TMI Tax Updates - e-Newsletter
December 29, 2017

Case Laws in this Newsletter:

Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise

Articles

1. AUDIT PROVISIONS UNDER GST

   By: Dr. Sanjiv Agarwal

News

1. Frequently Asked Questions - GST

2. Tax payers can see status of returns filed on GSTN portal

3. RBI Reference Rate for US $

4. IBBI grants recognition to two registered valuers organistaions

5. 'Startup India' Scheme

Notifications

Customs

1. 119/2017 - dated 28-12-2017 - Cus (NT)

Amendment in various notifications

GST - States

2. G.O.MS.No. 497 - dated 3-11-2017 - Andhra Pradesh SGST

Notifying the Evidences required to be produced by the supplier of Deemed Export Supplies For Claiming Refund Under Rule 89 (20 (g) of The APGST Rules, 2017.

3. G.O.MS.No. 496 - dated 3-11-2017 - Andhra Pradesh SGST

Notifying Certain Supplies As Deemed Exports Under Section 147 Of The APGST Act, 2017.

Circulars / Instructions / Orders

GST - States

1. 13/2017-GST - dated 15-11-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Assam Goods and Services Tax Rules, 2017.

2. 14/2017-GST - dated 15-11-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Assam Goods and Services Tax Rules, 2017.

3. 09/2017-GST - dated 30-10-2017

Extension of time limit for intimation of details of stock held on the date preceding the date from which the option for composition levy is exercised in FORM GST CMP-03.

4. 10/2017-GST - dated 30-10-2017

Extension of time limit for submitting application in FORM GST REG-26

5. 11/2017-GST - dated 30-10-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Assam Goods and Services Tax Rules, 2017.

6. 12/2017-GST - dated 30-10-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Assam Goods and Services Tax Rules, 2017.

7. 08/2017-GST - dated 23-10-2017

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Assam Goods and Services Tax Rules, 2017.

DGFT

8. Trade Notice No.4 - dated 13-11-2017

1. Onetime condonation of time period in respect of obtaining block-wise extension in Export Obligation period under EPCG Scheme, 2. Onetime condonation of time period in respect of obtaining extension in Export Obligation period under EPCG Scheme and 3. Acceptance of installation certificate under EPCG Scheme by the RAs wherein installation certificate is submitted beyond 18 months ... reg.

Highlights / Catch Notes

Income Tax

• Assessing Officer's Failure to Provide Opportunity for Special Audit Violates Section 142(2A) of Income Tax Provisions.

  Case-Laws - AT : Proper order of referral for Special Audit - AO never granted opportunity as required under the provisions of section 142(2A) - Nobody can replace the AO in such matters, leave alone the CIT, as is the case in the instant case. - AT
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• Insurance Companies Exempt from TDS on Interest Income u/s 194A of the Income Tax Act.

  Case-Laws - AT : TDS u/s 194A - interest income paid to a company carrying on a business of insurance need not deduct tax at source. - AT
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• Taxpayer's Expenses Disallowed u/s 37(1) for Using Carcinogenic Substances Beyond Limits, Stock Destroyed by Authorities.

  Case-Laws - AT : Disallowance of expense u/s 37(1) - He has used the carcinogenic substance, which is direct cause of cancer, much in excess of permissible limits, resulting in manufacture of product with substantial health hazard sand that is the reason that the related stocks had to destroyed by the law enforcement agencies. - Even if it is not treated as an offence, it is certainly prohibited in law. - Expenses cannot be allowed - AT
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• Penalty u/s 271(1)(c) Overturned Due to Ambiguity in Proceedings and Terms Used by Assessing Officer.

  Case-Laws - AT : Penalty levied u/s.271(1)(c) - Initiation of penalty proceedings in this case done in a general sense and the levy of penalty is done for both the limbs and such orders are bad in law. Usage of expressions like “or” and “and” confirm the ‘ambiguity’ in the mind of AO. - AT
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• Deduction Claim Allowed for Completed Housing Project Blocks u/s 80IB(10) Despite Incomplete Overall Construction.

  Case-Laws - AT : Even though the assessee had not completed the construction of all blocks of housing project, that would not deprive the assessee from availing deduction under section 80IB(10) in respect of the completed blocks on standalone basis. - AT
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Customs

• India Reduces Customs Duty for Korean Imports to Boost Trade, Subject to Periodic Updates and Amendments.

  Notifications : Concessional rate of customs duty on goods when imported into India from the Republic of Korea - Notification as amended from time to time
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Case Laws:

• Income Tax

• 2017 (12) TMI 1423
  TPA - rejection of aggregation approach adopted by the assessee for benchmarking its international transactions in the manufacturing activities - Held that:- Where various activities were so interlinked to the export of manufactured IC engines, then the said international transactions undertaken by the assessee for the year under consideration need to be aggregated for undertaking benchmarking analysis applying TNNM method. The Tribunal in this regard placed reliance on the principles laid down by the Hon’ble High Court of Delhi in Sony Ericsson Mobile Communications India Pvt. Ltd. Vs. CIT (2015 (3) TMI 580 - DELHI HIGH COURT ). Following the same principle and where the assessee was engaged in similar activity of manufacturing, we hold that various activities need to be aggregated. Accordingly, we direct so. Applying the TNNM method - whether the margins earned by the assessee from exports to associated enterprises is to be compared with margins earned from sales in domestic market or the same have to be compared with external comparables? - Held that:- Applying the said proposition laid down by the Hon’ble High Court of Delhi in Sony Ericsson Mobile Communications India Pvt. Ltd. Vs. CIT (supra), we hold that accepting the aggregation approach of the assessee of its transactions under the manufacturing activity, we hold that while applying TNNM method, the margins of assessee company are to be compared with the margins of external comparables. However, since the TPO had not verified this factum of comparison with external comparables, we direct the Assessing Officer / TPO to consider the case of assessee and determine the arm's length price and re-compute adjustment, if any, in the hands of assessee on account of international transactions. It may be pointed herein itself that the adjustments were made in the hands of assessee in HHP division and no adjustment was made in LHP division. Approach adopted by the TPO in application of net profit to cost as PLI - Held that:- We direct the Assessing Officer that while determining the PLI to adopt net profit to sales in order to benchmark the international transactions. Benefit of variation / reduction of 5% from the arithmetic mean is now decided against the assessee by the Special Bench of Delhi Tribunal in IHG IT Services (India) (P.) Ltd. Vs. ITO (2013 (5) TMI 309 - ITAT DELHI ), wherein it has been held that the benefit of 5% tolerance margin is available only when variation between arm's length price as determined under section 92C(1) of the Act and price at which international transactions has actually been undertaken does not exceed the said tolerance margin. Accordingly, we hold so. Re-working of deduction under section 80IB - Held that:- As in assessee's own case authorities below in allocating head office expenses, directors’ salary, etc. to the Daman unit and thus, upheld the re-computation of deduction under section 80IB of the Act. Disallowance of expenses under section 14A - Held that:- As the year of appeal being assessment year 2007-08 i.e. the year in which provisions of Rule 8D of the Income Tax Rules, 1962 were not applicable, we restrict the disallowance to Rs. 2 lakhs

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• 2017 (12) TMI 1422
  Chargeability of “Finance charges” as, interest received from hire purchase transaction, and other interest to attract tax on interest under the Interest Tax Act, 1974 - Held that:- Admittedly, the finance charges involved in the instant case are from hire purchase of vehicles. The position has now been settled by a precedent of this Court involving the same assessee, Commissioner of Income Tax v. K.S.F.E. Ltd. (2008 (3) TMI 676 - KERALA HIGH COURT) as held hire purchase companies are squarely covered by definition of “credit institutions” under the Act and are liable to pay tax on charge of interest on loans and advances. It is immaterial whether a loan or advance is called hire-purchase agreement or not. On the other hand, what is to be considered is whether the transaction involved is really a loan or advance and if the transaction is found so, then the interest earned on the same is taxable under the Interest-tax Act. - Decided against assessee.

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• 2017 (12) TMI 1421
  Deduction admissible under Section 36(1)(viia) - reopening of assessment - Held that:- In any event, the Tribunal remanded the matter for de novo re-adjudication and it would mean that the assessee would be entitled to canvass all the points, which they raised earlier before the Commissioner of Income Tax (Appeals) as well as in the grounds raised in these appeals including the substantial questions of law, which have been raised by the assessee. Therefore, we find that at this stage, the above referred to questions as framed by the assessee or that of the Revenue do not arise for consideration, as the common order passed by the Tribunal is an order consenting for remand of the matters before the Commissioner of Income Tax (Appeals) for re-adjudication de novo after granting the assessee an opportunity of being heard. It is needless to state that all issues are left open to be re-agitated before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) shall decide the matters afresh without being influenced by his earlier order.

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• 2017 (12) TMI 1420
  Eligibility for deduction u/s 80P(2)(a)(i) and 80P(2)(c)(ii) - Tribunal allowed claim - Held that:- CIT(Appeals) has simply referred to the order of the Assessing Officer and to the decision of this Court in Quepem Urban [2015 (6) TMI 573 - BOMBAY HIGH COURT]. There is no scrutiny on facts, which was necessary since the CIT was reversing the decision of the Assessing Officer denying the benefit to the Respondent/ Assessee. When the Revenue filed an appeal to the Tribunal challenging a decision adverse to them, the Tribunal was expected to scrutinize the decision of the CIT(Appeals). Here again, we find that the Tribunal has not done so. In paragraph 4 the Tribunal has simply reproduced the decision of the CIT(Appeals)and thereafter referred to the decision of this Court in case of Quepem Urban and has dismissed the Appeal. Thus the inquiry into the factual position, which the learned Counsel for the parties agree is necessary before the legal principle is to be considered, is not done by the CIT(Appeals) as well as the Tribunal. Therefore, before we consider what is the effect of the admission of the Special Leave Petition against the decision of this Court in Quepem Urban and the legal position enumerating from Quepem Urban, the factual foundation must be established as regards the nature of the business of the Respondent. Thus the appropriate course of action would be to set aside the order passed by the CIT(Appeals) and the Tribunal and to direct the CIT(Appeals) to consider the appeal filed by the Respondent against the order passed by the Assessing Officer dated 31 December 2014.

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• 2017 (12) TMI 1419
  TDS u/s 194C - non deduction of tds - Addition made u/s 201(1) and interest u/s 201(1)(a) - existence of payer and payee - Held that:- The record of the case reveals that both the Commissioner of Income Tax (Appeals) as well as the Tribunal have recorded concurrent findings of fact to the effect that there was nothing on record to indicate that there were any labour contractors with whom any contract had been entered by the assessee. The Tribunal was of the view that section 194C of the Act pre-supposes the existence of payer and payee and that in the facts of the present case the identity of the payee was not established at all. Section 194C envisages deduction of tax at source in pursuance of a contract between the contractor and a specified person. In the facts of the present case, there is a concurrent finding of fact recorded by both, the Commissioner (Appeals) as well as the Tribunal, that no such contract between the assessee and any specified person has been identified - Decided against revenue

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• 2017 (12) TMI 1418
  Levy of late filing fee u/s 234E - delay of 105 days as per intimation under section 200A - Held that:- Admittedly the default has been committed by assessee prior to 01.06.2015. As the legal issue raised in the present case is squarely covered by the ratio by this Tribunal in the case of Gajanan Construction (2016 (10) TMI 92 - ITAT PUNE), respectfully following the same we are also of the considered opinion that the Assessing Officer is not empowered to charge fees under section 234E of the Act by way of intimation issued under section 200A of the Act, in the case of present assessee since the default committed is prior to 01/06/15. - Decided in favour of assessee.

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• 2017 (12) TMI 1417
  Disallowing being interest paid on pro-rata basis relating to earning tax free interest Income on tax free HUDCO Bond - Held that:- During the year assessee has made investment in HUDCO of Rs. 2 crores as mentioned at page No. 3 of the assessment order whereas, interest free funds available with the assessee of share capital and reserve and surplus of Rs. 42.28 crores as at 31.03.2006. Further, as at 31.03.1999 the available interest free funds in the form of share capital and reserve and surplus was Rs. 35.14 crores. In view of this the presumption would lie in favour of the assessee that assessee has made investment out of its own tax free funds. Therefore, following decision of the Hon'ble Bombay High Court in HDFC Bank Ltd Vs. DCIT [2016 (3) TMI 755 - BOMBAY HIGH COURT] we reverse the finding of the lower authorities and direct the Ld AO to delete the disallowance of Rs. 364206/- on account for interest expenses being allegedly paid on pro rata basis relating to earning of tax free interest income of Rs. 15.50 lacs on tax free HUDCO bonds of Rs. 2 crores. In the result ground No. 1 of the appeal is allowed. Disallowance of interest paid on borrowings from Head Office - Held that:- Explanation to section 9(1)(v) has been inserted w.e.f. 01.04.2015, therefore, the situation arises is that the assessee a branch of a foreign bank of non treaty jurisdiction who has paid interest to its foreign head office is allowable as deduction or not. Prior to 01.04.2015 if interest is paid by the assessee to its Taiwan Head Office it is payment to self. In para no 50 of the decision of the Sumitomo Mitusi banking cop V DDIT (2012 (4) TMI 80 - ITAT MUMBAI) while dealing with domestic tax law this issues has been discussed that in domestic tax law there is no question of granting deduction of interest paid by the assessee to its HO , because it is payment to self. The issue of any applicability of any DTAA is not before us, therefore various case laws cited before us are not relevant as they deal with various DTAAs. In the result we do not find any infirmity in the orders of lower authorities in denying deduction of interest paid to HO by the assessee. Denying the claim of the assessee u/s 44C - head office expenses restricted - Held that:- The actual expenditure said to be borne by the head office is Rs. 3781095880/-. However due to the restriction placed u/s 44C of the Act the above expenditure claim were restricted to Rs. 1661289/- for the purpose of section 44C of the act. The assessee has not produced details of the expenditure incurred by the assessee, which are attributable to the business of the assessee either before lower authorities as well as before us. In the present case the total expenditure incurred by the head office of NTD 27056314/- as well as pension of NTD 4481126/- was said to be attributable to the assessee’s business. The details of the expenditure with respect to nature of such expenditure, purpose of such expenditure and actual incurring of such expenditure were neither provided before the lower authorities as well as before us. In view of this, we do not find any infirmity in the order of the lower authorities in denying the claim of the assessee u/s 44C of the Act. In the result ground No. 3 of the appeal of the assessee is dismissed.

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• 2017 (12) TMI 1416
  Addition on account of interest due to assessee - accrual of income - assessee did not include the same in its income on the ground that the amount of loan given to M/s ISG Traders Ltd., was Non-performing asset (NPA) - Held that:- The principle laid down by the Hon'ble Delhi High Court in the case of Vasisth chay Vyapar (2010 (11) TMI 88 - Delhi High Court) are identical to the facts of the present case. In the case before us the amount of interest was overdue but the same was not realized by the assessee since the year it was advanced to the party. Therefore we hold that the income of interest indeed has accrued to the assessee but has not been realized. Thus, applying the rule of real theory income we hold that the addition for the amount of interest income cannot be sustained in the hands of assessee. Thus, ground raised by assessee is allowed.

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• 2017 (12) TMI 1415
  Addition u/s 14A r.w.r. Rule 8D - Held that:- It is the duty of assessee to justify the source of investment mad by the assessee in the investment / PPF irrespective of fact that the own fund of assessee exceeds the impugned investment. We find that the issue of disallowance of interest will accordingly be decided after verifying the details whether the impugned investment was made by the assessee out of her own fund or borrowed fund. Thus, in the interest of justice and fair play we are inclined to restore the issue back to the file of AO with a direction to verify the source of investment made by the assessee in the impugned equity shares / PPF. In terms of above, this ground of Revenue’s appeal is allowed for statistical purpose. For disallowance made by the AO under Rule 8D(2)(iii) of I.T Rules, 1962. At the outside, it was observed that assessee has sum motu made the disallowance of Rs.15 lacs against the exempted income earned by it during the year. However, the AO has invoked the provision of Rule 8D(2)(iii) without recording the satisfaction as envisaged under the provision of Section 14A of the Act. We also find that in similar facts and circumstance, the Hon'ble Co-ordinate Bench of this Tribunal in assessee’s own case in immediate preceding AY 2010-11 has deleted the addition Disallowance on account of no business activity - Held that:- At the outset, it was observed that assessee has claimed total income business expenses in its profit and loss account for Rs.41,49,216/- only and , total expenses disallowed by AO comes to Rs.41,48,587/-. Thus, in our considered view further disallowance of Rs.15,00,632/- will lead to the double addition in the hands of assessee. Moreover, the amount of disallowance cannot exceed the actual expense claimed by assessee in its income tax return. In this view of the above matter, we do not find any infirmity in the order of Ld. CIT(A). We uphold the same Addition under the head house property - Held that:- It is undisputed fact that impugned properties are commercial properties and the assessee conceded the addition made by the Ld. CIT(A) for Rs.4.20 lacs as the addition of the same has not been challenged. Therefore, we dismiss the plea of Ld. AR that no addition can be made in respect of commercial property under the head “house property”. FMV determination - Held that:- AR has not brought any documentary evidence suggesting that fair market value as recommended by the Inspector of Department is not as per prevailing market rate. Thus in this view of the above, we find no infirmity in the order passed by Ld. CIT(A). Accordingly, we uphold the same. Hence, this ground of Revenue’s appeal is allowed.

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• 2017 (12) TMI 1414
  Mismatch between the audited profit and loss account and ITS details - The assessee is acting as agent on various Air Lines for domestic and international bookings. The assessee operates through its branches in almost all the major cities and places of tourist interest in India. - Held that:- On perusal of audited financial statement we note that the assessee has shown gross total income of Rs.12,65,18,608/- as evident from the audited profit and loss account. Thus, the allegation of the AO that all the income shown in the ITS details has not been declared in income tax return does not hold good. The AO has not bought anything on record about the name of parties in respect of which the assessee failed to disclose income in its income tax return. Thus, we feel that no addition cannot be sustained in the given facts and circumstances. We also note that the additional income declared by assessee in its income tax return vis-à-vis in ITS details exceeds the income shown in ITS details. Once the income shown by the assessee is greater than the ITS details then no addition can be made on account of non-disclosure of income. - Decided against revenue

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• 2017 (12) TMI 1413
  Penalty u/s 271(1)(c) - Exemption u/s 11 denied - Held that:- In the present case, it is an admitted fact that the claim of the assessee for exemption u/s 11 of the Act was earlier allowed by the AO up to the assessment year 1988-89 and thereafter upto assessment year 2007-08, for the year under consideration also the claim of the assessee was allowed by the ITAT. Subsequently the Hon’ble Jurisdictional High Court did not allow the claim of the assessee u/s 11 of the Act. However, SLP is pending before the Hon’ble Supreme Court. Therefore, it can be said that the issue relating to the claim of exemption u/s 11 of the Act is highly a debatable and legal issue. Therefore, it cannot be said that the assessee furnished inaccurate particulars of income or concealed its income. See CIT vs. Reliance Petro Products [2010 (3) TMI 80 - SUPREME COURT] In the present case also the claim of the assessee for exemption u/s 11 has not been allowed by the AO on the basis of the judgment of the Hon’ble High Court. Therefore, not allowing the claim of the assessee u/s 11 of the Act itself cannot tantamount to furnishing of inaccurate particulars of income - Decided in favour of assessee.

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• 2017 (12) TMI 1412
  Addition on account of bogus liabilities - Held that:- The existence of the liability appearing in the name of M/s. Subir Shellac Enterprise thus was duly established by the assessee by filing the relevant documentary evidence and the addition made by the Assessing Officer by treating the same as bogus liability merely on the basis of reply received from the said party in response to the letter issued under section 133(6), wherein the amount of purchases alone was confirmed in the said party, in our opinion, was rightly deleted by the ld. CIT(Appeals). We, therefore, uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss Ground No. 1 of the Revenue’s appeal. Addition on account of cash purchases by treating the same as unproved - Held that:- No discrepancy whatsoever was pointed out by the Assessing Officer in the books of account of the assessee, the ld. CIT(Appeals) deleted the addition of Rs. 20,00,000/- made by the Assessing Officer by way of disallowance of cash purchases holding the same to be not maintainable. At the time of hearing before us, the ld. D.R. has not been able to rebut or controvert the findings of fact recorded by the ld. CIT(Appeals) while giving relief to the assessee on this issue. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No. 2 of the Revenue’s appeal. Disallowance of alleged cash purchases - Held that:- Some disallowance on estimated basis is required to be made on account of the said purchases for the unverifiable element involved therein. Having regard to all the relevant facts of the case including the fact that the goods purchased by the assessee are in the nature of forest produce and the assessee has finally declared substantial loss, we are of the view that it would be fair and reasonable to make such disallowance to the extent of 10% of the purchases. We accordingly modify the impugned order of the ld. CIT(Appeals) on this issue and sustain the disallowance of Rs. 90,60,200/- made by the Assessing Officer to the extent of Rs. 9,06,020/-. Ground No. 3 of the Revenue’s appeal is thus partly allowed.

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• 2017 (12) TMI 1411
  TDS u/s 194C - Disallowance u/s 40(a)(ia) - disallowance against advertisement material - Held that:- As in assessee’s own case for A.Y.2009- 10 the assessee had made payments for purchase of material and had admittedly not supplied the materials to the job worker and hence the same would not fall under the definition of ‘work’ as per section 194C of the Act, hence there is no violation of section 194C warranting any disallowance u/s 40(a) (ia) of the Act. - Decided against revenue Addition u/s 14A read with Rule 8D - Held that:- No disallowance U/s 14A of the Act need to be made by invoking the provisions of Rule 8D (2) (ii) of the Rules as the investments admittedly are business expediency investments and strategic investments. Since the investments were held to be business expediency investments, there is no case for making any disallowance by adopting Rule 8D (2) (iii) of the Rules also Addition being interest attributed to alleged working capital employed in Wind Mill Unit although the Unit’s Balance Sheet reflects outflow to Consolidated Account - Deduction u/s 80IA - Held that:- We note that it is not a cash flow statement at all. Accounting Standard-3 issued by ICAI provides the method to draw the cash flow statement having operating investment and financing activities. Cash flow statement should explain on what account the cash is coming in the organization and on what account cash is going out side the organization. This statement shows ‘electricity sale’ in sources and ‘decrease in debtors’ in application which does not have any scene. What includes in ‘further debts’ of Rs. 14,13,885/- has not been explained. We also note that figures explained to assessing officer and figures mentioned in the above cited cash flow statement does not tally. Considering the factual position explain above, we are of the view that order passed by the ld CIT(A) does not have any infirmity and hence we confirm the order passed by ld CIT(A).

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• 2017 (12) TMI 1410
  Deduction u/s. 80IA - Held that:- We find that in assessment years 2006-07 and 2007-08 similar disallowance was made by the Assessing Officer. The matter travelled up to the Tribunal. The Co-ordinate Bench of the Tribunal in assessment year 2006-07 granted relief to the assessee by holding that the assessee is eligible for claim of deduction u/s. 80IA in respect of profits derived from development of infrastructure facility for Sardar Sarovar Narmada Nigam Limited. In assessment year 2007-08 the Tribunal followed the order of Co-ordinate Bench and granted the benefit of deduction u/s. 80IA. Both sides in present appeal are unanimous in admitting that the facts in assessment year under appeal are identical. Therefore, we find no reason to take a different view. - Decided in favour of assessee Disallowance u/s. 14A r.w.r. 8D - Held that:- In the instant case we find that own funds of the assessee are much more than the investments made. Rule 8D(2)(ii) seeks to make disallowance, where the assessee has incurred expenditure by way of interest, since, own funds of the assessee are sufficient to cover the investments, no disallowance under Rule 8D(2)(ii) is warranted. As regards disallowance under Rule 8D(2)(iii) i.e. an amount equal to 1/2% of the average value of investment is concerned, we find that as against closing balance of investment of Rs. 347 crores the Assessing Officer has taken into consideration Rs. 151 crores after excluding the investments on which the assessee has not earned any tax free income. The ld. AR contended that while computing the figure of Rs. 151 crores, the Assessing Officer has included some investment on which the assessee has not earned any tax free income. After considering the submissions of assessee we are of considered view that the issue can be remitted to Assessing Officer for limited purpose of verification whether any investment on which tax free income has not been received has been included while computing the closing balance of investment at Rs. 1,51,66,97,307/-. Disallowance of repairs and maintenance expenditure - Held that:- Expenditure incurred by assessee for renovation of building is capital in nature, as it provides new advantage/benefit to the assessee for years to come. The ld. AR has not been able to controvert the findings of Commissioner of Income Tax (Appeals). The ld. AR has also failed to substantiate that the expenditure held to be capital is in fact revenue in nature. Disallowance of interest expenditure u/s. 36(1)(iii) - Held that:- The Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT) has held that where both interest free funds and interest bearing funds are available and the interest free funds are more than the investment made, the presumption is that the investments are made out of interest free funds available with the assessee. Thus, in view of undisputed fact that own funds of assessee are sufficient to cover the loan advanced to sister concern, no disallowance u/s. 36(1)(iii) is called for Disallowance of commission - Held that:- In the instant case not only that the assessee has placed copy of letter of appointment which is in the form of MOU for engaging the services of M/s. Rex Poly Extrusion Limited as Consultant but has also given the details of contracts secured through M/s. Rex Poly Extrusion Limited. The assessee has also filed confirmation from M/s. Rex Poly Extrusion Limited indicating that the commission has been received through banking channels after deduction of TDS. The Department has not disputed that the assessee has not received contracts of the companies/organizations which are purportedly secured through M/s. Rex Poly Extrusion Limited. It is also an undisputed fact that in the subsequent assessment year the Assessing Officer has allowed payment of commission to M/s. Rex Poly Extrusion Limited. Thus as t the assessee has been able to establish that the services were rendered by the M/s. Rex Poly Extrusion Limited and thus, the payment of commission is justified Reimbursement of medical expenses to the employees liable for Fringe Benefit Tax - Held that:- This issue has been considered by the Co-ordinate Bench of the Tribunal in assessee’s own case and has decided against the assessee. We find that the Coordinate Bench of the Tribunal in assessee’s own appeal for assessment year 2007-08 after considering CBDT Circular No. 8 of 2005 has decided the issue against the assessee

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• 2017 (12) TMI 1409
  Addition of bogus purchases - G.P. rate determination - Held that:- We find the decision of the jurisdictional High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd., (2013 (1) TMI 88 - BOMBAY HIGH COURT) is relevant for the proposition that while accepting the sales, rejecting the bogus purchases entirely and making entire addition is not in tune with the principles of making sustainable assessment. GP rates of the assessee are never consistent. They are varying from 7.59% to 23.5%. Therefore, there is requirement of garnering the GP rates of the other years may be subsequent to the year under consideration as well before coming to the correct conclusion relating to the GP rates of the assessee. If necessary, there is a requirement of gathering the GP rates of the businesses of similar nature from the open market and make use of the relevant data for arriving at appropriate GP rate in this line of the business of the assessee. As such, there are various decisions against making of entire bogus purchases as additional income of the assessee. AO is directed to examine all these angles meticulously, i.e. appropriate GP rate, applying the rates of various decisions cited above, the finding of the Settlement Commission in case of the sister concerns and the profits offered by the assessee on this discovery of bogus purchases etc., and grant reasonable opportunity of being heard to the assessee in the remand proceedings. - Decided in favour of assessee for statistical purposes.

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• 2017 (12) TMI 1408
  Addition being bogus purchase of diamonds from M/s. Vitrag Jewels - Held that:- From the pictorial chart the activities of persons/concerns in each Box is as stated and the numerical numbers are step by step activities in serial number of concerns in Box ‘C ’ Rajendra Jain’s concerns place first the order (1) with foreign Belgium concerns for diamonds. The Box ‘B’ concerns, (2) takes the order and ships the diamond to Box ‘C’, then (3) the concern in Box ‘C’ collects the diamond sent by Box ‘B’, then (4) the diamonds are sent to concerns like assessee in Box ‘E’ and the (5) the concerns in Box ‘E’ purchases the diamonds and the (6) issues the cheques/RTGS in the name of the concerns shown in the invoice of sale i.e. concerns named in Box ‘C’. Thereafter (7) step, the Box ‘C’ concerns after receiving the cheque/RTGS from Box ‘E’ concerns (assessee), deposit it in their bank account. Thereafter (8) step concern in Box ‘C’ converts the amount deposited in their accounts into foreign exchange and transfer it to Box ‘B’. (9th) step, the Belgium concern in Box ‘B’ gets the sale consideration of diamonds sold to Box ‘C’ concern. When the aforesaid transaction is seen in the light of the statement of assessee that in the diamond business, the Angadias bring the diamond to their show room and the assessee selects some diamonds from them, which are invoiced in the name of concerns in Box ‘C’ and the cheques/RTGS are deposited in their bank accounts (Box ‘C’) concerns means the assessee cannot be said to be doing business as suggested by concerns in Box ‘C’. From the aforesaid entire transaction the only inference in respect to the role of persons named in Box ‘D’ can only be that of carriers of diamond to people like assessee. This inference from the aforesaid analysis can only be changed by bringing cogent evidence or at least by bringing on record the statements of the nine persons named in Box ‘D’ to the effect that they corroborate the version given by Shri Rajendra Jain as correct. Thus we are of the considered opinion that the additions saddled on the assessee for AYs. 2008-09, 2010-11, 2011-12, 2012-13 and 2014-15 should be deleted and we order accordingly.

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• 2017 (12) TMI 1407
  Revision u/s 263 - Held that:- Notice under section 263 pointing out the errors in the order of the A.O. was issued by the Ld. Principal CIT on 10.03.2017 and a detailed reply to the said notice was filed by the assessee on 24.03.2017 submitting that there were no errors as alleged in the notice under section 263 in the order of assessment passed by the A.O. on merits. Immediately thereafter i.e. on 28.03.2017, the Principal CIT passed the impugned order under section 263 without giving any finding or conclusion as to how the order of the A.O. was erroneous on merits in respect of issues raised in the notice under section 263 and set aside the same on the ground of lack of enquiry by the A.O. without putting the assessee on notice. In our opinion, the ratio of the decision rendered by the coordinate bench of this Tribunal in the case of Infinity Infotech Park Ltd. (2017 (6) TMI 294 - ITAT KOLKATA) thus is squarely applicable in the present case and applying the same, we hold that the impugned order passed by the Ld. Principal CIT under section 263 is liable to be quashed. - Decided in favour of assessee.

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• 2017 (12) TMI 1406
  Amount received on the retirement of the partner from the firm - taxability of the said receipt under the specific provisions of section 56(2)(vi) - Held that:- The order of the CIT(A) is deficient on reasons for not treating the rights surrendered by the partners, i.e. assessee and Smt. Shakuntala S. Sanghavi to the firm, as the adequate consideration for receiving the said amount. Therefore, in our view, the said finding of the CIT(A) as given in Para Nos. 9.1 to 9.3 suffers from major setback on this issue of surrender of rights/share in the firm for receipt of said consideration by the partners. As such, it is not the case of the Revenue that the assessee continues to be the partner of the firm even after the receipt of the consideration and the assessee has not surrendered the rights of every kind in the firm. From this perspective, the order of the CIT(A) which decided the issue against the assessee relying on the said provisions of section 56(2)(vi) of the Act, is erroneous and therefore, the said order of CIT(A) is required to be reversed and the same is in favour of the assessee. Accordingly, Ground Nos. 2 to 7 by the assessee are allowed.

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• 2017 (12) TMI 1405
  Proper order of referral for Special Audit - AO never granted opportunity as required under the provisions of section 142(2A) - Held that:- The proviso to section 142(2A) of the Act is explained and it is the statutory requirement of law that “AO shall not direct the assessee to get the accounted audited unless the assessee has been given a reasonable opportunity of being heard.” Nobody can replace the AO in such matters, leave alone the CIT, as is the case in the instant case. Accordingly, the additional ground raised by the assessee is admitted and allowed as a covered issue. Since the assessee succeeds on this technical ground, the other grounds for A.Y. 2000-01 have become academic in nature and therefore, they are dismissed as academic.

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• 2017 (12) TMI 1404
  Adjustment on royalty payment - Held that:- The royalty payment by the assessee in all the preceding years from assessment years 1997-98 to 2002-03 have been allowed and no adjustment has been made on account of arm's length price of international transactions, which arises from June, 1996 i.e. 04.06.1996. Further, the Revenue has failed to bring on record any evidence to show that there was any change in facts and in the absence of the same, no adjustment is warranted in the instant assessment year. Further the two parties were independent at the time of signing the agreement for payment of royalty and where payment of royalty was pursuant to such an agreement between independent entities and not associated enterprises; and where the concern become associated enterprise in a later period and where the price paid to associated enterprises was the same as entered when it was an independent entity, then the same has to be considered as uncontrolled transaction. Such was the proposition laid down by the Mumbai Bench of Tribunal in Addl. Director of Income Tax (IT) Vs. Ballast Nedam Dredging (2013 (1) TMI 830 - ITAT MUMBAI). Applying the said principle, we hold that on this count also, there is no merit in making any adjustment on account of the international transactions of payment of royalty. Accordingly, we hold that there is no merit in the order of TPO/Assessing Officer in holding the arm's length price of international transactions of payment of royalty at Nil. Coming to the second aspect of the issue, where the assessee was making payment of royalty to its associated enterprises at the rates which have been approved by the RBI. We find that the Hon’ble Bombay High Court in CIT Vs. SGS India (P.) Ltd. [2015 (11) TMI 1619 - BOMBAY HIGH COURT] had held that rate of royalty approved by SIA/RBI would constitute CUP data and the transaction would be at arm's length price.In the facts of present case, where the assessee has paid royalty to its associated enterprises as per the rates which were approved by RBI, which is not in dispute, then the said transaction would be at arm's length price. Accordingly, we hold that no addition is warranted on this count under Transfer Pricing provisions. Accordingly, we hold so. International transactions of payment of royalty is to be accepted at arm's length price and we reverse the order of TPO/Assessing Officer in holding the value of international transactions at Nil. The findings of CIT(A) are reversed but claim of assessee is allowed on other grounds. Thus, the grounds of appeal raised by the Revenue are dismissed.

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• 2017 (12) TMI 1403
  Disallowance of commission u/s 40A(2)(b) - contention of the AR that the amount of commission which was paid to both the HUFs was the minimum amount of commission decided, irrespective of the sales made by the assessee firm through such parties - Held that:- There is nothing on record either in terms of written agreement or understanding between the assessee and these two HUFs or even where the agreement/understanding is verbal, the onus is on the assessee to bring on record some evidence by way of confirmation etc., which defines and lays down the terms of such engagement in terms of sales target, target customers/area, years of engagement, etc. The assessee has thus failed to discharge the said onus cast on it. Secondly, regarding the determination of excessive amount of commission so paid and the comparative cases whereby the onus is cast on the AO, we find that where the assessee itself is paying commission to other entities on the sales so made through them and where there is nothing on record to distinguish the nature of services so rendered by these entities vis-à-vis two HUFs, the said internal comparable cases have been rightly applied by the AO. In these comparable cases, the assessee itself is paying commission which ranges between 27% to 37% and in the instant case, the AO has thus taken the average of such commission which comes to 33%, compared it with the actual commission so paid by the assessee and has determined the excessive commission payment. We therefore donot find any infirmity in the action of the AO who has rightly disallowed the excessive commission under the provisions of section 40A(2)(b) - Decided against assessee Disallowance of supervision charges - Held that:- the assessee firm has not brought on record any evidence through which it can be verified that such supervision services have been rendered or availed by the assessee firm. It is no doubt true that the payments have been made to these entities during the year and these entities have also filed the confirmations of receipt of such charges, however, the fact of payment is ancillary and secondary to the rendering of services or availment of supervision services and cannot be a basis to hold that since the payment have been made, the services ought to have been rendered or availed by the assessee firm. The payment is the consideration towards the discharge of consideration for rendering of services and unless such rendering of services is not proved, as in the instant case, mere payment is not sufficient enough to hold that the expenditure has been incurred and allowable in the hands of the assessee firm. Further, it is not a case that the AO has not taken any action to verify the transaction. He has issued notices under section 133(6) and when he was not convinced with the replies, he also issued summons under section 131 as well which remain uncomplied with and which has put further question mark on the authencity of the transaction under consideration. We have also gone through the assessment order passed under section 143(3) for AY 2012-13 wherein the AO noticed that various expenses such as carriage inwards, diesel and oil expenses, loading charges, supervision charges and unloading charges were made in cash and no supporting evidence has been maintained and were not verifiable and the AO has thus rejected the books of accounts u/s 145(3) of the Act and has made lump sum trading addition thereof. Hence, it cannot be said that the supervision charges were allowed by the AO for the AY 2012-13. - Decided against assessee.

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• 2017 (12) TMI 1402
  Unexplained source of cash deposits in bank account - Held that:- Absence of any document in support of claimed of assessee that she was a sub-broker and cash deposited in bank belong to the clients, we find no fault in the order of Ld. CIT(A). In our considered view, the assessee has not able to file any documentary evidence with regard to the nature and source of the cash deposits in her bank account of Rs. 56,30,000/-. Therefore, the CIT(A) has rightly sustained the additions. Set off of the loss to be allowed against the income taxed u/s 69 - Held that:- This plea is against the legal provision of the Act. This loss was a ‘speculation loss’ and it could be set off only against ‘speculation income’. Therefore, the CIT(A) has rightly denied the benefit of set off to the assessee. The final plea of the Ld. A/R that the matter may be restored to the file of the AO also cannot be accepted for the reasons that the assessee has been provided sufficient opportunity before the authorities below to produce necessary documents in support of her claim. Any remand of the issue to the file of the AO as this stage shall be against the basic tenants of law. Assessee appeal dismissed.

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• 2017 (12) TMI 1401
  TDS u/s 194A - interest income paid to a company carrying on a business of insurance - Held that:- As rightly contended on behalf of the assessee a plain reading of the provision of section 194A(3)(iii)(e) of the Act suggests that interest income paid to a company carrying on a business of insurance need not deduct tax at source. There is no other qualification mentioned in the relevant statutory provisions. Nevertheless it is not possible to conclude from a mere look at the profile of the company in a website that it is carrying on business of insurance. Therefore it would be in the interest of justice to set aside the order of CIT(A) on this issue and remand the issue for fresh consideration by the AO on the question as to whether Reliance Capital Ltd can said to be carrying on the business of insurance. Whether the recipients have included the receipts paid by the assessee in their respective returns of income? - Set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s.40(a)(ia) of the Act and remand the issue to the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act, for verification of the same.

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• 2017 (12) TMI 1400
  Nature of expenses - Trade Mark License Utilisation expenses - revenue or capital - Held that:- The aforesaid issue is covered, in favour of the assessee,in assessee’s own case for the assessment years 2010-11 and 2011-12. There is no dispute that the material facts of the case and reasoning, as set out in that order and which is not reproduced here for the sake of brevity though the same is deemed to be attached to and forming part of this order, equally applies to this assessment year as well. Respectfully following the said order, we uphold the impugned relief granted by the CIT(A) and decline to interfere in the matter. - Decided against revenue Addition on account of goods destroyed as per court’s order - allowable business expenses - Held that:- There is a paradigm shift in the scheme of the Act, by insertion of Explanation to Section 37(1) by Finance (No. 2) Act 1998 with retrospective effect from 1st April 1962, which lays down the rider to the mandate of Section 37(1) with the additional test to be satisfied, in order to ensure deductibility of an expenditure, is that it must not be incurred for any purpose which is an offence or prohibited by law. The reason as to why the stock had to be destroyed in the present case was that it contained impermissible high levels of a carcinogenic substance by the name of magnesium carbonate. Pan masala is a controversial product and, even when it is manufactured within the permissible legal norms, it is considered to be responsible for oral cancer and other severe ill effects on health. In the present case, the assessee has gone even further against the public interests. He has used the carcinogenic substance, which is direct cause of cancer, much in excess of permissible limits, resulting in manufacture of product with substantial health hazard sand that is the reason that the related stocks had to destroyed by the law enforcement agencies. Technicalities apart, even if manufacturing pan masala with impermissible carcinogenic contents, directly responsible for promoting cancer, is not treated as an offence, it is certainly prohibited in law. It is, of course, sad that our laws sometime appear to be so lax and unresponsive that even those responsible, with or without any ulterior motives, for such serious health hazards escape the exemplary punishment. As we note so, we may also place on record the gracious conduct by at least learned counsel of the assessee, who, on being told about what we feel about this situation, submitted that whatever be the legal merits of the claim for deduction, he leaves the matter to the bench. Be that as it may, as we have held on the merits, the Explanation 1 to Section 37(1) comes into play in this case, and, accordingly, the claim is legally inadmissible. - Decided against assessee.

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• 2017 (12) TMI 1399
  Reopening of assessment - CIT(A) has only adjudicated the issue of reopening and has not adjudicated the issue on merits - Held that:- We find that the grounds raised on merits were duly raised before the ld. CIT(A), but he has not adjudicated the same. Higher courts have held that lower authorities should adjudicate on all the aspects appealed before them and complete their order for proper appreciation of the issues at the higher appellate level. Hence, we are of the opinion that the ld. CIT(A) needs to adjudicate on the merits of the issues raised before him in order to make his appellate order complete. Accordingly, we remit the issue on merits raised in the cross objection by the assessee which were also before the file of ld. CIT(A) to the file of ld. CIT(A). The ld. CIT(A) is directed to consider the issue on merits and pass a speaking order on the same

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• 2017 (12) TMI 1398
  Addition on account of expenses not related to the business - Held that:- Commissioner of Income Tax (Appeals) has given valid and cogent reasons for deleting the addition made by Assessing Officer. We concur with the same. The Assessing Officer cannot step into the shoes of assessee and dictate how much expenditure is reasonable for earning particular quantum of income. As has been rightly pointed by the First Appellate Authority the Assessing Officer has not raised any doubt over the genuineness of the expenditure. Thus, in the absence of any material on record indicating that the expenditure has been made for non-business purpose, no disallowance is warranted. Accordingly, grounds raised by the Revenue in appeal are rejected and appeal of the Revenue is dismissed. Disallowance u/s. 14A r.w.r 8D - AO while making disallowance u/s. 14A r.w.r. 8D has included the amount of share application money against which shares are yet to be allotted - Held that:- Co-ordinate Bench of Tribunal in assessee s own case for assessment year 2009-10 has held that share application money pending allotment does not constitute part of investment for the purpose of computing disallowance u/s. 14A. Interest received on deposits belonging to the society - Held that:- In assessment year 2009-10 [2017 (2) TMI 1293 - ITAT PUNE] the assessee demonstrated before the Tribunal that own funds of the assessee were much more than the amount advanced. The Tribunal decided the issue in favour of the assessee holding no disallowance of interest is warranted. Share application money pending allotment does not constitute part of investment for the purpose of making disallowance u/s. 14A Disallowance u/s. 14A in respect of share of profits earned from partnership firms - Held that:- t is a trite law that no disallowance is to be made where investments are made for strategic purpose and no tax free income has been earned from such investments. In the instant case, the assessee has received income exempt from tax u/s. 10(2A) of the Act. Therefore, on such tax free income disallowance u/s. 14A r.w. Rule 8D(2)(iii) can be made. However, it is made clear that for computing disallowance only those investments on which exempt income has been earned shall be taken into consideration and the amount of disallowance in any case should not exceed the amount of exempt income. Suo-moto disallowance u/s. 14A made by the assessee - Held that:- It is no one s case that investment has been made by utilizing borrowed funds. Therefore, provisions of Rule 8D(2)(ii) are not attracted. However, the provisions of Rule 8D(2)(iii) would apply in respect of tax free income earned from partnership firms. The facts in the present case are distinguishable from the facts in the immediately preceding assessment years. While deciding ground No. 2 we have upheld disallowance u/s. 14A in respect of investments made in partnership firms on which tax free income has been earned. The Assessing Officer is directed that after giving effect to ground No. 2, the balance disallowance, if any from suo-moto disallowance made by the assessee u/s. 14A be deleted. Accordingly, additional ground No. 1 raised in the appeal is partly allowed for statistical purpose. Addition of interest received on deposits belonging to the society - Held that:- Assessee could not bring any material before us to show that assessee has infact handed over the money to the society. Since there is no evidence on record that any society has been formed and the assessee has transferred the money to the society or has shown any liability in its books and considering the fact that the assessee has claimed tax credit on such interest income, therefore, we find no infirmity in the order of the CIT(A) on this issue. Accordingly, the grounds raised by the assessee on this issue are dismissed Disallowance of interest expenditure u/s. 36(1)(iii) to be allowed. See The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT]

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• 2017 (12) TMI 1397
  Penalty levied u/s.271(1)(c) - defective notice - Held that:- AO has not bothered to specify the limb or stuck off an inappropriate limb of the provisions of section 271(1)(c) of the Act. It shows that the AO has not applied his mind to the fact for which reason of the default, the penalty notices were issued. We find the penalty order of the AO falls short of legal requirement on the issue under discussion. Initiation of penalty proceedings in this case done in a general sense and the levy of penalty is done for both the limbs and such orders are bad in law. Usage of expressions like “or” and “and” confirm the ‘ambiguity’ in the mind of AO. With such expressions the penalty is not sustainable. In view of the above discussion, we uphold the order of the CIT(A) deleting the penalty levied by the AO for both the assessment years. Accordingly, the grounds raised by the Revenue for A.Yrs. 2010-11 and 2011-12 are dismissed.

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• 2017 (12) TMI 1396
  Reopening of assessment - assessee company failed to furnish profit & loss account, balance sheet and other relevant financial statements of power generation unit and is not eligible for 80-IA deduction - Held that:- The details of employees employed in power plant unit, details of raw material used for production of power and its bye product steam with quantity-wise details, photostat copy of balance sheet enclosed along with detailed letter. The details of month- wise production of power production, register and the same is produced along with covering letter (These details filed, are not disputed by the Department). The Assessing Officer after considering the detailed explanation along with details, passed an assessment order by allowing deduction under section 80IA of the Act. We find that the assessee has discharged his duty by furnishing all the details which are necessary for completion of assessment. In this case, notice issued by the Assessing Officer under section 148 is beyond four years. As per proviso to section 147 of the Act, the Assessing Officer has to allege specifically that there a failure on the part of the assessee to disclose fully and truly all material facts necessary for completing the assessment. We find that there is no such specific finding given by the Assessing Officer in the reasons recorded. Insofar as adoption of unit rate at Rs. 4.50 ps. is concerned, in the reasons recorded, Assessing Officer after considering the submissions made by the assessee accepted the rate adopted by the assessee that the rate on which per unit paid by the assessee to the AP Transco i.e. Rs. 4.5 per unit. Therefore, it is not correct to say that the Assessing Officer has completed assessment without considering the relevant material. The assessee has submitted the relevant material to the Assessing Officer i.e. bills paid by the assessee to the AP Transco and after considering the same, the Assessing Officer allowed, therefore it is not correct to say that there is an escapement of income. We also find that after considering all the details filed by the assessee in paper book at page Nos. 20 to 25, in respect of claim of 80IA as well as adoption of rate per unit after considering the same assessment is completed. - Decided in favour of assessee Deduction u/s 80IA - profit from the eligible business computation - Held that:- As decided in the case of M/s. Eveready Spinning Mills Pvt. Ltd [2011 (11) TMI 368 - ITAT CHENNAI ] for the purpose of 80IA, profit of eligible undertaking has to be determined on the basis of actual lending cost of electricity purchased by the assessee from Tamilnadu Electricity Board and the tribunal has come to a conclusion by following the decision in the case of Addl. CIT v. Jindal Steel & Power Ltd. (2007 (6) TMI 308 - ITAT DELHI) - Decided in favor of the assessee.

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• 2017 (12) TMI 1395
  Disallowance made under section 14A - Held that:- in view of the availability of interest free funds in the form of share capital and reserves & surplus, being more than the investments made in securities, income from which was exempt from tax, there is no merit in making any disallowance under section 14A of the Act read with Rule 8D(ii) of the Rules. The assessee having applied the said funds in fixed and current assets, cannot be the basis for denying the availability of interest free funds available with the assessee i.e. share capital and reserves & surplus for making investments in tax free securities. Accordingly, we hold so. In view thereof, there is no merit in making any disallowance under Rule 8D(ii) of the Rules. However, we uphold the disallowance made under Rule 8D(iii) of the Rules on account of administrative expenses. Accordingly, the addition of Rs. 40,751/- in assessment year 2009-10 and Rs. 46,695/- in assessment year 2010-11 is upheld. The ground of appeal No.1 raised by the assessee in assessment years 2009-10 and 2010-11 is thus, partly allowed. Allowance of expenditure incurred on account of discount given to the dealers - Held that:- The perusal of the details would reflect that in none of the cases even after paying discount which the Assessing Officer felt was higher, the assessee had made the profits. The total turnover of the assessee for the year under consideration was about Rs. 32 crores and the total expenditure booked by the assessee on account of discount is Rs. 1 crore which less than 5% of the total sales. The assessee as businessman had taken business decision to make a policy for the distribution of its goods and to pay discount to different dealers in this regard. Such business decision cannot be negated by the Assessing Officer on the surmise that as per the Assessing Officer, the discount paid by the assessee was higher. The assessee is best judge of its business arrangement and in the absence of any evidence found that the expenditure has not been incurred, merely on the ground that the rate of discount paid is higher, the expenditure cannot be disallowed in the hands of assessee. Claim of bad debts - Held that:- Where the assessee has filed the outstanding statement and proofs of the entries made in the books of account in the respective previous years to which sales to the said parties were reflected and once the amount had not been recovered and had been written off in the books of account of the assessee, then the same is to be allowed as deduction under section 36(1)(vii) r.w.s. 36(2) of the Act. Accordingly, we hold so. Allowing late delivery charges - Held that:- no error in the order of CIT(A) in holding that the late delivery charges paid by the assessee were in the nature of expenditure carried out during the course of carrying on the business. The said late delivery charges were levied by the OEM customers, who were given specific orders to the assessee for delivery within time frame, but because of the delay in the project, clause for L.D. charges was applied and the amount was recovered from the assessee. In the totality of the above said facts and circumstances, we are of the view that the said expenditure is duly allowable in the hands of assessee.

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• 2017 (12) TMI 1394
  Assessment u/s 153A - disallowance u/s 69C - Held that:- CIT(A) has not specified as to what incriminating material was discovered in the search conducted on 21.07.2011. In our considered view, the addition in the unabated assessment can only be made only on the basis of incriminating material for a particular year. Since no incriminating material was seized during the search for the year under consideration, thus, no addition in the unabated assessment can be made. Hence, the assessment order passed by AO by making addition on account of disallowance u/s 69C of the Act in the assessment order passed under section 143(3) rws 153A is invalid. Bogus purchases - estimation of profit - Held that:- Keeping in view of any possibility of the revenue leakage which is very thin in the present case, the disallowance of purchases of steel for Surat- Dahisar and Kolhapur project at 5% of the impugned (disputed) purchases would meet the end of justice. Similar view was taken by Hon’ble Gujarat High Court in CIT Vs Simit P Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] Disallowance of depreciation on certain steel material - Held that:- We have noted that we have already held that the assessment order for AY 2008-09 and 2009-10 passed under section 143(3) read with section 153A as invalid, thus any consequence arise thereon has also become invalid. Even otherwise there is no material on record that the information on record that said machine or equipment for which depreciation was claimed is not put to use. The disallowance of depreciation on steel material under consideration is based on the addition on account of said alleged bogus purchase, which we have already deleted. Hence, the disallowance of depreciation is also to be deleted. Addition on ex-gratia payment made to Mr Madhav Hari Kale in cash - Held that:- We have seen that despite explaining the fact that Mr. Madhav H Kale was not in their employment, the assessing officer has not bring any material on record the facts to prove it otherwise. Even before us no contrary material is placed before us or any contrary law is brought in our notice. We have seen that the learned Commissioner (Appeals) granted relief to the assessee after considering the contention of the assessee and the material placed before him. In our view the finding of learned Commissioner (Appeals) is based on record, reasoned one and does not require any further interference at our end. In the result the ground of appeal raised by revenue is dismissed

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• 2017 (12) TMI 1393
  Addition on the basis of notings on seized document - payment by cheques - document are presumed to belong to the assessee found in search - assessment u/s 153A - Held that:- The assessee has admittedly, paid cheque in two accounting years i.e. one ending March, 2005 and the second by April, 2005. The assessee had advanced sum of Rs. 62,50,000/- by three different cheques upto 31.03.2005 i.e. relating to assessment year 2005-06 and in the next year, had paid sum of Rs. 25 lakhs which was also returned by the said concern M/s. SAAR Properties. The second aspect which has to be noted that except for narration in front of Bora of 50, which admittedly, was paid by cheque, no other entry has been used as basis for making any addition in the hands of other persons, who admittedly, were the partners of M/s. SAAR Properties and had made investment in purchase of property. The third aspect which has to be kept in mind is the total investment in purchase of property of Rs. 92,10,000/-, which included both cash and cheque components. After inclusion of related expenditure, total investment is Rs. 1.35 crores, sum of Rs. 29,60,000/- has already been added in the hands of Shri Ashok Jain on account of his cash contribution though the entries at page 9 in front of his name were 190+1945=2135. In the entirety of the above said facts and circumstances, we are of the view that the said document which beside noting the acts to be carried out by the group of persons related to M/s. SAAR Properties, had talked of some projected figures; on account of such projected figures, no addition can be made in the hands of assessee. In any case, the assessee had advanced sum of Rs. 87,50,000/- by cheques and the breakup of cheques do not tally with the breakup of 110 noted on the said documents. In the entirety of the above said facts and circumstances, we direct the Assessing Officer to delete the addition made in the hands of assessee - Decided in favour of assessee.

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• 2017 (12) TMI 1392
  Bogus purchases - estimation of income - Held that:- In the case of CIT vs. Simit P. Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) has held that where purchases were not bogus but were made from parties other than those mentioned in the books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of the assessee. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. As mentioned hereinbefore the assessee failed to substantiate his claim of expenditure of Rs. 2,25,72,581/- made from 30 parties in AY 2009-10; Rs. 2,43,30,038/- from 20 parties in AY 2010-11 and Rs. 2,81,43,532/- from 41 parties in AY 2011-12. Having regard to the above, we direct the AO to estimate profit @ 12.5% of the above purchases for the impugned assessment years. - Decided partly in favour of assessee.

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• 2017 (12) TMI 1391
  Claim for deduction under section 80IB - deduction was claimed by the assessee in respect of completed 3 blocks - lower authorities rejected the assessee’s claim on the ground that the entire housing project had not completed by the assessee within the stipulated period - Held that:- Even a single building consisting of a number of residential units could be considered to be a housing project by itself eligible for deduction under section 80IB(10). It was held that even though the assessee had not completed the construction of all blocks of housing project, that would not deprive the assessee from availing deduction under section 80IB(10) in respect of the completed blocks on standalone basis. Respectfully following the said decision of coordinate bench of this Tribunal in the case Vertex Homes Pvt. Ltd. (2015 (9) TMI 549 - ITAT HYDERABAD), we uphold the impugned order of the Ld. CIT (A) allowing the claim of the assessee for deduction under section 80IB subject to the verification by the AO that the five phases of the project completed by the assessee are eligible for deduction under section 80IB on standalone basis by treating the same as one project by itself. Subject to the said verification, the impugned order of the Ld. CIT (A) on this issue is upheld. - Decided against revenue

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• 2017 (12) TMI 1390
  Disallowance of commission expenses - Held that:- We are of the view that it cannot said that the assessee has failed to prove the genuineness of the commission expenditure. On the contrary, Assessing Officer has placed on the general statement given by Mr. Sandeep Sitani. We also noticed that Mr. Sandeep Sitani did not implicate the assessee specifically in his statement. Further, the cross examination asked for by the assessee could not be provided by the AO. We noticed that the learned CIT(A) has addressed all the points raised by the Assessing Officer while disallowing this expenditure. No other material was placed before us by the Revenue to contradict the findings given by the learned CIT(A). Disallowance of legal expenses u/s. 40(a)(ia) - requirement to deduct tax at source u/s. 195 - Held that:- We noticed that the learned CIT(A) has followed the decision rendered by Hon'ble Supreme Court in the case of GE (India) Technology Centre [2010 (9) TMI 7 - SUPREME COURT OF INDIA]

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• 2017 (12) TMI 1389
  Addition in respect of cost of construction of the property/building u/s 69C - whether addition made u/s 69C towards cost of construction on the basis of DVO report is allowable as deduction u/s 37(1) as business expenditure? - Held that:- Assessing Authority could not have referred the matter to the DVO without books of accounts being rejected. In the instant appeal, we find from the perusal of the assessment order that the Assessing Authority has not given any finding in order to reject the books of accounts of the assessee. This fact has not been disputed at any stage during the course of proceedings before the lower authorities as well as before us. Therefore in the given facts and circumstances of the case, are of the view that the action of the Assessing Officer of making reference to the DVO is invalid as the books of accounts were not rejected by him. We, therefore, hereby delete the addition of Rs. 1,22,980/- for Assessment Year 1999- 2000 also and accordingly allow this ground of appeal of the assessee.

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• Customs

• 2017 (12) TMI 1424
  Maintainability of appeal - Penalty - Valuation - revised valuation of FOC materials supplied by GMI - loading towards drawing and design supplied by GMI to AVTEC - Held that: - if multiple questions are involved in the matter, then the department has to raise all these issues before the Supreme Court by filing an appeal under Section 35L of the Central Excise Act, 1944 - appeal of the respondent /assessee is pending before the Supreme Court - Central Excise Appeal No.44/2017 dismissed with liberty to challenge the order by filing an appeal u/s 35L of the CEA, 1944.

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• 2017 (12) TMI 1388
  Valuation - includibility - royalty - Held that: - When the cost of imported items were included in the net ex factory sale price of the manufactured goods and the importer pays royalty as a percentage of turnover of final product, which included the cost of imported components, it becomes a condition of sale of finished goods. Hence, both the conditions of Rule 9(1)(c ) of the Valuation Rules are satisfied - Tribunal in the case of Herbalife International India Pvt. Ltd. [2016 (9) TMI 830 - CESTAT MUMBAI] held that when the cost of imported goods is included in the amount, which is considered for payment of royalty, then such royalty should be added in the assessable value of imported goods. Valuation - payment of patent/software fee - the claim of the appellant is that they are reimbursing the said fee on behalf of the various patent /software owners for which agreement dated 30.05.2013 was entered into with Fujitsu Ten India Ltd., Japan - Held that: - Admittedly, these patent/softwares are required for the functional utility of the imported items as well as the finished final product. The appellants are under obligation to pay fee for the said third party patent/software. Rule 10(1)(e) of the Valuation Rules stipulates that all other payments actually made are to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to the third party to satisfy and obligation of the seller to the extent that such payments are not included in the price actually paid or payable, shall be added to the price actually paid or payable for the imported goods. Explanation to the said rule provides that whether the royalty, license fee or any other payment for a process, whether partial or otherwise, is includible. Appeal dismissed - decided against appellant.

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• 2017 (12) TMI 1387
  N/N. 21/2002-Cus dated 01.03.2002 - Import of aircrafts - Held that: - The Tribunal in the case of Noble Asset Company Ltd. vs CC (Preventive), Mumbai, [2006 (4) TMI 370 - CESTAT, MUMBAI] have taken a view that the aircrafts are not liable to confiscation under Section 111 or Section 113 of the Customs Act and also not liable to pay import duty as and when they are brought back into India after making trips abroad and duty cannot be demanded on these aircrafts - appeal dismissed - decided against Revenue.

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• 2017 (12) TMI 1386
  Valuation of imported goods - actual import - whether the assessment is to be made based on the transaction value actually agreed and paid by the importer on the contracted quantity or based on the quantity actually received and cleared from the shore tanks? - Held that: - the issue involved in the present case is no more res integra and has been settled by the Hon’ble Apex Court in the appellant's own case Mangalore Refinery And Petrochemicals Ltd. Versus Commissioner of Customs, Mangalore [2015 (9) TMI 245 - SUPREME COURT], where it was held that quantity of crude oil actually received into shore tank in port in India should be basis for payment of customs duty - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 1385
  Penalty u/s 114A of CA - SAD - N/N. 21/2012 dated 17/03/2012 - whether the Adjudicating Authority is legally correct in imposing penalty equal to the duty by invoking the provisions of Section 114A ibid, in view of the fact that the entire duty alongwith interest and 15% of the penalty amount were deposited within one month from the date of issuance of the SCN? - Held that: - In view of the fact that the proceedings were concluded by the Adjudicating Authority u/s 28 (5) upon deposit of duty amount alongwith interest and 15% of penalty, there was no occasion or scope to proceed further against appellant for confirmation of penalty under Section 114A ibid - appeal allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2017 (12) TMI 1384
  Corporate insolvency process - interest claimed over the principal - Held that:- By seeing the loan transaction, one thing is clear that most of the interest rates charged are not heard of, at least we have not come across of charging 1% interest per day on defaulted amount, the Petitioner multiplied interest rates, with different nomenclature such as additional interest, minimum interest, future interest, prepayment interest. May be, the Debtor entered into an agreement agreeing for paying all these interests but for this Court, it appears as usurious, since there is a law in existence giving discretion to this Bench to discourage claiming interest at fleecing rates is usurious in nature. Therefore, since it is a Code came in to existence to deal with distress situation of the company, this Bench is not expected to permit to allow the companies like this fleecing whatever left in the company in the name of interest, if claims of this nature are allowed, the other creditors who are genuinely entitled to have their say in CoC will also get affected. It is not for the first time, this Bench applying this proposition, in the past various High courts in cases in between Sri Balasaraswathi Ltd., v. A. Parameswara Aiyar [1955 (11) TMI 15 - HIGH COURT OF MADRAS] decided interest rates are usurious wherever the rates are felt excessive, therefore, since the average rate of interest over the principal has come to 92% per annum, this Bench invoked discretion given under the Usurious Loans Act to deprecate the claim made by this Petitioner. In view of the reasons aforementioned, this Bench hereby holds that the interest claimed over the principal is usurious, therefore, this Petition is hereby dismissed with liberty to the Petitioner to approach before appropriate Forum.

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• Service Tax

• 2017 (12) TMI 1383
  Maintainability of appeal - time limitation - condonation of delay of 48 days - Held that: - there is no infirmity in the impugned order because as per Section 85(3A), the appeal before the Commissioner (A) has to be filed within 60 days from the date of communication of the order - reliance placed in the case of Singh Enterprises vs. CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] wherein it was made clear that the legislature intended the appellate authority to entertain the appeal by condoning the delay only upto 30 days after the expiry of 60 days which is the normal period of preferring appeal - appeal dismissed.

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• 2017 (12) TMI 1382
  Classification of services - Business Auxiliary Services or otherwise? - the services such as felling the trees, conversion, debarking, stacking of the logs, etc., provided by the contractors to M/s. MPM - manufacture - extended period of limitation - Held that: - In terms of Section 65 (19) (v), production or processing of goods for, or on behalf of the client is a service falling under the category of business auxiliary service. It is not a simple case of cutting of trees and then transporting the cut and debarked wood to the premises of their client. The appellants are required to convert the cut wood into billets of specific sizes, which sizes are fit for use in the pulp plant - as the issue of manufacture was never raised before the authorities below, we deem it fit to set aside the impugned orders and remand the matters to the original adjudicating authority for the purpose of deciding on the said plea of the assessees. Time limitation - Held that: - it is clear from above that the Revenue, though in the context of dispute involving the Mysore Paper Mills, was aware of the fact of placing work orders upon various contractors, for extraction collection, debarking stacking of the pulp wood. From this it becomes clear that there was no mala fide on the part of the contractors to suppress the fact of placement of work orders upon them - there is no mala fide motive on the part of the contractors not to pay the service tax - extended period not invocable. As the matters are being remanded to the original adjudicating authority for considering the aspect of manufacture, we direct him to examine each and every file separately and to limit the demands, if any, to the normal period - appeal allowed by way of remand.

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• 2017 (12) TMI 1381
  Business Auxiliary Services - activities in connection with receipt, storage, sale and sale promotion of the goods manufactured and sold by their principal - N/N. 13/2003-ST - Held that: - the appellants are engaged del credere agent and are causing sale of goods received from the principal. The amount paid to the appellant is linked with the sales quantum. The same is pre-determined as per the agreement - appellants are eligible for exemption as commission agent under N/N. 13/2003-ST. - similar issue decided in the case of Premier Enterprises Versus Commissioner of Central Excise, Hyderabad [2009 (3) TMI 123 - CESTAT, BANGALORE], where it was held that Once they are held to be commission agents, they will be entitled for exemption under N/N. 13/2003-ST during the relevant period - benefit of notification allowed. Valuation - includibility - reimbursable expenses - Held that: - It is clear that the various expenditure which were claimed on actual basis to be reimbursed by M/s United Breweries Ltd. are in effect reimbursable expenditures which are incurred on behalf of the principal. These are in terms of pre-arrangement with the principal. It is clear such expenditure which are on behalf of the principal in accordance with agreement which are reimbursed on actual basis without any mark up are not to be included in the assessable value - there is no justification to tax the reimbursable expenditures which are based on pre-arrangements with the principal and are received on actual basis. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 1380
  Classification of services - Site formation services or mining services - scope of work - Held that: - The scope of work mentioned covers providing all equipment, manpower, tools and tackles as stated under Clause 8 of this LOI. Admittedly, the appellants have processed excavated boulders to required size for use by the clients. The contract indicates that it is part of the Rajasthan Road Project Package RJ-7 - it is well settled position that such type of contracts were there is an extraction or raising of ore or mineral, the same cannot be considered as site formation service. In the present case, there is an excavation or extraction of boulders for further process. Regarding tax liability post 1.6.2007 under category of “mining service”, the appellants did undertake the process of excavating the boulders. However, substantially, there are further process involved on such excavation to make fit for client - the essence of the contract is to supply the required quantity of the specified size bounders to the client as per required quantity per day. As such, these are more properly covered under the tax entry “Business Auxiliary Service”. The scope of the term “manufacture” has no direct relevance to the issue at hand. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 1379
  Service tax liability - construction of residential complex service - commercial and industrial construction service - Closure for the amount already paid in terms of Section 73 (3) of the FA, 1994 - Held that: - the nature and use of building being for school education managed by school recognized by the Government, the building is excluded from the tax liability under commercial or industrial construction service - the building is primarily used for education and not for commerce or industry. Accordingly, tax liability set aside. Invocation of Section 73 (3) - Held that: - Section 73 (3) speaks about closure of case without further proceedings. In the present case, proceeding was continued, resulting in the impugned order. To that extent closure in adjudication proceeding is not contemplated in the said Section - also, there is no merit in the appeal by the Revenue for imposition of penalty under Section 76 and 78. Appeal dismissed - decided against Revenue.

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• 2017 (12) TMI 1378
  Levy of service tax - commercial training or coaching service - Revenue entertained a view that the appellants are engaged in commercial training and coaching and are not issuing any certificate or diploma recognized by law for the time being in force - Held that: - the expression “recognized by law” is a very wide one. Even if the Certificate is not the product of a statute but has approval of some kind in “law” would be exempted. It is apparent that the courses conducted by the appellants are essential and relevant and enables the candidate to obtain employment in the specialized field. As such, on this ground also the appellants liability to service tax gets exempted. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 1377
  Composite works contract - Commercial or industrial construction service - extended period of limitation - Held that: - It is clear that in case of composite works contract the tax liability will arise only with effect from 01.06.2007, demands under commercial or industrial construction service do not sustain - There is bonafide belief on the part of the appellant regarding non-liability to service tax. Such being in the case, we find the elements required for invoking extended period for demand under Section 73 could not be established in the present case - appeal allowed on limitation.

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• 2017 (12) TMI 1376
  Reverse charge mechanism - services availed by them from foreign companies under the category of Banking and Other Finance Services - Section 66A - case of appellant is that the service provider in UK is having a permanent establishment in India and as such, the appellant is not covered by Section 66 A - whether the presence of such an establishment in India is relevant to determine the tax liability of the appellant u/s 66 A? - Held that: - the permanent establishment of the service provider in India has no role or connection with the provisions of service - the appellants received service provided by a legal entity separately recognized and established in a foreign country, this is a case covered u/s 66 A - the appellants are liable to pay service tax on reverse charge basis w.e.f. 18.04.2006. Time limitation - Held that: - the appellants having received service from foreign entity and having been aware of the provision of Section 66 A, should have examined the tax liability for due discharge, extended period rightly invoked. Penalty - Held that: - the provision of Section 80 can be invoked for waiver of penalty in the facts and circumstances of the case as the appellants have been pleading regarding the payment of consideration through Indian affiliates of the service provider situated in UK - penalties set aside. Appeal dismissed - decided against appellant.

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• Central Excise

• 2017 (12) TMI 1375
  CENVAT credit - fake documents - it appeared to the department that assessee, DAPL had only procured cenvatable invoices without movement of goods and hence cenvat credit availed on the basis of those documents was inadmissible - non-existence of depot address shown in the invoices - Held that: - it is not the case that SAPL did not have any depot at all in Bangalore, only omission is that though they had changed their depot address, the invoices continued to reflect the earlier address - It is also not in dispute that DAPL had indicated in their books of account and inventory records that they had received the MS ingots against the invoices issued by DAPL. In any allegation that raw material has not been received and there was only paper transaction of invoices for availing cenvat credit, the absence or for that matter, shortage, of raw material in the factory premises is relevant fact to corroborate and support any such allegation. No shortage of inputs is alleged at the time of visit of officers. At the same time, there is also no dispute that DAPL were, in fact, manufacturing and clearing angles and channels after conversion of the MS ingots on payment of duty. When this is so, there has to be some source of supply of raw material. Apart from these unfounded evidences and uncorroborated facts which are the main basis of the SCN, the department has also, to a large extent, relied upon the statements of manufacturers of the appellants - none of these persons whose statements were recorded have been cross examined. The department has not been able to satisfactorily establish the allegations made in the SCN - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 1374
  Refund claim - Valuation - finalization of provisional assessment - Held that: - Today, when the matter came up for hearing, on behalf of the appellant, Ld. Advocate Shri M. Karthikeyan submitted that the said order passed by Tribunal granting refund to M/s.Grasim Industries is sub-judice before the Hon'ble Apex Court in the appeal filed by the department - the matter requires to be remanded to the Commissioner (Appeals) to await the judgement of the Hon'ble Apex Court in the matter of appeal filed by department against the Tribunal's order cited supra and then to decide the issue thereupon on merits - appeal allowed by way of remand.

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• 2017 (12) TMI 1373
  SSI Exemption - clubbing of clearances - dummy unit - it was alleged that SSI exemption benefit availed was ineligible to the appellant and that the value of clearances of appellants should be clubbed with that of CHFE - Held that: - From the initial adjudication proceedings and upto the proceedings which culminated in the impugned order, appellants have maintained that CHFE was actually existing and had provided documents like registration under the Companies Act as also with the Sales Tax and Income Tax Departments - non-issue of SCN to a dummy unit will undermine the entire proceedings - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 1372
  CENVAT credit - input service - Department took the view that appellants have availed ineligible input service credit of tax paid attributable to non-manufacturing activities mainly in respect of sales commission and other input services like, advertisement charges, audit fees, bank charges, cleaning charges etc. - Held that: - It is very common that part of the manufacture is given to the job worker on the basis of design and drawing supplied, as in this case. Job workers are not responsible for the marketing or sales of the goods, that has to be looked after by the appellants only. Hence input services like sales commission etc. are very much eligible input services in terms of Rule 2(l) of CCR during the period under dispute - there cannot be any denial of input service credits availed by the appellant - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 1371
  Clandestine removal - It appeared that the appellant had been supplying laminated sheets of 3mm thickness to Railways and the quantity supplied was much in excess to that, which were shown to have been manufactured in the factory - it was also alleged that some supplies were made to Railways, were not covered by gate pass issued from factory - rejection of cross-examination - Held that: - the appellant was prevented due to sufficient reasons and genuine reasons from making a proper representation at the adjudication proceedings, as they were not having access to their own records at the relevant time, which were lying under seizure or possession of PICUP - also, sufficient reasons have not been assigned for denial of cross examination. Matter remanded back to the file of the adjudicating authority with directions to pass a reasoned order, after hearing the appellant, including providing of opportunity to cross-examine the witnesses necessary in support of their contentions - appeal allowed by way of remand.

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• 2017 (12) TMI 1370
  Extended period of limitation - penalty - Clandestine removal - Valuation u/s 4A of CEA - Held that: - The authorities below have upheld and appropriate duty paid by resorting to invocation of the extended time limit provided in Section 11A. Whenever demand is confirmed on the basis of such allegations, the penalty payable under Section 11AC becomes automatically payable - reliance placed in the case of M/s Rajasthan Spinning and Weaving Mills Ltd. [2009 (5) TMI 15 - SUPREME COURT OF INDIA], where it was held that Once the conditions specified u/s 11AC of the Central Excise Act are satisfied, penalty becomes mandatory and there is no scope of discretionary power - the duty demand with interest as well as the penalty imposed on the assessee are upheld. Penalty u/r 26 on Sh Sanjay Bhatia, Director of the assessee - Held that: - penalty imposed on Sh Sanjay Bhatia, Director of the assessee under Rule 26 of the Central Excise Rules, 2002 is not justified and is set-aside. Appeal allowed in part.

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• 2017 (12) TMI 1369
  Valuation - MRP based valuation u/s 4A - branded and unbranded readymade garments (RMG) falling under sub-heading 6204 69 90 of Central Excise Tariff Act, 1985 - Confiscation on the ground of failure to affix MRP on the branded readymade garments - Held that: - Only such goods can be notified under Section 4A in relation to which the retail sale price is required to be declared on the package under the provisions of Legal Metrology Act, 2009. The goods which are covered for assessment u/s 4A have been notified by the Government from time to time under N/N. 49/2008 CENT dated 24-12-2008(as amended) - on a perusal of this notification it is seen that readymade garments are not specified in the said notification leading to the conclusion that at the relevant time, these goods were not covered under Section 4A - confiscation set aside. The duty is liable to be paid on the subjected goods by considering assessable value of such branded goods at the rate of 60 per cent of the retail sale prices in terms of the Tariff Value fixed by the Government as per N/N. 8/2001/CE(NT) dated 1-3-2001 as amended by N/N. 20/2001 dated 30-4-2001 - Since, the goods have been manufactured during the period when duty was liable to be paid on RMG with brand name, the duty demand amounting to Rs. 2,25,371 raised by the lower authorities under Section 11A of the Central Excise Duty Act, 1944 are to be upheld - The penalty imposed on M/s Om Sai Garments as well as M/s Om Sai Traders are also upheld. The penalty on Shri Rajiv Khera imposed under Rule 26 is set aside since penalty already stands imposed on the firm. Appeal allowed in part.

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• 2017 (12) TMI 1368
  Clandestine removal - 249.90 MT of ingot - submission of the appellant is that the demand cannot be confirmed on the appellant only on the basis of 3rd party documents - Held that: - it is clear that the entire quantum of ingots figuring in the records of M/s. Allianz have been admitted to have been received in the premises in the appellant. It is settled position of law what is admitted is not required to be proved with mathematical precision. The penalty of Rs. 10 lakh imposed on Sunil Bansal, Director under Rule 26 is on the higher side, Penalty reduced to 50% - appeal allowed in part.

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• 2017 (12) TMI 1367
  Levy of penalty - duty demand with interest paid before issuance of SCN - Held that: - duty is paid before the issuance of SCN, so, penalty under Section 11AC of the Central Excise Act 1944 and Rule 25 of Central Excise Rules cannot be imposed - reliance placed in the case of CCE, Rohtak vs. S.B. Packaging Ltd. [2007 (3) TMI 194 - HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH], where it was held that Penalty equivalent to disputed duty amount under Section 11 AC of Central Excise Act,1944 is not leviable where disputed duty amount is deposited prior to issue of SCN - penalty set aside - duty sustained - appeal allowed in part.

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• 2017 (12) TMI 1366
  CENVAT credit - sulphuric acid, a by-product - Sulphuric acid which was supplied to the fertilizer unit, no duty was paid and exemption was claimed as per N/N. 8/96 dated 23/07/1996; N/N. 6/2002 dated 01/03/2002; and N/N. 4/2006 dated 01/03/2006; N/N. 12/2012 dated 17.03.2012 - demand of 5%,6%,8%,10% of the value of Sulphuric Acid u/r 57CC of the CER, 1944 and Rule 6(3) of the CCR, 2004 - Held that: - identical issue decided in the appellant own case Union of India & Others Versus M/s. Hindustan Zinc Ltd. [2014 (5) TMI 253 - SUPREME COURT], where it was held that the requirements of 57CC were fully met in the way in which the Respondent was maintaining records and inventory and the mischief of recovery of 8% under Rule 57 CC on exempted sulphuric acid is not attracted - appeal dismissed - decided against Revenue.

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• 2017 (12) TMI 1365
  CENVAT credit - intermediate goods - generation of electricity - reversal of attributable credit on the inputs and input services consumed for generation of electricity used in colony, guest house, bank, canteen et cetera for non-manufacturing activity or pay an amount equal to 10% of sale price of such electricity sold to U.P.Power Corporation Ltd. - Held that: - But on query from the bench, whether the revenue have filed further appeal in respect of the aforementioned ruling of this Tribunal, the ld. A.R. stated that he is not aware about the same. The ld. Counsel for the appellant submits that till date, they have not received any notice in respect of any appeal filed by revenue before Higher Court - appeal allowed - decided in favor of appellant.

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