TMI Tax Updates - e-Newsletter
December 31, 2018

Case Laws in this Newsletter:

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

News

1. Calendar for Auction of Government of India Treasury Bills for the Quarter ending March 2019

2. Cabinet approves hike in MSP for Copra by more than ₹ 2000 per quintal for 2019 season

Notifications

Customs

1. 101/2018 - dated 28-12-2018 - Cus (NT)

Amendment to Notification no. 62/94-Customs (N.T.) dated 21.11.1994 in respect of Dahanu Port, Maharashtra.

DGFT

2. F. No. 14/3/2018-EP (Agri-III) - S.O. 6364(E) - dated 28-12-2018 - FTP

Central Government amends the Import Policy of items of Chapter 7 of the Indian Trade Classification (Harmonised System), 2017, Schedule - 1 (Import Policy)

SEBI

3. SEBI/LAD-NRO/GN/2018/54 - dated 24-12-2018 - SEBI

Renewal of recognition to “National Securities Clearing Corporation Ltd.”

Circulars / Instructions / Orders

DGFT

1. 65/2015-2020 - dated 28-12-2018

Amendments in the Appendix 3B, Table 2 of the Merchandise Exports from India Scheme (MEIS)

Customs

2. 53/2018 - dated 28-12-2018

Procedure to be followed in cases of manufacturing or other operations undertaken in bonded warehouses under section 65 of the Customs Act

3. PUBLIC NOTICE No. 39/2018 - dated 13-11-2018

Implementation Of Paperless Processing under SWIFT- Uploading of Supporting Documents (eSANCHIT) in Exports

Highlights / Catch Notes

Income Tax

• Court Upholds Tax Assessment on Property Transactions u/s 56(2)(vii)(b)(ii) of Income Tax Act; No Relief for Assessee.

  Case-Laws - AT : Addition u/s 56(2)(vii) being the difference between value mentioned in the Conveyance Deed and the stamp duty value of Immovable properties - This is not the assessee’s case that his four transactions are in any way covered in the last proviso. No reason to interfere with the lower authorities’ action invoking section 56(2)(vii)(b) clause (ii) of the Act.
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• Trust's Section 12A Registration Denied for Fraudulent Information, Attempted Tax Exemption Fraud Uncovered.

  Case-Laws - AT : Denial of registration u/s 12A - Had the case of the Trust been not carefully examined, these important and relevant facts would have remained wrapped under the carpet, and the Trust could have managed to get the relief of exemption from taxation by presenting wrong and false facts. This is a clear case of an attempt to play fraud.
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• Exemption Denial u/ss 11 and 12 Unjustified Unless Income Benefits Specified Persons.

  Case-Laws - AT : The denial of exemption to the assessee U/s 11 and 12 of the Act is not justified except to the extent where the specific part of the income or property is found to be used or applied for the benefit of specified persons.
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• Debate Over Classifying Trial Run Sales as Revenue or Capital Work in Progress in Phase-II Power Project.

  Case-Laws - AT : MAT - Addition on account of receipt of sale proceeds of production from trial run of the plant at Phase-II of the power project - whether the said receipt was revenue in nature and the same should have brought into the profit and loss account instead of taking it to the capital work in progress? - AO has on his own fancies and assumption - No additions.
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• AO Ordered to Rectify Error u/s 154 for Ignoring Jurisdictional High Court Decision, Taxpayer to Receive Benefits.

  Case-Laws - AT : Rectification order passed u/s 154 - AO has not considered the binding decision of the jurisdicitonal High Court and the same constitutes mistake apparent from record - AO directed to allow the benefit to the assessee.
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• Revenue's Cross Objection Invalid for Lack of Approval and Unattainable Objectives, Leading to Rejection.

  Case-Laws - AT : Validity of Cross Objection (CO) filed by the Revenue - the revenue is trying to achieve its objectives, which could not be achieved by it directly - Further, in the absence of approval of Principal Commissioner or Commissioner, the reframed grounds of the revenue are liable to be rejected on this ground also. - CO rejected.
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• Disallowance of Revenue Expenses u/s 37(1) for Land Acquisition in Business Start-Up Discussed.

  Case-Laws - AT : Disallowance of revenue expenses u/s 37(1) - relevant Assessment Year - The actual acquisition of the land may be a first step in the commencement of the business but section 3 of the Act does not speak of commencement of the business, it speaks only of setting up of the business.
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• ITAT wrongly denies benefits u/s 80IB for assessee's manufacturing activities with IOCL, BPCL, and BRPCL contracts.

  Case-Laws - HC : Entitlement to relief u/s.80IB - CIT(A) has correctly concluded that the activity of the assessee in designing, engineering and fabricating of the plant and systems in the contract with IOCL, BPCL, BRPCL, is manufacture of article or thing. - ITAT wrongly denied the benefit.
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• Transfer Pricing: Unjustifiable Arm's Length Price Adjustment for Credit Periods over 90 Days with Non-AE Transactions.

  Case-Laws - AT : Transfer Pricing Adjustment - credit period beyond 90 days - the transactions with the non-AE constitute valid Internal CUP inputs and ALP adjustment on account of realisation of bills beyond 90 days from the Associated Enterprise cannot be justified.
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Customs

• Court Examines Import of Squalene, Urges Improved Testing to Avoid Contamination Under Advance Authorization.

  Case-Laws - AT : Import of prohibited goods - squalene - advance authorization - it is necessary to make good the inadequacy of analysis in the earlier test reports and thus eliminate the possibility of any taint in the imported goods.
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Corporate Law

• Company's Share Transfer Refusal Deemed Reasonable; Board's Decision Not Arbitrary or in Bad Faith.

  Case-Laws - AT : Power to refuse registration of transfer of shares in the Company to outsiders - We find the reason recorded by the Company to refuse to record transfers is based on reasonable apprehensions recorded in the letters sent to Petitioner. We do not wish to impose our wisdom on that of the Board of Directors which cannot be said to be arbitrary on lacking in bona fides
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• Parties in Tribunal proceedings can request mediation anytime u/s 442(2) of Companies Law for efficient dispute resolution.

  Case-Laws - Tri : Mediation and Conciliation - by virtue of Sub-section 2 of Section 442, any of the parties to the proceeding during the proceedings pending before this Tribunal is entitled to apply for mediation.
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Service Tax

• Lead Generators Not Insurance Agents: Commissions Excluded from Assessable Value for Tax Under Finance Act, 1994.

  Case-Laws - AT : The service rendered by ‘lead generator’ is not that of an ‘insurance agent’ and, consequently, the commission paid by respondent to such entities are not liable to be included in the assessable value of the respondent for discharge of tax liability under Finance Act, 1994
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Central Excise

• CENVAT Credit Entitlement Confirmed: Service Tax Paid by Job Worker Qualifies for Credit, Even if Not Due.

  Case-Laws - AT : CENVAT Credit - service tax paid by job-worker - The credit of tax “paid” is available to the recipient and the law does not talk about the tax payable. As such, the job worker having paid the tax, whether payable or not, the appellant was entitled to the credit.
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• CENVAT Credit Reversal Not Required for Stock Shortages Found During Factory Stock Taking by Appellant.

  Case-Laws - AT : CENVAT Credit - shortage recorded on the basis of stock taking - whether the cenvat credit in respect of shortage recorded on the basis of stock taking done by the appellant themselves in their factory is required to be reversed or otherwise? - Held No
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• Appellants' Demand Overturned Due to Quasi-Judicial Lethargy and Ignored Cross-Examination Directions.

  Case-Laws - AT : Manufacture or not - The opportunity given for causing verification of the activity of the appellants was frittered away only due to quasi-judicial lethargy. The directions for granting cross examination was also not honoured - Demand set aside.
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• Appellant Liable for Differential Excise Duty Due to Price Escalation Clause in Petroleum Products per Section 11D of Central Excise Act.

  Case-Laws - HC : Price escalation clause - petroleum products - The calculation are accounted, against the appellant. Therefore, the appellant alone is liable to pay the differential excise duty, recovered, in terms of Section 11 D of the Central Excise Act.
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VAT

• Dealer Penalized for Suppressing Taxable Turnover and Misusing C Forms with Intent to Deceive.

  Case-Laws - HC : Suppression of taxable turnover - Misuse of C forms - The theory as propounded by the dealer that blank forms were handed over to the HPCL is a false statement. - there was sufficient mens rea on the part of the dealer and this can be gathered from their conduct and the Assessing Officer was justified in imposing penalty
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Case Laws:

• Income Tax

• 2018 (12) TMI 1569
  Reopening of assessment - availing statutory alternative remedies - reasons to believe - Held that:- No reason to interfere in the matter. The special leave petition is, accordingly, dismissed

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• 2018 (12) TMI 1568
  Entitlement to relief u/s.80IB - Installation of the equipment is a part of manufacturing activity carried on by the Appellant - splitting of contract - Held that:- In the instant case, the contract is for design, supply, installation and maintenance. Therefore, for the Assessing Officer to come to a conclusion that the design would fall within the category of "manufacture" and not supply and installation, in our considered view would be an incorrect way of interpreting the contract entered into between the two parties. The Assessing Officer did not have material to split up the contract into one or more parts. As examined the relevant documents which were placed before the CIT(A) and it appears from those documents that the contract is a very complex contract involving technical design and installation for a project and that is why, the contract has a component called design so the design has to be done for a customer to suit his parameters. Obviously, the product made by the appellant is not a product which available "off the shelf". The product which is subject matter of consideration has been designed exclusively for the customers, which are Government of India Enterprises and the design is to suit the customers' need and unless it is operational the product does not come into being. This is the correct manner the contract has to be interpreted and has rightly been interpreted by the CIT(A) as concluded that the activity of the assessee in designing, engineering and fabricating of the plant and systems in the contract with Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd., Bongaigaon Refinery and Petro Chemicals Ltd., is manufacture of article or thing - Decided in favour of the assessee

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• 2018 (12) TMI 1567
  Maintainability of appeal - assessee have not questioned the charging of interest under Section 234-B - Explanation to Section 140A(1) applicability to the case on hand - Held that:- If an assessee is called upon to pay additional amount than what has been quantified, which was also under challenge, elementary principle of natural justice would require that the assessee be given an effective opportunity. As pointed out earlier, the Assessing Officer has not given any specific finding as to why the contention of the assessee that Explanation to Section 140(A)(1) of the Act will have no application. This is also a reason, which has weighed in our mind to hold that the matter requires a fresh examination. As pointed out above, the decision in the case of Central Provinces Manganese Ore Co. Ltd.[1986 (5) TMI 3 - SUPREME COURT] will aid the assessee's case and the Tribunal was not right in holding that the appeal was not maintainable, as the appeal was not against an order rejecting the request for waiver. In any event, appeal under Section 253(1)(a) of the Act is maintainable before the Tribunal, as the order impugned before the Tribunal is an order passed under Section 250 of the Act. Thus, for the above reasons, we are of the considered view that the matter should be remanded to the Commissioner of Income Tax (Appeals) to take a fresh decision on merits and in accordance with law. Accordingly, the appeal filed by the assessee is allowed.

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• 2018 (12) TMI 1566
  Disallowance of revenue expenses u/s 37(1) - there was no (Revenue from) business in-existence carried out during the relevant Assessment Year - Held that:- Hon’ble Delhi High Court also in case of Dhoomketu Builders and Development Pvt. Ltd. [2013 (4) TMI 668 - DELHI HIGH COURT] held that when an assessee whose business it is to develop real estates, is in a position to perform certain acts towards the acquisition of land, that would clearly show that it is ready to commence business and, as a corollary, that it has already been set up. The actual acquisition of land is the result of such efforts put in by the assessee; once the land is acquired the assessee may be said to have actually commenced its business which is that of development of real estate. The actual acquisition of the land may be a first step in the commencement of the business but section 3 of the Act does not speak of commencement of the business, it speaks only of setting up of the business. - decided against revenue.

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• 2018 (12) TMI 1565
  Addition on account of notional interest income on the loan given - Assessee’s alternate ground that interest may be levied @ 6.75% - Held that:- Fact remains that the impugned Loan Restructuring Agreement was not examined by the lower authorities and was rejected on a pre-conceived notion of it being a colourable device to avoid tax. We also note that the lower authorities have not considered and verified the assessee’s contention that the impugned loan was given out of reserves and interest free funds of the assessee company. It is also seen that the Ld. CIT (Appeals) has, without assigning any cogent reasoning, summarily dismissed the assessee’s alternate ground that interest may be levied @ 6.75%. Therefore we deem it appropriate to restore the issue to the office of the Assessing Officer to adjudicate the issue afresh in accordance with law after duly considering the contents of the original loan agreement as well as the loan restructuring agreement. The assessee will be at liberty to file evidences before the AO in support of its claim. The Assessing Officer shall also duly consider the alternate argument of the assessee that an interest rate of 6.75% may be applied - Appeal of the assessee stands partly allowed for statistical purposes.

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• 2018 (12) TMI 1564
  Proceedings u/s 201(1) - TDS u/s 195 - ‘assessee in default’ for withholding of taxes from the payments made to ABN Amro Bank, Stockholm Branch - Held that:- both the parties before us agreed that the impugned interest in the quantum interest pertained to the same parties and the same loan for which the assessee has been held to be in default u/s 201 of the Act and against which the assessee was now in appeal before us. Both the parties fairly agreed that interest of justice would be served if these appeals were also restored to the file of the Assessing Officer in terms of the directions of the ITAT in assessee’s own appeal for assessment year 2007-08 Isuue to be restored to the file of the Assessing Officer with a direction to identify the factual aspect of the issue and determine as to whether the impugned income was taxable in India or not so as to bring the assessee within the mischief of section 40(a)(i) of the Act. The determination of this issue will essentially determine the issue whether the provisions of section 201 are attracted in this case. - Decided in favour of assessee for statistical purposes.

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• 2018 (12) TMI 1563
  TPA - Comparable selection - functinal dissimilarity - admission of the additional ground - Held that:- The Ld. CIT(DR) did not object to admission of the additional ground of appeal in view of the Assessee’s contention that relevant facts for adjudication of the additional ground of appeal are already on record of assessment proceedings. - the additional ground of appeal admitted. EIL cannot be taken as a suitable comparable company in the absence of its segmental accounts. As regards, comparable of Mahindra we respectfully follow the order of Coordinate Bench of ITAT, Delhi in Assessee’s own case for AY 2009-10 and set aside this issue regarding comparable of Mahindra to the file of TPO/AO for fresh order, with the direction to exclude Mahindra as a comparable if the assessee is also to substantiate its claim that most of the work carried out by Mahindra was outsourced whereas the assessee had not or minimal outsourcing.

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• 2018 (12) TMI 1562
  Rectification order passed u/s 154 - Admissibility of deduction claimed u/s 80IB(10) - return of income filed beyond the due date prescribed u/s 139(1) claiming deduction u/s 80IB(10) - Held that:- Since the income has already been taxed, it is the contention of the assessee, that the same would result in double taxation, if the claim of application is rejected. Even though the Ld CIT(A) has expressed the view that this issue may fall outside the scope of sec.154 of the Act, he has not given any specific direction to the AO. The assessee, in the alternative contended that where an expenditure is disallowed, it will go to increase the profits eligible for deduction u/s 80IB(10) of the Act. - AO has not considered the binding decision of the jurisdicitonal High Court [2015 (9) TMI 806 - BOMBAY HIGH COURT] and the same constitutes mistake apparent from record. Accordingly we direct the AO to allow deduction u/s 80IB(10) of the Act on the disallowance of Rs. 9.00 crores made by him. Validity of Cross Objection (CO) filed by the Revenue - Held that:- What cannot be achieved directly cannot be achieved indirectly. In the instant case, the revenue has fairly admitted that the time limit for reopening of assessment has already expired, meaning thereby, the AO could not disturb the assessment order already passed by him, even if any wrong is found therein. By filing this CO before the Tribunal, that too in an appeal proceeding challenging the rectification order passed u/s 154, the revenue is trying to achieve its objectives, which could not be achieved by it directly. The said objectives are sought to be achieved indirectly on the basis of allegation of fraud, since the AO could not take direct action due to expiry of limitation period. A.R also submitted that the assessee has filed its return of income for AY 2012-13 also beyond the due date prescribed u/s 139(1) of the Act claiming deduction u/s 80IB(10) of the Act. It was submitted that the AO has allowed the said deduction in AY 2012-13. Accordingly, it was submitted by Ld A.R that there is no merit in the allegation of fraud, if any, committed by the assessee, as the AO himself has allowed deduction in the succeeding year on the basis of belated return of income. In view of the foregoing discussions, we are convinced that the the CO filed by the revenue is not maintainable. Accordingly we reject the same. Absence of approval of Principal Commissioner or Commissioner - Held that:- We have earlier noticed that the revenue has furnished sanction of Ld CIT only in respect of original grounds of appeal filed by it. The approval in respect of revised grounds of appeal was not placed before us. The provisions of sec.253(2) mandates that the AO should file appeal on the direction of the Principal Commissioner or Commissioner, as the case may be. We notice that the practice followed by the revenue is to furnish a copy of approval granted by Ld Pr. CIT or CIT to the grounds urged by the assessing officer. Accordingly, in the absence of approval of Principal Commissioner or Commissioner, the reframed grounds of the revenue are liable to be rejected on this ground also.

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• 2018 (12) TMI 1561
  Extension of stay order - Inordinate delay in fixation of hearing of special benches cases - reasons for delay - Held that:- With the consent of the parties, the hearing of the related appeals is scheduled for 13th February 2019. As the date is announced in the open court, there is no need of issuing formal notices in this regard. As the delay in disposal of these appeals is not on account of any lapse on the part of the assessee, and as there is no change in the material facts and circumstances vis- -vis the material facts and circumstances when the stay was originally granted in this case, the stay on collection/ recovery of outstanding demands of tax and interest, as set out in first paragraph earlier, is extended till 180 days from the date of this order or till the disposal of these appeals- whichever is earlier. Ordered, accordingly.

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• 2018 (12) TMI 1560
  Unexplained cash credits u/s 68 - bogus Long Term Capital Gains - share price rigging - Held that:- We afforded sufficient opportunity to the Revenue for indicating any material on record indicating the assessee’s nexus with the alleged share price rigging or her name having specifically mentioned in any search statement. There is no such material forthcoming from the case file. We therefore adopt the detailed reasoning in SMT. NALINI BOTHRA C/O S.L. KOCHAR VERSUS INCOME TAX OFFICER, WARD-35 (3) , KOLKATA [2018 (11) TMI 870 - ITAT KOLKATA] mutatis mutandis to delete the impugned addition of unexplained LTCG. We adopt the above detailed reasoning mutatis mutandis to conclude that CIT(A) has rightly reversed assessment findings treating the assessee’s impugned LTCG to be unexplained cash credits - Decided in favour of assessee

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• 2018 (12) TMI 1559
  Undisclosed income deposited/credited in undisclosed three bank accounts - Held that:- AO had failed to examine the source of deposit on the basis of merit. It is not a matter whether the Bank accounts belong to the assessee or his HUF rather if the source of those deposits is explained no addition can be made in the case of the assessee as individual capacity or in the case of HUF. In the case in hand, the assessee has been able to explain the source of those deposits/credit entries during the assessment proceedings and meticulously before the appellate authority which was rightly taken into consideration which deleting addition by the CIT(A) as indicated by us hereinbefore. CIT(A) was pleased to direct the AO to examine the issue afresh regarding disallowance of deduction claimed by the HUF against the full value of consideration to compute the total income of HUF which makes the order complete and more reasonable. We, therefore find no infirmity in the order passed by the Learned CIT(A). The same is thus confirmed. - Decided against revenue.

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• 2018 (12) TMI 1558
  Addition on account of unexplained cash credit - Held that:- We hold that except crediting the cash to the credit of various debtors’ account in the ledger accounts of the assessee, we find that the assessee had not produced any other corresponding evidences from external sources such as from debtors’ confirming this fact of having settled their dues to the assessee in cash. The confirmatory certificate stated to have been filed by the assessee before the CIT(A) is not forming part of Paper Book filed before us and hence the same cannot be taken into account for want of proof. Once the cash is deposited into bank account of the assessee, the onus is primary on the assessee to prove that the said cash is sourced by realization from debtors, which in the instant case has not been proved by the assessee except making an oral statement and taking credence from the entries passed by him in the books of accounts of Rajeev Trading Co. It is not in dispute that the seven notices sent by the AO u/s 133(6) to seven sundry debtors returned unserved. The assessee did not take corrective measures to produce confirmations from these seven sundry debtors either during the assessment proceedings or during the appellate proceedings. Hence we hold that the primary onus and the three ingredients of section 68 has not been discharged by the assessee in the instant case. - decided against assessee Claim of bad debts u/s 36(1)(vii) - alternative argument stating that in case if the said credit to the account of the sundry debtors are not believed to be genuine by the department, it cannot be disputed that the assessee had reduced the debtors’ account balances in its books of accounts which effectively amounts to write off of debts - Held that:- As relying on M/S. D.K. INDUSTRIES VERSUS I.T.O WARD 34 (3) , KOLKATA [2016 (5) TMI 850 - ITAT KOLKATA] we hold that the assessee in the instant case is entitled for deduction as bad debts based on alternative argument advanced by the ld. AR. Accordingly, grounds raised by the revenue are dismissed.

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• 2018 (12) TMI 1557
  Computation of MAT - Addition on account of receipt of sale proceeds of production from trial run of the plant at Phase-II of the power project - whether the said receipt was revenue in nature and the same should have brought into the profit and loss account instead of taking it to the capital work in progress? - Held that:- There are predetermined criteria laid down to evaluate the efficiency of the plant and to analyze the flaws. Once the trial run operations are conducted, the results give a roadmap to suitable modifications required in the project. If however, major changes are required by the plant after commissioning it would lead to huge expenses and thus this acts as a preventive step to evaluate the plant. The production of power from Phase II and III would vary depending on the predefined criteria. It is not for the AO to determine if the units generated from Trial Run are high in number or not. While, the production of power from Phase I would basically be to fulfill the requirement of its customer. It would also be pertinent to note that the Income derived from the Phase II after its commissioning has also been higher in the subsequent years. The same was verified from comparative receipts of each phase. We find that during the succeeding Assessment years i.e. AY 2008-09 and AY 2009-10, the total receipts from Phase II and Phase III operations is higher than that of Phase I. The AO on page 3 of its order dated 31.03.2015 has stated that a plant that has yet to come to operation obtaining such high receipts is abnormal. AO has on his own fancies and assumptions taken a stand that the receipts of 42,75,00,000/- is abnormal and unjustified. He has totally ignored the facts of the case, the operating capacity of the Phases and its subsequent receipts. The table below clearly reflects that due to higher capacity of power production, the income earned by the assessee through Phase II/ III is reasonably higher than that of Phase I. We find that the AO has made an adjustment to the book profit of the receipts of Rs. 42.75 crores while computing the income under section 115JB of the Act and the assessee has treated the receipts earned which is lined to the setting up of the business and accordingly capitalized by reducing from the balance of capital work in progress. This treatment of such income was disclosed in the preparation of annual accounts of the assessee, which is inconsonance with mandatory accounting standards applicable to the assessee. The assessee is following the accounting standards consistently and preparing its annual accounts accordingly. This annual accounts are audited as per the companies Act and approved by shareholders in the AGM held for this purpose. These amounts were submitted before the ROC. In view of these facts, we are of the view that this issue is squarely covered by the decision of Hon’ble Supreme Court in the case of Apollo Tyres Ltd. Vs. CIT [2002 (5) TMI 5 - SUPREME COURT]. We are of the view that the issue on merits as well as on jurisdiction is covered in favour of assessee and against Revenue.

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• 2018 (12) TMI 1556
  Transfer Pricing Adjustment - transactions benchmarked using Transactional Net Margin Method (TNMM) - adjustment on account of realisation of bills beyond 90 days from the Associated Enterprise - Held that:- As pointed out by the learned Counsel, the undisputed position is that the assessee had allowed credit period beyond 90 days in the case of Non-Associated Enterprises, i.e. independent enterprises as well. Once this fact is not disputed, the transactions with the non-AE constitute valid Internal CUP inputs and ALP adjustment on account of realisation of bills beyond 90 days from the Associated Enterprise cannot be justified. In view of above discussions we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned ALP adjustment. TDS u/s 195 - Disallowance of provision for royalty expenses - expenses as disallowable under Section 40(a)(i) - Held that:- the tax withholding liability has been discharged by the assessee as and when the activation of key has taken place. This approach is legally correct because activation of the end product is the trigger to royalty accruing to the vendors and as such to the income in the hands, if taxable, being brought to tax in India. The approach of the assessee thus cannot be faulted with. In view of the above discussions and bearing in mind entirety of the case, we see merits in the plea of the assessee. The impugned disallowance of under section 40(a)(i), as rightly contended by the learned Counsel, is devoid of legally sustainable merits and must be, therefore, deleted. Accordingly, we direct the Assessing Officer to delete the impugned disallowance made under section 40(a)(i) - decided in favour of assessee.

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• 2018 (12) TMI 1555
  Reopening of assessment - reason to believe with AO of escaping the assessment at the time of issuing of the notice - addition on sale of agriculture land - whether land sold by the assessee is not a capital asset as it is an agricultural land? - Held that:- For holding whether the impugned land is a capital asset or not the distance of this land has to be measured only from municipal limit of Ghaziabad and not from Loni. As it has been stated by the learned commissioner appeals that the distance from the Ghaziabad Ministry per limit of the impugned land is 17.5 km and therefore it is not a capital asset and capital gain is not chargeable on sale of this agricultural land. In the remand report, also it is apparent that the impugned land is situated beyond 8 km from Ghaziabad Nagar Nigam. Ide - impugned land sold by the assessee is not a capital asset as it is situated beyond 8 km from the outer limit of the Ghaziabad Nagar Nigam. Hence, no capital gain is chargeable in the hands of the assessee on sale of the impugned agricultural land. - Decided in favour of assessee. For reopening of assessment assessing officer is correctly initiated the reopening of the assessment because the assessee has sold a impugned land and no return of income has been filed. In view of this the learned assessing officer has reasonable believe that income of the assessee has escaped the assessment. - decided against assessee.

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• 2018 (12) TMI 1554
  Levy of penalty u/s. 271(1)(c) - Non specification of charge - Held that:- Assessing Officer while initiating penalty proceedings has merely mentioned, “penalty proceedings u/s. 274 r.w.s. 271(1)(c) are separately initiated”. The manner in which satisfaction has been recorded and thereafter, penalty has been levied clearly shows that there was ambiguity in the mind of Assessing Officer with respect to charge for which penalty u/s. 271(1)(c) is to be levied. While recording satisfaction the Assessing Officer has omitted to mention charge for levy of penalty. In the case of Commissioner of Income Tax Vs. Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that the assessee should know the grounds which he has to meet specifically. Otherwise, the principle of natural justice is offended. On the basis of such proceedings, no penalty could be imposed on the assessee. Thus, where the Assessing Officer has failed to mention the charge at the time of recording of satisfaction for initiating penalty u/s. 271(1)(c) the penalty proceedings are liable to be quashed - Decided in favour of assessee.

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• 2018 (12) TMI 1553
  Exemption U/s 11 and 12 rejected - specific part of the income or property is found to be used or applied for the benefit of specified persons - AO applying the provisions of Section 164(2) for assessing the income of the society as business income after denying the exemption U/s 11 - Held that:- Denial of benefit of Section 11 and 12 is not automatic merely because some payments made to the some specified persons but the said payment should be in the nature of benefit of such specified persons. Therefore, if the payment is made without any service by the specified persons then to the extent of payment, which is excessive or without any service, the same will be treated as the income applied or used for the benefit of the specified person not eligible for exemption U/s 11 and 12 of the Act. In the case in hand, CIT(A) has already considered that the salary and interest paid to the specified persons was not in excess of what may be reasonably paid, therefore, to that extent the payment of salary and interest will not attract the provisions of Section 13(1). Hence, even if any part of the income or property which is found to be used or applied for the benefit of the persons specified to in sub-section (3) of Section 13, the benefit of Sections 11 and 12 is not available only to that extent and the claim of the assessee cannot be denied in toto. Accordingly we hold that the denial of exemption to the assessee U/s 11 and 12 of the Act is not justified except to the extent where the specific part of the income or property is found to be used or applied for the benefit of specified persons. Hence, the orders of the authorities below qua this issue are set aside and both the grounds of the assessee’s appeal are allowed. Addition on account of interest free advances to specified persons - Held that:- The assessee has clearly made out a case that the land in question was in the possession of the assessee and therefore, the payment made under the agreement for purchase of land. Once the possession of land was already transferred to the assessee then the payment in question was evidently for purchase of land. Therefore, merely because the conveyance deed was not registered as the assessee has not paid the balance payment of purchase consideration would not lead to the conclusion or any inference that the said payment was made for the benefit of the specified persons. The assessee is in possession of the land of Rs. 8.00 crores against which only Rs. 5,05,00,000/- was paid, therefore, we do not find any substance in the opinion of the AO as well as the ld. CIT(A) holding that the said payment is falling in the category of application of income or property for the benefit of specified persons. Even otherwise AO has made the addition of notional interest whereas there was no corresponding expenditure incurred by the assessee. In any case when the payment was made as a consideration for purchase of land, possession of which was already transferred to the assessee under the agreement dated 27/08/2012 then the said amount will not partake the character of income or property of the Trust applied or used for the benefit of specified persons. - decided in favour of assessee Addition of development receipt/fee treating the same as revenue receipt - Held that:- The development fee received by the assessee from the students as per the guidelines fixing the fee structure by the State Government for the technical institutions and applying the other conditions as specified in the orders of the State Govt. is capital in nature and not revenue. The decision as relied upon by the ld CIT-DR in the case of ACIT Vs. M/s Scholars Education Trust of India [2017 (12) TMI 354 - ITAT JAIPUR] is based on different set of facts and it was not either pleaded or brought on record by the assessee in the said case that the development fee was to be used for specific purpose. Hence, the Tribunal has given the finding based on the fact that the said fee was not part of the corpus fund of the assessee Trust. Accordingly, we delete the addition made by the Assessing Officer on this account. - decided in favour of assessee

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• 2018 (12) TMI 1552
  Denial of registration u/s 12A - non-incorporation of dissolution clause - Trust is controlled and managed by the Government - Held that:- The trust has been supposed to be governed by the officials of the Government under the Chairmanship of Chief Minister of Punjab as pleaded by the assessee society, itself, before the CIT(E) but has now given its control to the private persons who are no more in the Government. This fact has been conveniently concealed from the CIT(E) that the term of Board of Governors has not been extended since 15.5.2007 and that after year 2007, there is no control of the Government or any official of the Government on the trust after the year 2007 and that the Members of the trust, who are private persons, themselves have established control over the Trust. A totally false and wrong pleadings have been made by the assessee Trust before the Income Tax Authorities that it is a Government controlled organization. The facts on the file speaks that the trustees in violation of the ‘MOA’ and ‘Regulations’ of the trust have shifted control & management of the Trust from the state and central government officials unto themselves. Under the circumstances, the Ld. CIT(E) had a valid and reasonable apprehension that in case of dissolution, the properties of the trust, which admittedly have been created and constituted out of 100% grants given by the State and Central Government and have now been attempted to be shifted in the hands of the private management, may be distributed amongst the private individual members of the trust. The above facts and circumstances also cast doubt about the functioning and genuineness of the objects of the trust. In view of this, we do not find any infirmity in the order of the CIT(E) in rejecting the application of the trust for registration u/s 12A of the Act. A clear and visible attempt on behalf of the trust to mislead this Bench of the Tribunal by way of concealing the real and true facts that the Members of the Trust have, by not extending the term of Board of Governors, conveniently entrusted unto themselves the control and management of the Trust. Had the case of the Trust been not carefully examined, these important and relevant facts would have remained wrapped under the carpet, and the Trust could have managed to get the relief of exemption from taxation by presenting wrong and false facts. This is a clear case of an attempt to play fraud not only with the lower Income Tax authorities, but also upon this Tribunal - Decided against assessee.

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• 2018 (12) TMI 1551
  Addition u/s 56(2)(vii) being the difference between value mentioned in the Conveyance Deed and the stamp duty value of Immovable properties - Capital gain computation - FMV determination - Held that:- Sec.56(2)(vii)(b) is applicable in case of an individual or an HUF receiving any immovable property having stamp value exceeding Rs.50,000/- rupees without consideration or such a consideration to be less than stamp price of the property by an amount exceeding Rs.50,000/- rupees. As learned counsel vehemently contended that both the lower authorities have erred in law as well as on facts in invoking the impugned statutory provision find no merit in this argument since the legislature has made it clear in last proviso to sec. 56(2)(vii) that this clause does not apply to any sum of money or any property received from any relative or donor as per clauses (a) to (g) therein. This is not the assessee’s case that his four transactions are in any way covered in the last proviso. No reason to interfere with the lower authorities’ action invoking section 56(2)(vii)(b) clause (ii) of the Act. For fair market value of the assets it is an admitted fact that neither of the lower authorities made any reference to the DVO. Section 56 first proviso make it clear that where the stamp duty of immovable property is disputed on grounds mentioned in sec. 50C(2), the Assessing Officer’s may refer such a valuation to the DVO. Hon'ble jurisdictional high court’s decision in Sunil Kumar Agarwal vs. CIT [2014 (6) TMI 13 - CALCUTTA HIGH COURT] holds that a reference u/s 50C has to be mandatorily made even if the assessee concerned fails to make such request therefore apply the said ratio mutatis mutandis in light of proviso hereinabove to restore the fair market value issue back to the Assessing Officer for afresh adjudication after making necessary reference to the DVO as per law.- Assessee’s appeal is partly allowed for statistical purposes .

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• 2018 (12) TMI 1550
  Late deposit of TDS u/s 40(a)(ia) - whether TDS was deposited before the due date of filing of income tax return as specified u/s 139 - Held that:- It is settled law that no disallowance can be made on account of non-deduction of TDS u/s 40(a)(ia) of the Act if the same is deposited on or before the due date of the filing of income tax return. In this regard, we find guidance and support from the judgment of High Court of Gujarat in the case of CIT vs. BMS Products Pvt. Ltd. [2014 (4) TMI 242 - GUJARAT HIGH COURT]. The assessee has made sufficient compliance by depositing the amount of TDS within the due date of filing income tax return as specified u/s 139(1) of the Act. - Decided in favour of assessee.

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• Customs

• 2018 (12) TMI 1541
  Import of prohibited goods - squalene - eligibility to import against the ‘advance authorization’ - Held that:- Learned Counsel has not been able to sustain their contention that the goods are not of marine origin. The failure on the part of Revenue to conclusively establish coverage under the heading proposed by them would have sufficed to allow the claim of importer even if that not be on especially firm ground. The special circumstances are that the samples and/or the imported goods are available, that the goods are yet to be cleared for home consumption or that normal period of limitation has not elapsed since and that, most important of all, it behoves the administration of India, as a responsible constituent of the polity of nations comprising of responsible humanity, not to be a willing accessory in the reprehensible slaughter of endangered species. Hence, it is necessary to make good the inadequacy of analysis in the earlier test reports and thus eliminate the possibility of any taint in the imported goods. Matter remanded back to the assessing authority for having an appropriate test undertaken at such institution that has expertise in oceanography - appeal allowed by way of remand.

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• Corporate Laws

• 2018 (12) TMI 1549
  Illegal detention of the applicants - investigation u/s 212(3) Companies Act, 2013 - period of limitation - seeking Ad-interim ex parte release of the applicants from the alleged illegal arrest - investigation carried out by the SFIO beyond three months period, specified in the said order dated 20.06.2018, and the arrest of the applicants on 10.12.2018, pursuant thereto - Held that:- The applicants are co-operating with the investigation. We must also add that no cogent material has been brought to our notice on behalf of the SFIO to urge that, the applicants are a flight risk or that they will misuse the liberty granted to them by this Court. We must also add that, the applicants have deep roots in the society and belong to a respectable business family and have no criminal antecedents. Consequently, there is no possibility of their absconding and not being available for further investigation. The issues framed in the present applications are answered in favour of the applicants and against the official respondents. We have already hereinbefore expressed our considered view that, the facts and circumstances of the present case do not admit the continued unlawful detention of the applicants. In view of the foregoing, the present application is allowed. The applicants shall be released on interim bail, during the pendency of the accompanying petitions, on their furnishing a personal bond in the sum of Rs. 5,00,000/- each with two local sureties each of the like amount to the satisfaction of the trial court

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• 2018 (12) TMI 1548
  Mediation and Conciliation - parties to the proceeding during the proceedings pending before this Tribunal as entitled to apply for mediation - Held that:- From a perusal of Section 442 as extracted above, it is seen that by virtue of Sub-section 2 of Section 442, any of the parties to the proceeding during the proceedings pending before this Tribunal is entitled to apply for mediation. A further reading of Section 442, more particularly sub-section 3 of Section 442 also gives suo motu powers to this Tribunal to refer any matter pertaining to the proceedings to such number of experts from the Mediation and Conciliation Panel. The provision of Section 442 has been made effective on and from 1.04.2014 and the Central Government has also framed the rule 6 titled as The Companies (Mediation and Conciliation) Rules, 2016. Further, Central Government has also notified a Mediation and Conciliation Panel as displayed in the website maintained by Ministry of Corporate Affairs. In the present instance as already stated, even though the parties are in consensus for mediation but has failed to reach the consensus in relation to the mediator to whom the matter can be referred to for mediation. Taking into consideration the provisions of Section 442 of Companies Act, 2013 as well as the Rules as referred to above and the Mediation and Conciliation Panel as notified by the Central Government, the following two persons are appointed as mediators to mediate as between the parties.

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• 2018 (12) TMI 1547
  Oppression and mismanagement - respondent has failed to act upon the conditions and assurances based on which they have invested in 1st Respondent and that the 2nd respondent’s investment was only qua the residential portion of the project - Held that:- When anyone purchases/subscribes to the share capital of a company, to say that such purchase/subscription relates only to a portion of the property/assets belonging to the company cannot be countenanced in law. It is the company which owns the assets and shareholders have shares in the company and not in specific assets or part of assets of the company. Therefore, we find the argument of 2nd respondent convincing. Respondent failed to execute a new SHA with them to demerge the commercial portion of the project and incorporate the same in the Article of Association of 1st respondent - We are in agreement with the Respondent that 1st respondent being a public company cannot normally refuse to register transfer of shares from the original promoters to the appellants. As regards the issue raised by the appellant that the commercial portion of the project will be demerged in appellants’ favour is concerned, no fresh SHA or fresh agreement entered on the subject have been put up to establish that appellants have such right to commercial property. Further we have noted that the appellants were not even parties to the earlier SHA signed between the original promoters and the 2nd respondent and the appellant has himself stated in its communication dated 28.2.2012 that the SHA has become defunct since it was not incorporated in the Articles of Association of 1st respondent. The communication is prior to the date of transfer of shares in the name of appellant. Therefore, the appellants cannot be permitted to approbate and reprobate on the validity of the SHA to suit their convenience from time to time. The nominee directors of 2nd respondent entered into a master collaboration agreement with 7th respondent for development of a school on the commercial area of the Project and that this is direct contravention of the appellants’ rights and amounts to oppression and mismanagement - We have gone through the arguments and perused the record and we are of the opinion that while 1st appellant was watching his family interest but the interests of 1st respondent should always remain paramount. Therefore, we are not convinced with the argument of 1st appellant. These are business decisions decided as per corporate procedure. We cannot substantiate our opinion in it when no arbitrariness is show. As argued argued that 1st appellant’s allegation with regard to keeping of books of accounts of 1st respondent at the office of 2nd respondent and not at 1st respondent registered office, this is a gross distortion of facts, particularly when 2nd respondent does not have an office of its own in Hyderabad and the books are kept at 1st respondent registered office and are always available for inspection. As regards appointment of director after the final order has been passed in the company petition, there was no relief granted to the appellant, the company is to be managed/regulated with respect to the provisions of Companies Act/Article of Association of the company. The retirement of the director and re-election or not to re-elect the director is the normal routine in the company matters. If a person is not re-elected after he has retired in terms of the Companies Act/Article of Association of the Company, no grievance of his re-election can be raised by a person. As regards the other allegations regarding refusal to share information about 1st respondents’ litigation, acquisition of additional land for the Project, other affairs of 1st respondent, hindered the appellants’ access to company related information by illegally keeping books of account at 2nd respondent’s office instead of 1st respondent registered office is concerned, these are the issues relating to operational maters for running a company and grievance raised are quite vague for us to give directions. Appellants are free to adopt procedures under the Act and Rules. Appeal dismissed.

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• 2018 (12) TMI 1546
  Power to refuse registration of transfer of shares in the Company to outsiders - sufficient cause - Board of Directors of Synthite Industries, which at the time concerned was deemed public company and which was in the process of conversion into a private company power to refuse registration of transfer of shares in the Company to outsiders - Held that:- Admittedly Article 24 of the Articles of Association was existing as a contract between the Appellant Company and the respective Respondents 10. Apart from that, Sub-Section (4) of Section 58 of the Act, itself provides for an Appeal if the public company “without sufficient cause refuses to register the transfer of securities. It is obvious that if there is sufficient cause, the transfer can be refused. In the facts and circumstances of the present matter, looking to the above discretion, we are satisfied that the Appellant Company had sufficient cause to apprehend that Respondents No.10 in these Appeals were acting with a design and the original Petitioners had not purchased the share with bona fide object of investment. Respondent No.10 – Beena George held 2,640 shares of Rs. 100/- each in the Appellant Company but transferred just 25 shares. Appellant submitted that this could not be said to have been done with the bona fide object of trading but is rather attempt at introducing outsiders in the Appellant Company to get control and to create obstruction in the process which had been initiated by the Appellant Company of converting itself back to private limited company from a public limited company. We find the reason recorded by the Company to refuse to record transfers is based on reasonable apprehensions recorded in the letters sent to Petitioner. We do not wish to impose our wisdom on that of the Board of Directors which cannot be said to be arbitrary on lacking in bona fides. The decision was in interest of Company. Going through the reasons recorded by the learned NCLT for allowing the Compny Petition, we do not find that the Impugned Orders are well reasoned. For reasons discussed above, we find that the Petitions deserve to be rejected.

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• 2018 (12) TMI 1545
  Scheme of merger by absorption as proposed by the Appellant wholly accepted by the National Company Law Tribunal, Mumbai Bench, except with regard to changing the appointed date of the scheme - Conduct of Business during the Interim Period - Held that:- We hold that the appointed date of the scheme shall remain 1st April, 2017 as proposed by the Appellant. We make it clear that the Income Tax Authorities would not be hindered in any manner due to this scheme of merger. They would be at liberty to proceed against Appellant No.1 – the transferee Company for Income Tax liabilities of Transferor Companies, irrespective of the appointed date of the scheme, in accordance with law and if there is any difficulty, and need arises, as per law, they would be at liberty to proceed even against the erstwhile persons, members/directors of Appellants 2 to 4, holding them also liable.

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• 2018 (12) TMI 1544
  Scheme of merger by absorption - Held that:- The petitioner-companies have complied with all requirements as per directions of the Tribunal and they have filed necessary affidavits of compliance in this Tribunal. Moreover, the petitioner-company undertake to comply with all the statutory requirements if any, as required under the Companies Act, 2013 and the Rules made thereunder whichever is applicable. The scheme of merger by absorption appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy.

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• Insolvency & Bankruptcy

• 2018 (12) TMI 1570
  Corporate Insolvency Resolution Process - proof f default - Held that:- Default has occurred and the present application under Section 10 is complete and that the applicant is not ineligible under Section 11 of the Code. Further all requirements prescribed under sub-section 3 (a) and (b) of Section 10 of the Code have also been complied with. The Insolvency and Bankruptcy Code, 2016 is a complete Code in itself. The provisions of the Code are to be mandatorily followed. Adherence to the statutory requirements has to be in toto. Section 10 (4) (a) of the Code mandates the Adjudicating Authority to admit the application if it is complete. When the language of the Code is clear and explicit, the Adjudicating Authority must give effect to it, whatever be the consequences. In view of the above, we are satisfied that the present application is complete and that the applicant corporate debtor has committed a default. Therefore, as the application is complete the present petition is Admitted.

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• Service Tax

• 2018 (12) TMI 1540
  Classification of services - mandap keeper services - the revenue sought to levy service tax on the entire value i.e. including the value of room charges - Held that:- The appeal is dismissed on the ground of delay as well as on merits.

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• 2018 (12) TMI 1539
  CENVAT Credit - Rule 5 of CENVAT Credit Rules - Held that:- There is no merit in the Special Leave Petition - The Special Leave Petition is dismissed.

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• 2018 (12) TMI 1538
  Refunds of accumulated and unutilized CENVAT credit - rejection on the ground of time limitation - Section 11B of the Central Excise Act, 1944 - Rule 5 of CENVAT Credit Rules, 2004 read with N/N. 5/2006 dated 14.3.2006 and N/N. 27/2012-CE dated 18.6.2012 - Held that:- The original authority after proper verification found some of the refund claim within time and some of the refund claim beyond time. Accordingly, what was within time was allowed and what was beyond the time as prescribed by the Tribunal was rejected. Larger Bench of the Tribunal in the case of CCE vs. Span Infotech (India) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE] has also held that the time limit for consideration of the refund claim under Rule 5 of CENVAT Credit Rules, 2004 may be taken as the end of the quarter in which the FIRC is received in cases where the refund claims are filed on a quarterly basis. Appeal allowed in part.

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• 2018 (12) TMI 1537
  Levy of service tax - remuneration paid to channel partners as brokerage, commission, etc. - recipient of service - reverse charge mechanism - Held that:- The extract of a sample agreement entered into between the respondent and the lead generator makes it amply clear that their function is limited to marketing of the product whereas an insurance agent acts in place of the insurance company in so far as the policyholder is concerned. This is not to disclaim the scope of coverage of the service provided by lead generator under any other head of taxable service - The transfer of burden of discharge to the service recipient within section 68 of Finance Act, 1994 is specific and limited without scope for extending beyond the few transactions listed in rule 2(d)(i) of Service Tax Rules, 1994. The Central Board of Excise and Customs, vide instruction no. 137/21/2011-ST dated 15th April 2013, has clarified, in the context of certain levies under Finance Act, 1994, which had a reference to some other laws for the purpose of definition that the scope of such indirect definitions would not extend beyond the specific content of those definitions. It is, therefore, reasonable to surmise that the claim of the Learned Authorised Representative that the Finance Act, 1994 has been aligned entirely with the Insurance Act, 1938 is too farfetched for us to place reliance upon. The service rendered by lead generator is not that of an insurance agent and, consequently, the commission paid by respondent to such entities are not liable to be included in the assessable value of the respondent for discharge of tax liability under Finance Act, 1994 - appeal dismissed - decided against Revenue.

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• 2018 (12) TMI 1536
  Imposition of penalty - service tax paid on being pointed out - no malafide intent - Commercial or Industrial Construction Service - Held that:- The demand was raised on the basis of audit. The appellant have not denied the charges of non payment of service tax and immediately on pointing out by the audit, they paid the service tax and interest was also paid subsequently - also, there is no suppression of fact on their part. To invoke penalty, there should be suppression of fact and mis-declaration etc. on the part of assessee, which does not exist in the fact of the present case - penalty set aside - demand of service tax and interest and payment thereof is maintained - appeal allowed in part.

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• 2018 (12) TMI 1535
  CENVAT Credit - input services - consulting engineering service - input services received from foreign company - reverse charge mechanism - denial of credit on the ground that it is not input service - Held that:- The appellant has explained that these services were availed in order to start the township project. These were consultancy services availed for preparatory work for developing the township for which they have taken registration for discharging the service tax on these input services under the reverse charge mechanism - During the disputed period, there was no bar for taking the credit on demand of service tax under reverse charge mechanism - The decision laid down in the case of Kansara Modler Ltd. [2014 (1) TMI 1095 - CESTAT NEW DELHI] have categorically held that the assessees are eligible to take credit of the service tax paid under reverse charge mechanism - Credit allowed. CENVAT Credit - the appellant has not started providing output service and have taken registration for providing output service of works contract service only with effect from 23.10.2009 - Department is of the view that they are eligible to take credit only from the date of registration - Held that:- The services which are needed to start providing output service for manufacturing finished products would be eligible for credit. The said issue has been sufficiently analyzed in various cases - Hon’ble High Court of Karnataka in the case of Tavant Technologies Ltd. [2016 (3) TMI 353 - KARNATAKA HIGH COURT] had followed the decision in mPortal Wireless Solutions Pvt. Ltd. [2011 (9) TMI 450 - KARNATAKA HIGH COURT] and held that for availing as well as refund of unutilized credit, registration of service tax is not required - credit allowed. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (12) TMI 1534
  Price escalation clause - liability of excise duty on upward revision of rates - Section 11 D of Central Excise Act - petroleum products - sale of High Speed Diesel and Motor Spirit - Held that:- Whenever, there is upward revision of rates, the amount is collected from the customers, by the Depots. The additional amount recovered, has to be considered, as extra excise duty, which is liable to be paid under Section 11 D of the Act - The appellant cannot be permitted to pay duty, on the rates, prevailing on the date of stock transfer, ignoring the upward revision of rates, which is the price, at which the products to be sold, to the customer. Arguments of the appellant that they have no control over the Depots, is no answer to avoid the demand, because, it is the duty of the appellant to maintain the records of the amounts received from the Depots, from the sale of High Speed Diesel and Motor Spirit - Amount that are received from the Depots would include the excise duty, collected by the Depots, at the revised rate. The calculation are accounted, against the appellant. Therefore, the appellant alone is liable to pay the differential excise duty, recovered, in terms of Section 11 D of the Central Excise Act. Appellant, is the consignor of the goods, and the goods are removed from the terminal of the appellant to the depots only on stock transfer. They being the consignors, are responsible, for accounting to the authorities, for payment of excise duty. Admittedly, there is no sale between the terminal and depots. It is therefore, it is the responsibility of the consignor, to produce the sale record on stock transfer of goods, and pay the excess amount of excise duty collected due to upward revision of rates. Demand upheld - appeal dismissed - decided against appellant.

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• 2018 (12) TMI 1533
  Jurisdiction - power of Joint Commissioner to issue SCN under the provisions of the Central Excise Act, 1944 - Preparation of Draft Audit Report - Held that:- Issue Notice, returnable on 26th December 2018.

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• 2018 (12) TMI 1532
  Manufacture or not - appellants were purchasing parts, components and assemblies as spares for these vehicles in bulk and selling them after repacking and relabeling in retail / bulk pack from their spare parts division - MRP based assessment as required under Section 4A (2) of Central Excise Act, 1944 not followed - opportunity to cross-examine not given - reliability on statements - section 9D of the Excise Act. Held that:- There was no justifiable reason for non-conduct of the verification process when the appellant’s manufacturing premises were still in Hosur. Such laches will therefore not only preclude the Revenue from wriggling out of responsibility for conduct of the verification process, but at the same time put a question on the stand of the department that activity of appellant only amounted to „manufacture , which issue per se had been remanded by the Tribunal for de novo verification - Even more surprising however, is the adjudicating authority’s outright refusal to grant cross-examination in spite of the clear remand instructions of the Tribunal. Principles of natural justice - opportunity to cross-examine - Held that:- The necessity of strictly complying with the provisions of Section 9D of the Central Excise Act, 1944, including the requirement for grant of cross examination, has been consistently reiterated by higher appellate forums - the directions of the Tribunal in the earlier final order dt. 16.11.2009 has not been complied with and has only been followed in the breach. In consequence, appellants surely have been denied natural justice and opportunity to establish their credentials and case. The proceedings which have seen two rounds of litigation had commenced by way of issue of first SCN No.29/2008 dt. 10.4.2008. More than a decade has passed by, without any sign of resolution of the allegations raised by the department. The opportunity given for causing verification of the activity of the appellants was frittered away only due to quasi-judicial lethargy. The directions for granting cross examination was also not honoured - we find no purpose would serve by once again causing remand of the matter to the adjudicating authority. The impugned order cannot then sustain and will have to be set aside - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1531
  CENVAT Credit - capital goods or not - TMT Steel and PP Cement - credit reversed on being pointed out - demand of interest for delayed reversal of credit - imposition of penalty - Held that:- The fact is not under dispute that the disputed goods were used by the appellant in the fabrication of structure of capital goods namely sugar mill machinery, boiler house, power generation and power house, which are essential plants for ultimate manufacture of the final product - The period in dispute is from April 2006 to December 2007, which was covered under the un-amended definition of input (effective up to 7th July 2009). Under such un-amended provisions of Rule 2 (k) of the rules, there were restrictions for not allowing the Cenvat benefit on those structural items - Since specific restrictions were brought into the definition clause only with effect from 7th July 2009, Cenvat benefit on such disputed goods cannot be denied for the period prior to such effective date. Retrospective applicability of the definition of input contained in Rule 2 (k) of the Rules - Held that:- Though the Larger Bench of this Tribunal, in the case of Vandana Global Limited [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], has upheld the views expressed by Revenue, but the Hon’ble Chhattisgarh High Court in the case of said appellant M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] by relying on the Gujarat High Court judgment in the case of Mundra Ports & Special Economic Zone Ltd. [2015 (5) TMI 663 - GUJARAT HIGH COURT], has held that in absence of any specific mention about the retrospective application of the definition of input, the same should be considered as prospective in effect. Credit cannot be denied - demand set aside - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1530
  Clandestine removal - reliability on statements - corroborative evidences - Held that:- Commissioner(Appeals) has admitted that there is no other corroborative evidence to establish clandestine removal except for the statement of Shri Rakesh Jhindal, who was Managing Director of the Manufacturing unit - Tribunal in the case of Rimjhim Ispat Ltd. and Others [2018 (8) TMI 477 - CESTAT ALLAHABAD] have held that only on the basis of statement clandestine removal cannot be established - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1529
  CENVAT Credit - shortage recorded on the basis of stock taking - whether the cenvat credit in respect of shortage recorded on the basis of stock taking done by the appellant themselves in their factory is required to be reversed or otherwise? - Held that:- The same issue in the appellant’s own case COMMISSIONER OF CENTRAL EXCISE, CUS. & S. TAX, RAIGAD VERSUS M/S. CASTROL INDIA LTD [2018 (3) TMI 763 - CESTAT MUMBAI] has been decided by this Tribunal whereby the demand raised on such theoretical shortage was set aside. The impugned order is not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1528
  CENVAT Credit - removal of capital goods after use - demand of reversal of cenvat credit availed at the time of receipt of the capital goods - Rule 3(5) of Cenvat Credit Rules, 2004 - Held that:- From the plain reading of Rule 3(5), it is clear that duty on removal of capital goods required to be paid only in two cases i.e. if the capital goods is cleared as such without putting to use and capital goods is cleared as waste and scrap - There is no provision under Rule 3(5) or in any other Rule to demand duty if capital goods are cleared after use, therefore by invoking Rule 3(5) duty demand on the removal of capital goods as such cannot be made. Appellant is not required to pay duty on removal of capital goods as such - Appeal allowed - decided in favor of appellant.

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• 2018 (12) TMI 1527
  CENVAT Credit - service tax paid by job-worker - reverse charge mechanism - reopening of assessment at the end of service recipient - Held that:- It is not disputed that the job worker has paid the service tax. The credit of tax “paid” is available to the recipient and the law does not talk about the tax payable. As such, the job worker having paid the tax, whether payable or not, the appellant was entitled to the credit. The assessment cannot be reopened at the recipient end as held by number of decisions of the Tribunal - reliance placed in the case of Ultratech Cement Ltd. [2010 (12) TMI 90 - CESTAT, MUMBAI]. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (12) TMI 1542
  Huge suppression of taxable turnover by the dealer - Validity of assessment proceedings - PGST Act - failure on the part of first appellate authority to perform the statutory duties enshrined upon him - PVAT Act - correctness of the orders passed by the Assessing Officer, the first appellate authority and the Appellate Tribunal in its entirety - penalty u/s 24(3) of the Act - penalty u/s 13(3) of the Act - opportunity of cross examination of the officials not provided - intent to evade present or not - burden of proof. Principles of natural justice - details furnished by the dealer in the Form C declarations - whether the dealer was justified in contending that they should be given an opportunity to cross verify the details furnished by the HPCL, cross examination of their officers, before the assessment proceedings could be completed? - Held that:- The documents, namely, the form of declaration in Form C is a document generated by the petitioners/dealers. Therefore, whatever statement made in such declaration will fully bind the dealer. In such circumstances, there is a clear estoppel against the dealer to contend something contrary to the Form C declaration. The theory as propounded by the dealer that blank forms were handed over to the HPCL is a false statement. The documents were verified by the first appellate authority and there is a clear finding to the effect that the dealer has signed all pages of the declarations. Thus, the dealer, at the very first instance, has come out with the false statement. As mentioned above, the counterfoil has to be retained by the petitioner/dealer and therefore, they cannot feign ignorance of the details contained therein - it is too late for the dealer to contend that they are not aware of the details contained in the Form C declaration and if they still persist to contend so, even before others, their action has to be strongly deprecated, as they are perpetutately false representation. The Oil Corporation, HPCL has not only given the copy of the C-Form retained by them, which in fact, was issued by the dealer to them, but also has given the copies of the delivery details. Therefore, if the petitioner/dealer was a rightful person, the first step he should have taken is to verify these details with his selling dealers, namely, HPCL, who has granted dealership to do such business. Instead of adopting such a modus operandi, the petitioner/dealer has proceeded at a tangent by blaming the State Corporation without any details by making vague allegations, which cannot be appreciated. Thus, the fundamental basis on which the dealer has built up his case has crumbled because of the above fact that the Form C declaration is a solemn form made by the petitioner/dealer and is estopped from contending otherwise. Therefore, the initial burden has been fully discharged by the Department and it is for the petitioner/dealer to disprove the allegation against them and prove their innocence. No iota of evidence has been produced by the dealer to dislodge his own declaration made in Form C. Thus, we are of the clear view the question of applying Section 101 of the Indian Evidence Act, 1872 would not arise. It is not clear as to why the Department had not proceeded further in the matter, especially when they are contesting the present proceedings by filing tax case revisions to sustain the orders passed by the assessing authority. Thus, the first contention, regarding the requirement for cross examination, has to necessarily fail and accordingly, decided against the dealer. It was also contended that no reasons were given by the authorities as well as the Tribunal - Held that:- We wholly disagree with such a contention after going through the orders passed by the Assessing Officer. Admittedly, an Assessing Officer cannot be expected to write a judgment or a judicial order. We find that the Assessing Officer has analysed the objections given by the dealer and assigned reasons in paragraph 4 of his order. Therefore, we do not agree with the submission that the order is devoid of merits. Burden of proof - Held that:- The burden of proof had remained with the dealer and it is not for the Department to establish anything in the matter, as it is a document generated by the dealer. Levy of penalty - requirement of mens rea - CST Act - Held that:- The issue revolves around a Form C declaration and if according to the dealer, he had submitted the blank forms, it would amount to an offence. However, the first appellate authority found that there was no blank forms but, signed by them in all pages including annexure along with invoice bills - If that is so, then the details furnished therein should obviously tally with the return filed by the dealer. If there is discrepancy in that, the burden is on the dealer to disprove the same, more particularly, when the allegation is there is large scale suppression of taxable turnover. Mens rea is writ large on the face of the record. There is no further proof required to establish the blameworthy conduct of the dealer. Though we may not be fully justified in examining the past conduct of the dealer, especially when they had succeeded in the earlier writ petitions, which also arose out of the same type of transaction in the previous years and the Department having not filed an appeal yet, this would be a clear indicator as regards the modus operandi of the dealer. Thus, we safely conclude that there was sufficient mens rea on the part of the dealer and this can be gathered from their conduct and the Assessing Officer was justified in imposing penalty, as confirmed by the first appellate authority. There is no case for exercising any sympathy in such cases more particularly, when the transactions are all financial transactions especially dealing with the petroleum products, which can be handled only by licensed dealers such as the petitioner. There is no error in the decision making process as done by the Assessing Officer and such order was rightly affirmed by the first appellate authority as well as by the Tribunal - the Tax Case Revisions filed by the petitioners/dealers are dismissed and the questions of law framed in those revisions are answered against the petitioners - the order passed by the Assessing Officer is restored.

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• Indian Laws

• 2018 (12) TMI 1543
  Whether the plaints against the appellant/defendant-Axis Bank Limited are required to be rejected under the provisions of Order 7 Rule 11(d) of the Code of Civil Procedure, in view of the bar created by section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002? Held that:- Considering the expediency, prudence and wisdom of the banking business and when in the facts of the case the dealings between the bank and Orbit purely pertain to a banking business, the consequence of the bank being dragged into this litigation is definitely not warranted. In fact this would adversely affect the banks commercial interest to recover the debts due and payable to it by adhering to the procedure as prescribed by law, namely under the Securitisation Act. In the facts of the present case it would definitely meet the ends of justice that the plaint against the bank although it is one of the defendant needs to rejected. It is permissible for the Court to reject the entire plaint so far as the bank is concerned which is one of the defendants. The learned Single Judge was in an error in holding that the plaints against the bank were not barred under Section 34 of the Securitisation Act and consequently in rejecting the notices of motion and holding that the suits were not barred against the bank - impugned order set aside - notices of motion allowed.

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