Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 27, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Profiteering - supply of Peps Spring Koil Bornell Normal Maroon 75x60x6" Mattress - the rate of tax on the said product has increased from 14.5% (2% CST + 12.5% Excise) to 28% and therefore the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017.
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Profiteering - supply of “Panasonic LED TH43E200DX#45580” - the rate of tax in the Post-GST era has also been increased from 26.79% to 28%, therefore, the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017.
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Profiteering - supply of Readymade Garments - benefit of reduction in the rate of tax not passed on - the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017.
Income Tax
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Extending the due date for furnishing of report under section 286 (4) of the Income-tax Act, 1961
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Explanatory Notes to the Provisions of the Finance Act, 2018
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Levy of interest u/s 201(1A) - Delay in depositing TDS to government - When the assessee has made payment of TDS on 07.07.2014 by way of online payment and the same was debited from his account on 07.07.2014, the same is to relate back with date of online payment i.e. 07.07.2014 and not 08.07.2014 - No interest liability.
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Reopening of assessment - the reopening could not and should not have been declared as invalid, on the ground that he proceeded on the show cause notice issued by the Excise Department which had yet not culminated into final order.
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Penalty levied u/s 271(1)(c) - the mere disallowance under section 43B would not amount to concealment of income or furnishing inaccurate particulars of income - no penalty.
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Disallowance of proportionate revenue expenditure - allocating adhoc 10% of other expenses to work-in-progress account - AO directed to allocate 25% of other expenses of as directly related to the project to be capitalized under the head ‘work-in-progress account’.
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TDS u/s 194A - disallowance u/s 40(a)(ia) - non deduction of tds on interest paid - CA has certified that the payee (Tata Capital Finance Services Ltd.,) has accounted for interest received from the assessee as its income and has paid the tax on such interest - no addition.
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Entitlement to exemption u/s 10AA - whether the assessee who is operating his business from the unit of SEZ and to carries on trading activities in the nature of exporting shall eligible for exemption under Section 10AA? - Held Yes
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Cancellation of registration u/s 12AA - Display and distribution of religious books free of cost in a small book shop without charging any rent or electricity charges would not change the core and primary nature of charitable activity - benefits of exemption cannot be denied to the assessee.
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Disallowance made by the Assessing Officer by simply invoking clause (ii) to Rule 8D without recording any satisfaction in terms of Section 14A would not be in accordance with and as per the terms of the statute.
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Capital gain computation on the basis of stamp duty valuation of the property in question - invoking section 50C - Since there is a gap of 3 years between MOU and execution of sales deed, valuation taken by stamp authority cannot be adopted..
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Disallowance to 10% of the sub brokerage expenses - the Tribunal not accepting 20% disallowance and limiting the disallowance to 10% in these facts cannot be said to be perverse in any manner. the Tribunal not accepting 20% disallowance and limiting the disallowance to 10% in these facts cannot be said to be perverse in any manner.
Customs
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Smuggling - 24 ct. gold unfinished rings - Baggage Rules - prohibited goods - the learned single Judge, has only directed the return of the gold seized - When it is open to the authorities to proceed in the manner known to law, the appeal filed by them is unwarranted.
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Temporary detention of baggage - Smuggling - gold of third country origin - the import of the aforesaid gold into India was in complete violation of the aforesaid notification read with Section 11 of the Act and as such is nothing but smuggling of gold. - Tribunal wrongfully extended the benefit of section 80 to the respondents.
Corporate Law
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Striking off a company from register of ROC - failure to file balance sheet and annual returns since 2011 - If Income Tax Return is Nil it will have to be read as Nil Return of Business - there is no material or substance in those returns to show that the conclusion drawn by NCLT are perverse.
Indian Laws
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Review of policy on Foreign Direct Investment (FDI) in e-commerce
IBC
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Corporate insolvency process - Corporate Debtor has failed to demonstrate that there was a pre-existing dispute in regard to quality and standard of goods supplied by the Operational Creditor
Service Tax
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The appellant/assessee being a proprietary concern immediately paid the entire liability of service tax along with interest and filed ST-3 returns, though belatedly. - No penalty.
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Penalty u/s 77 of FA - Issue on doubt - site formation service - The impact of clarificating circular dated 12.11.2007 has not been considered at all. As the other matters need a relook - matter restored before the CESTAT
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Demand of Service Tax - Remuneration paid to the directors of the company - Reverse charge mechanism - in the absence of documents such as TDS Certificate, Ledger Account and other related documents substantiating appellant’s claim of employer-employee relationship, it is difficult to answer in favour of assessee.
Case Laws:
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GST
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2018 (12) TMI 1408
Permission for manual filing of appeal - contention of the petitioner is that, it is not in a position to upload the appeal electronically - Held that:- the appellate authority will consider such appeal papers as the appeal of the petitioner and will dispose of the same in accordance with law. -This order will not be construed to mean that, the petitioner is not required to comply with the other provisions regarding appeal including pre‐deposit. In the event, pre‐deposit as required is made by the petitioner for preferring the appeal within seven days from date and in the event, the petitioner complies with other formalities of the appeal, the appellate authority is requested to consider the appeal of the petitioner to be within the period of limitation. Petition disposed off.
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2018 (12) TMI 1407
Grant of interim bail and not regular bail - grievance of the petitioner is that the learn ed Magistrate has granted interim bail and is not considering the regular bail, though the application is pending before him - violation of certain provisions of GST Act. - Held that:- The learned Magistrate of Special Court (Economic Offences), Bengaluru, is directed to consider the application of the petitioner for regular bail in accordance with law and pass orders expeditiously - petition disposed off.
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2018 (12) TMI 1406
Filing of GST TRAN-1 - input tax credit - the grievance of the petitioners is that so far, no such Nodal Officer is appointed, which is not refuted by the learned Standing Counsel - Held that:- On a perusal of the typed set of papers accompanying the petition, this Court finds the various communications addressed by the petitioners with regard to the technical glitches faced by them in filing TRAN-1. Going by the supporting documents filed in the typed set of papers, this Court is satisfied that the petitioners have made genuine attempts to file their returns, which satisfies the ingredient of the circular in Circular No. 39/13/2018-GST also. Petitions are disposed of, with a direction to the respondents to open the portal, so as to enable the petitioners to file their TRAN-1 electronically for claiming the transitional credit and allow the input credits.
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2018 (12) TMI 1405
Refund of integrated tax paid - opportunity of personal hearing not provided - principles of natural justice - Held that:- It is evident that the respondent has chosen to pass the impugned order not only by ignoring the reply submitted by the petitioner dated July 13, 2018, filed in response to the deficiency memo dated July 4, 2018 and also in violation of the principles of natural justice, as admittedly the petitioner was not afforded with the personal hearing, even though such request was specifically made by the petitioner through their reply dated July 13, 2018. The respondent has chosen to reiterate the deficiencies already pointed out in the deficiency memo, as the reason for rejecting the refund application, without considering the explanation given by the petitioner, as to how such deficiencies pointed out by the respondent are either improper or not warranted. Therefore, this court is of the view that the respondent should consider the application already filed by the petitioner once again on merits. Appeal allowed by way of remand.
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2018 (12) TMI 1404
Profiteering - supply of Readymade Garments - benefit of reduction in the rate of tax not passed on - Section 171 of Central Goods and Service Tax Act, 2017 - Held that:- here was no reduction in the rate of tax on the above products w.e.f. 01.07.2017, hence the anti-profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted. Also, there is no increase in the per unit base price (excluding tax) of the above products and therefore the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017. There is no merit in the application - application dismissed.
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2018 (12) TMI 1403
Profiteering - supply of “Panasonic LED TH43E200DX#45580” - benefit of reduction in the rate of tax not passed - Section 171 of CGST Act, 2017 - Held that:- It is apparent from the perusal of the facts of the case that there was no reduction in the rate of tax on the above product w.e.f. 01-07-2017 and that the rate of tax in the Post-GST era has also been increased from 26.79% to 28%, therefore, the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017. There is no merit in the application - application dismissed.
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2018 (12) TMI 1402
Profiteering - supply of Peps Spring Koil Bornell Normal Maroon 75x60x6" Mattress - benefit of reduction in the rate of tax not passed - Section 171 of CGST Act, 2017 - whether there is a case of reduction in the rate of tax and whether the provision of section 171 of CGST Act, 2017 are attracted in the case? - Held that:- It is clear from the perusal of the facts of the case that there was no reduction in the rate of tax on the above product w.e.f. 01-07-2017 and that the rate of tax on the said product has increased from 14.5% (2% CST + 12.5% Excise) to 28% and therefore the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017. Application dismissed.
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2018 (12) TMI 1401
Profiteering - supply of “Granure Hard Nero-10 MM & Granure Hard Crema-10 MM Tiles” - benefit of reduction in rate of tax not passed on - Section 171 of the CGST Act - Held that:- It is evident that the base prices of both the products had remained same. It is also observed from the Annexure-6 attached with the Kerala Screening Committee's report that sale price of these products was reduced from ₹ 1037.52 (pre-GST revision) to ₹ 840.68 (post-GST revision) when the GST rate on the above items was revised from 28% to 18%. Thus it is clear that the base prices have not changed and accordingly the selling prices of the products have been reduced. This fact has also not been disputed by the representative of the Applicant No. 1. It is apparent from the perusal of the facts of the case that the Respondent has duly passed on the benefit of reduction in the tax rate by keeping the base price constant thus reducing the selling price of the products in question. Therefore the anti-profiteering provisions contained in Section 171 (1) of the CGST Tax Act, 2017 are not attracted - thus, Respondent has not contravened the provisions of Section 171 of the CGST Act, 2017. Application dismissed.
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Income Tax
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2018 (12) TMI 1400
Transfer of cases u/s 127(1) - reasons for transfer - Held that:- There is no quarrel that a case can be transferred for coordinated investigation. At the same time, it is also necessary for the authority to say that on what reasons, such coordinated investigation is required and that statement is to be clearly spelt out in the order transferring the case from one Officer to another Officer. When such reasoning is not available in the present case, this Court is inclined to set aside the impugned order and remit the matter back to the first respondent to pass a fresh order expressing the reasons for transfer. At this juncture, this Court makes it very clear that it is not expressing any view on the merits of the reasons stated in the show cause notice as well as the objections raised by the petitioner opposing such transfer, as it is for the first respondent to consider the matter afresh and pass order by stating reasons. Accordingly, the writ petition is allowed and the impugned order dated 26.06.2018 is set aside. Consequently, the matter is remitted back to the first respondent to pass a fresh order on merits and in accordance with law
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2018 (12) TMI 1399
Nature of expenditure - technical knowhow expenditure - revenue or capital expenditure - only objection of the Assessing Officer was that by virtue of the amendment in Section 32, this position would no longer be valid - Held that:- AO did not seriously dispute that the expenditure was in the nature of revenue expenditure. We notice that by virtue of such amendment in subsection (1) of Section 32 sub clause (ii) of subsection (1) of Section 32 merely grants depreciation on the listed intangible assets, in absence of which, the assessee would not be entitled to such depreciation. This provision however, cannot be pressed in service to examine whether certain expenditure for acquisition of know-how or similar intangible asset is revenue or capital expenditure. It would depend on the nature of expenditure. If it is a capital expenditure, it will be eligible for depreciation in terms of Section 32(1) of the Act. If it is revenue expenditure and expended wholly or exclusively for the purpose of the business, in any case, the assessee would be entitled to deduction thereof. Income accrued in India - attempt to tax the income in the hands of the assessee in relation to the assessee's units situated at USA and UK - Held that:- Nothing is available on record to indicate any challenge by the Revenue to the order of the Tribunal for Assessment Years 199697 and 1997-98 before any higher forum. It therefore follows that the orders of the Tribunal on the above issue for the Assessment Years 1996-97 and 1997-98, have been accepted by the Revenue. Therefore, the Revenue can have no grievance with the impugned order of the Tribunal as it merely follows its earlier orders which have been accepted. Further, no distinguishing features in the present Assessment Year from that existing in the Assessment Years 1996-97 and 1997-98 have been brought to our notice which would justify our taking a different view on this issue for the subject Assessment Year.
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2018 (12) TMI 1398
Disallowance to 10% of the sub brokerage expenses - Held that:- Taking into consideration the volume of the business, the assessing officer was directed to recompute disallowance at 10% of sub-brokers expenses claimed by the assessee in its books of accounts. We further note that that there is no dispute regarding genuineness of the expenses. The only issue with respect of percentage of expenses to be disallowed on account of payment made to the sub-brokers. We find that considering the facts and circumstances of the case, the Tribunal not accepting 20% disallowance and limiting the disallowance to 10% in these facts cannot be said to be perverse in any manner. Further, in any view of the matter the percentage of disallowance of expenses on the basis of estimate which is a plausible estimate, no substantial question of law would arise. Thus, both the appeals do not merit consideration.
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2018 (12) TMI 1397
Reopening of assessment - suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty - eligible reasons to believe - Held that:- The information supplied by the investigation wing to the Assessing Officer thus formed a prima facie basis to enable Assessing Officer to form a belief of income chargeable tax having escaped assessment. Assessing Officer perused the information supplied by the investigation wing and having formed the belief that income chargeable to tax had escaped assessment, cannot be stated to have acted mechanically. Further, mere fact that assessee had asked for certain information from the Assessing Officer, which at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the impugned notice. The entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report and show cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the AO also formed a belief that income chargeable to tax had also escaped assessment. AO had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the reopening could not and should not have been declared as invalid, on the ground that he proceeded on the show cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. AO truly had to form a bona fide belief that income had escaped assessment. - Decided against assessee
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2018 (12) TMI 1396
Stay petition - Held that:- We reckon the petitioner has exercised on time its statutory remedy of filing an appeal. It appears that it has also filed a stay petition. Procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition. Therefore, dispose of the writ petition directing the respondent authority to defer coercive steps until the 4th respondent considers the stay petition. Also hope that the 4th respondent will dispose of the stay petition expeditiously.
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2018 (12) TMI 1395
Capital gain computation on the basis of stamp duty valuation of the property in question - invoking section 50C - stamp duty authority had assessed the value of the property on the date of the execution of development agreement - Held that:- It can be seen that there were two significant factors why the CIT(A) and the Tribunal did not adopt the valuation of the stamp authority for the purpose of collecting capital gain tax in the hands of the assessee. Firstly, there was a gap of nearly 3 years between the date of execution of the MOU and the execution of a formal development agreement. Obviously, the valuation made by the stamp authority was as on the date of the execution of the development agreement. Secondly and more importantly, the stamp valuation of ₹ 4.63 crores was for a larger area of 7644 sq. meters where the assessee had assigned the development rights only with respect to 3872 sq. meters. No evidence has been produced by the Revenue at any stage that the assessee actually received the value which was adopted by the stamp valuation authority. Even the development agreement clearly mention the area and the assessee is not the owner of the TDR, thus, cannot be saddled with the value adopted by the stamp duty purposes as the assessee is only the owner of 3872 sq.mts. for which he received the consideration of ₹ 2,51,00,000/, thus, the capital gain has to be computed on the amount which the assessee actually received, consequently, we are in agreement with the finding of the CIT (Appeals) that on the basis of deeming provision of section 50C, no addition can be made. - Decided against revenue
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2018 (12) TMI 1394
Penalty levied u/s 271(C) - whether the assessee's transactions of sale of shares would result into capital gain or business income? - taxing the assessee's house properties which the assessee had not offered to tax - Held that:- Tribunal noted that in absence of any concealment of particulars of income, penalty cannot be attached. With respect to taxing the assessee's house properties which the assessee had not offered to tax. Here also the Tribunal came to the conclusion that the explanation offered by the assessee for not offering the notional rental income of such properties was a plausible explanation. The Tribunal, therefore, did not confirm the decision of the Assessing Officer to impose penalty. We are broadly in agreement with the view of the Tribunal. The Tribunal having examined the facts on record, has come to factual conclusions. No question of law in this respect therefore, arises.
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2018 (12) TMI 1393
Rejection of books of accounts - bogus purchases - N.P. determination - Held that:- It was the case of the respondent that all purchases were made by payment through Banks an opportunity to cross-examine sought by the respondent ought to have been given. This opportunity of cross-examination was not given only because the AO was running short of time to complete the account. It further holds that the net profit rate of 11 % the entire purchases made during the year was applied by the CIT (A) to determine the addition. Thus, the Tribunal restricted to only 11% out of the purchases of ₹ 3.09 crores made from the seven parties. This in view of the fact that consumption of goods is not denied/ disputed. We find the impugned order of the Tribunal has taken a view on facts which is possible view. It cannot be said to be perverse.
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2018 (12) TMI 1392
Disallowance u/s 14A - expenses attributable to exempt income - Non recording of satisfaction - Held that:- Assessment order is silent and does not examine and discuss the relevant facts relating to disallowance under Section 14A. The order proceeds to compute disallowance under clause (ii) of Rule 8D of the Income Tax Rules, 1962 without recording necessary satisfaction under Section 14A of the Act. The Assessing Officer had erroneously assumed that Rule 8D applies to all cases of exempt income, without examining and deciding whether or not the deduction or disallowance, if any, made by the assessee was satisfactory and proper Disallowance made by the Assessing Officer by simply invoking clause (ii) to Rule 8D without recording any satisfaction in terms of Section 14A would not be in accordance with and as per the terms of the statute. - decided in favour of assessee.
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2018 (12) TMI 1391
Allowability of commission payment - Genuineness of claim - AO has been asked to re-examine the claim for deduction of alleged commission payments - Held that:- We do not find any justification and reason to review and set aside the direction for remand. However, we are not making any comments and giving detailed reasons on merits to avoid prejudice. Observations of the Tribunal are factual. Tribunal was required to set aside the findings recorded by Commissioner of Income Tax (Appeals) and therefore, certain observations have been made. These observations were only for the decision of the appeal by the Tribunal and are not to be treated as conclusive findings on merits. If the findings were final and conclusive, then no order of remit was necessary. AO has been asked to re-examine the issue of the commission allegedly paid in its entirety on merits. AO would examine the question of genuineness of the commission payment and all aspects relating to allowability of the stated expenditure under Section 37 or Section 28 of the Income Tax Act, 1961. We also clarify that we have not interfered with the direction of the Tribunal regarding production/appearance of the commission agents for verification about rendition of services, production of relevant information and details to prove allowability of commission expenses.
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2018 (12) TMI 1390
Cancellation of registration u/s 12AA - charitable activities - Display and distribution of religious books free of cost in a small book shop without charging any rent or electricity charges - Held that:- The assessee had set up a bookshop in the assessee’s hospital for displaying Christian literature, which were distributed free of costs. Although no rent or electricity charges were received, as per the Assessment Order, the assessee had violated and had incurred disqualification under Section 13(1)(b) of the Act. The argument of the Revenue fails to notice however that the primary function of the assessee was to operate and run a hospital and provide medical facilities to public at large. Medical aid and facilities were not denied on the ground of religion or restricted to persons of a particular religion. General public was the beneficiary. Book shop had also stored and was distributing books on philosophy, moral science etc. In cases of illness etc. patient and attendants do like to read religious books and pray. To attract and fall foul of Section 13(1)(b) the trust or the institution should be created or established for the benefit of a particular religion or group. Display and distribution of religious books free of cost in a small book shop without charging any rent or electricity charges would not change the core and primary nature of charitable activity carried out by the respondent-assessee as to attract disqualification under Section 13(1)(b) of the Act. Recovery of expenses from the employees was found to be much less than the actual expenditure incurred by the assessee - Held that:- This Court is of the opinion however, that part payment of electricity or water charges or incurring maintenance expenses for the residential accommodation for employees would not result in violation of Section 13(2)(b) of the Act. This provision is attracted when land, building or other property of the trust or charitable institution is made available to a person referred to in subsection (3) to Section 13 without charging adequate rent or other compensation. Assessing Officer has not pointed out any abnormal or high expenditure on the aforesaid account made to benefit a particular employee covered under Section 13(3) of the Act. It is not shown that the employees were not discharging duties of equal market value. Residential accommodation within the hospital and assets owned by the respondent-assessee had to be maintained. Payment of electricity charges etc. would depend on the terms of employment. The assessment order does not refer to the specific details of purported ‘subsidy’ paid/incurred and also how employees were covered under Section 13(3) of the Act. As not disputed and challenged that the respondent-assessee was providing medical facilities including free medical facilities. Cost of medicine would depend on several aspects and assumptions should not be drawn. Purchase price of medicines was not disputed. Charging of market prices from those who can afford, and lower prices from others attending free OPD would in fact support the stand of the respondent-assessee. Even otherwise the assertion would not establish and show that the respondent-assessee was not providing or was not engaged in charitable activities. Income and revenue earned have not been diverted or misused. Without controverting the statement the Assessing Officer held that there was a possibility that the Specific Purpose Fund might have been credited to the corpus directly in earlier years. This possibility, he observed, could not be ruled out. This adverse finding was purely an assumption and not a finding in law. In case of doubt, the Assessing Officer should have examined and verified the issue in depth and detail. The respondent-assessee, as is apparent, had stated that the amount of the Specific Purpose Fund had been examined in earlier years and the addition was not justified. - Decided in favour of assessee
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2018 (12) TMI 1389
Entitlement to exemption u/s 10AA - whether the assessee who is operating his business from the unit of SEZ and to carries on trading activities in the nature of exporting shall eligible for exemption under Section 10AA? - Held that:- When the learned CIT(A) as well as learned Tribunal has observed and held that the assessee shall be entitled to exemption / deduction under Section 10 AA of the Act, it cannot be said that the learned Tribunal has committed any error. Learned counsel for the Revenue is not in a position to point out any contrary decision. Under the circumstances, no substantial question of law arise. See DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2 VERSUS GOENKA DIAMOND & JEWELLERS LTD.[2012 (3) TMI 258 - ITAT JAIPUR] - decided in favour of assessee
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2018 (12) TMI 1388
Levy of interest u/s 201(1A) - Delay in depositing TDS to government - online payment - Held that:- In the instant case, undisputedly, the assessee has made online payment of TDS due for the quarter ending 30.06.2014 on 07.07.2014 which was treated having been paid on 08.07.2014, the date of debiting the said amount from the account of the assessee. When the assessee has made payment of TDS on 07.07.2014 by way of online payment and the same was debited from his account on 07.07.2014, the same is to relate back with date of online payment i.e. 07.07.2014 and not 08.07.2014, as online payment is on better footing than payment made by cheque as has been discussed by Hon’ble Apex Court in K. Saraswathy vs. P.S.S. Somasundaram Chettiar [1989 (5) TMI 318 - SUPREME COURT] So, following the decision of K. Saraswathy vs. P.S.S. Somasundaram Chettiar (supra) as well as P.L. Haulwel Trailers Ltd. vs. DCIT [2006 (1) TMI 213 - ITAT MADRAS-B], we are of the considered view that the assessee has made payment of TDS for the quarter ending on the due date and no interest is to be charged. Consequently, ground no.1 of AY 2015-16 is determined in favour of the assessee.
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2018 (12) TMI 1387
N.P. rate determination - rejection of books of accounts - Held that:- The assessment order and submissions of the appellant show cause was issued vide order sheet entry dated 13.01.2015, to the appellant as to why his book results should not be rejected and profit rate of 8% not be applied. After considering his reply have no option but to reject the books of accounts of the appellant and determine income at 8% of the total turnover…”. The order of CIT(A) is silent on what reply was furnished to her by the assessee; and why it did not find favour with her. CIT(A) has also not explained why she has selected 8% as the net profit rate. As the order of CIT(A) is silent on these important aspects, we are of the view that the entire issue requires fresh consideration by CIT(A) for a denovo order. Accordingly, we restore the issues in dispute to the file of the CIT(A) for a fresh denovo order. CIT(A) is directed to pass a speaking order, after giving opportunity of being heard to the assessee. - Decided partly in favour of assessee for statistical purposes.
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2018 (12) TMI 1386
Penalty u/s 271(1)(c) - defective notice - non striking of the irrelevant clauses in notice - non deleting of inappropriate words - Held that:- the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT [2007 (5) TMI 198 - SUPREME COURT] has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. Accordingly levy of penalty suffers from non-application of mind. In the background of the aforesaid legal position and, having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 15.1.2014 without striking off the irrelevant words, the penalty proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable. Also see COMMISSIONER OF INCOME TAX & ANR. VERSUS M/S SSA'S EMERALD MEADOWS [2016 (8) TMI 1145 - SUPREME COURT] - decided in favour of assessee.
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2018 (12) TMI 1385
Addition of bogus purchases - concerned parties were not available at the given address as found by the department during the post search enquiries - Held that:- In the present case no blank cheque books and vouchers of the alleged four concerns have been found. Therefore, the decision in the case of N.K. Proteins Ltd.[2003 (1) TMI 228 - ITAT AHMEDABAD-C] cannot be applied to the facts of the present case. Similarly, in the case of Vijay Proteins Ltd.[1996 (1) TMI 144 - ITAT AHMEDABAD-C] the purchases were made through brokers and such documents relating to the brokers were produced for the first time before the CIT(A) and it was also found that there was close link between the assessee company and one Mr. P. Therefore, the above decision relied on by the ld. DR is also not applicable to the facts of the present case. In view of the above discussion, we do not find any infirmity in the order of the CIT(A) deleting the above addition on account of the purchase from the four parties. Accordingly, the order of the CIT(A) is upheld and the ground of appeal No.2 of the Revenue is dismissed. Addition invoking the provisions of section 40A(2)(b) - Addition on account of disallowance of salary - Held that:- Smt. Shibani Khosla was receiving salary and bonus from assessment year 2006-07 to 2010-11 ranging from ₹ 3,74,000/- during financial year 2006-07 which has gone up to ₹ 7,80,000/- in assessment year 2010-11. Even in the assessment order while the A.O. mentions that the kind of work rendered by Mrs. Khosla would have fetched her ₹ 3000/- to 5000/- per month in an industrial area of Ghaziabad. Thus, the A.O is not saying that Mrs. Khosla has not done any work for the assessee company. Therefore, he could not have disallowed the entire salary. Since the ld. CIT(A) after considering the totality of the facts of the case has restricted ₹ 1,80,000/- as against ₹ 4,20,000/- disallowed by the A.O., we are of the considered opinion that the order of the ld.CIT(A) is justified under the facts and circumstances of the case. - Decided against revenue
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2018 (12) TMI 1384
Unexplained cash receipts u/s 68 - Held that:- The addition is unsustainable as the cash deposited is as per the books of accounts being regularly maintained by the assessee. The Assessing Officer has not pointed out which cash receipt or deposited in the bank is unaccounted for. From the documents filed before the Assessing Officer placed it is evident that assessee has given explanation for each receipt and deposit in the bank. Since the facts are identical following our order in the case of ACIT vs. Piron Education Pvt. Ltd. [2018 (11) TMI 339 - ITAT DELHI]we uphold the order of the Ld. CIT(A) deleting this addition Addition on account of bogus expenses - Held that:- The assessee is carrying on regular business and all the expenses have been actually incurred. Further the assessing officer has made the disallowance arbitrarily ignoring the fact that assessee has actually carried out the business. As regard the survey report on going through the assessment order we note that though the Assessing Officer is making a reference to the survey report but is ignoring the fact that the allegations made are generic and in the light of evidences submitted by the assessee before him how he has ignored the same. It is important to point out that the assessing officer has not rejected the books of accounts nor has held that the assessee is not carrying any business. The expenses incurred are accounted for in the books of account and there is no material brought on the record by the AO that these expenses have not been actually incurred. Addition u/s 40A(2)(b) on account of remuneration to director - AO has made the above disallowance in respect of payment made to Mr. Abhishek Asthana who holds only 5% share of the assessee company - Held that:- CIT(A) has deleted the addition holding that the remuneration paid is neither excessive nor unreasonable. Mr. Abhishek Asthana is a qualified Chartered Accountant and looking after the overall affairs. The learned DR could not controvert the above facts. The remuneration paid to Mr. Ashthana being a Chartered Accountant can’t be said to be excessive. Further he is looking after the overall affairs. The observation the assessing officer on this issue is factually incorrect. Addition in respect of the service charges received by the assessee from M/s ESAJV D-Art Indo India Pvt. Ltd. - Held that:- The facts of the present case are identical to the facts in the case of Piron Education Pvt. Ltd. (Supra). This entire amount of ₹ 38,60,500/- forms part of the receipt declared by the assessee as its income in the Profit & Loss account of the year under consideration. Accordingly following the reasoning given in our order dated 31.10.2018 in the case of ACIT vs. Piron Education Pvt. Ltd., (Supra), we direct the Assessing Officer to delete the entire addition on this account. In the result ground no. 4 of Revenue’s appeal is dismissed. Unexplained investment under section 69 - Held that:- Analysis of each of the creditors shows that assessee has filed sufficient evidences so as to establish identity, creditworthiness and genuineness of the transactions. There is nothing abnormal so as to draw any adverse inference against the assessee. It may be relevant to point out that he AO has made addition without application of mind. This fact gets established that AO has made addition of the amount paid back and not that of the amount received by the assessee. The above analysis clearly demonstrate that the assessee has discharged its onus fully in respect of the credit. The observation made by the AO in the assessment order are factually incorrect. AO has not brought any material so as to draw any adverse inference. He has indulged into surmises. The CIT(A) has rightly deleted the addition. Unexplained cash credits - Held that:- In the said appeal in the case of M/s Piron Education Pvt. Ltd. we have held that the addition is unsustainable as the cash deposited is as per the books of accounts being regularly maintained by the assessee and such cash in books of accounts represents the fee receipt from the students which has been included in the income. Since the facts are identical following our order and the reasoning in the above said order we uphold the order of the Ld. CIT(A) deleting this addition. And this ground is dismissed. Addition being false expenses and unexplained credit of money - Held that:- Disallowance has been made on the allegation that during the course of survey at the business premises of the assessee no evidence of any activity or the assets of the company was found. These expenses pertain to fixed assets and there was no justification for making this addition. The reasoning given by the AO is incorrect. As held in ground no. 2 the assessee is very much carrying on the business and this addition made by the AO is unsustainable. Further the addition of ₹ 6,76,299/- has been rightly deleted by the Ld. CIT(A). This was the loan given by the assessee in the preceding year and has been received back during the year. As regards the further addition of ₹ 8,48,803/- the same represents the creditors for the various services and expenses outstanding as on last day of the year. CIT(A) was correct in deleting these additions.
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2018 (12) TMI 1383
TDS u/s 194A - disallowance u/s 40(a)(ia) - non deduction of tds on interest paid - Held that:- Assessee has placed on record the copy of the CA Certificate (this Certificate was also produced before CIT(A)) wherein the CA has certified that the payee (Tata Capital Finance Services Ltd.,) has accounted for interest received from the assessee as its income and has paid the tax on such interest. In such a situation, no disallowance u/s 40(a)(ia) is called for in view of the decision of CIT Vs. Ansal Land Mark Township Pvt. Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] wherein it has held that insertion of second provisio to Sec.40(a)(ia) of the Act is declaratory and curative in nature and has retrospective effect from 01.04.2005. As long as payee or resident has filed its return of income disclosing the payment received by and in which the income embedded by it and has also paid taxes on such income, then no disallowance can be made u/s 40(a)(ia). Before us Revenue has not pointed out any contrary binding decision in its support - no disallowance u/s 40(a)(ia) of the Act is called for in the present case and thus, the ground of the assessee is allowed.
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2018 (12) TMI 1382
Reopening of assessment - claim of interest u/s 24 (b) against the rental income from Dhanwatay House - Held that:- Though an A.O in the backdrop of the judgment in the case of Goetze (India) Ltd. Vs. CIT [2006 (3) TMI 75 - SUPREME COURT] cannot entertain a claim for deduction/relief which had not been raised by the assessee in its return of income, otherwise than by filing a revised return of income, however, the appellate authorities were vested with a jurisdiction to entertain such claim as long as the same was borne from the facts available on record. We thus, without going into the intricacies of the facts we are of the considered view that on the basis of the judgment in the case of Pruthvi Broker and Share Holders Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] no infirmity does emerge from the order of the CIT(A) who remaining well within his jurisdiction had directed the A.O to allow deduction of the interest expenditure under Sec. 24(b) to the assessee also in respect of the Dhanwatay House, as per the method which was suggested by him for establishing a nexus between the interest bearing borrowed funds and utilization of the same towards the aforementioned properties, viz. (i) Dhapla House property; and (ii) Dhanwatay House property. We thus finding ourselves to be in agreement with the view taken by the CIT(A) - Decided against revenue Entitlement for claim of deduction of the interest expenditure u/s 24(b) in respect of the Dhanwatay House property, to the extent of his share of income from M/s M.D. Dhanwatay & others, AOP - Held that:- As given a thoughtful consideration to the observations of the A.O, and unable to persuade ourselves to subscribe to the interpretation of Sec. 67A(3) so accorded by him. Admittedly, the interest paid by a member on capital borrowed by him for the purpose of investment in the AOP shall, in computing his share chargeable under the head “Profit and gains of business or profession” is to be deducted from his said share of income. In case before us the claim of interest expenditure of the assessee, is not in context of any borrowed capital which had been utilized for making of an investment in the AOP. Rather, the aforesaid interest expenditure pertains to the capital which was borrowed by the assessee for an investment in the property, the rental income of which only pursuant to a pending litigation amongst the members of the Dhanwatay family before the Hon‟ble High Court, was deposited in the bank account standing in the name of M/s M.D. Dhanwatay and others, AOP - the aforesaid interest expenditure pertaining to the funds which were utilized by the assessee in respect of Dhanwatay House property, cannot be placed at par with the interest on capital which was borrowed by the assessee for the purpose of making an investment in the AOP - in terms of our aforesaid observations are persuaded to subscribe of the view taken by the CIT(A) who in our considered view had rightly concluded that the share of profit in the form of rent received by the assessee was liable to be taxed under the “Income from house property”, and the assesses would be eligible to claim deduction of the interest expenditure against the said income, though with a rider that such deduction was not to exceed the share of income of the assessee as a member of the AOP. - Decided against revenue
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2018 (12) TMI 1381
Disallowance of proportionate revenue expenditure - allocating adhoc 10% of other expenses to work-in-progress account - Held that:- Neither, the assessee has furnished any details and reasons for allocating adhoc 10% of other expenses to work-in-progress account nor the AO has given any reasons for adopting the basis of capital deployment, i.e. work-in-progress ratio to the total assets’ ratio to allocate other expenses. The assessee as well as the AO has gone on adhoc basis of allocation of expenses. From this, it is clear that neither the assessee has justified treatment of other expenses being revenue in nature, nor the AO has proved that these expenses are directly relatable to the project undertaken by the assessee to be capitalized to work-in-progress account - neither the assessee has justified its allocation of 10% expenses to work-in-progress nor the AO has justified in allocating the expenditure on the basis of work-in-progress to total asset ratio. A reasonable percentage of expenditure debited under the head ‘other expenses’ needs to be allocated to work-in-progress account. Accordingly, we direct the AO to allocate 25% of other expenses of ₹ 24,74,231 as directly related to the project to be capitalized under the head ‘work-in-progress account’. We, order accordingly.
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2018 (12) TMI 1380
Disallowance of deduction claimed towards market value of Floor Space Index (FSI) sold prior to the sale of land and building - discharge of onus by assessee - Held that:- It is relevant to observe, during the course of proceedings before the DVO, though, the assessee had taken the aforesaid plea of sale of FSI, however, the DVO after due enquiry with the TMC has found that no such sale of FSI of 15,000 sq. ft was effected by the assessee, which is evident from the fact that FSI sanctioned at the time of sale of land by the assessee was considering the area of 2550 sq. mts. The DVO has observed, had it been the fact that the assessee had sold FSI of 15,000 sq. ft. in 1986, the TMC definitely would have deducted the area of 15,000 sq. ft. from the total plot area while sanctioning FSI on the plot of land sold by the assessee. If the assessee claims that it has sold FSI of 15,000 sq. ft in the year 1986, the onus is entirely on the assessee to prove such facts through cogent evidence. The assessee has failed to discharge such onus. When the assessee is not in a position to furnish any cogent evidence to prove its claim of sale of FSI of 15,000 sq. ft., such claim cannot be accepted on mere face value. When the assessee has failed to prove its claim at the stage of departmental proceedings as well as before us by furnishing any cogent documentary evidence, we do not find any reason to interfere with the decision of CIT(A) on this issue. Applying the provisions of section 50C(2) after completion of the assessment proceedings - Held that:- As could be seen from the material on record, before the AO also the assessee has not raised any objections on the issue of reference being made u/s. 50C(2) of the Act to the DVO. In any case of the matter, before the first appellate authority, the assessee has specifically raised the issue of non referral of valuation to the Assessing Officer u/s. 50C(2). CIT(A) has directed the DVO to determine the value of the asset and the assessee has also participated in such proceedings. In any case of the matter, by referring the valuation to the DVO, the assessee is in no way prejudiced, since, the value determined by the DVO is much less than the value determined by Stamp Valuation Authority for the purpose of stamp duty. Therefore, we do not find any merit in the ground raised. Addition being the scrap value of factory shed - Held that:- As could be seen from the facts emanating from record, assessee itself has credited aforesaid amounts to the Profit & Loss account. Therefore, as a natural corollary the amounts were required to be offered as income, unless, the assessee through proper evidence proves that it has not received such income. The assessee having not done so, the Assessing Officer was justified in making the addition of the aforesaid amounts. - Assessee appeal dismissed.
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2018 (12) TMI 1378
Penalty levied u/s 271(1)(c) - disallowance u/s 43B because of technical reason of non payment of the amount before the due date of filing the return of income under section 139(1) - Held that:- Once all the relevant details which were disclosed by the assessee in the return of income and books of account were found to be correct, then the case would not fall in the category of furnishing inaccurate particulars of income or concealment of income. It is also not in dispute that the VAT was due and payable and, therefore, the same is an allowable business expenditure except the condition under section 43B that the assessee has to pay the said amount on or before the due date of filing the return of income under section 139(1). Once the claim of the assessee is not found to be bogus or false but because of the reason that the assessee could not pay the amount as required under section 43B, the same was to be disallowed. The disallowance under section 43B is only because of technical reason of non payment of the amount and not because of the reason that the claim itself is not an allowable claim - there will be no revenue effect due to the disallowance made for the year under consideration and the claim was allowed in the subsequent year except on account of interest. As relevant details and facts were disclosed by the assessee and available before the AO during the course of assessment proceedings, then the mere disallowance under section 43B would not amount to concealment of income or furnishing inaccurate particulars of income attracting the levy of penalty under section 271(1)(c). Hence, we delete the penalty levied by the AO on this account. - Decided in favour of assessee.
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2018 (12) TMI 1377
Unexplained cash found deposited in the bank - admissibility of additional evidence - Held that:- Assessee has substantiated its explanation by way of filing bank statement reflecting the purchase of the said assets which was filed to the lower authorities but which has, we find, not been controverted by the Revenue at any stage. The assessee, therefore, proved the existence of the machinery which was sold in the impugned year and has therefore, substantiated its explanation to this extent. Further copy of sale invoice which was filed to the Revenue authorities also substantiates the explanation of the assessee. The Ld.CIT(Appeals) and the Assessing Officer, we hold, had erred in treating the same as additional evidence and rejecting admission of the same for adjudicating the issue. Reliance placed by the Revenue merely on the submission made by the assessee we hold is not of much relevance since the assessee has duly explained that the question raised to which was understood to be on account of purchase and sale of flat machinery with regard to which the assessee had stated that it had not sold any such machines while the sale made by the assessee related to embroidery machines. Thus addition cannot be made by holding the cash deposits as unexplained - Decided in favour of assessee
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Customs
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2018 (12) TMI 1371
Temporary detention of baggage - Smuggling - gold of third country origin - prohibited goods - N/N. 9 of 1996 Customs dated 22.1.1996 - Whether in the absence of any declaration under Section 77 of the Customs Act any benefit could be extended under Section 80 of the Act? Held that:- Admittedly, the gold seized from the respondent was of the third country origin and had not been exported to Nepal from India. It was purchased by the respondent in London and was then brought by him to Nepal. The bringing of the said gold from London to Nepal amounts to export of gold of the third country to Nepal. Thus, its subsequent import to India is prohibited by the notification - Accordingly, the import of the aforesaid gold into India was in complete violation of the aforesaid notification read with Section 11 of the Act and as such is nothing but smuggling of gold. The notification No. 11/2012-Customs dated 17th March 2012 relied upon by the counsel for the respondent is one which has been issued under Sub-section (1) of Section 25 of the Act exempting certain goods of the specified nature from duty. The said notification exempts the gold of the specified nature upto the limit of 10 Kg. from duty. The aforesaid notification is simply a notification exempting gold from the payment of duty. It does not over ride the prohibition which has been imposed by the notification dated 22nd January 1996 - the notification relied upon on behalf of the respondents dated 17th March 2012 is of no help to him. In fact, it is not applicable to the facts and circumstances of the case. The argument advanced on its basis is therefore not tenable in law. The question raised in this appeal is answered in favour the Custom Department and it is held that the benefit of Section 80 could not have been extended to the respondent by the tribunal when there was no declaration by him under Section 77 of the Act - impugned order set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1370
Provisional release of the goods - finalization of assessment of past imports not done - Held that:- On one hand, there is thus considerable delay in finalizing the assessment of the past import and on the other hand, the petitioner's future imports are allowed to be cleared under strict conditions.On one hand, there is thus considerable delay in finalizing the assessment of the past import and on the other hand, the petitioner's future imports are allowed to be cleared under strict conditions. It would be open for the respondent to issue show cause notice/s for finalizing the past assessment of the imports which will be done within four weeks from today - Subject to the petitioner cooperating with such show cause notice proceedings, final order of adjudication shall be passed within three months of the petitioner filing reply to the show cause notice/s - The future consignments of the petitioner of the same goods may be released upon the petitioner furnishing bond of the 100% of the value of the goods and further furnishing 25% bank guarantee for the differential duty payable thereon. Petition disposed off.
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2018 (12) TMI 1369
Maintainability of appeal - non-compliance with the pre-deposit - section 129(E) of the Customs Act, 1962 - Held that:- The Delhi High Court has relaxed the condition of pre-deposit - The Court has referred to a decision in Pioneer Corporation vs. Union of India [2016 (6) TMI 437 - DELHI HIGH COURT], wherein a Division Bench of this Court has held that the High Court while exercising writ jurisdiction under Article 226 of the Constitution can exercise discretion and reduce the pre-deposit in rare and deserving cases, notwithstanding the amendment made under Section 35F of the Customs Act. The statute has not withdrawn or taken away the said power vested in the writ court, which should be exercised in rare but compelling and deserving cases when the cause of justice requires such reduction. Here is a case, where there is a dispute in respect of classification of the total value of the goods. The total value of the goods is stated to be only ₹ 13 lakhs, whereas the claimed amount is ₹ 24 crores and therefore, it is a fit case where the classification has to be decided by the appellate court - ends of justice would be met if a direction is given to the petitioner to deposit a sum of ₹ 15,00,000/- and thereafter the appellate authority shall entertain the appeal - petition allowed.
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2018 (12) TMI 1368
Smuggling - 24 ct. gold unfinished rings - Baggage Rules - prohibited goods - Held that:- It is only the release of the seized goods ordered whereas, the proceedings under Section 124 had to go on. Admittedly, the authorities have not proceeded with the enquiry in this regard. In the event, the respondent is found guilty, it is always open to the authorities to proceed in the manner known to law. Though in the writ petition quashing of the seizure order was sought, the learned single Judge, has only directed the return of the gold seized. It is for the Department to proceed with the show cause notice and any reply filed by the respondent to be considered. It is for the Department to proceed with the show cause notice and any reply filed by the respondent to be considered. When it is open to the authorities to proceed in the manner known to law, the appeal filed by them is unwarranted - appeal dismissed.
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Corporate Laws
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2018 (12) TMI 1375
Striking off a company from register of ROC - whether procedure contemplated under Section 248(1) is complied with? - whether the appellant was not given an opportunity of being heard? - Held that:- As seen the record and noted that the Notice dated 20.3.2017 was issued to the appellant and he was directed to submit his defence alongwith relevant documents in his defence within thirty days from the date of receipt of the notice. Further as per Section 248(1) and 248(4) and under second proviso to the Rule 7(1) of Companies Act, 2013, STK-5 notice was given for removal of names of companies from the Register of Companies, Publication of the said notice was given in both Vernacular and English Language. Therefore, it can not be said that proper procedure was not followed and no opportunity was given to the appellant of being heard and principles of natural justice has been complied with. As gone through the record and found that the appellant has not filed Balance Sheet and Annual Returns for the financial year 2011 onwards and its directors ought to have filed statutory returns in compliance of provisions of the Companies Act. In the absence of any material being placed by appellant before the ROC, we fail to understand how ROC would know if the company is doing any business - gone through the record and gave our considerable thoughts on this issue. From the record we observe that the company was incorporated in the year 1991 and since then the company is filing its Balance Sheet and Annual Returns and they have not filed the same from financial year 2011 onwards. Therefore, it can not be believed that the non-filing of returns was a result of lack of legal awareness of the director. The company petition and company appeal has been filed by Mr. Maickavel Ravichandran, Director on behalf of the appellant company and he has stated that he is director and promoter of the company since 26th September, 2011. As perused the Articles of Association of the appellant and find that Sh M. Ravichandran was the director of the company (Page 37) in the year 1991. Similarly Mr. S. Sekar who is also now one of the directors was also a director in the year 1991. Therefore the plea of the appellant that the default in filing the returns was as a result of lack of legal awareness of the Directors of the Appellant cannot be accepted as they have been filing the same uptill the year 2010 as also observed in the impugned order. The directors of the appellant are very well aware of the legal awareness. The other issue raised by the appellant is that NCLT has erred in treating payment of nil tax and incurring of loss as tantamount to not carrying on any business. If Income Tax Return is Nil it will have to be read as Nil Return of Business. We have gone through the Income Tax Returns Acknowledgement filed by the appellant at Pages 115 and 199. We further observe that the Income Tax for the Assessment Year 2014-15, 2015-16, 2016-17 and 2017-18 has been filed in the month of February/March, 2018. We do not find that there is any material or substance in those returns to show that the conclusion drawn by NCLT are perverse.
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2018 (12) TMI 1374
Tribunal's jurisdiction to direct the Respondents (Appellants) to sell its shares to the company and the Company to buy back the shares of the Respondents (Appellants) - Held that:- From sub-section (4) of Section 59, it is clear that where the transfer of securities is in contravention of any of the provisions of the ‘Securities Contracts (Regulation) Act, 1956’, the ‘Securities and Exchange Board of India Act, 1992’ or the ‘Companies Act, 2013’ or any other law for the time being in force, the Tribunal can direct the company or a depository to set right the contravention and rectify its register or records concerned. The Tribunal has failed to notice that the petition having filed under Section 111A of the Companies Act, 1956, on transfer was required to deal with the Petitioner in terms of sub-section (4) of Section 59 of the Companies Act, 2013. For the said reason, we hold that the Tribunal exceeded its jurisdiction by annulling the shares and by directing the Respondents (Appellants) to transfer the shares to the Company. If there is contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956, the ‘Securities and Exchange Board of India Act, 1992’ or the Companies Act, 2013 or any other law for the time being in force, the Tribunal could have directed the company or a depository to set right the contravention and rectify its register or records concerned. The impugned judgment dated 5th July, 2017 cannot be upheld and the same is accordingly set aside.
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2018 (12) TMI 1373
Oppression and mismanagement - appellants argued that they have not made any claim that they are the shareholders of the first respondent and it is not their claim - Held that:- We have given a thoughtful consideration on this issue and it would have to be examined whether the first respondent is a necessary party or not and if so the appellants (the original petitioners) would have been directed to make suitable amendments. In the light of it we do not find that the dismissal of the company petition at the preliminary stage on this would be justified and at best the first respondent could only be deleted from the arrays of the parties which also we have to reach a conclusion after some examination. The other issue on which the company petition was dismissed raised in this appeal that no board resolution authorising representation of the appellant-company was presented. On this issue learned counsel for the appellants argued that no board resolution is required to be shown by shareholders of a company claiming to act in the name of that company, on the principle of derivative rights to act for and/or on behalf of, and/or in the name of the company. Learned counsel further argued that at the highest appellants (the original petitioners) could have been directed that the company shall not be allowed to be represented until such time a board resolution was presented or it could have been directed to stand stripped from the array of the appellants. We are, therefore, of the opinion that the appellants (the original petitioners) should have been given time to produce the authority to represent the company or it could have been directed to stand stripped from the arrays of the appellants. Further the second to fourth appellants have also an independent right to move the application for oppression and mismanagement against their interest even if they are representing the company. Therefore, the dismissal of the petition that they do not have a board resolution, etc., would be a partial truth only which should not amount to denial of right of a shareholder to move an application for oppression and mismanagement. The other issue raised by the respondents was that the appellants are not shareholders of the appellant-company. On the other hand, the appellants have stated that they are the shareholders of the appellant-company on affidavit, therefore, the Tribunal would have directed the appellants to present the proof of their shareholding during the course of hearing and then should have come to the conclusion whether the appellants are shareholders of the appellant-company or not. In view of the above observations, we set aside the impugned order passed in Company Petition and direct the Tribunal to rehear the company petition in view of our above observations.
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2018 (12) TMI 1372
Petition under Insolvency and Bankruptcy Code - existence of a dispute before the petition was filed - corporate debtor filed an application under section 17 of the SARFAESI Act before the Debts Recovery Tribunal, Madurai, challenging the sale notice issued by the financial creditor - Held that:- The Tribunal observes that the amount claimed by the financial creditor herein is ₹ 68,65,428.53 whereas the corporate debtor in their counter has disputed the amount claimed stating that the corporate debtor through other entities has repaid a sum to the tune of ₹ 2.16 crores. Further, there are civil suits pending for adjudication and other transactions between the financial creditor, corporate debtor and TVKL Properties P. Ltd., with respect to the possession of the property of the corporate debtor. In view of the above, the Tribunal observes that the petition is liable to be dismissed under sections 5(6) and (6)(a) of the IBC, 2016 as there is a civil suit pending and there exists a dispute in the amount of debt between both the parties. The Tribunal is of the opinion that there is in existence a dispute before the petition was filed in this Tribunal and hence under the provisions of the IBC, 2016 the petition stands dismissed.
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Insolvency & Bankruptcy
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2018 (12) TMI 1376
Corporate insolvency process - pre-existing dispute in regard to quality and standard of goods supplied by the Operational Creditor - Held that:- Raising of dispute in regard to quality of goods being inferior/substandard or defective for the first time in reply to demand notice or in response to notice served by the Adjudicating Authority would not constitute a prior and pre-existing dispute contemplated under law as a defence to the initiation of Corporate Insolvency Resolution Process, more so when the contemporary record in regard to transactions between the Corporate Debtor and the Operational Creditor at the time of delivery of goods or immediately thereafter does not demonstrate raising of any dispute with respect to quality of goods supplied by the Operational Creditor. In view of the foregoing discussion it is of the considered opinion that the Corporate Debtor has failed to demonstrate that there was a pre-existing dispute in regard to quality and standard of goods supplied by the Operational Creditor rendering the impugned order unsustainable. I find no infirmity in the impugned order. The appeal deserves to be dismissed.
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Service Tax
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2018 (12) TMI 1366
Rate of tax - jurisdiction of the HC to decide the appeal - cleaning factory premises - Held that:- the appeal is taken up for hearing, dispensing with all formalities and dismissed on the ground that this Court has no jurisdiction to entertain it.
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2018 (12) TMI 1365
Penalty u/s 77 of FA - Issue on doubt - site formation service - Government of India, Ministry of Finance had a doubt till the issuance of Circular dated 29.10.2006 whether service tax was leviable on the services of site formation - Held that:- In so far as the order which took converse view and assailed by the Assessee in other matters are concerned, there the consideration ends with a finding on nature of contract. The CESTAT holds that contract of Assessee with WCL is for a site formation. There the provisions of Section 80 of Finance Act or then circular dated 12.11.2007 are totally omitted from consideration. The said order, therefore, also show non application of mind. Extended period of limitation - Section 73[1] of the Finance Act, 1994 - Held that:- Impact of “confusion” about nature of activity undertaken is already directed to be looked into and matters are remanded back. If claim of assessee, that service tax is paid on transportation charges is incorrect, effect thereof or then entitlement of department to invoke “extended period” due to is may be a material consideration. This also appears to have escaped attention. This view, therefore, again shows non application of mind. The impact of clarificating circular dated 12.11.2007 has not been considered at all. As the other matters need a relook, it is in the interest of justice that this view is also given a fresh thought by CESTAT. Appeal restored back to file of the CESTAT for its further consideration as per law.
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2018 (12) TMI 1364
Validity of SCN - Sub-contract - Demand based on third party documents - Held that:- M/s Utility Powertech Ltd. did not submitted any invoices raised by appellant service-provider to support the information submitted by them in the form of Bill value from the period from 01.04.2006 to 31.03.2011 which was treated by Revenue as assessable value. Also, Revenue did not confront the appellant service provider with the figures obtained from M/s Utility Powertech Ltd. - therefore, the entire show cause notice is based on third party information, and is not sustainable - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1363
Manpower Recruitment/Supply Agency Service - Rent a Cab Service - Legal Consultancy Service - reverse charge mechanism - demand of service tax - Held that:- The demand of Service Tax of around ₹ 12 lakhs on Manpower Supply is not sustainable, since the short-paid service tax was made good by the appellant through payments dated 05.06.2014 04.07.2014 and reflected the same at Part-G of ST-3 returns filed on 14.11.2014 - demand set aside. Rent a Cab Service - Held that:- Rent a Cab Service was exempted during the relevant period - demand do not sustain. Legal Consultancy Service - Held that:- Service tax is leviable on services provided by advocate and not on other charges claimed by advocate on court fees etc. - demand do not sustain. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1362
Non-payment of Service tax - erection, commissioning and installation services - demand alongwith interest - Held that:- The appellants are engaged in providing solar fencing systems to their customers and owing to some tax concessions, available to the solar power sector they were under the bonafide belief that their activities are not subject to payment of Service Tax. Subsequent to audit of their accounts, it was pointed out that they are liable to service tax under the category of “maintenance or repair services”. The appellant/assessee being a proprietary concern immediately paid the entire liability of service tax along with interest and filed ST-3 returns, though belatedly. The appellants are not disputing their liability of service tax and have paid the entire amount of service tax along with interest which has also been appropriated in the adjudication order but are only before the Tribunal contesting the imposition of penalties - the entire proceedings were initiated based on the final audit report and the ST-3 returns and hence, do not find any element of suppression of facts mis-statement etc. with an intent to evade payment of service tax. The demand of Service Tax and interest is upheld and the penalties imposed u/s 78 and late fine imposed under Rule 7C of the S.T. Rules, 1994 are set side - appeal allowed in part.
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2018 (12) TMI 1361
Demand of Service Tax - Remuneration paid to the directors of the company - Reverse charge mechanism - Held that:- The learned Commissioner (Appeals) has observed that in the absence of documents such as TDS Certificate, Ledger Account and other related documents substantiating appellant’s claim of employer-employee relationship between the said directors and the claim of the appellant could not be examined for the period from July, 2012 to August, 2013 and therefore, said claim was rejected - also, the learned Commissioner (Appeals) did not have advantage of the documents submitted here - appeal allowed by way of remand.
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Central Excise
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2018 (12) TMI 1360
Credit of cess paid on the counter veiling duty - Extended period of limitation - Held that:- Admittedly the credit was being availed by the assessee by reflecting the same in their statutory records. The said fact was also declared by the appellant in their returns filed with the Revenue. Mere non-payment of tax or wrong availment of credit by itself, cannot lead to be a mala fide intent on the part of the assessee - It is well settled law that for invocation of longer period, Revenue has to produce evidence on record that any suppression or mis-statement by assessee was with a mala fide intention. In the present case, there was not even any suppression on the part of the assessee inasmuch as he was disclosing the fact of availment of credit to the Revenue - the demand is barred by limitation. The demand of duty along with imposition of penalty is set aside except the part which may fall within the limitation period - appeal allowed in part.
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2018 (12) TMI 1359
Valuation - manufacture of Gutkha pouches - Department was of the view that since, on the same machine, in addition to the Panmasala pouches of RSP of ₹ 3, the pouches of the RSP of ₹ 2 were also manufactured, first proviso to Rule 8 of the PMPM Rules would become applicable - Held that:- The undisputed facts are that during each of the four months - August 2009, September, 2009, October, 2009 and November, 2009, the appellant in Form -I declaration for that month filed by them in terms of Rule 6 of the PMPM Rules, had clearly declared that they would be using one packing machine for manufacture of the retail pouches of panmasala and that machine would be used for manufacture of the retail pouches of ₹ 2 as well as ₹ 3 RSP. The first proviso to Rule 8 becomes applicable when on an existing packing machine, the manufacturer commences manufacture of the “goods of a new RSP” during that month and in such a situation, this has to be treated as an addition in the number of operating packing machines for the month or in other words, that machine would have to be treated as two machines. The dispute is as to what is a "new retail sale price". The new retail sale price would mean the retail sale price which had not been declared in respect of that machine in the Form-I declaration. Identical issue decided in the case of M/S. KAY PAN SUNGANDH (P) LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [2017 (4) TMI 982 - CESTAT NEW DELHI], where it was held that Rule provides that if the manufacturer commences manufacturing of the goods of a new retail sale price during the month on an existing machine, it shall be deemed to be an addition in the number of operating packing machine for the month. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (12) TMI 1358
Penalty u/s 22(2) of the TNGST Act - there was no excess collection of sales tax, but there was only recoupment of entry tax collected in excess - Held that:- The Assessing Officer did not dispute the fact that the entire amount of tax collected by the dealer i.e. by way of sales tax at 8% and by way of recoupment of entry tax paid being a sum of ₹ 87,144/- was remitted to the treasury. Unfortunately, the Tribunal committed a factual mistake in stating that the excess amount collected was not paid over to the State. On a perusal of the assessment order dated 27.12.2002 and the erratum order dated 31.1.2003, it is clear that the dealer paid the sales tax as well as collection made by way of recoupment of entry tax into the treasury. Can it be stated that the dealer has contravened the provisions of Section 22(1) of the Act. This question has been answered in favour of the dealer - the levy of penalty made by the Assessing Officer is unsustainable and the First Appellate Authority is right in allowing the appeal - revision allowed.
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2018 (12) TMI 1357
Principles of natural justice - validity of revised assessment order - TNVAT Act - it is alleged that impugned orders passed without providing an opportunity of personal hearing and without independent application of mind - Held that:- Admittedly, notices were issued by the respondent, for which, objections were filed by the petitioner. The respondent, thereafter, ought to have fixed a date for personal hearing and communicated the same to the petitioner. A reading of the impugned orders reveal that no such exercise was done by the respondent. A Division Bench of this Court in G.V. COTTON MILLS (P) LTD. VERSUS THE ASSISTANT COMMISSIONER (CT) AVARAYAMPALAYAM ASSESSMENT CIRCLE, COIMBATORE [2018 (3) TMI 1617 - MADRAS HIGH COURT] has held that the opportunity of personal hearing cannot be denied, even if the objections not filed - In this case, admittedly, the petitioner has submitted his objections. But, the respondent, after receipt of the said objections, has passed the impugned orders, without giving an opportunity of personal hearing. The impugned orders, dated 23.03.2018, passed by the respondent are set aside and the matter is remanded back to the file of the respondent for fresh consideration - appeal allowed by way of remand.
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2018 (12) TMI 1356
Composition Scheme - APGST Act - whether the assessing authority could have levied tax on the tax component of the works executed by the petitioner? - Held that:- It is no doubt true that the amended Section 4(7)(b) of the Act enables every dealer executing works contract, in lieu of the amount of tax payable by him under Section 4(7)(a) of the Act, to opt to pay by way of composition at the rate of 5% of the total amount received or receivable by him. If the legislature had stopped there, the revenue may have been justified in contending that, since the total amount received or receivable by a dealer would include the tax levied on the total consideration, they were justified in levying tax on the total amount received or receivable which includes the tax component also. Since the tax which can be levied under Section 4(7)(b) of the Act is on the total amount received or receivable by the dealer towards execution of the works contract, it is only on the total value of the works contract executed by the dealer, could tax have been levied. The matter is remanded to the assessing authority who shall, after giving the petitioner a reasonable opportunity of being heard, examine whether VAT was levied on the VAT component of the total amount received or receivable by the petitioner in the execution of the works contract - petition allowed by way of remand.
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Indian Laws
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2018 (12) TMI 1367
Entitlement of Employees' Compensation - the deceased died during the course of his employment - death due to casual connection during the course of employment - Held that:- Admittedly, in the instant case, there was no accident involving vehicle and therefore the death of Monendra @ Mohindra @ Mohit may have resulted in a liability on the owner but not the insurer - In the instant case, the appellants' son was a tanker driver and was engaged to drive the tanker for long distance and it was also proved by the claimants that he had been working under stressful work conditions, that fact having been admitted by the employer, itself/himself. The present appeal is allowed and the matter is remitted to the Commissioner, Employees' Compensation, Meerut Region, Meerut to decide the petition/application of the claimants - appeal allowed by way of remand.
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