Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 21, 2018
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
GST
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Classification of goods - P P Leno Bags - whether classified under Tariff code 63053300 or otherwise? - The item under consideration being woven bags of polypropylene therefore merits classification under GST Tariff Heading ‘3923 29 90’.
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Input tax credit - Whether ITC of IGST paid on bill to ship to’ model admissible to the applicant? - Held Yes
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Where the applicant provides transport services to a training institute for carting food from one building to another for service/sale and the applicant charges a separate transport charges, the applicant needs to discharge GST on the gross amount (cost of Food + cost of Transportation) at the rate of 18% GST.
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The activity of supply of food in canteens of office, factory, hospital, college, industrial unit etc. on contractual basis excepting that supply is not event based or on specific occasions, constitute supply of service - taxable to GST @5%
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Levy of GST - supply of services or not - contribution made by Members towards “Annual Membership Fees and registration fees” to the Corpus Fund of BCSBI - The “Principle of Mutuality” is non existent in the subject case. - The activity is liable to GST as business activity.
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Supply or not - Transitional provisions - Section 141 of the CGST Act, 2017 - The transfer of machines & moulds (being capital goods), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise Act, 1944 will constitute as “supply” under GST.
Income Tax
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Maintainability of appeal before CIT(A) - Taxes due on the returned income not paid by the assessee - If tax due on income returned is paid even after disposal of the appeal by the CIT(A), the defect in the appeal due to noncompliance of a directory requirement of paying such tax before the filing of the appeal, stood removed. - Appeal restored before CIT(A)
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The transaction where cash is paid to person in lieu of a future promise cannot be a “benami” transaction as there is no lending of name. There can be no “benami” transaction if the future benefit is due from the person who is also the holder of property.
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TDS u/s 194C - the reimbursement of expenses to C&F Agents does not constitute income in the hands of the concerned C&F Agents and therefore TDS is not required to be deducted at source
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Allowability of the interest expenditure as a deduction u/s 57(iii) against interest on FDRs - assessee for not opting for a premature encashment of the FDR's and rather raising a loan from the bank to facilitate purchase of residential property - Claim of the assessee not allowed.
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Proceedings initiated u/s 153C - payment of cash against the property - The person who has recorded BAHIs found during the course of search was not subjected to cross-examination on behalf of the assessee. Initiation of proceedings under section 153C is invalid and bad in law
Customs
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Exemption on import High Density Polyethylene in the form of granules - HDPE compound or not - In the absence of any support for the conclusion that the product imported by the appellant has been chemically modified or it is not known as HDPE in the market, the benefit of exemption to be allowed.
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Revocation of CHA License - The CHA is supposed to safeguard the interest of both the importers and the customs. A lot of trust is pose in CHA by the importers/ exporters as well as by the Govt. Agencies. - any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the regulation.
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Import of Polyester Waste - restricted item or not - Held No - the goods under import are old, dull white ropes of assorted length and sizes. The said ropes are composed of Polyester Plastic other than Polymide (Nylon).
Corporate Law
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Companies (Incorporation) Fourth Amendment Rules, 2018
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Companies (Registration of Charges) Second Amendment Rules. 2018
SEBI
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SECURITIES AND EXCHANGE BOARD OF INDIA (SETTLEMENT PROCEEDINGS) REGULATIONS, 2018
Service Tax
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The buyers were not visible on the horizon, at the time when the site formation etc of the land was carried out by the appellant - such activity was a self service and hence the same cannot be exigible to service liability under the Finance Act,1994
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Renting of immovable property - Tahbazari fee - The authority below has wrongly considered it as a service being rendered by the appellant to the said traders - demand set aside.
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Classification of services - the appellant cannot be considered as Real Estate Agent for an amount not received since they have only acted as a ‘seller’ of the said land by virtue of Power of Attorney.
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Classification of services - import - Place of supply - job of organizing the event - To be classified as event management service - Not taxable since whole service has been performed outside India.
Central Excise
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Valuation - additional consideration flowing for the goods arising out of the difference in price between the clearances made to buyers who surrendered Advance License and others who did not - Rule 6 of the Central Excise Valuation Rules, 2000 - inclusion of additional consideration confirmed.
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Job work for SSI units - Benefit of exemption N/N. 83/94-CE dt. - the principal manufacturer is required to file necessary declaration under the said notification with the jurisdictional authorities which has not been complied with - Demand confirmed with reduced penalty of 25%.
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CENVAT Credit - capital goods - HS wagon - merely that the appellant has reversed the cenvat credit and interest thereon will not deprive from the substantive right for availing cenvat credit within Cenvat Credit Rules, 2004.
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Clandestine removal - there is no evidence on record except the difference in figures of sale as per ER-I Returns and balance sheet. There is neither any cogent nor any credible evidence on record to prove any surreptitious removal of the finished products - Demand of duty is not sustainable.
VAT
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Recovery proceedings - The statutory mandate under Section 27 is unmistakable. A legal heir or representative is liable to answer the claim raised against the deceased only to the extent he has succeeded to the deceased person's estate.
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Penalty - forged and fake C-Form - If such lee-way, concession or immunity is granted to such selling dealers, it will open a flood gate where large scale fraudulent forms seeking concessional rates of assessment will be used to avoid payment of taxes by putting the onus on non-existent purchasing dealers, who will only exist for argument or defence but not in reality.
Case Laws:
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GST
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2018 (12) TMI 1090
Classification of goods - P P Leno Bags - whether classified under Tariff code 63053300 or otherwise? - Held that:- In Chapter 39, in Tariff heading 3923, under sub-heading 39232990, PP sacks and bags are very well covered. There being a clear sub-heading in Chapter 39 assigned to PP Sacks and bags, the same can not be included in Chapter 63 and more specifically under subheading 63053300. Polypropylene Leno Bags, as stated by the applicant, are manufactured by weaving polypropylene strips (tapes), Linear Low Density Polyethylene (LLDPE) and Plastic Master Batch. Polypropylene is a wide variety of plastic. LLDPE is a plastic that is softer and more flexible and has lower tensile strength. These raw materials are made from Plastic Granules. The strips of plastic (polypropylene) are used for weaving ‘PP Leno Bags’ which are clearly classifiable under Tariff Item 39232990 of GST Tariff. PP Leno Bags are classifiable under heading 39232990 and not under 63053300. It is a fact that both the headings bear reference to Sacks and Bags but, in view of the exclusion in the Chapter Note I(h) appearing under Chapter X’, Woven Fabrics and articles thereof specified under Chapter 39 are not to be covered by the articles mentioned against the heading 63053300 - Further, as per the existing CBEC Revised Duty Drawback rates schedule applicable w.e.f. 01.10.2017, “polypropylene woven fabrics/bags/sacks, whether or not laminated, with or without C.V. stabilization, with or without liners/fasteners” are specifically classified under drawback chapter 39 under Tariff Item 392302 - The item under consideration being woven bags of polypropylene therefore merits classification under this Chapter as it stands today without any ambiguity. Ruling:- The item “Polypropylene Leno Bags (PP leno Bags)”, be classified under GST Tariff Heading ‘3923 29 90’.
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2018 (12) TMI 1089
Input tax credit - Whether ITC of IGST paid on bill to ship to’ model admissible to the applicant? - Held that:- M/s Umax Packaging Jodhpur is acting as a third party, directing M/S Uma Polymers, Guwahati to despatch the goods directly to M/s. Pratap Snacks Ltd., Guwahati. M/s. Uma Polymers, Guwahati would accordingly ‘bill to’ the applicant and ‘ship to’ M/S Pratap Snacks Ltd., Guwahati. Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business - it is deemed that the applicant has received the goods from M/s. Uma Polymers Ltd., Guwahati and thereafter the said goods are despatched to M/s. Pratap Snacks Ltd., Guwahati. M/s. Uma Polymers Ltd., Guwahati can charge IGST from the applicant, against which the applicant ie. M/s. Umax Packaging, Jodhpur are eligible to claim full input tax credit as per the relevant provisions of Section 16 and 17 of Chapter V of CGST Act, 2017. Ruling:- The applicant M/s. Umax Packaging, Jodhpur is eligible to claim the input tax credit (ITC) of IGST paid on ‘bill to ship to’ model as per the relevant provisions of Section 16 and 17 of Chapter V of CGST Act, 2017.
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2018 (12) TMI 1088
Levy of GST - Canteen services - services of serving food - input tax credit - N/N. 13/2018-Central Tax(Rate) dt.26.7.18 - principle supply - rate of GST - composite supply with transport service Held that:- The activity of supply of food in canteens of office, factory, hospital, college, industrial unit etc. on contractual basis excepting that supply is not event based or on specific occasions, constitute supply of service in terms of amended Notification No.13/2018-Central Tax(Rate) dt.26.7.18 and is taxable at rate of 2.5% CGST + 2.5% SGST and the supplier is not eligible for the input tax credit as per the condition stipulated therein. Earlier, CBEC has clarified the queries seeking clarification regarding the taxability and rate of GST on services by a college hostel mess. As per the Circular No. 28/02/2018-GST dated 08-01-2018 issued in this regard, normally the educational institutions have mess facility for providing food to their students and staff. Such facility is either run by the institution/ students themselves or is outsourced to a third person. Further it has been clarified that the supply of food or drink provided by a mess or canteen is taxable at 5% without Input Tax Credit [Serial No. 7(i) of notification No. 11/2017-CT (Rate) as amended vide notification No. 46/2017-CT (Rate) dated 14.11.2017 refers]. Levy of GST - Transport services to a training institute for carting food from one building to another for service/sale - Held that:- The applicant in addition to the supply of food, is also undertaking transportation of food from the place of preparation of food to the premises where it is served. Here the applicant is undertaking two supplies, one is supply of food and another is transportation service. Two supplies are involved and it is a composite supply where the supply of food is a Principal Supply and providing transportation is ancillary supply. In the instant case, principal supply being supply of food i.e. outdoor catering service, and transportation is ancillary, the whole transaction attracts 18% GST being highest rate of tax compared to tax on transportation service. Therefore, the applicant needs to discharge GST on the gross amount (cost of Food + cost of Transportation ) at the rate of 18% i.e., GST rate of outdoor catering service. Ruling:- The activity of supply of food in canteens of office, factory, hospital, college, industrial unit etc. on contractual basis excepting that supply is not event based or on specific occasions, constitute supply of service in terms of amended Notification No.13/2018-Central Tax(Rate) dt.26.7.18 and is taxable at the rate of 2.5% CGST + 2.5% SGST and the supplier is not eligible for the input tax credit as per the condition stipulated therein. Where the applicant provides transport services to a training institute for carting food from one building to another for service/sale and the applicant charges a separate transport charges, the applicant needs to discharge GST on the gross amount (cost of Food + cost of Transportation) at the rate of 18% GST.
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2018 (12) TMI 1087
Supply or not - transfer of machines & moulds (capital goods), from the premises of the job-worker to another job-worker, which were originally received by said job-worker - Circular No. 637/28/2002-CX., dt. 08.05.2002 - Held that:- From a reading of the Circular quoted by the applicant it is seen that nowhere it is mentioned that provisions of Rule 4(5)(b) of erstwhile Cenvat Credit Rules, 2004 for receipt back of such capital goods/ moulds by principal manufacturer within stipulated time lime of two years are not applicable. Transitional provisions - Section 141 of the CGST Act, 2017 - Held that:- Applicant have contravened the above provisions of the Erstwhile CCR, 2004. The goods were not received back by them within the time frame mentioned above and they had also not reversed the credit availed in such case. Now that GST has been introduced in the year 2017, they want to avail the benefit of sending the said capital goods from their first job worker to their second job worker. As per the Cenvat Credit Rules, 2004, if the capital goods were not received back within two years from the job worker, the manufacturer had to pay an amount equivalent to the CENVAT credit attributable to the capital goods by debiting the CENVAT credit account - In this case, the capital goods have not been received back from the first job worker even after three years and it is felt that the first principal manufacturer has not paid the Central Excise duty or debit the CENVAT account. Since, the duty has not been paid, the applicant is liable to pay GST while transferring the capital goods from the first job worker to the second job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd. The provisions of Rule 117 (Transitional Provisions) of the CGST Rules, 2017 provide for tax or duty to be carried forward under any existing law or on goods held in stock on the appointed day. The applicant has not brought on record any details to show that either the first Principal manufacturer or the applicant has submitted the declaration electronically in FORM GST TRAN-I and included the said capital goods in his TRAN-I, as provided under Rule 117 of the CGST Rules, 2017 - Since the details regarding the subject goods have not been carried forward by the applicant or the first principal manufacturer from the earlier law to GST laws, the goods cannot now be brought Into the GST fold. It appears that neither they, nor the first principal manufacturer have carried forward the capital goods into the GST regime by following the procedure prescribed by Section 117 - Hence the subject transaction Of transferring the capital goods from the first job worker to the second job worker would be an independent and fresh transaction for which the same would be treated as supply of goods and will be liable to tax under the GST Laws. Ruling:- The transfer of machines & moulds (being capital goods), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise Act, 1944 will constitute as “supply” under GST.
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2018 (12) TMI 1086
Levy of GST - supply of services or not - contribution made by Members towards “Annual Membership Fees and registration fees” to the Corpus Fund of BCSBI - recurring expenditure - Principle of Mutuality - whether the applicant is providing supply of services to their members and if so, is there any consideration received by them for such supply of services/ goods? Held that:- These activities are undertaken only for and in respect of the Member Banks, who have voluntarily become their members. Hence their primary objective is to guide the public and publicise about the Codes and Standards and Commitment of their Member Banks. Hence, the applicant is firstly developing and publishing and then publicizing Banking Codes and Standards for the banks who are their members and after this, they are monitoring its compliance, undertaking further research with regard to codes and standards and are also training bank employees about these codes - the applicant is also advertising and publishing promotional literature in newspapers and are also organizing, teaching and training courses, conferences, seminars and lectures and also publishing journals, pamphlets, reports, books and booklets in this regard. The applicant are basically drafting certain codes and standards and are directly as well as indirectly ensuring that member banks adhere to these standards and codes and thus provide banking services as per these codes and standards and thus the credibility of services of member banks increases if they are able to provide services as per codes and standards as drafted for adherence by the applicant. For performing the said activities, the applicant requires funds which are collected by them in the form of Annual Membership Fees and registration fees. Even though these fees are not used by them, it is clear that the said fees which are termed by them as corpus fund are used to generate interest amounts which are further used for performing their activities. In other words if there is no fee there is no corpus fund and no interest payment which can be used to fund their activities which are in the form of supply of services to their member banks. Thus here there is no doubt that consideration is flowing from Banks to the applicant in the form of Annual Membership Fee and Registration Fee which are being utilized by the applicant for generating further income as found feasible by them. Thus the consideration is clearly in the form of Annual Membership Fee and Registration Fee. Principles of mutuality - Held that:- The essence of the principle of mutuality is present only in situations where a group of persons form an association and contribute to constitute income of the associations in the nomenclature of a common fund, which so collected is used for the benefit of the members. Here the member banks have not come together contributing their resources to form the board like that of the applicant and for the benefits of the members themselves - In the present situation there is no compulsion under any enactment for the member banks to become the member of the applicant since the membership of the applicant body is voluntary. Hence the principle of mutuality is not at all applicable in present case. The applicant is supplying services to their Member Banks, against a consideration received from them in the form of Annual membership fees and registration fees and their supply is in furtherance of business as defined under Section 2 (17) (e) of the Act. Ruling:- The activity of BCSBI I.e. The Applicant is falling under the definition of “Supply”, as per Section 7 of the CC,ST Act, 2017. The contribution made by Member Banks to ‘Corpus Fund” can be considered as “Consideration”, as per Section 2 (31) of the CGST Act, 2017. Supply is meant to be between 2 persons, the Applicant Association” trust and Its Members are legally distinct from each other. The “Principle of Mutuality” is non existent in the subject case. The activity of Applicant is to be termed as “Business” as provided under Section 2 (17) (e) of the CGST Act, 2017.
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2018 (12) TMI 1085
Detention of goods with vehicle - expiration of the validity of e-way bill - Held that:- The learned Division Bench of this Court in Renji Lal Damodaran v. State Tax Officer [2018 (8) TMI 1145 - KERALA HIGH COURT] has dealt with an identical issue where It is directed to release the goods on the appellant 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. The respondent authorities are directed to release the petitioner's goods and vehicle on his furnishing Bank Guarantee for the tax and penalty 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 1084
Appearance for the examination for “GST Practitioner” - declaration of result - Held that:- Initially, the petitioner apprehended that he would not get a chance to write the examination, because his application was processed beyond the cut off date. Now as a matter of policy, the first respondent has condoned the lapse and is allowing all other persons to write the examination. The petitioner has, however, already gone through that process and his results have been kept in the sealed cover. It serves the interest of justice if the authorities declare the petitioner's result, in stead of giving him another opportunity of writing the examination - petition allowed by way of remand.
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2018 (12) TMI 1083
Extension of time period for filing GST Tran-1 - input tax credit - Held that:- The respondents are directed to reopen the portal within two weeks from today. In the event they do not do so, they will entertain the application of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner - petition disposed off.
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Income Tax
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2018 (12) TMI 1081
Addition of undisclosed income from the block assessment - non filing of returns by assessee - Held that:- There was absolutely no reason to find it as undisclosed income, since the assessee had not filed returns for the said year, and the same was deleted from the block assessment. We do not find any reason to interfere with the same, since the AO himself could have considered the same at the time of filing of the return on the basis of the materials recovered on inspection. The Revenue's contention is that the assessee did not show it in the return of that year nor the AO assessed it. That is the folly committed by the AO since it was included in the block assessment; which definitely was not permissible. We, hence, answer the said question in favour of the assessee. Return filed by the assessee for the assessment year 1993-94 being belated (and hence non-est) - Held that:- Government of India (Taxes) submits that the return filed belatedly is of no consequence and hence it has to be taken as undisclosed income. We agree with the said submission, but however, if the belated return is of no consequence, the undisclosed income has been returned by the assessee in a return filed on a notice issued after search. Hence, there is no warrant for adding on the income declared in a belated return. If at all, only ₹ 1,210 could have been added on being the excess income shown in the belated return. We do not think there is any warrant for making any such addition at this stage. The second question, hence, is answered in favour of the assessee. Addition made with respect to the deficiency in drawings in each of the years of block assessment - Held that:- The estimation carried out by the Assessing Officer in the subsequent years is also found to be reasonable. The assessee's drawings had also increased in the said years and on a reasonable basis, there was an increase in the house-hold expenses estimated by the AO. Tribunal had deleted the same on the ground that additions have been made on an estimation basis. We do not think that the AO carrying out the block assessment is divested of the power of estimation which every assessment Officer carries with the office. Deficiency in the drawings for the years 1993-94, 1994-95 and 1995-96 are to be confirmed. We also notice that there was an addition made on deficiency in drawings in the year 1996-97 of ₹ 12,000/-. As we noticed with respect to the first question, the assessee had not filed return and the time for that had not reached at the time of inspection. In such circumstances, there is no warrant for making such an addition in that year. - Decided against the assessee.
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2018 (12) TMI 1080
Computation of capital gains - assessee had ownership of half of the 38% sold to the builder - valuation of the property - entitled to exemption under section 54 & 54F - Held that:- The agreement specifically shows that the consideration to the assessee is 31% of the built up area. What benefit accrues to the assessee is of no consequence. The builder only promised construction of a super built up area in a multi-storeyed complex and handing over of 31% of the area. The consideration which passed from the builder to the assessee is only the cost of construction. This was the specific agreement between the parties. We do not think that an artificial exercise can be carried out, by which the market value of the constructed area can be determined and the same computed as the sale consideration which is not the specific terms of the agreement between the builder and the land owner. We need not look at whether the assessee kept the area assigned to him, for himself or sold it; which is irrelevant to determine the construction cost. In the context of the said question having been answered in favour of the assessee and the net result of the returns being a capital loss, the issue of exemption under Section 54 or Section 54F does not at all arise - decided against revenue
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2018 (12) TMI 1079
Valuation of the property as sold by the assessee - whether the valuation of the property, which was sold by the assessee, as adopted by the CIT (Appeals)-V in his order dated 20.09.2007, was proper? - whether the Tribunal was right in not interfering with the said valuation and dismissing the appeal filed by the Revenue? - Held that:- The estimation was found to be just and proper. The Court can take judicial note of the fact that during the relevant time, that is, during 1980-81, the guideline value fixed by the Sub-Registrar was based upon the last sale transaction, which took place in the area . Thus, for several years, if the sale transactions were done at a particular limit, then the guideline value remained static. It is only thereafter, the Government took a decision to revise the guideline value on a yearly basis with effect from 1st April of every month. Thus, considering the factual position, we are of the view that no substantial question of law arises for consideration in the instant case, as it pertains to computation of the value of the property, which was done by the Commissioner in a particular manner, which was considered to be fair and reasonable.
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2018 (12) TMI 1078
Eligible for deduction u/s. 80P(2)(a)(i) in respect of interest income on deposits with non co-operative banks - Held that:- We hold that the interest income received on FDRs with Bank of Maharashtra are eligible for deduction u/s 80P(2)(a)(i). The saving fund interest received by the assessee society is not eligible for the aforesaid deduction. AO assessment order relating to assessment year 2009-10 had mentioned that the interest income received by the assessee on FDRs with Bank of Maharashtra amounted to ₹ 1,03,72,581/-, on which the assessee is entitled to the aforesaid deduction, but the assessee is not entitled to claim the said deduction on interest on saving account with Bank of Maharashtra amounting to ₹ 878/-. In assessment year 2012-13, the AO has mentioned similar disallowance of the assessment order and accordingly, we hold that the assessee is entitled to claim the aforesaid deduction on interest income on fixed deposit with Bank of Maharashtra amounting to ₹ 2,02,33,008/-; however, the interest on saving account with Bank of Maharashtra amounting to ₹ 2,27,008/- is not entitled to the aforesaid deduction - Appeals of Revenue are partly allowed.
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2018 (12) TMI 1077
Assessment of income of HUF - CIT-A confirming the order of the AO by treating the interest income of the (HUF) Satish Tyagi to that of the individual Satish Tyagi - Held that:- We find that the issue in dispute is squarely covered by the decision of Sh. Ashwani Kumar Tyagi vs. ITO, Noida [2017 (10) TMI 933 - ITAT DELHI] factual reason to disallow the claim of the HUF is that no such return was filed and no such tax had been paid by the HUF. The issue gets settled by the payment of taxes by the HUF through the declaration made before the Pr. CIT under IDS, which has been accepted, as all taxes have been paid. Therefore, in such circumstances, and facts of the case, since the HUF has already paid tax due alongwith interest, etc and correct share had been declared at ₹ 27,79,279/- as against lesser amount of ₹ 22,50,413/- taken by both the authorities below, the Assessing Officer is directed to delete the addition so made. Thus, the grounds of appeal raised by the assessee are allowed.
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2018 (12) TMI 1076
Stay petition - power of tribunal - recovery proceedings - Held that:- Tribunal has no power to review or revisit the issues already decided on same facts especially where the Hon’ble High Court has dismissed the Writ Petition against earlier stay order of Tribunal, where the Hon’ble High Court had noted the conduct of applicant in Writ Petition challenging the stay order passed by Tribunal and even suo motu initiated civil and criminal contempt proceedings held that the conduct of the petitioner during the pendency of the petition disentitles it to any relief under Article 226 of the Constitution of India. Therefore we dismiss the petition. Hon'ble Supreme Court has also not allowed the petition of applicant for early hearing. Hence we find no justification in the present stay applications moved by applicant and the same are dismissed. In our considered view, since the applicant has not complied with earlier directions of the Tribunal to deposit part of tax amount within time frame fixed, then earlier order of Tribunal would stand that, in case of breach of any of the said conditions, the stay granted would automatically get vacated and the matter would be heard in ordinary course. Hence, we dismiss the stay applications moved by applicant.
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2018 (12) TMI 1075
Additional depreciation claimed on machinery purchased on/or after 01.04.2005 - acquisition for a period less than 180 days - Held that:- As held that in case the plant & machinery is held in the year of acquisition for a period less than 180 days, then balance 10% of cost of asset to be allowed as additional depreciation, is to be allowed in the succeeding year. We hold that the assessee is entitled to claim the aforesaid benefit. However, from the perusal of record, the relevant details of purchase of asset from year to year are not available. Accordingly, we direct AO to verify the claim of assessee in this regard. So, in case the asset was purchased in assessment year 2008-09 and was used for less than 180 days, then balance additional depreciation of 10% is to be allowed in assessment year 2009-10 and similar position is to be followed in assessment years 2010-11 and 2011-12. The Assessing Officer shall verify this position and allow the claim of additional depreciation as directed by us in the paras hereinabove. The ground of appeal raised by assessee is thus, allowed for statistical purposes.
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2018 (12) TMI 1074
Validity of initiation of proceedings u/s 153C - addition u/s 69D - no record of satisfaction note issued by the AO - Held that:- As the revenue authorities have failed to place on record the satisfaction note issued by the Assessing Officer of the searched person in favour of the Assessing Officer having jurisdiction of the other person i.e. the assessee in this case, the proceedings initiated u/s 153C of the Act for Assessment Year 2008-09 and 2009-10 in the case of the assessee needs to be quashed. We accordingly allow this common legal issue in the favour of the assessee challenging the validity of initiation of assessment proceedings u/s 153C of the Act. - Decided in favour of assessee.
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2018 (12) TMI 1073
Reopening of assessment - information received by the AO from the Investigation Wing that the Assessee had obtained accommodation entries from certain entry operators during the relevant period - Held that:- As decided in M/S. MULTIPLEX TRADING & INDUSTRIAL CO. LTD. [2015 (10) TMI 23 - DELHI HIGH COURT] this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. (2008 (11) TMI 2 - DELHI HIGH COURT) had observed that the requirements regarding recording the reasons to believe; communicating the same to the Assessee; permitting the Assessee to file the objections; and passing a speaking order disposing of the objections are all designed to ensure that the AO does not reopen assessments, which have been finalized, on his mere whim and fancy and that he does so only on the basis of lawful reasons. A deviation from the directions issued by the Supreme Court in G.K.N Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] would entail nullifying the proceedings. Although the AO is required to provide reasons, receive objections and pass a speaking order thereon, only after the notice under Section 148 of the Act has been issued; these requirements are an integral part of the safeguards which have been inbuilt for ensuring that the assessments are reopened only for lawful reasons and in a transparent manner. If the said safeguards are flouted, it would invalidate the exercise of jurisdiction under Section 147 and 148 - Decided in favour of assessee.
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2018 (12) TMI 1072
Penalty u/s 271(1)(c) - additional income declared by the appellant in the return of income filed in response to the notice issued u/s 153C - specification of charge - Held that:- Notice issued u/s 274 r.w.s 271(1)(c) of the Act is suffering from serious technical error and non application of mind by Ld.A.O who failed to level specific charge on the assessee at the time of initiating penalty proceedings due to which the principle of natural justice seems not to have been followed. We accordingly hold that the impugned penalty notice u/s 274 r.w.s. 271(1)(c) of the Act are invalid and untenable and thus deserves to be quashed. - Decided in favour of assessee.
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2018 (12) TMI 1071
TPA - ALP determination - comparable selection - Held that:- Assessee is engaged in business of development of software solutions and other Information Technology Enabled Services. As been characterised as routine contract software/IT service provider working in a risk insulated environment in TP study, thus companies functionally dissimilar with that of assessee need to be deselected from final list. If a comparable is functionally same as that of the tested party then the same cannot be rejected merely on the ground that data for entire financial year is not available. If from the available data on record the results were financial year can be reasonably extrapolated, then the comparable cannot be excluded solely on this ground.
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2018 (12) TMI 1070
TPA - difference in the arm’s length price of the international transaction of provision of software development services - comparable selection - Held that:- Assessee is engaged in the business of providing end-to-end business solutions in location Intelligence, which combines technology, data and services with domain expertise to enable an organization to measure, compare, visualize its business data thus companies functionally dissimilar with that of assessee need to be deselected from final list. After exclusion of four comparables Birla Soft India Ltd, Wipro Ltd, Larsen & Toubro Infotech Ltd and Tata Technologies Ltd the margin of the assessee comes within the range of +/- 5%. Since the operating profit margin of the assessee is within the plus minus 5% of the operating profit margin of the comparables, we do not find any reason why receivables should be considered separately for determining ALP. Interest has already been considered. Accordingly we hold that no interest can be imputed separately and additionally. We direct the Assessing Officer/TPO to delete the addition - decided in favour of assessee.
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2018 (12) TMI 1069
Income accrued in India - Revenues earned from a non-resident company on account of provision of services for executing contracts - deemed profit rate of 10% u/s 44BB - whether services rendered was not in the nature of Fee for Technical Services ('FTS') as defined u/s 9(l)(vii) of the Act and was not taxable under the provisions of sec 44DA r.w.s. 115A - Held that:- It is worth mentioning here that by Finance Act, 2010, amendment was brought in the proviso to section 44BB of the Act w.e.f 1.04.2011 whereby Section 44DA of the Act was inserted therein indicating that the provisions of Section 44BB shall not apply in respect of income referred to in that section. Finance Act 2010 itself specifically mentions that the above amendment shall take effect from 1st April 2011 and will, accordingly, apply to the assessment year 2011-12 and subsequent years. Memorandum explaining the provisions of Finance Bill, 2010 also makes it clear that these amendments assessment order proposed to take effect from 01.04.2011 and will, accordingly, apply to the assessment year 2011-12 and subsequent years. As in the case of DIT vs. OHM Ltd.[2012 (12) TMI 422 - DELHI HIGH COURT] held that income received from services rendered in connection with providing services in relation to extraction and production of mineral oil should be taxable under section 44BB as opposed to section 44DA of the Act and the amendment to the aforesaid sections by the Finance Act, 2010 could not have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation, so to take away the separate identity of Section 44BB of the Act Whether section 44BB is not applicable to second level contractors - Held that:- A plain reading of section 44BB of the Act envisages a non-resident service provider not merely engaged in the business of providing services or facilities in connection with prospecting, extraction or production of mineral oils but providing such services / facilities to a person / entity engaged in such activities. The said section does not distinguish between the main contractor or a sub-contractor. If the intention of the Legislature was to restrict the benefit of section 44BB of the Act to the main contractor only, then, the words after ‘the assessee engaged in the business of ‘providing services or facilities in connection therewith’ or ‘supplying plant and machinery on hire' ought to have been omitted. Hence, where the provision does not create any discrimination between the person who actually does the activity of prospecting for or extraction or production, and the person who renders services in connection therewith, the section cannot be narrowly construed. Levy of interest u/s 234B - scope of amendment of act - Held that:- The insertion of the proviso cannot be considered to have retrospective effect so as to expose a non-resident company to levy of interest u/s 234B of the Act for the assessment years prior to assessment year 2013-14. In the light of the above, we direct the Assessing Officer to not charge interest u/s 234B of the Act.
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2018 (12) TMI 1068
Levy of penalty u/s. 271(1)(c) - income admitted in the return filed in response to notice u/s 153A - A.O. has issued notice both u/s. 271(1)(c) and section 271AAA - Held that:- A.O. has given the said notice out of abundant caution. Prima facie satisfaction of the A.O. regarding the concealment was clearly exhibited in the assessment order. Hence, the CIT(A) has found no reason to hold that the penalty is liable to be quashed since the notice u/s. 271(1)(c)and 271AAA both were issued and notice u/s. 271AAA was not acted upon. We find that the reasoning given by the CIT(A) above is cogent. The assessee has received both notices. Notice u/s. 271AAA was issued by the A.O. under abundant caution only and it was not subsequently acted upon. As regards the striking off the relevant limb in the notice u/s. 271(1)(c) this issue was never raised before the ld. CIT(A). In our considered opinion, the adjudication of this issue needs reference to the original records in order to examine the veracity of the assessee’s claim, in view of the ld. CIT(A)’s finding that the penalty was levied on specific charge of concealment of income and noting that the assessee has pleaded that only notice u/s. 271AAAA was received. Hence, we deem it appropriate to remit this issue to the file of the CIT(A) only after factual examination of this claim, the case law on the issue cited above need to be considered. CIT(A) is directed to consider the issue and pass a speaking order. The penalty u/s. 271(1)(c) which are levied under the caption of Explanation 5A have to be levied irrespective of the fact whether the undisclosed income declared in search is disclosed by the assessee in the return of income furnished after the date of search. Hence, the assessee’s plea that the penalty should not be levied as the undisclosed income has been offered in the return of income pursuant to search cannot come to the rescue of the assessee. The case law cited by the ld. Counsel of the assessee in this regard with regard to the Kirit Dahyabhai Patel vs-ACIT, (2015 (1) TMI 201 - GUJARAT HIGH COURT) and DCIT-vs-Purti Sakhar Kharkhana (2013 (12) TMI 242 - ITAT NAGPUR) cannot help the case of the assessee as they were not rendered under the context of the penalty levied u/s. 271(1)(c) under Explanation 5A. Hence, we find that there is no infirmity in the order of the ld. CIT(A) upholding the levy of penalty on merits of the case. - Appeal of assessee is partly allowed for statistical purposes.
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2018 (12) TMI 1067
Reopening of assessment - addition in respect of renovation made in the house - assessment as time barred - no opportunity of being heard given to assessee - Held that:- Undisputedly the assessee was not a party before the Tribunal. Even no notice of hearing was given to the assessee by the Tribunal. We are of the considered view that the assessee was not given opportunity of being heard, therefore, relying upon judgment of Hon'ble Delhi High Court in the case of Rural Electrification Corporation Ltd. vs. CIT & Anr (2013 (7) TMI 317 - DELHI HIGH COURT) we hold that normal period of limitation would apply as per the notice issued u/s 148 of the Act and assessment framed thereafter is clearly barred by time. The assessment framed is hereby quashed for being time barred - Decided in favour of assessee.
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2018 (12) TMI 1066
Disallowance of loss made by the assessee on account of Derivative Trading - Held that:- Genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. through broker was duly established and the action of the authorities below in disallowing the claim of the assessee for the resultant loss in dealing in currency derivatives is not tenable. Therefore, delete the said disallowance and allow the appeal of the assessee. Disallowance u/s 14A r.w.r. 8D - Held that:- Admittedly, there is no exempt income earned during the year and hence not disallowance can be made u/s 14A r.w.r. 8D, as held by the Hon’ble Jurisdictional High Court in the case of CIT vs. Ashika Global Securities Ltd. [2018 (7) TMI 1425 - CALCUTTA HIGH COURT]. Also see CHEMINVEST LIMITED VERSUS COMMISSIONER OF INCOME TAX-VI [2015 (9) TMI 238 - DELHI HIGH COURT]
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2018 (12) TMI 1065
Revision u/s 263 - disallowance u/s 40(a)(i) - non deduction of tds payment to the non-resident u/s 195 and no remit to the Government account - Held that:- Point of allowability of deduction u/s 40(a)(i) in respect of payments which attracts the tax deducted at source under Chapter XVIIB is on remittance of such tax to Government account, but not before the year in which it was paid/incurred. It is a fact that the assessee has not complied with the provisions of section 195 and Chapter XVIIB of the Act. Therefore, till the expenditure was remitted to Govt. of India account, the assessee would not be entitled for the deduction. In the instant case, there is no dispute that the assessee has made the payment to the NRI and the payment attracts the TDS provisions u/s 195 of the Act and the assessee has neither deducted the TDS nor paid such tax to Govt. of India account. The assessee has claimed the expenditure in the impugned A.Y. and the same is covered by section 40(a)(i) and the AO has not examined the issue at the time of assessment. Therefore, the AO has committed an error in the assessment by not examining the issue which required to be examined consequently, which caused prejudice to the revenue. Therefore, we hold that Ld. Pr. CIT has rightly invoked the jurisdiction u/s 263 and we do not see any reason to interfere with the order of the Ld. Pr. CIT. - decided against assessee.
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2018 (12) TMI 1064
Addition of cash deposit as income from an unexplained source - Held that:- CIT(A) rejected the contention of the assessee that the cash was deposited out of the cash withdrawal from the bank without adducing the cogent reasons. The cash withdrawal has not been doubted by the authorities below, and nothing has been brought on records suggesting that the cash withdrawn from the bank has been incurred either as revenue expenses or capital expenses. In the absence of any documentary evidence, we can safely presume that the cash withdrawn from the bank was available with the assessee which was subsequently deposited with the bank. Therefore, we cannot treat the same as undisclosed income of the assessee. As regards the loan from the remaining parties, we note that both of them claimed to have generated agriculture income. But we find that such agriculture income was not declared in the income tax return. It was the duty of the assessee to disclose the agriculture income in return for the purpose of the correct calculation of tax liability under the income tax Act. In view of the said clear provisions in section 4 of the Act Chapter II and section 2 of the Finance Act, 2011, we have no doubt in our mind that agricultural income of an assessee has to be taken into consideration for the purpose of determining rate of tax that is applicable to his income. In the absence of disclosure of agriculture income in the income tax return, we cannot believe that the parties have generated agriculture income. With regards to other documents filed by the assessee in support of the cash loan transactions, we note that all these are internal and self-generated documents. Therefore, we are reluctant to place our reliance on the submission of the assessee. We note that the bank statement is not considered as books of accounts. Therefore, any sum found credited in the bank passbook cannot be treated as an unexplained cash credit. However, we note that the above order was not produced before the authorities below. Therefore, in the interest of justice and fair play we are inclined to restore this matter to the file of AO for fresh adjudication in accordance with the provisions of law and after considering the ratio laid down by the tribunal in the case of Rameshbhai Somabhai Patel (2004 (1) TMI 707 - GUJARAT HIGH COURT). Thus the ground of appeal of the assessee is allowed for statistical purposes.
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2018 (12) TMI 1063
Proceedings initiated u/s 153C - payment of cash against the property on behalf of the assessee-company over and above what is recorded in the sale deed - mandation of recording satisfaction - as per assessee no document belongs to the assessee were found and seized during the course of search and that no valid satisfaction have been recorded under section 153C in the case of the person searched - Held that:- It is well settled law that recording of the satisfaction by the A.O. of the person searched is a condition precedent for initiating action under section 153C. In the present case, no satisfaction under section 153C have been recorded in case of the person searched i.e., Manish Mehta group of cases. The language of the satisfaction note reproduced above clearly show that it is recorded in the case of the assessee on 13.06.2011 and notice under section 153C have been issued on 14.06.2011 by ACIT, CC-3, New Delhi who has framed the assessment under section 153C in the case of the assessee. It is, therefore, clear that no satisfaction note as required by Law have been recorded in the case of the person searched i.e., Manish Mehta group of cases in whose case search have been conducted. The statement of Manish Mehta was recorded on 11.09.2009 after the search and was subjected to cross-examination on behalf of the assessee in which the assessee pointed-out several infirmities and inconsistencies because Manish Mehta was not connected with the seller M/s. Honest Estate Pvt. Ltd., and he denied meeting any of the Directors of the assessee-company. He has also stated that at no point of time he takes any cash from the Directors of the assessee-company. He has stated that cash was received from a local Agent whose name and address he does not remember. Further Manish Mehta retracted from his statement, therefore, such statement has no evidentiary value because the Revenue has failed to record statement of any of the Agent who have allegedly received any cash against the sale of the property. No evidence have been found on record to justify payment of cash against the property on behalf of the assessee-company over and above what is recorded in the sale deed. The person who has recorded BAHIs found during the course of search was not subjected to cross-examination on behalf of the assessee. Initiation of proceedings under section 153C is invalid and bad in law - Decided in favour of assessee.
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2018 (12) TMI 1062
Income from House Property - rental income received from subletting - whether the assessee can be treated as owner or deemed owner of the subject property to consider the rental income received from subletting to Movielabs Films P. Ltd. as income from house property? - Held that:- Before treating the assessee as owner or deemed owner of the property for treating the income derived from subletting of the property as house property income, the Department must bring material on record to establish such fact. From the tenancy agreement submitted in the Paper Book it appears that the assessee is in possession/occupation of the property as a monthly tenant. Therefore, it was incumbent upon the AO to bring material on record to establish that the assessee is enjoying property having ownership rights - it is also necessary to examine whether the provisions of Section 269UA(f)(i) is applicable to the present case or not. Since the aforesaid factual aspects have not been properly examined before treating the rental income as income from house property, restore the issue to the AO for de novo adjudication. - Decided in favour of assessee for statistical purposes
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2018 (12) TMI 1061
Maintainability of appeal before CIT(A) - Taxes due on the returned income not paid by the assessee - Omission to comply with a mandatory requirement - Held that:- If tax due on income returned is paid even after disposal of the appeal by the CIT(A), if such payment is made the defect in the appeal due to noncompliance of a directory requirement of paying such tax before the filing of the appeal, stood removed. Ex consequenti the appeal should have been revived by the first appellate authority. In the present case, the taxes due on returned income is claimed to have been paid. Therefore, the appeal by the Assessee against the order of assessment should be admitted and adjudicated by the CIT(Appeals) on merits. If the admitted taxes are paid at a later point of time, then the appeal of the assessee should be considered as properly instituted and should be heard and decided by the CIT(Appeals) on merits. We set aside the order of CIT(Appeals) and direct the CIT(A) to decide the appeal on merits, subject to verification of payment of taxes due on the returned income. Assessee is allowed for statistical purposes.
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2018 (12) TMI 1060
Deemed dividend u/s. 2(22)(e) - as per AO common directors in both the assessee company and MPPL from whom assessee borrowed sum of ₹ 4 crores - plea of the assessee that it was not a shareholder in MPPL - Held that:- Since the Assessee in the present case is not a shareholder in the lender company, we are of the view that the action of the revenue authorities in bring to tax a sum of ₹ 4 Crores as deemed dividend u/s.2(22)(e) of the Act cannot be sustained and the said addition is directed to be deleted.- Decided in favour of assessee. Disallowance u/s. 14A - as disallowance is concerned, the same is only with regard to disallowance of ‘other expenses’ under Rule 8D(2)(iii) - Held that:- The argument advanced on this issue are general and vague. The computation has been done by the AO in accordance with the provisions of relevant Rule. No case has been made out by the assessee as to why the action of the revenue authorities in this regard are not correct. Hence this issue is decided against the assessee.
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2018 (12) TMI 1059
Gain on sale of investment - long term capital gain OR business income - Held that:- Without there being any material changes in facts for the year under consideration, there is no reason for the AO to deviate from the stand taken in earlier and subsequent assessment years. Hence, we are of the considered view that profit derived from sale of shares is assessable under the head ‘capital gains’ as declared by the assessee. The Ld.CIT(A), after considering relevant facts, has rightly directed the AO to assessee profit derived from sale of shares under the head ‘long term capital gain / short term capital gain. Disallowance u/s 14A by invoking rule 8D(2) - Disallowance of expenses incurred in relation to exempt income - assessee has earned dividend income from shares and mutual funds and claimed exemption u/s 10(38) - Held that:- Although the assessee has disallowed direct expenses being PMS charges and demat charges, but did not disallow interest expenses and other expenses. Insofar as interest expenses, the assessee has filed necessary evidences to prove availability of own funds. In view of the binding nature of decision of Reliance Power & Utilities Ltd vs CIT [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC Bank Ltd vs CIT [2014 (8) TMI 119 - BOMBAY HIGH COURT] once the availability of funds is established even though there is borrowed funds, then a general presumption is drawn in favour of the assessee that investment is made out of own funds. Therefore, the question of disallowance of interest expenses does not arise. Accordingly, we direct the AO to delete disallowance made towards interest expenses u/r 8D(2)(ii) of I.T. Rules, 1962. As regards other expenses .CIT(A) has directed the AO to restrict the disallowance to the extent of 2%, we find that considering the nature of expenses incurred by the assessee and quantum of exempt income, the rate applied by the Ld.CIT(A) appears to be on lower side. Therefore, to meet the ends of justice, we deem it appropriate to direct the AO to restrict the disallowance of expenses to the extent of 5% of total exempt income u/r 8D(2)(iii) for AY 2006-07 & 2007-08. Insofar as AY 2008-09, there is no dispute with regard to the direct expenses which have already been disallowed by the assessee on its own. Insofar as interest expenses, our findings given for AYs 2006-07 & 2007-08 holds good as the assessee has proved availability of own funds. As regards other expenses, from AY 2008-09 onwards rule 8D(2) came into picture and accordingly disallowance contemplated u/s 14A shall be determined by applying the prescribed formula provided u/r 8D(2)(iii). The AO has determined other expenses @0.5% of average value of investments.
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2018 (12) TMI 1058
Short grant of credit of advance tax - Rectification application u/s 154 - Held that:- The assessee has claimed for credit of advance tax paid of ₹ 33,70,59,363, in the return of income filed for the impugned assessment year. Whereas, AO while passing the final assessment order, has allowed credit for advance tax amounting to ₹ 33,60,13,160. According to the assessee, there is a short credit for advance tax paid amounting to ₹ 10,46,203. Notably, though, the assessee has filed an application under section 154 before the AO on 11th July 2017, pointing out the error in granting credit for advance tax, however, as submitted by the AR, the said application is still pending before the Assessing Officer. In due consideration of the aforesaid facts, we direct the AO to verify assessee’s claim of payment of advance tax and grant actual credit for the tax paid by the assessee. This ground is allowed for statistical purposes. Levy of interest u/s 234B - rectification application filed under section 154 - Held that:- As submitted by the assessee that, in fact, a refund of ₹ 5,22,35,371, is due to the assessee after deletion of addition made in the draft assessment order. Further, it is noticed that in the rectification application filed under section 154 of the Act before the Assessing Officer on 11th July 2017, the assessee has also raised the issue of mistake committee by the Assessing Officer in charging interest under section 234B. However, as submitted by the learned Authorised Representative, the said rectification application is still pending. In view of the aforesaid, we direct the Assessing Officer to verify assessee’s claim that interest under section 234B of the Act is not chargeable for the impugned assessment year and decide the issue after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes.
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2018 (12) TMI 1056
Penalty levied u/s 271(1)(c) - addition on account of foreign fluctuation loss and on account of disallowance u/s 40(a)(ia) - Held that:- Undoubtedly the penalty was levied on account of disallowance of the claim of loss of foreign exchange and disallowance of claim u/s 40(a)(ia). The assessee nowhere concealment the income or furnished the inaccurate particulars of income. In view of the above mentioned law disallowance of claim of the assessee nowhere attract the penalty. Therefore in the said circumstances and in view of the law relied by the Ld. Representative of the assessee, we set aside the finding of the CIT(A) on the issue and delete the penalty. - Decided in favour of assessee.
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2018 (12) TMI 1055
Allowability of business development expenses u/s 37 - providing cash discount upon insurance of vehicles- Held that:- The assessee failed to furnish adequate documents to support his claim of business expenditure particularly for providing cash discount upon insurance of vehicles which according to us is excessive and highly disproportionate to the expenditure incurred on this account in the earlier year. We find no justification in interfering with the order passed by the Ld.CIT(A). We, therefore, confirm the order passed by the Ld.CIT(A) on the disallowance to the tune of ₹ 9,66,659/-. - Decided against assessee.
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2018 (12) TMI 1054
TDS u/s 194C - non deduction of tds on the payment made to C&F agents - payment made to principal to principal - reimbursement of expenditure - Held that:- Mode of business of the assessee is that the customers desirous of sending their items to foreign countries used to approach the assessee, he then collects cargo from the customers and raises invoice on the customer along with airway bill on the basis of gross weight of cargo. The assessee thereafter sends such cargo to Clearing & Forwarding Agents (C&F Agents) for sending the same to the concerned foreign company as directed by the customer. The C&F Agents also incurred certain expenses where upon the C&F Agents raise invoices on the assessee broadly specifying two items; one being the agency charges and the other is the reimbursement of direct expenses. The assessee makes payments to such agents and the transaction thereby is completed. Thus it is a settled principle of law that the reimbursement of expenses to C&F Agents does not constitute income in the hands of the concerned C&F Agents and therefore TDS is not required to be deducted at source Reimbursement expenditure to the tune of ₹ 18,50,249/- is not liable to be disallowed u/s.40(a)(ia) as TDS is not required to be deducted since separate bills are raised by the commission agents. We, therefore, delete the addition made by the authorities below. As a result, the appeal is allowed in favour of assessee.
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2018 (12) TMI 1053
Addition u/s 69C - difference in outstanding balance shown in the books of the assessee as well as Starflex Sealing India Pvt. Ltd - Held that:- Though the assessee has made submissions before the Assessing Officer reconciling the difference, it has not be properly considered. The learned Commissioner (Appeals) has also sustained the addition in an unreasoned and mechanical manner since the assessee did not appear to represent its case. However, the issue is whether the addition can be made under section 69C of the Act. This aspect requires to be considered along with assessee’s claim that even if there is a difference it has to be allowed as bad debt. Since the aforesaid aspect has not been considered by the Departmental Authorities, restore the issue to the file of the Assessing Officer for denovo adjudication Addition of bogus purchases - AO has made the addition primarily for the reason that the notices issued under section 133(6) could not be served on the concerned parties - Held that:- Of–course, AO has also observed that the assessee failed to produce the concerned parties before him. However, it appears from the record that the assessee has furnished quantitative tally of the goods purchased it is also a fact that the Assessing Officer has not disturbed or doubted the sales affected by the assessee. In these circumstances, the entire purchases cannot be disallowed and treated as income of the assessee. Therefore, we direct the Assessing Officer to restrict the addition to 12.5% of the bogus purchases. Ad–hoc disallowance out of general expenses - Held that:- Assessing Officer has not pointed out which of the expenditures are not supported by bills and vouchers. In case, the assessee was unable to produce bills and vouchers in respect of specific expenditure, the Assessing Officer should have restricted the disallowance to such expenditure. Without doing so, the Assessing Officer cannot make any ad–hoc disallowance by simply observing that the assessee was unable to produce receipts bills to substantiate the expenses claimed. Accordingly, delete the disallowance Disallowance of set–off of brought forward of business loss - Rectification application filled - Held that:- here is no discussion either by the Assessing Officer or by the learned Commissioner (Appeals) with regard to the aforesaid claim of the assessee. Notably, though the assessee has filed an application for rectification under section 154 of the Act on 29th March 2013, however, it is still pending before the Assessing Officer. In view of the aforesaid, we direct the Assessing Officer to examine assessee’s claim and dispose off the application filed under section 154 - Assessee’s appeal is partly allowed.
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2018 (12) TMI 1052
Addition of unsecured loan u/s.68 - loan through RTGS and repaid through account payee/RTGS - Held that:- It is pertinent to note that in so far as companies incorporated under Indian Companies Act, whether private limited or public limited, they raise their share-capital through issue of shares though manner of raising of share capital in private company on one hand, and public limited company on other hand, would be different. Share capital and share premium are basically irreversible receipts or credits in the hands of the company. AO failed to appreciate this aspect while dealing with cash credit. The loans received by the assessee are not irreversible receipts in its hands. These are to be repaid. Therefore, angle of inquiry or degree of investigation in both these aspects would be little different. AO emphasised on the financial health of the creditors as well as their promoters. Whereas, the CIT(A) emphasised that the assessee has produced basic details of the creditors, their confirmations. Their existence is not in doubt and how they procured funds from TAPL. TAPL has confirmed all these aspects. Submitted details of loans given by it to those creditors of the assessee. Thus, the assessee has not only proved source but source of source also, which does not otherwise required under the law. Similarly, loan from SIPL was taken only for one day. It has been taking the loan through RTGS and repaid through account payee/RTGS. Bank details were submitted, then how could it be non-genuine ? Taking into consideration all these aspects, we do not find any merit in this ground of appeal raised by the Revenue. It is rejected. - Decided against revenue.
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2018 (12) TMI 1051
Allowability of the interest expenditure as a deduction u/s 57(iii) against interest income on FDRs - assessee for not opting for a premature encashment of the FDR's and rather raising a loan from the bank to facilitate purchase of residential property, was backed with the intent of protecting the interest income received from the fixed deposits - Held that:- In case of interest income earned by an assessee, only the expenditure (not being in the nature of a capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income is to be allowed as a deduction under Sec. 57(iii) of the Act. We thus, are of the considered view that as the interest expenditure of ₹ 37,84,593/- incurred by the assessee on the loan raised for purchase of property (against the security of FDR's), cannot be construed as having been laid out or expended wholly and exclusively for the purpose of making or earning of the interest income on the said FDR's, therefore, the same cannot be allowed as a deduction as against the interest income of the assessee - the existence of an inextricable nexus between the incurring of the interest expenditure and earning of the interest income is a pre-requisite condition for allowability of the interest expenditure as a deduction under Sec. 57(iii) of the Act. We find that our aforesaid view stands fortified by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Dr. V.P Gopinathan [2001 (2) TMI 10 - SUPREME COURT] - decided against assessee. Alternative claim of the assessee - as the interest expenditure was incurred on the funds borrowed for acquisition of a property, thus, the same would be entitled for deduction under Sec. 24(b) - Held that:- the interest expenditure incurred by the assessee on the loan raised by him, to the extent the same is relatable to the funds utilized by him towards purchase of his share of ownership in the residential property viz. Flat No. 201, Sea Goddess, Juhu, Mumbai, would be eligible for deduction under Sec. 24(b) of the Act. We thus, restore the matter to the file of the A.O, who shall after making necessary verifications allow the deduction of the interest expenditure under Sec. 24(b) of the Act to the assessee - decided in favour of assessee for statistical purposes.
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2018 (12) TMI 1050
Reopening of assessment - addition under the head peak credit of transaction of bogus purchases - Held that:- The issue of bogus purchase of diamonds from BJ group has been already been deliberated upon by the Tribunal and it stands decided. Facts of the case under consideration are almost identical to the facts of Vama International [2018 (2) TMI 1760 - ITAT MUMBAI]. In that case also the AO had added the entire purchases to the income of the assessee and the FAA had given part relief to the assessee. In the instant case, the assessee was denied the opportunity of cross examination though it had made a request to the AO during the assessment proceedings. By not allowing cross examination of the third party, whose statement was being used against the assessee, the AO had violated the basic principles of natural justice. Only on that count the order can be quashed. But, we are considering other factors. BJ has retracted his statement. So, the authenticity of the material relied upon by the AO reduces to a great extent. The supplier has admitted the transaction and the AO has not doubted the sales. It is also found that DD had filed VAT returns. Estimate the profit of 12.5% of the purchase from DD - addition invoking section 69C - Held that:- While deciding the appeal filed by the AO,we have decided the issue against the AO. Following the same, we decide ground no.6 in favour of the assessee. We are also of the opinion that provisions of section 69C are not applicable in case of alleged bogus purchases. Addition u/s 69C - Held that:- Since we have decided the issue of addition u/s 68 in favour of the assessee, the addition as sustained by the CIT(A) u/s 69C of ₹ 3,45,000/- is also ordered to be deleted.
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Benami Property
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2018 (12) TMI 1057
Offence under Benami Property Transactions Act - advance salary paid in cash to the appellants - Held that:- The property was never held by the appellants. The amount received by them have returned/adjusted towards salaries. Even the question of any arrangement in the present case does not arise as the appellants have received only advance salary from the employer under oral contract at the asking of the respondent, the same was immediately returned. The said factual position has not been denied by the respondent. This is also not a case where the person providing the consideration was not traceable or fictitious. The admitted position is that the management/employer was very much traceable, his statement was recorded, the money returned by the appellants was dealt by the department. The existence of the benami transaction has to be proved by the authorities i.e. the person who alleges the transaction (Sitaram Agarwal v. Subrata Chandra, (2008 (5) TMI 718 - SUPREME COURT). The authorities have failed to discharge the burden of proof. The authority has purely gone on the premise that cash is transferred from one person to another, with an object to defeat , demonetization. This is insufficient to establish a benami transaction. The transaction where cash is paid to person in lieu of a future promise cannot be a benami transaction as there is no lending of name. There can be no benami transaction if the future benefit is due from the person who is also the holder of property. The impugned order is not sustainable as it punishes the appellants for wanting to defeat the purpose of demonetization, which has no direct nexus with the Act and is beyond the purview of the Act.
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Customs
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2018 (12) TMI 1047
Suspension of empanelment as an approved RFID E-Seal vendor - case of petitioner is that the suspension howsoever temporary has brought about devastation of its commercial reputation besides resulting in a virtual blacklisting - RFID E-Seals were directed to be fixed on self-stuffed containers by exporters - Held that:- This Court is of the considered view that the action taken by the respondent is rather precipitate. What ought to have been done was that to supply whatever adverse material the respondent had considered, which led them to issue the impugned letters, including technical specifications which the petitioner was alleged to have violated, to it (the petitioner) - the most appropriate course would be to direct the respondents to furnish the relevant materials including test report and the other standards/technical specification, which required that the e-seal ought not to be readable in the unlocked position - petition disposed off.
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2018 (12) TMI 1046
Exemption on import High Density Polyethylene in the form of granules - Serial No. 477 of Notification No. 21/2002-Cus. - denial for the reason that the exemption is available only to High Density Polyethylene and not for HDPE compound - Held that:- The issue is settled in the case of Ratnamani Metal & Tubes Limited vs. CC, Kandla [2013 (8) TMI 851 - CESTAT AHMEDABAD], where it was held that In the absence of any support for the conclusion that the product imported by the appellant has been chemically modified or it is not known as HDPE in the market, the benefit of exemption under Sr. No. 477 has to be extended to the appellant - benefit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1045
Revocation of CHA License - contravention of regulations 10, 11 (a) (b) (d) (e) 11 (m) of CBLR, 2013 - Held that:- There is nothing on record that the appellant ever expressed his grievance before the senior authorities of the alleged coercion. In absence thereof and in absence of any evidence proving the statement to be incorrect, it stands established that the appellant had failed to observe his duties as custom broker as he was burdened with statutorily - the appellant has not produced any evidence contrary to the said statement. The only emphasis about KYC documents being mailed to him by Mr. Narula is not sufficient to satisfy that appellant was otherwise observing his statutory duties. The CHA is supposed to safeguard the interest of both the importers and the customs. A lot of trust is pose in CHA by the importers/ exporters as well as by the Govt. Agencies. - any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the regulation. Appeal dismissed - decided against appellant.
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2018 (12) TMI 1044
Penalty u/s 112(a) of CA - import of Polyester Waste - restricted item or not - Confiscation alongwith penalty - direction to re-export the goods - Held that:- The appellant is a first time importer of Waste Polyester Ropes and have bonafidely filed the Bill of Entry under First Check Basis. We further find that as per the report of CRCL, the goods under import are old, dull white ropes of assorted length and sizes. The said ropes are composed of Polyester Plastic other than Polymide (Nylon). The goods are more appropriately classifiable under Chapter 63 - no case of mis-declaration or conscious effort to import restricted goods is made out - confiscation set aside - penalty also set aside - clearance for home consumption on payment of duty allowed - appeal allowed.
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2018 (12) TMI 1043
Revocation of CHA Liense - time limit of issuance of the offence report - Held that:- There is a delay of more than two years after receipt of the offence report, for completion of the proceedings under the CHALR, 2004. In this regard, the CBEC had issued a Circular No. 09/2010-Cus. dated 08.04.2010 conveying a series of instructions with regard to various issues under CHALR. In paragraph 7.1 of the same, the Board has prescribed an overall time limit of nine months from the date of receipt of the offence report and has also prescribed time limits at various stages of the issue of Show Cause Notice, submission of enquiry report, passing of Order by the Commissioner of Customs, etc. The non-adherence of time limit of nine months from the date of issuance of the offence report to passing of order by the Commissioner, in the present case will vitiate the impugned Order - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2018 (12) TMI 1049
Initiating Corporate Insolvency Resolution Process - COC rejected the draft proposal received by RP from promoters - Held that:- In the light of the facts and circumstances stated in the Application filed by the RP, this Adjudicating Authority in exercise of powers conferred under Section 33(1)(a) of the I&B Code, 2016, proceed to pass the following order we order for liquidation of the Corporate Debtor viz., M/s. Jain Granites & Projects India Limited, which shall be conducted in the manner as laid down in Chapter III of part II of the I&B Code, 2016.
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2018 (12) TMI 1048
Corporate Insolvency Resolution Process (CIRP) - defaulted in making payment which is due for the cut and polished diamonds supplied by the Petitioner to the Corporate Debtor - Held that:- Petitioner has attached the relevant tax invoices and bank certificate to show that no payment has been received from the Corporate Debtor except an amount of ₹7,450/- on 18.10.2017. The Petitioner has annexed the demand notice, sent to Corporate Debtor as per section 8 of Insolvency and Bankruptcy Code, 2016, the invoices against which it claims the outstanding amount from the Corporate Debtor as well as the Bank Statements to show that payment of the outstanding default amount is not received from the Corporate Debtor in the bank account of the Corporate Debtor. The Corporate Debtor has not raised any dispute regarding the unpaid operational debt. The application made by the Petitioner is complete in all respects as required by law and it clearly shows that the operational debt has not been paid as also confirmed by the Corporate Debtor in its reply to the demand notice. Therefore, there is a clear default on the part of the Corporate Debtor in payment of outstanding amount to the Petitioner, and there was no existing dispute regarding the same. On perusal of the pleadings and documents submitted and the arguments of the counsel appearing for both the sides, we are of the view that the present case is fit for Admission under the Insolvency and Bankruptcy Code, 2016. The petition filed under Section 9 of Insolvency and Bankruptcy Code, 2016 is admitted.
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Service Tax
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2018 (12) TMI 1042
Maintainability of appeal - rejection of VCES Declaration - whether CESTAT was right in holding the Appeal as not maintainable in the Tribunal? - Held that:- An appeal under Section 85 of the Act, 1994 would lie against an order of rejection of a declaration passed by the Designated Authority under Section 106(2) of the Act, 1994. Payment of amount of service tax before the date of declaration of the scheme i.e. 10 May 2013 vis-a-vis applicability of the scheme - Held that:- For a valid declaration two of the essential conditions were that the proceedings for either declaration or recovery of the tax dues should not be pending on 1 March 2013, and secondly, that the tax should not have been deposited before the said date. In the instant matter, both the conditions are fulfilled - It would be for the Appellate Authority to take a decision in the Appeal. The matter stands remitted to the Customs, Excise Service Tax Appellate Tribunal, West Zonal Bench at Mumbai for taking a decision in accordance with the provisions of law and on its own merits - appeal allowed by way of remand.
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2018 (12) TMI 1041
CENVAT Credit - common input services which were used for both taxable and exempted services - Rule 6(3) of CCR 2004 - Held that:- As far as the services utilised in the Corporate Office on which they have taken the credit is concerned, there cannot be separate records for different projects (exempted and taxable). Therefore, the appellant had an option under Rule 6(3) of either reversing the proportionate amount of credit or paying 6% of the value of the exempted projects - impugned order upheld. As far as other demands confirmed in the impugned order are concerned, the appellant concedes the same. Penalties - Held that:- It is clear that the appellant has declared that they have maintained separate records in their return whereas they have not disclosed that they also are availing credit on common input services availed in the Corporate Office and have not reversed the proportionate amount of credit attributed to the exempted projects - penalty set aside. Appeal dismissed - decided against appellant.
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2018 (12) TMI 1040
Construction service - period involved is 2006-2009 - Site formation and clearance service - real estate projects at Silver County, Platinum County and other projects - non-payment of service tax - non-filing of periodical ST-3 returns. Construction service - period involved is 2006-2009 - Held that:- Hon’ble Supreme Court in the case of Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] and the decision of this very Bench in the case Real Value Promoters [2018 (9) TMI 1149 - CESTAT CHENNAI], the said activity will be exigible to service tax only under “Works Contracts Service” and not under Residential Complex Service as has been demanded in the impugned order. In view thereof, there is no hesitation in setting aside the demand of Rs. ? 83,77,188/- with interest thereon under the category of construction of residential complex service. The portion of the impugned order to the contrary demanding the aforesaid amount with interest thereon is set aside. Site formation and clearance service - Held that:- The site formation and clearance activity has obviously been done by the appellant by themselves, for themselves. Further neither the agreement for sale had not seen light of the day, nor were the buyers visible on the horizon, at the time when the site formation etc of the land was carried out by the appellant - such activity was a self service and hence the same cannot be exigible to service liability under the Finance Act,1994 - Demand set aside. Appeal allowed in toto.
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2018 (12) TMI 1039
Renting of immovable property - Tahbazari fee - liability of service tax - Held that:- Apparently and admittedly the authority is existing under the Municipal Act, 1960, as came into effect in furtherance of Article 285 of Constitution of India. Section 128 of the said Municipal Act clarifies that the amount received by the Nagar Nigam from the traders permitting them to carry out their activities within the municipal limits shall be collected in the form of the tax. The provision is sufficient to hold that the activity is intended to be a sovereign Act of the Nagar Nigam. The authority below has wrongly considered it as a service being rendered by the appellant to the said traders. In such scenario, emphasis on the definition of “renting of immovable property” under the Finance Act has no more significance - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1038
SEZ Unit - Refund of duty paid - N/N. 40/12-ST dated 20.06.2012 - Section 11A of the Central Excise Act, 1944 - Held that:- Inasmuch as the present impugned orders are by way of appeal proceedings against the denial of refund and inasmuch as in subsequent proceedings, such refund has been held to be admissible to the appellants, we find no merits in the impugned order of the Commissioner (Appeals) - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1037
Non-payment of service tax - Manpower Supply Service - collection of Deputation Charges for the above said service during the period from 16.06.2005 to 31.03.2007 - service tax for 01.04.2007 from March 2009 was only paid - Held that:- Tribunal in the case of M/s. Turbo Energy Ltd. Vs. C.G.S.T. & C.Ex., Chennai Outer & vice versa [2018 (9) TMI 1729 - CESTAT CHENNAI] placing reliance in the case of CST Vs Arvind Mills Ltd. [2014 (4) TMI 132 - GUJARAT HIGH COURT], has held that subsidiary companies cannot be said to be client of holding company and the deputation of employees was only for and in the interest of the company; there is no relation of agency and client - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1036
Classification of services - real estate agent services or not? - whether the assessee is liable to pay service tax on the developmental charges received for the service rendered as ‘Real Estate Agent’ to the members of the Society? Held that:- The appellant was indeed the seller of the housing plots to the members of the Co-operative society and had only received the sale consideration for the same without receiving any commission as Real Estate Agent thereof. Moreover, the developmental activities carried out by them would only be intended to fetch higher price for land and in any case, did not involve services to third parties - In any case, the appellant has sold the lands to the Co-operative Society at the rate of ₹ 136.36 per sqft. the same being the fixed rate of land by the statutory body. It is not the case of the Revenue that there was any extra payment/receipt as commission, which is not booked or that there was any cash transaction (on-money) involved over and above the booked amount - the appellant cannot be considered as Real Estate Agent for an amount not received since they have only acted as a ‘seller’ of the said land by virtue of Power of Attorney. The demand made under Real Estate Agent Service is unjustified - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1035
Classification of services - Import of service - Business Support Services or event management services? - event organized in Muscat relating to hiring equipment on rent for organizing the event in Muscat - it was alleged that the event organized by the appellant in UK and Muscat on 7.7.2006 and 24.4.2006 respectively was a part of their marketing strategy in promoting the channel and enlarge the subscriber base - reverse charge mechanism. Held that:- Undisputedly the appellant had paid the amounts of ₹ 1,36,99,550/- for organizing the events named as ETC/Loomba Trust Bollywood Concert . The amount paid to the overseas providers of said services was alleged by the Revenue to fall under the category of Business Support Service in as much as the services are in the nature of Operational Assistance for Marketing and liable to service tax under reverse charge mechanism under Section 66A of the Finance Act, 1994. The event was organized for the appellant by M/s. Concerto at UK, which involves various stages to make the event successful. The appellant paid service charges for undertaking the event by M/s. Concerto. Neither in the agreement nor in the invoices the object or purpose of the event reveals the role of M/s. Concerto was to promote the business or marketing of the appellant's channel. M/s. Concerto has carried out their job of organizing the event as per the agreement and the outcome of the event, whether increased customer base of the appellant or otherwise, is not their concern. The appellant had not received services under Business Support Services , but the service rendered by M/s. Concerto is correctly classifiable under Even Management Service and since the entire service is performed outside India, hence not taxable. Appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (12) TMI 1034
Valuation - Ayurvedic medicaments manufactured on job work basis - Rule 10A of Central Excise Rules, 2000 - period 01.04.2007 to 29.02.2008 - extended period of limitation - Held that:- As per the provisions of Rule 10A appellant is required to discharge the duty liability on the basis of sale price of the said goods - on merits there is no case for appellant. Time limitation - Held that:- The correspondences entered into by the appellant with P & G indicates that they were concerned with the issue but at the same time did not seek any clarification from the revenue authorities - Secondly, the appellant’s counsel was relying upon show cause notice dated 11.04.2008 to submit that the issue is hit by limitation, may also not carry their case any further as the adjudicating authority while adjudicating the said show cause notice clearly has recorded that the said show cause notice is up to 31.03.2007 - appellant’s case that revenue authorities were aware of the same issue before this adjudication is incorrect as the issue involved in that case was different and for a period up to March, 2007 wherein there was no provision for discharging duty liability under Rule 10A of the valuation rules, 2000. Penalty - Held that:- The penalty need not be set aside as appeal itself abates due to said demise of Shri C.L. Chadda. The appeal filed by M.s Elegant Chemicals is rejected and appeal of Shri C.L. Chadda abates.
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2018 (12) TMI 1033
Valuation - Job work - repacking of Cement into retail packs of different sizes - sale of goods on behalf of principal - Rule 8 of Central Excise Valuation Rules - inclusion of profit margin of 15% in assessable value - time limitation - Held that:- RBIL is discharging the duty liability on such bulk Ultramarine Robin Blue by considering the cost of production and 15% mark up as provided under Rule 8 of Central Excise Valuation Rules. It is not in dispute that RBIL is correctly discharging the duty liability as the bulk Ultramarine Robin Blue cleared is repacked and resold as Ultramarine Blue on behalf of RBIL. Provisions of Rule 8 would apply to RBIL and they accordingly discharged the duty liability. The formula which is sought to be applied for discharge of duty liability by the appellant is cost of raw material plus Job worker s charges and on this amount, the Central Excise Duty needs to be discharged. In the case in hand, appellant undisputedly is a job worker and includes the cost of job charges but while arriving at the raw material cost has considered only cost of production shown by RBIL in their invoice when they cleared the Ultramarine Robin Blue in bulk - In the case in hand, there being no dispute as to the fact that appellant is job worker of RBIL, has to consider the cost/ value of the raw materials. In the case in hand, raw material for the appellant is Ultramarine Robin Blue in bulk pack on which the duty liability is discharged by taking value of the cost of production plus 15% mark up. Appellant should have considered the value of bulk Ultramarine Robin Blue on which the principal has discharged the duty liability. Time Limitation - Held that:- Appellant had not brought this aspect of the valuation to the notice of the department and did not file any price declarations as was required during the relevant period. The first price declaration which was filed by him was in 2001 - appellant has no made out any case in his favour on the question of limitation also. Appeal dismissed - decided against appellant.
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2018 (12) TMI 1032
CENVAT Credit - input services - construction service - Civil constructions - banking and financial services - consulting engineering services - maintenance or repair service - contract service - club membership - insurance service - rent-a-cab travel by air services - denial on account of nexus - denial also on the ground of invalid documents. Duty paying documents - Rule 9 of Cenvat Credit Rules - Held that:- Rule 9 of Cenvat Credit Rules, require the assessee to mandatorily submit such documents as are mentioned therein. But perusal of record shows that details of bills have duly been submitted by the appellant as has also been acknowledged by the adjudicating authorities - Even if the documents as mentioned in Rule 9 (1) are not available, the competent authority as mentioned has a discretion to still allow the credit. In the present case, the documents placed have all the above mentioned details except for Service Tax Registration - There is no allegation in the show cause notice that the services have not been received by the appellant nor that they have not been accounted in the books of accounts of the appellant. In such circumstances, the denial of cenvat credit for want of STTG Certificate is not sustainable. Non-availability of Service Tax Registration - Held that:- Hon’ble High Court of Karnataka in the case of Commissioner vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT], wherein the credit was denied with regard to input services on the ground that in the bills Service Tax Registration is not mentioned and that the bills are not in the prescribed format - credit cannot be denied. Denial on the ground that these are not input services and also for want of evidence as that of contract/ agreement, drawing/design etc. - Held that:- In the present case there is no allegation in the show cause noticed that services in question were not received or not utilized by the Noticee. There is not even the allegation that services were not received under the cover of invoice and that the Service Tax was not paid. The documents placed on record as also been duly acknowledged by the adjudicating authorities below are in the form of invoices. The perusal thereof makes it clear that the payments for receiving the services mentioned therein i.e. of general insurance service, consultancy service, membership fee service etc. are being made by the company - credit cannot be denied. Time Limitation - Held that:- There is no other evidence of the Department to prove any act of the appellant to have an intention to evade the duty. As a result, the Department was not entitled to invoke proviso to Section 73 of Central Excise Act. The show cause notice for the demand beyond the normal period of one year is barred by time. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1031
Valuation - additional consideration flowing for the goods arising out of the difference in price between the clearances made to buyers who surrendered Advance License and others who did not - Rule 6 of the Central Excise Valuation Rules, 2000 - whether the transfer of advanced licenses are to be considered as a consideration for sale of the goods by the appellant to the buyers? Held that:- The transferred advanced licenses, can be beneficially used by the appellant for duty free import of the rawmaterials required for the manufacture in the appellant’s factory. Naturally it is obvious that certain benefit accrues to the appellant through the transferred advanced licenses. From the record it is seen that the demand for differential duty has been confined to only those cases where advanced licenses have been transferred in favour of the appellant though such prices have been charged from buyers who are EOUs as well as Deemed Exports, no demand for differential duty has been raised. In addition to the price being paid for the goods, the transfer of advanced import license in favour of the seller by the buyer enable the seller of the good to effect duty free import of the raw materials and brings out the cost of production. Hence, this constitutes additional monetory consideration which has to be added under the provision of Rule 6 of the Central Excise Valuation Rules - the Revenue was justified in adding such monetory value attributable to the transfer of advanced lincenses in favour of the appellant by the buyers. Time Limitation - Held that:- The show cause notice dated 24.10.2007 has raised the demand for the period November, 2002 to June, 2007; clearly the demand involves extended period of limitation - the appellant is entitled to a bonafide belief that such additional consideration is not required to be added - Revenue is not justified in invoking the extended period of limitation by alleging suppression of facts. Appeal allowed in part.
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2018 (12) TMI 1030
Excisability/marketibility - cinders - Section 3 of the Central Excise Act - Held that:- This Bench after considering the rival contentions has upheld the Order of the Supreme Court in the case of M/s. Ahmedabad Electricity Co. Ltd. [2003 (10) TMI 47 - SUPREME COURT OF INDIA] settling the issue that cinder is not an excisable product - there is no change with regard to facts nor is there any change in law between the period on hand and the above ruling and hence, the above ruling squarely applies to the case on hand - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1029
CENVAT Credit - penalty - Denial on the ground that the entire raw material has not been used in the final product as some part thereof being lost - Held that:- Department has conceded that had the washing process been undertaken by the appellant in its own factory, the entire credit would be available. Accordingly, denial of credit on raw coal is unjustifiable even in view of Rule 14 of CCR, 2004. Clandestine manufacture and removal - unaccounted raw materials - finished goods/ MS billets - penalty - Held that:- As is apparent from panchnama the estimation is based on presumption. There is no other evidence except the statements and the acknowledgement therein though without any retraction to prove the alleged shortage. Above all, Mr. Gopal Bordya is the third person as far as the Company as well as its Directors is concerned. The allegations of clandestine removal are serious. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - Once this is the situation, irrespective that the Central Excise duty as demanded stands paid, but the fact remains is that there is no evidence for alleged shortage. Mere statement as relied upon is highly sufficient. Also that the same has been paid well before the issuance of SCN. Resultantly, proviso to Section 11AC of the Act is applicable vide which the appellant was liable to pay the penalty only to the extend to 25% of the Central Excise duty involved. Penalty as imposed upon The Directors - Held that:- Though the Directors have been alleged to have not disclosed the facts and alleged short receipt of input to the Department which came to the notice of Department only at the time of visit but in view of above discussions, the cenvat credit as was denied by the Department on the input of the appellant, has been allowed, no mensrea of tax evasion can be attributed to the appellant Directors - keeping in view that the alleged short payment of Central Excise duty since has been paid by them and has not been demanded back, there is no infirmity in imposition of penalty upon the Directors - penalty upheld. Appeal allowed in part.
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2018 (12) TMI 1028
Job work for SSI units - Benefit of exemption N/N. 83/94-CE dt. 11.4.1994 - it was alleged that the principal manufacturer though required, but had not filed necessary declaration with their jurisdictional Assistant Commissioner - Held that:- The Hon’ble Supreme Court judgment in the case of Eagle Flask Industries Ltd case [2004 (9) TMI 102 - SUPREME COURT OF INDIA] observed that the declaration prescribed to avail the benefit cannot be considered as a mere formality and to be eligible to the benefit of exemption one must comply with the said condition. In the present case, to avail the benefit of notification No. 83/94-CE dt. 11.4.1994 by the job-worker, the principal manufacturer is required to file necessary declaration under the said notification with the jurisdictional authorities which has not been complied with. Extended period of limitation - penalty - Held that:- The Ld. Commissioner (Appeals) in the order recorded that even though the appellant had cleared the said goods without payment of duty no disclosure of such clearance was made by them in the relevant statutory records/ returns. Therefore, invoking of larger period of limitation and imposition of penalty by both authorities below are justified - However, while imposing penalty, both the authorities below, have not extended the benefit to discharge 25% of the penalty imposed under Section 11AC of the Central Excise Act, 1944, to which they are entitled under the said provision. Consequently, the impugned order is modified and benefit to discharge 25% of the penalty imposed is extended to the appellant subject to fulfillment of conditions laid down under Section 11AC of the Central Excise Act, 1944. Appeal allowed in part.
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2018 (12) TMI 1027
Clandestine removal - ‘CTD bars’ - utilization of raw materials, i.e. ‘MS ingots’ obtained from their suppliers - principles of natural justice - Held that:- The findings stand vitiated owing to the breach of the mandatory requirement of adjudication proceedings. Consequently, the show cause notice is required to be adjudicated afresh - the matter remanded back to the original authority with the direction that the submissions made by the appellants in personal hearing - appeal allowed by way of remand.
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2018 (12) TMI 1026
Valuation - inclusion of notional amount of freight for removal of goods from Haldia Refinery to Blending Plant at Paharpur - revenue neutrality - Held that:- The duty paid at the time clearance of the LOBs was availed by the appellant as Modvat Credit for payment of duty at the time of clearance of the manufactured lubricating oil. Any differential duty paid on the LOBs will be immediately available as Modvat Credit and hence this is clearly leading to a revenue neutral situation. The demand raised in the impugned order is not maintainable - Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1025
Benefit of duty free captive consumption to goods manufactured in a factory - N/N. 67/95-CE dated 16/03/1995 - Who is manufacturer - Held that:- Notification No. 67/95 dated 16/03/1995 which extends the benefit of duty free clearance for captive exemption within the factory. In the present case, it is not in dispute that Oxygen manufactured within the factory of H.E.C. is further consumed captively in the manufacture of other dutiable final products - In as much as, there is no dispute on these facts, the benefit of N/N. 67/95-CE, will be available for the goods irrespective of who is considered as the manufacturer. Appeal dismissed - decided against Revenue.
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2018 (12) TMI 1024
Valuation - inclusion of fix freight amount recovered from the outlets in assessable value - case of Revenue is that thses amount are not includible since these charges are not the actual transportation cost, but it is in the form of a fixed charge which is realized by the appellant - Held that:- This issue has been considered by the Tribunal in the Appellant’s own case INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PATNA [2007 (5) TMI 501 - CESTAT, KOLKATA], where it was held that the amounts recovered by the appellant were only towards the transportation charges and the same cannot be included in the assessable value - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1023
CENVAT Credit - capital goods - HS wagon - period of May, 2006 - Held that:- The capital goods has been defined under Rule 2(a)(A) of Cenvat Credit Rules, 2004, where certain goods have been specified by classification as well as by the description and such goods are required to be used in the factory of production of the final product. From the perusal of the definition of the “capital goods”, it is evident that the box HS wagon is classifiable under Chapter Heading 860692.90 which is not excluded from the definition of “capital goods”. The box HS wagon are being used for procurement of inputs as well as dispatch of output product from their factory. Going by the definition of the capital goods as extracted above, it can be seen that there is no bar on the use of the product as a capital goods, merely that the appellant has reversed the cenvat credit and interest thereon will not deprive from the substantive right for availing cenvat credit within Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1022
Clandestine removal - main allegation in the present case is that the production as shown in the books of account do not correspondent to the statutory register i.e. production register (DSA) and the ER-1 returns - corroborative evidences - Held that:- There are no corroborative evidence to suggest that the asessee has manufactured that quantity (which is alleged to have been cleared without payment of duty). To hold the assessee accountable for payment of duty on this account further evidences are essential in nature. The charge of clandestine removal and clearance is a serious charge against the manufacturer which is required to be discharged by the Revenue by production of sufficient and tangible evidence. In the present case, there is no evidence on record except the difference in figures of sale as per ER-I Returns and balance sheet. There is neither any cogent nor any credible evidence on record to prove any surreptitious removal of the finished products. The respondents have satisfactorily explained the difference between the figures as reflected in the Annual Financial Account and those entered in ER-I Returns. The confirmation of duty against the respondent is not justified - appeal dismissed - decided against Revenue.
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2018 (12) TMI 1021
CENVAT Credit - goods returned to the factory for being remade, refine, recondition and for other purposes - Section 16(2) of the Central Excise Rule 1944 - Held that:- There is no need for giving any intimation and the goods are received for being remade, refine and recondition, or for any other purposes. Rules, 16 does not prescribe any such procedure. It has been held in the case of CCE, JAIPUR VERSUS M/S. AMCO INDIA LTD. [2014 (12) TMI 119 - CESTAT NEW DELHI] wherein it has been held that there is no requirement for documents for the goods returned to the factory for the purpose on being remade, refine or recondition or any other purpose. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1020
CENVAT Credit - no physical verification of stock had been conducted by the Department to substantiate the allegations - principles of natural justice - Held that:- In absence of the inputs in question, the corresponding final products could not have been manufactured. Since the Appellant had been maintaining records, the Department ought to have shown how such records were incorrect to corroborate the statements of the transporter recorded by them. When there is a material on record to suggest otherwise than what has been concluded, a contradicting conclusion cannot be arrived at by disregarding the evidence and without discrediting the same. In the absence of any corroborative evidence, the contentions of the Revenue cannot be accepted. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1019
Classification of goods - reprocessed granules (RPG) - whether classified under heading 3902.10 and chargeable to duty or under 3926.90 with the benefit of Notification No. 15/94 CE dated 1/3/94 chargeable to Nil Rate of Duty? - provisional assessment - Held that:- The classification list does not indicate any endorsement to the effect that the assessment has been made provisional under Rule 9(B) of Central Excise Rules. The appellant has also not enclosed of RT 12 returns and the invoices of the relevant period to proof that there is no mention of the classification being provisional by a specific endorsement. Therefore, the classification list has been approved finally under Heading 3926.90. The approved classification list cannot be modified with retrospective effect. Extended period of limitation - Held that:- As the classification list was approved finally the demand cannot be raised by invoking the extended period of limitation treating the assessment to be provisional, which is not apparent from the facts and records of the case. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1018
CENVAT Credit - duty paying documents or not - invoices issued prior to registration by an ISD - Held that:- It has been consistently held that non-registration by an ISD is merely procedural in nature and hence credit cannot be denied - present issue is settled in favour of the assessee by the decision of the Hon’ble High Court of Gujarat in the case of CCEx., Vs. Dashion Ltd. [2016 (2) TMI 183 - GUJARAT HIGH COURT] - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1017
CENVAT Credit - duty paying documents - invoices issued by their registered office as input service distributor - Held that:- The Ld. Chartered Accountant, for the appellant, submits that because of the voluminous nature of the supporting documents, only consolidated statements were furnished, whereas they are in a position to submit invoices issued by the respective service providers in favour of the registered office. The matter needs to be remanded to the Adjudicating Authority for examination of the supporting documents so as to ascertain whether the appellant are eligible for the credit on the invoices issued by their registered office as input service distributor, under Cenvat Credit in January, 2007 - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (12) TMI 1082
Reopening of assessment - rate of tax - non-stick cookware and aluminum utensils - reopening on the ground that assessee having returned only 4% tax, for the turnover of non-stick cookware dealt with by the assessee; which was levied tax @ 12% - time limitation - Held that:- Clause (d) of sub-section (2) of Section 17D provides for reopening of assessment, but however only when there is fresh receipt of materials pertaining to tax evasion - In the present case, there is no fresh material obtained by the Department and the assessment was reopened only on the finding that there was a mistake in the return in so far as showing the tax leviable on non-stick cookware at 4%, as against the actual levy at 12% - the proviso to clause (d) enables reopening with the prior permission of the Commissioner, in which event the issue of fresh receipt of materials would not at all arise. Hence, when there is an order of the Commissioner definitely there could be a reopening made even in the absence of receipt of fresh materials. Time limitation - Held that:- There is no question of there being a limitation in so far as a reopening is concerned, either by receipt of fresh materials or by permission obtained from the Commissioner. Section 17D is a code by itself and is not controlled by the provisions of the KGST Act, which are in conflict with the scheme as envisaged therein. The issues decided herein cannot be reopened in the quantum appeal if at all filed - revision rejected.
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2018 (12) TMI 1016
Liability of tax - secondary machines which are in fact discarded by the petitioner-assessee on installation of a cone crusher - compounding proceedings - Held that:- Though the petitioner submits that the secondary crushers were discarded, there is absolutely nothing to show that the same were not being operated. In fact, the question of law raised by the petitioner, specifically No.4, indicates that the secondary crushers were discarded for reason of the two crushers being worn out, which indicates that the crushers are still existing in the unit. There is absolutely no document produced to evidence that the crushers having been removed or the AO intimated of such removal. The petitioner is obliged to satisfy the compounding fee for one primary crusher and two secondary crushers. The petitioner as per the second permission granted, has to satisfy the compounding fee for one primary crusher and one cone crusher for the two later quarters of the assessment year. Revision dismissed.
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2018 (12) TMI 1015
Imposition of penalty - Section 34(8) of the U.P. VAT Act, 2008 - alleged delay in deposit of TDS amount - April, 2009 to March, 2010 - Held that:- The facts being not in dispute and as have been noted above, it is clear that the default, if any, was cleared by the applicant-assessee together with interest about four years before issuance of the notice in the case of M/S Yadu Sugar Mill Ltd. Vs. The Commissioner Commercial Taxes [2018 (12) TMI 100 - ALLAHABAD HIGH COURT] a similar position of facts had given rise to the same questions of law as are involved in the present revisions. In that case, the penalties were deleted. Since the essential facts of the present cases are identical and the questions of law involved in such facts have been answered in the negative i.e. in favour of the assessee and against the revenue.
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2018 (12) TMI 1014
Recovery proceedings - KVAT Act - petitioner's contention is that the petitioner has inherited no property from his father. Therefore, he cannot be subjected to the recovery proceedings - Held that:- Indeed, the petitioner himself is not an assessee, nor has he owned any tax arrears to the Department. Instead, he was asked to answer the claim against his deceased father. The statutory mandate under Section 27 is unmistakable. A legal heir or representative is liable to answer the claim raised against the deceased only to the extent he has succeeded to the deceased person's estate. At any rate, that is a disputed question of fact - it will suffice if the District Collector, the 7th respondent, passes orders expeditiously on the petitioner's Ext.P9 application. If he has already heard him. Otherwise, he may hear the petitioner on the Ext.P9 and pass orders - petition disposed off.
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2018 (12) TMI 1013
Revision of assessment - non declaration of the taxable turnover - assessment years 2012-13, 2013-2014 and 2014-15 - Held that:- Perusal of the contents of the notice dated 14.07.2016 and the present impugned notice dated 24.08.2018 would show that they are one and the same in respect of the allegation with regard to the non declaration of the taxable turnover. Further, the present impugned notice does not anywhere indicate as if the earlier assessment made on 09.09.2016, is sought to be revised based on certain reasons and circumstances. The impugned notices, even though said to have been issued for revising the assessment already made, are not in conformity with the requirement of law for revising the assessment and therefore, the same cannot be sustained. However, the respondent, the Assessing Officer is entitled to give fresh notice for revising the assessment in accordance with law. Petition disposed off.
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2018 (12) TMI 1012
Penalty - Whether the refusal to exercise discretion by the learned Single Judge as against penalty proceedings was proper or not, especially considering the fact that the penalty proceeding taken was under Section 67 of the Kerala Value Added Tax Act, 2003? Held that:- When a penalty proceeding is initiated there is no question of a permission to file revised return, beyond the period of limitation - In the present case, the notice issued at Ext.P2 was dated 28.03.2018. The assessee has a contention that Ext.P3 communication seeking revised reruns was issued on 27.03.2018, a day before the proceedings had commenced. However, it is to be emphasised that the audited statement was filed long back on 16.05.2017, when the assessee definitely had the knowledge of the shortfall in the returns. There was no cause for the assessee to have, not sought for a revised return immediately thereafter. The Intelligence Officer had in attempting to find out the correct figures as per the audited report computed the tax evaded so as to determine the penalty; which is a permissible exercise. We hence leave the assessee to a statutory appeal which if filed within one month from today, shall be deemed to be properly filed in time and considered on merits. Appeal dismissed.
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2018 (12) TMI 1011
Validity of assessment order - TVAT Act - maintainability of petition - availability of alternative effective remedy of appeal - Held that:- The apex court in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai [1998 (10) TMI 510 - SUPREME COURT] observed that the alternative remedy may not come as a bar invoking the writ jurisdiction of this court under article 226 of the Constitution of India being plenary in nature and is not limited by any other provision of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition, but has imposed upon itself certain restrictions where an effective or efficacious remedy is available but under three exceptions the alternative statutory remedy may not operate as a bar in entertaining the writ petition filed under article 226 of the Constitution of India. Although there is no pleadings on record as to why the statutory remedy of appeal is not effective and efficacious remedy available under the Act, 2004, the reason prima facie appears to be a condition of pre-deposit as envisaged under proviso to section 69 of the Act, 2004 but that may not be a reason for this court to entertain the present writ petition under article 226 of the Constitution and this court is clear in its view that as long as the statutory remedy is available under the statute, it is advisable for this court to restrain from exercising its inherent jurisdiction under article 226 of the Constitution. It may be appropriate to observe that since the period of limitation is 60 days and that has expired pending writ petition, it is deemed appropriate to observe that if statutory appeal under section 69 of the Act, 2004 is being preferred by the petitioner, after due compliance of pre-deposit as mandated under section 69 - petition disposed off.
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2018 (12) TMI 1010
Penalty - Concessional rate of tax - forged and fake C-Form - Held that:- The facts are that Form-Cs were produced by the appellant, before the assessing authority. Those Form-Cs are fraudulent and fake. On a defence being put up that they were provided by the purchasers, the assessing authority tried to locate them but then admittedly, even the appellant is neither in a position to identify the dealer or the purchaser, who had supplied him with Form-C. Therefore, it becomes a case where Form-C was not tendered to the seller by any legal entity but by some elusive source which is unidentifiable. If such lee-way, concession or immunity is granted to such selling dealers, it will open a flood gate where large scale fraudulent forms seeking concessional rates of assessment will be used to avoid payment of taxes by putting the onus on non-existent purchasing dealers, who will only exist for argument or defence but not in reality. The revisional authority has already reduced the element of penalty from twice the assessed amount to as much as the assessed amount which is the least which could be done under Section 28 (1) of Chhattisgarh Commercial Taxes Act, 1994 - appeal dismissed.
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2018 (12) TMI 1009
Imposition of penalty - section 67(1) of the KVAT Act - assessment year 2009-2010 - Held that:- Indeed, the proviso is unambiguous, and it only insists that the appellant should remit 20 per cent. of the disputed tax to have the further proceedings stayed till the disposal of the appeal. There is no room for the authorities to insist that the petitioner, in addition, should provide any security-be it a solvency certificate or a simple bond. Under those circumstances, the demand cannot be sustained. Petition disposed off.
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2018 (12) TMI 1008
Revision of assessment - Jurisdiction - form "C" declarations - higher rate of tax - TNVAT Act - Held that:- Though the petitioner received the notice dated May 7, 2018, no objections were filed. Consequently, the proposal in the notice dated May 7, 2018, was confirmed and the impugned assessment order has been passed. The respondent being an assessing officer of the petitioner has no jurisdiction to revise his own assessment order, which itself is a revision of assessment and there is no such power vested with the respondent to pass the impugned order by invoking the power under section 84 of the TNVAT Act. The impugned revision of assessment is held to be without jurisdiction - petition allowed - decided in favor of petitioner.
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2018 (12) TMI 1007
Principles of natural justice - validity of assessment order - classification of goods - benefit of exemption - entry No. 69 of Part C of the First Schedule to the TNVAT Act - Held that:- The equipment would fall under entry No. 104 of Part B of the First Schedule and without applying the exemption, the rate of tax will be only 5 per cent. Issuance of Form-H - Held that:- In any event, form H has to be signed by the exporter giving registration number of the exporter under the provisions of the CST Act. Thus, it appears that it is mandatory for the person claiming exemption to produce form H declaration. So far as the claim of exemption is concerned, the petitioner has to produce form H mandatorily and without the same, the benefit of exemption cannot be granted. The matter is remitted to the respondent for fresh consideration - appeal allowed by way of remand.
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