TMI Tax Updates - e-Newsletter
December 25, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• SVLDRS 2019 - the cut-off date of 30.06.201 has been clarified in a Circular - paragraph Nos. vii/ viii of it are not violating the Scheme

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Articles

1. MIS-DIRECTED TINKERING WITH GST BY GST COUNCIL

   By: Dr. Sanjiv Agarwal

News

1. Extension of time limit for filing of response to notices issued under section 142(1) of the Income-tax Act, 1961 under E-assessment Scheme-2019

2. NITI Aayog to Launch SDG India Index & Dashboard 2019–20

3. Cabinet approves Promulgation of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019

4. GeM Samvaad takes off in Four States

5. Shri Anurag Thakur holds Pre-Budget Consultation with representatives from Health, Education and Rural Development Sectors

6. Auction for Sale (Re-Issue) of ‘6.18% GS 2024’, Auction for Sale (Re-issue) of ‘GoI Floating Rate Bond 2031’, Auction for Sale (Re-Issue) of ‘7.69% GS 2043’, and Auction for Sale (Re-Issue) of ‘7.72% GS 2049’

Notifications

GST

1. 73/2019 - dated 23-12-2019 - CGST

Seeks to amend Notification No. 44/2019–Central Tax, dated the 09th October, 2019

GST - States

2. Order No. 9/2019 - State Tax - dated 5-12-2019 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DF3/CIR/P/2019/166 - dated 24-12-2019

Investment in units of Mutual Funds in the name of minor through guardian and ease of process for transmission of units

2. CIR/CFD/CMD1/162/2019 - dated 24-12-2019

Format on Statement of Deviation or Variation for proceeds of public issue, rights issue, preferential issue, Qualified Institutions Placement (QIP) etc.

3. SEBI/HO/DDHS/DDHS/CIR/P/2019/167 - dated 24-12-2019

Framework for listing of Commercial Paper-Amendments

4. SEBI/HO/DDHS/DDHS/CIR/P/2019/161 - dated 24-12-2019

Guidelines for filing of placement memorandum - InvITs proposed to be listed

GST - States

5. TRADE CIRCULAR No. 48/2019 - dated 10-12-2019

Withdrawal of Trade Circular No. 28/2019 dt. 22.07.2019

6. 121/40/2019-GST 50/2019 (ST/Tech//2019/11241) - dated 15-10-2019

GST on license fee charged by the States for grant of Liquor licences to vendors

7. 120/39/2019-GST 49/2019 (ST/Tech//2019/11240) - dated 15-10-2019

Clarification on the effective date of explanation inserted in notification No. 11/2017- CTR dated 28.06.2017. Sr. No. 3(vi)

8. 118/37/2019-GST 47/2019 (ST/Tech//2019/11238) - dated 15-10-2019

Clarification regarding determination of place of supply in case of software/design services related to Electronics Semi-conductor and Design Manufacturing (ESDM) industry

9. 117/36/2019-GST 46/2019 (ST/Tech//2019/11237) - dated 15-10-2019

Clarification on applicability of GST exemption to the DG Shipping approved maritime courses conducted by Maritime Training Institutes of India

10. 119/38/2019-GST 48/2019 (ST/Tech//2019/11239) - dated 15-10-2019

Clarification regarding taxability of supply of securities under Securities Lending Scheme. 1997

GST

11. 129/48/2019 - dated 24-12-2019

Standard Operating Procedure to be followed in case of non-filers of returns

12. 128/47/2019 - dated 23-12-2019

Generation and quoting of Document Identification Number (DIN) on any communication issued by the officers of the Central Board of Indirect Taxes and Customs (CBIC) to tax payers and other concerned persons

Customs

13. 43/2019 - dated 23-12-2019

Generation and quoting of Document Identification Number (DIN) on any communication issued by the officers of the Central Board of Indirect Taxes and Customs (CBIC) to tax payers and other concerned persons

Highlights / Catch Notes

GST

• State Authority's Tax and Penalty Order Quashed for Violating Section 129(3) and (4) on Goods Detention.

  Case-Laws - HC : Detention of goods alongwith vehicle - The State authority straightway passed the order which is titled as “Order of Demand of Tax and Penalty”. This order thus clearly breaches the requirement of sub-sections (3) and (4) of Section 129 of the said Act - Order quashed.
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• Court Orders Refund of GST Input Tax Credit Due to Government Software Issues; Refunds Must Be Issued in Four Weeks.

  Case-Laws - HC : Refund of Input tax credit (ITC) under GST - The rights of the parties cannot be subjugated to the poor and inefficient software systems adopted by the Respondents (Government) - Refund to be given within 4 weeks.
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• Goods Seizure Overturned: Detention Unjustified Under CGST Act Section 129, Consignment Ordered to be Released.

  Case-Laws - HC : Seizure and detention of a consignment of goods - reason for detention is stated to be that the consignee, the petitioner herein, was a return defaulter for the last five months - As per Section 129 of the CGST Act, detention is not justified for such reasons. - Consignment ordered to be released.
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Income Tax

• Fringe Benefit Tax on Employer-Provided Benefits Upheld as Constitutional, Complies with Articles 14 and 246 of Indian Constitution.

  Case-Laws - HC : Levy of additional income tax called “fringe benefit tax” (“FBT”) on fringe benefits provided or deemed to have been provided by an employer to his employees, in addition to the income tax charged under this Act -it is not unconstitutional and opposed to Articles 14 and 246(1) read with Entry 82, List I of the Seventh Schedule to the Constitution of India.
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• Section 11 Exemption: Corpus Donations Exemption Valid Even if Section 12AA Registration Granted Later. Aligns with Section 12A Amendments.

  Case-Laws - AT : Exemption u/s 11 - addition of corpus donation - Registration under section 12AA is granted in the subsequent year then exemption cannot be refused in the earlier years merely for non registration under section 12A in terms of amended under section 12A of the Act. K
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• Long-term capital losses from taxed shares can offset gains from property sales; allowed u/s 10(38).

  Case-Laws - AT : Disallowance of set off and carry forward of Long Term Capital Loss of sale of quoted equity shares (STT paid) against LTCG arising on sale of property - the income contemplated u/s 10(38) was only a part of the source of capital gains on shares and only a limited portion of source was treated as exempt and not the entire capital gains. - carry forward allowed.
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• Interest on Zero Coupon Bonds Allowed as Deduction Under Income Tax Act Sections 36(1)(iii) and 57(iii.

  Case-Laws - AT : Deduction of interest incurred on zero coupon bonds u/s 36(1)(iii) OR u/s 57(iii) as claimed by the appellant - interest expenditure in respect of opening balance of amount advanced is to be allowed.
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• Interest on Late TDS Payments u/s 201(1A) Should Use 30-Day Month, Not British Calendar Month Method.

  Case-Laws - AT : Interest on late payment of TDS u/s 201(1A) - computation of period as "per month or part of the month" - British calendar months or otherwise - identical language in section 244A(1) as in section 201(1A) - For the purpose of computation of interest, the expression month is to be interpreted as period of 30 days and not British calendar.
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• Interest on Late TDS Payment: "Month" Defined as 30 Days Instead of British Calendar in Section 201(1A) Calculation.

  Case-Laws - AT : Interest on late payment of TDS u/s 201(1A) - For the purpose of computation of interest, the expression month is to be interpreted as period of 30 days and not British calendar.
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• MAT u/s 115JB Deemed Inapplicable to Banking Company for 2010-11; No High Court Support for Revenue.

  Case-Laws - AT : Applicability of MAT section 115JB to the assessee being a Banking Company - there is not a single decision of the Jurisdictional High Court or even of any other Hon’ble High Court which is in favour of the Revenue on this issue - the provision of section 115JB was not applicable in the case of the assessee being a Banking company for the year under consideration, i.e. A.Y. 2010-11
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• Software Sales Income Classified as Business Income, Not Royalty, u/s 91(vi); Non-Taxable in India Without Permanent Establishment.

  Case-Laws - AT : Royalty u/s. 91 (vi) OR Business income - sale of software products/ licenses - the said amount received by the assessee is normal business income of the assessee on account of sale of copy righted products (licenses) and not taxable in India in the absence of permanent establishment.
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Customs

• Interpreting "Reason to Believe" and "Liable to Confiscation" in Customs Act, Section 110: Betel Nuts Import Case Explained.

  Case-Laws - HC : Interpretation of statute - meaning of the expression ‘reason to believe’ and ‘liable to confiscation’ u/s 110 of the Customs Act, 1962 - import of prohibited goods - betel nuts - cut dried Areca Nuts (dark pink in colour) - There is no track record of past history of the instant petitioners - ‘reason to believe’ cannot be converted into a formalised procedural roadblock
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• Tribunal Reviews Dispute Over Customs Appraiser Misconduct; Conflicting Views Between Inquiry Officer and Disciplinary Authority.

  Case-Laws - HC : Misconduct on the part of Appraiser (Customs) - Since the Inquiry Officer and the disciplinary authority differed on the aspect of the culpability of the conduct, the tribunal ought to have examined the question of proof of misconduct.
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Corporate Law

• Petitioner Company permitted to amend Board's Report for 2015-16 u/s 131(1) of Companies Act, 2013.

  Case-Laws - Tri : Permission to revise Board's Report - The Petitioner Company is permitted to revise its Board's Report for the Financial Year 2015-16 in terms of Section 131(1) of the Companies Act, 2013 R/w Rule 77 of NCLT Rules, 2016
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Service Tax

• Court Dismisses Petition on Service Tax Inquiry; No Breach of Laws Found Under Repealed Chapter V of Finance Act 1994.

  Case-Laws - HC : Short payment of service tax/ reversal of CENVAT credit - validity of summon issued in furtherance of inquiry/ investigation proceedings - Chapter (V) of Finance Act, 1994 repealed - any breach or violation of the service tax laws not proved - Petition dismissed.
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• Tribunal to Decide on Penalty and Limitation Issues u/s 73(1) of Finance Act, 1994 for Assessee's Case.

  Case-Laws - HC : Levy of penalty - period of limitation for raising demand - the Tribunal has to first judge as to whether the case of the assessee is covered by proviso below sub-section (1) of Section 73 of the Finance Act, 1994. After recording the findings on the aspects so covered by the proviso, the question of limitation as provided under sub-section (1) of Section 73 of the Finance Act will have to be decided.
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Central Excise

• Exemption Denied: "Independent Texturizer" Must Not Source Yarn from Own Factories to Qualify for Benefits.

  Case-Laws - AT : Benefit of exemption - if the phrase is considered as a whole then we find that word “independent” qualifies the “texturizer” and not the factory. So if the texturizer is procuring the “partially oriented yarn” from any of his factory then he will not qualify to be an “independent texturizer”. Thus the benefit of exemption cannot be admissible to him.
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• Clarification Issued: SVLDRS Cut-Off Date Only Applies to Rules 3(a) and 3(c), Not 3(b) and 3(c).

  Case-Laws - HC : Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - The cut-off date of 30.06.2019 is applicable only in the eventualities which are covered under Rules 3(a) and 3(c) - The cut-off date of 30.06.2019 is not applicable for the cases which are covered under Rules 3(b) & 3(c). This cut-off date has been clarified in a Circular - by no stretch of imagination it can be said that paragraph Nos.vii and viii of the Circular is said to be in violation of the Scheme, 2019.
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VAT

• Court Upholds Retrospective Application of KVAT Act's Section 42(3) But Limits Reopening of Expired Assessments u/r 58(20.

  Case-Laws - HC : Reopening of completed assessments - escaped turnover - These writ petitions are disposed by upholding the retrospective operation of Section 42(3) of the KVAT Act, but declaring that the power to re-open assessments under the said provision cannot be exercised in relation to such assessments where the period for which the assessee concerned is obliged to retain the Books of account under Rule 58(20) of the KVAT Rules has expired
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Case Laws:

• GST

• 2019 (12) TMI 1054
  Maintainability of application - Appellate Tribunal under the U.P. Goods and Services Tax Act, 2017 has not been constituted as yet - HELD THAT:- Writ petitions are being entertained against the order of First Appellate Court under the said Act, however, in this case the Court finds that the writ petition is not accompanied by the deposits envisaged under Section 112(8)(a) and (b) of the U.P. Goods and Services Tax Act, 2017, therefore, it can not be entertained as of now. List/ put up on 07.01.2020 as fresh to enable the petitioner to make deposit as aforesaid.

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• 2019 (12) TMI 1053
  Extension of time for filling GST TRAN-1 - transitional credit - HELD THAT:- This petition is allowed and the respondents are directed to reopen the portal within a period of two weeks and in case the petitioner fills in the form in question, the respondents shall also entertain the application of the petitioner manually and it was further observed that the respondents shall also ensure that the petitioner is allowed to pay the tax.

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• 2019 (12) TMI 1051
  Outstanding liability towards GST - additional license fee - HELD THAT:- The Petitioners are directed to pay 50 percent of the outstanding liability towards GST and secure the remaining 50 percent by furnishing a bank guarantee to the satisfaction of the Respondents - So far as the additional license fee is concerned, we make it clear that the Petitioners should pay the same without any further delay subject to its rights to agitate its case in respect of the additional license fee in the appropriate proceedings. This interim order shall continue to operate in respect of future liabilities towards GST as well. List on 08.07.2020.

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• 2019 (12) TMI 1050
  Detention of goods alongwith vehicle - grievance of the petitioner is that the petitioner s goods in the nature of TMT Bars which were being transported from one place within the State to another, were illegally detained by the authorities along with the transport vehicle in which the goods were being transported - illegal demand of tax and penalty - HELD THAT:- The determination of payable tax and interest in terms of clause (a) or (b) of sub-section (1) upon payment of which the goods or the transport vehicle would be released or upon furnishing security in terms of clause (c), has to be after a notice to the person concerned and granting an opportunity of being heard in this respect as provided in sub-sections (3) and (4) of Section 129 of the said Act. In the present case, no such steps were taken. The State authority straightway passed the order dated 25.10.2018 which is titled as Order of Demand of Tax and Penalty . This order thus clearly breaches the requirement of sub-sections (3) and (4) of Section 129 of the said Act - In view of such facts despite availability of appellate remedy, present petition should be entertained. The said order is, therefore, quashed. In fact of the case, since the petitioner has already deposited the amount indicated in the said order dated 25.10.2018 and the goods along with the transport vehicle are already released - petition disposed off.

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• 2019 (12) TMI 1049
  Permission to obtain digital signatures of Officers of the Official Liquidator to complete the procedures of acquiring GST No. of the company in liquidation - permission to Official Liquidator to purchase three mobile phones along with SIM Card in the name of the office of the Official Liquidator, High Court of Gujarat, to maintain transparency as well as maintain digital records in order - HELD THAT:- Upon perusal of the report and considering the facts that it s a mandatory to furnish Digital Signature and Mobile Nos. of authorized person to obtain GST No. as per provisions of CGST Act, 2017 as well as both facilities are useful in other companies in liquidation and also filing other statutory returns of the companies in liquidation. There is need to obtain Digital Signature for authorized persons as well as to purchase three mobile phones along with SIM Card in the name of the office of the Official Liquidator, High Court of Gujarat for Official use only and to maintain transparency as well as maintain digital records in order. The report of the Official Liquidator is disposed of.

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• 2019 (12) TMI 1048
  Refund of Input tax credit - Form GST TRAN-1 - migration to GST regime - carry forward its electronic ledger account of unutilized ITC in terms of Section 140 of the CGST Act, 2017 - grievance of the Petitioner is that due to the inaction of the Respondents and their failure to allow smooth migration of the credit standing in the Petitioner s account of unutilized input tax, the Petitioner could not use and exploit the Input Tax Credit while making exports in the months of July and August, 2017 - HELD THAT:- The Petitioner cannot be made to suffer on account of failure on the part of the Respondents in devising smooth transition to GST regime w.e.f. 01.07.2017, from the erstwhile indirect taxation structure. The Petitioner, being an exporter under the GST regime is entitled to undertake zero rated supplies. Unfortunately, even after passage of over two years, the Respondents have not remedied their omissions and failures by taking corrective steps. They continue to take shelter of the limitations in, and the inability of their software systems to grant refund, despite the same being justified. The rights of the parties cannot be subjugated to the poor and inefficient software systems adopted by the Respondents. The Respondents are directed to refund the amount Rs. 1,37,37,029/- to the Petitioner within four week from today - petition disposed off.

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• 2019 (12) TMI 1047
  Unable to upload Form GST ITC-01 - requirement of filing of form, after opting out of the composition scheme, on 10.10.2017 - HELD THAT:- Without going into the veracity of the facts asserted by the petitioner, the writ petition is disposed of with direction to the respondents No.2 No.3 to consider petitioner s representation within a period of one month from receipt of certified copy of the order instant. Application disposed off.

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• 2019 (12) TMI 1046
  Seizure and detention of a consignment of goods - reason for detention is stated to be that the consignee, the petitioner herein, was a return defaulter for the last five months - HELD THAT:- There are force in the contention of the learned counsel for the petitioner that in terms of Section 129 of the CGST Act, the reason shown by the respondents in Ext.P3 detention notice is not one that can justify a detention - the respondents are directed to release the consignment covered by Ext.P3 notice to the petitioner forthwith on the petitioner producing a copy of of this judgment before the respondents.

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• 2019 (12) TMI 1045
  CENVAT Credit - filing of FORM GST TRAN-1 - Rule 117 of the Central Goods Service Tax Rules, 2017 - HELD THAT:- The respondents are directed to prefer representation before the Nodal Officer of Commissionerate (G.S.T.), Ranchi - the respondents are also directed to decide the representation of this petitioner for getting FORM GST TRAN-1 in accordance with law and the circulars issued by the respondents, within a period of four weeks from the date of receipt of a copy of the representation. Petition disposed off.

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• 2019 (12) TMI 1044
  Grant of bail - alleged irregular availment of input tax credit - fake invoices - retraction of coerced statement - HELD THAT:- In the case in hand, the applicant/accused is allegedly found to be involved in the evasion of tax by fraudulently passing on inadmissible ITC on the strength of alleged fake invoice. Ld. counsel for accused submitted that out of the alleged amount of Rs. 7 crores, the accused has already deposited Rs. 2 crores. The accused has been in custody JC since 16.11.2019 and the custodial interrogation of the applicant/accused is no more required. The applicant/accused Sudhir Kumar Aggarwal is hereby admitted to bail on furnishing personal bond in the sum of Rs. 2 lac with one surety of like amount - bail application disposed off.

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• Income Tax

• 2019 (12) TMI 1042
  Levy Fringe Benefit Tax (FBT) - Parliament Power under Entry 82 or Entry 97 of the Union List - Constitutional validity of Chapter-XII-H of the Income Tax Act - Double taxation -legislative competence of Parliament - Non inclusion of Fringe Benefit - scope of total income u/s 2(24) - Conflict with Sections 5 and 37(1) of the Income Tax Act, 1961 - HELD THAT:- Perusal of sub-section 37(1) is not contrary to sub-section (2) of Section 24 of Act, 1961. Since XII - H is an independent provision and it is not against Section 5 total income and one cannot draw inference that it is an anti-avoidance measure as employer. There is a nexus in introducing FBT and question of irrational concept is not attracted. Section 115-WC (2) do not violate Article 14 of constitution in terms of the above discussion on the issue. Further question of double taxation is not attracted in view of independent provisions for taxation. The petitioners have not pointed out how Section 115-WB WC would be self contradictory and unworkable and it is only presumption, so also in what manner Section 200(1) of the Companies Act, 1956 offends. Perusal of various issues like extending certain benefits to the employees by the employer it is evident employers are avoiding tax, so the contention of the petitioners that all employers are tarred as tax avoiders is not tenable. Question of extending opportunity while assigning percentages under Section 115-WC may not arise, since it is a policy matter. The contention of non inclusion of Fringe Benefit under sub-Section (24) of Section 2 and its inclusion under sub-section (43) does not vitiates provision of FBT with reference to charging section-4, since FBT is incorporated as an independent provision. The cited decisions on behalf of the petitioners do not assist in view of the fact that source of power to incorporate Chapter XII-H of the Income Tax Act, 1961 is available at 7th Schedule to Constitution read under Entry 97. Further violation of Article 14 is not made out in view of my answer to the point in the preceding paragraphs. In that view of the matter petitioners have not made out ground to interfere with Chapter XII-H of the Income Tax Act, 1961 on Fringe Benefits or any part thereof, it is not unconstitutional and opposed to Articles 14 and 246(1) read with Entry 82, List I of the Seventh Schedule to the Constitution of India. Hence, the legislative competence of Parliament to enact Chapter XII-H is upheld. Accordingly the above mentioned writ petitions stand dismissed.

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• 2019 (12) TMI 1041
  TP Adjustment - selecting Future Capital Holding as comparable - Whether TPO has wrongly applied OP margin as 37.68% as against actual OP margin of 15.21% - assessee has also filed calculation giving details of computation of OP margin in the case of Future Capital Investment segment - HELD THAT:- We are of considered view that there appears to be a clerical error in calculation of OP margins. This issue is restored to the file of Assessing Officer/TPO for recomputation of OP margin in respect of Future Capital/investment segment. The TPO/Assessing Officer, after recomputing O.P margin shall apply corrected margins, in accordance with law. The ground No.1 of the cross objections is allowed for statistical purposes. Selection of Kshitij Investment Advisory Co. Ltd as comparable - HELD THAT:- The assessee company is justified in asserting that Kshitij Investment Advisory Co. Ltd. deserves to be excluded from the final set of comparables on account of peculiar economic circumstances during the year under consideration

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• 2019 (12) TMI 1040
  Exemption u/s 11 - addition of corpus donation - registration u/s 12AA is granted in the subsequent year then exemption refused in the earlier years - HELD THAT:- In view of the order of the Kolkata Benches of ITAT in the case of Sree Sree Ramkrishna Sanity vs. DCIT [ 2015 (11) TMI 119 - ITAT KOLKATA] it is of view that addition of corpus donation has already been decided in favour of the assessee by the ITAT Delhi Bench (supra) by holding that even if there was a non compliance of section 12A(b) of the Act by the assessee then the corpus donation received by the assessee is not taxable in the hands of assessee. Registration under section 12AA is granted in the subsequent year then exemption cannot be refused in the earlier years merely for non registration under section 12A in terms of amended under section 12A of the Act. Keeping in view of the aforesaid discussion and respectfully following the precedents as aforesaid, the addition on account of corpus donation is deleted. Disallowance on account of repair and maintenance - After considering the arguments advanced by the learned counsel for the assessee and the learned DR alongwith the documentary evidences filed by the assessee in support of his contention, books of accounts of the assessee are audited and bill and vouchers in support of the expenses has been produced by the assessee and examined by the Assessing Officer. Assessing Officer has not pointed out any defect and has also not rejected the same by applying the provisions of section 145 of the I.T. Act. Even otherwise, all the payments were through bank channel and TDS deducted, against building repair and maintenance amount. Therefore, keeping in view the facts and circumstances of the present case and the non rejection of books of accounts the addition in dispute is not sustainable in the eyes of law, therefore, the same is deleted by allowing the ground no. 2. Impugned order is set aside and the additions involved in the grounds of appeal are deleted by accepting the appeal filed by the assessee.

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• 2019 (12) TMI 1039
  Penalty levied u/s 271(1)(c) - provision for bonus claimed u/s 43B - HELD THAT:- Profit includes profit from Sri Lanka branch as well. Thereafter, the assessee has reduced the profits losses of the overseas branch at Sri Lanka and Bangladesh, respectively. The assessee is that the assessee was under bona-fide belief that the profits of the overseas branches are taxable in the host country as the assessee is having permanent establishment in the said country. This belief of the assessee is further substantiated by the fact that the assessee has offered income from said overseas branch to tax in the host country. The DRP has given benefit of the tax credit to the assessee for the taxes paid overseas. Whether the profits of foreign branch are liable to be taxed in India is debatable - We find that in the case of DCIT vs. Essar Oil Ltd. [ 2011 (8) TMI 428 - ITAT MUMBAI] , the Tribunal has held that income from overseas branch is taxable in the country where branch is established. In the immediately succeeding assessment year, the Co-ordinate Bench of Tribunal in the case of very same assessee i.e. Essar Oil Ltd. vs. Addl. CIT (supra) has held that the profits of overseas branch are taxable in India. These two divergent views by two different benches of the Tribunal has made the issue debatable. The matter has travelled to the Hon ble Bombay High Court [ 2016 (12) TMI 1802 - BOMBAY HIGH COURT] as admitted substantial question of law on the issue of place of taxability of profits earned by the overseas. It is a trait law that where the issue is debatable no penalty under section 271(1)(c) is leviable. We further observe that the assessee in computation of income has already disclosed profits of Sri Lanka branch though, the same were subsequently reduced from the total taxable income by the assessee. Merely for the reason that the claim made by the assessee under bona-fide belief is not accepted by the Department penalty under section 271(1)(c) of the Act cannot be levied. Our this view is fortified by the decision rendered in the case of CIT vs. Reliance Petroproducts Ltd. ( 2010 (3) TMI 80 - SUPREME COURT ) . It is not a fit case for levy of penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.

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• 2019 (12) TMI 1038
  Disallowance of set off and carry forward of Long Term Capital Loss of sale of quoted equity shares (STT paid) against Long Term Capital Gain arising on sale of property - whether set-off of LTCL on sale of quoted equity shares would be allowable to the assessee against LTCG earned on sale of properties keeping in view the fact that LTCG on similar transactions of sale of quoted equity shares were exempt from tax u/s 10(38)? - HELD THAT:- Concept of income including losses would apply only when the entire source was exempt from tax and not in cases were only one particular stream of income was falling in exempt provisions. The income contemplated u/s 10(38) was only a part of the source of capital gains on shares and only a limited portion of source was treated as exempt and not the entire capital gains. In the above background, we find that various coordinate benches of Tribunal has chosen to take a view favorable to the assessee and therefore, respectfully following the same, we prefer to take similar view. Accordingly, we hold that the assessee would be entitled for set-off of Long-Term Capital Losses against aggregate Long-Term Capital Gains and entitled to carry forward unutilized losses.

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• 2019 (12) TMI 1037
  Revision u/s 263 - claim of exemption u/s 10(10D) - income in the hands of the assessee on account of maturity receipts of the Keyman Insurance Policy - HELD THAT:- The amendment brought in by Finance Act 2013 in explanation 1 to section 10(10D) of the Act is prospective in nature and by no stretch can be termed as retrospective or clarificatory in nature and shall only apply on the keyman insurance policy assigned after 01.04.2014. Even otherwise it has been submitted before us that has the policy been not assigned by the company to its Keyman and maturity proceeds offered to tax by the company , their would have been no loss to revenue as the company had huge losses much above the maturity proceeds during the Assessment Year 2015-16. Though Ld. Pr. CIT in the impugned order has referred to various judgments on merits as well as legality of the case but in our considered view they are not squarely applicable on the facts of the instant case and thus have no applicability on the issues raised before us. Action of the Ld. Pr. CIT invoking the provision of section 263 can be tested on twin conditions having been satisfied or not an order sought to be revised should be erroneous and prejudicial to the interest of Revenue. In the present case as per the Pr. CIT the assessment order is erroneous and prejudicial to the interest of revenue on the ground that by virtue of the amendment introduced in the Explanation 1 to section 10(10D) inserted w.e.f. 01.04.2014 would also be applicable in the present case as well on the basis that such explanation is clarificatory in nature. The issue related to taxability of such Keyman Insurance policies assigned in favor of Keyman or other individual has been examined has been examined by Hon ble Delhi High Court in the case of CIT vs. Rajan Nanda [ 2014 (1) TMI 249 - ITAT DELHI] holding them to be exempted u/s.10(10D). In view of this binding precedence we do not find any fault with the assessment order as the assessing officer has taken a view expressed by the Hon ble Delhi High Court which was law of the land. Pertaining to the assessment year under appeal no view was expressed by any of the authority or the court that the clarification was introduced by the amending Act would be retrospective in nature. Therefore, it cannot be inferred that the assessment order is erroneous. Even no such clarification by the CBDT was available at the time of passing of assessment order. Thus the view expressed by the Ld. CIT(A) is not supported by any of the binding precedence. The assessment order dated 13.12.2017 which has been set aside by the Ld. Pr. CIT invoking the powers u/s 263 of the Act is not erroneous in nature since the assessing officer has conducted adequate enquiry relating to the issue of proceeds from prematurity of LIC policy claimed to be exempted by the assessee after providing detailed information in the computation of income and various replied to the satisfaction of the assessing officer during the course of assessment proceedings. Assessee has given detailed replies on numerous occasions which have been duly considered by the Ld. AO. We are also of the view that the assessment order dated 13.12.2017 is also not prejudicial to the interest of revenue since proceeds are on prematurity of the life insurance policies which was noted by LIC of India on its assignment changing the characteristic from Keyman Insurance Policy to Life insurance policy and no expenditure has been claimed post its assignment and also in our view as the Amendment brought in by Finance Act 2013 explanation 1 to section 10(10D) of the Act w.e.f. 01.04.2014 is prospective in nature , same is not applicable on the assessee since assignment of policy in favour of the keyman Mr. A.S. Bhatia was in October 2010 and thereafter assignment recorded by the LIC in favour of the assessee on 30.01.2013 were much before the amendment brought in the Explanation 1 to section 10(10D) of the Act effective from 01.04.2014 and thus Ld. Assessing officer was justified in accepting the claim of the alleged receipts as exempted income u/s 10(10D) of the Act. Therefore, since twin conditions which are mandatorily required to be fulfilled by Ld. Pr. CIT before passing the order u/s 263 remains unfulfilled as the order of the Ld. AO is neither erroneous nor prejudicial to the interest of Revenue. We, therefore, are of the view that Ld. Pr. CIT was not correct in law in exercising the jurisdiction u/s 263 of the Act and cancelling the assessment. - Decided in favour of assessee.

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• 2019 (12) TMI 1036
  Disallowance u/s 14A read with Rule 8D - HELD THAT:- A comprehensive details of investment starting from 31.3.2005 upto 31.5.2015, has been placed by the assessee before the AO. Identical issue arose in the Asstt.Year 2008-09, wherein addition of Rs. 73.30 lakhs were deleted by the Tribunal, and order of the Tribunal was upheld by the Hon ble High Court [ 2017 (9) TMI 531 - GUJARAT HIGH COURT] . In the Asstt.Year 2011-12 also ITAT has deleted the disallowance, and one of us (JM) is author of the order. Therefore, considering past history and the availability of funds with the assessee, we are of the view that the amounts which have been calculated by the assessee itself for taking care of the tax free income is sufficient, and no further disallowance is required to be made, because only two persons have been kept for tracking of these investments, and part salary payable to them have already been disallowed. Disallowance u/s 14A is required to be added back in the book profit for the purpose of section 115JB - HELD THAT:- Disallowance worked out by the AO, and nothing left for making adjustment except the amounts the assessee itself added back, but apart from that we find that this issue is squarely covered in favour of the assessee by the decision of Special Bench of the Tribunal in the case of Vireet Investment, [ 2017 (6) TMI 1124 - ITAT DELHI] . From the Asstt.Year 2008-09 to 2010-11, the issue has been decided in favour of the assessee by the ITAT. It is also covered by the decision of Hon ble Bombay high Court rendered in the case of Reliance Industries Ltd., [ 2019 (1) TMI 887 - BOMBAY HIGH COURT] . In brief, the outcome of this order is that the disallowance under section 14A is not required to be added back in the book profit under section 115JB of the Act. Interest income from its subsidiary - HELD THAT:- CIT(A) has rightly held that no notional interest income is to be assumed because the assessee has not charged interest on ICDs. from subsidiary. The assessee has offered such interest income as business income in earlier years, and therefore, advancement of loan was considered for the purpose of business. To our mind, the ld.CIT(A) has appreciated the controversy in right perspective. It was in the interest of the assessee to revive its subsidiary, otherwise, its share capital as well as advances of Rs. 2278 crores would be in jeopardy. Therefore, we do not find any merit in these grounds of appeal. Disallowance of 75% of foreign travel expenses - HELD THAT:- Foreign visit was at least partly for business purposes and, therefore, just because this visit resulted in, assuming it is correct, personal benefit to the director, the expenses incurred on the visit cannot be disallowed as personal expenses. This is at best expense of the assessee company which resulted in benefit to the director. In any event, there is no material whatsoever to come to the conclusion that 75% time on this trip was used for personal purposes of the director. The case relied upon by the CIT(A) was a case in which a detailed analysis of the activities of the director was carried out and then this conclusion was drawn. There is no such material on record in this case. Once the CIT(A) came to the conclusion that the trip was for some business purposes, it was not open to him to deny any part of deduction for these expenses- particularly when there is no material to hold that the visit was for personal purposes. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance. Disallowance of bad debts - HELD THAT:- The moment debts have been written off in the books, it is to be allowed without expecting the assessee to demonstrate whether debts have actually become bad or not. A reliance can be made to the decision of Hon ble Supreme Court in the case of TRF Ltd. [ 2010 (2) TMI 211 - SUPREME COURT] . It is altogether irrelevant, whether QFL actually paid tax or not. If a liability has ceased, then it will be added back in the taxable income of the QFL. Now, if that concern was suffering huge loss, then that cannot be the reason to disallow claim of the assessee. If this type of logic is being accepted, then every business organization was required to show profit only. This is a misplaced notion at the end of the ld.CIT(A) for rejecting the claim of the assessee. We allow this ground of appeal, and delete disallowance of bad debts. In the other words, claim of bad debt at Rs. 170.91 lakhs is allowed. Non granting set off brought forward business loss against income from house property - HELD THAT:- A decided in own case income from warehouse has been shown under the head income from house property which cannot be equated by any cannon of law as profit and gains from business or profession .Both the lower authorities made no mistake in not allowing set off of brought forward business losses against the Income from house property . Loss suffered by the assessee on sale of preferential shares - whether actual sale consideration of the shares supported by the valuation report can be replaced with fair market value of the shares? - HELD THAT:- Full value of consideration would be replaced by way of deeming provision provided in section 50C which is relatable to transfer of capital asset in the shape of land or building or both. No such provision has been provided with regard to the sale of shares. With effect from Asstt.Year 2018-19, a provision has been made for sale of shares also. It is section 50CA. Prior to insertion of this section, there is no power with the Revenue authorities to replace the full sale consideration with fair market value of the shares. Since the ld.CIT(A) was not having jurisdiction to replace the full sale consideration disclosed by the assessee with FMV, therefore, there is no need to examine the justification of valuation report in support of sale consideration shown by the assessee vis- -vis FMV determined by the ld.CIT(A). We do not deem it necessary to go into this issue, and make any discussion. In view of the above, we are of the view that the assessee is entitled for claim of capital loss suffered by it on sale of shares

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• 2019 (12) TMI 1035
  Revision u/s 263 - estimation of profit @ 5% of gross business receipt - HELD THAT:- The assessee having failed to produce the books of accounts, bills, vouchers etc. during the second round of assessment proceedings; the AO had valid reasons to not be fully satisfied about the correctness and completeness of the accounts of the assessee; and therefore, the AO was justified in invoking the provisions of Section 145(3) of I.T. Act. Moreover, the Ld. Counsel for assessee has failed to bring any materials for our consideration to establish that the estimation of profit @ 5% of the gross business receipt is excessive, unreasonable, high pitched or contrary to law having regard to the facts and circumstances of the case. In view of the foregoing, we confirm the order of the lower authorities invoking provision of Section 145(3) of I.T. Act for the purpose of estimating business profits and we further confirm the estimation of business profits @ 5% of gross business receipts. Loss on sale of machinery - addition amounts to double addition of the same amount - HELD THAT:- Aforesaid amount was part of the business loss claimed by the assessee and once that loss is disallowed, and estimated net profit is assessed as income; the aforesaid amount stands disallowed automatically. Therefore, assessee correctly submitted that there was no justification for once again making repeated addition on the aforesaid amount in the Assessment Order. DR agreed that the repeated addition made by the AO in respect of the aforesaid amount amounts to double addition of the same amount and he left it to the discretion of the Bench to give appropriate direction to the AO for deleting the double addition. As both sides are in agreement that repeated addition made by the AO amounts to double addition of the same amount; we accordingly direct the AO to delete the repeated addition. Claim of depreciation - estimation of net profit - HELD THAT:- Both sides were in agreement that the assessee was eligible for depreciation of Income Tax Act, 1961 and Income Tax Rules, 1962. As the AO has estimated net profit and not gross profit of business, both sides were also in agreement that the depreciation as claimed by the assessee in the books stands already allowed in the estimation of net profit; and therefore, depreciation to be allowed to the assessee as per Income Tax Act, 1961 and Income Tax Rules, 1962 needs to be reduced by the amount of depreciation claimed by the assessee in the books of accounts. In view of the foregoing, and as both sides have agreed to this at the time of hearing before us, we direct the AO to allow depreciation as per Income Tax Act, 1961 and Income Tax Rules, 1962 as reduced by the amount of depreciation claimed by the assessee in the books of account. Claim for interest expenses on business borrowing of the assessee and does not relate to interest paid / payable to the partner of partnership firm - HELD THAT:- We agree with the contention of the Ld. DR that in a case where the determination of income of the assessee is based on estimation of net profit (and not gross profit) interest expenses on commercial borrowing of the assessee are deem to have already been allowed to the assessee. Therefore, this ground of appeal by the assessee is dismissed.

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• 2019 (12) TMI 1034
  Deduction of interest incurred on zero coupon bonds u/s 36(1)(iii) OR u/s 57(iii) as claimed by the appellant - HELD THAT:- After perusing the order of the CIT(A), especially interest pertaining to advance made in earlier years we observe that the assessment for A.Y. 2011-12 has also been framed and the said claim of the assessee under Section 57(iii) of the Act has been allowed by the AO as is apparent from the copy of the assessment order filed at page Nos. 24 25 of the Paper Book. We further note that Revenue has not taken any step for reopening the assessment for A.Y. 2011-12. Further assessee s own fund in the form of share capital is only Rs. 24.50 lakhs and thus there is merit in the contentions of the assessee that the entire amount of interest expenditure is to be allowed to the assessee considering the fact that the amounts advanced were out of loaned money Besides , once interest expenditure has been allowed in a particular year, the same cannot be disallowed in the subsequent year unless there is change in the facts. Similarly, the case of the assessee is also supported by several cases, namely CIT vs. Sridev Enterprises [ 1991 (1) TMI 52 - KARNATAKA HIGH COURT] Escorts Ltd. vs. ACIT [ 2006 (1) TMI 186 - ITAT DELHI-G] , Malwa Cotton Spg. Mills vs. ACIT [ 2003 (12) TMI 274 - ITAT CHANDIGARH-A] , ITO vs. J.M.P. Enterprises [ 2005 (12) TMI 209 - ITAT AMRITSAR] and other decisions referred to above wherein the common ratio is that once an expense is allowed in the earlier year some cannot be disallowed in the subsequent year unless there is a change of facts during the year vis-a-vis earlier years. Therefore after considering the facts of the case in the light of the decisions relied upon by the learned A.R., we are of the considered opinion that interest expenditure in respect of opening balance of amount advanced is to be allowed. Accordingly we set aside the order of the CIT(A) on this issue and direct the AO to allow interest relating to advance made in earlier years. Interest relating to advances made during the year - Since the assessee s own funds were only to the tune of Rs. 24.50 lakhs, which means that money advanced by the assessee has been out of the borrowings only and therefore where there is no direct nexus available, we are convinced with the arguments of the AR that interest should be allowed on proportionate basis. We also find merit in the contentions of the assessee that interest expenditure corresponding to interest income other than interest received from Essar Oil Ltd. is to be allowed. We note that the total interest income during the year was Rs. 125.58 crores out of which interest received from Essar Oil Ltd. is Rs. 102.02 crores as observed by the learned CIT(A) on page No. 46, para 78 of the appellate order and therefore in our opinion assessee has to be allowed interest expenditure in respect of interest income other than interest received from Essar Oil Ltd. Needless to say that computation of corresponding interest expenditure has to be on proportionate basis, as observed earlier, wherever no direct nexus is available. Considering the facts in the light of the discussions given hereinabove we are restoring the issue of calculation of interest expenditure to the file of AO with the direction as contained hereinabove i.e (i) to calculate correct amount of interest in respect of advances given in earlier years,(ii) calculate the correct amount of interest pertaining to advances made during the year and (iii) to calculate interest expenditure corresponding to interest income other than interest received from Essar Oil Ltd. and allow the same. The issue is restored for the limited purpose of calculation. Ground is allowed for statistical purposes. Disallowance u/s 14A under the normal provisions of the Act as well u/s 115JB - HELD THAT:- CIT(A) recorded clear cut finding that the assessee has not claimed any expenditure in computation of income. Similarly, while discussing the computation of book profit under Section 115JB of the Act the learned CIT(A) at page No. 95 onwards has given a finding that the assessee has already disallowed expenditure under Section 14A of the Act on which the learned AO has failed to give any contrary findings. Under these facts and circumstances, we are not inclined to interfere in the order of the CIT(A) and accordingly the grounds raised by the Revenue are dismissed.

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• 2019 (12) TMI 1033
  Revision u/s 263 - selection of scrutiny - mismatch in turnover - whether receipts reported in Statement 26AS fully reconciled with the receipts reported in the audited accounts? - HELD THAT:- Assessee had established before the AO as well as before the Ld. Pr. CIT that all receipts certified in the TDS certificates had been fully accounted in the assessee s books for the relevant year. Although these documents and explanations were admittedly filed before the lower authorities, no factual infirmity or falsity was shown by the Ld. Pr. CIT or by the ld. CIT, DR appearing on behalf of the Revenue. The Ld. Pr. CIT set aside the assessment order on this issue merely observing that the issue was not properly examined. Applying the principles set out in Paras 8 to 17 above, we therefore hold the order u/s 263 of the Act on this issue to be unsustainable because not only did the AO had enquired into this issue but had consciously applied his mind to the facts made available before him and adopted the permissible view in law. On the contrary the Ld. Pr. CIT did not bring on record any material to disprove the assessee s explanations which showed that receipts certified in the TDS Certificates totaling Rs. 972 Lacs were fully accounted in the assessee s books of the relevant year but merely restored the issue for fresh examination by the AO. The order of the Ld. Pr. CIT with reference to issue in clause (a) is therefore set aside. Ground Nos. 3 4 are accordingly allowed. Mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report (Form 3CEB) and ITR - HELD THAT:- When the impugned order was passed by the Ld. Pr. CIT, clause (i) of section 92BA of the Act had already been omitted by the Finance Act, 2017 and in that view of the matter the Ld. Pr. CIT could not set aside the order for alleged non-compliance with provision of law which no longer existed in the statute as on the date of order. The Ld. Pr. CIT s direction requiring the AO to consider making a reference to the TPO in the set aside proceedings is also contrary to the view expressed in the foregoing decision of the coordinate bench in M/S. DVC EMTA COAL MINES LTD., M/S. BENGAL EMTA COAL MINES LTD., M/S. PANEM COAL MINES LTD. VERSUS ASSISTANT COMMISSIONER OF INCOMETAX, CENTRAL CIRCLE-3 (1) , KOLKATA. [ 2019 (5) TMI 1709 - ITAT KOLKATA] . For all the foregoing reasons therefore, we hold that the AO s order did not suffer from any error for the reason that he did not make reference to the TPO. Accordingly the Ld. Pr. CIT s order for the reason setout in clause 3(b) of the SCN and for the entirely new set of reasons contained in the impugned order, is set aside. Ground Nos. 5 to 7 are accordingly allowed. Disallowance u/s 14A not made by the A.O keeping in view the circular No. 5/2014 (F.No. 225/182/2013-ITA.II) dated 11-02-2014 as well as provisions laid down in the Act - HELD THAT:- Assessment order passed by the AO in which no disallowance u/s 14A was made, could not said to be unsustainable in law because the course adopted by the AO while passing the order u/s 143(3) of the Act was not only permissible in law but the said course was in conformity with the view expressed by the jurisdictional high court. Accordingly the impugned order of the Ld. Pr. CIT with reference to the reasons set out in clause (c) of the SCN is held to be unsustainable and accordingly set aside. Ground Nos. 8 9 are therefore allowed. Assessee did not take valuation of properly sold as per provisions of section 50C - HELD THAT:-We find that in the Profit Loss Account, the assessee never debited under the head write-off of fixed assets nor separately claimed deduction therefore in the return of income. In the circumstances therefore when there was no claim for deduction of such an amount in the return, the issue of non-enquiry in respect of a non issue did not have any material impact and no prejudice can be said to have been caused to the interest of the Revenue because of the alleged nonenquiry. We also find that before the Ld. Pr. CIT the assessee had filed the certificate issued by M/s D.V. Agarwal Associates, Chartered Accountant in which it was certified that the assets written off were sold during the relevant year and the loss incurred on sale was netted off against profit made on sale of other fixed assets and the net gain was separately credited under the head Other Operating Income, and this was separately considered in the computation of income. No factual infirmity or falsity was shown by the Ld. Pr. CIT in the explanations put forth which was supported by corroborative evidence. Applying the ratio laid down in the decisions of the Hon ble Delhi High Court in the case of ITO vs DG Housing Projects Ltd [ 2012 (3) TMI 227 - DELHI HIGH COURT] DIT vs Jyoti Foundation [ 2013 (7) TMI 483 - DELHI HIGH COURT] we therefore hold that the order of the ld. Pr. CIT merely setting aside the AO s order without independently dealing with merits of the issue was untenable and therefore the same is set aside. Ground Nos. 13 14 are accordingly allowed. Deduction u/s 80IC on income from other Sources - Rationale behind such claim was not verified by the A.O during the course of assessment proceedings - the preceding four income-tax assessments framed u/s 143(3), the AOs had consistently allowed the deduction u/s 80IC in respect of scrap sales which was accounted in the respective standalone accounts under the head Other Sources . Having regard to these facts and judicial precedents, we do not find merit in the submissions of the ld. CIT, DR that the order of the AO suffered from any error or that the view taken by the AO was unsustainable in law making the AO s order liable for revision u/s 263 of the Act. The Ld. Pr. CIT s order on this issue is therefore held to be unsustainable and accordingly set aside. Ground Nos. 15 16 are allowed. Headwise break up of miscellaneous expenses was not called for by the A.O - HELD THAT:- We find from the chart furnished before us that in fact the expenditure debited under the head Miscellaneous Expenses during the year under consideration was substantially lower than the expenditure incurred in the prior years Miscellaneous Expenses not permissible as deduction u/s 37(1) the same was disallowed by the AO in the impugned order which showed that the AO had examined the amounts disallowable but included under the head Miscellaneous Expenses. We also note that in none of the past assessments completed u/s 143(3) any part of the expenses debited under the head Miscellaneous Expenses was disallowed and therefore we find merit in the submissions of the ld. AR that by allowing deduction for expenses debited under the broad head of Miscellaneous expenses, no prejudice was caused to the Revenue. For the foregoing reasons therefore we hold that the assessment order passed by the AO could not be held to be erroneous and prejudicial to the interests of the Revenue for the reason set out clause 3(g) of the SCN. Accordingly the order of the Ld. Pr. CIT on this issue is set aside and Ground No. 17 is allowed. Assessment order was not the result of non-enquiry or nonapplication of mind or assumption of wrong facts. We are also of the considered opinion that while passing the assessment order the AO had followed the permissible view in law which cannot be said to be unsustainable in law . In the circumstances therefore, the jurisdictional facts for usurping the jurisdiction u/s 263 of the Act, being absent, we hold that the action of Ld. CIT was without jurisdiction - Decided in favour of assessee.

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• 2019 (12) TMI 1032
  Interest on late payment of TDS u/s 201(1A) - computation of period as per month or part of the month - British calendar months or otherwise - identical language in section 244A(1) as in section 201(1A) - HELD THAT:- For the purpose of computation of interest, the expression month is to be interpreted as period of 30 days and not British calendar. The Ld. AR has placed on record computation to submit that excess interest levied would be Rs. 49,363/- which need to be reversed. We direct Ld. CPC-TDS / concerned AO to verify the same and charge interest accordingly in terms of our above order. HELD THAT:- For the purpose of computation of interest, the expression month is to be interpreted as period of 30 days and not British calendar. AR has placed on record computation to submit that excess interest levied would be Rs. 49,363/- which need to be reversed. We direct Ld. CPC-TDS / concerned AO to verify the same and charge interest accordingly in terms of our above order.

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• 2019 (12) TMI 1031
  Disallowance u/s 40(a)(ia) - HELD THAT:- Hon ble Kerala High Court in the case of CIT vs.- PVS Memorial Hospital Limited [ 2015 (8) TMI 277 - KERLA HIGH COURT] in support of the Revenue s case on this issue, it is observed that the decision of the Hon ble Calcutta High Court in the case of S.K. Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] relied upon by the ld. CIT(Appeals) in his impugned order to give relief to the assessee on this issue squarely covers this issue in favour of the assessee. We, therefore, respectfully follow the said decision of the Hon ble Jurisdictional High Court and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made under section 40(a)(ia). Ground No. 1 of the Revenue s appeal is accordingly dismissed. Addition u/s 14A read with Rule 8D - HELD THAT:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Y. 2012-13, we respectfully follow the decision of the Tribunal for A.Y. 2012-13 and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer under section 14A read with Rule 8D Applicability of MAT section 115JB to the assessee being a Banking Company - HELD THAT:- A similar issue as involved in the year under consideration thus was decided by the Tribunal in favour of the assessee for A.Y. 2002-03 after taking into consideration not only the provisions of section 115JB but also the relevant provisions of the Companies Act, 1956. The Tribunal also considered the Circulars issued by the Board from time to time in this regard and took note of the decision of the Hon ble Supreme Court in the case of Surana Steels Pvt. Limited [ 1999 (4) TMI 5 - SUPREME COURT] wherein the legislative intent of section 115J was considered. As rightly contended by the ld. Counsel for the assessee, a similar issue thus has been decided by the Tribunal in favour of the assessee for A.Y. 2002-03 by passing a well discussed and well reasoned order and we do not find any justifiable reason to reconsider the said decision as sought by the ld. D.R. Also see UNION BANK OF INDIA VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [ 2012 (6) TMI 500 - ITAT MUMBAI] Since there is not a single decision of the Jurisdictional High Court or even of any other Hon ble High Court cited by the ld. D.R, which is in favour of the Revenue on this issue, we respectfully follow the judicial pronouncements referred to and discussed above, which are in favour of the assessee and uphold the impugned order of the ld. CIT(Appeals) holding that the provision of section 115JB was not applicable in the case of the assessee being a Banking company for the year under consideration, i.e. A.Y. 2010-11

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• 2019 (12) TMI 1030
  Bogus purchases - information received from investigation department which in turn relied on information from VAT Department - reliance on the statements of the dealers - disallowance u/s 14A - nexus of expenditure with tax free income - HELD THAT:- This present appeal has been filed by the assessee in ITAT against the aforesaid impugned appellate order of the CIT(A). At the time of hearing, Revenue was represented by Shri Saras Kumar, the Ld. Departmental Representative (in short Ld. DR ). However, none was present from the assessee s side. In the absence of any representation from assessee s side, at the time of hearing before us, we heard the Ld. DR. The Ld. DR relied upon the order of the Assessing Officer and the aforesaid impugned order of the Ld. CIT(A). After perusal of the order of the AO and the aforesaid impugned order dated 20.01.2016 of the Ld. CIT(A), we find that the Ld. CIT(A) has passed speaking order on merits. Relevant portion of the impugned order of the Ld. CIT(A) has already been reproduced in foregoing paragraph (C) of this order. We find that the Ld. CIT(A) has given detailed reasons for his decision on merits in the aforesaid impugned appellate order dated 20.01.2016 of Ld. C1T(A). During appellate proceedings in Income Tax Appellate Tribunal ( ITAT , for short) no material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned order on merit. After hearing the Ld. DR and after perusal of materials on record, and further, in view of the foregoing discussion, we decline to interfere with the aforesaid impugned appellate order of Ld. CIT(A); and this appeal filed by the assessee is dismissed.

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• 2019 (12) TMI 1029
  Royalty u/s. 91 (vi) OR Business income - amount received by the assessee company from its customers as per Article 12 (3) of the Indo US DTAA - PE in India - whether software with restriction of copying etc is a copy right or a copy righted product ? - HELD THAT:- Mumbai Bench of the Tribunal in the case of ADIT (IT) Mumbai Vs. First Advantage Private Limited [ 2017 (1) TMI 984 - ITAT MUMBAI] has held that Payment made by assessee to US company for use of software owned by US company, when assessee would use software only for internal business operations and would not sub-license or modify same, could not be considered as royalty within meaning of article 12(4) of DTAA. Coordinate Bench of the Tribunal in the case of ACIT Vs. Landmarks Graphics Corporation [ 2017 (7) TMI 1269 - ITAT DELHI] has held that where assessee, a US based company, did not have PE in India and its activities were not covered by deeming fiction of article 5(2) of India - USA DTAA, income earned by it from sale of software to Indian companies which was off the shelf software, was not taxable In India. Tribunal in the case of Black Duck Software Inc Vs. DCIT [ 2017 (7) TMI 1269 - ITAT DELHI] has held that where assessee, a US based company, granted a non-exclusive, non-transferable software license to Indian customer for a specific time period, since copyright in said software programme was retained by assessee, payment received by it was not liable to tax in India as royalty. In the case of Aspect Software Inc Vs. ADIT [ 2015 (5) TMI 726 - ITAT DELHI] held that consideration received by assessee for supply of contact solutions used for better management, customer interaction, comprising of sale of hardware alongwith license of embedded software to end user is not royalty under article 12 of DTAA between India and USA. Provision of implementation and maintenance services are inextricably and essentially linked to supply of software; where supply of software is itself not taxable as royalty , these services are also not royalty. Respectfully following all we hold that the payment received by the assessee from its customers from sale of software products/ licenses is not in the nature of the royalty u/s. 9(1)(vi) of the IT Act, 1961 and also as per article 12 (3) (a) and article 12(3) (b) of the Indo US DTAA. In our opinion the said amount received by the assessee is normal business income of the assessee on account of sale of copy righted products (licenses) and not taxable in India in the absence of permanent establishment. - Decided in favour of assessee.

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• 2019 (12) TMI 1028
  Default U/s 201(1) and 201(1A) - non-deduction of tax on interest payment exceeding basic limit due to submission of form 15G/15H - HELD THAT:- As found from the record that during the appellate proceedings, the assessee had filed the additional evidences which were sent by the CIT(A) to the AO for his remand report. The remand report so submitted by the AO has been reproduced by the CIT(A) at page 7 of his appellate order. Nothing was produced by the Department so as to persuade the Bench to deviate from the findings recorded by the CIT(A) wherein the CIT(A) after considering the remand report held that the assessee was not in default u/s 201(1) and 201(1A). Thus we do not find any reason to interfere in the findings of ld. CIT(A). - Decided against revenue

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• Customs

• 2019 (12) TMI 1027
  Interpretation of statute - meaning of the expression reason to believe and liable to confiscation under Section 110 of the Customs Act, 1962 - import of prohibited goods - betel nuts - cut dried Areca Nuts (dark pink in colour) - petitioners application for release of the goods stood rejected for the reason that the prescribed authority had got the seized sample of the product tested from the laboratories which was classified as unsafe food. HELD THAT:- The consignor and the consignee are recorded and are identified. The goods are not seized at any notified custom zone or area. Save and except for what is recorded in the seizure memo, there is no other material available on record. The learned Additional Solicitor General has tried to supplement the reasons for formation of reason to believe , which also are on mere suspicion, through the affidavit of the authority - A general practice in trade cannot be, ipso facto, applied and adopted to the instant case, for unless it is shown that the act and the conduct of the petitioner makes him to be a part and parcel of the trading community, based in the area or dealing with the illegal activities of such like nature. There is no track record of past history of the instant petitioners. While dealing with the expression reason to believe in relation to another confiscatory statute, i.e. Narcotic Drugs and Psychotropic Substances Act, 1985, S. B. Sinha J., in Aslam Mohammad Merchant Versus Competent Authority and others, (2008) 14 SCC 186 [ 2008 (7) TMI 852 - SUPREME COURT] , opined that proper application of mind on the part of the competent authority is imperative prior to issuance of a show cause notice, intending to confiscate the goods. Also there has to be some material leading to formation of some opinion or reason to believe for such action cannot be taken on mere ipse dixit and roving enquiry is not contemplated in law - In the Bar Council of Maharashtra versus M. V. Dabholkar and others, (1976) 2 SCC 291, Krishna Iyer J., has observed that reason to believe cannot be converted into a formalised procedural roadblock, it being essentially a barrier against frivolous enquiries. We find no reason to take a contrary view, more so, when the goods in question are yet raw, as an unfinished product, meant to be transported to another State for it to be processed and packaged, whereafter, only, eventually sold in an open market and if the goods are actually unsafe food then it is not the provision of the Customs Act which can be invoked, for not falling within its purview. Petition allowed.

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• 2019 (12) TMI 1026
  Misconduct - Appraiser (Customs) - out of charge order - it is alleged that the petitioner cleared the consignment by making a false report that he had examined 40 packages in the said consignment, despite the said consignment not being detained in the area under his jurisdiction. - whether petitioner can be said to have committed misconduct warranting disciplinary action? HELD THAT:- The jurisprudential connotation of misconduct is required to be kept in view. The norm of conduct expected of an employee is often spelled out in the Code of Conduct or the Conduct Rules. The complained act or omission is thus required to be tested on the touchstone of it being in conformity with the conduct expected of the employee. Rule 3 of the Conduct Rules enjoins the civil servant to maintain absolute integrity and devotion to duty and refrain from an act or omission, which can be termed as that of unbecoming of a government servant . Viewed through the prism of the statutory provision, the act or omission which is in breach of the prescription of conduct amounts to misconduct. Whether the complained act or omission amounts to misconduct is thus required to be judged in the context of the nature of such act or omission, the circumstances in which it occurred and its impact. The act or omission, which is tainted with ill motive, moral turpitude and improper or unlawful behaviour with an element of willfulness therein or any fagrant violation of an express stipulation, squarely fall within the mischief of misconduct. Negligence, lapse in performance of duty, errors of judgment or innocent mistake, on the other hand, stand at the other end of the spectrum and generally do not constitute a misconduct. In a given situation, a single act or omission or error of judgment would not ordinarily constitute misconduct though when such an error or omission results in serious or atrocious consequences the same may amount to misconduct. It is not an inviolable rule of law that the gross negligence or lapse in performance of duty entailing serious consequences may not amount to misconduct. Gross or habitual negligence in performance of duty may not involve means rea yet it may still constitute misconduct for disciplinary proceedings. The cleavage in the opinion of the Inquiry Officer and the disciplinary authority was on the point of the petitioner having calculatingly fed and generated fallacious (false) document item (ii) extracted above. The word calculatingly covers in its fold a mental element. It is impregnated with an idea of deliberateness. It implies that the action was taken after taking into account the foreseeable consequences thereof. The element of an intentional and deliberate act, therefore, was part of Charge-II attributed to the petitioner. If the element of state of mind is thus completely effaced the matter gets restricted to the consideration of the aspect of the gross negligence or carelessness. There are circumstances which suggest that though there was lapse on the part of the petitioner in issuing out of charge order, undoubtedly without inspecting the consignment in question; yet it cannot be said to be such a gross negligence as would constitute misconduct - if considered in conjunction with total absence of ill motive, mala fide intent or animus to cause wrongful gain to the importers and the petitioner, lead to a legitimate inference that the act on the part of the petitioner was the result of negligence and carelessness. It falls short of misconduct . The tribunal did not examine this aspect of the matter. The tribunal, on the other hand, posed unto itself the question of proportionality of the punishment. Since the Inquiry Officer and the disciplinary authority differed on the aspect of the culpability of the conduct, the tribunal ought to have examined the question of proof of misconduct. Thus, we are persuaded to interfere with the order of the tribunal as well as the orders of the disciplinary authority and the appellate authority. Petition allowed.

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• 2019 (12) TMI 1025
  Smuggling - narcotic drugs concealed in his sandals - HELD THAT:- This Court finds that the prosecution has proved its case for the offence of the appellant under Sections 8(c) r/w.22(c) of NDPS Act, the trial Court has found that the prosecution has established its case beyond reasonable doubt and also there is no violation of mandatory provisions of NDPS Act. Therefore, this Court does not find any perversity in the judgment of the trial Court. This Court also finds that the prosecution has proved its case through cogent and reliable evidence and there is no merit in the appeal and the appeal is liable to be dismissed and accordingly dismissed. Appeal dismissed.

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• Corporate Laws

• 2019 (12) TMI 1043
  Sanction of the Composite Scheme of Arrangement - dispensation of the meeting of Equity Shareholders of the Petitioner Company No.2 and the Petitioner Company No.3 - main thrust of the argument was that by scheme of arrangement, the transferor company has sought to convert the redeemable preference shares into loans i.e. conversion of equity into debt which is not only contrary to the well settled principles of company law as well as Section 55 of the Companies Act, 2013 but also would reduce the profitability or the net total income of the transferor company causing a huge loss of revenue to the Income Tax Department. HELD THAT:- The case of the Appellant(s) is covered by the decision of the Hon ble Supreme Court in Department of Income Tax v. Vodafone Essar Gujarat Limited and Another [ 2012 (9) TMI 100 - GUJARAT HIGH COURT ] where it was held that Appeal dismissed.

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• 2019 (12) TMI 1024
  Permission to revise Board s Report - Section 131(1) of the Companies Act, 2013, R/w Rule 77 of the NCLT Rules, 2016 - HELD THAT:- By perusal of inadequacies of the Board Report dated 6th September, 2016 as noticed and pointed supra, are not serious in nature and happened due to inadvertence and if permitted to revise as sought for, would not prejudice interests of Company, its shareholders, or stake holders or violate any provisions of Companies Act, 2013. They have also declared that the Petitioner Company has been prompt in all annual filings with the RoC and all statutory Registers and records are maintained in accordance with the provisions of the Companies Act, 2013. It is satisfying that the instant Application/Petition is filed duly following extant provisions of Companies Act, 2013, and the Rules made thereunder and thus, by following principle of ease of doing business, we are inclined to dispose the Company Petition subject to compliance of provisions of Rule 77 of NCLT Rules, 2016. The Petitioner Company is permitted to revise its Board s Report for the Financial Year 2015-16 in terms of Section 131(1) of the Companies Act, 2013 R/w Rule 77 of NCLT Rules, 2016 - The Petitioner Company is directed strictly to follow all the prescribed procedure/conditions as laid down under Rule 77 of NCLT Rules, 2016.

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• Insolvency & Bankruptcy

• 2019 (12) TMI 1023
  Maintainability of application - initiation of CIRP - Conduct of NCLT - passing an order in illegal member - principles of natural justice and the procedure established by law - Retiring Judicial member of NCLT is going to be appointed as member of NCLAT - HELD THAT:- When the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 were notified, the legislature was aware that it will have to frame and notify separate rules enabling filing of application under section 7(1), section 9(1) and section 10(1) of the IBC. If they are not notified as yet, then, Rule 10 allows filing of application under the NCLT Rules, 2016 and particularly Rules 20 to 26. However, that does not mean that the rest of the NCLT Rules already notified and governing procedural aspects and guiding the NCLT would cease to apply. That is not the mandate flowing from the language of Rule 10. We, therefore, do not find any merit in the argument of Mr.Kadam in this behalf. Clause (a) of sub-section (5) enables admission of the application on the necessary satisfaction being recorded with regard to the default. Further, the disciplinary proceedings should not be pending against the proposed resolution professional. If the satisfaction is recorded on this ground, the order of admission can be made, whereas, the rejection is contemplated by clause (b) of sub-section (5) of section 7. Before rejection of the application, the applicant has to be given an opportunity to rectify the defect and within the time stipulated in the proviso below clause (b). The CIRP shall commence from the date of application under sub-section (5) and that is what subsection (6) of section 7 contemplates, whereas, the communication of the order to the Financial Creditor and the Corporate Debtor is an aspect covered by sub-section (7) of section 7 of the IBC. The legislature says by sub-section (1) of section 7 that an application can be made and by other sub-sections of section 7, how the application should be dealt with is enumerated. Pertinently, sub-section (5) of section 7 requires the satisfaction to be recorded in terms thereof. If that satisfaction is recorded, there is an admission of the application. The admission of the application has to be intimated or communicated. The order of admission or rejection of the application is required to be passed and that has to be intimated or communicated. By that alone, we cannot conclude, as desired by Mr.Kadam, that there is no mandate or requirement of pronouncement of the order. The intimation or communication of admission of the application presupposes or predicates the passing of an order. Such an order of the adjudication authority is to be declared by the NCLT. A perusal of the sub-rules of Rule 150 and 151 so also 152 would enable us to hold that the tribunal, after hearing the applicant and respondent, shall make and pronounce the order either at once or, as soon as thereafter, as may be practicable, but not late than thirty days from the final hearing. Apart from the fact that there is a limit set out for everything, that by itself does not mean that rule makers intended total dispensation of the requirement of pronouncement of the order. The pronouncement is necessary. It could be either at once or as soon as thereafter, as may be practicable, but not later than 30 days from the final hearing. We are not concerned in this case with a situation where this time limit is not adhered to. However, by sub-rule (2), what is indicated is that every order of the tribunal shall be in writing and shall be signed and dated by the President or Member or Members constituting the Bench which heard the case and pronounced the order. Sub-rule (3) of Rule 150 says that a certified copy of every order passed by the tribunal shall be given to the parties and then sub-rule (4) says that the tribunal may transmit order made by it to any court for enforcement, on application made by either of the parties to the order or suo motu. There is enlargement of time permissible by Rule 153. The rectification of order is provided under Rule 154 and by Rule 155, there is a general power to amend conferred in the tribunal. These ancillary and incidental powers enable the tribunal to render complete justice. The requirement of making entries by Court Master would play a very vital role in the conduct of judicial proceedings is contemplated by Rule 156 and by Rule 157, there is a transmission of order by the Court Master. There is a transmission of the order with the case file to the Deputy Registrar by Rule 157(1) and thereafter, the duty of the Deputy Registrar is to make scrutiny and record the satisfaction that the provisions of these rules have been duly complied with and in token thereof affix his initials with date on the outer cover of the order. Everything depends upon the facts and circumstances in each case. Nobody should be allowed to manipulate the judicial process and secure favourable relief or judgment by deft management. Judges ought to be aware of the modern trends and tendencies in instituting and prosecuting litigation before a court of law. They must maintain absolute integrity and autonomy, independence of the judiciary cannot be compromised. At all costs, that should be maintained. If the functioning of the tribunal is monitored and supervised by a particular department of the Central Government, then, that departmental staff is appointed to assist the tribunal. Effective work cannot be done unless the Registrar, Superintendent and other staff members are drawn from the courts already functioning and discharging judicial functions. The trained staff of such courts can be deployed as a temporary measure and thereafter, by a proper selection process, the staff to assist and support the Judicial Members and the President should be selected and appointed. The staff ought to be drawn from legal field. If any administrative staff or departmental member is appointed or deputed to work in the tribunals, he may not have any experience of working in a court. We have have noticed in this case that the NCLT lacks such a staff. It is on account of the staff members that in this case both the judicial Members have been embarrassed. The litigants suffer by a requirement to hold the proceedings afresh. The present writ petition is maintainable - the impugned order is set aside on the ground that the same is a nullity.

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• 2019 (12) TMI 1022
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of loan - financial creditor - existence of default - debt due and payable - HELD THAT:- The petitioner-financial creditor had disbursed the loan amount to the respondent-corporate debtor. It is accordingly held that the respondent-corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one lakh. Thus, the petition warrants admission as it is complete in all respects. The provisions of Section 7 (2) and Section 7 (5) of IBC have been complied with and after a conjoint reading of the aforesaid provision along with Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, we are satisfied that a default has occurred and the application under sub-section 2 of Section 7 is complete. Application admitted - moratorium declared.

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• 2019 (12) TMI 1021
  Maintainability of application - initiation of CIRP - allegation that application is not in accordance with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules, 2016) and also not in accordance with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules, 2016) - Section 8 of I B Code, 2016 - HELD THAT:- Although applicant submitted application in form 1 r/w Rule 4 but part 1 to part 3 is of Form-1 and part 4 to part 5 of the application is of Form-5 i.e. a particular of operational debt. Therefore, it can be said that applicant filed the application partly in form 1 and partly in form-5. This Adjudicating Authority further find that in the synopsis the applicant also mentioned as financial creditor/operational creditor. This Adjudicating Authority further find, applicant has stated that the demand notice was issued on 04.02.2019 under Section 8 of I B Code, 2016. This Adjudicating Authority is of considered view that Application submitted by the Applicant is not in accordance with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules, 2016) and also not in accordance with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules, 2016) under which Operational Creditor is required to file application, rather it is combination of both Rules 4 and 6 and that it is the reason applicant has filed application partially in Form -1 and partially Form-5 - Since in present case application is not in accordance with Rule 4 or Rule 6 and applicant itself not sure under what provision he is required to file the application for the amount, which he claims to be paid to M/s. Sunworld Residency Pvt. Ltd. fall (Financial Debt/ Operational Debt), under such circumstances this Adjudicating Authority is of considered view that present application filed by the Applicant is not as per prescribed Form and not as per IB Code, 2016. Application not maintainable.

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• 2019 (12) TMI 1020
  Maintainability of application - initiation of CIRP - Corporate Debtor committed default in making payment - existence of dispute or not - HELD THAT:- There are clear disputes relating to breach of agreement as provided u/s. 5(6) of the Code. The dispute regarding the breach of agreement was raised by the Corporate Debtor long back prior to the issue of demand notice. Hence this is a clear case of pre-existing dispute between the Corporate Debtor and the Petitioner. There is a dispute, in relation to the unpaid operational debt, between the parties which is supported by abundant evidence. This dispute existed prior to the serving of demand notice under section 8 and the Operational Creditor had notice of existence of such dispute. Further, this dispute truly exists in fact and is not spurious, hypothetical or illusory. This petition as under section 9(5)(2)(d) is rejected.

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• PMLA

• 2019 (12) TMI 1019
  Money Laundering - proceeds of crime - attachment of property - charge or encumbrance of a third party in a property attached under PMLA - scheduled offences - privity/complicity of contract - HELD THAT:- The appellant is a third party bonafide claimant of the property - The security interest has been created on the property in question and there are legitimate banking transactions. There is no allegation on the part of Enforcement Directorate that the appellant has not exercised due diligence in sanctioning loan. Such facilities were extended after conducting due diligence and the necessary checks and balances. The security interest has been created in the year on 29.03.2007, whereas the ECIR has been registered much later and the Provisional Attachment Order has been passed on 24.03.2017. Much prior to the year 2017, Section 13(2) notice under SARFAESI Act, 2002 was issued on 25.08.2009 and the DRT proceedings have been finally concluded in the year 2015. The Hon ble High Court of Delhi in the recent decision of The Deputy Director, Directorate of Enforcement, Delhi Vs. Axis Bank Ors., reported in [2019 (4) TMI 250 - DELHI HIGH COURT] (hereinafter referred to as the Axis Bank Decision ) has rightly held that the interest of a third party in the property of an accused, acquired prior to the commission of the proscribed offence cannot be defeated or frustrated by attachment of such property under Section 8 of the Act - The Hon ble High Court further recognized the right of such third party to proceed with enforcement of its interest in accordance with law such that while the order of attachment under the Act would not be rendered irrelevant, yet it would take a backseat such that the State action would be restricted to such part of the value of the property as exceeds the claim of the third party, if any. In terms with the statutory safeguards incorporated in the Act, any party aggrieved by the confirmation of the Provisional Attachment Order by the Adjudicating Authority may challenge such confirmation in an appeal to this Tribunal U/s 26 of the Act and then before the Hon ble High Court U/s 42 of the Act against the order of this Tribunal - Accordingly, under the legislative and statutory scheme of the Act, unless a party has exhausted its remedies in appeal right up to the Hon ble High Court, an order confirming the attachment cannot be said to have attained finality. This Tribunal is fully equipped and possesses the requisite jurisdiction in terms with the Act as the court of first appeal, to adjudicate upon the pleas of the Appellant and determine the bonafides and legitimacy of its claims as well as the legality of the Provisional Attachment Order - the Adjudicating Authority by the Impugned Judgment has erred in failing to recognise the legitimate claim of the Appellant at the stage of confirmation of the PAO itself as the Appellant Bank is a victim of the fraud by M/s. SSPL the effect of the Impugned Judgment, depriving it of pursuing its legal claims against property mortgaged to it. The Appellant has nothing to do and has no connection with the allegation of crime committed by the borrower. They are not involved for the offences of money-laundering. The secured property is admittedly not derived from criminal activities or proceeds of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent person who is not involved in the crime within the meaning of Section 2 (v) read with Section 3 of the Act. The appellant is not charge sheeted nor any prosecution complaint has been filed against the appellant - There is no nexus whatsoever, between the alleged crime and the appellant who has secured property and is a victim of the fraud and is innocent party. The definition of proceeds of crime as per Section 2 (u) of the Act comprises of the property which is derived or obtained as a result of criminal activities. The secured property is not acquired from proceeds of crime. Provisional attachment order set aside - appeal allowed.

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• Service Tax

• 2019 (12) TMI 1052
  Short payment of service tax/ reversal of CENVAT credit - validity of summon issued in furtherance of inquiry/ investigation proceedings - Chapter (V) of Finance Act, 1994 repealed - Section 174(2)(e) of the Central Goods and Services Act, 2017 - HELD THAT:- Reliance placed by the petitioner on Mega Cabs [ 2016 (6) TMI 163 - DELHI HIGH COURT ] is misplaced, firstly, on account of the fact that the said decision has been stayed by the Supreme Court; and, secondly, on account of the fact that the Division Bench only declared that Rule 5A(2) as amended, to the extent that it authorized the officers of the Service Tax Department, the audit party deputed by a Commissioner or the CAG to seek production of documents therein on demand as ultra vires the Finance Act. It does not interfere with the power of the authorities vested by Sub-Rule (1) of Rule 5A and the power of the respondents to conduct investigation and inquiry. Petition dismissed.

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• 2019 (12) TMI 1018
  Works Contract Service - appellant s contention is that in terms of Notification No.12/2003-ST dated 21.08.2003 read with subsequent Notification No.24/2012 dated 06.06.2012, in case of composite contract, service tax shall be payable at the rate of 40% of the gross amount charged - HELD THAT:- The issue is no more res-integra. The Hon ble Allahabad High Court in the case of COMMISSIONER CENTRAL EXCISE VERSUS M/S. MAHENDRA ENGINEERING LTD. [ 2014 (9) TMI 480 - ALLAHABAD HIGH COURT] has held that Tribunal correctly held that assessee was not liable to pay Service Tax on the gross amount charged in repair of transformers including value of consumables like transformer oil and component part. Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 1010
  Penalty under Rule 15(3) of Cenvat Credit Rules, 2004 read with Section 78 of Finance Act, 1994 - period of limitation for raising demand -Tribunal has failed to consider the question of limitation under sub-section (1) of Section 73 of the Finance Act, 1994 - HELD THAT:- The question of imposition of penalty would arise only after the decision of the question on such plea of limitation. According to the learned counsels appearing for the parties, the Tribunal has to first judge as to whether the case of the assessee is covered by proviso below sub-section (1) of Section 73 of the Finance Act, 1994. After recording the findings on the aspects so covered by the proviso, the question of limitation as provided under sub-section (1) of Section 73 of the Finance Act will have to be decided. It is only thereafter the question of maintaining or setting aside the order imposing penalty passed by the lower authority would arise. The orders passed by the Tribunal and challenged in Appeal filed by assessee and department are hereby quashed and set aside - Appeal allowed.

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• Central Excise

• 2019 (12) TMI 1017
  Benefit of exemption - texturized yarn - independent processor who does not have facilities of manufacture of POY in their factory - bifurcation of their existing unit into two units for implementing, product management concept policy and requested separate Registration on the basis of information provided by them and as requested the existing manufactory - N/N. 6/2000-CE dated 1.3.2000 as claimed in declaration No 1/2000-01 dated 8.5.2000 - Rejection of declaration filed u/r 173B of the Central Excise Rules, 1944 - demand of duty alongwith interest and penalty. Whether the benefit of exemption under Notification No 6/2000-CE dated 1.03.2000 is admissible to the appellant post 26.04.2000, the date from which they obtained two Central Excise Registrations by bifurcating their existing facility into two units? - HELD THAT:- Coming to the phrase independent texturizer used in the Notification No 6/2000-CE, we are of the view that independent texturizer, is a person (legal or natural) who procures the partially oriented yarn from the open market and then clears the texturized yarn after texturizing the same. We are holding this view because the phrase independent texturizer used in the notification is followed by the phrase who does not have the facilities in his factory (including plant and equipment) for producing partially oriented yarn (POY) of polyesters , which implies that he has no facility to produce the partially oriented yarn. Thus procurement of the partially oriented yarn which is the raw material to start with for him can be only by way of purchase. Undisputedly KSF(PUY) and KSF (POY) are having common sales tax registration and PAN and are proprietorship concerns of M/s CEL, before and after bifurcation. The phrase interpreted was his factory i.e. the factory of manufacturer. In our view said decision is distinguishable, in view of the use of word independent to qualify the texturizer , in the notification under consideration. In our view if the phrase is considered as a whole then we find that word independent qualifies the texturizer and not the factory. So if the texturizer is procuring the partially oriented yarn from any of his factory then he will not qualify to be an independent texturizer . Thus the benefit of exemption cannot be admissible to him. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification - When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue - The benefit of the exemption notification 6/2000-CE and its successor notification will not be admissible to the appellants. Valuation of the goods cleared by the appellant - HELD THAT:- We are not in agreement with the approach made by the Commissioner in rejecting the deductions claimed by the appellants for determining the assessable value from the sale value at depot. Commissioner should have considered and allowed the admissible deductions from the sale value for determination of assessable value - Hence for the determination of the correct assessable value and the quantum of duty short paid or evaded, the matter needs to be remanded back to the Commissioner. Whether appellants have mis-declared, mis-stated to wrongly avail the benefit of exemption notification? - HELD THAT:- By bifurcating the existing unit, to claim the benefit of exemption notification, appellant have created a colourable instrument, a fa ade to evade the payment of legitimate central excise duty - The contents of letter are self explanatory and clearly show that appellants have in garb of the product management , sought to create a colorable instrument a fa ade in name of product management group for evading the payment of legitimate duty due. The intention of the appellant is also clear from the fact that they had been selling the said goods from their depots by charging the duty @ 36.8% ad valorem instead of the duty actually paid by them after bifurcation. They never declared the pricing mechanism to the department at the depot at the time of seeking an amendment in registration hence they had misstated the facts with the intention to evade payment of duty and hence in our view extended period of limitation has been correctly invoked against the appellants in the present order. Whether interest on the demand made can be sustained? - HELD THAT:- This is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the pockets of the Central Government much earlier - Upon reading Section 11AB together with Sections 11A and 11AA, the interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional. Whether penalties are imposable on appellant? - HELD THAT:- The order of Commissioner to the extent of imposing penalties under Rule 173Q of the Central Excise Rules, 1944 or Rule 25 of the Central Excise Rule 2002 as the case may be read with Section 11AC of the Central Excise Act, 1944 upheld - However the quantum of penalty needs to be redetermined after determination of actual duty evaded by the appellants. Whether penalties are imposable on four functionaries in the unit? - HELD THAT:- In view of the specific finding recorded by the Commissioner, to the effect that the four functionaries were instrumental and in knowledge of the entire fa ade being created to evade payment of duty, the penalties imposed on these functionaries are upheld - However, the quantum of penalty needs to be re-determined after ascertaining the duty evaded. CENVAT/ MODVAT Credit - exemption under Notification 6/2000-CE - HELD THAT:- The benefit of CENVAT/ MODVAT credit can be allowed only on establishing the claim to such credit by way of production of requisite documents before the adjudicating authority - Since the matter is being remanded for re-determination of the value and quantum of duty short paid by the appellants, appellants may make the claim towards admissible CENVAT/ MODVAT credit before the adjudicating authority in remand proceedings, who will consider the claim and allow the admissible CENVAT/ MODVAT Credit. Appeal allowed in part and part matter on remand.

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• 2019 (12) TMI 1016
  CENVAT Credit - Furnace Oil consumed for generation of electricity, a part of which was not used in or in relation to manufacture of their final product - recovery alongwith interest and penalty - HELD THAT:- The appellant assessee had rightly availed Cenvat Credit on Furnace Oil used in the generation of electricity in a captive power generating machine, even though a part of such generated electricity is used in factory office, workers canteen etc. In terms of the definition of input as was prior to 01.04.2011, input includes goods used for generation of electricity used in or in relation to manufacture of final products or for any other purpose, within the factory of production - Further, the terms factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured or process, connected to manufacturing, is carried out. Oxfotd Dictionary defines the terms precincts as the area within the walls or perceived boundaries of a particular building or place . Hence, the terms factory includes all the facilities, including that of manufacturing process, within its boundary wall. As was prior to 01.04.2011, CENVAT credit was available on goods used in generation of electricity and consumed within the boundary wall of the factory of production in or in relation to manufacture of final products, or for any other purpose which may not have direct relation to manufacture - This view was also ratified by the Hon ble Supreme Court in the judgement in the case of Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III [2009 (8) TMI 14 - SUPREME COURT] wherein the Hon ble Court has inter alia observed that assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption) - However, with effect from 01.04.2011, with the abolition of the phrase used in or in relation to manufacture of final products from the definition of input vide Notification No.3/2011-CE(Nt) dated 01.03.2011, the scope of input has not only been more widened, it has also become more inclusive. With effect from 01.04.2011, input inter alia, includes all goods used for generation of electricity for captive use. It would be pertinent to mention that the Show Cause Notice alleges consumption of Furnace Oil whereas the appellants have tried to convince the authorities below that after installation of the electricity there was no occasion for them to continue with the old system and they had stopped using any Furnace Oil for generation of electricity for smooth running of their manufacturing facility - Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 1012
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - cut-off date for settlement of case - quantification of demand - validity of circular issued by CBIC - Form of declaration under section 125 (1) - HELD THAT:- In view of Rule 3 of the Scheme, 2019, which is floated under the provisions of Finance Act, 2019, and looking to the definition of amount in arrears as stated hereinabove, by no stretch of imagination it can be said that paragraph Nos.vii and viii of the Circular dated 25.09.2019 is said to be in violation of the Scheme, 2019. Even if the demand is quantified and no appeal is preferred or even if the appeal is preferred but the assessee is applying under the aforesaid Scheme, 2019, it will mean to be covered by Clause 3(b) - Moreover, looking to Rule 3 of this Scheme, 2019, cut-off date of 30.06.2019 is not made applicable in all the four eventualities. The cut-off date of 30.06.2019 is applicable only in the eventualities which are covered under Rules 3(a) and 3(c) - The cut-off date of 30.06.2019 is not applicable for the cases which are covered under Rules 3(b) 3(c). This cut-off date has been clarified in a Circular dated 25.09.2019 which is annexure P-1. The respondents are directed to follow scrupulously the Scheme, 2019 and the provisions of the relevant Act whenever any benefit is to be given for the Central Excise and for the Service Tax. As and when the individual case will come to the Court in detail, the provisions of the Scheme, 2019 and the relevant Act shall be matched with the facts of that individual case - petition dismissed.

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• 2019 (12) TMI 1011
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - Permission for withdrawal of petition - HELD THAT:- Permission to withdraw this writ petition is granted. If application is preferred by this petitioner under the aforesaid Scheme, the same shall be decided by the concerned respondent authorities in accordance with law, rules, regulations, Government policy and the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and, after giving an adequate opportunity of being heard to this petitioner, as early as possible and practicable - Petition disposed off.

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• CST, VAT & Sales Tax

• 2019 (12) TMI 1015
  Recovery proceedings - coercive steps against the petitioners - garnishee notice - HELD THAT:- Out of the group of matters similarly situated, it is the only present matters where garnishee notice has been issued by the Respondents. On the last occasion, we had called upon the learned AGP to inform the Court whether there is any specific reason for issuing garnishee notice to the present Petitioner when it was not so issued to the other petitioners. The only answer of the learned AGP is that the Officer waited for some time and since there was no ad-interim order a garnishee notice was issued. Therefore, we see no special reason why the garnishee notice was issued to the present Petitioner. The position is that none of the similarly situated Petitioners have deposited any amount pursuant to the assessment orders against them as all are awaiting the conclusion of the reference. To maintain parity amongst all the similarly situated petitioners and in view of the statement made by the learned Advocate General, we do not find it necessary that the mandate placed upon the Petitioner should continue further. There shall be ad-interim order in terms of prayer clause (f)(i) of the petitions. The earlier statement made by learned AGP regarding State not taking any coercive steps would continue - Awaiting decision of the Larger Bench, stand over to 5 March 2020.

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• 2019 (12) TMI 1014
  Cancellation of Warehouse License - blacklisting - 12 beer bottles the petitioner has been blacklisted for period of 18 months - service of SCN - violation of the terms and conditions of the license/Delhi Excise Act, 2009 and Rules framed there under - principles of natural justice - HELD THAT:- The requirement of serving a Show Cause Notice is a sine qua non before taking any action of blacklisting. The Show Cause Notice must state the alleged breach / default as also the nature of action which is proposed to be taken for such a breach. These two components of the Show Cause Notice, if not specifically mentioned therein, must be clearly and safely discernible from a plain reading. Mere presence of a power to blacklist cannot amount to a sufficient notice. In absence of a Show Cause Notice, extreme nature of a harsh penalty like blacklisting, would itself amount to causing prejudice to the person against whom such order is passed. - there can be absolutely no doubt that the order dated 16.07.2019 was passed by the Deputy Commissioner (Excise) in complete violation of the Principles of Natural Justice. The show cause notice dated 07.09.2016, apart from the fact that it was issued only on M/s Barshala, also called the said noticee to show cause why its licence be not suspended / cancelled - The power to suspend/cancel the licence is provided under Section 17 of the Act. This clearly is a power distinct from blacklisting as provided in Rule 70 of the Rules. The petitioner in all its replies kept insisting that no Show Cause Notice has been issued to the petitioner and that it was participating in such proceedings merely to give information as required and called upon by the Licencing Authority. In spite of these submissions, the Licencing Authority never put the petitioner to notice of allegations against it or the proposed penalty. The mere fact that the petitioner was allowed to take an inspection of all the records, cannot satisfy the test of putting the petitioner to a specific notice of allegations against it - the order dated 16.07.2019 passed by the Deputy Commissioner (Excise) was in complete breach of the Principles of Natural Justice. Alternative remedy of appeal - Section 72 of the Delhi Excise Act, 2009 - HELD THAT:- In the present case, though the order passed by the original authority that is the Deputy Commissioner of Excise was clearly in violation of Principles of Natural Justice, the petitioner chose the statutory remedy of filing an appeal before the Commissioner (Excise) - Reading of section 72 provision would show that the Appellate Authority is entitled to make further enquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order of the original authority, as the case may be. The powers of the Appellate Authority are therefore, wide. The petitioner not only chose to exercise such appellate remedy by filing the first appeal before the respondent no. 1- Commissioner (Excise), but also, on being declined an order of stay by the order dated 05.08.2019, preferred a second appeal before the respondent no. 2-Financial Commissioner. It is only when the second appeal could not be heard that the petitioner preferred the present petition - In the present petition also, the petitioner primarily sought the setting aside of the order dated 05.08.2019 (rejecting the stay) and for a stay of the order dated 16.07.2019 (order of blacklisting the petitioner) rather than laying a substantive challenge to the order dated 16.07.2019 passed by the Deputy Commissioner-respondent no. 3. The petitioner, therefore, having availed of the statutory remedies under the Act, must be relegated to the same. It is not the case of the petitioner that the petitioner was not afforded an opportunity of hearing by the Commissioner Excise. By that stage, the petitioner was fully aware of the allegations against it and the proposed penalty. It had full opportunity to meet allegations on merit as also counter the extenuating circumstances that would justify an order of blacklisting the petitioner even for a lesser period. The finding of the Commissioner (Excise) rejecting the submission of the petitioner of violation of Principle of Natural Justice by the Deputy Commissioner of Excise, cannot be sustained and is accordingly set aside. However, as the Commissioner (Excise) has also considered the submissions of the petitioner on merits against the allegations made against it, the petitioner may challenge the same in an appeal filed under Section 72 of the Act. In such appeal, the Financial Commissioner shall also consider the effect of the present order on the order passed by the Commissioner (Excise). The present petition is dismissed granting liberty to the petitioner to challenge the order dated 20.09.2019, if so advised, in the form of an appeal as provided in Section 72 of the Act.

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• 2019 (12) TMI 1013
  Reopening of completed assessments - escaped turnover - retrospective amendment - mandatory period for retaining books of account already expired - invocation of Section 42(3) of the Kerala Value Added Tax Act - HELD THAT:- Section 42 of the KVAT Act was amended through a Notification dated 13.11.2016, and the amendment was given retrospective effect from 01.04.2005, the date on which the KVAT Act was brought into force in the State of Kerala. The legislative power of the State legislature to amend the Act with retrospective effect, cannot be disputed for the power to legislate carries with it the power to legislate retrospectively also - Limitations have, however, been recognised to the power to legislate retrospectively, and the issue to be considered in these cases is whether any such limitation ought to be applied in relation to Section 42(3) of the KVAT Act. While the prospective operation of Section 42(3) satisfies the test of constitutionality, the question arises as to whether the retrospective operation of the newly introduced provision would cause the assessees substantial prejudice or deprive the assessees of any vested right that accrued to them prior to the introduction of the new provision. It is trite that if a retrospective operation of a statutory provision has the effect of depriving an assessee of an accrued right, in a manner that will substantially prejudice him, then such retrospective operation of the amended provisions would not be legally justified. These writ petitions are disposed by upholding the retrospective operation of Section 42(3) of the KVAT Act, but declaring that the power to re-open assessments under the said provision cannot be exercised in relation to such assessments where the period for which the assessee concerned is obliged to retain the Books of account under Rule 58(20) of the KVAT Rules has expired - The retrospective operation of Section 42(3) of the KVAT Act will thus stand controlled by the period of limitation aforementioned, and the legality of the notices/orders impugned in these writ petitions shall stand determined by the said declaration. Petition disposed off.

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• 2019 (12) TMI 1009
  Principles of Natural Justice - power vested in the Assessing Officer for the purposes of obtaining information from third parties in relation to finalisation of assessment - opportunity sought for cross-examination the officer negates the same, stating that such opportunity was only academic - HELD THAT:- It appears very apparent that the principles of natural justice have been given a go-by in the present case. The extracts from the website relied upon by the Department no doubt reveal that Salsar was a trader and importer of yarn. However, this, by itself cannot lead to the inference of clandestine sales by the petitioner to the societies. An enquiry would have to be carried out in an appropriate manner after providing the material relied upon by the Department to the petitioner and soliciting its responses to the same, before any conclusion to this effect is arrived at - It is incumbent that a copy of such materials, including statements that are relied upon by the Assessing Officer be furnished to the petitioner, and an opportunity be grated to it to cross-examine the parties upon whose statement reliance is intended to be placed. Petition allowed by way of remand.

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