Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 24, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Advance Ruling Application - Levy of GST - since the supply of scrap, will not be undertaken/is proposed to be undertaken, by the applicant, thus, this authority is not allowed to answer the question raised by the applicant, being out of the purview of Sec. 95 of CGST Act.
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Scope of advance ruling authority - Section 97(2), which encompasses the questions, for the ruling by this Authority does not deal with the issue of whether a GST registration should be surrendered. Hence, it is held that this authority does not have jurisdiction to pass any ruling on such matters.
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Reopening of portal for filing of Form TRAN-1/TRAN-2 - Input tax credit - the registered persons were not able to upload the Form GST TRAN-1 due to the glitches in the system - The respondents are directed to either open the online portal so as to enable the petitioner to file the Form TRAN-1 electronically, or to accept the same manually on or before 31.12.2019
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Release of detained goods - He cannot have the benefit of a segregated liability in the present context and the procedure prescribed for release of vehicle under the Uttar Pradesh Goods and Services Tax Act, 2017, cannot be avoided by the petitioner.
Income Tax
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Validity of Revision of Income Tax Returns (ITR) after the expiry of the due date prescribed under Section 139(5) on account of the pendency of proceedings for amalgamation of the assessee companies with other companies - it is incumbent upon the Department to assess the total income of the successor in respect of the previous assessment year after the date of succession.
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Addition u/s 68 - Reason for taking cash loan - The power to make additions under Section 68 of the Act of the un-explained cash credit, requires such an exercise to be undertaken by the authorities in a diligent, just and fair manner. But we do not find any such solemn exercise undertaken by the Authorities in the present case. - Matter remanded back.
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Penalty u/s 271F - assessee could not file the return of income because of preoccupation of the employment - there was a refund due, non filing of return of income within specified time u/s. 139(1) of the Act has to be considered as a bonafide belief and the said bonafide belief is to be treated as reasonable cause for non furnishing the return before the end of the assessment year. - No penalty
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Gains arising on buy-back of shares taxable u/s 46A or under section 45 - “Transfer” in section 46A - section 45 and section 46A operate in different fields. Section 45 covers actual capital gain on transfer of a capital asset but section 46A is about Deemed Capital gains on buy back of shares - section 46A is applicable in the present case.
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Not allowing the carry forward of the business loss - If any loss is not be allowed to be carried forward as discussed above, then the revenue has the power to deny the claim of the assessee in that very year only - However, the Revenue has no remedy/power to disturb such claim of the assessee in any other assessment year.
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Not accepting the revised return of income and disallowing the claim of loss - Submission of return for losses - there is no specific denial u/s 80 that the return filed u/s 139(3), which is considered the return filed u/s 139(1), cannot be revised u/s 139(5).
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Penalty u/s.271D - contravention of provision of section 269SS - Accepting Loan / Deposits in cash - transactions with the close relatives - Genuineness of the cash transaction has not been doubted. - No penalty.
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Payment of Referral fees to the Doctors by the Appellant - the regulations issued by MCI are qua the doctors/medical practitioners registered with MCI, and the same shall in no way impinge upon the conduct of the pharmaceutical companies. - the expenditure incurred on account of Referral Fees paid to Doctors is allowable as deduction u/s 37(1) of the Act.
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Assessment on the AOP - AO alleged that, the group of 8 persons was involved in the defrauding the custom duty - it is not necessary that there should be anything in writing for referring any group of persons as the AOP. What is required is that there should be common object and profit motive of the persons involved. - AO has rightly taken the value based on the valuation determined by the custom department.
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Deduction u/s 80IC - factory unit of the assessee falls within the notified area - Even if sales are made to three parties only, there is nothing wrong against the assessee. It may also be noted here that in respect of some items of manufacture, A.O. has allowed the claim of assessee in scrutiny assessment for earlier AYs - rule of consistency apply to the facts of the case.
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LTCG - Exemption u/s 54B in respect of gains on sale of agriculture land - two crop seasons in the two years preceding to the date of transfer, meets the legal requirement of law in section 54B of the Act.
Customs
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Imposition of Demurrage charges - It is only where a clear case of unquestionable delay, bordering on mala fides and demonstrative of unreasonable harassment of an importer, is made out, that the customs authorities can be mulcted with the liability to pay demurrage or detention charges - emurrage, to CELEBI, would be payable by the petitioners-importers in these writ petitions, and not by the Customs authorities.
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Duty free advance authorization - regularization of bonafide default by exporters - Revenue has failed to notice Para 4.28 of HBP relates only to cases of bonafide default in fulfilling export obligation and it would naturally not apply to the cases where there is no default like in the instant case.
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Import of restricted item - 100% EOU - import and clearance of fabric in to DTA without permission - shortage of stock - it was a mistake on the part of the department, show-cause notice could have been issued within normal period and not invoking extended period.
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Valuation of imported goods - While invoking Rule 5, no values of contemporaneous imports were taken for comparison; arbitrarily 30% has been loaded without any authority of law under Rule 5 and clearly the OIO transgressed the scope of remand. - No demand can be made.
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Valuation - Eligibility for ‘Franchise Discount’ and ‘Quantity discount’ - The discounts availed by the appellants are of commercial nature and no case has been made either on the basis of evidence in the form of higher contemporaneous prices or flow back of money, we find that the discounts have to be allowed - Demand set aside.
Indian Laws
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Dishonor of Cheque - section 138 of NI Act - forgery for the purpose of cheating - Since the document itself is forged, therefore, under no stretch of imagination, it can be held that the petitioner has been looking after day-to-day affairs of the company and is responsible for the offence under section 138 of the NI Act
Service Tax
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Refund of service tax - tax was erroneously collected - the time-limit prescribed u/s 104(3) of the Finance Act, 2017 is only directory, but however, the time as well as the procedure prescribed under Section 11B applies in full.
Central Excise
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CENVAT Credit - capital goods - Since the appellant had no profits in relevant Financial Years, even claiming of depreciation did not lead to double benefit - thus, compliance of Rule 4 (4) of Cenvat Credit Rules, 2004 has been made.
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Classification of goods - Bulk Milk Cooler - When the bulk milk cooler are in stationary stage and are used for cooling the milk so as to bring down the temperature to 4 degree centigrade with intention of storage and preservation, it is clear that the goods are for use as cold storage of Milk. - when the goods are covered by the exemption notification and there is no dispute about the use of goods, we are of the view that the intended benefit be given to the Appellant.
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Classification of services - Synthetic Filament Yarn - The moment the yarn is of multifilament nature, it goes out of Heading 5402. Therefore, as far as the tariff entries till 2004-05 are concerned, the assessee’s contention of classification under 5404.90 cannot be accepted. From 2005-06 also, the heading remains of synthetic monofilament yarn of 67 decitex or more. Therefore, from 2005-06 the Heading is not applicable to the appellants on the basis of the Chemical Examiners report.
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Extended period of limitation - Suppression of fact cannot be alleged on the basis of statements of dealers to conclude that the goods cleared in the past are also similar to the goods tested. Unless such goods are available and tested, nature of the goods cannot be established on the basis of oral submissions
VAT
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The discretion exercised by the Objection Hearing Authority under Section 74 of the Delhi Value Added Tax Act, 2004 while issuing direction for deposit of 5% of the amount can, by no stretch of imagination, be said to be illegal, unreasonable or excessive
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Ex-parte assessment - In view of the inter se dispute between the assessee and the tax consultant or merely on the complaint made by the department against the tax consultant, the Revenue should not suffer. Hence, the assessments concluded by the prescribed authority – respondent No.2 subjecting the petitioner to tax liability cannot be faulted with.
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Levy of Entry Tax - applicant is a dealer in regard to SIM Cards which are the essential part of services provided by the applicant - the SIM Cards, as they are not the goods, do not fall under the ambit of Sec. 3(1) of the Entry Tax Act, 1976
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Reversal of ITC on worn-out jewellery sent outside the state for manufacture and received back and sold within the State - TNVAT - mere fact that the manufacturing unit is located outside the State of Tamil Nadu cannot be the basis, for denial of ITC, under section 19(1) of the 2006 Act.
Case Laws:
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GST
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2019 (12) TMI 1007
Maintainability of Advance Ruling Application - Levy of GST - Scrap Generated from Labour job at our Vendor s Place - HELD THAT:- The applicant have themselves submitted that the scrap is the property of the vendors. Hence question with respect to taxability of sale/supply of such scrap can be raised only by the concerned vendors and not by the applicant - Hence in view of the provisions of Section 95 of the GST Act, since the supply of scrap, will not be undertaken/is proposed to be undertaken, by the applicant, thus, this authority is not allowed to answer the question raised by the applicant, being out of the purview of Sec. 95 of CGST Act. The application for advance ruling is rejected, as being non-maintainable.
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2019 (12) TMI 1006
Maintainability of rectification application - Application was filed beyond time limitation and is thus barred by time - HELD THAT:- In the present matter, the applicant's ARA order was passed by the authority on 12.10.2018, as per the documents submitted on record at the time of final hearing - On going through the record, it is seen that, the applicant has not provided any copies of contract, entered into by them with MCGM at the time of hearing. Therefore, the applicant's contention that such copies were submitted during hearing is not accepted. The applicant has filed rectification application on 10.10.2019 which is beyond the statutory limit of six months as prescribed under Section 102 of CGST Act/MGST Act, 2017. It is delayed and barred by limitation. Therefore, the said application is not found tenable under scope of rectification. The application for rectification is barred by limitation and not maintainable.
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2019 (12) TMI 1005
Scope of advance ruling authority - Section 97(2) of the CGST Act, 2017 - Surrender of Registration - GST Act - applicant is a charitable trust registered with Charity Commissioner, Mumbai, Maharashtra and engaged in running a school, providing educational services, as principal activity of the Trust - exempt supply/outward supply - HELD THAT:- in the instant case, the question which has been raised by the applicant is not pertaining to any of the matters mentioned in Section 97 (2) of the GST Act. In other words, Section 97(2), which encompasses the questions, for the ruling by this Authority does not deal with the issue of whether a GST registration should be surrendered. Hence, it is held that this authority does not have jurisdiction to pass any ruling on such matters. The question posed before us does not pertain to matter in respect of which an Advance Ruling can be sought under the GST Act - the impugned application is not maintainable.
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2019 (12) TMI 1004
Permission for withdrawal of application - Classification of goods - rate of GST - almond milk - entry 48 of Schedule II of Notification No. 1/2017-IGST(Rate) dated 1st July, 2017 - HELD THAT:- The Application in GST ARA Form No. 01 of M/s. Life Health Foods India Pvt Ltd., is disposed of, as being withdrawn voluntarily and unconditionally.
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2019 (12) TMI 1003
Confiscation of conveyance alongwith the goods - the petitioner is ready and willing to pay the amount computed by the respondents towards fine in lieu of confiscation of conveyance - section 130 of the Central Goods and Services Tax Act, 2017/Gujarat Goods and Services Tax Act, 2017 - HELD THAT:- The petitioner is ready and willing to deposit the amount determined in lieu of confiscation of conveyance in the notice issued in Form GST MOV-10 issued under section 130 of the CGST Act, the respondents are directed to forthwith release the conveyance in question upon the petitioner depositing such amount with them. The amount so deposited by the petitioner shall be treated as a deposit, subject to the final outcome of the proceedings under section 130 of the CGST Act. The respondent authorities shall afford the petitioner a reasonable opportunity of hearing and thereafter, pass an order under section 130 of the CGST Act. Petition disposed off.
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2019 (12) TMI 1002
Reopening of portal for Filing the Form GST TRAN-1 - transition to GST regime - CBIC Circular No.39/13/2018-GST dated 03.04.2018 - HELD THAT:- The factual position in the present case is not any different. At this juncture, it may be noted that as per Notification No. 49/2019 dated 09.10.2019 issued by CBIC, the date prescribed for filing of Form GST TRAN-1 under Rule 117 (1A) of the CGST Rules has been extended to 31.12.2019. This itself demonstrates that the Respondents recognise the fact that the registered persons were not able to upload the Form GST TRAN-1 due to the glitches in the system. It is not fair to expect that each person who may not have been able to upload the Form GST TRAN-1 should have preserved some evidence of it such as, by taking a screen shot. From the documents placed on record, it emanates that the Respondents have no cogent ground to deny the benefit of the Notification No. 49/2019 dated 09.10.2019 issued specifically to grant relief to taxpayers who faced difficulty in filing Form GST TRAN-1 due to technical glitches. Thereafter when he engaged in communication with the respondent, there was no genuine ground forthcoming except for stating that the due date for filing of Form GST TRAN-1 was over. The respondents to either open the online portal so as to enable the petitioner to file the Form TRAN-1 electronically, or to accept the same manually on or before 31.12.2019 - petition allowed.
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2019 (12) TMI 1001
Reopening of portal for Filing the Form GST TRAN-1 - transition to GST regime - CBIC Circular No.39/13/2018-GST dated 03.04.2018 - HELD THAT:- The factual position in the present case is not any different. At this juncture, it may be noted that as per Notification No. 49/2019 dated 09.10.2019 issued by CBIC, the date prescribed for filing of Form GST TRAN-1 under Rule 117 (1A) of the CGST Rules has been extended to 31.12.2019. This itself demonstrates that the Respondents recognise the fact that the registered persons were not able to upload the Form GST TRAN-1 due to the glitches in the system. It is not fair to expect that each person who may not have been able to upload the Form GST TRAN-1 should have preserved some evidence of it such as, by taking a screen shot. From the documents placed on record, it emanates that the Respondents have no cogent ground to deny the benefit of the Notification No. 49/2019 dated 09.10.2019 issued specifically to grant relief to taxpayers who faced difficulty in filing Form GST TRAN-1 due to technical glitches. Thereafter when he engaged in communication with the respondent, there was no genuine ground forthcoming except for stating that the due date for filing of Form GST TRAN-1 was over. The credit standing in favour of an assessee is property and the assessee could not be deprived of the said property save by authority of law in terms of Article 300 (A) of the Constitution of India. The respondents to either open the online portal so as to enable the petitioner to file the Form TRAN-1 electronically, or to accept the same manually on or before 31.12.2019 - petition allowed.
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2019 (12) TMI 1000
Reopening of portal for Filing of Form GST TRAN-1 - transitional credit - transition to GST regime - HELD THAT:- The factual position in the present case is not any different and petitioner is also entitled to similar relief. At this juncture, it may be noted that as per Notification No. 49/2019 dated 09.10.2019 issued by CBIC, the date prescribed for filing of Form GST TRAN-1 under Rule 117 (1A) of the CGST Rules has been extended to 31.12.2019. This itself demonstrates that the Respondents recognise the fact that the registered persons were not able to upload the Form GST TRAN-1 due to the glitches in the system. It is not fair to expect that each person who may not have been able to upload the Form GST TRAN-1 should have preserved some evidence of it such as, by taking a screen shot. From the documents placed on record, it emanates that the Respondents have no cogent ground to deny the benefit of the Notification No. 49/2019 dated 09.10.2019 issued specifically to grant relief to taxpayers who faced difficulty in filing Form GST TRAN-1 due to technical glitches. The respondents to either open the online portal so as to enable the petitioner to file the Form TRAN-1 electronically, or to accept the same manually on or before 31.12.2019 - Petition allowed.
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2019 (12) TMI 999
Reopening of portal for filing of Form TRAN-1/TRAN-2 - Input tax credit - HELD THAT:- The factual position in the present case is not any different. At this juncture, it may be noted that as per Notification No.49/2019 dated 09.10.2019 issued by CBIC, the date prescribed for filing of Form GST TRAN-1 under Rule 117 (1A) of the CGST Rules has been extended to 31.12.2019. This itself demonstrates that the Respondents recognise the fact that the registered persons were not able to upload the Form GST TRAN-1 due to the glitches in the system. It is not fair to expect that each person who may not have been able to upload the Form GST TRAN-1 should have preserved some evidence of it such as, by taking a screen shot. Many of the registered dealers/traders come from rural/semiliterate background. They may not have had the presence of mind to create any record of their having tried, and failed, to upload the Form GST TRAN-1. They cannot be made to suffer in this background, particularly, when the systems of the Repsondents were not efficient - From the documents placed on record, it emanates that the Respondents have no cogent ground to deny the benefit of the Notification No. 49/2019 dated 09.10.2019 issued specifically to grant relief to taxpayers who faced difficulty in filing Form GST TRAN-1 due to technical glitches. The respondents are directed to either open the online portal so as to enable the petitioner to file the Form TRAN-1 electronically, or to accept the same manually on or before 31.12.2019 - petition allowed.
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2019 (12) TMI 998
Reopening of portal for filing of Form TRAN-I - transitional credit - transition to GST regime - HELD THAT:- Issue decided in the case of ADFERT TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA AND ORS. [ 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT ] where it was held that The Respondents are directed to permit the Petitioners to file or revise where already filed incorrect TRAN-1 either electronically or manually statutory Form(s) TRAN-1 on or before 30th November 2019. The present petition is allowed with permission/modification to file the said Statutory Form TRAN-I by 31.12.2019.
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2019 (12) TMI 997
Reopening of portal for filing of Form TRAN-I - transitional credit - transition to GST regime - HELD THAT:- Issue decided in the case of ADFERT TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA AND ORS. [ 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT ] where it was held that The Respondents are directed to permit the Petitioners to file or revise where already filed incorrect TRAN-1 either electronically or manually statutory Form(s) TRAN-1 on or before 30th November 2019. The present petition is allowed with permission/modification to file the said Statutory Form TRAN-I by 31.12.2019.
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2019 (12) TMI 996
Grant of Bail - Fake/Bogus Firm - fake input tax credit claim - CGST Act - offence under Section 132 Sub-Clause (b) and (c) of the Act - HELD THAT:- Considering the contentions put forth by counsel for the Union of India, the bail cannot be granted - bail application rejected.
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2019 (12) TMI 995
Assessment to GST - Imposition of penalty - main contention raised therein was that the notification to apply EWay bill was not made known to the assessee - HELD THAT:- The notification to apply E-way bill mechanism was revised subsequently but was not notified to the assessee. In absence of information of application of E-way bill mechanism, the petitioner made the transaction, as per the procedure then existing with required declaration. The document in that regard were not considered by the Assessing Authority as well as by the Appellate Authority as compliance of E-way bill system was not made by the petitioner though it was not notified by the Government. The order for assessment and penalty was challenged in appeal for the aforesaid reasons. Ignorance of the judgment of a superior Court on the similar issue cannot be expected rather the appellate authority needs to be careful in future - The impugned orders are accordingly set aside with remand of the case to the Assessing Authority to examine the matter afresh in light of the law propounded by this Court. It would be without applying E-way bill mechanism. Petition disposed off.
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2019 (12) TMI 994
Release of detained goods - segregation of vehicle from the goods - section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - HELD THAT:- The heading is wide and clear enough to encompass within its fold this vehicle which has been seized along with the goods and as such, the writ petitioner cannot wriggle out of his liability to pay the amount as imposed in terms of section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017, for the purpose of release of his vehicle. He cannot have the benefit of a segregated liability in the present context and the procedure prescribed for release of vehicle under the Uttar Pradesh Goods and Services Tax Act, 2017, cannot be avoided by the petitioner. Petition dismissed.
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2019 (12) TMI 993
Profiteering - supply of Kit Kat 4 Finger 18 - allegation that the Respondent had not passed on the benefit of reduction in the GST rate - contravention of section 171 of CGST Act - penalty - HELD THAT:- On perusal of records, it is clear that the Respondent has indulged in profiteering in violation of the provisions of Section 171 (1) of the CGST Act, 2017 and has not passed on the benefit of reductions of tax given vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and Notification No. 06/2018 dated 25.01.2018 in respect of the 116 products as per the details given, to his customers and has thus profiteered an amount of ₹ 16,45,559/- therefore, he is liable for action under Rule 133 of the CGST Rules, 2017. Accordingly, a sum of ₹ 16,45,559/- is determined as the profiteered amount in respect of the 116 products including an amount of ₹ 14,62,981/- which has been profiteered in respect of 81 products on which the rate of tax was reduced from 28% to 18% and an amount of ₹ 1,69,379/- on 32 products on which the GST was reduced from 18% to 12% w.e.f. 15.1112017 and 3 products on which the tax rate was reduced from 18% to 12% w.e.f. 25.01.2018, as per the provisions of Rule 133 (1) of the CGST Rules, 2017 - The Respondent is directed to reduce the sale prices of the above products immediately commensurate with the reductions in the rates of tax as were notified on 14.11.2017 and 25.01.2018 respectively and pass on the benefit of reductions in the rates of tax to his customers. Penalty - HELD THAT:- The Respondent has profiteered an amount of ₹ 16,45,559/- as he has not passed on the benefit of tax reductions to his customers. It is also apparent that the Respondent has deliberately and consciously acted in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and hence he is liable for imposition of penalty under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 - Keeping in view the principles of natural justice, before imposition of penalty, a notice be issued to him asking him to explain why penalty should not be imposed on him under the above provision.
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Income Tax
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2019 (12) TMI 992
Exemption u/s 11 - admittedly the assessee got registration U/s 12AA from A.Y. 15-16 - Exemption claim from prospective effect that is from assessment year 2011-12 - HELD THAT:- Application seeking exemption from filing certified copy of the impugned order is allowed. Issue notice.
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2019 (12) TMI 991
Validity of Revision of Income Tax Returns (ITR) after the expiry of the due date prescribed under Section 139(5) on account of the pendency of proceedings for amalgamation of the assessee companies with other companies in the group under Sections 230-232 of the Companies Act, 2013 - Succession to business otherwise than on death - HELD THAT:- In the present case, the predecessor companies/transferor companies have been succeeded by the Appellants/transferee companies who have taken over their business along with all assets, liabilities, profits and losses etc. In view of the provisions of Section 170(1) of the Income Tax Act, the Department is required to assess the income of the Appellants after taking into account the revised Returns filed after amalgamation of the companies. We find that the learned Single Judge had rightly allowed the Writ Petitions. We accordingly set aside the impugned Judgment and Order dated 04.07.0219 passed by the learned Division Bench, and restore the judgment dated 30.04.2019 passed by the learned Single Judge. Accordingly, the Civil Appeals are allowed. The Department is directed to receive the revised Returns of Income for A.Y. 2016-2017 filed by the Appellants, and complete the assessment for A.Y. 2016-2017 after taking into account the Schemes of Arrangement and Amalgamation as sanctioned by the NCLT.
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2019 (12) TMI 990
Maintainability of the appeal - Stay of recovery proceedings - position to interdict the interim order under challenge - Main relief' sought for in the writ petition - HELD THAT:- The 'interim relief' sought for in the I.A. is virtually the 'main relief' sought for in the writ petition. It has been held by the Apex Court in Bank of Maharashtra v. Race Shipping and Transport Co. Pvt. Ltd. and Another [ 1995 (2) TMI 471 - SUPREME COURT] that no final relief can be granted in the form of interim relief. Proviso to Section 2(1) of the Act, 2006 clearly shows that no appeal is maintainable against an interim order passed by the learned Single Judge. Admittedly, the order dated 05.09.2019 is an interim order passed by the learned Single Judge in I.A. No. 1 of 2019. By virtue of the statutory bar, no appeal can be entertained against such an order. Unless the order finally adjudicates the lis, it cannot be treated as an order from which appeal lies. It is relevant to note that the Appellant / writ Petitioner is free to substantiate the contentions in the writ petition with regard to the 'main reliefs' and also as to the necessity to have the appeal / stay petition stated as filed before the 2nd Respondent to be finalized within a specific time. Similarly, the observation made by the learned Single Judge in the 'last sentence' of the order under challenge, that it is open for the writ Petitioner to move the Assessing Officer / 3rd Respondent to have relaxation in any manner and as to the alleged futility in this regard (having already moved the said authority and also the higher authority / 1st Respondent) could be highlighted in the course of final hearing. In the said circumstance, the appeal is dismissed as not maintainable, without prejudice to the rights and liberties of the Appellant to substantiate the merit involved with reference to the main prayers sought for in the writ petition.
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2019 (12) TMI 989
Validity of reopening u/s 147/148 - issue of limitation - HELD THAT:- The legislature has designedly not placed any time limit under Section 150, and reading a period of limitation into it, would be incorrect approach. In the present case, the date relevant for deciding the question of limitation in terms of Section 150(2), and the observations in Praveen Kumari [ 1998 (12) TMI 72 - PUNJAB AND HARYANA HIGH COURT] would be the date of the order of the CIT (A), which was passed on 05.10.2011 and was the subject matter of appeal. Thus, the limitation of six years under Section 149, must be alive on the date of passing of the order of CIT (A). In the present case since, as on 05.10.2011, the time limit for reopening of assessment for A.Y. 2009-10 had not lapsed, the order of the ITAT was well within the limitation. In view of the forgoing decision, we are of the view that the reopening of the assessment under Section 147, read with Section 150, was within the period of limitation. Needless to say that during the reassessment proceedings, the Asseessee will be entitled to lead fresh material and evidence to prove his entitlement to claim deduction under Section 80-IC for the AY 2009-10, before the AO, and this order does not in any way abrogate or limit his rights to justify his claim before the AO. The present petition is dismissed in the above terms.
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2019 (12) TMI 988
Addition u/s 68 - Reason for taking cash loan - HELD THAT:- From the record of the Assessing authority, we do not find any kind of examination of Affidavits or cross examination by the Assessing authority of these persons. The Affidavit of Mr.N.Rajagopalan, inter alia states that he is a retired employee of the Southern Railways and out of his retirement benefits received, he advanced a sum of ₹ 3,00,000/- (Rupees three lakhs only) to his brother's son who is the Managing Director of the Assessee Company. The other Affidavit of Ms.Dhanam shows that she has advanced a sum of ₹ 1,00,000/- (Rupees one lakh only) as loan to the Managing Director of the Assessee Company, from the amount received out of the business carried out by her husband and agreed to take interest at the time of final settlement. In the absence of any cross examination or rebuttal or controverting of these Affidavits, the learned Assessing Authority could not have concluded that the Assessee has failed to adduce the evidence to prove the identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. The Managing Director who was drawing a sum of ₹ 60,000/- p.a. as salary had advanced only a sum of ₹ 10,000/- out of the sum of ₹ 4,10,000/-. He has also stated in his Affidavit dated 05.09.2007 about the adverse legal consequences under Section 58A of the Companies Act, 1956, as the direct cash deposits will tantamount to the acceptance of Deposits, in violation of Section 58A of the Companies Act. Therefore, the Managing Director, for obtaining the required unsecured loan, had chosen the route of taking cash loans from his own relative and friend and had given the same to the Assessee Company without attracting Section 58A of the Companies Act. About the non- mentioning of the said fact in his own return of income, the said Managing Director has explained that since he was not maintaining the Books of Accounts and nor he furnished any Balance Sheet, he was not bound to give any note for the same in his Return of Income, as there was no statutory requirement for disclosing the personal cash loan taken by Managing Director in the Return of Income, where only income earned during the year is required to be disclosed and not the loan taken during the year. In the absence of maintaining of the Books of accounts, there was no question of producing the Balance sheet with the Return of Income, which was a reasonable explanation and these explanations of the Managing Director at least required the consideration on the part of the Assessing Authority as the said Assessing Authority enjoyed the powers of a Civil Court but he has not undertaken the exercise of cross examination in respect of the Affidavits filed by the Managing Director and two other persons as aforesaid. Without undertaking this exercise, the conclusions drawn by him in the Appeal proves that he has failed to discharge his duty and therefore such foundation less findings cannot be sustained, as they are perverse. The power to make additions under Section 68 of the Act of the un-explained cash credit, requires such an exercise to be undertaken by the authorities in a diligent, just and fair manner. But we do not find any such solemn exercise undertaken by the Authorities in the present case. The affirmation of findings without undertaking similar exercise also cannot be sustained. They just glossed over and mechanically affirmed the findings of Assessing Authority. Therefore, we are inclined to remit the case back to the Assessing Authority for the limited purpose of holding enquiry on the issue of additions made under Section 68 of the Act in the present case. We allow this Appeal filed by Assessee only for this limited purpose and remand the case back to the Assessing Authority without answering the Substantial Questions of Law at this stage and grant six months time to the Assessing authority to complete the said exercise.
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2019 (12) TMI 987
Reopening of assessment - low tax effect - HELD THAT:- As per circular No.17/2019 dated 08.08.2019, issued by the Central Board of Direct Taxes which came into effect from 08.08.2019, the above tax appeal may be dismissed on account of low tax effect,
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2019 (12) TMI 986
Software expenses for licence up to 2 years - allowable revenue expense - HELD THAT:- Toyota Kirloskar Ltd. [ 2013 (2) TMI 108 - KARNATAKA HIGH COURT] held that software expenses for licence up to 2 years is revenue in nature and is fully allowable as a deduction. Respectfully following this judgment, the Tribunal held in that year that the AO is directed to allow the deduction in respect of software expenses having licence period up to 2 years after considering and verifying the details furnished by the assessee. In the present year, as per para 27 of his order, it is noted by the learned CIT(A) that the Tribunal in the assessee s own case for Assessment Years 2004-05 and 2006-07 held that software expenses up to 2 years are allowable as deduction and directed the AO to allow the same. Learned CIT(A) has followed this Tribunal s order and decided the issue in favour of the assessee. Deduction u/s 10A - interest on loans to subsidiary company - deemed income under section 41(1) - HELD THAT:- Regarding the first aspect of interest amounting to ₹ 27.80 lakhs, we restore the matter back to the file of the AO for fresh decision, after examining the factual aspect as to whether the loan given to subsidiary is a loan given in ordinary course of business or not. We do so by following the judgment of Hon ble Karnataka High Court rendered in the case of CIT Vs. Hewlette Packard Global Ltd., . [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT] with observation that incidental activity of parking of surplus funds with the banks or advancing of staff loans by such special category of assessee covered under sections 10A or 10B of the IT Act is integral part of their export business activity but the factual aspect noted by Hon ble Karnataka High Court was this that parking of surplus funds with the bank or advancing of staff loans was in ordinary course of business of the assessee in that case. On this aspect, there is no finding of any of the authorities below in the present case as to whether the loan given to subsidiary company and staff advances were given by the assessee in ordinary course of business or not and hence, the AO has to examine this factual aspect and if it is found that such loan and staff advances are given by the assessee in ordinary course of business, then on resultant interest income earned by the assessee, deduction should be allowed under section 10A. Regarding the second aspect in respect of deemed income under section 41(1) of the IT Act, 1961, amounting to ₹ 107,62,841/-, we allow the claim of the assessee by following the judgment of Hon ble Karnataka High Court rendered in the case of CIT Vs. Wipro Ltd. [ 2012 (2) TMI 535 - KARNATAKA HIGH COURT] We find that this is true that note was there in the audited accounts for the year ended 31.03.2004 and present year both. In this note, only it was stated that one of the customers have agreed to settle consideration in respect of services rendered by assessee by transferring certain software programs along with annual maintenance services which amounted to ₹ 157.14 lakhs. Similar note is there in the audited account for the present year also and hence, the confusion has arisen as to whether this sale transaction of ₹ 157.14 lakhs is pertaining to Assessment Year 2004-05 or the present year or similar transaction is there in both years. Hence, we feel it proper to restore this matter to the file of the CIT(A) for fresh decision after examining the facts in this regard carefully and after providing reasonable opportunity of being heard to both sides and he should decide this issue by way of a speaking and reasoned order Disallowance of brokerage charges - HELD THAT:- We find that in para Nos.29 and 30 of his order, it is noted by the learned CIT(A) that it was explained by the assessee before him that the assessee has incurred this amount as brokerage charges for securing residential accommodation for its employees but no documentary evidence has been furnished by the assessee to support his claim. Before us also, no documentary evidence has been submitted by the learned AR of the assessee and hence, on this issue, we find no reason to interfere in the order of the CIT(A) and accordingly, ground No.7 is rejected. Disallowance on account of debonding charges - HELD THAT:- Disallowance respect of interest on debonding charges was upheld by learned CIT(A) with a categorical finding that the assessee has not furnished any documentary evidence in this regard. Before us also, no documentary evidence has been brought on record and hence, on this issue also, we find no reason to interfere in the order of the CIT(A).
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2019 (12) TMI 985
Assessment u/s.144 - whether the assessment order is barred by limitation u/s.153(1)(b) - HELD THAT:- Plain reading of the provisions of Sec.153(1)(b) it is evident that the said provisions applies only to AY 1988-89 or any earlier Assessment year and cannot be applied for AY 2008-09 as contented by the learned counsel for the Assessee. The assessment order was passed in the present case on 30.12.2011 and is well within the period of limitation as contemplated by the provisions of Sec.153(1)(a). AO rightly assumed jurisdiction and was well within his power to frame the assessment u/s.143(3) of the Act. We therefore find no merit in the argument advanced on behalf of the Assessee. Without an order of transfer u/s.127 of the Act having been passed by the Commissioner of Income Tax, the case of the Assessee for AY 2009-10 could not have been transferred from ITO, Ward-2, Shimoga to ITO, Ward- 3,Davangere - Admittedly, in the present case the Assessee on his own filed return of income before the ITO, Ward-3, Davangere, even though as per the PAN the jurisdiction was with ITO, Ward-2, Shivamogga. When ITO, Ward-2, Shivamogga issued notice u/s.143(2) of the Act dated 25.8.2010, the Assessee submitted that ITO, Ward-3, Davangere had jurisdiction over the Assessee. Thereafter the Assessee in reply to the notices u/s.142(1) of the Act took a plea that notice u/s.143(2) of the Act ought to have been issued by ITO, Ward-3, Davangere and since the notice u/s.143(2) of the Act dated 25.8.2010 was issued by the ITO, Ward-2, Shimoga, the ITO, Ward-3, Davangere cannot frame an assessment u/s.143(3) of the Act. It is for the first time in his letter dated 3.12.2011 that the Assessee took a stand that there has to be an order u/s.127 of the Act for transfer of jurisdiction from ITO, Ward-2, Shivamogga to ITO, Ward-3, Davangere. Assessment was getting time barred on 31.12.2011. The Assessee thus acquiesced to the action of the AO at Davangere in framing assessment for AY 2009-10. The Assessee never took a stand that the AO at Davangere had no jurisdiction. The Assessee cannot be allowed to blow hot and cold at the same breath. I am of the view that the AO at Davangere had jurisdiction and he validly assumed jurisdiction and was well within his powers to pass the order of assessment. We find no merits in the argument advanced by the Assessee. On merits of the addition made by the AO, no arguments were advanced by the learned counsel for the Assessee except stating that the presumptive income declared by the Assessee as per sec.44AF of the Act ought to have been accepted. AO has given reasons for his conclusions in determining the total income of the Assessee and there is no rebuttal of those conclusions drawn by the AO. Therefore confirm the action of the AO in framing the order of assessment as he did in the present case. - Decided against assessee.
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2019 (12) TMI 984
Penalty u/s 271 - non furnishing of the returns as required under section 139(1) - CIT(A) passed the order under section 154 confirming the penalty levied by the AO - HELD THAT:- There are two views are possible on the issue one is in favour of the assessee and the other one is against the assessee. When the two views are possible on the same issue and the issue which needs to be decided after debate and deliberations it is not permitted to make the rectification section 154 of the Act. It is settled issue that under section 154 of the Act, the authorities are permitted to rectify the mistake which is apparent from the record and in the instant case, there was no mistake which is apparent from the record and the issue required to be discussed deliberately and consider various case laws. Therefore, we hold that the order passed by Ld. CIT(A) u/s 154 is bad in law and unsustainable. Accordingly, we the cancel the order passed under section 154 of the Act and restore the original order dated 19-4-2018 and allow appeal of the assessee. Penalty u/s 271F - assessee could not file the return of income because of preoccupation of the employment - HELD THAT:- The department has not made out the case that the assessee required to pay tax which remained unpaid. The income tax return was refund return and the order of Hon ble ITAT, Kolkata in the case of Mrs. Manju Kataruka vs. ITO [ 2004 (4) TMI 262 - ITAT CALCUTTA-B] held that when there was a refund due, non filing of return of income within specified time u/s. 139(1) of the Act has to be considered as a bonafide belief and the said bonafide belief is to be treated as reasonable cause for non furnishing the return before the end of the assessment year. Considering the all the facts of the case that the assessee has filed the return of income within time allowed u/s. 139(4) of the Act, the return being refund return, the decision of Hon ble High Court of Bombay in the case of Trustees of Tulsidas Gopalji Charitable and Chaleswar Temple Trust vs. CIT [ 1993 (9) TMI 75 - BOMBAY HIGH COURT] we hold that there is no case for levy of penalty u/s. 271F of the Act. - Decided in favour of assessee.
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2019 (12) TMI 983
Revision u/s 263 - validity of reopening of the assessment - HELD THAT:- For deciding about the validity of reopening of the assessment, this aspect was open before CIT (A) that reopening was made for the allegation of accommodation entry of ₹ 65 lacs from Sri Aseem Kumar Gupta although no addition of ₹ 65 lacs was made by the AO in the assessment order passed u/s 147 rws 143 (3) of I. T. Act on 11.03.2013 and that order was under challenge before CIT (A) in that appeal which was pending before CIT (A) when the notice was issued u/s 263 by PCIT and the impugned order was passed by him. In our considered opinion, under these facts, this Judgment of Hon ble Madras High Court rendered in the case of CWT vs. Sampathmal Chordia [2001 (11) TMI 39 - MADRAS HIGH COURT] is applicable and respectfully following the same, we hold that learned PCIT had no jurisdiction u/s 263 in the facts of the present case and hence, we set aside the impugned order passed by PCIT u/s 263 - Decided in favour of assessee.
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2019 (12) TMI 982
Addition of interest income - assessee had earned interest on the deposits in its bank account out of funds received by the assessee to be used as its own and the claim of transfer of the interest income to the payer was in contravention to provisions of section 60 - HELD THAT:- We find that identical issue in the case of the assessee for the assessment year 2009-10 has been decided by the Tribunal in favour of the assessee CIT (A) has also made finding of fact that out of total interest earned by assessee interest related to this account. CIT(A) has also made a finding of fact that the conditions stipulated for grants of funds to the appellant clearly provides that interest earned on the deposits shall be utilized for cost of the projects by way of adjustment in the last instalment and therefore there was no difference between funds granted by the Government and the interest credited by the bank in the account of the appellant. We find that learned CIT (A) has correctly allowed relief to the assessee and we do not find any infirmity in his order. Expenditure was incurred on social responsibility activities - HELD THAT:- In comparison to the business turnover of the assessee, the amount incurred on community development and welfare is very miniscule amount and has been incurred to encourage a conducive atmosphere in the area of working of the assessee. In view of the fact, the finding of the ld. CIT(A) that expenditure has not been incurred wholly and exclusively for the purpose of business can not be said to be correct. The Tribunal in the case of National Seeds Corporation Ltd. [ 2018 (4) TMI 335 - ITAT DELHI] has held the above Explanation 2 to be prospective and not to be operated retrospectively. Since the assessment year involved in the instant case is A.Y. 2012-13, the above Explanation cannot be invoked in the case of assessee. Accordingly, the expenditure incurred of ₹ 5,99,893/- on community Development and welfare is allowed. Ground of appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.
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2019 (12) TMI 981
Gains arising on buy-back of shares taxable u/s 46A or under section 45 - Transfer in section 46A - charging provision for gains arising from buy-back of shares - HELD THAT:- Sections 45 and 46A operates in a different field. Section 45 of the Act is applicable regarding transfer of a capital asset whereas section 46A is applicable in respect of receipt of consideration from any company for purchase of its own shares. Since there is no requirement in section 46A of the Act that there has to be a transfer of shares, section 47(iv) of the Act is not applicable in connection with the issue covered by section 46A of the Act and hence, there is no merit in the argument that because of section 47(iv) of the Act, the capital gain in the present case is not chargeable to tax. We deal with the applicability of the judgment of the Hon ble Bombay High Court rendered in the case of Cadell Wvg. Mill Co. (P.) Ltd., Vs. CIT [ 2001 (2) TMI 105 - BOMBAY HIGH COURT] on which reliance has been placed by the learned AR of the assessee - Section 46A of the Act has been introduced in the statute book from 01.04.2000 and the issue involved is different and therefore, this judgment is not applicable in the present case where section 46A is applicable as per the department and in our considered opinion also. When shares can be held by nominees also, it is not impossible to hold entire shares of the subsidiary company by the holding company along with one or more nominees or by the nominees only without holding of any share by the parent company. Second reasoning given by us about non applicability of section 47 (iv) is this that in section 46A, there is no requirement of transfer of any capital asset being shares. Only requirement is that a shareholder receives a consideration from a company for purchase of its own shares and in that situation, subject to section 48, the difference between the cost of acquisition and value of consideration received by the shareholder shall be deemed to be the capital gains arising to such shareholder in the year in which, the shares are purchased by the company. There is no mention of the term Transfer in section 46A. Section 47 (iv) is regarding non applicability of section 45 to a transfer of a capital asset by a company to its subsidiary company if the parent company or its nominees hold the whole of the share capital of the subsidiary company. We have noted above that section 45 and section 46A operate in different fields. Section 45 covers actual capital gain on transfer of a capital asset but section 46A is about Deemed Capital gains on buy back of shares. We hold that in the facts of the present case, section 46A is applicable and therefore, we find no reason to interfere in the order of the CIT(A). - Decided against assessee.
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2019 (12) TMI 980
Disallowance u/s 14A - assessee submitted before the AO that the investments in SBI Mutual Fund were made out of own surplus funds and no funds were borrowed for this purpose - AO after recording reasons and following CBDT Circular No. 5/2014 dated 11.02.2014 made disallowance - HELD THAT:- Keeping in view the judgment of Hon ble Delhi High Court in the case Cheminvest Ltd. Vs CIT [ 2015 (9) TMI 238 - DELHI HIGH COURT ] - Further, in the case of IL FS Energy Development Company Ltd., [ 2017 (8) TMI 732 - DELHI HIGH COURT ] = [2017] 399 ITR 483 (Del) held that the Circular of the CBDT cannot override the provisions of the Section 14A. Hence, we hereby hold that the order of the ld. CIT (A) is not legally valid in confirming the disallowance made by the Assessing Officer. Claim of Excise Duty subsidy and interest subsidy - capital receipt OR revenue receipt - HELD THAT:- The similar subsidy has been allowed as capital receipt and also the issue of computation of profits u/s 115JB has been examined by the Co-ordinate Bench of Tribunal in M/s Dhanuka Agritech Ltd. [ 2019 (11) TMI 750 - ITAT DELHI ] wherein the appeal of the assessee is allowed. The same is squarely applicable to the facts of the instant case. Further, the matter stands squarely covered by the order of the Hon ble Jammu Kashmir High Court in the case of Shri Balaji Alloys Vs CIT [ 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT ] - Appeal of the assessee on the ground of Excise Duty subsidy and interest subsidy as capital receipt is hereby allowed. Claim of education cess as an allowable expenditure - Allowable deduction u/s 37 - HELD THAT:- The similar issue of allowability of cess u/s 37 has been examined in ITC LTD. [ 2019 (4) TMI 1574 - ITAT KOLKATA ] wherein the amount of the cess paid has been held to be an allowable deduction. We find that in the case of Chambal Fertilizers and Chemicals Ltd. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT ] held that in view of the Circular of CBDT where the word cess is deleted, the claim of the assessee for deduction is acceptable. In that case, the Hon ble High Court held that there is difference between the cess and tax and cess cannot be equated with the cess. Hence, keeping in view the provisions of the Act, Circular of the CBDT and judicial pronouncements, we hereby hold that the assessee is eligible to claim the deduction of the cess as per the provisions of Section 37 of the Income Tax Act.
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2019 (12) TMI 979
Revision u/s 263 - adequate enquiry on the core issue - AO disallowing only 2% of gold purchases from Unregistered Dealers in cash is erroneous and prejudicial to the interest of the Revenue - HELD THAT:- Revisionary jurisdiction u/s 263 of the Act can be assumed by the Pr.CIT only in case where there is no enquiry conducted by the Assessing Officer, whereas in this present case it is already demonstrated before us that there has been adequate enquiry on the core issue of URD purchases by the Assessing Officer. This fact also accepted by the Ld. DR and moreover the Ld. DR could not bring on record any other decision or evidences contradicting these existing facts on record. That also, regarding the binding judgments referred to by the Ld. AR of the assessee, the Ld. DR could not bring on board any other contrary view of other High Court or the Apex Court. In view of the matter and on examination of facts on record and the binding principles enshrined from the judicial pronouncements referred hereinabove, we are of the considered view that the Ld. Pr.CIT was not correct in resorting to revisionary jurisdiction u/s 263 of the Act and therefore, we quash the order passed u/s 263 of the Act. - Decided in favour of assessee.
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2019 (12) TMI 978
Deduction u/s 36(1)(viia) of provision for nonperforming assets (NPA) - disallowance on the grounds that no provision made under the head Provision for bad and doubtful debts for the year under consideration - as held by AO that the net balance of other provisions have actually decreased in respect of last year balance and since it shows overall decrease in provisions, the same needs to be disallowed - HELD THAT:- The terminology Reserve for NPA has been used by the assessee in accordance with the RBI directions. As is evident from the assessment order, the assessee has indeed created Reserve for NPA . For claiming benefit under the provisions of Section 36(l)(viia)(a) the conditions to be satisfied is: that provision for bad and doubtful debts should have been made by the bank eligible to claim such deduction. Cooperative Banks do not strictly follow the provisions of Banking Regulation Act for the purpose of maintaining their Books of Accounts. In our considered opinion, the assessee has created provision for bad and doubtful debts may be under different nomenclature. This will not dis-entitle the assessee for claiming deduction under the provisions of Section 36(l)(viia)(a). The purpose for creation of reserve for NPA is same i.e., creating provision towards bad and doubtful debts. Thus, in view of the facts of the case and judicial pronouncements in the above state cases the assessee will be entitled to deduction u/s 36(l)(viia) to the extent of provision made for bad and doubtful debts . The A.O is therefore directed to allow the full deduction as claimed by the assessee in the computation of income and not to restrict it - Decided in favour of assessee.
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2019 (12) TMI 977
Reopening of the assessment u/s 147 - addition on account of accommodation entry - addition of unexplained deposit - HELD THAT:- Notice u/s 148 have not be served upon the assessee and no further evidence have been produced on record, if any attempt have been made to serve the notice upon the assessee personally. A.O. in the assessment order has noted that notice u/s 148 have been served later on through affixture for which no record have been produced to satisfy the requirements of Law whether notice through affixture have been served in accordance with Law. These facts considering the fact that incorrect address have been recorded in the speed post record would clearly reveal that no notice under section 148 have been served upon the assessee. Therefore, assumption of jurisdiction under section 147 is clearly illegal and bad in Law. It may also be noted here that the A.O. in the reasons recorded for reopening of the assessment has merely recorded that ₹ 15 lacs accommodation entry taken by the assessee has escaped assessment. However, at the re-assessment stage, A.O. made further addition of ₹ 52.91 crores on account of deposits in the bank account of the assessee. No reasons have been mentioned as to why such addition have been made and what was the purpose in making the addition. The entire deposit in the Bank account of the assessee could never be unexplained. Even the Investigating Agency have not made any allegation against the assessee if that amount was an accommodation entry taken by the assessee ? D.R. admitted that no notice have been issued by the A.O. while proposing to make this addition of ₹ 52.91 crores. We are of the view that A.O. has recorded non-existing, incorrect and wrong facts in the reasons recorded for reopening of the assessment. A.O. did not applied his mind to the report of Investigation Wing. A.O. merely believed report of Investigation Wing without making further scrutiny at the assessment. The A.O. merely reproduced report of Investigation Wing without making further scrutiny of the same. The A.O. merely reproduced report of Investigation Wing and crux of statement of Shri Kishori Sharan Goel for reopening of the assessment in the matter. It was merely a borrowed satisfaction without application of mind. Initiation of re-assessment proceedings in the instant case is illegal, bad in law and is liable to be quashed. In this view of the matter, we set aside the orders of the authorities below and quash the reopening of assessment under section 147/ 148 - Decided in favour of assessee.
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2019 (12) TMI 976
Not accepting the revised return of income and disallowing the claim of loss - Submission of return for losses - Whether the assessee can claim the losses for the current year in the return revised under section 139(5)? - Whether the loss on account of FDR s maintained with MMCBL and written off is eligible for deduction under the head business and profession? - HELD THAT:- A return filed under section 139(3) of the Act is considered a return filed under section 139(1) of the Act and accordingly all the provisions of subsection (1) of 139 of the Act shall be applied to the return filed under section 139(3) of the Act. Thus there remains no ambiguity that a return filed under section 139(3) of the Act is considered a return filed under section 139(1) of the Act and accordingly we hold that the same can be revised under section 139(5) of the Act. Similarly, we also note that there is no specific denial under section 80 of the Act that the return filed under section 139(3) of the Act, which is considered the return filed under section 139(1) of the Act, cannot be revised under section 139(5) of the Act. Once a return filed under section 139(3) of the Act has been considered a return filed in the section 139(1) of the Act which implies that all the provisions of section 139 of the Act will be equally applicable. In holding so we find support and guidance from the judgment of Hon ble High Court of Gujarat in the case of PCIT Vs. Babubhai Ramanbhai Patel [ 2017 (7) TMI 744 - GUJARAT HIGH COURT] We hold that the assessee cannot be denied the benefit of the loss to be allowed carried forward under the provisions of subsection 139(3) read with section 80 of the Act in a situation where the loss was claimed in the revised return of income. On this technical count, the assessee succeeds. Eligible for deduction for the FDR s written off against the business income of the assessee - HELD THAT:- Any loss on account of FDR s written off cannot be denied merely on the ground that the impugned interest income was offered under the head income from other sources. We also note that the activity of the assessee for investing its money as FDR s is a normal business activity despite the interest thereon is offered to tax under the head income from other sources - See BIHAR STATE CO-OPERATIVE BANK LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1960 (2) TMI 8 - SUPREME COURT] - We also note that the investment written off by the insurance company was allowed as deduction treating the same as business loss. Thus we hold that the impugned loss claimed by the assessee is allowable deduction under the head business and profession. Hence the ground of appeal of the assessee is allowed. Not allowing the carry forward of the business loss - HELD THAT:- If any loss is not be allowed to be carried forward as discussed above, then the revenue has the power to deny the claim of the assessee in that very year only. If the revenue has omitted to do so, the remedy provided under the Act for the revenue to invoke the provisions of section 154 of the Act or 263 of the Act or 147 of the Act for that very assessment year as the case may be and depending upon the facts and circumstances. However, the Revenue has no remedy/power to disturb such claim of the assessee in any other assessment year. There were several assessments carried out by the Revenue pertaining to the assessment years 2007-08, 2009-10 and 2010-11 but claim of the assessee was not disturbed in these assessment years. Thus the issue in the case on hand has reached the finality and the same cannot be disturbed until and unless there is a mechanism provided under the Act. Hence, we hold that claim for the brought forward losses for the earlier years cannot be denied to the assessee in the year under consideration. Thus the ground of appeal of the assessee is allowed.
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2019 (12) TMI 975
Penalty u/s.271D - contravention of provision of section 269SS - Accepting Loan / Deposits in cash - transactions with the close relatives - reasonable cause in accepting the loans within the meaning of section 273B - HELD THAT:- Provision of section 269SS was brought under the statue to discourage the assessee to justify their unaccounted money. However, in the case on hand, there is no allegation that the assessee has introduced unaccounted money in his business. Thus, keeping in view the object of the provision of section 269SS of the Act the cash transaction which is genuine cannot be brought under the net of tax under the provision of section 269SS of the Act. We also note that such transactions between the relatives and sister concern are not subject to the provisions of section 269SS of the Act in view of the order of Bangalore Bench of ITAT in the case of G.D. Subraya Sheregar vs. Income-tax Officer, Ward 2, Udupi [ 2006 (4) TMI 356 - ITAT BANGALORE] where the issue was decided in favor of the assessee. Genuineness of the cash transaction has not been doubted. Therefore, the penalty levied u/s 271D of the Act is not sustainable. - Decided in favour of assessee.
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2019 (12) TMI 974
TP Adjustment - ALP adjustment in respect of assessee s corporate guarantee provided to its overseas associate enterprise (AE) - HELD THAT:- CIT(A) has followed his detailed discussion in assessment years 2007-08, 2009-10 and 2010-11 in assessee s case itself deleting identical ALP adjustment on the ground that a corporate guarantee does not amount to an international transaction in view of various judicial precedents i.e. Bharti Airtel Ltd. Vs. Addl. CIT [ 2014 (3) TMI 495 - ITAT DELHI] , M/s Videocon Industries Ltd. vs. ACIT [ 2015 (2) TMI 631 - ITAT MUMBAI] have also taken note of corresponding amendment in sec. 92B by way of explanation vide Finance Act, 2012 w.r.e.f 01.04.2002. We thus affirm the CIT(A) s findings going by the very analogy reject the Revenue s instant first substantive grievance. Addition u/s 14A r.w.s. 8D as well as consequential u/s 115JB computation - HELD THAT:- We notice herein as well hon'ble jurisdictional high court s decision in CIT vs. Ashika Global Securities Ltd [ 2018 (7) TMI 1425 - CALCUTTA HIGH COURT] holds that the impugned disallowance does not apply in absence of any exempt income. The same takes care of both the foregoing limbs of the impugned disallowance since the latter aspect of MAT computation has no legs to stand. This tribunal s decision in VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] has also settled the law that sec. 115JB MAT does not apply in case of sec. 14A disallowance. The Revenue fails in its second substantive grievance as well. Disallowance of foreign exchange loss - HELD THAT:- there is no dispute on facts so far as all the corresponding items of the impugned foreign exchange loss are concerned. The Revenue s twin arguments, inter alia, are that Assessing Officer had rightly declined the impugned foreign exchange loss on the ground that neither there was any business exigency involved in cancellation of the assessee s forward contracts involving net loss of ₹51,77,406/- nor the sum of ₹74,39,71,483/- on account of revaluation; PCFC and ECB i.e. pre-shipment in foreign currency and external commercial borrowings; respectively could be taken as revenue items u/s 37(1) being notional capital loss(es). We see no reason to accept either of Revenue s twin arguments. Hon'ble apex court s decision in S.A Builders Ltd. vs. Commissioner of Income Tax [ 2006 (12) TMI 82 - SUPREME COURT] has settled the law that the department cannot claim itself to be put in arm cheker of the businessman or the board of directors to decide as to in what manner a particular business is to be run. Taxpayer has also placed on record its bank advice regarding cancellation of forward contracts, accounting standards AS-11 prescribed by the ICAI stipulating that effect of exchange rate different in instances involving unsettled or unsecured transactions of foreign exchange during the relevant accounting period have to be recorded in the books. Case law i.e. DCIT vs. Bank of Bahrain and Kuwait [ 2010 (8) TMI 578 - ITAT, MUMBAI] holds that such losses are allowable u/s 37(1) of the Act. We hold in this factual backdrop that the CIT(A) has rightly deleted the impugned former loss figure disallowance. Repayment / revaluation of foreign currency PCFC loan - HELD THAT:- The assessee admittedly recognized its revaluation loss qua its PCFC loan which had been availed exclusively for export import business. The relevant bank records to this effect forming part of case file suggests that the same was meant for importing coking coal and export of metcok only. There is further no indication that the impugned loans from M/s Standard Chattered Bank and M/s Yes Bank PCFC accounts had been availed for acquiring any capital asset - foreign exchange loss on account of revaluation of business loans in foreign currency deserve to be treated as revenue items allowable u/s 37 of the Act since incurred wholly and exclusively for the purpose of the assessee s business. - Decided against revenue.
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2019 (12) TMI 973
Revision u/s 263 - sufficient, adequate and proper enquiry on certain points made by AO or not - HELD THAT:- JCIT Range-2, Sambalpur prepared a proposal for revisional proceedings u/s.263 and ld ACIT, Sambalpur in the order sheet dated 14.1.2019 created an explanation from the AO that the AO should have asked the assessee produce documentary evidence related to its business like bills and vouchers, details of documents of sale of flats but the assessee failed to submit the same before the AO during the scrutiny assessment. Therefore, he alleged that in real estate business with high closing stock, the information about estimated cost of construction of the project, estimated sale value of the project, selling price of individual flats, period of construction etc should have been examined before completion of scrutiny assessment but the ld ACIT failed to consider that it was a case of limited scrutiny only on two points and from the assessment order dated 21.3.2017, it is clearly discernible that the AO has made enquiry and deliberation on both the points and as per CBDT Circulars (supra), he is not allowed to travel beyond the ambit of the points for which, case was selected for limited scrutiny. ACIT, who was not having revisional power u/s.263 wrongly alleged that the AO has not made enquiry on certain points. Therefore, we are unable to agree with the conclusions drawn by ld PCIT in paras 10 11 of the impugned order and hold that the assessment order is neither erroneous nor prejudicial to the interests of the revenue and the AO has made sufficient enquiries, investigations and examination on both the points. Consequently, the revisional proceedings, issue of notice and impugned order u/s.263 of the Act is quashed. - Decided in favour of assessee.
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2019 (12) TMI 972
Addition u/s 68 - Unsecured cash credit - HELD THAT:- CIT(A) found a reconciliation of fund flow, and thereafter observed that addition under section 68 was not required to be made in the hands of the assessee. CIT(A) has recorded a finding of fact that nothing has been retained by the assessee, which has been considered as unexplained cash credit. The assessee has explained fund flow i.e. demonstrating transactions were back to back, and were in the nature of accommodation entries. Characterization of income - CIT(A) has held that alleged ₹ 1,57,10,000/- was not earned from any business activity but from other sources of income - Contrary to the above factual finding of the ld.CIT(A), neither Revenue has filed any evidence, nor assessee has filed any paper book. It has not been brought to our notice, as to how these analyses are contrary to the record. Therefore, we are of the view that the ld.CIT(A) has made a lucid analysis of the record available before her, and appreciated the controversy in right perspective. We do not find any merit in the ground of appeal raised by the Revenue challenging deletion of ₹ 9.33 crores as well as ground of appeal raised by the assessee pleading therein that the income of ₹ 1,57,10,000/- ought to have been assessed as business income instead of income from other sources . Not to grant set off of unabsorbed depreciation and business loss from granite business under the head income from business - We do not find any merit in this ground of appeal, because, the ld.CIT(A) has rightly observed that the income of ₹ 1,57,10,000/- is not a income from any regular source of business, rather it is income from other sources, and therefore, it would not qualify for grant of set off. No details have been supplied by the assessee before us in this regard. Retaining income which was offered to tax by the appellant - CIT-A not restricting the same at loss from rotation of funds in the guise of software business by ignoring the principles of real income theory - HELD THAT:- Since no explanation was furnished by the assessee regarding this entry, the same was treated non-genuine and made addition to that extent and worked out a total addition of ₹ 20,99,934/-. However, the ld.CIT(A) observed that since the assessee has already offered an income of ₹ 45,53,000/- in the books of accounts, which is more than the addition worked out, no separate addition was required. Accordingly, the ld.CIT(A) restricted the addition to ₹ 45,53,00/- which was disclosed by the assessee in the return of income. To contradict finding of the ld.CIT(A), there is nothing placed before us by the assessee either in the form of explanation or in the form of paper book. Therefore, we do not find any merit in the grounds of appeal of the assessee. It is rejected.
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2019 (12) TMI 971
Penalty u/s.271(1)(c) - additional income was offered to tax by the assessee as a result of search proceeding carried out u/s 132 - whether the assessee can be visited with the penalty with respect to the income disclosed by him in such proceedings voluntarily and without finding any incriminating document during the course of search ? - HELD THAT:- There cannot be any penalty under explanation 5A to section 271(1)(c) of the Act until and unless it supported on the basis of incriminating document. At the time of the hearing, a query was raised to the Ld. DR whether the income disclosed by the assessee in pursuance to the search was based on the incriminating document, but he failed to bring any material on record. Therefore, in the absence of any documentary evidence, we infer that the additional income offered to tax and addition of other business income cannot be subject to the penalty under explanation 5A to section 271(1)(c) of the Act. Penalty u/s 271AAB - assessee has disclosed additional income in pursuance to the return filed under section 153A - HELD THAT:- Penalty shall be imposed under section 271AAB of the Act where there is undisclosed income within the meaning of the explanation C to 271AAB of the Act. However, we note that there was no documentary evidence found by the search team suggesting that there was any undisclosed income of the assessee. As such the voluntary income disclosed by the assessee and the addition made by the AO was without having found any incriminating document in the course of search. We also note that there no reference made by the authorities below to the documents of incriminating nature having bearing on the income of the assessee in their respective orders. The ld. DR has not advanced any arguments against the contentions raised by the ld. AR for the assessee. See M/S. MARVEL ASSOCIATES VERSUS ACIT, CENTRAL CIRCLE-2, VISAKHAPATNAM [ 2018 (3) TMI 946 - ITAT VISAKHAPATNAM] - Decided in favour of assessee.
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2019 (12) TMI 970
Benefit of deduction u/s 80P(2) - interest income received - basis of declining claim of deduction u/ s 80P(2) is that the surplus funds deposited in bank account would partake character of 'income from other sources' but not 'income from business' - HELD THAT:- In the present case, the undisputed fact is that the assessee society is required to deposit 25% of its profit as mandated by section 43(2) of the M.P./ Chattisgarh Societies Act, 1960. Hence, the assessee is under legal obligation to keep 25% of its profits as reserves. Any interest accrued there on would certainly, in our considered view partake character of business income of the assessee. Hence, it would be eligible for deduction. Therefore, the A.O. is directed to allow deduction on the interest earned out of amount so reserved by the assessee i.e. 25% of profit transferred to reserves. A.O. ought to have allowed the expenditure incurred for the earning of the interest income, when he treated the same as 'income from other sources' - We find merit into the contention of the assessee that the set off of expenditure incurred ought to have been allowed by the A.O. When the interest income is charged to tax, the expenditure incurred for earning of such income would certainly be deductible. We direct accordingly. The A.O. would allow the deduction of expenditure incurred for earning of the interest income. We would like to clarify that the allowance of expenditure is restricted to the interest income, which has not been treated as a business income, in view of the discussion herein above. Both the grounds of the assessee are allowed in terms indicated herein above. Appeal of the assessee is allowed.
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2019 (12) TMI 969
Income from sale of land - Business income or capital gain - assessee in revised return of income has declared the gain on sale of land as Capital Gains , whereas, the stand of Revenue is that the gain on sale of land is assessable under the head Income from business - HELD THAT:- The sequence of events and the documents available on record fairly indicates that the intention of assessee was not to engage in the business of trading in subject land. It was standalone transaction carried out by the assessee. The contention of the Revenue that in the original return of income the assessee had declared gain arising from sale of land as business income and it was in the revised return that the assessee declared the gain from sale of land was an afterthought, is not sustainable. The provisions of the Act has granted liberty to the assessee to revise the returns with the object of removing any mistakes / errors in the computation of income or head of income. If the assessee in the original return of income has inadvertently mentioned the head of income as business income, it does not mean that it becomes sacrosanct and the assessee cannot change the head of income in the revised return. Taking into consideration the entirety of the facts, we are of the considered view that the transaction of sale of agricultural land by the assessee is not adventure in the nature of trade. The gain arising from sale of land is assessable under the head Capital Gains . Disallowance of cost of improvement over the land - HELD THAT:- Though the voluminous paper book filed before the Tribunal by the assessee, the ld. AR has certified that all the details were available before the AO, however, it is not clearly emanating from records whether the expenditure claimed by the assessee ₹ 3.74 crores was part of expenditure already allowed by the AO. Since, there is ambiguity on facts on this issue, we deem it appropriate to restore this issue back to the file of AO for re-examination. The assessee is directed to furnish relevant details of expenditure before the AO and also clarify whether expenditure of ₹ 3.74 crores is part of the expenditure already allowed by the AO. The AO shall decide this issue de novo after affording reasonable opportunity of hearing to the assessee, in accordance with law.
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2019 (12) TMI 968
Rectification petition u/s 154 - rectify the computation of adjusted book profits and allow the deduction being lower of brought forward loss and unabsorbed depreciation - HELD THAT:- The assessee had actually carried forward the amount of ₹ 18,69,57,957/- to the next years and not the net amount after adjustment of debit balance in the Profit and Loss account. If the debit balance of profit and loss account would have been adjusted against General Reserve in the FY 2007-08 (AY 2008-09), then the opening balance as on 01-04-2008 would not have been ₹ 18,69,57,957/-. As such, it is clear that the assessee had not adjusted the brought forward losses of earlier years with the General Reserves. Hence, the observation of the learned CIT(A) that the entire brought forward losses has been adjusted against General Reserve in books of accounts is not correct. Whether waiver of a loan is capital receipt or revenue receipt? - We note that this issue is no longer res integra . Waiver of a loan certainly cannot be reckoned as transaction of a kind usually taken but it is an item of exceptional and non-recurring nature. A capital surplus on account of waiver of loan in no way can be recorded as operational profit or profit which is to be included in the profit loss account. See M/S. JSW STEEL LIMITED [ 2017 (4) TMI 47 - ITAT MUMBAI] as held that waiver of a loan is a capital receipt therefore, it cannot be adjusted with brought forward business losses. Based on the facts narrated above, we note that section 115-JB is a stand-alone provision which does not contain any provision about carry forward of B/F losses, while computing the Book Profit u/s 115-JB of the Act. Audited accounts of the company clearly suggests that the assessee had never adjusted the brought forward losses/debit balance of Profit and Loss account with the General Reserve. Sum of ₹ 18,69,57,957/- credited in the General Reserve account was a Capital Receipt hence, it should not to be considered in computation of book profit u/s 115JB of the Act.The Ld. A.O. failed to take into account that the restriction, contained in Sec.72 of the I.T. Act on carrying forward the unabsorbed business losses for more than 8 years, does not apply in computing the Adjusted Book Profit u/s 115JB of the Act.Therefore, we direct the AO to allow the claim of the assessee for adjusting the unabsorbed losses of ₹ 2,95,24,689/- with the book profits under section 115-JB of the Act, for the year. Payment of Referral fees to the Doctors by the Appellant - allowable deduction u/s 37 - HELD THAT:- The action as had been suggested on the violation of the code of conduct is only for the medical practitioners and not for the pharmaceutical companies or allied health sector industries. Thus, it is viewed that the regulations issued by MCI are qua the doctors/medical practitioners registered with MCI, and the same shall in no way impinge upon the conduct of the pharmaceutical companies. As a logical corollary to it, if there is any violation or prohibition as per MCI regulation in terms of Explanation to section 37(1), then the same would debar the doctors or the registered medical practitioners and not the pharmaceutical companies and the allied healthcare sector for claiming the same as an expenditure. In view of the above judicial precedents, the expenditure incurred on account of Referral Fees paid to Doctors is allowable as deduction u/s 37(1) of the Act. Hence, we direct the Assessing Officer to delete the addition paid to the Doctors as referral fees.
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2019 (12) TMI 967
Reopening of assessment u/s 147 - assessment on the AOP and consideration of the members of the AOP - AO had the information from the DRI wherein it was alleged that the group of 8 persons was involved in the defrauding the custom duty - HELD THAT:- AO in the income tax assessment proceedings has to form a prima-facie opinion that the income has escaped assessment based on the tangible documentary evidence. As such the AO is not under the obligation to reach to the conclusion that there is actually escapement of income. Thus we are of the view that the AO has derived his satisfaction based on the tangible materials received from the DRI. Reopening u/s 147 of the Act was initiated within the period of 4 years from the end of the assessment year in which notice u/s 148 was issued. Thus in such case, we are of the view that the prima facie opinion was based on the tangible material which is sufficient to initiate the proceedings u/s 147 of the Act. In view of the above, we uphold the initiation of the proceedings u/s 147 of the Act. Accordingly, we do not find any reason to interfere in the finding of the Ld. CIT (A). Whether there exist any AOP as alleged by the authorities below? - It is clear that it is not necessary that there should be anything in writing for referring any group of persons as the AOP. What is required is that there should be common object and profit motive of the persons involved. Whether all the members as alleged by the authorities below constitute the AOP? - CESTAT in its order dated 25/08/2009 acquitted certain persons. The copy of the order is placed on 21 to 24 of the paper book. Therefore, in our considered view, the persons acquitted by the CESTAT cannot be treated as member of the impugned AOP. We are also conscious that the whole basis for initiating the proceedings u/s 147 of the Act against the AOP was the notice issued by the DRI wherein the 8 persons and 2 trust were alleged to be involved. Accordingly, in case of any change subsequently by the custom department, the same should also be incorporated in the proceedings initiated u/s 147 of the Act. Accordingly, we hold that all the 8 persons don t constitute as member of the AOP. Accordingly, we delete the name of these persons from the list of members of such AOP. Whether the value computed by the custom department of the goods diverted in the open market i.e. 15,26,050.00 represents the income of the assessee ? - Admittedly, the assessee has paid the import duty on the value of the goods determined by the custom department. Thus it is presumed that the market value of such goods was the value determined by the custom department. Accordingly, it is inferred that the assessee must have sold the impugned goods in the open market as the same was not seized by the custom department. The AO also noted that that the income from sale of goods was not disclosed in the income tax return. Onus lies on the assessee to justify based on the documentary evidence that it has sold the goods at a value less than the value determined by the custom department. But the assessee failed to discharge its onus. Furthermore, the AO has taken the value based on the valuation determined by the custom department which was not challenged by the assessee. Accordingly, we are of the view that the impugned value cannot be disputed by the assessee in the income tax proceedings. Whether the entire amount of the value represents the income of the assessee? - The assessee is entitled for the deduction of the expenses incurred in connection with such income. There is no information about the purchase cost and the transport expenses incurred by the assessee, therefore in the absence of any information we hold that the assessee cannot be given the benefit of such expenses. It is because the provisions of section 147 of the Act are not for the benefit of the assessee. Thus, the expenses about which there is no information available on record cannot be given any relief to the assessee. There is no dispute to the fact that the assessee against such value of the goods of ₹ 15,26,050.00 has incurred a cost of ₹10 lakhs by way of paying the custom duty, interest etc which has direct nexus with the impugned income. Accordingly we hold that the assessee is entitled for the relief/benefit of such expenses against the impugned undisclosed income determined by the authorities below. Accordingly, we sustain the addition of ₹ 5,26,052.00 ( 15,26,052- 10,00,000.00) as income of the assessee. Hence, the ground of appeal of the assessee is partly allowed.
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2019 (12) TMI 966
Expenditure incurred on payment of License Fees on renewal of software license - Capital expenditure or Revenue expenditure - HELD THAT:- DR was not able to controvert the factual and legal findings of the CIT (Appeals) wherein the disallowance has been deleted by holding that the CWIP is towards current business needs and same could not be considered as capital in nature. CIT (Appeals) has also held that the respondent/assessee has sufficient own funds and further that the net worth of the company is far more than the value of CWIP and as such there is no nexus between the borrowed funds and the CWIP. We also note that the assessing officer has accepted the claim of interest in AY 2011-12 wherein, on identical facts, no such disallowance was made. In these circumstances, the department cannot be allowed to agitate this issue in the year under reference. Disallowance of software expenses - HELD THAT:- Following the decision of the Tribunal in assessee s own case, we hold that the AMC, consumables and the software expenses are revenue in nature. We, therefore, dismiss the ground raised by the revenue and allow the grounds raised by the assessee on this issue CIT(A) after obtaining a remand report from the Assessing Officer and the rejoinder to such remand report, deleted the addition by passing a detailed order the reasons for which have also been extracted in the preceding paragraphs. We find no infirmity in the order of the CIT(A). He has given justifiable reasons while deleting each and every disallowance made by the Assessing Officer. Even the complete documentary evidence filed before him which were forwarded to the Assessing Officer for his counter comments remained unattended by the Assessing Officer in the sense he did not give any adverse comment against the same. Since the ld.CIT(A) while deleting the disallowance has passed a speaking order by giving detailed reasons which could not be controverted by the ld. DR, therefore, we find no infirmity in the order of the CIT(A) deleting such addition. No distinguishable feature was brought to our notice by the Revenue so as to take a contrary view than the view taken by the CIT(A) on this issue. Accordingly, the order of the CIT(A) on this issue is upheld and the grounds raised by the Revenue are dismissed. Expenditure incurred on payment of licence fee on renewal of software licence is revenue in nature
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2019 (12) TMI 965
Deduction u/s 80IC - manufacture items of Perfumes and Fragrances in the notified area - Assessee submitted that even in the case of lessor at the same premises in question, the Department has granted deduction u/s 80IC vide Order under section 143(3) - Assessee also filed copy of Notification Dated 27.08.2008 to show that factory unit of the assessee falls within the notified area - HELD THAT:- assessee produced all documentary evidences before the authorities below to show that it has began to manufacture items of Perfumes and Fragrances in the notified area. The same were supported by documentary evidences i.e., Excise Records and Sales Tax assessment etc., The assessee furnished GRs of transportation and bills etc., and C-Form to show that assessee entered into genuine business activity. Though A.O. has raised so many objections at assessment stage and Ld. CIT(A) dealt with each and every item, but, Department has filed revised ground only on few items. Thus, the genuineness of the activities of manufacturing conducted by the assessee at Baddi have not been challenged by the Revenue in the revised grounds of appeal. These facts clearly show that assessee has entered into genuine business activities. Even if sales are made to three parties only, there is nothing wrong against the assessee. It may also be noted here that in respect of some items of manufacture, A.O. has allowed the claim of assessee in scrutiny assessment under section 143(3) for A.Y. 2013-2014 vide Order Dated 31.03.2016 after calling a report from Income Tax Officer, Baddi. Therefore, rule of consistency apply to the facts of the case and Department cannot take a different stand against the assessee in different assessment years. It may also be noted here that it has not been clarified, whether report of the Inspector or statement of Shri Kusum Kumar Sethia was supplied to the assessee for rebuttal ? Therefore, such report and statement cannot be read in evidence against the assessee. It may also be noted here that it is a Departmental Appeal and no documentary evidences have been produced before us to contradict or rebut the finding of fact recorded by the CIT(A) in favour of the assessee. Therefore, in the absence of any evidence against the assessee on record, it is difficult to take a contrary view as have been taken by the CIT(A). In view of the above discussion, we do not find any infirmity in the finding of fact recorded by the Ld. CIT(A) to allow the claim of assessee for deduction under section 80IC - Decided in favour of assessee.
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2019 (12) TMI 964
Withholding liability u/s 195 - payment made by the assessee to Reliance JioInfocomm Pte Limited, Singapore (RJIPL) for availing bandwidth services - India-Singapore DTAA - HELD THAT:- As decided in ow case [ 2019 (11) TMI 1110 - ITAT MUMBAI] when the expression royalty is a defined expression under the applicable tax treaty, there cannot be any occasion to invoke article 3(2) for further dissecting the issue and explore the domestic law meaning of each expression used in this definition for coming at the conclusions about connotations of royalty. It cannot, therefore, be open to invoke article 3(2) to import domestic law meaning, even partly, when the treaty term has received a definition under the treaty. It is for this reason that Explanation 6 to Section 9(1)(vi), in our humble understanding, has no role, under article 3(2) of the treaty, in explaining the expression process , in the context of defining royalty under the Indo Singaporean tax treaty. This statutory provision, under the domestic law, is relevant only when the definition of royalty under section 9(1)(vi) of the Income Tax Act, 1961, is subject matter of consideration, as it specifically states that said definition is for the purpose of for the purpose of this clause [i.e. Section 9(i)(v)] . Additional test that is required to be put, while adopting the ambulatory interpretation in such a situation, is whether the amendment is domestic law ends up unsettling a conclusion arrived at under the pre domestic law amendment position i.e. reversing the judicial rulings in favour of the residence jurisdiction, and, if the answer is in the positive, the ambulatory interpretation is to be discarded because that approach would patronise, and legitimise, a unilateral treaty override, and the outcome of ambulatory interpretation in such a case will be incompatible with the fundamental principles of treaty interpretation under the Vienna Convention. The approach is justified on the first principles on the ground that when two approaches are possible for incorporation of domestic law provisions in the tax treaties and one of these approaches is compatible with Article 26 of the VCLT while the other is incompatible with the same, the approach compatible with the VCLT provisions is to be adopted. In view of these discussions, and bearing in mind entirety of the case, we find no legally sustainable merits in the grievances raised before us. The arguments raised before us do not lead us to a different conclusion either. Concurring with the coordinate bench decisions, therefore, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. As we hold so, we may add that these observations regarding ambulatory or dynamic approach being inappropriate in the context of article 3(2) is confined to the peculiar facts discussed above, and, are not, therefore, of general application. Payments made to RJIPL Singapore for providing Operations and Maintenance (O M) services - Whether is not in the nature of fees for technical services under section 9(1)(vii) of the Act read with Article 12 of the India- Singapore DTAA? - HELD THAT:- As decided in ow case [ 2019 (11) TMI 1110 - ITAT MUMBAI] The services were simply maintenance services which did not involve any transfer of technology. In response to our specific question, learned DR could not enlighten us about what was the nature of technology transferred under these arrangements. The amounts received by RJ-S could not, therefore, be taxed as 'fees for technical services' either. - Revenue appeal dismissed.
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2019 (12) TMI 963
Addition made on account of deferred income - method of accounting - HELD THAT:- As per the consistently followed accounting method and revenue recognition policy, the assessee offers reasonably attributable time share income in the year in which the purchaser of time share units becomes a member and the balance amount of the membership fee, though, is recognized as time share income, however, it is offered as income in equal proportion over a period for which the holiday facilities are provided to the member commencing from the year in which the member is entitled to benefits of membership under the scheme. Accordingly, the assessee offers 45% as membership fee as income and defers the balance 55% to subsequent years. This method of revenue recognition is being followed by the assessee consistently from past several years. It is also evident, whether the deferred income is to be treated as income of the assessee in the year of receipt, is a subject matter of dispute in the past years and the Tribunal while deciding the issue in AYs. 2002-03, 2006-07, has deleted the addition made by the A.O. on account of time share income. A.O. has made the addition by not applying the decisions of the Tribunal simply on the plea that the department has not accepted the decision of the Tribunal. In our view, this cannot be a valid reason for not following the decision of the Tribunal rendered in the assessee s own case. In our considered opinion, the issue at hand stands fully covered by the decision of the Tribunal in assessee s own case as referred to above. - Decided in favour of assessee. Disallowance of Employee Stock Option Plan (ESOP) expense/cost - HELD THAT:- ESOP expenditure debited to the profit and loss account represents the difference between the fair market value and the issue price of the stocks. It is also evident that the assessee has provided for such cost in terms with SEBI guidelines. The Hon ble Madras High Court in the case of PVP Ventures [2012 (7) TMI 696 - MADRAS HIGH COURT ] has allowed similar expenditure claimed by the assessee. In fact, in case of Biocon Limited vs. Dy. CIT [2014 (12) TMI 838 - ITAT BANGALORE] has also allowed ESOP expenditure/cost.
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2019 (12) TMI 962
Addition to rental income - two lease agreements - the rent has been remarkably low for the last eight months of the financial year. - hiding material facts - rental income of the assessee from the leased out premises should be taken @ ₹ 5 lacs per month for the whole year as against the rental income taken by assessee @ 5 lacs for four months and ₹ 1 lacs per month for 8 months - HELD THAT:- There is absolutely no mention of any sketch containing the factory shed and administrative building in any of the agreements. Further the second agreement does not bear the signature of any witnesses although the agreement says that it was signed in the presence of the witnesses. We, therefore, hold that the explanation offered by the assessee is not born out of records. The so called sketches are not signed by the notary. These documents in our opinion are only self serving. The letter addressed to the Excise Superintendent also can be termed as self serving, since the copy of letter which is placed at page 63 of the paper book, does not bear the seal of the Excise Department where as the previous letter dated 30.10.2006 addressed to the excise department bears the seal of the department alongwith the designation of the person who has received it. Therefore, it is only a piece of paper ment for self serving. In view of the above discussion and in view of the detailed order passed by the CIT(A) on this issue, we find no infirmity in the same. Accordingly the same is upheld and the grounds raised by the assessee are dismissed.
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2019 (12) TMI 961
Bogus purchases - HELD THAT:- No adverse inference of the AO vis a vis the documentary evidence furnished by the assessee is discernible from the assessment order. Further, the assessee had furnished quantitative details of purchases and sales both before the Assessing Officer as well as the learned Commissioner (Appeals). Commissioner (Appeals) has recorded a factual finding that the assessee had effected corresponding sales against the purchases. Commissioner (Appeals) has rightly held that the addition of the entire non genuine purchases cannot be made. This is so, because in the absence of purchases, the assessee could not have effected the corresponding sales. In such circumstances, one can come to a logical conclusion that the assessee must have purchased the goods from grey market to avoid payment of Sales Tax / VAT and to regularize such purchases, the assessee might have obtained accommodation bills from hawala operators. In such scenario, the profit element embedded in the non genuine purchases can be considered for addition. After considering the overall facts and circumstances of the case and nature of business carried on by the assessee as well as consistent view of the Tribunal and different High Courts in such types of cases, we are of the considered opinion that profit estimated @ 12.5% of the non genuine purchases can reasonably be considered for the purpose of addition.
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2019 (12) TMI 960
LTCG - Exemption u/s 54B in respect of gains on sale of agriculture land - AO observed that, the said lands are not only the non-agricultural land but also they are not used for agricultural purposes by the assessee for full 2 years period as required u/s 54B - AO taxed entire such gains and agricultural income as business income - Preliminary issue and admission of additional evidence HELD THAT:- The motive of increasing the value of the capital assets should not be confused with the business linked profit motive. Business should not only have the profit motive but also should have the stock-in-trade. The book entries, which happen at the time of purchase of asset, reflects that the intention of the asset is to hold the asset as fixed asset/investment and not the asset for sale for profit. Such business assets are held by the firm where the assessee is the partner. In our view, the assessee s arguments have the merits. Therefore, assessee s claim of offer the gains earned on the disinvestment of the fixed assets, under the head capital gains like in earlier and later years, is proper and is confirmed in principle; but for the additional evidences. However, the Assessing Officer is required to examine the additional evidences furnished by the ld. AR for the assessee as per the set principles of natural justice. Deduction claim u/s 54B - In the present case, there is no dispute about the time-line provided for purchase of eligible lands and the agricultural nature of the same. The dispute is only on the condition of 2 years of land use for agricultural purposes for immediately preceding two years from the transfer date of the lands sold. Thus, while the revenue is in favour of the two calendar years, the assessee argues that the agricultural use of lands for two crop seasons in two years fulfils the specified conditions mentioned in section 54B(1) of the Act. it is evident that the condition of two years of agricultural use of lands stands met if the said lands are used for an year preceding to the date of transfer of land and also same days of the year preceding to the said preceding year. In other words, two crop seasons in the two years preceding to the date of transfer, meets the legal requirement of law in section 54B of the Act. However, this aspect of the provisions was not examined by the Assessing Officer. Therefore, considering the principles of natural justice, Assessing Officer is directed to examine the facts relating to the crop seasons of Rice, to apply the said order of the Tribunal in the case of Ramesh Narhari Jakhadi . [ 1992 (2) TMI 178 - ITAT PUNE] the extent of reimbursement of gains in the eligible lands etc. In the absence of any contrary evidence, Assessing Officer shall accept the contents of 7/12 extract in its entirety. Assessing Officer shall also restrict the deduction u/s 54B of the Act to the extent of reinvestment of gains earned on sale of eligible lands and in the eligible agricultural lands only.
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2019 (12) TMI 959
Addition u/s 68 - genuineness of the transaction, creditworthiness identity of the creditors - HELD THAT:- We are not inclined to accept to the finding of the ld. CIT(A) with M/s.Rabna Holdings Ltd. is only a mere pass through entity and M/s. Amas Ltd., being incorporated in Bahamas is found to be a tainted entity. All these observations of the CIT(A) are purely without any basis and not supported by any material evidences brought on record. This is a classic case of the CIT(A) disbelieving the information obtained by CBDT, FT TR division from Mauritian tax authorities under exchange of information in terms of Section 90 of the Act and relevant DTAA Article. AR placed on record various case laws in support of its contentions. Since this is purely a factual matter, we do not find it necessary to look into those case laws as in our considered opinion, assessee had duly established three necessary ingredients of Section 68 of the Act of facts and on merits duly supported by all documentary evidences. In view of the aforesaid observations, we direct the ld. AO to delete the addition made in the sum of ₹ 155 Crores u/s.68 of the Act. Accordingly, the ground Nos.1 to 4 raised by assessee are allowed. Addition made under the head income from house property in respect of unit No.701 in the building Marvella - HELD THAT:- Assessee had genuine intention to let out unit No.701 along with other units in the same premises and derive rental income thereon. But due to circumstances beyond its control, it could not do so till 31/12/2014 in respect of unit no. 701 alone and ultimately the said unit after making certain structural corrections had been let out to Hinduja Healthcare Ltd., from 01/01/2015 onwards and rental income derived thereon. Hence, for A.Y.2014-15, this property was not let out as it was remaining vacant and hence, the annual letting value in terms of Section 23(1)(c) of the Act should have to be determined at Rs. Nil. We direct the ld. AO to determine the Annual Letting Value (ALV) of Unit No.701 at Rs. Nil and delete the addition made thereon. Accordingly, the ground No.5 raised by the assessee is allowed. Disallowance u/s.14A under normal provisions - HELD THAT:- From the perusal of the balance sheet, we find that assessee had got sufficient own funds in its kitty and hence, there is no need to make any disallowance of interest under second limb of rule 8D(2) of the rules. Accordingly, by placing reliance on the decision of Hon ble Jurisdictional High Court in the case of HDFC Bank [ 2018 (1) TMI 883 - ITAT MUMBAI] and Reliance Utilities and Power Pvt. Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] we direct the ld. AO to delete the disallowance made under second limb of rule 8D(2) of the rules. With regard to the third limb, we hold that only investments that had yielded exempt income should be considered and the ld. AO is directed to recompute the disallowance under third limb of rule 8D(2) of the rules accordingly. The disallowance made under first limb of rule 8D(2) will remain. Disallowance u/s.14A of the Act r.w.r.8D of the rules while computing book profits u/s.115JB - HELD THAT:- Special Bench of Delhi Tribunal in the case of Vireet Investments [ 2017 (6) TMI 1124 - ITAT DELHI] had held that the computation mechanism provided in rule 8D(2) of the rules cannot be imported into clause of Explanation-1 to section 115JB (2) of the Act. The Special Bench further held that the disallowance of expenses under Clause f need to be made based on actual expenditure debited to profit and loss account by the assessee by clearly identifying the same for the purpose of earning exempt income. Hence, we deem it fit and proper to remand this issue to the file of the ld. AO for denovo adjudication
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2019 (12) TMI 958
Disallowance u/s 14A read with rule 8D(2)(ii) and 8D(2)(iii) - assessee-company has suo motu offered an amount as disallowance under the said section - HELD THAT:- If there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption was established considering the finding of fact both by the Commissioner (Appeals) and the Tribunal. The interest was deductible. Therefore, considering the factual position and position in law explained above, we delete the disallowance under rule 8D(2)(ii) of the Income-tax Rules. Disallowance under rule 8D(2)(iii) - We note that in its computation of income, the assessee suo motu disallowed a sum under section 14A of the Act read with rule 8D(2)(iii), being 0.5 per cent. of the average investments yielding exempt income. The said computation is reproduced in the assessment order, page 3, point 5. We direct the Assessing Officer to restrict the disallowance to the tune of ₹ 91,07,352 under section 14A of the Act read with rule 8D(2)(iii), being 0.5 per cent. of the average investments yielding exempt income. In a nut shell we confirm the disallowance under rule 8D(2)(i) at ₹ 56,181 and under rule 8D(2)(iii) at ₹ 91,07,352. The same principles for computation of disallowance under section 14A read with rule 8D will be applicable to the assessee's appeal in I. T. A. No. 937/Kolkata/2018, therefore, the Assessing Officer is directed to compute the disallowance as per the precedents cited above and discussion made Disallowance of prior period expenses - CIT(Appeals) rejected the claim of the assessee holding that since the assessee followed the mercantile system of accounting and as such the impugned expenditure can only be allowed in the year to which it pertains - HELD THAT:- Since the bills were not received, it was not possible to make provisions for such expenses in the accounts of the preceding year ending on March 31, 2009. On receipt of these bills relating to earlier year, these payments were made in the current year. These prior period expenses, which were claimed in the current year, were not debited in the books of the preceding year and accordingly were not claimed by the assessee in the assessment year 2009-10. The said expenses of ₹ 4,06,487 was claimed by the assessee in the assessment year 2010-11, hence we allow the claim of the assessee. Therefore, we delete the addition Addition of notional interest - HELD THAT:- Keeping in view all these facts of the case and applying the rule of consistency, we uphold the impugned order of the learned Commis sioner of Income-tax (Appeals) deleting the disallowance made by the Assessing Officer on account of interest allegedly attributable to the interest-free loans given by the assessee-company to its subsidiary companies and dismiss ground No. 3 of the Revenue's appeal Disallowance of compensation paid to M/s. Conforms Pvt. Ltd, a related company under section 40A(2)(b) - HELD THAT:- The payment was made in respect of vacation of the property so occupied by such company. We find substance in the learned counsel's argument that the payment was made by the assessee after much negotiation and it was a separate entity and correspondences had occurred between the assessee and the said company to settle the amount. Even if the agreement was not there but the relevant correspondences duly prove that the payment was for the vacation of the impugned premises which was vacated by the said company. Hence, it is in accordance with the business of the assessee and the same is allowable. That being so, we decline to interfere with the order of the learned Commissioner of Income-tax (Appeals) in deleting the aforesaid addition. His order on this issue is, therefore, upheld and the grounds of appeal of the Revenue is dismissed. Treating the Government securities within the meaning of 'bonds' for the purpose of the third proviso to section 48 of the Act and erred in dismissing the assessee's claim for indexed loss - HELD THAT:- as per section 2(42A) expression security shall have meaning assigned to clause II of the Securities Contracts Regulation Act, 1956 which includes Government securities. The facts of this case are squarely applicable to the present case of the assessee. Therefore, respectfully following the judgment of the co-ordinate Bench in the case of Sundaram Finance Limited [ 2017 (7) TMI 661 - ITAT CHENNAI] we note that it is abundantly clear that the Government securities are entitled to indexation benefits. Therefore, we note that the Government securities are different from bond and debenture for the purpose of the third proviso to section 48 of the Act (4th proviso after amendment) and therefore the benefit of indexation should be granted to the assessee on the redemption of these Government securities. Deduction u/s 37(1) on account of education cesses paid by the assessee - HELD THAT:- Education cess being not Income-tax is allowable as deduction under section 37(1) of the Act. For this, we rely on the judgment of ITC Ltd. [ 2018 (11) TMI 1611 - ITAT KOLKATA] wherein it was held that education cess is an allowable expenditure under section 37(1) of the Act. Therefore, we direct the Assessing Officer to verify all the relevant facts and allow education cess as deduction under section 37(1) of the Act.
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Customs
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2019 (12) TMI 957
Imposition of Demurrage charges - liability is of the importer or customs department - On examination of the consignment, it was felt that there had been misdeclaration of quantity. Pursuant thereto, vide Panchnama, the Commissioner seized the consignment and handed it over, to CELEBI for safe custody - petitioner represented, to the Commissioner requesting that the aforesaid goods be permitted to be warehoused, so that further demurrage charges could be avoided - whether Respondent No.1 (CELEBI) could charge demurrage, on the goods imported by the petitioners, which have been stored in the premises of CELEBI? - Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009. HELD THAT:- The charging of demurrage by the CELEBI, being in terms of the concessionaire agreement, between the DIAL and CELEBI, which was entered into, by them, in terms of the OMDA, which, in turn, stands sanctified by Section 12A of the AAI Act, the CELEBI must be treated as charging, and recovering, demurrage, in accordance with law for the time being in force . The inevitable sequitur would be that the injunction, engrafted in Regulation 6(1)(l) of the Handling of Cargo Regulations, on the charging of demurrage in respect of goods detained/seized, or confiscated by the customs authorities, would not apply to, or affect, CELEBI - It is also settled, by various decisions that the liability, to pay demurrage to the CELEBI, was of the petitioner - the Customs authorities have acted mala fide or have contributed, in any manner, to delay in release of the consignment imported by the petitioner. It is only where a clear case of unquestionable delay, bordering on mala fides and demonstrative of unreasonable harassment of an importer, is made out, that the customs authorities can be mulcted with the liability to pay demurrage or detention charges. A reading of sub-section (1) of Section 13 of the AERA Act makes it abundantly clear that the AERA is basically concerned with fixing tariff, and not with other airport services, including actual collection of demurrage, for continued storage of the goods. The prayer, of the petitioner, for issuance of directions to the respondents, not to collect any demurrage, in respect of the goods, imported by the petitioner and in the custody of CELEBI, is bereft of merit - CELEBI is entitled, despite Regulation 6(1)(l) of the Handling of Cargo Regulations, to charge demurrage in respect of the goods consigned to its custody, and to retain custody over such goods till the demurrage is paid - demurrage, to CELEBI, would be payable by the petitioners-importers in these writ petitions, and not by the Customs authorities. Petition dismissed.
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2019 (12) TMI 956
Release of the seized goods - polyester knitted boys shorts - Herbal Heena Mehandi - HELD THAT:- Since orders for provisional release of the goods have already been passed in both the cases, there are no reason to entertain these writ petitions for quashing of the seizure order dated 08.10.2018. The petitioners can always avail the benefits under the provisions of the Customs Act, 1962 and the Rules made thereunder, and as per policy floated by the respondent. If the petitioners are aggrieved by any further actions of the respondent, they can always initiate litigation before the appropriate forum in accordance with law. Petition dismissed.
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2019 (12) TMI 955
Refund of Customs Duty - classification of goods - polyester cloths - petitioner had deposited a duty of ₹ 5,34,521.13 on the basis of the valuation of ₹ 27,22,160/- whereas as per respondent the duty leviable on this petitioner comes to ₹ 47,57,416/- - HELD THAT:- In view of the aforesaid Order-in-Appeal passed by the Commissioner of Customs (Appeals) dated 23.10.2013, a fresh sample drawn by the respondent is to be re-tested. Thus, fresh Order-in-Original will have to be passed by the respondent and therefore till then no refund can be granted to this petitioner. As the respondent has yet to pass an order on the basis of the retesting, as directed by the Commissioner of Customs (Appeals), we are not going much into the details of the case. Petition dismissed.
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2019 (12) TMI 954
Maintainability of appeal - section 129A of CA - Appeal dismissed on account of non-compliance of the order passed by the Tribunal - HELD THAT:- The issue decided in the case of RAHUL RAJVAIDHYA VERSUS CUSTOMS CENTRAL EXCISE AND SERVICE TAX [ 2019 (10) TMI 227 - MADHYA PRADESH HIGH COURT ] , where it was held that as the mandatory requirement of per-deposit as provided u/s 129 (e) has not been fulfilled, the Tribunal was justified in dismissing the appeal. This Court does not find any reason to interfere with the present writ petition - petition dismissed.
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2019 (12) TMI 953
Duty free advance authorization - export of finished goods - quantity of goods importable by them is determined by Standard Input Output Norms (SION) norms. As a result, while they were permitted to import certain quantity against advance authorization duty free, they actually needed the lesser quantity to manufacture the goods required to be exported - N/N. 93/2004-Cus and 96/2009-Cus. HELD THAT:- Para 4.28 relates to regularization of bonafide default by exporters. The said provision is applicable only in cases of regularization of default and it cannot be applied straightaway to normal imports where export obligations have been fulfilled like in the instant case. Thus, it cannot be said that the provisions of Para 4.28 of HBP are applicable to all advance authorization. It is seen that the entire foundation of the Revenue s case is based on Para 4.28(v) of HBP 2004-09 and Revenue is seeking apply the said provisions to the case where there is no default. Revenue has failed to notice Para 4.28 of HBP relates only to cases of bonafide default in fulfilling export obligation and it would naturally not apply to the cases where there is no default like in the instant case. Appeal allowed - decided in favor of appellant.
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2019 (12) TMI 952
Levy of penalty - confiscation of goods - mis-declaration of imported goods - SEZ unit - It is contended that there is no duty involved as the goods were imported into SEZ and there was no restriction for import of such goods and therefore, there could not have been any intention to evade any duty. - For the purpose of said manufacturing, they are entitled to import various fabrics without payment of duty. The allegation of Revenue is that while the appellant had declared that the goods imported by them are falling under Chapter heading 5407 but some of the goods were woven fabric falling under Chapter heading 6001. HELD THAT:- While making these imports the appellant would not have gained any monetary benefit as no duty is involved. We also find that appellant have not contested confiscation of the goods and abandoned the goods. In these circumstances, penalty of ₹ 3 Lakh imposed on M/s. Awin Exim Company under Section 112 of Customs Act, 1962 is excessive and the same is reduced to ₹ 1,50,000/-. Penalty is imposed on the M/s. Awin Exim Company - penalty has also been imposed on its partner Shri Satish Choudhary - HELD THAT:- When penalty is imposed on partnership firm, penalty cannot be imposed on its partner - penalty imposed on Shri Satish Choudhary is set-aside. It is noticed that penalty of ₹ 2 Lakh has been imposed on Shri Subhash Choudhary, Power of Attorney holder under Section 112 of the Customs Act, 1962. Shri Subhash Choudhary has not appeared to answer the summons and his role is relatively limited and keeping in view the fact that Shri Subhash Choudhary would not have gained any monetary benefits, the penalty of ₹ 2 Lakh is excessive and the same is reduced to ₹ 1,00,000/-. Appeal allowed in part.
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2019 (12) TMI 951
Valuation of imported goods - whey protein and other food products - rejection of declared value - enhancement of value on the basis of contemporaneous import price - HELD THAT:- Though the appellant have waived the Show Cause Notice, however, the appellant was not put to notice the intention of the revenue for confiscation of the goods. Due to this reason the appellant could not make any defence as regard confiscation of the goods which is consequential to alleged misdeclaration of the value of imported goods. In these circumstances the original order passed by the Adjudicating Authority is ex-parte order without having on record any representation in defence of the appellant. Since the appellant have raised various grounds and the Adjudicating Authority had no occasion to consider the submission now made before Commissioner (Appeals) as well as before this tribunal, the matter needs to be remanded to the Adjudicating Authority - Appeal allowed by way of remand.
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2019 (12) TMI 950
Import of restricted item - 100% EOU - import and clearance of fabric in to DTA without permission - shortage of stock - main allegation on the appellant is about non-reconciliation of stock of raw material and shortage of raw material - Whether the demand of duty from the appellants on the issue of shortages, shrinkages, non accountal and non-receipt of goods from job workers etc.? HELD THAT:- As the material is hydroscopic in nature, excess or shortage is bound to occur from the Bill of Entry quantity; therefore, the person was recording the actual weight of the material issued for production. We find that these aspects have also not been considered in the impugned order. Therefore, the shortage has been arrived at on the basis of assumption or presumption or on the basis of calculations. Moreover, going by the case laws submitted by the appellants, we find that finding of shortage cannot in itself be a conclusive proof of raw material being sold clandestinely or being used for manufacture of fabric which has been sold clandestinely. There is neither any allegation nor evidence regarding the clandestine clearance of such short-found material in the domestic market. That being the position, demanding of duty on mere shortages cannot be acceptable. Alleged import and clearance of fabrics in DTA - the department alleges that the appellants have imported fabrics whereas as per the license they were entitled to import only raw silk and that, they have cleared the imported fabrics under the guise of defects/waste - HELD THAT:- The fact that a Bill of Entry was filed at the time of import and the goods were warehoused under the supervision of an officer, the appellants cannot be found fault with. It was an act which was performed under the glare of the light and customs cannot allege that the appellants have wrongly imported the fabrics. It was open to the officers to disallow the clearance and warehousing. In case, it was a mistake on the part of the department, show-cause notice could have been issued within normal period and not invoking extended period. Even if it is held that the appellants have not received waste back from their job workers or the subcontractors of job workers, the applicable duty payable would be Nil . The whole exercise will be futile. Moreover, like the case of shortage in raw material, we do not find that the department has proved anything with evidence to show that the scrap has been cleared in the domestic market. Demand not sustainable - Once the duty demand itself becomes non-sustainable, the levy of penalties, on the appellant-company and the Managing Director, does not arise - appeal allowed - decided in favor of appellant.
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2019 (12) TMI 949
Valuation of imported goods - sale and distribution of contactless access control chords and readers - related party transaction - rejection of transaction value - scope of remand - HELD THAT:- OIA is very reasoned, logical and maintainable; we find that no cogent reasons have been brought out in the OIO for rejection of declared value; even when it was rejected, the Rules were not sequentially followed; even then, while following the deductive method, due allowances were not given and correct data was not compared. The OIO proceeds on a curious admixture of Rule 5 and Rule 7 which is nowhere provided for. While invoking Rule 5, no values of contemporaneous imports were taken for comparison; arbitrarily 30% has been loaded without any authority of law under Rule 5 and clearly the OIO transgressed the scope of remand. The Review Order passed by the Committee of Chief Commissioners states that the impugned order has given the reason for not accepting the invoice value as per Rule 4(3)(a) of Customs Valuation Rules, 1988 and proceeds to say that as the value cannot be determined as per Rule 5, Rule 6 recourse was taken to Rule 7. This ground of appeal is contrary to the facts stated therein OIO. The OIO has not at all discussed the non-applicability of Rule 5, Rule 6 in a sequential manner and the applicability of Rule 7 - thus, the premise on which the appeal is made is factually incorrect and for the reason stated, no cause has been made by the appellants necessitating to interfere with the impugned order. Appeal dismissed - decided against Revenue.
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2019 (12) TMI 948
Valuation - Eligibility for Franchise Discount and Quantity discount on the imports of rock phosphate made by them at karwar port - appellants submit that the discounts are genuine; discounts under any name are to be allowed and that they have not paid over and above the contracted price - extended period of limitation - HELD THAT:- In respect of quantity rebate there is a condition that the discount is upon lifting and payment of certain quantity and that JPMC would release this amount to BILT along with the settlement of dispatch/demurrage of last shipment. We find that the dispute is with the Vessel MV Azizia-II; department claims that there are two invoices for the Vessel and they were showing different prices; the appellants contends that out of the 6800 MT, 5000 MT belong to the earlier contract for 45000 MT which was extended to these 5000 MT by virtue of Minutes of a Meeting. The quantity discount was agreed upon by both the parties subject to fulfillment of the condition that the contracted quantity is lifted. If both the parties agree to increase the quantity available for discount even though by way of a Minutes of Meeting, holding such discount is not permissible defies any logic. We see that there is nothing significant in the e-mails transacted to show that such a quantity discount was not extended and was only shown to the Customs authorities with an intent to evade payment of duty. As long as the discount is given, in course of the international trade, and as long as there is no flow back of money from the importer to the supplier, such discounts cannot be held to be not permissible as to hold that It is not understood as to why Revenue thinks that to be eligible the discount should be only under a contract. Assessments, once made provisional, shall be provisional for all purposes; there was nothing to stop the Revenue from going through the contracts and seeking further clarification from the appellants on any of the issues. As the appellants have been continuously importing the same item at the same Port over the years, the charge of suppression of fact cannot be sustained. The appellants have paid duty as per the discharge quantity at the Port of discharge - The submissions of the appellant that sometimes they receive in excess and sometimes they receive short are plausible. Therefore, allegations based on excess receipt in the factory are not maintainable. The discounts availed by the appellants are of commercial nature and no case has been made either on the basis of evidence in the form of higher contemporaneous prices or flow back of money, we find that the discounts have to be allowed - no case is made for demand of duty - Penalty also set aside. Appeal allowed - decide in favor of appellant.
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Corporate Laws
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2019 (12) TMI 947
Grant of Anticipatory bail - money laundering - siphoning of funds - Director of companies, which had caused a loss to the State by hatching a conspiracy - HELD THAT:- Though undoubtedly, the allegations which are levelled against the applicant/petitioner of his being a Director of four shell companies/ dummy companies which companies are stated to have been created so that they could be taken over by the prime accusedA-1 Mohd. Iqbal for the purpose of laundering his ill-gotten money through engaging in illegal sand mining operations in the State of UP and in/around the District Saharanpur, so that he could project the said ill-gotten money as legitimate assets and these companies were utilized to purchase land and that majority of the transactions made by these companies were outside the banking channels and the companies did not even maintain any account,- are allegations, if established prima facie undoubtedly fall within the domain of a fraud in terms of Sections 447 and 448 of the Companies Act, 2013. The provisions of Section 212(6) of the Companies Act, 2013 in the facts and circumstances of the instant case would have also to be considered and thus, it cannot be contended that the embargo of Section 212(6) would essentially operate in the instant case - In the instant case, there are no contentions raised on behalf of the SFIO that the applicant s presence cannot be secured or that the applicant would flee from justice or that the applicant can influence the witnesses or tamper with the evidence in any manner. The applicant in the circumstances is allowed to be released on bail on filing a bail bond in the sum of ₹ 2,00,000/- with two sureties of the like amount to the satisfaction of the Special Judge - application disposed off.
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Securities / SEBI
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2019 (12) TMI 946
Recovery certificates/attachment notices/orders issued by the concerned authority in SEBI - SEBI held that the scheme mooted by the appellant was a CIS and directed that the contributions made to the scheme must be returned - proof of refund of money to the investors in full or refund in the form of land with full transfer of ownership and all rights - HELD THAT:- This Tribunal had given ample opportunities to the appellant to prove the veracity of their statements with documents before SEBI. The appellant is not able to prove that. Therefore, just making bold statements with part documentation by which no conclusion can be reached do not prove refund of money to the investors in full or refund in the form of land with full transfer of ownership and all rights. We also note that the impugned orders dated August 12, 2016 and September 14, 2016 deal with the documents furnished by the appellant in detail and we are not able to find fault with the same. The appellant is not able to prove whether land has been given to the investors in accordance with the terms and conditions i.e. after development of the land etc. and what happens to the maintenance aspect. In fact, we are told by the learned counsel for the SEBI that a large number of plots are still being maintained by the appellant which is not disputed. If that be the case the contention that land parcels have been handed over to the investors as ultimate beneficiaries and as full and final transfer is not correct. Therefore, in the absence of appropriate and complete evidence relating to full refund of the investors' amount, either in the form of money or in the form of developed land and maintenance amount we are unable to interfere with the impugned directions in the various orders.
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PMLA
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2019 (12) TMI 1008
Power of Tribunal to proceed with the matter - this court remanded the matter to the Appellate Tribunal for PMLA and directed the said Tribunal to restore the appeal and after hearing both the parties decide the same within six weeks from the receipt of this order - HELD THAT:- The petitioner submits that the Hon ble Supreme Court has granted status quo qua the property in question, however, there is no status quo to proceed with the matter by any court including the Appellate Tribunal of PMLA. This fact has not been disputed by counsel for the respondent. Thus, it is clarified that the order of the status quo of the Supreme Court is regarding the disposal of the property, therefore, Appellate Tribunal of PMLA is directed to comply with the order dated 01.11.2019 passed by this court within six weeks from today - application disposed off.
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Service Tax
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2019 (12) TMI 945
Refund of service tax - tax was erroneously collected - refund was rejected on the ground of time limitation - Retrospective exemption vide Finance Act, 2017 - Revenue was of the view that any claim for refund was to be made within a period of six months from the date of assent of the Hon ble President of India (which was on 01.04.2017) and therefore, the appellant s application for refund dated 11.12.2017, which was beyond six months, was barred by limitation as prescribed under Section 104 (3) - HELD THAT:- In the case of Roop Automotives Ltd. [ 2019 (7) TMI 907 - CESTAT CHENNAI] it was held that, the time-limit prescribed under Section 104 (3) is only directory, but however, the time as well as the procedure prescribed under Section 11B applies in full. The limitation of one year as in Section 11B of the Central Excise Act, 1944 would have to be reckoned from 01.04.2017 which is the date on which the assent of the Hon ble President was received. The matter is remanded to the file of the Adjudicating Authority, who shall verify and pass appropriate orders - appeal allowed by way of remand.
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2019 (12) TMI 944
Club or Association Membership Services - appellant is an organization of persons engaged in providing common facilities - service tax payable for the period 1.6.2005 to 31.3.2007 - HELD THAT:- The issue is settled by Hon ble Apex Court as cited by the appellants in the case of STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. [ 2019 (10) TMI 160 - SUPREME COURT ] where it was held that from 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members clubs in the incorporated form. Appeal allowed - decided in favor of appellant.
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2019 (12) TMI 943
Classification of services - Franchisee service or not - Very Small Aperture Terminal Fee (both onetime fee and usage charges) - Board vide Circular No.59/8/2003-ST dated 20.6.03 - suppression of facts - extended period of limitation - HELD THAT:- Nothing in the agreement indicates that the learning Centres have been given a franchise by providing the VSAT at the learning Centres; Nothing is forthcoming from the contracts that appellants gives permission to use their name by providing the VSAT facility. We also find that the appellants are not receiving any royalty towards the alleged franchise. Therefore, it is incorrect to classify the same as Franchise service - CBEC circular No.59/8/2003 dated 20-6-2003 clarifies at Para 2.4 that unless the following ingredients are satisfied, the agreement cannot be called as franchise agreement. Nothing related to grant of representational rights present in the instant case and all the ingredients listed above are not present. Therefore, the agreement cannot be termed as franchise agreement and hence, Service Tax under that head is not leviable - the coordinate bench of the Tribunal held in the case of IMA Mental Arithmetic Academy Pvt Ltd Vs CST, [2018 (3) TMI 709 - CESTAT CHENNAI] that only those amounts directly relatable to 'representational right' granted by the franchisor to franchisee and royalty/franchise fee towards that right alone be part of taxable value under 'franchise' service; admission fee, tuition fee, competition fee and course instructor fee was not liable for service tax under franchise service . Supply of tangible goods service - HELD THAT:- As regards VSAT usage fee, as submitted by Senior Counsel, it is in the nature of telecommunication costs apportioned and recovered as reimbursement. Therefore, such charges are not liable to service Tax as held in the case of Indian National Ship Owners Association [2018 (3) TMI 357 - SUPREME COURT]. The impugned order does not survive both on limitation and merits - Appeal allowed - decided in favor of appellant.
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2019 (12) TMI 942
Refund of service tax - job-work - price escalation clause - Section 11B of Central Excise Act, 1944 - It was the case of the appellant that due to increase in the cost of packaging they raised supplementary invoices dt. 31.3.2016, 30.6.2016 and 30.9.2016 on the customer M/s.TSL towards differential value and taxable service and had paid service on such charges - burden of duty incidence to another person passed on not - principles of unjust enrichment. HELD THAT:- The appellant was given date for personal hearing. Later as there was no representation the matter was decided exparte. In appeal, the Commissioner (Appeals) has considered the issue on merits and thereafter rejected the refund claim. However, it is contented by the appellants that they had furnished Chartered Account certificate before the Commissioner (Appeals) to adjudge the issue of not having passed on the burden of duty incidence to another person and also that they have paid excess amount in terms of packaging charges. Commissioner (Appeals) has not considered the Chartered Accountant certificate alleged to be produced by the appellant. Without such documents the issue of unjust enrichment cannot be decided - matter remanded to the original authority who shall consider the refund claim afresh after taking cognisance of all the documents produced by the appellant. The appeal is allowed by way of remand to the original authority.
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2019 (12) TMI 941
Refund of service tax - time limitation - whether provisions of Section 11B of Central Excise Act, 1944, would apply to the refund of service tax claimed beyond the normal period of limitation, prescribed under the said section? - HELD THAT:- In terms of the provisions of Section 11B, any refund, arising to an assessee, has to be filed within the period of limitation provided under the said section. The said section, nowhere makes any distinction between the refund of tax/duties having been filed under a mistaken belief or otherwise. Every refund arises to the assessee only and only when the same is not payable. As such any duty or tax, which was not payable, but was paid by an assessee, is required to be refunded to the assessee. If such refund are allowed without considering limitation, the provisions of section 11B would become futile and otiose and nothing would remain in section 11B regarding limitation to be applied to such refund claims. It is well settled law that any interpretation which leads to rendering any provisions of law as futile has to be avoided. Hon'ble Supreme Court in the case of PORCELAIN ELECTRICAL MFG. CO. VERSUS COLLECTOR OF C. EX., NEW DELHI [ 1994 (11) TMI 145 - SUPREME COURT] has clearly held by the Hon'ble Supreme Court that the excise authorities working under the Act are bound by the provisions of the Act and cannot exercise jurisdiction which the Hon'ble High Court exercised in terms of their writ jurisdiction. In the absence of any dispute to the fact that the refund claim stands made after a period of one year do not sustain - appeal dismissed - decided against appellant.
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Central Excise
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2019 (12) TMI 940
Power of review of its own order by High Court - error apparent on the face of record or not - clandestine manufacturing and supply of scented tobacco to various manufactures - Review is sought for on the ground that Mr. Devi Prasad Pande, Partner of M/s Sarita Roadways has stated in his statement before the authority that he transported the scented tobacco to M/s. RS Industries and M/s. RS Company, which shows that both are the same companies, therefore, slight change in their name becomes insignificant. HELD THAT:- There is no error apparent on the face of the record warranting review. The Apex Court in the case of HARIDAS DAS VERSUS SMT. USHA RANI BANIK ORS [2006 (3) TMI 686 - SUPREME COURT] where it was held that Perusal of the Order XLVII, Rule 1 shows that review of a judgment or an order could be sought: (a) from the discovery of new and important matter or evidence which after exercise of due diligence was not within the knowledge of the applicant; (b) such important matter or evidence could not be produced by the applicant at the time when the decree was passed or order made; (c) on account of some mistake or error apparent on the face of record or any other sufficient reason. The Apex Court has held that rehearing of a case can be done on account of some mistake or an error apparent on the face of the record or for any other sufficient reason - In the present case, there is no error apparent on the face of the record and the petitioner in fact under the guise of review is challenging the order passed by this Court, which is under review. There are no reason to review the order - review petition dismissed.
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2019 (12) TMI 939
CENVAT Credit - capital goods - Area based exemption availed - N/N. 39/2001-CE dated 31.07.2001 - allegation that the department that they had claimed depreciation of said capital goods under Section 32 of the Income Tax Act, 1961 and they are not taking/availing Cenvat credit in terms of Cenvat Credit Rules, 2004 - compliance with the condition of Rule 4(4) of Cenvat Credit Rules, 2004 or not - HELD THAT:- The appellant have received the capital goods in the year 2005-06; they, though claimed depreciation under Section 32 of Income Tax Act on the said capital goods but the said depreciation was returned by filing a revised Income Tax return in the subsequent Financial Year; Cenvat credit to the tune of ₹ 2,72,769/- is related to service tax paid on the construction of factory building, however, on the said building the appellant had claimed depreciation. The appellant during the relevant Financial Years i.e. 2005-06 when the capital goods were received and in the Financial Year 2006-07 when the depreciation was claimed, the appellant were suffering losses therefore, even though the depreciation was claimed it does not have any effect under the Income Tax. The objective of non-claiming of depreciation is to avoid double benefit i.e. one is the benefit of Cenvat credit and the other is depreciation in Income Tax which reduce the income tax liability. Since the appellant had no profits in relevant Financial Years, even claiming of depreciation did not lead to double benefit - thus, compliance of Rule 4 (4) of Cenvat Credit Rules, 2004 has been made. Denial also on the ground that appellant have taken 100% credit instead of 50%, we find that the year of receipt of capital goods is 2005-06, whereas the credit was taken in October 2007 - HELD THAT:- As per Rule 4(4), it is clear provision that part of taking 50% credit is applicable only if Cenvat credit is availed in the year of receipt of capital goods. As per proviso to sub-rule, the assessee is entitled for the credit of remaining 50% in the subsequent Financial Years. That means, in the subsequent year of receipt of capital goods, the appellant is entitled for 100% Cenvat credit. Therefore, on this ground, the denial of Cenvat credit is not correct and legal. CENVAT Credit - input services - construction services - denial of credit on the ground that appellant have claimed depreciation on building - HELD THAT:- The appellant even though claimed the depreciation on the building which was subsequently returned, the credit was taken in respect of service tax paid on construction of factory building, as submitted by the appellant - Cenvat credit in respect of setting-up of factory building is clearly covered in terms of inclusion clause of definition of Input Services as provided in Rule 2(l) of Cenvat Credit Rules, 2004. Merely because the appellant have availed Cenvat credit showing it of building as capital goods, admissibility of Cenvat credit of service tax paid on construction of building does not get extinguished. It was held in plethora of judgments by this Tribunal that merely because the credit was taken under wrong head, the same is not sufficient to deny the credit. The appellant have rightly availed the Cenvat credit on capital goods and on construction service - Appeal allowed - decided in favor of appellant.
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2019 (12) TMI 938
Clandestine removal - SSI Exemption - use of brand name - rural area - N/N. 8/2003 CE dated 01.03.2003 - demand against the Appellant Unit is based upon the pen drive said to be seized from the table drawer of office in factory - HELD THAT:- The statement of buyer of goods has been relied upon who on the basis of alleged sales data found in pen drive have stated that they received the goods without payment of duty. Coming to the submission of the Appellant, we find that the pen drive was taken under possession by the officers vide panchanama dated 19.10.2010 - The panchnama dated 19.10.2010 does not record the sealing of the pen drive in presence of the panch witness or any director/ employee of Appellant unit. It is only in panchnama dated 02.12.2010 that it is recorded that the pen drive was sealed earlier and was opened in presence of panchas. Even this Panchnama dt. 02.12.2010 is disputable as on Page No.1 it records that the panchnama proceedings of opening of pen drive and taking out printout were started at 5PM, but on the 3rd Page it records that the proceeding started at 3.00 PM and completed at 4.30. We also find that the pen drive was opened on 19.10.2010 during the visit of the officers. However the panchnama dated 19.10.2010 is silent about any alleged sales data found in pen drive. The alleged data finds mention only in panchnama dated 02.12.2010. In such case we find that the panchnama proceedings are not reliable piece of evidence having observed the serious discrepancies in panchnama proceeding - the appellant has vehemently argued that the Pen drive data cannot be relied upon as requirement under section 36B of Central Excise Act, 1944 was not followed. Acceptable evidences or not - HELD THAT:- Section 65B of the Evidence Act, 1872 and Section 36B of the Central Excise Act, 1944 are parimateria and hence the ratio laid down by the Apex Court is squarely applicable for the invocation of the provision of Section 36B of the Central Excise Act, 1944 and any reliance placed on the computerized printouts, without following statutory procedures and conditions of Section 36B, are not acceptable as evidence. Further as required under sub-section (4) of Section 36B, no certificate has been obtained as well as none of the conditions under Section 36B(2) of the Act, 1944 was observed. In such situation, the printout cannot be accepted as evidence to support the clandestine removal of the goods. Cross-examination of persons - HELD THAT:- The pen drive data did not contain the name of Appellant, the quantity and description of goods was also not appearing. When the statements were solely based upon pen drive data with no corroborative evidence either from the Appellant Unit or from side of persons whose statements were recorded, in that case it was incumbent on the part of adjudicating authority to allow cross examination. In absence of same the demands could not have been confirmed against Appellant. In the present case, the statements were relied upon as corroborative evidences, but the cross-examination of such persons who made such statements was denied without valid ground. There is no other corroboration evidencing alleged clandestine removal. Hence in such view of facts we hold that the demand based upon pen drive and statements is not sustainable. Apart from above, there are no evidence in the form of documentary evidence or physical evidence of clearance of goods or purchase of goods was found either from the Appellant unit or buyers of goods. Confiscation of goods bearing brand name KLMN - HELD THAT:- The Appellant has produced certificate issued by the Gram Panchayat that the factory is situated in rural area. In terms of para 4 (c) of the Notification No. 8/2003 CE dated 01.03.2003 the factory situated in rural area even if manufacturing others branded goods is eligible for said exemption. Therefore, the Appellants are eligible for SSI Exemption and the goods cannot be confiscated. Since we have held that the demand against M/s JBC is not sustainable, the penalty upon Appellant Unit and other co-appellants is also not sustainable - appeal allowed - decided in favor of appellant.
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2019 (12) TMI 937
Classification of goods - Bulk Milk Cooler - whether classified under CETH 84186990 or under CETH 84198990 of CETA - benefit of N/N. 6/2006 CE dated. 01.03.2006 and N/N. 12/2012 CE dated. 17.03.2012 - Rule 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - HELD THAT:- The Appellant intimated the jurisdictional authorities on 12.01.2012 vide their letter that they are availing exemption from duty on said goods under notification No. 6/2006 - CE dated 01.03.2006 ( Serial No. 5) and 12/2012 dated 17.03.2012 (Serial No. 232). The Stationary Bulk Mill Cooling equipment were supplied by Appellant to Milk Co-operative Societies for use as cold storing and preserving the Milk along with dairy products. The Appellant along with such Bulk Milk Cooler were also clearing bought out items viz. DG Sets, Solar Panels, Milk Pump, Water Pump, Stabilizer etc. and were cleared as per option of customers. The goods were assembled at the premises of co-operative societies. The goods covered under the exemption were Goods specified in List 7 intended to be used for the installation of a cold storage, cold room or refrigerated vehicle, for the preservation, storage, transport or processing of agricultural, apiary, horticultural, dairy, poultry, aquatic and marine produce and meat. It is an undisputed fact that Bulk Milk Cooler were supplied for installation of cooling facility for preservation and storage of Milk by cooling by Mechanical Appliances. The goods in question are Stationary Pre-cooling equipment which is also not disputed and the product broucher also shows the same. When the bulk milk cooler are in stationary stage and are used for cooling the milk so as to bring down the temperature to 4 degree centigrade with intention of storage and preservation, it is clear that the goods are for use as cold storage of Milk. The undisputed fact is that the goods were used for intended purposes covered by the Notification. It is coupled with the fact that the Appellant had informed their jurisdictional authorities about the clearance of goods under exemption. In such case when the goods are covered by the exemption notification and there is no dispute about the use of goods, we are of the view that the intended benefit be given to the Appellant. Clearances to interconnected undertaking M/s Krishna Allied Industries Ltd. - HELD THAT:- The sale price of said company would be chargeable to duty at the end of Appellant in terms of Section 4 (3) (b) (i), we find that said section is applicable where the goods are sold to or through any related party and the assessable value would be eventual sale price to the actual customer - Thus from the perusal of Rule 9, it is clear that in case of sale to interconnected undertaking the assessable value would be the transaction value to the interconnected undertaking only and the sale price of the interconnected undertaking will not merit any consideration. Time limitation - HELD THAT:- From the facts of the case no contumacious conduct of the Appellant is appearing. They had bonafide belief that Bulk Milk Cooler is exempted from payment of duty by virtue of exemption notification. In such case it cannot be said that the Appellant had any intention to suppress the fact. Therefore, the demands are time barred also. The Appellant being eligible for exemption are not liable for duty - Appeal allowed - decided in favor of appellant.
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2019 (12) TMI 936
Classification of services - Synthetic Filament Yarn of a denier of 600 - whether the synthetic filament yarn manufactured by the appellant falls under 5402 of CETA as contended by the department or under 5404 as contended by the appellants and as to whether the test result would be applicable prospectively or retrospectively? - benefit of N/N. 7/2003 CE and 30/2004 CE - Confiscation - imposition of redemption fine and penalty - extended period of limitation. HELD THAT:- The appellants classified the impugned goods under 5404. The Heading 5404 refers to synthetic monofilament of 60 d or more and of which, no cross sectional dimensions exceeds 1 mm; strips and like (For Example, artificial straw) of synthetic textile material of an apparent width not exceeding 5 mm. This heading had two single -'. One refers to monofilament yarn and the second others . Chemical Examiner has given a report that it is a multifilament yarn. The moment the yarn is of multifilament nature, it goes out of Heading 5402. Therefore, as far as the tariff entries till 2004-05 are concerned, the assessee s contention of classification under 5404.90 cannot be accepted. From 2005-06 also, the heading remains of synthetic monofilament yarn of 67 decitex or more. Therefore, from 2005-06 the Heading is not applicable to the appellants on the basis of the Chemical Examiners report. The impugned goods cannot be classified under 5404. Coming to the claim of the department that the impugned goods fall under 5402.39 / 540259.10, we find that whereas 5404 has no place for multifilament yarn, 5402 has an inclusive definition. Till 2004-05, 5402 covered synthetic filament yarn (other than sewing thread), including synthetic monofilament yarn of less than 60 d. The Heading has three single dash ( _ ) i.e., high tenacity yarn of nylon or other polyamides, high tenacity yarn of polyesters and textured yarn. Revenue wishes to classify the impugned goods under 5402.39 till 2005. However, for the goods to fall under 5402.39, they should be textured yarn. However, we find that from 2005-06, the scope of 5402 has been expanded to contain 5 single dash ( _ ) i.e., high tenacity yarn of nylon or other polyamides, high tenacity of polyesters, textured yarn, other yarn, single, untwisted or with a twist not exceeding 50 turns per meter, other yarn, single with a twist exceeding 50 turns per meter and other yarn, multiple (folded) or cabled. Extended period of limitation - HELD THAT:- The appellants have kept the department informed about their intention to claim exemption under the above said Notification vide their letters dated 12.11.2003 and 15.3.2005. The test conducted in 2003 was in favour of the appellants. It was free for the department to get another test conducted in 2005 also. This having not done, extended period cannot be invoked - Suppression of fact cannot be alleged on the basis of statements of dealers to conclude that the goods cleared in the past are also similar to the goods tested. Unless such goods are available and tested, nature of the goods cannot be established on the basis of oral submissions. Therefore, we find that the invocation of extended period is not tenable. Confiscation - redemption fine - HELD THAT:- As the department relies upon the test report obtained on 21.9.2006, apparently in favour of the department, we hold that the same cannot be applied retrospectively and to the goods cleared before the test report. Therefore, the confiscation of the goods cannot be upheld, as no mala fide intention of the appellants is evident - confiscation and imposition of fine in lieu of confiscation on the above goods cannot be justified. Penalties - HELD THAT:- Department is free to collect the applicable duty on the said goods. As extended period cannot be invoked, penalty under Section 11AC is liable to be set aside - Penalty imposed on M/s. A.R. Trading Company under Rule 25 and penalty imposed on Shri T. C. Vijayan of Usha Traders, Madurai under Rule 26 of Central Excise Rules, 2002, are also liable to be set aside. The appeal is partially allowed by way of remand to the original authority with a direction to restrict the duty demanded to the normal period.
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2019 (12) TMI 935
Condonation of delay in filing - Time Limitation - CENVAT Credit - capital goods - period from 30.06.2011 to 30.06.2013 - reason for delay given is that the person who was handling the matter of Excise has left the job without any prior notice - HELD THAT:- The reason is not sufficient to condone the delay. The appellant has failed even to specify the name of the concerned person and the date when he would have left the job. Above all, Commissioner (Appeals) has no statutory power to condone the delay beyond 90 days (60+30 days). The present appeal has been filed beyond said 90 days. Accordingly, there are no infirmity in the order of Commissioner (Appeals). Hon ble Supreme Court in the case of Singh Enterprises vs. CCE, Jamshedpur [ 2007 (12) TMI 11 - SUPREME COURT ] where it was held that it appears that the appellant has categorically accepted that on receipt of order the same was immediately handed over to the consultant for filing an appeal. The appeal stands dismissed, not only for want of prosecution but also on merits of the case.
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2019 (12) TMI 934
Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- In the Revenue s appeal, the amount involved is ₹ 11,86,250/-, hence covered by the Litigation Policy Circular F. No. 390/Misc/116/2017-JC dated 11.07.2018. Appeal of Revenue dismissed.
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CST, VAT & Sales Tax
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2019 (12) TMI 933
Validity of assessment order - compliance with the pre-deposit under Section 74 of the DVAT Act - supply of form C and C-I - grant of opportunity to Petitioner to produce evidence in their support and a personal hearing - principle sof natural justice - HELD THAT:- Various contentions have been raised about the supply of form C and C-I. As the appeal is pending, we are not going into the fine niceties of the facts and further dissection of the facts. Otherwise also, learned counsel for the respondent has also argued in detail that nothing was produced by the petitioner before the Assessing Authority despite several opportunities being granted to them. We are not going into the arguments of both the sides on merits. However, suffice would it be to say that the discretion exercised by the Objection Hearing Authority under Section 74 of the Delhi Value Added Tax Act, 2004 while issuing direction for deposit of 5% of the amount can, by no stretch of imagination, be said to be illegal, unreasonable or excessive - there is no substance in this writ petition and the same is hereby dismissed along with the pending application.
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2019 (12) TMI 932
Levy of Additional tax - Section 3(4) of the TNGST Act - goods manufactured by the Assessee and sold in the course of export - HELD THAT:- The controversy involved in the case on hand is squarely covered by the decision of this Court in TUBE INVESTMENTS OF INDIA LTD. (FORMERLY KNOWN AS M/S. TI DIAMOND CHAIN LTD.) VERSUS THE STATE OF TAMIL NADU, REPRESENTED BY THE COMMERCIAL TAX OFFICER [ 2010 (10) TMI 938 - MADRAS HIGH COURT ] where it was held that Section 3(4) of the Act will have no application since situs of the export sales of the petitioners for the purpose of said Section was the State of Tamil Nadu and by virtue of the said factual position, the applicability of Section 3(4) stands excluded for the exigibility of tax. There is no merit in the present Revision Cases filed by the State - revision dismissed - decided against Revenue.
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2019 (12) TMI 931
Ex-parte assessment - dispute between the petitioner and the tax consultant - Levy of turnover tax - EFS (Electronic Filing System) data collected by the prescribed authority indeed disclosed the turnovers of the petitioner - prescribed authority ought not to have levied tax on the petitioner concluding ex parte assessment for not producing the books of accounts - HELD THAT:- It is clear that the EFS Data collected from the prescribed authority discloses the turnover of the petitioner. The petitioner is banking upon the intelligence report to take shelter on the alleged misuse of the password by his tax consultant. Moreover, it is not in dispute that the PCR filed by the petitioner against the said tax consultant is pending adjudication. It is the inter se dispute between the petitioner and the tax consultant. The turnover of the petitioner available on EFS data, cannot be ignored. In view of the inter se dispute between the assessee and the tax consultant or merely on the complaint made by the department against the tax consultant, the Revenue should not suffer. Hence, the assessments concluded by the prescribed authority respondent No.2 subjecting the petitioner to tax liability cannot be faulted with. Petition dismissed.
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2019 (12) TMI 930
Levy of Entry Tax - applicant is a dealer in regard to SIM Cards which are the essential part of services provided by the applicant - scope of section 3(1) of the Entry Tax Act, 1976 - HELD THAT:- The issue decided in the case of M/S. IDEA CELLULAR LTD. VERSUS THE ASSTT. COMMISSIONER OF COMMERCIAL TAX, LTU, INDORE AND FIVE OTHERS AND M/S. BHARTI AIRTEL LTD. VERSUS THE DY. COMMISSIONER OF COMMERCIAL TAX DIV-3, INDORE AND FIVE OTHERS [ 2017 (1) TMI 336 - MADHYA PRADESH HIGH COURT ] where it was held that Even in the case of replacement of SIM Card, the value of replacement in respect of SIM cards forms part of the activation charges, as no activation is possible without a valid functioning of SIM card and the value of taxable service is calculated on the gross amount received from the operator from the subscriber and, therefore, once it has been held that no sales tax can be charged for providing a SIM, the question of charging it on replacement of a SIM, does not arise. This Court is of the considered opinion that the SIM Cards, as they are not the goods, do not fall under the ambit of Sec. 3(1) of the Entry Tax Act, 1976 and, therefore, the questions of law are answered in favour of the assessee - question of imposition of Entry Tax on SIM Cards does not arise. Reference allowed.
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2019 (12) TMI 929
Wrong calculation of VAT refund - Delhi VAT Act - HELD THAT:- The amount of interest on the refund amount has to be calculated by the respondent as per the provisions of law, especially, under Section 42 of the Act, 2004. A detailed speaking order dated 29th August, 2019 has been passed by the Additional Commissioner. The interest on the refund amount has already been directed to be paid @6% for the period 02.03.2015 to 20.08.2019 which comes to ₹1,67,98,822/-. The dispute raised by the petitioner in this petition about the calculation of the interest is an appealable order under Section 42 of the Act, 2004 and as an efficacious remedy is available with the petitioner, we do not deem it fit to exercise our powers under Article 226 of the Constitution of India for the prayer made in this writ petition. Petition disposed off.
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2019 (12) TMI 928
Revision of assessment - purchases of old gold - Pre-assessment notices had been issued proposing revision of assessments, on the grounds that the tax in respect of the purchases had not been paid and that the ITC claimed on the gold sent outside the state of Tamil Nadu for the manufacture of jewellery and sold, thereafter admittedly within the state of Tamil Nadu, was not permissible in terms of Section 19(2)(ii) of the Act. HELD THAT:- The assessing authority has not appreciated the methodology followed in the proper perspective. What the petitioner has done is, as apparent from the tabulation and reply extracted above, to remit the purchase tax by taking credit in respect thereof against the credit available in the immediately preceding month. Thus, at the end of the period in question, the liability to purchase tax is taken to be remitted in full by set-off of such liability against credit admittedly available in the monthly returns. This methodology has found acceptance and approval by the Commissioner of Commercial Taxes, Chennai, in proceedings dated 29.11.2007. There are no infirmity with the methodology adopted by the petitioner. Clearly, the petitioner has remitted tax on purchases and this fact is not denied. What is disputed is only the methodology of set-off against the monthly returns which, when approved by the Commissioner in proceedings dated 29.11.2007 ought not to have been rejected by the assessing authority - issue held in favor of petitioners. Reversal of ITC on worn-out jewellery sent outside the state for manufacture and received back and sold within the State - HELD THAT:- The issue has been held in favour of the assessee by a Division Bench of this Court in the case of PATINA GOLD ORNAMENTS PVT. LTD. VERSUS THE ASSISTANT COMMISSIONER (CT) , THE STATE OF TAMIL NADU [2017 (10) TMI 185 - MADRAS HIGH COURT] , where it was held that the mere fact that the manufacturing unit is located outside the State of Tamil Nadu cannot be the basis, for denial of ITC, under section 19(1) of the 2006 Act. Clause (ii) of sub-section (2) of section 19 of the 2006 Act is, thus, declared bad in law - this issue is also held in favour of the assessee. Petition allowed - decided in favor of assessee.
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Indian Laws
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2019 (12) TMI 927
Dishonor of Cheque - section 138 of NI Act - forgery for the purpose of cheating - present petition is filed on the ground that the petitioner since beginning had been disputing over the working style of the management of M/s Vigyan Chemicals Pvt. Ltd., therefore, the petitioner was never involved in any affairs of the company - HELD THAT:- The fact remains that as for the signing of Master Facilities Agreement and supplementary agreements, the FSL has opined that the signatures are not of the petitioner. Further, the petitioner filed police complaint as well as complaint under section 156(3) Cr.P.C. to lodge FIR against respondent no.2 and same has been lodged vide FIR No.168/2019 dated 02.12.2019. On perusal of the order dated 16.09.2019, whereby the Trial Court directed to register FIR, it is revealed that as per the FSL report, the disputed signatures on the loan documents are different from the specimen signatures of the respondent no.2. The signature on the resolution passed by the company are forged, therefore, there was no occasion for the petitioner to appoint Mr.Sanjay Jain to issue cheque in question. Since the document itself is forged, therefore, under no stretch of imagination, it can be held that the petitioner has been looking after day-to-day affairs of the company and is responsible for the offence under section 138 of the NI Act - In the present case, the signatures were not of the petitioner and because he had complaints regarding day-to-day business of the company, he resigned from the company on 22.02.2016, which is not in dispute, much prior to cheque issued on 10.11.2016. The complaint set aside - petition allowed.
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