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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter December 26, 2018 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles 1. Ancillary supplies to Health Care Services By: CA Akash Phophalia Summary: The article discusses the tax implications of ancillary supplies such as medicines, consumables, and implants used in health care services under the Goods and Services Tax (GST) framework. Health care services, including diagnosis and treatment, are generally exempt from GST, except for cosmetic procedures not related to medical necessity. For in-patient services, the supply of medicines and related items is considered a naturally bundled service and is not taxable. However, medicines sold to out-patients are treated as independent supplies and are taxable. The article concludes with a summary of taxability for various scenarios in health care services. 2. No TDS even if consideration of property exceeds RS 50 Lakhs By: Sandeep Rawat Summary: The Income Tax Appellant Tribunal (ITAT) in Delhi ruled that no Tax Deducted at Source (TDS) is required if the consideration for each transferee is below 50 lakh, even if the total property consideration exceeds 50 lakh. In a case involving four individuals purchasing a property for 1.50 crore, each paid 37.5 lakh, below the threshold for TDS under Section 194IA of the Income Tax Act. The ITAT emphasized that each transferee is considered a separate tax entity, thus the law applies individually. The ITAT allowed the appeal, overturning the Assessing Officer's decision to levy TDS and interest. 3. Conversion of public company into private company- RD authorised one step towards ease of doing business but there seems legal hurdles. Separate laws relating to different type of companies is need of hour to really extend ease of doing business. By: DEVKUMAR KOTHARI Summary: The article discusses the recent notification by the Ministry of Corporate Affairs allowing Regional Directors to oversee the conversion of public companies into private ones, aiming to simplify the process. However, it highlights that legal hurdles remain, particularly the requirement for Tribunal approval as mandated by the Companies Act, 2013. The author suggests that while the government's efforts are a step towards easing business operations, a comprehensive simplification of laws is necessary. The article advocates for separate legal frameworks for different types of companies to facilitate easier compliance and understanding of applicable laws. Circulars / Instructions / Orders Customs 1. 04/2018 - dated 13-12-2018 AEO Programme digitization -Ease of doing business-development of web-based application for AEO-T1 Summary: The Customs Office in Bengaluru has announced the digitization of the Authorized Economic Operator (AEO) Programme through a new web-based application for AEO-T1. This initiative aims to enhance ease of business by allowing online filing and processing of AEO T1 applications via the newly launched website, aeoindia.gov.in. While the online system is encouraged for immediate use, manual applications will be accepted until March 31, 2019, to ensure a smooth transition. The validity of AEO Certificates for T1 and T2 has been extended to three years. Any implementation issues should be reported to the office. 2. 26/2018 - dated 26-10-2018 Cases where IGST refunds have not been granted due to claiming higher rate of drawback OR where higher rate and lower rate were identical Summary: The Customs Office in Bengaluru has issued Public Notice No. 26/2018 addressing issues where Integrated Goods and Services Tax (IGST) refunds have not been granted due to claims of a higher rate of drawback or cases where higher and lower rates were identical. Stakeholders, including customs brokers, exporters, and importers, are advised to comply with Board's Circular No. 37/2018-Customs dated 09.10.2018, which is attached for reference. Any challenges faced in implementing this notice should be reported to the Customs Office for resolution. 3. 28/2018 - dated 26-10-2018 IGST Export Refunds- extension in SB005 alternate mechanism and revised processing in certain cases including disbursal of compensation cess Summary: The circular from the Customs Commissionerate extends the SB005 alternate mechanism for rectifying invoice mismatches in shipping bills filed up to November 15, 2018. It provides guidelines for processing and sanctioning differential IGST refunds due to discrepancies between the refund scroll amount and the IGST paid by exporters. Exporters are encouraged to correct errors to receive the remaining refund amounts. The circular emphasizes careful adherence to the instructions, as the facility is available only once per shipping bill. Any implementation difficulties should be reported to the office. Highlights / Catch Notes GST Indian Supplier to Duty-Free Shop Not 'Export' Under GST; Rule 96-A Bond/LUT Required for Duty-Free Supplies. Case-Laws - HC : Exemption from GST - duty free shop - As the supply to a DFS by an Indian supplier is not to 'a place outside India', therefore, such supplies do not qualify as 'export of goods' under GST. Consequently, such supplies cannot be made without payment of duty by furnishing a bond/letter of undertaking (LUT) under rule 96-A of the CGST Rules, 2017. Visit to Get Source Court Allows Interrogation of Custodial Accused in GST Evasion Case Involving Fake Invoices; Statements to be Recorded. Case-Laws - DSC : Permission to interrogate and record statement of accused in judicial custody - GST evasion - issue of fake invoices - IO and Superintendent allowed to interrogate and record statement of accused persons in judicial custody Visit to Get Source Bail Canceled for Accused in Fake Invoice Scam Involving Bogus Companies and Dummy Proprietors. Case-Laws - DSC : Cancellation of Bail - opening bogus companies in the name of dummy proprietors and through these companies had issued fake invoices with no actual supply of goods - The order granting bail to the accused/ respondent is hereby set aside Visit to Get Source GST and Import Duty Levied on Goods from Duty-Free Shops Before Immigration Clearance; Customs Action Upheld. Case-Laws - HC : Levy of GST / import duty goods purchase from Duty free shops - shops situated before immigration clearance by a passenger - Since the applicant crossed the green channel without declarations and without payment of customs duty, the department has rightly proceeded against the Applicant. Visit to Get Source Income Tax Assessing Officer Cannot Reopen Assessment After Four Years Without Evidence of Incomplete Disclosure by Petitioner. Case-Laws - HC : Reassessment - Whatever the validity of the AO's contention regarding such dividend, surely, he cannot reopen the assessment beyond the period of 4 years from the end of the relevant assessment year, without there being any element of lack of true and full disclosure on the part of the petitioner. Visit to Get Source Transaction Not an SDT u/s 92BA(i); No Need for Form 3CEB Disclosure in Loan Purchase from HDFC Ltd. Case-Laws - HC : Interpretation of section 92BA(i) read with section 40A(2)(b) - Purchase of loans by the Petitioner from the HDFC Ltd. - the transaction does not fall within the meaning of a SDT as required under section 92BA(i) - not required to be disclosed by the Petitioner by filing Form 3CEB. Visit to Get Source Denial of Benefits Under Income Tax Act's Section 11 Applies Only to Non-Compliant Income Portions of a Trust. Case-Laws - HC : Denial of benefit u/s 11 - diversion of income - On a plain reading of Sections 11 and 13 of the Act, it is clear that the legislature did not contemplate the denial the benefit of Section 11 of the Act to the entire income of the Trust. Visit to Get Source Overseas businesses in DTAA countries must provide PAN; tax rates follow treaty rules, not domestic laws. Case-Laws - HC : Requirement to furnish Permanent Account Number (PAN) - where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty. Visit to Get Source Section 80IB Deduction Allowed for Mentha Oil Hedging Profits; Direct Connection to Manufacturing Not Required. Case-Laws - HC : Entitlement for deduction u/s 80IB - hedging profit derived from industrial activity - whether hedging activity of Mentha Oil has a direct nexus with the manufacturing activity? - No difference in the situation merely because such gain or loss were pursuant to hedging contract of the assessee - Deduction allowed. Visit to Get Source Court Dismisses Petition Against Reopened Assessment Due to New Tangible Evidence by Assessing Officer. Case-Laws - HC : Reopening of assessment - AO had tangible material at his command to form a reasonable belief that income chargeable tax had escaped assessment. In the result, the petition is dismissed. Visit to Get Source Section 94(8) of the Income Tax Act targets dividend stripping in share transactions, intended for prospective application only. Case-Laws - HC : Section 94(8) as retrospective in operation or prospective - Dividend stripping in buying and selling of shares and units - Avoidance of tax by certain transactions in securities - sub-Section (8) of Section 94 was intended to be prospective. Visit to Get Source Denial of Tax Benefit: Land Purchase Outside 1-Year Limit Disqualifies Section 54F Exemption for Capital Asset Sale. Case-Laws - AT : Entitlement to the benefit of 54F - as the said purchase of the land was not within a period of one year prior to the sale of the capital asset or falling in any of the categories in which the assessee was entitled to claim exemption u/s.54F under various categories, exemption cannot be allowed. Visit to Get Source Court Upholds Disallowance of Ad-Hoc Salary Due to Lack of Protective Claim in Later Years. Case-Laws - AT : Disallowance of ad-hoc provision of salary - Assessee, having failed to make protective claim in subsequent year(s) in which it was lawfully allowable, cannot force the claim in an earlier year in which it was not lawfully allowable. Visit to Get Source Fee Levied u/s 234E for TDS Processing Contested; Impugned Order Set Aside Due to Missed Deadline. Case-Laws - AT : Levy of fee under Section 234E - processing the TDS statement furnished by the assessee u/s 200A - the AO has not passed any order u/s. 234E independently within 31.03.2015 and hence, the impugned order is set aside. Visit to Get Source Mutuality Doctrine Exclusion: Pay & Park, Vodafone, BSNL, Idea Rentals, and Fixed Deposit Interest Not Covered. Case-Laws - AT : Doctrine of mutuality - The first four incomes i.e. Pay & Park Charges and rent from Vodafone, BSNL and Idea towers cannot be considered to be covered by doctrine of mutuality. - Interest income on Fixed Deposit also fails to pass the test. Visit to Get Source Revenue Rejects Assessee's Claim for Expenses on Undisclosed Truck Receipts Due to Lack of Substantiation and Presumptive Nature. Case-Laws - AT : Entitlement to expenses against the undisclosed receipts of truck - The assessee’s case, being wholly unsubstantiated and presumptuous, has thus rightly been not accepted by the Revenue. Visit to Get Source Purchase of Land with Shed Qualifies as Residential House for Section 54F Deduction Eligibility in Income Tax Case. Case-Laws - AT : Deduction u/s 54F - purchase of land with constructed shed measuring 100 sq.ft. of ACC sheet roofing and without electricity and water. - whether the Assessee can be said to have purchased “a residential house” - Held Yes Visit to Get Source Customs Court Denies Provisional Release of 552 Cartons of Undeclared Sewing Machine Needles in Import Case. Case-Laws - HC : Provisional release of goods - concealed offending goods - when the allegations made against the petitioner is serious in nature, that about 552 cartons of sewing machine needles were found in excess in the import consignments, which is over and above from the declared goods - petition dismissed. Visit to Get Source Green Pepper Misclassified as Spice, Not Vegetable, Sparks Legal Proceedings Over Bills of Entry Declarations. Case-Laws - AT : Classification of goods - green pepper - The misconception that ‘green pepper’ is a spice and that, until it is processed, is not a vegetable that appears to have been the basis for initiating proceedings against the appellant should no longer stand in the way of endorsing the declaration of the appellant in the bills of entry. Visit to Get Source Service Tax Court Rules Against Restricting Input Tax Credit to One Unit for IP Rights and IT Services. Case-Laws - HC : Input tax distribution - intellectual property rights and I.T. software services were to he used by all the units of the assessee - since the all the units were eligible for credit, availing credit only at one unit cannot be disallowed. Visit to Get Source Show Cause Notice Based Only on Audit Objections Cannot Allege Suppression: Legal Decisions Affirm. Case-Laws - AT : Penalty u/s 78 - The SCN was issued merely on audit objections and in view of the various decisions, no suppression can be alleged merely on audit objections. Visit to Get Source Appellant's Non-Disclosure of Renegotiation Leads to Extended Limitation Period for Service Tax Assessment. Case-Laws - AT : Extended period of limitation - It is also evident that appellant has not disclosed the facts of their re-negotiation with their client and that they are getting over and above the amount initially agreed upon. Therefore, there was clear suppression of fact with intent to evade duty. Visit to Get Source Central Excise Appeal Dismissed for Non-Deposit; Quasi-Judicial Authorities Can Exercise Inherent Recall Powers for Justice. Case-Laws - HC : Restoration of appeal - appeal was dismissed for non-deposit of the statutory amount - even in the absence of such power of recall being provided in the statute, every quasi judcial authority has inherent powers to exercise this power of recall in its inherent jurisdiction in the interest of justice. Visit to Get Source Department Can Only Appeal Low-Value Excise Cases if Exceptions Apply; Must Maintain Consistency Across Assessees. Case-Laws - HC : Revenue appeal - Monetary limit - If the tax effect is less than the monetary limit prescribed, the department can pursue the appeal only it falls in any of the exceptions; not otherwise - Department cannot be allow to take different stand for different assessee. Visit to Get Source VAT Authorities Must Prove Inability to Recover from Company Before Targeting Director in Recovery Proceedings. Case-Laws - HC : Validity of recovery proceedings against the Director of a private limited company - the proceedings has to be taken first against the company and there should also be sufficient material to show that the recovering authorities were not able to recover the amounts from the assessee company. Visit to Get Source Case Laws: GST 2018 (12) TMI 1355 Maintainability of Advance Ruling application - admissibility u/s 97 (2) of CGST Act - Levy of GST - retention of amount on cancellation of flats - What is the legal procedure for cancellation of flat which is booked in pre-GST Regime and cancelled in post-GST Regime? Held that:- The questions posed before us are not the questions in respect of which an Advance Ruling can be sought under the GST Act. In view thereof, the impugned application is not maintainable - No proceedings of Advance Ruling under the GST Act lie in the instant case. Ruling:- The application for advance ruling is rejected being non-maintainable. 2018 (12) TMI 1354 Petition Challenging an enquiry - Jurisdiction - parallel proceedings / enquiries under the same subject - contention of the petitioner is that he is already being subjected to enquiry by CGST Authorities at Jaipur who have issued him a summons dated 7.9.2017 - Held that:- It is an undisputed position that the petitioner has taken registration under the CGST Act 2017 Finance Act, 1994 (service tax) in Mumbai. Thus, having taken registration, he is subject to the jurisdiction of Mumbai authorities in respect of the business which he has carried out within jurisdiction of the authority - Once registration has been taken in Mumbai and some services have been rendered in Mumbai, then the petitioner is subject to the jurisdiction of Mumbai Authorities. Thus, no interference with the investigation by the respondent No. 2 at Mumbai is warranted - petition dismissed. 2018 (12) TMI 1353 Seeking relief from State Government due to changes in tax structure - Entertainment tax subsumed Upon introduction of Goods Services Tax ( GST ) - incentive under the state tourism policy offered no longer survived - Repayment of borrowed funds - Held that:- The issue is required to be examined at the highest level before the Government. We request the Government i.e the Chief Secretary to constitute a High Level Committee which would besides others, comprise of Principal Secretary of Finance and the Secretary of Tourism Department - appeal allowed by way of remand. 2018 (12) TMI 1352 Exemption from payment of tax - duty free shop - territorial limits - petitioner made a prayer for directing the respondents to treat the goods supplied to the petitioner as an export without payment of CGST and IGST, only on the ground that Duty Free Shop at international airport are located beyond the customs frontier of India and any transaction that takes place in a Duty Free Shop is said to have taken place outside India. Held that:- No provision of law has been brought to the notice of this Court under the Central Goods and Services Tax Act, 2017, which grants exemption from payment of taxes. A taxing statute has to be strictly construed. In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used - The statute governing the field does not provide any such exemption as prayed by the petitioner. Undisputedly, the petitioner is supplying goods to Duty Free Shops and as per Section 2(5) of IGST Act, 2017 export of goods takes place only when goods are taken out to a place outside India. India is defined under Section 2(27) of Customs Act,1962 as India includes territorial waters of India . Similarly under the CGST Act, 2017 under Section 2(56) India means the territory of India including its territorial waters and the air-space above its territory and territorial waters and therefore, the goods can be said to be exported only when they cross territorial waters of India and the goods cannot be called to be exported merely on crossing customs frontier of India - The petitioner s contention is that no GST is payable on such supply taking place beyond the customs frontiers of India as the same should be considered as export of goods under Section 2(5) of the IGST Act, 2017 and should be zero rated supply under Section 2(23) read with Section 15(1) of the IGST Act, 2017 is misconceived. The location of the DFS, whether within customs frontier or beyond, shall be within India as long as it is not beyond EEZ (200 nautical miles). Therefore, DFS cannot be said to be located outside India. Instead, the DFS is located within India. As the supply to a DFS by an Indian supplier is not to a place outside India , therefore, such supplies do not qualify as export of goods under GST. Consequently, such supplies cannot be made without payment of duty by furnishing a bond/letter of undertaking (LUT) under rule 96-A of the CGST Rules, 2017. The petitioner is liable to pay GST on supply of indigenous goods to DFS - Whether, transaction under taken at a DFS (i.e. sale of goods to outgoing passengers) are to be treated as export of goods or services does not form part of the instant writ petition - petition dismissed - decided against petitioner. 2018 (12) TMI 1351 Permission to interrogate and record statement of accused in judicial custody - GST evasion - issue of fake invoices - Held that:- Both the applications are allowed and Jail Superintendent concerned is directed to allow Insp. / IO Sahil Yadav alongwith Insp. Amar Singh and Superintendent Shaminder Chhabra to interrogate and record statement of accused persons in judicial custody alongwith writing material during office hours on any working day as per rules and make necessary arrangement - application disposed off. 2018 (12) TMI 1350 Cancellation of Bail - tax evasion - Wrong availment of Input Tax Credit - opening bogus companies in the name of dummy proprietors and through these companies had issued fake invoices with no actual supply of goods - Held that:- The allegations are clear enough to make out a case falling under clause (b) of sub-section (1) of Sec. 132 of the CGST Act, 2017. The contention of Id. counsel for the accused/applicant that the application for judicial remand of the accused did not disclose the details of the offence except of making of a mention that Sec. 132(1)(b) is alleged, has no merits as admittedly when the application for judicial remand was preferred by the applicant before the Ld. Link MM, the entire record file including the arrest, search and seizures was put up for perusal and consideration. The allegations of tax evasion against the accused/ respondent was of less than ? 5 crores and as such taking out the Offence from the purview of sub-section (5) of Sec. 132 of the Act, thus, making it non-cognizable and bailable. Admittedly, the file which has been produced by the applicant/ petitioner clearly notes in the note-sheet of the inquiry that the accused / respondent as well as the co-accused Adesh Jain in their respective statements recorded u/s 70 of CGST Act on 31.07.2018 have stated that they both were indulging in the act of providing false invoices to other companies I firms/ agents and thus were passing on wrongful availment of input tax credit. Cancellation of Bail - Held that:- The law is well settled that very cogent and overwhelming circumstances are necessary for an order directing the cancellation of the bail, already granted. Generally speaking, the grounds for cancellation of bail, broadly (illustrative and not exhaustive) are:- interference or attempt to interfere with the due course of administration of justice or evasion or attempt to evade the due course of justice or abuse of the concession granted to the accused in any manner. The satisfaction of the Court, on the basis of material placed on the record of the possibility of the accused absconding is yet another reason justifying the cancellation of bail. However, bail once granted should not be cancelled in a mechanical manner without considering whether any supervening circumstances have rendered it no longer conducive to a fair trial to allow the accused to retain his freedom by enjoying the concession of bail during the trial. Not only there are serious allegations against the accused/ respondent of his having made fictitious sales of value of more than ? 200 crores and having consequently caused loss to the government of the GST evasion/wrongful availment of input tax credit of the value of more than ? 27 Crores, it is also alleged that the accused/respondent had indulged in the act of threatening the witnesses who were otherwise coming forward to give their statement to the department/petitioner as to how the bogus firms were created and how their documents were misused - there are merits in the application of the applicant/ petitioner seeking cancellation of bail of the accused / respondent. The order granting bail to the accused/ respondent is hereby set aside - application allowed. 2018 (12) TMI 1278 Levy of GST / import duty goods purchase from Duty free shops - shops situated before immigration clearance by a passenger - Exemption on sale of cosmetic products, perfumes etc. to the International passenger - refund of any input tax paid on input supplies and input services - Held that:- The Central Government holds that the transactions effected at the duty free shops at the arrival or departure of the International Airports in India might have taken place within the geographic territory of India, but for the purposes of levy of Customs Duties or any other taxes, the area of duty free shops shall be deemed to be the area beyond the customs frontiers of India. Although, the applicant bought goods from duty free shop at CSI Airport Mumbai, the same are deemed to be imported from across the Customs Frontiers of India and customs duty is payable on such goods. Since the applicant crossed the green channel without declarations and without payment of customs duty, the department has rightly proceeded against the Applicant. A passenger travelling on a domestic flight from Nagpur may or may not travel abroad, and the Customs Authorities would not be able to have effective check and control to verify whether the goods purchased from Domestic Airport at Nagpur are actually taken abroad by the passenger. Petition dismissed. Income Tax 2018 (12) TMI 1349 Validity of reopening of assessment - notice issued beyond the period of 4 years from the end of the relevant assessment year - lack of true and full disclosure on the part of the petitioner - Held that:- From the reasons recorded by the Assessing Officer, nothing can be gathered to suggest that there was any failure on the part of the assessee to disclose truly and fully all material facts. In order to bring any element of lack of true and full disclosure, the Assessing Officer has merely referred to certain dividend which according to him the petitioner should have paid. When the petitioner's contention is that now such dividend was payable, obviously it was not the duty of the petitioner to have made any such reference in the return. Whatever the validity of the Assessing Officer's contention regarding such dividend, surely, he cannot reopen the assessment beyond the period of 4 years from the end of the relevant assessment year, without there being any element of lack of true and full disclosure on the part of the petitioner. Only on this ground, the impugned notice is set aside. - Decided in favour of assessee 2018 (12) TMI 1348 Settlement Application - Held that:- The Writ Petition challenging the order of the Commission is pending for hearing. After hearing Advocates of both sides, Court would choose its option – whether to admit the Petition or not, and if admitted, with or without interim relief. For the time being, we are concerned only with the question of granting or refusing the request for amending the Petition. We, therefore, confine our observations to this issue. As noted, the Commission has rejected the Petitioner's request for Settlement of the cases for the Assessment Years 1998-99 to 2014-15. The notice issued by the Competent Authority under the Act of 2015, is an independent issue and a fresh proceeding instituted against the Petitioner under the said Act – whether the order of the Commission and the ultimate outcome of the Petition, would cast a shadow on the proceedings instituted under the said Act, is neither possible nor necessary for us to pronounce at this stage. We are, however, make it clear that the said notice dated 22nd November, 2017 is an independent cause of action and is based on the materials mentioned in the notice itself. It is always open for the Petitioner to take recourse of legal options in connection with the said notice. However, in the present Petition, we are not inclined to allow the amendment by bringing on record such additional developments and the interim prayer against the notice dated 22nd November, 2017. The Petition, as noted above, would proceed after hearing Advocates on both sides, at which stage, the Court would also examine whether interim protection should be granted to the Petitioner or not. 2018 (12) TMI 1347 Reopening of assessment - assessee had adjusted the interest income against the interest expenditure which according to AO was not permissible - eligibility of reason to believe - Held that:- Whatever may be the validity or assessee s stand in this respect, it cannot be denied that the Assessing Officer had asked the assessee to explain why the interest income of certain amount was not offered to tax and the assessee did offer the explanation in this respect. Further, as noted the assessee had also produced the full details of the interest earned and the interest paid on borrowed capital. The total of interest paid come to Rs. 47,11,82,441/ . The interest amount received was Rs. 11,08,36,618/ . In Exhibit 7, the assessee also clarified that the company has netted off the interest received of Rs. 11,08,36,618/against the interest paid of Rs. 47,11,82,441/ and the remaining amount was transferred to work in progress account. Indisputably, therefore, the entire question of taxing the assessee s interest of Rs. 11,08,36,618/ was minutely scrutinized by the Assessing Officer during the original assessment proceedings. In the absence of any new material, the reopening of the assessment would be based on mere change of opinion. It is true that in the final order of assessment, the Assessing Officer had not elaborated this aspect but had not made any dis allowance or addition in the hands of the assessee. Merely because the order of assessment was silent on a particular claim of the assessee, would not by itself mean that the same was not scrutinized or that the Assessing Officer had not formed an opinion with respect to the same. If after detailed scrutiny during the assessment, the Assessing Officer examines a claim but does not reject the claim of the assessee which had come up for scrutiny, would not enable the Revenue to argue that the Assessing Officer had not formed any opinion on such issue and, therefore, reopening of the assessment would be permissible without there being any new or additional material available to the Assessing Office - Thus the impugned notice is set aside - Decided in favour of assessee 2018 (12) TMI 1346 Interpretation of section 92BA(i) read with section 40A(2)(b) - Purchase of loans by the Petitioner from the HDFC Ltd. - Meaning of specified domestic transaction - Held that:- In the facts of the present case, the loans purchased by the Petitioner from HDFC Ltd. were reflected in the balance-sheet and not in the Profit and Loss account. This being the case, we find that this is not an expenditure at all as contemplated under section 92BA(i), and therefore, the money expended for purchasing these loans can never be termed as an expenditure incurred by the Petitioner. It would, therefore, not fall within the meaning of a SDT as understood under section 92BA(i) of the Act. We therefore have no hesitation in holding that this transaction of purchase of loans by the Petitioner from HDFC Ltd. would not fall within the meaning of a SDT. This being the case, there was no question of Respondent No.1 treating it so and thereafter referring the same to the TPO under section 92CA(1) for determining the ALP Payment made by petitioner by petitioner to HBL global for rendering service - Held that:-Transaction with a person falling within section 40A(2)(b)(vi)(B) - Held that:- There is no question in the facts of the present case to refer to or consider any indirect shareholding. As mentioned earlier, on a plain reading of explanation (a) to section 40A(2)(b), for there to be a substantial interest, the person has to be the beneficial owner of shares holding not less than 20% of the voting power. In this transaction, the Petitioner can never be said to be beneficial owner of the shares in HBL Global for the simple reason that it holds absolutely no shares in HBD Global. It holds shares in a company called ADFC Ltd., which in turn holds 98.4% shares in HBL Global. This would not mean that either directly or indirectly the Petitioner is the beneficial owner of the shares of HBD Global. We, therefore, find no merit in this contention. We are unable to accept the submission of Mr. Chhotaray that the present transaction (namely the payment made by the Petitioner to HBL Global for services rendered) would fall within the meaning of a SDT as understood and covered under section 92BA(i) of the I.T. Act. Payment of interest by the petitioner to HBD welfare trust - Held that:- It is not even the case of the Revenue that the Petitioner is entitled to at least 20% of the profits of the said Trust. The Trust has been set up exclusively for the welfare of its employees and there is no question of the Petitioner being entitled to 20% of the profits of such Trust. This being the case, we find that this transaction also clearly would not fall within section 40A(2)(b) read with explanation (b) thereof to be a SDT as understood and covered by section 92BA(i) of the I. T. Act. one peruses section 79 of the I.T.Act, it is clear that the same deals with carry forward and set off of losses in the case of certain companies. It is on the wording of section 79 of the I.T. Act, that the Karnataka High Court has given a finding that since ABL was having complete control over APIL and even though the shareholding of ABL was reduced to 6% in the year in question, yet by virtue of being the holding company, owning 100 % shares of APIL, the voting power of ABL could not be said to have been reduced to less than 51%. It came to this finding because ABL, together with APIL were having voting power of 51%. This finding of the Karnataka High Court was given because the wordings of section 79 of the I.T. Act are materially different from the wordings of Section 40A(2)(b). In view of the foregoing discussion, we find that none of the three transactions that form the subject matter of this Petition fall within the meaning of a SDT as required under section 92BA(i) of the I.T. Act. This being the case, we find that Respondent No.1 was clearly in error in concluding that these transactions were SDTs, and therefore required to be disclosed by the Petitioner by filing Form 3CEB. He therefore could not have referred these transactions to Respondent No.2 for determining the ALP. 2018 (12) TMI 1345 Revision u/s 263 - revised return were accepted on the date they were submitted and without following the procedure prescribed under Section 143(3) - Held that:- Assessing Officer by virtue of the provision of Section 143(3) has been empowered by an order in writing, to make an assessment of the total income or loss of the assessee, and to determine the sum payable by him on the basis of such assessment and that in doing so he has to consider the evidence as the assessee may produce or that may be required by him and after taking into account all relevant material which he has gathered. In the instant case, the assessment was made on or after the date specified in the notice on the basis of the relevant material collected. Therefore, there appears to be no infringement of the procedure as prescribed under subsection (3) of Section 143 of the Act. The CIT(C) in its order has clearly recorded that the assessee had attended the proceedings and had not challenged the same. In view of the above finding, we are unable to appreciate the argument advanced on behalf of the Revenue that the procedure prescribed under Section 143(3) of the Act was not followed by the Assessing Officer and, therefore, the CIT(C) had rightly exercised the revisional power. The assessment orders clearly indicate the manner of computation of the income of the assessee for the purposes of tax and refers to the details of the queries and the material gathered. The appellate tribunal in its impugned order repelled the argument that the Assessing Officer accepted the revised returns without properly examining the seized material on the ground that the order of the CIT(C) is factually incorrect and that the assessment orders are not erroneous and, at the same time, are not prejudicial to the interests of the Revenue. The aforesaid finding of the tribunal is a pure finding of fact and is not liable to be disturbed. In regard to admissibility of deductions under Sections 80HH and 80HHA, the appellate tribunal clearly recorded that this point was never considered by the CIT(C) in passing the revisional order and, therefore, there is no point in considering the validity of the revisional order on the above score. In view of the above and the fact that though as per the notice the orders of the Assessing Officer were sought to be revised, inter alia, on the above ground, but since in the final analysis the revisional order was not based upon it, we do not think that the order of the appellate tribunal can be faulted with. - decided against revenue 2018 (12) TMI 1344 Denial of benefit u/s 11 - diversion of income - restriction of denial to income of the Trust which was used/applied directly or indirectly for the benefit of the prohibited persons by tribunal - Held that:- The decision of the Karnartaka High Court in Fr. Mullers Charitable Institutions [2015 (9) TMI 395 - SUPREME COURT OF INDIA], dealt with the very issue herein viz. the denial of exemption of entire income under Section 11 of the Act, or is the denial restricted only to the quantum of diverted funds. This, as it is hit by Section 13 of the Act. The Court held that the benefit of Section 11 of the Act will not be available only in respect of the diverted income. On a plain reading of Sections 11 and 13 of the Act, it is clear that the legislature did not contemplate the denial the benefit of Section 11 of the Act to the entire income of the Trust. If the interpretation sought to be advanced by the Revenue is accepted, it would lead to grave injustice as any mistake minor and/or misdemnour involving a small amount takes place by the Trust, the consequence would be denial of the benefit of exemption to the entire income otherwise admittedly used for charitable purposes. In the above view, the view taken by the Tribunal in the impugned order is in accord with the view of the Karnataka High Court in Fr. Mullers Charitable Institutions (supra), Delhi High Court in Agrim Charan Foundation [2015 (9) TMI 395 - SUPREME COURT OF INDIA] and this Court in Sheth Mafatlal Gagalbahai Foundation Trust [2000 (10) TMI 26 - BOMBAY HIGH COURT]. Hence, the proposed question does not give rise to any substantial question of law. Thus, not entertained. 2018 (12) TMI 1343 Reopening of assessment - eligibility of reason to believe - genuineness of the gift questioned - Held that:- The reopening of an assessment can only be done if there is reason to believe that income chargeable to tax has escaped assessment. The reason recorded in support of the reopening notice must disclose the basis of the reasons to believe that income chargeable to tax has escaped assessment. The reasons must provide a link between the material available and the formation of reasonable belief that income chargeable to tax has escaped assessment. The reason to believe must be based on some material available with the Assessing Officer and no reasonable belief can be formed without some material to support the same. The impugned order of the Tribunal has correctly held that the reopening of the assessment cannot be for the purpose of fishing inquiry. The reopening of the assessment has to be based on same material which is available with the Assessing Officer which would give rise to reason to believe that the income chargeable to tax has escaped assessment. The reasons as recorded in support of the impugned notice to doubt the genuineness of the gift is not based on any material. At the highest, it is only a suspicion subject to enquiry. In fact, this is a case of fishing enquiry. Thus, there is no material available with the Assessing Officer to have the reason to believe that income chargeable to tax has escaped assessment. The view taken by the impugned order of the Tribunal cannot be found fault with. - Decided in favour of assessee 2018 (12) TMI 1342 Deduction u/s 80IB(10) - production of completion certificate indicating completion of the project - Held that:- In the case of CIT, Aurangabad Vs. Hindustan Samuh Awas Ltd.[2015 (10) TMI 2306 - BOMBAY HIGH COURT] holding on identical facts that where the builder has completed a housing project within the time provided under Section 80IB(10)(a)(iii) and had also filed an application seeking completion certificate from the Municipal Corporation in time, then, the said builder - assessee is entitled to the benefit of Section 80IB(10)(a)(iii) of the Act. This notwithstanding the fact that the certificate has not been issued by the municipal corporation before the last date for completion of project. The aforesaid decision in Hindustan Samuh Awas Ltd (supra) of this Court had dismissed the Revenue's appeal at final hearing on the substantial question of law. Moreover, the decision was rendered after the appeal in the case of Satish Bora (supra) was admitted. As the decision in Hindustan Samuh Awas Ltd (supra) concludes the issue raised herein finally, the same is binding upon us. More so in absence of the Revenue being able to show any distinguishing factor in this case which would warrant different view than that taken by this Court in Hindustan Samuh Awas Ltd (supra). No substantial question of law. 2018 (12) TMI 1341 Requirement to furnish Permanent Account Number - Whether the Tribunal was correct in law and on facts in coming to the conclusion that Sec. 206AA does not override the provision of Sec. 90(2) of the Income Tax Act, despite the fact that Sec. 206AA starts with a non-obstance clause? - tax liability on the payee at a lower rate as per Double Taxation Avoidance Agreement (DTAAs) - Held that:- We notice that identical situation had came before the Delhi High Court in case of Danisco India Pvt Ltd Vs. Union of India & Ors [2018 (2) TMI 1289 - DELHI HIGH COURT] having regard to the position of law explained in Azadi Bachao Andolan (2003 (10) TMI 5 - SUPREME Court) and later followed in numerous decisions that a Double Taxation Avoidance Agreement acquires primacy in such cases, where reciprocating states mutually agree upon acceptable principles for tax treatment, the provision in Section 206AA (as it existed) has to be read down to mean that where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty. 2018 (12) TMI 1340 Interest u/s 244A - delay in the proceedings for granting the refund - TDS certificates were not furnished with the return of income - Held that:- As decided in assessee's own case UNION BANK OF INDIA AND OTHERS VERSUS DEPUTY COMMISSIONER OF INCOME TAX, LTU AND OTHERS [2015 (10) TMI 19 - ITAT MUMBAI] TDS certificates were submitted with the return of income - TDS certificate has been issued by Reserve Bank of India and various other Government agencies therefore any defect in the TDS certificate cannot be attributed to the assessee - the tax deducted at source by the deductors have been deposited to the credit of the Government, therefore assessee cannot be denied interest u/s. 244A of the Act when the tax was deducted and deposited in the exchequer in time, section 244A(2) is not attracted. Case of Larsen & Toubro (2010 (6) TMI 54 - BOMBAY HIGH COURT) to be followed. Direct the AO to allow the interest - Decided in favour of assessee. 2018 (12) TMI 1339 Entitlement for deduction u/s 80IB - hedging profit derived from industrial activity - whether hedging activity of Mentha Oil has a direct nexus with the manufacturing activity? - Held that:- In the present case what we find is that the assessee needed high quantity of steady supply of the raw material, which would go into manufacturing its final product. If the assessee did not enter into hedging contract, it would be exposed to wide fluctuation of costs in procuring such material. This would expose the assessee to possible losses since while undertaking contracts for production and sale of the final product, the assessee would have taken into account the procurement price of the raw material at the prevailing rate. In order to avoid such uncertainties, the assessee would enter into hedging contracts. Essentially, the entire exercise was for the purpose of making the profit out of its manufacturing activity more predictable. If the assessee had not entered into such contract and relied on the spot purchase of the product, surely the resultant loss or profit as a case may be, would be part of the assessee's manufacturing activity and thereby, in any case qualify for deduction under Section 80IB or eligible for carrying forward loss if otherwise permissible under the Act. No difference in the situation merely because such gain or loss were pursuant to hedging contract of the assessee. - Decided against revenue 2018 (12) TMI 1338 Disallowance of deputation and other cost - addition on reliance of report of Special Auditors appointed u/S. 142(2A) - expenditure nexus with the business - Held that:- Both the Commissioner of Income Tax (Appeals) as well as the Tribunal have come to the concurrent finding and noted that the expenditure incurred in both assessment years was held allowable by the Special Auditor. This was for the reason that the expenditure was incurred in running of hotel and therefore, incurred wholly for the purpose of business. The Tribunal was satisfied that there was a nexus between the expenditure incurred of Rs. 7.56 crores and the business of running hotel of the respondent. Thus, dismissal of the Revenue's appeal. Disallowance of Hotel Management fees and sales & management fees - Held that:- IT(A) and the Tribunal have come to concurrent findings of the fact that the expenses on account of hotel management fees and sales and marketing fees were allowable expenses having been incurred for the purpose of business. This was on the basis of examination of the record which was also duly supported by the Special Auditor's report holding that these expenses have been incurred for running of hotel business of the respondent – assessee. This, correct findings of fact is not shown to be perverse so as to warrant interference. Disallowance of depreciation on intangible asset which was claimed by the assessee - Tribunal upheld the deletion of depreciation on intangible assets by upholding the finding of the CIT(A) that it is undisputed that the intangible assets were purchased as slump sale and fell under block of assets on which depreciation is allowable @ 25% - Held that:- We find that both the CIT (A) as well as the Tribunal found on facts that the hotel business cannot be carried out without necessary licenses, permits and approvals. Thus, the proposition canvassed by by the Revenue that intangible assets in the nature of permits, licenses & approvals are not required for carrying on the business of hotel not found to be correct by both the CIT(A) and the Tribunal. It is not disputed that the intangible assets viz. permits, licenses and approvals fall within the meaning of intangible assets under Section 32 of the Act. Addition on account of royalty as income on accrual basis - assessee company is following mercantile system of accounting - Held that:- We find that both the CIT(A) and the Tribunal on examination of the records, found that there was no question of any accrual of Rs. 10 lakh as royalty during subject assessment year as the respondent had not rendered any services to claim the amount of Rs. 10 lakh during the subject assessment year. The respondent had recorded services to the extent of Rs. 50 lakh during the year and accounted the same as income. The view of the CIT(A) and the Tribunal on the facts as existing is a very plausible view. No substantial question of law raised. 2018 (12) TMI 1337 Reopening of assessment - seeking sanction from the Principal Commissioner - return filed by the petitioner is accepted without scrutiny - eligibility of reason to believe - Held that:- We are satisfied that the reasons did exist on file, were duly recorded by the Assessing Officer before obtaining sanction from the Principal Commissioner, that the Joint Commissioner perused such reasons and forwarded the same to the Principal Commissioner with his own remarks and lastly that the Principal Commissioner also put his endorsement that it was a fit case for reopening of assessment. The mix up by the Departmental Authorities in conveying reasons twice would not be fetal in the present case. Firstly, it was later set of reasons conveyed to the petitioner which exist on file. Secondly, the earlier communication dated 22nd May, 2018 also concerns the gist of same reasons. So far as the material aspects are concerned, we notice no change. In essence under communication dated 22nd May, 2018 the Assessing Officer had merely conveyed the gist of his reasons to the petitioner. The present case is one where return filed by the petitioner is accepted without scrutiny. The Assessing Officer therefore, would have much wider latitude to reopen the assessment. The reasons recorded by him show that according to the Assessing Officer, the petitioner had invested the cash amount of Rs. 61,34,800/for purchase of an immovable property to be developed by one M/s Soni & Associates. The Petitioner had given a statement to the Police Authority, in which he had made such declaration. The return filed by the petitioner declared a total income Rs. 6,04,017/. It can thus be seen that the Assessing Officer had tangible material at his command to form a reasonable belief that income chargeable tax had escaped assessment. In the result, the petition is dismissed. 2018 (12) TMI 1336 Entitlement to depreciation - Admission of additional evidence by CIT-A - Held that:- Assessee had filed documents before the AO to show that production in the second unit had commenced on or before 30.09.2009, but the same were ignored. CIT(Appeals) had verified this fact and the order passed by him specifically states that the documents filed by the assessee were available in the file of the AO. Referring to the documents, the CIT (Appeals) had observed that the assessee had produced evidence of payment of excise duty, sales tax and issue of statutory sales tax forms to the suppliers to show and establish that production in the second unit had commenced on 24.08.2009. Hence, the assessee was entitled to depreciation for the entire year. These findings are factual. There is no ground or reason to hold that the said findings were wrong or incorrect. No substantial question of law. Deduction under Section 43B - Held that:- The second issue does not arise from the order of the Tribunal as this issue was not raised by the Revenue in the appeal preferred by them before the Tribunal against the order of the Commissioner of Income-Tax (Appeals). 2018 (12) TMI 1335 Income Tax Appeals are admitted for consideration of following substantial questions of law:- “(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the assessee was not liable to deduct tax at source, particularly as the assessee steps into the shoes of its client while executing the contract and therefore, the assessee becomes a person responsible for the deduction of TDS? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding the order of the assessing officer that tax was deductible at source by the assessee from the above payments under Section 194C of the Act? 2018 (12) TMI 1334 Allowability of speculative loss - Held that:- Both the CIT(A) and the Tribunal have come to a concurrent finding of fact that actual delivery of the bullion had taken place. Therefore, the loss on account of trading in bullion was not a speculative loss but a business loss. Thus, the above finding of fact led to allowing the loss on account of trading in bullion, being set off as a business loss from the profits made on account of consultancy in mining. This concurrent findings of fact by the CIT(A) and the Tribunal, has not shown to be perverse in any manner. No substantial question of law. 2018 (12) TMI 1333 Condonation of delay - miscellaneous application for rectification of certain apparent mistakes - Held that:- On a perusal of the averments made in the memorandum of application, it emerges that subsequent to the passing of the impugned order, the applicant had moved a miscellaneous application for rectification and it was only after such application came to be disposed of, that the applicant has filed the present appeal. It is in these circumstances that a delay of 276 days has occasioned in preferring the tax appeal. Having regard to the submissions advanced by the learned advocates for the respective parties and considering the averments made in the memorandum of application, the court is of the view that the delay caused in filing the tax appeal has been sufficiently explained. 2018 (12) TMI 1332 Profit arising on the frequent and voluminous transactions initiated with borrowed funds in shares - 'Long Term Capital Gain' OR 'Business Income' - Held that:- Circular No. 6 of 2016 dated 29.2.2016 issued by the Central Board of Direct Taxes (CBDT) issued with regard to the issue of taxability of surplus on sale of shares and securities, - whether as capital gain or business income in case of long term holdings of shares and securities i.e in excess of 12 months. It has clarified therein that with a view to reduce litigation and uncertainty in the matter of taxibility, as long term capital gains or business income - the assessee has an option to treat the income from sale of listed shares and securities as income arising under the head 'Long Term Capital Gains', them the same shall be accepted by the assessing officer. However, the stand once taken by the assessee would not be subject to change and consistently the income on the sale of securities which are held as investment would continue to be taxed as long capital gains or business income as opted by the Assessee. The circular makes no distinction whether the investments made in shares were out of borrowed funds or out of its own funds. Thus, the distinction which has been sought to be made by the Revenue cannot override the above CBDT Circular, which is binding upon it - issue stands concluded in favour of the Respondent by the above CBDT Circular, the above question as proposed does not give rise to any substantial question of law. Hence, not entertained. Treatment to the notional loss incurred on Futures & Option transaction as normal business loss - Held that:- This issue stands concluded against the Revenue by the decision of this Court in the case of Commissioner of Income Tax Vs. Bharat R. Ruia (HUF) reported in [2011 (4) TMI 37 - BOMBAY HIGH COURT]. 2018 (12) TMI 1331 Allowability of excess provision for warranty - tribunal holding that the assessee is entitled for deduction when excess provision towards warranty made in the previous years is not offered to tax by reversing the entries - Held that:- Substantial questions of law are covered by the judgment of this Court in the case of COMMISSIONER OF INCOME-TAX AND ANOTHER vs. M/s. ACER INDIA PVT. LTD.[2018 (6) TMI 1557 - KARNATAKA HIGH COURT] as decided in favour of assessee. Interest income inclusion in the eligible profits for computing deduction u/s. 80IB - Held that:- Substantial question of law is covered by the judgments of the Hon'ble Supreme Court in the case of PANDIAN CHEMICALS LTD., vs. COMMISSIONER OF INCOME TAX [2003 (4) TMI 3 - SUPREME COURT] AND Liberty India ltd., vs. COMMISSIONER OF INCOME TAX [2009 (8) TMI 63 - SUPREME COURT]. Decided in favour of revenue. 2018 (12) TMI 1330 Section 94(8) as retrospective in operation or prospective - Dividend stripping in buying and selling of shares and units - Avoidance of tax by certain transactions in securities - whether bonus shares are distributed out of the benefit earned during the year and then, when there are no profits, bonus shares can be allotted out of accumulated results? - Held that:- Considering the general scope and purview of the Income Tax Act, the remedy sought to be applied and the former state of the law and what the legislature contemplated, we are of the clear view that sub-Section (8) of Section 94 was intended to be prospective. As pointed out by the Hon'ble Supreme Court of India in the case of Gold Coin Health Food (P) Ltd. [2008 (8) TMI 5 - SUPREME COURT]), that the law is well settled that the applicable provision would be the law as it existed on the date of filing of the return and when any loss is returned in any return, it need not necessarily be the loss, as the previous year is concerned. Therefore, the applicable law on the date of filing of the return cannot be confined only to the losses of the previous accounting years. We are of the clear view that the Tribunal committed error in reversing the order passed by the CIT(A)as sub-Section (8) of Section 94 is neither curative nor declaratory of the previous law, which has to be held to be prospective in operation. - Decided in favour of the assessee 2018 (12) TMI 1329 Entitlement to the benefit of 54F - land purchased is prior to the disposal of Asset resulting in Capital Gain - Held that:- section 54F is an exemption provision and though there is no ambiguity in reading of 54F assuming there is some ambiguity in that eventuality section 54F is required to be read in favour of the Revenue as held by the Hon’ble Supreme Court in the matter of Dileep Kumar & Co. (2018 (7) TMI 1826 - SUPREME COURT OF INDIA ). We dismiss the appeal of the assessee and hold that the assessee is not entitled to the benefit of Section 54F in respect of the investment made by the assessee in purchasing the capital asset (land) prior to the period of one year from the sale of capital asset , as the said purchase of the land was not within a period of one year prior to the sale of the capital asset or falling in any of the categories in which the assessee was entitled to claim exemption u/s.54F under various categories. - Decided against assessee 2018 (12) TMI 1328 Interest accrued but not due on current investment - taxability under accrual system of accounting - Disallowance of mark to market loss on the value of current investments - Disallowance of realised loss on sale of current investments - Held that:- There is merit in the submissions made by the assessee, as the various points noted down by the assessing officer has rightly been addressed by the assessee. Both the case laws relied upon by D.R have been rendered on different set of facts and hence they cannot be taken support by the Revenue. Accordingly we hold that the assessee has held the securities as its trading assets only. Provision for diminution in the value of investments is allowable as deduction as per the principle laid down by the Hon’ble Supreme Court in CHAINRUP SAMPATRAM VERSUS COMMISSIONER OF INCOME-TAX, WEST BENGAL [1953 (10) TMI 2 - SUPREME COURT].Accordingly, we set aside the order passed by Ld CIT(A) on this issue in both the years under consideration and direct the AO to allow the claim of the assessee in both the years. Since we have held that the investments held by the assessee as trading assets, the realised loss on sale of investments shall constitute business loss only in the hands of the assessee. Accordingly we set aside the order passed by Ld CIT(A) on this issue in both the years under consideration and direct the AO to allow the deduction of the same in both the years. Revenue is challenging the decision of Ld CIT(A) in holding that the interest accrued but not due as not taxable - CIT(A) noticed that an identical issue has been considered in the case of DIT (International Taxation) vs. Credit Suisse First Boston (Cyprus) Ltd ( [2012 (8) TMI 17 - BOMBAY HIGH COURT] wherein it was held that when an instrument or an agreement stipulates that interest shall be payable at a specified date, interest does not accrue to holder thereof on any date prior thereto. Accordingly, following the above said binding decision of jurisdictional High Court, the Ld CIT(A) deleted the addition made by the AO in both the years on account of interest accrued but not due. The revenue is aggrieved wrongfully - decided in favour of assessee. 2018 (12) TMI 1327 Validity of reopening of assessment u/s 147 - non-issuance of notice u/s 143(2) - Held that:- As relying on PR. COMMISSIONER OF INCOME TAX-08 VERSUS SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. [2015 (10) TMI 1765 - DELHI HIGH COURT ] Even though notice u/s 148 of the Act has been issued but the notice u/s 143(2) of the Act has not been issued in the case of both the assessee namely M/s.Sukhmani Cotton Industries Pvt. Ltd. & M/s. Manjeet Cotton Pvt. Ltd. a fatal error has been committed by AO and thus the reassessment order passed u/s 147 r.w.s 143(3) of the Act is invalid bad in law and void ab initio and thus liable to be quashed. - Decided in favour of assessee. 2018 (12) TMI 1326 Disallowance of ad-hoc provision of salary - failure to make a protective claim in subsequent year - Held that:- A claim wrongly made by an Assessee in an earlier year cannot be allowed in that year, merely because the Assessee did not make the claim correctly in a subsequent year. During the pendency of a dispute as to the year in which a claim of the Assessee is to be allowed; a prudent Assessee can make the claim in other year(s), on protective basis, subject to final outcome of such a dispute, by explaining such a protective claim in other year(s). Assessee, having failed to make protective claim in subsequent year(s) in which it was lawfully allowable, cannot force the claim in an earlier year in which it was not lawfully allowable. However, the Assessee is free to exercise its legal options in respect of the subsequent year(s) in which the claim was lawfully allowable; such as U/s 264 of I.T. ACT with particular reference to Proviso to Section 264(3) - thus sustaining the disallowance on account of ad hoc provision for pay revision - Decided against assessee. Addition of denial of change in the accounting policy - Held that:- The Assessee is a company incorporated under the Companies Act, 1956 and follows mercantile system of accounting. An Assessee company registered under the Companies Act, 1956 is required to maintain accounts in accordance with provisions of The Companies Act, 1956. However, the profits computed in this manner need not necessarily be the same as Total Income for the purposes of I.T. Act. The computation of Total Income for the purposes of Income Tax Act requires giving effect to statutory provisions under I.T. Act, by making necessary adjustments/modifications/alterations/variations to profits compounded in accordance with provisions of the Companies Act, 1956. In view of this, the Assessee was in clear error of law by not adding back the aforesaid amount of Rs. 1.28 crores in the computation of Total Income for the purposes of I.T. Act. This error of law is further aggravated by the error of fact, in that the change of accounting policy was based on faulty premise (i.e. error of fact) that there was no financial impact. Thus a clear errors of law and fact on the part of the Assessee, we uphold the addition of aforesaid amount - Decided against assessee. Revision u/s 263 - Disallowance u/s 14A - Held that:- CIT(A) has mentioned in his impugned order dated 28.8.2014, in computing disallowance U/s 14A of I.T. Act, the AO should have carried out necessary verifications regarding the nature of investments as directed by CIT in the order U/s 263 of I.T. Act; which the AO failed to do. However, CIT(A) also not only himself failed to carry out this verification; but also, he failed to cause this verification to be done by the AO. It is well-settled that powers of CIT(A) are co-terminus with powers of the AO. Useful reference may be made to case of CIT v/s Kanpur Coal Syndicate (1964 (4) TMI 18 - SUPREME COURT) as held that AAC has plenary powers in disposing off an appeal; that the scope of his power is co-terminus with that of the ITO, that he can do what the ITO can do and also direct him to do what he failed to do. CIT(A), having noticed lack of proper verification at the end of the AO, should have ensured that effective verification was carried out. CIT(A) could have made the verification himself, or he could have caused the verification by way of further inquiry in exercise of powers U/s 250(4) of I.T. Act - we are of the view that the lower authorities, the AO as well as the Ld. CIT(A), have not considered the issue regarding disallowance U/s 14A of I.T. Act properly and the matter requires fresh consideration at the level of the AO. Therefore, we restore the disputed issue regarding disallowance U/s 14A of I.T. Act to the file of the AO for fresh order 2018 (12) TMI 1325 Sale of investment in shares - business income OR capital gains - Held that:- In the entire framework of the Income Tax Act, there is no direct and specific embargo for conversion of stock-in-trade of shares to investment and vice versa. That over the years, Hon'ble Courts have held once such conversation has taken place, assessee should maintain that pattern. There should not be any further change in the pattern and thereby, statement of the accounts should also be maintained. In effect, there should not be any action of the assessee by which any loss arises to the Revenue. In the instant case, it is not disputed that conversion has taken place from stock-in-trade to investment and also that the Hon'ble Apex Court in the case of Sir Kikabhai Premchand (1953 (10) TMI 5 - SUPREME COURT) wherein it has been held that such conversion is not something not known to the commercial world and there is no legal bar on the same. Therefore, in view of the matter, we set aside the order of CIT(Appeals) on this issue. Claim u/s 80IA - Held that:- Velayudhaswamy Spinning Mills (P.) ltd. Vs. ACIT (2010 (3) TMI 860 - MADRAS HIGH COURT) and on the basis of said decision CBDT had issued Circular No.1 of 2016, dated 15.02.2016 clarifying term 'initial assessment year' in section 80IA(5), order of Tribunal holding that assessee was entitled to deduction under section 80IA without setting off losses/unabsorbed depreciation pertaining to windmill, which were set off in earlier year against other business income was deserved to be upheld. The CBDT vide Circular No.1/2016, dated 1502.2016 has also clarified situation of claim of deduction under section 801A(4) of the Act by any concern by adopting initial assessment year as the first year of claim, irrespective of the fact that the windmill was installed and started functioning in any of the earlier years. Following the same parity of reasoning, we hold that the assessee is entitled to claim deduction u/s.80IA(4) of the Act. The ground of appeal No.4 raised by the assessee is thus, allowed. Penalty u/s.271(1)(c) - claim of deduction under section 80IA - Held that:- Interpretation along with guidance taken from the decision of Hon'ble Apex Court in the case of Liberty India Vs. CIT (2009 (8) TMI 63 - SUPREME COURT) wherein, it has been categorically held that the eligible profits are to be computed as if such eligible business is the only source of income of the assessee. Further, CIT(A) analyzed that the AO has apparently proceeded to treat assessee’s making a claim of deduction u/s 80IA as furnishing of inaccurate particulars of come. The expression ‘inaccurate particulars of income’ cannot be extended to the issues, which are capable of different interpretations under law and therefore, the case of the assessee cannot be said to be a case of ‘furnishing of inaccurate particulars of income’ - Decided in favour of assessee. 2018 (12) TMI 1324 TDS u/s 194A - assessee has not deducted tax at source in respect of the interest paid to the NBFCs -Disallowance u/s 40(a)(ia) - Held that:- Accordingly, the matter is set aside to the record of the Assessing Officer for verification of the fact that the recipients NBFCs has already taken into account the amount of interest received by them in their total income declared in the return of income and paid the tax. The assessee is also directed to furnish the requisite information for verification of the fact. 2018 (12) TMI 1323 Levying the late fees u/s 234E while processing the statement of tax deducted at source u/s 200A - Held that:- In the given facts and circumstances of the case as well as following the decision given by us in the case of State Bank of India, Genda Chowk and others (2018 (12) TMI 1229 - ITAT INDORE) are of the opinion that Ld. CIT(A) erred in confirming the levy of late fees u/s 234E of the Act by the assessing officer. As decided above in the intimation prepared u/s 200A of the Act up to 31st May 2015, the late filing fee u/s 234E of Act cannot be charged while processing the TDS return/statement because enabling clause (c) of sub-section (1) of section 200A have been inserted w.e.f. 01.06.2015 and before this amendment w.e.f 01.06.2015 there was no enabling provision in the Act u/s 200A of the Act for raising demand in respect of levy of fees u/s 234E of the Act. - Decided in favour of assessee 2018 (12) TMI 1322 Addition u/s 68 - unexplained cash credit - identity, creditworthiness and genuineness of the transaction - Held that:- We note that the director of the assessee company, Mr. Siddheswar Halder, vide its letter, dated 20.03.2015, submitted in response to notice u/s.131of the Act, the following information and documents, Viz: Copy of PAN Card for identity proof and copy of Driving License as a proof of address, Copy of Income Tax Return for the A.Y. 2010-11, 2011-12 &2012-13, Copy of Profit & Loss Account and Balance Sheet for the F.Y. 2009-10 onwards, Copy of Bank Statement for the relevant period, and other details for his personal identity. We note that ‘source of fund’ of share applicants viz. Sarvottam Commercial Pvt. Ltd., M/s. Landmark Exim Pvt. Ltd and M/s Ganpati Hirise Pvt. Ltd, is directly from M/s. Emami Biotech Ltd. (now M/s. Emami Agrotech Ltd.) and the source of source of fund of the Share Applicants viz. M/s. Ghazal Textiles and Finance Pvt. Ltd and M/s. Procton Commerce Pvt. Ltd, is also M/s Emami Biotech Ltd. (now M/s. Emami Agrotech Ltd.), which is a highly reputed company. Therefore, assessee has even proved the source of source of share applicants in the instant case. Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source, shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In these peculiar facts and circumstances and in view of Assessing Officer’s supportive remand report as above, no addition is warranted under Section 68 of the Act. That being so, we decline to interfere in the order passed by the ld CIT(A), his order on this issue is hereby upheld - Decided in favour of assessee. 2018 (12) TMI 1321 Characterization of income earned - Income accrued in India - existence or otherwise of a Permanent Establishment (PE) or a fixed place of business in India - appellant is a company incorporated in United Kingdom and is also a tax resident of United Kingdom - Held that:- Since the facts and circumstances in this year remain the same as in the past years, which has been considered by the Tribunal, we find no reason to distract from the earlier decision of the Tribunal. Pertinently, it is also not the case of the Revenue that there is any change in the nature of the income being earned by the assessee from TCL than that considered by the Tribunal in its order dated 14.07.2017 (supra). Therefore, following the precedent in assessee’s own case for Assessment Years 2000-01 to 2005-06, the stand of the assessee has to be approved. Before parting, we may make a mention of the discussion sought to be made by the DRP in the impugned order regarding the inapplicability of the ratio of the decision of the AAR in the case of ISRO Satellite Centre [2008 (10) TMI 15 - AUTHORITY FOR ADVANCE RULINGS]. In this context, we find that this aspect of the controversy has been expressly considered by our coordinate Bench while rendering its decision earlier. Therefore, we find no reason to uphold the stand of the Revenue in this year following the precedent in the assessee’s own case We find that the assertions of the assessee qua the activity of the assessee and liaison office as well as the significance of the use of SSMS equipment located in India qua the services provided to VSNL clearly establishes that the same could not be construed to constitute a PE in India. The DRP, in our view, has also not referred to any specific instances in the functioning of the liaison office to point out that it was rendering services which could be construed as being a PE in India. Considering the orders of the authorities below as well as the material led by the assessee before the lower authorities, in the present case, it is safe to deduce that the Revenue has failed to discharge its burden of proving that the activities of the liaison office were such as to construe it to be a PE in India. On the aspect of use of SSMS equipment also, we find that there is no reason to hold that it could be construed as a PE in India. So far as the reference to the LES made by the DRP in Assessment Years 2010-11 to 2012-13 is concerned, the same, in our view, is quite misplaced. The DRP itself notes that the LES is owned by the LESO, i.e. VSNL. It is also a feature of assessee’s agreement for providing services that it is the LESO, i.e. VSNL, who has the full right and responsibility with regard to the LES. In any case, it is undeniable that the LES is not owned by the assessee, an aspect which the DRP itself has noted in its order. Therefore, considering the matter in its entirety, we find it erroneous on the part of the Assessing Officer to hold that there exists a PE of the assessee in India. Thus, assessee succeeds on this aspect also. Insofar as Ground as relates to income computed by the Assessing Officer, which can be attributable to the PE of the assessee in India. Since we have upheld the primary stand of the assessee that there does not exit any PE of the assessee in India, the dispute in Ground of appeal no. 5 is rendered academic and is dismissed as infructuous. 2018 (12) TMI 1320 Reopening of assessment - reopening based upon audit objection - addition on account of loss exchange fluctuation - as per revenue assessee is a reseller of Government lottery tickets and there were no foreign currency transaction which could have been entered by the assessee which could have resulted in loss on account of foreign exchange rate fluctuation - Held that:- The entire foundation of re-opening of the concluded assessment u/s 148 based on audit objections was on wrong footing based on the premise that the assessee is engaged only in the business of government lottery resellers , while the fact of the matter is that the assessee was also engaged in the business of manufacturing of moulds and dies and plastic containers and goods. Now, it is established beyond doubt that the AO proceeded on the aforesaid wrong footing despite the assessee bringing in evidence to contrary. There is no rebuttal by the AO to demolish the version of the assessee. The learned CIT(A) has also given finding of fact that the assessee is engaged in the business of manufacturing of moulds and dies apart from government lottery resellers. The said finding has not been challenged by Revenue as no appeal is filed nor CO is filed by Revenue. The only question left to be answered is that if the entire premise/foundation on which the edifice of reopening of the concluded assessment is found to be erroneous , then in that situation will the proceedings conducted u/s 148 itself will be sustainable in the eyes of law or not, even if Revenue has a strong case on merits so much so the assessee has conceded that it has no case on merits keeping in view provisions of Section 43A of the 1961 Act the answer is emphatic "No" as on jurisdictional ground itself the proceedings are required to be quashed because the Revenue proceeded on the entire wrong presumption and footing based on erroneous audit objections raised by Sr. Audit Officer, despite the assessee bringing to the notice of the AO in response to reasons supplied for reopening, the correct factual matrix which was conveniently ignored by the AO and no reasons were supplied by the AO to demolish the contentions of the assessee. - Decided in favour of assessee. 2018 (12) TMI 1319 Penalty u/s 271(1)(c) - assessee while claiming deduction of administrative expenses did not furnish any evidence - Held that:- Mere rejection of claim, made by the assessee, would not ipso-facto, result in penalty imposed under section 271(1)(c) of the Act as was held in CIT vs Reliance Petro Products Pvt. Ltd. ( [2010 (3) TMI 80 - SUPREME COURT]), wherein observed that merely because the assessee's had claimed the expenditure, which claim was not accepted or not acceptable to the Revenue, that by itself would not in our opinion attract penalty under Section 271(1)(c). Before penalty can be imposed under Section 271(1)(c) of the Act, the Revenue in terms thereof must be satisfied that the assessee had concealed particulars of income or furnished inaccurate particulars of his income. In case, where an assessee makes a complete disclosure of facts it then cannot be said to have concealed the particulars of income or furnished inaccurate particulars of income. Thus, mere making a claim for benefit under a particular provision of law would not attract penalty under Section 271(1)(c) if there is absence of concealment and / or furnishing of inaccurate particulars of income. Thus the penalty imposed under section 271(1)(c) of the Act is directed to be deleted. - Decided in favour of assessee. 2018 (12) TMI 1318 Levy of fee under Section 234E - processing the TDS statement furnished by the assessee u/s 200A - Fee for default in furnishing statements - Held that:- Prior to 01.06.2015, there was no enabling provision in Section 200A of the Act for making adjustment in respect of the statement filed by the assessee with regard to tax deducted at source by levying fee under Section 234E. The Parliament for the first time enabled the Assessing Officer to make adjustment by levying fee under Section 234E of the Act with effect from 01.06.2015. See SMT. G. INDHIRANI, SALEM, RAJAGURU SPINNING MILLS LTD., A. DHAKSHINAMURTHY , PADMA TEXTILES & MURTHY LUNGI COMPANY VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CPC – TDS, TDS – CPC, UTTAR PRADESH [2015 (7) TMI 640 - ITAT CHENNAI] As held by this ITAT, the intimation sent to the assessee u/s. 200A dated 16.01.2014 raising the demand of Rs. 9,000/- u/s. 234E towards levy of late filing fee is invalid as there was no enabling provision in section 200A, viz., clause (1)(C) of section 234E, prior to 01.06.2015 for levy of fees u/s. 234E while processing the statement of tax deducted at source. It was open for the AO to pass separate order u/s. 234E levying the fee, provided the limitation for such a levy did not expire. However, in this case, the AO has not passed any order u/s. 234E independently within 31.03.2015 and hence, the impugned order is set aside. - Decided in favour of assessee. 2018 (12) TMI 1317 Exemption being the surplus income after deducting personal expenses declared under the head Income from Other Sources - doctrine of mutuality - Held that:- Fund was contributed by the members for providing financial assistance to the members and only surplus fund which were not required for the time being were kept in the bank for safe custody mainly and not for earning interest income. In the present case, the facts are totally different. The income in dispute in the present case are 1) Pay & Park Charges, 2) Rent from Vodafone tower, 3) Rent from BSNL tower, 4) Rent from Idea Tower and 5) interest on Fixed Deposit. The first four incomes i.e. Pay & Park Charges and rent from Vodafone, BSNL and Idea towers cannot be considered to be covered by doctrine of mutuality. Regarding interest on Fixed Deposit also, this is not the claim of the assessee that the fund which was used for earning such interest income on Fixed Deposit was mainly for the purpose of providing financial assistance to the members and only surplus fund kept with bank for safe custody and not for earning interest income and earning of interest income is incidental. Hence in the facts of present case, this judgement of Hon'ble Karnataka High Court is also not applicable. Hence in my considered opinion this judgement of Hon'ble Karnataka High Court rendered in the case of Canara Bank Golden Jubilee Staff Welfare Fund Vs. DCIT (2008 (7) TMI 239 - KARNATAKA HIGH COURT) is not applicable in the facts of present case. The judgement of Hon’ble Apex Court rendered in the case of Bangalore Club Vs. CIT [2013 (1) TMI 343 - SUPREME COURT] is squarely applicable in the present case and as per this judgement of Hon’ble Apex Court, the issue is covered against the assessee and the judgement of Hon'ble Karnataka High Court rendered in the case of Canara Bank Golden Jubilee Staff Welfare Fund Vs. DCIT (supra) is not applicable in the present case and hence, by respectfully following the judgement of Hon’ble Apex Court rendered in the case of Bangalore Club Vs. CIT (supra), I decline to interfere in the order of CIT(A). - decided against assessee 2018 (12) TMI 1316 Addition u/s.68 - unexplained cash credit - identity, genuineness and credit worthiness of share applicants - Held that:- CIT(A) recorded a finding to the effect that assessee had discharged its onus to prove the transaction and that AO has not brought any contrary documentary evidence on record to dispute the transaction and involvement of unaccounted money belonging to the assessee, CIT(A) also recorded a finding to the effect that on perusal of bank statement of share applicants, it is observed that there are no cash deposit corresponding to cheques issued towards share application money. Even in remand report, the AO had not brought any contrary material to disprove the transaction and had not found any fault in the documents furnished by the assessee, accordingly it was held by CIT(A) that assessee had reasonably discharged its onus to prove the identity, creditworthiness and genuineness of transaction. In view of the documentary evidence furnished which included PAN details, registration certificate, share application forms, board resolution of share applicants, affidavit and confirmation of the share applicants, IT returns, balance sheet and bank statements of share applicants and assessment orders u/s 143(3) in respect of two share applicants. We found that CIT(A) has dealt with the issue threadbare in respect of each share applicant and after applying various judicial pronouncements to the facts of the case and the documents placed on record reached to the conclusion that all the three ingredients of Section 68 i.e., identity, genuineness and credit worthiness of share applicants are duly complied with, accordingly, no addition is warranted. The findings so recorded by CIT(A) are as per material on record which do not require any interference on our part. - Decided against revenue 2018 (12) TMI 1315 Disallowance u/s 14A r.w. Rule 8D - Held that:- Disallowance u/s 14A r.w. Rule 8D to the amount of Rs. 20,58,424/- suo motu disallowed by the appellant. Addition on account of transactions listed in Annual Information Report (AIR) of the Department - Held that:- We are of the considered view that the above matter be reexamined by the AO, because he was running short of time while making the assessment u/s 143(3) on 25.02.2013. Therefore, we set aside the order of the CIT(A) on the above issue and restore the matter to the file of the AO to make a fresh order, after giving (i) the relevant documents and (ii) reasonable opportunity of being heard to the appellant. We direct the appellant to file the relevant documents/evidence before the AO. Thus the 2nd ground of appeal is allowed for statistical purposes. Credit of tax deducted at source to the appellant - Held that:- As decided in CITICORP FINANCE (INDIA) LTD VERSUS ADDL COMMISSIONER OF INCOME TAX [2013 (10) TMI 1119 - ITAT MUMBAI] the department is required to give credit for TDS once valid TDS certificate had been produced or even where the deductor had not issued TDS certificates on the basis of evidence produced by assessee regarding deduction of tax at source and on the basis of indemnity bond. We, therefore modify the order passed by CIT(A) on this point and direct the AO to proceed in the manner discussed above to give the credit of tax deducted at source to the assessee - Direct the AO to proceed in the manner discussed above to give credit of tax deducted at source to the appellant. 2018 (12) TMI 1314 Entitlement to expenses against the undisclosed receipts of truck - addition made by the AO on account of freight of truck owned by the assessee - whether only the profits embedded and not the whole of gross receipts are taxable? - Held that:- It would be, under the circumstances, incorrect to say that the assessee has not been allowed any expenditure against the said receipt, but only that the same – to the extent admissible, stands already claimed and allowed as a part of regular business expenditure. There is no need or occasion to, under the circumstances, engage in any estimation exercise. The case law relied upon, even as indicated above, is distinguishable. Why, as observed by the Bench during hearing, the depreciation claim itself works to about 10% of the gross freight. The claim for TDS, deductible at 2%, and not paid to the assessee but to the Central Government, has been already allowed. To conclude, no evidence in support thereof being adduced at any stage, the assessee’s claims, both as regards the incurring of expenditure – over and above that allowed, as well as the source thereof, remain unproved, if not disproved; the assessee, by all available accounts, having been already allowed his claim for the relevant expenditure against his undisclosed receipt, which appears to be arising to him regularly and in the normal course of his business, though kept outside books. The assessee’s case, being wholly unsubstantiated and presumptuous, has thus rightly been not accepted by the Revenue. The matter being otherwise wholly factual, the assessee’s reliance on the decisions supra, including on his own case for AY 2011-12, which stands already met, to no rebuttal and, in fact, a tacit admission of its inapplicability by the ld. counsel, would be of no consequence - no infirmity in the Revenue’s case or reason to interfere and, accordingly, uphold the impugned order - decided against assessee 2018 (12) TMI 1313 Denial exemption u/s 80P(2)(a)(i)/(ii) and 80P(2)(d) - Held that:- Assessee is a cooperative society registered under Gujarat Co-operative Societies Act, 1961 and engaged in providing credit facilities to its members. High Court in the case of State Bank of India Co-operative Society (2016 (7) TMI 516 - GUJARAT HIGH COURT) has held that interest earned from investment made in bank by a cooperative society engaged in providing credit facilities to its members, is not eligible for deduction under section 80P(2). Tribunal in earlier occasions on similar issue has taken a consistent view by following above judgment of the Hon’ble jurisdictional High Court. Since orders of the Revenue authorities are in accordance with judgment of the Hon’ble jurisdictional High Court cited supra, no interfere is called for in the impugned orders, which we confirm. However, any expenditure incurred by the assessee for earning such income could be allowed to it, if not already allowed. AO has to determine the net interest income as well as misc. income earned by the assessee, and only thereafter that income has to be excluded from the admissibility of deduction under section 80P(2) of the Act. AO is also directed to consider allowance of deduction under section 80P(2)(c)(ii) of the Act in accordance with law. - Decided partly in favour of assessee. 2018 (12) TMI 1312 Deduction u/s 54F - purchase of land with constructed shed measuring 100 sq.ft. of ACC sheet roofing and without electricity and water. - whether the Assessee can be said to have purchased “a residential house” - Held that:- The fact that civic amenities were not available in the building constructed cannot be the basis to hold that the property in question is not a residential house. It was capable of being used as a residential house de hors these facilities. These facilities could come in due course and make the property more habitable. The section does not lay down any standards of habitation like existence of civic amenities etc. Besides the above, the undisputed factual position is that there was a constructed shed of 100 Sq.ft. with ACC sheet roofing with walls of brick and mortar and cement flooring and the Assessee's employee has been staying to look after the property. Since there was a person already living in the structure, it can be said that it was in a habitable condition even though basic amenities such as Electricity and water supply was not there. The Khate issued by the BBMP mentions the description of the property as residential property and determined annual value at Rs. 780/-. CIT(A) was justified in directing the AO to allow deduction u/s.54F of the Act to the Assessee. The order of CIT(A0 does not call for any interference. Consequently, the appeal by the revenue is dismissed. Customs 2018 (12) TMI 1307 Provisional release of goods - concealed offending goods - intent to evade or not - Held that:- There is no dispute to the fact that the imported container was examined by the officials and it was found that 552 cartons of offending goods were concealed at the back part of it behind and underneath the declared goods. When such being the case of the Revenue and further investigation is in progress, that too, by arresting the proprietor of the petitioner, this Court is of the view that any order passed on the request of the petitioner for releasing the other goods would affect the investigation and further adjudication process and therefore, the petitioner has to only face the investigation and adjudication process, especially, when the allegations made against the petitioner is serious in nature, that about 552 cartons of sewing machine needles were found in excess in the import consignments, which is over and above from the declared goods - petition dismissed. 2018 (12) TMI 1306 Delay in issuance of SCN - appellant had effected a Project Import on 13.03.1999, installation was completed on 26.12.2002 and complied with all formalities and in 2018, the present impugned show cause notice was issued alleging under valuation of a few of the items which were imported by the appellant - Held that:- Though the case may be one of investigation done by the DRI, yet final assessment should be done within a reasonable time. In the opinion of the Central Board, 6 months' is reasonable time under normal circumstances. In our prima facie view, period of 15 years cannot be considered as a reasonable time - Assuming without admitting upon adjudication of the show cause notice, the proposal therein is confirmed, the entire liability may be around Rs. 11 crores and assuming the assessee files appeal, the minimum pre- deposit required to be made would be Rs. 7.5% of the disputed demand. The partial relief can be granted to the appellant so as to enable them to tide over the financial crisis, which they are stated to be undergoing at present - appeal allowed in part. 2018 (12) TMI 1305 Smuggling - narcotic items i.e., mashed leaves in cake form - baggage rules - seizure of goods - NDPS Act - limitation on granting of bail - Held that:- In the absence of chemical analysis test as contemplated under the Instruction, it is opined that though the seized article is considered to be Hashish as per the kit report, in the absence of the chemical analysis report, it cannot be considered and in that light, the accused-petitioner is having a right to be enlarged on bail by imposing some stringent conditions - also though the seized articles is more than the commercial quantity but due to lapse on the part of the department in not getting the report, the benefit of bail has to be extended to the accused-petitioner and in that light, the petition is allowed. 2018 (12) TMI 1304 Export of imported consignments - classification of goods - green pepper - Held that:- Spice is a traded commodity, and has been for centuries, with the implication that it must necessarily be in a desiccated form for it to last and to preserve the characteristic that is so tempting to the human race. Spice is, therefore, not the produce of a plant but the product of processing of such produce The inclusion in note 2, with corresponding exclusion in note 4, in chapter 7 of the First Schedule to Customs Tariff Act, 1975 is a deliberate inclusion to eliminate any doubts that may be entertained of the headings appropriate for classification of genus Capsicum and genus Pimenta. The absence of a specific heading for these varieties enlightens us as to the intent. By this specific inclusion of fruits, i.e., whose seeds are capable of germination, not generally known in the country as ‘pepper’, there would be no attempt to classify them in the heading considered appropriate to that class of plants. There was, therefore, no need to bring the other class in the dichotomous distribution of producing plants specifically for coverage in this chapter. The misconception that ‘green pepper’ is a spice and that, until it is processed, is not a vegetable that appears to have been the basis for initiating proceedings against the appellant should no longer stand in the way of endorsing the declaration of the appellant in the bills of entry. The impugned orders lack the mantle of logic and the sanctity of law - appeal allowed - decided in favor of appellant. Corporate Laws 2018 (12) TMI 1309 Winding up petition - recovery of dues - liability to pay the dues of the petitioner - Held that:- It is clear that the averments being made in the preliminary submission and the averments in the reply are mutually contradictory, evasive and only an attempt to wriggle out of the liability to pay the dues of the petitioner. Hence, admissions can be inferred from vague and evasive denials or admissions can even be inferred from the facts and circumstances of the case. In view of the above, the defence set up by the respondent is clearly not bonafide. The reply/defence is vague and evasive. The averments are also contradictory. There is clearly no dispute raised in this case by the respondent. Accordingly, I admit the present petition. The Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take over all the assets, books of accounts and records of the respondent-company forthwith. The citations be published in the Delhi editions of the newspapers ‘Statesman’ (English) and ‘Veer Arjun’ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing. 2018 (12) TMI 1308 Winding up petition - whether the debt is due and payable to the petitioner? - Held that:- It is not for this Court to sit and serve through the evidence and record a finding of fact as to whether the amount is due and payable. The books of accounts/ running account of the petitioner would have to be proved to show that the said amounts are due and payable to the petitioner. It is also a matter of fact that the two invoices being Ex.564 dated 04.03.2011 for Rs. 11,36,603/- and Ex.573 dated 09.03.2011 for Rs. 17,69,989/- show that these goods were returned in view of the entries made in the transport receipts. Hence, no clear finding can be drawn that the debt is due and payable to the petitioner. It is settled legal position that it is not the function of the company court to enter into an adjudication of disputed facts which should have been the subject matter of the Civil Suit. Respondent has raised disputes that are bona fide. Clearly, the contentions which are now being raised by the petitioner are the issues which ought to have raised before the Civil Court. There is no merit in the present petition. Needless to add that any observations made herein will not in any manner prejudice the rights of the parties. It would be for the petitioner to approach the appropriate civil court for adjudication of its claim for any period spent while adjudication of the present winding up petition was pending, the petitioner can claim condonation of delay as per law, if required. The petition stands dismissed. Insolvency & Bankruptcy 2018 (12) TMI 1311 Corporate Insolvency Resolution Process - Corporate Debtor has defaulted in making payment of Rs. 32,04,812/- against supply of various books being published by the Operational Creditor - Held that:- Operational creditor served demand Notice in Form No. 3 dated 30.10.2017 demanding for payment. The Corporate Debtor replied after the expiry of 10 days, raising, inter-alia, disputes regarding (a) the supply of goods not being in confirmation to the order placed by the authorised persons, (b) the Corporate Debtor is not liable to pay for order placed by individuals other than authorised persons. It is pertinent to note that the Corporate Debtor raised theses disputes after the receipt of the demand notice and no correspondence prior in time to the demand notice about the disputes have been brought on record. The defence taken by the Corporate Debtor is not covered in pre-existing dispute in the light of law laid down by the Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited (2017 (9) TMI 1270 - SUPREME COURT OF INDIA). The application made by the Petitioner clearly shows that the operational debt has not been paid even after the service of demand notice. The disputes raised belatedly are not tenable in law. In compliance of Section 9(3)(b) and Section 9(3)(c), Bank statements and affidavit of no dispute has also been annexed, therefore, the petition deserves to be admitted. This Bench hereby admits this petition filed under Section 9 of IBC, 2016, declaring moratorium with consequential directions. 2018 (12) TMI 1310 Initiation of Corporate Insolvency Resolution Process (CIRP) - satisfaction of default as occurred - intervention application has been filed against the financial creditor - Held that:- The third party (being an entity other than the financial creditor/corporate debtor) is not offered the right to be heard and/or to intervene in a proceeding initiated under Section 7 of the IB Code as affirmed by the Hon'ble Supreme Court in ICICI BANK & ANR. [2017 (9) TMI 58 - SUPREME COURT OF INDIA]. That from the aforesaid decision it is clear that the Adjudicating Authority is only to satisfy that the default has occurred and that the Corporate debtor is entitled to point out that the default has not been occurred in the sense that the debt is not due. That no other person has a right to be heard at the stage of admission of the application under Sections 7 and 9 of the IB Code including the shareholders or the personal guarantor etc. That in view of the facts and circumstances narrated above, it is clear that any application/proceeding under this provision can only be filed by or against the corporate debtor. That in the present case, the intervention application has been filed against the financial creditor. Furthermore, sub-section (c) of section 60(5) has no applicability at the stage of adjudication on admissibility of an application filed under Section 7 of IB Code as this sub-section pertains to questions of priorities, facts or law arising out of or in relation to the Insolvency Resolution or Liquidation proceedings of the corporate debtor. In the above facts and circumstances as discussed above, we are of the considered view that Intervention Application do not hold merits, deserves to be rejected and stands rejected accordingly. PMLA 2018 (12) TMI 1303 Offence under PMLA - attachment orders - reason to believe - Held that:- The predicate FIR and Charge Sheet, from which the subject PAO arises, were filed in May 2011 and August 2012, respectively. The ECIR was registered in May 2012. The investigation carried by the Respondent was also way back in the year 2015. The respondent has passed the PAO in the year 2017. There is no justification whatsoever on behalf of ED for such a long delay once even the alleged POC at the part the total proceed of crime can be attributable to the Appellant is Rs. 3.97 Lakhs. The Appellant is a steel trader with good financial standing in the market and society. The Appellant is ready to secure an amount of Rs. 3.97 Lakhs, but the respondent is not agreeable. The entire computation is illegal manner because as per the Respondent's own case, the alleged value of the material purportedly obtained by fraudulent means is Rs. 18,97,090/- which has been rounded to Rs. 19 lakhs by the Respondent. However, while effecting the attachment, the attachment was made for an amount of Rs. 21,20,000/- as per the value ascribed by the Complainant himself. The Respondent at the best could have directed the Appellant to secure Rs. 3.97 lakhs for the purpose of trial. The Respondent's pursuit to only attach immovable property, admittedly unconnected to the alleged offence, demonstrates the mala fide intention behind the attachment, which is to harass the Appellant. The Complainant in its own showing has denoted the market value of the property as more than 60 lakhs. The appeal is allowed, the impugned order against the appellant is set-aside so as the PAO. However, without prejudice, the appellant is directed to secure the alleged amount being attributed as POC in the hands of Appellant to the tune of Rs. 3.97 lakhs to be deposited in the form of FDR in favour of the respondent for the period of five years so that trial is over by that time, otherwise the appellant shall renew the FDR for further period of five years. Once the said amount is deposited, the attachment shall be lifted forthwith. Service Tax 2018 (12) TMI 1299 Rectification of mistake - By Order dated 05.02.2018, the Bench disposed of two appeals ST/30840/2017 & ST/30848/2017 in which the issue was refund of service tax for different periods. It is noticed that the Bench in Paragraph 3 has only indicated the period involved in one appeal and not another appeal - Held that:- The error of not mentioning the period involved in the first appeal is now rectified and it being a typographical error, the same is rectified and the first sentence of Paragraph 3 - The application for rectification of mistake is disposed off. 2018 (12) TMI 1298 SEZ Unit - Refund of service tax paid - only reason which has been given for rejection of the refund claim is that the appellant has not produced required documents and further the reasons for the delay in the application seeking condonation are not convincing - Held that:- In the N/N. 12/2013, discretion is given to the Assistant Commissioner for condonation of delay in filing the refund application. Further, the appellants have given reasons for seeking condonation but the same have not been considered by the authorities below and the reasons for delay are beyond the control of the appellant. The condition regarding the time limit is procedural only and it should be liberally interpreted and by taking a liberal approach, the delay in filing the refund application filed before the authorities below is condoned and the impugned order is set aside by remanding the case back to the original authority to decide the claim on merit - appeal allowed by way of remand. 2018 (12) TMI 1297 Condonation of delay of 298 days in filing appeal - appellant has submitted that they had no knowledge regarding the service tax liability on rent and they got the registration on 20.6.2013 and had filed the service tax returns through electronically - Held that:- Admittedly, there is a delay of 298 days in filing the appeal before the Commissioner (A), which is beyond the condonable power of the Commissioner (A) - Since the delay in the present case was beyond the condonable limit, therefore, the Commissioner (A) has rightly dismissed the appeal as time bar. Reliance placed in the case of SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - appeal dismissed. 2018 (12) TMI 1296 Extended period of limitation - Evasion of service tax - Security Agency service - suppression of facts - Demand of service tax alongwith Interest and penalty - Held that:- The issuance of subsequent SCN on the basis of some facts for which earlier show-cause notice was issued and which was finally decided by the Tribunal dropping the penalty on the appellant cannot be done in view of the decision of Hon'ble Supreme Court in the case of Nizam Sugar Factory [2006 (4) TMI 127 - SUPREME COURT OF INDIA]. This decision of the Hon'ble Supreme Court was consistently followed by High Courts and by the Tribunal in various decisions cited supra. In view of the settled position of law, subsequent show-cause notices cannot be issued alleging suppression of facts after all the facts were within the knowledge of the Department when the first show-cause notice was issued. Therefore, the invocation of extended period is not sustainable in law. In the present case, the show-cause notice was issued on 19/10/2006 covering the period from April 2001 to March 2006 and the impugned order also appropriated an amount of Rs. 66,06,843/- being service tax voluntarily paid for the normal period of limitation i.e. April 2005 to March 2006. Further, there are errors in quantification of the service tax as alleged by the appellant. The demand of service tax for the normal period confirmed and the demand for the extended period of limitation set aside - case remanded back to the original authority to quantify the demand for the normal period and the appellant would also be liable to pay interest as per law, if there is a delay in the payment of tax found by the adjudicating authority - appeal allowed in part by way of remand. 2018 (12) TMI 1295 Penalty u/s 78 - reversal of CENVAT Credit wrongly availed - no suppression of facts - applicability of Section 73(3) of the Finance Act - Held that:- After the audit raised the objection, the appellant reconciled his accounts and paid the service tax along with interest much before the issuance of the show-cause notice. Assessee has also accepted that the CENVAT credit was wrongly taken on account of clerical mistakes committed by the officers who were handling Service Tax matters and the Finance Manager of the unit who was handling the service tax matter had also resigned. The SCN was issued merely on audit objections and in view of the various decisions, no suppression can be alleged merely on audit objections. Appeal allowed - decided in favor of appellant. 2018 (12) TMI 1294 Extended period of limitation - Mis-match of amounts shown as income in the income tax amounts to the shown in service tax returns - Demand of Service tax - Held that:- During the period in question 2003-2004, there were two views prevailing on the issue of whether consideration received for hiring out a taxi on kilometer basis is rent-a- cab services or otherwise. These two views has to be settled by the various higher judicial forums to come to a conclusion as to that the services and the consideration received by rent-a-cab services person is taxable even if it is hired out on the basis of kilometer - the impugned order to the extent it is contested in this case is set aside on ground of limitation - appeal allowed - decided in favor of appellant. 2018 (12) TMI 1293 Levy of Service Tax - Reimbursement of service tax by service recipient - demand alongwith interest and penalty - extended period of limitation - Held that:- As per Chapter V of the Finance Act, 1994, the service tax has to be levied on the gross amount charged for the service. Wherever the gross amount charged includes service tax, the amount so charged is taken as cum-tax amount and the tax is calculated backwards - In this case, the amount received by the appellant was much higher than what they have disclosed to the department as a result of their re-negotiation with their clients and hence the differential duty arose. It is also evident that appellant has not disclosed the facts of their re-negotiation with their client and that they are getting over and above the amount initially agreed upon. Therefore, there was clear suppression of fact with intent to evade duty. Appeal dismissed - decided against appellant. Central Excise 2018 (12) TMI 1300 Input tax distribution - intellectual property rights and I.T. software services were to he used by all the units of the respondent and not restricted only to the Pune unit - It is the case of the Revenue that the respondent-assessee should have distributed the tax credit to the various units situated across the country and should not have availed CENVAT credit only at Pune - Held that:- Both provisions give an option to the assessee concerned whether to distribute input services tax available to it amongst its other manufacturing units which are providing output services. This is evident from the use of word may distribute the CENVAT credit is found in Rule 7 both prior and also post 2012. Thus, from the reading of the Rules, the option was available to the assessee whether to distribute the CENVAT credit or not - on plain reading of Rule 7 as existing both pre and post amendment 2012 covering period involved in these proceedings, the respondent - assessee was entitled to utilize the CENVAT credit available at its Pune unit. The Tribunal, on facts found that the entire exercise would be revenue neutral. This is so as the distribution of Cenvat Credit to the various units would result lesser service tax being paid by cash on their activity of coating as they would have utilized the cenvat credit available for distribution - the question of law as proposed does not give rise to any substantial question of law as the entire exercise would be revenue neutral - appeal dismissed. 2018 (12) TMI 1292 Restoration of appeal - appeal was dismissed for non-deposit of the statutory amount - Section 35F of the Central Excise Act, 1944 r/w Section 83 of the Act - Held that:- Where an appeal is dismissed for non-deposit and such deposit if made within a reasonable time of dismissal then, the appellate authority should exercise its inherent power to recall the order of dismissal and hear the petitioner's application on merits. This is a procedural review and not a review on merits of the case - Therefore, even in the absence of such power of recall being provided in the statute, every quasi judcial authority has inherent powers to exercise this power of recall in its inherent jurisdiction in the interest of justice. The appeal of the petitioner is restored to the file of respondent no.2 – Commissioner (Appeals). 2018 (12) TMI 1291 Revenue appeal - Monetary limit - Recovery of CENVAT Credit - Can the department without pointing out applicability of any of the exceptions in circular dated 11th July, 2018 of CBIC, continue to press the appeal on merits? - Held that:- As is well known by way of its policy for reduction of litigation, the Central Board of Direct Taxes i.e. CBDT and CBIC have been issuing circulars from time to time instructing the department not to file and in some cases if so filed, not to press appeals before Higher Authorities, Tribunal, High Court or Supreme Court as the case may be unless the tax effect involved is higher than the minimum threshhold respectively prescribed in such circulars - In the present case, we are governed by the latest circular of CBIC dated 11th July, 2018. Circular is issued in exercise of powers under Section 35R of the Central Excise Act, 1944, which pertains to appeal not to be filed in certain cases. Subsection (1) of Section 35R provides that the Central Board of Excise and Customs may from time to time issue orders or instructions or directions fixing such monetary limits as it may deem fit for the purposes of regulating the filing of the appeal, applications, revision or reference by the Central Excise Officers under the provisions of Chapter VIA of the Central Excise Act, pertaining to appeals. Thus, this circular has a statutory force. In the present case, the department does not point out that the monetary limit is higher than one prescribed by CBIC in its circular dated 11th July, 2018 or that the case falls within any of the exceptions provided in the circular dated 17th August, 2011. The letter of the Assistant Commissioner, Raigad to the counsel for the department only conveys that it is wholly discretionary within the powers of the Commissioner whether to withdraw certain appeal or not - If the tax effect is less than the monetary limit prescribed, the department can pursue the appeal only it falls in any of the exceptions; not otherwise. This would give rise to wholly arbitrary application of the Government policy which is simply not permissible in law. Excepting the stand of the department would permit the authorities to withdraw appeals against one assessee, whereas without citing any reasons, pursue the appeal against the another assessee situated identically as the former. The appeal is dismissed as involving low tax effect. 2018 (12) TMI 1290 Aggrieved party - Whether in the facts and circumstances of the case and in law, the CESTAT was correct in dismissing the appeal filed by the Appellant on the ground that the Appellant is not aggrieved party but it is IIMT which is the aggrieved party when the Appellant is running the institute (IIMT) as part of its trust activities? Held that:- Once the matter was sent back by the Commissioner (Appeals) and thereafter the OrderinOriginal was passed on 14.02.2014, then, the merits of both orders are before the Tribunal. The Tribunal refrains from going into the merits of the matter and rests its finding on a technical issue of maintainability. When the Tribunal was aware that it's bounden duty was to scrutinize the orders brought before it on merits and adjudicate the issue of taxibility, then, it should not have indulged itself and wasted its time on such technical matters which do not go to the root of the case at all. Both appeals are restored to the file of the Tribunal for adjudication on merits and in accordance with law - appeal allowed. 2018 (12) TMI 1289 Rectification of mistake - Held that:- The mistake that is sought to be corrected is in Paragraph 5 - The application for rectification of mistake is disposed off. 2018 (12) TMI 1288 CENVAT Credit - applicability of Rule 6 of CCR - Manufacture of electricity - case of appellant is that electricity being non-excisable goods is not exempted goods and therefore the provisions of Rule 6 of CCR are not applicable - Held that:- Electricity, though listed in the Tariff, but is not excisable goods - further, electricity is not an exempted goods and there is no manufacture of exempted goods in the present case and therefore the demand under Rule 6(1), (2) and (3) of CCR are not applicable. Board has also clarified the issue vide instruction dt. 23/12/2013 wherein it has been opined that in the case of manufacture of non-excisable goods, Rule 6 would not attract - also, in the case of UOI Vs. DSCL Sugar Ltd. [2015 (10) TMI 566 - SUPREME COURT], the Hon'ble Supreme Court has held that Bagasse is not excisable goods, there being no manufacturing process, hence Rule 6 of CCR is not applicable. Appeal allowed - decided in favor of appellant. 2018 (12) TMI 1287 CENVAT Credit - demand of 6% of the value of exempted goods supplied to the subsidiary of BARC - demand confirmed in the absence of certificate required to be produced by the appellant to show that he has actually reversed the CENVAT credit relating to the manufacture of exempted goods which were sold to the subsidiary of BARC - Held that:- Since the appellant has produced the certificate which was not there before the Commissioner (Appeals), I remand the case back to the original authority to consider the said certificate to find out the reversal of CENVAT credit attributable to the manufacture of exempted goods - appeal allowed by way of remand. 2018 (12) TMI 1286 Rectification of Mistake - Held that:- The figures mentioned in the above reproduced para seem to be incorrect after going through the Order-in-Original in the case in hand - here is an error apparent on the face of the record, which is rectified - application for ROM allowed. CST, VAT & Sales Tax 2018 (12) TMI 1285 Principles of Natural Justice - grievance of the petitioner is that the Dy. Commissioner of State Tax passed the impugned order dated 19.3.2018 confirming the show cause notice without considering the various submissions made by the petitioner in its reply dated 17.3.2018 - Held that:- There is an efficacious alternative remedy of filing appeal under Section 26 of the MVAT Act available to the petitioner to challenge the impugned order dated 19.3.2018. The Appellate Authority would necessarily examine all the grievances of the petitioner and pass appropriate order in accordance with law. Thus, there is no reason to entertain this petition - petition disposed off. 2018 (12) TMI 1284 Validity of recovery proceedings - constitutional validity of provisions of Section 26C of the Kerala General Sales Tax Act, 1963 - validity of proceedings against the Director of a private limited company - Held that:- Section 26C specifically speaks of joint and several liability of every person who was a Director of a private limited company only if the tax or other amounts recoverable under the Act cannot be recovered for any reason from the private company - Hence the proceedings has to be taken first against the company and there should also be sufficient material to show that the recovering authorities were not able to recover the amounts from the assessee company. There is no such averments made by the Government in the counter affidavit also. Since Section 26C contains a specific clause that it would be subject to the Companies Act, if any statutory right or protection is available to the Director under the Companies Act contravention of the same could be taken as a defense against the recovery. Petition allowed - decided in favor of petitioner. 2018 (12) TMI 1283 Taxability under MVAT Act - distribution income/subscription charges collected from sub-distributors - Held that:- If the factual aspects or law had undergone any change since the order was passed by the Deputy Commissioner on 12th January, 2007, the same has not been brought on record nor stated in the impugned order. In absence of difference in relevant facts or applicable legal provisions of development of law at the hands of higher authority or court, the respondent No. 2 could not have taken a decision different from what the Deputy Commissioner in his order dated 12th October, 2007 had done. The principle of administrative and judicial hierarchy and the requirement of following binding proceedings even by Departmental Authority exercising quasijudicial functions is all too well settled. The impugned appellate order dated 31st January, 2017 is set aside. The proceedings are placed back before the appellate authority for fresh disposal of the appeal in accordance with law - petition allowed by way of remand. 2018 (12) TMI 1282 Maintainability of rectification petition - Section 84 of TNVAT Act - grievance of the petitioner against the said orders of assessment is that the same was passed without affording an opportunity of personal hearing to the petitioner - principles of natural justice - Held that:- This Court has repeatedly held that providing such an opportunity of personal hearing is mandatory, especially, when the Assessing Officer chooses to impose penalty - the very revision of assessment orders passed in this case on 31.05.2018 without affording an opportunity of personal hearing to the petitioner, cannot be sustained on the ground of violation of principles of natural justice - petition allowed - decided in favor of petitioner. 2018 (12) TMI 1281 Validity of assessment order - imposition of penalty - case of petitioner is that the Assessing Officer has failed to record any reasons and his satisfaction that the escapement of tax was due to non-disclosure of the turn over by the Assessee - Held that:- It is true that the petitioner has admitted the tax liability and paid the same before the Inspecting Officials in respect of the assessment years 2007-2008, 2011-2012, 2012-2013 and 2013-2014. Thereafter, the Assessing Officer has chosen to issue the notices of proposal for imposing penalty. It is evident that the Assessing Officer has not indicated the exact date of personal hearing to the petitioner. It is true that the petitioner did not file any reply to the notices of proposal - also, the perusal of the orders of assessment would show that the Assessing Officer has simply imposed the penalty only on the reason that the petitioner did not file any reply, without recording his satisfaction that the escapement of tax was due to willful non-disclosure of the turn over by the petitioner - thus, the Assessing Officer, if chooses to impose penalty, should specifically record his satisfaction in the order of assessment that the escapement of tax is due to willful nondisclosure of the turn over by the Assessee, since the order of assessment is being passed by way of quasi judicial proceedings and therefore, such orders should contain reasons justifying the conclusions. Therefore, this Court is inclined to set aside the impugned orders passed in respect of penalty in all the assessment years and remit the matter back to the Assessing Officer for reconsidering the issue once again, after receiving the reply from the petitioner. Assessment years 2014-2015, 2015-2016 & 2016- 2017 - Held that:- It is not in dispute that one of the issue considered in those assessment years is mis-match issue - in respect of the mismatch issue. The matters are remitted back to the Assessing Officer to redo the assessments only in respect of mis-match issue and penalty - petition allowed by way of remand. 2018 (12) TMI 1280 Restoration of penalty u/s 27(3) of the TNVAT Act - it was alleged that sales turnover was disproportionate to the purchases - TNVAT Act - Held that:- The Appellate Deputy Commissioner rightly considered the petitioner's plea and deleted penalty. The reasons assigned by the Tribunal for restoring the penalty are not convincing and are not in accordance with the law - It is not disputed by the Revenue that the alleged difference in turnover was found out only from the books of accounts i.e. the returns filed by the assessee under the Income Tax Act, 1961 and the monthly returns filed under the TNVAT Act. In such circumstances, there can be no allegation of willful non disclosure of taxable turnover. The penalty, which has been restored by the Tribunal, is set aside - tax case revision allowed. 2018 (12) TMI 1279 Non-compliance with pre-deposit - Section 26 (6B)(c) of the Maharashtra Value Added Tax Act, 2002 - retrospective effect of amendment - Whether the Tribunal has committed an error in dismissing the appeal as not maintainable for want of deposit of 10% of the amount assessed, so as to give retrospective effect to the amendment introduced on 15.04.2017 to Section 26 of the Maharashtra Value Added Tax Act, 2002? Held that:- The assessment order concerning appellant for the financial year 2010 11 was passed on 30/10/2014, of which review proceedings were initiated on 13/4/2017, upon which review order was passed on 27/7/2017, which was challenged by way of appeal before Tribunal on 25/9/2017, which appeal came to be dismissed by the impugned order dated 22/2/2018 and before order of review was passed on 27/7/2017, Section 26(6B) of the Act of 2002 came to be inserted by amendment with effect from 15/4/2017 - The impugned order reveals that appeal came to be dismissed by the Tribunal observing that first appellate order was passed on 27/7/2017 and before that date, amended provisions came into effect from 15/4/2017, which required appellant to deposit 10% of the disputed tax along with appeal as a pre condition of admission of appeal, however, appellant has not complied with said mandatory provisions of Section 26(6B) of the Act of 2002 and since said amount was not deposited, appeal came to be dismissed. Admittedly review proceedings in respect of assessment order passed on 30/10/2014 for the financial year 2010 11 were initiated on 13/4/2017, which came to be decided on 27/7/2017 while the amended provisions of Section 26(6B) of the Act of 2002 came into force with effect from 15/4/2017 - the relevant date to hold applicability of amended provisions or otherwise shall be the date on which proceedings were initiated and not the date of decision. Thus, the Tribunal has committed an error in dismissing the appeal as not maintainable for non payment of amount aforesaid, i.e. 10% of the amount assessed. Whether recovery proceedings initiated by respondent no.5 during the pendency of appeal are legal or otherwise? - Held that:- In the case in hand, though appellant has submitted Form 314 along with his application for withdrawal of recovery proceedings before respondent nos.4 and 5, no steps are taken to act upon his request. On the contrary, it is the case of appellant that he is orally informed that no steps for withdrawal of recovery proceedings shall be taken - thus, before expiry of period prescribed to prefer an appeal, respondent nos.4 and 5 were not competent to initiate recovery proceedings against appellant or for enforcing notice issued to the appellant pending appeal. Appeal disposed off. Indian Laws 2018 (12) TMI 1302 Dishonor of Cheque - Winding up of Companies - company winded up on the ground that the Respondent companies are unable to pay its debts as and when they arise in the usual course of its business - Held that:- The learned Company Judge has found the Appellants claim to be based on manipulated accounts. The claim being for sums due at the foot of the ledger account and not for dishonour of cheques. The learned Judge has considered the cheques issued by the Respondent Companies, to be blank or given as security. The Appellants, despite these cheques being given in good faith, deposited these cheques which were dishonoured - The learned Company Judge has observed that neither any complaint nor a Suit is filed under the Negotiable Instruments Act, for the dishonour of these cheques. Thus showing the falsity of the Appellants claim. There is no perversity in the findings on facts by the learned Company Judge to conclude that no liability of the Appellants could be said to have been admitted so as to warrant admission of these Company Petitions - petition dismissed. 2018 (12) TMI 1301 Dishonor of Cheque - recovery of outstanding loan - whether a compromise, at this stage, can be permitted to be effected between the parties where the petitioner has been charged under Section 138 of the Act? - Held that:- This court is not powerless in such situation and adequate powers have been conferred upon it not only under sections 397 read with Section 401 or Section 482 Cr.P.C. but also under Section 147 of the Act for accepting the settlement entered into between the parties and to quash the proceedings arising out of the proceedings, which have consequently culminated into a settlement. This power has been conferred to subserve the ends of justice or/and to prevent abuse of the process of any Court. Though, such power is required to be exercised with circumspection and in cases which do not involve heinous and serious offence of mental depravity or offences like murder, rape, dacoity etc. This Court after being satisfied that the cheque amount with the assessed cost and interest has been paid, can close the proceedings even in absence of the complainant. Since, the petitioner has paid the entire compensation amount, therefore, quashing of the complaint initiated at the instance of complainant/respondent would be a step towards securing the ends of justice and to prevent abuse of process of the Court, especially, when the petitioner is facing pangs and suffered agony of protracted trial and thereafter appeal/revision for the last more than four years and has paid the entire compensation amount - revision petition disposed off.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter December 26, 2018

Articles

1. Ancillary supplies to Health Care Services

2. No TDS even if consideration of property exceeds RS 50 Lakhs

3. Conversion of public company into private company- RD authorised one step towards ease of doing business but there seems legal hurdles. Separate laws relating to different type of companies is need of hour to really extend ease of doing business.

Circulars / Instructions / Orders

1. 04/2018 - dated 13-12-2018

2. 26/2018 - dated 26-10-2018

3. 28/2018 - dated 26-10-2018

Highlights / Catch Notes

GST

Indian Supplier to Duty-Free Shop Not 'Export' Under GST; Rule 96-A Bond/LUT Required for Duty-Free Supplies.

Court Allows Interrogation of Custodial Accused in GST Evasion Case Involving Fake Invoices; Statements to be Recorded.

Bail Canceled for Accused in Fake Invoice Scam Involving Bogus Companies and Dummy Proprietors.

GST and Import Duty Levied on Goods from Duty-Free Shops Before Immigration Clearance; Customs Action Upheld.

Income Tax

Assessing Officer Cannot Reopen Assessment After Four Years Without Evidence of Incomplete Disclosure by Petitioner.

Transaction Not an SDT u/s 92BA(i); No Need for Form 3CEB Disclosure in Loan Purchase from HDFC Ltd.

Denial of Benefits Under Income Tax Act's Section 11 Applies Only to Non-Compliant Income Portions of a Trust.

Overseas businesses in DTAA countries must provide PAN; tax rates follow treaty rules, not domestic laws.

Section 80IB Deduction Allowed for Mentha Oil Hedging Profits; Direct Connection to Manufacturing Not Required.

Court Dismisses Petition Against Reopened Assessment Due to New Tangible Evidence by Assessing Officer.

Section 94(8) of the Income Tax Act targets dividend stripping in share transactions, intended for prospective application only.

Denial of Tax Benefit: Land Purchase Outside 1-Year Limit Disqualifies Section 54F Exemption for Capital Asset Sale.

Court Upholds Disallowance of Ad-Hoc Salary Due to Lack of Protective Claim in Later Years.

Fee Levied u/s 234E for TDS Processing Contested; Impugned Order Set Aside Due to Missed Deadline.

Mutuality Doctrine Exclusion: Pay & Park, Vodafone, BSNL, Idea Rentals, and Fixed Deposit Interest Not Covered.

Revenue Rejects Assessee's Claim for Expenses on Undisclosed Truck Receipts Due to Lack of Substantiation and Presumptive Nature.

Purchase of Land with Shed Qualifies as Residential House for Section 54F Deduction Eligibility in Income Tax Case.

Customs

Court Denies Provisional Release of 552 Cartons of Undeclared Sewing Machine Needles in Import Case.

Green Pepper Misclassified as Spice, Not Vegetable, Sparks Legal Proceedings Over Bills of Entry Declarations.

Service Tax

Court Rules Against Restricting Input Tax Credit to One Unit for IP Rights and IT Services.

Show Cause Notice Based Only on Audit Objections Cannot Allege Suppression: Legal Decisions Affirm.

Appellant's Non-Disclosure of Renegotiation Leads to Extended Limitation Period for Service Tax Assessment.

Central Excise

Appeal Dismissed for Non-Deposit; Quasi-Judicial Authorities Can Exercise Inherent Recall Powers for Justice.

Department Can Only Appeal Low-Value Excise Cases if Exceptions Apply; Must Maintain Consistency Across Assessees.

VAT

Authorities Must Prove Inability to Recover from Company Before Targeting Director in Recovery Proceedings.

Case Laws:

GST

Income Tax

Customs

Corporate Laws

Insolvency & Bankruptcy

PMLA

Service Tax

Central Excise

CST, VAT & Sales Tax

Indian Laws

Quick Updates:

TMI Tax Updates - e-Newsletter
December 26, 2018