TMI Tax Updates - e-Newsletter
December 25, 2018

Case Laws in this Newsletter:

GST Income Tax PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

News

1. Payroll Reporting in India – A Formal Employment Perspective

2. Auction for Sale (Re-issue) of Government Stocks

3. Exception from online filing of application under section 197 and 206C (9) in the cases of NRIs and resident applicants

Notifications

DGFT

1. 46/2015-2020 - dated 24-12-2018 - FTP

Prohibition on import of milk and milk products from China

SEBI

2. SEBI/LAD-NRO/GN/2018/53 - dated 19-12-2018 - SEBI

Grant of recognition to stock exchanges

3. SEBI/LAD-NRO/GN/2018/52 - dated 19-12-2018 - SEBI

SEBI considered the application for grant of renewal of recognition

4. SEBI/LAD-NRO/GN/2018/41 - dated 3-10-2018 - SEBI

SECURITIES CONTRACTS (REGULATION) (STOCK EXCHANGES AND CLEARING CORPORATIONS) REGULATIONS, 2018

Circulars / Instructions / Orders

Income Tax

1. F. No.275/29/2018-IT(B) - dated 24-12-2018

Exception from online filing of application under section 197 and 206C (9) in the cases of NRIs and resident applicants

Customs

2. 37/2018 - dated 16-11-2018

Observations and concerns regarding Electronic seals used on Export Containers

3. 37/2018 - dated 30-10-2018

Observations and concerns regarding Electronic seals used on Export Containers

4. F.No.S25/260/2017 I&B Cus - dated 15-10-2018

Corrigendum to the PN 33/2018 dated 08.10.2018, issued under Sec. 154 of Customs Act, 1962

5. 33/2018 - dated 8-10-2018

Examination to be conducted on 18.01.2019 by Commissionerate for grant of Custom Broker License

Highlights / Catch Notes

GST

• Limestone slabs classified under Chapter 68 of Customs Tariff Act, 1975, not under Chapter 25.

  Case-Laws - AAAR : Classification of goods - Polished / Processed limestone slabs - The commodity “Polished/Processed limestone slabs” falls under Chapter 68 of the First Schedule to the Customs Tariff Act, 1975 - The goods would not fall under Chapter 25 of the Schedule.
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• Renting workwear under Schedule II, entry 5(f) of CGST Act 2017 is a mixed supply with services like washing.

  Case-Laws - AAR : The activities/transactions of renting of workwear qualify as “transfer of right to use” of goods in terms of entry 5 (f) of Schedule II of Central Goods and Services Act, 2017. - Renting of work wear along with other services such as transportation, weekly washing etc. is mixed supply.
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• GST Rate Set at 5% for Retrofitting Twin Pipe Air Brake Systems on Railway Wagons as Composite Supply.

  Case-Laws - AAR : The Applicant’s contract for retro-fitment of Twin Pipe Air Brake System on Railway Wagons is to be treated as Composite Supply, where the Twin Pipe Air Brake System is the Principal Supply - Rate of GST is 5%.
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• Agricultural Soil Testing Minilab Reagents Classified Under GST Tariff Heading 9027, Not Eligible for Exemption Under 8201.

  Case-Laws - AAAR : Classification of goods - rate of tax - Agricultural Soil testing Minilab and its Reagent Refills - whether classifiable under Tariff heading 9027 of the GST Tariff - Held Yes - they are not classifiable under Heading 8201 - Benefit of exemption not available.
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• GST Council Revises Tax Rates, Exemptions, Reverse Charge Mechanisms to Enhance Compliance and Clarity Across Sectors.

  News : GST Council Decisions - GST on goods and services - Rates, Exemptions, Reverse Charge, Procedural aspects etc.
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• GST Council Meeting: Key Rate Reductions Proposed for 28% Bracket, Compliance Simplification, and Efficiency Enhancements Discussed.

  News : Recommendations made during 31st Meeting of the GST Council held on 22nd December, 2018 (New Delhi)-Rate changes
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Income Tax

• Taxpayer Fails to Counter Presumed Income from Seized Documents; Additions to Income Upheld.

  Case-Laws - AT : Addition based on seized documents during the course of search - presumption is rebuttable but assessee has not produced any evidence to rebut that presumption - it is not the claim of the assessee that no such transaction has taken place. He merely pleaded that it is a dumb documents - Additions confirmed.
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• Capital Gains from Transferring 3,750 ESOPs Classified as Long-Term Despite Unexercised Options Due to Non-Vesting.

  Case-Laws - AT : LTCG or STCG - transfer of ESOP - The contention that the assessee cannot exercise option in the absence of vesting is not relevant as the options were transferred without any exercise in the case on hand. The capital gain arising from the transfer of 3750 options should be considered as LTCG.
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• Assessee Faces Double Jeopardy: Capital Gains Taxed Without Allowing Loss Carry Forward, Deemed Unjust by AO.

  Case-Laws - AT : If the capital gain is held to be taxable in India, then the loss suffered by the assessee and carry forward of such loss is allowable to the assessee. However, no such benefit has been given to the assessee by the AO - Thus, the assessee has been put to double jeopardy which, in our view, is unjust and improper.
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• Interest Disallowance on Citi Bank Loans Unsupported by Evidence; No Legal Basis for New Projects Assumption.

  Case-Laws - AT : The disallowance of interest on the borrowings from the Citi Bank, which is solely based on the assumption that the borrowings from the Citi Bank have been used in the new projects – something which is not burnout from the material on record, is devoid of legally sustainable basis.
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• Alleged suppression in production affects net profit rate; distinct recipes prevent standardizing total production quantities.

  Case-Laws - AT : Addition on account of suppression of production - Rate of net profit - For determination of total production, all products and raw-material cannot be clubbed together to arrive at standard or a uniform quantity, because the assessee is manufacturing different products having different recipe with common raw-material.
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• Appellant's Operating Profit Margin Exceeds Peers; No Extra Adjustments Needed for AMP Expenses Benchmarking.

  Case-Laws - AT : Transfer pricing - ALP - Since the operating profit margin of the appellant company is better than those of the comparables, it can be safely concluded that the assessee has been suitably remunerated and no further adjustment is required to bench mark the AMP expenses.
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• Additions u/s 68 Invalid in Tax Assessment: No Incriminating Material Found in Section 132 Search.

  Case-Laws - AT : Assessment u/s 153A - Addition u/s 68 - nowhere it is the case of Revenue that the aforesaid additions made in the Assessment Order were based on any incriminating material found in the course of search U/s 132 of I.T. Act. - No additions can be made.
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• Court Upholds Deduction for Doubtful Assets u/s 36(1)(viia)(c) Despite Lack of Positive Profits.

  Case-Laws - HC : Entitlement to deduction of provision made in respect of doubtful and loss assets u/s 36(1)(viia)(c) - assessee did not have any positive profits to set it off from - scope of amendment - claim of the assessee allowed - the proper method of interpreting the proviso is to give life to the proviso and the intention behind the insertion of the proviso.
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Service Tax

• Appellant's land rights as consideration included in villa sales value; demand set aside.

  Case-Laws - AT : Construction of complex services - the amount attributable to the consideration received by appellant in the form of land rights from the land owner stands included in the value of villas sold to prospective customer which would mean that whatever consideration was received by the appellant in form of developmental right was considered in assessable value - demand set aside.
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• National Authority Faces Demand for Unpaid Differential Service Tax Due to TDS Discrepancy in Financial Reporting.

  Case-Laws - AT : Recovery of differential Service Tax - amounts paid by NHAI as TDS - The appellant has also not been able to make out a case on limitation for simple reason that despite showing TDS amount as income in his balance sheet, did not indicate the same or reconcile figures with the service tax returns filed by them - Demand confirmed.
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Central Excise

• Appellant's CENVAT Credit Claim Upheld: Revenue's Allegations of Goods Substitution with Bazaar Scrap Lack Evidence.

  Case-Laws - AT : CENVAT Credit - inputs - As the Revenue has not come with any evidence on record to show that the goods have been substituted by bazaar scrap, the allegation against appellant is not sustainable.
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• Court Highlights: Delay in Filing Appeals Shouldn't Unfairly Deny Rights; No Malicious Intent Presumed in Late Filings.

  Case-Laws - HC : Condonation of delay in filing appeal - Limitation is not intended to destroy the rights of parties. No prudent man would purposely lodge an appeal belatedly, unless and until the person has some mala fide intention to do so.
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• Court Considers Restoring Appeal After 5-Year Delay; Appellant Pre-Deposited Rs. 7 Lakhs Pending Compliance with Conditions.

  Case-Laws - HC : Restoration of appeal - praying for restoration of appeal was made with a delay of about 5 years - The appellant had already pre-deposited ₹ 7 lakhs. If the appellant complies with this condition within the time stipulated by us in this judgment, appeal restored.
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Case Laws:

• GST

• 2018 (12) TMI 1277
  Classification of supply - rate of tax - Composite Contract or Works Contract? - tender received from the Indian Railways for retro-fitment of Twin Pipe Air Brake Systems on wagons - principal supply - Twin Pipe Air Brake Systems or the supply of services of fitting these goods to the wagons? Held that:- The contract referred to by the Applicant is that of a composite supply within the meaning of Section 2(30), where the Twin Pipe Air Brake Systems are the Principal Supply as defined under Section 2(90) ibid. The entire contract value is, therefore, taxable at the rate applicable for supply of Twin Pipe Air Brake Systems - Twin Pipe Air Brake System is classifiable under Tariff Head 8607 21 00 [Parts of Railway.. ..Air Brakes and part thereof] which is taxable @ 5% under Serial No. 241 of Schedule I of Notification No. 01/2017 CT (Rate) dated 28/06/2017 with no benefit of refund of the unutilized input tax credit (as per TRU Clarification issued under F.No.354/1/2018-TRU dated 25/01/2018). Ruling:- The Applicant s contract for retro-fitment of Twin Pipe Air Brake System on Railway Wagons is to be treated as Composite Supply, where the Twin Pipe Air Brake System is the Principal Supply Twin Pipe Air Brake System is classifiable under Tariff Head 8607 21 00 and is taxable @ 5% [in terms of Serial No. 241 of Schedule I of Notification No. 01/2017 CT (Rate) dated 28/06/2017] with no refund of the unutilized input tax credit [as clarified in TRU Clarification issued under F.No.354/1/2018-TRU dated 25/01/2018].

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• 2018 (12) TMI 1276
  Classification of goods - rate of tax - Agricultural Soil testing Minilab and its Reagent Refills - whether classifiable under Tariff heading 9027 of the GST Tariff or otherwise? - N/N. 2/2017 of Section 6, sub-Section (1) of the Act. Classification of the Minilab - Held that:- By the nature, functions and usage etc., the Mridaparikshak instrument / Minilab falls within the specific phrase instruments for physical or chemical analysis used in Heading 9027 - this classification would be applicable under the primary criterion according to the terms of Headings vide Rule I of the Interpretative Rules. Heading 9027 in the Tariff mentions the names of only some such instruments for physical / chemical analysis illustratively, as referred earlier. As such, the Adv. Ruling Authority was right in referring to the HSN Notes and in arriving at the conclusion basing on the specific mention therein of pH meter, Wet Chemical Analyser; which are used for the similar functions of measuring / determining the pH factor, inorganic / organic components etc., as done by the impugned Mridaparikshak / Minilab - Inasmuch as the Mridaparikshak / Minilab is found to be classifiable under Heading 9027, the plea of appellants for classifying them under Heading 8201 remains further negated by Note I (h) to Section XV which precludes instruments/apparatus of Section XVIII (under which Chapter 90 falls) from being classified under Section XV, which includes Chapter 82. Thus, Mridaparikshak-MiniIab is rightly classifiable under Heading 9027 of the Tariff as held by the Adv. Ruling Authority and not under Heading 8201 as claimed by the appellant. Classification of Refill Reagents - Held that:- Refill Reagents are not classifiable under the said Heading since these do not qualify to be considered as Hand tools by any means. Appellants have also not put forth any separate grounds/contentions in support of their claim for classifying the Refill reagents under Heading 8201 - The appellants have, either in the grounds of appeal or further submissions, not disputed either the finding of the lower Authority that the Refill Reagents are solely or principally for use with the Mridaparikshak Minilab falling under Heading 9027 nor as to the application of Note 2 (b) of Chapter 90, for determining the classification - thus, the Adv. Ruling Authority s decision of classifying Refill Reagents under Heading 9027 is correct and merits to be upheld. Whether the exemption entry Sl.No. 137 of Notification No. 2/2017-Central Tax (Rate) dated 28-6-201 7 is applicable to the impugned goods? - Held that:- The exemption is applicable to a sub-set from out of the broad category of Hand tools covered in Heading 8201. Since the impugned goods do not fall in the Heading itself, the exemption given in respect of a part of the Heading would not be applicable to them - the impugned goods are not covered by the entry SI.No. 137 in the exemption Notification as claimed by the appellant. The impugned goods are correctly classifiable under Heading 9027 of the Tariff; they are not classifiable under Heading 8201 ibid. Further the impugned goods are not eligible for the exemption vide entry Sl.No. 137 of the Notification No. 2/2017- Central Tax (Rate) dated 28-6-2017. Ruling:- The Advance Ruling pronounced vide TSAAR Order No. 02/2018 dated 30-052018 [2018 (6) TMI 465 - AUTHORITY FOR ADVANCE RULING HYDERABAD TELANGANA] passed by the Telangana State Authority for Advance Ruling in re: appellant M/s. Nagarjuna Agro Chemicals Pvt. Ltd., Hyderabad is confirmed.

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• 2018 (12) TMI 1275
  Classification of supply - Composite supply or mixed supply - Transfer of right to use - activities / transactions of renting of workwear - Transfer of right in goods or not - entry 5 (f) of Schedule II of Central Goods and Services Act, 2017. Held that:- It is clear that for the contractual period, the ownership of the workwear rests with the applicant and only the right to use the workwear is intended to be passed on to the customer for the period of contract - the activity of renting workwear qualifies as transfer of the right to use any goods for any purpose (whether or not for a specialized period) for cash, deferred payment or other valuable consideration and thus would be categorized as supply of services within the meaning of entry 5(f) of Schedule II of the GST Act. Renting of work wear along with other services such as transportation, weekly washing etc - The provision of renting of workwear is combined with provision of ancillary services such as transportation, weekly clearing, maintenance, repairs and finishing of the said workwear. Thus applicant satisfies one of the conditions that is essential character of Bundled Service of the composite supply - also, services other than renting of workwear are being supplied not in the ordinary course of business but under the compulsion imposed by the applicant on the customer. If the particular supply is a mixed supply, the first requisite is to rule out that the supply is a composite supply. A supply can be a mixed supply only if it is not a composite supply. As a corollary it can be said that if the transaction consists of supplies not naturally bundled in the ordinary course of business then it would be mixed supply - the possibility of the present transaction being a composite supply is already ruled out, and the fall out is that the transaction qualifies as a mixed supply as defined in section 2(74) of the GST Act. Ruling:- The activities/transactions of renting of workwear qualify as transfer of right to use of goods in terms of entry 5 (f) of Schedule II of Central Goods and Services Act, 2017. The supply of renting of workwear along with other services such as transportation, weekly washing etc. for a single consideration is a mixed supply under section 2 (74) of CGST Act.

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• 2018 (12) TMI 1274
  Classification of goods - Polished / Processed limestone slabs - whether classifiable under heading 6802 of the GST Tariff or otherwise? - Held that:- The processes of polishing , tumbling and calibration ; or the state of goods as polished / tumbled / calibrated are not covered by Note 1 to Chapter 25 of the Customs Tariff Act, 1975 - it is evident that the HSN Explanatory Notes also reflect the restriction as to only certain specified processes being allowed on the products for a classification under Chapter 25 - as per HSN notes also, slabs which have been polished , tumbled and/or calibrated WOUld be covered by exclusions detailed in both General Note to Chapter 25, as well as the Heading Note to Heading 2515. In sum, the goods in question, limestone slabs, have admittedly been subjected to processes of polishing (including tumbling) and calibration, in addition to being cut to rectangular/square shapes. The said processes, except that of cutting, are not among those specified either in the Heading description or the Chapter Note 1, for an eligible classification under Chapter 25. Hence, classification of the subject goods under Chapter 25 i.e, specific Headings 2515 /2516 remains precluded by virtue of description in said Headings as also Chapter Note 1 Note 1 to Chapter 25 makes fulfilment of the specified criteria in the Heading description or the Note itself. Neither of the two categories of limestone slabs viz., Polished limestone slabs or Processed Limestone slabs (as referred at para 15.2 supra), can be classified under Chapter 25 in general and under Headings 2515/2516, in particular. Correctness of classification of the goods under Heading 6802, as held by the lower authority - Held that:- The meaning/scope of the word worked is not separately and specifically delineated in the HSN Notes also. However, the said word is used at various places denoting certain illustrative and not exhaustive list of processes. The Heading 6802, apart from articles, also specifically covers stone in the description itself i.e. worked monumental or building stone and articles thereof . The same, coupled with the HSN Explanatory Notes, as detailed and analysed above, show that such stone (limestone slabs, in the instant context) which have been worked beyond the processes mentioned in Chapter 25 on the one hand and polished as specified under Chapter 68 in particular reference to slabs (blocks etc.,) has to be classified under Heading 6802. There is no restrictive connotation that such working has to be done only by stone-mason or sculptor. The appellant has not made out a case against the decision in impugned Advance Ruling in so far as it has been ruled that Polished / Processed Limestone slabs are. correctly classifiable under heading 6802 of the GST Tariff (sic) . The classification under Chapter Heading 6802 of the First Schedule to the Customs Tariff Act, 1975 is the appropriate classification of the said goods (both polished only as well as processed , as referred at para 15.2 supra), in view of the relevant Heading-description read with the Chapter Notes and HSN Explanatory Notes. Ruling:- The commodity Polished/Processed limestone slabs falls under Chapter 68 of the First Schedule to the Customs Tariff Act, 1975. The commodity comes under Chapter Heading 6802 (Tariff Item No. 6802 92 00 - Other calcareous stone ) of the Schedule. The goods Polished/ Processed Limestone slabs do not fall under HSN Code - Chapter Heading 2530 of the Schedule. The goods Polished / processed Limestone slabs do not fall under HSN Codes i.e, Chapter headings 2515 / 2516 / 2521 of the Schedule. The goods would not fall under Chapter 25 of the Schedule.

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• 2018 (12) TMI 1273
  Seizure of goods with vehicle - Section 129(1) of the GST Act - Held that:- The petitioner has already deposited the tax and the penality but even then the goods are not being released and they are insisting that the petitioner-owner should appear instead of the authorised representation or the signatory - respondent are directed to forthwith release the goods and vehicle provisionaly unconditional.

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• 2018 (12) TMI 1272
  Filing of Form GST Tran-I - carry forward of CENVAT Credit - Held that:- Petition is disposed off by directing respondent No.4 to take a decision on the representation dated 22.11.2018 (Annexure P-6), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner.

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• Income Tax

• 2018 (12) TMI 1271
  Non-deduction of TDS on the payments made on reimbursement of service charges - Disalllowance u/s 40(a)(ia) - Disallowance of amounts claimed to have been paid to sundry creditors - Net expenditure credits under Section 68 addition - Held that:- Learned counsel appearing for the petitioner submits that in a similar matter giving rise to identical issues, this Court had granted special leave to appeal. Delay condoned. Leave granted.

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• 2018 (12) TMI 1270
  Allowable revenue expenditure - claim of modernization/expenditure incurred - whether the expenditure incurred by the assessee on replacement of old machinery by purchase and installation of new machinery, replacement of spares of textile machinery be allowable as a Revenue expenditure? - Held that:- A Division Bench of this Court in the case of Super Spinning Mills Ltd. Vs. ACIT [2013 (9) TMI 88 - MADRAS HIGH COURT] considered an identical substantial question of law as framed in this appeal and after taking note of the decisions of Saravana Spinning Mills Pvt. Ltd. [2007 (8) TMI 16 - SUPREME COURT OF INDIA] and Mangayarkarasi Mills (P) Ltd [2009 (7) TMI 17 - SUPREME COURT] remanded the matter to the Commissioner of Income Tax (Appeals) [for short, the CIT (A)] to decide the issue as to whether the expenditure, in effect, could be treated as revenue expenditure. In the light of the legal position as enunciated above we are of the considered view that the matter has to be remanded for fresh consideration.

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• 2018 (12) TMI 1269
  Waiver of interest u/s 220(2) and Rule 5 of the Second Schedule to the Act - quantification of refund eligible in view of the expiry of time limit of one year from the end of the month in which the petition for waiver was filed - Held that:- There is no error in the order passed by the learned Single Judge in directing the respondent to decide the application for waiver dated 21.2.2017. The decision in the case of Strawboard Manufacturing Co. Ltd.[1952 (12) TMI 32 - SUPREME COURT] can be of no assistance to the case of the assessee, since it was a case where a Notification was issued under the Industrial Disputes Act, 1947 notifying a Tribunal to decide the issue within a time frame. The question was as to whether the Tribunal had become functus officio after the period had lapsed. The facts of the present case are entirely different since the case on hand is a case where there is exercise of statutory powers under Section 220(2A) of the Act, which also contains conditions to be fulfilled by the assessee.

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• 2018 (12) TMI 1268
  Entitlement to deduction of provision made in respect of doubtful and loss assets u/s 36(1)(viia)(c) - assessee did not have any positive profits to set it off from - scope of amendment - Tribunal allowed claim - Held that:- We are unable to accept the stand taken by the Revenue for the reason that the proviso to sub-Clause (c) in Section 36(1)(viia) uses the word at its option . The proviso provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in sub-Clause (c) in Section 36(1)(viia) shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after 1st April 2003 and ending before 1st April 2005, deduction in respect of any provision made by it for any assets classified as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year. Thus, in our view, the proviso carves out an exception from the stipulation in sub-Clause (c) otherwise, the use of the expression at its option would loose its significance. The amendment was brought into the Act by inserting the said proviso with effect from 01.04.2003 and this was with an object of granting incentive for debt/capital market and financial sector by which, the Central Government directed fiscal incentive for provisioning in respect of bad and doubtful debts in the case of banks and financial institutions. Therefore, the proper method of interpreting the proviso is to give life to the proviso and the intention behind the insertion of the proviso. A similar proviso is contained under sub-Clause (a) of Section 36(1)(viia) which apply to schedule bank and non-schedule bank and this proviso was inserted with effect from 01.04.2000. Thus, the Central Government proposes the amendment to give a retrieve for State industrial corporation, public financial institution and State financial Corporation giving them an option to claim deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets. The proviso also place another condition that those assets should be classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by the Reserve Bank of India. Thus, the interpretation given by the CIT(A) and the Tribunal is perfectly valid. - Decided in favour of the assessee

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• 2018 (12) TMI 1267
  Tribunal not adjudicating the grounds relating to the question of jurisdiction as raised by the assessee - Held that:- Whenever a question of jurisdiction is raised before the authority, the same should be adjudicated. The very power of the authority to consider the plea of the assessee is called in question. Whether it is to be accepted or not is completely within the jurisdiction of the authority. However, the question of jurisdiction should necessarily be answered by the authority which has not been done. Therefore, the first substantial question of law is answered in favour of the assesee by holding that the Tribunal was not justified in passing the impugned order without adjudicating the ground relating to jurisdiction. Addition in respect of KGF property - Tribunal not recording any reasons for passing the said order with regard to modifying the addition - Held that:- Tribunal has not given any reasons for recording such a finding. Any conclusion to be recorded by the authority should stand preceded by reasons. In the absence of recording any reasons, the order becomes unsustainable

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• 2018 (12) TMI 1266
  Assessment u/s 153A - Addition u/s 68 on account of unexplained cash credits - Held that:- CIT (DR) failed to establish that the additions made in the case of Assessee were based on any incriminating material found in the course of search U/s 132 of I.T. Act. On perusal of the Assessment Orders and on further perusal of impugned appellate orders of Ld. CIT(A), it is found that nowhere it is the case of Revenue that the aforesaid additions made in the Assessment Order were based on any incriminating material found in the course of search U/s 132 of I.T. Act. It is also not in dispute that no assessments were pending in the case of any of the three assessee on the date of search u/s 132 of I.T.Act. Thus additions to be deleted - Decided in favour of assessee.

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• 2018 (12) TMI 1265
  Addition u/s 68 - not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order - denial of natural justice - Held that:- We find that the case laws relied upon by the Ld. DR are on the merits of the case, however, the ground argued before the Tribunal is relating to confirmation of addition which was made on the basis of material collected at the back of the assessee without giving his an opportunity to rebut/cross examine the same which is in violation of the principle of natural justice, hence, the same are not applicable here. We find considerable cogency in the contention raised by the assessee’s counsel that addition was made on the basis of material collected at the back of the assessee without giving him an opportunity to rebut/cross examine the same, which was also raised before the CIT(A), who did not adjudicate the same and wrongly upheld the AO’s order, which is not proper and is against the principle of natural justice as well as law laid down in the case of Andaman Timber vs. CIT [2015 (10) TMI 442 - SUPREME COURT] wherein held as not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. - Decided in favour of assessee.

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• 2018 (12) TMI 1264
  TPA - AMP expenditure - whether Advertisement and marketing expenditure incurred by the appellant assessee can be treated as international transaction and made subject matter of adjustment in arms length pricing? - Held that:- TPO has used the same comparables as that of the assessee and the TPO chose to examine the international transaction, if any, by applying BLT, knowing fully well that the operating margin of the assessee is better than those of the comparables. It would not be proper to ask the TPO to rework the AMP expenses into that which was incurred for building the brand value of the foreign AE and that the same was incurred wholly or exclusively of the benefit of the brand building of the AE. Moreover, in our considered opinion, multiple opportunities are not permissible to any authority to experiment in setting up case as held in the case of Rajesh Babubhai Damania [2000 (6) TMI 5 - GUJARAT HIGH COURT]. The benefit, if any, gone to the AE can only be termed as incidental benefit. Merely because there is an incidental benefit to AE, Sony Company, it cannot be stated that the AMP expenses incurred by the assessee was for promoting the brand Sony Japan. Since the operating profit margin of the appellant company is better than those of the comparables, it can be safely concluded that the assessee has been suitably remunerated and no further adjustment is required to bench mark the AMP expenses. Following the guidelines listed by the Hon'ble High Court in the case of Sony Ericson Mobile Communication India Private Limited [2015 (3) TMI 580 - DELHI HIGH COURT], the grounds raised by the assessee are allowed.

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• 2018 (12) TMI 1263
  Addition on account of running bill - assessee failed to explain the discrepancy noted by Ld. AO during assessment proceedings - Assessee was following accrual method of accounting and moreover, contractee had credited the said amount to the account of the assessee and had made TDS on it. - Held that:- We find that it is undisputed fact that the assessee had failed to explain the discrepancies noted by AO during assessment proceedings and could not justify as to why the said receipts were not offered to tax. The perusal of ledger accounts received from HDIL revealed that the assessee was given credit of impugned amount and due TDS was also deducted against the same. The transactions were duly reflected in Form 26AS. The assessee while claiming the credit of TDS, justified its stand of not offering the same to tax on the premise that there was uncertainty as to collection of the revenue which was in sharp contrast to the fact that expenditure against the projects were being claimed by the assessee in profit & loss account. Under the given circumstances, we set aside the findings of first appellate authority and remit the matter back to the file of Ld. AO for re-adjudication - Decided in favour of revenue for statistical purposes

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• 2018 (12) TMI 1262
  Income received by way of rent & service charges offered - Business income OR Income from House Property - Held that:- As decided in assessee's own case for previous AY in course of hearing before the Commissioner (Appeals) the assessee had submitted similar additional evidences for consideration of the Commissioner (Appeals) and to impress upon the fact that by virtue of these additional evidences holding the assessee as a monthly tenant, the decision of the Tribunal in earlier assessment years cannot be followed. It is apparent on record, learned Commissioner (Appeals) has totally ignored such evidences filed by the assessee. Therefore, keeping in view the decision of the Tribunal in assessee’s own case for assessment year 2008–09 and 2009–10 as referred to above, we restore the issue to the file of the Assessing Officer for de novo adjudication after due opportunity of being heard to the assessee Nature of certain capital gains earned by the assessee during impugned AY and applicable tax rate thereupon - Sale of flat - STCG OR LTCG - Held that:- Factual matrix that depreciation under the Income Tax Act was never claimed by the assessee against the flat and the said flat was never used as a commercial asset remained unrebutted. The revenue could not bring on record any material to controvert the same whereas LD. AR, drawing our attention to the computation of income for past several years, demonstrated that the depreciation was never claimed by the assessee under Income Tax Act against the said flat. This being the case, no fault could be found with the conclusions of first appellate authority. This ground stands dismissed.

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• 2018 (12) TMI 1261
  Assessment u/s 153A - validity of action u/s. 132 - Held that:- Adverting to the facts of the present case, it is found that not only the documents relating to the assessee’s business were found at 102 and 103, B-Wing, Parmar Trade Centre, Sadhu Vaswani Chowk, Pune, but they were incriminating in nature and on the basis of such documents the assessee surrendered certain income as well. The name of the assessee also appears in the panchanama drawn for that premises. Action u/s. 132 of the Act was validly taken against the assessee, pursuant to which the assessment got completed u/s. 153A of the Act. No illegality can be found in the framing of assessment u/s. 153A of the Act. Addition on loose papers as found and seized from the searched premises - Held that:- The situation is that the assessee paid its share of unaccounted income of Rs. 123.13 lakhs to Sushil Agarwal and such income was generated in books by obtaining inflated purchase bills, on which he earned income at the rate of 25% at Rs. 130.88 lakhs. It is the higher of unexplained inflow or unexplained outflow, which can be subjected to tax. The assessee has already surrendered a sum of Rs. 123.13 lakhs, being, payment of unaccounted income to Sushil Agarwal. If we reduce the outflow of unaccounted income of Rs. 123.13 lakhs from the inflow of unaccounted income generated by procuring accommodation bills at Rs. 130.88 lakhs, any further addition which is warranted, can be a sum of Rs. 7.75 lakhs. We, therefore, direct to restrict the addition to a sum of Rs. 7.75 lakhs. Bogus purchases - Addition in respect of entries recorded in the seized document - Held that:- We have already directed to include a sum of Rs. 7.75 lakhs in the income of the assessee for the preceding year on the basis of profit of 25% on total bogus purchases of Rs. 5.23 crore for both the years, as reduced by the surrender of Rs. 123.13 crore made by the assessee for the instant year. If we view total bogus purchases pertaining to both the years in juxtaposition to the surrender made by the assessee in income for the instant year, there remains nothing more to be added on this score to the total income of the assessee for the year under consideration. We, therefore, order to delete the addition

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• 2018 (12) TMI 1260
  Addition on account of suppression of production - AO has made comparison of net profit ratio shown during the year under consideration at 1.64% with the net profit ratio of 1.77% shown in the immediate preceding year - Held that:- There cannot be a standardizations or uniformity of sugar consumption in these nature of products, and therefore method adopted by the AO to club all the products together and standarise consumption of sugar at a particular quantity is not correct method. The ld.CIT(A) has dealt with both the aspects viz. consumption of papaiya and sugar for different products manufactured by the assessee and arrived at a just conclusion that the approach of the AO in estimating the production was not correct. CIT(A) has recorded a finding that consumption of raw material varies from product to product, which passes through different stages. For determination of total production, all products and raw-material cannot be clubbed together to arrive at standard or a uniform quantity, because the assessee is manufacturing different products having different recipe with common raw-material. The ld.CIT(A) has appreciated the facts in right perspective and restricted the addition to Rs. 10,00,000/-. We do not find any infirmity in the order of the ld.CIT(A), which we confirm and reject the grounds of appeal of the Revenue.

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• 2018 (12) TMI 1259
  Eligible for exemption u/s 54F - denial of claim as assessee was having more than one residential house - Held that:- As on the date of transfer of the original asset i.e. on 16.7.2012 and 12.9.2012, the assessee was only owner of half portion of the house, which was in joint ownership. Therefore, the A.O. was not correct to decline benefit of section 54F(1) of the Act on this basis. However, Ld. CIT(A declined benefit of section 54F(1) of the Act on the basis that subsequent to transfer of original assets, the assessee had purchased two new assets. It is clearly contrary to the proviso (a)(ii) to section 54(F)(1) of the Act. Since the Ld. CIT(A) rejected the claim on the ground other than the ground taken by the A.O., he ought to have given a specific notice to the assessee in this regard. Therefore, we set aside the orders of the authorities below and restore the issue to the file of the assessing officer to decide it afresh - Appeal filed by the assessee is allowed for statistical purposes.

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• 2018 (12) TMI 1258
  Disallowance u/s 14A - Held that:- In views of case of Corrtech Energy Pvt Ltd [2014 (3) TMI 856 - GUJARAT HIGH COURT] and in view of the undisputed factual position that there was no exempt income in the hands of the assessee in the relevant previous year, we uphold the plea of the assessee and delete the impugned disallowance u/s. 14A. The assessee gets the relief accordingly. Disallowance of interest expenditure as capital expenditure on part of loan which was utilised for the purpose of the running business of the company - Held that:- The factual position about interest free funds being far from excess of the funds deployed in the new projects and absence of any factual findings about the diversion of funds is not even disputed by the learned Departmental Representative. The disallowance of interest on the borrowings from the Citi Bank, which is solely based on the assumption that the borrowings from the Citi Bank have been used in the new projects – something which is not burnout from the material on record, is devoid of legally sustainable basis. Learned CIT(A)’s conclusions are based on surmises and conjectures. In the light of these discussions, and bearing in mind entirety of the case, we direct the Assessing Officer to delete the impugned disallowance - Decided in favour of assessee

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• 2018 (12) TMI 1257
  Renewal of approval u/s 10(23C) - assessee is one of the temples in the State of Tamil Nadu, which is being managed by Hindu Religious and Charitable Endowments Department of the Government of Tamil Nadu - charitable activities - Held that:- In view of Section 10(23C)(v) of the Act, the assessee being a public religious temple / institution is entitled for approval by the Commissioner (Exemption). In fact, the Commissioner (Exemption) granted approval under Section 10(23C)(iv) of the Act by an order dated 03.11.2016 from the assessment year 2016-17 which was subsequently modified by an order dated 28.12.2017 as if the approval was granted under Section 10(23C)(v) of the Act. From the material available on record it appears that the approval under Section 10(23C) of the Act was granted from 08.05.1989 by Notification No.8354. Therefore, the assessee is seeking only renewal of earlier approval. Hence, this Tribunal is of the considered opinion that the Commissioner (Exemption) is not justified in restricting the approval from assessment year 2016-17. The approval ought to have been renewed from the assessment year 2015-16.The Commissioner (Exemption) is directed to grant approval under Section 10(23C)(v) from assessment year 2015-16, so that the approval under Section 10(23C)(v) of the Act can be continued without any break. - Decided in favour of assessee

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• 2018 (12) TMI 1256
  Income / loss on account of foreign exchange transaction - assessed under the head capital gain or is exempt under Article–14(6) of India–Spain Double Taxation Avoidance Agreement (DTAA) - assessee company, is a tax resident of Spain - Held that:- Commissioner (Appeals) while deciding the issue in preceding assessment years referring to Article–14(4) of India–Spain tax treaty qua Article–13(4) of U.N. Model Convention has held that capital gain arising out sale of shares is not taxable in India. No doubt, in the impugned assessment year, the learned Commissioner (Appeals) has followed his orders passed for the earlier assessment years. Moreover, as could be seen from the facts on record, the assessee had incurred huge loss in assessment year 2009–10 as well as in the impugned assessment year. Admittedly, if the capital gain is held to be taxable in India, then the loss suffered by the assessee and carry forward of such loss is allowable to the assessee. However, no such benefit has been given to the assessee by the AO on the reasoning that assessee has not claimed it in the return of income. Thus, the assessee has been put to double jeopardy which, in our view, is unjust and improper. No reason to interfere with the decision of the learned Commissioner (Appeals) on the issue. - decided in favour of assessee.

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• 2018 (12) TMI 1255
  Deduction claimed u/s 54EC denied - Treatment by the authorities of LTCG on transfer of ESOP options as STCG - Held that:- If ESOP options had been exercised, and the shares allotted thereby would have been sold after their allotment, then undisputedly the gains arising therefrom would have to be treated as STCG. In the case on hand, however, the 3750 options have been transferred as such, without any exercise of options. In the absence of exercise of options, no shares were allotted to the assessee. It is a case of buy back of ESOP options by Infosys Technologies Ltd., with Infosys BPO Ltd., the assessee’s employer, as a confirming party. It is not in dispute that ESOP options provided valuable right to the assessee to exercise and have allotment of shares. They were thus ‘capital asset’ held by the assessee from the date of grant i.e., 28.02.2003 and 02.02.2004 for which a consideration was paid to the assessee under the option Transfer Agreement. The contention that the assessee cannot exercise option in the absence of vesting is not relevant as the options were transferred without any exercise in the case on hand. The capital gain arising from the transfer of 3750 options should be considered as LTCG. AO is accordingly directed. Consequently, grounds 1.2 to 1.6 are allowed. Deduction u/s 54EC - There is no dispute in the matter that the deduction claimed u/s 54EC is to be allowed to the assessee as the AO in the original order of assessment for Assessment Year 2007-08 passed u/s 143(3) of the Act vide order dated 31.12.2009 on page 2 at para 5 thereof has recorded that the Assessee’s claim for deduction u/s 54EC is to be allowed. Charging of Interest u/s 234B and 234D - Held that:- The assessee denies itself liable to be charged interest u/s 234B and 234D of the Act. The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld in the case of Anjum H. Ghaswala ([2001 (10) TMI 4 - SUPREME COURT) and therefore uphold the AO’s action in charging the same. The AO is however directed to re-compute the interest chargeable u/s 234B and 234D of the Act, if any, while giving effect to this order.

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• 2018 (12) TMI 1254
  MAT computation - payment of surcharge and education cess consideration for the purpose of MAT credit - Held that:- As decided in assessee's own case for year 2012-13 CIT-A correctly directed the Assessing Officer to revise the MAT computation by including payment of surcharge and cess, we find no reason to interfere with the order passed by the ld. CIT(A). Thus, the ground raised by the Revenue stands dismissed.

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• 2018 (12) TMI 1253
  Addition on account of share capital introduced in one of the company of the assessee i.e. M/s. Umkal Healthcare Pvt. Ltd.- Held that:- CIT (A) failed to understand that the assessee has voluntarily surrendered the amount during the course of search and survey carried out at various premises. He stated that the surrender was made under section 132(4). The disclosure is also not bald. It was backed by the evidences and items of income as well as the amount of investments by the assessee. Hence, it cannot be brushed aside lightly. In view of this, we reverse the finding of the learned commissioner appeals, restore the finding of the learned Assessing officer, and confirm the addition of Rs. 29.50 lakhs made in the hands - on the assessee on substantive basis on account of the disclosure made during the course of such. Accordingly, ground number one and two of the appeal of the learned Assessing officer are allowed. Addition on account of cash paid - Held that:- Modification in disclosure from assessee to depreciation claim in case of companies, it also holds good for this grounds of appeal. Further during the course of search when the above paper when confronted to assessee he voluntarily admitted vide question number 18 of the statement recorded under section 132 (4) of the act that the above sum was paid by assessee for purchase of one property at Gurgaon. For the reasons given by us in confirming the addition in ground number one and two of the appeal of revenue, we also reverse the finding of the learned commissioner appeals and confirm the addition of Rs. 1293832/– on account of cash paid. Addition based on seized documents during the course of search - Held that:- We are not in a position to uphold the above finding for the simple reason that assessee himself has confessed that h he is inflating cost of assets, therefore CIT (A) could not have held so. Further document found during the course of search are correct and belonging to the assessee is the presumption available to the revenue in accordance with the provisions of section 132(4A) and section 292C of the income tax act. However, presumption is rebuttable but assessee has not produced any evidence to rebut that presumption - it is not the claim of the assessee that no such transaction has taken place. He merely pleaded that it is a dumb documents. Therefore, such addition could not have been deleted. Accordingly, we reverse the finding of the CIT (A) and confirm the addition of Rs. 30 lakhs in the hands of the assessee. Ground no 4 and 5 of the appeal are allowed.

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• 2018 (12) TMI 1252
  Addition on account of disallowance of expenses - CIT(A) deleted the disallowance - Held that:- Assessee during the course of assessment proceedings has filed various details including ledger account of the expenses a finding given by CIT(A) and not controverted by DR. AO never raised any further query to examine the genuineness of the expenses. No specific remark in respect of any defect or shortcomings in maintaining of details has been made by the Assessing Officer. Since the accounts of the assessee are audited under the companies Act, 1956 and u/s 44 AB of the Income Tax Act, 1961, therefore, in absence of any defect brought on record by the Assessing Officer, the disallowance made by him by estimating the disallowance of expenditure of 50% of such expenses is uncalled for - decided against revenue. Deemed dividend addition u/s 2(22)(e) - Held that:- No infirmity in the order of the CIT(A) deleting the addition from the hands of the assessee and directing the Assessing Officer to make the addition in the hands of the share holders by following the decision of CIT Vs. Ankitech Private Limited (2011 (5) TMI 325 - DELHI HIGH COURT) which has been upheld by Hon’ble Supreme Court in the case of CIT Vs. Madhur Housing Development Company [2017 (10) TMI 1279 - SUPREME COURT OF INDIA] - decided against revenue. Addition on account of inflated purchases - Held that:- The entire addition by disallowing of 40% of the purchases in our opinion is not justified when the books of account are not rejected. We find the Hon’ble Gujarat High Court in the case of Yunus Haji Fazawala Vs. CIT [2016 (2) TMI 1204 - GUJARAT HIGH COURT] has held that action of the Assessing Officer in disallowing 25% of purchases by doubting its genuiness without rejecting the books of account cannot be sustained. The order of the Tribunal confirming the disallowance was accordingly reversed. Since in the instant case also the books of account are not rejected, therefore, action of the CIT(A) in deleting such addition is justified. Further we find merit in the findings of the CIT (A) that if the action of the Assessing Officer is accepted then profit of the assessee will be 32.9 % for A. Y. 2013-14 and 56.09% for A.Y. 2014-15 which is illogical and absurd. Order of the CIT(A) on this issue is just and proper. Protective addition on account of cash and seized - assessee submitted that since the substantive additions has already been made in the hands of Mr. Moin Akhtar Qureshi - Held that:- No infirmity in the order of the CIT(A) deleting the addition made Assessing Officer. We find while deleting the same the ld. CIT(A) has given the finding that substantive addition has already been made in the hands Mr. Moin Akhtar Qureshi as mentioned by the Assessing Officer himself. Since he has deleted the addition with certain directions, therefore, the same being in order we do not find any infirmity in the same. Accordingly, the ground raised by the revenue is dismissed. Addition based on documents found and seized during the search proceedings - bogus purchases - Held that:- When the assessee was making regular transaction with M/s. Jajit Industries, and making purchases from M/s. Hari Mohan Enterprises, M/s. Bajrang Traders and M/s Gurunanak Traders. The Assessing Officer should have called for details from the said parties and should have verified the transactions, if any, over and above the figures mentioned in the seized documents. In our opinion the Assessing Officer cannot estimate the unaccounted purchase and sale for assessment year 2013- 14 based on the material found in the search proceedings relating to AY 2014-15 - restore the issue to the file of the Assessing Officer with a direction to obtain information from the parties regarding transactions carried on by the assessee during the above 2 years.

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• 2018 (12) TMI 1251
  Addition u/s 40A(3) - cash payment exceeding permissible limit - Held that:- AO/CIT(A) have not analysed this aspect of cash payments if they have exceeded Rs. 20,000/- specified under the provisions of section 40A(3) of the Act. Therefore, in the interest of administration of justice, remand the issue to the file of AO for verification of the same and passing a speaking order on this issue. Needless to mention, the AO shall give reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

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• 2018 (12) TMI 1250
  Capital gain computation - Disallowance of the claim of indexed cost of improvement - Held that:- The assessee had produced the original purchase deed executed for the financial year 1993-1994 for a total consideration of Rs. 1,54,360. In the said sale deed, the description of the property is enumerated as paddy field. The assessee has also produced a copy of the land acquisition notice u/s 9(13) of the Land Acquisition Act, 1894, wherein it is clearly enumerated the land as a “filled wet land”. Therefore, these documents clearly show that when the purchase of the impugned property was made, it was a wet land and subsequently when it was compulsorily acquired, the same was a filled wet land. AR, in the course of hearing, had produced old note book, wherein the expenditure incurred for filling up of the land and constructing a compound wall was hand-written. The translated copies of the said note book was also enclosed therefore, the conclusion of the CIT(A) that no evidences were produced before him, for incurring cost for improvement of land, was factually incorrect. There is no doubt that the land purchased by the assessee was paddy wet land, which was subsequently filled up and the same is evidenced from both the purchase deed and the land acquisition notice. The assessee, out of 34 cents, had sold 6 cents of land in April 1996. The said 6 cents of land was sold after incurring cost for improvement and had fetched higher sale price of Rs. 45,000 per cent compared to Rs. 4,500 per cent for which it was purchased in the year 1993. The assessee has also produced the details of the expenses incurred for filling of land and compound wall, which worked out to more than Rs. 8,000 per cent. AO and the CIT(A) were not justified in denying the claim of indexed cost of improvement on the land. Accordingly, we direct the A.O. to re-calculate the LTCG after taking into account the indexed cost of improvement of Rs. 8,000 per cent, which was incurred during the period July 1995 to March 1996.

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• 2018 (12) TMI 1249
  Unaccounted stock difference and non revaluation of the value of stock - LIFO v/s FIFO method - Held that:- So far the method of valuation of closing stock is concerned, the assessee has been following the norm to compute the value of closing stock at cost and net reliable value whichever is lower by applying the LIFO method - quantitative analysis which has been prepared by the Registered Valuer at the time of survey and what is recorded in the stock register has no difference except for 215 gms which is due to mis-weighing of items. We note that the valuation of stock made by the assessee was well-established and was consistently being followed by the assessee in the earlier years. Once adopted method of valuing closing stock should be followed consistently unless there is cogent reason to change it. It is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular's view or proposition in the past, it is not open for the Revenue to take a entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the Assessing Officer on the basis of change in facts. For that we rely on the order of the Hon’ble Supreme Court in RadhaSoamiSatsang vs. CIT [1991 (11) TMI 2 - SUPREME COURT]. - Decided against revenue

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• 2018 (12) TMI 1229
  Levying the late fees u/s 234E while processing the statement of tax deducted at source u/s 200A - scope of amendment brought in the Finance Act 2015 w.e.f. 01.06.2015 - Held that:- This issue has consistently being adjudicated by the Coordinate Bench of the Tribunal and consistent view has been taken that the amendment brought in the Finance Act 2015 w.e.f. 01.06.2015 in clause (c),(d) & (e) of sub-section (1) of section 200A of the Act are prospective in nature, therefore, fee u/s 234E cannot be levied in the statement processed u/s 200A up to 31.05.2015. See SUDARSHAN GOYAL VERSUS DCIT- (TDS) , GHAZIABAD. [2018 (5) TMI 1626 - ITAT AGRA] Thus in the intimation prepared u/s 200A of the Act up to 31st May 2015, the late filing fee u/s 234E of Act cannot be charged while processing the TDS return/statement because enabling clause (c) of sub-section (1) of section 200A have been inserted w.e.f. 01.06.2015 and before this amendment w.e.f 01.06.2015 there was no enabling provision in the Act u/s 200A of the Act for raising demand in respect of levy of fees u/s 234E of the Act. - Decided in favour of assessee

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• PMLA

• 2018 (12) TMI 1247
  Offence under Prevention of Money Laundering Act - bail application - applicant did not surrender before the court - Held that:- The conduct of the applicant that she did not surrender before the court below since July 2015 when the present case as well as all the other three cases were registered against the applicant also and she avoided her arrest and did not appear before the Enforcement Directorate for interrogation. The trial court has also issued a non-bailable warrant against her when she did not respond to the summon issued to her. Ultimately, she surrendered on 5.9.2018 before the trial court. Thus, she appears to have absconded for three years from the due process of law. Hence the case of the applicant is distinguishable from the case of her daughters who have been granted bail by this Court who were involved in only one case. In view of the above, without expressing any opinion on merit of the case, we are of the view that the applicant does not deserve to be granted bail. The bail application is accordingly rejected. However, taking into account the order of the Apex Court, it is directed that the applicant shall not be arrested till 10.1.2019 in order to enable her to avail the remedy before the appropriate forum, if she further wants to seek, failing which the trial court is at liberty to take coercive action against her to secure her presence if she does not surrender before the trial court after 10.01.2019.

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• 2018 (12) TMI 1246
  Offence under PMLA - attachment of properties - properties which are not mortgaged with any bank but provisionally attached herein - overriding effect of IB&C, 2016 over PMLA 2002 - Held that:- The Punjab National Bank has moved the NCLT, Ahmedabad Bench, under IB&C. The properties which are not mortgaged with any bank but provisionally attached herein are undisputedly secured being the properties of the private appellants and M/s Accumen( also an appellant) who are the guarantors and loan amount is liable to be recovered from their properties attached herein. We have taken into consideration the stand of the enforcement directorate on the issue of overriding effect. We are not agreeing with their view hence their arguments that the PMLA,2002 has overriding effect is negated. So far as the legal issue of overriding effect of IB&C, 2016 over PMLA 2002 is concerned, it is held that the IB&C has the overriding effect over the Prevention of Money Laundering Act as the PMLA is a statue which came into effect much prior to the coming into force of IB &C. The IB&C is a later statute which came into effect in the year 2016. The aim and object of both the statutes are not doubt different but they are in operation in their respective fields. The legislature while framing the IB&C is quite aware of the existence of PMLA and other statutes. Thus it is held it is held that the IB&C has overriding effect over PMLA. Whether the proceedings before Adjudicating Authority PMLA is a civil proceedings or a criminal proceedings? - Held that:- The proceedings before the Adjudicating Authority(PMLA) are quasijudicial in nature. It is not bound by the procedure laid down by the Code of Civil Procedure(CPC), 1908, but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Adjudicating Authority shall have powers to regulate its own procedure as provided under section 6(15) of PMLA. At the same time section 11 of PMLA has empowered the Adjudicating Authority to exercise certain powers (of civil courts under CPC) prescribed in section 11 of PMLA. It is held that the proceeding u/s 8 of PMLA,2002 before the Adjudicating Authority is a civil proceeding and the Adjudicating Authority should have stayed the proceedings on passing of the moratorium order by the NCLT. The continuation of the proceedings from the date of commencement of the moratorium order is contrary to the intention of the legislature hence the consequential order of confirmation of PAO is contrary to law. Hence liable to be set aside. Therefore, the period of continuation of proceedings before the Adjudicating Authority, PMLA, and before this Tribunal till the passing of the present judgment and order, from the date of commencement of the moratorium order, be treated as excluded while calculating limitation of the period of completion of the Corporate Insolvency Resolution Process. The appeals are allowed in terms of the order mentioned above.

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• 2018 (12) TMI 1245
  Offence under PMLA - attachment of property - properties mortgaged with the appellant banks - Held that:- The attached properties were purchased much prior to the period when the facility of loan sanctioned to the borrowers. The Banks while rendering the facilities were bonafide parties. It is not the case of the Respondent that the attached properties were purchased after the loan was obtained. The mortgage of the properties was done for bonafide purposes. The Appellant Banks admittedly are not involved in the scheduled offence. There is no criminal complaint under the schedule offence and PMLA is pending against the Bank. The Respondent no 1 has not fulfilled its duty of carrying out a thorough investigation and attached only such properties which were already mortgaged and held as securities with the Banks against the loans granted by them. Even the car bearing BMW-0005MH43AP was bought by the M/s SVLL out of the loan borrowed by it from the appellant Bank (Bank of Baroda) and was hypothecated to the Bank (Bank of Baroda). Since the M/s SVLL failed to refund the same, the said car has become the property of the Bank (Bank of Baroda)and cannot be said be bought out of the proceeds of crime as alleged. In view of the aforesaid submissions, the provisional attachment order, so far as the properties mortgaged with the appellant banks are concerned, confirmed by the Adjudicating Authority is liable to be quashed.

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• Service Tax

• 2018 (12) TMI 1244
  Recovery of differential Service Tax - amounts paid by NHAI as TDS - time limitation - Held that:- There is no dispute as to the fact that the agreement entered by the appellant with NHAI at clause 1.10.2 [under taxes and duties clauses] wherein the liability to discharge/ deduct the income tax from the consultant, sub-consultant and personnel was on the part of NHAI which they have complied with and it is also undisputed that appellant had received the amount of consideration of the contract and discharged the service tax liability on such an amount. Provisions of Section 195A of Income Tax Act, are very clear inasmuch that where the tax chargeable on the income of payee is borne by the payer, then for the purpose of TDS such income shall be increased to such an amount as would after TDS be equal to the net amount equal to payee - the amount of TDS either deducted from the payee s account or paid on behalf of the payee is considered as income by the Income Tax Act, 1961 and in the case in hand, it is very clear from the records that the amount of consideration on which service tax demand has been raised was reflected and captured from the accounts on verification of the records of the appellant. Undisputedly, the TDS deducted by NHAI and paid on behalf of the appellant is the amount received for the services rendered as amount of TDS which has been paid by NHAI gets reflected as income in the books of the appellant. It is undisputed that appellant has no other income other than amounts received as consideration from NHAI. If that be so, the amount of tax deducted and paid is shown as income and is directly related to the contract entered by the appellant with NHAI, it can be said that the amount of TDS is charged by the appellant to NHAI for services rendered and is definitely liable to the service tax. TDS amount paid by NHAI into the Government Treasury on behalf of the appellant herein was an amount paid towards consideration for the services rendered - impugned order upheld. Time limitation - Held that:- The appellant has also not been able to make out a case on limitation for simple reason that despite showing TDS amount as income in his balance sheet, did not indicate the same or reconcile figures with the service tax returns filed by them and revenue had to come out with the figures on verification of the records itself indicates that there was suppression of facts - the point raised on limitation would also not carry the case of the appellant any further. Appeal dismissed - decided against appellant.

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• 2018 (12) TMI 1243
  Construction of complex services - Demand of Rs. 10,91,396/- on the amounts received over and above the sale deed value for rendering construction of complex services prior to 01.07.2010 - demand alongwith interest and penalties - Held that:- An identical issue has been decided by the Principal Bench in Delhi in the case of UB Constructions Pvt Ltd [2014 (1) TMI 402 - CESTAT NEW DELHI] held that amount received prior to 01.07.2010 over and above the sale deed cannot be taxed under construction of commercial complex services - demand set aside. Demand of Rs. 26,73,714/- for the period after 01.07.2010 on the amounts received over and above the sale deed - Held that:- The explanation clause included in the definition of construction of complex services will cover the said amount and appellant is liable to pay service tax. It is brought to notice that they had paid the entire service tax liability along with interest - since, the issue involved in this case was being litigated and appellant would have entertained a bonafide belief that tax liability need not be discharged, the provisions of Sec.73(3) could be made applicable to the situation in hand and penalties need to be set aside - demand set aside. Demand of Rs. 1,73,17,823/- - Held that:- The issue involved in this case is regarding the amounts notionally attributed as consideration to the area shared to the land owner for the construction undertaken on development basis - identical issue has been decided by this Bench in the case of Vasantha Green Projects and Om Sree Builders & Developers and others [2018 (5) TMI 889 - CESTAT HYDERABAD], where it was held that the amount attributable to the consideration received by appellant in the form of land rights from the land owner stands included in the value of villas sold to prospective customer which would mean that whatever consideration was received by the appellant in form of developmental right was considered in assessable value - demand set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1242
  Refund of unutilized CENVAT Credit - input services used for providing taxable services under the category of Business Auxiliary Services in respect of Export of Services - Rule 5 of CCR 2004 read with N/N. 27/2012 dated 18.06.2012 - Held that:- Identical issue decided in the case of M/S. EVALUESERVE. COM PVT. LTD. VERSUS CST, GURGAON [2018 (3) TMI 1430 - CESTAT CHANDIGARH], where it was held that the appellants are not liable to pay service tax being provider of service in India in terms of Rule 9 of the Place of Provision of Service Rules, 2012 - refund allowed - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (12) TMI 1241
  Restoration of appeal - praying for restoration of appeal was made with a delay of about 5 years - non compliance with the condition of pre-deposit - Held that:- If the legal position wipes out substantial liability or entire liability, as, according to the appellant, construction of residential complex by a builder was subjected to service tax only from 01.7.2010, this vital point has to be considered by the Tribunal and if this plea is acceptable, it goes without saying that the appellant made out a strong prima facie case. Hence, we are constrained to interfere with the impugned order, however, subject to a condition. The appellant had already pre-deposited Rs. 7 lakhs. If the appellant complies with this condition within the time stipulated by us in this judgment, then the two miscellaneous applications shall stand automatically restored to the file of the Tribunal and the Tribunal shall take a fresh decision in both the applications and more particularly in the application for modification of the stay order - appeal allowed.

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• 2018 (12) TMI 1240
  Condonation of delay in filing appeal - Time Limitation - service of order - Section 37C of the Central Excise Act, 1944 - Held that:- Tribunal could have examined the matter on merits. Since very often, several appeals are filed before this Court by the Department with delay of more than 300 days. In case, the delay in presenting the papers also is more than 200 days, yet the Court exercises its discretion and condone the delay, so that the parties can agitate the matter on merits and a decision can be taken on the questions of law raised - Law of limitation is founded on principles of public policy so as to attach penalty to a proceeding. Limitation is not intended to destroy the rights of parties. No prudent man would purposely lodge an appeal belatedly, unless and until the person has some mala fide intention to do so. The substantial question of law is answered in favour of the assessee - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1239
  Monetary limit involved in the appeal - notification - F No.390/Misc./116/2017.JC dated: 11.07.2018 - Held that:- The present appeal is not maintainable now due to the tax effect involved in the present case being less than the prescribed monetary limit of Rs. 50,00,000/- and that the present case does not fall under the exception category of Notification dated 17.08.2011 referred in paragraph No.4 of the aforesaid Instructions dated 11.7.2018. Therefore, present appeal may permitted to be dismissed as withdrawn/ not pressed. The appeal filed by Revenue is dismissed as withdrawn/not pressed.

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• 2018 (12) TMI 1238
  CENVAT Credit - input service distribution - sub-rule (d) of Rule 7 of Cenvat Credit Rule, 2004 - Held that:- Since it is an undisputed fact that the appellant’s head office is situated at Delhi and their factory at Bhiwadi and that head office is designated as Input Service Distributor (ISD), also there is no dispute on availment of cenvat credit at ISD level, it is observed that the services on which cenvat credit is denied are covered by various decisions. The amount of cenvat credit as has been denied by the adjudicating authority merely for want of documents is not sustainable in view of the settled proposition of issue - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1237
  Clandestine removal - Goa 1000 Gutkha - appellants were given inspection of all the documents relating to the case, and an inference is drawn on the basis of these letters, ignoring the letters and submissions of the appellant and without providing copies of these 3 letters - principles of natural justice - Held that:- No evidence of clandestine manufacture and or removal of gutkha from the appellant’s factory at Jodhpur has been adduced in the notice. Though Appellants factory at Jodhpur was searched on the very first day of the investigations, no evidence of clandestine manufacture and or removal, or any excess shortage of any raw material (except a very negligible variation) or finished goods were noticed. No evidence whatsoever was found, showing unaccounted transportation of goods from the Jodhpur factory of the appellant. In the entire investigation no evidence of clandestine manufacture or removal of Gutkha or unaccounted receipt of any raw material /packing material in the appellant’s factory required for clandestine manufacture & sale of Gutkha could be brought to light except the recovery of certain documents from the office of Raj Group of companies in Thane allegedly showing procurement of raw materials. Even these evidences recovered from one Mr. Suresh B. Jajra, during corss-examination were revealed to be pertaining to M/s. Royal Marwad, Ahmedabad and Meenakshi Foods Pvt. Ltd. other franchisees engaged in the manufacture of Goa 1000 Gutkha. Revenue have not corroborated its allegations with sufficient reliable evidence - the allegations in the show cause notice are based more on assumptions and presumptions, having no legs to stand - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1236
  CENVAT Credit - duty paying invoices - invoices issued beyond the six months from the date of invoice - sub-rule (1) of rule 9 of the CENVAT Credit Rules - Held that:- What is required is that that the appellant has to take credit within six months and the fact that they have taken credit within six months only gets reflected in their ER-1 returns. Otherwise, the department has no way of knowing whether they have taken credit within six months - credit has to be taken within a period of six months and the fact that they have taken credit has to be reflected in their ER-1 returns. Otherwise, the entire rule has no meaning and the department has no means of verifying whether the credit was taken as per the Rules. Whether the relevant date for effect of the Notification placing the time limit is the date of invoice or the date on which credit has been taken? - Held that:- The date of the invoice has to be after 01.09.2014 for limitation of six months to apply - In this case since invoices in question were issued prior to 01.09.2014, credit is admissible on this ground alone. Appeal dismissed - decided against appellant.

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• 2018 (12) TMI 1235
  CENVAT Credit - inputs - credit denied on the ground that the said goods in question cannot be the inputs for the appellant M/s. Tharaj to manufacture their final products - Held that:- No investigation was conducted at the end of the transporter by the Revenue to prove that the goods have not been received by the appellant in their factory. Moreover, no investigation was conducted to prove that these inputs have been diverted by the appellant M/s.Tharaj in the market and procured bazaar scrap from the open market. As the Revenue has not come with any evidence on record to show that the goods have been substituted by bazaar scrap, the allegation against appellant is not sustainable. As the Revenue has failed to bring on record any cogent evidence in support of their allegation, therefore, the allegation that the goods in question cannot be the inputs for the appellant M/s.Tharaj for manufacture of their final product is not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1234
  Recovery of Refund claim - area based exemption under N/N. 56/2002-CE dated 14.11.2002 availed - demand on the grounds that the farmers are non existence ensuring non supply of raw material by commission agents to J&K based units and absence of evidence of power by the appellant - Held that:- The commission agents never supplied inputs to the appellant and the appellant did not manufacture the goods. Consequently, they have not sold the goods and it was alleged that the appellant has not manufactured the goods at all. The investigation was not conducted at the end of the appellants and whole case has been based on the investigation conducted at Commissioner Central Excise, Merrut-II. Without investigation, it cannot be held that the appellants were not manufacturer of the finished goods during the impugned period. Moreover, the entries of vehicles at the toll barriers also certified that the movements of raw material and finished goods - the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants had not manufactured the goods during the impugned period. The appellants are manufacturers during the impugned period and paid the duty on the goods manufactured by them, therefore, duty on account of erroneous refund cannot be demanded on the allegation that the appellants were not manufacturers - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (12) TMI 1233
  Classification of goods - Rate of tax - bakery shortening - Held that:- Delay condoned - The Leave is granted.

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• 2018 (12) TMI 1232
  Imposition of penalty u/s 15A(1)(o) of the U.P. Trade Tax Act, 1948 - no intent to evade payment of tax - Held that:- There was no evidence led by the revenue to establish that non-production of Form-31 at the first instance was a conscious act by the assessee. The further evidence that had been led by the assessee to establish that the transaction was one of stock transfer and was duly disclosed, merited acceptance. The fact that the assessee had filled up Form D-3 under the Haryana Act disclosing the transportation of goods to the statutory authority does appears to have raised presumption in it's favour that the transaction was not proposed to be concealed. Penalty may be imposed under Section 15A(1)(o) of the Act for contravention of Section 28A(6) of the Act, an intention to evade is sine qua non before the goods may be seized, by virtue of section 28A (6) of the Act - In the facts of the present case, there is no finding has been shown to have been recorded as to intention to evade tax. Penalty appears to have been levied merely on account of absence of Form 31 being produced at the first instance, when the goods reached the entry check post at Bhopura. Revision allowed.

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• 2018 (12) TMI 1231
  Assessment of tax - compounding of tax - whether the M-Sand produced by the various writ petitioners by using a vertical/horizontal shaft impactor machine is liable to separate assessment under the Kerala Value Added Tax Act, 2003 even when the dealers had opted for compounding under Section 8 of the Act? Held that:- Section 8(b) is very clear and indicates compounding fee only on the specific machines provided there under with respect to a dealer producing granite metals. True, the legislature never contemplated the introduction of vertical or horizontal shaft impactors for the purpose of producing M-Sand from the granite metal produced by a separate process through an impactor. The exemption granted, did not exclude such production by a separate machine other than that specified in clause (b) of Section 8 - The exemption granted as per the proviso applies across the board to any production of manufactured sand made by the dealers producing granite metals whether it be from the machines as specified in Clause (b) or otherwise. The compounding scheme also is for the dealers or the crushing units and on option exercised, they are absolved from regular assessment of the goods produced in the crusher units whether it be larger or smaller aggregates of granite metal or M-Sand by a VSI/HSI. The legislature having found that there is a loss of tax insofar as the M- Sand produced by a different machine had from the assessment year 2014-15 provided a compounding fee for the VSI/HSI. M-sand, as the provision existed in the subject assessment year was not exigible to tax when compounding has been applied for and sanctioned - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1230
  Validity of re-assessment done - reassessment done on mere suspicion when there was misclassification of turnover on taxable and exempted goods - deletion of assessment in the absence of valid records in respect of heavy profit under exempted sales and heavy loss under taxable goods - Held that:- The Revision of assessment was done by the Assessing Officer invoking his power under Section 16(1) of the TNGST Act. The question would be as to whether the said power could have been invoked in the facts and circumstances of the case. The First Appellate Authority found that the Assessing Officer had revised the assessment based on his working that there was shortage of taxable turnover to the extent of Rs. 36,87,078/- and excess accounting of sales tax under exempted goods to an extent of Rs. 37,07,091/-. The First Appellate Authority rightly held that there can be no two best judgement, assessment for the same dealer for the same year. Next, the First Appellate Authority considered whether the Assessing Officer could have invoked Section 36 of the TNGST Act and after examining the facts found that the Revision of assessment itself was the case of change of opinion and no finding has been recorded that there has been any suppression on the part of the dealer. The orders passed by the First Appellate Authority as confirmed by the Tribunal are perfectly legal and valid - Tax Case Revision is dismissed.

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• Indian Laws

• 2018 (12) TMI 1248
  Offence under Prevention of Corruption Act - Absence of a valid sanction - trial as conducted against the public servant - security scam - Harshad S. Mehta case against whom the case however stands abated on account of his untimely death in the year 2001. The other Accused were at the relevant time the Officers in the State Bank of India,Held that:- Here in the case, Investigating Officer has obtained the sanction for prosecution of accused No.1 R. Sitaraman. However, the Prosecution has failed to prove it and therefore, it is as good as not on record. The Prosecution has filed a report dated 30/08/2018 stating that the sanctioning authority Mr. Gordhan Bhojraj Kathuria has expired on 25/01/2018 and therefore, not available for giving evidence. In considered opinion of this Court, if the sanctioning authority was not available, then in that case, the Prosecution could have examined any other witness from the said Department, who was acquainted with the facts of the case or even with the signature of the sanctioning authority and get the sanction proved. The burden was entirely upon the Prosecution to prove the fact that the requisite sanction has been obtained. The Prosecution has however not made any attempt to prove the sanction by examining the subordinate officer or the staff, who has seen the sanctioning authority signing the sanction order or who is acquainted with the signature of the sanctioning authority. Merely, filing the order purported to be the sanction order alleged to have been signed by the competent authority, does not discharge the burden on the Prosecution of proving the sanction, according to law - no hesitation in holding that the Prosecution has failed to prove its case against all the Accused beyond reasonable doubt. Hence, the order. (i) Accused No.1 R. Sitaraman, Accused No.3 Ravi Kumar, Accused No.4 Ashok Agarwal, Accused No.5 Janardan Bandopadhyay, Accused No.8 Ashwin Mehta, Accused No.15 S.R. Gupta, Accused No. 16 B.D. Raut and Accused No. 17 P. Murlidhar stand acquitted for the offences punishable under Section 120B and 420, in the alternate Section 409 read with Section 120B of IPC. (ii) Accused No.1 R. Sitaraman, Accused No.3 Ravi Kumar, Accused No.4 Ashok Agarwal, Accused No.5 Janardan Bandopadhyay, Accused No.12 Suresh Babu, Accused No.15 S.R. Gupta, Accused No. 16 B.D. Raut and Accused No.17 P. Murlidhar, are further acquitted for the offences punishable under Section 13(1)(c) and (d) read with Section 13(2) of the Prevention of Corruption Act and Accused No.8 Ashwin Mehta stands acquitted for the offence punishable under Section 13(1)(c) and (d), read with Section 13(2) of the Prevention of Corruption Act, read with Section 109 of IPC. (iii) Accused No.1 R. Sitaraman and Accused No. 16 B.D. Raut are further acquitted for the offence punishable under Section 477A read with Section 120B of IPC. (iv) Accused No.3 Ravi Kumar and Accused No. 12 Suresh Babu are acquitted for the offence punishable under Section 467 and 471 read with Section 120B of IPC. (v) Accused No.8 Ashwin Mehta and Accused No. 15 S.R. Gupta stand acquitted for the offence under Section 411 and 414 read with Section 120B of IPC. (vi) Bail Bonds of all the Accused persons stand cancelled. However, as per Section 437A of Criminal Procedure Code, 1973, they are directed to execute fresh P.R. Bonds and Surety Bonds for the amount of Rs. 25,000/-each for their appearance before the Hon’ble Supreme Court, as and when notice is issued to them in respect of any Appeal or Petition filed against Judgment and such Bonds shall be in force for six months. Accused No.1 R. Sitaraman, Accused No.3 C. Ravi Kumar, Accused No.4 Ashok Agarwal, Accused No.5 Janardan Bandopadhyay, Accused No.8 Ashwin Mehta and Accused No.12 Suresh Babu are granted three weeks time to furnish cash surety of Rs. 25,000/- each. Accused No.15 S.R. Gupta, Accused No. 16 B.D. Raut and Accused No. 17 P. Murlidharan were released on bail on furnishing PR Bonds and Cash security of Rs. 25,000/- each. Same security be continued for the period of six months for their appearance before the Hon’ble Supreme Court, as and when the notice is issued to them in respect of any Appeal or Petition filed against Judgment and such Bonds shall be in force for six months.

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