TMI Tax Updates - e-Newsletter
November 8, 2017

Case Laws in this Newsletter:

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

Articles

1. GST and Transfer Pricing – Need for Harmonization (GST vis-à-vis Income Tax)

   By: CASanjay Kumawat

2. RCM suspension under CGST ACT 2017

   By: cavamsi krishna

3. SCOPE OF BUSINESS UNDER GST LAW

   By: Dr. Sanjiv Agarwal

News

1. Note ban, GST impact behind us, growth in sight: FM

2. India Signs Loan Agreement with World Bank for US$ 119 Million for “Odisha Higher Education Programme for Excellence and Equity (OHEPEE) Project

3. I-T to issue 1L notices for huge deposits post demonetisation

4. Direct Tax Collections for F.Y. 2017-2018 show Growth of 15.2% up to October, 2017

5. RBI Reference Rate for US $

6. Initial Steps Towards the Setting up of a Public Credit Registry for India

7. Cases pertaining to ‘Panama Papers’: Investigation in full swing

Notifications

Customs

1. 105/2017 - dated 7-11-2017 - Cus (NT)

Amendment in Notification No. 104/2017-CUSTOMS (N.T.), dated 6th November, 2017

GST - States

2. G.O. (P) No. 115/2017/TAXES - dated 25-9-2017 - Kerala SGST

State Level Screening Committee constituted under sub-rule (2) of Rule 123 of Kerala Goods and Services Tax Rules, 2017

Circulars / Instructions / Orders

RBI

1. RBI/2017-18/82 DBR.No.BP.BC.92/21.04.048/2017-18 - dated 2-11-2017

Introduction of Legal Entity Identifier for large corporate borrowers

GST

2. 15/15/2017 - dated 6-11-2017

Due date for generation of FORM GSTR-2A and FORM GSTR-1A in accordance with the extension of due date for filing FORM GSTR-1 and GSTR-2 respectively – reg.

3. 14/14 /2017 - dated 6-11-2017

Procedure regarding procurement of supplies of goods from DTA by Export Oriented Unit (EOU) / Electronic Hardware Technology Park (EHTP) Unit / Software Technology Park (STP) Unit / Bio-Technology Parks (BTP) Unit under deemed export benefits under section 147 of CGST Act, 2017 – reg.

Customs

4. 141/2017 - dated 3-11-2017

Subject: Amendment in Para 2.17 of the Foreign Trade Policy 2015-2020 on imports and Exports to Democratic People's Republic of Korea (DPRK) in terms of UNSC resolutions concerning DPRK.

5. 139 /2017 - dated 1-11-2017

Sub : Submission of reply to the queries raised by the officers for the purpose of assessment – reg.

Highlights / Catch Notes

GST

• GSTR-2A and GSTR-1A Deadlines Extended to Align with Revised GSTR-1 and GSTR-2 Filing Dates Under CGST Regulations.

  Circulars : Due date for generation of FORM GSTR-2A and FORM GSTR-1A in accordance with the extension of due date for filing FORM GSTR-1 and GSTR-2 respectively – reg. - CGST - Circular
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• EOUs, EHTP, STP, and BTP Units Access DTA Goods with Deemed Export Benefits under CGST Act Section 147.

  Circulars : Procedure regarding procurement of supplies of goods from DTA by Export Oriented Unit (EOU) / Electronic Hardware Technology Park (EHTP) Unit / Software Technology Park (STP) Unit / Bio-Technology Parks (BTP) Unit under deemed export benefits u/s 147 of CGST Act, 2017
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Income Tax

• Assessee Delays Recognizing Revenue from PTFSI Due to Uncertainty in Collecting Technical Knowhow Fees Amid Financial Struggles.

  Case-Laws - AT : TPA - since there is uncertainty involved in collection of the technical knowhow fees from the PTFSI due to its bad financial condition, the assessee has rightly not recognized the revenue.
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• Court Denies Exemption for Transportation and Games Surplus, Deems Them Business Activities u/ss 11 and 12.

  Case-Laws - AT : Denial of exemption u/s 11 and 12 - Taxing surplus from Transportation and Games holding that the transportation activity, games activity and picnic are business activities - Being the part of educational activity, exemption cannot be denied.
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• Loan Waiver u/s 41(1) Income Tax Act: Clarified as Non-Taxable Capital Receipt, Not Income.

  Case-Laws - AT : Addition u/s.41(1) - waiver of loan as taxable u/s.41(1) - The loan received is a capital receipt and it does not lose its capital nature even when it is renounced or waived by the lender.
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• Interest on Enhanced Compensation Taxable as Income from Other Sources in Appellant's Case.

  Case-Laws - AT : The interest received on enhanced compensation in the appellant’s case is liable to tax under the head income from other sources.
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• Court Rules PMS Income as Short-Term Capital Gain, Not Business Loss, Despite Rs. 5 Crore Investment.

  Case-Laws - AT : Disallowance of business loss - treating the income derived by the assessee from Portfolio Management Services (PMS) transaction as short term capital gain - Merely because the assessee has invested a huge sum of ₹ 5 crore it cannot be treated as a business activity of the assessee.
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• High Court Rules Excess Stock Investment Taxed as Business Income, Not Income from Other Sources.

  Case-Laws - HC : The investment in the excess stock has to be brought to tax under the head "business income" and not under the head "income from other sources" - HC
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• High Court Rules Interest on Land Purchase Loans Deductible Under Income Tax Act Section 36(1)(iii.

  Case-Laws - HC : The interest on funds borrowed to purchase land which is part of inventory of the assessee company is an allowable deduction u/s 36(1)(iii) - HC
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• High Court Allows Delay in Investment for Tax Exemption on Capital Gains u/s 54EC.

  Case-Laws - HC : Exemption from Capital Gain Tax u/s 54EC - eligible investment in the Infrastructure Bonds of National Highway Authority of India - HC condones the delay of 6 months in making investment
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• Court Orders Removal of Addition: AO's Conclusion on Unaccounted Money Based on Loose Sheet Deemed Incorrect.

  Case-Laws - AT : A.O. is not correct in coming to the conclusion that on money is exchanged between the parties based on a loose sheet found in the premises of a third person - AO directed to delete addition made towards on money.
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Service Tax

• Show Cause Notice Validity Questioned: Issued After Five Years, Section 11D Observations Incorrect, Reasonable Time Required.

  Case-Laws - AT : Validity of SCN - the SCN was issued after a period of 5 years - The observations of adjudicating authority on Section 11D is not correct as Section 11D does not provide any rigid time limit. However, show cause notice under Section 11D has to be issued within reasonable period.
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• Taxpayer Must Pay Service Tax Regardless of Receipt; Declare Transactions in ST-3 Return and Face Penalties if Unpaid.

  Case-Laws - AT : Non receipt of Service Tax amount cannot come in way of their ability to pay. The fact that transactions are recorded in Books of Account is not material, as they needed declare the same in the ST-3 return - Demand alongwith penalty confirmed.
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Central Excise

• Refund Claim Approved u/s 11B Due to Non-Payment of Supplementary Invoice for Non-Chargeable Duty.

  Case-Laws - AT : Refund claim - price variation clause - supplementary invoice - if the payment of supplementary invoice was not made by the customers because duty has not chargeable, refund of the same is admissible under Section 11B.
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Case Laws:

• Income Tax

• 2017 (11) TMI 396
  Stock valuation - ITAT remitted the matter on the question of stock verification for the previous years 1996-1997, 1997-1998 and 1998- 1999, having regard to the stock statements of the hypothecated finished goods - Held that:- This Court is of the opinion that the exercise undertaken by the CIT(A) is based upon sound principles – he did not base himself merely upon Bank stock statement furnished to the Bank but rather went into detail and examined the excise returns and the other audited documents. The appreciation of this evidence is in no way unreasonable and the findings are in accordance with law. The ITAT did not fall into any error in affirming the CIT’s order.

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• 2017 (11) TMI 395
  Entitled to the exemption from Capital Gain Tax s/s 54EC - delayed investment - eligible investment in the Infrastructure Bonds of National Highway Authority of India, albeit with the delay of about six months - exercise of discretion in condoning the said delay of six months under Section 119 (2)(b) - Held that:- The present case is one of such nature, where the Court finds that the substantial conditions for claiming the exemption from capital gain tax stood satisfied and the prescribed investment was made by the assessee in the Bonds of the National Highways Authority, for the minimum lock-in period of three years also is an undisputed fact, and therefore, the delay in making such investment of six months deserved to be condoned, in view of the fact that, the assessee- petitioner, a Doctor by profession was traveling from India to USA a long distance country where she normally resided and came to India not only to meet her family members, but to sell the immoveable property belonging to her and sought to avail the genuine exemption from such tax liability upon making the investment in the prescribed investment in the form of Bonds of Infrastructure which she did make in the National Highways Authority. In these circumstances, this Court is inclined to allow this petition. The same is accordingly allowed. The impugned order vide Annexure-A passed by the respondent, Central Board of Direct Taxes on 26-01-2014 is set aside and the assessee is held entitled to the exemption from Capital Gain Tax under Section 54 EC of the Act and the respondent authority or the authorities below Central Board for Direct Taxes are directed to give effect to such exemption to the assessee and pass necessary consequential orders in this regard.

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• 2017 (11) TMI 394
  Following questions of law arise: “I) Whether ld. ITAT erred in law in holding that assessee is entitled to exemption u/s 11 & 12 of the Income Tax Act, 1961? II) Whether ld. ITAT has erred in law in allowing capital expenditure though the assessee has no legal right on the land on which capital expenditure has been incurred? III) Whether ld. ITAT has erred in law and on the facts of the case in holding that the corpus donations received by the assessee in the form of immovable properties will not be liable to tax?” 1The appeal is admitted, restricted to the above questions of law.

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• 2017 (11) TMI 393
  Penalty u/s 271(1)(c) - benefits of the Voluntary Disclosure Scheme dishonoured - Held that:- Admittedly the cheque issued by the petitioner which was a condition precedent for availing the benefits of the Voluntary Disclosure Scheme was dishonoured. Perhaps this led to service of notice under Section 148 of the Income Tax Act. It appears that the petitioner filed returns under protest. Subsequently, after assessing the amounts, a notice was issued under Section 158BFA r.w.s. 158 BFA(2) of the Income Tax Act. The Assessment order under Section 143(3) was passed on 1st December, 2000 under which penalty proceedings under clause (c) of Sub-Section (1) of Section 271 were initiated apart from imposing penalty and interest. The application made by the petitioner for rectification under Section 154 of the Income Tax Act was rejected on the ground that applications were filed belatedly after gap of 13 years. This observation was made on the ground that though the relevant assessment order was made on 1st December, 2000 the rectification application was made on 21st January, 2014. That is the reason why there is an observation by the CIT Appeal that the order passed on 1st December, 2000 had attained finality.

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• 2017 (11) TMI 392
  Claim as interest expenditure as business expenditure - Held that:- The purchase of inventory is continuation of the same business activity in routine course and cannot be termed as extension of the business activity. The proviso has been inserted to disentitle claim of interest on funds borrowed for acquisition of capital assets for the period upto the asset is put to use. The term ‘put to use’ here applies to capital asset only because a capital assets is held to facilitate the business activity and sometimes it needs to be prepared after its acquisition for being used to facilitate the business activity. As against this, purchase and holding of inventory item itself is a business activity. In absence of this proviso, section 36(1) (iii) earlier entitled assessee to claim interest in respect of capital assets, even for the period during which they were under construction as held in various judgments pointed out by the ld. AR of the assessee. The interest was found allowable despite its capitalization in the books of accounts in the judgments. We are therefore, of the opinion that the interest on funds borrowed to purchase land which is part of inventory of the assessee company is an allowable deduction u/s 36(1)(iii). Thus we are in complete agreement with the view above taken by both the authorities i.e. CIT(A) and tribunal. - Decided against revenue

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• 2017 (11) TMI 391
  Exemption u/s 11 - proof of charitable activities - Held that:- Though the assessee has been found by the Tribunal to be an institution established for the advancement of any other object of general public utility, the assessee does not fall under the category of such an institution, which is carrying on an activity in the nature of trade, commerce or business so as to attract the proviso to Section 2 (15) at all. Hence, the first question of law arising in both cases has to be answered against the appellant/Revenue. Once the first question of law is answered against the appellant/Revenue, the second question of law revolving around Section 13(8) may not arise at all. Section 13(8) revolves around the quantum as stipulated in clause (i) and (ii) of the Proviso to Section 2(15). If the proviso has no application, the invocation of those two clauses would not apply. Hence, the second question of law does not arise for consideration in the light of our answer to the first question of law. After taking note of the amendment to Section 11(6) in paragraph 33, the Madras High Court also took note of the Circular bearing No.1 of 2015, dated 21.01.2015 and came to the conclusion that the provisions of Section 11 (6) inserted w.e.f., 01.04.2015 would operate only prospectively w.e.f., the assessment year 2015-16. Insofar as the cases that arose prior to the amendment are concerned, almost all High Courts have taken the same view. The position may be different after the amendment. But in the case on hand, the same relates to a period prior to amendment. Therefore, we do not wish to admit the appeals on the third substantial question of law, merely for waiting for the outcome of the decision of the Supreme Court. We respectfully agree with the views expressed by the other High Courts and answer the third question of law in favour of the assessee.

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• 2017 (11) TMI 390
  Trading addition - defect pointed out by the Assessing Officer that the assessee had failed to produce details of stock despite have been provided repeated opportunities - assessee had changed its stand before the appellate authorities to explain the decline of GP & NP - rejection of books of accounts - Held that:- ITAT was justified in deleting the trading addition and in accepting the books of accounts of the assessee - Decided against revenue Disallowance in view of Section 36(1)(va) r.w.s. 2(24)(x) - Held that:- With regard to this question the same is now covered by the decision of this Court in Tax Appeal [2014 (5) TMI 222 - RAJASTHAN HIGH COURT] and the same will be subject to SLP pending before the Supreme Court, therefore, this issue is also not entertained subject to SLP.

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• 2017 (11) TMI 389
  Addition on depositing the employee’s contribution to PF and ESI beyond the prescribed time limit provided in the respective Acts - Held that:- If the amount has been deposited on or before the due date of filing the return under Section 139 and admittedly it was deposited on or before the due date then the amount cannot be disallowed under Section 43B of the I.T. Act or under Section 36(1)(va) of the Act. See Commissioner of Income Tax, Jaipur-II, Jaipur vs. Jaipur Vidyut Vitran Nigam Ltd. [ 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT ] - Decided in favour of assessee. Addition on account of front end fees paid in HIDSCO for raising the loan holding it to be revenue expenditure - Held that:- The assessee has raised loan of Rs. 300 crores for improvement in transmission, network and infrastructure. The assessee paid this amount to HUDCO, which was pre-decided condition on the loan sanctioned. The learned CIT DR has not controverted the findings by the learned CIT(A) in his order. Further the laws relied upon by the AR for the assessee are squarely applicable on it being identical issue, therefore we uphold the order of the learned CIT(A).

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• 2017 (11) TMI 388
  Excess stock surrendered during the course of survey - whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head business income or income from other sources ? - Held that:- ITAT is correct to conclude that in the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of Rs. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee s bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future. In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (2016 (9) TMI 1354 - ITAT JAIPUR) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head business income and not under the head income from other sources Addition on account of notional interest - Held that:- Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. If further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman. Further, in past, no such disallowance/addition was made. Therefore, neither the addition of notional interest made by the AO or disallowance of interest as held by the ld. CIT(A) is Rs. 1,96,73,637/-. Partners are paid interest @ 12% the balance in the partners account is much more than the amount advanced to Smt. Rita Gupta who is a wife of one of the partner. Therefore, even the disallowance made @ 4% is not justified and the same should be restricted @ 2% only. Revenue appeal dismissed.

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• 2017 (11) TMI 387
  Addition of unsecured loans - proof of identity of creditors - Held that:- In the present case, the return of income of the creditors would show that they have declared small income and paid meagre tax. In their bank accounts, there was meagre bank balance prior to giving loan to the assessee and cash have been deposited immediately before giving loan to the assessee. Further, assessee failed to produce any of the creditor before A.O. for examination to verify genuineness of transaction. Therefore, assessee failed to prove identity of the creditors, their creditworthiness and genuineness of the transaction in the matter. - Decided against revenue. Bogus purchases - Held that:- Assessee has specifically explained the discrepancy in noting the purchases material into Kg or MT. Proper bills have been produced on record to justify the contention of the assessee. The A.O. and Ld. CIT(A) have however, not given any finding on the same. It would, therefore, show that the matter requires reconsideration at the level of the A.O. Accordingly, set aside the orders of the authorities below and restore this issue to the file of the A.O. with a direction to re-decide this issue by verifying the facts from the invoices by appreciating the explanation of assessee. In case, A.O. has any doubt, he could have verify the facts from the concerned parties as per Law. Difference in closing stock - Held that:- In view of the above findings and material available on record and same opening stock shown in next year clearly supports the explanation of assessee that there is no difference in the valuation of the closing stock. The addition is without any justification. Accordingly, set aside the orders of the authorities below and delete the addition of Rs. 2,02,466. This ground of appeal of assessee is allowed.

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• 2017 (11) TMI 386
  TPA - whether AMP adjustment could be made in the case of the assessee on protective basis following the Bright Line Test (BLT)? - Held that:- We find that BLT has been discarded as a method for computing arm’s length price for international transactions of AMP by the Hon’ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Private Limited Vs. CIT (2015 (3) TMI 580 - DELHI HIGH COURT) thus, no addition could be sustained applying the BLT even on protective basis. Since in the year under consideration also, the only addition of AMP adjustment amounting to Rs. 42,90,27,103/- made applying BLT on protective basis has been challenged before us, respectfully following the above decision of the Tribunal, we direct the Assessing Officer to delete the said addition.

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• 2017 (11) TMI 385
  TPA - selection of comparable - selection criteria - Held that:- Assessee is engaged in providing services in the field of customer relationship management, managing call Centre and Information Technology (IT) enabled services to its Associated Enterprises (AEs). The assessee has provided the services from its undertaking registered with Software Technology Parks of India (STPI), thus companies functionally dissimilar with that of assessee need to be added to final list of comparable. Consider the additional remuneration(which was received in financial year 2006-07, but claimed as pertaining to financial year under consideration) for computing PLI - Held that:- CIT-(A) has noted that following matching principle, the additional revenue need to be included in the PLI of year under consideration. The leaned CIT-(A) has also noted that this approach has been accepted by the Ld. DRP for the subsequent assessment year under same facts and circumstances. In view of the facts, in our opinion, following the rule of consistency, we agree with the finding of the learned CIT-(A) that the additional revenue in question needs to be included in for computing PLI of the year under consideration. However, whether the additional revenue fee received pertains to IT enabled services i.e. relevant international transaction, has not been examined by the lower authorities, thus, we feel it appropriate to restore the issue to the file of the AO/TPO for verifying the facts and decide the issue in accordance with law. The assessee shall be afforded adequate opportunity of being heard. Accordingly, the ground of the appeal is allowed for statistical purposes.

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• 2017 (11) TMI 384
  Initiation of re-assessment proceedings - non payment in respect of Government duty covered under section 43B - Held that:- A.O. passed the original assessment order under section 143(3) and did not make any addition under section 43B of the I.T. Act. Later on, A.O. found certain mistakes in the original assessment order dated 22nd December, 2011 and one of the mistake was that no proof of payment in respect of Government duty covered under section 43B have been filed which was to be added under section 154 of I.T. Act to the income of the assessee. The assessee filed reply before A.O. in the rectification proceedings under section 154 of the Act supported by copies of the challan to show that payment in question have been made to the department. It, therefore, appears that A.O. was satisfied with the explanation of assessee and that is why he did not make any amendment in the original assessment order dated 22nd December, 2011 and proposed action under section 154 would be deemed to have been dropped under section 154. It, therefore, shows that A.O. accepted the explanation of assessee that assessee made proper payment under section 43B of the I.T. Act. There were no other material available on record to show that assessee has not made any payment covered under section 43B of the I.T. Act. On the face of the material available on record, it was not proper for the A.O. to initiate the re-assessment proceedings with regard to the same fact that assessee has not made payment in respect of Government duty covered under section 43B - Decided in favour of assessee.

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• 2017 (11) TMI 383
  Disallowance of business loss - treating the income derived by the assessee from Portfolio Management Services (PMS) transaction as short term capital gain - Held that:- Undisputedly, the assessee has invested an amount of Rs. 5 crore in the mutual fund which is managed by ICICI Prudential Assets Management Co. Pvt. Ltd. The amount received from the assessee towards mutual fund, in turn, was invested in various scrips of companies listed in the stock exchange to maximize the gain to the assessee. Thus, from the aforesaid fact, it is evident that the intention of the assessee was for the purpose of investment and not trading. That being the case, the Assessing Officer was justified in assessing the gain derived from sale of securities as short term capital gain. Merely because the assessee has invested a huge sum of Rs. 5 crore it cannot be treated as a business activity of the assessee. As far as allowability of PMS cost and other expenditure, the learned Counsel appearing for the assessee fairly submitted that the issue has been decided against the assessee by virtue of decision of the Tribunal, Mumbai Bench, in Capt. Animesh Chandra Batra (2016 (5) TMI 155 - ITAT MUMBAI). In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground no.2 raised by the assessee. Computing long term capital gain on sale of Salt Pan Land - sale of development rights - year of taxability - Held that:- The amount of Rs. 50 crore having neither been received by the assessee nor accrued in the financial year relevant to the assessment year under dispute, it cannot be considered as a part of sale consideration for computing capital gain in the impugned assessment year. The Assessing Officer is free to proceed in accordance with law if and when such income arises. With the aforesaid observation, ground no.3, is allowed. Adoption the cost of property shown by the assessee as per the report of the registered value - Held that:- It is manifest from the assessment order that the Assessing Officer being of the view that cost of acquisition shown by the assessee on the basis of registered valuer’s report is more than FMV had made a reference to the DVO for determining the FMV of the capital asset transferred by the assessee. As held by the Hon'ble Jurisdictional High Court in Pooja Prints (2014 (1) TMI 764 - BOMBAY HIGH COURT), as per the existing provisions of section 55A(a), which was applicable to the relevant assessment year, a reference can be made to the DVO only if the value declared by the assessee in the opinion of the Assessing Officer is less than its fair market value. The situation is reverse. The Assessing Officer made a reference to the DVO under section 55A(a) having entertained an opinion that the value adopted by the assessee is more than the FMV. Respectfully following the decision of Hon'ble Jurisdictional High Court (supra), we uphold the order of the learned Commissioner (Appeals) on this issue. Grounds raised are dismissed.

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• 2017 (11) TMI 382
  Disallowance made towards advances written off - initiation of steps to recovery of debts - Held that:- The assessee had written off the advances given in the normal course of business to aforesaid three parties after taking necessary steps for recovery of the same and also preferring civil suits and criminal suits, wherever possible, as the case may be. The assessee had also enclosed the necessary evidences in this regard before the Ld. AO. Hence, it would be factually incorrect to state that no legal steps were taken by the assessee for recovery of the dues. The relevant evidences with regard to steps taken by the assessee for recovery of these advances and consequential write off thereon are enclosed. We find that the issue under dispute is squarely covered by the Co-ordinate Bench decision of this Tribunal in favour of the assessee in assessee’s own case for the assessment year 2009-10 [2017 (11) TMI 363 - ITAT KOLKATA] wherein held he advances were given by the assessee in the normal course of its business and when a loss arises due to non-recovery of such advances and when the same is irrecoverable and written off as such, the same should be allowed as a loss while computing the profit and gains of business. - Decided in favour of assessee Disallowance of foreign travel expenditure - payment for commercial expediency - Held that:- In the instant case, the senior employees of the assessee visited foreign countries and it has generated revenue to the assessee in the form of brokerage income on tea/coffee. Further, the said expenses have been incurred out of commercial expediency and hence it should be viewed from a businessman’s point of view. The assessee had incurred similar foreign travel expenses in earlier years also. The revenue had accepted the same till assessment year 2009-10 by allowing the same as business expenditure. The scrutiny assessment orders for the assessment years 2007-08 and 2009-10 framed u/s 143(3) of the Act dated 31.12.2009 and 30.12.2011 respectively are filed by the Ld. AR in this regard. When there is no change in the facts and circumstances of the case during the year under appeal, then there is no need for the Revenue to take a different stand ignoring the principle of consistency. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of Radhasaomi Satsang vs. CIT (1991 (11) TMI 2 - SUPREME Court ). - Decided in favour of assessee

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• 2017 (11) TMI 381
  Disallowance of claim of Internal development charges (IDC) in respect of project at Greater Kailash Part I & II - Held that:- These are business expenses for development of various projects under execution and same could not be related to particular area or apartment and as such the Assessing Officer is not justified in considering the admissibility of part of the expenses on proportionate basis. Further, this disallowance is revenue natural as the appellant has sold the properties in the subsequent years and taking into consideration the principle laid down by Supreme Court in the case of CIT Vs. Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] there is no ground or justification for disallowance of part of expenses relating to IDC and accordingly this ground is allowed. However, if any part of these expenses have been claimed or allowed in subsequent year, the Assessing Officer may take necessary step so as to ensure that no double claim is allowed. Disallowance u/s 14A read with Rule 8D - Held that:- The issue is fully covered as per order of the ITAT relating to A.Y. 2006-07. It is further noticed that even though the tribunal worked out disallowance in A.Y. 2006-07 to the extent of Rs. 22,50,000/- but sustained disallowance to the extent of Rs. 1,87,35,000/- on the ground that appellant itself has agreed for such disallowance during assessment proceedings. However, the appellant has clarified that no such admission was made and in clarification of factual mistake in the order of the tribunal, miscellaneous application has been field and same has also been heard, but order is still awaited. Without making any comment on the same, we are of the view that no such issue was raised by the Ld. CIT DR or fact about any such admission was brought on record. In the ultimate analyses, we are of the view that the issue is fully and squarely covered by order of ITAT for A.Y. 2006-07 and accordingly disallowance is confirmed to the extent of Rs. 33.25 lakhs. The Assessing Officer may give necessary effect so as to restrict the disallowance to Rs. 33.25 lakhs. Disallowance and capitalization of amount expanded on repair and maintenance of Generator sets - Held that:- We are of the view that claim is in the nature of current repair as AO has not brought on record any evidence in support of allegation of purchase of new generator sets and also failed to make any comments in respect of details submitted by the appellant. There is thus, no justification for treating the same as of capital nature and accordingly the impugned disallowance is deleted and this ground of appeal is allowed Disallowance and capitalization of claim of interest on loan taken for purchase of Aircraft - AO has considered the disallowance u/s 36(1)(iii) on the ground that deduction of interest for acquisition of capital asset would only be available after the asset is put to use for the purpose of business - Held that:- The use of aircrafts for trial run and training of pilots is part of the business activities and as such there is merit in the contention of the appellant that air craft was used for the purpose of business. Further, principle laid down by Supreme Court in the case of Core Health Care Ltd.(2008 (2) TMI 8 - SUPREME COURT OF INDIA) also support the claim of the appellant as the Assessing Officer himself has not disputed the fact that the air craft was used for the purpose of business as he accepted the claim of interest for the remaining period relevant to the year under consideration. In the light of above discussions, there is no justification for treating the part of claim of interest as of capital nature and consequential disallowance u/s. 36(1)(iii) of the Act and accordingly the Assessing Officer is directed to accept the claim of interest as permissible deduction. Addition of notional rent from Kiosks - addition on the ground that assessee is the owner of Kiosks and rental income from same is assessable in its hands - Held that:- The appellant assigned DLF Services Ltd. right to recover lease rent for maintenance and upkeep services of Mall and as such there was a genuine business arrangement between the parties. If the lease income is considered as chargeable to tax in the case of appellant, the appellant may be eligible for claim of expenses on account of maintenance of Mall which was owned and run by the appellant and as such appellant has not derived any tax benefit on the basis of such arrangement and for diversion of lease rent. It is further relevant to take note of the fact that such lease rent has been subjected to tax in case of M/s. DLF Services Ltd. There is no justification for addition of Rs. 12,60,000/- as same was towards business obligation and for specific services rendered by M/s. DLF Services Ltd. and accordingly the impugned disallowance is directed to be deleted. Disallowance on account of prior period expenses - Held that:- Claim of prior period was on the basis of liability crystallised during the year and same is on the basis of regular system of accounting followed by the appellant. In the light of order of ITAT and detailed finding recorded by CIT(A), no interference is called for in the order of the CIT(A) and this ground of the revenue is dismissed. Addition on account of brokerage and commission - Held that:- Claim of brokerage and commission is permissible deduction as same is in the nature of sales expenses Addition on account of enhancement of revenue under POCM method - Held that:- aking into consideration, the system of accounting being followed by appellant and recognition of revenue on the basis of the said system, the proposed addition by the AO on hypothetical basis is of no relevance unless such adjustments are not in conformity with POCM method. The CIT(A) has appreciated the facts and correctly considered the claim of expenses under POCM method. In our opinion, there is no distortion of claim of income or expenses and accordingly order of the CIT(A) is confirmed and this ground of revenue is dismissed. Disallowance on account of non allocation of expenses incurred on behalf of M/s. Galaxy Mercantiles Ltd. - Held that:- CIT(A) was right in observing that the allowability of these expenses in the hands of the appellant cannot be disputed merely on the ground that the appellant has not been able to recover the same from the other party. Even if these expenses were incurred on behalf of M/s. Galaxy Mercantile Ltd., non recovery of same shall be in the nature of business loss. In view of the above position, there is no infirmity in the order of the CIT(A). However, as and when any recovery is made by the appellant in respect of these expenses, the same should be considered as its income in terms of provisions of section 41(1) of the Act. Subjected to these observation, the order of the CIT(A) is confirmed. TDS u/s 195 - Disallowance u/s 40(a)(i) - consultancy services provided by M/s. M/s. Paul, Hastings, Janofsky & Walker LLP - Held that:- We find that payment of legal and professional charges to a firm is covered under Article 15 of Indo-US DTAA. There is also no dispute to the factual position that the service provider does not have any PE in India or any of its personnel stayed for more than 90 days in India during the relevant AY. In the light of these factual findings, we are of the opinion that payment made to M/s. Paul, Hastings, Janofsky & Walker LLP (USA) falls outside the purview of section 195 as the conditions specified in Article 15 are not satisfied and as such there is no question of any disallowance u/s 40(a)(i) of the Act. In respect of second issue of payment to Control Risks Group (S) Pte Ltd. for obtaining assessment report. The AO has held the payment to be in the nature of Fees for technical service as per Article 12 of Indo-Singapore DTAA. We find that satisfaction of ‘Make Available’ clause is sine qua non for a payment to be considered as Fees for technical Services in terms of Article 12 of Indo-Singapore DTAA. Further, the CIT(A) has categorically held that mere issuance of report does not tantamount to making technology available in India. The ITAT Delhi bench decision in the case of Romer Labs Singapore Pte.Ltd. vs. ADIT [2013 (10) TMI 751 - ITAT DELHI] as referred to above is also relevant and support the claim of the appellant. The ld. CIT DR has not disputed the factual finding recorded by CIT(A), there is thus no case for any interference in the order of the CIT(A) and this ground of revenue is dismissed. Disallowance u/s 40(a)(ia) - assessee has collected rent from Shri Ram School on behalf of DLF Qutub Enclave Complex Educational Charitable Trust and same has been paid to the trust without deduction of TDS - Held that:- the appellant has neither credited this rental income nor claimed any expenditure on account of payment made to DLF Qutub Enclave Complex Educational Charitable Trust. The entries recorded by appellant were merely pass through entries and as such there is no case of any adverse revenue implication. The order of CIT(A) is confirmed. Addition u/s 40(a)(ia) on account of non deduction of TDS on payments made to two trusts - Held that:- here is no default on the part of the assessee in not deducting TDS on such payment. The order of the CIT(A) is based on proper appreciation of facts and there is thus no justification for any interference and this ground of revenue is dismissed. Disallowance u/s. 40(a)(ia) on the ground that there was delay in deposit of TDS - Held that:- The CIT(A) has taken note of the fact that TDS was deposited before due date of filing of return u/s. 139(1) of the Act and also made reference to order of Delhi High Court in the case of CIT Vs. Rajendra Kumar [2013 (7) TMI 454 - DELHI HIGH COURT]. In view of the above position, the order of the CIT(A) is confirmed. Disallowance on account of rejection of claim of TDS on rent received from Shri Ram School - Held that:- Assessing Officer has not allowed the benefit of claim of TDS which is in respect of rental income from Shri Ram School. The Assessing Officer observed that as the rent has not been offered as income by the appellant, it is not entitle to claim of TDS. The CIT(A) has allowed relief on the ground that rent has been transferred to DLF Qutub Enclave Complex Educational Charitable Trust, but as TDS is in the name of appellant, benefit of same is to be allowed to appellant. We are not impressed with the finding of the CIT(A). The appellant having transferred the rent to DLF Qutub Enclave Complex Educational Charitable Trust, the TDS is also required to be transferred. The claim of TDS is directly related to the issue of rent. If the rent belongs to another entity, the TDS is also to be transferred and to be claimed by the recipient of rent. In the light of above position, finding of the CIT(A) is reversed and this ground of revenue is accepted. Mismatch in TDS certificates - Held that:- No addition can be considered merely on the basis of TDS certificates especially in the case of income from house property. It was also argued that the addition is revenue neutral in nature as the excess has been offered for taxation in subsequent year. Capital gain computation - substitution of sale price of shares by NAV of the shares of Diwakar Estates Ltd. and Monishka Builders & Developers Pvt. Ltd. - Held that:- For the purpose of computation of capital gain, provisions of sec. 45 make reference to full value of consideration and it is not open to consider any notional or hypothetical value unless there is a case of understatement and non disclosure of full value of consideration. The principle laid down by Supreme Court in the case of K.P. Verghese [1981 (9) TMI 1 - SUPREME Court] has been considered by Delhi High Court in number of cases and it may be appropriate to make reference to decision of Delhi High Court in the case of CIT v. Gulshan Kumar [2002 (5) TMI 35 - DELHI High Court]. In view of the settled legal position and in the absence of any evidence regarding non-disclosure of full value of consideration, there is no infirmity in the order of CIT(A) and same is confirmed. Disallowance of claim of depreciation on DLF Centre Building - Held that:- CIT(A) has observed that this very issue arose in the preceding year and relief allowed at the first appellate stage was accepted by the revenue as no appeal was filed against the same before ITAT. In the light of above position and as per the decision of Hon’ble Supreme Court in the case of CIT v. J K Charitable Trust [2008 (11) TMI 8 - SUPREME COURT] the revenue could not be permitted to agitate the very same issue in the year under reference. Accordingly, the order of CIT(A) is confirmed.

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• 2017 (11) TMI 380
  Validity of assessment u/s 153A - Prior Period expenses addition - Held that:- Relevant discussion in the assessment order does not show that it is based on any incriminating material found in the course of search. Thus, the ratio of the judgment of the Hon'ble Bombay High Court in the case All Cargo Global Logistics Ltd. (2015 (5) TMI 656 - BOMBAY HIGH COURT) is clearly attracted and the same is outside the purview of the impugned assessment finalized under section 143(3) r.w.s. 153A of the Act. - Decided in favour of assessee.

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• 2017 (11) TMI 379
  Addition of long term capital gain - assessee declared long term capital gain as nil - cost of construction computation - Held that:- The assessee has referred to details of various loans from the bank at different time however, some of the loans are in the joint name of the assessee and his family members showing the transactions are of withdrawal and deposit in cash. Therefore the bank statement itself cannot give a definite idea of purpose and used of the funds withdrawn in small amount of cash by the assessee and his family members. As regards the payments made to the two parties namely Bansal Trader and Agarwal Traders in the absence of further details and explanations whether these two parties are dealing with the construction activity or supply of construction material cannot be said that the payments were made for the purpose of construction of the house. Hence, I find that this issue requires a proper verification and examination by considering the valuation report of the DVO as well as the valuation report, if any, to be filed by the assessee from the registered valuer. Hence, this issue is set aside to the record of the Assessing Officer for adjudication of the same in light of the above observations. Denying the claim deduction u/s 54 - investment made by the assessee in the new residential houses in the name of his wife and claim of exemption under section 54 against the acquisition of these two houses - Claim of deduction u/s 54 available to more than one houses - Held that:- Mere fact of the assessee purchased of new house in the name of his wife would not disentitle the assessee for claiming the benefit u/s 54 when the other conditions as provided u/s 54 are satisfied. Following the decision of Hon’ble Punjab and Haryana High Court in case of Pawan Arya Vs. CIT (2010 (12) TMI 44 - PUNJAB AND HARYANA HIGH COURT) hold that the assessee is entitled for the claim of section 54 of the Act only in respect of one house at the choice of the assessee. Disallowances claim of interest u/s 48 of the Act as well as under 24(b) - Held that:- This issue is directly connected with the claim of the assessee regarding the loan availed by the assessee and his family members are used for the purpose of construction of the house. As have already set aside the issue of cost of construction of the house as well as use of the barrowed fund for the purpose of construction of the house to the record of AO. Therefore, this ground of the assessee’s appeal is consequential to outcome of the issue already set aside to the record of the assessing officer. Accordingly, in the facts and circumstances of the case I set aside this issue to the record of the Assessing Officer for consideration, exemption and adjudication along with the other issue remitted to the record of the Assessing Officer. Appeal of the assessee is partly allowed.

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• 2017 (11) TMI 378
  Penalty u/s 271 (1)(C) - transfer of general reserve and claim of higher depreciation - assessee society is registered U/s 12AA - Held that:- The claim of depreciation at higher rate was based on bonafide belief that the buses for transportation of students will be eligible for higher rate of depreciation. The assessee has made full disclosure of particulars before the Assessing Officer, therefore, in our considered view, this amount cannot be treated as concealed particulars of income. Further the amount of Rs. 55,83,342/- was transferred to general reserve, on this amount also, the assessee has not furnished inaccurate particulars of income. In this factual matrix, we also note that there was no tax implication arising out of the assessment passed by the Assessing Officer for the reason that such additions got set off with the brought forward losses. Considering all these facts and circumstances, we sustain the order of the ld. CIT(A) on this issue. For he amount transferred to general reserve for which we have already taken a view that the assessee has made the claim in the return of income and has submitted all relevant documents. Further it was a debatable issue, therefore, in this year also, we sustain the order of the ld. CIT(A). The other issue for levy penalty of Rs. 9,45,825/- was that income over expenditure. The issue was debatable and it was simply a difference of opinion between A.O. and assessee society. The assessee had neither concealed income nor filed inaccurate particulars of income. On this issue also, we agree with the findings of the ld. CIT(A) that this was a debatable issue and there was different opinion on such issue. Considering all these facts, we find no fault in the order of the ld. CIT(A) and accordingly, we sustain the same. - Decided against revenue

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• 2017 (11) TMI 377
  Reopening of assessment - information received from investigation wing of department - Held that:- What is necessary is that there must be some relevant material on which the formation of opinion is arrived at by the assessing officer. In the instant case, the A.O. formed his opinion based on the information received from the investigation wing of the department and which is the valid basis for issuing notice u/s 148 of the Act. It is not necessary for the A.O. to conduct independent enquiry and gather material to form his opinion. Material may come from within the assessment records or from outside the assessment record. But what is important is that there should be some cogent material, which suggests prima facia escapement of income chargeable to tax. Therefore, we are of the view that the A.O. has rightly formed his opinion based on the information received from the investigation wing of the department which constitutes a sufficient material for reopening of assessment and hence, the A.O. is right in reopening assessment. Therefore, we are inclined to uphold reopening of assessment and reject ground raised by the assessee. Additions towards alleged on money received by the assessee for sale of property based on third party statement - Held that:- A.O. is not correct in coming to the conclusion that on money is exchanged between the parties based on a loose sheet found in the premises of a third person. To sustain the addition, the A.O. should have conducted an independent enquiry about the value of the property and ascertain whether any under valuation is done, if so what is the correct value of the property. Further, the A.O. did not brought on record any evidence to support his contention to say that there is on-money exchanged between the parties. In the absence of proper enquiry and sufficient evidences, we find no reason to confirm addition made by the A.O towards on money. Therefore, we direct the Assessing Officer to delete addition made towards on money. Penalty levied u/s 271(1)(c) for concealment of particulars of income deleted.

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• 2017 (11) TMI 376
  Transfer Pricing Adjustment by adding interest in relation to non-interest bearing shareholder’s deposits with an associate company - Held that:- The statutory permissions required under the foreign exchange laws of India, are equally applicable to controlled and uncontrolled enterprises i.e. they are universally applicable and hence the very restrictions for permissions would be deemed to encompass the principle of neutrality and hence, the standard of arms length is inherent in the provision of law. Hence the company has a contractual and statutory obligation with the PTFSI for not charging any interest on the shareholder deposits and thereby it cannot take any recourse for charging interest till the year 2015 by which PTFSI is required to make payment to the company. There has been no inflow or outflow relating to the above deposit during the Previous Year 2011-12 and hence it is outside the purview of transfer pricing provisions. We are of the view that the assessee cannot be asked to do something which is impermissible in law and expenditure incurred in compliance of law or the direction of the statutory authorities, the same is allowable. This view is supported by the case law relied on by the assessee of Hon’ble Bombay High court in the case of CIT vs. Hukumchand Mills Ltd. (1983 (2) TMI 1 - BOMBAY High Court). We are of the considered opinion that no addition on account of transfer pricing adjustment can be made in relation to interest @ 8.39% in relation to non-interest bearing shareholder’s deposits with an associate company. We reverse the orders of DRP and AO/TPO on this issue and allow this issue of the appeal of assessee. Transfer Pricing Adjustment towards technical knowhow fees from an associate enterprise P.T. Five Star- Indonesia (PTFSI) - Held that:- We are of the view that since there is uncertainty involved in collection of the technical knowhow fees from the PTFSI due to its bad financial condition, the assessee has rightly not recognized the revenue. This view of ours is supported by the decision of Hon’ble Supreme Court in the case of Godhra Electricity Co. Ltd. vs. CIT (1997 (4) TMI 4 - SUPREME Court) wherein rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the Assessing Officer did not represent the income which had really accrued to the assessee-company during the relevant previous years. Taking the same principle, in the present case before us, we delete the addition made AO / TPO and confirmed by DRP on account of transfer pricing adjustment towards technical knowhow fees from its AE i.e. PTFSI. We direct the AO accordingly. This issue of assessee’s appeal is allowed. Addition on account of transfer pricing adjustment towards risk involved in guarantee on loans advanced to the AE-PTFSI - Held that:- The decision in the case of ACIT v. Nimbus Communications Ltd. [2011 (1) TMI 68 - ITAT MUMBAI] reiterates the proposition of the assessee that when the guarantee has been given by the assessee results in a direct or indirect benefit to the assessee itself, then there arises no need to charge any commission on the same. The above transaction does not fall within the purview of international transaction as defined under section 92B of the Act and hence, the orders of the lower authorities are reversed. This issue of assessee’s appeal is allowed. Addition on account of transfer pricing adjustment towards interest on outstanding balances of the AE-PTFSI - Held that:- Outstanding debit balances with the associates is not directly covered within the ambit of 'international transaction'. Also, the terms “any other transaction having a bearing on the profits, income, losses or assets of such enterprises” must be interpreted ejusdem generis with the transactions mentioned in the preceding clause or at least analogous to it and therefore would not include the provision of guarantee for loans taken by associate enterprises. In view of the above, we are of the view that it is the real income and not the hypothetical income which is to be taxed and real income is to be ascertained from the realistic and practical point of view as held by Hon’ble Supreme Court in the case of UCO Bank (1999 (5) TMI 3 - SUPREME Court ). Hence, we delete the disallowance and reverse the orders of the lower authorities. Addition on account of subsidy received under package scheme of incentive from Government of Maharashtra by holding the same as revenue receipt - Held that:- Central Board of Direct Taxes ('CBDT') has issued Circular No. 142 dated 01-08-1974 wherein it has clarified that where the subsidy is primarily given for helping the growth of industries and not for supplementing their profits, such subsidy can be regarded as 'capital' receipt in the hands of the recipient. Further, it has been time and again held by various Courts that Circulars issued by CBDT are binding on Revenue and it is not open to the Revenue even to raise a contention contrary to the binding circular. Therefore, it is the purpose' under the Scheme which is relevant to decide whether the incentives are 'capital' or 'revenue' receipt and other factors like the point of time when incentive is received, the form, etc are irrelevant considerations. For the same reasons, nomenclature given to any incentive/component of an incentive will not be decisive for determining the 'revenue' or 'capital' nature of such benefits. Thus, considering that the purpose of PSI is to enable the Company to set up a new unit or to expand an existing unit to encourage industrial development in the State, the subsidy / incentives received is on capital account in the present case of the assessee and hence, not chargeable to tax. Accordingly, this issue of the assessee’s appeal is allowed. Disallowance of expenses relatable to exempt by invoking the provision of section 14A r.w.d. 8D - Held that:- As during the relevant previous year relevant to this assessment year, the assessee has not earned any dividend on investments, and not claimed it as exempt income u/s. 10(34) of the Act. Therefore, no disallowance u/s. 14A can be called for. We find that this issue is covered in favour of assessee and against Revenue by the decision of the Hon’ble Delhi High Court in the case of Cheminvest Limited vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT ]. AS the assessee itself has made disallowance of Rs. 2,73,960/- and the same is returned by the assessee in its return of income for the relevant assessment year and hence, we restrict the addition to this extend only. The learned counsel for the assessee during the course of hearing also conceded this issue. Accordingly, this issue of assessee’s appeal is partly allowed. Addition u/s 115JB of the Act on account of revaluation reserve created for revaluation of land - Held that:- this is not a case of revaluation of stocks. The Indian Accounting Standards (AS-2) does not permit upward revaluation of stock-in-trade. This is, a case of transfer of Fixed Asset to Stock-in-trade at a revalued amount. Indeed, in the year of creation of Revaluation Reserve, there is no commercial profit earned by the Assessee Company by virtue of revaluation. The entire purpose of introduction of MAT was that certain companies were declaring significant book profits, paying dividends to its shareholders but not paying any tax because of various tax shields like investment allowance, depreciation etc. Accordingly, we delete the addition made by AO of the entire amount of revaluation reserve created during the year to its audited profit applying the provisions of section clause (b) of explanation (1) to section 115JB (2) of the Act. However, the AO will verify whether the assessee has released a sum of Rs. 165,26,83,871/- from revaluation reserve and credited to the profit and loss account, in that case this is not to be added as income under section 115JB of the Act. This issue of assessee’s appeal is partly allowed. Addition towards capital gains on conversion of land into stock-in trade - Held that:- We find from records that lower authorities proceeded on total misreading of the relevant provision of the Act and have brought to tax the whole of the capital gain on the conversion of the land (fixed asset) to stock in trade in the year in which only part sale of stock in trade is effected and assessee has offered the proportionate capital gain in the year under consideration. We, in view of the above facts and circumstances, direct the AO to verify the sale of stock in trade effected and offered the proportionate capital gains in the relevant years and the same should be taxed accordingly. This issue of assessee’s appeal is set aside for verification purpose only with the above directions. Addition of disallowance under section 14A of the Act r.w.r 8D while computing book profit under section 115JB - Held that:- This issue is covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned CIT Departmental Representative could not controvert the above proposition. Accordingly, we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. (supra), respectfully following the same, we delete the disallowance and allow this issue of assessee’s appeal.

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• 2017 (11) TMI 375
  Reopening of assessment - addition of bogus purchases - profit rate application - Held that:- We have observed that assessee failed to furnish confirmed copy of ledger account and current mailing address of the hawala parties. Accordingly, books of accounts were rejected u/s.145(3) by following the decision of Hon’ble Delhi High Court in the case of Jansampark Advertising And Marketing (P) Ltd.[2015 (3) TMI 410 - DELHI HIGH COURT]. After considering the fact that material so purchased have actually been used by the assessee in manufacturing activity and also the fact that assessee has furnished quantitative analysis of consumption as per tax audit report, the CIT(A) has restricted addition to the extent of 12.5%. Keeping in view of the findings recorded by CIT(A) vis-à-vis G.P. rate disclosed by assessee during the year under consideration in its manufacturing activity, we modify the orders of the lower authorities and direct for upholding addition by applying profit rate of 10%. We direct accordingly.

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• 2017 (11) TMI 374
  Scope of adjustment permissible under section 143(1) - Status of the trust - Held that:- We find merit in the alternative contention of the learned counsel for the assessee that the issue relating to the determination of the status of the assessee as well as the rate of tax applicable to it is highly debatable and the same is beyond the scope of adjustment permissible under section 143(1). Therefore, accept the alternative contention raised by the assessee and setting aside the impugned order of the Ld. CIT (A), I direct the AO to take the status of the assessee as claimed in the return of income and levy tax accordingly. Appeal of the assessee is allowed.

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• 2017 (11) TMI 373
  Penalty u/s 271(1)(c) - addition on account of expenses on payment made on behalf of foreign ship owners - Held that:- After going through the assessment order, the Assessing Officer has made payment to the tune of Rs. 20,53,28,258/- and the Assessing Officer has not made any charge on this addition regarding imposition of penalty u/s. 271(1)(c) of the Act in the assessment order and this issue has been discussed elaborately by the ld. CIT(A). In view of the all, we are not inclined to disturb the impugned order of ld. CIT(A). Therefore, it is held that the ld. CIT(A) has rightly deleted the penalty on both the issues. Accordingly, the appeal of the Revenue being devoid of merits deserves to fail. - Decided in favour of assessee.

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• 2017 (11) TMI 372
  Income from sale of shares - capital gain or business income - use of IPO funding availed by the assessee - Held that:- An undisputed fact is that the assessee has applied in the shares, acquired through IPO of the company from borrowed capital. Merely because the shares were purchased through borrowed capital cannot be the ground for capital gain, to be assessed as business income. The fact that the assessee paid interest on borrowings cannot be held against him, treating it business income, when there are other predominating natures which give clear impression that the assessee intended only to invest on shares and not to hold them as stock-in-trade. Therefore, we are of the view that assessee has worked as an Investor and not Trader. The IPO funding availed by the assessee was to get more allotment but the fact of the matter is that the assessee was an investor and the sole intention of applying in the shares through IPO was to get higher allotment of shares. There were no repetitive purchase and sale of the same script in the assessee’s case under consideration, which means that there was no churning of shares. Besides, the assessee has accumulated past losses, that is, short term/long term capital losses, and as per the assessment done by the Department in past years, he is entitled to set-off these losses form short term/long term capital gain in subsequent years, if the Department is changing its stand and treat the assessee as a trader in shares then assessee would not be able to set off these losses and this would be an harassment to the assessee, which is not acceptable. We note that the Department has been consistently accepting the assessee as an Investor in scrutiny proceedings, therefore, we do not uphold the order of the ld. CIT(A) following the Rule of consistency. See RadhasoamiSatsang vs. CIT (1991 (11) TMI 2 - SUPREME Court ). Thus no reason to treat the assessee as a trader. Direct the AO to treat the short-term capital gain / long-term capital gain as income under the head capital gain and treat the assessee as an Investor. - Decided in favour of assessee Disallowance of interest as cost of acquisition in computing the short-term capital gain - Held that:- We are of the view that the assessee under consideration is an investor and the interest paid on loan by the assessee was accepted by the AO as cost of investment and revenue expenditure in the assessment for the A.Y. 2010-11. The interest paid by the assessee, on the money borrowed for acquiring the shares, which is the cost for acquisition of shares. We, therefore, hold that the interest paid by the assessee on the money borrowed for purchase of shares should be treated as cost of acquisition in computing the short-term capital gain / long-term capital gain as the case may be. See case of Smt. Sunita A. Damani [2011 (11) TMI 788 - ITAT MUMBAI] - Decided in favour of assessee

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• 2017 (11) TMI 371
  Revision u/s 263 - disallowance made by him U/s 14A - Held that:- For making any disallowance u/s.14A is to, firstly, examine the assessee’s claim of having incurred some expenditure or no expenditure in relation to exempt income if the Assessing Officer gets satisfied with the same, then there is no need to compute disallowance as per Rule 8D. It is only when the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure having been incurred in relation to exempt income, that the mandate of Rule 8D will operate. In the assessee's case under consideration, the Assessing Officer has satisfied about the expenditure in relation to exempt income, he has every kind of details with him. The Assessing Officer computed the disallowance under the Rule 8D(2)(ii) at Rs.Nil. Under Rule 8D (2) (iii), the Assessing Officer disallowed the amount of Rs. 7,67,500/- stating the expenses which are not related to normal business. Therefore, every kind of details and documents were available before the Assessing Officer and there was no any mistake on the part of the assessee. If the Assessing Officer takes a plausible view to disallow any expenditure then it cannot be said that order passed by him is erroneous and prejudicial to the interest of revenue. Therefore we are of the view that order passed by the ld. CIT U/s 263 is neither erroneous nor prejudicial to the interest of revenue. We accordingly quash the order u/s 263 of the Act and allow the appeal of the assessee.

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• 2017 (11) TMI 370
  Addition of interest received on enhanced compensation as “Income from other sources” u/s 56(2)(viii) r.w.s 145A(b) - whether the interest paid under the provisions of section 28 of LA Act is part of the enhanced compensation or is it taxable as interest income? - Held that:- Interest received u/s 28 of the Land Acquisition Act is not exempt under the act as it could not partake the character of compensation for acquisition of agricultural land. It is held that the interest received on enhanced compensation in the appellant’s case is liable to tax under the head income from other sources. Accordingly, the grounds of appeal raised by the assessee are dismissed.

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• 2017 (11) TMI 369
  Rental income earned by the assessee - head of income selection - chargeable under the head Business Income or Income from House Property - Held that:- The main objective of the assessee company was to deal in real estate of varied nature and the rental income was the main source of income for the assessee. Our view is further fortified by the cited CBDT circular No. 16/2017 and judgment of this Tribunal rendered in the case of assessee’s sister concern under identical situation. Even otherwise, the revenue has accepted the stand of assessee in several other years and rule of consistency demands that similar stand be taken under identical circumstances. Therefore, we conclude that rental income earned by the assessee was chargeable under the head Business Income only as against Income from House Property taken by lower authorities. Resultantly, this ground of assessee’s appeal succeeds. Disallowance of various expenditure viz. depreciation, business expenses, interest expenses etc. - These were disallowed by the lower authorities since the rental income earned by the assessee, as per their opinion, was chargeable under the head Income from house Property against which the assessee was eligible for fixed statutory deduction of 30% - Held that:- Since, we have already allowed assessee’s appeal qua head under which rental income would be assessable, we deem it fit to restore the matter of allowance of various expenditure to the file of jurisdictional Assessing Officer with a direction to re-appreciate the same and verify their allowability as per law. The assessee, in turn, is directed to substantiate the same forthwith failing which Ld. AO shall be at liberty to dispose-off the same on the basis of material available on record. Resultantly, all other grounds stands allowed for statistical purposes.

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• 2017 (11) TMI 368
  Addition u/s.41(1) - waiver of loan as taxable u/s.41(1) - in the nature of trading transaction or not - Held that:- Secured loan obtained from the bank is not obtained during the course of trading transaction and hence neither the provisions of Section 41(l) of the Act nor the rule of law laid down in the decisions relied upon by AO can be invoked to treat that as income within the meaning of Section 41(1) of the Act. Accordingly, AO is directed to delete the addition so made u/s.41(1). Appeal for the A.Y.2000-01 is allowed. Addition in respect of waiver of loan on settlement with the bank by invoking the provisions of Section 41(1) read with Section 28(iv) - A.Y.2001-02 - Held that:- It is clear from the records placed before us that the total dues payable by the Bank consisted of principal component and interest component. The principal Component being a loan in respect of which no deduction, benefit or loss was either claimed or allowed, was transferred to Capital Reserve Account and interest component was duly credited to the Profit and Loss Account and also offered to tax as income within the meaning of Section 41(1) of the Act. The loan received is a capital receipt and it does not lose its capital nature even when it is renounced or waived by the lender. - There is no merit for treating the waiver of loan as taxable u/s.41(1) of the IT Act. - Decided in favor of assessee.

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• 2017 (11) TMI 367
  Bogus purchase and sales - assessee is engaging into bogus entry operations - rejection of books of accounts - Held that:- Assessing Officer has given a copy of the statement to the assessee and asked for the response. The Assessing Officer found no cogency in the submission of the assessee. The Assessing officer has also issued a notice u/s 133(6) to various parties from whom the assessee has claimed to have made sales / purchases. None of the party has confirmed that any sales / purchase transaction has been carried out by the assessee-company nor submitted any transport receipt, warehouse receipt and delivery challans as sought for. No quantitative detail of sales and purchase has been provided by the assessee. These facts make it amply clear that the assessee is engaging into bogus activities. In these circumstances, Assessing Officer has rejected the books of account and considered 1% commission on purchase / sales made with outside parties as assessee’s income. The facts enumerated above clearly indicate that assessee is entry operator and showing fictitious purchase and sales. In the absence of any response from the assessee’s so called purchasers and sellers and in the absence of any quantitative details, we are of the considered opinion that there is no infirmity in the rejection of books.

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• 2017 (11) TMI 366
  Denial of exemption u/s 11 and 12 - Taxing surplus from Transportation and Games holding that the transportation activity, games activity and picnic are business activities - Educational activity - Held that:- The assessee has provided the facilities of the Transportation for the students and staff of the educational activity on chargeable basis which has generated surplus. It is not the case of the revenue that Assessee provides transportation facilities to other outsiders also by charging the fees. Admittedly such facilities is for the purposes of the students etc to whom education is imparted by the society. The claim of the assessing officer that merely because of the admission of the student in the school, he does not become entitle to avail the transport or games facility but has to pay some more fees towards them. We are of the opinion that for the students who are studying in the colleges if they want to avail such facilities then they are charged such fees, which is nothing but providing an additional facility to the students. Therefore it cannot be said that it is not incidental to the education. None of the instances were found by the ld AO or appellate Authorities where the student is not studying in the school and is providing transport or games facility. It is also not the case of the revenue that surplus generated by the assessee in transportation activity is not used for the educational activities. Further the provisions of section 11 (4A) does not apply in case the activity generating profit is incidental to the attainment of the objectives of the trust. In the present case it is not disputed that activities of the games and transportation is for the students of the society and hence both these activities are incidental to the main objects of the trust. Hence the lower authorities erroneously applied the above provisions and taxed the surplus as the separate income of the assessee denying benefit of section 11 and 12 of the act. Transportation activities and Games activity are incidental to the educational activity of the trust. See Queens s Educations Case [2015 (3) TMI 619 - SUPREME COURT ] - Decided in favour of assessee. Disallowance being payment of interest etc to provident fund authorities - Held that:- The assessee has paid interest to provident fund authorities for late payment of provident fund. Before us assessee could not establish that how this expenditure is incurred for the object of the trust. In fact, this expenditure is incurred for the violation made by the assessee of the provident fund laws in not depositing the dues of the assessee as well as of the employees in time. In view of this, the above amount cannot be considered as an application of the income and therefore no infirmity is found in the order of the lower authorities. Hence, ground of the appeal of the assessee is dismissed. Disallowance of depreciation - Held that:- Depreciation to be allowed on the assets, cost of which is already allowed @100% as application of the income. No double deduction. [2014 (11) TMI 733 - DELHI HIGH COURT]

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• 2017 (11) TMI 365
  Exemption claimed u/s 10(23C) denied - entitlement to exemption u/s 11 and 12 - assessee is carrying on educational activity and entitled for registration u/s 12A - Held that:- Delay for making application for granting registration was due to the fact that the assessee has chosen a path of 10(23C). The registration was granted w.e.f. 1.4.2011 on 30.03.2012 and the CIT has never rejected the Registration earlier. Had the society did not prefer the path of 10(23C), it would have applied well in advance for registration u/s 12A, thus we find reasonable cause for delay in applying for the registration u/s 12A. As on the date of registration, the impugned assessments for the assessment year 2010-11 and 2011-12 are pending. The facts of the case are similar to that of Sree Sree Ramakrishna Samity Vs. DCIT reported (2015 (11) TMI 119 - ITAT KOLKATA). Accordingly we hold that exemption u/s 11 and 12 should be granted to the assessee subject to satisfactory compliance of the terms and conditions laid down in the section 11 and 12 for the pending assessments i.e. 2010-11 and 2011-12. Accordingly appeal of the assessee is allowed.

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• 2017 (11) TMI 364
  Rejection of books of accounts - working unrecorded sales out of books of accounts - Held that:- Assessing Officer had noted down certain crucial aspects in not accepting revised chart and therefore, it is wrong to say that the revised chart was not considered by the authorities below. We further find that the assessee had various units located in various parts of the country and all the units of the assessee are excisable units and the mistakes even if committed by Accountant can be verified with the records which has not been done by the authorities below. The Assessing Officer has particularly noted that quantum of raw material inputs as per Excise Register Form No. RQ-23A has not been entered in the Stock Register. He has further held that purchase quantum does not tally with the quantum issued as per excise register. The Hon’ble Tribunal on the other hand had held that assessee had submitted explanation for wrong chart obtained from excise records and stock register. Therefore, we deem it appropriate to remit back issue to the office of Assessing Officer, who should re-adjudicate the additions on the basis of figures to be obtained excise records and stock record. The difference if any between the original chart and revised chart should be explained by assessee in the light of excise records maintained by it - matter remanded back.

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• 2017 (11) TMI 363
  Disallowance made on repairs and maintenance expenses - Held that:- We find that the Tribunal in assessee’s own case for the assessment year 2007-08 and 2006-07 considered a similar addition and adjudicated the same in favour of the assessee. As the revenue has not brought anything on record to demonstrate its point of view that the expenditure in question was incurred in the capital field, we uphold the order of the first appellate authority and dismiss this ground of appeal.- Decided against revenue Disallowance made on account of claim for bad debt - Held that:- The advances were given by the assessee in the normal course of its business and when a loss arises due to non-recovery of such advances and when the same is irrecoverable and written off as such, the same should be allowed as a loss while computing the prof it and gains of business. See CIT –vs. - Sumangal Overseas Limited [2011 (11) TMI 45 - DELHI HIGH COURT] - Decided against revenue

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• Customs

• 2017 (11) TMI 362
  Maintainability of petition - Redemption Fine in lieu of confiscation of Gold imported - Held that: - In view of an effective alternate remedy being available to the petitioner-Bank, the present petition is held to be not maintainable. However, since the limitation in filing such an appeal might have expired by now, as prayed by learned counsel for the petitioner-Bank, the petitioner-Bank is permitted to file an appeal even now i.e., within the period of 30 days from today.

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• 2017 (11) TMI 361
  Correctness of Revision Application - case of petitioner is that if the gold is sold after obtaining orders from the Judicial Magistrate Court, the petitioner's interest could be affected and the Revision Application itself would become infructuous - Held that: - It is not known as to whether the Revision Application has been registered and a number has been assigned to it. As the letter dated 03.05.2017 would intimate that the Revision Application has only be provisionally accepted. However, if the Revision Application is in order and has been entertained by the 3rd respondent, the 3rd respondent may consider the same as expeditiously as possible, preferably within a period of four months - petition disposed off.

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• 2017 (11) TMI 360
  Unjust enrichment - refund of excess duty paid - price variation - the Govt. had enhanced the tariff value vide N/N. 36/2001 dated 03.08.2001. Therefore, differential duty was demanded - The Hon. High Court of Madras in the case of M/s. Foods, Fats and Fertilisers Ltd. Versus The Deputy Commissioner of Customs [2015 (8) TMI 782 - MADRAS HIGH COURT] held that as long as the impugned Notification has been notified in the Official Gazette, to the public, only on 06.08.2001, the duty becomes payable only from that date and as such the excess duty collected is refundable. Held that: - The representative for the appellants is vociferous in his contention that they have paid the differential duty only after sale of all the goods was completed. However, on their own admission, all these documents have not been produced before the sanctioning authority - Accordingly, the appellants should be given another opportunity before the original authority to prove their bonafides and to establish that they have indeed completed the sale of goods before they paid up the differential duty to their buyers - appeal allowed by way of remand.

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• 2017 (11) TMI 359
  Jurisdiction - power of DRI Officer to pass adjudication order - Held that: - It may be stated that when an appeal is admitted, order or judgment of lower court is in jeopardy and judgment of Apex Court shall bring the matter to finality as has been held by Apex Court in the case of Union of India v. West Coast Paper Ltd. [2004 (2) TMI 344 - SUPREME COURT OF INDIA]. Therefore, as a rule of consistency, this matter may also go back to the adjudicating authority for appropriate decision on the basis of outcome of the Apex Court judgment in the case of Mangali Impex [2016 (5) TMI 225 - DELHI HIGH COURT]. When the review is read, that also exhibits that the adjudicating authority has not examined the corroborative evidence gathered by investigation. This is also a ground for remand of the matter for re-adjudication. Appeal allowed by way of remand.

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• 2017 (11) TMI 358
  Penalty u/s 112(b) of CA - Clandestine removal - clearance of duty free imported fabric in domestic area without payment of duty - Held that: - fact is not under dispute that appellant Mr. Shahid Yusuf Qureshi has escorted the truck loaded with offended goods which were cleared without payment of duty by M/s. Mayur Impex. Since, he has escorted the goods he was aware about the offending nature of the goods. Moreover, he was continuously coordinating on phone with the supplier of the goods, therefore it cannot be said that he without knowledge escorted the goods, therefore his handling of offended goods clearly falls under the provision of Section 111 of Customs Act, 1962 - penalty rightly imposed - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 357
  Recovery of customs duty - duty foregone due to duty free import - subsequent amalgamation - Held that: - The goods imported in the present case were meant for use in manufacture but became redundant by virtue of amalgamation. There is no evidence at all brought on record by Revenue to establish that the goods were not meant for such use - When there is no evidence on record to establish that appellant was not enriched at the cost of revenue, appeal is allowed - decided in favor of appellant.

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• Service Tax

• 2017 (11) TMI 355
  Insurance as well as reinsurance broker international insurance - service providers situated abroad - import of services and / or export of services - the decision in the case of Suprasesh General Insurance Services Brokers Pvt. Ltd. Versus The Commissioner of Service Tax, Custom, Excise And Service Tax Appellate Tribunal [2015 (9) TMI 1219 - MADRAS HIGH COURT] contested, where it was held that the basis of the circular, which is clarified that Notification Nos.6/99 dated 09.04.1999, 9/01 dated 16.07.2001, 13/02 dated 01.08.2002 and 2/03 dated 01.03.2003 would not apply to export of service, the question of receiving the payment in convertible foreign exchange does not arise - Held that: - leave granted.

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• 2017 (11) TMI 354
  Valuation - includibility - Fuel Surcharge (YQ Tax) - Passenger Service Fee (PSF) - GDS cost collected (YR) - Held that: - The controversy concerning taxability of Passenger Service Fee collected by the airlines from the passengers in their air ticket has indeed been set to rest in the case laws adduced by the Ld. Advocate. Hence there can be no service tax liability on the quantum of 'passenger service fees' collected by the appellant under this head. For the limited purpose of ascertaining whether the tax liability that was alleged in respect of "other taxes" has also been paid up by the appellant along with interest as averred, the matter is being remanded back to the adjudicating authority. In such de novo proceedings, in case it is ascertained that all the tax liabilities except that relating to Passenger Service Fee has been paid by the appellant along with interest thereon, there shall be no further tax liability in respect of these proceedings. Penalty - Held that: - there was sufficient cause for the appellant's failure to discharge their tax liabilities. Another mitigating factor is that the appellants have paid up the entire tax liability as admitted by them along with interest, before the issue of the show cause notices. Keeping all these aspects in mind, we are of the considered opinion that imposition of penalty would be an overkill, for which reason, they are set aside. Appeal allowed in part and part matter on remand.

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• 2017 (11) TMI 353
  Management, Maintenance or Repair Services - operational activities - levy of service tax - Held that: - the facts in relation to operational activities performed by the appellant under the Operation and Maintenance Agreement entered into by them with Madurai Power Corporation are identical to the facts in the earlier decision of this Tribunal in Shapoorji Pallonji Infrastructure Capital Company Ltd. [2017 (6) TMI 225 - CESTAT CHENNAI], where it was held that The activity carried out in the power plant is not solely management of power plant, but operation of the same. The word operation is not used in the definition of Maintenance and repairservices which is relied by department as amended with effect from 16.06.2005 - the consideration apportioned towards operational activities by the appellant will not attract levy of service tax under Management, Maintenance or Repair Services under Section 65 (64) of the Act - decided in favor of appellant. Levy of service tax - consumables - Held that: - Appellants herein have not availed any cenvat credit in respect of consumables utilized. This being so, the beneficial provisions of N/N. 12/2003-CE will then be applicable to the appellant - decided in favor of appellant. Appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 352
  Levy of tax - sale of food and beverages - documentary evidence - Revenue's challenge is only on the ground that the assessee could not produce the documentary evidence which is required for not taxing the consideration towards the sale of food and beverages as per the Board Circular B1/6/2005-TRU dt. 27.07.2005 - Held that: - the Commissioner (Appeals) had dropped the demand of Rs. 15,41,486/- on account of sale of food and beverages, considering the documents such as VAT Returns, Bar Room Sales Leger, Summary of Bar Room VAT Report, Specimen Bills etc. therefore it cannot be said that the Ld. Commissioner (Appeals) had dropped the demand without any basis. The documents referred in the finding of the Ld. Commissioner (Appeals) are more than sufficient to establish the receipt towards sale of food and beverages. Therefore, we do not find any infirmity in the order in as much as it dropped the demand of Rs. 15,41,486/- - decided against Revenue. Doctrine of mutuality - whether consideration receipt by the club from their members is taxable or otherwise? - Held that: - Considering the doctrine of mutuality therefore all said judgments cited are also in jeopardy, accordingly this Tribunal cannot take any decision on the merit of the case in the present legal status of the issue on merit - As regard the quantification error pointed by the assessee in their grounds of appeal. We find that there appears to be apparent errors and if the same is rectified the demand would be substantially reduced - matter on remand. Partly decided against Revenue and part matter on remand.

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• 2017 (11) TMI 351
  Penalty u/s 76 and 78 of FA - delay in payment of tax - invocation of Section 73(3) of the Finance Act, 1994 - extended period of limitation - Held that: - the question of financial hardship does not arise as the liability was to be discharged on amounts received. It is also seen that the figure mentioned in the Balance Sheet do not match with the returns filed by them. The appellant have also admitted their liability to Service Tax and admitted to failure to deposit the same, in these circumstances invocation of period of limitation is justified and consequently penalties under Section 76 & 78 become are imposable. Invocation of section 80 - The appellant have sought benefit of Section 80 on the ground that their transactions are recorded in their Books of Account and non-payment of Service Tax to the appellant by their client - Held that: - The liability of appellant arise by receipt of payment from the client. There cannot be a liability if payment has not been received, during the impugned order. Thus non receipt of Service Tax amount cannot come in way of their ability to pay. The fact that transactions are recorded in Books of Account is not material, as they needed declare the same in the ST-3 return - By not declaring the values in the ST-3 return they have failed to shows the correct liability, in these circumstances Section 80 is not applicable. Appeal dismissed - decided against appellant.

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• 2017 (11) TMI 350
  Manpower Recruitment and Supply Agency Service - whether the employees of the appellant deputed to the their other group companies against which they received consideration towards remuneration of those employees during 2006-07 to 2009-10 falls under category Manpower Recruitment and Supply Agency service as defined under sub clause (k) of Section 65(105) of the Finance Act, 1994 and liable for Service Tax? - Held that: - from shareholding pattern it is seen that some companies share holding is less than 50%, therefore it cannot be said that these are subsidiaries of the appellant - Similarly in other subsidiary companies it has to be ascertained, whether in of case different limited company, whether there is relationship of service provider and service recipient. Since the adjudicating authority has not gone into details of constitution of the each company and share holding pattern, matter needs to be remanded to the adjudicating authority - appeal allowed by way of remand.

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• 2017 (11) TMI 349
  Commercial training and coaching centre services - Extended period of limitation - effect of amendment, retrospective or prospective - N/N. 9/2003-ST dated 20.06.2003 as amended by N/N. 24/2003-ST dated 10.09.2004 - Held that: - the explanation as to what is vocational training institute indicates that the said exemption can be extended to any vocational training institute which imparts skills to enable the trainee to seek employment or undertake self-employment directly after such training or coaching. It is nobodys case in all these appeals that for completion of the educational programmes conducted by the appellants, students are employed either directly by the employers or can seek self-employment. We find that in support of such a claim, appellants have enclosed a list of the students who were employed by various industries on successful completion of education programmes conducted by the appellants. In our view, there can not be any doubt as to the fact that the students successfully completing the educational programmes of the appellants are being selected for employment by various organisations. It is evident that the term "vocational training institute" included the commercial training or coaching centers which provide vocational coaching or training meant to "impart skills to enable the trainees to seek employment or to have self employment directly after such training or coaching. The notion of such training institute having been recognized or accredited to nowhere emerges from such a broad definition. The further Notification of 2010 substitutes the existing explanation to the term "vocational training institute"and narrowing it to those institutes affiliated to National Council for Vocational Training offering courses in designated trade in fact supports the assessee. Had the intention been to exempt only such class or category of institutions, the appropriate authority would have designed such a condition in the original Notification of 2003 and Notification No. 10 of 2004. Service tax demands raised and confirmed in the denovo adjudication by denying the benefit of exemption notification for the period 1.07.2003 to 31.3.2005 is incorrect and unsustainable - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 348
  Validity of SCN - Time limitation - Held that: - the SCN was issued after a period of 5 years - the Adjudicating Authority has followed the Circular No. 58/2003, dated 20-5-2003. When it is so then we find no need to interfere with the impugned order and the same is sustained. The observations of adjudicating authority on Section 11D is not correct as Section 11D does not provide any rigid time limit. However, show cause notice under Section 11D has to be issued within reasonable period - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 347
  CENVAT credit - GTA services - whether appellant is eligible to avail credit on GTA services for the period October, 2005 to March, 2006? - sub-section (4) of Section 84 - Held that: - The provision of sub-section (4) of Section 84 expressly states that no order shall be passed by the Commissioner when an appeal is pending before the Commissioner (Appeals). Therefore, the order passed by the Commissioner confirming the penalty under Section 76 as well as confirming the demand of interest is against law - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 346
  Security services - levy of tax - whether providing armed security guards to public sector banks/undertakings and Govt. departments is to be covered under the definition of ‘security services’ and collection of charges for the same will be liable to service tax under the Finance Act, 1994? Held that: - CBEC has issued a Circular No. 89/7/2006-S.T., dated 18-12-2006 clarifies that wherever the charges collected by any sovereign public authority for carrying out any statutory function, the same is not liable to levy of service tax subject to three conditions - CESTAT in the case of Dy. Commissioner of Police & Others v. CCE, Jaipur & Others, [2016 (12) TMI 289 - CESTAT NEW DELHI] concluded that the police department which is in the agency of State Government cannot be considered to be a person engaged in the business of running security services. It is on record that the appellant is depositing the money collected on account of the subject services in the Govt. treasury. It is also on record that the appellant is performing statutory function which is one of the three conditions of the CBEC Circular dated 18-12-2006 and it has also been claimed that the collection of the fee levied by the appellant is as per the provisions of relevant law. Appeal allowed - decided in favor of appellant

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• 2017 (11) TMI 345
  Penalty u/s 76 and 78 - payment of tax with interest and 25% penalty on being pointed out - Manpower Recruitment Agency service - Held that: - Since, the SCN in the present case has been issued on 28-8-2009, which is after the date of amendment of Section 78 and imposition of penalty under such provision has been invoked, no further penalty under Section 76 ibid can be imposed on the appellant - penalty u/s 76 and 78 set aside - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 344
  GTA service - N/N. 34/2004-S.T., dated 3-12-2004 - Held that: - the exemption is only available on first voucher and not on subsequent vouchers - In the instant case, the lower authorities have already disallowed the claim on the vouchers which are in numbers but each below Rs. 1500/-. Thus the order appears reasonable as per the Golden Rule of Interpretation for the reason that in the said N/N. 30/2004 the word “a” transaction is already mentioned. Penalty u/s 76 - Held that: - In the instant case, the Appellate authority has already cancelled the another penalty. When it is so, then we find no reason to interfere with the order impugned which is hereby sustained along with the reasons mentioned therein. Appeal dismissed - decided against appellant.

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• Central Excise

• 2017 (11) TMI 343
  Maintainability/entertainability of the present Appeals - Section 35G of the Central Excise Act - the decision in the case of COMMISSIONER CENTRAL EXCISE AND SERVICE-TAX APMEDABAD-III Versus PRAVINBHAI NARSHIBHAI PATEL, PARTNER [2016 (12) TMI 478 - GUJARAT HIGH COURT] contested, where it was held that despite having found that the present Appeals under Section 35G of the Act before this Court shall not be maintainable, the present Appeals are not required to be entertained and/or held to be maintainable merely because the Department earlier before the Hon’ble Supreme Court withdrew it with a liberty to prefer appeals before this Court, more particularly when the question of maintainability of appeals before this Court has not been addressed before the Hon’ble Supreme Court - Held that: - delay condoned - notices issued.

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• 2017 (11) TMI 342
  Principles of Natural Justice - Whether non supply of resumed records which are relied upon in SCN and adjudication order constitute violation of principles of natural justice, when not provided in spite of preliminary objections and request letters? - Whether onus of proving classification was on the part of appellant when all the resumed and relied upon documents were not supplied to him in spite of repeated requests? Held that: - It is well settled principle of law that the person who is to take an action is required to supply basic documents, which sought to be relied upon. The documents though referred in the show cause notice were not given to the assessee by the Tribunal - The Tribunal has seriously committed an error in dealing with issue in view of the decision of this Court in case of P.G.O. Processors Private Limited vs. Commissioner, C.Ex., [2000 (1) TMI 59 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR] the documents which are required to be given to the assessee. The matter is remitted to the first authority. The petitioner will appear before the first authority on 06.11.2017 and authority will settle the matter within a period of four weeks - appeal allowed by way of remand.

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• 2017 (11) TMI 341
  Clandestine removal - yarns - Revenue entertained a view that the said yarn was clandestinely cleared by the appellant to the three units ie., M/s. Gowri Textiles, M/s. Sri selvapathy Textiles and M/s. Arulmathi Tex, who are sister concerns of the present appellant with the same Managing Director Shri S. Rangasamy being a partner in those three units - Held that: - the above view entertained by Revenue may be a cause of doubt against the appellant but cannot by itself, take the shape of evidence so as to confirm the findings of clandestine activities against the assessee. I have also examined the statement of Shri Rangasamy which is merely to the effect that he is not able to show the invoices in respect of the alleged clearances and if the Revenue is of the view that such yarn received by the sizing units has been cleared from their factory, without payment of duty, he is ready to pay the duty. Apart from the fact that confessional statements cannot be adopted solely for arriving at the clandestine removal findings, I find that the said statement of Shri S.Rangasamy cannot be held to be confessional statement, in strict sense, in as much as there is no acceptance of the fact that they were indulging in clandestine activities - Revenue has not examined the scribe of the entries made in the receipt book of the sizing mills, on the basis of which the entire case of the Revenue is made. The findings of the lower authorities are based upon the surmises and conjectures and there is virtually no evidence produced by the Revenue to establish clandestine removal against the assessee. It is also to be noted that during the relevant period the appellant s factory was put to stock taking, by the officers themselves, not once but three times and no discrepancies were found either in the raw materials stock or the final product stock. In such a scenario, the appellants cannot be held to be indulging in clandestine activities and it is for the Revenue to produce the evidence to support its allegations. Appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 340
  Valuation - goods sold to Holding company - time limitation - whether the aspect of applicability or otherwise of extended period of limitation has been sufficiently dealt with by the lower appellate authority? - Held that: - From a plain reading of the provisions of Section 11 AC of the Central Excise Act, 1944, it is clear that mandatory penalty equal to the duty determined is imposable when duty of excise has not been levied or paid put forward by reasons of fraud, collusion or any mis-statement or suppression of facts etc., with intention to evade payment of duty - No doubt, the original authority, while justifying invokation of extended period, has observed that there is suppression on the part of the assesse. But, we are unable to fathom how in spite of such an observation, he has chosen not to impose penalty under Section 11 AC. When the original authority has chosen not to impose penalty under Section 11 AC, impliedly he has also not found any elements of fraud, collusion, suppression or mis-statement in the conduct of the assessee. When no such contumacious conduct is found, there can be no justification for invocation of extended period of limitation provided under Section 11 A (1) ibid - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 339
  Deemed manufacturer - availing of Cenvat Credit after abolition of Rule 12B - Held that: - identical issue decided in the appellant own case M/s Harco Exports (India) Versus Commissioner of Central Excise, Mumbai-I [2017 (6) TMI 267 - CESTAT MUMBAI] - in both the proceedings, the charges against M/s.Harco Export (India) are identical in nature of having continued to avail Cenvat Credit and paid Central Excise duty despite resending of Rule 12B. Both the proceedings are for identical period. The proceedings initiated in Mumbai-1 Commissionerate has been set aside by the Tribunal by order dated 30/05/2017. Consequently, the impugned proceedings against M/s.Harco Exports (India) also cannot survive and are set aside - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 338
  CENVAT credit - input services used for both manufacturing as well as trading activities - case of appellant is that it is the option of the appellant to avail the benefit of any of the option prescribed under Rule 6(3) of the CCR - Held that: - no option can be thrust upon the appellants and the appellants are free to choose any of the three options available to them. The appellants have on their own reversed a certain amount of cenvat credit which does not appear to have verified by the lower authorities. In view of the above, appeal is allowed in so far as reversal of credit in terms of 6(3)(ii) is permitted. However for verification of calculation the matter is remanded to the original adjudicating authority - appeal allowed by way of remand.

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• 2017 (11) TMI 337
  CENVAT credit - capital goods - duty paying documents - Held that: - The only thing disputed is the appellants have failed to provide the transport document on the said machine from Koregaon to the appellants’ premises. It is seen that the appellants have now submitted an undertaking of transporter dated 19.05.2015. In these circumstances it can be reasonably said that the grounds of rejection in the impugned order did not survive - appeal allowed - decided in favor of appellant.

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• 2017 (11) TMI 336
  CENVAT credit - fake invoices - appellant’s submission is that they were not provided documents asked for during adjudication and cross examination was also not allowed - natural justice - Held that: - Though the case is prima facie against the appellant, but despite this principle of natural justice has to be complied with. I am therefore of the view that one opportunity can be given to the appellant. The adjudicating authority shall provide the documents as asked for by the appellant and also allow the cross examination of the persons wherever possible - appeal allowed by way of remand.

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• 2017 (11) TMI 335
  Interest - penalty u/r 173Q - short payment of duty due to wrong calculation of assessable value - Held that: - the differential duty arose only due to wrong calculation of value which the appellant paid. The duty paid by the appellant was taken as cenvat credit by the sister concern which is recipient of the goods. Therefore the malafide intention is not proved - penalty not imposable and is set aside. Interest - Held that: - the interest u/s 11AB is inevitable wherever there is a delay in payment of duty, interest is payable. Accordingly, demand of interest is upheld. Appeal allowed in part.

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• 2017 (11) TMI 334
  Whether the ‘Blast Furnace Gas’ generated as bi-product during the manufacturing process is leviable for payment of an amount in terms of Rule 57AD of erstwhile CER, 1944/Rule 6(3)(b) of CCR, 2001/2002/2004? Held that: - demand of 8% under Rule 6 of Cenvat Credit Rules, 2002/2004 is not applicable, in the light of the Hon’ble Apex Court judgement in the case of Hindustan Zinc Ltd. [2014 (5) TMI 253 - SUPREME COURT], where it was held that Payment of 8%/separate accounts not applicable for by-products - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 333
  Refund claim - price variation clause - supplementary invoice - denial on the ground that value of supplementary invoice is part and parcel of assessable value and should be included in the assessable value, therefore duty was correctly payable - Held that: - value which is paid or payable at the time of removal of the goods was the price which was charged in the main invoice. The supplementary invoice was raised subsequently for the price variations. The said price was not chargeable at the time of the clearance of the goods. Moreover, the customer has refused to accept that supplementary invoice and returned the same back to the respondent. Accordingly, firstly this amount was not payable at the time of clearance and subsequently also the same was not paid by the customer therefore excise duty paid in respect of supplementary is payment of excess duty which is correctly refundable to the respondent. Similar issue decided in the case of CCE Rajkot Versus M/s. Amul Industries Pvt. Ltd. & Others [2011 (3) TMI 586 - CESTAT, AHEMDABAD], where it was held that if the payment of supplementary invoice was not made by the customers because duty has not chargeable, refund of the same is admissible under Section 11B. Refund allowed - Appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 332
  CENVAT credit on Sugar Cess - sugar cess paid on imported raw sugar - denial on the ground that sugar cess paid under the Sugar Cess Act was not admissible under Rule 3(i) of CCR, 2004 - Held that: - issue is no longer res integra in the light of the decision in the case of Commissioner of Central Excise, Customs and Service Tax, Belgaum Versus Venkateshwara Power Projects Ltd. [2017 (7) TMI 836 - CESTAT, BANGALORE], where placing reliance in the case of Shree Renuka Sugars Ltd. [2014 (1) TMI 1469 - KARNATAKA HIGH COURT] it was held that Rule 3 of the Cenvat Credit Rules provides that a manufacturer or producer of a final product shall be allowed to take credit of the duty of excise. Therefore, once a duty of excise is paid, the manufacturer or producer of the final product is entitled to take CENVAT credit - the Cenvat credit in respect of sugar cess paid as CVD on imported sugar is admissible - appeal dismissed - decided against Revenue.

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• 2017 (11) TMI 331
  Penalty u/s 11AC - compliance of provision of Rule 11A(2B) - Held that: - there is no dispute that entire amount of demand along with interest had been paid by the respondent before issuance of SCN. Considering the said facts, the Ld. Commissioner(Appeals) waived the penalty invoking provision of Section 11A(2B) - Section 11AC penalty cannot be imposed if the respondent has opted for provision of Section 11A(2B) under which they have admittedly paid entire amount along with interest before issuance of show cause notice. Therefore I do not find any infirmity in the impugned order passed by the Commissioner(Appeals) - appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2017 (11) TMI 330
  Exemption by way of refund of Earned Input Tax Credit - Certificate of Entitlement - Section 42(4A) of the Act - case of petitioner is that In the assessment order which is passed on 8.4.2013 there is no discussion about Certificate of Entitlement by the Assessing Authority, of which the petitioner is affected - Held that: - With the consent of the learned counsel for the parties the writ petition is finally disposed of by directing the petitioner to approach the appellate authority under Section 55 of the U.P. VAT Act or any other provision of law, which entitled the petitioner to approach the appellate authority to raise its grievance with regard to claim passed by the amended order by the Commissioner of Commercial Tax dated 10.2.2016 allegedly entitling the petitioner company for the refund, so as claimed - since this writ petition has been entertained in the year 2013 on 27.5.2013 and was pending before this Court, there would be delay caused to approach the appellate authority on the part of the petitioner - we direct the appellate authority to entertain the appeal, if the same is filed within a period of three weeks from today, without going into the question of limitation.

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• 2017 (11) TMI 329
  Application of Stay - request for waiver - huge liability as per review orders - Held that: - It is true that at the stage of considering application for stay it is not necessary to record any concluded findings or to finally deal with serious issues. However, the order must reflect application of mind, on the issue whether the issues raised in the pending Appeal are debatable or arguable. Prima facie consideration of the submissions made on merits is necessary to decide, whether stay should be granted by complete waiver or whether stay should be granted on conditions. In the facts of the present case, even the Tribunal has declined to go into the question of existence of a prima facie case - The Petitioner has deposited a sum of Rs. 10 lakhs on 13th September 2017 without prejudice to its rights and contentions in the pending Appeal. In view of this deposit and considering the nature of the impugned order, we find that interference with the impugned order is warranted. The order dated 17th July 2017 passed by the Maharashtra Sales Tax Tribunal at Mumbai is set aside and stay applications in VAT Appeal Nos. 208 to 212 of 2016 are restored to the file of the Maharashtra Sales Tax Tribunal.

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• Indian Laws

• 2017 (11) TMI 356
  Suit filed for recovery of money with interest - Money withdrawn by messenger and relative used to transact with the Bank on plaintiff's behalf by forging signatures in the cheque slips - Whether the plaintiff is entitled for the amount claimed? - whether the defendant Bank Officials had passed the cheques without due care and by gross negligence, which amounts to dereliction of duty and misconduct in the course of employment? Held that:- To seek protection under section 131, the Banker has to establish that it was not negligent while honouring the cheques presented by Thomas and it was acting in good faith, after following standard protocol for passing the cheques. In this case, the depositions of P.W.1 to P.W.6 satisfy the said requirements. To prove that there was negligent on the part of the bank, it is for the plaintiff to adduce the evidence satisfactory to the conscious of the Court. While the trial Court has cursorily gone through the evidence and allowed the suit, the lower appellate Court has pointed the lapses and lacunae in the finding of the trial Court and has reversed the finding of the trial Court. This Court, on going through the materials placed, holds that the respondent bank was never negligent in honouring the cheques. Hence, they are protected under Section 131 of the Negotiable Instrument Act, 1881. In the absence of justification on the part of the plaintiff for allowing the said Thomas to handle her passbook and cheque book and representing to the bank implicitly and explicitly that Thomas is her representative, she is estopped from alleging negligence on the part of the respondent bank. Therefore, the conduct of the respondent Bank estops her from questioning the bank for honoring the cheques of the plaintiff. Even if it is not signed by her, but due to lookalike signatures, the bank cannot be held responsible. The evidence of DW1 to DW6 narrate the care and caution exercised by the bank officials while passing the cheques. Therefore, their evidence cannot be just ignored, in the absence of contra evidence. As pointed out by the lower appellate Court, the reasoning of the trial Court is bad and bereft of details for his conclusion that the signatures found in the cheques are forged. Therefore, even though there is no legal impediment to exercise the power under Section 73 of the Indian Evidence Act, 1872, without resorting to expert opinion under Section 45 of the Indian Evidence Act, 1872, the manner in which the power under Section 73 of the Indian Evidence Act, 1872 exercised is always subject to judicial scrutiny. First and foremost, the plaintiff/appellant ought to have proved the case of forgery by letting in plausible evidence, which is well within her limitation, but miserably failed to do. Next, in the absence of reasoning and the process undertaken by the trial Court to arrive at the conclusion that signatures found in the disputed signatures are forged, since finding deserves to be reversed. The lower appellate Court has rightly reversed the trial Court finding by allowing the first appeal.

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