TMI Tax Updates - e-Newsletter
December 10, 2019

Case Laws in this Newsletter:

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

TMI SMS

• The assessment order passed by the Addl. CIT when jurisdiction lies with DCIT is without authority of law & illegal u/s 120 - order quashed

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• Time limit for filing of Rebate of Central Excise Duty cannot be extended for Late receipt of Export Promotion (EP) copy of Shipping Bill

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News

1. GST Seva Kendras resolve complaints related to GST

2. Overwhelming response to Nationwide GST Stakeholder Feedback Diwas

3. Quarterly report on Public Debt Management

4. Government amended IEPFA Rules, 2016, to simplify refund of claims

5. SFIO’s Market Research Analysis Unit prepares 55 reports on fraud & misappropriation by Companies; SFIO assigned 12 for probe

6. Government has introduced 33 tranches of Sovereign Gold Bonds

Notifications

GST - States

1. S.O. 397 - dated 27-11-2019 - Bihar SGST

The Bihar Goods and Services Tax (Seventh Amendment) Rules, 2019.

2. F.NO.FIN/REV-3/GST/1/08 (Pt-1)(Vol. 1)/253 - dated 9-10-2019 - Nagaland SGST

Due date for furnishing FORM GSTR- 1 for registered person having aggregate turnover more than 1.5 crore rupees for the months of October, 2019 to March, 2020, extended till the eleventh day of the month succeeding such month.

3. F.NO.FIN/REV-3/GST/1/08 (Pt-1)(Vol. 1)/252 - dated 9-10-2019 - Nagaland SGST

Due date for furnishing FORM GSTR- 3B return for the months of October, 2019 to March, 2020, is, on or before the twentieth day of the month succeeding such month

4. CT/LEG/GST-NT/12-17/869 - 14/2019 - dated 9-10-2019 - Nagaland SGST

Seeks to prescribe the due date for furnishing of return in FORM GSTR-1 from Oct,2019 till Mar,2020

5. CT/LEG/GST-NT/12-17/868 - 13/2019 - dated 9-10-2019 - Nagaland SGST

Seeks to prescribe the due date for furnishing of return in FORM GSTR-3B for from Oct,2019 till Mar, 2020

6. F.NO.FIN/REV-3/GST/1/08(Pt-1) (Vol.1)/251 - dated 30-9-2019 - Nagaland SGST

Seeks to notify the grant of alcoholic liquor licence

7. F.NO.FIN/REV-3/GST/1/08(Pt-1) (Vol.1)/250 - dated 30-9-2019 - Nagaland SGST

Seeks to amend Notification No. F.NO.FIN/REV-3/GST/1/08(Pt-1) (Vol.1)/115 dated 29th March , 2019

8. F.NO.FIN/REV-3/GST/1/08(Pt-1) (Vol.1)/249 - dated 30-9-2019 - Nagaland SGST

Seeks to insert Explanation in Notification No. F.NO.FIN/REV-3/GST/1/08(Pt-1) /37 dated 25th January, 2018

9. F.NO.FIN/REV-3/GST/1/08 (Pt-1)(Vol-1)/248 - dated 30-9-2019 - Nagaland SGST

Amendment in Notification No. F.NO.FIN/REV- 3/GST/1/08 (Pt-1) “P” dated 30th June, 2017

10. F.NO.FIN/REV-3/GST/1/08 (Pt-1)(Vol-1)/247 - dated 30-9-2019 - Nagaland SGST

Amendment in Notification No. F.NO.FIN/REV-3/GST/1/08 (Pt-1) “O” dated 30th June, 2017

11. F.NO.FIN/REV-3/GST/1/08 (Pt-1) (Vol. 1) /239 - dated 30-9-2019 - Nagaland SGST

Seeks to exclude manufacturers of aerated waters from the purview of composition scheme

12. F.NO.FIN/REV-3/GST/1/08 (Pt-1) (Vol. 1) /238 - dated 24-9-2019 - Nagaland SGST

Seeks to bring rules 10, 11, 12 and 26 of the Nagaland Goods and Services Tax ( Thirty Second Amendment) Rules, 2019 shall come into force

Circulars / Instructions / Orders

DGFT

1. 47/2015-2020 - dated 7-12-2019

Changes in MEIS rates

Highlights / Catch Notes

Income Tax

• Tax Not Deducted at Source: M/s Prabhu Construction Not Contractors u/s 194C of Income Tax Act.

  Case-Laws - HC : TDS u/s 194C - deduct tax at source on the cost of the construction incurred by M/s Prabhu Construction deeming it as a contract - since neither the Assessee nor M/s. Prabhu Construction can be styled as contractors, it is obvious that the provisions of Section 194 C of the IT Act were not attracted
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• Court Denies Tax Exemptions u/ss 10(23AA) & 11; Income Taxed at Maximum Marginal Rate.

  Case-Laws - HC : Exemption u/s 10(23AA) - exemption u/s 11 - assessee failed to prove its case - If the assessee was not entitled to the exemption under Section 11, the maximum marginal rate should have been applied on the total income
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• Amalgamation Depreciation: Calculate WDV for Amalgamated Company Excluding Unabsorbed Depreciation from Amalgamating Companies.

  Case-Laws - AT : Disallowances of depreciation - increased WDV of assets transferred on amalgamation - The WDV in the hands of the amalgamated company was to be calculated without considering the unabsorbed depreciation of the amalgamating companies, for which set off was never allowed.
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• No TDS liability for assessee on payments to SFIC Logistics; PAN obtained, section 194C compliance ensured.

  Case-Laws - AT : TDS u/s 194C - Addition u/s 40(a)(ia) - transport contract for transportation of two wheelers - assessee obtained Permanent Account Number (PAN) of M/s SFIC Logistics P Ltd and accordingly it did not deduct tax at source from the payments made to the above said company - there is no TDS liability - hence no addition
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• Income from Rent, Interest, and Royalties Qualifies for Deductions u/s 80IA for Airport Core Activities.

  Case-Laws - AT : Deduction u/s. 80IA - whether the income e.g. rent, interest, royalty etc. are from core and essential activities of airport and not from incidental activities of providing amenities to passengers. - CIT(A) is justified in granting deduction u/s. 80IA
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• Assessment Quashed: Addl. CIT Issued Order Without Formal Jurisdiction Transfer from DCIT u/s 143(3.

  Case-Laws - AT : Jurisdiction of AO - originally the jurisdiction to make the assessment over the company was with the DCIT. The assessment order has been passed by the Addl. CIT without any transfer or jurisdiction in his favour - Assessment framed under section 143(3) quashed.
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• Interest on Delayed Tax Payments Deductible u/s 37(1) of the Income Tax Act, Aligns with Legal Precedents.

  Case-Laws - AT : Deduction of expenditure u/s 37(1) - It is settled position of law that interest on delay in payment of tax is also part and parcel of tax and it is equally settled position of law that Service Tax paid is also a permissible deduction. - interest is only of compensatory nature and does not take a colour of penalty.
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Customs

• Petitioner entitled to excise duty drawback if all scheme requirements met, despite Public Notice saying otherwise.

  Case-Laws - HC : Drawback of central excise duty - the petitioner should not be denied the benefit of drawback based merely on a Public Notice, particularly when the petitioner has satisfied all other requirements under the relevant Notification/Scheme, thus frustrating the object of the scheme itself.
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DGFT

• Merchandise Exports from India Scheme: Extra 2% Benefits Apply to Specific Products, Excluding Annexure Listings.

  Circulars : Except entries/ products listed in the Annexure, the additional 2% benefits under MEIS will be available for entries/products mentioned in Public Notice
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Service Tax

• Interest on Delayed Refund of Cenvat Credit Denied: Section 11BB Not Applicable u/r 5 of Cenvat Credit Rules.

  Case-Laws - AT : Right to claim interest of delayed sanction of Refund of unutilised Cenvat Credit - Applicability of Section 11BB where refund is granted under Rule 5 of Cenvat Credit Rules r.w.s 11B of central excise - Interest not provided for - requested rejected.
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• Service Tax on Modem-Provision Upheld Due to Lack of VAT Payment on Goods in Telephone Services Case.

  Case-Laws - AT : Recovery of service tax - telephone services - Modem was given to the customers - Since admittedly, the goods did not involve payment of VAT, the question of those being purely a trading activity cannot be ascertained, demand of service tax upheld.
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• Motor vehicle registration and smart card services not classified as Business Support Service for tax purposes.

  Case-Laws - AT : Support service of business or commerce - Valuation - charges collected towards registration of motor vehicle, smart card etc. - customer of car is not a business entity, so called business service to the customer of cars is not in relation to business of commerce of the customer of cars. Therefore service in question is not covered under Business Support Service
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Central Excise

• Appellate Tribunal Misinterprets Rule 16(1) on CENVAT Credit for Returned Goods, Incorrectly Includes Scrapping.

  Case-Laws - HC : Availment and utilization of CENVAT credit - returned goods - Appellate Tribunal has incorrectly interpreted the scope of Rule 16(1) by bringing scrapping within the embrace of Rule 16(1) and has proceeded to legitimise the benefit of CENVAT availed by the assessee.
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• Excise Duty Rebate Denied Due to Late Filing; Section 11B Enforces Strict One-Year Refund Claim Deadline.

  Case-Laws - HC : Rebate of Central Excise Duty - time limit - Late receipt of Export Promotion (EP) copy of the Shipping Bill - There is no provision u/s 11B which permits relaxation of this stipulated one year time limit, refund was rightly rejected since filing beyond one year.
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• Jarda Scented Tobacco Classified Under Tariff Item 2403 99 30 for Central Excise; Aligns with Case Laws and Regulations.

  Case-Laws - AT : Classification of goods - chewing tobacco, perfumery compounds etc. - It is essentially Jarda Scented Tobacco and stands correctly classified under Tariff Items No.2403 99 30.
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• Refund Claim for Terminal Excise Duty Sanctioned After Demand Against EMI Transmission Ltd. Dropped; Limitation Period Issue Resolved.

  Case-Laws - AT : Recovery of Refund of terminal excise duty - Period of limitation - fter receiving the World Bank loan, they filed the refund claim but could not be pursued, due to pending demand notice issued to M/s EMI Transmission Ltd. After the order of the learned Commissioner dropping the demand, the appellant pursued the refund, which was sanctioned to them. - Demand set aside.
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• CENVAT Credit Allowed for Taxes on Inputs in Commercial Property Construction for Leasing Services.

  Case-Laws - AT : CENVAT Credit - duties/tax paid on inputs/input services deployed/utilised for construction of the commercial property which was then leased out - requirement of construction of a building is a necessary pre-condition for rendering the renting service - credit allowed.
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Case Laws:

• GST

• 2019 (12) TMI 383
  Revision/correction in monthly returns i.e. GSTR-1, GSTR-2A and GSTR-3B and also annual returns in the form of GSTR-9C - CGST Act, 2017 - HELD THAT:- Mr.Jetly, learned Counsel appearing for Respondent No.5 - Commissioner, Goods Service Tax and Central Excise, Mumbai Central on instructions states that if the Petitioners file a copy of representation dated 8 July 2019 within a period of three days from today, then the same will be disposed of after following the principles of natural justice, on or before 24 December 2019. Statement accepted. Petitions disposed of with a direction to Respondent No.5 to dispose of the representation dated 8 July 2019 in above terms.

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• Income Tax

• 2019 (12) TMI 382
  Tribunal power of accepting additional evidence - whether the production of such additional evidence was to be allowed or not ? - HELD THAT:- ITAT does have the power to permit production of additional evidence before the Tribunal if the case for the same is indeed made out by the parties. This means that the Tribunal is duty bound to consider the application seeking leave to produce additional evidence at the appellate stage. Since this has not been done, the substantial question of law, now framed, is required to be answered in favour of the appellant and against the revenue. Accordingly, without going into the merits of the main matter or without even going in the merits of the application made by the appellant seeking leave to produce additional evidence at the appellate stage, we, for the aforesaid reasons, set aside the impugned judgment

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• 2019 (12) TMI 381
  Reopening of assessment - whether they are good reasons, as based on tangible material having live link with formation of the belief? - criteria for deduction under section 80IA - HELD THAT:- There is no dispute that for the relevant assessment year, a return under section 139 was filed by assessee. The notice issued under section 143(2) is pursuant to a notice issued under section 142(1). In such circumstances, scrutiny assessment under section 143(3) was made on the Assessing Officer having required disclosure of further particulars and information, to thereupon allow the exemption. Nothing has been disclosed by Revenue to give credence to the statement in the reasons to believe that in spite of repeatedly asking for copies of bills and vouchers towards construction of the bridges, assessee never produced any evidence, in the face of contents of said two notices issued under sections 142(1) and 143 (2). Court has once again looked at notice dated 24th October/19th November, 2007 issued under section 143(2) and earlier notice dated 9th April, 2007 under section 142(1). The assertion in the affidavit-in-opposition that the AO for the first time came to know that assessee was not in the business of infrastructural facility but in the business of outdoor advertisement, thereby not fulfilling criteria for deduction under section 80IA, is not based on any tangible material that has been placed before Court, either by the reasons or by subsequent disclosure. There is no disclosure in the affidavit-in-opposition. Letter of Executive Engineer, PWD (Roads) Department received on 14th January, 2011 in response to notice dated 27th October, 2010 issued under section 133(6), are correspondence post assessment order dated 14th July, 2008, in scrutiny assessment made under section 143(3). The notice dated 27th October, 2010 issued under clause (6) in section 133, according to the Assessing Officer, drew belated response from Executive Engineer PWD (Roads) Department and not relied upon in the reasons, for being of doubtful genuineness. Absence of reliable answer from, such as appears to be given by a government functionary, being noticee under clause (6) in section 133, can be cause for further enquiry but not tangible material having live link with formation of the belief. The letter obviously does not support contention of Revenue. As such no material has been disclosed by Revenue. All this leads to inevitable conclusion that there has been change of opinion. Writ petition succeeds. Impugned notice is set aside

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• 2019 (12) TMI 380
  PE in India - only supplying aero-engines and spare parts to the Indian customers on principal to principal basis - Whether PE of assessee was in fact liaison office of RRIL in India, which is separately assessed to tax in India and its profit and taxability now has attained finality in the form of agreement under MAP. ? - HELD THAT:- As seen that the finding returned by the ITAT-that RRIL constituted the PE of the appellant is primarily a finding of fact based on the appreciation of evidence. No change in the factual matrix is pointed out by the appellant, and the finding returned does not raise a substantial question of law. Submission of Mr. Billimoria is that the amendment incorporated in the second explanation in section 9(1) of the Income Tax Act with effect from 1st April, 2019 would not have retrospective application. This submission has no merit. This is for the reason that while determining the issue whether RRIL constituted the PE of the appellant-assessee, the authorities have not relied upon the said explanation at all, and the determination of the said issue was undertaken dehors the said explanation, upon appreciation of the evidence unearthed during the survey. The explanation may, or may not, be prospective. In any event, the same would certainly not have the effect of nullifying the determination made on the issue of PE on the basis of the evidence collected and the pre existing law as prevalent prior to the amendment of Section 9(1) with effect from 1st April, 2019. That, clearly, is not the purport of the substituted Clause (a) of Explanation-2 to Section 9(1) of the Act, with effect from 1st April, 2019. Another argument advanced by Mr. Billimoria is that the income of the assessee, on the basis that RRIL constituted its PE, has already been subjected to tax in the hands of PE i.e. RRIL, and the revenue is seeking to tax the same again. This submission has no merit. Firstly, this aspect does not raise a substantial question of law, since it is clearly a factual issue. Secondly, the order of the CIT(A) dated 15th February, 2009 was available when this Court rendered its decision on 30th August, 2011 in the case of the assessee, as taken note of hereinabove. No such plea was raised then. It is not open to the appellant to raise it now.

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• 2019 (12) TMI 379
  Reopening of assessment u/s 147 - AO received information that M/s. Banas Finance Ltd. is a penny stock listed on BSE with script code and has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain or short term capital loss in their books of accounts - HELD THAT:- As submitted that the assessment is sought to be reopened on borrowed satisfaction of the investigation wing without making any inquiry into the facts of the case. Assessment is sought to be reopened beyond a period of four years from the end of the relevant assessment year and that in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts, the assumption of jurisdiction by the Assessing Officer under section 147 of the Act is without any authority of law. Having regard to the submissions advanced by the learned advocate for the petitioner, issue notice, returnable on 21st January 2020. By way of ad-interim relief further proceedings pursuant to the impugned notice dated 29th March 2019 issued by the respondent under section 148 of the Act for assessment year 2012-2013 are hereby stayed.

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• 2019 (12) TMI 378
  TDS u/s 194C - deduct tax at source on the cost of the construction incurred by M/s Prabhu Construction deeming it as a contract - HELD THAT:- CIT(Appeals) as well as ITAT upon consideration of the clauses of the agreements concluded that the Asseesee assigned the rights in favour of M/s. Prabhu Construction. They have concurrently held that this was sale of area in the two projects and this was not a case where the Assessee had merely engaged M/s. Prabhu Construction as its contractor. These findings of fact, concurrently recorded cannot be said to be vitiated by any perversity or misreading of the documents on record. The two authorities have basically taken a plausible view on the basis of the interpretation of the agreements which forms part of the record. In the absence of any use of perversity being made out, it would not be proper for us to interfere in such finding of fact in exercise of the jurisdiction under Section 260 A of the IT Act. Once the finding of facts are to be sustained, it is obvious that the provisions of Section 194 C cannot be said to be attracted. Section 194 C deals with deduction of tax at source when it comes to payment to contractors. In the present case, since neither the Assessee nor M/s. Prabhu Construction can be styled as contractors, it is obvious that the provisions of Section 194 C of the IT Act were not attracted as held by both the Commissioner (Appeals) and the ITAT. Section 194-C refers to any person responsible for paying any sum to any resident referred to as contractor in the said section for carrying out any work in pursuance of a contract. The expression sum , in the context, would mean sum of cash money as was held by the Hon ble Supreme Court in the case of H.H. Sri Rama Verma vs. Commissioner of Income Tax, Ernakulam [ 1990 (9) TMI 4 - SUPREME COURT] though in the context of the provisions of Section 80- G as then stood. The Hon ble Apex Court has held that when the language of the provision is plain and clear, the Courts cannot enlarge the scope of the provision by adopting an interpretative process. - Decided in favour of the Assessee Addition u/s 40(a)(ia) - disallowing of expenditure in computing his income from business and profession - HELD THAT:- Since the provisions of Section 194-C were not applicable, the consequent provisions of Section 40(a)(ia), will also not apply for making disallowance of the expenditure in computing the income under the head income from business or profession . The ITAT, in such circumstances, was quite justified in holding that the CIT was not right in taking the view as the costs incurred in construction is a capital cost for computation of income under Section 48 of the IT Act. Accordingly, even the second substantial question of law is required to be answered against the Revenue and in favour of the Assessee.

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• 2019 (12) TMI 377
  Reopening of assessment u/s 147 - basis for issuance of notice under Section 148 merely because the orders for block assessment had been reversed by the Tribunal - HELD THAT:- Ruling in Smt. Mira Ananta Naik and others [ 2008 (8) TMI 800 - BOMBAY HIGH COURT] completely supports the contentions raised by and on behalf of the petitioners and on the basis of reasoning reflected therein, in this case as well, the impugned notice dated 18.10.2006 and the impugned order dated 31.01.2007 deserve to be quashed. In this case as well, block assessment orders have been made treating this amount as income vide order dated 27.09.2002. This order was however reversed by the Commissioner (Appeals) on 13.07.2006 and soon thereafter the respondents, proceeded to issue impugned notice dated 18.10.2006, even though, there was really no material to suggest that any income had escaped assessment. Since, in the present case there was full disclosure and in fact, the amount had even become the subject matter of the assessment both under Section 158 BC and Section 143(3) of the I.T. Act, there could have been no reason to believe that the income chargeable to tax had indeed escaped assessment. In Asian Paints Ltd. [ 2008 (7) TMI 237 - BOMBAY HIGH COURT] this Court had held that in a situation where according to the assessing officer he failed to apply his mind to relevant material in making assessment order, he cannot take advantage of his own wrong and reopen assessment by taking recourse to provisions of section 147/148 of the I.T. Act. In the present case, the assessing officer in the course of regular assessment had in fact asked for information in relation to this very amount of Rs. 10.33 Crores. This information was duly furnished by the petitioners. Only thereafter, the assessing officer made orders dated 21.03.2005 under Section 143(3) of the I.T. Act. In these circumstances, it was no longer open for the respondents to issue the impugned notice under Section 147/148 of the I.T. Act.

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• 2019 (12) TMI 376
  Exemption u/s 10(23AA) - exemption u/s 11 - proof of charitable activity u/s 2(15) - income on behalf of regimental fund or non-public fund established by the armed forces of the Union - HELD THAT:- In the instant case, the assessee has failed to prove income on behalf of regimental fund or non-public fund established by the armed forces of the Union. The establishment should be of armed forces of the Union with receipt of the fund of the nature given under the said provision. The issue aforesaid has been ignored by the tribunal so as by the CIT(Appeals). It seems to have been persuaded only by one issue which was initial denial of the exemption under Section 10(23AA) as it was not claimed at the time of submission of return but during the course of assessment. It may be that assessee can claim the exemption under Section 10(23AA) at the time of assessment but entitlement for it was required to be decided by CIT(Appeals) and the tribunal. On the facts of the case, we do not find that the assessee was entitled for exemption under Section 10(23AA) of the Act of 1961 when it failed to prove it case. Thus, the order of the CIT(Appeals) and the tribunal to allow the exemption under the aforesaid provision cannot sustained. Addition u/s 40(a)(ia) - CIT(Appeals) deleted the addition - HELD THAT:- It is after ignoring the fact that the assessee was not found entitled to the exemption under Section 11 in view of the violation of Section 13. An order for denial of exemption under Section 11 was passed on 12.02.2016. Ignoring the aforesaid and treating the assessee to be entitled for the exemption on its registration under Section 12A of the Act of 1961, deletion of the addition was made. The tribunal upheld the order passed by the CIT(Appeals) ignoring the fact of denial of exemption under Section 11 of the Act of 1961. Once the exemption under Section 11 was denied, the assessee was required to deduct the TDS and thereby the addition was rightly made by the Assessing Authority. Accordingly, CIT(Appeals) so as to the tribunal was not justified to delete addition by referring to Section 40(a)(ia) while ignoring proviso appended to it and the order dated 12.02.2016 where the exemption under Section 11 of the Income Tax Act of 1961 was denied to the assessee. Thus, order of the CIT(Appeals) so as to the tribunal needs interference even on that count. Maximum marginal rate - maximum marginal rate was not applied on the total income despite the fact that the assessee was not found entitled to the exemption under Section 11 - HELD THAT:- A reference of Section 164(2) of the Act of 1961 would be relevant for the aforesaid. If the assessee was not entitled to the exemption under Section 11, the maximum marginal rate should have been applied on the total income and not on the addition of Rs. 1,54,745/- and Rs. 2,95,185/-. Since the assessee conducted itself in violation of Section 13 of the Income Tax Act, exemption under Section 11 was denied in the assessment order dated 12.02.2016. The CIT(Appeals) and the tribunal was required to consider aforesaid aspect while restricting the maximum marginal money on the addition of Rs. 1,54,745/- and Rs. 2,95,185/-. - Decided in favour of revenue

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• 2019 (12) TMI 375
  Allowance of club membership fees - Both the counsel state that the assessee is entitled to claim deduction to the extent of subscription or membership fee if paid by the assessee but not incidental expenses incurred by the employees/member of the assessee. - Held that:- the decision of CIT(A) and ITAT to the extent of granting complete deduction to the amount spent towards club membership fee and incidental expenses is untenable. - Matter restored before AO for passing orders after examining the accounts on the actual extent of expenses incurred by the assessee in this behalf and grant deduction to the actual expenses incurred by the assessee by keeping in view the ratio laid down by this court in [ 2019 (4) TMI 82 - KERALA HIGH COURT ] Deduction of interest on the investment made from pool of funds - nexus between borrowed funds and interest in units of mutual funds - assessee received dividend and reduced from the net profit under Explanation (ii) below the second proviso to sub-section (2) of section 115JB by treating the said income to which the provisions of section 10(33) of the Act would apply. - assessee for the previous assessment year in an appeal pending before the apex court has taken a different stand from the stand taken in the present assessment year. - Held that:- the remand to the Assessing Officer is justified and no interference is warranted in the appeal. MAT - computation of the book profit under section 115JB - disallowance of amount paid from reserve funds of GPEL (JV Partner) as guarantor of bank loans - Held that:- the assessee has established that the memorandum of association, authorised the assessee to expand its business into new areas, i.e., incorporating GPEL, etc. - GPEL on account of technical glitches in sharing know-how provided by the foreign collaborator could not take off on expected lines, resulting in cash loss etc. GPEL was referred to the BIFR as sick industry. The BIFR notified a scheme for operation or reviving GPEL. The BIFR, under the scheme had equally distributed the obligations both to Gujarat infrastructure Development company and the assessee. The assessee, as part of implementation of a scheme accepted by the BIFR had to clear the debt of GPEL as guarantor. The Tribunal held that the contention of the Assessing Officer if accepted literally amounts to deciding the priorities of the business exigencies of the assessee, as long as the truthfulness of the entries is not doubted and it is not a case of siphoning off of money through cheap fictitious entries, the Tribunal held that there was no need to interfere with the findings recorded by the Commissioner of Income-tax (Appeals). - Order of CIT(A) and ITAT sustained. Payment of bonus - deduction on actual payment basis u/s 43B - Held that:- The Tribunal further refers to consistent practice followed by the assessee, namely, that the assessee makes payment on account of bonus on the occasion of Onam, which is an important festival in the State of Kerala. It is finally held that a combined reading of section 36(2), sub-section (1) of section 36 read with section 43B allows accepting the expenditure on actual payment basis made by the assessee. - No interference required.

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• 2019 (12) TMI 374
  Foreign/Associated Enterprise as a tested party - HELD THAT:- Issue admitted to have been decided by the Tribunal against the assessee in its order for the immediately preceding assessment year, namely, 2009-10. A copy of such order [2019 (4) TMI 1653 - ITAT PUNE ] has been placed on record as per which such contention of the assessee for adopting Foreign/ Associated Enterprise as a tested party has been jettisoned. - Decided against assessee. Depreciation towards difference in rates - AR submitted that similar issue also came up before the Tribunal in its order for the assessment year 2009-10 - HELD THAT:- By inviting our attention towards page 23 para 20 of the order, the ld. AR submitted that the Tribunal has restored the matter to the file of AO/TPO for allowing adjustment to the operating margin of comparable companies if there is some difference in the rates of depreciation charged by the assessee vis- -vis the comparable companies. In view of the reason that the facts and circumstances on this issue are similar, we set-aside the impugned order and remit the matter to the file of AO/TPO for deciding it in conformity with the directions given by the Tribunal in its order for the preceding year as referred to in para 20 of its order. Transfer pricing addition should be restricted only to the value of international transactions and not all the transactions - Admission of additional ground - HELD THAT:- DRP directed the AO/TPO to restrict the transfer pricing adjustment only with reference to the international transaction but the TPO failed to give effect to the DRP s direction in proper perspective while calculating transfer pricing addition in the final assessment order. The Tribunal in its order for the assessment year 2009-10 has also examined this issue on page 23 para 23. Following the judgment of Hon ble Bombay High Court in CIT vs. Thyssen Krupp Industries India Private Ltd. [2015 (12) TMI 1076 - BOMBAY HIGH COURT ] the Tribunal has directed that the transfer pricing addition should be restricted to the transactions with AEs and not the unrelated or non-AEs. Following the same view, we allow this additional ground of appeal and direct the AO/TPO to restrict the transfer pricing addition only qua the international transactions and not the entity level transactions. Suo moto transfer pricing adjustment offered by the assessee - HELD THAT:- The assessee itself suo moto offered transfer pricing addition of Rs. 38.00 lakh in this international transaction and offered the same in the computation of total income under point no.20.7. The claim of the assessee before the Tribunal is that the authorities have gone ahead with the transfer pricing addition as computed by them without giving effect to the amount of income voluntarily offered by the assessee. The AO/TPO is directed to verify the assessee s contention. In case the assessee offered the transfer pricing addition of Rs. 38.00 lakh which inadvertently went unnoticed, then relief to this extent should be allowed. Needless to say, the assessee shall be allowed a reasonable opportunity of hearing. TPA - Comparable selection - inclusion of Coral Hub Ltd. (Vishal Information Technologies Ltd.) - HELD THAT:- Coral Hub Ltd. was following June as the year ending as against the assessee following financial year, namely, year ending on 31st March. Thus, there is basic difference in the year ending periods of the assessee and the company. The Hon ble Bombay High Court in CIT Vs. PTC Software [2016 (9) TMI 1282 - BOMBAY HIGH COURT] has held that the companies with different financial year endings cannot be considered as comparable under Rule 10B(4). In addition, there are certain other functional differences also between the assessee and Coral Hub Ltd. Without delineating on the same, we order to exclude this company on the first issue itself, namely, having different year ending vis- vis the assessee. This company is, therefore, directed to be excluded from the list of comparables. Non-granting of depreciation adjustment - HELD THAT:- Similar issue has been decided by the Tribunal in its order for the assessment year 2009-10 holding that the depreciation amount should be considered as a part of Operating Cost and that no adjustment can be granted on account of different amounts of depreciation in the hands of assessee and comparables. However, the Tribunal accepted the assessee s contention for granting adjustment in respect of different rates of depreciation between the assessee and comparables. Following the same view, we direct the AO to examine this issue. In case, there is some difference in the rates of depreciation between the assessee and comparables, then necessary adjustment should be allowed on this count in the profit of comparables. Restricting the transfer pricing addition only to the international transactions and not the unrelated transactions or transactions with non-AEs - HELD THAT:- Following the consistent view taken herein in the immediately two preceding assessment years, we direct to restrict the amount of transfer pricing addition only in respect of transactions with AEs and not with non-AEs.

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• 2019 (12) TMI 373
  Deduction u/s 54/54F disallowed - AO considered the 1/3rd of presumed cost of construction as capital gains and added the same in the income of the assessee - AO has mentioned that the assessee has sold the second floor of the property. Finally, he submitted that the assessee in lieu of the sale consideration of the first floor of the property, got the ground floor and the second floor of the property constructed from the builder which is only one unit and as such the assessee is entitled to exemption of capital gains in full and not proportionately - HELD THAT:- Exactly similar issue has already been adjudicated and decided in favour of the assessee by the Hon ble Delhi High Court in the case of Commissioner of Income Tax vs. Geeta Duggal [2013 (3) TMI 101 - DELHI HIGH COURT] where it was held that unable to see how or why the physical structuring of the new residential house,whether it is lateral or vertical, should come in the way of considering the building as a residential house. The residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. The addition in dispute is deleted - appeal of the assessee allowed.

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• 2019 (12) TMI 372
  Notice u/s 143(2) never been served upon the assessee company in time - Notice issued on non-existant address - HELD THAT:- First notice was issued on 04.09.2014 on non-existant address of the assessee and then Revenue Officer rushed to serve the notice by way of affixation without recording any satisfaction, the entire assessment proceedings are null and void. Moreover in the instant case when the revenue knew correct address of the assessee since 2008, there is no question of issuing the notice dated 04.09.2014 at the wrong address and suddenly resorted to served the notice by way of affixation at the correct address. It appears that the entire exercise has been completed in haste to meet with the statutory requirement of limitation to serve the notice up till 03.09.2014, which cannot be treated as a valid service by any stretch of imagination even. In the instant case, notice was never issued on the correct address and as such there is no question of drawing presumption of service of the same on the assessee as the revenue department itself has acknowledged its mistake by abruptly rushing to substitute service of notice by way of affixation by mentioning the correct address which cannot be taken into account as there was no effort whatsoever on the part of revenue department to get the service effected through ordinary course. Question framed is answered in affirmative and consequently assessment framed in this case u/s 143(3) is void ab initio for want of issuance of statutory notice u/s 143(2) consequently, assessment is hereby quashed without going into merit of this case. - Decided in favour of assessee

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• 2019 (12) TMI 371
  Deduction u/s 80P on interest income - HELD THAT:- CIT(A) had initially allowed the appeal of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, CIT(A) passed order u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assessee-society. The Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P - In view of the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer who shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Cooperative Banks and other Banks , the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service CoITA operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business instead of `income from other sources . However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income

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• 2019 (12) TMI 370
  Transfer Pricing (TP) adjustment - payment of corporate charges - assessee was receiving the intra group services from its AEs, which were allocated among the group companies - benchmarking of international transaction with AEs - The margin of the assessee worked out to 25.54% as against the mean margins of comparables selected by the assessee, at 14.79%. The TPO however, was of the view that the assessee had failed to establish its case of receipt of economic and commercial benefits from such payment - Held that:- where the assessee had demonstrated the need for the services and had also produced evidence of availment of such services and had also established the benefit derived from the said services, and where those services were neither deliberative in nature nor were shareholder activities, then the said availment of the intra-group services being inter linked with the other international transaction, then the same should be benchmarked on aggregate basis by adopting the Transactional Net Margin Method as the most appropriate method. - Upward additions deleted. Interest on foreign currency loan extended to the AE. - TPO applied the Comparable Uncontrolled Price method to benchmark the aforesaid international transaction - Held that:- where the transaction is in foreign currency, then the rate of interest is to be applied is LIBOR plus. In the present case, it may also be pointed out that the loan was advanced after taking permission of the RBI and even the rate of interest was approved. - no transfer pricing adjustment needs to be made in the hands of the assessee on account of interest on foreign currency loan wherein the assessee himself had charged interest @ LIBOR + 150 basis points. - Additions deleted. Re-characterizing the inter-company receivables as unsecured loan extended by the assessee to its AEs. - Held that:- where the operating profit margin shown by the assessee from its transactions with its AEs was higher than the mean margins of the comparable companies, then no separate adjustment could be made on account of imputing interest on outstanding receivables. In any case, the aforesaid receivables have been received by the assessee as and when due and the same could not be re-characterized as unsecured loan. - Adjustments deleted. Depreciation of goodwill arising out of amalgamation - methodology approved as part of scheme of amalgamation - Held that:- the assessee to be entitled to claim depreciation on goodwill, as per the rates applicable for the year under consideration. Claim of deduction u/s 43B of the Act in respect of leave encashment and gratuity paid - Amount was paid before due date of filing of return - Held that:- inadvertently, the assessee did not claim the said deduction in the return of income filed for the year under consideration. We hold that the assessee is entitled to the aforesaid claim subject to verification by the Assessing Officer. Sundry credit balances outstanding from past three years - addition u/s 41(1) - According to AO, the liability had seized to exist. - Held that:- where the creditors are outstanding in the books of accounts of the assessee and they have not been reversed, then such outstanding balance of creditors cannot be treated as income of the assessee. - Additions deleted. Capital loss - Computation of capital gain on sale of shares - The Assessing Officer has disallowed the loss claimed by the assessee on the ground that the method adopted by the assessee for valuing its shares on the date of sale suffers from ambiguity. - Held that:- Assessing Officer cannot make any adjustment/addition by not accepting the sale consideration received by the assessee. The reference to the valuation report which was filed by the Assessing Officer before the RBI cannot be the basis for reworking the capital gains in the hands of the assessee, where the assessee had entered into equity purchase agreement dated 25.08.2011, wherein 800 shares were sold by the assessee at a price of JPY 35 million. - Claim of loss is allowed.

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• 2019 (12) TMI 369
  Deleting the addition made by the Assessing Officer - deletion made on the ground that assessee s firm is into the manufacturing of chemicals which is not been mentioned by assessee in his book of account but is part of audit report - typographical error in audit report - rejection of Books of Accounts u/s 145(3) - audit under section 44AB of the Act - HELD THAT:- While uploading the report in Form 3CB/3CD, there was typographical error due to switching between two different clients , screens simultaneously, as a result the data of the other client was cut and passed in Clause 10(a) and 11 and corresponding clauses 35bA and 35bB in the assessee s report - The above typographical error was explained to the AO vide letter dated 20.12.2017 along with other proof that the dealer is not a manufacturer having stock of raw materials and finished goods. The books of accounts and final accounts did not show any manufacturing account. No manufacturing expenses such as wages, processing charges were claimed by the assessee - The accounts did not show any factory nor any depreciation on any factory, the items stated in Clauses 35(bA) and 35(bB) were not borne out by any purchase or sales invoices. The AO has rejected Books of Accounts Under section 145(3) on the doubt that the assessee was engaged in manufacturing of chemicals which activity was not disclosed by the assessee. It is apparent that the assessee is able to explain that there was typographical error due to switching between two different clients screens simultaneously and as a result, the data of the other client was cut and pasted in clause 10(a) and 11 and corresponding clauses 35(bA) and 35(bB) in form No. 3CB and CD of the assessee s report. Hence, there is no manufacturing and it is only dealing in the business of trading of acids and chemicals. The CIT(A) has rightly deleted the addition and this issue of Revenue s appeal is dismissed - decided in favor of assessee.

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• 2019 (12) TMI 368
  Reopening of assessment u/s 147 - Bogus purchases - assessee suo moto informed that the actual purchase from these two parties - HELD THAT:- As disclosed profit rate at the rate of 9.61% on the turnover of Rs.6,50,58,621/- and there is no dispute whatsoever noted by the AO or CIT(A) in their respective orders. AO has already disclosed the gross profit amounting to Rs.62,54,161/- but the purchase from the parties are to the tune of Rs.1,50,25,860/- which are included in the total turnover of the assessee. Assessee itself declared the profit rate at the rate of 9.69% but the purchase made from these suspected parties on which profit accounted for is only to the tune of Rs. 9.69% but in our view the profit rate in the case of bogus purchase or purchase made from suspected parties should have been at the rate of 12.5%. Hence, we direct the Assessing Officer to restrict the addition being differential amount as profit at the rate of 12.5% minus (-) 9.61% on the bogus purchases or purchases from suspected parties amounting to Rs. 1,50,25,860/- only. There is no defect in the books of accounts but since, there is element of bogus purchase which we have already considered and no other addition can be made. We direct the Assessing Officer to re-compute the income in view of the above directions. The appeal of the assessee is partly allowed.

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• 2019 (12) TMI 367
  Disallowances of depreciation - determination of WDV - Actual cost of acquisition - increase in cost of assets on account of loss arising on cancellation of forward, foreign exchange contracts. - Held that:- since forward foreign exchange contracts were taken for acquiring capital assets, the profits/loss arising on settlement of such contracts had to be adjusted against the cost of the concerned capital asset in terms of section 43A of the Act, and depreciation was to be allowed on such adjusted value of the capital assets. - Decision in the case of assessee own case [ 2010 (5) TMI 716 - ITAT BANGALORE ] followed. Disallowances of depreciation - increased WDV of assets transferred on amalgamation - Held that:- the WDV of assets transferred on amalgamation in the hands of the amalgamating company has to be necessarily computed in terms of Explanation (2) to section 43(6) of the Act. As can be seen from the above, in terms of Explanation (2) to section 43(6), while computation the WDV on amalgamation, depreciation actually allowed has to be reduced. - Explanation (3) being a deeming fiction, operates only in a particular conditions and in order to remove an anomaly, which otherwise would have been created under the other provisions of the Act. It thus follows that while interpreting Explanation (3), one needs to be aware of the intention of the statute. These provisions along with their intent have been explained elaborately by the Hon ble Bombay High Court [ 1990 (7) TMI 44 - BOMBAY HIGH COURT] Accordingly, in terms of Explanation (3) to section 43(6), in the present case, unless the unabsorbed depreciation of the amalgamating companies is carried forward in the hands of the amalgamated company u/s 32(2) of the Act, Explanation (3) cannot be read into Explanation (2) to simply conclude that depreciation actually allowed also includes unabsorbed depreciation. The meaning of the term actually allowed is interpreted by the Hon ble Supreme Court, in the case of CIT v. Doom Dooma India Ltd. [ 2009 (2) TMI 9 - SUPREME COURT] The WDV in the hands of the amalgamated company was to be calculated without considering the unabsorbed depreciation of the amalgamating companies, for which set off was never allowed. - Decided in favor of assessee. Treatment of interest income - business income or income from other sources - The fixed deposits were kept with banks in the normal course of business for extending guarantee to the Government authorities - Held that:- till the company commences its business and earns income, if they have kept their surplus funds in short deposits in order to earn interest that income is chargeable under section 56 of the Act. However, once the assessee commences its business and earns income and in additions to the income so earned, the company also earns interest by way of such deposits, then the said income cannot be construed as income from other sources. - Ld.CIT(A) has rightly treated the interest income from fixed deposits under the head income from business. Treatment of sales tax subsidy as capital in nature instead of revenue in nature - Held that:- one has to understand the purpose for which said subsidy was given by the State Government. - the subsidy was granted to the assessee for setting up of a unit and to incentives was given to promote industry in a backward area of Karnataka and thereby generating employment in the state. Thus, the purpose of the concession/incentives was clearly not to provide general assistance to carry on its business as alleged by the Ld.AO. The said subsidy, although was qualify in terms of sales tax exemption on purchase of raw materials and plant and machinery and also, on sale of finished goods after commencement of production, but the purpose of the subsidy was to reimburse the cost of expenditure incurred for setting up the new industry. - Therefore, we are of the considered view that when, the subsidy was given with an object to effect new industries in the backward area of the state in terms of sales tax exemption, then the said subsidy shall be treated as capitol receipt. Interest u/s 234B - advance tax - assessment of income u/s 115JB - MAT - Held that:- In the current year, as well the liability for interest under section 234B of the Act has arisen only on account of a retrospective amendment to the provision of section 115JB of the Act, 1961 with effect from AY 2001-02. Accordingly, the assessee would not have anticipated the retrospective amendment at the time of making the payments for advance tax, but to estimate the liability to pay advance tax on the basis of existing provisions. - No interest liability.

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• 2019 (12) TMI 366
  Penalty u/s 271(1)(c) - assessee claimed a sum under the head underwriting commission as non-taxable and gains on the transfer of debt securities as also considered as non-taxable - case was selected for scrutiny and the AO assessed the income considering all receipts as taxable and penalty proceeding u/s 271(c) was initiated. CIT(A) has decided the matter of controversy to the fact that the underwriting commission was taxable as Fee for Technical Service @ 10% on gross basis under Article 12 of the DTAA and gains on transfer of debt securities was assessable as Capital Gains and not Business Income and the same is exempt under Article 13(6) of the DTAA. HELD THAT:- Return of income was filed on 30.09.2008. The assessee filed the true nature of income as underwriting commission in sum of Rs. 15,80,80,000/- which was not taxable and gains on the transfer of debt securities of Rs. 18,86,80,359/- was not taxable as business income but the same was taxable as capital gain. According to the return of income, one claim of the assessee was accepted by the CIT(A) and on account of other claim, the nature of income was changed as capital gain in comparison to the business income and accordingly taxed. According to Section 271(1)(C) of the Act, the assessee nowhere concealed any particulars of income nor furnishing the inaccurate particulars of income. Declining the claim of the assessee nowhere attract the penalty. The facts of the present case is quite similar to the facts of the case decided by Hon ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee.

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• 2019 (12) TMI 365
  Reopening of assessment u/s 147 - non-issuance of notice u/s 143(2) - HELD THAT:- At this stage submitted that the section 292BB comes into play here wherein the AO s notice is deemed valid in certain circumstances when an assessee participates in the corresponding proceedings without raising any objection. We quote hon ble apex court s yet another decision in CIT vs. Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] holds that this statutory provision does not correct the Assessing Officer s inaction in not issuing section 143(2) notice during the course of assessment. We therefore adopt the foregoing coordinate bench s detailed reasoning mutatis mutandis to quash the impugned reassessment dated 23.11.2010. That being the case, rectification proceedings are taken recourse by the Assessing Officer u/s 154 of the Act forming subject matter of the latter appeal have no legs to stand. The same are also quashed.

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• 2019 (12) TMI 364
  Long Term capital gains on account of sale of land - assessee s claim seeking cost of improvement of the impugned capital asset - HELD THAT:- Assessee has not produced even a single expenditure voucher or her oral deposition specifying the nature of such an improvement made to her capital asset. It is in view of this clinching fact only that the Assessing Officer as well as CIT(A) have rejected her claim to be not even prima facie proved. CIT(A) has further made reference to sec. 55(1)(b) (supra) that cost of improvement means expenditure of capital nature incurred in making in addition(s) or alteration to the asset. We sought to know the details of any such improvement in the capital asset. No material much less a cogent evidence has come from assessee s side except oral submissions. We accept the Revenue s arguments in this peculiar factual backdrop and affirm the CIT(A) s detailed discussion that the Assessing Officer had rightly made the impugned long term capital gains addition after distinguishing the assessee s case law quoted in the lower appellate proceedings (supra). We see no illegality or irregularity in the CIT(A) s action distinguishing the same on facts. The assessee fails in her sole substantive grievance. - Decided against assessee.

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• 2019 (12) TMI 363
  TDS u/s 194C - Addition u/s 40(a)(ia) - transport contract for transportation of two wheelers - assessee obtained Permanent Account Number (PAN) of M/s SFIC Logistics P Ltd and accordingly it did not deduct tax at source from the payments made to the above said company - HELD THAT:- In the instant case, there is no dispute with regard to the fact that the assessee herein has obtained PAN number of the payee. In view of the discussions made supra and following the decision rendered by the Kolkatta bench of Tribunal in the case of Soma Rani Ghosh [ 2016 (10) TMI 55 - ITAT KOLKATA] , we hold that the assessee is not required to deduct tax at source from the payments to made and hence the question of invoking the provisions of sec.40(a)(ia) does not arise in the facts and circumstances of the case. - Decided in favour of assessee

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• 2019 (12) TMI 362
  Department of Scientific and Industrial Research (DSIR) - claim made under Section 32(2AB) - assessee claimed weighted deduction @ 200% of expenditure incurred - HELD THAT:- When the AO has disallowed the claim of the assessee, then at the first available time before the First Appellate Authority the assessee ought to have produced all these details so that a report could be called for from the Assessing Officer and it could be ascertained his actual role in the research activity. In earlier years, no such disallowance was made by the Assessing Officer even in scrutiny assessment. The assessment order for Assessment Year 2011-12 has been placed on record. A perusal of this order would indicate that there is no discussion on the claim made under Section 13(2AB) of the Act. In other words, it is not ascertainable whether any claim was available in that year or not. Faced with above situation and in the interest of justice, we deem it appropriate to remit this issue to the file of the learned Assessing Officer for fresh adjudication. The assessee will be at liberty to submit any evidence exhibiting the role of Mr. Dhiran Shah as an Executive Director-cum-Chief Technology Officer helping the research activity. In case it is established that he was hired in the research activity related work and he has played an active role in the research operations, then the expenditure incurred towards his salary will qualify for grant of deduction under Section 35(2AB) - Assessing Officer shall re-adjudicate this issue after providing due opportunity of hearing to the assessee.

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• 2019 (12) TMI 361
  Addition u/s 68 - unsecured loans as unexplained cash credit - HELD THAT:- In the remand report called for by the Ld. CIT(A), the assessee has filed the necessary evidences in the form of confirmations of the lenders, bank statements, copies of balance sheets, PAN Numbers, ITRs etc. of the lenders. Even the lenders have replied in response to notice issued under section 133(6) of the Act. The copies of ledger accounts and subsequently repayment of loans, loan confirmations, bank statements reflecting the loan given and received back, mode of receipt / payment of loans, details of interest charged and TDS deducted, nature of loan advanced, returns of income filed along with balance sheets, audited reports and PAN numbers with the AO. In respect of Dev Diamond Surat from whom Rs. 55 lakhs were received was sustained by Ld. CIT(A) whereas the loan from the same party in the hands of Smt. Bharti N. Patel was accepted by the AO in the remand report, a copy of which is filed at page No.35 to 39 and the relevant para is 3.1. We have also examined the appellate order passed by the Ld. CIT(A) in the case of Smt. Bharti N. Patel dated 14.02.2018 wherein addition made by the AO qua Dev Diamond Surat of Rs. 50 lakhs was deleted. Even the interest paid on these loans by the assessee after deduction of tax at source were duly allowed as expense by the AO. Under these circumstances, we are not in a position to subscribe and concur with the conclusion of Ld. CIT(A) that these are paper companies and identities of the creditors and genuineness and creditworthiness of the lenders were not proved especially when the information/evidences having been filed by the assessee in the assessment proceedings and remand proceedings and even the lenders have filed all the evidences before the AO which has been admitted by the AO in the remand report. It is nothing but an addition made by the AO and also confirmed by the Ld. CIT(A) on presumption basis. Further, we find that assessee has not been confronted with any information that the said companies were non genuine and paper companies. In the case of Pr. CIT vs. Veedhata Tower Pvt. Ltd. [ 2018 (4) TMI 1004 - BOMBAY HIGH COURT] held that assessee has discharged his onus which has cast upon him in terms of preamended section 68 of the Act by filing the necessary confirmation letters from the creditors, their affidavits, their full addresses and their PANs and it was not necessary to prove the source of source prior to 01.04.2013 as has been held in the case of CIT vs. Gagan Deep Infrastructure Pvt. Ltd. . [ 2017 (3) TMI 1263 - BOMBAY HIGH COURT] wherein it has been held that proviso to section 68 has been inserted to Finance Act, 2012 w.e.f. 01.04.2013 and therefore it would be effective from A.Y. 2013-14 onwards and not earlier assessment years. - Decided in favour of assessee

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• 2019 (12) TMI 360
  Deduction u/s. 80IA - non compliance of agreement and commencement u/s. 80IA(4)(i)(b) - Held that:- In view of the above judgment of the High Court [ 2017 (8) TMI 1190 - KERALA HIGH COURT] , the assessee is entitled for deduction u/s. 80IA(4)(i)(b) of the I.T. Act. Deduction u/s. 80IA - deduction towards income in respect of surcharge from prepaid taxi, sale of scrap, notice pay, interest on delayed payment and bond from staff - revenue claim the same as income from other sources and not as business income - Held that:- The Assessing Officer had already given effect to the above order of the High Court by allowing the claim of the assessee u/s. 80IA of the Act. Hence, the department cannot contest this issue once again before the Tribunal. Deduction u/s. 80IA - whether the income e.g. rent, interest, royalty etc. are from core and essential activities of airport and not from incidental activities of providing amenities to passengers. - Held that:- The Assessing Officer had considered this issue in AYs 2005-06 to 2007-08 and granted deduction u/s. 80IA of the I.T. Act in respect of above income and denied deduction u/s. 80IA in respect of income from surcharge from pre paid taxi, income from sale of scrap, notice pay, interest on delayed payment, income from film shooting and bond from staff. Hence, in these assessment years also, the assessee is not entitled for deduction u/s. 80IA in respect of these items only. Being so, the CIT(A) is justified in granting deduction u/s. 80IA of the Act in respect of royalty income, treating it as business income. Accordingly, this ground of appeals of the Revenue is dismissed. Revision u/s 263 - Held that:- the CIT passed order u/s. 263 of the I.T. Act dated 30/03/2015 for re-considering the issue related to deduction u/s. 80IA(4)(i)(b) of the I.T. Act.. This issue has already been decided by us in favour of the assessee in paras 3.3 and 3.4 of this order. In view of this, we hold that the CIT is not justified in exercising power u/s. 263 of the I.T. Act.

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• 2019 (12) TMI 359
  Addition on account of loss of raw tobacco - CIT(A) has deleted the said addition stating that loss is consistent in nature and assessee company is subject to audit by excise authorities and day to day production consumption records are being maintained which are scrutinized by the excise authority - HELD THAT:- The assessee manufactures tobacco from raw tobacco in the form of small flags and remove impurities before processing i.e. dust, threads and other parts of plants i.e. seeds, stems, seeds, small stone/earthen material etc. which are to be separated and discarded. The assessee has maintained day to day production consumption record which was subject to scrutiny by the excise authority and the total wastage occurred on account of raw tobacco is 0.210% of the total consumption. The ratio of loss on account of raw tobacco was very consistent as the same was 0.2048 % in assessment year 2011-12 and 0.2112 % in F.Y. 2014-15. Considering these facts and circumstances, we do not find any infirmity in the decision of ld. CIT(A), therefore, the appeal of the revenue is dismissed on this issue. Undervaluation of closing stock of Varakh and Masala - HELD THAT:- As noticed that assessee has consistently applied FIFO method for valuation of stock in respect of Varakh and Masala and furnished purchase bills on sample basis of various items but the assessing officer has not pointed out how the method of valuation adopted for valuation of stock was wrong. It is clearly elaborated in the finding of the ld. CIT(A) that during the course of assessment proceedings, the assessing officer has not demonstrated how the method of valuation adopted for valuation of stock by the assessee was wrong. Therefore, we do not find any error in the finding of ld. CIT(A). Accordingly, this ground of appeal of the revenue is dismissed Addition for the manufacturing loss - HELD THAT:- The entire production record was maintained as prescribed by the excise authority which was subject to scrutiny and examination by the excise authorities. During the year under consideration there was increase in the gross profit and net profit of the assessee compared to the other years. We do not find any infirmity in the decision of ld. CIT(A) in restricting the addition of manufacturing loss to Rs. 4,47,060/-, therefore, this ground of the revenue is also dismissed. The ground of cross objection filed by the assessee is also dismissed as we justify the finding of the ld. CIT(A) that claim of loss of raw tobacco should be the part of the total loss of manufacturing process. Disallowance of damage goods - HELD THAT:- Claim is just 0.004% of the total turnover which is miniscule looking to the size of the turnover. In this regard, it is noticed that this claim of damaged goods is made by the agents/dealers because of pilferage during transport etc. The assessee has also furnished the credit notes issued to the parties after verification and no cash payment was made against the claim of damaged goods as the dealers required to make less payment in the subsequent disbursement after reducing the claim of damaged goods Addition of foreign travel expenses - HELD THAT:- Assessee has failed to substantiate with relevant supporting evidences that foreign travel expenses were connected to the business purpose of the assessee. Even the assessee has failed to controvert the findings of the A.O. that foreign trips were made to Singapore, Hongkong under the arranged tour package and the assesse could not demonstrate with supporting evidences that tour was connected with business purpose of the assessee. Therefore, this ground of cross objection filed by the assessee is dismissed. Disallowance as excess depreciation on electrical installation - HELD THAT:- Assessee has failed to substantiate with relevant supporting evidences that the electrical fitting was part of plant and machinery, therefore, we do not find any error in the decision of ld. CIT(A) Disallowance of employees contribution to PF or ESIC - HELD THAT:- The issue is covered against the assessee by the decision of Hon ble Jurisdictional High Court in the case of Gujarat State Road Transport Corporation Ltd. [ 2014 (1) TMI 502 - GUJARAT HIGH COURT ] therefore, this ground of cross objection is rejected. Disallowance of expenses u/s. 35D - HELD THAT:- After considering the fact that such expenditure has been incurred for increasing the authorized share capital, this ground of cross objection of the assessee is dismissed after fallowing the decision of the Hon ble Supreme Court in the case of Punjab State Industrial Development Corporation Ltd. vs. CIT [ 1996 (12) TMI 6 - SUPREME COURT ].

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• 2019 (12) TMI 358
  Transfer Pricing (TP) adjustments - selection of comparable - various companies - Held that:- Keeping in view the findings returned in the preceding paras, the appeal filed by the taxpayer is allowed for statistical purposes and AO/TPO to computer the TP adjustment, if any, accordingly.

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• 2019 (12) TMI 357
  Deduction u/s 57 (iii) - disallowing the assessee s claim of deduction of interest u/s 57(iii) against the interest received by him - HELD THAT:- For claiming deduction u/s 57(iii) it would be sufficient to prove that there is nexus between the income earned and amount expended. In view of that matter, all the requirements for claiming deduction u/s 57(iii) are fulfilled and therefore assessee s claim of interest of Rs. 49,38,149/- laid out wholly and exclusively for the purpose of earning interest shown under the head Income from Other Sources can be legally allowed u/s 57(iii) of the Act. CIT has neither verified nor commented to establish nexus between the funds borrowed and advanced for claim of such interest expenses before arriving at such conclusions. The finding of CIT(A) are not supported by corroborative factual evidence in arriving at the conclusion about the intention of the assessee whether his intention was to earn profit or losses and further the department has accepted such a practice adopted by assessee in the past assessment years. The intention to earn interest is disputed by either of the subordinate authorities or adversely commented by the ld. CIT (A) or controverted by the ld. DR and therefore, such interest expenditure, deductible under section 57(iii) can be allowed even if it is not claimed in full by the assessee in the peculiar facts of the case at hand. Considering the factual matrix of the case and legal precedents, we accept the grievance of the assessee justified. Accordingly, we allow the claim u/s 57(iii) of the Act, as legally justified - Decided in favour of assessee.

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• 2019 (12) TMI 356
  Revision u/s 263 - order passed by the AO u/s 143(3) is erroneous and prejudicial to the interest of revenue - payment made to the partners on the retirement by the assessee was not disallowed being capital in nature - HELD THAT:- Grievance raised by the assessee against the order of the learned CIT under section 263 of the Act has been settled for the same assessment year by the CIT-A in his order dated 10 June 2019 which has been elaborated in the preceding paragraph. Therefore, once the issue raised by the learned CIT under section 263 of the Act on account of payment to the retiring partners pension has been settled by the learned CIT (A) in his favour against the consequential order passed under section 263 of the Act, thus, we are of the view that the issue raised by the assessee becomes academic and does not require any separate adjudication. Before parting, we are inclined to grant the liberty to the assessee to move an application for recalling of this order if the appeal, if any, has been preferred by the Revenue against the order of the learned CIT (A) dated 10 June 2019. The application for the calling of the order shall be made within the prescribed time. We hold that there is no requirement to adjudicate the issue raised by the assessee on merit. Hence the ground of appeal of the assessee is dismissed.

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• 2019 (12) TMI 355
  Levy of penalty u/s 271(1)(c) read with section 274 - search and seizure action under section 132 - assessee company offered undisclosed income in the Financial Year 2011-12, relevant to AY 201213 and paid the taxes accordingly - HELD THAT:- AO in the assessment order has not initiated the penalty proceedings for a specific charge i.e. for concealment of particulars of income or for furnishing of inaccurate particulars of income. It means that the AO is not sure about the charge on which he is initiating the penalty under section 271(1)(c) of the Act. We find that this issue is squarely covered by the decision in the case of CIT vs Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT ] . We noted that at the time of hearing the learned Sr. DR has not doubted the facts of the case but pointed out that there is due application of mind by the AO which can be demonstrated from the discussion in the assessment order and the order of CIT(A), wherein if discussed the reasons for the disallowance of depreciation, he has recorded the satisfaction that the penalty proceedings are initiated under section 271(1)(c) for concealing of particulars of income as well as for furnishing of inaccurate particulars of income. We are of the view, that the DR has admitted to demonstrate the application of mind by the AO but it is no difference in as much as that the AO in assessment order as initiated the penalty proceedings for both the charges i.e. for furnishing of inaccurate particulars of income as well as concealment of particulars of income. - Decided in favour of assessee.

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• 2019 (12) TMI 354
  Unexplained investment u/s 69B - CIT(A) deleted the additions - indirect evidence - recording of statement by coercion or threat - HELD THAT:- Shri Sanjay D Shah and Shri Jadavji Lalji Shah are not connected with the transaction or with the assessee. Further, no corresponding addition was made in the hands of Shri Narendra Kumar Sankla and Prem Kumar Sankla, even though the assessments in their cases were framed under section 143(3) by the ACIT, Hyderabad. Even the CIT(A) has categorically reproduced the remand reports of the respective AO s of Shri Narendra Kumar Sankla and Prem Kumar Sankla. Both, Shri Narendra Kumar Sankla and Prem Kumar Sankla retracted the statement of cash received of Rs.1.50 crores on behalf of assessee. We noted that the additional amount received by Smt. Dhanalakshmi and family has been accepted by the assessee and assessee also disclosed the said amount of Rs.3 crores in its return of income and paid the taxes accordingly. We noted that the CIT(A) based on submissions and evidences decided the issue in favour of assessee by deleting the addition of Rs.1.50 crores which was made by AO just on conjunctures and surmises. Hence, we find no infirmity in the order of CIT(A) deleting the addition - Decided against revenue.

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• 2019 (12) TMI 353
  Penalty u/s 271AAA or u/s 271(1)(c) - HELD THAT:- In this case, the date of filing the return of income u/s 139(1) has expired on 31.09.2007 and much after; the Department initiated the search action under section 132 of the Act on 10.01.2008. The previous year had ended before the date of search and the date of filing of return of income u/s 139(1) had also been expired. Thus, the provisions of section 271AAA have no application in this case, and accordingly, the ground raised by the assessee to this extent is allowed. Levy of penalty u/s 271(1)(c) - unaccounted cash payments and negative cash balance - HELD THAT:- The source of unaccounted cash transaction of Rs.. 11 lakhs was not brought on record. Moreover, the entire unaccounted cash transaction was carried out outside the books of account. But for search operation u/s132 the unaccounted cash transaction would have escaped assessment. Under these facts and circumstances, we are of the considered opinion that the AO has rightly held that the assessee has furnished inaccurate particulars of income warranting levy of penalty under section 271(1)(c). Thus, the penalty levied u/s 271(1)(c) of the Act stands confirmed. Levy of penalty for assessee has not complied with the provisions of TDS in respect of the payments made in connection with land development - disallowance under section 40(a)(ia) - There was non-compliance of provisions of TDS in respect of land development expenses incurred by way of payments made to M/s. Bright Electricals of Rs..39,390/- and Shri S. Rajendran of Rs..25,450/- totalling to Rs..64,840/-, but not deducted TDS. Moreover, while filing return under section 153A of the Act, the assessee has failed to add the statutory disallowances applicable as per law, thereby the assessee has furnished inaccurate particulars warranting levy of penalty - we are of the considered opinion that the Assessing Officer has rightly levied penalty under section 271(1)(c) of the Act and the same stands confirmed. Negative cash balance - The fact of negative cash balance was revealed only during the course of search proceedings. During the course of assessment proceedings, the assessee submitted that the books were recasted resulting in negative cash balance of Rs..86,393/-, which was due to cash deposits in the bank. Penalty proceedings were initiated on the ground that, but for search under section 132 of the Act, the issue of negative cash balance would not have come to light and the books of accounts would not have been recasted, thereby, an amount of Rs..86,393/- would have escaped assessment. The fact of on-money cash payments, concealment of purchases and sales, improper maintenance of books of account in the regular course of business are all go to prove of furnishing of inaccurate particulars of income. The assessee could not controvert the above observations of the Assessing Officer. Under these facts and circumstances, we are of the considered opinion that the Assessing Officer has rightly levied penalty u/s 271(1)(c) of the Act and the same stands confirmed.

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• 2019 (12) TMI 352
  Addition on house rent - Addition made on account of difference between rent received by the assessee and fair market value for the properties - As per AO the said properties were located in big cities like Mumbai, Delhi and Pune and according to ld. DR the value as determined by the municipal laws is not binding on the assessee - HELD THAT:- Hon ble High Court of Delhi in the case of Moni Kumar Subba [2011 (3) TMI 497 - DELHI HIGH COURT] held that the annual value fixed by the Municipal authorities can be valuable yardstick, however, it would be subject to the condition that the annual value fixed bears a close proximity with the Assessment Year in question in respect of which assessment is to be made under the Income Tax proceedings. It may not be a safe yardstick if there is a change in the circumstances because of passage of time that the annual value fixed by the municipal authorities much earlier. Therefore it is clear that the Hon ble High Court of Delhi pleased to say the annual value fixed by the municipal authorities can be rationale and reasonable but subject to the condition that the value determined by the municipal value should be a close proximity with the Assessment Year under consideration. As noticed from Page No.28 wherein is a written submission, before the CIT(A) showing municipal value is far less than the rent received by the assessee. It is noted from the record as held by the CIT(A) that no evidence whatsoever brought on record by the AO for comparison that the rent received by the assessee is far less than to any of the property located in the similar area. The CIT(A) also held that Assessing Officer erred in applying the method provided in Schedule III of Wealth Tax Act. It is correct to note that the Assessing Officer did not accept the claim of rent received by the assessee and he doubted that it has been received between M/s Ballarpur Industries Ltd. and the assessee according to their suit will. Admittedly, the value determined by the municipal authority regarding the seven properties of assessee is much less than the rental income as shown by the assessee. Hon ble High Court of Delhi opined that in the case of Moni Kumar Subba (supra), that if the Assessing Officer finds the value determined by the Municipal authorities is not reasonable, he can determine the value on the basis of material/evidence by placing on record. As discussed above, there was no such exercise done by the Assessing Officer. However it has to be noted that the appellant- Revenue is following consistently in accepting the income as offered by the assessee under the head income from house property for earlier A.Y. 2006-07 and subsequent assessment years. As noted above, the CIT(A) in the present year under consideration considering the reasoning given by his predecessor for A.Y. 2008-09 deleted the additions by holding the rental income as offered by the assessee is reasonable/fair, so therefore, in our opinion, the CIT(A) rightly justified in deleting the addition made by the Assessing Officer. Thus only ground raised by the Revenue fails and it is dismissed.

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• 2019 (12) TMI 351
  AO filing appeal against his own factual finding - HELD THAT:- Assessing Officer has no locus standi to file an appeal against his own findings in the remand report. See SMT. B. JAYALAKSHMI [ 2018 (8) TMI 208 - MADRAS HIGH COURT] and M/S SHRADDHA TOWER PVT. LTD. [ 2018 (10) TMI 1405 - ITAT KOLKATA] . Hence, this appeal of the revenue is dismissed as not maintainable.

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• 2019 (12) TMI 350
  Estimate on account of alleged excess stock - value adopted by the survey team for inventorised/taking valuation of stock - HELD THAT:- Valuation of stock in hand the general rule adopted is cost price or fair market value whichever is less whereas in the present case the survey team has valued the stock of assessee by taking MRP without considering some relevant factors viz., (i) sales price includes GP approximately 8 to 10%; (ii) the stock inventorised includes old and absolute stock also and rebate onaccount of damaged, discolour and outdated materials should be allowed and (iii) MRP printed on the items cannot be taken as basis for valuation of stock because MRP is generally 20 to 25% higher than the actual purchase price charged by the manufacturer/wholesaler. The assessee has not disputed quantum of material/stock inventorised by the survey team - valuation of stock should have been done by considering the said three factums as noted above, therefore, direct the AO to allow 20% rebate on the value adopted by the survey team for inventorised/taking valuation of stock. AO is directed to estimate the value of stock accordingly and to recalculate/estimate the excess Stock, if any, found during the course of survey. Addition on the basis of third party statement - HELD THAT:- AO has made addition without any basis and ld. CIT(A) while confirming the same noted that the assessee is continuously changing its stand about the actual date of payment, which brings his submission under serious suspicion. The Assessing Officer has also asked the assessee for the payments made by the assessee, however, the assessee could not reply the same, therefore, the Assessing Officer observed that the assessee has made the said expenditure out of books and added the same to the total income of the assessee. From the above observations of the both the authorities below, do not find any good reason to interfere in the findings recorded by the CIT(A) and I uphold the same and dismiss the ground No.3 of the assessee. Charge of interest u/s 234A, 234B, 234C and 234D - HELD THAT:- Issue is covered in favour of the assessee on the decision of Hon ble Jharkhand High Court in case of Ajay Prakash Verma [ 2013 (1) TMI 140 - JHARKHAND HIGH COURT] wherein held that interest u/s. 234B can be levied only on the returned income and not on the assessed income. We direct the AO to recompute the interest u/s.234A, 234B, 234C 234D of the Act on the basis of total income declared by the assessee in the return filed. This ground of appeal of the assessee is allowed.

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• 2019 (12) TMI 349
  Scrutiny assessment u/s 143(3) - Valid Jurisdiction of Addl. CIT u/s 120(4)(b) - Jurisdiction was not assigned in the manner prescribed u/s 120 - Transfer of case u/s 127 from DCIT to Addl . CIT - Held that:- as per section 2(7A) of the Act, AO means inter alia an Addl. CIT who is directed under section 120(4)(b) to exercise or perform all or any of the powers and functions conferred on, or assigned to, an AO under the Act. As per Section 120(4)(b), the CBDT has to first empower the Commissioner to issue orders and then the said authority has to assign or confer the authority of the AO on the Addl. CIT. In the present case none of such notifications/ orders as required by section 120(4)(b) of the Act have bene issued. Further, as per section 127 of the Act when there is a transfer or jurisdiction, then the condition therein has to be fulfilled. In the present case, originally the jurisdiction to make the assessment over the company was with the DCIT. The assessment order has been passed by the Addl. CIT without any transfer or jurisdiction in his favour. Assessment framed under section 143(3) quashed.

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• 2019 (12) TMI 348
  Maintainability of appeal - monetary amount involved in filing of the appeal - CBDT circular No.17/2019 in F.No.279/Misc.142/2007ITJ(Pt) dated 8th August, 2019 - HELD THAT:- The circular dated 8th August 2019 is not a standalone circular. It is to be read in conjunction with the CBDT circular No. 3/2018 (and subsequent amendment thereto), and all it does is to replace paragraph nos. 3 and 5 of the said circular. The Hon ble Supreme Court in the case of THE PR. COMMISSIONER OF INCOME TAX-5, NEW DELHI VERSUS KESHAV POWER LTD. [ 2019 (8) TMI 811 - SC ORDER] has also applied the Circular No.17/2019 dated 08.08.2019 has dismissed the appeal holding Since the tax effect involved in the matter is less than Rs. 2/- crores, going by the latest circular issued by the CBDT, we see no reason to interfere in this matter. The appeal filed by the Revenue is found to be non-maintainable - the appeal of Revenue stands dismissed as withdrawn.

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• 2019 (12) TMI 347
  Reassessment u/s 147 - estimation of profit - Principles of natural justice - no notice u/s 148 was ever served by the Ld AO - impugned assessment order passed without giving any opportunity of hearing - HELD THAT:- The assessee is apparently not aware either of the statutory rules or the provisions. A perusal of the impugned order also brings out the fact that admittedly the statutory Appellate Forum provided to the assessee namely First Appellate Authority in the facts of the present case has not been availed of by the assessee effectively. The reasons for making the said observation is evident not only from the manner in which the prayer in the grounds has been couched. The assessee admittedly was required to address during the assessment proceedings the deposits in his bank account. On account of inability to address the facts with supportive evidences addition of Rs. 16,54,127/- stood made as a result of estimation of profits @ 5% of the deposits amounting to Rs. 3,30,82,547/- made in assessee s bank account - the assessee was under a bonafide belief that on the advancing of arguments of having been framed by some person named Ishu Sharma, the ld. CIT(A) would have the power to waive the fine imposed . The assessee appearing in person admittedly did not comprehend the nature of relief being sought and failed to comprehend that there was no such power vested by the Statute in the Authority of the First Appellate Authority and further that no fine had been imposed - the Right to Appeal cannot be said to have been exercised by the assessee in all fairness as the assessee failed to comprehend the nature of the order and the magnitude of the evidences required. It is deemed appropriate to restore the issue back to the file of the Ld. CIT(A), directing the assessee to address the relevant facts on the basis of which the Ld. CIT(A) can grant relief if maintainable in law. The appeal of the assessee is allowed for statistical purposes.

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• 2019 (12) TMI 346
  Deduction of expenditure u/s 37(1) - Allowability of interest paid for belated payment of Service Tax - allowable deduction or not - HELD THAT:- Admittedly, the interest is paid for belated payment of Service Tax, which is a compensatory nature. It is settled position of law that interest on delay in payment of tax is also part and parcel of tax and it is equally settled position of law that Service Tax paid is also a permissible deduction. The Hon ble Supreme Court in the case of Mahalakshmi Sugar Mills Co. Vs.C.I.T [ 1980 (4) TMI 1 - SUPREME COURT ] and C.I.T Vs. Luxmi Devi Sugar Mills P. Ltd., [ 1990 (9) TMI 8 - SC ORDER ] held that interest is only of compensatory nature and does not take a colour of penalty and therefore, allowable deduction. There are no merit in the appeal filed by the Revenue - appeal dismissed - decided against Revenue.

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• 2019 (12) TMI 328
  Deduction u/s 80HHC - HELD THAT:- In ACG Associated Capsules (P) Ltd. [ 2012 (2) TMI 101 - SUPREME COURT] the Hon ble Supreme Court, has clearly held that deductions of the nature as are referred to in the substantial question of law at (ii) above, are permissible, such deductions are required to be made not on the gross receipts but on the net receipts. Substantial questions of law at (ii), (iv) and (v) will have to be answered by holding that the revenue was quite right in making the deductions referred to in the substantial question of law at (ii). However, such deductions ought to have been made on the basis of net receipts and not gross receipts. The substantial questions of law at (ii), (iv) and (v) are answered accordingly. The revenue will therefore have to rework the assessment on such basis and extend the necessary benefits, if any, to the appellant within a reasonable period. The impugned orders are modified accordingly. Tribunal not permitting adding losses from export of trading goods in respect of disclaimed turnover to the profit eligible for deduction under Section 80HHC - HELD THAT:- The substantial question of law at (vi) is consequently answered in favour of the assessee-appellant and against the revenue-respondent as relying on own case [ 2012 (4) TMI 344 - BOMBAY HIGH COURT] . The impugned orders are modified accordingly.

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• 2019 (12) TMI 327
  TDS u/s 194J - Carriage Fees/ Channel Placement fees - Whether payments made for use/right to use of process are royalty as per Explanation 6 to section 9(1)(vi) ? - whether any obligation was cast upon the assessee to subject the carriage fees paid to the cable operators for deduction of tax at source under Sec.194J, or not? - HELD THAT:- Hon ble High Court of Bombay in the case of CIT, TDS-2, Mumbai Vs. UTV Entertainment Television Ltd. [ 2017 (11) TMI 915 - BOMBAY HIGH COURT ] had observed, that in case of an assessee carrying on the business of broadcasting television channels, the payments made towards placement charges would fall within the meaning of work covered in Clause (iv) of Explanation to Sec.194C. On the basis of our aforesaid observations, we are of the considered view, that the CIT(A) had rightly vacated the disallowance that was made by the A.O under Sec. 40(a)(ia) - Appeal filed by the revenue is dismissed.

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• Customs

• 2019 (12) TMI 345
  Drawback of central excise duty - petitioner was of the view that the order was a non-speaking order that was passed in violation of the principles of natural justice and thus seeking to pass a proper, speaking order - principles of natural justice - HELD THAT:- In the present case, the defect memo has been published and this would not satisfy the specific requirement of Rule 13(3), which states that a defect memo should be served on the assessee/exporter calling for rectification of the defects. Admittedly, no defect memo has been issued to the petitioner pointing out to it the defects that ostensibly arise in its drawback claims - Had this Rule been complied with, the petitioner might well have rectified the defects, thus paving the way for a timely disposal of its drawback claims. The flaw has occasioned at the door of the Department by the violation of principles of natural justice, specifically Rule 13(3) of the Rules. The rejection of representation dated 05.11.2004 on the ground that all drawback claims were brought to nil is flawed - the petitioner should not be denied the benefit of drawback based merely on a Public Notice, particularly when the petitioner has satisfied all other requirements under the relevant Notification/Scheme, thus frustrating the object of the scheme itself. The claim of rebate in relation to the twelve transactions denied under the impugned order shall be sanctioned and paid over to the petitioner within a period of six weeks from date of receipt of copy of this order - Petition allowed.

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• 2019 (12) TMI 344
  Valuation of imported goods - Mixed 100% Polyester Knitted Fabrics (Rolls of Assorted Colors) - enhancement of the value by the Assessing Officer was done only on the ground that the declared value is substantially low as compared to the value of the contemporaneous imports - HELD THAT:- There is nothing new in the present appeal particularly for the reason that the assessee has waived the SCN, therefore, there was no occasion for the Assessing Officer to provide the detail of contemporaneous imports to the assessee, however, it is also fact that the appellant was not provided the data/documents for contemporaneous imports - matter requires remand. Exemption from CVD - benefit of N/N. 30/04-CE - benefit was denied on the ground that the notification was not claimed at the time of assessment of the Bills Of Entry - HELD THAT:- Since, the same was legally due to the assessee, the Assessing Officer should have extended the benefit of CVD exemption. Since, the appeal was filed against the assessment order passed by the Assessing Officer, the assessee was free to raise all the claim which is legally otherwise available to them at the time of clearance of the goods - the denial of CVD exemption only on the ground that the assessee have not claimed the said exemption in the bills of entry is not justified. The matter should be re-considered in respect of both the issues of valuation and exemption notification in respect of CVD - Appeal allowed by way of remand.

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• Corporate Laws

• 2019 (12) TMI 343
  Disqualification of Petitioner to hold the Office of the Directorship of a Company - Section 164 (2) (a) of the Companies Act 2013 - HELD THAT:- The lists dated 08.09.2017 and 01.11.2017 published by the Registrar of Companies, Tamil Nadu, Chennai were the subject matter of challenge before this Court in a batch of cases in BHAGAVAN DAS DHANANJAYA DAS VERSUS UNION OF INDIA, REGISTRAR OF COMPANIES, TAMILNADU CHENNAI [ 2018 (8) TMI 436 - MADRAS HIGH COURT ] and came to be disposed by this Court where it was held that Section 164(2)(a) is read down to the extent it disqualifies the directors in other companies which are scrupulously following the requirements of law, making it clear that no directors in other companies can be disqualified without prior notice. As the Petitioner in this case is similarly placed to the Petitioners in the aforesaid batch of cases relating to the same impugned lists published in the website by the Respondents, she is entitled to identical relief that has been granted to them. Petition allowed.

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• 2019 (12) TMI 342
  Striking the name of the company from the register of companies - non-compliance with the requirement of sending a notice to the company and all the directors of the company of his intention to remove the name of the company from the register of the companies - Sub-rule (2) of Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 - HELD THAT:- Sub-section (1) of Section 248 of Companies Act, 2013 provides that where the Registrar has reasonable cause to believe that a company is not carrying on any business of operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of dormant company under Section 455 then he shall send a notice to the company and all the directors of the company of his intention to remove the name of the company from the register of companies and requesting them to send their representation alongwith the copies of relevant documents within 30 days from the date of notice. Admittedly ROC has served notice dated 17.3.2017 to company s registered address which returned unserved. In the notice name of company s directors i.e. Appellant No.2 and 3 and their address are mentioned, however, no notice have been sent to them by the ROC. It is true that in the notice dated 17.3.2017 which was sent to company it is mentioned that the notice is also treated as having been served on the directors of the company in terms of the provisions of Section 20 of the Companies Act, 2013 - this is not the compliance of mandatory provisions under sub-section (1) of Section 248 of Companies Act, 2013 and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. Due to non-compliance of this provisions the appellants could not send their representations alongwith relevant documents before the ROC. Before passing the order ROC has not recorded his satisfaction as per provisions under sub-section (6) of Section 248 of Companies Act, 2013 - The name of the appellant No.1 company shall be restored to the Register of Companies subject to conditions imposed.

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• Insolvency & Bankruptcy

• 2019 (12) TMI 340
  Direction to Liquidator to collect the amount of Rs. 5.95 Crores plus interest accrued thereon from DRT II Chennai for being dealt with under provisions of Section 53 of I B Code - HELD THAT:- The Adjudicating Authority failed to take the right of the Appellant of realizing the security interest and sit out of liquidation, under consideration before passing an order of liquidation and assigning the assets of the company to the liquidator. The provisions of Section 52 of the I B code were not complied with. On the perusal of documents it can be ascertained that the corporate debtor gave as security to the appellant bank the sums it had to receive from Southern Railways for such projects so executed. The submission of the Corporate Debtor that the sums deposited by the Southern Railways, into the credit of the account in O.A. No. 131 of 2013 were all receivables from projects for which no loans were taken from the appellant is untenable. Matter remanded back to decide the security interest of the Appellant Bank before the liquidator can be given the assets of the corporate debtor to be dealt with under section 53 of the I B Code.

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• Service Tax

• 2019 (12) TMI 341
  Extended period of limitation - Classification of services - Rail Travel Agents Service or not - consideration received from Gallilieo Amadus for using their platform for booking air ticket - Circular No. 334/8/2016-TRU dated 29.02.2016. HELD THAT:- There is no dispute on the fact that there was confusion about classification and taxability of the service of CRS system used by the appellant, therefore the demand is restricted to normal period limitation. The demand for extended period is not sustainable - Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 339
  Right to claim interest of delayed sanction of Refund of unutilised Cenvat Credit - Applicability of Section 11BB where refund is granted under Rule 5 of Cenvat Credit Rules r.w.s 11B of central excise - HELD THAT:- Apparently and admittedly, the refund claim of unutilised Cenvat Credit is neither the refund of excise duty nor of the service tax paid. Applicability of Section 11BB of the Act is, therefore, opined to be not available to the refund of unutilised Cenvat Credit. Further perusal of Rule 5 of Cenvat Credit Rules, 2004, classified it to be silent about any entitlement of the assessee to the interest in case of delay in sanction. Otherwise also unutilised Cenvat Credit is an amount which is lying with the assessee itself as contrary to the excise duty or service tax paid to the department - To my opinion, this could have been the reason for Rule 5 to be silent about any scope of providing interest while refund of unutilised Cenvat Credit. In the decision of High Court of Bombay titled as AFFINITY EXPRESS INDIA PVT. LTD. VERSUS COMMISSIONER [ 2016 (2) TMI 1265 - BOMBAY HIGH COURT] it was held that export of services is not, specifically, covered by any of the sub-clauses of Clause (B) of explanation of Section 11B of Central Excise Act, 1944, as applicable to service tax vide section 83 of Finance Act. Appeal dismissed - decided against appellant.

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• 2019 (12) TMI 338
  Recovery of service tax - telephone services - Short-payment of service tax as per reconciliation of ST-3 returns and with income shown in accounts and interest thereon - HELD THAT:- Apparently and admittedly document of defence was produced by the appellant before the adjudicating authority below reflecting the extra payment of service tax by the appellant. Such document has already been allowed to be placed on record by this Tribunal. The document has been prepared in accordance of the ST-3 returns as were filed by the appellant during the period of dispute which are already the part of the impugned order - Since the document is in the form of calculation chart, it would be appropriate that this issue be remanded back to the adjudicating authority below for re-verification of the impugned ST-3 returns - appeal allowed by way of remand. Short-payment of service tax on proceeds of Modem being part of taxable services along with interest thereon - whether the Modem was given to the customers free of cost or as to whether the value thereof was included in the value of telecommunication services provided by the appellant? - HELD THAT:- The said question cannot be adjudicated unless and until there are appropriate invoices on record proving that no amount has been received by the appellant from their customers in lieu of providing them with the Modem or that supply of Modem was purely a trading activity of the appellant. In the absence thereof, the adjudicating authority has committed no error while forming the opinion that the appellant has not paid service tax on the gross amount charged from the customers inasmuch as they have also charged for the Modem provided to the subscriber and that the same is justified - Since admittedly, the goods did not involve payment of VAT, the question of those being purely a trading activity cannot be ascertained - there are no reason to differ from the observations that Modems rather were typically the part of service provision - demand upheld. Wrong availment of service tax credit on rent-a-cab services along with interest thereon - HELD THAT:- The availment of utilisation of Cenvat credit on rent-a-cab services has duly been acknowledged on behalf of the appellant. Admissions are the best evidences. Otherwise also there is clear cut finding by the adjudicating authority below which, in the light of the aforesaid acknowledgment, we do not find any reason to differ - demand upheld. Wrong availment of service tax credit on invoices on which service tax registration number/STC of service provider are not mentioned along with interest thereon - HELD THAT:- There is no denial about the impugned invoices to have all details except the PAN based registration number of the service providers. There is also no denial that all such registration numbers were provided by the appellant. The appellant has acknowledged that M/s L.K. Enterprises only one of the service providers among the said list has not deposited the service tax. However, remaining all have discharged their liability. There is nothing on record produced by the Department to falsify the discharge of liability by the remaining service providers - There is no denial that the impugned input services have been utilised by the appellant in provision of output service - the entire demand on account of this issue except for the liability of M/s L.K. Enterprises is set aside - adjudicating authority is required to arrive at the appropriate calculation as far as the amount on account of M/s L.K. Enterprises is concerned so as to be recovered after deducting the same from total demand as was confirmed by the adjudicating authority below but now stands dropped except for such amount as is directed to be calculated by the authority below. Non/short payment of service tax on telephone service provided to employees - HELD THAT:- The service recipient being the employees of the appellant no other object then that of efficiency of appellant services is found to be a reason for given services to the employees. In the given circumstances, there is no separate service recipient then the employees of appellant itself. Resultantly, the impugned service here in is the service to self Section 67(1) of the Service Tax Act is held to have wrongly invoked as since there is no consideration to question of any taxation at all arises - Demand set aside. Non-reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT:- Qua this liability also there is an apparent acknowledgement on part of the appellant that the proposed amount of credit has already been reversed by them. There is no otherwise submission nor the documents to falsifying the said reversal. In view thereof, the order disallowing the credit taken under Rule 6(3) of Cenvat Credit Rules, 2004 and reversal thereof is hereby upheld. Appeal allowed in part.

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• 2019 (12) TMI 337
  Support service of business or commerce - charges collected by appellants for getting the vehicles sold by them registered under the Motor Vehicles Rules and obtaining of smart card and similar documents for the buyers - demand of service tax - HELD THAT:- The issue is covered by the decision of the Tribunal in Kundan Cars Pvt Ltd v. Commissioner of Central Excise, Pune I [ 2017 (7) TMI 133 - CESTAT MUMBAI ] which has relied upon the decision of the Tribunal in WONDER CARS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE I [ 2016 (1) TMI 738 - CESTAT MUMBAI ] where it was held that the customer of car is not a business entity, so called business service to the customer of cars is not in relation to business of commerce of the customer of cars. Therefore service in question is not covered under Business Support Service - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (12) TMI 336
  Availment and utilization of CENVAT credit - returned goods - Rule 16(1) of the Central Excise Rules, 2002 - manufacture of various brands of cigarettes on job work basis - certain goods were returned by Godfrey Philips India Limited for various reasons - period November, 2006 to May, 2007 - period August, 2008 to April, 2009 - inclusion of scrapping within the scope of Rule 16(1) of the Central Excise Rules, 2002 - sum and substance of the case of the Revenue against the respondent assessee was that the respondent assessee engineered the return of the so-called non marketable/non saleable cigarettes, with the intent to unlawfully avail the benefits of CENVAT credit under Rule 16 (1) of the CENVAT Credit Rules, by misleading the Revenue - imposition of penalty u/r 26 of CER. HELD THAT:- Rule 16(1) is applicable to goods on which duty had been paid at the time of removal of such goods and the same are brought back to the factory. The goods are brought back to the factory for being re-made, refined, re-conditioned or for any other reason . The assessee is also required to state the particulars of such receipt of goods in his records - Once the above conditions are fulfilled, the assessee becomes entitled under Rule 16(1) to take CENVAT credit of the duty paid on the returned goods as if such goods are received as inputs under the CENVAT Credit Rules, 2002. The credit shall be utilised by the assessee according to the latter Rules. It is evident that the learned Appellate Tribunal has incorrectly interpreted the scope of Rule 16(1) by bringing scrapping within the embrace of Rule 16(1) and has proceeded to legitimise the benefit of CENVAT availed by the respondent assessee - The findings of facts returned by the Assessing Officer thus attain finality since they were not successfully impeached by the learned Appellate Tribunal. These findings extracted in extenso in the earlier part of the judgment are set forth, in brief, hereinafter to take the discussion forward and to its logical conclusion. Clearly, the goods were not brought back to the factory by the assessee to be re-made , refined , reconditioned , or for any other reason as contemplated in Rule 16(1) of the Central Excise Rules, 2002. The transactions were devices to illegally avail CENVAT credit. The intent to illegal avail CENVAT credit and escape duty was fully established - the ingredients to avail credit of duty of goods brought back to the factory, as contemplated under Rule 16(1) of the Central Excise Rules, 2002, were not satisfied. The assessee was not entitled to avail the benefit of CENVAT credit of the duty paid on the aforesaid goods and illegally availed such credit. The intent of the assessee to defraud the revenue and escape tax is thus proved. Penalty u/r 26 of CER - HELD THAT:- The ingredients of Rule 26 for imposing the penalty upon Sri R.K.Gupta, Deputy General Manager (IT Accounts), are fully satisfied. The provisions of the Rule 26 have been duly adhered to - The order imposing penalty against Sri R.K.Gupta under Rule 26, is a lawful and just order, in the facts and circumstances of this case. Thus, CESTAT was clearly misdirected in law in its interpretation of Rule 16(1) of the Central Excise Rules, 2002 by unlawfully including scrapping within the scope of Rule 16(1) of the Central Excise Rules, 2002 - CESTAT also erred in law by finding that the respondent assessee had lawfully availed CENVAT credit in the offending transaction - penalty on R.K. Gupta upheld. Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 335
  Rebate of Central Excise Duty - time limit for filing rebate claim, within one year of the date of their export - It is submitted that, Export Promotion (EP) copy of the Shipping Bills, which were required to be filed with the rebate claim, were not made available to it - section 11B of CEA - HELD THAT:- Section 11B of the Act is clear and categorical. The Explanation thereto states, in unambiguous terms, that Section 11B would also apply to rebate claims. Necessarily, therefore, the rebate claim of the petitioner was required to be filed within one year of the export of the goods. In Everest Flavours Ltd. v. Union of India [2012 (4) TMI 480 - BOMBAY HIGH COURT] , the High Court of Bombay, speaking through Dr. D.Y. Chandrachud, J. (as he then was) clearly held that the period of one year, stipulated in Section 11B of the Act, for preferring a claim of rebate, has necessarily to be complied with, as a mandatory requirement - this is agreed upon. The submission, vehemently urged by Mr. Sachdev cannot be agreed upon, that, the date of submission of the ARE-1, to the Customs Officer, ought to be treated as the date of filing of the rebate claim. ARE-1 expands to Application for Removal of Excisable Goods - The ARE-1 is, therefore, an application which accompanies the removal of the excisable goods, and its submission is necessarily anterior, in point of time, to the export of the goods. Indeed, this is apparent from Clauses 3(a) (vii), (xii), (xiv) and 3(b) of Notification 19/2004 CE (NT) (supra), which deal with the procedure for sealing of goods, examination thereof and presentation of rebate claim. Clearly, the submission of the ARE-1 is anterior to the filing of the rebate claim and the date of submission of the said application cannot, therefore, be treated as the date of filing of the rebate claim - Mr. Sachdev was unable to draw our attention to any statutory provision, or judicial authority, enabling the date of submission of the ARE-1 application to be treated as the date of filing of the rebate claim. Section 11(B)(1) of the Act read with the Explanation thereto, clearly requires any claim for rebate to be submitted within one year of export of the goods, whereagainst rebate is claimed. There is no provision which permits relaxation of this stipulated one year time limit - the concurrent view of all three authorities below i.e. the AC, the Commissioner (Appeals) and the Revisionary Authority, that the rebate claim of the petitioner merited rejection, as it was barred by time, need not be disturbed. Petition dismissed.

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• 2019 (12) TMI 334
  Classification of goods - chewing tobacco, perfumery compounds etc. - whether classified as Chewing Tobacco falling under Chapter Heading No.2403 99 10 or to be classified as Jarda Scented Tobacco falling under Chapter Heading 2403 99 30? - HELD THAT:- The appellants were manufacturing the goods under the brand name of Baba and filed various declarations in terms of the provisions of Chewing Tobacco and unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 by describing the product as Chewing Tobacco. Such declarations were scrutinized by the Deputy Commissioner who fixed the capacity of the machines having the speed for the manufacture of Jarda Scented Tobacco. Chewing Tobacco and Jarda Scented Tobacco are classifiable under two different Tariff Items. The test report of the chemical examiner clearly reveals that the product in question is not Chewing Tobacco but the same is Jarda Scented Tobacco. Zarda is admittedly a variety of Chewing Tobacco but keeping in view two separate headings for Chewing Tobacco and Jarda Scented Tobacco leads us to conclude that the two products are different products classifiable under different tariff items and have to be assessed accordingly going by the ingredients of the product - such ingredients stand revealed by the test report of the chemical examiner supported by the statement of Shri Shashi Kumar Maheshwari. The issue of classification of Baba Zarda stands finally decided by the Hon ble High Court of Orissa in the case of MISHRA ZARDA TRADERS VERSUS STATE OF ORISSA [ 1987 (1) TMI 455 - ORISSA HIGH COURT] . While dealing with classification of the said product, the Hon ble High Court observed that Baba Zarda Zafrani Patti Scented Tobacco is essentially Zarda and not Chewing Tobacco. The same is leviable to tax. It is the classification of the product which is relevant and the subsequent consequences of the same resulting in confirmation of demand of duty are result of the decision on the classification. Whether in the case of Sales Tax or in the case of Central Excise, once the product stand held as Jarda Scented Tobacco by the Hon ble High Court and there being no contra decision of any other High Court, the ratio of the said decision would be fully applicable to the facts of the present case. The appellants final product declared by them as Chewing Tobacco is essentially Jarda Scented Tobacco and stands correctly classified by the Lower Authorities under Tariff Items No.2403 99 30. As a consequence of classification of goods under said Heading, the confirmation of demand of duty by the Lower Authorities is proper and appropriate. Appeal dismissed.

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• 2019 (12) TMI 333
  Recovery of Refund of terminal excise duty - Period of limitation - benefit of N/N. 108/95-CE dated 28.8.1995 - case of appellant is that due to delay in receiving World Bank loan, the appellant had deposited the entire amount of terminal excise duty benefit with the Department, which otherwise admissible - HELD THAT:- Tribunal in the case of POWER GRID CORPORATION OF INDIA LTD. VERSUS C.C.E., CUSTOMS, JAIPUR II [ 2015 (6) TMI 742 - CESTAT NEW DELHI] , this Tribunal allowed their appeals. In the present case, after receiving the World Bank loan, they filed the refund claim but could not be pursued, due to pending demand notice issued to M/s EMI Transmission Ltd. After the order of the learned Commissioner dropping the demand, the appellant pursued the refund, which was sanctioned to them. Therefore, the demand is unsustainable. Refund allowed - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 332
  CENVAT Credit - waste/residue/by-product - manufacture of both dutiable final product as well as exempted goods namely, coke breeze/iron ore fine - non-maintence of separate records - requirement to pay 5%/10% on the value of clearance of such exempted goods - applicability of Rule 6(3) of the CENVAT Credit Rules, 2004 - HELD THAT:- The issue of applicability of Rule 6(3) of CENVAT Credit Rules, 2004 byproducts/waste products which emerges during the process of manufacture of finished goods is no more res integra - The Hon ble Supreme Court in UNION OF INDIA OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [ 2014 (5) TMI 253 - SUPREME COURT ] taking the meaning and the scope of the amended definition of excisable goods under Section 2(d) of the Central Excise Act, 1994 held that bagasse which emerges as the waste and residue as a result of the process carried out on the raw material cannot be considered to fall under the scope of definition of manufacture under Section 2(f) and accordingly, Rule 6 of CENVAT Credit Rules, 2004 shall not apply. No merit in the impugned order - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 331
  CENVAT Credit - duties/tax paid on inputs/input services deployed/utilised for construction of the commercial property which was then leased out - renting of immovable property services provided - period from June 2007 to Mach 2010 - It is the contention of appellant that the inclusion of cement , angles , channels , etc, used in construction of building, among the exclusions in Explanation II to rule 2(k) of CENVAT Credit Rules, 2004 came into effect only from 7th July 2009. HELD THAT:- As reliance was placed by the original authority on circular no. 98/1/2008-ST dated 4th January 2008 of Central Board of Excise and Customs, it may be necessary to examine the applicability of the intent of that clarification to the present dispute - The issue that was raised therein was whether commercial or industrial construction service could be treated as input service for the output service of renting of immovable property and, while clarifying that commercial or industrial construction service is an input service for the output, viz., immovable property, the view taken was that right to use of the immovable property, being the output liable to service tax and not the property per se, credit would not be available. It was clearly held in the decision of the Tribunal in Musaddilal Projects Ltd v. Commissioner of Central Excise, Customs Service Tax [2017 (4) TMI 951 - CESTAT HYDERABAD] that, without the establishing of the property, right to use would not come into being. It is inconceivable that a structure which is to be utilized for service can be alienated from the right to use - In re Dymos India Automotive Pvt Ltd, [2018 (9) TMI 1135 - MADRAS HIGH COURT] the Hon ble High Court of Madras has also taken the view that requirement of construction of a building is a necessary pre-condition for rendering the service. Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 330
  Extended period of limitation - Valuation - processed fabrics - mis-declaration of the value of the grey fabrics supplied to them on job-work by their principal manufacturer on the basis of the declaration issued by that manufacturer - filing of the classification list under rule 173B of the erstwhile Central Excise Rules, 1944 - HELD THAT:- In appellant own matter, for identical dispute pertaining to a different period, the Tribunal had extended the benefit of limitation in VISHNU DYEING PRINTING WORKS VERSUS COMMISSIONER OF C. EX., MUMBAI [ 2007 (9) TMI 157 - CESTAT, MUMBAI] which was upheld by the Hon ble High Court in COMMISSIONER VERSUS VISHNU DYEING PRINTING WORKS [ 2008 (8) TMI 896 - BOMBAY HIGH COURT] where it was held that invocation of extended period for the confirmation of demand against the present appellant is not available to the revenue in the absence of any evidence to show that the appellant had colluded with the merchants/traders in giving wrong declaration of the price. The appeal is allowed on the claim of limitation.

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• CST, VAT & Sales Tax

• 2019 (12) TMI 329
  Imposition of penalty - Section 54(1)(14) of the U.P. Value Added Tax Act - validity of passing a fresh order after quashing the order of penalty, being without any basis and without any material on record - validity of remanding the matter back to the Assessing Authority to give fresh innings in terms of passing a fresh order when the order appealed against was unsustainable in the eyes of law - Principles of natural justice. HELD THAT:- From the perusal of the record, it reveals that the first appellate authority has accepted the contention of the revisionist that the penalty order is a cryptic one, as neither any provision was referred nor any reason was assigned for levy of penalty - The record further reveals that the first appellate authority has recorded a finding of fact in favour of the revisionist that in the penalty order, no violation of law has been mentioned. Moreover, neither any notice was issued before levy of penalty, nor any opportunity was provided to the revisionist before taking action against it. In the case, in hand, the revisionist was deprived of any notice being served upon it, nor any reason or contravention of the provisions were mentioned in the penalty order. The penalty order clearly shows that it has been passed in pre-printed format, from which it is clear that the penalty has been imposed without application of mind and without assigning any reason. The case, in hand, is squarely covered by the judgement of this Court in M/s Ecom Express Private Ltd. [2019 (1) TMI 309 - ALLAHABAD HIGH COURT] . In the said case, the Court came to the conclusion that after issuance of notice, charges were framed. The first appellate authority is not permitted to give a second innings to the Department. Revision is allowed - issue answered in favour of the revisionists and against the Department.

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