TMI Tax Updates - e-Newsletter
December 1, 2018

Case Laws in this Newsletter:

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

Articles

1. ANNUAL RETURN: A COMPREHENSIVE ANALYSIS

   By: CA.Saurav Patni

News

1. Monthly Account of the Government of India up to the month of October 2018 for the Financial Year 2018-19

2. Dr. Ajay Bhushan Pandey takes over as Revenue Secretary

3. Fifth Bi-monthly Monetary Policy Statement, 2018-19

4. India to Chair Kimberley Process from 1st January 2019

Notifications

Companies Law

1. F. No. 5/2/2018- NFRA - S.O. 5848(E) - dated 28-11-2018 - Co. Law

Appointed Shri Rangachari Sridharan as the Chairperson, the National Financial Reporting Authority (NFRA)

Customs

2. 78/2018 - dated 29-11-2018 - Cus

Amendment to notification no. 57/2000-Customs dated 08.05.2000

DGFT

3. 44/2015-2020 - dated 30-11-2018 - FTP

Amendment in Para 4.32(i) of Chapter 4 of the Foreign Trade Policy 2015-20

GST

4. 66/2018-Central Tax - dated 29-11-2018 - CGST

Seeks to extend the due date for filing of FORM GSTR – 7 for the months of October, 2018 to December, 2018.

GST - States

5. LGL.123/2017/120 - dated 20-10-2018 - Assam SGST

Assam Goods and Services Tax (Amendment) Act, 2018

6. 38/1/2017-Fin(R&C)(81) - dated 28-11-2018 - Goa SGST

Amendments in the Government Notification No. 38/1/2017-Fin(R&C)(72), dated 21st September, 2018

7. 15/2018-State Tax - dated 10-10-2018 - Kerala SGST

Notifies the National Academy of Customs, Indirect Taxes and Narcotics, Department of Revenue, Ministry of Finance, Government of India, as the authority to conduct the examination of GST Tax Practitioners.

8. 14/2018-State Tax - dated 10-10-2018 - Kerala SGST

Amendments in the Notification No. 6/2018-State Tax dated the 11th July, 2018.

9. 18/2018-TNGST-Rc.46/2018 /Taxation/A1 - dated 29-11-2018 - Tamil Nadu SGST

Last date for filing FORM GSTR-1 for the month of October 2018 has been extended upto 20th December 2018 for the taxpayers having principal place of business in 11 districts of Tamil Nadu.

10. 17/2018-TNGST-Rc.46/2018/Taxation/A1 - dated 29-11-2018 - Tamil Nadu SGST

Last date for filing FORM GSTR-3B for the month of October 2018 has been extended upto 20th December 2018 for the taxpayers having principal place of business in 11 districts of Tamil Nadu.

11. TAMIL NADU ORDINANCE NO. 2 OF 2018 - dated 14-11-2018 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Amendment) Ordinance, 2018

12. No. 854/2018/15(120)/XXVII(8)/2018/CT-43 - dated 27-9-2018 - Uttarakhand SGST

Notifies the registered persons having aggregate turnover of up to 1.5 crore rupees furnishing the details of outward supply of goods or services or both

13. 857/2018/16(120)/XXVII(8)/2018/CT-49 - dated 27-9-2018 - Uttarakhand SGST

Uttarakhand Goods and Services Tax (Tenth Amendment) Rules, 2018

14. 855/2018/15(120)/XXVII(8)/2018/CT-48 - dated 27-9-2018 - Uttarakhand SGST

Uttarakhand Goods and Services Tax (Ninth Amendment) Rules, 2018

15. 853/2018/10(120)/XXVII(8)/2018/CT-41 - dated 27-9-2018 - Uttarakhand SGST

waive the late fee return in FORM GSTR-3B, FORM GSTR-4 and FORM GRTR-6

Service Tax

16. 01/2018 - dated 30-11-2018 - ST

Exempting the payment of Service Tax on services by way of granting of right of way by local authorities for the period commencing from the 1st of July, 2012 and ending with the 30th of June, 2017

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CDMRD/DMP/CIR/P/2018/146 - dated 30-11-2018

Trading hours for commodity derivatives segment

GST - States

2. 8/2018-TNGST - dated 12-11-2018

TNGST Act, 2017 - Commercial Taxes Department - Guidelines for Deductions and Deposits of TDS by the DDO under GST.

DGFT

3. 51/2015-2020 - dated 30-11-2018

Wastage Norms and Value Addition in respect of Gold religious idols (only gods and goddess) of 8 carats and above (upto 24 carats) under Para 4.60 and 4.61 of HBP 2015-20 - reg.

Highlights / Catch Notes

GST

• GSTR-7 Filing Deadline Extended for October to December 2018 Period.

  Notifications : Seeks to extend the due date for filing of FORM GSTR – 7 for the months of October, 2018 to December, 2018.
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• Court Highlights Importance of Correct E-Way Bill Use in Goods Transport to Uphold Economic Efficacy.

  Case-Laws - HC : Detention of goods - e-way bills meant for intra-state transport - interstate movement of goods - in the name of interim orders and in the name of our exercising judicial discretion at the threshold, we cannot afford to chip away at the statutory scheme-especially if the scheme has an economic efficacy.
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• Transmission Line Contract Deemed Single Source for Bundled Supplies; GST Exemption Not Applicable.

  Case-Laws - AAR : Erection of a series of transmission towers and commissioning of the transmission line - It is thus a single source contract for bundled supplies of goods and services - Benefit of exemption from GST not available.
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• International Inner Wheel's Activities in India Classified as Business, Subject to GST as Supply of Services.

  Case-Laws - AAR : Supply of Services or not - applicant is affiliated to International Inner Wheel and the administrative body for all Inner Wheel Clubs spread in 27 Inner Wheel Districts all over India - whether the activities undertaken by them may be termed “business” or not - Held Yes.
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Income Tax

• Assessing Officer's Error: Section 68 Misapplied Instead of Section 69, Unexplained Cash Deposits Addition Deleted.

  Case-Laws - AT : Addition u/s 68 - unexplained Cash deposits in bank - To our mind in present facts of case section 69 should have been initiated by Ld.AO. It is unfortunate that Assessing Officers blindly apply provisions, which can be fatal to the interest of Revenue. - Additions deleted.
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• Income Below 15% Threshold: No Taxable Income Assessed; Additions by AO and CIT(A) Removed u/s 11.

  Case-Laws - AT : Exemption u/s 11 - since the net income as per expenditure account is much below the prescribed limit of 15%, therefore, no income is held to be taxable and consequently in all the years income has to be assessed at ‘nil’ and consequently the entire addition made by the AO and CIT(A) is directed to be deleted.
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• Expenditure in foreign currency excluded from 'Export Turnover' u/s 10A; unsupported transaction split by Assessing Officer invalid.

  Case-Laws - HC : Computation of deduction u/s 10A - exclusion of expenditure incurred in foreign currency in export of software, from the purview of 'Export Turnover' - the artificial split up of the transaction by the Assessing Officer, that too without any materials on his file, is wholly unsustainable
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• Company's Management Services Not Taxable in India Under DTAA; Section 40(a)(i) Disallowance Not Justified.

  Case-Laws - AT : TDS u/s 195 - Management service cannot be characterized as ‘fees for included services’, and hence, not taxable in India as per the Double Taxation Avoidance Agreement (DTAA) between India and USA - disallowance u/s 40(a)(i) is not justified.
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• Board Approval Pending for Performance Pay to Directors and Staff, Expense Claim Allowed as Liability Crystallized.

  Case-Laws - HC : Additions made on account of provisions of performance related pay to director and staff - Payment could not be made simply, because, the approval of Board of Directors which was necessary, was awaited. The liability had thus, crystallized - Claim of expenses allowed.
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Customs

• SEZ Units' Supplies to DTA Eligible for SAD Refund Under Notification No. 102/2007-Cus.

  Case-Laws - AT : SEZ unit - refund of SAD - supply of goods from Special Economic Zone (SEZ) to Domestic Tariff Area (DTA) is eligible for exemption Notification No. 102/2007-Cus and consequently, the DTA unit is entitled for the refund of Special Additional Duty of customs paid on such supply.
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• EOU Debonding Case: Procedural Lapses Shouldn't Deny Benefits Under Notifications 25/99-Cus & 25/2002-Cus.

  Case-Laws - AT : 100% EOU - Debonding of EOU - if any lapse on the part of the appellant it is mere procedural lapse. For this reason, the substantial benefit of notification no. 25/99-Cus and 25/2002-Cus cannot be denied
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• Chocolates Import Needs Strict Labels per FSSAI Act 2006; NOC Issuance Depends on Compliance with Curable Issues.

  Case-Laws - HC : Import of Chocolates - Issuance of NOC under the FSSAI Act, 2006 - the strict labelling requirement in respect of objection 1 in the second review order, even if it is there, is curable.
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DGFT

• Foreign Trade Policy 2015-20: Amendment to Paragraph 4.32(i) Announced by DGFT, Updating Tax Regulation Highlights.

  Notifications : Amendment in Para 4.32(i) of Chapter 4 of the Foreign Trade Policy 2015-20
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• New Guidelines on Wastage Norms & Value Addition for Gold Religious Idols in Handbook of Procedures 2015-2020, Para 4.60-4.61.

  Circulars : Wastage Norms and Value Addition in respect of Gold religious idols (only gods and goddess) of 8 carats and above (upto 24 carats) under Para 4.60 and 4.61 of HBP 2015-20 - reg.
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Service Tax

• Service Tax Demand on Income Surrendered to Income Tax Department Cannot Be Upheld Against Appellant.

  Case-Laws - AT : Levy of Service tax - The demand on account of income surrendered with the Income Tax Department cannot be confirmed against the appellant
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• Appellant shows reasonable cause for non-payment; Section 80 of the Finance Act, 1994, waives penalty u/s 78.

  Case-Laws - AT : Penalty - there is a reasonable cause for non-payment of service tax by the Appellant and accordingly, the provision of Section 80 of the Finance Act, 1994 can be applied for waiver of penalty u/s 78
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Central Excise

• Petitioner Misuses Legal Process to Evade Duty Payment for Over a Decade, Court Denies Relief from Pre-Deposit Condition.

  Case-Laws - HC : Relief of waiver of condition of pre-deposit of duty and penalty - By filing proceedings in this Court and by filing applications for waiver of the pre-condition, the petitioner has apparently misused the process of law and petitioner has successfully avoided the payment of huge amount of duty, penalty and interest for more than 10 years.
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• Zymegold Classified as Fertilizer Due to Nitrogen and Chlorine Content, Affirming Tax and Excise Law Compliance.

  Case-Laws - AT : Classification of goods - Zymegold - presence of nitrogen and chlorine is not disputed - That should suffice to characterize the product as ‘fertilizer’
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• Limitation Period Starts from Search and Seizure Date; Proceedings Must Begin Within One Year for Clandestine Cases.

  Case-Laws - HC : Clandestine removal - The period of limitation would begin to run from the date of carrying out search and seizure operation and in that case, the extended period of limitation can not be taken recourse to as the proceeding, in any case, were required to be initiated within a period of one year
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VAT

• To challenge an interest levy on entry tax, dispute both the consequential and underlying basic orders for validity.

  Case-Laws - HC : Levy of Interest on Entry tax - the party challenging the consequential order is obliged to challenge the basic order also and only if the same is found to be illegal the correctness of the consequential order can be examined.
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Case Laws:

• GST

• 2018 (11) TMI 1574
  Supply of Services or not - applicant is affiliated to International Inner Wheel and the administrative body for all Inner Wheel Clubs spread in 27 Inner Wheel Districts all over India - whether the activities undertaken by them may be termed business or not - Held that:- The Inner Wheel Clubs have specific objectives and members are granted various facilities and/or benefits, enabling them to attend conventions/meetings for the furtherance of the objectives of the Organisation, against subscriptions or fees, renewable annually - It appears that the fund collected is mainly spent on organising meetings and conventions like Triennial etc. Clearly, such meetings and gatherings provide facilities and benefits to the members in the form of a platform for social mixing, networking, promotion of friendship etc. The term business under the GST Act includes, under Section 2(17), subclause (e) provision by a club, association, society, or any other body (for a subscription or any other consideration) of the facilities or benefits to its members. It is, thus, clear that the Applicant is doing business as defined under section 2(17)(e) of the GST Act - The subscription and membership fee is to be considered as consideration for the supply of such services, which are classifiable under SAC Heading 99959 under the category Services furnished by other membership organization . However, the Applicant also has activities which involve providing space for advertisements, raising sponsorship etc, and the transactions regarding these activities are, therefore, business transactions within the meaning of section 2(17)(b), being transactions undertaken in connection with or incidental or ancillary to the social welfare activities of the Applicant, and are supplies in terms of Section 7(1) of the GST Act - Such services are classifiable under SAC Heading 99836 under the category Advertising services . Sale of souvenirs is to be treated as a supply of goods. Ruling:- The Applicant s activities involve supply of services classifiable under SAC Heading 99959 against consideration received in the form of subscription and membership fees. Services classifiable under SAC Heading 99836 are also supplied. Sale of souvenirs is to be considered as a supply of goods. The nature of supply for miscellaneous income as recorded in the Financial Accounts is to be determined by the nature of the supply.

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• 2018 (11) TMI 1573
  Erection of a series of transmission towers and commissioning of the transmission line - Supply of a bundle of goods and services - Works contract - Composite supply or not - whether the Tower Package, which includes the erection of a series of transmission towers and commissioning of the transmission line, is an immovable property? Held that:- Neither the risk in the goods passes to PGCIL at the factory gate nor that the JV will get any payment, other than the advances paid, until and unless the goods are dispatched. Evidently, property in the goods does not pass to PGCIL at the factory gate. The JV needs to move the goods and deliver them at the work site before claiming 60% of the payment for execution of the First Contract. The balance amount is to be paid in phases till completion of erection of all towers of the transmission line. It is immediately apparent that the First Contract cannot be executed independently of the Second Contract. There cannot be any supply of goods without a place of supply. As it is evident that title to the goods has not been transferred to PGCIL at the factory gate, supply under the First Contract involves movement and/or installation at the site, and the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to PGCIL or moved to the site for assembly or installation [refer to Section 10(1)(a) (d) of the IGST Act, 2017]. The First Contract, however, does not include the provision and cost of such transportation and delivery. It, therefore, does not amount to a contract for supply of goods unless tied up with the Second Contract - the First Contract has no leg unless supported by the Second Contract. It is no executable contract unless tied up with the Second Contract. It is evident that although supplies of goods and services to PGCIL are being made under two separate agreements, they are not executable separately. The First Contract for supply of goods cannot be executed unless tied up with the Second Contract. Unless and until supplies under both the contracts are made and the Tower Package is commissioned, PGCIL is not treating either of the contracts as successfully completed and reserves the right to initiate actions for breach of contract. It is thus a single source contract for bundled supplies of goods and services for construction, erection and commissioning of the Tower Package an immovable property. The Applicant is executing an indivisible composite contract for construction, erection and commissioning of an immovable property, namely the Tower Package, execution of which involves bundled supply of both goods and services. It is, therefore, works contract, as defined under Section 2(119) of the GST Act - The contract for the Tower Package, being works contract is service in terms of paragraph 6(a) to Schedule II to the GST Act. Activities covered under Schedule II are to be treated as a supply of the nature described under section 7(1)(d) of the GST Act. Reference to Circular No. 47/21/2018-GST dated 08/06/2018 of CBIC or the e-flyer is, therefore, not relevant in the present context. The price components of both the First and the Second Contracts, including that for transportation, in-transit insurance etc. are, therefore, to be clubbed together to arrive at the value of the supply of works contract service - Transportation of goods and in-transit insurance, being merely parts of the bundled services, should to be treated as components of the value of the works contract and not as separate and independent supplies - The exemption under serial no. 18 of the Exemption Notification is, therefore, not applicable in the present context. Ruling:- The Applicant supplies works contract service, the value of which includes inter alia consideration paid for transportation and in-transit insurance. GST is to be paid on the entire value of the works contract, including the supply of materials, transportation, intransit insurance, erection, commissioning etc. The exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 is, therefore, not applicable in the present context.

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• 2018 (11) TMI 1572
  Seizure of goods in transit - seizure on the ground that E- Way Bill the number of tax invoice was incorrectly mentioned - Held that:- There is no discrepancy in any document accompanying the goods which may amount to contravening the provisions of the act to permit the seizure of the goods. Sri C.B. Tripathi is directed to file counter affidavit within three weeks. One week thereafter is allowed to the petitioner for filing rejoinder affidavit.

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• 2018 (11) TMI 1571
  Detention of goods - the vehicle driver showed the invoices and e-way bills meant for intra-state transport, that is from Ernakulam to Thalassery and Kozhikode. He could not show the e-way bill from Bangalore to Ernakulam - Held that:- If online generation of e-way bill suffices, the Rule would not have insisted on the consignment carrying a copy of the bill or the number in electronic form. At any rate, the issue now concerns only the provisional release and the statute provides an efficacious mechanism for that. Of course, the statutory compliance for the provisional release does visit on the petitioner with certain financial burden, as it has to produce the Bank Guarantee. The Court should adopt a pragmatic view rather than a pedantic one. True. But in the name of interim orders and in the name of our exercising judicial discretion at the threshold, we cannot afford to chip away at the statutory scheme-especially if the scheme has an economic efficacy - The issues the petitioner raised here are the ones to be considered on merits finally-but not at the threshold and definitely not as a prima facie factor. Preserving the petitioner s right to advance all its pleas before the State Tax Officer, the writ petition is disposed off, holding that the authorities will release the goods if the petitioner complies with Section 129(3) of the GST Act.

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• 2018 (11) TMI 1570
  Vires of Goods and Service Tax (Compensation to States) Act, 2017 and the Notification No.01/2017 dated 28.06.2017 and No.02/2017 dated 01.07.2017 under the said Act.

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• 2018 (11) TMI 1569
  Bail application - Illegal availment of Input tax credit - Petitioner is in custody since 24.7.2018 i.e. more than 62 days - Held that:- The petitioner is directed to be released on bail on furnishing bail bond of Rs. 50,000/- with two sureties of the like amount each to the satisfaction of learned Special Judge, Economic Offence, Jamshedpur in connection with Complaint Case No. 2144 of 2018. Petitioner is directed to co-operate with the Investigating Officer during investigation and till completion of the investigation, he must appear before the Investigating Authority once a fortnight.

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• 2018 (11) TMI 1568
  Acceptance of hard copy of TRAN 1 Form and TRAN 2 Form - portal not working properly - Held that:- This writ petition is disposed of, because now the time limit has been extended up to 31.03.2019 and also the Assistant Solicitor General of India has given assurance to do the needful into the matter for recommendation etc. - Petition disposed off.

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• 2018 (11) TMI 1567
  Acceptance of hard copy of TRAN 1 Form and TRAN 2 Form - portal not working properly - Held that:- This writ petition is disposed of, because now the time limit has been extended up to 31.03.2019 and also the Assistant Solicitor General of India has given assurance to do the needful into the matter for recommendation etc. - Petition disposed off.

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• 2018 (11) TMI 1566
  Acceptance of FORM GST TRAN-1 and TRAN-2 of the petitioner (hard copy) - Input Tax Credit/CENVAT credit - period running from 1st April, 2017 to 30th June, 2017 - pre Goods and Service Tax (GST) regime - Held that:- The GST portal of the Central Government was not accessed by the petitioner for varieties of reasons, as stated in Annexures-5, 6, 7 and 8 of this writ petition. Time and again, there is correspondence to that effect. The respondents are directed to accept the hard copies of the FORM GST TRAN-1 and TRAN-2 and to scrutinize the same on or before the next date of hearing.

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• Income Tax

• 2018 (11) TMI 1565
  Revision u/s 263 - apportionment of expenses against exempted income under Section 14A r.w.r.8D - Held that:- Special Leave Petition is dismissed both on the ground of delay as well as on merits.

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• 2018 (11) TMI 1564
  Registration of assessee u/s 12A cancelled - genuineness of the activities of the society - activities of the assessee were not being carried on in accordance with the provisions required to be fulfilled under Section 12A - Held that:- Delay condoned. Leave granted.

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• 2018 (11) TMI 1563
  Assessment u/s 153A - mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with - not enough time left with Additional CIT to analyze the issues of draft order on merit - Held that:- Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises.

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• 2018 (11) TMI 1562
  Additions made on account of provisions of performance related pay to director and staff - liability had not crystallized as assessee failed to furnish any evidence for accrual of expenses - tribunal deleted the addition - Held that:- The principle that when a liability has accrued but the computation thereof with precession, is not possible presently, the provision could be made on the basis of actuary by applying some scientific method or procedure, is well established principle. Reference in this respect may be to the decision of the Supreme Court in case of M/s. Rotork Controla India Pvt. Ltd.,v/s. Commissioner of Income Tax [2009 (5) TMI 16 - SUPREME COURT OF INDIA] In the present case, in fact, the facts are even better. Not only that the liability had crystallized, the computation thereof was also readily available. Payment could not be made simply, because, the approval of Board of Directors which was necessary, was awaited. The liability had thus, crystallized. On the principle of accrued liability, the Assessee was well within its right to claim the expenditure. - decided against revenue

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• 2018 (11) TMI 1561
  Exemption under Section 54 - allotment of the flats was in the nature of the assessee's investments in new residential property - adoption of FMV as on 1st April, 1981 - Held that:- Tribunal notices that the assessee had received sale consideration partly in cash and partly in form of new flats to be constructed and to be allotted to the assessee. The Tribunal, therefore, correctly came to the conclusion that the assessee's investment in such new flats amounts to investment for acquisition of new residential house. The Tribunal, therefore, correctly held that the Assessing Officer was not justified in disallowing the exemption under Section 54 of the Act. No question of law arises

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• 2018 (11) TMI 1560
  Reopening proceedings - addition of interest due and payable and interest due and accrued - notice beyond the period of 4 years from the end of the relevant assessment year - Held that:- Admittedly the reopening notice has been issued beyond a period of four years from the end of the relevant assessment year i.e. 2001-02 in respect of regular assessment completed under Section 143(3). The jurisdictional requirement to issue a reopening notice under the proviso to Section 147, is a failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment during the scrutiny proceedings. In fact, the reasons in support of the reopening notice even do not allege any failure to disclose truly and fully all material facts necessary for assessment. Therefore, the jurisdictional requirement is not satisfied. Tribunal has on facts found that there was a full and true disclosure on the part of the assessee during the regular assessment proceedings. This finding of fact has not been shown to be incorrect or perverse in any manner. No admittedly the reopening notice has been issued beyond a period of four years from the end of the relevant assessment year i.e. 2001-02 in respect of regular assessment completed under Section 143(3) of the Act. The jurisdictional requirement to issue a reopening notice under the proviso to Section 147 of the Act, is a failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment during the scrutiny proceedings. In fact, the reasons in support of the reopening notice even do not allege any failure to disclose truly and fully all material facts necessary for assessment. Therefore, the jurisdictional requirement is not satisfied. Moreover, we find that the Tribunal has on facts found that there was a full and true disclosure on the part of the assessee during the regular assessment proceedings. This finding of fact has not been shown to be incorrect or perverse in any manner. No substantial question of law.

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• 2018 (11) TMI 1559
  TDS u/s 195 - disallowance u/s.40(a)(i) - payment to utilize its bandwidth - non deduction of tds - payment of subscription charges - Held that:- Questions of law are covered by the judgment of this Court in the case of COMMISSIONER OF INCOME TAX AND ANOTHER vs. M/s. INFOSYS TECHNOLOGIES LTD, [2015 (3) TMI 850 - KARNATAKA HIGH COURT] and connected matters, disposed off on 02.06.2014, whereby the said substantial questions of law were answered in favour of the Revenue and against the assessee, subject to the result of the SLP filed by the assessee before the Hon’ble Supreme Court, Post sale customer support as an allowable deduction - past history showed accumulated provisions which was carried forward and made in excess of requirement - Held that:- Issue remanded to the Tribunal for a fresh consideration in terms of the direction issued in the earlier case of the assessee itself. Computation of deduction u/s 10A - telecommunication charges was liable to be reduced from both export turnover as well as total turnover - Held that:- Substantial question of law is covered by the judgment of the Hon’ble Supreme Court in the case of COMMISSIONER OF INCOME TAX, CENTRAL-III vs. HCL TECHNOLOGIES LTD. reported in [2018 (5) TMI 357 - SUPREME COURT]. Following the said judgment, the fourth substantial question of law is answered in favour of the assessee Computation of deduction u/s. 80HHE - whether the total turnover of the units eligible for deduction u/s. 80HHE of the Act, should be taken into account and not the entire turnover as per the P & L account as held by the Assessing Officer? - Held that:- Substantial question of law is covered by the judgment of this Court in the case of COMMISSIONER OF INCOME TAX AND ANOTHER vs. M/s. INFOSYS TECHNOLOGIES LTD. [2015 (3) TMI 850 - KARNATAKA HIGH COURT] - substantial question of law is answered in favour of assessee and against the Revenue.

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• 2018 (11) TMI 1558
  Demand notice - stay petition is pending - Held that:- It is for the second respondent/First Appellate Authority to consider the stay petition and pass orders on the same on merits and in accordance with law, without loss of further time. Accordingly, this writ petition is disposed of in the following terms: (a) The second respondent shall take up the stay petition filed on 05.10.2018 and pass orders on the same on merits and in accordance with law, within a period of three weeks from the date of receipt of a copy of this order. (b) Till an order is passed by the second respondent as stated supra, the impugned demand shall be kept in abeyance. (c) It is made clear that this Court is not expressing any view on the merits of the matter, as it is for the second respondent to consider and decide.

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• 2018 (11) TMI 1557
  Addition made of interest receivable from Kerala State Horticultural Corporation (Horticorp) - assessee is following the mercantile system of accounting - Held that:- The Board decided no material change during the year, except on two issues one of which is relevant for the consideration in this appeal. The Board had while continuing under the mercantile system, decided to provide no interest accrued on the loan to the Horticorp. Having followed the mercantile system of accounting, a decision of the Board not to show the interest receivable, would not absolve the liability, since under the mercantile system, interest is deemed to have accrued in the previous year to the assessment year.

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• 2018 (11) TMI 1556
  Deduction under section 80HHC - whether assessee's business in the purchase and sale of units and its business in the manufacture and sale of tyres constituted one and the same business? - Held that:- Issue covered by the decision of this Court, in favour of the assessee, in C.I.T. v. Appollo Tyres Ltd. [1998 (8) TMI 68 - KERALA HIGH COURT], as confirmed by the Hon'ble Supreme Court [2002 (5) TMI 5 - SUPREME COURT] Amount of deduction u/s 80HHC - whether should be worked out on the basis of book profits even though as per sub-section 3 of section 80 HHC, this has to be allowed on the basis of normal profits - Held that:- Issue covered in favour of the assessee by the decision of the Hon'ble Supreme Court in C.I.T. v. Bhari Information Tech. Sys.P.Ltd. [2011 (10) TMI 19 - SUPREME COURT OF INDIA ]. MAT computation - revaluation reserve account for adjusting the depreciation should be allowed as deduction while computing the book profits - Held that:- The assessee in the previous assessment year on a revaluation of its assets, credited an amount to the revaluation reserve account. In the current assessment year, the assessee debited Rs. 2,72,43,385/- from the revaluation reserve account and adjusted the depreciation arising in the said year. In fact, this should have been shown in the profit and loss accounts as a profit, which the assessee did not; but, however, adjusted to depreciation, which has the same effect. In fact, if the assessee had added on the said amounts to the profit, then under Section 115J [Minimum Alternate Tax (MAT)] the said amounts would be allowed as deduction under Section 115J. The Assessing Officer, however, found that the profit having not been added on, there could be no deduction claimed. The Assessing Officer, hence, added on the said amounts to the profit for assessment under MAT. The first appellate authority and the Tribunal found that there is no ground to decline such exemption to the assessee, merely for the fact that the same was not shown in the profit. The deduction which is permissible under the Act could not have been disallowed. - Decided in favour of the assessee and against the Revenue.

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• 2018 (11) TMI 1555
  Interest paid netted off against the interest income earned - Held that:- So far as the Substantial Question of Law No. 1 is concerned, it is squarely covered in favour of the assessee, in the light of the decision of this Court in the case of Arul Mariammal Textiles Ltd., Vs. Assistant Commissioner of Income Tax, Coimbatore in [2018 (8) TMI 1729 - MADRAS HIGH COURT]. Interest income to be assessed under the head 'income from other sources' or business income - Hed that:- Insofar as the Substantial Question of Law No. 2 is concerned, the same is covered by the decision of ACG Associated Capsules (P.) Ltd Vs. The Commissioner of Income Tax, Central-IV, Mumbai in [2012 (2) TMI 101 - SUPREME COURT OF INDIA]. Substantial Questions of Law are answered in favour of the assessee

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• 2018 (11) TMI 1554
  Entitled to deduction u/s.80HHC in respect of 90% of income from sale of DEPB license - Held that:- Appeal, filed by the assessee, is allowed and the order passed by the Tribunal is set aside and the matter is remanded to the Assessing Officer to apply the decision in the case of Avani Exports v. Commissioner of Income Tax [2012 (7) TMI 190 - GUJARAT HIGH COURT] and to proceed to grant proper deduction to the assessee under Section 80HHC of the Act. Since the assessment pertains to the year 2003-04, the Assessing Officer is directed to give priority to the matter and conclude the proceedings within a period of three months from the date of receipt of copy of this judgment. No costs.

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• 2018 (11) TMI 1553
  Computation of deduction under Section 10A - exclusion of expenditure incurred in foreign currency in export of software, from the purview of Export Turnover - Held that:- Element of technical services , have been rendered as integral part of the software development process. There was no material available before the Assessing Officer to split up the transaction into two or to bisect the transaction to find out an element of technical services . As rightly pointed out by the assessee, this exercise has been done by the Assessing Officer based on the notes to the accounts in the financial statements, which would be impermissible. What is required to be examined is the nature of services rendered by the assessee to the foreign entity. Thus, we are fully satisfied that the technical services rendered by the assessee is not on a standalone basis , but it is an integral part of the software development and up to step No.(8), as mentioned above, the assessee is bound to render all assistance to the foreign entity. Therefore, the artificial split up of the transaction by the Assessing Officer, that too without any materials on his file, is wholly unsustainable. - decided in favour of assessee Inclusion of the component of unrealised sale proceeds in total turnover while directing the exclusion of the same from export turnover - Held that:- These questions have been answered by the Hon ble Supreme Court in the decision of the Commissioner of Income Tax, Central-III vs. HCL Technologies Ltd.[2018 (5) TMI 357 - SUPREME COURT] as held as the term total turnover has been defined in the Explanation to Section 80HHC and 80HHE, wherein it has been clearly stated that for the purposes of this Section only , it would be applicable only for the purpose of that Sections and not for the purpose of Section 10A. If denominator includes certain amount of certain type which numerator does not include, the formula would render undesirable results. Setting aside the issue of deduction of expenditure in connection with the earning of dividend income by tribunal - Held that:- Assessee contended that Section 14A(2) could not have been invoked, as during the relevant assessment year there is no power vested with the AO on account of the fact that Section 14A(2) was inserted by Finance Act, 2006, with effect from 01.04.2007. Therefore, as submitted this provision cannot be made applicable to the assessment years prior to the said date. Such a ground was never canvassed either before the Assessing Officer or before the CIT-A or before the Tribunal - while confirming the order passed by the Tribunal in remanding the matter for fresh consideration to the Assessing Officer, we direct the assessee to raise the contention which was raised before us with regard to the jurisdiction of the Assessing Officer to invoke Section 14A(2) of the Act and the same shall also be considered by the Assessing Officer along with other points in accordance with law - order of remand passed by the Tribunal is confirmed

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• 2018 (11) TMI 1552
  Computation of deduction u/s 10A - exclude expenses incurred in foreign currency and other expenses that has been excluded from ETO, from the total turnover also - Held that:- The issue is covered by the decision of the hon'ble Supreme Court in the case of CIT v. HCL Technologies Ltd [2018 (5) TMI 357 - SUPREME COURT] as held when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Oth erwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. TPA - selection of comparable - Held that:- Since the Tribunal has examined the profile and datas of Bodh tree Consulting Ltd. and has come to the conclusion that this com pany cannot be taken as good comparable for computing the arm's length price (ALP), we find no justification in re-examining the issue again. Accordingly, following the aforesaid order of the Tribunal, we uphold the exclusion of Bodhtree Consulting Ltd. from the list of comparables. Sankhya Infotech Ltd. was examined by the Tribunal and the Tribunal following the view taken in the case of Kodiak Network India Ltd.[2015 (8) TMI 225 - ITAT BANGALORE] has directed the TPO to exclude this company from the list of comparables - same yardsticks and parameters will have to be applied, even if such appeals are filed by the assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an 'arm's length price' in the case of the assessees with which the assessees may not be satisfied and have filed such appeals before this court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not at all a sufficient reason to invoke section 260A of the Act before this court - Decided against revenue

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• 2018 (11) TMI 1551
  Penalty proceedings u/s 271(1)(c) - benefit of section 11 - disallowance of interest and disallowance of entire receipts shown by the assessee and disallowing the expenditure claimed - principle of mutuality - Held that:- If the appellant society has been formed by way of association of members for maintenance of the housing society for the benefits of all the members, then it cannot be held that all the members of the association are the ‘persons’ as defined in Sub section (3) of Section 13. Nowhere it has been spelt by the Ld. CIT(A) as to which of the conditions laid down in section 13 (1) has been violated. Nowhere there is any finding that the amount has been spent for benefit of any particular individual member. The entire mandate of appellant association was that the amount received by way of interest would be spent only for the maintenance and upkeep of common area facilities of the building and of common services for the benefit of all the members and not to any individual member. Thus, such an allegation of the Ld. CIT(A) deserves to be rejected. Accordingly, we hold that entire receipts by the Ld. CIT(A) is unsustainable in law and on facts. Even when the Ld. CIT(A) has held that assessee is neither eligible for benefit u/s 11 nor its receipts fall within the doctrine of mutuality, then its income should have been computed under the normal provision of Act and only the net income could have been brought to tax. Here in this case the net income for the assessment year is Rs. 5,44,992/- and in the other years, as stated above, is much below that. Hence, the action of the Ld. CIT(A) in taxing the entire income is not justified under any provisions of law. Accordingly, we hold that the entire interest income earned by the assessee is eligible for benefit of section 11; and since the net income as per expenditure account is much below the prescribed limit of 15%, therefore, no income is held to be taxable and consequently in all the years income has to be assessed at ‘nil’ and consequently the entire addition made by the AO and CIT(A) is directed to be deleted. Lumpsum maintenance charges collected from the members at the time of allotment is the corpus which has been put at the disposal of the appellant association with the mandate that the interest income earned from corpus would only be utilised only for the maintenance of the housing society, i.e., the purpose for which it was found. Nothing has been brought on record or any material has been found that the interest income received has not been utilised for the benefit of the members, i.e., for the maintenance and upkeep of the residential and common area and facility. It is also not the fact that the banks in which FDR was kept was also a member of the appellant association. The question of commerciality arises only where entities claiming to be mutual concern have an object to carry on a particular business and generate income from members and non-members through their business. Here appellant does not run any activity or profit earning with a profit motive or from which it can derive any profit. The club has claimed interest earned on fixed deposits kept with certain banks which were corporate members of the assessee and claim exemption on the basis of doctrine of mutuality on the interest earned on fixed deposits kept with non-member banks which were offered to tax. Here all the ingredients of applicability of mutuality exists; and accordingly, no such income can be taxed in view of the principle of mutuality. Thus, on this score also, we hold that no income is chargeable to tax in the case of assessee. In so far as the appeals relating to penalty proceedings u/s 271(1)(c) is concerned, in view of our finding given above that no income is taxable in the hands of the appellant association, then levy of penalty u/s 271(1)(c) has no legs to stand and accordingly, penalty levied in all the years impugned before us stands deleted. - decided in favour of assessee.

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• 2018 (11) TMI 1550
  Addition u/s 68 - unexplained Cash deposits in bank - Held that:- Section 68 can be applied only where, there are sum found credited in “books of account” maintained by assessee. No doubt passbook /bank statement, are maintained by a bank for its customers. Thus in our considered opinion, we agree with proposition advanced by AR of non applicability of section 68 in case of cash credit found in saving bank account. Further observed that AO applied section 68 and made additions in hands of assessee, as unexplained cash credits, to such amount, which has been found deposited by assessee in his saving bank account. To our mind in present facts of case section 69 should have been initiated by Ld.AO. It is unfortunate that Assessing Officers blindly apply provisions, which can be fatal to the interest of Revenue. However as a Tribunal, we are not competent to make addition u/s 69A of the Act, by virtue of the decision of Hon’ble Allahabad High Court in case of Smt. Sarika Jain vs. CIT [2017 (7) TMI 870 - ALLAHABAD HIGH COURT] - we allow additional ground raised by assessee, only because addition u/s 68 is not sustainable in present facts of case. - Decided in favour of assessee.

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• 2018 (11) TMI 1549
  Revision u/s 263 - correctness of gross losses claimed and discrepancies in purchases made from Basma Jewellers - Held that:- In the assessment order passed under section 143(3) r.w.s. 153A, the AO has again examined year wise and unit wise details of the exports while dealing with the claim of deduction under section 10B of the Act. The business income of these units were also examined by the AO while dealing with the issue of set-off of brought forward losses before computing the income under section 10AA of the Act. In the original assessment order passed on 30.12.2010 and 30.12.2011, the AO has discussed the issue in detail with regard to income and losses of different units after obtaining information from the assessee. Since the issue of income and losses of different units were thoroughly examined by the AO in the original assessment proceedings, there was no need to readjudicate or to re-examine all these evidences in subsequent proceedings. Therefore, the AO has not discussed these issues in detail in subsequent proceedings framed consequent to the search. CIT may not agree with the conclusion of the AO but if the AO has applied his mind and adjudicated the issue in the light of legal provisions, the CIT cannot set aside the order of the AO simply by holding that the order of the AO is erroneous and prejudicial to the interest of the Revenue. It has been repeatedly held that for setting aside the order under section 263 of the Act, the CIT is required to establish that the assessment order is not only erroneous but also prejudicial to the interest of the Revenue. In the instant case, when the AO has examined the issue in detail after calling all requisite information from the assessee, the assessment framed cannot be called to be erroneous and prejudicial to the interest of the Revenue. We are therefore, of the view that the Revision Order passed by the CIT on this issue is without assuming the proper jurisdiction and we accordingly set aside his order on this issue. So far as the other issue regarding import made from Basma Jewellers is concerned, we find that this issue was not examined either by the AO or by the CIT(A). The assessee has raised the claim to have purchased the gold bar from Basma Jewellers and AO intended to make verification but could not get the report from the concerned authorities before the conclusion of the assessment. According to us, the right course would have been for the AO to make a necessary verification of the detailed evidences filed and thereafter to adjudicate the issue and submit the report to the CIT(A) and then CIT(A) should have adjudicated the issue by passing a detailed order. But unfortunately, the AO has not discharged his duties and recommended the matter for revision under section 263 to the CIT (Administration). In any case, though the action of the AO may not be proper but for this reason, the order of CIT passed under section 263 on this issue cannot be sustained as the issue was never examined either by the AO or the CIT(A).

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• 2018 (11) TMI 1548
  Levying penalty u/s 271(1)(c) - defective notice - Held that:- We have perused the copy of the notice issued u/s 274 r.w.s 271 of the Act; dated 24/11/2016 and find that it reveals that the AO has not deleted the inappropriate words and parts in the relevant paragraph of the notice, whereby it is not clear as to which default has been committed by the assessee; i.e whether it is for furnishing of inaccurate particulars of income or concealing particulars of income that penalty u/s 271(1)(c) of the Act is sought to be levied. The Hon’ble Karnataka High Court in the case of M/s Manjunatha Cotton i.e. whether the notice is issued for concealment of particulars of income or furnishing of inaccurate particulars of income; is invalid and the consequential penalty proceedings/order are also not valid. - Decided in favour of assessee.

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• 2018 (11) TMI 1547
  Penalty levied u/s 271(1)(c) - deeming addition under section 68 - specification under which limb penalty proceedings are initiated - Held that:- Assessee was aware about under which limb penalty has been initiated. Further it is observed that while passing penalty order, Ld.AO levied penalty for concealment. Thus we do not find any merit in arguments advanced by Ld.Counsel regarding jurisdiction of Ld. AO in passing penalty order. Assessee had filed details regarding deposits and sources from where deposits have been made in bank account. Merely because parties were not produced before Ld.AO to establish genuineness of transaction, cannot lead to concealment. At the most addition deserves to be sustained as has been already confirmed by this Tribunal. In our view alleged addition forms part of records and therefore there cannot be any concealment as has been alleged by authorities below. We are therefore inclined to delete penalty. - Decided in favour of assessee.

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• 2018 (11) TMI 1546
  Addition made u/s 68 - unexplained cash deposits - assessee company failed to file the confirmations despite the opportunities - Held that:- AO during remand proceedings has not challenged authenticity/veracity of documents filed by assessee, which was verified by him. It is further pertinent to note that assessee declared said sum as its income and there was full disclosure of such sum as has been recorded by Ld. CIT(A). No infirmity in decision of Ld. CIT(A) in respect of cash found deposited in bank account. - Decided against revenue Addition of cash receipts for sale of car - AO admitted purchase of said car thereby allowed depreciation claimed during preceding assessment years - Held that:- On deliberating on facts, at this juncture, we do not think, Ld.AO has any right to interfere with genuineness of transaction now. We observe that Ld.AO grossly erred in accepting purchase of car, in the year of purchase thereby granting depreciation on it during preceding years, and it is merely impossible to rectify this error in the year under consideration, when sale occurred. In our considered opinion Ld.A.O. during year under consideration, cannot improve upon error committed by not verifying transaction of purchase of car during financial year 2006-07.- Decided against revenue Addition of advertising services - difference between declared receipt and offered receipt - Held that:- AO, has not disputed claim made by assessee, other than to state that no details/explanation was furnished during assessment proceedings. We agree with CIT(A) that this objection is without any merit. From assessment order, it is apparently clear that assessee had explained difference between declared receipt and offered receipt for taxation on account of accrual basis during year under consideration, whereas the bills in respect of these receipts were issued in succeeding assessment year and has been accepted by Ld.AO, while framing assessment for assessment year 2008-09.- Decided against revenue

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• 2018 (11) TMI 1545
  TPA - MAM selection - selection of TNMM as the most appropriate method - Held that:- If adjustments as permissible under TNMM are considered, he ultimately conceded that the issue of selection of most appropriate method may be left open for adjudication in some other year recording the assessee's objections to tinkering with the most appropriate method without any justification. Having thus considered the facts and circumstances alongwith the submissions of the parties, we leave the issue of selection of the most appropriate method open to be considered in another year. We note that the TPO while upsetting the most appropriate method selected by the assessee has admittedly not considered the facts fully and infact appears to have confused himself with the method selected by the assessee. Since in view of the relief maintainable to the assessee even in the method selected by the TPO the issue of most appropriate method in terms of the concession of the assessee becomes academic the same accordingly is left open. Exclusion of comparables - inclusion of Blue Star as a comparable - Held that:- It is seen that the said comparable undertakes research and developmental activities which position is not disputed by the tax authorities. It is also seen that Blue Star has various other segments wherein assembly of air conditioners is also one of the segments. On a consideration of facts we deem it appropriate to remand the issue and direct the TPO to work out the profit margin of the relevant segment of this comparable the inclusion of the said comparable is upheld on the said condition. However in case the TPO is unable to obtain the relevant details then the comparable is directed to be excluded. Capacity utilisation benefit - Held that:- We have seen that the assessee has shown that after reaching a threshold of certain manufacturing activity level the assessee has finally broken even and has also returned profits. The chart and figures made available in the course of the hearing based on documents in public domain admittedly demonstrate the fact. It is well accepted that in the peculiar case like that of the assessee, the manufacturing costs would necessarily have certain fixed overheads and these costs would be met only when manufacturing activity breaches a certain level. Thus considering the peculiar facts and considering the judicial precedent cited we deem it appropriate to restore the issue back to the TPO with the direction to give necessary relief in accordance with law. Addition u/s 41 - Held that:- We find that though the legal position is well settled by the decision of the Delhi High Court in the case of CIT versus EKL [2012 (4) TMI 346 - DELHI HIGH COURT ] however, considering the judicial precedent in assessee’s own case wherein on similar set of facts and circumstances the TPO himself has made no addition in 2014–15 assessment year we accordingly deem it appropriate to set aside the issue to the TPO to verify whether there was any services availed by the assessee during the year or not. The factum of payment made in the year under consideration stands offered in 2015-16 Assessment Year as argued i.e. has it been included in the taxable income of the assessee in terms of section 41 (1) of the Act has no relevance in this case. Subject to verification the TPO is directed to examine the issue afresh and decide the issue in accordance with the law.

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• 2018 (11) TMI 1544
  Bogus Long Term Capital Gains (LTCG) / Long Term Capital Loss (LTCL) - addition u/s 68 - Held that:- No dispute that assessee having derived her LTCG on transfer of shares held in M/s Kailash Auto Finance Ltd. Learned Departmental Representative fails to dispute that very issue stands adjudicated in assessee’s favour in co-ordinate bench’s decision in SANJEEV GOEL (HUF) VERSUS INCOME TAX OFFICER, WARD-45 (3) , KOLKATA [2018 (8) TMI 1747 - ITAT KOLKATA]. As we rely on the evidence produced by the assessee in support of its claim and base our decision on such evidence and not on suspicion or preponderance of probabilities. No material was brought on record by the AO to controvert the evidence furnished by the assessee. Under these circumstances, we accept the evidence filed by the assessee and allow the claim that the income in question is Long Term Capital Gain from sale of shares and hence exempt from income tax - Decided in favour of assessee

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• 2018 (11) TMI 1543
  Determination of arm’s length price in relation to Management support services - Held that:- As decided in assessee’s own case, we hold that the benefit is not a precondition for justifying arm’s length price. Under Rule 10B of the Income-tax Rules, 1962 which deals with ‘Determination of the arm’s length price’. There is no mention of the ‘benefit test’ being adopted for the purpose of determining such arm’s length price. It is not a precondition to conclude that the payment is within arm’s length. In other words, the TPO cannot apply the benefit test for determining ALP as he cannot assess the benefit derived by assessee in a particular transaction. Accordingly, ground No.3 raised by the assessee is allowed. TDS u/s 195 - Management services categorized as ‘Fees for Included Services’ - taxabilty in India as per the DTAA between India and United States of America - Held that:- As decided in assessee's own case [2018 (8) TMI 1264 - KERALA HIGH COURT] Management service cannot be characterized as ‘fees for included services’, and hence, not taxable in India as per the Double Taxation Avoidance Agreement (DTAA) between India and USA - disallowance u/s 40(a)(i) is not justified. Management services paid to the AE of the assessee disallowed u/s 37 - Held that:- DRP has only given a general direction based on the finding of the TPO that there was no benefit accrued to the assessee on payment of management fees and hence ALP of said international transaction is to be determined at ‘Nil’. The fact that the above expenditure, whether it is business expenditure, which can be claimed as deduction u/s 37 of the I.T.Act, was never examined. Therefore this issue is also restored to the A.O. to test the reasonableness of the claim of deduction u/s 37 of the I.T.Act. - decided in favour of assessee for statistical purposes.

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• 2018 (11) TMI 1542
  Cancellation of registration U/s. 12AA(1)(b) - withdrawing the approval granted to the assessee trust U/s. 10(23C)(vi) and (via) - unaccounted capitation fee - Held that:- NIMS University, Rajasthan, Jaipur has been notified by an enactment passed by the Legislature of Rajasthan. The said university was enacted to provide higher education in various fields. The sponsoring body of the University was Indian Medical Trust. Thereafter in the Gazette Notification, Schedule-1 provided that the University will have 60.67 acres of land comprising of various khasras numbers in village Jugalpura, Teshil- Amber, district-Jaipur. The said schedule also enlists various buildings, academic facilities and various kinds of degrees run by the said University. In an enquiry conducted by the CIT (E), it was found that certain 'Khasra' number as mentioned in the Government Notification for the allotment of land to the University was not in the ownership of the Indian Medical Trust or NIMS University. Solely on this ground, he has refused to grant registration. No where he has discussed the “objects” for which the said University is running; nor there is any whisper about the genuineness of the activities qua the objects. It is well settled position of law that at the time of granting registration u/s 12AA, CIT(E) is required to examine the 'objects' of the Trust or institution as to whether they are for the charitable purposes or not and also to see the genuineness of the activities qua the objects. If certain 'Khasra' numbers as notified by the Government has not been acquired or is not owned by the Indian Medical Trust or by the NIMS University and it is standing on some different land bearing different 'Khasra' numbers, but that does not mean that its activities are not genuine or is not carrying out charitable activities. Even if there is some technical breach or violation of the Notification pertaining to land that the said University is not standing on a particular 'Khasra' notified, then that would be a subject matter of issue of dispute with State authorities and not the Income Tax Department. What is required to be seen in terms of Section 12AA is, only the 'objects' and the genuineness of the activities. Accordingly, the reasons given by the CIT (E) for refusing the registration cannot be upheld. Since the objects and the genuineness of the activities have not been examined, therefore, we are remitting the issue of grant of registration back to the file of the CIT(E), who shall examine the 'objects' of the institution whether they are for educational or charitable purposes or not; and whether its activities are being carried out in accordance with such objects including the genuineness of the activities qua that 'objects'. With this direction, the entire matter is restored back to the CIT (E) who shall decide and examine the issue of registration u/s 12AA afresh and in accordance with law after giving due and effective opportunity of hearing to the assessee to substantiate its case. Accordingly, the appeal relating to refusal of registration U/s 12AA of the Act is allowed for statistical purposes only. In so far as the issue of material found during the course of search in the case of Indian Medical Trust that it was receiving unaccounted capitation fee, the same was applicable till the date of search and that to be in the case of Indian Medical Trust for which we have already given our finding while deciding the case of the Indian Medical Trust. However, the same charge or allegation cannot be imported in the case of NIMS University also until and unless there is some incriminating material or any kind of enquiry has been conducted leading to any adverse inference, for instance, receiving of unaccounted capitation fee is still continuing or is permeating in the subsequent years also, that is, from the date when NIMS University has taken over by entire assets and liabilities of the Trust and also the educational activities. The issue of grant of approval u/s 10(23C) needs to be examined afresh. On the issue of running of a news channel also, the issue needs to be examined under the scope of 3rd proviso to Section 10(23C) (vi) & (via) and Section 11(5). CIT (E) shall examine this aspect also without getting prejudice with the finding given in the appeals of the Indian Medical Trust as decided above for the reason that here the activities of the NIMS University had only started after 01/10/2016 when all the assets and liabilities of the Indian Medical Trust has been transferred to NIMS University by way of an agreement between the Indian Medical Trust and NIMS University. The genuineness of the agreement whereby entire assets and liabilities have been transferred from the Indian Medical Trust to NIMS University also can be examined whether it is in accordance with relevant provisions of law and there is actual transfer of assets and liability or it is mere paper entry or is just a façade. The issue of approval U/s 10(23C) is also remanded back to the file of the ld. CIT(E) to be examined denovo and afresh and in accordance with law after examining the objects and genuineness of the activities - Appeal of the assessee allowed for statistical purposes only.

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• 2018 (11) TMI 1541
  N.P. determination - assessee is a Partnership Firm, engaged in the business of civil construction - assessee is a Partnership Firm, engaged in the business of civil construction - Held that:- neither the authorities below has specified circumstances under which it could have been presumed that the reported rate of profit is low nor has cited any comparable case, in support, for application of “high profit rate” on gross total receipt - neither the authorities below has specified circumstances under which it could have been presumed that the reported rate of profit is low nor has cited any comparable case, in support, for application of “high profit rate” on gross total receipt. There is a consistency in judicial opinion that after rejection of books of accounts, income is to be computed after due consideration of the past history of the assessee. We find that the authorities below were in gross ignorance determining NP rate without consideration of the past history of the appellant and without any instance of some comparable case on identical facts in applying profit rate of 8%, in the case of the assessee - it would be just, fair and reasonable to estimate the income of the assessee at the Net Profit rate of 5.75% of the gross total receipts of Rs. 15,26,42,919/- [as adopted by CIT(A)]for the year under appeal. Thus, the assessee gets relief of 2.25% in estimation of profit rate on the gross total receipts, as against the 8% net profit rate estimated by the Authorities below. - Decided partly in favour of assessee Addition u/s 41 - outstanding liability in the accounts of trade creditors appearing as payable in the Balance Sheet - Held that:- CIT(A) had not brought anything on record to prove that any amount or benefit had been obtained by the appellant during the year under consideration against liabilities which is allegedly ceased to exist moreso when no such specific allowance in respect of material purchased was allowed in present assessment where income was initially and finally upto this stage is arrived after application of flat rate of profit. It is also an established proposition of law that onus is on the revenue to establish that any benefit has accrued to the appellant against alleged liabilities during the year under consideration. In the light of the provisions of section 41(1) of the Act and the Judgment of Hon’ble Apex Court in the case of ‘Kesaria Tea Company [2002 (3) TMI 1 - SUPREME COURT] and ‘CIT Vs Sugauli Sugar’ [1999 (2) TMI 5 - SUPREME COURT], we hold that the action of the Ld CIT(A) in making addition is unsustainable on facts and in law. Therefore, addition of Rs. is deleted. - Decided in favour of assessee Disallowing statutory claim of Depreciation - Held that:- Claim of Depreciation has already been taken care while applying N.P rate of 6% and therefore, no further allowance is called for. Thus Ground is rejected. Separate addition against Income Tax refund - Held that:- During the course of hearing the Counsel of the assessee fairly conceded that this represents Interest on Income Tax Refund, which is liable for addition. We therefore, confirm the addition. Separate addition towards amounts received as Trade Tax Refund - Held that:- We find that VAT has been deducted by various Departments on contract payment and the assessee has claimed debit of Rs. 46,08,996/- against VAT paid. Correspondingly assessee has received Refund of Trade Tax amounting to Rs. 13,88,945/-. Since, no specific deduction has been allowed in respect of VAT paid and being deducted by various Department on the same analogy, Trade Tax Refund cannot be separately added. - Decided in favour of assessee Penalty u/s 271(1)(c) - Held that:- Since, the basis for imposition of penalty was the addition of Rs. 90,33,414/- being the alleged unverifiable sundry creditors, which is stood deleted in quantum appeal as above,therefore, the consequential penalty levied u/s 271(1)(c) by the CIT(A) would not survive and as such deleted.

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• 2018 (11) TMI 1540
  Validity of reopening of assessment - Addition u/s. 68 towards "unexplained cash credit" - Held that:- We find that on what basis and on examination of what fact and figure in the records, the CIT(A) has given a finding that the capacity of the shareholders is also not in doubt, is not comprehendible. Though the CIT(A) has referred to several case laws from the ITAT, he has not at all referred to the proposition in the said case law and how they are applicable to the facts of the present case. On the overall consideration of the entire conspectus of the case, we are of the considered opinion that the CIT(A) has passed a very cryptic order both on the validity of the reopening and the merits of the case. It is settled law that even the administrative orders have to be consistent with the rules of natural justice. In our considered opinion, it was incumbent upon the ld. CIT(A) to pass a speaking order on both the issue of validity of reopening and the merits of the case. Hence, in our considered opinion, the interest of justice will be served if both the issue of validity of reopening and merits of the addition are remitted to the file of the ld. CIT(A) for fresh adjudication by passing a speaking order on the subject. - Revenue’s appeal and the assessee’s cross objection are allowed for statistical purposes.

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• 2018 (11) TMI 1539
  Disallowance of re-insurance premium paid by the assessee to the non-resident re-insurance companies - Failure to dedcution TDS on Reinsurance premium - Additions u/s 40(a)(i) - Held that:- As carefully gone through the decision of Mumbai Bench of this Tribunal in Swiss Re-Insurance Company Limited v. DDIT (2015 (4) TMI 905 - ITAT MUMBAI) and other decisions cited by the Sr. counsel for the assessee on identical issue. In all these cases, the provisions of Section 2(9) of Insurance Act, 1938 was not brought to the notice of the Benches of the Tribunal which decided the above cases. Therefore, the Mumbai Bench and Pune Bench had no occasion to decide the applicability of Section 2(9) of Insurance Act, 1938. Since this Bench of the Tribunal finds that Section 2(9) of Insurance Act, 1938 as it stood before amendment in 2014, is applicable to the payment of re-insurance premium to non-resident re-insurance company, the assessee is liable to deduct tax. Therefore, the above decisions of Mumbai Bench and Pune Bench of this Tribunal also may not be of any assistance to the assessee - the order of the CIT(Appeals) is set aside and that of the Assessing Officer is restored except for the assessment years 2003-04 and 2004-05. Reopening of assessment - Held that:- Unless there is a tangible material found after completion of assessment, the High Court found that the completed assessment cannot be reopened on the basis of the material already available on record. In view of the above, this Tribunal is of the considered opinion that reopening of assessment for the assessment years 2003-04 and 2004-05 in the absence of any tangible material after assessment under Section 143(3) of the Act is not justified. Therefore, the consequential orders passed by the Assessing Officer for both the assessment years 2003-04 and 2004-05 are set aside and the appeals of the assessee for those years are allowed. Disallowance of provision created towards claim incurred but not reported - Held that:- Admittedly, the compensation payable to insured person was not determined during the assessment year 2009-10. Therefore, this Tribunal is of the considered opinion that merely because the incident happened during the year which is the basis for making claim, that cannot be a reason for allowing the compensation payable by the assessee for the assessment year 2009-10. In other words, the compensation payable by the assessee has to be allowed in the year in which the amount of compensation was determined. Since the amount was not determined during the year under consideration, this Tribunal is of the considered opinion that the same cannot be allowed for assessment year 2009-10. Hence, the CIT(Appeals) is not correct in allowing the claim of the assessee. Accordingly, the order of the CIT(Appeals) is set aside and that of the Assessing Officer is restored. Profit from insurance busniss - disallowance made by the Assessing Officer u/s 14A - contention u/s 37 the expenditure relating to income has to be disallowed in respect of insurance company - Held that:- In view of Rule 5(a), the expenditures which are not for insurance business cannot be allowed and it has to be added back. In view of the above, this Tribunal is unable to uphold the order of the CIT(Appeals). Accordingly, the order of the CIT(Appeals) is set aside and that of the Assessing Officer is restored. Taxability of profit on sale of investments - Held that:- It is not in dispute that Rule 5(b) of the First Schedule to the Income-tax Act, 1961 was deleted by Finance Act, 1988 with effect from 01.04.1989 and it was re-inserted by Finance (No.2) Act, 2009 with effect from 01.04.2011. Therefore, during the years under consideration, i.e. 2008-09 and 2009-10, the provisions of Rule 5(b) were not in statute book. Hence, as rightly contended by the Ld. Sr. Standing Counsel for the Revenue, the Assessing Officer has rightly taken the sale of investments as taxable income of the assessee. In the earlier order of this Tribunal the fact of deletion of provisions of Rule 5(b) of the First Schedule to the Act by Finance Act, 1988 was not brought to the notice of the Bench. Therefore, the earlier order of this Tribunal may not be applicable to the facts of the case. Accordingly, the order of the CIT(Appeals) is set aside and that of the Assessing Officer is restored. Depreciation on UPS - Held that:- UPS is a part of computer and allowed depreciation at the rate of 60%, we are unable to uphold the orders of the lower authorities. Accordingly, we set aside the orders of both the authorities below and direct the Assessing Officer to allow 60% in respect of UPS also. Disallowance of exemption under Section 10(23G) - CIT(Appeals) by referring to Section 80(IA(4) of the Act found that the companies in which the assessee made investments were not eligible for business - Held that:- It is not in dispute that investments were made by the assessee in the companies which are not producing or generating electricity. All these companies are admittedly distributing the electricity. Therefore, as rightly found by the CIT(Appeals), they are not eligible business under Section 80(IA)(4) of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Addition made while computing book profit - Held that:- It is not in dispute that the applicability of provisions of Schedule VI of the Companies Act was excluded in respect of insurance companies. Therefore, the provisions of 115JB of the Act, which enables the companies to compute the book profit, may not be applicable to the insurance companies. Therefore, this Tribunal is unable to uphold the orders of both the authorities below. Accordingly, orders of both the authorities below are set aside and the Assessing Officer is directed to delete the additions.

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• Customs

• 2018 (11) TMI 1535
  Import of Chocolates - Issuance of NOC under the FSSAI Act, 2006 and the Regulations made there under for the cargo covered under the Bill of Entry No 6431998 dated 18.05.2018 - direction to the second respondent to depute officers for affixing new labels by deleting the word ‘compound’ in the carton boxes and to mention ‘contains vegetable oils in addition to cocoa butter’ over the boxes of the consignment. Held that:- By no stretch of imagination, it can be claimed that the mentioning of the product description as “compound chocolates” is in any way aimed at deceiving/hoodwinking the consumers. In fact the consignment fall under the group “filled chocolates” and the same was not disputed. The Also the petitioner is willing to re-label the cartons as mere “chocolates”. The description “chocolate” is a very generic term under the FSS Regulations. It recognizes the many sub classifications of chocolates. The respondents have failed to make out a case to conclude that the choice of nomenclature defies the standards mandated under the FSS Act, 2006 and the Regulations made there under - Thus, the strict labelling requirement in respect of objection 1 in the second review order, even if it is there, is curable. Interestingly, the imported chocolates has not been tested. Only visual examination was conducted. Apparently, the presence and absence of ingredients and compliance requirements were discussed by all the parties only on the basis of the declarations of the petitioner. The ends of justice would be met if the respondents are directed to allow the petitioners to affix suitable labels and issue necessary NOC upon affixing the labels so required by the respondents within two weeks time - petition allowed.

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• 2018 (11) TMI 1534
  Maintainability of Appeal under Section 130 of the Customs Act, 1962 - Smuggling - dry suprari (betel nuts) - goods were of foreign origin or not - Held that:- It was for the revenue to discharge the onus regarding foreign origin of the seized goods (betel nuts). As the said goods (commodity) are not notified under Section 123 of the Customs Act, 1962 - True it is that the revenue has not produced any evidence scientific or otherwise to prove foreign origin of the seized goods. Betel nuts are also available in India, therefore, pre-condition for confiscation is that the goods must have been of foreign origin and must have been imported to India in a manner other than as prescribed by Customs Act so as to fall within the ambit of Section 111 of the Act of 1962. Appeal under Section 130 of the Act of 1962 has to be maintained only when substantial questions of law will arise for determination. The contention of learned counsel for the respondent that the learned Tribunal had not returned the finding regarding genuineness of the claim of the so called owner is in the realm of evidence so cannot be looked into in this appeal because it does not constitute substantial question of law. Thus, no substantial question of law arise for determination. That being so, appeal under Section 130 of the Act of 1962 is not worth to be entertained is accordingly dismissed.

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• 2018 (11) TMI 1533
  100% EOU - Debonding of EOU - Enhancement of value of imported goods - Whether the value of imported goods enhanced at the time of filing of into bond bill of entry can be challenged against the ex-bond bill of entry? - Benefit of N/N. 25/02-Cus dated 01/03/2002 and N/N. 25/99-cus dated 28/02/1999. Challenge to assessment of ex-bond bill of entry as regard enhanced value which was done in into bond bill of entry - Held that:- The final assessment is done only in ex-bond bill of entry for home the consumption whereby the customs duty is actually paid when the goods are cleared from the bonded warehouse. The ex-bond bill of entry is final assessment order which is appealable. Hence, the appellant had a legal right to challenge the ex-bond bill of entry contesting all the issues - It is observed that in the into bond bill of entry, value was enhanced over the amount of invoice value without any evidence which is not legal and proper. Therefore, consequently, the enhanced value adopted in ex-bond bill of entry is also not correct - the enhancement of the value is set aside. Entitlement of the exemption notification no. 25/99-Cus dated 28/02/1999 and 25/02-Cus dated 01.03.2002 - denial on the ground that the appellant have not followed the Customs (the import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 - Held that:- Initially when the goods were imported, the same were received in the factory of the appellant who was 100% EOU and admittedly used within the 100% EOU. The exemption is claimed only at the time of debonding of 100% EOU. The procedure provided under Customs Rules, 1996 is mainly for the purpose of movement of goods from port of Custom up to the factory and use thereof - Even in the case of procedure prescribed under Customs Rules, 1996, similar procedure is followed. Therefore, even if the procedure of Customs Rules 1996 was not followed but practically the similar procedure was followed with reference to notification 53/2003-Cus, if any lapse on the part of the appellant it is mere procedural lapse. For this reason, the substantial benefit of notification no. 25/99-Cus and 25/2002-Cus cannot be denied - the appellant is entitled for exemption under notification 25/2002-Cus and 25/99-Cus. Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1532
  Scope of SCN - Classification of goods - Penalties - Held that:- The adjudicating authority has decided the classification of the export goods exported as not classifiable under 3817009 as declared by appellant and correctly classified under ITC Heading 25.01. It is also observed that in the SCN, there is no proposal for change of classification, therefore, in the adjudication order deciding the classification is not legal and proper and beyond the SCN. Since the classification has a bearing on the overall case of nature of product as well as valuation, due to the ambiguity created by adjudicating authority in deciding the classification without any proposal for the same in the SCN, the entire matter needs to be re-considered - appeal allowed by way of remand.

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• 2018 (11) TMI 1531
  SEZ unit - refund of SAD - N/N. 102/2007-Cus dated 14.09.2007 - rejection of refund on the ground that no statutory provision exist either in SEZ Act, 2005 or the Rules and Regulations made there under - Held that:- The major requirement of Notification No. 102/2007 stands fulfilled that the DTA unit that is indeed an importer as per SEZ Act, 2005 and the goods received by DTA were duly SAD paid. The DTA unit has further sold such goods on payment of Sales Tax/ VAT - The lower authorities rejected the claim on the ground which apparently not tenable. Jurisdiction - Held that:- The DTA Unit of the appellant i.e. unit situated at Bhimasar had correctly filed the refund claim dated 12.12.2013 with the Adjudicating Authority therefore, on this ground refund cannot be rejected. Non-compliance with the condition mentioned at Point (vii) of Circular No. 16/2008-Cus dated 13.10.2008 - Held that:- This condition is applicable when the goods are sold by a consignment agent, which obviously other than own company. In the present case, the goods were supplied by SEZ unit and received by DTA unit of the same company who sold the goods in the market therefore, in the transaction, consignment agent does not exist. The question of fulfilling a condition mentioned at point (vii) of the Circular dated 13.10.2008 does not arise. Therefore, on this count also the lower authorities have gravely erred in rejecting the refund claim. Rejection of refund claim also on the ground of transfer of goods from SEZ to DTA unit is not an import - Held that:- As per SEZ Act, 2005 and the legal fiction provided therein, the supply made from SEZ is treated as import for the receiving DTA unit and in case of any supply from DTA to SEZ, the same is treated as export - supply of goods from Special Economic Zone (SEZ) to Domestic Tariff Area (DTA) is eligible for exemption Notification No. 102/2007-Cus and consequently, the DTA unit is entitled for the refund of Special Additional Duty of customs paid on such supply. Refund cannot be rejected - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1530
  Maintainability of petition - alternative remedy of appeal - demand of duty drawback even for the period prior to five years - time limitation - Held that:- The petitioner has an alternative efficacious remedy of appeal against the impugned order. The Apex Court in Commissioner of Income Tax and others vs. Chhabil Dass Agarwal, [2013 (8) TMI 458 - SUPREME COURT], considered the question of entertaining writ petition where alternative statutory remedy was available, where it was held that Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The remedy under the statute, however, must be effective and not a mere formality with no substantial relief. The instant writ petitions are not entertained to grant relief to the petitioners by exercising the extra ordinary writ jurisdiction under Article 226 of the Constitution of India - the petitioners are relegated to the alternative remedy of filing appeal against the impugned order, before the authorities below within one month from the date of receipt of a copy of this order - petition dismissed.

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• Corporate Laws

• 2018 (11) TMI 1536
  Benefit of Section 14(1) of the Limitation Act, 1963 - burden to prove good faith and due diligence to avail benefit of Section 14(1) - Held that:- Undoubtedly, there has to be a liberal interpretation of Section 14(1) to advance the cause of justice. However, in accordance with Section 14(1) of Act, 1963, the earlier proceeding and the latter proceeding must relate to the same matter in issue, i.e. a matter which is directly and substantially in issue. Also, the previous proceeding should have failed on account of defect of jurisdiction or other causes of a like nature. The Supreme Court in Madhavrao Narayanrao Patwardhan v. Ram Krishna Govind Bhanu AIR [1958 (4) TMI 125 - SUPREME COURT] has further held that the burden to prove good faith and due diligence to avail benefit of Section 14(1), is on the plaintiff. In the present case, the reliefs sought in the Company Petition and Company Appl. filed before the CLB were absolutely distinct and different based on different cause of action from the reliefs which plaintiffs seek in the present suit. While the subject matter of the Company Petition and Company Appl. was the violation of the Code, 1997, the subject matter of the present suit is the breach of the Inter Se Agreement. Consequently, the reliefs in both the proceedings were not the same. Further, plaintiff nos. 2 to 5 were not parties to the CLB proceedings and plaintiff no. 1 is not a party to the Inter Se Agreement. The CLB also did not dismiss the Company Petition due to defect of jurisdiction or other causes of the like nature. Consequently, plaintiffs are not entitled to benefit of Section 14(1) of the Act, 1963 and the present suit is barred by limitation.

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• Insolvency & Bankruptcy

• 2018 (11) TMI 1538
  Corporate Insolvency Resolution Process - failure to make the payment against invoices - completion of application - expiry of the period of 10 days from the date of delivery of notice or invoice demanding payment - Held that:- Admittedly, operational creditor issued notice under sub-section (1) of section 8 of the Code to the Corporate Debtor. However, despite of receipt of such notice, the corporate debtor had not disputed the claim nor submitted any reply in terms of sub-section (2) of section 8 of the Code. In the circumstances application u/s 9 of the Code has been filed in Form-5, where in it was specifically mentioned that no reply has been filed by corporate debtor under sub-section (2) of section 8 of the Code, nor does any dispute have been raised. Once defects have been removed and the application under section 9 is complete and the required particulars have been given; the application is liable to be admitted. In the present case we are satisfied that the application is complete in all respect and the Operational Creditor is entitled to claim its dues towards the goods supplied to the corporate debtor and there has been a default in payment of the operational debt. Besides the invoices raised and the amount claimed by the operational creditor have not been disputed by the respondent corporate debtor. It is also seen that no disciplinary action is pending against the proposed IRP. Therefore, on fulfillment of the requirements of section 9(5)(i)(a) to (e) of the Code, the present application is admitted.

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• 2018 (11) TMI 1537
  Corporate Insolvency Resolution Process - outstanding debt - Held that:- The Corporate Debtor admitted the liability in the letters addressed to MMRDA and further acknowledged liability in the letter addressed to the Operational Creditor. Thus, Corporate Debtor committed default. Demand notice under Section 8 was also issued and there was no reply and no dispute was raised. The Operational Creditor filed bank statement to prove that no payment from the side of Corporate Debtor. The Petition is therefore liable to be admitted. The Petition is in order. Hence Petition is admitted. The Operational Creditor has filed a fresh Form-2, the consent given by Mr. Rakesh Rathi having IP registration No. IBBI/IPA-001/IP-P00696/2017-18/11211 to act as Interim Resolution Professional. Hence, the Adjudicating Authority admits this Petition under Section 9 of IBC, 2016, declaring moratorium for the purposes referred to in Section 14 of the Code

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• Service Tax

• 2018 (11) TMI 1528
  Levy of service tax - Banking and other Financial Services - Maintenance or Repair Service - Storage and Warehousing Service - period August 2002 to July, 2005 - penalties. Banking and other Financial Services - Held that:- The agreement dated 11.07.2001 entered into by PIPL with their customer UML. The very same agreement was considered by the Bangalore Bench in the case of PRAXAIR INDIA LTD VERSUS THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX BANGALORE-I [2018 (10) TMI 217 - CESTAT BANGALORE] with reference to the service tax demand made against PIPL. The Tribunal held that there is no liability for payment of service tax since the agreement for lease was executed prior to the date of introduction of the Banking or Financial Services i.e. 16.07.2001. Since the very same agreement for an earlier period is before us, we find no reason to take a different view. Management, Maintenance or Repair service - Held that:- In terms of the agreement entered into by PIPL with UML dated 30.12.2006, PIPL was required to carry out operations and maintenance of the plant and by way of consideration, UML will pay PIPL the amounts as specified in Schedule 4 of the agreement - After careful consideration of the agreement the Bangalore Bench upheld the demand of service tax under the above category - Since the dispute in the present case is very same, we find no reason to take a different view. Storage and warehousing service - Held that:- After considering the agreement the Bangalore Bench has come to the conclusion that the service rendered by PIPL to UML will not come under storage and warehousing service and accordingly has set aside the demand for service tax - demand set asdie. Penalties set aside. Appeal allowed in part.

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• 2018 (11) TMI 1527
  Penalty - the Appellants have made up the Service Tax liability with interest totally before the issuance of show cause notice - no intent to evade - Held that:- It is clear that there was no intention to evade the Service Tax liability - Since the Appellant has discharged the Service Tax liability before the issuance of the show cause notice therefore it is clear that there was no malafide intention. There was bonafide belief which might have made the Appellant not to discharge the tax liability on time - there is a reasonable cause for non-payment of service tax by the Appellant and accordingly, the provision of Section 80 of the Finance Act, 1994 can be applied for waiver of penalty u/s 78 ibid of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1526
  CENVAT Credit - input service - Medical Insurance Service - period prior to 1-4-2011 - Rule 2(l) of the Cenvat Credit Rules, 2004 - Held that:- Even in the case of health insurance of the workmen, when employees fall sick, it is necessary that they are provided proper treatment so that they are brought back to work without loss of man hours and disruption of manufacturing lines and the employer may take insurance for arranging proper medical attendance for sick workman or other employees of the company. Therefore, the medical insurance in relation to the employees of the company are also within the broad definition of input service given at Rule 2(l) of the Cenvat Credit Rules, 2004. The Hon’ble Karnataka High Court in the matter of CCE v. Micro Labs Ltd. [2011 (6) TMI 115 - KARNATAKA HIGH COURT] has held that Service Tax paid on group insurance and health insurance policy for employees is an input service on which credit can be allowed. There is no dispute about the fact that the issue in question is prior to 1.4.2011 i.e before the amendment in Rule 2(l) ibid. The definition of input service, post amendment contains exclusion clause and the said exclusion specifically excludes the life insurance/health insurance. The need for exclusion would arise only when such services are otherwise covered by the definition earlier i.e before amendment. Tribunal in the matter of M/s. Wipro Ltd. Vs. CCE, Bangalore-III [2018(4) TMI 149- CESTAT BANGALORE] has observed that the legislature in its wisdom has excluded certain service from the availment of CENVAT credit w.e.f. 1.4.2011, when such service are otherwise covered by the main definition clause of the ‘input service’ - Since the insurance has been specifically excluded post-amendment, this itself shows that it was included in pre-amendment period. Appeal dismissed - decided against Revenue.

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• 2018 (11) TMI 1525
  Penalty u/s 77 and 78 - wrong assessment of Service Tax liability - reduction in rate of service tax - service tax alongwith interest paid before issuance of SCN - Held that:- When the appellant admitted itself that it had negotiated the price which includes Service Tax components, it is not understood as to how he believed that the tax would be paid by the service receiver. More importantly, non-payment of Service Tax collected by the appellant was detected by the Department from the point of service received from the service receiver i.e. appellant and the same would clearly establish the intention of the appellant that it had not paid the tax under bonafide mistake, since its intention to evade payment of tax was apparent from its conduct. The investigation made by the Department also reveals that appellant had not declared their Service Tax liability correctly for which he imposed penalty under Section 78 of the Finance Act, 1994 - Penalty under Section 77 to the tune of Rs. 10,000/- was also imposed as appellant had failed to furnish the periodical ST-3 returns in contravention to Section 70 of the Finance Act, 1994 - penalties upheld. Appeal dismissed - decided against appellant.

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• 2018 (11) TMI 1524
  Demand of interest and penalty - irregularly availed CENVAT Credit reversed before issuance of SCN - Interpretation of statute - the word “or” whether can be substituted with the word “and” appearing in Rule 14 - Held that:- Interest is usually payable when the amount due is not paid back or amount deposited as tax is taken away erroneously. In the instant case, the duty paid against which cenvat credit was noted in the books of account was all along lying with the government treasury and it was neither utilised by way of adjustment against duty demand nor taken as a refund erroneously for which the appellant can be punished with imposition of interest for the amount which had never come to its account for utilisation. Demand not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1523
  Renting of immovable property services - penalty - Held that:- I do find that the appellant had intimated the lower authority regarding the discharge of service tax liability and the interest thereof on 17.09.2012. The appellants were correct in following the law and are eligible for the benefit of Section 80(2) of the Finance Act, 1994 - having discharge of service tax liability within time there was no reason to visit the appellant on any penalty. The penalty imposed on appellant is set aside. Demand of ineligible CENVAT credit - Held that:- The submission of the Counsel seems to be acceptable these payments were made from the head office as a receiver of the services. In my view, the Adjudicating Authority should consider the plea of the appellant in its correct perspective and go through the documents and come to a conclusion as to the correctly availed the CENVAT credit - the matter is remitted back to the Adjudicating Authority to reconsider the issue afresh after following the principles of natural justice. Appeal allowed in part and part matter on remand.

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• 2018 (11) TMI 1522
  Levy of Service tax - demand has been confirmed on the basis of income surrender before the Income-Tax Department - services or not - Held that:- The income surrendered with the Income-Tax Department cannot be the turnover of the service provided by the appellant, in the absence of any evidence placed on record by the Revenue that the income or turnover is on account of services provided by the appellant. The demand on account of income surrendered with the Income Tax Department cannot be confirmed against the appellant - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1521
  Business Auxiliary Service - amount received as commission for sale of Indian Made Foreign Liquor (IMFL) during the period 01.07.2003 to 30.06.2004 - Held that:- The agreement entered into do not indicate that the respondent shall be paid the amount as commission which is based on the quantum of sale or purchase. The first appellate authority has correctly come to the conclusion that the respondent is covered under the notification No. 13/2003-ST, dated 20.06.2003 for the period in question and no tax liability arises - impugned order upheld - appeal dismissed - decided against appellant-Revenue.

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• 2018 (11) TMI 1520
  Interest on the amount of refund already sanctioned - Section 11BB of the Central Excise Act, 1944 - period 01.09.2004 to 31.03.2008 - Held that:- It is a settled position of law that interest under Sec. 11BB should be allowed to the assessee whenever there is delay in sanctioning the refund beyond the period of three months from the date of filing of the application for refund - the interest amount may be recalculated at the appropriate rates and the interest should be granted to the appellant forthwith. Refund of Service Tax with Interest - period involved is from 01.09.2004 to 30.09.2007 - Time limitation - Held that:- The period between 01.06.2007 to 30.09.2007 falls beyond the period of limitation of one year and accordingly the service tax paid during that period is refundable. The demand of Rs. 2,95,001/- pertaining to period 01.06.2007 to 30.09.2007 on limitation was set aside by the Tribunal and hence the amount is refundable to the appellant. Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1519
  Failure to make pre-deposit - Section 35F of the Central Excise Act, 1944, made applicable to the Service Tax matters under Finance Act, 1994 - Held that:- The requirement of Section 35F of the Act, have been complied with, for entertaining the appeal of the appellant. However, since the learned Commissioner (Appeals) has dismissed the appeal solely on the ground of noncompliance of the requirement of Section 35F of the Act, and no findings have been recorded with regard to the merits of the case, the matter should be remanded to the learned Commissioner (Appeals) for deciding the issue afresh on the basis of the available records and the submissions to be made by the appellant. Appeal allowed by way of remand.

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• 2018 (11) TMI 1518
  Demand of Interest with recovery of credit - irregular availment of CENVAT credit - appellant had sufficient balance in its Cenvat account - Rule 14 of the Cenvat Credit Rules, 2004 - Held that:- It is admitted fact on record that the credit availed by the appellant had not been utilized for payment of service tax on the output service. Thus the provisions of Rule 15 of the rules cannot be sustained for imposition of equal amount of penalty, inasmuch as there was no intention on the part of the appellant to defraud the Government revenue by availing the irregular Cenvat Credit - the penalty imposed in the impugned order cannot stand for judicial scrutiny and accordingly, the same is liable to be set aside. Penalty set aside - the matter is remanded to the original authority for verification of records and proper fact finding regarding reversal of Cenvat Credit, as claimed by the appellant - appeal allowed by way of remand.

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• 2018 (11) TMI 1517
  Business promotion service/Business Support Services - amount collected as Field Care Plan Incentive Deposit (FCP deposit) - fallacious act - Held that:- The fallacious act to be discarded at the first reading itself - The unemployed persons approach the appellant to undertake sales of insurance policies and for which they make certain deposits with the appellant, which are later refunded to the appellant on successful enrolment of further 25 Sales Officers for the said job. There are no justification on the part of the department in alleging that the appellant had promoted the business of the Sales Officers, on the contrary, the appellant provided employment to the Sales Officers in selling the insurance policies for which they obtained necessary agency certificates from the respective insurance companies. Demand set aside - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (11) TMI 1516
  Relief of waiver of condition of pre-deposit of duty and penalty amount for filing appeal - technical hardship - whether for refusal to use discretion, there were some circumstances including the conduct of the party and whether case of undue hardship is made out by the appellant? Held that:- Apparently false record was prepared for evasion of duty. In spite of these circumstances, the concession is given by the Tribunal in condition of pre-deposit and the order shows that the order was made after keeping in view the financial condition and also the admitted liability . Thus, other things like admitted liability in respect of duty are also considered by the Tribunal and financial condition is also considered. Due to the orders made by this Court of allowing the petitions, the Tribunal gave more concession and the pre-condition amount was reduced. Unfortunately, such orders are made by the Tribunals and the Courts after the order of remand of the matter made by this Court. By filing proceedings in this Court and by filing applications for waiver of the pre-condition, the petitioner has apparently misused the process of law and petitioner has successfully avoided the payment of huge amount of duty, penalty and interest for more than 10 years. Proceedings dismissed.

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• 2018 (11) TMI 1515
  Full waiver of pre-deposit - undue hardship - whether the Tribunal, having accepted the plea of undue hardship had discretion or obligation under the law to grant full waiver? - Section 35F of CEA - Held that:- There are two important expressions in Section 35-F. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient - For a hardship to be 'undue' it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it. The other aspect relates to imposition of condition to safeguard the interest of Revenue. This is an aspect which the Tribunal has to bring into focus. It is for the Tribunal to impose such conditions as are deemed proper to safeguard the interests of the Revenue. Therefore, the Tribunal while dealing with the application has to consider materials to be placed by the assessee relating to undue hardship and also to stipulate conditions as required to safeguard the interests of revenue. In view of the decision of Supreme Court in the case of Benara Valves [2006 (11) TMI 6 - SUPREME COURT OF INDIA], there is no hesitation to hold that even though the Tribunal is satisfied with regard to undue hardship, it has discretion to grant waiver either full or in part. What should be relevant consideration has been indicated in the aforesaid judgment of the Supreme Court. We are inclined to answer in the manner that even though in a given case, the Tribunal has held that a case of undue hardship is made out, it is within the jurisdiction of the Tribunal to grant full or partial waiver of pre-deposit. Liberty granted to the appellant to approach the Tribunal to satisfy on what relevant considerations it claims full waiver of pre-deposit - appeal disposed off.

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• 2018 (11) TMI 1514
  Clandestine removal - reliance placed on the statement of the Director of Appellant - Section 9D of the Central Excise Act, 1944 - penalty - time limitation - Section 35 G of th Central Excise Act, 1944. Did the Tribunal act contrary to the law relying on the statement of the Director of Appellant to decide the appeal against the Appellant herein? - Is the procedure adopted by the Appellate Tribunal contrary to Section 9D of the Central Excise Act, 1944? - Held that:- The adjudicating officer as well as Customs, Excise and Service Tax Appellate Tribunal committed illegality in placing reliance upon the statement of Director Narayan Prasad Tekriwal which was recorded during investigation when his examination before the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice - The statement of the Director could not be treated as relevant piece of evidence nor could be relied upon without compliance of Section 9D of the Act. Did the Tribunal act in accordance with law in upholding the penalty equal to duty under Section 11AC of the Central Excise Act, 1944 and the penalty under Rule 25 of the Central Excise Rules 2002? - Held that:- Revenue does not seriously dispute the submission that the circular containing aforesaid clarification was issued in exercise of statuary powers under Section 37 B of the Act of the 1944 - If that be so, the adjudicating authority could not have proceeded to impose penalty simultaneously under Section 11 AC of the Act and Rule 25 of the Rules of 2002 - the Customs, Excise and Service Tax Appellate Tribunal/adjudicating authority was not justified in law in imposing penalty simultaneously under Section 11 AC of the Act of 1944 and under Rule 25 of the CEC Rules 2002, in view of the specific Bar created under clause 2.2 of the statutory circular issued by CEC, in view of 37 B of the Act of 1944. Was the demand barred by limitation period of one year under Section 11AC(1) of the Central Excise Act, 1944? - Held that:- The period of limitation would begin to run from the date of carrying out search and seizure operation and in that case, the extended period of limitation can not be taken recourse to as the proceeding, in any case, were required to be initiated within a period of one year - The show cause notice, in so far as the proceedings in respect of shortage/ excess of stock as is concerned were initiated beyond this period and is therefore, required to be held beyond the authority of law - levy of interest and penalty is also held illegal. On the facts and in the circumstances of the case, can the finding rendered by the Tribunal be treated as perverse warranting interference under Section 35 G of th Central Excise Act, 1944 on any ground referable as substantial question of law? - Held that:- Once we have held that the statement of the Director could not be admitted as relevant piece of evidence, there is no question of there being any admission on the statement of the Director of the company. Then the only other material left is unverified private document in the form of certain entries made in the note book, seized during search operations - without there being clinching evidence much less relevant admissible evidence on record, the adjudicating authority drew an inference of clandestine removal which cannot be sustained in law - the Tribunal committed perversity in law in coming to the conclusion that there existed relevant and material evidence to draw inference of clandestine removal. Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1513
  CENVAT Credit - waste - electricity sold by the appellant that was being generated from bagasse, a waste product of sugar manufacturing - invocation of Rule 6(3A) of Cenvat Credit Rules 2004 - Held that:- Admittedly electricity, though not found in tangible form, is classifiable under Tariff item no. 27160000 of Central Excise Tariff Act, 1985. But it is a non-excisable goods and the process of generation of electricity though a manufacturing process is dutiable if it is generated from mineral oils, bitumen substance, mineral waxes etc. and electricity generated from bagasse is not covered under Chapter 27 like electricity generated through solar power, hydro power, wind power etc. For post amendment period it can be said that the duty demand made against such sale of surplus electricity manufactured through waste product is not sustainable in law - appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1512
  Classification of goods - Zymegold - whether classified as ‘plant growth regulator’ under heading 310100 of the First Schedule to the Central Excise Tariff Act, 1985 or as ‘fertilisers’? - Held that:- In the context of unscientific approach to re-classification, there have been occasions of non-conformity to settled principles that should govern adjudication, appeal and remand which has been the primary contention in the proceedings before the first appellate authority. The first appellate authority has found the blatant disregard thereof to be sufficient to hold in favour of the present respondents. The test result, on which the scientist-expert has ventured to classify the product, does not dispute the presence of nitrogen and chlorine. That should suffice to characterize the product as ‘fertilizer’ based on the decision of the Tribunal in Commissioner of Central Excise, Mumbai-II v. Aries Agro-vet Industries Ltd [2018 (6) TMI 1070 - CESTAT MUMBAI]. Appeal dismissed - decided against Revenue.

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• 2018 (11) TMI 1511
  Recovery of refund - it was alleged that refund was erroneously sanctioned - Revenue has not challenged the order of sanctioning the refund claim - Held that:- The Revenue has not challenged the order of sanctioning the refund claim - provisions of Section 11A of the Act are not applicable to the facts of this case - demand not sustainable. The adjustment of refund is also not sustainable. Hence, the demand on account adjustment of refund is set aside. Denial of refund of education cess and higher education cess in terms of Notification No.56/02-CE dt.14.11.2002 - Held that:- As the issue has been settled by Hon’ble Supreme Court in the case of M/s. SRD Nutrients Pvt. Ltd. vs. CCE- Guwahati [2017 (11) TMI 655 - SUPREME COURT OF INDIA], therefore the appellant is entitled to claim refund of education cess and higher education cess paid by the appellant in terms N/N. 56/02-CE dt.14.11.2002. Appeal allowed - decided in favor of appellant.

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• 2018 (11) TMI 1510
  CENVAT Credit - fake invoices - credit denied on the ground that they have not received the material against the invoices issued by Shiva Metal Traders or M/S V.K enterprise, the second/first stage dealer and penalty has been imposed on the all the appellants - Held that:- The fact which is not in dispute is that no investigation was conducted at the end of manufacturer/buyers to ascertain whether they have received the inputs in question or not - Merely, on the basis of the statement of third party, it has been alleged that the appellants have not received the goods. Moreover, no investigation was conducted with the transporter to ascertain the fact that whether this manufacturer/buyers have received goods in their factory or not? In the absence of these evidence, the Cenvat credit cannot be denied to the manufacturer/buyers, namely, M/s Gupta Metal Sheets Pvt. Ltd. and M/s Agrawal Metal works Pvt. Ltd. - credit allowed. Penalty - Held that:- These dealers have failed to establish that they have received the goods against the Cenvatable invoices issued by M/s Annpurna Impex Pvt. Ltd. In that circumstances, penalty on first stage/second stage dealer is rightly imposed by the adjudicating authority or the authorities below - penalty imposed on first stage dealer and second stage dealer, namely, M/s Shiva Metal Traders and M/s V.K. Enterprises are confirmed. Appeal allowed in part.

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• 2018 (11) TMI 1509
  Monetary limit of amount involved in the appeal - M/s Navbharat Industries was issued with five show-cause notices for recovery of Rs. 14,50,429/-, of Rs. 10,42,240/-, of Rs. 9,63,266/-, of Rs. 18,09,053/- and of Rs. 16,34,829/-. Likewise, M/s Shree New India Processors were issued with a single show-cause notice for recovery of Rs. 4,70,460/- and of Rs. 3,94,164/- - Held that:- The litigation policy of Government of India notified in F.No.390/Misc./163/2010-JC dated 17th December 2015 of Central Board of Excise & Customs, New Delhi, and enhanced by amendment dated 11th July 2018 are taken to that the monetary limits for pursuing of appeals before the Tribunal has not been crossed in each of these disputes - appeals of Revenue against M/s Shree New India Processors and M/s Navbharat Industries dismissed.

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• 2018 (11) TMI 1508
  100% EOU - clearance of lipsticks against advance DTA permission - benefit of N/N. 2/95-CE dated 4.1.1995 - benefit of notification denied on the ground that the manufactured product, viz. lipstick, was never exported by the appellant subsequently, therefore, the condition of EXIM Policy para 9.9(b) is violated - Held that:- As to be eligible to the benefit of notification, the assessee has to discharge the burden that their case falls within the four corners of the conditions prescribed in availing the benefit of the exemption notification - the appellant could not prove the same. Also, there is no merit in the contention of the learned Advocate for the appellant that the demand is barred by limitation inasmuch as the benefit of the notification was obtained by misdeclaring the fact that lipsticks were exported or meant to be exported, then the appellant knew that the lipsticks manufactured would be cleared in DTA only. Appeal dismissed - decided against appellant.

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• 2018 (11) TMI 1507
  Refund of excess duty - refund claims have already been sanctioned to the respondent and the same was not challenged - N/N. 56/2002-CE dated 14.11.2002 - Held that:- Unit-II and Unit-I are owned by the respondent themselves and they are operating under Notification No. 56/2002-CE dated 14.11.2002. As per the said notification, whatever duty has been paid by the Unit-I in cash is refundable, Unit-II is entitled to avail cenvat credit the whole of the duty paid by Unit-I. If Unit-I has paid excess duty which was not required to be paid by Unit-I. In that circumstances, Unit-I is entitled to claim refund of the excess amount paid by Unit-I which is not the duty. Further, if Unit-II has taken excess credit of duty paid by Unit-I and the respondent is same, therefore, it is a revenue neutral situation. Also, the refund claims have already been sanctioned and which has not been challenged by the Revenue, therefore, in the absence of challenge thereto, the proceedings against the Respondent is not sustainable. Appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2018 (11) TMI 1506
  Levy of Interest on Entry tax - validity of orders of assessment of entry tax - principle of constructive res judicata - Uttar Pradesh Tax On Entry Of Goods Into Local Areas Act, 2007 - Held that:- It is settled law that the challenge to the consequential order would be of no consequence and serve no purpose until and unless the main/basic order on which the demand is based is challenged. A challenge to the consequential order without challenging the basic order on which the consequential order has been based cannot be entertained. Thus, the party challenging the consequential order is obliged to challenge the basic order also and only if the same is found to be illegal the correctness of the consequential order can be examined. The assessment orders of entry tax in relation to the petitioner have already attained finality as the challenge to the same stand defeated in the earlier round of litigation - The petitioner cannot maintain successive writ petitions for the same cause of action in respect whereof earlier petitions filed were decided but without any relief in respect of levy of interest on entry tax. Any attempt to re-agitate the matter on a cause of action or issue on which the parties have previously litigated or which may have been raised and may not have been decided would amount to an abuse of the process of the court and would be contrary to the public policy as the object is to bring the lis to an end and not to allow any party to be vexed twice for the same cause of action. The petitioner had a better alternative remedy of disputing the correctness of the levy and demand of interest on entry tax on fact and law in appeal. Also, the matter regarding levy and payment of interest on entry tax in so far as the petitioner is concerned for the assessment years in question do not deserve to be interfered with by us in exercise of writ jurisdiction. Petition dismissed as not maintainable.

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• Indian Laws

• 2018 (11) TMI 1529
  Condonation of a delay caused on the account of alleged fraud played on the objector beyond the period prescribed under Section 34 (3) of the Arbitration and Conciliation Act of 1996 - applicability of Section 17 of the Limitation Act, 1963. Held that:- This Court in several pronouncements has extended Section 14 of Limitation Act to Section 34 of Arbitration Act and thereby excluded the time spent in bonafide pursuing proceedings in a Court which lacks jurisdiction - Similarly, this Court also extended Section 12 of the Limitation Act to the Arbitration Act and excluded the day on which the Award was received from computing the starting period under Section 34(3). Extending Section 17 of the Limitation Act would go contrary to the principle of unbreakability enshrined under Section 34(3) of the Arbitration Act. Section 17 does not defer the starting point of the limitation period merely because the Appellants has committed fraud. Section 17 does not encompass all kinds of frauds and mistakes. Section 17(1)(b) and (d) only encompasses only those fraudulent conduct or act of concealment of documents which have the effect of suppressing the knowledge entitling a party to pursue its legal remedy. Once a party becomes aware of the antecedent facts necessary to pursue a legal proceeding, the limitation period commences. In the context of Section 34, a party can challenge an award as soon as it receives the award. Once an award is received, a party has knowledge of the award and the limitation period commences. The objecting party is therefore precluded from invoking Section 17(1)(b) (d) once it has knowledge of the Award. Section 17(1)(a) and (c) of Limitation Act may not even apply, if they are extended to Section 34, since they deal with a scenario where the application is based upon the fraud of the respondent or if the application is for relief from the consequences of a mistake . Section 34 application is based on the award and not on the fraud of the respondent and does not seek the relief of consequence of a mistake. Thus, Once the party has received the Award, the limitation period under Section 34(3) of the Arbitration Act commences. Section 17 of the Limitation Act would not come to the rescue of such objecting party. In the present case, the Respondents had a right to challenge the Award under Section 34 the moment they received it. In this case, Respondents received the Award on 21.02.2010. The alleged MoU was executed on 09.04.2010. Once the Respondents received the Award, the time under Section 34(3) commenced and any subsequent disability even as per Section 17 or Section 9 of Limitation Act is immaterial. Merely because the Appellant had committed some fraud, it would not affect the Respondents right to challenge the Award if the facts entitling the filing of a Section 34 Application was within their knowledge - The moment the Respondents have received the Award, the three months period prescribed under Section 34(3) begins to commence. It was incumbent on the Respondents to have instituted an application under Section 34 challenging an award. Therefore, in light of the discussion above, there would not have been any point for meaningful remand as the question of law is answered against the Respondents herein. Appeal allowed - decided in favor of appellant.

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