Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 5, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Exemption from GST - Security Services rendered to Pimpri Chinch wad Municipal Corporation in relation to functions entrusted to Municipality under Article 243W of the Constitution - Being a pure service, benefit of exemption allowed.
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Levy of GST - export of service or not - intermediary services - The “Commission” received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” between an exporter abroad receiving such services and an Indian importer Of an Equipment, is not an “export of service” and GST will be levied.
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Levy of GST - sale of goods outside India - The goods sold in the subject transaction are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975
Income Tax
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Penalty levied u/s 271(c) for failure to deduct TDS - Imposition of penalty for non-compliance of statutory provision, is not a criminal liability, but is only a civil liability and therefore, bad motive on the part of the assessee is not essential to be proved.
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Addition on account of Business Promotion Expenses - personal element in the business promotion expenses to the extent of 10% of the total expenses cannot be ruled out.
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The penalty proceedings initiated by the Assessing Officer against a dead person was not enforceable in law and the penalty imposed under section 271AAB in pursuance of such invalid initiation is not sustainable.
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Merely because a business group and Directors of company are members of society, does not dilute nature of society being a trust. - assessee deserves to be granted registration under section 12 AA of the Act.
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Any expenditure incurred by a sugar factory on cane development programmes would be eligible for deduction in computing the taxable profits u/s 37(1) - The withdrawal of the tax concession under s. 35C would not affect this position.
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Entitlement to claim of deduction under Sec. 80-IA - filing of an audit report is procedural and directory in nature, and the same could also be validly filed by an assessee at the appellate stage.
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Addition on the transactions shown in 26AS - the said amount is considered while filing the return of income of the proprietorship concern and consequently the assessment in the hand of the dissolved partnership firm would amount to double taxation of the same income
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TDS u/s 195 - payments made to non-residents - tds liability - the commission were paid to such non-resident agents in respect of all the services rendered by them related to the export made by the assessee outside India - there is no PE in India - No TDS liability.
Customs
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Procedure for movement of goods under TIR Carnets-reg.
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continuation of Anti Dumping Duty (ADD) - Time limit for completing the New Shippers Review - the procedure under Rule 22, was initiated on 23/9/2015 and it culminated on 12/4/2017, after 18 months, which is more than the time prescribed in Rule 17 and Rule 23.
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The coal imported by the appellant is weak coking coal having Ash content below 12%, accordingly, the appellant is eligible for the benefit exemption notification.
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Demand of differential duty - the difference between the theoretical weight that has been declared on the bill of entry vis-a-vis the weight that has been physically computed worked out to 3.57% and is well within the 5% tolerance provided for, in the Indian Standard specifications - demand set aside.
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Classification of imported goods - Encoder / Multiplexer / Modulator - As the impugned goods are having the function of transmission of data and other functions and hence the same would merit classification under CTH 8517
DGFT
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Amendments in the Appendix 3B, Table 2 of the Merchandise Exports from India Scheme (MEIS)
Corporate Law
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Companies (cost records and audit) Amendment Rules, 2018
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Direction of re-audit of the accounts - allegation of Oppression and Mismanagement - A litigation may remain pending for years and dispute relating to Accounts of a particular year may be raised. It does not mean that for years to come finalization of Accounts should be kept suspended or in doubts.
State GST
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Clarifications of issues under GST related to casual taxable person and recovery of excess Input Tax Credit distributed by an Input Service distributor.
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Processing of Applications for Cancellation of Registration submitted in FORM GST REG-16
Service Tax
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Cenvat Credit - input services - where the input services are used in providing output services and there is some nexus, then invoking the test of necessity would be adding words to the rule which is not permissible in a fiscal statute.
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Refund of Service tax paid - Cargo Handling Services or port services - since these activities deal with export cargo, there is no liability for payment of service tax - the service tax paid is liable to be refunded.
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Classification of services - Mandap Keeper Service or otherwise - letting out of the auditorium - cultural functions are also social functions and renting out the hall for cultural functions would attract Service Tax liability
Central Excise
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Refund/rebate of duty paid on goods exported - rejection of rebate claim on the ground of non submission of ARE-1 application - The submission of ARE-1 document was essential requirement and it cannot be condoned.
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Shortage of goods - Discrepancy of stock as per form 3CD filed with income tax return - demand of duty upheld
VAT
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Exemption from payment of sales tax - supply of the specified drugs to WHO - Sub-section 3 of Section 6 of CST Act - The interplay of the provisions of the Sub-section 3 and Sub-section 1 of Section 6, in the present case would lead to some what harsh consequences. However, when the provisions of law are clear, the consequences cannot be avoided.
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Recovery of tax dues - those statutes under which a charge is created on the assets will have priority over mortgage rights under any other Act. And those statutes where charges are not created will be accorded a status of unsecured debts and will have low priority over the secured creditors under the SARFESAI Act
Case Laws:
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GST
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2018 (12) TMI 228
Exemption from GST - Security Services rendered to Pimpri Chinch wad Municipal Corporation in relation to functions entrusted to Municipality under Article 243W of the Constitution - Pure services - N/N. 12/2017- Central Tax (Rate) dated 28/06/2017 (Entry No. 3 of the Notfn.). Whether the activities of the applicant’s personnel who are there to assist/help the security guards of PCMC can be equated with as being in relation to any function entrusted to a Municipality under article 243W of the Constitution? Held that:- There is no doubt in anyone’s mind that the personnel provided by the applicant to the PCMC are actually aiding and helping the security guards of PCMC. In the subject case the applicant is providing pure services (without the supply of goods) to PCMC. The said services are in relation to any functions entrusted to a Municipality under article 243W of the Constitution. The agreement between the applicant and PCMC very clearly states that the applicant shall provide assistants to the Security Guards of PCMC. The invoice raised by the applicant mentions services rendered as, “Being round the clock helper to security service Providing assistance to the Security Guards of PCMC is an activity in relation to various functions as enumerated above which have been entrusted to a Municipality under article 243W of the Constitution. The applicant is entitled to the benefit of Notification No, 12/2007-CT(Rate) dated 28.06.2017. Ruling:- The Exemption N/N. 12/2017-Central Tax (Rate) dated 28/06/2017 (Entry No. 3 of the Notfn.) is applicable to the applicant for the Pure services i.e. Security Services rendered to Pimpri Chinch wad Municipal Corporation in relation to functions entrusted to Municipality under Article 243W of the Constitution thereby exempting the applicant service provider from the whole of GST.
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2018 (12) TMI 227
Levy of GST - export of service or not - intermediary services - “Commission” received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” between an exporter abroad receiving such services and an Indian importer of an Equipment - zero rated tax - section 16 (1) (a) of the Integrated Goods and Services Tax Act, 2017 - Place of supply - intra-state supply or not - rate of tax. Whether the commission received as an “intermediary” in International/ cross border transaction, for acting as a Broker or facilitator, in procuring from an Indian Customer/s purchase order/s (P.O.) for importing Laboratory Equipment from Germany, is liable to GST either under CGST/SGST Act, 2017 or the IGST Act, 2017? Held that:- The applicant is of the opinion that they are providing services as an intermediary. The facts also reveal likewise - an intermediary can be a broker, an agent or any other person who arranges and facilitates the supply of goods and/or services between two or more persons and who cannot change the nature of supply as provided by the principal. Applicant is covered by the said definition of an intermediary because they are definitely acting as a broker and facilitating the process for sale of materials by their foreign principals to the Indian parties because they locate the customer, negotiate the prices and probably ensure the sale, they also provide for discounts to the said customers, out of the commissions received bythem, as mentioned in the PO. It is very clear from the facts of transaction that the applicant is neither providing services nor supplying the goods on their own account. Since the applicant, being the supplier of service is located in India and the recipient of Service i.e. supplier of goods is located outside India, Section 13 of the IGST Act, 2017 would be applicable to determine the place of service - Since the place of supply of services in the instant case is in taxable territory, the said intermediary services cannot be treated as export of services under the provisions of the GST laws. In order to classify as ‘export of service’, as per section 2(6) of the Integrated Goods and Service Tax Act, 2017, one of the crucial condition as contained under sub-clause (iii) requires that the place of supply of service should be outside India - In the subject case, the place of supply shall be location of the supplier of services and therefore such ‘intermediary services’ cannot be classified as ‘export of services’. The provisions of inter-state supply and intra-state supply have clarity when both the recipient and the supplier of services are located in India. However as in the subject case, when the recipient is located outside India provisions of section 7(5)(c) shall be applicable - IGST is payable under such transaction. Ruling:- The “Commission” received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” between an exporter abroad receiving such services and an Indian importer Of an Equipment, is not an “export of service” and GST will be levied. The said supply will be treated as Inter-State supply and not intra state supply and IGST will be levied @ 18%.
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2018 (12) TMI 226
Levy of GST - sale of goods outside India - section 7(5) (a) of Integrated Goods and Services Tax Act, 2017 - place of supply - entitlement of Input Tax Credit to the recipient of service - Scope of IGST Act - territorial jurisdiction - Held that:- There are two different transactions effected in present matter between the parties for the supply of same tools. One from foreign supplier to the applicant (in short T1) and second between applicants to customer within India (in short T2). The transaction covered by the present application herein after will be referred to as T2 transaction. The applicant would be purchasing from Schaeffer Germany, who is a manufacturer on principal to principal basis. The ownership of the said goods get transferred to the applicant without any physical movement of the goods from Germany to India. However the goods remain in the possession of Schaeffer Germany. Once the first transaction takes place applicant transfers the ownership of the goods to Indian customer by way of sale. In this case also the goods remain under the possession of Schaeffer Germany. In short, the order received by the applicant from their customer in India and the order placed by applicant On Schaeffer Germany is in the nature of back to back order. Inter-state sale or intra-state sale - Held that:- Supply of goods imported into the territory of India till they cross the customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce - in the present case, the location of the applicant as a supplier of goods is in India and the place of supply of goods is outside India i.e. Germany and such impugned transaction get clearly covered by the scope of section 7(5) (a) of the Act. As a result the transaction is in the nature of interstate trade and commerce. From the harmonious reading of Section 7(2) and Section 7(5)(a) of the IGST Act, it is clear that the transaction referred to as T2 gets covered under the ambit of Interstate trade and commerce. And thus liable to tax as per Section 5 of the IGST Act. Levy and collection of GST - Held that:- As per Section 7(2) and 7(5) (a) of the [GST Act and proviso to Section 50) Of the IGST Act it is very clear that in respect of imported goods into the territory of India there is no levy and collection except in accordance with the provisions of Section 12 of the Customs Act, 1962 and Section 3 of the Custom Tariff Act, 1975. Section 12 of the Customs Act, 1962 provides that custom duties which includes integrated tax in respect of imported goods would be levied only at the time of import or export of goods - In case of goads supplied on an out an out basis as is in the present case, there is no levy till the time of their customs clearance in compliance with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act. In view of this the imported goods sold from and to a non-taxable territory, though they are clearly in the nature of inter-state supply would come in the category of “exempt supply” as no duty is leviable on them except in accordance with proviso to Section 5(1) of the IGST Act. The goods sold in the subject transaction are non-taxable supply as no tax is leviable on them till the time of customs clearance in accordance with and compliance of Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975 - this position is further reiterated and confirmed by Circular No. 3/1/2018-IGST dated 25.05.2018 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing. The question of input tax credit do not arise, as no GST is levied. Ruling:- The sale of goods, which are located outside India, would not be liable to tax India under section 7(5) (a) of Integrated Goods and Services Tax Act, 2017.
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2018 (12) TMI 225
Issue of mandamus commanding the respondents not to arrest and harass the petitioner pursuant to the First Information Report - offence under CGST Act - Held that:- The petitioner to appear in the office of respondent no. 4 on 04.12.2018, and thereafter as and when required by the inquiry officer. The Investigating officer shall furnish a questionnaire to the petitioner - The petitioner would be obliged to answer the questionnaire and furnish the answers available with her. List on 13.02.2019.
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Income Tax
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2018 (12) TMI 223
Assessment u/s 153A - Held that:- In the present case, we have no hesitation in accepting the petitioner's contention that in order to issue notice under sub-section (1) of section 153A, there must be initiation of search in case of the noticee. Mere search authorization would not be sufficient. There is clear distinction between search authorization and conduct of the search. In sub-section (1) of Section 153A of the Act, therefore, the legislature has advisably used expression “where a search is initiated under Section 132”. Admittedly search authorization was issued against the firm as well as other persons. Actual search was also conducted and carried out at 3 different locations, which included the residential premises of one of the partners of the firm and residential premises of two more persons. Primafacie, we do not find any provision which would restrict the Department's search action only to the registered office of a partnership firm. The conduct of the search at these places in relation to the partnership firm and its business need to be examined in proper perspective keeping in mind the objections of the partnership firm and such exercise should be allowed to be done at the level of the Assessing Officer. At this stage, we do not propose to thwart the assessment pursuant to the impugned notices. Firstly, at this stage, in a writ petition we would not go into the minute factual details when said factual aspects can be and should be considered by the Assessing Officer before whom the proceedings are pending. In this context, we may refer to the judgment of the Supreme Court in the case of Commissioner of Income Tax Vs. Vijaybhai N. Chandrani [2013 (7) TMI 740 - SUPREME COURT]. It is the case, in which the assessee had approached Gujarat High Court challenging show cause notice under Section 153C of the Act contending that during the search conducted by the Department against another person, no material belonging to the assessee was found and, therefore, action against the assessee under Section 153C of the Act was invalid. Under the circumstances, keeping the petitioner's factual and legal contentions and objections open, we relegate the petitioner before the Assessing Officer. Once the Assessing Officer passes final order pursuant to the impugned notices, it will always be open to the petitioner to pursue the remedy available under the Act.
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2018 (12) TMI 222
Exemption u/s 11 - donations being made out of its corpus by the Trust - diversion of income involving infringement of provisions of Section 13 of the Act was made out - Held that:- Gujarat High Court in CIT Vs. Sarladevi Sarabhia Trust No.2 (1988 (3) TMI 53 - GUJARAT HIGH COURT) where on almost identical facts, by relying upon the CBDT instruction No.1132 dated 5th January, 1978 issued by the CBDT that utilization of the funds by making donations to another Trust would amount to application of income within the meaning of Section 11 of the Act. No case of diversion of income involving infringement of provisions of Section 13 of the Act was made out. The grievance of the Revenue is that the donations are being made out of its corpus by the Trust. Thus, the allowance on account of donation should be restricted only to the income for the subject assessment year i.e. ₹ 52.70 lakhs. There is no dispute that the donation made to other Charitable Trust would be an application of income within the meaning of Section 11 of the Act. The only grievance of the Revenue is that the donation has come out of its corpus. CIT(A) found that the corpus itself was accumulation of 15% income from year to year. This view has been upheld by the Tribunal. No statutory provision is shown to us which prohibits the Trust from donating a part of its corpus to another Trust having similar objects for utilization to fulfill its charitable objects.
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2018 (12) TMI 221
Nature of income - Gain made on sale of shares - short term capital gain OR business income - classification of income on sale of shares as business income or as short term capital gains is to be decided the facts of each case - Held that:- We note that the Tribunal kept in mind the tests as provided in the above Circular in the context of the facts and found is that these investments were out of its own funds and not borrowed funds, further it maintained a distinction between trading in shares and investments. Thus two portfolios one for “Investment” and other for “Trading”. Besides for the earlier years the Revenue accepted the claim of short term capital gain. Thus the income has to be taxed as short term capital gain. We are of the view that respondent holding the shares for a short period, will not convert the capital gain into business income. This would be contrary to be legislative mandate which itself provides that when the investment is held for less than 12 months, it is to be termed as short term capital gain. Moreover, the impugned order of the Tribunal also in the present facts correctly placed reliance upon the decision of this Court in the case of CIT Vs. Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT].
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2018 (12) TMI 220
Withdrawal of registration granted u/s 12-A - charitable activity - object of the Trust - Held that:- So far as the object of the Trust is concerned, so long as it fits into any one of the objects as enumerated under Section 2(15) such a requirement stands fulfilled. So far as the second requirement with regard to the genuineness of the activities is concerned, the same could be arrived at only during the assessment proceedings. Tribunal was justified in coming to the conclusion that so far as the factum of the assessee being involved in any charitable activities or not, whether the income so derived has to be apportioned towards any other purpose or not, could be considered only during the assessment proceedings. Considering of the application is quite different from the assessment of the income of the assessee. Therefore, at this stage, it is suffice to hold that the conditions for grant of exemption have been satisfied by the assessee. The Tribunal was justified on facts and in law to pass the impugned order. Under these circumstances, we concur with the view of Tribunal. Tribunal was justified in coming to the conclusion that the assessee is entitled for registration under Section 12-A. The substantial question of law is answered in favour of the assessee
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2018 (12) TMI 219
Deduction u/s 80-IB - no profit was earned by the assessee from its trading and manufacturing activity and the net profit was derived from other sources - Whether the Tribunal was justified in passing the order without even considering the contentions of the Revenue and without discussing the reasons assigned by the Assessing Officer? - Held that:- The Tribunal came to the conclusion that the figures as assigned by the Assessing Officer at ₹ 3,50,17,424/- is to be accepted. This is sought to be supported by the assessee by relying on the order of the Assessing Officer, who himself came to the conclusion that profit at Pondicherry would be ₹ 3,50,17,424/-. Therefore, the entire income was confused as profit earned at Pondicherry Unit. Keeping the contentions in mind, we are of the view that the Tribunal should have considered the contentions as advanced before it. Tribunal being an appellate forum did not appropriately consider the reasons assigned by the AO. Non-consideration of all the contentions and without any discussion would render the order of the Tribunal to be interfered with. Therefore, it is only just and necessary that the impugned order of the Tribunal be set-aside, by remanding the matter to the Tribunal for a fresh consideration in accordance with law. Substantial question of law is answered by holding that the Tribunal was not justified in passing the order without considering the contentions advanced by the Revenue and without discussing the reasons as assigned by the AO. Therefore, the order of Tribunal is set-aside and the matter is remanded to the Tribunal for a fresh consideration.
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2018 (12) TMI 218
Allowability of bad debts - carried forward and set off of loss as claimed by the assessee for the current assessment year - Revenue to contest the claim of the assessee even after passing of the order under Section 171 cannot be accepted - Held that:- The reason for entering into a family arrangement was with the hope to avoid all future disputes and litigations inter se between the members of the HUF. It is for this reason, the family arrangement was entered into. Therefore, it cannot be said that it is a colorable device and, therefore, the allowance should not be granted to the assessee. Both the authorities were right in holding that the amount claimed as bad debts to an extent of ₹ 6,03,08,000 should be treated as bad debts. Insofar as the Circular is concerned, we are of the view that the contentions of the Revenue cannot be accepted. The Circular clearly suggests that all pending appeals should be withdrawn. Merely relying on the first sentence of the Circular, that it pertains only with regard to filing of appeals on the issue of allowability of bad debts that are written off as irrecoverable cannot be accepted. The matter pertains to grant of disallowance with regard to bad debts. Hence, even insofar as the Circular is concerned, the appeal would have to be dismissed.
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2018 (12) TMI 217
Liability to capital gains tax - dissolution of the firm as on 31st March 2002 - Held that:- On perusal of the audited balance sheet of the partnership firm as on 31.03.2002, and the balance sheet of the de-merged as well as the existing business as on 1st April 2002, concluded that the audited accounts of the assessee firm as on March 31, 2002 shall be the basis for de-merging the business in to an independent unit and it is clear that the de-merger of business has not taken place on 31.03.2002. CIT(A) held that there is a mention of three balance sheets, i.e., the assessee's as on 31.03.2002 and the assessee's de-merged business as on 01.04.2002 and that the later two balance sheets came into existence only on 01.04.2002 and not on 31.03.2002. After appreciating the documents placed before it, the CIT(A) held that the assessee firm was never dissolved much less on 31.03.2002 and on the other hand, got itself re-constituted with three of the continuing partners and therefore, the case is squarely covered by Section 187(2) of the Act. Further, the assets and liabilities relating to the civil construction business remained with the assessee firm and were not distributed among anybody. Even the assets and liabilities relating to the software education business and real estate project were not distributed among any partners but, were transferred to a new firm and transfer of a business should be construed as distribution of assets and liabilities among the partners. We are of the clear view that the decision in the case of A.L.A. Firm [1991 (2) TMI 1 - SUPREME COURT] which was heavily relied upon by the learned counsel for the Revenue, can have no application to the case on hand - the partnership firm deed dated 03.08.2005, is a good piece of evidence to show that the assessee firm continued to be in existence after re-constitution, that is, even after 31.03.2002 without getting dissolved. Tribunal erred in reversing the order passed by the CIT(A) and therefore, the order passed by the Tribunal calls for interference. - Decided in favour of the assessee
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2018 (12) TMI 216
Gain on Sale of land - nature of land sold - agricultural land u/s 2(14)(iii) OR Capital asset - HELD THAT:- No materials have been produced by the assessee for the period between 1998 and 2006 to show that he was carrying on agricultural activities in the land at any point of time except producing Chitta and Adangal for the year 2005. Since relevant columns in the Adangal with regard to crop and extent are left blank, it would not be proper to record a finding on those documents and they have to be discarded. It is an undisputed fact that no genuine agriculturist would purchase a land ₹ 2,50,00,000/- per acre. In our considered opinion, the factors 2, 7, 8 and 13 evolved by the Gujarat High Court in SIDDHARTH J. DESAI [ 1981 (9) TMI 48 - GUJARAT HIGH COURT] are relevant factors to be taken into consideration for deciding the nature of the land. However, the appellate Tribunal overlooking the above material factors and on the basis of Chitta and Adangal,granted exemption of payment of capital gain. Hence, this is the case of finding on no evidence and it is perverse. As contended by the assessee that the entire extent of 301 cents does not belong to him. It is evident from the records produced by the assessee that the entire sale consideration was ₹ 15,30,00,000/- and the share of the assessee was ₹ 8,61,41,416/-. - Decided in favour of the Revenue
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2018 (12) TMI 215
Penalty levied u/s 271(c) - entitled to the exemption under Section 194-I in view of Section 44AB - reasonable cause within the meaning of Section 273(B) - Held that:- In a case where the assessee is liable to deduct tax at source and fails to do so, penalty under Section 271(1)(c) is liable to be imposed. The learned Counsel appearing for the assessee has pointed out a decision in Commissioner of Income Tax v. Bank of Nova Scotia, [2016 (1) TMI 583 - SUPREME COURT] wherein had considered the question regarding deletion of penalty under Section 271(1)(c). Going through that decision, it is seen that the Tribunal had allowed the assessee's appeal and cancelled the penalty levied under Section 271(1)(c) on the specific finding that it is necessary to establish that there was contumacious conduct on the part of the assessee to attract penalty under Section 271(1)(c) of the Act. The Hon'ble Supreme Court agreed with the High Court that there was no substantial question of law raised and rejected the challenge. We find that in Union of India v. Dharmendra Textile Processors, [2008 (9) TMI 52 - SUPREME COURT] held that mens rea is not an essential element for imposing penalty for breach of civil obligations. Imposition of penalty for non-compliance of statutory provision, is not a criminal liability, but is only a civil liability and therefore, bad motive on the part of the assessee is not essential to be proved. We are of the considered opinion that the assessee is liable to pay penalty under Section 271(1)(c) of the Act, and therefore, the impugned order of the Tribunal deleting the penalty is not sustainable and hence, set aside. The questions of law are answered in favour of the Revenue
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2018 (12) TMI 214
Additions in gross profit - addition made solely on the basis of statement of an employee of the assessee - estimation based on Gross Profit rate - suppressed turnover - Held that:- At the time of search, there was detected materials as available from the computer of the assessee showing vast disparity in the sales and purchase disclosed as per the accounts and the actual business carried out by the assessee. The gross profit was also based on the sales and purchase as disclosed from the books of accounts. It is also pertinent that the Manager of the assessee, who made the statement u/s 132(4) had in fact opened a second set of bills in the computer using a password and it was from these materials that a definite pattern of suppression was detected. This pattern having been applied to the earlier assessment years, was perfectly correct and a permissible exercise u/s 144 of the Act being power conferred on the Assessing Officer for proceeding on best judgment. We do not think that there is any scope for interference of the order of the Tribunal insofar as the addition made and adoption of gross profit.- Decided against the assessee
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2018 (12) TMI 213
Computation of capital gains u/s 48 - value of the 1/12 undivided share of land that was agreed to be transferred as per the agreement - right conferred on the tranferee - possession as handed over in pursuance to the agreement for sale as contemplated under Section 53A of the TP Act - Held that:- Tribunal went wrong in holding that the possession was not handed over in pursuance to the agreement for sale as contemplated under Section 53A of the TP Act. Once the sale agreement comes under the provisions of Section 53A of the TP Act, handing over of possession takes place and the provisions under Section 2(47) would squarely apply. That apart, the argument of the learned Senior Counsel for the assessee that contract was subsequently rescinded will not be of any help because the contract was rescinded only subsequent to the assessment year and what we are concerned for the purpose of the Act is the transactions which took place during the assessment year. The fact that the contract was subsequently terminated on mutual consent will not improve the case of the assessee to wriggle out of the the purview of Section 2(47) of the Act and the liability to pay tax on short term capital gains under Section 45 of the Act. Returns were filed there was a right conferred on the tranferee as per Section 53A of the T.P. Act. The transferor though subsequently was absolved from the rigour of Section 53A; in the close of assessment year was obliged to return the capital gains as per Section 2(47) (v). The IT Act by the definition clause includes a transaction in accordance with Section 53A as a transfer in relation to a capital asset. The consequence flowing from the inclusive definition has to be given effect as on the subject assessment year and the transferor being absolved subsequently from the rigour of Section 53A as against the transferee is of no consequence in applying the rigour under the taxation enactment. The transaction failed and the parties settled between themselves, but the voluntary act of the parties cannot efface the tax liability. We hence answer the questions of law on the facts arising in the above case against the assessee and in favour of the revenue. It is however pertinent to note that capital gains can be calculated only after computing the value of the 1/12 undivided share of land that was agreed to be transferred as per the agreement, and computation made in accordance with Section 48 of the Act. Hence, the appeal is only to be allowed setting aside the order of the Appellate Authority and the Tribunal. The matter is remitted to the Assessing Officer for the sole purpose of computation of capital gains under section 48 after taking into account the value of 1/12th share in the landed property that was agreed to be sold.
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2018 (12) TMI 212
Addition u/s 68 - identity and creditworthiness of creditors - Held that:- As the transactions in the commodities were carried out by the assessee off market, thus the same did not inspire any confidence as regards the veracity of such transactions, in our considered view is also an observation arrived at by the A.O on the basis of a half hearted approach and premature observations. In case the A.O had any serious doubts as regards the identity and creditworthiness in respect of the counter party which was identified in the course of the assessment proceedings, then it was open for him to have made further enquiries, which we find has not been done by him. On the basis of our aforesaid observations, we are of the considered view that as the assessee has duly substantiated that it had earned a profit of ₹ 5,73,96,307/- from commodities transactions, therefore, the same in our understanding cannot be held as an unexplained cash credit under Sec.68. The Ground of appeal No. 1 raised by the revenue is dismissed. Loss suffered by the assessee from F O transactions could be set off against the income assessed by the A.O under Sec. 68 - Adjustment as per Sec.115BBE - Held that:- Sec.115BBE was brought on the statute by the Finance Act, 2012 with effect from 01.04.2013. On a perusal of the said statutory provision, as was then so available on the statute and was applicable to the case of the assessee for the year under consideration i.e A.Y. 2013-14, no restriction was placed as regards set off of losses against the income referred to in Sec.68, 69, 69A, 69B, 69C and 69D. Rather, the legislature in all its wisdom by amending Sec. 115BBE vide Finance Act, 2016 w.e.f 01.04.2017 had only w.e.f A.Y. 2017-18 placed a restriction on set off of losses, in addition to raising of any claim of expenditure and allowance against such income. The fact that the aforesaid amendment of Sec. 115BBE by the Finance Act, 2016, w.e.f 01.04.2017 is prospective in nature can safely be gathered from a perusal of the CBDT Circular No. 3/2017, dated 20.01.2017. In the backdrop of our aforesaid observations, it can safely be gathered that there was no embargo to claim set off of losses in the year under consideration i.e A.Y. 2013-14. We thus in terms of our aforesaid observations are persuaded to subscribe to the view taken by the CIT(A) that the loss suffered by the assessee from F O transactions could be set off against the income of ₹ 5,73,96,307/- that was allegedly assessed by the A.O under Sec.68. The fact that the restriction as regards the set off of the losses against the income assessed under Sec.68 had been made available on the statute on the basis of an amendment of Sec. 115BBE that was made available on the statute by the Finance Act, 2016 w.e.f 01.04.2017, therefore, the same could not be read into the statute for a period prior to the said amendment. In terms of our aforesaid observations the Ground of appeal no. 3 raised by the revenue is dismissed. We thus in terms of our aforesaid deliberations are in agreement with the view taken by the CIT(A), that the profit shown by the assessee from commodities trading business of ₹ 5,73,96,307/- could not have been treated as an unexplained cash credit under Sec.68 of the Act. Alternatively, we are also persuaded to subscribe to the view taken by the CIT(A) that the loss suffered by the assessee from F O transactions, could validly be adjusted as per Sec.115BBE as was applicable during the year under consideration i.e A.Y.2013-14 against the income of ₹ 5,73,96,307/- that had allegedly been treated by the A.O as unexplained cash credit under Sec.68. We thus not finding any infirmity in the view take by the CIT(A), uphold his order. - Decided against revenue
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2018 (12) TMI 211
Income from house property - determining the notional lettable value of the unsold flats held by the assessee company as stock-in-trade of its business of builders and property developers - Held that:- Respectfully following the judgment of the Hon”ble High Court of Gujarat in the case of CIT Vs. Neha Builders (P) Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] and the aforesaid orders of the coordinate benches of the Tribunal, we are of the considered view that the lower authorities had erred in determining the notional lettable value of the unsold flats held by the assessee company as stock-in-trade of its business of builders and property developers, and bringing the same to tax in the hands of the assessee under the head “Income from house property”. We thus in terms of our aforesaid observations set aside the order of the CIT(A). - decided in favour of assessee.
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2018 (12) TMI 210
Revision u/s 263 - bogus purchases - difference in purchase of gold jewellery, silver and the copper purchases - Held that:- AO called for the details and verified the same and found that the assessee has accounted the purchases correctly. The assessee also furnished the details of purchases before the AO, party wise and found no difference. Hence, we observe that the assessee has correctly accounted the purchases and did not over state the purchases and there is no understatement of income on account of purchases. Therefore, CIT has invoked the jurisdiction without having any error in the assessment order which was not prejudicial to the interest of the revenue. Hence, we hold that the order passed by the Ld. Pr. CIT is unsustainable, accordingly quash the order and allow the appeal of the assessee.
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2018 (12) TMI 209
Treating the sum of License Fees as business income - Held that:- We find merit in the arguments of the Ld. A.R. as is clear from the various agreements that the assessee has allowed M/s. Kuoni Travels India Ltd. to use its business model including brand and logo with the option to buy ultimately if the said it was fully satisfied with the model of the business of the assessee. As per the assessee ₹ 1,00,00,000/- was received as non refundable fee in lieu of assets to be used by the M/s. Kuoni Travels India Ltd. We find reason in the contentions of the assessee that so long as there was no confirmation of purchase of business by the said transferee, the same can not be treated as capital gain. The assessee offered the income on pro-rata basis as business income and once the transferee exercises the option to purchase the business, income falling thereafter was offered as capital gain. In our view, the assessee has rightly offered the income in A.Y. 2002-03, 2003-04 & 2004-05 to the tune of ₹ 13,63,636/-, ₹ 18,18,132/- and ₹ 13,63,636/- respectively as business income which were duly assessed and to this extent we are not in agreement with the CIT(A) that the same should be assessed in one year i.e. 2002-03. So far as the license fee shown as capital gain A.Y. 2004-05 to the tune of ₹ 54,54,546/- is concerned we are in agreement with the CIT(A) that the same should be treated as revenue receipt following the same practice as followed in the earlier years. Accordingly, we modify the order of CIT(A) to this extent that income has to be amortized and therefore this appeal of the assessee is allowed on this issue. Receipt from sale of running business - Capital gains OR business income - allow deduction under section 54E towards investment in bonds of Rural Electrification Corporation Ltd. - Held that:- We find that CIT(A) has passed a very detailed and reasoned order and thus came to conclusion that ₹ 12,79,60,000/- has to be assessed as capital gain in A.Y. 2004-05 which in our opinion is correct. We are, therefore, fully satisfied with the reasoning of the CIT(A) on this issue and in view of the same the appeal of the Revenue is dismissed.
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2018 (12) TMI 208
Disallowance of interest expenses debited in P&L account - assessee made huge interest free advances for unrelated activities - Held that:- As regards the interest free advances given by the assessee even prior to the loan raised from the bank for acquiring vehicles and business properties, the Revenue has failed to establish any nexus between the interest bearing funds and interest free advances made to his relatives and friends. Moreover, no cogent evidence is there on the file if secured loans have not been used by the assessee for business purposes. Assessee proved to have taken the secured loans for specific purpose and their utilization has not been disputed by the AO. AO has merely made the addition on the ground that the assessee has utilized sizable amount out of the secured loans to be given as interest free advances to his family members, related concerns and for acquiring property for their personal needs. As discussed above and following the decision rendered by the coordinate Bench of the Tribunal for AY 2008-09 and 2009-10, we are of the considered view that the ld. CIT (A) has rightly deleted the addition after scrutinizing the facts - decided against revenue. Addition on account of Business Promotion Expenses - Held that:- Incurrence of expenses has not been disputed by the Revenue but they have guess-worked the personal elements in the expenses incurred by the assessee to tune of 20% by the AO and then to the tune of 5% by the ld. CIT (A). Keeping in view the facts inter alia that there is a steep increase in the current year’s business promotion expenses to the tune of 67.52% whereas increase in the gross receipt during the year under assessment is merely 25.97%, we are of the considered view that personal element in the business promotion expenses to the extent of 10% of the total expenses cannot be ruled out. So, we direct the AO to disallow 10% of the business promotion expenses of ₹ 1,97,48,988/- claimed by the assessee. Consequently, ground no.2 raised by the Revenue is partly allowed.
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2018 (12) TMI 207
Exemption under section 11 - disallowance made by AO on account of depreciation on fixed assets which the assessee had purchased and for which assessee had already availed benefit under section 11 - Held that:- CIT(A) has categorically noted in his order that assessee had not claimed exemption under section 11 when the assessee originally purchased fixed assets. He has further noted that depreciation was allowed to assessee in earlier years also and there was no change in facts and circumstances. He has further relied on a number of case laws for the proposition that depreciation is an allowable expense. Keeping all the issue of depreciation is decided in favour of the assessee. Sustenance of 50% of disallowance which the AO had made out of counseling expenses - Held that:- Expenditure to be an allowable expenditure but he just sustained the disallowance to the extent of 50% by holding that the same was sustained for want of proper verification. Other than this objection, there is no objection by the AO as well as the CIT(A). Simple ad-hoc disallowance is not sustainable in the eyes of law and therefore CIT(A) should have allowed full relief to the assessee and, therefore, we direct the AO to allow full claim of expenditure and in view of that cross objections filed by the assessee are allowed, and Revenue’s appeals on this account is also dismissed.
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2018 (12) TMI 206
Addition of unexplained cash deposits - assessee could not establish any nexus between the frequent withdrawals and the subsequent deposit - AO made addition on the ground that he has come to the conclusion that cash deposits were from some other source of income which is not disclosed to the Revenue -Held that:- AO nowhere in his order has brought out any material on record to show that assessee is having any additional source of income other than that disclosed in the return nor Assessing Officer could spell out in his order that cash deposits made by the assessee was from some undisclosed source. All throughout Assessing Officer has raised suspicion on the behavioral pattern of frequent withdrawal and deposits by the assessee. There is no law in the country which prevents citizens to frequently withdraw and deposit his own money. Documentary evidences furnished before the Revenue clearly clarifies that on each occasion at the time of deposit in her bank account, assessee had sufficient availability of cash which is also not disputed by the Revenue. Entire transaction of withdrawals and deposits are duly reflected in the bank account of the assessee and are verifiable from relevant records.Assessing Officer himself admitted that assessee had sufficient cash balance on each occasion at the time of deposit in her bank account on different dates during the assessment year under consideration - Decided against revenue.
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2018 (12) TMI 205
Addition solely on the basis of statement of the assessee recorded under section 133A - loose papers assembled as Diary BK-4 - Amount surrendered by statement on oath at the time of survey by one of the Directors of the assessee-company - said amount of ₹ 1 crore was not included in the return of income filed when there were some amounts mentioned in the diary BK-4 - Held that:- No detail of any immoveable property comes out in the assessment order. There is no mention to whom the amounts were paid. CIT(A), whose powers are co-terminus with that of the AO, also did not conduct any enquiry as regards the aforesaid issues - D.R. also by examining the original records brought in during the course of hearing on 20/11/2018 deposed before the Bench that nothing in the file suggests that the addition was supported by corroborating evidences. Such addition cannot be sustained. Therefore, we set aside the order of the CIT(A) and allow the grounds of appeal of the assessee.
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2018 (12) TMI 204
Condonation of delay - Late fee charged from the assessee u/s 234E - date of filing application u/s 154, date of passing order u/s 154 and date of filing of appeals before learned CIT(A) - Held that:- We find that assessee had filed appeals before CIT(A) after outcome of order u/s 154 of the Act and the appeals were filed within a period of 20 days from the outcome of the order u/s 154. There is a reasonable cause of delay in filing the appeals before learned CIT(A) and therefore, learned CIT(A) should have decided the issue on merits. Hon'ble Allahabad High Court in the case of Bharat Auto Centre (2005 (7) TMI 46 - ALLAHABAD HIGH COURT) on the issue of condonation of delay - we direct the learned CIT(A) to condone the delay in filing the appeals and hear the assessee on merits. - Assessee stand allowed for statistical purposes.
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2018 (12) TMI 203
Penalty u/s 271AAB - undisclosed income - proceedings initiated by the AO against a dead person - Held that:- The notice initiating penalty proceedings under section 271AAB was issued by the Assessing Officer on 13.10.2015 in the name of the assessee, who had already expired on 29.04.2015. He has filed a copy of the relevant death certificate and contended that the penalty notice thus was issued by the AO in the name of a dead person, which is not enforceable in law. Since this contention of the ld. Counsel for the assessee is duly supported by the decision of the Hon’ble Madras High Court in the case of Alamelu Veerappan –vs.- ITO (2018 (6) TMI 760 - MADRAS HIGH COURT), we accept the same and hold that the penalty proceedings initiated by the Assessing Officer against a dead person was not enforceable in law and the penalty imposed under section 271AAB in pursuance of such invalid initiation is not sustainable. - Decided in favour of assessee.
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2018 (12) TMI 202
Penalty u/s 271(1)(c) - addition under section 41(1) - defective notice - Held that:- As relying on the decision of the Hon’ble Karnataka High Court in the case of CIT & Another –vs.- Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] is squarely applicable in the present case and respectfully following the same, we hold that the show-cause notice issued by the Assessing Officer under section 274 for the year under consideration not being in accordance with law, the penalty order passed by the Assessing Officer in pursuance thereof is liable to be cancelled being invalid. We accordingly cancel the penalty imposed by the Assessing Officer under section 271(1)(c) and confirmed by the ld. CIT(Appeals) and allow the appeal of the assessee.
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2018 (12) TMI 201
Denying the benefit of deduction u/s 80P(2) - assessee cannot be considered as Primary Agricultural Credit Society as they were engaged in the business of banking and only negligible percentage of loans disbursed by the assessee was for agricultural purposes - Held that:- In the present cases, the nominal members are members as provided in law and deposits from such nominal members cannot be considered or treated as from the non-members or from public. The Reserve Bank of India, which is the competent authority as per the Banking Regulation Act, treats assessee society and similar societies as only "Primary Agricultural Credit Society" not falling within the ambit of Banking Regulation Act. The Reserve Bank of India has given letters to the societies similar to assessee stating that they are Primary Agricultural Credit Societies and therefore in terms of section 3 of the Banking Regulation Act are not entitled for banking license; (Copies of such letter from RBI are placed on record). That being the case, the assessing officer was not competent and did not possess the jurisdiction to resolve / decide the issue as to whether the assessee was a 'Primary Agricultural Credit Society' or a 'Cooperative bank', within the meaning assigned to it under the provisions of the Banking Regulation Act and to take a contrary view especially in view of the Explanation provided after the clause (ccvi) of section 5 r.w.s Section 56 of the Banking Regulation Act. In view of the aforesaid reasoning, hold that the judgment in Citizen Cooperative Society Ltd. [2017 (8) TMI 536 - SUPREME COURT] is not applicable to the facts of the present case. Therefore, hold that the CIT(A) has correctly allowed the claim of deduction - Decided against revenue.
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2018 (12) TMI 200
Exemption u/s 11 - Application for Registration u/s 12AA denied - only reason for rejecting application u/s 12AA of assessee was on basis of land, on which hospital has been constructed by M/s ASPAM Foundation - as submitted assessee was not having sufficient fund and M/s ASPAM Foundation spent approximately 85% of its receipts which was utilised for construction of hospital building on land owned by assessee - Held that:- ASPAM Foundation claimed exemption in their return of income, whereas, land has been provided by assessee, who has not claimed any expenditure on account of construction activities. Thus in our considered opinion M/s ASPAM Foundation helped in achieving social objective of assessee. Further in respect of land, we observe from paper book that the litigation against 76 people has attained finality vide order dated 12.10.99 passed by Civil Judge (J. Division) Hissar). CIT(E) does not dispute M/s ASPAM Foundation to be charitable trust. Assessee during year under consideration constructed Satsangh Bhavan and Temple which has not been disputed by Ld. CIT(E). These forms part of balance sheet as on 31/03/15 placed. Thus in our considered opinion assessee has achieved its objective of trust through M/s ASPAM Foundation. Merely because a business group and Directors of company are members of society, does not dilute nature of society being a trust. We therefore are of considered opinion that, assessee deserves to be granted registration under section 12 AA of the Act. We accordingly set aside this issue back to Ld.CIT(A) for granting registration to assessee. - Decided in favour of assessee.
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2018 (12) TMI 199
Unexplained cash credit u/s 68 - Bogus LTCG - addition made towards unexplained expenditure on commission - Held that:- Both the lower authorities have adopted identical line of reasoning in treating the sale consideration received on transfer of shares in KAFL to be bogus thereby treating the LTCG on sale of such shares as unexplained cash credit u/s 68 - DR drew our attention to a voluminous exercise undertaken by the AO involving a long drawn process of stock market prices rigging in collusion with the various entry operators. DR drew our attention to the assessment order indicating the assessee to have allegedly invested the money in M/s KAFL not having any sound financial position or business activity so as to justify the LTCG in issue. The cases of Sumati Dayal vs. CIT [1995 (3) TMI 3 - SUPREME COURT]) and CIT vs. Durga Prasad More [1971 (8) TMI 17 - SUPREME COURT] were quoted in support to plead that both the lower authorities have made it clear in their respective order(s) about the assessee having acted in collusion with various entry operators for the purpose of bogus LTCG in issue. There is no dispute that assessee having derived the LTCG on transfer of shares held in M/s Kailash Auto Finance Ltd. We find that the revenue did not indicate any specific evidence against the assessee in above terms qua the LTCG derived from transfer of share in M/s Kailash Auto Finance Ltd. We therefore adopt the above extracted reasoning mutatis mutandis to delete the impugned bogus LTCG addition of ₹ 37,03,514/-. Consequently the addition made towards unexplained expenditure on account of commission of ₹ 11,250/- also stands automatically deleted. - Decided in favour of assessee.
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2018 (12) TMI 198
TPA - exclusion of certain companies from the final list of comparables - functional criteria - Held that:- The assessee is engaged in the business of market research and data processing, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Rate of depreciation to be allowed on software license fee - Capitalization of license fees - Held that:- We uphold the direction of the DRP to treat the amount as 'capital in nature' to allow the depreciation. However, the rate of depreciation is to be determined at 60%. With the above directions, the ground is considered partly allowed TDS receivables as advance written off/bad debt - Held that:- AO observed that though the assessee has claimed it as advances written off, it has not given full details and therefore, he disallowed the same and brought to tax. Even before us also, the assessee has not filed any evidence. The learned Counsel for the assessee requested that this issue may be remanded to the TPO to give another opportunity of filing all the evidence. But since the assessee has not been able to produce any evidence before us, we do not see any reason to remand the issue at this juncture without any evidence. In view of the same, this ground of appeal is rejected. Exemption u/s 10A on enhanced income - Held that:- Issue is covered in favour of the assessee by various decisions, particularly in the case of CIT vs. Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT] wherein it was held that the exemption u/s 10A should be granted even on the income which is enhanced due to the disallowance of certain expenditure. Respectfully following the same, we direct the AO to allow the deduction u/s 10A of the Act to the assessee on enhanced income as well.
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2018 (12) TMI 197
Addition u/s 68 - explained cash credit - proof of identity, creditworthiness and genuineness of the transaction - assessee fails to explain the nature and source - Held that:- Section 68 provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its income of the previous year in which the same was received. In the facts of the present case, both the nature & source of the share capital received with premium were fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. This is a case of a company which has genuine business of which is in the manufacturing of granite slabs and has huge turnover running into crores of rupees. All the share application companies have filed all necessary documents in support of their claim that the transactions are genuine. No adverse material is brought on record by the revenue. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed before the AO. Accordingly, all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction were placed before the AO and the onus shifted to the AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified - no addition was warranted under Section 68 . See ITO, WARD-12 (3) , KOLKATA VERSUS M/S SPLENDOUR VILLA MAKERS PVT. LTD. [2018 (9) TMI 414 - ITAT KOLKATA] - decided in favour of assessee.
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2018 (12) TMI 196
Disallowance on account of sugarcane development expenses - AO submitted that Cane development expenses incurred for development of the infrastructure facility are in the nature of capital expenditure and thus not allowable - Held that:- Sec. 37(1) provides that any expenditure, not being in the nature of capital expenditure of personal expenses of the taxpayers, laid out or expended wholly and exclusively for the purposes of his business, is to be allowed as deduction in computing the income chargeable under the head "Profits and gains of business or profession". Hence, any expenditure incurred by a sugar factory on cane development programmes would be eligible for deduction in computing the taxable profits if, having regard to the facts and circumstances of the case, AO is satisfied that the conditions laid down in s. 37(1) of the Act are fulfilled. The withdrawal of the tax concession under s. 35C would not affect this position - Decided in favour of assessee. Disallowance on account of provision for liability outstanding - Held that:- Identical liability was raised in respect of electrical stores and other expenditure in assessment year 2006-07. Thus, we do not find any error in the order of the CIT(A) while adjudicating this issue for the Assessment Year 2004-05, came to a conclusion that the liability in question is ascertained liability and hence allowable under the mercantile system of accounting. Assessee made a statement at the Bar that these liabilities were discharged in the immediately succeeding Assessment Year. This is a timing issue i.e. the year of allowability of the expenses is in dispute. On the principle of consistency, we are of the considered opinion that the order of the First Appellate Authority has to be upheld as in the earlier Assessment Year the finding of CIT (Appeals) on the year of allowability has not been challenged by the Revenue. In the result this ground of the Revenue is dismissed Late payment of the employees contribution to Provident Fund and ESI is not allowable to the assessee - Held that:- We note that the Hon’ble Jurisdictional Delhi High Court in the case of CIT Vs AIMIL[2009 (12) TMI 38 - DELHI HIGH COURT] held that the assessee can get benefit of section 36(1)(va), if the actual payment towards the PF/CSI contributions is made before the return is filed. - Revenue appeal dismissed.
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2018 (12) TMI 195
Notice U/s 153A - Addition u/s 68 - unexplained share application money - Held that:- There is an identical pattern of deposits made in the bank accounts of all share applicant companies just prior to the payment to the assessee which clearly reveals the fact on record that the transactions are not free from doubt or tainted with modus-operandi of converting the unaccounted income of the assessee into share application money. Hence, the burden was shifted to the assessee to produce further evidence to clear the shadow of bogus transactions. Failure on the part of the assessee to be established the genuineness of the transactions beyond any doubt would amount non-discharge of the burden and consequently it cannot be said that the assessee has proved its claim. The onus of proving the claim primarily lies on the assessee and once the assessee brings the primary evidence on record in support of claim, the burden is shifted on the Assessing Officer to disprove the evidence produced by the assessee. AO has brought on record the counter facts or evidence then the burden is again shifted on the assessee to prove the transaction beyond any doubt. Hence, the discharging of primary burden itself is not enough when AO has made out a case from the bank statements that there is a deposit of equal amount just prior to the transfer of the money by these companies to the assessee then the assessee was required to prove and clear the said doubt about the source of payment made by these share applicant companies. Therefore, we find that this matter requires a thorough and deep investigation of fact and to find about the trail of money as it was deposited in the bank accounts of the share applicant companies just prior to the payment to the assessee. Further the status of the allotment of share to these share applicants is also to be examined in the context of the present holding of the same. It is relevant to verify the holding of the alleged allotment of the shares of the assessee company by all these seven companies and in case the shares were finally transferred back to the existing promoters or share holders of the assessee company or the family members or closed relatives of the promoters of the assessee company then it will go against the assessee. Accordingly we set aside this issue to the record of the Assessing Officer to carry out a proper investigation and trace out the trail of the money found deposited in the bank account of the share applicants and further the present status of the holding of those shares allotted to the share applicant companies. Incriminating material found in search even when the assessment proceedings for the year under consideration was not pending as on the date of search - Held that:- It is admitted fact that the assessee did not raise this issue before the authorities below, therefore, the scope of sub-section (4) of Section 253 cannot be extended to the scope of filing of the appeal as per sub-section (1) of Section 153 of the Act. There is no dispute that once the C.O. is filed and admitted then the same has to be adjudicated in the manner as an appeal is presented. However, the scope of C.O. cannot be beyond the order of the ld. CIT(A) which is against the party who is filing the C.O. Once a particular issue was not raised before the ld. CIT(A) then the question of deciding the same against the assessee does not arise. Disallowance of expenditure incurred for increasing the authorized share capital of the assessee company trading the same as capital expenditure - Held that:- No incriminating material found during the course of search and therefore, the disallowance made by the Assessing Officer is not sustainable - Having considered the rival submissions as well as the relevant material on record we find that for the A.Y. 2013-14 it was not pending as on the date of search as the limitation for issuing the notice U/s 143(2) of the Act had expired before the date of search and therefore, the decision of the Tribunal for the A.Y. 2012-13 is applicable for the A.Y. 2013-14 also. Undisclosed income of the assessee based on the statement - Held that:- Since the assessee has now explained that there was reverse entry of the equal amount passed in the subsequent year and offered for tax, therefore, the addition would be a double tax on the same amount. Since this aspect was not considered by the authorities below, therefore, we direct the Assessing Officer to consider this issue and then decide the same in accordance with the law as well as decision relied upon by the assessee. Needless to say the assessee be given an appropriate opportunity of hearing. Disallowance of interest paid on alleged payment of TDS - Held that:- Though TDS is not an income tax levied on the profit of the appellants business nevertheless the interest on delayed payment of TDS is due to a violation of rule for timely payment of TDS and same is compensated to government by interest under mandatory provision of law. However, this could not be said normal incidence of business and therefore, could not be covered U/s 37 of the IT Act
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2018 (12) TMI 194
Addition u/s 68 - unexplained cash credit - Held that:- The assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained. - Decided in favour of assessee.
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2018 (12) TMI 193
Deduction u/s 80IC - “substantial expansion” within the specified window period - Held that:- These assessee have availed deduction under Section 80-IC alone. Initially, they claimed the deduction on the ground that they had set up their units in the State of Himachal Pradesh and after availing the deduction @ 100% they want continuation of this rate of 100% for the next 5 years also under the same provision on the ground that they have made substantial expansion. As pointed out above, once the assessee had started claiming deduction under Section 80-IC and the initial Assessment Year has commenced within the aforesaid period of 10 years, there cannot be another initial Assessment Year thereby allowing 100% deduction for the next 5 years also when sub-section (3), in no uncertain terms, provides for deduction @ 25% only for the next 5 years. It may be asserted again that the assessee accept the legal position that they cannot claim deduction of more than 10 years in all under Section 80-IC. We hold that after availing deduction for a period of 5 years @ 100% of such profits and gains from the 'units', the assessees would be entitled to deduction for remaining 5 Assessment Years. @ 25% (or 30% where the assessee is a company), as the case may be, and not @ 100%. The question of law is, thus, answered in favour of the Revenue thereby allowing all these appeals. See case of M/s Stovekraft India [2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT] - Decided in favour of assessee.
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2018 (12) TMI 192
Levy of penalty u/s 271(1)(c) - TDS was not claimed in the original return of income - Held that:- The declaration, if any, made during the course of assessment proceedings, once the proceedings have been commenced and the assessee is confronted with the details in Form No.26AS statement, then such a declaration cannot be said to be voluntary and cannot discharge the assessee from his onus. We find no merit in the plea of assessee in this regard. He has time and again pointed out that it was by an inadvertent mistake the said income was not declared but keeping in mind the declaration of assessee in assessment year 2010-11 and when compared to the declaration of income in assessment year 2011-12, it is not case wherein the business income has arisen for the first time. Similar income was being carried on in earlier years, even receipts were similarly earned and the assessee had declared the business income in earlier years, then non-declaration of said business income in the year under consideration makes the assessee liable to charge of concealment i.e. non furnishing of correct particulars of income. In the case of assessee, it is not salary which was not declared but it was business receipts of assessee on which TDS was deducted and total receipts were not taxable in the hands of assessee. The claim of assessee was as per Income & Expenditure Account which needs to be verified and then net income was to be added in the hands of assessee. In such circumstances, it cannot be said to be a case of inadvertency. - Decided against assessee.
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2018 (12) TMI 191
Disallowance of expenditure being the professional fee paid to Preroy AG - Held that:- As decided in assessee's own case [2016 (5) TMI 280 - ITAT MUMBAI] we uphold the disallowance made by the Assessing Officer on this issue. As regards the point submitted by the learned counsel of the assessee for consideration, we find that the above order of the ITAT has already been appealed by the assessee before the Hon'ble High Court. We note that the matter is already before the Hon'ble High Court and we are of the considered opinion that these points referred by the learned counsel of the assessee are not cogent. Accordingly, we decline to accept these submissions, and consequently we do not find it proper to distinguish the consistently held view of the tribunal. Disallowance u/s 14A - Held that:- We direct that the disallowance u/s 14A should be made in respect of only those investments which yielded dividend income during the year under consideration and disallowance should be restricted to 0.5% of the average value of such investments. Disallowance of business expenses - Held that:- As the assessee submitted that in Assessment Year 1999- 2000, the Tribunal had held that the same should be done pro-rata as that of Sec. 14A of the Act. Upon careful consideration, we follow the same and order accordingly. Interest u/s 234D - whether CIT(A) has erred in holding that interest u/s 234D should not be charged where refund has been received before 01.06.2003? - Held that:- As find merits in the Appellant submission that Sec. 234D has been inserted by the Finance Act 2003 w.e.f. June 1st 2003. Accordingly, all the ingredients for its applicability must take place after its coming into force. The AO is, therefore, directed not to charge interest u/s. 234D where refund has been received by the assessee before the date of insertion of Sec. 234D. In the result the appeal is allowed.
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2018 (12) TMI 190
Transfer of the property, assets, liabilities etc. on conversion of the Private company into LLP - Charging capital gains u/s 45 in the hands of the successor assessee LLP by invoking the provisions of section 47A of the Act - Transactions not regarded as transfer - superseding effect of Sec. 58(4) of the Limited Liability Partnership Act, 2008, on conversion the assessee LLP - Held that:- We have given a thoughtful consideration to the issue under consideration and are unable to persuade ourselves to accept the same. We find ourselves as being in agreement with the view taken by the CIT(A), that sub-section (4) of Sec. 58 of the Limited Liability Partnership Act, 2008 is only in context of the tangible and intangible property, interests, rights etc., and has nothing to do with the 'carry forward' of losses, which is the creature of a specific statute in the form of the Income-tax Act, 1961. We are of the considered view that Sec. 72A(6A) which entitles a LLP to 'carry forward' the losses of the erstwhile private limited company, is in clear and loud terms preconditioned by a statutory requirement that the assessee should have complied with the conditions of the proviso to clause (xiiib) of section 47. In the backdrop of our aforesaid observations, we are of the considered view that as the claim of the assessee LLP as regards 'carry forward' of the loss of the erstwhile private limited company, de hors satisfaction of the conditions laid down in the proviso to clause (xiiib) of section 47, clearly militates against the aforesaid statutory provision, thus, the same cannot be accepted. Our aforesaid view is further fortified from a perusal of the 'Memorandum' explaining the Finance Act, 2010. We thus in terms of our aforesaid observations find no infirmity in the order of the CIT(A), who in our considered view, after taking cognizance of the fact that the assessee had failed to satisfy the conditions laid down in the proviso to clause (xiiib) of section 47 had rightly declined the 'carry forward' of the losses of the erstwhile company by the assessee LLP. The order of the CIT(A) to the said extent is upheld. The Cross-Objection No. IV of the assessee is dismissed. Entitlement to claim of deduction under Sec. 80-IA - non-filing of the 'audit report' - CIT(A) after necessary deliberations admitted as 'additional evidence' the Audit Report' filed by the assessee in 'Form 10CCB' in respect of its claim of deduction under Sec. 80-IA - Held that:- On a perusal of the order of the CIT(A), it emerges that it was the contention of the assessee before him, that as the A.O had in the course of the assessment proceedings only raised two issues as far as its claim of deduction under Sec. 80-IA was concerned viz. (1) the applicability of sub-section (12A) of Sec. 80IA; and (ii). the reason as to why no deduction was claimed in the 'return of income', therefore, the assessee which had replied to the said queries, thereafter remained under a bonafide belief that non-filing of the 'audit report' would not jeopardize its entitlement towards claim of deduction under Sec. 80-IA of the Act. Be that as it may, we find that the assessee had in the course of the appellate proceedings before the CIT(A) filed the audit report in 'Form 10CCB'. We find that filing of an audit report is procedural and directory in nature, and the same could also be validly filed by an assessee at the appellate stage. CIT(A) after calling for the objections of the A.O had fairly exercised his discretion and admitted the 'audit report' filed by the assessee in 'Form 10CCB' before him as an 'additional evidence'. We have further deliberated on the merits as regards the allowing of the claim of deduction under Sec. 80-IA by the CIT(A), and are persuaded to subscribe to the view taken by him. We thus being of the considered view that the CIT(A) has rightly admitted the 'audit report' filed by the assessee in 'Form 10CCB' during the course of the appellate proceedings, and therein allowed the claim of deduction raised by the assessee under Sec. 80-IA, thus uphold his order in context of the issue under consideration. - Decided against revenue
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2018 (12) TMI 189
Reopening of assessment - reasons of reopening of assessment - Held that:- While following the decision in the case of Wel Intertrade P. Ltd vs ITO [2008 (8) TMI 18 - HIGH COURT DELHI] and Duli Chand Singhania Vs. ACIT [2003 (12) TMI 23 - PUNJAB AND HARYANA HIGH COURT] for the principle that in the absence of an allegations that escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment, which is a “sine qua non” for assuming jurisdiction u/s 147 in a case falling under the proviso thereto, any action taken by the AO is wholly without jurisdiction. In the instant case, it is not the case of the revenue that any material could be secured in the search conducted at the premises of the assessee to suggest that the assessee failed to disclose fully and truly all material facts necessary for the assessment, as such, reopening u/s 147 of the Act is justified. We hold that the reopening proceedings cannot survive and that are liable to be quashed and are accordingly quashed. - Decided in favour of assessee.
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2018 (12) TMI 188
Disallowance u/s.14A r.w. rule 8D for the administrative expenses incurred for earning exempt income - Held that:- When the assessee had sufficient interest-free funds out of which concerned investments had been made, disallowance under Section 14A is not justified. We allow the ground of appeal in favour of assessee by deleting the orders of disallowance u/s.14A r.w. Rule 8D of the Act passed by the authorities below. Thus, Ground No.1 of assessee’s appeal is allowed. Donation expenses u/s.80G - Held that:- Assessee is entitled to get deduction u/s.80G of the Act since the Disable Welfare Trust of India was rightly eligible to receive donations as claimed by the assessee. Capital nature of expenses - Held that:- We are of the considered opinion that the assessee’s claim towards travelling expenses is justified. But having regard to the disputed question of facts relating to the travelling expenses incurred towards the persons sponsored by the company other than the doctors needs to be verified in its proper perspective with the supporting documents to be made available by the assessee to the AO. We therefore find it proper for the ends of justice to set aside the issue to the file of AO to verify the claim of the company towards the expenses incurred upon the persons other than the doctors as indicated by the authorities below in the order impugned before us. We make it clear that the assessee will co-operate with the AO by furnishing the details of those persons to ascertain the actual expenses incurred on the medical practitioners which only required to be allowed after being fully satisfied upon verification of the details to be furnished by the assessee at the time of assessment. Assessee is thus partly allowed for statistical purposes
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2018 (12) TMI 187
Addition on the transactions shown in 26AS - TDS was deducted and deposited by the payers under the PAN of the dissolved partnership firm - addition of the said amount in the hand of partnership firm - Held that:- We hold that once the assessee has produced all the details to establish that these receipts pertain to the proprietorship concern and mistakenly the TDS was deducted and deposited by the payers under the PAN of the dissolved partnership firm then the assessment of the income in the hand of the non-existing partnership firm is not justified. Further the said amount is considered while filing the return of income of the proprietorship concern and consequently the assessment in the hand of the dissolved partnership firm would amount to double taxation of the same income. AO has already accepted this fact for the A.Y. 2009-10, accordingly we delete the addition made by the Assessing Officer. We delete the addition made by the Assessing Officer - Appeal of the assessee is partly allowed.
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2018 (12) TMI 186
Trading addition - net profit rate of 5% applied by the AO while estimating the profit of the assessee from extra ordinary sales - Held that:- In support of contention, assessee has filed the details of gross profit rate and net profit rate declared by the assessee for the immediately preceding three years as well as immediately succeeding two years. It is, however, observed that the CIT(A) has not decided this issue on merit vide his impugned order passed ex parte. It is also observed that written submission was filed by the assessee during the course of appellate proceedings before the CIT(A) as mentioned by the CIT(A) himself in paragraphs 2 of his impugned order. CIT(A) has not taken the same into consideration while disposing of the appeal of the assessee and there is no decision rendered by him on the merit of the issue involved in this case. Therefore, consider it fair & proper and in the interest of justice to set aside the impugned order of the CIT(A) passed ex parte and remand the matter back to him for disposing of the appeal of the assessee afresh after giving the assessee one more opportunity of being heard. Appeal of the assessee is treated as allowed for statistical purpose.
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2018 (12) TMI 185
Revision u/s 263 - as per CIT-A AO had failed to take into account the conditions to be fulfilled by assessee before granting deduction u/s 80IB(11C) - Held that:- Tribunal in assessee’s own case in assessment year 2010-11 had taken note of the provisions of section 80IB(11C) of the Act and claim made by assessee as to whether it had fulfilled the conditions and it was held that the AO during assessment proceedings had verified the claim of assessee and had found that all the conditions were satisfied by the assessee, hence the order allowing deduction claimed by assessee under the said sub-section does not make the order prejudicial to the interest of Revenue. The Tribunal further held that exercise of revisionary powers by the Commissioner under section 263 of the Act was not warranted in the facts of case. The issue arising in the present appeal before us is also against exercise of revisionary powers by the Commissioner under section 263 on the same grounds as raised in assessment year 2010-11. Since the issue has been decided in favour of assessee and the order of Commissioner passed under section 263 of the Act in assessment year 2010-11 has been held to be both invalid and bad in law, following the same parity of reasoning, we hold that exercise of revisionary powers by the Commissioner under section 263 in assessment year 2012-13 do not survive. - Decided in favour of assessee.
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2018 (12) TMI 184
Penalty levied u/s 271(1)(c) - non satisfaction of one of the two limbs of section 271(1)(c) - bogus purchases - Held that:- AO holds the assessee to have concealed particulars of its income in the form of bogus purchases and further holds that the assessee has furnished inaccurate particulars of income within meaning of section 271(1)(c) read with Explanation-1 of the Act. Explanation-1 of section 271(1)(c) deals with concealment of income and the Assessing Officer thus, in the present case has held the assessee to have furnished inaccurate particulars of income and also concealed its income. Such an order levying penalty under section 271(1)(c) of the Act on both the limbs of section 271(1)(c) of the Act do not stand and the same is held to be invalid and accordingly, penalty levied under section 271(1)(c) of the Act is deleted. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by Revenue.
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2018 (12) TMI 183
Reopening of assessment - Disallowance of 12.5% of bogus purchase - Held that:- We find that tangible and cogent incriminating material were received by the AO which clearly showed that the assessee was beneficiary of bogus purchase entries from bogus entry providers which formed the reason to believe by the AO that income has escaped assessment. The information so received by the AO has live link with reason to believe that income has escaped assessment. On these incriminating tangible material information, assessment was reopened. At this stage there has to be prim-a-facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to the guilt. Precedent from Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd [2007 (5) TMI 197 - SUPREME COURT] fully justify the validity of reopening in this case It will not be appropriate to consider and take away the relief already granted by the Assessing Officer and CIT (Appeals) to the assessee. As held when sales are not doubted 100% disallowance for bogus purchase is not disallowable. Hence, we confirm the order of ld. CIT(A) sustaining disallowance of 12.5% of bogus purchase.
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2018 (12) TMI 182
TDS u/s 195 - payments made to non-residents - tds liability - PE in India - income accrued in India - Held that:- It is noticed that the assessee company has been regularly exporting its products with the help of overseas dealers. It is undisputed fact that the commission were paid to such non-resident agents in respect of all the services rendered by them related to the export made by the assessee outside India. There was no permanent establishment / office of these agents or any infrastructure situated in India. These agents have carried out all their activities outside India and commission was paid for the activities carried out side India. Section 195 is applicable only if the payments made to non-residents are chargeable to tax. If the payment is not chargeable to tax under the act, the payer would not be liable to deduct tax at source under the act. Section 4 of the act provides that income tax shall be charged for a particular year in accordance with the provision of the act. Section 5 of the act deals with the scope of the total income of the non-residents and takes within the scope two types of income, the income which is received or deemed to be received in India and second one the income accrues or arises or deemed to accrues or arise in India. In the case of the assessee we are dealing with the second part of the scope of income pertaining to income deemed to accrue or arise in India. Section 9 of the act provides for the income deemed to accrue or arise in India. It is noticed that no income is deemed to accrue or arise in India by applying the provisions of section 9 (l)(i) as the assessing officer has failed to establish accruing or arising of any income from business connection in India or through or from any property or through the transfer of a capital asset situated in India. There was no material which can demonstrate that any of the agents had any Permanent Establishment in India as all the agents had their establishments situated in the overseas places. CIT(A) it is clear that the Provisions of section 9(1)(i) cannot be applied, therefore we consider that the CIT(A) has rightly deleted the impugned disallowance of commission payment made to the foreign agents. - Decided in favour of assessee. Addition u/s 14A - Held that:- After perusal of the above facts and material on record it is noticed that during the year under consideration the assessee company has earned exempt income to the amount of Rs. ₹ 5,25,837/- only. JIVRAJ TEA LIMITED VERSUS DCIT, CIRCLE-1, SURAT [2014 (9) TMI 131 - ITAT AHMEDABAD] on similar issues have restricted the disallowance u/s. 14A to the extent of exempt income earned by the assessee, therefore, we restrict disallowance u/s. 14A in the case of the assessee to the extent of exempt income earned of ₹ 5,25,837/- . On the similar reasons disallowance u/s. 14A in respect of A.Y. 2011-12 is also restricted to the extent of exempt income of ₹ 15,47,552/-Accordingly, the appeal of the assessee is partly allowed.
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2018 (12) TMI 181
Long term capital gain - benefit of the indexation and the cost in respect of cost of construction incurred by the assessee’s mother in respect of property, which has been sold, when computing the long term capital gains - cost inflation index in respect of mother’s investment - Held that:- A perusal of the returns filed by Mrs.M.A.Ahamed Asia, mother of the assessees herein, clearly show that investments in the said property are fully disclosed. A perusal of the assessment order passed u/s.143(3) r.w.s.147 of the Act on 02.03.2016 for assessment year 2010-11 in the case of one of the sisters of the assessee, namely, Smt.Wavoo Fathima Muneera, shows that the same AO has accepted the cost of construction of ₹ 14,96,157/- and granted indexation in respect of the said property. This being so, as the cost of construction has been accepted by the Revenue in the case of one of the sisters of assessees, it is not open to Revenue to say that the evidences are not available. This being so, the Assessing Officer is directed to grant the assessee’s benefit of the indexation and the cost in respect of cost of construction incurred by the assessee’s mother in respect of the said property, which has been sold, when computing the long term capital gains. - Decided in favour of assessee.
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2018 (12) TMI 180
Allowable business expense u/s 37 - gift amount as paid out of commercial expediency to strengthen the relationship with employees - Held that:- In the instant case the assessee has claimed gift expenses of ₹ 35,000/- by debiting it to its P&L account. This is purely personal expense of the assessee. If the assessee chooses to make such gifts out of the income received by the assessee in the course of his business, he can do so, but cannot claim it as a legitimate expenditure while computing the income for the purpose of taxation as held in CIT v. Jeevandas Laljee & Sons (1998 (11) TMI 32 - MADRAS HIGH COURT). Ground of appeal are dismissed. Expenses incurred for business purposes - expenses quite nominal compared to the turnover of the assessee and hence the disallowance is excessive - Held that:- The assessee could file before the Ld. CIT(A) the ledger account of expenses to suggest that all the expenses are for regular business purposes. Before us, the Ld. counsel could not find fault with the findings of the CIT(A). However, we find that the disallowance made by the AO and confirmed by the Ld. CIT(A) at 15% of expenses of ₹ 18,31,221/- is on a higher side.Considering the facts and circumstances of the case, we direct the AO to restrict the disallowance to 10% of the aforesaid expenses of ₹ 18,31,221/- in place of 15% made by him.
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2018 (12) TMI 179
Addition on account of cash deposits - CIT-A deleted by admitting the additional evidences - Held that:- The assessee was maintaining current account and overdraft account in Karur Vysya Bank Ltd. and deposited the sale proceeds in those bank account. The assessee also deposited cash out of the sales in his individual saving bank account which was later on transferred to current account and OD account. AO accepted the sales made by the assessee and also accepted the deposits in current account as well as over draft (OD) account from the cash sales, he only doubted the deposits in the saving bank account of the assessee. Copy of saving bank account is placed at page nos. 138 to 142 of the assessee’s paper book, the AO doubted the cash deposits in the said saving bank account but has not doubted the transfer from the said saving bank account to other accounts through cheque - when the AO has not doubted the quantum of cash sales and accepted the deposits, out of those sales in current account and overdraft account maintained with Karur Vysya Bank Ltd. then there was no occasion to doubt the part of deposit from the accepted sales in the saving bank account of the assessee. We, therefore, considering the totality of the facts, are of the view that the CIT(A) was justified in deleting the impugned addition made by the AO. - decided against revenue.
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Customs
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2018 (12) TMI 176
Advance authorization - non-fulfillment of export obligation - it is alleged that in case of exports to SEZ (special Economic Zone), the petitioner had failed to produce bill of export - Held that:- The question of relegating the petitioner to an alternative remedy of an appeal in these facts does not arise. It may be pointed out that the petitioner had applied to the Policy Relaxation Committee (PRC) as far back as on 18th March, 2018 seeking relaxation of the requirement of submission of bill of exports for redemption of Advance Authorization. However, no action was taken on the same. The impugned order do not sustain - petition allowed - decided in favor of petitioner.
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2018 (12) TMI 175
continuation of Anti Dumping Duty (ADD) - Time limit for completing the New Shippers Review - Continuation of investigation - Validity of Initiation notification and Orders of the Designated Authority, dated 10/4/2017 and 12/4/2017 - validity of notification dated 16.6.17 - principle argument was that the authorities had no jurisdiction to continue the investigation beyond a period of eighteen months, from the date of initiation, for the simple reason that New Shippers Review, which deals with only one exporter could not exceed the time period, which is prescribed for investigation, under Rule 17 of the ADD Rules which is the period for investigation, for all exporters. Held that:- The imposition of Anti-Dumping Duty was the outcome of the General Agreement on Tariffs Trade, 1994, to which India is a party. The purpose behind the imposition of the duty was to curb the unfair trade practices resorted to by the exporters of a particular country of flooding the Domestic Markets with goods, at the rate which are lesser than the rate at which the exporters normally sell the same in their own countries which is the effect of causing injury to the domestic market. Section 9 A was therefore, brought in, to maintain a level playing field and prevent dumping the goods into India while allowing the healthy competition. It is also not in dispute that Rule 22 would deal with much lesser number of exporters. Rule 23 (1-A) provides that Designated Authority shall review the need for continued imposition of Anti Dumping Duty either upon a request by interested party, who submits positive information, substantiating the need of such review or when the reasonable period of time has elapsed since the imposition of the definitive Anti Dumping Duty and upon such review, the Designated Authority has to recommend to the Central Government for its withdrawal, where it comes to a conclusion that the injury to the domestic industry is not likely to continue or recur, if the said Anti Dumping Duty is removed, and is not warranted. The period for conducting the review is specified as twelve months. A perusal of the above would show that the period of twelve months (not exceeding 18 months) is provided for the original investigation, a period of 12 months is provided, under Rule 23, but no period has been specified for Rule 22, which is for exporters, who have not been originally investigated because they did not export the goods in question into India. It is to be noted that both under investigation conducted under Rule 17 and 23, the number of exporters are much more compared to the exporters who are scrutinized under Rule 22. The period taken for these assessment cannot exceed the original investigation - Learned counsel for the appellant is justified in contending that if the time taken in review under 22 is longer than the original investigation, then this would allow the foreign exporter to dump its goods into India, on the basis of provisional assessment, to the detriment of the Indian Domestic Industry. The exporter can manipulate his prices and create documents, if the period for investigation, under Rule 22 is not shorter than the original investigation. The agreement to which India is a signatory, is the basis of the ADD, and therefore, the purpose behind that must be the guiding force while interpreting Rule 22. The learned Single Judge erred in applying the literal Rule of Interpretation, to come to a conclusion that to fix the time limit in Rule 22 would amount to rewriting the Rule. In our opinion, the Rule of purpose of interpretation should have been applied - Keeping in view the spirit of GATT, to which India is a signatory and the stand which India has taken in answering various questions. If the time taken in review under 22 is longer than the original investigation, then this would allow the foreign exporter to dump its goods into India, on the basis of provisional assessment, to the detriment of the Indian Domestic Industry. The exporter can manipulate his prices and create documents, if the period for investigation, under Rule 22 is not shorter than the original investigation and the very purpose of imposing Anti-Dumping duty will be lost. The time limit for completing the New Shippers Review must be read into Rule 22 of ADD - In the present case, the procedure under Rule 22, was initiated on 23/9/2015 and it culminated on 12/4/2017, after 18 months, which is more than the time prescribed in Rule 17 and Rule 23. The new Shippers review initiated by Notification dated 23/9/2015, and culminating in final finding dated 10/4/2017, is clearly barred by time. Even in the absence of time limit fixed in rule 22, a review undertaken under Rule 22 is required to be completed on an accelerated basis i.e., definitely before the time period prescribed in Rule 17 or Rule 23. Appeal allowed.
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2018 (12) TMI 174
Benefit of Concessional rate of duty - N/N. 19/1994-Cus dated 01.03.1994 - import of 15.00 MT “Weak Coking Coal” - weak coking coal having Ash content below 12% or not? - Department has observed that the appellant had wrongly availed the benefits of concessional rate of duty under N/N. 19/1994-Cus in as much as the exemption under subject Notification was specifically for the Coking Coal of Ash Content below 10.29%. Held that:- It is observed that there is no dispute that the sample is of coal in which ash content is 10.29%. In the bottom of the report it is mentioned as, no specification for weak coking coal with respect to its physico-chemical properties are available in the technical literature. However in the chemical analysis result, it does not show that whether it is weak coking coal or otherwise. Therefore, the test report 65-Cus/97 only confirms that the sample is of coal and Ash content is 10.29%. There is no dispute that the weak coking coal is also specie of coal ash content being 10.29% is well within the parameter prescribed in the entry Serial No of the notification i.e. below 12%. It can be seen that as per above report the remark of the chemical examiner regarding not mention of specification of weak coking coal is with reference to technical literature, it is nothing to do with actual analysis of coal conducted by the chemical examiner. Therefore, the report does not confirm that the goods imported by the appellant is not weak coking coal, therefore, only on the basis of the test report it cannot be concluded that the coal imported by the appellant is not weak coking coal. The department has nothing on record except the report to conclude that the coal imported by the appellant is not weak coking coal - Therefore, as regard the contention of the department that the coal imported by the appellant is not weak coking coal as per the test report is not correct, as the reports does not specifically gives the result that the coal is weak coking coal or otherwise. From the report, it is clear that the coal imported by the appellant is weak coking coal having Ash content much below 12%. It is also observed that the entire agreement for import of coal is in respect of weak coking coal and not for the coal other than weak coking coal - Though the appellant’s product is weak coking coal and exemption is granted for coking coal. This does not make any difference for the reason that coking is a genus term in which all type of coking coal covered such as prime/hard coking coal, semi-hard coking coal, medium coking coal, soft coking coal, semi-soft coking coal, weak coking coal etc. the only criteria is that Ash content should be less than 12% which is not under dispute even as per the report of CRCL, New Delhi, therefore, the appellant is eligible for exemption notification 19/94-Cus. In the present case even as per CRCL, New Delhi report the Ash content admittedly is 10.29 % - exemption is provided to weak coking coal which is genus of all coking such as prime/hard coking coal, semi-hard coking coal, medium coking coal, soft coking coal, semi-soft coking coal, weak coking coal etc. therefore, merely because the chemical examiner does not mention in the test result that whether it is a weak coking coal or otherwise, the exemption cannot be denied particularly when all other documents clearly establish that the coal imported by the appellant is weak coking coal of Ash content below 12%. The coal imported by the appellant is weak coking coal having Ash content below 12%, accordingly, the appellant is eligible for exemption Notification No. 19/94-cus - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 173
Demand of differential duty - HR plates - confiscation of goods found in excess than the goods declared in the relevant Bills of Entry - appellant contended that, the steel plates in international trade are traded with reference to their length, width and thickness. The weight of such plates is never the basis or criteria for trading in such goods. The weight of such steel plates is never determined by actually weighing them on a weigh scale but is always computed with reference to a scientifically approved universal formula which is 7.85kg/dm3. Held that:- The demand for the differential duty is not sustainable both on facts and as well as in law. It is not in dispute that the transaction value as determined in terms of Section 14 of the Act, is required to be taken as the basis for computing the assessable value on which the duty is to be assessed. It is nobody s case that the importer has paid anything over and above the declared value for the goods in question. It is also nobody s case that any of the exceptions provided for in proviso to Rule 3(2) of the Customs Valuation (Determination of Value of Imported goods) Rules, 2007 are attracted to the facts of the instant case, thereby warranting rejection of the transaction value. It is settled law laid down by the Hon ble Apex Court in the case of Eicher Tractors Ltd vs Commissioner of Customs [2000 (11) TMI 139 - SUPREME COURT OF INDIA] that it is only when the transaction value is liable to be rejected, based on the exceptions provided for in Rule 3(ii) of the erstwhile Customs Valuation Rules, 1988, could the assessable value be determined in terms of the valuation provisions - The ratio laid down in the aforesaid judgement applies in all fours even under the amended Section 14 and the Customs Valuation Rules, 2007. In the instant case, the adjudicating authority has not come to a conclusion that the transaction value as adjusted in accordance with the provisions of Rule 10, was incorrect or mis-declared and was required to be rejected and the assessable value re-computed under the valuation rules. The adjudicating authority has in a completely ad-hoc and arbitrary manner, without any reference to any provisions of the law and as also without following the provisions of the Valuation Rules, which lay down a codified manner of re-computing the value, arrived at an assessable value which has no legal basis or sanctity. It appears from the Public Notice No.17/2010 dated 29.6.2010 and Public Notice No.10 dated 17.6.2013, that the weight variation upto 1% is to be accepted and ignored irrespective of the nature and type of the commodity - this proposition cannot be accepted - there cannot be a thumb rule in such cases. The extent of permissible variation between the declared and actual weight has to be with reference to the type of commodity qua which the said difference is being evaluated. Undisputedly, when steel plates are globally traded based on their theoretical weight as has been contended by the appellant, which also appears to be the position as is evident from the Indian Standard specification as also the Japanese Standard specification, the weight tolerance envisaged in the trade notice referred to by the Respondent in the impugned order qua such steel plates has to be taken at + 5% / -2.5% and not at 1% as has been adopted by the Respondent - it is not in dispute that the difference between the theoretical weight that has been declared on the bill of entry vis-a-vis the weight that has been physically computed worked out to 3.57% and is well within the 5% tolerance provided for, in the Indian Standard specifications. Also, the manner of computing the physical weight was not the most scientific one inasmuch as the physical weight was arrived at by first arriving at the tare weight of the truck trailer and thereafter arriving at the weight of the truck trailer with the steel plates loaded on it. Further, the allegation of suppression arrived at by the Respondent, on the premise that the difference between the declared and the actual weight being more than 1% would not have come to the notice had physical weighment had not been done, is completely untenable. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 172
Classification of imported goods - Encoder / Multiplexer / Modulator - whether classified under CTH 8517 or under CTH 8528 of CTA? - Held that:- In the instant case, it is an undisputed fact that the items in question, i.e. Encoders, Multiplexers, Modulators, are having individual functions. It is found that each of these products is having independent functions and are used for various purposes for transmission of data. The Appellants are selling these goods not only to TV Cable operators but also to other users such as Space Centre Application (Space & Satellite related applications), Infosys (Information Technology & Software industry), Hathway Cable Datacom (Cable & Broadband Network service provider), Broadband (Internet service provider). These products are used for conversion and compression (coding) used for conversion of signals as apparatus for transmission at transmission site for both wired and wireless networks (WAN & LAN). The goods are not used at subscribers end as reception apparatus for television - The adjudicating authority has over-looked this aspect while passing the impugned order. Further, the same goods have been imported into India by others classifying the same under CTH 8517. The goods classified under CTH 8517 have functions, whereas the goods falling under Chapter 8528 are only of reception apparatus with no functions of transmission. It is only on this basis that the impugned goods would merit classification under CTH 8517. As the impugned goods are having the function of transmission of data and other functions and hence the same would merit classification under CTH 8517 - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2018 (12) TMI 178
Arbitration proceedings - parties to the Arbitration agreement, being a body corporate, incorporated in Malaysia - why “an association” cannot be read with “body of individuals” - no “international commercial arbitration” as defined under Section 2(1)(f) of the Act for the petitioner to come to this Court - Held that:- Prior to the deletion of the expression “a company or”, there were three sets of persons referred to in Section 2(1)(f)(iii) as separate and distinct persons who would fall within the said sub-clause. This does not change due to the deletion of the phrase “a company or” for the reason given by the Law Commission. This is another reason as to why “an association” cannot be read with “body of individuals” which follows it but is a separate and distinct category by itself, as is understood from the definition of “person” as defined in the Income Tax Act referred to above. Indian company is the lead partner, and that the Supervisory Board constituted under the Consortium Agreement makes it clear that the lead partner really has the determining voice in that it appoints the Chairman of the said Board (undoubtedly, with the consent of other members); and the fact that the Consortium’s office is in Wadala, Mumbai as also that the lead member shall lead the arbitration proceedings, would all point to the fact that the central management and control of this Consortium appears to be exercised in India and not in any foreign nation. This being the case, we dismiss the petition filed under Section 11 of the Act, as there is no “international commercial arbitration” as defined under Section 2(1)(f) of the Act for the petitioner to come to this Court. We also do not deem it necessary to go into whether the appropriate stage for invoking Arbitration has yet been reached.
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2018 (12) TMI 177
Direction of re-audit of the accounts - allegation of Oppression and Mismanagement - Held that:- When the audit had taken place, without finding at least prima facie from the record that there was error in the audit or that it had not been properly done, directing re-audit was not correct. We are not impressed by the arguments of the learned counsel of the Respondents that only because the notice and agenda for that EOGM dated 07. 12. 2017 used the word “appointment” and not “approval”, the appointment should be treated as on 07. 12. 2017. The law requires and the Board Meeting dated 01. 11. 2017 in which the appointment was done shows that the appointment was done on 01. 11. 2017 which was subject to the approval of the general body. Respondents is raising various grievances regarding the accounts. We find that the grievances being raised may be raised at the time of final hearing of the Company Petition. Learned counsel for the Appellant is submitting that because of the present Impugned Order the Respondent is raising contentions and disputes even with regard to the subsequent Audit of 2017-18 claiming that unless 2016-17 gets settled, the accounts of 2017-18 cannot be looked into. A litigation may remain pending for years and dispute relating to Accounts of a particular year may be raised. It does not mean that for years to come finalization of Accounts should be kept suspended or in doubts. For the above reasons, the Appeal is allowed. The Impugned Order directing re-audit of the accounts is quashed and set aside. The Respondent would be at liberty to question the audit done of 2016-17 at the time of final hearing of the Company petition. The accounts of subsequent Financial Years may be settled but would be subject to the decision of the Company Petition. Disposed off accordingly. No Costs.
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Insolvency & Bankruptcy
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2018 (12) TMI 224
Initiating the insolvency resolution process against the respondent-corporate debtor - default in repayment of loan - Held that:- Corporate debtor has defaulted, reference has been made to various documents which are already referred while narrating the facts of the case. All the relevant documents regarding sanction of the loan facilities as well as execution of the documents by the respondent-corporate debtor have been relied upon. As the petitioner submits that loan has been secured by hypothecation of assets for which the documents have already been referred. In Part IV and V of Form No.1 the particulars of the amount of debt granted with date of disbursement are given in detail. The amount claimed to be defaulted and the date on which the default occurred are also mentioned in column No.2 of Part IV of the application. In Form -I statement of account of the respondent-corporate debtor for the period of 17.06.2015 to 31.01.2018 has been attached which has been certified by the Assistant General Manager who is also In-charge of the Computer Systems Bank of the Financial Creditor in order to comply with the requirements of Section 2(A) of the Bankers Books Evidence Act, 1891. This certificate is at page 978 of the paper book. The petitioner has also filed the CIBIL report in order to support the evidence of default and that report is at Annexure A/79. The requirements of Clause (a) of Section 7(3) of the Code have been fulfilled. Interim Resolution Professional/Resolution Professional appointed. In view of the above the petition is admitted
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Service Tax
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2018 (12) TMI 171
Refund of Cenvat Credit - necessity of various input services - export of services - event management services - pandal or shamiana contractor's services - mandap keeper services - health and fitness services - denial of refund on the ground of nexus with output service - Held that:- The only requirement under the Cenvat Credit Rules 2004 to satisfy the definition on input services is the use in providing of output services. Therefore, where the input services are used in providing output services and there is some nexus, then invoking the test of necessity would be adding words to the rule which is not permissible in a fiscal statute - Tribunal has come to the view that all the above services have nexus and have been used in providing output services - appeal dismissed.
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2018 (12) TMI 170
Penalty - Erection, commissioning & installation Services - Consulting engineer Services - GTA Services - Held that:- The Revenue has pointed out serious mistake committed by the Adjudicating Authority in arriving at the demand for service tax in this order. The levy of service tax was required to be paid on receipt basis during the period under dispute. But it is seen that the adjudicating authority has not computed the correct service tax liability, but has gone by the submissions on calculation furnished by the Revenue. The matter is remanded to the adjudicating authority to pass a detailed order after taking into account the grounds agitated before this Tribunal - appeal allowed by way of remand.
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2018 (12) TMI 169
Refund of Service tax paid - Cargo Handling Services or port services - export of goods or not - Section 11B of the Central Excise Act, 1944 - Held that:- The activity carried out by Gopalpur Port for the appellant is in the nature of Cargo Handling Service and not port service. Further, since these activities deal with export cargo, there is no liability for payment of service tax - the service tax paid is liable to be refunded. The jurisdictional Assistant Commissioner/Deputy Commissioner is ordered to pay refund to the appellant only after due verification whether such refund has been claimed/paid to Gopalpur Port - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 168
Classification of services - Mandap Keeper Service or otherwise - charges recovered by the appellant for letting out of the auditorium - time limitation - Held that:- An identical issue has come up before the Bombay Bench of this Tribunal in the case of Gadkari Rangayatan [2014 (12) TMI 544 - CESTAT MUMBAI], where reliance placed in the case decision of Tribunal in the case of Secretary, Town Hall Committee [2007 (6) TMI 504 - CESTAT BANGALORE] where it was held that cultural functions are also social functions and renting out the hall for cultural functions would attract Service Tax liability - thus, the appellant will be liable to payment of service tax. Time Limitation - Penalty - Held that:- No malafide intention to evade payment of service tax can be attributed to the appellant - non-payment of service tax is only as an omission on the part of the appellant - demand restricted to the normal period of limitation along with interest under Section 75 of the Finance Act, 1994 - penalty also set aside for same reason by invoking section 80. Appeal allowed in part.
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2018 (12) TMI 167
Short payment of service tax - telecommunication services - demand pertains to a very old period from April 1994 to March 2004 - prayer to remand the case - Held that:- Considering the fact that even at the time of adjudication i. e., in 2008 the appellant was unable to submit documentary evidence to support their arguments, no useful purpose will be served by remanding the matter for further verification and recalculation. The Adjudicating Authority has already restricted the demand to the period of five years from the date of Show Cause Notice. In the facts and circumstances of the present case, we have no option but to up-hold the demand confirmed by Adjudicating Authority with interest. Penalty - Held that:- We are inclined to waive the same by taking recourse to Section 80 of the Finance Act, 1994 which was part of the Finance Act during the relevant time. Appeal allowed in part.
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Central Excise
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2018 (12) TMI 166
Refund/rebate of duty paid on goods exported - rejection of rebate claim on the ground of non submission of ARE-1 application - stand taken by the counsel for Revenue is that the requirement of production of original copy of ARE-1 is a mandatory requirement to establish that the goods have suffered duty at the time of removal from the factory of manufacture and further that they are actually exported - whether the requirement of submission of ARE -1 form is mandatory or mere directory? Held that:- The provisions of taxing statute are required to be strictly construed. Further where a taxing statute provides for certain exemptions or rebates subject to certain conditions, those preconditions, fulfillment of which entitles a person to rebate or exemption from taxes or duty are also mandatory. However, in appropriate cases, a play may be allowed, in so far as the procedure through which the required conditions are to be fulfilled to claim rebate/exemption. In the present case, on the face of Rule 18, which specifies precondition for grant of rebate, it should also be held to be mandatory - If the Rule itself requires the fulfillment of precondition for grant of rebate, it would amount to doing violence to the plain language of the statute to hold otherwise that fulfillment of requirements would not be a mandatory precondition. Ordinarily, the requirements of fulfillment of preconditions as stated in Rule 18 read with relevant notification, as mandated are required to be fulfilled to avail rebate. However, in exceptional cases it is open for the assessee to prove claim of rebate by leading other collateral documentary evidence in support of entitlement of rebate - where an assessee seeks to establish claim for rebate without ARE-1 document or for that matter without submission of those documents which are specified in relevant notifications he is required to clearly state as to what was that reason beyond his control due to which he could not obtain ARE-1 document. The submission of ARE-1 document was essential requirement and it cannot be condoned. Appeal dismissed - decided against appellant.
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2018 (12) TMI 165
CENVAT Credit - input services used in or relation to the generation of electricity sold outside the factory - the proportionate cenvat credit on input services used in relation to generation of Steam and Fly-Ash (exempt goods) reversed - Rule 6(3) of Cenvat Credit Rules, 2004 - time limitation - demand under Rule 6(3) of Cenvat Credit Rules for the period prior to April, 2010 in view of retrospective amendment by the Finance Act, 2010 - whether the demand confirmed by the Revenue under Rule 6(3) i.e. 5%/10% on value of exempted goods is legal and proper? Held that:- The appellant is not disputing that the cenvat credit in respect of input services attributed to exempted goods namely Steam, Fly-Ash and non excisable goods i.e. electricity sold outside their factory, is not admissible and they have admittedly reversed the proportionate cenvat credit and also paid the interest from the date of taking credit till the date of reversal. The appellant rightly availed the option of Sub Rule 3(A) of Rule 6 of CCR, 2004, the only lapse on the part of the appellant is that the payment of cenvat credit was made belatedly, however the appellant have paid interest for the period right from availing the cenvat credit till the payment/reversal of proportionate cenvat credit which create a position as if the appellant have not availed cenvat credit right from the date when cenvat credit was availed. Therefore there is no reason for imposing option under Clause (i) of Rule 6(3) i.e. payment of 5%/10% of the value of exempted goods - the demand confirmed equal to 5%/10% of value of the exempted goods is not sustainable. Time Limitation - Penalty - Held that:- Since the issue regarding reversal of cenvat credit under Rule 6(3) is contentious and various cases on the same issue have been made out which can be seen from such of judgment given above, therefore, on the issue related to Rule 6(3) particularly in the facts of the present case it cannot be said that the appellant had malafide intention to evade payment of duty. Therefore, demand for the extended period is also hit by limitation for the same reason the penalties imposed are also unsustainable. The proportionate credit paid by the appellant along with interest is sufficient compliance under Rule 6(3), accordingly the same is maintained - demand under Rule 6(3)(i) i.e. 5%/10% of value of the exempted goods and all the penalties are set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 164
Shortage of goods - Wrongful availment of CENVAT Credit - supply of finished excisable goods to 100% EOU under CT-3 certification and export of excisable goods under Letter of Undertaking/under claim of rebate - shortage of stock and finished goods - processing/handling loss - Discrepancy of stock as per form 3CD filed with income tax return - non receipt of material sent for job work beyond the time limit of 180 days - ineligible cenvat credit availed on crucibles sent to job worker - shortage of raw-material observed after verification at job workers premises - penalty under Section 11AC. Shortage of stock and finished goods - Held that:- The original authority has found that assessee has not given any satisfactory explanation for having not maintained the statutory record for the goods manufactured by them and further the shortage has not been denied except for processing and handling loss - there is no force in the contention of the appellant as far as shortage of cenvatable inputs and finished goods as on 24.08.2007 is concerned - demand upheld. Discrepancy of stock as per form 3CD filed with income tax return - Held that:- On perusal of the closing stock as per the stock accounts available in their 3CD returns, the figure shown as 84009 Kg. Therefore, there was a shortage of raw-material to the extent of 36,482 - demand upheld. Non receipt of material sent for job work beyond the time limit of 180 days - Held that:- The learned counsel for the appellant submitted that input sent for processing to job work in some cases were returned back beyond the period of 180 days due to unavoidable reasons. He further submitted that they have produced the record of receipt from the job worker after the stipulated period of 180 days but both the authorities have refused to consider that and therefore if the case is remanded back for examination of this aspect - matter on remand. Ineligible cenvat credit availed on crucibles sent to job worker - Held that:- The appellant could not justify from the record that the crucibles were used in the process of manufacture and it becomes waste because no records were maintained. Further the assessee has accepted the non receipt of crucibles sent for job worker for melting aluminium and zinc and therefore the duty liability on this count is also rightly confirmed - demand upheld. Shortage of raw-material observed after verification at job workers premises - Held that:- The original authority has found that cenvatable inputs sent for job work was not properly accounted for and verification of accounts conducted showed shortage of material sent for job work at job worker’s end. Further the original authority has recorded that Mr. Vijaya Kumar, Operations Director of M/s. Dolphin Die Cast Pvt. Ltd. in his statement dated 25.08.2007 given before the Superintendent of Central Excise has accepted that they should have paid the appropriate duty in respect of this violation - demand upheld. Penalty under Section 11AC - Held that:- It is not a case of suppression of material facts with intent to evade payment of duty - imposition of penalty not warranted. Appeal allowed in part as regards penalty is set aside - other demands upheld and part matter on remand as far as verification of raw-materials received from the job worker within 180 days or beyond 180 days is concerned.
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2018 (12) TMI 163
Demand of Interest in terms of Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AA of Central Excise Act, 1944 - Held that:- From the adjudication order that the appellant had taken credit but not utilized the same and reversed the same prior to the issuance of the show cause notice. The Adjudicating Authority following the Board’s Circular dated 03.09.2009 observed that interest is payable even when credit has not been utilized. Larger Bench of the Tribunal in the case of J.K. Tyre & Industries Ltd. v. Asst. Commr. of C.Ex., Mysore [2016 (11) TMI 911 - CESTAT BANGALORE] held that wrong availment of Cenvat Credit, interest is not payable, if reversed before utilization. The demand of interest on unutilised Cenvat Credit, cannot be sustained - appeal allowed in part.
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2018 (12) TMI 162
Demand of Interest - irregular availment of CENVAT Credit, reversed before utilization - Held that:- The appellant had taken credit and without utilizing such credit, reversed the same prior to issue of show-cause notice. Tribunal in the case of J.K.Tyre & Industries Ltd. Vs. Assistant Commissioner of Central Excise, Mysore [2016 (11) TMI 911 - CESTAT BANGALORE], held that for wrong availment of cenvat credit, interest is not payable, if the credit is reversed before utilization. The demand of interest on unutilised Cenvat Credit, cannot be sustained - Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 161
Valuation - related party transaction - stock transfer of goods from Unit I to Unit II - From 2008 onwards, Unit I & Unit II were merged together - applicability of Rule 8 of Central Excise Valuation Rules, 2000 - Held that:- Clearance of goods from Unit I to Unit II is in the nature of stock transfer for captive consumption and there is no sale. Hence valuation is to be determined in terms of Central Excise Valuation Rules, 2000 - Rule 8 of the said Rules provides for valuation of goods for captive consumption on the basis of cost production plus 115%/110%, as applicable during the relevant period. In the case of Ispat Industries Ltd. [2007 (2) TMI 5 - CESTAT, MUMBAI], the Larger Bench of Tribunal has expressed the view that in cases where a part of the goods manufactured is also sold to independent buyers in addition to clearance to sister concern, the valuation can be done on the basis of value of clearance made to independent buyers. The Larger Bench of the Tribunal has expressed the view that in such cases, there will be no need to adopt the valuation as per Rule 8 of Central Excise Valuation Rules, 2000 and Rule 4 ibid, will apply in such cases. Demand set aside - the appeal filed by the Revenue is rejected. Demand of differential duty - period 2003-04 - Held that:- Since the clearance have been made from Unit I to Unit II, both belonging to the same Company, we are of the view that these lead to a revenue neutral situation - the demand for differential duty cannot be justified. Appeal allowed - decided in favor of assessee.
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2018 (12) TMI 160
Clandestine manufacture and removal - Gutka - applicability of Rule 18 of Pan Masala Packing Machines (Capacity Determination and Collection of duty) Rules, 2008 - entire demand is based on the invocation of explanation to Rule 18A with Rule 17 (2) of said Rule, 2008 - two undeclared FFS machines found installed in some part of the same premises. Held that:- The premises which were rented out to the manufacturer-appellant were not the premises where two pouch packing machines were found by the officers - the two pouch packing machines were found in the premises rented out to M/s Gaurav Enterprises and M/s Anandeshwer Enterprises. Further, revenue could not establish any evidence to establish manufacture of Gutkha by the appellant and could not establish clearance of the same and therefore, invoking Sub-rule 2 of Rule 17 of said Rules, 2008 for fastening liability on the manufacturer-appellant from 1st July, 2008 is not tenable in law. It is provided in explanation to Rule 18 of the said Rule, 2008 that the goods shall be held to be manufactured with the aid of packing machines if they are cleared from the factory where the pouch packing machine are found installed - the said provisions are not invokable in the present case, because revenue could not establish beyond doubt that the premises which was under the control of the manufacturer-appellant through rent agreement were the premises in which two pouch packing machines were found. Demand not sustainable - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 159
CENVAT Credit - manufacture of taxable as well as exempt goods - packing materials used commonly for both types of scented supari, which is exempt by N/N. 25/2006-CE dated 20.03.2006 - Rule 6 (3) of Cenvat Credit Rules, 2004 - Held that:- While observing that the dispute can be settled in the light of the amended provisions of Rule 6 (3), it is noted that the computation of the amount liable to be paid as claimed by the appellant, has not been verified by the Department. In terms of amended provisions of Rule 6 (3), the appellant is required to support the claim of such amount with a Certificate from the Cost Accountant/Chartered Accountant. It is appreciated that the appellant did not get an opportunity to provide such Certificate from the Cost Accountant. The matter is remanded to the adjudicating authority for denovo decision after considering the claim of the appellant if duly supported by the Certificate - appeal allowed by way of remand.
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2018 (12) TMI 158
CENVAT Credit - duty paying invoices - denial of credit on inputs availed on the basis of Bills of entry and Transfer memos for Durgapur Factory - Rule 9 of the Cenvat Credit Rules, 2004 - Held that:- Since the entire quantity covered by the bill of entry, has not been moved to one unit, the appellant has issued an internal document termed as ‘transfer memo’ in which the quantities transferred to Durgapur unit has been indicated - There is no dispute regarding the receipt of such goods in the Durgapur unit or the use of such raw material in manufacture of the final product. Similar case has been considered by the Hon’ble Supreme Court in the case of Union of India Vs. Marmagoa Steel Ltd [2008 (7) TMI 95 - SUPREME COURT]. In the said case, the Apex Court has allowed the Cenvat Credit on the basis of the Bill of Entry attached with a delivery challan indicating the quantities. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 157
Demand of Central Excise Duty - Department was of the view that the Central Excise duty is required to be paid at ZTVL, since the transaction between IOCL and IBP are settled at ZTVL - Held that:- The Revenue s allegation that the appellant has realized the amount as per ZTVL from the subsidiary, has not been supported by any documentary evidences on record. In the absence of any documentary report for such allegation, the demand for differential duty based only on allegation, which is not supported by any documentary evidences, cannot be sustained - Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 156
Vires of Rule 8(3A) of Central Excise Rules, 2002 - Default in payment of duty in terms of Rule 8 of Central Excise Rules, 2002 - confirmation of demands, required to be paid in cash - imposition of penalties - Held that:- The Hon’ble Gujarat High Court in the case of M/s Indsur Global Ltd. vs. UOI [2014 (12) TMI 585 - GUJARAT HIGH COURT] has declared the provisions of Rule 8(3A) of Central Excise Rules, 2002 as unconstitutional. The said decision of the Hon’ble Gujarat High Court stands followed by the Tribunal in number of cases - Subsequently the said decision of the Hon’ble Gujarat High Court in the case of Indsur Global Ltd. stands considered and followed by the Hon’ble Madras High Court in the case of M/s A. R. Metallurgicals Pvt. Ltd. vs. CESTAT, Chennai [2015 (5) TMI 661 - MADRAS HIGH COURT]. It is noticed that though the issue has been held in favour of the assessee by the above referred decisions of various High Courts but Revenue has challenged the Hon’ble Gujarat and Madras High Court’s decision by filing a Special Leave Petition against the said judgment before the Hon’ble Supreme Court. The SLP stands admitted by the Hon’ble Supreme Court alongwith grant of stay of proceedings - Tribunal in the case of Principal Commissioner of Central Excise, Delhi vs. Space Telelink Ltd. [2017 (3) TMI 1599 - DELHI HIGH COURT] has taken note of the said development of staying the proceedings by the Hon’ble Supreme Court. However it stands observed that the said submission of the Revenue is fallacious because the Hon’ble Supreme Court in the case of Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association [1992 (4) TMI 183 - SUPREME COURT OF INDIA] has observed that an order keeping in abeyance the judgment of a Lower Court or Authority does not deface the underlying basis of the judgment itself i.e. its reasoning. Inasmuch as the issue stands decided by various decisions, the impugned orders set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 155
Vires of Rule 8(3A) of Central Excise Rules, 2002 - Default in payment of duty in terms of Rule 8 of Central Excise Rules, 2002 - confirmation of demands, required to be paid in cash - imposition of penalties - Held that:- The Hon’ble Gujarat High Court in the case of M/s Indsur Global Ltd. vs. UOI [2014 (12) TMI 585 - GUJARAT HIGH COURT] has declared the provisions of Rule 8(3A) of Central Excise Rules, 2002 as unconstitutional. The said decision of the Hon’ble Gujarat High Court stands followed by the Tribunal in number of cases - Subsequently the said decision of the Hon’ble Gujarat High Court in the case of Indsur Global Ltd. stands considered and followed by the Hon’ble Madras High Court in the case of M/s A. R. Metallurgicals Pvt. Ltd. vs. CESTAT, Chennai [2015 (5) TMI 661 - MADRAS HIGH COURT]. It is noticed that though the issue has been held in favour of the assessee by the above referred decisions of various High Courts but Revenue has challenged the Hon’ble Gujarat and Madras High Court’s decision by filing a Special Leave Petition against the said judgment before the Hon’ble Supreme Court. The SLP stands admitted by the Hon’ble Supreme Court alongwith grant of stay of proceedings - Tribunal in the case of Principal Commissioner of Central Excise, Delhi vs. Space Telelink Ltd. [2017 (3) TMI 1599 - DELHI HIGH COURT] has taken note of the said development of staying the proceedings by the Hon’ble Supreme Court. However it stands observed that the said submission of the Revenue is fallacious because the Hon’ble Supreme Court in the case of Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association [1992 (4) TMI 183 - SUPREME COURT OF INDIA] has observed that an order keeping in abeyance the judgment of a Lower Court or Authority does not deface the underlying basis of the judgment itself i.e. its reasoning. Inasmuch as the issue stands decided by various decisions, the impugned orders set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 154
Concessional rate of duty - manufacture of Usha brand Sewing Machine Heads - benefit of N/N. 01/2011-CE dated 01.03.2011 claimed - benefit of notification denied on the ground that the said Sewing Machine Head was having fly wheel with a groove and that groove could facilitate attachment of electric motor to the said Sewing Machine Heads - Held that:- It is understood from the wording of entry that if Sewing Machine are cleared in such a manner that they are not operated with electric motors then such Sewing Machines are cleared from the factory of manufacturer, thus they are eligible for the benefit of N/N. 1/2011-CE dated 01.03.2011 as amended by N/N. 8/2014-CE dated 11.07.2014. It is undisputed fact that the appellants were manufacturing only Sewing Machine Heads which were cleared without any electrical control or electric motor - appellant were eligible for the benefit - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 153
CENVAT Credit - denial on the ground that the units in Jammu & Kashmir did not manufacture Menthol Flakes and DMO - the grounds raised were not considered properly - Held that:- Similar issue decided in the case of M/S ARORA AROMATICS [2017 (12) TMI 1430 - CESTAT ALLAHABAD], where it was held that The Original Authority was pre-determined to adjudicate the matter in the manner in which he has decided the issue and he was not just and fair and did not discharge his duty as an independent adjudicator - credit remains allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 152
Clandestine manufacture and removal - unrecorded cash found from the business premises - illicit manufacture of Gutka - it appeared to the officer that the same is as result of unrecorded sale and clandestinely removed Gutkha of various brands manufactured at their various factories - Held that:- The appellant had only stated in his statement under section 14 that the cash found and seized was out of their business operations. The appellant had also led evidences that they had income from other business of trading in Bhusan, provisions and also on rental income. Nowhere it is stated that the cash recovered is from the sale proceeds of clandestinely removed Gutka. The allegation of clandestine removal does not stand in view of the lack of evidences on record and also the statements relied upon by Revenue are not a good piece of evidence as they are hit by section 9D of the Central Excise Act - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 151
Valuation - inclusion of amount of freight for transfer of the LBO from the Refinery to the appellant’s storage tank in assessable value - period from October, 1996 to March, 2000 - time limitation - Held that:- LBO is moved from warehouse to the storage tank of the appellant without payment of duty. Duty is to be paid at the time of its removal from the storage tank. Since transportation charges for bringing the goods to the storage tank, is an element of value accrued prior to such removal, it is required to be included. Time bar - Held that:- The practice of transporting non-duty paid LBO from the refinery to the storage tank of the appellant has been used for several years and the same is very much within the knowledge of the Department. It cannot be said that non-inclusion of freight element for payment of duty is on account of any malafide intention on the part of the appellants - there is no justification to extend the demand of duty beyond the normal time limit. Appeal allowed in part.
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2018 (12) TMI 150
100% EOU - rate at which Central Excise Duty is required to be paid for clearance from 100% EOU to DTA - benefit of N/N. 23/2003 denied on the ground that the appellant has not satisfied condition specified in the Notification that the goods should be manufactured exclusively out of indigenous raw materials - Held that:- The circular dated 31/01/2002 proposed to deny the benefit but the subsequent circular dated 28/03/2002 advised to extend such benefit - The Apex Court in the case of Vanasathali Textile [2007 (10) TMI 303 - SUPREME COURT OF INDIA] in which the Apex Court examined the scope of Notification 08/1997 ibid. The term Consumables as per the Apex Court refers only to material which is utilized as an input in the manufacturing process but is not identifiable in the final product, by reason of fact that it has got consumed therein. From the nature of the use of the imported item, it is evident that the item is in the nature of the consumable. The purport of the CBEC Circular is to allow the benefit of the Notification 08/1997 as long as the final products are manufactured by EOU exclusively out of indigenous raw materials notwithstanding the of use of consumables, even if imported. Benefit of notification cannot be denied - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 149
Time limitation - Removal of waste and scrap without payment of duty - this scrap was lying in stock as on 31/08/1997, prior to the introduction of compounded levy w.e.f. 01/09/1997 - benefit of N/N. 49/1997 dated 01/08/1997 - Held that:- It is not in dispute that such waste and scrap has arisen during a period when the appellant was not paying the duty under the compounded levy scheme introduced under Section 3A w.e.f. 01/09/1997. In terms of clarification issued by the CBEC dated 01/08/1997 it is clear that the waste and scrap lying in stock as on 31/08/1997 will be liable to payment of duty and will not be eligible for the benefit of the N/N. 49/1997. Time limitation - Held that:- The demand pertaining to the period August 1997 has been raised by issue of Show Cause Notice, dt. 01/09/2002 by invoking the extended period of limitation available to Revenue in terms of Section 11A of the Central Excise Act, 1944 - there is no single act on the part of the appellant of collusion or suppression. No specific fact or omission thereof has been cited in the Show Cause Notice - the fact of clearance of waste and scrap lying in stock on 31/07/1997 was within the knowledge of the Department - demand is hit by time-bar. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (12) TMI 148
Exemption from payment of sales tax - supply of the specified drugs to WHO - Sub-section 3 of Section 6 of CST Act - Held that:- If the sales had been made to WHO, the exemption from payment of tax in terms of Sub-section 3 of Section 6 would have been available. In the present case, as a matter of fact concurrently and if we may add correctly the Revenue Authorities and the Tribunal have come to the conclusion that the sale was not made by the assessee to WHO. Sub-section 3 of Section 6 of the CST Act, therefore, would not apply. Reference to the proviso to Sub-section 1 of Section 6 also would not help the assessee. As per the said proviso, irrespective of the provisions contained in Sub-section 1 a dealer would not be liable to pay tax on any sale of goods on sale in course of export of the goods out of the territory of India. In order to claim this benefit, therefore, the sale had to be export sale of goods travelling out of territory of India. The Tribunal, therefore, correctly did not accept this contention. The interplay of the provisions of the Sub-section 3 and Sub-section 1 of Section 6, in the present case would lead to some what harsh consequences. However, when the provisions of law are clear, the consequences cannot be avoided - appeal dismissed.
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2018 (12) TMI 147
Valuation - includibility - works contract sales - composition amount - whether the amount of service tax charged separately in the invoice will not be included in total contract value? - Held that:- Once the State has accepted that service tax would not form part of the sale price and informed the trade, the same would bar the Revenue from taking a contrary view. The State has to apply the law uniformly to all the assessees. Appeal not entertained and is dismissed.
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2018 (12) TMI 146
Preference of Charge on Mortgaged property - TNGST Act - who holds first charge as to whether the crown debt / the revenue to the government under the fiscal laws or the claim of secured creditors under SARFESAI Act? - Held that:- The issue is laid to rest by the decision of the Hon'ble Supreme Court in the case of Central Bank of India vs. State of Kerala & Others [2009 (2) TMI 451 - SUPREME COURT OF INDIA] where it was held that the statutory charge prevail over mortgage charge over any pledged property. The crown debt is treated as unsecured and mortgage rights will get priority only when the statute does not create a charge under the Act. It is also settled that the non obstante clauses of the Tamil Nadu General Sales Tax Act, 1959, and the SARFESAI Act are not at conflict with each other as both the statutes can be given effect harmoniously through purposive interpretation. Accordingly, those statutes under which a charge is created on the assets will have priority over mortgage rights under any other Act. And those statutes where charges are not created will be accorded a status of unsecured debts and will have low priority over the secured creditors under the SARFESAI Act - The Tamil Nadu General Sales Tax Act, 1959, having created charge on the assets of the assessee by virtue of Section 24, the interest of revenue cannot be separated from the assets of the defaulters. Petition dismissed - decided against petitioner.
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