Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 18, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Classification of services - Rate of GST - MEP activities (Mechanical, Electrical & Plumbing Works) undertaken by the applicant falls within the definition of composite supply of works contract as defined under Section 2(119) of CGST Act.
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Levy of CGST/MGST/IGST - fixed fee received - brewing / manufacturing, packing and supply of Products i.e. alcoholic liquor for human consumption - Supply of beer per se is not taxable under GST. What is taxable in the subject case is the job work which is a service provided by PIL to the applicant, for which they are receiving consideration.
Income Tax
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Initiation of special audit of the petitioner/assessee u/s 142(2A) - far from the case showing non-application of mind, the AO has carefully outlined what were the salient aspects in the accounts and returns of the assessee that needed to be looked into and made the impugned order directing special audit - writ petition dismissed.
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Employee on deputation - computation of total salary paid as provided in Section 195A - income tax liability on the salary received by the appellant from the consultant company - AO directed to employ Section 195A
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Penalty u/s 271(1)(c) - concealment or furnishing inaccurate particulars - Where the explanation is not make belief and sham but genuine, the assessee would satisfy the requirement of Explanation 1 to Section 271(1)(c). This test and requirement is satisfied in the present case.
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MAT computation - sick company - the assessee company’s net worth was negative and the assessee satisfied the condition to hold the company as sick industrial company. Though the SICA was repealed w.e.f. 2003, the provision was not removed from the Income Tax Act. - assessee is entitled for relief.
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Addition u/s 40A(3) - cash payment for freight charges paid to clearing and forwarding against for clearing our goods for exports - disallowances u/s 40A(3), cannot be made if the genuineness of the transaction has not been doubted by the authorities below
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Weighted deduction u/s 35(2AB) - clinical trials conducted outside the ‘in-house R & D facility’ - such expenditure has to be necessarily spent outside the facility, but for the purpose of ‘in -house’ research - claim of the assessee allowed.
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Bad debts - assessee does not fulfill the conditions mandated in section 36(2) r.w.s 36(1)(vii) - However, the write off became imminent because the landlord declined to refund the security deposit. The write off has to be considered in the light of provisions of section 28 r.w..s 37 - Claim allowed.
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Deduction u/s. 80IA - The issue raised that assessee is not doing the development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges thereof.
Customs
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Seeks to further postpone the implementation of increased customs duty on specified imports originating in USA from 17th December, 2018 to 31st January, 2019
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Refund claim - Reduction of freight - refund rejected solely on the argument that the appellants had resorted to self-assessment procedure for payment of Customs Duty on imported Rock Phosphate and the impugned Bills of Entry including the declaration made there in respect of such goods - refund cannot be rejected.
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Valuation of imported goods - consignment of jute backed polypropylene carpet from Indonesia - rejecting the transaction value without the contemporaneous price, the demand confirmed in the impugned order is not sustainable
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Mis-declaration of value of export goods - rejection of valuation - attachment / seizure order - At this stage there being no further material on record, the prohibitory orders must be rescinded.
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Refund of excess duty paid - rejection of refund on the ground that the Petitioner had not submitted reassessed bill of entries - There is no question of challenging the selfassessed bill of entries - The refund applications are revived.
Indian Laws
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Exemption sought in Paper ‘18’ of Group IV of the final CMA Examination - appellant has not been able to prove that he had sought any exemption - Having not acted with due diligence, appellant cannot be given the benefit of the exemption
Service Tax
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Nature of activity - service or sale - bottling of alcohol liquor on job-work basis - If the bottling amounts to manufacture, the Revenue’s stand that the appellant is providing taxable services to the manufacturer of the rectified spirits cannot be upheld
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Refund of service tax paid erroneously - no service was provided - the refund claim which has been filed within one year after receiving the order or after coming to know about the amalgamation has to be considered to be made within the time prescribed u/s 11B - refund claim cannot be rejected on the ground of period of limitation.
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Supply of cranes and material handling equipment can by no stretch of imagination can be brought within the scope of ‘Support of Service of Business or Commerce’.
Central Excise
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CENVAT Credit - input services - period prior to 01/04/2011 - assessee is eligible for availing credit of Service Tax paid on the Services availed for the purposes of its business activities except the services availed in respect of the club premises
VAT
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A mere receipt of money, may attract liability to income tax, but sales tax could be levied only if there is a transaction of sale; which the Department has not proved in this case. The receipt alone cannot raise a presumption of taxable transaction or a computation of tax evaded.
Case Laws:
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GST
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2018 (12) TMI 844
Classification of services - Rate of GST - Composite supply of works contract - MEP activities (Mechanical, Electrical & Plumbing Works) undertaken by the Applicant - whether taxable at 12% or otherwise? - benefit of Central Tax (Rate) Notification No. 01/2018 dated 25th January 2018 - supplies are in relation to an housing project enjoying Infra status - F No 13/6/2009-INF dated 30th March 2017 of Government of India - compete installation testing and commissioning and satisfactory handing order of substation electrical works, HT & LT cabling works, DG and cabling works, street light and cabling. Held that:- The contract like the one at hand which includes Design, engineering, work laying of RCC Hume pipe/GI pipe etc. for storm waterline and construction of chambers involves more than two taxable supplies in the nature of resources, material and machinery - large number of service receivers of such bundle of services mostly expect plumbing work to be provided as a package in the ordinary course of business. In the light of above observation the plumbing contract constitute a composite supply as defined u/s 2(30) of the GST Act. Works Contract as is essentially a contract of service which may also involve supply of goods in the execution of the contract. It is basically a composite supply of both goods and services. In a general sense, a contract of works, may relate to both immovable and movable property - it can be seen that the term works contract has been restricted to contract for building, construction, fabrication, repair etc. of any immovable property only. The draft contract for plumbing work is a composite supply of works contract as defined in S. 2(119) of the GST Act. The acts to be committed by the applicant cannot be divided into two parts, namely supply of goods and services which are in fact inseparable - thus, the plumbing contract is indivisible works contract pertaining to immovable property within the scope of section 2(119) of the GST Act. Compete installation testing and commissioning and satisfactory handing order of substation electrical works, HT & LT cabling works, DG and cabling works, street light and cabling - Held that:- The applicant would be required to do various acts which includes design, supply, installation and commissioning of substation that is electrical infrastructure. This is also a turnkey project contract like plumbing contract discussed in the earlier part of this ruling - electrical contract which involves supply of taxable goods and services is a composite supply as defined u/ s 2(30) of the GST Act and the said composite supply is works contract as defined u/ 2(119) Of the CST Act. Rate of GST - MEP (Mechanical, Electrical & Plumbing Works) activities by availing the benefit of Central Tax (Rate) Notification No 01/2018 dated 25th January 2018 - taxable at 12% or not? - Held that:- The applicant has not submitted any details / evidence such as agreement entered into with a developer/ builder for the provisions Of MEP services to an affordable housing project. Therefore in the absence of detailed information in relation to housing project it is not possible for this authority to reach at definite conclusion. Ruling:- MEP activities (Mechanical, Electrical & Plumbing Works) undertaken by the applicant falls within the definition of composite supply of works contract as defined under Section 2(119) of CGST Act.
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2018 (12) TMI 843
Levy of CGST/MGST/IGST - fixed fee received by the PIL as a consideration for brewing / manufacturing, packing and supply of Products i.e. alcoholic liquor for human consumption - Scope of supply - service or not? - Held that:- The applicant has entered into an agreement for brewing/manufacturing, packaging and supplying beer only because PIL has surplus manufacturing and licensed capacity at its bottling unit. As per the agreement the applicant would pay to PIL such costs for purchasing the goods mentioned above and therefore they are effectively their own goods. In fact the agreement mentions that PIL shall maintain in force, at all times during the term Of the Agreement, full and complete insurance cover for Products, raw materials and ingredients used in the Manufacture of Products and work in process in relation thereto by nominating Crown as the beneficiary. Since the applicant is paying costs to PIL for purchase of the said goods, there is no supply rendered by them to each other since as per the definition of supply of services. In the GST Law, the taxable event would be SUPPLY. Hence it is the most important part of the GST law, as it will determine the taxability or otherwise under the GST law. The definition of Supply in the CGST Act, is an inclusive one. It is contained in Section 7 of the CGST Act. Apart from Section 7, Schedules I to Ill are provided which explain various provisions related to supply. From the transaction between the applicant and PIL, it is clear that in respect of the costs paid and received there is no supply of goods/ services in the form of sale, transfer, barter, exchange, etc. and therefore there is no requirement to pay GST on such costs paid by the applicant to PIL However in respect of the fixed costs paid by the applicant to PIL, it is very clear that the said fixed costs are paid to PIL because they are providing job work services to the applicant - For these services rendered there is a consideration which flows from the applicant to PIL in the form of fixed costs . The entire services rendered by PIL and the consideration paid by the applicant for receiving such services is in the course of furtherance on business of both, the applicant and PIL. Hence this amount is liable to tax under the GST Laws and such tax is payable by the supplier of service i.e. PIL. What is service in this case the entire gamut of brewing/ manufacturing, packaging and supplying beer by PIL to the applicant, for which they are receiving fixed costs for job work as discussed above. If the applicant had brew/manufactured, packaged and supplied beer on their own account then their activity would not have been liable to tax under the GST laws since the supply of alcoholic liquor for human consumption is not taxable under the GST laws - it is the job work which is a service provided by PIL that is required to be taxed. Ruling:- The taxes have to be discharged by PIL on the fixed fee received and not on costs received. Supply of beer per se is not taxable under GST. What is taxable in the subject case is the job work which is a service provided by PIL to the applicant, for which they are receiving consideration.
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2018 (12) TMI 842
Detention of goods with vehicle - detention on the ground that the petitioner did not upload the Part-B e-way bill - Held that:- The respondent authority is directed to release the petitioner's goods and vehicle on the petitioner's “furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules - petition disposed off.
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2018 (12) TMI 841
Detention of goods - Bank Guarantee - Penalty - Held that:- The issue is decided in the case of KANIYAMPARAMBIL STEELS [2018 (10) TMI 1518 - KERALA HIGH COURT], where it was held that The petitioner has already filed a statutory appeal. It will suffice if this Court recalls its judgment under review and dispose of the writ petition with a direction to the respondent authorities not to encash the Bank guarantee until the statutory appeal is disposed of - petition disposed off.
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2018 (12) TMI 840
Unable to upload FORM GST TRAN-1 - input tax credit - migration to GST regime - Held that:- The petitioner may apply to the ninth respondent, the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame - petition disposed off.
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2018 (12) TMI 839
Validity of assessment order - condonation of delay in filing appeal - Held that:- In modification of the judgment dated 23rd October 2018 it is held that if the petitioner approaches the appellate authority-the fourth respondent-within two weeks from today, he will condone the delay that has occurred in the petitioner's pursuing its remedy before this Court - revision allowed.
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2018 (12) TMI 838
Levy of GST/Service Tax - license fee and application fee called by whatever name for alcoholic liquor for human consumption - Held that:- The challenge to the relevant provisions of law have been rendered moot. The writ petitions are, therefore, disposed of in these terms.
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Income Tax
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2018 (12) TMI 837
TDS u/s 194A - Interest paid to the members without TDS - Co-operative Society engaged in the activities of Co-operative Bank failed to deduct tax at source under the provisions of Section 194A (1) of the Income Tax Act, 1961 from the interest paid to its member over ₹ 10,000/- - Held that:- Special Leave Petitions are dismissed. However, the question of law is left open
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2018 (12) TMI 836
Dis-allowance of bad debts written off u/s 36(1)(vii) - Held that:- In South Indian Bank Ltd. v. CIT [[2018 (12) TMI 682 - KERALA HIGH COURT] already found the issue against the assessee and in favour of the Revenue. This Court had also noticed the decision of the Hon'ble Supreme Court in Southern Technologies Ltd. v. Joint CIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA] wherein the Gujarat High Court decision was reversed. Disallowance of expenditure incurred u/s 14A - Held that:- As decided in ESSAR TELEHOLDINGS LTD. THROUGH ITS MANAGER [2018 (2) TMI 115 - SUPREME COURT OF INDIA] Section 14A would be applicable only from the year 2007-08. In the present appeals arising from the prior years, the dis-allowance made by the AO under Section 14A as affirmed by the Tribunal, has to be set aside. The question is answered in favour of the assessee and against the Revenue. Levy of interest under Section 234B - Held that:- The question has already been answered in favour of the Revenue and against the assessee in South Indian Bank Ltd. v. CIT [2014 (2) TMI 1080 - KERALA HIGH COURT]. Dis-allowance of provision for leave encashment under Section 43B - Held that:- Section 43B spoke of certain deductions only on actual payment. Sub-clause (f) is with respect to any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee. The deduction, hence, is allowable only on actual payment. It is submitted that the Calcutta High Court has struck down the said provision. Admittedly a Special Leave Petition was filed before the Hon'ble Supreme Court and there is also a stay order granted. In such circumstances, the provision applies and this Court has also in a similar case answered the question in favour of the Revenue and against the assessee in South Indian Bank Ltd. v. CIT [2009 (12) TMI 394 - KERALA HIGH COURT]. Dis-allowance of bad debts of non-rural Banks written off under Section 36(1)(vii) - Held that:- In considering the allowance of deduction of actual written off debts under sub-clause (vii) of Section 36(1) with respect to urban bad debts as distinguished from rural bad debts, for which provision is allowable under sub-clause (viia), the same cannot be with reference to the provision under sub-clause (viia). The write off of non-rural bad debts under sub-clause (vii) has been found by the Hon'ble Supreme Court in CATHOLIC SYRIAN BANK LTD. [2012 (2) TMI 262 - SUPREME COURT OF INDIA] to be independent of the provision for rural bad debts made under sub-clause (viia). In such circumstances, the question has to be answered in favour of the assessee and against the Revenue, with only reservation as to examination of whether any provision for non-rural bad debts has been granted deduction in the previous assessment year. If there is a deduction allowed for provision for non-rural bad debts, then necessarily the allowance for write off has to be only that in excess of the deduction granted for the provision. We make it clear that what we have directed the AO to examine is only as to whether there is an allowance granted for provision of non-rural bad debts in the earlier assessment year; without any reference to the rural bad debts, the provision for which has been granted deduction under sub-clause (viia). Addition of amortisation of expenses incurred in connection with the issue of public subscription of shares under Section 35D - whether assessee being not an 'industrial undertaking' - Held that:- this Court would answer the question in favour of the assessee and against the Revenue, finding the appellant-assessee to be eligible for the claim under Section 35D. The actual expenditure, whether it comes within Section 35D(2)(c)(iv) would be left for consideration by the AO. Disallowance of expenses relating to right issue in view of the decision of the Supreme Court in the case of Brooke Bond India Ltd. vs. CIT [1997 (2) TMI 11 - SUPREME COURT] - decided against assessee.
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2018 (12) TMI 835
Rectification application u/s 154 - refuse set off of the loss carried forward - Tribunal's order setting aside the rectification on the ground of change of opinion - period of limitation - Held that:- Admittedly, the assessment of 1985-86 as completed under Section 143(3) remains as such and carry forward is hence permitted. There can be no rectification made for the said assessment year for the limitation having expired. Further, even in the subject assessment years, the limitation under Section 154 has expired. The notice as seen from the appeals and the rectification order was first issued on 04.12.1995. The four year period from the end of the assessment years of 1987-88, 1989-90 and 1990-91 stands expired respectively on 31.03.1992, 31.03.1994 and 31.03.1995. All the proceedings were initiated beyond the four year period. In such circumstances, we refuse to answer the question regarding the change of opinion. We also uphold the order of the Tribunal setting aside the rectification under Section 154 for the subject assessment years. I.T.Appeals are rejected.
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2018 (12) TMI 834
Obligation to seek exemption under Section 12AA - real income accrued to society - 'statutory levy' under the VAT Act, 2005 is being collected by virtue of the powers entrusted by the State Government to the respondent Assessee - surplus of income over expenditure - whether the retention of a part of the VAT collected by the respondent Assessee till the process of determination of its actual expenditure incurred on the collection, followed by deposit of balance surplus amount in the Government Treasury for onward transmission to the State Government, can be treated as the 'real income' in the hands of the respondent Assessee for the purpose of IT Act, 1961? Held that:- Assessee continued to receive ₹ 5/ per Form till May, 2009 out of which Re.1/ was straightaway deposited in the Government Treasury and out of the balance of ₹ 5/ , only the actual expenditure incurred by it on collection process was deducted and the balance amount (80% as assessed by the authorities) was duly deposited in the Government Treasury to be paid to the Excise and Taxation Department of the State Government. In this entire process, the respondent Assessee neither gained anything nor earned any profit. The VAT amount recovered by the respondent Assessee was/is an entrustment of the statutory function of the State which alone is competent to levy VAT under Section 34 of the VAT Act, 2005. The respondent Assessee thus neither created any source of income nor generated any profit or gain out of such source. The Assessee merely performs the statutory functions under the VAT Act, 2005 and collects the tax amount for and on behalf of the State and transfers such collection to the Government Treasury. Even if the tax collection remains temporarily parked with the Assessee for some time, it cannot be treated as 'income' generated by the Assessee as the said amount does not belong to it. The Tribunal has thus rightly concluded that the surplus of income over expenditure, as reflected in the entries or the Returns filed by the respondent Assessee, also belonged to the State Government which was duly deposited in the Government Treasury. Hence, it does not partake the character of 'profit or gain' earned by the respondent Assessee. The non- registration of the respondent Assessee, under Section 12AA of the IT Act, 1961 is inconsequential, for an occasion to seek exemption from payment of tax on the income by a Trust or Institution serving the cause of general public utility would arise only when some actual income is derived. The respondent Assessee though is a 'juristic person' but in the absence of any income having been earned by it through 'profits or gains' within the meaning of Section 2 (24) of the IT Act, 1961, the respondent Assessee is indeed not obliged to seek exemption under Section 12AA of the IT Act, 1961, for it does not have any taxable income. - Decided in favour of assessee.
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2018 (12) TMI 833
Allowable business expenditure - expenditure incurred on the foreign tour of the wife of a Senior Executive of the company, in connection with the medical treatment of the said Executive - Held that:- In the present case, there was no business purpose at all and the Senior Executive was traveling abroad for the purpose of a heart surgery. We are not sure as to whether the expenditure incurred by the Senior Executive was reimbursed and claimed as a deduction. That would definitely be permissible as a medical reimbursement. The dispute, as of now, is only the disallowance of the expenditure incurred for the wife's travel. The wife had accompanied the Senior Executive, when such Senior Executive had traveled abroad for a heart surgery. The wife's presence though imperative, we are unable to find it to be a business expenditure. We do not think that the same can be called a business expenditure and the travel itself is not for a business purpose. - Decided against the assessee
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2018 (12) TMI 832
Validity of reassessment proceedings - assessment time barred and the Revenue have no jurisdiction in the matter - Time limit for notice - assessee was a non-resident - Held that:- The ratio of K.M Sharma [2002 (4) TMI 7 - SUPREME COURT] and S.S. Gadgil [1964 (4) TMI 19 - SUPREME COURT] in the opinion of this court covers the facts of this case. Reassessment for 1998-99 could not be reopened beyond 31.03.2005 in terms of provisions of Section 149 as applicable at the relevant time. The petitioner’s return for assessment year 1998-99 became barred by limitation on 31.03.2005. The question of revival of the period of limitation for reopening assessment for AY 1998-99 by taking recourse to the subsequent amendment made in Section 149 in the year 2012, i.e., more than 8 years after expiration of limitation on 31.03.2005, has been dealt with by the Supreme Court in K.M. Sharma (supra). AO has conceded in the order rejecting the petitioner’s objection that “It is also found that the assessee was a non-resident as contended by him, in the AY 1998-99.” There can be no question about the applicability of the then existing provision- Section 149 (b), which stated that the normal time limit for reopening assessment was four years, “but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.” It has been said that “the government in all its actions is bound by rules fixed and announced beforehand-rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances, and to plan one’s affairs on the basis of this knowledge” (Ref. FA Hayek, “Road to Serfdom”, 1944). In this case, the interpretation proposed by the revenue has the potential of arming its authorities to re-open settled matters, in respect of issues where the citizen could genuinely be sanguine and had no obligation of the kind which the Revenue seeks to impose by the present amendment. All the more significant, is the fact that absent a clear indication, every statute is presumed to be prospective. The revenue had sought to contend that the amendment (to Section 149) is merely procedural and no one has a vested right to procedure; and that procedural amendments can be given effect any time, even in ongoing proceedings. No merit in the revenue’s contention. - Decided in favour of assessee.
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2018 (12) TMI 831
Initiation of special audit of the petitioner/assessee u/s 142(2A) - benefit of Section 80IC - Held that:- The order passed under Section 142 (2A) on 28.03.2013 contains a detailed discussion as to the complexity of the accounts. The profit and loss account, balance sheet and the computation of the income were before the A.O. It cannot be disputed that the profit and loss account and the balance sheet fit the description of “accounts”. The complexity arising out of such accounts is the difficulty in allocating the expenses incurred by the petitioner given the manner in which it chose to supply information to the AO, during the inquiry, in a piecemeal fashion. Nor is the court persuaded to agree with the learned counsel that AS-3 did not apply and that the accounting practise adopted was correct or that it foreclosed inquiry. The linchpin of the assessee’s argument is that the AO’s indolence or inability to exert himself to inquire diligently cannot result in a special audit. Undoubtedly, the AO has a duty to apply his (or her) mind and not fall back upon the provision of special audit in all routine cases. However, when the AO does feel that information is not forthcoming in a timely manner (as appears to have occurred in this case) her choices are limited – to let go of the stage of inquiry, and complete the assessment, or, disallow what is considered appropriate. The AO quite correctly felt that the latter course would not be appropriate; he therefore, ordered special audit, which was quite reasonable, especially in regard to the imprest account for which details of expenses incurred had not been furnished. That amount was sizeable. Also, with respect to the benefit of Section 80IC and the revision of returns, was an aspect which could not have been given a light treatment, but needed inquiry, if the AO felt it to be so. This court is of the opinion that far from the case showing non-application of mind, the AO has carefully outlined what were the salient aspects in the accounts and returns of the assessee that needed to be looked into and made the impugned order directing special audit. The assessee has not alleged any mala fides - writ petition has no merit. Consequently, the interim orders which operated for these last 5 years are vacated. The assessee is directed to co-operate with the Special Auditor. The period during which the interim order operated shall be excluded for the purpose of calculation the period for completion of such special audit.
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2018 (12) TMI 830
Employee on deputation - computation of total salary paid as provided in Section 195A - income tax liability on the salary received by the appellant from the consultant company - whether salary and the tax portions were paid by the foreign consultant Snc-Shawinigan as evidenced by clause 1.9.1 clearly indicated that the tax portion was to be borne by KSEB? - liability to bear the tax burden - Held that:- As decided in HORACE DANSEREAU, TRIVANDRUM VERSUS ASST. COMMISSIONER OF INCOME TAX, CIRCLE I (1)TRIVANDRUM [2017 (12) TMI 1066 - KERALA HIGH COURT] question of law raised has to be answered in favour of the revenue and against the assessee on a different reasoning than that given by the Tribunal. In many of the assessment orders the computation has not been properly made. The Assessing Officer would, hence, employ Section 195A and compute the amounts properly within a period of two months from the date of receipt of the certified copy of this judgment. The assessee are said to have paid up the amounts already. Only if there is a balance due, the same would have to be satisfied by the assessee or its agent - Decided in favour of revenue.
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2018 (12) TMI 829
Scrutiny assessment - remanding of matter by ITAT to the C.I.T. (A) to enable him to pass a speaking and reasoned order - Held that:- We are of the view that, firstly, no substantial question of law arises for consideration in this appeal. Even otherwise, the matter has been remanded for a fresh consideration, on reasons, which we find acceptable. Therefore, we do not find any ground in this appeal. Reliance on the judgment in the case of DELL INTERNATIONAL SERVICES INDIDA (P.) LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX reported in [2016 (5) TMI 114 - KARNATAKA HIGH COURT]] to contend that the Tribunal ought to have arrived at a conclusion rather than remanding the matter further back to the Assessing Officer but the facts narrated therein would indicate that the matter was initially remanded by the High Court to the Tribunal for a fresh consideration, but the Tribunal further remanded the matter back to the Assessing Officer. Therefore, we are of the view that the said judgment would not help the appellant, in any manner. No substantial question of law
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2018 (12) TMI 828
Penalty u/s 271(1)(c) - concealment or furnishing inaccurate particulars, by making a claim for deduction under Section 36(1)(viii) - CIT-A held that the assessee had paid advance tax for the Assessment Year 2003-04, without including and computing benefit of deduction under Section 36(1) (viii) which would indicate and show that the assessee was not entitled to the benefit - Held that:- We do not agree that payment of advance tax would show and establish lack of bonafides. It is not only the assessee bank who had verily believed their entitlement to deduction under clause (viii); even officers of the Central Board of Direct Taxes were of the same opinion. Bonafides, therefore, of the assessee cannot be doubted or debated as advance tax was paid. There is no column of income tax returns whereby the assessee, in case of claim, can call upon Assessing Officer to decide and adjudicate claim for deduction. Provisions of Advance Ruling were not applicable. Therefore, to claim any benefit of any deduction, a claim is required to be made in the return with full particulars and details. Bonafides are accordingly examined with reference to statutory provision, which is required to be interpreted, and whether interpretation placed by assessee was plausible and could have been accepted. Where the explanation is not make belief and sham but genuine, the assessee would satisfy the requirement of Explanation 1 to Section 271(1)(c). This test and requirement is satisfied in the present case. Further, full and complete facts were clearly stated in the income tax returns. In our opinion, the assessee had acted bonafidely and were under a genuine belief that they were entitled to benefit of the said deduction - Decided against revenue
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2018 (12) TMI 827
Delayed employee contribution of PF/ESI - Held that:- Admittedly the said employee contribution of PF/ESI was deposited before the due date of filing of return of income u/s 139(1) of the 1961 Act. Thus, keeping in view decision of Hon’ble Bombay High Court in the case of CIT v. Ghatge Patil Transports Limited [2014 (10) TMI 402 - BOMBAY HIGH COURT] we allow this claim of the assessee. TDS u/s 194J - disallowance of professional fee paid as TDS not deposited by the assessee - Held that:- It is not clear that who were the payees to whom the assessee had made payment of ₹ 23,340/- on which income-tax was deducted at source u/s 194J. It is equally not available on record , the break-up payee wise of total professional fees paid by the assessee of ₹ 62,250/- and whether provisions of section 194J are hit or not as if the same payee is paid above threshold limit in aggregate in a year, the provisions of Section 194J read with Section 40(a)(ia) of the 1961 Act got hit. Thus, under these circumstances we are inclined to restore this issue back to the file of the AO and the assessee has to demonstrate the factual matrix on merits to take it out of clutches of provisions of Section 194J. The AO shall adjudicate this issue afresh on merits. Addition u/s 43B - Non-payment of services tax as claimed was paid after the due date of filing of return of income u/s 139(1), which fell on 30th September 2012 - Held that:- The assessee fairly admitted before us that this disallowance is to be upheld, keeping in view that there is an infringement of Section 43B as admitted by the assessee in paying the service tax late beyond the due date of filing of return of income as prescribed u/s 139(1) , we uphold the aforesaid disallowance. Addition of labour payments - Held that:- AO disbelieved the contentions of the assessee that it physically carried huge cash from Maharashtra to Jharsuguda, Orissa for making payments to labour , but the facts also remains that the assessee has got contract from Vedanta Aluminium Ltd. industrial unit at Jharsuguda (Orissa) for which it is stated by the assessee that it engaged local labour and its turnover increased - AO on its part only disallowed 30% of labour payments while rest stood allowed despite the fact that the AO doubted genuineness of these labour payments. The assessee has also claimed that its turnover had increased but profit ratio fell in this year comparative to preceding year - the assessee deserve one more opportunity as the appellate order of the learned CIT(A) was also an ex-parte order , for whatever reasons the assessee could not avail an opportunity to explain its case before learned CIT(A) - restoring this matter back to the file of the AO for fresh adjudication - Appeal of the assessee is partly allowed
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2018 (12) TMI 826
Initiation of proceedings u/s 153A - addition u/s 68 - Held that:- In assessee’s case under consideration, on the date of search, no assessment for these three years (that is, assessment years 200910, 201011 and 201112) were pending. The issue of share capital was before the AO during the original assessment proceedings and in original assessment proceedings under section 143(3)/143(1), the assessing officer examined the issue relating to share capital/share premium. Assessment u/s 153A was made by assessing officer after search and no any incriminating documents/papers seized during the search operation, therefore, without incriminating material the addition should not be made. Therefore, keeping in view the ratio decided by the Hon’ble Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] since there is no incriminating material unearthed during search in respect of the concluded assessments, no addition/disallowance could be made by the AO for AYs 2009-10, 2010-11, 2011-12 - Decided in favour of assessee.
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2018 (12) TMI 825
Carry forward of either the current year loss or that of earlier year loss denied to assessee trust - assessee satisfies the condition for exemption u/s. 11 and 12 - AO was of the view the loss suffered during the year was on account of capital expenditure and therefore loss cannot allowed to be carried forward - Held that:- Respectfully following the Coordinate Bench order of the Tribunal in assessee’s own case passed in assessment year 2008-09 AND SUBROS EDUCATIONAL SOCIETY [2018 (4) TMI 1622 - SUPREME COURT OF INDIA] which is identical to the facts of the instant case, hence, we quash the orders of the lower authorities and allow the carried forward of current year’s loss to be set off in the future years. It is ordered accordingly. - Decided in favour of assessee.
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2018 (12) TMI 824
Penalty u/s 271(1)(c) - disallowance being the amount of interest on account of diversion of the fund - Held that:- Regarding the loan taken from magma leasing Ltd for the purchase of machinery ₹ 45,09,000/- we note that there was no interest paid by the assessee in the year under consideration. The assessee has received a sum of ₹ 45,09,000/- from M/s Shri OSHIYA Engineering company as evident from the copy of the ledger placed on page 52 of the paper book. The amount received was deposited in the syndicate bank account (SOD) and Indian Overseas Bank of the assessee as evident from the bank book placed on pages 53 to 57 of the paper book. Such deposits have resulted in the reduction of the loan amount from the Syndicate Bank and Indian Overseas Bank - the assessee subsequently has Squared up the account of Shri OSHIYA Engineering company with the amount of loan taken from magma leasing Ltd. All these accounting adjustments show that the amount of loan taken by the assessee from magma leasing company Ltd for the purchase of machinery was ultimately utilized for the purpose of the business. - no disallowance can be made Treating the amount of ₹ 3,39,456/- as undisclosed income of the assessee - Held that:- On perusal of the ledger of the assessee in the books of the V Arks Engineers private Ltd we note that the assessee has raised invoices for ₹ 16,09,044/- which evidences that the assessee has worked for V arks Engineers private Ltd for ₹ 16,09,044/- in the year under consideration. The copies of ledgers are placed on pages 69 to 73 of the paper book. Therefore we do not find any infirmity in the order of the Ld. CIT(A). Hence the ground of appeal of the assessee is dismissed. Regarding the penalty appeal, at the outset, we note that there was no representation made by the assessee on merit. Therefore we are of the view that the matter should be restored back to the file of AO in the interests of justice and fair play. Accordingly we remit the issue to the file of AO with the direction to adjudicate the issue of fresh in the light of the order of this Tribunal in relation to the quantum appeal of the assessee. Hence the ground of appeal of the assessee is allowed for statistical purposes.
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2018 (12) TMI 823
Penalty u/s 271(1)(c) - non filing the return of income and non-payment of the taxes due to the government - Jurisdiction for revision u/s 263 also invoked - Held that:- The assessee is in the habit of not filing the return of income and non-payment of the taxes due to the government. Since the assessee has not filed the return of income though it has taxable income, the AO ought to have initiated the penalty proceedings for concealment of income. Since the AO did not initiate the penalty proceedings, the Ld.Pr.CIT has taken up the case for revision u/s 263 and held that non initiation of penalty proceedings, which ought to have been initiated during the assessment proceedings as erroneous and prejudicial to the interest of the revenue. CIT has considered the amended provisions of section 271 w.e.f. 01.06.2002, the provision u/s 263 and rejected the rejected the objections of the Ld.AR challenging the jurisdiction of the Ld.Pr.CIT for giving directions to initiate the penalty u/s 271(1)(c). The issue with regard to initiation of penalty proceedings by the CIT and directions of the Ld.Pr.CIT to AO to initiate the penalty proceedings was considered by this Tribunal in the case of U.V.Ramanamurthy Raju [2017 (8) TMI 475 - ITAT VISAKHAPATNAM] and held that the Pr.CIT is empowered to initiate the penalty proceedings and also empowered to direct the AO to initiate the penalty proceedings u/s 271(1)(c) r.w.s 263 of the Act in revision proceedings u/s 263. - Decided against assessee.
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2018 (12) TMI 822
Disallowance of deduction u/s 54F - whether deduction under s.54F is available in respect of capital gains arising from sale of more than one long term capital assets, not being residential house (original asset) against the construction or purchase of one residential house (new asset)? - whether capital gains of multiple years can be claimed against purchase/construction of same new residential house i.e. new asset subject to fulfillment of other conditions? - Held that:- The identical issue of allowability of Section 54F of the Act on sale of multiple assets came up for consideration before the co-ordinate bench in the past. Useful reference can be made to Anagha Ajit Panekar[2006 (6) TMI 256 - ITAT MUMBAI]; Krishnadevi Kejriwal [2010 (6) TMI 769 - ITAT MUMBAI] and ACIT vs. Mahindrakumar Jain [2017 (8) TMI 480 - ITAT DELHI] as quoted in the appellate order of CIT(A). The object of Section 54F is to encourage an assessee to convert any of his long term assets into a residential house subject to the condition that assessee does not own more than one residential house other than the new residential house on the date of transfer of long term asset. The Section, thus, in essence, offers some incentives to a tax payer to change its unproductive assets into a residential house. The action of the assessee is thus in conformity with the object and purpose of Section 54F of the Act. To say that the assessee is entitled for deduction in respect of capital gains arising from sale of only one long term capital asset and conversion thereof in residential property would in effect seriously limit the object and purpose of Section 54F of the Act. If the interpretation of ‘any long term asset’ as suggested by Revenue is read to mean deduction in respect of only one transaction of transfer is endorsed, it will seriously curtail the application of Section 54F of the Act. Such interpretation would lead to absurd results and requires to be shunned. Significantly, we also notice the use of broader expression ‘any’ long term asset in distinction to expression ‘a’ long term asset as used in Section 10(38) of the Act. Thus, the legislative intent when gathered from the distinct language used, it is clear that a narrower interpretation would fail to achieve manifest purpose of the deduction provision. We thus, prefer to avoid a construction which would reduce the legislation to futility and grant broader construction to bring effective result on availability of such deduction. As a corollary, the decision of the co-ordinate bench in favour of the assessee is, in effect, harmonious interpretation of Section 54F of the Act and not necessarily a liberal interpretation of the deduction provision. We are thus of the view that the decision of the Hon’ble Supreme Court in Diipkumar & Co. [2018 (7) TMI 1826 - SUPREME COURT OF INDIA] does not hinder the claim of assessee. - Decided against revenue
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2018 (12) TMI 821
MAT computation - adjustment of book profit for working out MAT tax and the resultant profit on sale of assets - capital gains on sale of asset - Held that:- The capital gains on sale of asset resulted into Nil income. Therefore, even applying the case law in the case of Veekaylal Investment Co.(P) Ltd.[2001 (2) TMI 117 - BOMBAY HIGH COURT] the assessee is entitled for relief. In the instant case there was no profit in the ordinary course of business and the profit derived by the assessee was on account of sale of asset which was a capital profit. The assessee has not shifted the business profits to the balance sheet. The capital gains on sale of asset as per section 45 results in to loss but not the positive income. Therefore the facts of the assessee’s case are identical to the decision of Bombay high court in the case of Bhagwan Industries Ltd, [2017 (8) TMI 32 - BOMBAY HIGH COURT] and the said case is squarely applicable in the assessee’s case. The lower authorities committed an error in making adjustment to the book profit and the same deserves to be deleted. The next contention of the assessee is that SICA was exempt from the provisions of section 115JB of the Act. In the instant case, there is no dispute that the assessee company’s net worth was negative and the assessee satisfied the condition to hold the company as sick industrial company. Though the SICA was repealed w.e.f. 2003, the provision was not removed from the Income Tax Act. On the similar facts, the Coordinate Bench in B.V. REDDY TRANSPORTS PVT. LTD. VERSUS ASST. COMMISSIONER OF INCOME TAX [2018 (6) TMI 281 - ITAT HYDERABAD] decided the issue in favour of the assessee - there is no case for making adjustment s u/s 115JB of the act and the assessee is entitled for relief - Decided in favour of assessee
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2018 (12) TMI 820
Undisclosed profits from the payments received from HPC - accrual of income - receipt in the nature of advance - accounting treatment - Held that:- The advance amount so received by HAN from HPC was to be refunded in case the land acquisition doesn't materialize in time bound manner. Post the execution of the above amended MOA, the very premise of the AO i.e the amount received is non-refundable has ceased to exist. Further proof for the above comes in the future transactions entered into by the assessee with HPC. The assessee has already refunded an amount of ₹ 5.13 crores to HPC as on date. The same has been verified by the ledger account of HPC in the books of the assessee and the confirmation given by HDFC bank which reflects the payments made by the assessee to HPC. On the basis of above, the question of refundability or otherwise becomes immaterial and the said advance cannot be treated as income in the hands of the assessee. Assessee fails to perform the future services with respect to acquiring land, conducting a land survey and providing Title certificate' all the services performed in the past would be rendered futile and the assessee would be required to refund the advance received owing to its inability to provide the services agreed upon. For income to accrue to the assessee, the transaction should have been materialized. Since, there is no accrual the consideration received shall be treated as advance and not as an income item. Thus, the original Memorandum of agreement alongwith new deed of amendment dated 15/03/2012 establishes in clear and unambiguous terms that the amount received by the assessee was as “advance” and was refundable in case the objectives were not met. Further as per Clause 2 of MOA, it is evident that the “acquisition of land” was the essence of the agreement entered into as MoA. Once the same is established, it flows that the amount received cannot be bifurcated between the “past services” and “future services”. The land as envisaged as available by both the parties to MoA never became available due to the stiff opposition to the proposed power plant. To confirm the position from the perspective of opposite party HPC, a confirmation was received from the said party. The said confirmation also supports the position that the MoA was entered with the objective of land acquisition which never materialized. CIT(A) has dealt with the issue threadbare after meeting with all the observation of the AO with regard to the nature of advance and after recording detailed finding reached to the conclusion that amount so received was in the nature of advance not liable to tax during the year under consideration. - Decided against revenue
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2018 (12) TMI 819
Section 10B deduction - Holding assessee’s duty drawback and interest subsidy eligible for sec. 10B - Held that:- Hon'ble apex court’s recent decision in CIT vs. Meghalaya Steels Ltd [2016 (3) TMI 375 - SUPREME COURT] has settled the law about the similar kind of interest subsidy reducing revenue expenditure as eligible for sec. 80I deduction. Be that as it may, learned co-ordinate bench has declined Revenue’s similar arguments in preceding paragraph. We therefore adopt the said reasoning mutatis mutandis affirm the CIT(A)’s findings under challenge in holding assessee’s duty drawback and interest subsidy to be eligible for sec. 10B. Disallowance of other income while computing the deduction u/s 10B - Held that:- as rightly pointed out by the ld AR that section 10B(1) of the Act starts with the expression ‘subject to the provisions of this section’. The provisions of section 10B(4) of the Act which stipulates the computation mechanism clearly states that the entire profits of the business of the eligible undertaking should be taken into account for computing the amount eligible for section 10B of the Act.
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2018 (12) TMI 818
Bogus purchases - estimation of profit - Held that:- CIT(A) has confirmed the profit rate at the rate of 12.5%, which according to me is on higher side going by the nature of business of the assessee i.e. Pipes and Pipe Fittings. We are in full agreement with the contentions raised by the assessee before CIT(A) and according to me a profit rate of 12.5% is on higher side as assessee has also paid the VAT element on these bogus purchases, a further deduction in estimation of profit to the extent of 4.5% can be allowed. Hence, direct the AO to recompute the income after applying profit rate at the rate of 8% and compute the income accordingly. The appeal of the assessee is partly allowed.
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2018 (12) TMI 817
Levy of penalty u/s 271(1)(c) - assessee has been notified the date of hearing twice by Registered Post. However, none appeared on behalf of the assessee - Held that:- It appears that assessee is no more interested in prosecuting the appeal. The appeal of assessee is, therefore, liable to be dismissed. See MULTIPLAN INDIA (PRIVATE) LIMITED. [1991 (5) TMI 120 - ITAT DELHI-D]
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2018 (12) TMI 816
Addition on share premium treating the same as unexplained u/s 68 - nature & source of the share application received was fully explained by the assessee - Held that:- In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO’s record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified - no addition was warranted under Section 68 - Decided in favour of assessee Addition of bogus purchases - ddition at 4% of the bogus purchases - Held that:- We find that the CIT(A) has rightly applied the profit rate at the rate of 4% and we confirm the same. This issue of assessee’s appeal is dismissed.
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2018 (12) TMI 815
Disallowance of alleged bogus the purchases - CIT-A retained to the extent of 14.84% i.e. to the extent of GP - Held that:- The sales turnover achieved by the assessee has not been disputed by the revenue and the payments to suppliers were through banking channels. The assessee was in possession of primary purchases documents. The survey proceedings casted serious doubts on the purchases transactions being carried out by the assessee. The key personnel, during survey proceedings, admitted discrepancies in the purchase transactions. The notices u/s 133(6) issued to all the suppliers elicited no response and the spot verification revealed that none of the supplier existed at the given address. All these factors cast serious doubts on assessee’s claim. Both the lower authorities, in our opinion, clinched the issue in the proper perspective and proceeded to make estimation against the same. Considering the nature of assessee’s business, the estimation, in our opinion, was on the higher side. Upon perusal of appellate orders for AYs 2009-10 & 2010-11 in assessee’s own case, we find that the Ld. first appellate authority has adopted a uniform rate of 7% while estimating such additions for all the group concerns. Keeping in view the same, we reduce the estimated additions to 7% of alleged bogus purchases.
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2018 (12) TMI 814
Addition u/s 40A(3) - cash payment for freight charges paid to clearing and forwarding against for clearing our goods for exports - Held that:- In the instant case the assessee has made payment to its clearing and forwarding agent mostly through banking channel except in few instances where the payment was made in cash. The payment made by the assessee through banking channel was accepted by the AO but the same payment made to the same party in cash was disallowed under the provision of section 40A(3) of the Act. From the above facts there remains no ambiguity that the payment/expenses were not doubtful and these were incurred exclusively for the purpose of the business. The party to whom the payment was made in cash was a genuine party. In such circumstances we note that the Hon’ble ITAT, Ahmadabad in the case of M/s. Shiv Krupa Tin Containers v/s ITO [2016 (9) TMI 445 - ITAT AHMEDABAD]allowed the deduction to the assessee - disallowances u/s 40A(3) of the Act, cannot be made if the genuineness of the transaction has not been doubted by the authorities below - we direct the AO to delete the addition made u/s 40A(3) - Decided in favour of assessee.
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2018 (12) TMI 813
Weighted deduction u/s 35(2AB) - clinical trials conducted outside the ‘in-house R & D facility’ - deduction disallowed by A.O. on the reason that the same was not certified by Prescribed Authority (DSIR) in Form 3CL - Held that:- We find that similar issue came up for consideration before the coordinate bench of this Tribunal in assessee’s own case for AYs 2011 -12 and 2012- 13 By very nature, the Clinical Trials cannot alone be done within research facility as they require cooperation from the Medical Doctors, Hospitals, Volunteers and patients, therefore such expenditure has to be necessarily spent outside the facility, but for the purpose of ‘in -house’ research - decided against revenue.
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2018 (12) TMI 812
Condonation of delay - Reasons for delay - Approval u/s 10(23C)(iv) rejected - Held that:- The appellant society has been negligent in filing the appeal before this Tribunal. Reasons for delay are general and vague and simply it has been stated that when the order of the CIT (E) was received, the same was mailed to the counsel. However, who was the counsel and when did the order was mailed to the counsel has not been mentioned. All the reasons are vague and general reasons. Even there was no application moved for condonation of delay along with the appeal. The present application for condonation of delay has been moved only after the Registry show caused the assessee vide letter dated 21.8.2017 and even the reasons mentioned for condonation of delay are seemed to be an afterthought. It is a clear cut case of gross negligence and inaction on the part of the assessee. The aforesaid plea taken by the assessee, in our view, does not constitute a reasonable cause for condonation of delay. - Decided against assessee.
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2018 (12) TMI 811
Levy of penalty u/s 271(1)(c) - Addition made of unsecured loans taken by the assessee, the genuineness of which remained unproved - no documents proving the genuineness of the said loans was filed by the assessee - addition u/s 68 - admission of additional evidence - Held that:- Additional evidences now filed by the assessee, we hold, cannot be rejected for admission simply following the order of the ITAT in quantum proceedings in this regard, holding them to be wholly irrelevant for the purpose of determining whether the assessee had concealed/furnished inaccurate particulars of income so as to levy penalty u/s 271(1)(c). The said evidences do show that the transactions took place through banking channels, that the loans were repaid also in later years, that interest was also paid on the same and TDS was deducted by the Government also. The assessee had also filed confirmations from four parties which had not been filed to the I.T.A.T. in quantum proceedings. The aforesaid documents therefore throw some light on the fact that loans had been taken by the assessee, though they may not be sufficient enough to conclusively prove the genuineness of the transactions. Unsecured loans shown to be taken by the assessee cannot be categorically held to be a bogus transaction, though it may be sufficient for making addition u/s 68. The documents therefore are relevant for the purpose of determining whether the assessee had concealed /furnished any inaccurate particulars of income, for the levy of penalty - decided in favour of assessee.
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2018 (12) TMI 810
Revision u/s 263 - deduction u/s 80IA(4)(i)denied - whether the AO has examined the relevant facts during the assessment proceedings u/s 143(3)Held that:- As decided in the case of CIT v. Sunbeam Auto Ltd. [2009 (9) TMI 633 - DELHI HIGH COURT] if there is some inquiry by the AO in the original proceedings even if inadequate that cannot clothe the Commissioner with jurisdiction under Section 263 of the Act merely because he can form another opinion. It was emphasized here that the notice and questionnaire given to the assessee which were duly replied, were evidence of full and due inquiry about this expenditure We hold that the order of the AO cannot be held erroneous in so far prejudicial to the interest of the revenue merely on the ground that the AO has not verified/examine the facts properly during the assessment proceedings. It is noticed that the necessary verification was duly carried out by the AO during the assessment proceedings as discussed above. The assessee before us has filed a letter from the Govt. of Andhra Pradesh dated 06-06-2018 clarifying the agreement between Netafim ACS & India Ltd. as discussed above. It is a fact that this clarification by way of letter was not available at the time of original assessment proceedings u/s 143(3) of the Act. The clarification being additional document filed by the ld. Counsel for the assessee needs to be examined/verified by the AO in order to establish the veracity of the same. Therefore, we are restoring back the issue to the file of the AO for the limited purpose of carrying out the verification/ examination of the letter filed by the assessee written by the State Govt. of Andhra Pradesh and adjudicate the issue afresh in accordance to the provisions of law. - Decided in favour of assessee for statistical purposes.
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2018 (12) TMI 809
Disallowance of bad debts u/s 36(1)(vii) r.w.s 36(2) - Held that:- No doubt, the assessee claimed write off as bed debt but it is equally true that the assessee did explain the sequence of events which prompted it for the said write off. There is no denying that the assessee does not fulfill the conditions mandated in section 36(2) r.w.s 36(1)(vii). It is equally true that the loss of security deposit is business loss in the revenue field because the said security deposit was given in the ordinary course of business of the assessee and since the assessee had to shift the business premises on the wake of the fire, the write off became imminent because the landlord declined to refund the security deposit. The write off has to be considered in the light of provisions of section 28 r.w..s 37 of the Act. We, accordingly, set aside the findings of the CIT(A) and direct the AO to delete the disallowance - Decided in favour of assessee
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2018 (12) TMI 808
Reopening of assessment - addition u/s 68 - assessee was beneficiary of accommodation entries - non independent application of mind by AO - borrowed satisfaction - Held that:- In the instant case none of the companies from whom the assessee company has received share capital/share premium are mentioned in the statement of Shri Rajesh Kumar Aggarwal, therefore, it is a clear case of no independent application of mind by the Assessing Officer to the tangible material and the reasons failed to demonstrate live link between tangible material and formation of reasons to believe that income has escaped assessment. The satisfaction recorded by the Assessing Officer is at best a reproduction of the conclusion of the investigation wing report and is a borrowed satisfaction. The Hon’ble Delhi High Court in the case of RMG Polyvinyl (I) Ltd. [2017 (7) TMI 371 - DELHI HIGH COURT] has held that where information was received from Investigation Wind that assessee was beneficiary of accommodation entries but not further enquiry was undertaken by the Assessing Officer, said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified. - Decided in favour of assessee.
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2018 (12) TMI 807
Unexplained cash found deposited in the bank account of assessee - Held that:- CIT-A has passed a cryptic order merely stating that the evidences filed by the assessee were not sufficient to explain the large cash deposits made by the assessee without pointing out the insufficiency in the evidences filed. The assessee had demonstrated that he was earning salary alongwith his wife amounting in all to ₹ 2,26,680/- and ₹ 2,23,200/- respectively which had been substantiated by way of salary certificate filed. The assessee had also stated that he was earning lease income from the agricultural land which was in the name of the father of the assessee but who had given the assessee the responsibility of collecting revenue earned from the same. Evidences substantiating the ownership of the land by the father were also filed. The documents evidencing leasing out of the agricultural land was also filed. None of the above documents have been controverted, nor any infirmity found in the same by the CIT(Appeals). In fact, we find that the CIT(Appeals) has not even taken the pain to go through them and has without any basis at all dismissed the above sources as attributable to the cash deposits. Moreover, we also find that the assessee had also filed a cash flow statement explaining the source of various cash deposits in the bank. CIT(Appeals) has erred, therefore, in stating that no cash flow statement was filed by the assessee - Decided in favour of assessee.
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2018 (12) TMI 806
Denying the claim of benefit of deduction u/s. 80IA - assessee is not doing the development work but is only doing the contract - Held that:- The assessee is doing the activity of development of an infrastructure facility as provided under section 80IA(4). The project is a Turnkey project and it cannot form nor have a character of a works contract. Works contract would be applicable to the repairs and maintenance of an existing project. Works contract cannot be in relation to the development of a new project. One of the arguments raised by the learned Sr.DR that the intention of the substitution of the Explanation after sub clause (13) of section 80IA was to deny, the benefit of deduction u/s. 80IA(4) in respect of works contract, but to provide the deduction to such undertakings, which is doing the business of building, operating and Transfer (BOT) and building owning, operating and transfer BOOT as also PPP contracts does not hold water in so far as an irrigation project can never function under BOT or BOOT or PPP . In the circumstances, we are of the view that the assessee’s claim is not hit by the substituted Explanation as provided after sub clause(13) of section 80IA.. The issue raised that assessee is not doing the development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges thereof. Development encompasses within itself contract work. The agreement between the assessee and the customer being the government is for the development of the infrastructure facility being roads and rail systems and bridges by participating in the tenders. Under these circumstances, granting the assessee the benefit of deduction u/s. 801A(4) to be confirmed - Decided in favour of assessee.
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Customs
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2018 (12) TMI 804
Mis-declaration of value of export goods - rejection of valuation - attachment / seizure order - Held that:- The exports were made in the year 2015. Nearly four years have been passed since then. The department has so far not produced any material prima facie suggesting that there is likelihood of demand for recovery of money from the petitioner. Learned counsel for the department also pointed out that the show-cause notice was issued without prejudice to the penal action which may be taken later on - We are neither preventing the department from further investigation into the petitioner's past export and if found necessary, to issue show-cause notice in that respect nor are we preventing the department from taking any further action with respect to the later exports, if otherwise available under the law. At this stage, however, there being no further material on record, the prohibitory orders must be rescinded. The attachment of the petitioner's six bank accounts is set aside. Refund of amount deposited under protest - Held that:- Whether the said amount was deposited under protest or voluntarily, the department cannot appropriate the same unless a legal demand is crystallized against the assessee. Admittedly, no such demand has been raise - we would direct the respondents to refund such amount to the petitioner, however, by imposing a condition of providing bank guarantee of matching amount to safeguard the interest of the department if any such demand arises in future. Petition disposed off.
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2018 (12) TMI 803
Anti-Dumping Duty - applicability of lower rate of ADD - whether any injury exists and if so, its margin, involves (through Rule 11 of the Annexure to the Anti-Dumping Rules and other provisions under such rules) examination of “the causal relationship between the dumped imports and the injury to the domestic industry”? Held that:- In the present case, the corporate structure of the petitioner companies was such that four companies were part of the Inovyn group. During the investigation, there appears to have been a proposal of restructuring. However, the then existing companies (of which the petitioner claims to be successors) did not disclose this; perhaps correctly so, because the proposal had not been approved by the European Union. However, when that did happen, the EU stipulated that a third party entity had to be part of the holding JV arrangement. This resulted in the entry of Solvay- a complicating factor for the petitioner, because Solvay had stayed out of the investigation and therefore was subjected to the residual, higher rate of duty (rather than the considerably lower anti-dumping duty rate imposed on the petitioner’s predecessors). The petitioner had to approach this court, because on the previous occasion the DA felt that since the relevant facts were investigated at the determination of injury margin stage, it had become functus officio. The court therefore, directed the examination of the relevant facts and also stated that if indeed Solvay had exited from the JV, the DA could consider granting the petitioner’s request. The DA has re-examined the petitioner’s contentions and concluded yet again that the amendment sought is unfeasible. The petitioners, naturally cry foul and attack that order as arbitrary and contrary to the previous order of this court. The two step corporate reorganization of the petitioner companies did not entail only name change or inconsequential changes in shareholding. The petitioner’s entities were transformed and placed under the control of different groups. Given that the nature of inquiry by the DA was not superficial but application of mind with respect to a web of details, that authority was justified in holding that the relief- of change in the notification to enable the petitioners to claim benefit of lower rate of anti dumping duty, was not capable of being granted. Petition dismissed.
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2018 (12) TMI 802
Refund of excess duty paid - rejection of refund on the ground that the Petitioner had not submitted reassessed bill of entries on the basis of which the Petitioner was claiming the refund - Section 27 of the Customs Act, 1962 - Held that:- In consonance with amendments, defination of term assessment conferred in Section 2(2) of the Act has also been suitably modified. Prior to amendments of 8th April, 2011 term assessment was defined as so include provisional assessment, reassessment and any order of assessment in which duty assessed is nil. Post amendments of 8th April, 2011 term assessment includes self assessment also. Instead of referring to claim of refund of duty or interest paid in pursuance of the order of assessment or borne by him, the amended Section 27 merely refers to the claim of refund of duty or interest paid or borne by the refund claimant. Thus, earlier reference to the refund of duty or interest paid pursuant to an order of assessment is now deleted. This would be in consonance with the changed procedure for clearance of imported goods as contained in Section 17 of the Act. There is no question of challenging the self assessed bill of entries. The Department has cited as many as 10 defects in the refund application. - Once the Petitioner replied to such communication in detail, in subsequent communications the authority confined his objection only to the question of the assessment not having been revised or set aside. Thus, all other objections of not supplying documents or details were waived or can be seen to have been satisfied through correspondence. Section 149 of the Act provides that a proper officer may at his discretion authorize a document after it is presented in the Custom House to be amended. Proviso to Section 149 clearly lays down that no amendment of bill of entry shall be authorized to be amended after imported goods have been cleared for home consumption. Thus, the opportunity to have the bill of entry amended in terms of Section 149 of the Act, was simply not available to the Petitioner. Unjust enrichment - Held that:- When there is no clarity in the order itself, whether the Competent Authority has accepted the Petitioner's evidence as to establishing the fact that the duty element has not been passed to any other person, we would like to tread cautiously. The sole objection contained in the impugned orders for rejection of the Petitioner's refund claims is overruled. The refund applications are revived - petition disposed off.
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2018 (12) TMI 801
Smuggling - contraband item - Heron - acquittal of offence - NDPS Act - Held that:- The appellant is entitled to acquittal on both the accounts urged by Ms.Sidhu, i.e., because PW-1 was complainant as well as I/O, and because the public witnesses, who had supposedly been co-opted during investigation, had been dropped by the prosecution, after citing them as witnesses in their support. I do not intend, therefore, to enter into any other intricacies of the submissions advanced by learned counsel. The present case stand completely vitiated even by the sole reason of the fact that PW-1 Anju Singh was IO, as well as complainant. The appellant in the present case, by authoritative pronouncements of the Supreme Court as well as this Court, the appellant is entitled, on the basis thereof, to acquittal, of the charges against her. The appellant is acquitted of the charges against her - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 800
Applicability of N/N. 30 of 2004 as amended by N/N. 34 of 2015 and 37 of 2015 - time limitation - Held that:- Hon’ble Tribunal dismissed several appeals of the Revenue on 27.11.2017 and 21.03.2018 against the respondent by following the previous orders of the Tribunal - No appeal has been preferred against the above two orders and limitation period has expired. The orders have attained finality. There is no reason to interfere with the impugned order and accordingly, the same is sustained - appeal dismissed - decided against Revenue.
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2018 (12) TMI 799
Refund claim - Reduction of freight - refund rejected solely on the argument that the appellants had resorted to self-assessment procedure for payment of Customs Duty on imported Rock Phosphate and the impugned Bills of Entry including the declaration made there in respect of such goods - appellant have not challenged the same - Held that:- Tribunal in the case of Commissioner of Customs (Export) New Delhi Vs. Lalit Kumar [2017 (1) TMI 7 - CESTAT NEW DELHI] has held that since the Bill of Entry was assessed by the Customs Department and the assessed duty was paid by the respondent, it cannot be said that the duty was paid by the respondent in pursuance of an order of assessment. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 798
Valuation of imported goods - consignment of jute backed polypropylene carpet from Indonesia - rejection of transaction value - enhancement based upon the report received after overseas enquiry report forwarded to the DRI after the detailed investigation - Held that:- The Bill of Lading No. and invoice No. are same but the Customs Tariff Heading and the quantity is different. The Revenue has not taken any further clarification regarding the mismatch from the Indonesian authority, who have supplied the same and straightway applied the same with the consignment of imported goods. The adjudicating authority has not got this further clarified as to why there is a difference in classification as well as in the quantity of the consignment imported. Merely on this basis, the valuation for the imported carpet cannot be enhanced. The valuation of consignment is required to be done as per the provisions of Section 14 of the Customs Act, read with the Customs Valuation Rules. The Department should have tried to obtain the price for the contemporaneous import and admitted to enhance the value, if found correct. It is also a fact that in respect of 13 Bills of Entry which was finally assessed and the clearance was effected, the Department tried to enhance the price based on the data received from overseas sources as well as from the two Bills of Entry imported by the appellants. It is the contention of the Department that the price of the similar goods should therefore had been applicable in all the past cases as well. It is a common knowledge that the jute backing polypropylene carpet are of the different types and quality may be superior or inferior and therefore without the sample being analyzed by the competent authority, it cannot be concluded that the goods are same or similar quality for want of specific information. Having not followed the procedure under Section 14(1) and 14 (1A) read with Customs Valuation Rules by the Adjudicating Authority and rejecting the transaction value without the contemporaneous price, the demand confirmed by the adjudicating authority in the impugned order is not sustainable - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 797
Penalty - DEPB Scheme - duty drawback - it was alleged that the appellant company availed Export incentive mis-declaring the same as of Indian Origin in the export documents - Held that:- The appellant company exported FeSi during the period from 2008-09 to 2012-13 against 18 Consignments and availed export incentive in the form of Duty Entitled Pass Book (DEPB)/ Duty Draw Back (DBK). It has also availed in some cases, incentive under Focus Marketing Scheme (FMS) in addition to DEPB/DBK against the export consignment. It was found that the exported FeSi, against which DEPB and FMS was availed, was procured from Traders/ Suppliers of Local Market in India. Once the issue referred to DGFT for cancellation of DEPB/FMS Scrips and the adjudication order passed by DGFT had imposed fiscal penalty only, without cancelling the said Scrips and hence, credits allowed cannot be denied. Further, Customs had no authority to take any parallel action under different law making the case a double jeopardy - Goods were not available for seizure and no specific evidence could be adduced to justify mis-declaration and hence, penalty is not imposable. Taking into consideration of the fact that the DGFT authorities had already imposed penalty upon the appellant, the penalty imposed on the appellant company is not warranted. Further, after going through the statements and the conduct of the appellant no. 2 in so far as they have returned the incentive immediately, the penalty imposed under Section 114 (iii) on the appellant no. 2 needs to be waived. Penalty set aside - appeal disposed off.
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2018 (12) TMI 796
Misappropriation of government revenue (import duty) - Demand raised against the importer while no proceedings against the officers - Irregularities in import through Land Customs Station, Khowaighat under Agartala Customs Division - Held that:- It is evident from the final enquiry report filed by the Additional Commissioner, Customs and it is quite surprising to note that there is nothing on record in the hands of the officers posted at Khowaighat LCS to prove the case and all documents are only to be obtained from the Bangladesh customs department but most unfortunately till date nothing has been received from the Bangladesh Customs. Such plea as adopted herein is not at all tenable in the eye of law. There is nothing on record to show what disciplinary action has been taken by the customs department against the officers who were on duty during the period when such irregularities and infirmities in maintenance of Government records took place - it is also evident from the final report that the investigation cannot be proceeded with any further until documents pertaining to export are received from Bangladesh Customs Department. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2018 (12) TMI 805
Scheme of amalgamation - matter is pending before Arbitration - Held that:- The Appellants received amount aggregating to ₹ 56,95,00,000/- with balance ₹ 5 Lakhs remaining. The Respondents are disputing this. With regard to 3rd tranche, it appears that there are requirements under the SPA linking the payment to criteria relating to “EBITDA”. Admittedly, now the transferee Company has been taken by the Appellants to Arbitral Tribunal and the matter is pending before Arbitration as can be seen from Annexure R-3 in Diary No.6037 which is Reply of the Respondents in CA 167/2018. The Appellants claim that they have to receive ₹ 10.05 Crores from the transferee Company and the transferor Company No.1 in which they were 100% shareholders has already been ordered to be wound up and stands amalgamated and thus according to the Appellants, they may be rendered remediless. What appears is that after the Appellants executed the SPA, they handed over their shares and admitted that they had resigned as Directors on 01.01.2017. In fact, the Appellants even approved the balance sheet of the transferor Company No.1, as on 31st March, 2016 by signing the same on 31.08.2016 as can be seen from Page – 66 of Diary No.4167 (Volume – 1). What appears after going through such documents is that the Appellants were clearly aware of the proceedings relating to the scheme of amalgamation and had no difficulties initially but it appears that, as their transaction based on SPA landed in difficulties and so, now they want to raise grievances to the scheme of amalgamation on the plea that Notice to them also was necessary. Going through the material on record, we do not find that there is any substance in the grievance raised by the Appellants. Dispute relating to SPA is before Arbitration . Transferee Company is facing it. If Appellants had difficulty, they never went before NCLT to raise Objections although they knew about the amalgamation process going on. This being so, we are proceeding to reject both the Appeals.
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Service Tax
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2018 (12) TMI 793
Nature of activity - service or sale - bottling of alcohol liquor on job-work basis - excisable goods or not - Held that:- An identical issue was the subject matter of the Hon’ble Madhya Pradesh High Court in the case of Maa Sharda Wine Traders vs. Union of India [2008 (3) TMI 319 - MADHYA PRADESH HIGH COURT]. It stands observed by the Hon’ble High Court that packaging activity means packaging of goods including pouch filling, bottling, labeling or imprinting of package which would get covered under the definition of ‘manufacture’ inasmuch as the same includes any process incidental or ancillary to the completion of a manufactured product. If the bottling amounts to manufacture, the Revenue’s stand that the appellant is providing taxable services to the manufacturer of the rectified spirits cannot be upheld - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 792
Classification of services - Works Contract Services or not - Mega Exemption Notification No.25/2012-ST dated 20.06.2012 - Circular No.80/10/2004-TRU dated 17.09.2004 - Held that:- Board Circular supports the assessee’s case and it is well settled law that revenue cannot go against the Board Circular. Circular No.80/10/2004-TRU dated 17.09.2004 has observed that from the definition of work contract, it is very much clear that completion and finishing services, repair, alternation, renovation or restoration of, or similar services, in relation to construction of a new building or a civil structure or a part thereof, or of pipeline or conduit, primarily for the purposes of commerce or industry is within the purpose of tax. Appeal dismissed - decided against Revenue.
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2018 (12) TMI 791
Refund of service tax paid erroneously - information technology software services - refund claim denied on the ground of limitation - applicability of Section 11B of the Central Excise Act - Held that:- Hon’ble Supreme Court’s decision in the case of Porcelain Electrical Mfg. Co. v. Collector of C.Ex., New Delhi [1994 (11) TMI 145 - SUPREME COURT OF INDIA], vide which the Hon’ble Supreme Court rejected the assessee’s stand that since the duty has been paid under mistake of law, the period of limitation applicable would be three years. Admittedly the refund claims having been filed after normal period of limitation prescribed under Section 11B are required to be rejected and no infirmity can be found in the impugned orders of the authorities below. Appeal dismissed - decided against appellant.
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2018 (12) TMI 790
Refund of service tax paid erroneously - no service was provided - rejection on the ground of time limitation and unjust enrichment - period from April 2004 to August 2007 - Held that:- The refund claim has been filed on 14.3.2008. The Ministry of Company Affairs has issued the order of amalgamation on 30.4.2007. Further, in this order it is specifically stated that the amalgamation is to take effect from 1.4.2004 - In the present case, they have filed the refund claim within one year of the order passed by the Ministry of Company Affairs. In such a case, the refund claim which has been filed within one year after receiving the order or after coming to know about the amalgamation has to be considered to be made within the time prescribed under section 11B of the Act - thus, the refund claim is not hit by time bar. Unjust enrichment - Held that:- The Tribunal in the case of Usha International Ltd. [2016 (3) TMI 205 - CESTAT NEW DELHI] after analyzing the issue held that the assessee is eligible for refund as the service was rendered to self and the burden cannot be passed on to one self. Further, in the case of M/s. Sescot Sheet Metal Works Ltd. Vs. Commissioner of Customs [2015 (4) TMI 386 - MADRAS HIGH COURT], the jurisdictional High Court held that the doctrine of unjust enrichment is inapplicable to the State (PSU), and therefore it cannot tantamount passing the burden to any other person. The rejection of refund is unjustified - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 789
Short payment of service tax - certain amount received on account of mobilisation advances from the service recipient - relevant piece of evidence not considered - principles of natural justice - Held that:- The Commissioner (Appeals) has committed an error while ignoring the relevant piece of evidence as that of agreement just for want of date thereupon. He also ignored the affidavit in this respect and even the bank acknowledgement corroborating the subsequent event of withdrawal of the entire mobilisation amount of ₹ 1Cr., however with adjustment of ₹ 15 lakhs. Thus, the amount of ₹ 85 lakh cannot be the part of the taxable value. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 788
Valuation - inclusion of PSF and airport taxes in assessable value - pure agent services - Section 67 of Finance Act, 1994 readwith Service Tax Determination of Value Rules, 1994 - Held that:- The matter is no longer res-integra as several decisions on the same issue have already been passed by this Tribunal - reliance placed in the decision in the case of Austrian Airlines vs. Commissioner of Service Tax [2016 (9) TMI 373 - CESTAT NEW DELHI], where following the Tribunal in the case of M/s Continental Airlines Inc. Vs CST, New Delhi [2015 (7) TMI 1079 - CESTAT NEW DELHI] wherein it was held that the airport taxes as also the passenger service fees collected by the airlines on behalf of the airports and paid to them are not includable in the assessable value for the purpose of levy of service tax. Demand set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 787
Non-compliance with the order of payment of costs - Held that:- In the absence of any compliance of our Order of paying cost to the other side/respondent, we dismiss the appeal for non-compliance of our Order.
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2018 (12) TMI 786
Commercial or industrial construction service - raising of height and upgradation of the ash pond by the appellant for M/s NALCO - period from 10.9.2004 to 31.3.2008 - extended period of demand - Held that:- It is on record that the appellant has paid the service tax to the extent of ₹ 2,17,741/- initially but on advise of their client i.e. NALCO they stopped the payment of service tax on being told that the proposed work is within the ambit of definition of dam, which covers pond and services have been relatable to water resources and therefore the service would not come under the category of commercial or industrial construction service. The appellant contention is that the scope of work includes supply of material along with provisions of service in construction raising height of the ash pond, the situation being so, the activity would come under work contract service, which is not leviable to service tax prior to 1.6.2007 in view of the Hon’ble Supreme Court decision in the case of L&T [2015 (8) TMI 749 - SUPREME COURT] also period subsequent to 1.6.2007 this issue is part of the work contract service and not CICS. As the demand raised under the CICS, the same is not sustainable and, therefore, the assessee appellant contention that they are not leviable to service tax is required to be upheld in view of various decisions. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 785
Support Services of Business or Commerce - Non-payment of service tax - supply of crane, material handling equipment - Held that:- Supply of tangible goods as a service has been included in the taxable category with effect from 16.5.2008 by introducing necessary amendment to the Finance Act, 1994. This proves that this service was not within its ambit prior to its introduction the supply of crane and other material equipment handling equipment etc. on hire were not covered by any existing entry in the Finance act, prior to 16.5.2008, which necessitated the creation of new entry for such type of services rendered by the service provider. It was the background against which the legislature created a new category of services in the name of ‘supply of tangible goods’. The introduction of new category of service itself proves that such activity was not under service tax net before 16.5.2005 - supply of tangible goods cannot be considered as support service of business or commerce. ‘Infrastructural Support Services” primarily relates to the logistic support system, such as the office premises and other office utilities pertaining to the smooth functioning of office and hence supply of cranes and material handling equipment can by no stretch of imagination can be brought within the scope of ‘Support of Service of Business or Commerce’. The services provided by the appellant is not covered under the support service of business or commerce - The service provided by the appellant will fall under the category of ‘support of tangible goods’ with effect from 16.5.2008. In the case demand pertains to the period from 1.4.2006 to 10.3.2008 and hence non-taxable under the Finance Act. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 784
Scope of SCN - the determination of the constitution of the firm was not alleged in the SCN - Held that:- In the Show Cause Notice, there is no allegation against Smt. Priyatama Mohanty either as Partner or as Proprietor or the other partner – Shri Santosh Kumar Sarangi, in as much as, demand had been issued to the Partnership firm, i.e. M/s Universal Travels. By observing Smt. Priyatama Mohanty is not the partner of M/s Universal Travels but she is sole Proprietor, the Ld. Addl. Commissioner has travelled beyond the Show Cause Notice. In the present case, the Ld. Adjudicating Authority has not given any notice to the Appellant to record her submissions on the point and therefore the order cannot be sustained. The matter remitted to the ld. Adjudicating Authority to decide afresh - appeal allowed by way of remand.
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Central Excise
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2018 (12) TMI 783
Maintainability of appeal - Section 35 G and 35 L of the Central Excise Act, 1944 - Section 83 of the Finance Act - whether fleet cards have been provided is a part of loan transaction or is it a credit card facility? Held that:- It is pertinent to note that Section 129 D of the Customs Act, is similar to Section 35 G of the Central Excise Act. Hon'ble Division Bench of this High Court in THEJO ENGINEERING SERVICES PVT LTD Vs. COMMISSIONER OF CUSTOMS EXCISE, CHENNAI [2015 (7) TMI 1229 - MADRAS HIGH COURT] has held that In such a scenario, in view of the above position of law, which exempts appeal to be entertained by the High Court in relation to rate of duty, the objection as raised by the respondent is liable to be sustained in view of the decision of the Supreme Court in Navin Chemicals [1993 (9) TMI 107 - SUPREME COURT OF INDIA]. It is clear that an appeal is not maintainable before this Court. Right of appeal to this Court - amendment by way of Section to 35 L of the Central Excise Act, 1944, whether has taken away the right to appeal - Held that:- Right of appeal has not been taken away. Instead of an appeal in the High Court, an appeal would lie to the Hon'ble Supreme Court. Under the pre-amended regime, there was no second appeal provided to the Supreme Court - The contention of the appellant that pre-amended provision must apply to them as it takes away the right of appeal does not have any force. Appeals are not maintainable and is dismissed.
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2018 (12) TMI 782
Clandestine Removal - excess unaccounted quantity of raw-material - Lead Ingots - Kacha Parchi i.e. rough slips - entire case is made out on the basis of voluntary statement of the appellant/ assessee and entries made in note pads and pocket diaries - Held that:- These statements of the transporters have not confirmed the transportation of alleged goods. In their statements, the transporters have deposed that they have not maintained any record regarding the goods transported by them and nothing more. These statements in itself do not indicate that the appellant/assessee is engaged in clandestine removal of goods. It has been held in the various decisions that clandestine manufacture and clearance of goods is a very serious charge and required to established by the Revenue. In the case of M/s Continental Cement Company, [2014 (9) TMI 243 - ALLAHABAD HIGH COURT], Hon’ble High Court has laid down that there must be clinching evidence for establishing the clandestine clearance and the same cannot be based on assumption and presumption only. No investigations have been conducted by the Department, in the light of the observations made by Hon’ble High Court, to make a fool proof case for the clandestine removal of the goods as alleged in the two Show Cause Notices. Seizure of goods - Held that:- Only the excess stock has been found in the factory. But the same was not removed and was lying there itself. This in itself will lead into inference that such and intention to remove the goods in a clandestine manner - there could not be any scope of clearance of seized goods without payment of duty. Second SCN - Held that:- The same has been issued by and made answerable to Principal Commissioner of Indore and, however, the adjudication was done by the Additional Commissioner without any indication that the Adjudicating Authority has changed during the course of adjudication proceedings. This in itself would have been reason to drop the demand raised by the Show Cause Notice. However, the appellant has not raised this plea in the appeal, and therefore, the same is ignored. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 781
CENVAT Credit - inputs - there was variation in the product description in the dealers invoice and the Material Inward Notes (MIN) maintained by the appellant - Held that:- There is no different central excise duty with regard to CI borings and waste and scrap (other). On such score, I cannot find any reason for the appellant to have any intention to avail fraudulent credit. The very variation in the description of the goods in the dealers invoice as well as the material inward notes cannot be a ground for alleging that the appellant has availed fraudulent credit. There is no allegation with respect to the difference in quantity of the goods received. It is only with regard to the variation in the description of the goods in the dealers invoice. Demand cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 780
Clearance of by-products/waste without payment of duty - benefit of N/N. 89/1995 dated 18.05.1995 - case of Revenue is that as the appellants are manufacturing other excisable goods, they are not eligible for exemption under N/N. 89/1995 dated 18.05.1995 - Held that:- The appellants are engaged in the manufacture of vegetable oils and the by-products that are incidental to the manufacture and are nothing but waste arising during the course of refining of the oil, the appellants can be held to be manufacturers of such waste products arising during the course of manufacture. The Commissioner has erred in finding that the appellants are not eligible for the N/N. 89/95 because they are manufacturing tins as submitted by the learned counsel for the appellants. The learned Commissioner has not appreciated the fact that the tins manufactured are also eligible for exemption under N/N. 10/96 as submitted by the appellant. The decision in the case of M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD [2018 (2) TMI 1395 - CESTAT NEW DELHI] squarely applies to the facts of the present case, where it was held that the excisability of the product itself is seriously in dispute as per the opinion expressed by us, as above, these cannot be considered as anything other than waste and as such will be covered by the exemption N/N. 89/95-CE. The appellants are entitled to exemption contained in Notification No. 89/95-CE on the products which arise incidentally to the manufacture of vegetable oils - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 779
CENVAT Credit - various input services - Telephone Services - GTA/Courier Services - Security Services - Works Contract Services - ISD invoices - Vehicle Maintenance Services - Consultancy Services - Catering Services/Tea expenses - Held that:- The issues have been decided at various levels and the same are more or less settled which is also applicable to the period after 01.04.2011 - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 778
Clandestine removal - Khaini - Revenue alleged that the assessee did not fully account the goods manufactured in the factory in the statutory records and cleared the unaccounted portion clandestinely without payment of duty - Held that:- The assessee has admitted that they have continued to follow the same process of manufacture; and the percentage of ingredients during the current period of dispute, as in the earlier period which was already investigated and settled. The proprietor in his statement dt. 20/05/2006 has also admitted to the fact of non accountal of the additional quantity of khaini as result of addition of water. Time Limitation - Held that:- The Hon’ble Supreme Court has held in the case of Nizam Sugar Factory [2006 (4) TMI 127 - SUPREME COURT OF INDIA], that the extended period of limitation under Section 11A will not be available to Revenue to raise demand a second time on the same set of allegations. Consequently, it is concluded that the demand duty is to be restricted to the normal time limit. Appeal allowed in part.
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2018 (12) TMI 777
Refund of Additional Excise duty in cash - Pan Masala (Plain) without tobacco - N/N. 32/99-CE dated 08.07.99 - Held that:- There is no irregularities committed by the appellant while debiting the amount on account of retrospective amendment of N/N. 32/99-CE dated 08.07.99 through Cenvat Credit Account. Refund on account of Education Cess - Held that:- The purpose of N/N. 32/99-CE dated 08.07.99 was to make the entire production within North Eastern Region to be total tax free zone by that aforesaid Notification. If it is held that the appellant is not entitled for refund of AED paid, as per N/N. 32/99-CE dated 08.07.99, the same will be render Industrial Policy envisaged by the Government in effective. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 776
CENVAT Credit - inputs/capital goods - M.S Angle, M.S. Channel, Joist, Plate, H.R. Sheet, Mill Plate etc. classifiable under Chapter 72 - M.S. Rounds, Lancing Pipes classifiable under Chapter 73 - Aluminum Balls classifiable under Chapter 76 of the first schedule - period of dispute is from 2003-2004 to 2007-2008. Held that:- The amendment of the definition of Rule 2(k) of Cenvat Credit Rules, 2004 made w.e.f. 07.07.2009 is not applicable to the facts and the present case since all the goods have been purchased and used before the amendment. The exclusion made is to the effect that the inputs used in the manufacture of capital goods eligible for credit shall not include cement, angles, channels, CTD bar, TMT bars and other items used for construction of factory shed, building or laying foundation for support of capital goods. The applicability of such exclusion for the period prior to 07.07.2009 has been exempted by the Hon’ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. [2015 (5) TMI 663 - GUJARAT HIGH COURT]. In the above case the Hon’ble High Court held that exclusion brought in by the amendment cannot be given retrospective effect. The eligibility of steel items for cenvat credit has been a subject matter of decision by the Tribunal, Hon’ble High Courts and the Hon’ble Supreme Court in various cases. It has been held by the Tribunal consistently that the steel items when they were used in fabrication of capital goods and their accessories inside the manufacturing premises are eligible for credit. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 775
Penalty u/s 11AC of CEA - Clandestine removal - entire amount of differential duty alongwith interest paid on their own before intervention of the department - Held that:- Such reversal of credit on the basis of their own ascertainment and payment of interest involved thereon, before the issuance of relevant Show Cause Notice, is in agreement with the provisions of sub-section (1)(b)(i) of Section 11A of the Central Excise Act, 1944 - appeal dismissed - decided against Revenue.
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2018 (12) TMI 774
CENVAT Credit - input services - appellant’s claim is that having included expenses for the cost of production, they are entitled to avail Cenvat Credit - Held that:- Hon’ble High Courts and the Tribunal in various decisions have specifically held that any expenditure incurred by an assessee, if it forms part of the price of the final product, on which Excise Duty is paid, Cenvat Credit must be allowed on the said Service Tax, if the manufacturer can demonstrate that the said expenses are in relation to the manufacture of final product. The Central Excise Duty paid by the appellant on their finished goods is on ad-velorom which has been arrived at after considering all the expenses that had gone into manufacturing of the finished goods. In so far as the present facts of the case is concerned, it is not in dispute that the credit of Service Tax has been availed on services such as Banking and other Financial Service, Courier Service, General Insurance Service, Group Health Insurance Service, etc. which were received and used by the assessee for the purpose of manufacture of the final product and these cost formed part of the excisable value on which Excise Duty was discharged. Service availed at the club premises - Held that:- The maintenance and repair service of various civil and electrical work, carpenter work has been availed at the school, colony and the club maintained by the appellant for its employees. However, the Cenvat Credit of Service Tax Paid on service availed at the club premises cannot be allowed - credit not allowed. The period involved is prior to 01/04/2011, when the definition of input service during the relevant period had wide ambit as it included the words “activities related to business” - the respondent-assessee is eligible for availing credit of Service Tax paid on the Services availed for the purposes of its business activities except the services availed in respect of the club premises. Appeal allowed in part.
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2018 (12) TMI 773
Penalty u/s 11AC - the Duty has been paid prior to the issuance of the SCN along with interest - Held that:- The Appellant Company had cleared the waste & scraps from their manufacturing facility under challans but subsequently, no Central Excise invoices were raised. However, on being pointed out, the discrepancy by the Central Excise Officers, the assessee did not dispute the clearance of waste & scraps generated in the course of production of finished goods and also admitted that the violation of the Statutory Provisons of the Central Excise Act was unintentional. The entire demand along with interest was deposited by the assessee much before the issuance of the Show Cause Notice - also, none of the Lower Authorities had intimated the assessee regarding option to pay penalty of 25% of the duty amount. The demand of Central Excise Duty along with interest is upheld. The penalty imposed under Section 11 AC is also upheld - appeal allowed in part.
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2018 (12) TMI 772
Clandestine removal - shortage of stock - MS Flat - invocation of provision of Section 11AC - Held that:- There is no evidence brought on record by the Department to substantiate that the goods found short were clandestinely removed. The manufacturer’s obligation to account for the goods received as inputs and the finished good in stock Register is a statutory obligation, failure to do so clearly attracts the penalty provisions. However, no evidence has been relied upon by the Department justifying invocation of provision of Section 11 AC. The challenge of the appellant seeking setting aside of demand of Duty, does not deserve to be accepted. Having held that it is not a case for invoking the provisions of Section 11AC, the penalty imposed is set aside - a general penalty of ₹ 5,000/- under Rule 27 of the Central Excise Rules, 2002 is imposed for breach of Rules. Appeal disposed off.
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2018 (12) TMI 771
CENVAT Credit - requirement of endorsement as per Circular dated 10.04.1986 not being complied prior to availing the credit - Held that:- The non-endorsement of the relevant Gate Passes was at the most, a bonafide and rectifiable defect of a procedural/technical nature. Such defect has already been rectified and proper endorsement in favour of the respondent has already been made by the Railway Authorities. The original Gate Passes in proper form and duly endorsed by the Railway Authorities were produced before the Additional Commissioner. The Additional Commissioner has himself held that the Respondent was entitled to restoration of the credit once the Gate Passes were endorsed on 6.2.1992 and 16.12.1992. The credit is allowable to the respondent as per the instructions issued by the CBE&C by its Circular No.441/7/99-CX dated 23.02.1999 - By the said circular, the Board directed the Central Excise Authorities to allow credit of the duty paid on inputs ignoring minor procedural lapses in the Invocie/documents based on which the credit is taken if it is proved that the inputs have suffered duty and were used in the process of manufacture. The Board further directed that all pending cases may be disposed off in accordance with the guidelines laid down in the aforesaid Circular. All the particulars in respect of the said MCI inserts and the credit taken thereon were duly entered in the RG23A Parts I & II, the extracts whereof were regularly submitted by the Respondent to the Central Excise authorities alongwith the monthly RT-12 returns. The bona fide omission to furnish the duty paying documents for defacing cannot be treated as suppression of facts by the Respondents. It is well settled that when availment of credit and utilization thereof has been reflected in RT-12 Returns, the non submission of duty-paying documents cannot be treated as suppression of facts. Appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2018 (12) TMI 770
Imposition of penalty - receipt of amounts towards a contract, which the assessee had not disclosed in the returns - KVAT Rules - Held that:- On the mere ground of receipt of certain amounts towards mobilisation advance of a contract, there can be no penalty imposed alleging evasion of tax under Section 67, since there is no taxable activity carried out as such by the assessee as is detected by the Intelligence Officer. This is a clear case in which the assessee, though failed to disclose the amounts in the return, had however entered the same in the books of accounts and no work having been carried out in the subject year. The Intelligence Officer also did not conduct any enquiry as to the incidence of tax, which is the execution of the works contract - the penalty could only be of ₹ 10,000/- for not disclosing the receipt in the returns. A mere receipt of money, may attract liability to income tax, but sales tax could be levied only if there is a transaction of sale; which the Department has not proved in this case. The receipt alone cannot raise a presumption of taxable transaction or a computation of tax evaded. Unless there is a specific incidence of levy of tax shown, which is the initial burden cast on the Department itself, the Explanation casting only a reverse burden on the assessee cannot be resorted to. The question of law in favour of the assessee and against the Revenue - penalty of ₹ 10,000/- retained - appeal allowed in part.
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2018 (12) TMI 769
Penalty u/s 15A(1)(o) of the U.P. Trade Tax Act, 1948 - intent to evade tax - Held that:- There does not appear to be recorded any finding of fact as to intention to evade tax on part of the assessee. In fact the assessing authority had recorded a finding that it could not be said there was no intention to evade payment of tax. For a valid levy of penalty, a positive finding as to intention to evade tax was a sine qua non. Penalty could not be imposed on a mere possibility of intention to evade tax. The discrepancy noted in the invoice and the Import Declaration Form No. 31 may have been relevant to make further inquiry. However, it did not itself lead to a finding that the Import Declaration Form contained incorrect or false disclosure. That was a matter to be inquired by the authority at the relevant time. That not being done, the inference drawn by the Tribunal as to intent to evade tax is perverse. Decided in favor of the assessee and against the revenue - revision allowed.
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2018 (12) TMI 768
Imposition of tax liability - works contract - addition of 20% made in the turnover - benefit of section 3-F(2)(B)(i) of the U.P. Trade Tax Act, 1948 - Held that:- Issue as to whether necessary ingredients to attract levy of tax by applying principles of 'works contract' appear to have been extensively dealt with by the assessing authority and also by the tribunal - The assessing authority has relied upon the standard format used for issuing allotment to the buyers. Specific clause of the agreement has been examined to return a finding that construction work undertaken by the revisionist on behalf of the allottees, would amount to a 'works contract'. The question as to whether import of goods/construction materials from beyond the State of Uttar Pradesh was in furtherance of specific contract and was meant exclusively for it has been specifically urged, but the same does not appear to have been adverted to by the tribunal. - Matter remanded back. Revision disposed off.
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Indian Laws
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2018 (12) TMI 795
Levy of Motor Vehicles Tax / additions tax - marginal tax - chassis of the motor vehicles manufactured by the appellants during the period these chassis are in their possession , i.e., before they are delivered to the dealers and/or the purchasers of the said vehicles - Section 6 of the Bihar Motor Vehicles Taxation Act, 1994 - constitutionality of Section 6 - Held that:- Under Section 5, tax is payable at the time of registration of the vehicle, which is payable by the registered owner. In contrast, Section 6 is the stage before that as it is on the event of the vehicle being possessed by the manufacturer or dealer - the appellants are liable to pay tax under Section 6 of the Bihar Act. May be, Section 6 is not happily worded. But the intent is to convey that tax will not be payable as per Schedule I which is payable under Section 5 but in place thereof it would be payable as per Schedule III. Penalty - Held that:- Section 23, in no uncertain terms, lays down that any person who does not pay the tax during the prescribed period shall pay a penalty at the rate prescribed by the State Government together with arrears of tax. Therefore, for non-payment of the tax within the prescribed period, penalty becomes payable at the rates specified in Rule 4. The vires of Section 6 were challenged in the High Court in earlier proceedings and this challenge was repelled. Further, since Rule 4 uses the expression may , on that basis it was also argued that this rule gives discretion to the Assessing Officer. Under the Bihar Act, as per Section 23, penalties levied for breach of statutory duty for non-payment of tax. While upholding the validity of Section 23 of the Act, insofar as penalty is concerned, the Court had set aside the same on the ground that before imposing the penalty, no show cause notice was issued - Permission was given to the tax authorities to take fresh decision after giving the show cause notice. It is an admitted case that show cause notices were issued and after hearing the appellants, the penalty was imposed. Appeal dismissed.
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2018 (12) TMI 794
Exemption sought in Paper ‘18’ of Group IV of the final CMA Examination - appellant has not been able to prove that he had sought any exemption in Paper ‘18’ for the June, 2014 as contended by him at the time of admission of this appeal - Held that:- The form shown to us at Page 364 is an Online Form and as rightly contended by the learned counsel for the respondent, no pen or pencil could have been used and therefore, the figure ‘18’ appearing in the said document is of no help to the appellant. We do not want to concern ourselves with the issue as to how the said figure is appearing in the hard copy filed in the petition. Moreover, a reading of the writ petition also shows that there is no averment whatsoever that any such exemption was sought prior to the Examination through an Online Form - this Court rejects the contention of the appellant that any exemption in Paper ‘18’ was sought by the appellant. Having not acted with due diligence, appellant cannot be given the benefit of the exemption and can neither be permitted to appear in the Examination of the final court at this stage. In any case, even assuming that he had applied for exemption, he was not entitled having exhausted three attempts under Regulations of 2012 - appeal dismissed.
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