Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 15, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Profiteering - purchase of flats - The Respondent is not being asked to extend this benefit out of his own account and he is only liable to pass on the benefit of ITC to which he has become entitled by virtue of the grant of ITC on the Construction Service by the Government.
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Levy of GST - electronic commerce operator or not - money paid by the customer directly to the driver of the cab for the service of the trip - The applicant is liable to tax (GST) on the amounts billed by him on behalf of the taxi operators - Order of AAR confirmed
Income Tax
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Penalty levied u/s 272A(2)(k) - omission to deduct TDS - the failure of the assessee for not filing the TDS was found during the inspection of TDS Wing of the Department, it appears that the assessee has not taken any step for filing the returns. - Levy of penalty confirmed.
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Rejection of books of account U/s 145(3) - receipt and payment of the freight - providing transportation work of different parties through the third party vehicles - AO was not justified in rejecting the books of account merely because the assessee could not file the confirmation from the parties to whom the freight charges were paid.
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The Revenue cannot deny the claim of expenditure on whims and fancies. - Denial of claim of expenditure incurred on the trip of the MD of the assessee company to Germany was unwarranted and uncalled for and the same is directed to be allowed to the assessee
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The Assessing Officer himself has observed that the addition made on account of income from house property is notional. Penalty u/s. 271(1)(c) cannot be imposed in respect of addition made on account of notional income from house property.
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Additions on account of expenditure on speed-boat owned by the assessee - the assessee has suo-moto disallowed 25% of the expenditure on estimated basis to account for personal element / usage - No further addition is required.
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Reopening of assessment - notice issued u/s 148 to the deceased assessee - curable defect u/s 292BB - the absence of any provision in the Act, to fasten revenue liability upon a deceased individual, in the absence of pending or previously instituted proceeding, burden upon a legal representative cannot be imposed.
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Assessment u/s 153A - Gold jewellery found in the lockers held by the assessee - CIT(A) ought to have taken a liberal approach by giving the benefit to the assessee for the value of gold jewellery and value of silver utensils held by her, within the monetary limit of value as provided in the CBDT Instruction No.1916
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Computation of deduction u/s 80-0 - overall deduction under Chapter-VIA could not exceed gross total income of the assessee in terms of Section 80A(2).
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Interest on interest with respect to the refund - it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest
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Charitable activity - approval u/s 80G(5) - an application of the Trust for grant of approval under Section 80G(5)(vi) of the Act can be turned down only if the trust fails to carry out its objects and/or violates the conditions encapsulated in Clause (i) to (v) of Section 80G(5) of the Act of 1961.
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Valuation of the closing stock of shares on the basis of “since realized value” - such contingencies are clearly covered in Clause 8 of AS-4, which deals with events occurring after the balance sheet date.
Customs
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Forwarding of received applications under Regulation 4 of Customs Brokers Licensing regulations, 2018 to National Academy of Customs, Indirect Taxes and Narcotics, NACIN- reg.
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IGST Export Refund-extension in SB005 alternate mechanism revised processing in certain cases including disbursal of compensation cess-reg
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Standard operating procedures for discharge of bonds executed by nominated agencies/ banks under Notification no. 57/2000-Customs
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Procedure for disposal of un-claimed/un-cleared cargo Under section. 48 of the Customs Act, 1962, lying with the custodians
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Classification of imported goods - mixture of fatty acids having stearic acid, palmitic acid and other fatty acids with stearic acid ranging from 40-45%. - the imported goods answer to the definition of palm stearin and need to be classified accordingly.
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Revocation of CHA License - there is no force in the allegation that the appellant has filed the wrong address of the importer because the Custom Broker has filed the address which appears in the IEC code.
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Penalty u/s 112 of CA on Managing Director - Import of car under EPCG Scheme - The evolution of the scheme beyond physical exports is within the purview, and only, of the Director General of Foreign Trade (DGFT). It is not open to customs authorities to contend that, sans the empowerment, powers not existing, the license itself was issued on the basis of fraudulent submissions.
Corporate Law
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Extension of the last date of filing of Form NFRA-1
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NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor - This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction.
IBC
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Corporate insolvency process - steps for ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Debtor’ - The Adjudicating Authority is required to satisfy itself that the notice was actually served on the ‘Corporate Debtor’ not that technically it was served in the address.
Case Laws:
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GST
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2018 (12) TMI 711
Levy of GST - electronic commerce operator or not - money paid by the customer directly to the driver of the cab for the service of the trip - Held that:- In the instant case the transportation of passenger service is provided by the taxi drivers by using a software application. Transportation of passengers is a taxable service liable to GST. The provision of this service by the taxi driver to the passenger is a ‘supply’ within the scope of supply given in Section 7 of the CGST Act since the service is provided for a consideration. The Appellant on the other hand has developed a digital platform which aggregates the taxi drivers on one common platform. The service of transportation of passengers is supplied by the taxi drivers using the digital application developed by the Appellant. The Appellant manages the digital application which facilitates the supply of the service of transportation of passengers. On completion of the service Appellant sends an invoice to the customer through the digital network facility which is payable by the consumer to the taxi driver. Therefore the appellant M/S. OPTA Cabs Pvt Ltd is an “electronic commerce operator” in terms of the definition given in Section 2(45) of the CGST Act. The argument of the Appellant that the taxi services are merely booked through it and not supplied through it is not a tenable argument. Further, the fact that the ecommerce operator is not receiving the amount from the customer is also not a valid consideration since the e-commerce operator is deemed to have supplied the service in terms of Section 9 (5) read with the notification. Ruling:- The services of transportation of passengers supplied through the Appellant’s electronic platform and digital network would be liable to tax at the hands of the Appellant.
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2018 (12) TMI 710
Classification of goods - HIDPE Woven Tarpaulin - whether classified under HSN 6306 of GST tariff? - Held that:- In view of the Note 1(h) to Section XI of the GST Tariff Act, the tarpaulins of IIDPE woven fabrics, laminated as per specification of IS 7903:2017, being expressly excluded, do not merit classification under Chapter 63. Ruling of the West Bengal Authority for Advance Ruling pronounced, 2018 (8) TMI 874 - AUTHORITY FOR ADVANCE RULINGS WEST BENGAL [2018 (8) TMI 874 - AUTHORITY FOR ADVANCE RULINGS WEST BENGAL], is upheld in its entirety. Appeal disposed off.
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2018 (12) TMI 709
Extension of Time limit for submission of TRAN-1 - Held that:- The concerned Commissioner/ Nodal Officer is directed to take appropriate decision on the representations of the respective Petitioners before us. The entire exercise of examining the cases of the Petitioners through the channel, shall be completed latest by 31st January, 2019 - petition disposed off.
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2018 (12) TMI 708
Bail application - Input tax credit - Sections 132(1)(c) of the Central Goods and Services Act, 2017 - Held that:- Considering the period of custody, the petitioner is enlarged on bail - Accordingly, petitioner namely, Satya Prakash Singh @ S.P.Singh @ Satya Prakash is directed to be released on bail on furnishing bail bond of ₹ 50,000/- (fifty thousand) with two sureties of the like amount each to the satisfaction of Special Judge, Economic Offence, Jamshedpur. The petitioner is directed to cooperate with the Investigating Officer during investigation and till completion of the investigation, he must appear before the Investigating Authority once a fortnight.
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2018 (12) TMI 707
Profiteering - purchase of flats - benefit of Input Tax Credit (ITC) had not been passed - refund of appropriate amount alongwith Interest - Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case? - quantum of profiteering. Held that:- Section 171 deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC - In the instant case though rationalization of tax had not resulted in the reduction in the tax rate, the benefit of ITC had been extended to all the goods and services which were utilized by any builder which was not available in the pre-GST era. This fact has not been denied by the Respondent - Since Section 171 not only deals with passing on the benefit of reduction in the rate of tax but also deals with passing on the benefit of ITC therefore the contention made by the Respondent is legally not correct to the extent that there had been increase in the rate of tax from 5.25% to 12% and then 8% and no benefit could be passed on by him to the Applicants as the Respondent had become entitled to claim ITC the benefit of which was required to be passed on by him to the Applicants as per the provisions of Section 171. It is also apparent from the returns that when compared to the pre- GST period where 86% of the tax liability was paid in cash after availing ITC, in the post GST period the entire amount of tax liability had been paid through ITC, which shows that the entire 12% GST liability was paid through ITC while 12% GST was being collected by him from the Applicants. Therefore this Authority is of the view that the ratio of the ITC to the taxable turnover calculated by the DGAP is correct and the Respondent has not placed any concrete facts or reasons on record to dispute the same. It is absolutely clear that the excess ITC was available to the Respondent the benefit of which he was required to pass on to the Applicants. The Respondent cannot appropriate this benefit as this is a concession given by the Government from it’s own tax revenue to reduce the prices being charged by the builders from the vulnerable section of society which cannot afford high value apartments. The Respondent is not being asked to extend this benefit out of his own account and he is only liable to pass on the benefit of ITC to which he has become entitled by virtue of the grant of ITC on the Construction Service by the Government. Quantum of profiteering - Held that:- The Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the price to be realized from the buyers of the flats in commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 28.02.2018 any benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. He shall not only pass on the benefit as has been mentioned above to the 109 Applicants who are before us but to all the 2476 buyers as they are identifiable. Penalty - Held that:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171(1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled them to pay more GST than that they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122 (1) (i) of the CGST Act, 2017 and therefore, he is liable for imposition of penalty - Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 122 of the above Act read with rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off.
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Income Tax
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2018 (12) TMI 706
Interest realized on debentures to be taxed as business income - Held that:- The matter has been called out for twice. None appears for the appellant. The civil appeal is dismissed for non-prosecution.
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2018 (12) TMI 705
Rental income received by the Assessee - taxable as income from business and not under the head Income from House Property - Held that:- It is an undisputed position that the respondent is involved in the business of purchase and sale of ready-made garments and also letting out of commercial premises. The object of the business of the respondent firm is not restricted to only ready-made garments. Therefore, once it is accepted that the giving commercial premises on rent/lease is also a business activity of the respondent then the decision of the Supreme Court in case of Chennai Properties and Investment Ltd.[2015 (5) TMI 46 - SUPREME COURT] and in Shreeji Exhibitors would [2015 (8) TMI 886 - ITAT MUMBAI] equally apply in the facts of respondent's case.
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2018 (12) TMI 704
Pre-operative expenditure - revenue or capital expenditure - assessee itself has treated the same as 'capital work-in-progress' in the balance sheet - Held that:- The Tribunal examined the nature of the expenditure and came to the conclusion that the expenditure was not incurred for a new business but was for the expansion of the existing business. The Tribunal relied upon its own decision in the case of Ms. Reliance Footprint Ltd. We noticed that the Revenue had challenged the judgment of the Tribunal in the case of Reliance Foot Print Limited came to be dismissed by this Court by judgment [2017 (7) TMI 611 - BOMBAY HIGH COURT]. The Tribunal correctly held both the issues in favour of assessee. Mere accounting entires in the books of accounts would not decide the taxability of the amount in question. The Tribunal also noted that the expenditure was incurred for expansion of existing business. Thus, this is a mere question of fact. No question of law, therefore, arises. Income Tax Appeals are dismissed.
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2018 (12) TMI 703
Penalty levied u/s 271(1)(c) - disallowance of claim u/s 80IB(9) - Held that:- Revenue had raised the question of the quantum additions being deleted in connection with the assessee's claim of deduction under Section 80IB(9). This would mean that the decision of the Tribunal with respect to the quantum additions has become final. If that be so, obviously the penalty in relation to such additions cannot be sustained. Revenue stated that the order of the High Court dated 16th March, 2017 refers only to the additions under Section 80(9). There were other additions in the same assessment year 2007-08. If that be so, the rest of the issues do not even appear to have been challenged by the Revenue in the said appeal. Even on that ground no further penalty can be sustained. We also notice that the Revenue is contesting the deletion of penalty on account of interest income, foreign exchange gain and other miscellaneous income. Tribunal has in the impugned judgment given detailed reasons and come to the conclusion that there was complete disclosure on part of the assessee and therefore, no penalty could have been leveled. Tribunal in the process referred to and relied upon the judgment of Supreme Court in case of CIT Vs. Reliance Petroproducts Pvt. Ltd.[2010 (3) TMI 80 - SUPREME COURT] - No question of law.
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2018 (12) TMI 702
Revision u/s 264 - payments towards employee's contribution to the PF - Held that:- We find that the Commissioner was not correct in refusing to exercise Petitioner's claim on merits. Since the Commissioner has not examined the merits of the Petitioner's case, we may place the Revision Petition back to the Commissioner for disposal on merits. We have noticed that all payments towards employee's contribution to the PF were made before the due date of the filing of the return. If that be so, surely, the Commissioner would be guided by the decision of this Court on the relevant issue namely – CIT v/s.Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT]. Under the circumstances, the impugned order is set aside. Revision Petition is revived and placed back before the Commissioner for fresh consideration and disposal in accordance with law, bearing in mind, the observations made in this Judgment. This may be done preferably before 28th February, 2019.
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2018 (12) TMI 701
Objection to a report of the valuation by the DVO for four immovable properties - contention of the petitioner is that this report was finalized without following the requirements of hearing to be granted to the petitioner in terms of sub-section 4 of Section 142A - Held that:- We are not inclined to interfere at this intermediary stage when the AO has yet to pass any final order of assessment. It is always open for the petitioner to contest the contents of the report before the AO. As is clear from sub-section 7 of Section 142A this provision provides that the Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the assessee an opportunity of being heard, take into account such report in making the assessment or reassessment. Thus, even this provision enjoins a duty on the Assessing Officer to hear the assessee on the report of the DVO before he can act upon the same. At this stage, the petitioner would have ample opportunity to contest the report on all grounds including on the ground that reasonable opportunity of hearing as envisaged under sub-section 4 of Section 142A of the Act was not granted. We have not examined the validity of this contention. This observation would not limit the petitioner's objection only to this limited issue and would enable the petitioner to raise all objections on substance as well as contents of the report. At the stage where the assessment is not yet made, we do not find it appropriate to interference.
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2018 (12) TMI 700
Expenditure incurred on software - revenue expenditure OR capital expenditure - Held that:- This Court has admitted the appeal of the Revenue which involves a somewhat similar question as has arisen in the present appeal. However, as noted, the learned counsel for the assessee has cited three judgments of this Court clearly holding that the expenditure for software development was a revenue expenditure. In case of Raychem RPG Ltd (2011 (7) TMI 953 - BOMBAY HIGH COURT) the Division Bench upheld the decision of the Tribunal allowing software expenditure as revenue expenditure.
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2018 (12) TMI 699
Charitable activity - approval u/s 80G(5) - as per revenue the applicant has not commenced any charitable activity as per its objects in last three years - ITAT allowing approval - Held that:- According to us, an assessee can neither be expected to spend higher amount than its income nor can it be expected to elongate its feet beyond its blanket. The amount of ₹ 41,000/-, which the respondent Trust has spent during the period of three years cannot be said to be insufficient, considering its income/receipts for the corresponding period. In the present facts, it was absolutely erroneous on the part of the Commissioner to infer that the Trust has failed to carry out its objects. An appraisal of the scheme of Section 80G and Rule 11AA, more particularly sub-rule (4) thereof clearly suggests that an application of the Trust for grant of approval under Section 80G(5)(vi) of the Act can be turned down only if the trust fails to carry out its objects and/or violates the conditions encapsulated in Clause (i) to (v) of Section 80G(5) of the Act of 1961. Neither the Commissioner (Exemption) has recorded any finding nor the counsel for the Revenue has brought to fore, any breach of the conditions enumerated in clause (i) to (v) of Section 80G(5) of the Act; which is a precursor for refusal of the approval u/s 80G. Appellant has neither pointed out any statutory provision nor has he cited any precedent, which provides or rules that in case the amount spent by a trust is insignificant, its request for approval under Section 80G of the Act deserves to be rejected. - Decided in favour of assessee.
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2018 (12) TMI 698
Pension contribution Fund after the due dates an impermissible deduction - addition u/s 43B - Held that:- Whether the second proviso to Section 43B being brought into the statute book on 01.04.2004, the deduction is impermissible insofar as the payment to pension fund having been made after the due dates. The Honourable Supreme Court in Commissioner of Income Tax v. Alom Extrusions Ltd.[2009 (11) TMI 27 - SUPREME COURT] has found that the amendment by introduction of a proviso to Section 43B has to be read retrospectively to give full effect thereto. Hence, the question stands answered in favour of the assessee and against the Revenue upholding the order of the Tribunal, which affirmed the deduction as granted by the first appellate authority. Entitled to claim the expenses under the head Lease Equalization charges - Held that:- In favour of the assessee as found by the Honourable Supreme Court in Commissioner of Income Tax v. Virtual Soft Systems Ltd.[2018 (4) TMI 1472 - SUPREME COURT]. The issue of lease equalization charges arose in the context of the assessee claiming the lease rentals to be adjusted towards the cost of acquisition of the property or machinery, which is leased out. The Guidance Note of the Institute of Chartered Accountants of India providing for separation of capital recovery element and finance income has been approved by the Honourable Supreme Court in the aforesaid decision. Hence, the said question also has to be answered in favour of the assessee and against the Revenue. MAT - computing minimum alternate tax payable under Section 115JA, the provision for bad and doubtful debts has to be added back under clause (c) of the Explanation to Section 115JA(2), which speaks of the provisions made for meeting liabilities - Held that:- The Honourable Supreme Court in Commissioner of Income Tax-IV v. HCL Comnet Systems and Services Ltd. [2008 (9) TMI 18 - SUPREME COURT] categorically held that the addition made under clause(c); of the provision for bad and doubtful debts cannot be permitted. However, clause (g) as noticed in the question has now been introduced, which has retrospective effect from 01.04.1998 onwards. That when the Tribunal considered the issue, clause (g) was not introduced, which was introduced by the Finance Act, 2009. In such circumstances, it is only appropriate that the Tribunal considers the issue afresh on the basis of the facts and the specific provision of bad and doubtful debts as provided for by the assessee- Bank. hence, shall stand remanded. The parties shall appear before the Tribunal on 11.01.2019 and the Tribunal shall consider the issue expeditiously, especially noticing the fact that the assessment is of the year 1999-2000. Treatment of loss on amortisation of securities purchased for a price and then sold or redeemed at a lower price - Held that:- The Honourable Supreme Court in Commissioner of Income Tax-IV v. HCL Comnet Systems and Services Ltd. [2008 (9) TMI 18 - SUPREME COURT] categorically held that the addition made under clause(c); of the provision for bad and doubtful debts cannot be permitted. However, clause (g) as noticed in the question has now been introduced, which has retrospective effect from 01.04.1998 onwards. We notice that when the Tribunal considered the issue, clause (g) was not introduced, which was introduced by the Finance Act, 2009. In such circumstances, it is only appropriate that the Tribunal considers the issue afresh on the basis of the facts and the specific provision of bad and doubtful debts as provided for by the assessee- Bank. Treatment of loss on amortisation of securities purchased for a price and then sold or redeemed at a lower price - Held that:- The assessee purchases securities at face value or otherwise at a premium. When purchase is made at a premium and the same is redeemed on maturity, the assessee gets only the face value of the security so purchased. Similarly, when the security is sold before the period of maturity, then the assessee at times suffers a loss for reason of the market value having fallen. The assessee claimed write off of such loss in the years at which the assessee held the security, which was allowed by the Tribunal. The issue is covered by a Division Bench judgment of this Court in Commissioner of Income Tax v. South Indian Bank Ltd. [2009 (10) TMI 905 - KERALA HIGH COURT]. Additions made for appreciation in the value of securities - learned Senior Counsel points out the specific instance in which the question arose - Held that:- The assessee-Bank in a particular year values a security, the cost price of which is ₹ 100/- at the market value of ₹ 90/-. Then, the assessee is entitled to depreciation on the reduction that has been occasioned in the market value, which is the loss suffered by the assessee. In the subsequent year, if the market value exceeds the cost price and the same reaches ₹ 105/-, the question is as to what is the addition to be made. Then, what is to be adopted is the cost price, since what is required as per the RBI guidelines is to show the profits in accordance with the cost price or the market value whichever is lower. The question of additions made for appreciation in the value of securities also has to be answered in favour of the assessee Excess bad debts written off over and above the existing provisions in non-rural branches can be claimed as an expense without setting off against the existing provision for bad debts for rural branches. The question is covered in favour of the assessee-Bank by the decision of Catholic Syrian Bank Ltd. v. Commissioner of Income Tax [2012 (2) TMI 262 - SUPREME COURT OF INDIA]. Levy of interest under Section 234C - Held that:- We cannot accede to the view that considerable advance tax payment would absolve the liability of interest if it arises under Section 234C. The question, hence, is answered in favour of the Revenue and against the assessee. The order of the Tribunal is set aside and it is directed that the AO would determine the interest payable under Section 234C, in accordance with law.
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2018 (12) TMI 697
Reopening of assessment - notice issued u/s 148 to the deceased assessee - curable defect u/s 292BB - Held that:- If the original assessee had lived and later participated in the proceedings, then, by reason of Section 292BB, she would have been precluded from saying that no notice was factually served upon her. When the notice was issued in her name-when she was no longer of this world, it is inconceivable that she could have participated in the reassessment proceedings, (nor is that the revenue s case) to be estopped from contending that she did not receive it. The plain language of Section 292BB, in our opinion precludes its application, contrary to the revenue s argument. This court is of opinion that the absence of any provision in the Act, to fasten revenue liability upon a deceased individual, in the absence of pending or previously instituted proceeding which is really what the present case is all about, renders fatal the effort of the revenue to impose the tax burden upon a legal representative. After rejection, of the objection, which meant that according to the revenue, such a transaction was indeed recorded in the deceased s books, the revenue attempted to correct the error by changing the name of the entity (with whom the suspect transaction occurred). This court is of opinion that such correction is neither innocuous nor innocent; it was clearly aimed at improving what was a fatally defective reasons to believe and mask the reality, to wit, that the revenue authorities utterly failed to apply their minds to the facts and circumstances of the case. On the last issue, i.e the fatality attached to the completed reassessment in the absence of a notice under Section 143(2), this court notices that the omission renders the assessment (or reassessment as in this case) void a proposition of law enunciated in Asstt. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] The impugned reassessment notice and all consequent proceedings-including the reassessment order-have to be and are, hereby quashed. W.P. allowed.
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2018 (12) TMI 696
Valuation of the closing stock of shares on the basis of “since realized value” - whether Tribunal were right in coming to the conclusion that the method of accounting adopted by the assessee, is an unconventional method of accounting and an attempt to re-write his accounts? - whether the assessee should be precluded from reflecting the actual realised cost of share and should a figure which obviously does not match with the sale price realised, be relied on for the purpose of making the amount addition? - Held that:- In the case of CIT vs. Mahalaxmi Sugar Mills Co. Ltd [1992 (10) TMI 73 - DELHI HIGH COURT] Tribunal allowed the assessee's claim by examining the documents and found that the loss, in fact, was incurred and this is allowable as a deduction. The Tribunal pointed out that the method of valuation of the closing stock, which was adopted by the assessee, was that it would not take the value of the closing stock on the last date of the accounting year but, it took the estimated realisable market value by adopting the price of sugar subsequently realised or realisable before the balance sheet for the year in question was adopted. The Tribunal found this method to be scientific and accordingly, allowed the assessee's appeal. In our considered view, the decision in Mahalaxmi Sugar Mills Co. Ltd. (supra) would squarely apply to the case on hand. The Assessing Officer or the CIT(A) does not dispute the fact with regard to the loss suffered by the assessee. We say so after going through the factual matrix of the case, nor such a contention was advanced before us by the Revenue. From the assessment order, it is seen that for the subsequent year also, the assessee had generated huge loss from the share business and has settled all such loans from other incomes in various years. Thus, we are of the clear view that the 'since realised price', as adopted by the assessee, is the price realised by the assessee upon its sale and taking note of the law laid down in the aforementioned decisions, we hold that the method of valuation of the closing stock adopted by the assessee cannot be stated to be lacking in bona fides and the value adopted by the assessee is the value realised by the assessee upon sale of the share and such contingencies are clearly covered in Clause 8 of AS-4, which deals with events occurring after the balance sheet date. - Decided in favour of assessee
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2018 (12) TMI 695
Reopening of assessment u/s 147 - assumption of jurisdiction for reassessment under Section 147 - Held that:- Non-consideration of the question of jurisdiction is erroneous. In these circumstances, the first question is answered in favour of the assessee by holding that the Tribunal was not justified in ignoring the grounds urged by the appellant with regard to jurisdiction for re-assessment under Section 147 of the Income Tax Act. Addition of bogus creditors - As a consequence to the additions, gross profit ratio would amount to 58.29% - Held that:- The contentions of the assessee required to be accepted. If the amounts are added on then the gross profit ratio would amount to almost 58.29% which is erroneous. It does not arise in the said type of business of the assessee; that there cannot be such a huge profit ratio of 58.29%. Moreover certain material placed by the assessee have not been considered. Therefore, we are of the view that the matter requires to be reconsidered by the Tribunal. Under these circumstances, the second substantial question is answered in favour of the assessee by holding that the authorities committed an error in adding a sum as bogus creditors with respect to credit purchase made by the assessee. As a consequence to answering both the substantial questions of law, the appeal is allowed.
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2018 (12) TMI 694
Interest on interest with respect to the refund - ITAT allowed the claim of assessee - Held that:- As decided in Gujarat Fluoro Chemicals (2013 (10) TMI 117 - SUPREME COURT) held it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest. The clarification has put it in the proper perspective and the facts in the present case do not commend such a drastic measure of interest on interest. We, hence, allow the appeals and set aside the order of the Tribunal on the sole issue of grant of interest on interest on the refunds and answer the question of law in favour of the Revenue and against the assessee.
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2018 (12) TMI 693
Transfer Pricing adjustment in respect of software development services - Stay petition - Held that:- We are of considered opinion that applicant has made out a prima-facie case on merits. The balance of convenience shifts in favour of assessee and, therefore, we are inclined to grant stay to assessee for year under consideration for a period of 6 months (180 days), or till the passing of the order whichever is earlier subject to making payment of ₹ 1.5 crores on or before 15/12/18. On making aforestated payment within stipulated time, Registry is directed to fix the appeal for hearing on 24/12/2018. Needless to say that assessee shall not seek any adjournment unless there being a cogent reason, otherwise this stay shall stand automatically vacated. In the result stay application filed by assessee stands allowed.
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2018 (12) TMI 692
Computation of deduction u/s 80-0 - Held that:- As perused relevant material on record. So far as the method of computation of impugned deduction is concerned, we find that first appellate authority has merely followed the order of this Tribunal in assessee’s own case for AY 1995- 96. Nothing on record suggest that the aforesaid decision has even been over-ruled by any higher judicial authority or the same has no application for impugned AY. Therefore, the stand of Ld. CIT(A), in this regard, could not be faulted with. Ground Number-1 stands dismissed. Whether a deduction u/s. 80-O to the assessee aggregating total chapter VI-A deduction without considering the fact that as per provisions of section 80A(2) the aggregate amount of deductions under chapter VI-A shall not, in any case exceed the gross total income of the assessee - Held that:- We concur with the same that overall deduction under Chapter-VIA could not exceed gross total income of the assessee in terms of Section 80A(2). Therefore, the aforesaid deduction shall be granted by AO within this overall limit provided u/s 80A(2). The impugned order stand modified to that extent. Ground Number-2 stands allowed.
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2018 (12) TMI 691
TP adjustment in respect of transacted price of royalty paid to associated enterprises - Held that:- Assessee was engaged in the business of manufacture and sale of propeller shafts and light axles in the automotive industry segment. The assessee had entered into Technology Licensing Agreement with its associated enterprises AE Dana Corporation USA. Royalty was paid @ 2.85% of net sales by the assessee for the use of licensed technology in the manufacture of the said products pursuant to the renewal of the licensing agreement on 30.03.2007 for light axles and 14.06.2008 for propeller shafts, for a period of five years. The Transfer Pricing Officer (TPO) following earlier years, made the aforesaid upward adjustment in the hands of assessee, which was confirmed by Dispute Resolution Panel (DRP) and final assessment order was issued by the Assessing Officer, against which the assessee is in appeal. Disallowance of management fees - Held that:- Since the issue has been covered in favour of assessee and there is no change in factual aspects, we find no merit in the orders of authorities below. Accordingly, we direct the Assessing Officer to delete the addition made on account of disallowance of management service fees. Disallowance of provision made for warranty - Held that:- The issue raised in the present appeal is similar where the assessee is following systematic manner of creating provision for warranty and there is no change in factual aspects, hence, we find no merit in the orders of authorities below in not allowing the claim of assessee. Accordingly, we direct the Assessing Officer to delete the addition. Claim of deduction for employer’s contribution to the employees’ superannuation and gratuity funds - Held that:- We find merit in the plea of assessee since after respective trusts were created, the approval was sought from the Commissioner in time. However, the said approval was granted later but from retrospective effect. So, once the approval has been given by the Commissioner by passing orders in respect of Group Gratuity Fund and Employees’ Superannuation Fund, then contribution made by the assessee to the aforesaid funds is to be allowed in its hands as deduction. Accordingly, we hold so and direct the Assessing Officer to allow the same - Appeal of assessee is allowed.
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2018 (12) TMI 690
Non-constitution of Permanent Establishment ('PE') of the Appellant in India - invoking provisions of section 115A - No attribution of income deemed to accrue / arise in India possible to the alleged PE of the Appellant in India - Indo-German Treaty - Held that:- We find that the issue in the present appeal is squarely covered by different orders of Tribunal and the Tribunal has decided the issue in favour of assessee [2017 (12) TMI 1337 - ITAT PUNE] in turn, relying on earlier decisions and have held that there is no merit in invoking provisions of section 115A in respect of interest and 115A r.w.s. 44DA in respect of support / royalty services; the receipts are to be taxed in the hands of assessee under Indo-German Treaty @ 10%. Assessability of royalty income and interest is decided in favour of assessee. Additions made on account of reimbursement of expenses - plea of assessee is that once the expenses were reimbursed by its Indian subsidiary, then the same cannot be added as its income - Held that:-We find that the issue raised by assessee is purely legal in nature and the same is admitted for adjudication. The assessee has also pleaded that the evidence in this regard could not be furnished before the Assessing Officer but the same is being filed before the Tribunal by way of additional evidence. Admitting the same, we direct the AO to verify the copies of invoices in this regard and adjudicate the issue in turn, giving reasonable opportunity of hearing to the assessee. The assessee is in any case, is entitled to claim the credit for TDS against the aforesaid receipts and we direct the Assessing Officer to allow the same in accordance with law after verifying the claim of assessee.
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2018 (12) TMI 689
Transfer Pricing adjustment u/s 92CA(3) - comparable selection - Held that:- Assessee is engaged in the production and sale of alcoholic beverages in India, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2018 (12) TMI 688
Assessment u/s 153A - proof of incriminating material was found during the course of search - addition under unexplained cash credit - Held that:- DR could not controvert the submissions of the assessee that no incriminating documents was found. Moreover we find that the addition is sustained merely on the basis of presumptions. We therefore direct the AO to delete this addition. Follow KABUL CHAWLA case [2015 (9) TMI 80 - DELHI HIGH COURT] Cash expenditure unexplained - Held that:- Looking to the details of Assessment Year 2013-14 and 2014-15 wherein the assessee has spent ₹ 2,59,405/- and ₹ 1,95,700/- as cash expenditure for household needs along with incurring of household expenses by cheque at ₹ 33,866/- and ₹ 22,097/- , the additions sustained by Ld. CIT(A) is only to the extent of ₹ 24,000/- and ₹ 20,625/-. Looking to the regular earning source of the assessee and her husband, we find no justification in the finding of Ld.CIT(A) confirming the addition for ₹ 24,000/- and ₹ 20,625/- towards unexplained cash deposit. We therefore direct the Ld.A.O to delete the addition of ₹ 24,000/- and ₹ 20,625/- for the Assessment Year 2013-14 and 2014-15. Amount received from husband towards household expenses - Held that:- No material on record in the form of balance sheet or capital account of the assessee’s husband has been filed which could prove that Rajeev Mazumdar has given ₹ 3,60,000/- to his wife for household needs. This fact could be verified only from the capital account of Shri Rajeev Mazumdar for Assessment Year 2015-16 and for this we direct the Ld. A.O for carrying out the necessary verification by calling details from the assessee after providing sufficient opportunity and if it is found that Rajeev Mazumdar has shown cash withdrawal of ₹ 3,60,000/- for household needs from his capital account, then the cash flow statement given by the assessee should be accepted and the alleged addition to be deleted. Gold jewellery found in the lockers held by the assessee - Held that:- We find that Ld.CIT(A) has only given relief for the gold jewellery but did not accept the fact that in the Indian customs and traditions at the time of marriage silver utensils are also given to the bride. It is quite possible that the word silver utensils were not included in the CBDT instructions because at that point of time silver utensils were not coming under the category of capital assets. In our considered view Ld. CIT(A) ought to have taken a liberal approach by giving the benefit to the assessee for the value of gold jewellery and value of silver utensils held by her, within the monetary limit of value as on the date of search of the gold jewellery ornaments and permitted to be held, as provided in the CBDT Instruction No.1916 dated 11.5.1994. We accordingly direct the Ld.A.O to delete the addition of ₹ 34,495/- made for Assessment Year 2015-16 for silver utensils found in the locker owned by the assessee.
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2018 (12) TMI 687
Deemed dividend made u/s 2(22)(e) - taxation in the hands of the appellant company who is not the shareholder of lender company - Held that:- The issue is squarely covered in favour of the assessee so far as the contention of the learned authorised representative is that the deemed dividend cannot be taxed in the hands of the appellant company as it is not a shareholder of the lender company. Same is the finding of the learned Commissioner of income Tax A. So far as this issue is involved we do not find any infirmity in the order of the ld CIT (A), hence we uphold it to the extent that deemed dividend is chargeable to tax in the hands of the share holder only. Accordingly, we do not find any merit in the appeal of the revenue for assessment year 2006 – 07 and 2007-08. Commissioner of income tax appeal has given a correct finding on the issue that the amount of loan given by the lender to the appellant company is chargeable to tax in the hands of the shareholders. The proper opportunity was also given by the Commissioner of income tax appeals to the shareholder. The shareholder did not comment that this amount is not chargeable to tax in his hands, but has only stated that the above amount given by the lender to the appellant is only a business advance and therefore provisions of deemed dividend does not apply to the facts of the case. On careful analysis of the order of the learned Commissioner of income tax appeals, he has merely directed the learned assessing officer to add the said amount as deemed dividend under section 2 (22) (e) in the hands of the shareholder. No infirmity is found in the order of the learned Commissioner of income tax appeals in holding so after giving proper opportunity of hearing to the shareholder also Accordingly, for A Y 2006 – 07 we dismiss ground number 1 and all its sub grounds holding that the advances received by the appellant from the lender is liable to tax as deemed dividend in the hands of the shareholder as it is not a business advance. We also dismiss ground number 2 of the appeal, where the learned Commissioner of income tax appeals has correctly held that the aforesaid amount is chargeable to tax in the hands of the shareholder after giving proper opportunity to the shareholder and the learned Commissioner appeals when deleting the addition in the hands of the assessee was duty-bound to say, in whose hands the deemed dividend is chargeable to tax - Decided against assessee
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2018 (12) TMI 686
Rejection of books of accounts - estimation of income - Addition made on account of estimation by holding the books of accounts are correct - Held that:- CIT(A) observed that sale of commercial portion @ 826.75 per sq.ft., expenditure not claimed under the head “substructure & super superstructure” in profit & Loss account, AS-7, advance received for residential portion not included in sales consideration, discounts offered to parties for making full payments does not justify to reject the books of accounts and estimation of profits thereon, thereby, the CIT(A) held that books of accounts are completed as correct and deleted the addition. CIT(A) examined the record together with the two remand reports and come to the above conclusion in favour of the assessee. Further, it is observed that the CIT(A) placed reliance on the decision of Hon’ble Supreme Court in the case of Realest Buildings & Services Ltd. [2008 (5) TMI 6 - SUPREME COURT] - decided against revenue Addition made on account of unexplained cash credit u/s 68 - Held that:- As all the three ingredients identity, creditworthiness and genuineness of transaction were proved and the addition made thereon is to be deleted. Addition made on account of bogus sundry creditor - Held that:- AO issued notice u/s 133(6) of the Act to M/s. Nivedita Enterprises and the notice was returned unserved with an endorsement “Not known”. The AO held that an amount of ₹ 9,70,426/- is bogus and added to the total income of the assessee. Before the CIT(A), the assessee submitted copy of trade license, profession tax enrollment certificate and copy of PAN card relating to M/s. Nivedita Enterprises and the CIT(A) inturn sought remand report from AO. The CIT(A) considering the submissions of the assessee, and remand report deleted the addition made by the AO - no infirmity in the order of CIT(A) and it is justified. Thus, Ground raised by the Revenue is dismissed.
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2018 (12) TMI 685
Rectification application u/s. 154 - Computation of long term capital loss - assessee company vide its application for rectification has stated that the assessee company considered only the actual cost of acquisition instead of indexed cost of acquisition and determined the Long Term Capital Loss at ₹ 3,85,05,000/- instead of ₹ 14,27,10,063/- - Held that:- Referring to provisions of section 154, it is seen that only those mistakes which are apparent from records can be rectified under the provisions of section 154. Hence, we have to examine this as to whether the assessee’s claim for rectification is for apparent mistake or not. In the present case, it is noted by the AO on page no. 2 of the order passed by him u/s. 154 of IT Act that the assessee company vide its application for rectification has stated that the assessee company considered only the actual cost of acquisition instead of indexed cost of acquisition and determined the Long Term Capital Loss at ₹ 3,85,05,000/- instead of ₹ 14,27,10,063/-. In our considered opinion, this may be a mistake against which the appeal can be filed by the assessee by filing an appeal before CIT(A) against the assessment order but such mistake is not an apparent mistake which can be rectified by the AO u/s. 154 of IT Act - rectification sought for by the assessee u/s. 154 is not in respect of an apparent mistake which can be rectified u/s. 154. - decided against assessee.
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2018 (12) TMI 684
Addition of payment to retired partners u/s.37(1) on identical issue /facts with respect to payment made to retired partners that too in the case of the assessee the Tribunal considered the factual matrix and considered the decision of the Tribunal on identical facts / issue for ay 2011-12, wherein the payment of expenditure allowable u/s.37(1) of the Act has been considered. The Tribunal also considered the partnership deed wherein identical reference has been made in various clauses with respect to determination and the payments to retiring partners or the spouse /nominees of the deceased partners and thereafter reached to the particular conclusion. - Decided in favour of assessee. Addition towards advances received from clients - Held that:- In the case of the assessee itself for ay 2011-12, the Tribunal has deliberated upon identical issue and considering the decision from Hon’ble Delhi High Court in the case of Dinesh Kumar Goel [2010 (10) TMI 287 - DELHI HIGH COURT] and arguments from both sides including the decision in the case of A.F.Ferguson & Co. [2014 (7) TMI 1285 - BOMBAY HIGH COURT] another decision from Hon’ble P&H High Court in the case of CIT vs. Punjab Tractors Co-operative Multi-purpose Society Ltd. [1997 (8) TMI 37 - PUNJAB AND HARYANA HIGH COURT], affirmed the stand of the ld.CIT(A). Reopening of assessment - reason to believe that income has escaped assessment - incorrect claim of expenditure as a revenue expenditure towards the pension paid to retired partners - Held that:- ase was reopened with the issuance of notice u/s,.148 on 13.3.2015 as the ld. A.O found that the assessee incorrectly claimed the expenditure as a revenue expenditure towards the pension paid to retired partners. As per the partnership deed also, it was found that money received from the clients has been shown as advances from clients instead of offering the same as income. Thereafter, the assessee in response to the notice offered the total taxable income of Rs,13,56,49,603/- on 29.4.2015. The ld.AO communicated the reasons for reopening. The assessee filed its objections vide letter dated 18.2.2016. The ld.A.O disposed of the objections of the assessee by a speaking order on 10.03.2016. We note that the contention of the assessee that the reopening of the assessment was merely done on the basis of the change of opinion and based on audit objections has been duly discussed. Thus, considering the foregoing decisions and the amended provisions with effect from 01.04.1989, we are of the considered opinion that the ld.First Appellate Authority is justified to confirm the reopening as valid. Thus, the Cross objections of the assessee for assessment year 2010-11 with respect to validity of reopening of assessment u/s.147 of the Act is held to be valid.
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2018 (12) TMI 683
Additions on account of expenditure on speed-boat owned by the assessee - Held that:- The appellate order for AY 2009-10 records a clear-cut finding that the assessee had been using speed-boat for travelling from Mumbai to Alibaug for his professional activities like acting, practice, health, maintenance, story telling etc. and hence, business asset has been utilized by assessee for commutation for professional work and therefore, the expenditure against the same was allowable to the assessee like any other travelling mode like motor-car etc. Another important fact to note is that the speed-boat forms part of the 15% block of Fixed Assets which is evident from depreciation chart as placed on record and therefore, constitute business / professional asset for the assessee. As further noted that the assessee has claimed impugned depreciation on opening written down value of the speed-boat which is being carried forward from earlier AY and already merged under 15% block of fixed assets. Further, the assessee has suo-moto disallowed 25% of the expenditure on estimated basis to account for personal element / usage. Therefore, considering the totality of facts, impugned additions could not be sustained. Reversing the stand of lower authorities, we allow the appeal.
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2018 (12) TMI 682
Claim made u/s 36(1)(viia) - excess amounts written off in excess of the provision for bad debts under Section 36(1)(viia) - assessee is labouring under a misapprehension that the AO declined their claim only on the basis of the fact that the loan accounts were not credited with the amounts shown as written off - Held that:- There could be no deduction claimed because obviously even if the said amounts are written off in the said year, it would not exceed the provision under Section 36(1)(viia). In such circumstances, we do not think that the question raised requires an answer. The amounts written off were not declined deduction, merely for the reason of the same having not been credited in the party's account; in which context alone, the decision of the Gujarat High Court applies. The learned Standing Counsel for Government of India (Taxes) alertly points out that Gujarat High Court decision as relied on by the assessee is no longer good law in view of the decision in Southern Technologies Ltd. v. Joint CIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA]. The very same Section 36(1)(vii) and (viia) came up for consideration before the Hon'ble Supreme Court. The Hon'ble Supreme Court noticed the Explanation brought in by Finance Act, 2001 with retrospective effect from 01.04.1989. Here, the written off amounts have been granted deduction, only to the extent of the same exceeding the provision under clause (viia) of Section 36(1), which is in accordance with the statutory prescription.
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2018 (12) TMI 681
Penalty u/s. 271(1)(c) - additions on account of disallowance of interest expenditure and notional house property income - Held that:- For disallowance of interest expenditure the assessee has availed of overdraft facility from Dena Bank and out of the funds borrowed from overdraft account investment was made in taxable bonds of RBI as well as fixed deposit - as against the interest income earned from taxable bonds and fixed deposits, which was offered as income, assessee has set off the interest expenditure incurred on account of funds borrowed from the overdraft account. This claim of set off of interest expenditure against interest income has been rejected by the Assessing Officer in course of assessment proceedings. Thus, under a bona fide belief that interest expenditure incurred on the overdraft facility is allowable against the interest income earned by investing the funds borrowed from the overdraft account assessee has claimed the expenditure. This, in our view, neither leads to furnishing of inaccurate particulars of income nor concealment of income. As regards imposition of penalty on the addition made on account of notional house property income, it goes without saying that in reality the assessee has not earned any income from house property. The Assessing Officer himself has observed that the addition made on account of income from house property is notional. Penalty u/s. 271(1)(c) cannot be imposed in respect of addition made on account of notional income from house property. - Decided in favour of assessee.
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2018 (12) TMI 680
Disallowance of depreciation on Effluent Treatment Plant - whether the assessee was able to establish that its ETP was installed and put to use during the year, enabling it to claim depreciation on the same? - Held that:- The installation of the ETP in the impugned year not being in dispute and the assessee having proved that ETP was capable of being run on the existing load available with the assessee in the impugned period being a lean period in the beer industry the factum of ETP being put to use in the impugned year stands established. The assessee is, therefore, we hold, is eligible to claim depreciation @ 50% of the value of the asset. The order passed by the CIT(A) denying the said claim is, therefore, set aside and ground No.1 raised by the assessee is, therefore, allowed. Disallowance of foreign travel expenses - expenditure incurred on the trip of MD to UK and the trip to Germany - Held that:- For trip to UK The only evidence, we find, which have been filed by the assessee gives the details of the trip and proof of expenses incurred by way of bills of travel agent and bills of foreign exchange purchased. No evidence to prove the visit of the MD to breweries in Edinburgh had been filed, nor any other evidence to prove that the trips were undertaken for business purpose. Therefore, we uphold the order of the Ld.CIT(A) in disallowing the claim of foreign travelling expenses incurred on the trip undertaken by the MD of the assessee company to UK. There is no justification for holding the expenses incurred on the MD as excessive. Surely the stature of an MD if far above that of the other employees of the company and therefore the expenses cannot be said to be excessive by comparing with the quantum incurred on other employees.Even while disallowing expenses for personal usage, only general statements have been made that some personal element must be involved in the trip to Germany. There is therefore we find no basis either for holding the expenses incurred on the MD’s trip to Germany excessive or personal. The Revenue cannot deny the claim of expenditure on whims and fancies. The same is, therefore, not acceptable. In view of the same, we hold that the denial of claim of expenditure incurred on the trip of the MD of the assessee company to Germany was unwarranted and uncalled for and the same is directed to be allowed to the assessee. The disallowance of claim of expenditure, therefore, to the extent of ₹ 3,27,030/- is deleted.
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2018 (12) TMI 679
Upward adjustment u/s 92C - Comparable selection - Held that:- Exclusion of CGAAVK Software & Export Limited is concerned, it has been rejected as consistently loss making concern which is clearly incorrect, because once foreign exchange gains are to be included as operating income – which is what ought to be done, the figures at page 33 of CIT(A)’s order itself show profitability in the financial year 2008- 09, 2010-11 and 2012-13. In our considered view, therefore, CGA-AVK Software & Export Limited was wrongly excluded. We direct the Assessing Officer to include the same in the list of comparables. As regards the question as to whether foreign exchange gains are to be included in operating profits or net, the issue is settled in favour of the assessee by a co-ordinate bench decision in the case of ITO vs. EDAG Engineers & Design India Limited [2015 (3) TMI 235 - ITAT DELHI] - We accept the plea, and remit the matter to the file of the Assessing Officer to verify whether, upon the above directions being implemented, margin will be less than 5%. If so, the entire ALP addition will stand deleted. In any other case, the ALP adjustment will stand modified suitably. Addition u/s.36(1)(va) r.w.s. 2(24(x) towards late payment of employees’ contribution to PF & ESIC - Held that:- while any delayed deposit of PF/ESI is to be disallowed, in terms of case of Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT), the question as to whether there is a delay or not may be decided by the Assessing Officer in the light of above observations by the coordinate bench. The assessee will get relief, if found admissible, on that basis. Disallowance under section 14A - Held that:- Only elementary that for the purpose of computing administrative expenses to be disallowed under rule 14A r.w.r. 8D, only such investments are to be taken into account as yield tax exempt income. The 0.5% of investments is to be treated as inadmissible administrative expenses under rule 8D must therefore be computed with respect to equity funds Mutual Funds only. The plea of the assessee is thus indeed well taken and meets our approval. We remit this issue also to the file of the Assessing Officer for recomputation of disallowance under section 14A r.w.r. 8D in the light of above observations.
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2018 (12) TMI 678
Rejection of books of account U/s 145(3) - receipt and payment of the freight - providing transportation work of different parties through the third party vehicles - non-acceptance of a particular claim of expenditure - Held that:- The non-acceptance of a particular claim of expenditure cannot be a reason to hold that the books of account of the assessee are defective and suffering from deficiency or discrepancies warranting rejection U/s 145(3). In case, the AO was not satisfied with the claim of freight charges then that particular claim could have been examined and disallowed to the extent of not proved by the assessee instead of resorting to the provisions of Section 145(3) - Even otherwise some other expenditure which is not substantiated by the assessee by filing a supporting evidence, the same can be disallowed but these disallowances cannot be a reason for rejection of books of account - when the assessee has been maintaining regular books of account duly audited by the qualified auditor then in absence of specific discrepancy or deficiency in the books of account, the provisions of Section 145(3) cannot be invoked. Hence we hold that the Assessing Officer was not justified in rejecting the books of account merely because the assessee could not file the confirmation from the parties to whom the freight charges were paid. Hence, this ground of assessee’s appeal is allowed. Estimation of income by applying the NP rate - Held that:-Since the Assessing Officer has doubted the claim of freight payment as the assessee has not filed any confirmation and the parties have not responded to the notice issued by the Assessing Officer U/s 133(6) of the Act, therefore, the issue of allowability of the said claim can be reexamined by the Assessing Officer only to the extent of scope of any inflation in the quantum of the freight charges paid by the assessee. So far as the outright rejection of freight charges is concerned we note that when the freight income and freight charges are linked one to one for each trip and also found recorded in the books then the entire claim of the assessee cannot be held as bogus. The only issue which can be examined by the Assessing Officer is the quantum of the freight charges inflated by the assessee or not. Accordingly, for limited purpose, we set aside the issue of allowability of the freight charges in the above terms.
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2018 (12) TMI 677
Penalty levied u/s 272A(2)(k) - omission to deduct tax and filing of e-TDS returns within the stipulated time - delay of five years in filing the e-TDS statements - Held that:- The explanation of the assessee that there was no experienced person at Kotagiri and it had to engage somebody from Coimbatore for filing of return appears to be not a valid reason for not filing the TDS returns. When the assessee was required to deduct tax and file the statement as required under Section 206C(3) of the Act within the time prescribed under Section 200(3) of the Act, the assessee is expected to comply with the mandates of the Income-tax Act. Kotagiri is not far away from Coimbatore. It may not be required for the assessee to wait till an inspection was carried out by the TDS Wing of the Department. From the very fact that the failure of the assessee for not filing the TDS was found during the inspection of TDS Wing of the Department, it appears that the assessee has not taken any step for filing the returns. Under similar circumstances, the Punjab & Haryana High Court High Court in Central Scientific Instruments Organisation [2016 (8) TMI 508 - PUNJAB AND HARYANA HIGH COURT] has confirmed the penalty levied. - Decided against assessee.
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2018 (12) TMI 676
Addition on account of non deduction of TCS as goods sold is other than scrap - Held that:- The contention so raised by the assessee before the CIT(A) cannot be accepted. Further it is noted that the lower authorities have already allowed the credit in respect of the scrap purchasers who have provided the necessary declaration regarding receipt of such items and the fact that the same have been taken into account while filing the return of income and the taxes have been duly paid on them. There is nothing on record in respect of any declarations which has been filed and not considered by the lower authorities. In light of the same, we do not find any infirmity in the order of ld. CIT(A) which is hereby confirmed. - Decided against assessee.
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2018 (12) TMI 656
Rental income received to be taxable - income from business OR income from House Property - Held that:- Tribunal observed it is clear from objects of the respondent as set out in its partnership deed viz. to deal with properties i.e. to construct real estate, multiplex centre, entertainment complex etc. and operate and manage the same. On the basis of the above object clause the impugned order placed reliance on Chennai Properties & Investment Limited Vs. CIT [2015 (5) TMI 46 - SUPREME COURT] to hold that the objects clause of assessee's partnership deed would be the determining factor to decide the nature of income. On the above basis, it concluded that it is business income. In case of Chennai Properties & Investment Limited (supra) the object of the Assessee therein was to acquire properties and let out the same. Appeal of the respondent was allowed and held that the income from letting out of business premises was taxable under the head business income not income from the house property. Tribunal has applied Apex Court decision in Chennai Properties & Investment Limited(supra), on similar facts, the proposed question of law does not give rise to any substantial question of law. Therefore, not entertained.
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2018 (12) TMI 655
Addition to VAT payment to the income of the appellant - Held that:- Full disallowance of the purchases under dispute as made by lower authorities was not justified. AR has canvassed that input VAT was never claimed as deduction and therefore disallowance thereof amounted to double taxation. We do not agree with the same since the input VAT has been adjusted against output VAT and the net amount of VAT has been paid / refunded by the assessee, which in effect amounts to indirect debit to the financial statements keeping in view that fact that purchases were not considered as genuine and therefore, the input VAT claimed there against also could not be considered to be genuine. Additional income on account of alleged bogus purchases - Held that:- Addition from a supplier against which the surrender was not made by the assessee. However, as noted by lower authorities, the purchases made from this supplier were also not proved conclusively as in the case of suspicious dealers. Therefore, the same stand on similar footing. This ground stand dismissed. Addition on account of claim of loss arising out of foreign currency term loan - Held that:- AR, while fairly conceding that the issue stood against the assessee by the order of this Tribunal in immediately preceding AY 2009-10, submitted that the fact that the machinery was already put to us by the assessee has not been considered by the Tribunal and therefore, the same was rendered on erroneous assumption of facts. However, since a view has already been taken by the Tribunal on identical facts and circumstances, refraining from adjudicating the same and respectfully following the same, we conclude that the loss was not allowable as revenue expenditure. Ground Number-4 & 9 stands dismissed. However, we find force in the alternative plea that the same should be treated as capital expenditure and eligible for depreciation. Therefore, the matter stand remitted back to the file of Ld. AO to consider the alternative plea as raised by Ld. AR before us and re-adjudicate as per law.
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Customs
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2018 (12) TMI 671
Penalty u/s 112 of CA on Managing Director - Import of car under EPCG Scheme - benefit of N/N. 55/2003-Cus dated 1st April 2003 - Held that:- The proceedings were initiated by customs authorities who had, under a notification issued under section 25 of Customs Act, 1962, permitted duty-free import. It is also apparent that the said notification governing the administration of imports under the Export Promotion Capital Goods scheme was primarily drafted for realisation of foreign exchange proceeds from export of goods; however, recognising the importance of service industry, the scheme has been utilised to grant licenses to service providers. In the present instance, the discharge certificate itself is questioned only against the background of eligibility of a service provider based in India to apply for, and to obtain, a licence under a scheme that was originally formulated for export of goods. The evolution of the scheme beyond physical exports is within the purview, and only, of the Director General of Foreign Trade. It is not open to customs authorities to contend that, sans the empowerment, powers not existing, the license itself was issued on the basis of fraudulent submissions. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 670
Valuation of imported goods - adhesive coated jumbo rolls - Held that:- The appellant had declared the first of the consignments as ‘plain plastic film’ and the other two consignments as ‘adhesive coated jumbo rolls’ with unit price of US $425/kg and US $ 450/kg respectively. Even though the manufacturer-supplier did, in their communication, clarify the nature of the goods, the appellant has not been able, either before the first appellate authority or before us, to controvert the findings that rolls were consistent dimensions in the imported consignment. There is no doubt that, following a finding of superior quality, the declared value stands on very weak foundations. However, the findings of the original authority on the value adopted, to the extent not dealt with in the impugned orders but assumed to merge therewith, lack the rigour that is mandated by Customs Valuation (Determination of Value of Imported Goods) Rules, 2007; These flaws in the order of the first appellate authority deprives it of legality and propriety that must be rectified - the matter remanded back to the original authority for a fresh decision duly that is in consonance with section 14 and section 125 of Customs Act 1962 - appeal allowed by way of remand.
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2018 (12) TMI 669
Revocation of CHA License - the allegation against the appellant is that he has declared only the chemical name of the goods and not the trade name of the goods imported - Held that:- This allegation does not have any force because the appellant has declared the classification as per the direction of the importer and if there is a wrong classification as per the Department, then they should take it against the importer because on the same classification earlier also, the importer has imported the goods - there is no force in the allegation that the appellant has filed the wrong address of the importer because the Custom Broker has filed the address which appears in the IEC code. Principles of natural justice - Held that:- There is a violation of principles of natural justice and the impugned order has been passed without giving proper opportunity of hearing to the appellant. The finding of the Commissioner that the Custom Broker has not applied for renewal is factually incorrect - the forfeiture of security and imposition of penalty on the appellant is not sustainable and is set aside. The Commissioner is directed to examine his application for renewal of licence and decide the same in accordance with law - appeal allowed by way of remand.
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2018 (12) TMI 668
100% EOU - duty-free procurement - manufacture and packaging of articles of export goods - N/N. 22/03-CE dt. 31/03/2003 - Held that:- It has not been disputed by both the authorities below that the impugned goods have not been diverted by the appellant and have been put to use in the EOU. Also, subsequently, the Development Commissioner has accorded approval for procurement of prefabricated RPUF Insulated Panels which is identical in nature with only difference in description. Further, in view of the various decisions relied upon by the appellant, the duty can only be demanded at the time of debonding and demand prior to debonding would be premature. Division Bench of this Tribunal in the case of CCE, Chandigarh Vs. Kejriwal Bee Care (I) Ltd. [2011 (1) TMI 422 - CESTAT, NEW DELHI] has held that there is no definition for capital goods in Notification No.22/2003-CE and the definition of capital goods under CENVAT Credit Rules, 2004 are not applicable to exemption notification EOU. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 667
Classification of imported goods - mixture of fatty acids having stearic acid, palmitic acid and other fatty acids with stearic acid ranging from 40-45%. - whether classified under CTH 38231119 or otherwise? - Held that:- There is no dispute about the fact that imported goods namely Stearic Acid and KortAcid have 54-58% of Palmatic Acid and 40-45% of Stearic Acid. As per the published literature palm stearin contains about 40- 60% of palmitic acid (C-16 chain), remaining being steric acid (C-18.0) and Oelin (C-18.1 & C-18.2). Hence the imported goods answer to the definition of palm stearin and need to be classified accordingly. There is no hesitation in upholding the classification of imported goods under CTH 38231119 as determined by the Assistant Commissioner and Commissioner (Appeal). Benefit of N/N. 21/2002-Cus dated 1st March 2002 - Held that:- In absence of any findings from the authorities below in respect of this claim made by the appellants we are not in position to render independent finding on this plea. Accordingly matter needs to be remanded back to adjudicating authority for consideration of the claim of exemption under Sl No 491 of Notification No 21/2002-Cus dated 1st March 2002 available to imported goods classifiable under CTH 38231119. The matter needs to be remanded to adjudicating authority - appeal allowed by way of remand.
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Corporate Laws
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2018 (12) TMI 674
Transfer winding up proceedings pending before HC to the National Company Law Tribunal ( NCLT ) refused - Held that:- If there is any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that the NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside. The NCLT proceedings will now continue from the stage at which they have been left off. Obviously, the company petition pending before the High Court cannot be proceeded with further in view of Section 238 of the Code. The writ petitions that are pending before the High Court have also to be disposed of in light of the fact that proceedings under the Code must run their entire course. We, therefore, allow the appeal and set aside the High Court s judgment.
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2018 (12) TMI 673
Convening of the meetings to consider the proposed scheme of ‘compromise and arrangement’ - whether there was any justification to not convene the meeting of the allottees of Blocks B, C & D of the Spire Edge Project for the purpose of considering the proposed scheme of ‘compromise and arrangement’? - Held that:- Considering that the Appellants have listed out what their grievances against the Respondent No.1 company are and they have in fact filed Company Petition 704/2014, they cannot be considered to be persons who stand outside the winding up proceedings, particularly since their grievances have still not been satisfactorily addressed by the Company. They do have monetary claims against the company. If a scheme of ‘compromise and arrangement’ is finalised without taking into account their claims against the Respondent No.1 company, their rights would definitely be prejudiced. Therefore, it is incorrect on the part of the Respondent No.1 company to contend that the proposed scheme of ‘compromise and arrangement’ does not alter or affect the rights of the allottees of Blocks B,C and D who are the Appellants here. The Court is of the view that the complete and correct facts concerning the allottees of Blocks B, C & D were perhaps not placed before the learned Company Judge. The Court modifies the impugned order dated 16th October 2018 of the learned Single Judge (as further modified by order dated 14th November, 2018) to the extent of holding a meeting shall be held also of the allottees of Blocks B, C & D of the Spire Edge Project.
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2018 (12) TMI 672
Voluntary revision of financial statements or Board‘s report - Held that:- Paragraph No. 2 of the affidavit, states that there would be no change in the financial statements or in the income tax returns already filed by the Company relating to financial year 2015-16. Further, it is stated in affidavit dated 04.08.2018 of Ms. Kanchan Kukreja, Company Secretary of the Company, filed by Diary No.2875 dated 07.08.2018 that the demand/claim of the Income Tax Department pending, if any, relating to previous years would not be affected adversely by way of present petition. Therefore, no effect on the outstanding demand raised by the Income Tax Department for the assessment year 2013-14 to 2015-16 is envisaged by the proposed changes. After taking into consideration the reports of the Central Government and the Income Tax Authorities, approval is granted under Section 131(1)(b) for revised report of the Board for the financial year 2015-16 in respect of the following disclosures stated to be not provided for in the Board Report for the financial year ending March, 2016 in respect of the following disclosures stated to be not provided for in the Board Report for the financial year ending March, 2016. Necessary further action be taken by the Company for filing certified copy of the order of the Tribunal with the Registrar of Companies within 30 days of the receipt of the certified copy and calling for General Meeting and further, filing with the Registrar of Companies as per Section 131 (1) of the Act read with Rule 77 of the Rules.
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Insolvency & Bankruptcy
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2018 (12) TMI 675
Corporate insolvency process - steps for ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Debtor’ - Held that:- From the provision of Section 8, it is clear that the legislature intended to put the ‘Corporate Debtor’ on notice that the amount due having defaulted if the amount is not paid. The ‘Operational Creditor’ may take steps for ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Debtor’. It is not a mere formality but mandate of law that such notice is actually served on the ‘Corporate Debtor’ who may act accordingly. For the said reason, the Adjudicating Authority is required to record its satisfaction that the records, including service of demand notice are in order. The Adjudicating Authority is required to satisfy itself that the notice was actually served on the ‘Corporate Debtor’ not that technically it was served in the address. Adjudicating Authority having failed to do so, we have no other option but to set aside the order dated 18th June, 2018 and the order dated 4th October, 2018. The parties having settled the matter we are not remitting the matter to the Adjudicating Authority. The Adjudicating Authority will direct the Registrar NCLT, Kolkata Bench to release the amount in favour of the 1st Respondent- ‘Cytech Coatings Private Limited’ deposited on behalf of the ‘Corporate Debtor’ immediately. Orders passed by the Adjudicating Authority appointing ‘Resolution Professional’, declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, taken by the ‘Resolution Professional’, including the advertisement, published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the ‘I&B Code’ is dismissed. Adjudicating Authority will now close the proceeding. The ‘Corporate Debtor’ (company) is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect.
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Service Tax
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2018 (12) TMI 666
Rectification of Mistake - Revenue's contention is that the submissions made during the course of hearing of appeal were not considered in proper perspective and the grounds urged in the appeal memo were also not considered in the said order - Held that:- Since the findings recorded by the Tribunal were based on the submissions made, by both sides, it cannot be said there was any apparent mistake in the said order, which can be rectified in terms of the miscellaneous application filed by Revenue. The right course of action on the part of Revenue under such circumstances is to seek for appellate remedy provided in the statute, instead of approaching the Tribunal for rectification of mistake, which is not apparent on the fact of the case records. The prayer made by Revenue cannot be considered - ROM Application dismissed.
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Central Excise
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2018 (12) TMI 665
Grant of promotion - Held that:- There is no reason to entertain this petition under Article 136 of the Constitution of India - SLP dismissed.
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2018 (12) TMI 664
Valuation - enhancement of assessable value - Held that:- Though stay application is listed for hearing today, by the consent of learned senior counsel appearing for the parties, we have heard the main appeals itself - Judgment reserved.
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2018 (12) TMI 663
CENVAT Credit - input services - GTA Service for outward transportation of the goods from factory to buyers’ premises - sale on FOR basis - place of removal - Held that:- This issue is no longer res integra and has been settled by the Hon’ble Apex Court in the case of Andhra Sugars Ltd., [2018 (2) TMI 285 - SUPREME COURT OF INDIA] where it was held that Once it is accepted that place of removal is the factory premises of the assessee, outward transportation ‘from the said place’ would clearly amount to input service - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 662
Goods cleared after conversion without cover of any invoice - Rule 57F(2)/57F(3) of CER - Held that:- M/s. Ratna Fibres are found to be not registered and have not maintained any records. M/s. Bangalore Monofilament has stated that they have not included such clearances in their turn over and M/s. Elastic Enterprises have, however, accepted that they have included. Moreover, it is seen that the Central Excise Acts and Rules existing at that point of time had a clear provision in movement of goods under job work. The appellants have not used the challan as prescribed under Rule 57F(2)/57F(3) or any other document prescribed by the Department. It clearly specifies the category of manufacturers who are availing the CENVAT credit and who are not availing CENVAT credit to prevent any misuse of the provision of exemption a clear cut procedure has been provided in the rules for Monofilament of goods on job work basis. The job work procedure cannot claim at any after thought the procedure and forms prescribed therein are fundamental to the working of the procedure. Non-adherence to the same will dis-entitle the appellants to the exemption they have claimed. Appeal dismissed - decided against appellant.
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2018 (12) TMI 661
Availability of CT-1 Certificate - benefit of N/N. 42/2001 - Held that:- Admittedly Notification No.45 was available to the assessee and the mere fact that they initially applied under Notification No.42, cannot be adopted as a ground for denial of benefit of N/N. 45 - appeal dismissed - decided against Revenue.
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2018 (12) TMI 660
Valuation - inclusion of selling and distribution charges and administrative expenses in the cost of production - goods transferred to sister concern or captively consumed - Held that:- Undisputedly, under CAS-4 method, the aforesaid expenses are held to be not part of the cost of production of the goods captively consumed - CAS- 4 method of computation of production cost is retrospectively applicable - appeal dismissed - decided against Revenue.
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2018 (12) TMI 659
CENVAT Credit - input services at their head office i.e. place where the factory is also situated - Held that:- Appellant has submitted that before the adjudicating authority they could not produce the relevant evidences in support of their claim that the credit has been availed at their head office wherefrom centralized billing was undertaken even though services were rendered from various other locations - it is prudent to remand the matter back to the adjudicating authority to re-assess the evidences in the light of the claim of the appellant that they had a centralized billing/ accounting system at the places where they have availed the credit on various input services used in or in relation to manufacture of goods taking into consideration the principles of law - appeal allowed by way of remand.
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2018 (12) TMI 658
Vires of sub-rule 3(A) of Rule 8 of the Central Excise Rules, 2002 - default in payment of monthly duty liability - Revenue has accepted the duty discharged through PLA but objected to reversal of CENVAT credit account in discharging duty liability during the default period. Held that:- Issue has been decided in the case of M/S. GEI INDUSTRIAL SYSTEM LTD. VERSUS CCE, BHOPAL [2016 (11) TMI 227 - CESTAT NEW DELHI], where it was held that To hold that the clearances subsequent to March, 2006 as non-duty paid clearance only on the ground that the cenvat credit has been used for payment of such liability, is not legally sustainable. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (12) TMI 657
Jurisdiction - default in payment of tax relates to certain C-Forms - prosecution under which provisions of the Central Sales Tax Act, 1956 read with the Maharashtra Value Added Tax Act, 2002 - Held that:- Since it prima facie appears that the entire issue may be resolved if the Petitioner is able to produce all the C-Forms, we request the Deputy Commissioner of Sales Tax, Pune not to pass any final order on the impugned show cause notice for a period of four weeks from today - Petition disposed off.
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