The matter is remanded back to the original authority to pass a fresh order after examining the various documents for the disputed period - appeal allowed by way of remand.

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• 2019 (11) TMI 1047
  CENVAT Credit - adjustment of duty paid on such returned goods against their liability - HELD THAT:- In the impugned order the Commissioner (A) has not appreciated the facts properly and has not considered the factum of return of the goods and taking back the credit by the appellant - Since the impugned order is not clear and has not considered the material facts, therefore, in the interest of justice, the case remanded back to the original authority with a direction to the original authority to determine whether the appellant is entitled to the CENVAT credit of Rs. 17,02,316/- as claimed by the appellant under Rule 16 of the Central Excise Rules, 2002. Appeal allowed by way of remand.

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• 2019 (11) TMI 1040
  Service of adjudication order - Time Limitation - the adjudication order was passed by the adjudicating authority on 12.02.2014 and as per the records of the order of the ld. Commissioner (Appeals), the same was sent to the appellant on 17.10.2014 almost more than 8 months of passing the order through speed post - no record of delivery of the said order on the appellant, but as per the track event, it is shown that on 18.10.2014 - Principles of natural justice - HELD THAT:- No acknowledgement receipt has been produced by the Revenue in support of the service of the adjudication order. Moreover, during the impugned period, service through speed post was not proper service in terms of Section 37C of the Central Excise Act, 1944, therefore, the adjudication order was not served on the appellant. Hence, the appeal cannot be dismissed by the ld. Commissioner (Appeals) as time barred. Further, the adjudication order is itself an exparte order. The matter remanded back to the adjudicating authority for fresh adjudication with the direction to the appellant to appear before the adjudication authority on 11.11.2019 to fix a date of hearing and thereafter, the adjudicating authority shall allow an opportunity on being heard to the appellant and after that, the adjudicating authority shall pass an order in accordance with law - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2019 (11) TMI 1069
  Rejection of claim of the revisionists under section 4-BB of the U.P. Trade Tax Act - benefit of setting off of tax on finished goods denied on the ground that it purchased the raw material from a dealer which is exempted under section 4-A of the Act - Whether on the facts and circumstances of the case the impugned order of the Tribunal is sustainable under law specially when the same has been passed in utter ignorance of the material on record and by recording erroneous and perverse findings? HELD THAT:- The issue involved in the present revisions has already been decided by this Court in the inter-parties case of COMMISSIONER, TRADE TAX, UP., LUCKNOW VERSUS SHRI MAHAVEER ROLLING MILLS (P) LTD. [ 2010 (5) TMI 754 - ALLAHABAD HIGH COURT ] where it was held that The dealer, M/s. Mahaveer Iron Industry Pvt. Ltd., who has been given full exemption under section 4A of the Act was assessed to tax on the material sold to the assessee/revisionist and the tax so assessed on the sale of the said goods was deducted from his eligibility amount. Accordingly, it amounts to the payment of tax by way of adjustment. Section 4BB has not prescribed the manner of payment of tax and manner of payment cannot be confined to payment by actual tender but it would include payment of tax by adjustment also. In favour of assessee. Petition allowed.

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• 2019 (11) TMI 1068
  Liability of tax - sale of motor bodies - component parts of motor vehicle under Notification No. KA.NI.-2- 306 dated 29.01.2001 or not - Whether on the facts and circumstances of the case, the Tribunal was correct to hold that the notification No. 306 dated 29.1.2001 issued under Section 3A of the Act is rightly applied by treating the construction of bus bodies as component part of the motor vehicle? HELD THAT:- It has been rightly pointed out by learned Senior Counsel that bus-body would necessarily have to be treated to be included in the phrase motor bodies used under Notification No. ST-1921/X-905(1)-64 dated 01.05.1968 - the motor bodies or bodies of built or meant to be mounted on chassis of motor vehicles were always treated apart and different from component parts, accessories etc. of motor vehicles. They were made taxable at the specified rates, under the aforesaid notifications. However, that scheme came to be altered upon issuance of notification no. Notification No. ST-II-5784 dated 07.09.1981 as amended by notification no. TT- 2-3402 dated 01.10.1994. Since the notification dated 27.04.1987 only brought the activity of construction of bodies of motor vehicles and construction of trailers under the ambit of Section 3F of the Act for the purposes of taxation without affecting the rate of tax on the goods that may be deemed to have been sold in execution of such works contract, it remains to be examined, the rate of tax that would be leviable on such goods - Even though, it may have been argued by the revenue that in 1987, the commodity bus bodies would have been taxable as motor vehicles by virtue of earlier Notification No. ST-1921 dated 01.05.1968 issued under Section 3A of the Act, however, the material difference in the language of the subsequent notification issued under Section 3A being Notification No. TT-2-3402 dated 01.10.1994 and the subsequent notifications, as have been noted above, would have to be borne in mind. In that regard, the words motor bodies or bodies of vehicles are found to be missing in the taxing notification issued on 01.10.1994 and subsequently. The reference to Entry 18 of Notification No. 306 dated 29.01.2001 is found to be irrelevant, inasmuch as, by that notification, only the words and harvester combines had been added but there was no amendment to subject motor bodies or bodies of motor vehicles to tax as motor vehicles. The question is answered in the negative, i.e. in favour of the assessee and against the revenue.

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• 2019 (11) TMI 1065
  Imposition of penalty - KVAT Act - assessment order challenged on the ground that the assessment order was passed while the writ petition challenging the penalty proceedings were pending before this Court and that the assessment order was communicated to the petitioner after the date of the interim order that restrained the respondents from proceeding further with the pre-assessment notice issued to the petitioner. HELD THAT:- On a perusal of Ext.P5 order, there is no mention with regard to any hearing having been extended to the petitioner. Under the said circumstances, without going into the other aspects urged by the petitioner in his challenge against Ext.P5 penalty order, Ext.P5 penalty order is set aside on the ground of violation of the rules of natural justice, and direct the 4th respondent to pass fresh orders in lieu thereof, after hearing the petitioner and taking note of the assessment order that has since been passed by the Assessing Authority, in relation to the petitioner for the same assessment year. Validity of assessment order - main challenge to the said order is only that the said order was passed at a time when there was a stay in operation, from this Court, against the passing of the said order - HELD THAT:- In the absence of any jurisdictional error or allegation regarding violation of the rules of natural justice, this Court would not be justified in interfering with Ext.P6 order in these proceedings under Article 226 of the Constitution of India. The writ petition, in its challenge against Ext.P6 assessment order, therefore fails, and is accordingly dismissed. The recovery proceedings for recovery of amounts confirmed against the petitioner by Ext.P6 order shall be kept in abeyance, for a period of one month, so as to enable the petitioner to move the Appellate Authority in the mean while - petition dismissed.

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• 2019 (11) TMI 1061
  Non-issuance of C-Forms - Central Sales Tax (CST) Registration not done - Rajasthan Value Added Tax Act - purchase of High speed diesel - HELD THAT:- This Court is of the opinion that denial of C Forms is purely on account of exigencies of advent of the GST regime which compelled the assessee to migrate to and obtain GST Registrations which rendered at the same time its CST registrations ineffective. This was inadvertent and beyond its control. Appeal dismissed.

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• Indian Laws

• 2019 (11) TMI 1067
  Condonation of delay of 546 days in filing the first appeal - dishonor of cheque - ex-parte decree - principles of natural justice - Section 96(2) CPC - time spent in the proceedings to set aside the ex-parte decree - sufficient cause within the meaning of Section 5 of the Limitation Act, 1908 or not - HELD THAT:- Right to file an appeal under Section 96(2) CPC is a statutory remedy. The right to appeal is not a mere matter of procedure; but is a substantive right. Right to appeal under Section 96(2) CPC challenging the original decree passed ex-parte, being a statutory right, the defendant cannot be deprived of the statutory right merely on the ground that the application filed under Order IX Rule 13 CPC was earlier dismissed. In BHANU KUMAR JAIN VERSUS ARCHANA KUMAR ANR. [ 2004 (12) TMI 676 - SUPREME COURT] , the Supreme Court considered the question whether the first appeal filed under Section 96(2) of the Code was maintainable despite the fact that an application under Order IX Rule 13 CPC was dismissed. Observing that the right to appeal is a statutory right and that the litigant cannot be deprived of such a right, the Supreme Court held that whereas the defendant would not be permitted to raise a contention as regards the correctness or otherwise of the order posting the suit for ex parte hearing by the trial court and/or existence of a sufficient case for non-appearance of the defendant before it, it would be open to him to argue in the first appeal filed by him under Section 96(2) of the Code on the merits of the suit so as to enable him to contend that the materials brought on record by the plaintiffs were not sufficient for passing a decree in his favour or the suit was otherwise not maintainable. Lack of jurisdiction of the court can also be a possible plea in such an appeal. An appeal under Section 96(2) CPC is a statutory right, the defendant cannot be deprived of the statutory right merely on the ground that earlier, the application filed under Order IX Rule 13 CPC was dismissed. Whether the defendant has adopted dilatory tactics or where there is a lack of bona fide in pursuing the remedy of appeal under Section 96(2) of the Code, has to be considered depending upon the facts and circumstances of each case. In case the court is satisfied that the defendant has adopted dilatory tactics or where there is lack of bona fide, the court may decline to condone the delay in filing the first appeal under Section 96(2) CPC. - But where the defendant has been pursuing the remedy bona fide under Order IX Rule 13 CPC, if the court refuses to condone the delay in the time spent in pursuing the remedy under Order IX Rule 13 CPC, the defendant would be deprived of the statutory right of appeal. When the defendant filed appeal under Section 96(2) CPC against an ex-parte decree and if the said appeal has been dismissed, thereafter, the defendant cannot file an application under Order IX Rule 13 CPC. This is because after the appeal filed under Section 96(2) of the Code has been dismissed, the original decree passed in the suit merges with the decree of the appellate court. Hence, after dismissal of the appeal filed under Section 96(2) CPC, the appellant cannot fall back upon the remedy under Order IX Rule 13 CPC. The delay of 546 days in filing the first appeal shall therefore be condoned with condition that the appellant should deposit Rs. 20,00,000/- before the trial court-Principal District Judge, Tiruchirappalli - delay condoned.

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• 2019 (11) TMI 1066
  Cancellation of bail - smuggling - Sections 23(c), 27A, 28 and 29 of the Narcotic Drugs And Psychotropic Substances Act, 1985 - HELD THAT:- True, the prayer for cancellation of bail granted to the second accused is made not on the ground that he has violated the conditions of bail but on the ground of illegality of the order granting him bail. The allegation against the second accused is that he had booked the flight ticket for the first accused. He had booked the flight ticket for the first accused not at the instance of the first accused but at the instance of one Ashraf @ Sharafudheen. The offence alleged against the second accused is punishable under Section 29 of the Act. Considering the nature of the act allegedly committed by the second accused, there are reasonable grounds for believing that he is not guilty of an offence punishable under Section 29 of the Act. There are also no materials to find that he is likely to commit any offence, while on bail. In fact, during the period he was on bail, he has not committed any offence. In these circumstances, he is entitled to be released on bail on satisfaction by this Court of the two conditions mentioned under Section 37(1) (b) of the Act. Therefore, the bail already granted to him by the learned Sessions Judge, as early as on 07.02.2019, need not be cancelled. The order passed by the learned Additional Sessions Judge granting statutory bail to the first accused, without considering the provisions contained in Section 36A(4) of the Act, was illegal - inspite of the illegality committed by the learned Additional Sessions Judge in granting statutory bail to the first accused, at this distant point of time, I am not inclined to cancel the bail granted to the first accused, especially in the absence of any material produced by the petitioner to show that complaint was filed within a period of 180 days from the date of arrest of the first accused. Petition dismissed.

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• 2019 (11) TMI 1064
  Dishonor of Cheque - discharge of legally recoverable debt - Section 138 of Negotiable Instrument Act - HELD THAT:- The fact remains that the amount was paid by the society on behalf of its individual member to facilitate the transaction in getting their houses constructed by the respondent. Since the individual members of the petitioner society immediately doubted whether the respondent would be able to complete the flats, they did not deposit the amount with the society and thus, the cheques issued by the society got dishonoured - It is not disputed that the society was constituted for the welfare of its members who were interested in getting their houses constructed by the respondent. Therefore, the society played a role only to facilitate its members in getting their houses constructed and the society had no liability as per Section 138 NI Act on the date of signing of the MOU. Even if it is presumed that the said amount was paid to the respondent as advance money, even then there appears to be no criminal liability or any liability which is recoverable under provisions of Section 138 NI Act. Petition allowed.

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• 2019 (11) TMI 1062
  Appealable order or not - enforcement of consent arbitral award - foreign award - whether the impugned order is under the Code of Civil Procedure to make it appealable, or it is under the Act of 1996? - HELD THAT:- The impugned order is passed in execution of an arbitral award. The execution of the award is governed by Section 36 of the Arbitration Act. According to the Appellants, Section 36 of the Arbitration Act stipulates that the award is to be executed as if it is a decree of the civil court and that being the position, the proceedings for execution of the arbitral award will be governed by the Code of Civil Procedure. It was sought to be contended that a right of Appeal cannot be taken away from those who are not a party to the award or arbitral proceeding. We do not intend to enter into an analysis of hypothetical fact situations. A preliminary objection has been raised before us that the present Appeals are not maintainable. The Appellants are a party to the arbitral proceedings - The Act of 2015 and the Act of 1996 reflect the legislative intent of time-bound resolution of commercial disputes. It cannot be the legislative intent to provide a speedy remedy of arbitration only till the award is passed, with no priority when the award is to be put to execution. The purpose of the arbitral process is not only to expedite the declaration of an award on paper but the actual receipt of the claim. The impugned order dated 24 August 2018 passed by the learned Single Judge of this Court being neither under Order XLIII of the Code of Civil Procedure nor appealable under Section 37 of the Act of 1996, these appeals are not maintainable - Commercial Appeals are dismissed as not maintainable.

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