Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 3, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Re-opening of assessment - assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie found to be a shell company - Notice not quashed.
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Deduction of interest from House property Income - nature of loan - The bank did not disburse any fresh loan to the assessee but the outstanding amount out of the loan granted earlier to the assessee for construction of the building was converted into a fresh loan.
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Capital gain u/s 45 - agreement for purchase of property could not mature - amount received by the assessee over and above the advance amount as the settlement agreement - such capital receipt cannot be brought to tax, since there is no transfer of assets.
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Gain on sale of shares - LTCG or STCG - Reckoning of date of purchase - shares transferred to DEMAT account - correct timimg of trade - since the shares were purchased much before the date of Demant, gain is in the nature of long term.
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Charitable activity u/s 2(15) - the hostel and transport facilities is incidental to achieve the object of providing education as per object of the trust - benefit of exemption allowed.
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Capital gins - When there was family arrangement between the assessee and his brother, and the inequalities of distribution of shares was compensated monetarily, then there was no transfer within the meaning of Section 2(47) - Amount not taxable.
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Interest paid on a borrowed capital for acquiring land - expenditure before Commencement of busniss - The process of conversion of the land and then getting the approval of the site plan establishes that the assessee has already set up its business - claim of expenditure allowed.
Customs
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Imposition of condition of re-export for redeeming the goods - Whether adjudicating authority was correct in imposing the condition of re-export while allowing the goods to be redeemed on payment of redemption fine? - Held No
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Misdeclaration of value of goods - Respondents cannot be blamed of suppressing any facts or wilful misstatement or collusion. The Respondents cannot be penalized for the apparent inaction of the department.
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Misdeclaration of origin of goods - intent to evade customs duty - holding back the goods without clearance would invite mounting demurrage.
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Advance Authorization Scheme - imposition of restrictive “Pre-Import” condition - The principles of Lex Non Cogitadimpossibilia does not apply in this case as the scheme is an option and not a compulsion.
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Issuance of Show Cause notice challenged - non supply of Relied Upon Documents (RUDs) - All such requests can be made before the competent authorities and the writ petitioner can submit his explanations / objections in respect of the allegations set out in the show cause notice. - SCN cannot be quashed.
Indian Laws
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PM launches historic Support and Outreach Initiative for MSME Sector
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Companies (Amendment) Ordinance, 2018 - President gives assent to promulgation of the Companies Amendment (Ordinance), 2018
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Dishonor of cheque - Burden of prove - cheques returned with an endorsement funds insufficiency - the complainant has proved his case and that the trial Court went wrong in dismissing the complaint and acquitting the accused.
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Dishonor of cheque due to insufficiency of funds - Since, the petitioner has already paid the entire compensation amount, therefore, quashing of the complaint would be a step towards securing the ends of justice and to prevent abuse of process of the Court.
Service Tax
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CENVAT Credit - duty paying invoices - There were no allegations that the services were not received by the appellant - the only objection was that the challans were not serially numbered - credit cannot be denied.
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The present demand stands raised by way of audit conducted for the second time, when no such objection was raised by the first Audit, which was conducted for the prior period in question, the appellant cannot be held guilty of any suppression of facts
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Consulting Engineering Services - reverse charge mechanism - it is a case of import of design and drawing and not a case of use of any taxable service. As such demand of service tax confirmed against the appellant is not sustainable.
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Construction of Residential Complex - advances received from the customers - the dispute in the present case is prior to the date of insertion of explanation - appellant not liable to service tax.
Central Excise
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CENVAT Credit - input services for setting up of their plant - labour charges which were for fixing and erection of equipments, buffing work, fixation and erection of equipment work, insulation work etc. - credit allowed.
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Demand of pre-deposit in cash for maintenance of appeal - whether such pre-deposit can be made only by cash or also by availing credit in cenvat account? - Predeposit made by the petitioners by availing cenvat credit shall be accepted for the purpose of section 35F of the Central Excise Act
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It was open for the Settlement Commission to impose penalty on the directors in addition to imposing penalty on the company, if there was material justifying imposition of such penalty.
VAT
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Imposition of tax both on the undisclosed purchases and undisclosed sales being made by the applicant, without giving the benefit of input tax credit - The finding of the Tribunal depriving the assessee benefit of input tax on undisclosed purchase of mustard seed is against the law and it cannot be sustained
Case Laws:
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GST
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2018 (11) TMI 143
Detention of goods - the respondent authorities insisted that the petitioner should have a temporary registration, remit the amounts using that registration, and get the goods released. The petitioner is disinclined to follow that procedure - Held that:- The Government pleader took instructions from the authorities, and informed the Court that the petitioner's representative can approach the authorities with a request to remit the amounts. They will generate the challan in the petitioner's name and hand it over to the petitioner's representative. That person, then, can approach the Bank, remit the amount, and produce the proof before the authorities. Thereafter, the authorities will release the goods. The petitioner's counsel agrees for this arrangement. Petition disposed off.
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2018 (11) TMI 142
Detention of goods alongwith vehicle - detention on the ground that E-Way bill was not updated - Held that:- By way of ad interim relief, it is provided that the respondent shall release truck along with goods upon the petitioner furnishing bank guarantee for the said sum of ₹ 6,17,760/- - Notice returnable on 01.11.2018.
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2018 (11) TMI 141
Release of petitioner's goods with vehicle - detention on the ground that e-way bills did not carry necessary details - Held that:- Division Bench of this Court in Renji Lal Damodaran Vs. State Tax Officer [2018 (8) TMI 1145 - KERALA HIGH COURT] has dealt with an identical issue and held that It is directed to release the goods on the appellant furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules. The respondent authorities are directed to release the petitioner's goods and vehicles on their "furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules - petition disposed off.
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Income Tax
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2018 (11) TMI 140
Interpretation of Total Turnover & Export Turnover under 10A - Held that:- Learned counsel appearing for the appellants fairly submits that the question raised in this appeal is answered against the appellants by this Court in CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. The appeal is accordingly dismissed.
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2018 (11) TMI 139
Re-opening of assessment - information received from the departmental channels - assessee company as found to be indulging in providing bogus claim of long term and short term capital gain - Held that:- Perusal of the reasons recorded by the AO would suggest that the petitioner had shown to sold scrip of one TURBO TECH Company for a sale consideration of ₹ 1.33 crores rounded off and claimed exemption long term capital gain thereon. The information was received from the departmental channels that the sale pertains to 31750 shares of TURBO TECH, the Kolkatta Investigation Wing had investigated several companies including TURBO TECH. During the course of investigation it was found that the TURBO TECH was not engaged in any substantial activity. The financials of the company were poor, funds raised were not used for any business purposes. It was also found that there was preferential allotment of shares in a pre-arranged manner managed to allot such shares to beneficiaries of bogus long term capital gains claimants. The prices of the shares were rigged on the stock exchange through manipulation. The shares of the company were basically used for providing bogus claim of long term or short term capital gain. It was found that the assessee had thus sold penny stocks which were valued at ₹ 1.33 crores and thereby claimed wrong exempt capital gain. The return filed by the assessee were accepted without scrutiny. Since there was no scrutiny assessment, the AO had no occasion to firm any opinion on any of the issue arising out of the return filed by assessee. The concept of change of opinion would therefore no application. It is equally well settled that at the stage of re-opening of the assessment, the court would not minutely examine the possible additions which AO wishes to make. The scrutiny at that stage would be limited to examine whether the AO had formed a valid belief on the basis of the material available with him that income chargeable to tax had escaped assessment. In the present case the Assessing Officer has heard the material on record which would prima facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie found to be a shell company. The assessee had claimed exempt of long term capital gain of ₹ 1.33 crores by way of sale of share of such company. Principal Commissioner of Income Tax, Rajkot-3 v. Gokul Ceramics [2016 (7) TMI 214 - GUJARAT HIGH COURT], the Division Bench had examined the contention of the Assessing Officer proceeded on the basis of the information supplied by the department - Decided against assessee.
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2018 (11) TMI 138
Joint and several liability of partners for tax payable by firm u/s 188A - stay against the recovery of entire tax - recovery from the erstwhile partners of the firm after retirement - Held that:- Present situation is that the Commissioner (Appeals) has granted stay against the recovery of entire tax on condition of depositing 20% thereof. The firm has also been granted the facility of such 20% through installments. Till date, the department does not complaint of any breach. Where, in any case, thus the firm has been protected by the interim order, subject to conditions which the firm is anyway fulfilling, the recoveries from the petitioners even otherwise would not be called for. We however cannot take care of the anxieties of the petitioners for the future developments, many of which are not possible to foresee with any clarity at this stage. We can only request the department to be vigilant about enforcing the conditions against the firm. The department would also look into the transactions of the firm in the said account number which is supplied by the petitioners. Petition is disposed of at this stage. Further, providing that as long as the respondent no.2 firm continues to fulfill the conditions of depositing installments and till the stay pending appeal continues, there shall be no further recoveries from the petitioners. In case of either of these two conditions undergoing material change, the department would proceed in accordance with law.
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2018 (11) TMI 137
Capital Gains - Transfer u/s 2(47) - Tribunal held that the transaction or sale was not complete in the year under consideration - Held that:- The sale or transfer was not complete on the date of the execution of the agreement as is now urged and erroneously understood by the Assessing Officer and the Commissioner. The Tribunal was right in its conclusion that on facts, the agreement executed on 14th February, 2011 is but an agreement for sale of immovable property. The law then prevailing required such an agreement to be registered. In any event merely because it is registered, that does not partake the character of a conveyance or a sale deed automatically. Thus, the possession also was not handed over but was to be handed over on compliance with certain obligations by the Vendor. It is in these circumstances that the total consideration was received on 16th June, 2011. It is evident that the Vendor was in possession of the premises from February to June 2011. It was carrying on its business from these premises up to April 2011. This would indicate as to how the Tribunal applied the correct legal principles and construed the clauses in the agreement, otherwise than as understood by the Assessing Officer and the Commissioner
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2018 (11) TMI 136
Higher rate of depreciation on trucks/dumpers u/s 32 - @15% or 30% - assessee is a sole proprietorship firm engaged in the business of civil work - Held that:- Having heard the learned counsel for the appellant and perused the impugned order, we find that the two arguments, which the appellant has raised now on the basis of which he proposed two questions of law do not arise in the facts of the present case as no such arguments were raised on behalf of the appellant-assessee before any of the authorities below. Perusal of the order passed by the CIT(A) as also of Income Tax Appellate Tribunal does not reflect whether any one of these arguments were raised by the appellant before them, therefore, such arguments cannot be allowed to be raised before this Court for the first time. The Tribunal in the impugned order has relied on the judgement of the Madhya Pradesh High Court at Gwalior in M/s. Anamay Construction Co. vs. UOI & Ors [2015 (10) TMI 2740 - MADHYA PRADESH HIGH COURT]wherein it was held that the assessee had engaged his own trucks for transporting earth to facilitate laying of roads. Under such circumstances, the assessee cannot be said to be in the business of hiring out his trucks for removal of earth to make him entitled for higher rate of depreciation, as removal and transportation of earth are only sub-processes of his main business of laying of roads. The Tribunal on the same assumption had also relied on judgement of the Kerala High Court in Gaylord Constructions [2009 (8) TMI 1156 - KERALA HIGH COURT]. No substantial question of law.
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2018 (11) TMI 135
Exemption u/s 10(10C) - Voluntary retirement scheme - amount received under the OERS of the Reserve Bank of India - assessee in the Reserve Bank of India and took Voluntary Retirement under the 'Optional Early Retirement Scheme' (OERS), framed by the Reserve Bank of India - Held that:- This very issue was considered by the Hon'ble Supreme Court in the case of Chandra Ranganathan vs. Commissioner of Income Tax [2009 (10) TMI 498 - SUPREME COURT OF INDIA] wherein as held in view of circular dated 8-5-2009, revenue agreed to allow the benefit of deduction to the appellants under section 10(10C) of the Income-tax Act, 1961, as far as the retired employees of the Reserve Bank of India are concerned. - Exemption u/s 10(10C) allowed - Decided in favour of assessee.
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2018 (11) TMI 134
Offence u/s 276CC on the private complaint lodged by the Income Tax Department - failure to file the return of income on time - whether the accused can be discharged under Section 245 (2) Cr.P.C without examining the witnesses? - Held that:- The very non-filing of the return cannot be a reason for launching a prosecution against the petitioners. In the opinion of this Court, this is a disputed question of fact which cannot be gone into in proceedings under Section 245 (2) Cr.P.C. On a reading of the complaint of the Income Tax Department, there are prima facie materials to take cognizance of the offence and issue process which the Trial Court has done. There are no materials to exercise powers under Section 245 (2) Cr.P.C, to discharge the accused at the threshold in this case. It is always open to the petitioners to plead for discharge under Section 245(1) Cr.P.C, after the prosecution witness is examined. This petition is closed. The respondent is directed to produce their witnesses for examination before the Trial Court within a period of three (3) months from the date of receipt of a copy of this order.
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2018 (11) TMI 133
Addition u/s 68 - amount of unsecured loans taken during the year - creditworthiness of the lenders were not established whereas the lenders have duly accepted the notices under Section 133(6) - Held that:- Out of the total lenders 16 were from Ghatkopar but CIT(A) doubted the trasactions on this basis also. Moreover, opening of account in one bank could not be a basis for doubting the transactions. Revenue authorities have not disputed the interest paid during the year which is duly paid/discharged by the assessee after deducting tax at source. It is very surprising and strange that the Revenue has accepted interest on loan but the genuineness was doubted which appears to be fallacious and wrong. The case of the assessee is supported by case of CIT vs. Orissa Corporation Pvt. Ltd.[1986 (3) TMI 3 - SUPREME COURT] wherein held that where the assessee has given names and addresses of the alleged creditors and the said creditors were in the knowledge of the Revenue authorities to be income tax assessees and their index numbers were in the file of Revenue, the Revenue did not pursue the matter further apart from issuing notices under Section 131 of the Act. Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. Thus there was no effort made to pursue the so called alleged creditors. The Court further held that if Tribunal came to the conclusion that the assessee has discharged the burden they lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. Thus set aside the order of the CIT(A) by holding that the assessee has duly discharged the its onus by filing the necessary evidences before the authorities below and therefore addition by the AO u/s 68 of the Act is ordered to be deleted. The appeal of the assessee is allowed.
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2018 (11) TMI 132
Addition u/s 68 - reopening of assessment - no proper opportunity was not given to assessee by AO during the reassessment proceedings - Held that:- After examining all the details filed by the assessee company, shareholders of the assessee company and the directors of the share applicant companies the A.O. opined that verification of identity, genuineness and creditworthiness of the share applicants could not be done because the assessee company and the shareholders failed to comply to the summons. Thus the entire amount of share application money received along with premium to the tune of ₹ 91,35,00,000/- was added u/s 68 of the Act. The assessee had successfully explained the source of source of receipt by matching each entry with the bank statement and thus, the assessee has successfully proven the source of source and origin of origin of the receipts as envisaged u/s. 68. It was reiterated by the AR that the Balance Sheet and ITR Acknowledgement were also submitted at the time of hearing. The bank statement showing the sources of fund was being submitted before us for the first time. In such a scenario, for the ends of justice and fair play for both the parties and since the assessee could not produce the directors at the fag end of the assessment, on which ground alone the share capital along with the premium was added u/s. 68 therefore, we hold that proper opportunity was not given to assessee by AO during the reassessment proceedings and so we are, therefore of the opinion that assessee did not get proper opportunity before the AO during reassessment proceedings - Remand the matter back to the file of AO for de-novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2018 (11) TMI 131
Bogus Short Term Capital Gain and Long Term Capital Gain from purchase/sale of shares - unexplained credit u/s 68 - Held that:- The genuineness of the sale transactions has not been doubted by the revenue authorities. Equity shares of the IFCI Ltd have been purchased by making payment through disclosed sources in the form of account payee cheque. Equity shares have been duly transferred in and transferred out of the demat account of the assessee at the time of purchase and sale respectively. The alleged addition made u/s 68 for unexplained cash credit do not apply in the given facts when the sale consideration has itself been found to be genuine. If the purchase and sale are not doubted as the payments made for purchase and sale consideration received are also genuine, demat account has been used for the alleged transactions of purchase and sale, then mere delay in payment itself cannot prove that the transactions are sham and bogus. We therefore set aside the order of the lower authorities and allow the ground raised by the assessee and direct AO to treat the alleged profit from sale and purchase of equity shares of IFCI Ltd as short term capital gain and tax accordingly. In the result appeal of the assessee is allowed. Profit earned by the assessee wherein the delivery of shares have not been taken through demat account because the shares were sold in short span of time i.e. within 7 to 8 days of the purchase and for this reason the gain has been treated as business profit - Held that:- We find that the assessee is not a regular trader of shares as it earned income from salary and house property. This is not the case of an intra day trading nor of the forward market trading for derivatives. It is simply a case that share have been purchased and they were held in the demat account of the broker and as the assessee has sold them in a very short period they were not transferred to her demat account. It is not the case of revenue that the broker i.e. HDIL Financial Ltd has not received the delivery of shares purchased and has not delivered the shares at the time of sale. In such situation treating of income of ₹ 2,49,045/- as business income will not be justified. We therefore set aside the finding of lower authorities and direct the Assessing Officer to tax the income of ₹ 2,49,045/- treating it as Short Term Capital Gain from sale of shares. Capital gain as claimed as exempt income by virtue of provision of Section 10(38) - Capital Gain from sale of listed equity shares as per the provisions of Section 111A - Held that:- Similar issue in the case of ITO V Deepchand Shah [2010 (10) TMI 687 - ITAT, MUMBAI] wherein it was held that “it is necessary to trace corresponding purchase of shares from the demat account maintained by the broker in order to verify whether such purchases of respective shares were actually made by broker on behalf of the assessee and shares so purchased were credited to its demat account and were lying there till same were transferred to demat account of the assessee after a period of more than one year”. Examining the facts of the instant appeal and our discussions in the preceding paragraphs on this issue we are of the considered view that the alleged transaction claimed by the assessee to have resulted into Long Term Capital Gain is not sustainable and the alleged transaction of earning income of ₹ 17,23,052/- should be taxed by the Assessing authority treating it as Short Term Capital Gain because the equity shares sold in these transactions were held for less than 12 months and therefore they were in the category of Short Term Capital Assets.
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2018 (11) TMI 130
Non charging of interest from non-AEs - interest foregone by the assessee on outstanding receivables from non-AEs - Held that:- It is pertinent to mention here that a similar adjustment was made in assessment year 2009-10 and the DRP deleted the same by observing that the interest foregone by the assessee on outstanding receivables from non-AEs is higher than the interest foregone from AEs. For the sake of completeness of the adjudication, we find that the working capital adjustment subsumed in main international transaction has been accepted by the TPO inasmuch as working capital adjusted in operating margin of the comparable companies was taken by the TPO at 6.38% whereas appellant’s margin was 16.78% in respect of ‘Provision of network support services.’ The appellant’s margin is 16.60% whereas arm’s length margin accepted by the TPO was 7.01%. Once the working capital adjustment has been accepted, then, we do not find any merit in making further adjustment in respect of outstanding receivables. Adjustment made by the Assessing Officer. We, accordingly, direct the Assessing Officer to delete the addition Disallowance u/s 43B - disallowance on account of statutory liabilities payable - Held that:- AO has not properly appreciated the accounting entries in their due perspective. The marginal heading of section 43B clearly states that certain deductions to be allowed on actual payment. This means that if the assessee has claimed deductions, the same can be disallowed u/s 43B of the Act. However, in the case in hand, the assessee has not claimed any deduction as the input service tax and the output service tax have never been routed through the P&L Account. However, in the interest of justice and fair play, we restore this issue to the files of the Assessing Officer. The assessee is directed to explain the entries and the Assessing Officer is directed to verify the same. Disallowance of year end accruals - Held that:- Following the law laid down by the Hon'ble Apex Court in Rotork Controls India (P) Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA) we are of the considered view that when the taxpayer has worked out the liability by using a substantial degree of estimation by proving 95% of the invoices on the basis of historical trend, no disallowance can be made. So, we order to delete this addition. Addition on account of non-charging of mark-up on support service charges billed to AGNSI - Held that:- In case of a contract by both the parties who are admittedly resident Indian entities, they make the law for themselves which cannot be interfered unless contract is unlawful or specially barred by the law of the land. Moreover by such a decision of not charging mark up by the taxpayer on support services charges billed to AGNSI, no loss of tax has been caused to Revenue. So, the findings of the TPO/DRP that the taxpayer is not only to cut charges but mark up also is not sustainable in the eyes of law. So, we order to delete the addition on account of not charging of mark up on support services charges billed to AGNSI. Non-deduction of tax at source on reimbursement made to AT &T World Personnel Services Inc. (AWPS) - Held that:- Reimbursement made by the appellant company cannot be classified as FTS/FIS under the provisions of the Act and Indo-US DTAA. It would not be out of place to mention here that total tax deducted by the assessee u/s 192 of the Act is ₹ 1,97,36,176/- which is much higher than the withholding tax sought to be levied by the Assessing Officer which comes to 10% of ₹ 4,17,56,851/-. Considering the facts in totality, we direct the Assessing Officer to delete the impugned addition.
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2018 (11) TMI 129
Penalty u/s 271(1)(c) - non specification of charge - Held that:- AO is required to specify which limb of Section 271 (1)(c) of the Act, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. From the perusal of the notice issued u/s 274 r.w.s. 271 of the Act, it is clear that the Assessing Officer has not specified as to under which limb of the section the penalty was imposable. The notice, in fact, is in the standard pro forma wherein the irrelevant clauses have not been struck off. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. Thus, in the circumstances and facts of the case, the penalty proceedings initiated by the Assessing Officer are bad in law and deserve to be deleted. - Decided in favour of assessee.
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2018 (11) TMI 128
Interest expenditure as an allowable claim U/s 36(1)(iii) - expenditure incurred by the assessee on account of financial charges are an allowable business expenditure and consequently the losses brought forward from the assessment year 2005-06 would be set off against the income if any for the A.Y. 2005-06 - AO is directed to allow the claim of carry forward of loss for setting off against the income of the succeeding year - Held that:- It is clear from the earlier order of this Tribunal dated 04/06/2010 that the AO was directed to verify the fact whether the land in question was shown as stock in trade in past and consequently the sale proceeds to be treated as business receipt. The scope of enquiry in the remand proceedings was only to ascertain whether the land in question was shown by the assessee as stock in trade and therefore, any income or expenditure incurred in respect of the stock in trade would be revenue in nature. Even if there is no sale transaction after purchasing of land in question, but when the lands in question is shown as stock in trade in the books of account then whenever the assessee sales the land or any part of the land in question, the same will be business income of the assessee and the expenditure which is incurred for taking loan for purchase of land in question cannot be disallowed on the ground that after purchasing the land, the assessee has not carried out any business activity. Hence, in view of the undisputed fact that the assessee has right from the year in which the land in question was purchased treated the same as stock in trade in the books of account then the Assessing Officer cannot substitute the business decision of the assessee merely because there was no subsequent activity of sale of land. Accordingly, the claim of the assessee is an allowable revenue expenditure and in absence of any business income, the same would be allowed as carry forward of the losses for the A.Y. 2004-05.
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2018 (11) TMI 127
Income derived from leave and license fee - Nature of income - to be treated as income from house property OR income from business - Held that:- Accounting entry or accounting treatment given by the assessee in its books of account is not conclusive. What is required to be examined is the intention of the assessee whether to exploit the property as owner or engage itself in an organized and systematic activity of constructing, developing and building house property and giving them on lease along with other services for earning rental income. As can be seen from the objects of the assessee as contained in the Memorandum and Articles of Association, the primary object of the assessee is not to construct, develop and lease them out for earning rental income but to engage itself as real estate developer. Therefore, as it appears from the facts on record, the business of the assessee is not letting out properties for earning rental income. As rightly observed by the learned CIT(A) in the appellate order passed for ay 2010-11, in case the Department treats the income generated from leave and licence fees as business income, the AO is duty bound to allow depreciation to the assessee on the asset generating such income. In such eventuality, the income which would ultimately be determined would be lesser than the income offered by the assessee, hence, prejudicial to the interest of Revenue. It is also relevant to observe, in assessee’s own case for A.Y. 2009-10 the AO while completing the assessment under Section 143(3) of the Act has accepted the income generated from leave and licence fees of the building as income from house property. The assessment order so passed has neither been revised nor reopened. That being the case, the Department cannot be allowed to take different stand in different assessment years with regard to head of income generated from leave and licence fees. Allowance of assessee’s claim of deduction under Section 24(b) on account of interest on borrowed capital - Loan availed by the assessee was for the purpose of construction of building - Held that:- It is a clearly established fact that vide sanction letter dated 20.04.2006 the HDFC bank did not disburse any fresh loan to the assessee but the outstanding amount out of the loan granted earlier to the assessee for construction of the building was converted into a fresh loan. That being the case, there cannot be any doubt that the loan availed by the assessee was for the purpose of construction of building, hence, interest paid on such loan is allowable under Section 24(b) of the Act. AO has observed that the fresh loan sanctioned to the assessee vide letter dated 20.04.2006 was for working capital. Such fact is not forthcoming either from the sanction letter or from the agreement between the assessee and the bank. Therefore, the conclusion reached by the AO is purely on conjecture and surmises. As regards the pre-payment charges paid to the bank, there is no doubt that such pre-payment charges are connected/ attached to the loan availed by the assessee for construction purposes. Therefore, has to be considered as part of the cost of loan. Hence it is allowable as deduction under Section 24(b) of the Act. - Decided against revenue
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2018 (11) TMI 126
Addition u/s. 69A on account of deposit in HSBC Bank, Geneva - income added in the hand of beneficiary of trust - Discretionary trust - Distribution of money by trust - Held that:- In the present case admittedly both the appellants namely Deepak B. Shah and Kunal N. Shah are discretionary beneficiaries of the “Balsun trust” created by Mr. Dipendu Bapalal Shah and the two appellants have not made any contribution nor done any transaction with said trust at all. In our opinion in the case of discretionary trust, the income of the trust could not only be added in the hand of beneficiary but the trustees are the representative assessee who are liable to be taxed for the income of the trust. If the discretionary trust has made some distribution of income during the year in favour of the discretionary beneficiaries only then the distributed income is taxable in the hands of the beneficiaries but nothing of the sort has happened nor two appellants have received any money as distribution of income by the discretionary trust. So long as the money is not distributed by the discretionary trust, the same cannot taxed be in the hands of the beneficiaries. Similarly, the present case for us, the deposits held in HSBC, Geneva account cannot be taxed in the hand of beneficiaries/ appellants at all. Additions cannot be made and sustained in the hands of the appellants as the Balsun trust is a discretionary trust created by the Mr. Dipendu Bapalal Shah and said trust has neither made any distribution of income nor did the two beneficiaries/appellants receive any money by way of distribution. While the department has failed to bring any conclusive evidence to establish nexus between these two appellants and bank account in HSBC, Geneva and more so when the Mr. Dipendu Bapalal Shah has owned the balance in the HSBC, Geneva bank account, we are not in agreement with the conclusions of the CIT(A) in sustaining the additions equal to fifty percent of the peak balance in the hands of both the appellants. CIT(A) is wrong in assuming that the said money may belongs these two appellants and such conclusion is against the facts on record and based on surmises and presumptions - direct the AO to delete the additions made u/s 69A in respect of HSBC Bank account for assessment years 2006-07 and 2007-08 in the case of both the appellants before us. - decided in favour of assessee.
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2018 (11) TMI 125
Capital gain u/s 45 - agreement for purchase of property could not matured - whether the amount received by the assessee over and above the advance amount is interest or a capital receipt? - fraudulent transaction without having right, title or interest in the property, there was neither a capital asset u/s 2(14) nor was there any transfer of the said asset u/s 2(47) - Held that:- In this matter there is no transaction of lending or borrowing nor the disputed amount was received by the assessee towards any service, fee or other charges in respect of the moneys borrowed or debt incurred or in respects any credit facility which has not been utilized. The receipt under consideration in these appeals does not, therefore, clearly fall within the definition of interest provided under the Act. In view of the decisions referred to above and inasmuch as this receipt does not fall within the definition of “interest” under the Act, we are of the considered opinion that this receipt is not towards interest but only a capital receipt. Admittedly, the flat was never acquired by the assessee nor has it been transferred so as to give rise to the income under dispute, as such, it does not fall within the definition of capital gain. As is held in the case of Dhruv N. Shah [2003 (5) TMI 478 - ITAT MUMBAI] a capital receipt is not an income u/s 2(14) unless it is chargeable to tax as capital gain u/s 45 of the Act and clearly in this matter, the impugned receipt is not a capital gain and, therefore, it is outside the definition of income u/s 2(24) of the Act. The assessee entered into the memorandum of settlement does not seem to be an act of unwiseness. The memorandum of settlement is the result of the sellers foregoing their right to approach the Hon’ble Apex court and the assessee purchasing peace by putting end to the seemingly endless litigation. By no stretch of imagination could it be said that the assessee did not act as a prudent man in entering the said memorandum. We are convinced that all these circumstances do not suggest anything suspicious surrounding the settlement. We, therefore, hold that the assessee not earning a particular income is not without any reason and it is not for the AO to say that the assessee should have earned such income also or that even otherwise to pay tax on such amount which was never realized by the assessee. With this view of the matter, we reach a conclusion that the Ld. AO is not justified in bringing the notional interest to tax and, therefore, learned CIT(A) is perfectly justified in deleting the same. In so far as ₹ 70 lacs received by the assessee over and above the advance amount of ₹ 50 lacs is concerned, for the reasons recorded in the preceding paragraphs, we find that it is in the nature of capital receipt which can be brought to tax only if the case falls u/s 45 of the Act as capital gains and since it is conspicuously a different case, such capital receipt cannot be brought to tax. We accordingly holding so, allow the appeal of the assessee.
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2018 (11) TMI 124
Disallowance on account of commission paid - no genuine expenditure - Held that:- Though the A.O. had made up his mind not to allow the expenses incurred /claimed by the assessee on account of commission charged by M/s Sumiti Alloys (P) Ltd., yet he had picked up the gross figure of ₹ 90,72,893/- while overlooking the fact that service tax amounting to ₹ 8,47,242/- was included in the total figure of ₹ 90,72,893/-. It may be worth pointing out here that the assessee had claimed expenses to the tune of ₹ 82,25,651/- through its P & L Account (and not ₹ 90,72,893/-) CIT(A) had touched the issue relating to commission on export sales, and recorded “However keeping in view the fact that the said Sumiti Alloys (P) Ltd. is based at Ghaziabad and there is no evidence in support of its experience/connections for enabling export sales, commission on export sales also does not appear genuine, in the light of the finding of enquiry made above, which shows that the said partly had colluded with appellant in fraudulently providing entry for commission payment”. CIT(A)’s remarks “does not appear genuine”, itself shows that even the Ld. CIT(A) was not sure that such expense was non-genuine. Moreover, the Ld CIT(A) had not brought on record any evidence/ material to show that such expenses were not genuine. - Decided in favour of assessee.
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2018 (11) TMI 123
Gain on sale of shares - LTCG or STCG - Reckoning of date of purchase - shares transferred to DEMAT account - correct timimg of trade - Held that:- Sole reliance placed by the AO and CIT(A) to draw adverse inference is with regard to the trade date and time of purchase of shares Sangotri Construction Ltd. from the Kolkata Stock Exchange. The broker has shown the trade timing at 13:19 hours. Simply based on this information of Kolkata Stock Exchange, it cannot be held that; firstly, the broker of the assessee had not trade in the purchase of shares or the shares were not available with the broker, when on the other hand, the broker has adduced ample evidence directly before the Department to prove not only the purchase but also the delivery of the shares to the assessee; secondly, the broker ‘Bubna Stock Broking Ltd.’ was neither examined or inquired by the Department despite matter was restored back to the file of the AO, especially when, in response to one letter written by ACIT, Kolkata, the broker has furnished the copy of ledger account, DEMAT statement and also confirmation regarding purchases and sale. This information received by the Department from the said broker have neither been rebutted nor any crossexamining has been done from the broker to ascertain the fact about the correct timing of trade AO has not made any specific enquiry from the broker to ascertain the correct time and date of purchase after the information from the stock exchange even after second round of proceedings. The assessee can prove from the documents which are made available from the broker and if there is any discrepancy at the end of the broker regarding timing of purchase then broker alone could have clarified. Thus, in view of material on record, we hold that the purchases made by the assessee on 11.06.2003 cannot be disbelieved and accordingly the transaction of share is treated as Long Term Capital Gain. - Decided in favour of assessee.
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2018 (11) TMI 122
Disallowance of expenses incurred on support service u/s 37 - Both authorities have disallowed the expenses on the ground that, firstly, M/s. GRPL was not in a position to provide such services looking to its infrastructure; and secondly, it was a make believe arrangement from a sister concern to reduce the tax liability of the assessee, as M/s. GRPL’s profits have been set off from brought forward losses. Held that:- Nowhere has it been brought on record that M/s. HPL Infrastructure P. Ltd., i.e., assessee, during that period had its own office or infrastructure to carry on its business. Out of the said amount, ₹ 7,79,328/- has been paid for support services and infrastructure charges. Thus, the major expenses relate to these ‘support services charges’ from where assessee was running its office. If the service has been rendered as per the ‘work order’ and assessee has incurred the expenditure in the course of its business, then such an expenditure cannot be disallowed simply on the ground that payment has been made to a sister concern or there was no necessity for incurring such expenditure or it does not have much infrastructure in the form of fixed assets. Once it has been brought on record that M/s. GRPL has taken a lease on rent and also maintaining the office, who in turn is providing such office space and other infrastructure facilities to the assessee, then it cannot be held that it is a make believe arrangement, unless any contrary material is brought on record or any inquiry has been done from M/s. GRPL. - Decided in favour of assessee.
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2018 (11) TMI 121
TPA - Comparable selection - Held that:- All the three comparables which the Ld. AR submitted to be included as comparables requires a proper verification as the very basis of rejecting the comparables on the ground that the financials were not available seems to be not proper as there is database available in public domain. In fact, quarterly database of the comparable R system is available. Thus, it will be appropriate to remand back this issue for verifying these three comparbles to be included in the final list of comparables to the file of the TPO/AO. The issue is remanded back to the file of the TPO/AO and we direct the TPO that after verifying the database available and after applying the relevant filters, if these three comparables are suitable then the same may be included in the final list of the comparables. Assessee be given the opportunity of the hearing by following principles of natural justice. Working capital adjustment the same needs to be verified properly by the TPO/AO. The appropriate transfer pricing adjustment can only to be made in consonance with the international transaction undertaken by the assessee company during the year under assessment on the basis of its comparability vis-ŕ-vis comparable companies, by providing working capital adjustment to the assessee in view of the provisions contained under Rule 10B(1)(e) also. Matter is required to be restored to the TPO to provide the assessee company the benefit of working capital adjustment for transfer pricing adjustment. Therefore, we remand back this issue to the file of the TPO/AO for proper adjudication.
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2018 (11) TMI 120
Short deduction of tax at source - intimation u/s 200A - Provisions of the DTAA - assessee have deducted the TDS at the rates applicable under the double taxation avoidance agreement (DTAA) with respective countries whereas the AO mechanically applied the rate of deduction in such cases to be 20% as prescribed under section 206AA - section 206AA overridring the provisions of Section 90(2) - Held that:- Section 206AA of the Act does not override the provisions of Section 90(2) of the Act and that in the cases of payments made to non-residents, assessee correctly applied the rate of tax prescribed under the DTAAs and not as per Section 206AA of the Act because the provisions of the DTAAs were more beneficial. In view of the settled position of law, we find it difficult to sustain the orders of the authorities below. With this view of the matter, we find that the orders of the authorities below are liable to be quashed and accordingly they are quashed. Thus, we hereby direct the deletion of the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAAs. Appeals are allowed accordingly.
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2018 (11) TMI 119
Charitable activity u/s 2(15) - hostel facility' of the school provided exclusively to students of the school - whether not an integral part of "education" u/s 2(15) - whether a separate business activity in terms of section 11 (4A)? - Income for 'charitable purposes' - expenses incidental to achieve the object of trust - Held that:- We find that the issues and additions involved in this appeal are squarely covered in favour of the assessee by the decision of Co-ordinate Bench in the case of Kanha Charitable Trust [2017 (11) TMI 1650 - ITAT NEW DELHI] where in the Tribunal has decided the identical issues in favour of the assessee holding that providing of hostel facilities and transport facilities to the student and staff member of the educational Institute cannot be considered as business activity but is subservient to the object of educational activities - the hostel and transport facilities is incidental to achieve the object of providing education as per object of the trust - Decided in favour of assessee.
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2018 (11) TMI 118
Nature of income - treatment to rent from building as well as service & amenity charges - income from House property or income from other sources - Held that:- Mere splitting of rent is not decisive of the issue and each case has to be decided in the light of the facts and circumstances of each case. Keeping in mind above principles laid down in the judicial pronouncements, we are of the view, that in the facts and circumstances of the present case, the rent for use of building as well as maintenance/amenity charges has to be considered as income from house property. We, therefore, do not find any infirmity in the order of the CIT(A). See case of H&M Housing Finance & Leasing P. Ltd. [2011 (6) TMI 967 - ITAT MUMBAI]
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2018 (11) TMI 117
Exemption u/s. 11 - denial of exemption as activities of the assessee did not fall under under any of the objectives such as relief for the poor, education, medical relief, the preservation of environment (including water sheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest but comes under the objectives of advancement of any other object of general public utility - though the assessee are issued a certificate u/s. 12A of the Act by the CIT - Held that:- Even if is held not to constitute a business held under trust, but only as a business carried on by or on behalf of the trust, so long as the profits generated by it are applied for the charitable objects of the trust, the condition imposed u/s. 11(4A) of the Act should be held to be satisfied, entitling the trust to the tax exemption. These observations have to be understood in the light of the facts before the Supreme Court in the case of Thanthi Trust [2001 (1) TMI 80 - SUPREME COURT] wherein the trust carried on the business of a newspaper and that business itself was held under trust. The charitable object of the trust was the imparting of education which falls u/s. 2(15) of the Act. The newspaper business was incidental to the attainment of the object of the trust, namely that of imparting education and the profits of the newspaper business are utilized by the trust for achieving the object of imparting education. In this case, there is no such nexus between the activities carried on and the objects of the assessee that can constitute an activity incidental to the attainment of the objects, namely, to promote cause of charity, mission activities, welfare, employment, diffusion of useful knowledge, upliftment and education and to create an awareness of self-reliance among the members of the public etc. Being so, we are inclined to hold that the assessee is not entitled for any exemption u/s. 11 of the I.T. Act. - Decided against assessee.
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2018 (11) TMI 116
Revision u/s 263 - no effort was made by AO to know the reasons for low net profit, no examination of the increase of unsecured loans and not verified the closing stock of finished goods as there were no supporting documents - Proof of AO's order to be erroneous and prejudicial to interest of revenue - Held that:- It is not the Department’s case that no information regarding the issues raised by the Pr. CIT was called for by the AO. It is undisputed that relevant details and documents were furnished by the assessee during the assessment proceedings and forms part of the record. Hence, no inference can be drawn that the AO has not examined the issue although he has not expressed it in as many terms as may be considered appropriate by his superior authority and even if the same is found to be inadequate the same cannot be a ground for revision. It is clear that an order cannot be termed as erroneous unless it is not in accordance with law. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the AO. Therefore, it cannot be held that in the instant case the AO’s order was erroneous and prejudicial to the interest of the revenue within the terms of section 263 of the Act - decided in favour of assessee.
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2018 (11) TMI 115
Revision u/s 263 - unexplained cash credit - since the director did not appear before the ld. AO the entire amount has been added to the income of the assessee - Held that:- As argued before us that the AO has not made independent enquiry at his end to disprove the claim of the assessee company is really evident from the conduct of the AO which is placed before us. We find that the ld. CIT(A) also purposely overlooked such conduct of the AO and confirmed the same on the basis of the finding by the AO in a stereotyped manner without considering the relevant laws, the present legal position in the identical facts of the case, the judgements passed by this ld. Tribunal which has attained finality by the pronouncement of the Apex Court. Thus set aside the orders passed by the authorities below and restore the issue to the file of the AO to decide the same afresh positively upon making compliance of the guidelines/mandate as mentioned above in accordance with law. - Appeals of the assessee are allowed for statistical purposes.
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2018 (11) TMI 114
Ad hoc disallowance with respect to conveyance expenses, vehicle running and maintenance expenses and business promotion expenses - Held that:- It is evident from the past assessment records that no similar disallowance had been made by the department in assessment years 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 in respect of conveyance expenses although the assessment was completed u/s 153A r/w section 153(3) of the Act. With respect to vehicle running and maintenance expenses and business promotion expenses, no disallowance had been made in assessment years 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 and it is further noted that the basis of disallowance in the impugned year is a mere estimation on the part of Assessing Officer wherein he has disallowed 1/5th of the expenses without assigning any reason for such disallowance. Assessing Officer has not pointed out any specific defects in the books of accounts/details produced before him with regard to these expenses. It is also undisputed that the books of accounts of the assessee were duly audited and they were produced before the Assessing Officer. It is settled law that in absence of any corroborative finding, ad hoc disallowance cannot be upheld. - Decided in favour of assessee Addition on account of undisclosed cash transaction - CIT(A) has assumed that 50% of the seized Annexure A-1 was a duplication - Held that:- Commissioner of Income Tax (A) has not specifically recorded a reason as to how he assumed a figure of 50% to be of duplication, therefore, on this count alone, the department succeeds and we deem it expedient in the interest of justice to restore ground no. 1 to the file of the CIT(A) to be adjudicated de novo after giving due opportunity to the assessee to present its case. - Ground of department’s appeal stands allowed for statistical purposes. Addition on short and excess recoveries by the assessee - Held that:- Commissioner of Income Tax (A) held the debit of the impugned amount as reasonable. On the facts of the case, we find no reason to interfere with the finding of the Ld. Commissioner of Income Tax (A) on the issue as the Ld. Commissioner of Income Tax (A) has adjudicated the issue after duly considering the quantum of turnover of the assessee as well the details submitted before him. The Ld. CIT DR also could not point out any factual error in the findings of the Ld. Commissioner of Income Tax (A) in this regard - decided against revenue Addition with respect to liquidated damages - Held that:- Commissioner of Income Tax (A) has noted that in view of the nature of business being conducted by the assessee on a large scale which entails making supplies to various agencies including government agencies, such claims were bound to arise. We also note that the Assessing Officer has disallowed the entire amount of expenditure claimed as liquidated damages without pointing out any specific instance where such claim was not allowable. This is not legally tenable and even the Ld. CIT DR was unable to point out any legal or factual inaccuracy in the order of the Ld. Commissioner of Income Tax (A). - decided against revenue
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2018 (11) TMI 113
Computation of capital gains arising on slump sale - overriding title - nature of sale - Full value of consideration received or accruing as a result of Transfer of the capital asset - sale consideration receivable or accruing on slum sale - terms of agreement - whether said that ₹ 25.50 crores accrued as a result of the Transfer or was received at a later point of time by the Assessee towards slump sale? - Held that:- A reading of clause 3.2 of the Agreement dated 16.3.2007 in particular clause 3.4 would show that if on or before 31st December, 2007 if the Assessee does not get waiver of MGT from CPT then the Assessee will not be in a position to claim the sum equivalent to the amount due as MGT to CPT limited to a sum of ₹ 5 Crores. Therefore, there is an overriding title in so far as the receipt of ₹ 5 Crores is concerned by the Assessee from KCPL which is part of the sale consideration receivable or accruing on slum sale of Kochi Terminal Undertaking. In such circumstances it would not be correct to say that the sale consideration for the slump sale is a sum of ₹ 25.50 Crores by reading clause 3.1 of the Agreement dated 16.3.2007 in isolation. The evidence with regard to how much was the due to CPT towards MGT payable by the Assessee and how much was not waived by CPT have not been brought on record by the Assessee. The Assessee parted with the Kochi Terminal Undertaking on its slump sale as early as 16.3.2007 and the time for completion of condition precedent for slump sale as per the agreement, expired in December, 2007. KCPL refused to give any further extension of time for completion of the terms of the agreement by the Assessee. Therefore, there is merit in the contention of Assessee that it could not procure the required details from CPT and M/s. Aegis Logistics Ltd., who were the subsequent transferee of the Kochi Terminal Undertaking refused to co-operate. The issue should be remanded to the AO for consideration afresh on these aspects with a direction to the AO to exercise his powers under the Act, on specific request from the Assessee on the information required and the party from whom it is required, to establish its case that a sum of ₹ 5 Crores or such other lesser sum was in fact not receivable by the Assessee as per the terms of the Agreement dated 16.3.2007. Decided in favour of assessee for statistical purpose.
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2018 (11) TMI 112
Taxability of transfer of shares by means of family arrangement - capital gains - inequalities of distribution of shares was compensated monetarily - reopening of assessment after revision u/s 263 - Held that:-Whatever may be the reason, when the higher authority, namely, Commissioner, found that there was family arrangement and the source for investment is the funds received consequent to the family arrangement, the Assessing Officer cannot ignore the same. Therefore, reopening of assessment under Section 147 of the Act, cannot stand for scrutiny of law. Consequently, the order passed by the Assessing Officer after reopening of assessment on issue of notice under Section 148 of the Act cannot stand for legal scrutiny. Accordingly, we hold that the reopening of the assessment under Section 147 of the Act is invalid When there was family arrangement between the assessee and his brother, and the inequalities of distribution of shares was compensated monetarily, this Tribunal is of the considered opinion that there was no transfer within the meaning of Section 2(47) of the Act. Therefore, the same cannot be brought to taxation under any of the provisions of Income-tax Act. Accordingly, the order of the CIT(Appeals) is confirmed on this issue. Non-compete fee as a part of the family settlement - When the CIT(Appeals) found that the compensation received by the assessee is not taxable under Income-tax Act, it is not known why the non-compete fee received by the assessee is to be taxed under the Income-tax Act. This Tribunal is of the considered opinion that even though it was referred as non-compete fee, it is only a part of family settlement to settle the dispute once for all and to bring peace in the family . They anticipated that allowing the assessee to establish another cement factory in the near future may create a friction in the family and therefore, certain amount in cash was paid. This Tribunal is of the considered opinion that what was paid to the assessee is only a part of family settlement arising out of agreement dated 12.08.2009, therefore, the same also cannot be brought to taxation. In other words, what was paid to the assessee is consequent to the family settlement dated 12.08.2009. Hence, the same is not liable for taxation. Reopening of assessment after the order of the Administrative Commissioner under Section 263 of the Act is invalid. Hence, we are unable to uphold the orders of the lower authorities. - Decided in favour of assessee
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2018 (11) TMI 111
Interest paid on a borrowed capital for acquiring land - expenditure before Commencement of busniss - assessee claimed this as business expenditure and allowable expenses as per provisions of Section 36(1)(iii) - AO disallowed the claim as this was the interest paid by the assessee before commencement of the business and it should be capitalized and the borrowed money was not utilized for business purposes - Held that:- The acts of the assessee shows that he was pursuing the business of real estate during the relevant period. The land was purchased for the purpose of doing the business of real estate by developing the plots etc. Reflecting the land as investment in books does not reflect the true nature of the transaction. In fact the purchase of land, immediately applying for the conversion of land to residential and also getting the site plant approved establishes that the assessee was very much in the business of real estate during the relevant period and he had set up such business. The process of conversion of the land and then getting the approval of the site plan establishes that the assessee has already set up its business during the financial year relevant to assessment year 2012-13. The interest paid on the borrowed capital for acquiring land has been allowed to the assessee as business expenditure. In such a situation, we direct to delete the addition confirmed by the ld. CIT(A). - Decided in favour of assessee.
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Customs
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2018 (11) TMI 106
Issuance of Show Cause notice challenged - non supply of Relied Upon Documents (RUDs) - Principles of Natural Justice - Held that:- The statutory proceedings initiated based on certain materials available on record, must reach its logical conclusion. In the present case on hand, the writ petitioner has raised certain grounds by stating that along with the show cause notice, the documents relied upon has not been supplied. All such requests can be made before the competent authorities and the writ petitioner can submit his explanations / objections in respect of the allegations set out in the show cause notice. However, the merits in this regard cannot be adjudicated in a writ petition. This Court is of an opinion that the show cause notice impugned in the present writ petition has been issued under Section 124 of the Customs Act, 1962 and therefore, the writ petitioner is bound to respond to the show cause notice by submitting his explanations / objections and defend his case in the manner known to law. The writ petitioner has not established any acceptable legal ground, for the purpose of quashing the show cause notice - petition dismissed - decided against petitioner.
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2018 (11) TMI 105
Non-Fulfilment of export obligation - EPCG Scheme - export of Vanaspathi and Margarine as per EPCG authorisation license granted - petitioner claims that export of such product to be considered as an alternative product for granting the benefit under the EPCG licence. The Original Authority rejected their claim on the reason that the petitioner is not producing any export documents in support of the export obligation. Held that:- Since it is the claim of the petitioner that 30% of the Vanaspathi was already exported during the said period, certainly, it is for the fifth respondent to consider the said claim once again by inviting the petitioner to place all the relevant materials in support of such claim. The second reason stated in the impugned order is that the petitioner made the benefit under the EPCG licence after its expiry - the learned counsel for the petitioner invited this Court's attention to Clause 5.11.3 of Export Promotion Capital Goods Scheme in Handbook of Procedures to contend that if there is any ban in respect of a particular products the period during which such ban is in operation, has also to be given as an extension period for the licence and therefore, the claim made by the petitioner is in order. This again is a matter for the fifth respondent to consider and decide on merits after hearing the petitioner. When it is contended by the respondent that the said provision was notified in the year 2004 and the same cannot be applied retrospectively, the petitioner's claims that in view of the decision taken in the minutes of the EPCG committee held on 23.09.2010, such permission has to be applied retrospectively to all those who hold EPCG licence. Therefore, this again is a matter for the fifth respondent to consider the matter afresh after hearing the petitioner. The fifth respondent shall have to consider the matter once again afresh after giving an opportunity of hearing to the petitioner - petition allowed by way of remand.
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2018 (11) TMI 104
Advance Authorization Scheme - imposition of restrictive “Pre-Import” condition - Sl. No. 2(c) of Notification No 79/2017-Customs dated 13th October, 2017 and Notification No 33/2015-20 dated 13th October, 2017 - exemption to IGST/ Compensation cess. Held that:- In the instant case, it appears that the petitioner fulfils Export obligation (EO) and then obtained AA for duty free import of inputs - Therefore the import is actually a replenishment of inputs used in the already exported goods. As such, it was averred that complying with condition No.1 cannot be fulfilled by the petitioner at the time of import of inputs. Similarly, the petitioner expresses difficulty in fulfilment of pre- import conditions in the absence of explicit definition for prehttp:// import condition. Para 4.13 of FTP and Appendix 4J of HBP deals with pre import conditions. What is disallowed to the petitioner and allowed to others of the same class should be demonstrated by the petitioner. That is the test for arbitrariness. The petitioners had no occasion to demonstrate their case in the test of arbitrariness. Needless to mention, GST laws are a self contained legislations. The laws were promulgated after necessary constitutional amendments. The preposition that the GST levy subsumes the erstwhile levies of CVD and SAD in lieu of Excise duty and VAT can be of no avail to the petitioner. More so, the petitioner is estopped from claiming relief in view of Para 4.02 of the FTP that AAs are issued in accordance with the policies and procedures in force as on the date of the issue of Advance Authorization. The petitioner's plea of vagueness in the definition of pre-import condition is hollow - The principles of Lex Non Cogitadimpossibilia does not apply in this case as the scheme is an option and not a compulsion. The principles of Lex Non Cogitadimpossibilia does not apply in this case as the scheme is an option and not a compulsion - petitioner is directed to cooperate with the enquiry and DRI is directed to complete the enquiry at the earliest possible time - petition disposed off.
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2018 (11) TMI 103
Misdeclaration of origin of goods - intent to evade customs duty - demand based on the statements of importers and others, recorded under section 108 of the Customs Act - investigation still going on - Held that:- Of course further investigation is going on and we cannot foresee what further evidence may be collected. Be that as it may, when yet show-cause notice for final adjudication has not been issued and even after issuance of show-cause notice, completion of the adjudication is bound to consume time, it would not be in anyone's interest to stop the clearance of goods when it is not the case of the department that the import of such materials has any other legal impediment. The question of correct assessment of duty and related issues such as penalty for mis-declaration if ultimately established and personal penalties would only be the question to be decided eventually. In the meantime, holding back the goods without clearance would invite mounting demurrage. The provisional release of goods permitted on fulfillment of certain conditions - petition disposed off.
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2018 (11) TMI 102
Confiscation - goods attempted to be re-export - frozen Cuttlefish - appellant has failed to produce the required certificate from the Department of Animal Husbandry and Dairying, Govt. of India and also failed to produce NOC from competent Quarantine / Veterinary officer before clearance - imposition of redemption fine and penalty. Held that:- Larger Bench decision in the case of Hemant Bhai R. Patel [2003 (2) TMI 87 - CEGAT, NEW DELHI] is squarely applicable in the facts and circumstances of the present case. The Larger Bench of the Tribunal in the said case has held that Section 111 of the Customs Act gives power to customs officer to confiscate the goods imported, if any, all the provisions contained in sub-clauses is specific and Section 112 authorises the imposition of penalty. The Larger Bench has categorically held that it is open to the adjudicating authority to impose redemption fine as well as penalty even when permission is granted for re-exporting the goods. The adjudicating authority has the power to impose redemption fine and penalty - the ends of justice would be met if the redemption fine and penalty is reduced - appeal allowed in part.
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2018 (11) TMI 101
Classification of imported goods - plant extracts (bio fertilizer) - Whether the impugned goods are ‘plant extract’ classifiable Under CTH 13021990 or as ‘bio fertilizer’ under CTH31010099? - Held that:- The impugned product cannot be grouped under Chapter 31 due to the genesis of the product and characteristics. Moreover, the National and Regional Centre for Organic Farming have given a categorical report that the subject goods do not conform to any of the requirements of any biofertilizers listed under FCO. Therefore, the impugned products are not biofertilizers - the Commissioner has correctly held that when there is a legal definition available on the subject defining an item, no other definition can be adopted in this regard to the same. The appellants themselves have mentioned the product to have been extracted from different plants grown in China. This being the case, one should have no hesitation or doubt in categorizing the impugned product as ‘Extracts’ - As it is not denied that the impugned product is an extract of plants, it is correct to classify the same under Chapter 13 of CTH. Moreover, as the goods were certified not to be biofertilizers, the classification claimed by the appellants under Chapter 31 is squarely excluded. The impugned product is classifiable under CTH 13021990. Extended period of limitation - Held that:- Having assessed that Bill of Entry provisionally, it was open to the department to keep an alert in the system to interdict subsequent Bills of Entry. Having failed to do so, department cannot allege suppression on the part of the importer. Therefore, the demand needs to be restricted to the normal period. Whether the Ld. Commissioner erred in not imposing fine in lieu of confiscation and penalty? - Held that:- The goods in respect of Bill of Entry 740088 dt.6.1.2009 were seized and were provisionally released and therefore, in view of the Hon’ble Supreme Court’s decision in the case of Weston Components Ltd. vs. CC [2000 (1) TMI 45 - SUPREME COURT OF INDIA], the adjudicating authority should have imposed redemption fine. Appeal allowed in part.
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2018 (11) TMI 100
Time Limitation - misdeclaration of value of goods - Held that:- The SCN dated 04.08.2008 was issued for demanding a differential customs duty from the respondent for the period 11.08.2003 to 22.01.2008. The said show cause notice was issued when the audit query was raised by A.G’s Office on 16.03.2005. The adjudicating authority has rightly come to the conclusion that Given the fact that the Bills of Entry filed by them after submission of clarification were assessed by the Department from time to time without raising any query or objection, their bonafides cannot be suspected. In these circumstances, the Respondents cannot be blamed of suppressing any facts or wilful misstatement or collusion. The Respondents cannot be penalized for the apparent inaction of the department. Appeal dismissed - decided against Revenue.
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2018 (11) TMI 99
Imposition of condition of re-export for redeeming the goods - Whether adjudicating authority was correct in imposing the condition of re-export while allowing the goods to be redeemed on payment of redemption fine? Held that:- Section 125 of the Customs Act 1962 has been considered by the larger bench of Tribunal in case of A K Jewellers [2003 (6) TMI 31 - CESTAT, NEW DELHI], where it was held that When an adjudicating authority after ordering confiscation of imported goods permits their re-export, he is in effect first ordering the redemption of the goods on payment of fine and thereafter permitting them to be reexported. Each of these two actions is independent and is permitted by law. An order whereby both are combined, therefore, is not contrary to law. Thus, we are not in position to uphold the order of the lower authorities whereby a condition of re-export has been imposed in the proceedings of confiscation under Section 125 of the Customs Act, 1962 - we modify the orders of the adjudicating authority to delete the condition of re-export imposed by him, and allow the appeal of party to the extent of such modification.
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2018 (11) TMI 98
Import of restricted item - used multi functional photocopier machines without any licence - confiscation - redemption fine - penalty - Held that:- There is no dispute that the said photocopier machines are imported violating the provisions of Import Export Policy and not producing the licence for import of old used photocopier machines. To that extent, the orders of the lower authorities are upheld that the photocopier machines are liable for confiscation. Redemption Fine - Held that:- Hon’ble High Court of Punjab & Haryana in the case of Bhagwan Elector Photocopiers [2014 (11) TMI 996 - PUNJAB & HARYANA HIGH COURT] has felt that redemption fine against confiscation for the regular violators as 20% of the enhanced value of the photocopier machines - thus, appellant is required to pay redemption fine in both the appeals @ 20% of the enhanced value of the photocopier machines. Penalty - Held that:- The ends of natural justice would be met, if penalty is restricted to 10% of the enhanced value of the photocopier machines. Appeal allowed in part.
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Corporate Laws
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2018 (11) TMI 109
Winding up of the respondent Company - failure to pay dues - in defense, company submitted that the invoices in question are for the period w.e.f. 2010- 2011 whereas the present winding up petition has been filed in May, 2016 - Held that:- This court has today admitted the said petition holding that the defence of the respondent is not bonafide. For the same reasons, the present petition is also admitted. Consequently, the petition is admitted and the Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published in the Delhi editions of the newspapers ‘Statesman’ (English) and ‘Veer Arjun’ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing. The cost of publication is to be borne by the petitioner who shall deposit a sum ₹ 75,000/- with the Official Liquidator within 2 weeks, subject to any further amounts that may be called for by the liquidator for this purpose, if required. The Official Liquidator shall also endeavour to prepare a complete inventory of all the assets of the respondent-company when the same are taken over; and the premises in which they are kept shall be sealed by him.
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2018 (11) TMI 108
Conversion of the public Company into Private Limited Company - change of status of company - Special Resolution passed at the Extra Ordinary General Meeting (EOGM) held on 28.04.2017 - Held that:- Having regard to the facts and circumstances of the above case and since all the requisite statutory compliances having been fulfilled, the conversion of the status of the Company from “Public Limited” to “Private Limited” as per Special Resolution passed at the EOGM on 28.04.2017 is hereby approved in the interest of the Company and such change of status of the Company shall not cause any prejudice either to the Members or the Creditors of the Petitioner Company.
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Insolvency & Bankruptcy
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2018 (11) TMI 110
Initiation of corporate insolvency resolution process by financial creditor - Held that:- Financial Creditor has succeeded to make out a case for triggering the Corporate Insolvency Resolution Process. To succeed a Financial Creditor must satisfy the requirements of Section 7 (2) and Section 7 (5) of the Code and the Adjudicating Authority-NCLT has to record a finding to that effect. It would be imperative to examine the provisions of Section 7 (2) and Section 7 (5) of IBC. A conjoint reading of the aforesaid provision would show that form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, read with Section 7 of the Code. We are satisfied that a default amounting to lacs of rupees has occurred within the meaning of Section 4 of the Code and the application under sub-section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission. Thus the petition is complete from all angles. This petition is admitted and Mr. Manoj Kulshrestha, F4-CC-14, Ansal Plaza, (Opp. Dabur), Vaishali, Ghaziabad, Registration No. IBBI/IPA-033/IP-N0005/2016-17/10024 is appointed as an Interim Resolution Professional. In pursuance of Section 13 (2) of the Code, we direct that Interim Insolvency Resolution Professional to make public announcement immediately with regard to admission of this application under Section 7 of the Code. The expression 'immediately' means within three days as clarified by Explanation to Regulation 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. We also declare moratorium in terms of Section 14 of the Code.
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PMLA
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2018 (11) TMI 97
Offence under PMLA - provisional attachment orders - mortgaged property in favour of the appellant bank - Held that:- There is no nexus whatsoever between the alleged crime and the Bank who is mortgagee of the properties in question which were purchased before sanctioning the loan. Thus, no case of money-laundering is made out against Bank who has sanctioned the amount which is untainted and pure money. They have priority right to recover the loan amount/debts by sale of assets over which security interest is created, which remains unpaid. The Adjudicating Authority has not appreciated the facts and law involved in the matter and the primary objective of section 8 of PMLA is that the Adjudicating Authority to take a prima-facie view on available material and facts produced. In the present appeal, this Tribunal is concerned with only mortgaged property in favour of the appellant bank. As far as the criminal proceedings and complaint under PMLA, 2002 are concerned against the borrower, the same have to be decided by the Special Court in accordance with the law. With regard to impugned order is concerned where this Tribunal is only to examine as to whether the PAO has been rightly passed as per law or not. In view of settled law on this aspect, the respondent no. 1 and adjudicating authority has not considered the Judgement of Supreme Court, High Courts and final orders passed by this Tribunal. Considering the facts of this case as well as settled law on the subject,the impugned order dated 4.12.2017 is liable to be set aside. Consequently,the PAO dated 11.5.2016 is also quashed with regard to the mortgaged property of the appellant. The borrowers are restrained not to deal with thes aid properties directly or indirectly.
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Service Tax
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2018 (11) TMI 93
Construction of Residential Complex - advances received from the customers - liability of service tax - Held that:- There were doubts in the field at the relevant time about the liability for payment of service tax in respect of the advances received by such builders for construction of residential apartments. Finally with the insertion w.e.f. 01.07.2010 of Explanation in the definition of Section 65(105) (zzzh), the matter was laid to rest with the conclusion that any amount received by the builders prior to the issuance of completion certificate will be liable to payment of service tax under the category of construction of residential complex - Admittedly, the dispute in the present case is prior to the date of insertion of explanation - appellant not liable to service tax. Refund claim - time limitation - Section 11B of CEA - Held that:- In order to decide whether the appellant’s claim for refund will be hit by time bar under Section 11B, it is required to be verified from records whether any letter of protest has been filed by the appellants with the jurisdictional authorities and obtained acknowledgement - Original Authority will verify the records whether any letter of protest has been filed by these appellants either before him or before jurisdictional Commissioner. Appeal allowed by way of remand.
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2018 (11) TMI 92
Classification of services - Business Support Service or not - removal of scrap and slag generated during the manufacturing premises of the steel manufacturers i.e. RINL and JSWSL - Held that:- On similar issue in the case of M/s Ferro Scrap Nigam Limited for the services rendered to Bokaro Steel Plant, a show cause notice was issued seeking to classify them as “business auxiliary service” which has not been upheld during the adjudication proceedings. When this failed, DGCEI sought to classify the same under business support service which was a later thought. The original authority has rightly observed that the activities undertaken by the respondent herein do not fall in the category of the services mentioned in the business support service or closely associated with them. Appeal dismissed - decided against appellant.
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2018 (11) TMI 91
Consulting Engineering Services - reverse charge mechanism - services availed while importing standard design and drawings from the foreign supplier - Held that:- The Tribunal in the case of Solitz Corporation vs. Commissioner of Service Tax, New Delhi [2008 (10) TMI 35 - CESTAT NEW DELHI] held that design and drawing imported from foreign country on payment of agreed upon price attract the provisions of Customs Act, 1962 and have to be treated as goods. In the present case, it is a case of import of design and drawing and not a case of use of any taxable service. As such demand of service tax confirmed against the appellant is not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 90
Demand of differential amount of tax - It appeared to Revenue that there is huge difference between the taxable amount received by the appellant as per Form No.26AS and the taxable amount shown in their returns - management, maintenance and repair service - manpower supply service - works contract service - Held that:- The work done at Item No.2 for Kanpur Development Authority is construction of low cost houses under EWS Scheme and also road/lane was constructed along with the houses - both the work of road and the construction of EWS houses under the Manyavar Kansiram Sahari Garib Awas Yojana are exempt as already held by this Tribunal in its ruling in the case of Commissioner of Customs, C.Ex. & S.T., Allahabad vs. Ganesh Yadav [2017 (5) TMI 1251 - CESTAT ALLAHABAD]. Construction of Road along Ganga canal - demand of service tax - Held that:- The appellants have constructed road for the state government through the Executive Engineer of Ganga Canal Project wherein road is constructed along the canal - the said work is not liable to Service Tax and Service Tax is set aside. Loan reimbursed - demand of service tax - Held that:- The receipt is in the nature of return of loan by the said M/s.Choudhary Flour Mills Pvt.Ltd. - said amount is not a taxable receipt. Non taxable amount of Interest On deposit - demand of service tax - Held that:- These are receipt of interest by the appellant on their deposits with the bank, post offices etc. - these amounts are not exigible to Service Tax and accordingly no Service Tax is leviable under the provisions of Service Tax. Appeal allowed in part.
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2018 (11) TMI 89
Refund of service tax credit - N/N. 41/2012 –ST dated 29.06.2012 - only point of contention is that the Assistant Commissioner has not discharged his duty in properly recording his satisfaction of fulfillment of conditions of the notification while sanctioning the refund - Held that:- There is no allegation that the appellant has not fulfilled the conditions mentioned in the notification. In view of this unusual factual matrix in which one of the conditions of the notification was not fulfilled by the Assistant Commissioner (and not by the assessee), this is a fit case remanded back to the Original Authority to satisfy himself and record his satisfaction regarding the fulfillment of the notification and sanction refund to the extent admissible - appeal allowed by way of remand.
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2018 (11) TMI 88
Cargo Handling Service - period 1.10.2002 to 30.09.2007 - activity related to loading, collecting, unloading and stacking of waste paper and pulp - Held that:- Hon’ble High Court of Jharkhand in the case of CCE, Ranchi vs. Modi Construction Company [2011 (4) TMI 598 - JHARKHAND HIGH COURT] have specifically held that the services of loading and unloading and stacking within the factory premises would not fall under the category of cargo handling service - demand set aside - appeal dismissed - decided against Revenue.
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2018 (11) TMI 87
Penalty - non-payment of service tax - Tour Operator Service - period October, 2007 to March, 2012 - Held that:- Demand raised against the appellant as a result investigations made at the end of the service recipient and on the basis of the records maintained by service recipient. There was no disclosure of providing such services by the appellant and no service tax was paid by them. Learned advocate has not been able to give any justifiable reasons as to why the tax was not being deposited with the Revenue during the relevant period - there is no justification for setting aside of penalty, which already stands reduced to 25% - appeal dismissed - decided against appellant.
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2018 (11) TMI 86
Construction Services - Works Contract Services - suppression of facts or not - extended period of limitation - Held that:- Inasmuch as there is no dispute on the factual position that the present demand stands raised by way of audit conducted for the second time, when no such objection was raised by the first Audit, which was conducted for the prior period in question, the appellant cannot be held guilty of any suppression of facts - longer period of limitation is not available to the Revenue - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 85
Cargo Handling service - mining of coal which are provided to various organisations including the National Thermal Power Corporation Ltd (NTPC) - loading charges - Held that:- The sale of coal has not taken place at the time the loading takes place. The sale takes place after loading is completed. In other words, the coal continues to be owned by the respondent herein at the time of handling of the coal. Therefore, there is no client to whom the service has been rendered by the respondent herein. The invoices raised by the respondent on NTPC show very clearly that the coal handling charges which they charge from NTPC is only an additional element in the cost of coal for delivering the coal as per the convenience of NTPC. Therefore, they have also paid VAT on the full cost of coal including the loading charges - there is no case to charge service tax on cargo handling services for loading charges collected by the respondent from NTPC - demand set aside. Appeal dismissed - decided against appellant.
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2018 (11) TMI 84
Levy of Service tax - Composite Works Contract Service - abatement - period prior to 01.06.2007 - Held that:- As far as the period prior to 01.06.2007 is concerned, the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT] has held that prior to 01.06.2007, where after Finance Act, 2007 expressly made such contracts liable to service tax, there was no charging section specifically levying service tax only on works contracts - for the period prior to 01.06.2007, no service tax was payable by the appellant - deman dset aside. Period post 01.06.2007 - Held that:- The tax demand is upheld along with interest and it has been paid as per the composition scheme before the issue of show cause notice - Section 73 (3) applies in this case and penalties set aside - demand of tax with interest upheld. Appeal allowed in part.
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2018 (11) TMI 83
CENVAT Credit - duty paying invoices - challans issued by Input Credit Distributor situated in Delhi and that the said challans were not serially numbered and were not having information as required - Rule 4A(2) of Service Tax Rules, 1997 - Held that:- It is very clear that show cause notice did not elaborate on any deficiency in the said challans as compared to the requirement under the said Rule 4A(2), it only pointed out that the challans were not serially numbered. There were no allegations in the show cause notice that the services were not received by the appellant nor the services were not eligible to avail Cenvat credit nor the service tax was not paid by service providers - the only objection was that the challans were not serially numbered. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 82
Refund claim - Business Auxiliary Services - services of Commission Agents (Business Auxiliary Services) provided to them by non-resident foreign service providers - reverse charge mechanism - Held that:- There is no merit in this appeal filed by Revenue as no error has been pointed out in the order of learned Commissioner (Appeals) or in the order of Hon’ble Bombay High Court in the case of Indian National Shipowners Association [2008 (12) TMI 41 - BOMBAY HIGH COURT] which is a binding precedent, where it was held that no Service Tax is leviable on reverse charge basis, on receipt of services from the service provider located outside India for the services received in India - there is no merit in this appeal filed by Revenue and same is dismissed. The Adjudicating Authority to grant the refund of Service Tax deposited by the respondent – assessee relating to the period prior 18th April, 2006 within a period of 75 days from the date of receipt of copy of this order - refund allowed - appeal dismissed - decided against Revenue.
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Central Excise
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2018 (11) TMI 81
Levy of penalty by the Settlement Commission - Clandestine removal - Kar Vivad Samadhan Scheme - case of appellant is that the scheme of settlement under the Act envisages only one settlement proceeding. Once the settlement application of the main noticee is accepted by the Settlement Commission, there could thereafter be no separate adjudication of the case against the remaining noticees. In view of the fact that when in case of a manufacturer who was stated to have carry out clandestine removal of goods without payment of excise duty, the application for settlement was accepted by the Settlement Commission and was granted immunity from penalty and prosecution, the department can still proceed further against the present assessee who was facing only the notice for penalty? Held that:- The Court was clearly of the opinion that under KVS Scheme, there is no adjudication on the subject matter of the demand notice or show cause notice but there is a settlement of tax arrears. Even though the same show cause notice may call upon the company and its Directors to show cause, there is a separate tax demand for arrears against the Directors. Thus each entity or person would have to file a separate declaration. The settlement is in respect of each declaration. Under section 91, immunity would be available only in respect of matters covered in such declaration. It was emphatically held that the matter covered under the declaration by the Company is the tax arrears of the company and therefore, the directors or the officers of the company cannot claim immunity on the basis of immunity granted to the company. Kar Vivad Samadhan Scheme (Removal of Difficulties) Order thus made a special provision extending the benefit of settlement in case of the principal noticee to all persons to whom show cause notices were issued in respect of the same subject matter. In fact, the extension of such benefit to the so called subsidiary noticees was not the focal point of the judgments of Kerala and Gujarat High Court in case of Omkar S. Kanwar [2000 (11) TMI 19 - GUJARAT HIGH COURT] and [2000 (3) TMI 16 - KERALA HIGH COURT]. What was at the centre of controversy was what can be stated to be a pending adjudication. It was in this context while approving the decision of Kerala High Court, Supreme Court observed that “Thus read as a whole the words “pending adjudication” cannot be read to exclude cases where the proceedings are still pending in Appeal.” Any other way of understanding this judgment of Supreme Court would pose a serious difficulty. It was open for the Settlement Commission to impose penalty on the directors in addition to imposing penalty on the company, if there was material justifying imposition of such penalty. Merely because the appellants herein could not have applied for settlement due to monetary limit would not change the situation - question is held against the appellants and in favour of the department. Appeal dismissed.
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2018 (11) TMI 80
Demand of pre-deposit in cash for maintenance of appeal - whether such pre-deposit can be made only by cash or also by availing credit in cenvat account? - Held that:- It appears that Commissioner had not even put the petitioners to notice about the decision that he took in this regard. This was thus not a case of by parte hearing culminating into a quasi judicial decision formed by the Commissioner which was a mere communication of his opinion that such pre-deposit must be made in cash. Even otherwise, it is well settled that mere availing of alternative remedy is not a bar to entertain a writ petition. Even the ground of delay is not valid. The petitioners after receiving the communications in question made detailed correspondence with the departmental authorities trying to persuade them that the pre-deposit as well can be made with the aid of cenvat credit. Having failed in receiving the positive response, this petition came to be filed. Essentially, credit in an assessee's cenvat account is a duty he has already suffered which he can encash for specified purposes subject to conditions laid down under the Rules. Predeposit made by the petitioners by availing cenvat credit shall be accepted for the purpose of section 35F of the Central Excise Act - petition allowed - decided in favor of petitioner.
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2018 (11) TMI 79
MODVAT Credit - Sulphuric acid is cleared partly on payment of duty and partly without payment of duty - demand of duty of 8% of the value of the Sulphuric acid cleared without payment of duty - Held that:- After the decision of the Tribunal directing the appellant to reverse the entire credit in respect of Vanadium Pentaoxide, the appellant reversed the entire credit on Vanadium Pentaoxide amounting to ₹ 54,533/- - the High Court has also not disturbed the said order of the Tribunal. Once the appellant has reversed the entire credit as per the direction of the Tribunal then there remains no demand against the appellant. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 78
100% EOU - CENVAT Credit - appellants are manufacturing both dutiable and exempted goods and are rendering exempted service - non-maintenance of separate records - scope of SCN - Held that:- The Commissioner(Appeals) has not considered all the grounds raised by the appellant in their appeals. Further the computation error committed in the original order was sought to be rectified by the appellant by way of production of Chartered Accountant certificate and the same was denied on the ground that additional evidence cannot be produced before the appellate authority by resorting to provisions of Rule 5(1) of the Central Excise (Appeals) Rules, 2001. There is no restriction under law for raising the additional issue / grounds in the appeal, if the same has a bearing on the taxability of the assessee - The impugned order is not sustainable in law and the same is set aside and the case is remanded back to the original authority to pass de novo order - appeal allowed by way of remand.
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2018 (11) TMI 77
Provisional release of trucks - Clandestine manufacture and removal of pan masala and guthka - rejection of release of trucks on the ground that the ownership of the seized trucks are not transferred in the name of the appellant. Held that:- Having furnished all the documents which clearly show that though he becomes owner of the vehicles from the day he has made the payment and taken the possession of the vehicles, there is no reason for the respondent not to release the said vehicles on provisional basis till the investigation is completed. The seized trucks bearing Registration No.AP07TC1323, AP07TB9819 and AP07TW7603, seized during the investigation, are directed to be released to the appellant on appellant furnishing the security bond of ₹ 10 lakhs (Rupees ten lakhs only) each for each of the trucks - appeal disposed off.
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2018 (11) TMI 76
Area Based Exemption - branded goods manufactured in Himachal Pradesh, exempt from payment of duty under N/N. 49 & 50/2003, dated 10.06.2003 - the aggregate value of the clearances of both units i.e. Hyderabad and Himachal Pradesh exceeded ₹ 400/- lakhs during the financial year 2007-08 - Held that:- An identical issue decided in the case of SARVOTHAM CARE LTD. VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX HYDERABAD-IV [2015 (11) TMI 244 - CESTAT BANGALORE], where it was held that It is settled law that we cannot go into the intentions of the legislature, unless there is ambiguity or lack of clarity in the notification. The notification has to be implemented according to the meaning of the words and clauses used therein. It is nobody s case that Notification No.49/2003 and No.50/2003 have been mentioned in paragraph 4 of the notification. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 75
Non-imposition of penalty - Revenue has contested only this point as to non-imposition of penalty is incorrect as there is violation of Central Excise Act and Rules made there under - Held that:- Respondent company is not in appeal against the said impugned order and we are informed that the respondent has accepted the order and it was stated that they have discharged the entire liability arising out of impugned order. The adjudicating authority was correct in coming to a conclusion that no penal action though proposed in the show cause notice needs to be imposed on the respondent herein - appeal dismissed - decided against Revenue.
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2018 (11) TMI 74
Refund of CENVAT Credit - supplies to 100% EOU - rejection on the ground that Rule 5 of CCR read with N/N. 27/2012-CE (NT) dated 18.06.2012 grants refund of accumulated CENVAT credit only in respect of exports and not in respect of supplies to 100% EOUs - Held that:- In an identical matter in the case of Sai Polymers [2017 (5) TMI 671 - CESTAT HYDERABAD] this very bench had held that Rule 5 of CCR also entitles one to refund of CENVAT credit in case of deemed exports by way of supply to 100% EOU prior to the introduction of explanation (1A) - refund allowed - appeal dismissed - decided against Revenue.
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2018 (11) TMI 73
CENVAT Credit - welding electrodes used for repair and maintenance of the machinery - Held that:- Held that:- Tribunal in the case of Kisan Sahkari Chini Mills Ltd. vs. Commissioner of Central Excise, Meerut-II [2017 (1) TMI 1479 - CESTAT ALLAHABAD] laying down that welding electrodes used for joining of coils is an admissible cenvatable item - credit allowed. Valuation - includibility - whether the inspection and weighment charges recovered by the appellant from their customers would become a part of the assessable value or not? - Held that:- It is only in respect of supplies made to the Government Departments, who insist on further inspection of the goods that the said inspection is being undertaken and inspection charges are being recovered by the appellant from their customers on actual basis - Tribunal in the case of Classic Polytubes Pvt. Ltd. vs. Commissioner of C. EX., Lucknow [2016 (3) TMI 800 - CESTAT ALLAHABAD] has held that such inspection is not mandatory and is undertaken at the option of the buyers, the same would not be a part of the assessable value of the final product - demand set aside. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 72
Imposition of personal penalty - demand on the basis of invoices - Held that:- The finding by the Original Authority in respect of 231 invoices and 52 invoices is not sustainable and revenue has not put-forth any ground to deal with the findings of Original Authority. The grounds of the appeal by revenue are general in nature and therefore, we dismiss the appeal filed by revenue. Appeal filed by manufacturer-appellant - Held that:- Since the appellant has accepted at some point of time the liability of ₹ 56 lakhs, therefore, he confirmed the same We find such confirmation of demand is not sustainable. The Original Authority should have confirmed the demand on the basis of evidence admissible to law. We do not find any such evidence relied upon by the Original Authority - The manufacturer-appellant’s appeal is allowed by us by setting aside that part of the Order-in-Original through which a demand of ₹ 56 lakhs confirmed. Penalty imposed is set aside - decided in favor of assessee.
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2018 (11) TMI 71
CENVAT Credit - repacking of the sugar in small packs of 1kg/5kg - Manufacture or not - denial of the credit on the ground that such activity of repacking in smaller packs does not amounts to manufacture - Held that:- It is not being disputed by the revenue that the smaller packs were being cleared by the appellant on payment of duty, by treating the same as manufactured goods. Tribunal in the case of M/s Asian Colour Coated Ispat Ltd. Vs CCE, Delhi-III [2014 (9) TMI 974 - CESTAT NEW DELHI], by majority order has observed that even if the activity undertaken by an assessee does not amount to manufacture, the credit availed on the inputs used in such final products which stands cleared on payment of duty would still be available to the assessee. Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 70
Penalty u/s 11AC of CEA - suppression of vital facts in the ER-1 returns with intent to evade payment of duty or not - Held that:- The Adjudicating Authority has not imposed any penalty on the appellant under Section 11AC of the Act, by observing that non-payment of duty immediately on manufacture was bona fide mistake on their part and it is a case where proviso to Section 11A is not applicable in facts and circumstances of the case. If the party has filed “Nil” ER-1 it was because there was no physical manufacture or clearance of goods in their factory - appeal dismissed - decided against Revenue.
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2018 (11) TMI 69
CENVAT Credit - inputs imported without payment of duty found short - denial on the ground that issue having settled the matter before the Settlement Commission, there can not be any availment of CENVAT credit on the amounts so paid as full duty. Held that:- There is no allegation of diversion of the materials/inputs procured without payment of customs duty nor there is any allegation that there was clandestine manufacture and clearance of finished goods out of the inputs found short during the visit of the DRI Officers. Similar issue was decided by the Tribunal in the case of Shreem Capacitors Pvt. Ltd. [2016 (10) TMI 298 - CESTAT MUMBAI], where it was held that Availing of cenvat credit on the amounts settled before the Settlement Commission is not barred by any provision of the Cenvat Credit Rules, 2004 Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 68
CENVAT Credit - input services rendered by the service providers while setting up of their plant - labour charges which were for fixing and erection of equipments, buffing work, fixation and erection of equipment work, insulation work etc. for the activity undertaken by the service providers in the factory premises. Held that:- The services which were rendered by the service providers were in respect of capital goods and not for laying of foundation or making structures for support of capital goods. Further, it has to be recorded in the findings of the first appellate authority that these services were not used coextensively for manufacture of final products, also seems to be not correct from the factual position as the appellant herein being the manufacturer of bulk drugs, requires installation of various plant and machinery which would contribute towards manufacture of final products. In the case in hand, it cannot be said that the services rendered by service providers on various activities as enumerated in Annexure-B to the show cause notice were in respect of equipments which are not used for manufacturing of final products. If that be so, the law is now clearly settled as to what would be “directly or indirectly or in relation to manufacture as the foundation or making structures for support are in respect of the capital goods. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 67
Classification of goods - Industrial Solvent produced - suppression of facts - whether classified under Sub-heading No.3814.00 or not? Held that:- Revenue in their memo of appeal have not rebutted the above findings of the Adjudicating Authority by production of any evidence. Their only contention is that the Adjudicating Authority has not made any independent status/verification in the matter to confirm the products of being suitable as fuel either by difference or in admixture with any other substance in spark ignition engine and as solely relied upon the reports of chemical examiner which were inconclusive. Appeal dismissed - decided against Revenue.
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2018 (11) TMI 66
Intermediate goods - sugar syrup - N/N. 67/1995-CE dated 16.03.1995 - excisability/marketibility - demand of Central Excise duty on intermediate product ‘sugar syrup’ captively consumed in the manufacture of biscuits - Held that:- Tribunal in the said case of M/s Bhagwati Food Pvt. Ltd. and others [2016 (9) TMI 678 - CESTAT ALLAHABAD] held that, there was no evidence to prove that sugar syrup captively consumed is classifiable under Tariff Item No. 17029090 nor there is any evidence to prove that the goods in question in the form in which they come into existence in the appellants’ factory are marketable and finally held that Sugar syrup coming into existence during the manufacture of biscuits was not attracting Central Excise duty. Sugar syrup coming into existence during the manufacture of biscuits and captively consumed does not attract Central Excise duty for the reason that there is no evidence that the same is marketable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 65
Principles of natural justice - SSI Exemption - crossing of threshold limit - the value of clearance of all excisable goods had exceeded the prescribed limit of ₹ 3 crores during the previous year - N/N. 08/2003-CE, as amended - Held that:- The court below have erred in not granting adequate opportunity of hearing to the appellant. After the receipt of the report of Deputy Commissioner, the Additional Commissioner have not given any opportunity to the appellant nor made them aware with such a report which has been collected behind the back of the appellant. The impugned order is bad, in violation of the principles of natural Justice and accordingly fit to be set aside - matter remnaded back to the file of the Adjudicating Authority to re-adjudicate the show cause notice after providing a copy of the said report of the Deputy Commissioner of Central Excise Division-III, Kanpur - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (11) TMI 64
Validity of revised assessment order - interstate-sale attracted CST or local sale - sale of Cardamom - Held that:- Perusal of record shows that the petitioner was issued with an urgent notice dated 24.05.2018, directing them to appear for personal hearing on 30.05.2018. But, it is not stated by any of the parties that whether such an opportunity was availed by the petitioner. Even in the impugned order dated 31.05.2018, there is no whisper as to the same. If an aggrieved person raises certain contention in his/her reply, the authorities, while passing orders, have to specifically deal with the same in the manner known to law. In other words, the authority has to give his/her finding on all the grounds raised by the aggrieved persons. While answering the contentions, the authorities, exercising quasi-judicial powers, have to record the reasons for such holding - Admittedly, factual disputes have to necessarily be agitated before the appropriate authority, as rightly contended by the learned Additional Government Pleader. But, the order impugned suffers from violation of principles of natural justice. The matter is remitted back to the file of the second respondent for fresh consideration, while reserving all the grounds raised by the petitioner herein to raise before the authority - petition allowed by way of remand.
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2018 (11) TMI 63
Input tax credit - consignment sale of the bye product - Tribunal did not deal with the question of reversal of input tax credit - rule 22(2) of U.P. VAT Rules - Held that:- No useful purpose would be served in examining this issue any further on merits. The Tribunal was obliged in law to decide such ground of appeal as was contained in the memo of appeal and had been pressed before it, during oral hearing. Failure to decide a ground of appeal after noticing the same in its order renders the order of the Tribunal contrary to law, on that issue - decided in favor of assessee. Imposition of tax both on the undisclosed purchases and undisclosed sales being made by the applicant, without giving the benefit of input tax credit - Held that:- The finding of the Tribunal depriving the assessee benefit of input tax on undisclosed purchase of mustard seed is against the law and it cannot be sustained - decided in favor of assessee. Revision allowed.
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2018 (11) TMI 62
Validity of assessment order - the petitioner was not able to verify the transactions and make their reply on time - impugned order passed without affording an opportunity of personal hearing to the petitioner - principles of natural justice - Held that:- It is not in dispute that the petitioner has received the prerevision notice, but they did not file their objections, as the same is bereft of relevant particulars. As rightly contended by the learned Counsel for the petitioner, in cases of mismatch, as per the Circular of the Commissioner of Commercial Taxes in Circular No.10 of 2015 dated 01.04.2015, the second respondent ought to have enclosed the full particulars, invoice-wise, either in printed form or CD or email. Even if the petitioner does not respond for the show cause notice, it is mandatory on the part of the respondent to post the matter for personal hearing - As per the circular issued by the Head of the Department, pursuant to the recommendations issued by the Justice Ramanujam Committee, it is mandatory to give an opportunity of personal hearing, by specifying the dates of such personal hearing, whether it is asked or not by the petitioner. But, in the impugned order, there is no whisper as to the same. This Court is of the view that the matter should be remanded for fresh consideration - petition allowed by way of remand.
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2018 (11) TMI 61
Validity of revised order - revised order came to be passed for the assessment year 2017-18, even before the very expiry of the assessment year, ie., 31.03.2018 and without completing the original order of assessment - principles of natural justice. Held that:- It is not in dispute that the petitioner has received the show cause notice, but did not file their objections. Even otherwise, it is mandatory on the part of the respondent to post the matter for personal hearing. As per the circular issued by the Head of the Department, pursuant to the recommendations issued by the Justice Ramanujam Committee, it is mandatory to give an opportunity of personal hearing, by specifying the dates of such personal hearing, whether it is asked or not by the petitioner. This Court is of the view that the matter should be remanded for fresh consideration - Petition allowed by way of remand.
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2018 (11) TMI 60
Assessment of escaped turnover - section 25(1) of KVAT Act - case of the petitioner is that on receipt of Exts.P1 and P1(a) notices, the petitioner preferred Exts.P2 and P2(a) requests on 30.12.2012 seeking one month's time. It is alleged that without giving any further intimation in the matter, the proceedings have been completed - Principles of Natural Justice. Held that:- In the absence of any communication on the request made by the petitioner, the assessing authority should not have completed the assessments, without a further notice to the petitioner - In so far as the said course was not adopted by the assessing authority, I am in agreement with the case set up by the petitioner that Exts.P3 and P3(a) orders are vitiated for non compliance of the principles of natural justice. The assessing authority is directed to complete the assessments pursuant to Exts.P1 and P1(a) notices afresh, after affording the petitioner an opportunity of hearing - petition allowed by way of remand.
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Wealth tax
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2018 (11) TMI 107
Capital asset - exemption from wealth ta act - whether Subject land is an “asset” within the meaning of Section 2(ea)(v) of the Wealth Tax Act - Held that:- If the appellants are held to have treated the subject land as a “capital asset”, the assessing authority would have treated transfer of the said asset, pursuant to the joint development agreement, as liable to tax as capital gains under Section 45 of the Income Tax Act; and the very fact that they did not, reflects their understanding that the assessee intended to treat this asset only as a stock-in-trade for the purpose of carrying on business. It is possible that the assessing authority was of the view that execution of a joint development agreement did not automatically result in the transfer of the asset. The mere fact that the appellants-assessees were not subjected to tax towards capital gains under Section 45 of the Income Tax Act would not necessitate the inference that the subject “land” was treated as stock-in-trade for the purpose of carrying on business; and is, therefore, exempt from tax under Section 3(2) of the Wealth Tax Act. The Income Tax Appellate Tribunal is the final Court of fact. An appeal to the High Court lies, under Section 27A(2) of the Wealth Tax Act, only if the High Court is satisfied that the case involves a substantial question of law. We are satisfied that the findings of fact recorded by the Tribunal, and its conclusions on law, are not such as to necessitate interference in proceedings under Section 27A of the Wealth Tax Act. We see no reason, therefore, to interfere with the impugned orders passed by the Tribunal. Appeal dismissed.
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Indian Laws
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2018 (11) TMI 96
Dishonor of cheque due to insufficiency of funds - Section 138 of the Negotiable Instruments Act - the petitioner was sentenced to undergo simple imprisonment for a period of nine months and to pay a compensation of ₹ 2,70,000/- to the complainant - whether the Court in such like cases can set aside the judgments of conviction and sentence where the petitioner has been charged under Section 138 of the Act? Held that:- Since, the petitioner has already paid the entire compensation amount, therefore, quashing of the complaint initiated at the instance of complainant/respondent No.1 would be a step towards securing the ends of justice and to prevent abuse of process of the Court, especially, when the petitioner is facing pangs and suffered agony of protracted trial and thereafter appeal/revision for the last more than three years and has deposited the entire compensation amount of ₹ 2,70,000/-. This is a fit case to exercise the powers not only under Sections 397, 401 and Section 482 of the Code, but even under Section 147 of the Act - the impugned substantive sentence of simple imprisonment imposed in this case shall stand modified and substituted in lieu of the amount of compensation of ₹ 2,70,000/- that stands already paid by the petitioner - learned trial Court is also directed to release the amount of ₹ 27,000/- deposited in this case by the petitioner to complainant /respondent No.1-Bank as per procedure. Petition disposed off.
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2018 (11) TMI 95
Dishonor of cheque - Section 138 of the NI Act - burden of proof shifted on complainant - acquittal of accused by stating that the complainant has failed to prove that the 2nd accused received a sum of ₹ 50,000/- from the complainant as loan and in order to discharge the said loan, she had given the impugned two cheques - Held that:- On overall analysis of the evidence on record, it is seen that the trial Court erred in holding that DW1 had set up the complainant to initiate the proceeding against the accused by giving the impugned cheques given to him as security by the accused. The story of setting up pleaded by the accused has not been proved by way of documentary proof. In the absence of any proof, it cannot be contended that DW1 had set up the complainant to initiate the present proceedings. Burden of prove - Held that:- It is also settled that the accused had to prove in the trial by leading cogent evidence that there was no debt or liability and that the accused not having led any evidence could not be said to have discharged the burden cast on him. Existence of legally recoverable debt or liability is a matter of presumption under Section 139 of the NI Act. In the case on hand, the 2nd accused has not gone into the witness box. Since issuance of Exs.P1 and P2-cheques by the accused is admitted and the complainant has proved his case by way of preponderance of evidence to show that Exs.P1 and P2-cheques returned with an endorsement funds insufficiency, it is to be held that the complainant has proved his case and that the trial Court went wrong in dismissing the complaint and acquitting the accused. The criminal appeal is allowed setting aside the acquittal recorded by the trial Court and finds the accused guilty of offence under Section 138 of the NI Act - appeal allowed.
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2018 (11) TMI 94
Rectification/modification of the interest amount on penalty imposed - Section 43A of the Competition Act, 2002 - case of appellant is that there being partial order of stay and part of the amount having been deposited with the COMPAT and later on total amount of ₹ 2,00,00,000/- (Rupees Two Crores) having been deposited with the COMPAT, the Appellants are not liable to pay any interest. Held that:- Similar issue fell for consideration before the Hon’ble Supreme Court in State of Rajasthan and Anr. Vs. J.K. Synthetics Limited and Anr. [2011 (7) TMI 1300 - SUPREME COURT OF INDIA], where it was held that whenever there is an interim order of stay in regard to any revision in rate or tariff, unless the order granting interim stay or the final order dismissing the writ petition specifies otherwise, on the dismissal of the writ petition or vacation of the interim order, the beneficiary of the interim order shall have to pay interest on the amount withheld or not paid by virtue of the interim order. As the case of the Appellants is covered by the decision of the Hon’ble Supreme Court in J.K. Synthetics Limited, we are not inclined to interfere with the demand notice, so far it relates to interest - appeal dismissed - decided against appellant.
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