TMI Tax Updates - e-Newsletter
December 28, 2018

Case Laws in this Newsletter:

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

Articles

1. THE FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING) REGULATIONS, 2018

   By: DR.MARIAPPAN GOVINDARAJAN

2. Learning from judgment of Madras High Court in case of M. Sougoumarin v. Asstt. CIT- do not take legal provisions about cash transactions carelessly and also prepare case seriously taking all facts and contentions.

   By: DEVKUMAR KOTHARI

News

1. NITI Aayog Releases Second Delta Ranking of the Aspirational Districts

2. Sale of Electoral Bonds at Authorized Branches of State Bank of India (SBI)with effect from 01.01.2019 to 10.01.2019

3. North East Industrial Development Scheme

4. Monthly Accounts of Government of India up to the month of November 2018 for the Financial Year 2018-19 consolidated and Reports published

5. Performance of States on EODB

6. National IPR Policy

7. Promotion of Manufacturing Sector

Notifications

Customs

1. 100/2018 - dated 27-12-2018 - Cus (NT)

Seeks to amend various notifications

Income Tax

2. 89/2018 - dated 21-12-2018 - IT

Agreement between the Government of the Republic of India and the Republic of the Hong Kong Special Administrative Region of People’s Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes

Circulars / Instructions / Orders

Customs

1. PUBLIC NOTICE NO. 109/2018 - dated 16-11-2018

Extension of rectification facility for IGST Export Refunds through Officer Interface upto 15.11.2018 and introduction of Refund through Refund mechanism for Short paid IGST

2. Public Notice No. 98/12018 - dated 26-10-2018

Rectification of EGM errors (SB002 or SB006), SB005, SB001 & SB003 and filing of claim for IGST Refund on export of goods under Rule 96 of CGST Rules, 2017

Highlights / Catch Notes

Income Tax

• India-Hong Kong Agreement to Avoid Double Taxation and Prevent Fiscal Evasion Boosts Economic Relations and Tax Transparency.

  Notifications : Agreement between the Government of the Republic of India and the Republic of the Hong Kong Special Administrative Region of People’s Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes
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• Court Quashes Reassessment Due to Lack of Independent Evaluation by Assessing Officer on Income Escape Claim.

  Case-Laws - AT : Reopening of assessment - receipt of accommodation entries - it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment - reopening proceedings quashed.
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• AO Directed to Allow 100% Depreciation on Water Supply System; 10% Depreciation for Roads Upheld.

  Case-Laws - AT : Depreciation on water supply scheme as well as for ‘road’ - AO directed to allow the assessee’s claim for 100% depreciation on water supply system and AO’s order allowing only 10% depreciation of roads is upheld.
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• Section 195: No Technical Services Provided, Payment Not a Fee Under India-USA DTAA.

  Case-Laws - AT : TDS u/s 195 - no technical knowledge, skill, know-how etc was made available to the assessee and thus the payment in question cannot be termed as fee for included services under India USA DTAA.
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• Reopening Assessment u/s 68 Not Justified by Directors' Absence; No Automatic Validity for Additions.

  Case-Laws - AT : Reopening of assessment - addition made u/s 68 - non production of directors in person of share holder companies - mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference u/s 68
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• Mining Operations Qualify for Additional Depreciation on Machinery u/s 32(1)(iia) of Income Tax Act.

  Case-Laws - AT : Additional depreciation on Plant & Machinery - mining activity - the appellant is engaged in the business of mining which amounts to manufacturing and hence entitled for additional depreciation u/s 32(1) (iia) of the I.T.Act.
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• TDS Not Applicable on LC Discount Charges u/s 194A; Reimbursement to Suppliers Exempt from TDS Liability.

  Case-Laws - HC : TDS u/s 194A - addition on account of Letter of Credit (LC) discount charges u/s 40(a)(ia) - the assessee has not made payment of interest to the bank or to the supplier and the amount credited to the suppliers’ account is towards reimbursement of expenses incurred by the suppliers - No TDS liability.
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• Assessing Officer's Role: Deciding on Income Reassessment Without Detailed Investigation u/s 143(1.

  Case-Laws - HC : Reopening of assessment - The primary task of the AO is to probe whether any income had escaped assessment when the original returns were accepted or merely framed u/s 143(1) - as it so happened in this case. AO cannot be expected to conduct a mini-investigation or assessment during the course of ascertaining whether the re-assessment notice needs to be gone further into.
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• Provisional Attachment Orders u/s 132 (9B) of Income Tax Act Expire After Six-Month Validity Period Lapses.

  Case-Laws - HC : Provisional attachment orders made u/s 132 (9B) - the fact remains that the impugned attachment proceedings have already become infructuous, as the time for its existence namely six months has already expired.
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• Charitable Institution's Delay in Section 12A Registration Application Condoned; Exemption u/s 11 Granted.

  Case-Laws - HC : Charitable institution - exemption u/s 11 - delay in filing the application for registration under Section 12A - the explanation offered is satisfactory and the delay has to be necessarily condoned.
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Customs

• IGST Export Refund Rectification Extended to Nov 15, 2018; New Mechanism for Short-Paid IGST Refunds Announced.

  Circulars : Extension of rectification facility for IGST Export Refunds through Officer Interface upto 15.11.2018 and introduction of Refund through Refund mechanism for Short paid IGST
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Service Tax

• CENVAT Credit Allowable: Disputed Services Not Excluded u/r 2(l) Input Services Category.

  Case-Laws - AT : CENVAT Credit - input services - The description of disputed services provided in the impugned order, do not fall under the excluded category provided under Rule 2(l) of the Rules.
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• CAG's Authority to Conduct Compulsory Service Tax Audit of Private Agencies u/r 5A Challenged; Audit Stayed.

  Case-Laws - HC : Service tax audit of private agencies - whether, with the aid of Rule 5A of the Service Tax Rules, 1994, the CAG can carry out the compulsory service tax audit of private agencies like the petitioner? - interim relief granted - stayed.
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Central Excise

• New Rule 11(3) in Cenvat Credit Rules, 2004 affects tax-paying assessees opting for exemptions post-July 1, 2007.

  Case-Laws - HC : Lapse of credit in case of exempted goods - The question of reversal does not arise. In effect, the amendment to Cenvat Credit Rules, 2004 by the insertion of Rule 11 (3) will operate only on tax paying assessees who opt to avail exemption on or after 01.07.2007
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VAT

• Appellant not liable for tax after selling dealer's registration cancellation; second sale exemption applies from April 1, 1990.

  Case-Laws - HC : Second sale exemption - The cancellation of the registration of the selling dealer with effect from 01.04.1990 would have no impact on the transaction in question particularly on the appellant and the liability to pay tax cannot be shifted on the appellant
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• Provisional Attachment Orders Unlawful Post Final Assessment u/s 45(1) of the Act.

  Case-Laws - HC : The continuance of the orders of provisional attachment under section 45(1) of the Act after the passing of the final assessment orders being bad in law.
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Case Laws:

• GST

• 2018 (12) TMI 1442
  Levy of GST - Constitutional Validity of N/N. 4 of 2018-Central Tax (Rate) dated 25th January, 2018 and N/N. 4 of 2018-State Tax (Rate) dated 25th January, 2018 - basic grievance of the Petitioner is that the notifications seek to bring the tax an activity which would not amount to service or supply of service - Held that:- The Petitioner is directed to serve the Respondents once again the copy of this order upon the Respondent Nos. 1 and 2 so as to ensure that the Respondents will remain present on the next date - Stand over to 18th January, 2019.

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• 2018 (12) TMI 1441
  Provisional attachment of Bank Accounts - It was submitted that even if the case of the respondents is taken at face value, at best, the tax liability of the petitioner would come to Rs. 13,84,000/- and therefore, the amount of Rs. 17,00,000/- deposited by the petitioner should be sufficient to protect the interests of the revenue - Held that:- From the facts as emerging on record, it appears that the tax liability of the petitioner in terms of the goods seized as well as the transporter s statement, the same would not exceed Rs. 13,00,000/-. The petitioner has already deposited a sum of Rs. 17,00,000/- with the respondent. Insofar as the amount assessed towards the penalty is concerned, in the absence of any proceedings having been undertaken under the provisions of the GGST Act as well as any penalty having been imposed, the respondent authorities were not justified in resorting to such a drastic coercive measure of attachment of the bank accounts and seizure of goods, which results in bringing the business of the petitioner to a grinding halt. There is nothing to show that the respondents would not be in a position to recover any amount that the petitioner may ultimately be held liable to pay. In these circumstances, without recording any such satisfaction, the respondent could not have formed the opinion that it was necessary to resort to provisional attachment to protect the interest of the Government revenue. The impugned order of attachment, therefore, cannot be sustained. The impugned order of attachment dated 22.10.2018, attaching the bank accounts of the petitioner is hereby quashed and set aside - Appeal allowed.

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• 2018 (12) TMI 1440
  Levy of GST - transfer of redevelopment rights - Vires of CGST Act, 2017 - State Government sought time for filing reply - the petitioner stated that petition has been served on the Central Government Authorities also. An affidavit in support of service shall be filed. Stand over to 24th January, 2019.

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• Income Tax

• 2018 (12) TMI 1467
  Assessment in the name of the (by then) non-existent entity - AO completed the assessment after noticing that the matter had been centralized under Section 127 and further taken care to mention the name of the merged or amalgamated entity, i.e., Adhunik Technology Pvt. Ltd. - Held that:- Delay condoned. The Special Leave Petition is dismissed.

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• 2018 (12) TMI 1466
  Revision u/s 263 - whether AO erred in determining the income of the assessee at 10% on estimate basis in respect of godown receipts and hence, directed the AO to redo the assessment by assessing the godown receipts separately in addition to the income from contract receipts - Held that:- Special Leave Petition is dismissed. Pending applications, if any, shall also stand disposed of.

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• 2018 (12) TMI 1465
  Charitable institution - exemption u/s 11 - delay in filing the application for registration under Section 12A - deemed registration under Section 12A for reason of the delay in consideration by virtue of Section 12AA(2) - Held that:- We are not convinced that the mere delay would have affected the registration being granted. Clause (a) of Section 12A provides an application to be filed in the prescribed form and in the prescribed manner to the Commissioner before the first day of July, 1973 or before the expiry of a period of one year from the date of creation of the trust or the establishment of the institution. The proviso also makes it clear that if there is a delay occasioned and the Commissioner is satisfied that there were sufficient reasons for not having filed an application within the time provided under clause (a), then the registration would be applicable from the date of creation of the trust or establishment of the institution. Even if the delay is not condoned for reason of no satisfactory explanation having been offered, the registration; if enabled, would be applicable from the first day of the financial year in which the application is made. What assumes relevance is the fact that the assessee herein was entitled to exemption under Section 10(20) by virtue of its registration as a local authority and the same was taken away by an amendment of 13.11.2002, which came into effect from 01.04.2003; when the exemption was withdrawn. We notice that there has been a delay of about 3 years. The need for registration as a trust carrying on activities of charitable purposes arose only for reason of the exemption having been withdrawn. The assessee which was enjoying exemption from income-tax from its inception was suddenly faced with the prospect of being made liable under the taxing statute. This would have required considerable research and as was rightly pointed out by the assessee, the Ports, all over the Country had been suddenly deprived of their exemption and had filed applications under Section 12AA with considerable delay. Taking all these aspects into account; we find that the explanation offered is satisfactory and the delay has to be necessarily condoned. We agree with the Tribunal on the condonation of delay. We answer the questions framed against the Revenue and in favour of the assessee upholding the order of the Tribunal, condoning the delay in filing the application under Section 12AA and directing the registration to be granted as a trust established for the purpose of charitable purpose, eligible for exemption under Section 11 & 12A of the Income Tax Act. We however, deem it fit not to answer the question framed with respect to the deemed grant of registration on the delay occasioned in passing a final order on the application under Section 12AA since we find the delay having been satisfactorily explained. We also answer the additional questions framed by us, though not arising from the order of the Tribunal following Berger Paints [2004 (2) TMI 4 - SUPREME COURT] in favour of the assessee and against the Revenue.

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• 2018 (12) TMI 1464
  Provisional attachment orders made u/s 132 (9B) - Held that:- This Court is not inclined to go into the merits of the impugned attachment and find out as to whether such attachment was validly made or not, for the simple reason that considering such question does not arise now, since, as on today, the very impugned attachment itself ceased to have effect after the expiry of a period of six months from the date of the said order in view of Section 132(9C). It is admitted by the learned counsel appearing for the first respondent that so far no fresh attachment is made under any other provision of Income Tax Act in pursuant to the impugned attachment proceedings. When such being the factual position, the fact remains that the impugned attachment proceedings have already become infructuous, as the time for its existence namely six months has already expired on 07.08.2018 and 25.08.2018, as admitted by the first respondent himself in the counter. Therefore, without expressing any view on the correctness or otherwise of the order impugned in these writ petitions, these writ petitions are disposed of by observing that the impugned attachment proceedings ceased to have any effect on and from 07.08.2018 and 25.08.2018 respectively as contemplated under section 132(9C) of the Income Tax Act, 1961.

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• 2018 (12) TMI 1463
  Reopening of assessment - “reasons to believe” - unexplained investment - Held that:- The reply of the assessee in this case, we notice – whether it is categorical or otherwise, is unsupported by any document or statement, containing the investments made or copies of the investment account or the shares and securities purchased and traded in. The assessee was afforded an opportunity to provide this but chose not to provide the materials, other than denying the transactions altogether. Laying the blame on the door of the AO and characterizing the re-assessment as illegal, in the opinion of this Court is not accurate. The primary task of the AO is to probe whether any income had escaped assessment when the original returns were accepted or merely framed under Section 143(1) - as it so happened in this case. AO cannot be expected to conduct a mini-investigation or assessment during the course of ascertaining whether the re-assessment notice needs to be gone further into. On the basis of these parameters of what he is expected to do, the Court is of the opinion that at least in this case the AO confined himself to the jurisdiction conferred. Furthermore, the aspects on which the re-assessment has been ordered were concededly not gone into since assessment was merely framed with an intimation under Section 143(1), which does not even amount to an assessment order in law as held by Deputy Commissioner of Income-Tax And Another Versus Zuari Estate Development And Investment Company Ltd. [2015 (8) TMI 480 - SUPREME COURT] - Decided against assessee.

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• 2018 (12) TMI 1462
  Reopening of assessment - TDS u/s 194A - addition on account of Letter of Credit (LC) discount charges u/s 40(a)(ia) - Held that:- The assessee had opened LC in favour of its suppliers who had discounted the same with the bank. On account of early payment, the bank had deducted some amount which the assessee was liable to reimburse to its suppliers. Accordingly, the assessee had credited the suppliers’ account with the amount of bill discount charges and had debited the LC discount charge account. The amount credited to the suppliers’ account was in the nature of reimbursement of cost incurred by the supplier towards early discounting of the LC resulting into additional cost towards purchase of goods. Thus, the assessee has not made payment of interest to the bank or to the supplier and the amount credited to the suppliers’ account is towards reimbursement of expenses incurred by the suppliers. Commissioner (Appeals), therefore, was wholly justified in holding that the provisions of section 194A would not be attracted and consequently, the question of making any disallowance under section 40(a)(ia) would not arise and in deleting the disallowance. The Appellate Tribunal has not committed any infirmity in affirming the view adopted by the Commissioner (Appeals). No substantial question of law

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• 2018 (12) TMI 1461
  Validity of reopening of assessment - non-communication of reasons to the assessee for reopening of assessment - Held that:- In the absence of signature of the AO, the order sheet entry dated 22.02.2016 is unauthenticated and cannot be given much weightage. Reasons required to be communicated to the assessee properly. See SABH INFRASTRUCTURE LTD. VERSUS ASSTT. COMMISSIONER OF INCOME TAX [2017 (9) TMI 1589 - DELHI HIGH COURT] The department could not place any evidence or any other decision of the Higher Court or Tribunal to controvert the submissions made by the AR and the decisions relied upon by the AR. The department could not place any evidence to establish that the reasons were communicated to the assessee and no other decision was brought before us to controvert the submissions of the AR. Therefore, we hold that the AO has not communicated the reasons for reopening of assessment and the case laws relied up on by the Ld.AR are squarely applicable to assessee’s case. Accordingly, we hold that the assessments made u/s 147 r.w.s. 143(3) are invalid - Decided in favour of assessee

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• 2018 (12) TMI 1460
  Additional depreciation on Plant & Machinery - assessee engaged in the business of mining - manufacturing activity - Held that:- In the instant case the assessee is engaged in the business of mining of Manganese ore & Iron ore and mining is constructed as a manufacturing activity. Respectfully following the decision of CIT v. Sesa Goa Ltd [2004 (11) TMI 14 - SUPREME COURT], case of CIT v/s G.S. Atwal &. Co [2001 (2) TMI 32 - CALCUTTA HIGH COURT] and Integrated Coal Mining Ltd. vis DCIT [2015 (12) TMI 1326 - ITAT KOLKATA] I held that the appellant is engaged in the business of mining which amounts to manufacturing and hence entitled for additional depreciation u/s 32(1) (iia) of the I.T.Act. - decided in favour of assessee Depreciation on land & site development - Order of CIT(A) in remanding the issue to the file of AO for its verification - Held that:- According to CIT(A), the assessee is entitled to depreciation @ 10% by holding the building as contemplated in Appendix I of Income Tax Rules including roads, bridges, culverts, wells and tubewells. The CIT(A) placed reliance in the case of Gwalior Rayon Silk Manufacturing Co. Ltd. [1992 (4) TMI 3 - SUPREME COURT] which held that roads constructed by the assessee in factory premises forms of part of building. The CIT(A) further placed reliance in the case of HMT Ltd. [1992 (7) TMI 58 - KARNATAKA HIGH COURT] which held that roads, walls and fences are regarded as part of building. Therefore, taking into consideration the law laid down we find no infirmity in the order of the CIT(A) in holding that the assessee is entitled to claim depreciation on land and site development expenditure. Therefore, we find no infirmity in the order of CIT(A) in remanding the issue to the file of AO for its verification. MAT - addition made on account of expenditure in earning exempt income u/s 115JB - Held that:- As decided in assessee's own case admittedly, there was no income earned during the year under consideration from the aforesaid investment. It is a settled law that no disallowance shall be warranted under the provision of Sec. 14A r.w. Rule 8D if there is under the year consideration. - decided in favour of assessee Expenses incurred on club entrance fees and subscriptions - allowable busniss expenditure - Held that:- AR did not bring on record any evidences before us atleast to show that the said expenditure incurred by the assessee for the purpose of development of its business. Therefore, in the absence of any evidence, we set aside the order of CIT(A) and uphold the view of the AO in making the said addition - decided in favour of revenue Disallowance u/s 14A with Rule 8D will not apply where no exempt income is received or receivable during the relevant previous year - Held that:- e CIT(A) taking into consideration the submissions of the assessee and found satisfied that the assessee did not earn any exempt income during the year under consideration. Therefore, placing reliance on the decision of REI Agro Ltd. [2013 (9) TMI 156 - ITAT KOLKATA] held that when there is no tax free income, no disallowance could be made. Therefore, we find no infirmity in the order of CIT(A) and it is justified. - decided in favour of assessee Addition on delayed payment of employees contribution towards PF & ESI by invoking provision of section 43B - Held that:- It is noted from the impugned order that CIT(A) found satisfied that the employee’s contribution was relating to PF & ESI was deposited before due date of filing of return of income. Therefore, we find no infirmity in the order of CIT(A) in deleting addition - decided against revenue

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• 2018 (12) TMI 1459
  Under statement of receipts as per TDS Certificate and the P&L account on account of redrying and threshing charges - Non-reflection of discounts in TDS certificates - evidences for allowing the additional discount - Held that:- Due to recession in the tobacco market, the assessee has allowed additional discount to M/s Somasundaram who is bulk customer and the receipts in the TDS certificates were before allowing the additional discount. There is no dispute that the assessee has allowed the additional discount and the recipient M/s Somasundaram has admitted the additional discount in the returns of income and offered for taxation. The office of the Sr. AR has filed a copy of AO’s letter dated 16.08.2017 addressed to Sr. AR confirming that M/s Somasundaram, the recipient has admitted the entire discount by means of credit entry in redrying and threshing charges in their books. AO has confirmed that the assessee has allowed the discount and the recipient had admitted the additional discount in the hands of the recipient, there is no case for making the addition again in the hands of the assessee and accordingly we uphold the order of the CIT(A) and dismiss the appeal of the revenue.

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• 2018 (12) TMI 1458
  Incorrect claim of deduction u/s 54F - assessee had received the equal amount of consideration in the form of land in exchange and the entire land was used for the purpose of construction - Held that:- The assessee had received 1089 sq. yds of vacant site at an agreed cost of Rs. 88,08,000/- for which the market value was Rs. 10,000/- per sq. yd and the aggregated deemed consideration was Rs. 1,08,90,000/- from Sri Dandamudi Suman Babu. From the recitals of the above exchange document dated 03. 08. 2009, it is evident that the deemed consideration for the property transferred by the assessee was Rs. 57,49,200/- against which the property was valued at Rs. 88,08,000/-. The assessee had received the vacant site valued at Rs. 1,08,90,000/- against the agreed consideration of Rs. 88,08,000/- which is less that the fair market value as per section 50C. It is established that the assessee had received the equal amount of consideration in the form of land in exchange and the entire land was used for the purpose of construction thus there is no case for capital gains and the assessee is entitled for the benefit of deduction u/s 54F. Reopening of assessment - Held that:- In the instant case, the assessee had received the land in exchange of land which is a kind component but not in cash and the entire land received by the assessee was applied for the purpose of construction of new residential house. There was no cash component received by the assessee for depositing in specified account and there was no investment. There was no finding either from the AO or by the Pr. CIT that the land was not fully utilized for the construction of the house. As per sub section 1 of Section 54, in case the assessee applied the entire net consideration for acquiring new asset, the entire net consideration is eligible for deduction u/s 54F of the Act. In the instant case, there is no dispute that the entire land received in exchange was used for the purpose of acquiring the new house and the assessee had completed the construction of the new house within the stipulated period u/s 54F. Therefore, we are of the considered opinion, that the assessee would be entitled for deduction u/s 54F as claimed. There is no error which causes prejudice to the interest of the revenue, accordingly, we set aside the order of the Ld. Pr. CIT and allow the appeal of the assessee. Non-admission of rental income - Held that:- During the reassessment proceedings AO has satisfied that there is no case for taxing the rental income due to non-receipt of the same from the tenant. Though the notional rent is taxable in the hands of the assessee as per section 23(1)(a), having examined the issue in detail during the reassessment proceedings and accepted the contention of the assessee regarding non receipt of rent there is no error in the assessment order. CIT is permitted to invoke the jurisdiction only if the assessment is erroneous and prejudicial to the interest of revenue. The twin conditions should be satisfied cumulatively for taking up the revision. In the instant case though the assessment is prejudicial but it is not erroneous thus there is no case for invoking the jurisdiction u/s 263. The order passed by the Ld. Pr,CIT u/s 263 is unsustainable and the same is quashed. - Appeal of the assessee is allowed.

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• 2018 (12) TMI 1457
  Reopening of assessment - addition made u/s 68 - non production of directors in person of share holder companies - notice u/s 143(2) issued at same time and date of return filing u/s 148 - Held that:- A plain reading of the relevant provision suggests that the State Government may publish the modifications only after consideration that such modifications have become necessary. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessarymust be construed in the connection in which it is used. (See-Advanced Law Lexicon, 3rd Edition, 2005; P. Ramanatha Aiyar)..” which fits in present case fully. Guided by these felicitous observation we have no hesitation in our mind in accepting the legal plea raised by Ld AR before us and thus holding that notice u/s 143(2) issued at same time and date of return filing u/s 148 ( vide order sheet entry dated 27/04/2016) vitiates the entire exercise and accordingly all subsequent proceedings are held to be invalid in eyes of law and therefore we quash the orders passed by AO and CIT(A) and allow additional ground raised by assessee. We find that assessee has filed all evidences like share application form, board resolution confirming investment made, confirmation of share capital raised, Share certificate, income tax particulars of share holders, bank statement of share holders and form 2 for allotment of shares along with their audited final a/c in support of share capital recd. to establish its case - So we have no hesitation in accepting Ld AR’s argument that for mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference u/s 68 of the Act. - Decided in favour of assessee.

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• 2018 (12) TMI 1456
  TDS u/s 195 - non-taxability of the receipts of DeGolyer and MacNaughton, USA - Income accrued in India - India-USA DTAA - assessee claimed that services rendered by the non-resident company falls under the provision of section 44 BB - existence of PE in India or fixed place of profession - Held that:- As decided in assessee's own case for assessment year 2012-13 Tribunal has decided that no technical knowledge, skill, know-how etc was made available to the assessee and thus the payment in question cannot be termed as fee for included services under India USA DTAA. In assessment year 2011-12 also the Tribunal in its order following the finding of the Tribunal in assessment year 2012-13 allowed the appeal of the assessee. Thus we find that issue is squarely covered in favour of the assessee

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• 2018 (12) TMI 1455
  Depreciation on water supply scheme as well as for ‘road’ - CIT(A) allowed 100% depreciation for both water supply scheme and road as compared to 10% as per AO - Held that:- We note that the assessee is an authority established by the State Act (West Bengal Act) and is engaged in developing infrastructure facility like roads, water supply project and executes the projects undertaken for West Bengal Govt. Thus, the assessee an authority of State Govt. is seen to have installed machinery and plant which forms part of water supply project and which have been put to use for providing infrastructure facilities under clause (1) of sub section (4) of sec. 80IA of the Act. Since the assessee has installed machinery and plant for water supply project and which was put to use for the purpose of business of providing infrastructure facility, the assessee is eligible for 100% deduction which should be allowed and therefore we confirm the order of Ld CIT(A) on this issue We are not in agreement with the contention of the Ld. AR that the roads which the assessee has developed falls under item (3) because no machinery and plant can be installed on the road. Since the road which the assessee has developed does not fall under item (1) and item (3) then it has to fall under the residual item under (2) which provides for 10% depreciation and, therefore, the AO has rightly granted 10% depreciation for the roads developed by the assessee which action we uphold - we direct the AO to allow the assessee’s claim for 100% depreciation on water supply system and AO’s order allowing only 10% depreciation of roads is upheld. - Appeals of assessee and revenue are partly allowed.

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• 2018 (12) TMI 1454
  Disallowance of leave encashment expenses paid to Life Insurance Corporation of India (LIC) - Held that:- Tribunal while deciding the issue has followed the decision in the case of CIT Vs. Textool Co. Ltd.[2009 (9) TMI 66 - SUPREME COURT] and the payment made to LIC was held to be allowable deduction. In absence of any contrary precedent we follow the decision of the Coordinate Bench and accordingly the claim of expenditure on account of payment to LIC for leave encashment scheme policy is allowed. Disallowance of claim of provision for gratuity - Held that:- Payment was made to the LIC against the group gratuity fund policy taken from the LIC then there is no requirement of a separate approval of the fund for allowing the claim U/s 36(1)(v) of the Act. Accordingly, following the earlier decision of this Tribunal, we allow the claim of the assessee and the disallowance made by the authorities below on this account is deleted. - Decided in favour of assessee

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• 2018 (12) TMI 1453
  Disallowance of Guest House Expenses - only expenditure which the assessee is agitating is on account of telephone, electricity & other expenses for Somerset place Co-operative Society Ltd. and Antariksha Housing Complex - Held that:- The expenditure in respect of telephone, electricity etc. associated with the guest house stand on the same footing as the expenditure towards rent, repairs and maintenance of the guest house. Thus, we do not find any merit in the submissions of assessee in creating distinction between the expenditure on maintenance and telephone, electricity charges in respect of guest house. Accordingly, ground No. 1 raised in the appeal is dismissed. Eligibility of compensation towards sale price of cable for claiming deduction u/s. 80IA - Held that:- A perusal of the terms of the agreement reveal that the interest paid by DOT is imbedded in equated quarterly installments. Thus, the interest received by the assessee towards the compensation for deferred payments for supply of cables to the DOT has direct nexus with the business of the assessee. Thus, it can be safely construed that the compensation received for deferred payments is "derived" from the business activities of the undertaking. Therefore, we are of considered view that the assessee is eligible to claim deduction u/s. 80IA on such interest/compensation component of the deferred payments. - Decided in favour of assessee.

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• 2018 (12) TMI 1452
  Addition of unsecured loans followed by disallowance of interest paid thereupon - identity, genuineness and creditworthiness of the creditors / family members - Held that:- We find no merit in Revenue’s instant arguments. It has come on record that the assessee has obtained its unsecured loans of Rs.62 lac from ten family members including three related HUFs. We find from the corresponding tabulation in the case file that six of the said parties involved opening balances as well. This means that the assessee has carried forward preceding years closing balance of loans in this impugned assessment year. The very loans had attained finality therefore as the AO nowhere raised any objection in earlier assessment years. We notice that taxpayer has placed on record not only his creditors confirmations but also their entire detailed evidence in the nature of income tax returns, computation, capital account, balance-sheet, bank statement, affidavits etc. All of them are stated to be assessed in the same jurisdiction. The assessee has also repaid the impugned loans in eight cases in full / part alongwith interest involving TDS deduction. We take into account all these voluminous debtors to conclude that the CIT(A) has rightly deleted the impugned unsecured loans and interest as the assessee satisfied all the relevant particulars of identity, genuineness and creditworthiness of his creditors / family members. Revenue’s appeal is dismissed.

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• 2018 (12) TMI 1451
  Reopening of assessment - receipt of accommodation entries - Held that:- Assessing Officer referred to the information and the two directions as "reasons" on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. See Rajendra Prasad vs. ITO [ [2018 (10) TMI 143 - ITAT DELHI]] - Decided in favour of assessee.

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• 2018 (12) TMI 1450
  Disallowance u/s 36(1)(iii) - interest bearing funds have been utilized for non - business purposes - Held that:- The advances have been made to M/s Suresh Goel & Son (HUF) for the purpose of the business and on account of commercial expediency, and it has not been established by the learned Assessing Officer that advances are for non-business purposes and as such, disallowance made by the learned Assessing Officer is unsustainable in law. We direct the Assessing Officer to delete the addition. The appeal filed by the assessee is allowed.

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• 2018 (12) TMI 1449
  Reopening of assessment - bogus purchases - Reopening within four years from the end of assessment year - Held that:- We uphold the validity of the reopening of assessment u/s 147 of the 1961 Act as originally return of income was processed u/s 143(1) and no assessment was framed u/s 143(3) of the 1961 Act. The notice u/s 148 was issued within four years from the end of assessment and first proviso to Section 147 of the 1961 Act is not applicable. Fresh and new tangible and material incriminating information was received by the AO as detailed above from DGIT(Inv.), Mumbai which in turn was based on incriminating information received from Maharashtra VAT authorities incriminating assessee to be beneficiary of alleged bogus purchases and accommodation entries which in our considered view keeping in view factual matrix of the case was sufficient to reopen the concluded assessment within parameters of Section 147 of the 1961 Act. Thus, based on our detailed reasoning as set out above, we affirm the appellate order passed by learned CIT(A) and dismiss the appeal of the assessee.

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• 2018 (12) TMI 1448
  Eligibility for deduction u/s 80P (2) - Assessee Society as not a cooperative Bank - investment or deposit in bank was out of assessee’s own funds - Held that:- In the present case, there is no discussion in the orders of the lower authorities on this factual aspect as to whether the deposit in bank was out of assessee’s own funds or out of liability and therefore, we feel it proper to set aside the order of CIT(A) and restore the matter back to the file of AO for fresh decision after examining the facts of present case in the light of these two judgments of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO [2015 (2) TMI 995 - KARNATAKA HIGH COURT] and in the case of PCIT and Another Vs.Totagars Co-operative Sale Society Ltd. [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] and also the judgment of Hon’ble Apex Court rendered in the case of The Totgars Cooperative Sale Society Limited Vs. ITO [2010 (2) TMI 3 - SUPREME COURT] and then decide the issue afresh - Appeal filed by the revenue as allowed for statistical purposes.

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• 2018 (12) TMI 1447
  Validity of proceedings initiated u/s 153C - basis of seized papers found - entries found in seized documents / note books found from the possession of person searched i.e. Shri Mohan Patel - plea assessee before us is that the said document does not belong to the assessee and if it does not belong to the assessee - whether under the pre-amended provisions of section 153C of the Act, where the word was is ‘belonging to’ and where the transaction recorded on the seized document ‘related to’ person searched? - Held that:- As relying on the decision of Pr. CIT & Ors. Vs. Nikki Drugs & Chemicals Pvt. Ltd. & Ors. [2015 (12) TMI 304 - DELHI HIGH COURT] and M/S. ARPIT LAND PVT. LTD., M/S. AMBIT REALTY PVT. LTD. [2017 (2) TMI 553 - BOMBAY HIGH COURT] wherein held that in the absence of incriminating material found during the course of search of the person, who is covered under section 153A of the Act, which in turn, does not belong to other person than the searched person, then proceedings under section 153C of the Act cannot be triggered. Following and applying the same ratio, we hold that in the instant case where the documents found from the possession of Shri Mohan Patel does not belong to the assessee though it may relate to the assessee, but in view of pre-amended provisions of section 153C we hold that there is no merit in initiating proceedings under section 153C of the Act. Appeal of assessee is allowed.

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• 2018 (12) TMI 1446
  Addition on account of non-genuine purchases - CIT-A directed AO to restrict the disallowance to 12.5% of the purchases made from the hawala operators - Held that:- Neither before the AO nor before the CIT(A) the assessee could establish the genuineness of the purchases made from the concentrated parties through proper documentary evidences. Further, even before me also the assessee has not produced any material to prove the genuineness of the purchases made. However, as rightly observed by the CIT(A), the AO has not doubted the sales effected by the assessee. Therefore, as a natural corollary it has to be assumed that in the absence of purchases made, the assessee could not have effected the sales. Only the profit element embedded in the non-genuine purchases can be considered for addition to prevent leakage of revenue. Admittedly, the learned CIT(A) has restricted the addition made to the profit element embedded in the bogus purchase by estimating the same at 12.5%. The estimation of profit at 12.5% as made by the CIT(A), in my view, being reasonable needs no interference. - Decided against assessee.

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• 2018 (12) TMI 1445
  Reopening of assessment - include diminution in the value of investment and consequently to increase the assessed book profit to this extent - MAT computation - reopening after the expiry of four years from the end of the assessment year - Held that:- The expression ‘disclose’ in first proviso postulates a pre-existing knowledge. A person can possibly disclose something, he is privy to. A retrospective amendment of law cannot be visualized by an assessee which may lead to any kind of failure to disclose. Therefore, the conditions prescribed in the first proviso cannot be said to be fulfilled and thus the action of the AO u/s 147 after the expiry of four years from the end of the assessment year in question is clearly time barred and therefore, vitiated in law. AO initiated proceedings under s.147 read with proviso thereof solely on the grounds of retrospective insertion of clause (i) to Explanation 1 to Section 115JB of the Act whereby provisions for diminution in the value of any asset is required to be added to the book profit for the purposes of Section 115JB of the Act. As observed and as echoed in decision of Sadbhav Engineering Ltd. vs. DCIT [2014 (6) TMI 296 - GUJARAT HIGH COURT] and Vodafone West Ltd. vs. ACIT [2013 (7) TMI 536 - GUJARAT HIGH COURT], retrospective amendment in law does not give rise to any failure to disclose material facts as contemplated in the first proviso. Thus, apparently the order of the CIT(A) in setting aside the re assessment order based on an invalid notice under s.148 of the Act cannot be faulted in law. - decided against revenue

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• 2018 (12) TMI 1444
  Eligibility for the claim of deduction u/s 80P(2) - whether the assessee was a Cooperative Bank and held a banking licence issued by RBI - Held that:- The impugned orders of both the authorities below for both assessment years 2013-14 and 2014-15 are set aside and the matter remanded to the file of the AO for examining/ascertaining as to whether the assessee in the case on hand has obtained a licence from the RBI to conduct banking business. If the assessee is found to be possessing a licence from the RBI to conduct banking business, it will be hit by the mischief of sub-section (4) of Section 80P and thus would not be eligible to deduction under section 80P(2) of the Act as claimed. AO shall afford the assessee adequate opportunity of being heard and to file details/submissions required which shall be duly considered before deciding the issue in the light of the observations above and the aforesaid decision of the Hon’ble Apex Court in THE CITIZEN CO-OPERATIVE SOCIETY LIMITED, THROUGH ITS MANAGING DIRECTOR, HYDERABAD VERSUS ASSISTANT COMMISSIONER OF INCOME TAX [2017 (8) TMI 536 - SUPREME COURT] - Assessee’s appeals allowed for statistical purposes.

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• 2018 (12) TMI 1443
  Undisclosed share capital u/s 68 - identity of share capital - non issue of summons u/s 131 - Held that:- The undisputed fact is that Shri Achchan Khan is an existing share holder of the appellant company. Therefore, his identity cannot be disputed. Moreover, the notice issued u/s 133(6) was duly served upon Shri Achchan Khan, who not only confirmed the transaction, but also furnished necessary details. AO has made addition only because Shri Achchan Khan could not be produced and he was a man of no means. I fail to understand what prevented the AO to issue summons u/s 131 on Shri Achchan Khan. Secondly, when the AO was fully aware that Shri Achchan Khan has made investment of Rs. 8.50 lakhs as share application money with the appellant company, nothing could have prevented the Assessing Officer to ask the source of investment from Shri Achchan Khan - if the source was not properly explained, addition could have been made in the hands of Shri Achchan Khan as unexplained income. By no stretch of imagination addition can be made u/s 68 in the hands of the appellant company since it has discharged the initial onus cast upon it by virtue of provisions of section 68. Addition is uncalled for and directed to be deleted. - Decided in favour of assessee.

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• 2018 (12) TMI 1412
  Addition u/s 68 - Rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares - Held that:- CIT(A) has in his order relied upon “circumstantial evidence” and “human probabilities” to uphold the findings of the AO. He also relied on the so called “rules of suspicious transaction”. No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. The overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entire conclusions drawn by the revenue authorities, are based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Under the circumstances, in a number of cases this bench of the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. We have in all cases deleted such additions - addition made u/s 68 and the consequential addition made u/s 69C of the Act, are deleted. - Decided in favour of assessee.

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• 2018 (12) TMI 1411
  Reopening of assessment - share application money received by the assessee as its own concealed income introduced in the garb of share application money - Held that:- There is no dispute that the information received from the office of the DIT [INV], New Delhi triggered the proceedings and the Assessing Officer, taking a leaf out of the said INV report, proceeded to verify the transactions entered into by the assessee with the five companies mentioned elsewhere. There is also no dispute that all the transactions have been done through banking channel, duly recorded in the books of account of the assessee. When the assessee was asked to furnish details of share application money, the assessee not only filed confirmations but also copy of bank statement, report of income and copy of bank statement in which money was received. It is not the case of the Revenue that cash was found to be deposited in the accounts of five companies prior to subscribing the shares of the appellant company. It is also not the case of the Revenue that the assessee has produced cheques from the five companies by giving cash. No doubt there is a contradiction in the statement of Shri Waseem Gupta, but that alone cannot be a deciding factor once the corroborative evidences in the form of bank statements have been filed by the assessee. The Assessing Officer did not make any effort to examine the bank statement furnished by the assessee. - decided against revenue

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• 2018 (12) TMI 1410
  Unexplained cash credit u/s 68 - unexplained share application money received during the assessment year - no occasion to cross-examination of the entry providers by assessee - Held that:- The glaring feature of the assessment proceedings conducted by the learned assessing officer is that that he has grossly relied upon the investigation, carried out by the investigation wing Kolkata on the basis of the statement of Shri Rajesh Kumar Agarwal and Shri Rakesh Bansal recorded by the Deputy Director of income tax (investigation), New Delhi and the copies of such statements were not provided to the assessee. When the copy itself was not provided of the statement recorded of the above persons, based on which the allegation of the revenue that the share applicants are accommodation entry providers, the assessee did not have any opportunity to rebut those averments made by them. The assessee did not have any occasion to ask for the cross-examination of those entry providers, unless the statement was provided to the assessee. As per principle of natural justice, it was obligatory on the part of AO to have provided all the materials, which were used by him against the assessee. In case, the assessing officer was relying on the statement of different persons then the assessee will have to be given an opportunity to cross-examine them and rebut averments made by them. In such cases, otherwise additions cannot be sustained. No offer was made by the learned departmental representative that the copies of the statement of those persons or their cross-examination would be afforded by the revenue now; we do not have any option but to delete the addition made by the learned assessing officer on this count itself. No option but to reverse the finding of the lower authorities and direct the learned assessing officer to delete the addition made under section 68 - decided in favour of assessee.

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• 2018 (12) TMI 1409
  Reassessment proceedings u/s 147 v/s assessment u/s 153C - assessment barred by limitation - Held that:- Revenue has not challenged the order of the CIT(A) quashing the reassessment proceedings by invoking the 1st proviso to section 147 of the IT Act, i.e., barred by limitation. Once the CIT(A) has quashed the reassessment proceedings on account of limitation and the Revenue has not challenged the same, the order of the CIT(A) has attained finality so far as the same is barred by limitation. Once the reassessment proceedings are quashed, the other grounds raised by the Revenue in the appeal and the grounds raised by the assessee in the CO become infructuous and academic in nature. Addition u/s 68 - non independent application of mind - report of the Investigation Wing of the Department relied upon - Held that:- We find from the various details furnished by the assessee that it has received share application money aggregating to Rs. 9.27 crore from various share applicants. The assessee company has issued shares @ Rs. 100/- with a premium of Rs. 400/- out of which share amount of Rs. 75/- and premium amount of Rs. 300/- has been received by the company during the year as share application money. The assessee has issued 230000 shares out of which 56800 shares have been issued to the five parties in question. Assessee during the course of assessment proceedings u/s 143(3) as well as during the course of proceedings u/s 147 of the Act filed various documents in order to prove the identity and credit worthiness of the parties as well as the genuineness of the transactions by filing documents such as financial statements of the parties, bank statements of the parties, income-tax returns of the parties, PAN nos. of the parties, confirmation of accounts and master data of the companies as per the ROC records. The Assessing Officer has not pointed out any discrepancy in the documents so filed and not made any further enquiries and simply made the addition on the basis of the report of the Investigation Wing of the Department. It is the settled proposition of law that addition u/s 68 of the Act cannot be made when the assessee has discharged the initial onus cast on it by furnishing necessary documents to prove the identity and credit worthiness of the share applicants/loan creditors and genuineness of the transaction. Once the assessee satisfies the initial onus cast on it, the burden shifts to the Revenue. However, in the instant case, it appears that the Assessing Officer has not done his job properly. No infirmity in the order of the CIT(A) deleting the addition on merit especially when no contrary material was brought before us by the ld. DR. - Decided in favour of assessee

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• Customs

• 2018 (12) TMI 1435
  Principles of natural justice - appellant s grievance in this case is that its appeal before the CESTAT against the order-in-appeal of the Commissioner of Customs dated 27.12.2016 was not dealt with but was merely dismissed on the ground that the Revenue s appeal was rejected - Held that:- We cannot interfere in the order which has already been sustained by the Tribunal, especially when the High Court upholds the Tribunal order. Present appeal is nothing but an example of misuse of the judicial process. This Court expresses its regret that the CESTAT which is under a duty to consider the appeals pending before it, on their merits, appears to have completely abdicated its responsibility merely on two circumstances; firstly, that the Revenue s appeal was rejected and secondly, that this Court had been approached on an earlier occasion for some directions - Appeal dismissed.

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• 2018 (12) TMI 1434
  Non-compliance with pre-deposit - smuggling of Gold - petitioner’s explanation was that he merely acted as a courier and was not the owner of the goods - Held that:- To this Court, it appears that the petitioner is a man of limited means. It is not clear whether any prosecution has been launched against the petitioner. In these circumstances, in view of the material on record which suggests that the petitioner has very limited means to deposit any amounts, this Court is of the opinion that the relief is warranted. The requirement of pre-depositing of any amount is hereby directed to be waived, however, the petitioner shall furnish a bond and also provide reasonable security, having regard to the list of immovable properties produced before the Court - petition disposed off.

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• 2018 (12) TMI 1433
  Jurisdiction - power to issue SCN - Whether CESTAT was justified in remanding the matter for adjudication to the concerned official to first decide the issue of jurisdiction after the appeal pending in the Supreme Court against the reported judgment in the case of Mangli Impex Limited vs. Union of India, [2016 (5) TMI 225 - DELHI HIGH COURT] is decided? Held that:- The impugned order is hereby set aside and the matters are remitted to the CESTAT which shall proceed to examine and decide the merits of the appeals without being influenced by the decision of this Court in Mangli Impex - appeal allowed in part.

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• 2018 (12) TMI 1432
  Refund claim - refund rejected on the ground that they had not filed appeal against the earlier assessment order - Held that:- This Tribunal in the earlier round of litigation observed that the goods were exported on 23.9.97 and thereafter re-imported, processed and re-exported within six months. Thus, it was concluded that the conditions of the Notification No. 158/95-Cus are satisfied - rejecting the refund claim in the denovo proceedings stating that the original order rejecting the refund claims were not challenged, is contrary to the remand order of this Tribunal dt. 18.3.2004, hence deserves to be set aside - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2018 (12) TMI 1436
  Offering corporate guarantee for the loan availed - outstanding liability under a corporate guarantee offered at the instance of the petitioner - Held that:- The petitioner had deliberately made false averments with respect to the loss of shares and its consequent formal reporting with the police. It is not denied that loan was availed from Celica Developers P. Ltd., by Apsom Turner in which the petitioner alone had interest being a director on its board and his wife holding a major stake therein. This Bench is unable to appreciate the petitioner's stand that the respondents cannot hold on to a security in the absence of a written agreement. Under such circumstances the right to claim the shares or to redeem the pledge cannot be adjudicated by this forum. The pledge of shares necessitates only possession to be handed over. The pledgee has a right to hold on to them as security in the event of bailing out the pledgor, till he is duly paid. The respondents submit that they are ready and willing to return the shares upon their claim being satisfied. No merit in the prayer made by the petitioner. This Bench does not find it equitable to direct the respondents to hand over the share certificates over which they assert their lien having bailed out Apsom Turner P. Ltd., by liquidating the outstanding liability under a corporate guarantee offered at the instance of the petitioner. The entitlement of the respondent to recover their claim is already a subject matter of adjudication. Should the suit, for recovery be adjudicated in their favour, they would well be within their rights to appropriate the proceeds under the shares in execution proceedings if the pledge is not redeemed. It would be grossly inequitable to direct the respondent to hand over the security to the petitioner without the claim of the respondents being satisfied. On payment of the guaranteed debt in full, the surety is entitled to all securities assigned to him, which can only be adjudicated by a civil court.

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• Insolvency & Bankruptcy

• 2018 (12) TMI 1439
  Placing 'Resolution Plan' for consideration before the CoCs - Held that:- In spite of 'Information Memorandum' being shared and Resolution Plans circulated amongst the CoC Members, the same were not taken up for discussion. The potential Resolution Applicant was called by the Resolution Professional for discussion with the CoCs in the last two CoCs meetings, the CoCs refused to take up that agenda for the reasons not known to the Resolution Professional and the Resolution Applicant. Besides this, the maximum period of CIRP as provided under the provisions of Section 12 of the I&B Code, 2016 has already got expired. Moreover, it has been submitted by the Resolution Professional that during the CIRP, M/s. Pepsi Co., has terminated the contract which was the only contractual arrangement for running the business of the Corporate Debtor that has caused the Corporate Debtor to run high and dry without any business to do on its own. Thus, the Corporate Debtor has suffered huge loss and lost its concept of “going concern". In view of the circumstances stated above and the cold response of the CoCs towards the Resolution Plan circulated, there does not appear any reasonable ground for giving the direction to the Resolution Professional and the CoCs to consider their proposed 'Resolution Plan', as the same will be an exercise in futility.

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• 2018 (12) TMI 1438
  Corporate insolvency process - default in payment of dues - Held that:- The Adjudicating Authority noticed that there is a debt payable in the law and in the fact to the ‘Financial Creditor’ and being satisfied that the default has occurred, admitted the application being complete. Thus it is found that there is a debt due to the ‘Financial Creditor’ and the ‘Corporate Debtor’ has defaulted in paying the dues. This is also evident from the satisfaction recorded by the Adjudicating Authority while discussing the case of the Appellant

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• 2018 (12) TMI 1437
  Corporate Insolvency Resolution Process - matter has not been referred within 180 days from the date of abatement of reference in terms of sub-clause (b) of Section 4 of the ‘Sick Industrial Companies (Special Provisions) Repeal Act, 2003 - Held that:- 180 days’ time period provided in subclause (b) of Section 4 of the ‘SICA Repeal Act, 2003’ (by Eighth Schedule) relates to reference if made to the National Company Law Tribunal (Adjudicating Authority) to treat application under Section 10 of the ‘I&B Code’ without payment of fees. It does not mean that the ‘Corporate Applicant’ cannot file an independent application under Section 10 of the ‘I&B Code’ even after 180 days of abatement of the reference under the ‘SICA Repeal Act, 2003’ on payment of requisite fee. In the present case, we find that the case of the Appellant is covered by this Appellate Tribunal in “Pr. Director General of Income Tax (Admn. & TPS) [2018 (6) TMI 350 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI]”. The impugned order, therefore, cannot be upheld. In view of the decision in “Mr. Suresh Narayan Singh [2018 (11) TMI 892 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] a ‘Corporate Insolvency Resolution Process’ is required to be initiated against ‘Tayo Rolls Limited’, for the said reason, while we declare the impugned judgment dated 26th September, 2018 as illegal and set aside the said order but do not remit the case for admission of application under Section 10. The ‘Corporate Debtor’ having already suggested the name of the ‘Interim Resolution Professional’, in terms of the decision of this Appellate Tribunal in “Mr. Suresh Narayan Singh (Supra)”, the Adjudicating Authority will appoint ‘Interim Resolution Professional’, as proposed by the ‘Corporate Debtor’, if no proceeding is pending against him.

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• Service Tax

• 2018 (12) TMI 1431
  Service tax audit of private agencies - whether, with the aid of Rule 5A of the Service Tax Rules, 1994, the CAG can carry out the compulsory service tax audit of private agencies like the petitioner? - Held that:- The respondent no.1 shall not carry out any further service tax audit of the petitioner till next order - interim relief granted - Issue Notice returnable on 24.1.2019.

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• 2018 (12) TMI 1430
  Manufacture or service - catering services - validity of assessment order - Section 35G of the Central Excise Act, 1994 - Held that:- The issue is decided in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI – I VERSUS M/S. TAJ SATS AIR CATERING LTD., SKY GOURMET CATERING SERVICES PVT. LTD., MR. GANESH CHATURVEDI, MR. MANISH CHIRANEWAL [2018 (3) TMI 852 - BOMBAY HIGH COURT], where it was held that A party should not be left guessing nor a higher court speculating as to whether the tribunal decided the matter by holding that the activity amounts to manufacture and yet not sustained the demand in terms of the adjudication order on the ground of limitation. Precisely, that has happened in this case. The impugned order dated 10th August, 2018 of the Tribunal is set aside to the extent it relates to the Appellant and restore the issue before the Adjudicating Authority for fresh consideration and disposal, in accordance with law, qua the present Respondent alone - appeal disposed off.

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• 2018 (12) TMI 1429
  Maintainability of appeal - Voluntary Compliance Encouragement Scheme - case of Revenue is that VCES being a self contained code under Finance Act, 2013 without any appeal provision in the scheme dismissed the appeal holding that the appeal is not maintainable - Held that:- Issue decided in the case of Narasimha Mills Pvt. Ltd. vs. Commissioner of C. Ex.(Appeals), Coimbatore, [2015 (6) TMI 787 - MADRAS HIGH COURT], where the very issue fall for consideration before the Madras High Court and the Madras High Court, by specific observation, dismissed the appeal on the ground that there is no remedy of appeal in the scheme would be giving unfettered power to the authority and same is not acceptable. The impugned order dated 22nd September, 2017 passed by the Customs, Excise and Service Tax Appellate Tribunal is quashed and set aside - Matter restored before CESTAT.

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• 2018 (12) TMI 1428
  Non-payment of service tax - erection and commissioning or installation services - maintenance or repair service - scope of SCN - Held that:- The appellant are engaged in providing various services to Maharashtra State Electricity Distribution Company Ltd (MSEDCL), Ratnagiri and other places relating to distribution of electricity during the period 2008-09 and 2009-10. The said services are held to be not leviable to service tax by virtue of Notification No. 45/2010-ST dated 20th July 2010 in exercise of powers conferred by Section 11C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Whether the appellant are eligible to the benefit of the said Notification or otherwise was not raised before the authorities below and, therefore, the same was not examined. Thus, in the interest of justice, this issue needs to be analysed - appeal allowed by way of remand.

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• 2018 (12) TMI 1427
  Rectification of mistake - Held that:- On going through the case records, more specifically, the stay order dated 23/09/2014 passed by the Tribunal, we are of the prima facie view that the observations recorded in the said order have not been properly considered by the Tribunal while passing the final order dated 22/03/2018 - there are apparent mistake in the final order dated 22/03/2018, which can be called for rectification in the interest of justice - ROM Application allowed.

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• 2018 (12) TMI 1426
  CENVAT Credit - input services - repair and maintenance of staff quarters - expenses incurred towards staff welfare services - travelling expenses - membership fees - denial of credit on the ground of nexus - Held that:- Under the unamended definition of input service (effective upto 31.03.2011) the phrase “activities relating to business” was specifically finding place for consideration of the service as input service. The fact is not under dispute that for accomplishing the purpose of the appellant business, the appellant had used and utilized the disputed services. Since the value of taxable service along with service tax paid there-on was considered as business related expenses in the Books of Accounts, the disputed services should be considered as input service in terms of Rule 2(l) of the Rules for the period upto 31.03.2011. Under the amended definition of Rule 2(l) (with effect from 01.04.2011), the assessee is permitted to avail credit on any service used for providing the output service, excepting the excluded category of services mentioned in the definition of input service - The description of disputed services provided in the impugned order, do not fall under the excluded category provided under Rule 2(l) of the Rules. Since the original authority had specifically recorded the findings that the appellant had not produced any documentary evidences to show nexus as well as the eligibility of Cenvat benefit on the disputed services, the matter should be remanded to the original authority for verification of the documentary evidences to be produced by the appellant - appeal allowed by way of remand.

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• 2018 (12) TMI 1425
  Taxability - commission for marketing services - Reverse charge mechanism - principles of natural justice - Held that:- The submissions made by the appellant have not been considered in proper perspective - Since the issue relates to calculation of actual service tax liability, which according to the appellant is not payable in absence of any provision of service, the matter should be remanded back to the original authority for a proper fact finding with regard to the actual service tax payable by the appellant - Appeal allowed by way of remand.

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• Central Excise

• 2018 (12) TMI 1424
  Rebate claim - export related benefits - rule 16 of CER - manufacture of biscuits - Held that:- There are no ground to interfere with the impugned order(s) - SLP dismissed.

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• 2018 (12) TMI 1423
  Rebate claim - rejection on the ground that the EOUs do not have option to pay duty and thereafter claim rebate of duty paid - revenue neutrality - Held that:- Issue Notice returnable on 27th December, 2018. By way of ad-interim relief, the respondents are restrained from making any coercive recovery against the petitioner pursuant to the impugned order.

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• 2018 (12) TMI 1422
  Lapse of credit in case of exempted goods - Review of order - Section 35 EE of the Central Excise Act, 1944 - rebate claim - alleged erroneous refund of rebate of taxes on the duty paid export goods in terms of Rule 18 of the Central Excise Rules, 2004 - Held that:- Unless it is demonstrated or held that the effect of the Notification No.10/2007 CE-NT dated 01.03.2007 is retrospective in character which does not assert so, the availing of lying cenvat credit, while choosing to avail exemption, for payment of duty on export goods against claim of rebate of duty under Rule 18 of the Central Excise Rules, 2002, is in accordance with law, until the introduction of Rule 11(3) of Cenvat Credit Rules on 01.03.2007 - It may be noted that the sanction and payment of the alleged rebate claims pertain to payment of duty by availing cenvat credit during the period 10.06.2007 to 31.07.2007. When the amendment was made on 01.07.2017, the petitioner was already availing exemption. It is to be noted that the provision apply only in transitional situation when the assessee opts to stop payment of duty and avail exemption. The question of reversal does not arise. In effect, the amendment to Cenvat Credit Rules, 2004 by the insertion of Rule 11 (3) will operate only on tax paying assessees who opt to avail exemption on or after 01.07.2007 - the impugned Orders in Review 06.03.2013 are liable to be set aside - Petition allowed.

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• 2018 (12) TMI 1421
  Maintainability of appeal - Section 35B (1) of the Central Excise Act, 1944 - Whether the CESTAT was justified in holding that the Communication dated 18.03.2015 from the Superintendent is NOT Decision or Order? - Held that:- The impugned order of the Tribunal has on perusal of the letter dated 18th March, 2018 received by the Superintendent of Central Excise held that it does not decide any lis for the purpose of holding it to be an appealable order. This finding is a possible view on facts and circumstances of the case and cannot be said to be perverse. The question proposed does not give rise to any substantial question of law - appeal dismissed.

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• 2018 (12) TMI 1420
  Rectification of mistake - the order of the Tribunal records the date of hearing to be 13th December 2017, as it is in the application herein, but the date of decision is the same day whereas the ground of application indicates a different day - Held that:- There is material error in the application, it is not possible for us to accept that the application is in order. Moreover, it was open to Learned Counsel to have any mistakes rectified at the time of dictation of the order in Court. Failure to do so precludes a plea against deficiency in the findings of the said Tribunal. Application for ROM rejected.

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• 2018 (12) TMI 1419
  Rectification of mistake - errors apparent on the face of record - section 35C(2) of Central Excise Act, 1944 - Held that:- The present applicant does not differ with, or controvert, any of the facts that were recorded in the order of the Tribunal. The appeals had been filed by Revenue against the order of the first appellate authority. The applicant herein had not filed any cross-objections in response to appeal of Revenue. For that reason, the respondent therein was denied the opportunity of raising issues that had have been within the consideration of the lower authorities. The procedure of disposal of appeals cannot be converted into an appeal with fresh submissions on the part of the respondent therein.

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• 2018 (12) TMI 1418
  Demand of Interest and 50% penalty - payment of duty liability on being pointed out - clearance of manufactured excisable goods namely castings between the period from 10.03.2013 to 30.09.2013 - Rule 8 (3A) of the Central Excise Rules 2002 - Held that:- It is found even from the SCN that assessee has discharged the duty liability much before the issue of show-cause notice and GAR detail challan - Appellant was put to show-cause notice for imposition of penalty under Section 11AC of the Central Excise Act 1994. In para 22 of the order of the adjudicating authority, he noticed no suppression of fact and only found non compliance of Rule 8 of Central Excise Rules 2002 for which he gave his finding that there is default in payment of duty which renders the appellant liable for penalty under the provision of Rule 8 (3A) of the Central Excise Rules 2002 as the Rule itself specifies such penalty which is read with Section 11AC of the Act. Penalty being a criminal remedy to set right a defaulter which is to be proved by the prosecution itself beyond all reasonable doubt, in the absence of any such finding regarding fraud, collusion, wilful misstatement or suppression of fact or contravention of the provisions of this Act or Rules penalty under Section 11AC is not attracted. The order of the Commissioner (Appeals) imposing 50% penalty on the appellant for not discharging duty liability of Rs. 26,34,931/- along with applicable interest is hereby set aside - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1417
  Suo motu availment and utilisation of CENVAT credit - refusal of rebate claim - Rule 18 of Central Excise Rules read with Notification no. 19/2004-CE.(NT) dated 06.09.2004 - Held that:- Admittedly, N/N. 19/2012-CE(NT) dated 06.09.2004 provides for the procedure to be followed in claiming of rebate to central excise authorities or by electronic declaration where no time limit is prescribed. As found from the explanation to Section 11B of the Central Excise Act, refund includes rebate of duty of excise on excisable goods exported out of India and 11(1)(B) restricts such filing of refund before the expiry of one year from the relevant date and relevant date indicates, in the case of appellant, the date of shipment and not the date of payment of duty. Cnsidering the fact that appellant had expressed its intention to the department, requested in writing to follow the procedure by way of recrediting cenvat credit account of the disputed account and did wait for one and half years as well as issued two remainders to the department and thereafter taken suo motu credit, it cannot be said that it had intention to contravene any of the provisions of rule or act for which it shall be penalised. It can be recorded as its erroneous understanding of procedural law by the appellant. Penalty is set aside - rest of demand upheld - appeal allowed in part.

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• CST, VAT & Sales Tax

• 2018 (12) TMI 1416
  Validity of assessment order - Held that:- The petitioner has exercised on time his statutory remedy of filing an appeal. It appears that he 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 - the writ petition disposed off directing the respondent authority to defer coercive steps until the 2nd respondent considers the stay petition.

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• 2018 (12) TMI 1415
  Imposition of penalty u/s 54(1)(15)(i) of UPVAT Act, 2008 - absence of Transit Declaration Form - absence of documents referred to under Section 52 - failure of the assessee to establish that the goods were meant for delivery outside the State - It was the case of the revenue that though the goods had been detained and the truck along with goods parked inside Police Station Mathura Refinery, Mathura, the driver of the truck, without being permitted, drove away the truck. Held that:- While the conduct of the driver of the truck, as alleged by the revenue, even if is found to be true, may result in other penalties including one under Section 54 (1)(22) of the Act, however, in face of evidence that the goods were meant for being transported from outside the State of Uttar Pradesh to outside State of Uttar Pradesh, no penalty may arise merely because of that conduct offered by the driver of the truck - at present, it is seen that at the stage of detention of goods itself, the assessee had disclosed the exact value and quantity of goods along with details of the seller and the purchaser both of whom were located outside the State of Uttar Pradesh. The documents that were produced by the assessee by way of proof to disbelieve the allegation of transaction again pertains to same two dealer, with respect to the same commodity and quantity of the goods. In the first place, the assessee appears to have discharged the burden cast on him to prove that the goods were transported from outside the State of Uttar Pradesh and that they had actually been delivered outside the State, as disclosed in the tax invoice. On the other hand, the revenue has failed to lead any evidence to prove the charge under Section 54(1)(15)(i) of the Act. In view of the fact that no such evidence was led, the imposition of penalty has wrongly been upheld - decided in favor of the assessee and against the revenue.

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• 2018 (12) TMI 1414
  Provisional attachment of Bank Accounts - section 45(1) of the Gujarat Value Added Tax Act, 2003 - Held that:- An order under section 45(1) of the Act would enure during the pendency of the proceedings of assessment or re-assessment, but once the assessment orders is passed, the authority concerned have to resort to the other provisions provided under the Act for recovery of the amount payable under the assessment orders if the dealer does not pay the same within the statutory time limit, however, they cannot continue with the provisional attachment made under sub-section (1) of section 45 of the Act. The continuance of the impugned orders after the making of the assessment orders, therefore, cannot be sustained. The continuance of the orders of provisional attachment under section 45(1) of the Act after the passing of the final assessment orders being bad in law, the second respondent is directed to forthwith lift the attachment of the bank accounts of the petitioner under the orders dated 16.10.2018 - Petition allowed in part.

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• 2018 (12) TMI 1413
  Jurisdiction - suo motu revisional powers - second sale exemption - Whether on the facts and in the circumstances of the case, the Joint Commissioner is right in law in exercising suo motu revisional powers under Section 37 of the Act in setting aside the order of the Appellate Authority? - Held that:- In the case on hand, the documents namely, the validity of the registration certificate is upto 31.03.1990 is not disputed by the Department. The payment made through Banking channels have been found to be correct. Therefore, the petitioner has discharged the onus cast upon them to prove that the first seller is real and identifiable person. By merely relying upon the Village Administrative Officer certificate, these records produced by the appellant could not have been discredited by the respondent. The cancellation of the registration of the selling dealer with effect from 01.04.1990 would have no impact on the transaction in question particularly on the appellant and the liability to pay tax cannot be shifted on the appellant - appeal allowed.

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