Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 7, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Due date of payment of tax under GST - last date off filing of return - Requirement of filing of GSTR-3 return in addition to GSTR-3B return - Validity of Circular No.07/07/2017-GST - Govt. directed to file affidavit.
Income Tax
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Entitlement to claim deduction u/s 35AD(v)(aa) - the provision, which is obviously to encourage establishment of hotels of a particular category, should be read as a beneficial provision and therefore, the interpretation given by the Tribunal considering the facts of the case is perfectly valid
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Allowance of interest expenditur - A camouflage or not, the assessee had arranged the affairs in such a manner as no interest being earned directly by the assessee firms through the investments made by its partners - ITAT has committed an error in allowing interest expenditure.
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Assessee had held the shares as an investment and not as a stock in trade. The loss arising out of the sale of shares would hence be in the nature of capital loss and not in the nature of speculation loss,
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Failure on the part of the assessee to file the returns voluntarily, as statutorily prescribed, would be a culpable act or omission attracting penalty under Section 271(1)(c).
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When the Income-tax Officer stated that full expenditure had been allowed in the year of acquisi tion of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as 'application of income' of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account.
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Assessment u/s 153A - there are contradictory findings regarding the action taken by the Revenue i.e. Survey and Search, and further in the absence of any documentary proof submitted by the Revenue to prove that the search warrant was issued in the name of the assessee the assessment made u/s. 143(3) r.w.s. 153A is bad in law and void ab-initio.
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Exemption u/s 11(1)(d) - grant received - proof of charitable activities - The grants so received by the appellant from the Government to tie utilized for specific purpose cannot be held to be income of the appellant.
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Disallowing the claim of capital loss incurred by the appellant due to reduction of capital by the investee company - transfer u/s 2(47) - face value of shares remains the same - assessee’s claim for capital loss on account of reduction in share capital in ANNPL is allowable
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Depreciation on intangible assets - case of conversion of partnership firm into a company - determination of WDV / cost of acquisition - As actual cost to the assessee was ‘Nil’, the WD value of the assets in the hands of the predecessor firm shall be considered for the allowance of depreciation.
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Set off the business losses against the capital gains u/s 71 - The assessee in the return of income did not set off the business loss against the short term capital gain. However, after adjusting the capital gains of the year against the brought forward short term capital loss and claiming deduction u/s 80 returned the taxable income at ‘nil’ with carry forward business loss - Action of the assessee confirmed.
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ITAT observed that, we are unable to accept the observations of the lower authorities, that the provisions of Sec. 43B would not be applicable as regards the employees contribution to provident fund, and the same would continue to be governed by Sec. 36(1)(va) r.w.s. 2(24)(x) of the Act.
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Validity of assessment order - period of limitation - CIT(A) annulled the assessment order - Settlement Commission rejected the application on the grounds that the admitted tax and interest on the income disclosed had not been paid - Since AO has passed the order within 60 days from from the order of the ITSC, the order of CIT(A) cannot be sustained.
Customs
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Amendment to notification no. 52/2003-Customs dated 31.03.2003 -reg.
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Import of Gold granules (non-monetary) - gold granules were neither imported on a consignment basis nor on a credit basis - The importer/appellant paid an advance payment through bank Letter of Credit/Swift - the contention that the Appellants are prohibited from importing gold granules, is not legally sustainable
Service Tax
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Refund of cenvat credit - a manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking which is exported without payment of service tax shall not be an exempted goods and as such shall be allowed refund of cenvat credit in view of Rule 5
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The irregularity as found in EA audit vis a vis prompt payment of service tax and subsequent payment of penalty in conformity to Section 78 (B), the confirmation of penalty under Section 78 is uncalled for.
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Cenvat Credit - subsequent amendment considering trading activity as 'exempted service' cannot entitle the assessee to avail the proportionate credit on various input services attributable to the trading activity.
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In respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis.
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Penalty u/s 78 - failure to discharge tax - Construction services - both the authorities below have rightly imposed and upheld penalty under section 78 of the Finance Act, 1994.
Central Excise
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General Bond (Form B-17) to be executed by the EOUs
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Amendment to notification no. 22/2003-CE, 23/2003-CE & 24/2003-CE all dated 31.03.2003 -reg.
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Valuation - petroleum products - Import Parity Price agreed between one OMC and another based on MoU reached between them, can be considered as transaction value for assessment purpose in terms of Section 4 of the Central Excise Act, 1944
VAT
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Imposition of penalty - CST Act - purchase tax not paid - The assessee attempted revision of returns only after penalty proceedings were issued, which is not permissible as per the proviso to Section 42(2).
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The specific power granted for review to an Appellate Tribunal does not even include correction of errors apparent on the face of the record. - review is allowed only on the basis of the discovery of new and important facts, which, after the exercise of due diligence, were not within the knowledge of the review petitioner or could not be produced by him.
Case Laws:
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GST
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2018 (12) TMI 348
Seizure of goods with vehicle - seizure on the ground that E-Way Bill had expired - Held that:- The goods had reached at the destination in time but on account of no entry, the vehicle could not enter into the city. In the meantime, the detention order was passed - the seized goods and the vehicles be released forthwith on furnishing security in the form of bank guarantee of the amount equivalent to that as prescribed under section 129(1) of the U.P. GST Act.
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2018 (12) TMI 347
Release of seized goods and vehicle - Section 129 (1) of the U.P. Goods and Service Tax Act, 2017 - Held that:- Since the petitioner is the owner of the goods as he had paid the entire amount of the value of the goods to the selling dealer, we direct that on petitioner's furnishing security in the form of Bank guarantee of the amount equivalent to that mentioned under clause (a) of Subsection (1) of Section 129 of the Act, the seized goods and the vehicle shall be released forthwith.
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2018 (12) TMI 346
Successive writ petition for same cause of action - Validity of challenge to the order dated 31.1.2018 - seizure of goods with vehicle - Held that:- In case we allow the petitioner to challenge the said order in this writ petition it would amount to filing of successive writ petitions for one of the causes of action involved in the earlier writ petition. It is settled law that successive writ petitions for the same cause of action are not maintainable and all questions which could have been taken or ought to have taken and if not decided would be deemed to have been adjudicated or declined - This apart the seized goods of the petitioner have already been released - petition dismissed as was having no merit.
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2018 (12) TMI 345
Due date of payment of tax under GST - last date off filing of return - Requirement of filing of GSTR-3 return in addition to GSTR-3B return - Validity of Circular No.07/07/2017-GST File No.349/164/2017-GST dated 01.09.2017 - Vires of Section 39 of the Central Goods & Services Tax Act, 2017 and Rule 61(5) of the Central Goods and Services Tax Rules, 2017 - Respondent has drawn our attention to the counter affidavit filed on behalf of the Commissioner of Central Tax, GST, Delhi-East, wherein it has been stated that the return filed in Form GSTR-3B is not in addition to the return in Form GSTR-3 - Counsel for the respondents has stated that notifications have been issued by the Commissioner, as per which the assessee are required to file returns in Form GSTR-3B till 31st March, 2019. Till then, returns are not required to be filled under Form GSTR-3. Held that:- Respondents would file an affidavit meeting the said contentions within four weeks from today. Rejoinder thereto, if any, may be filed within four weeks thereafter - Re-list on 12th February, 2019.
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Income Tax
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2018 (12) TMI 336
Reopening of assessment - tangible evidence to reassessment - nondisclosure of the taxing event, i.e. allotment of shares - assessee contests that the allegations with respect to transaction value, being contrary to Section 56(2)(vii)(c) (ii) and in terms of Rule 11UA of the Income Tax Rules is plainly erroneous and cannot be the basis of a reassessment - Held that:- It is not possible to take up this matter today as the Bench is not sitting in the afternoon session. The matter stands adjourned to 08.01.2019. Since the limitation period for completing the assessment is expiring, in the meantime, it would be open to the Assessing Officer to complete the assessment and pass the assessment order as well. However, till the next date of hearing that would not be given effect. We make it clear that since the matter is still at the preliminary stage and limitation is expiring, aforesaid course of action is adopted without going into the merits of the case.
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2018 (12) TMI 335
Non-service of notice under Section 148 - entitled to raise the plea of limitation - Held that:- From the reading of the impugned order, it appears that the authority found that there was undue delay caused by the petitioner in the proceedings and that is why the authority thought it not feasible to pass separate orders on the objections raised. The petitioner has seriously disputed that the petitioner caused any delay. We are unable to agree with the reason given by the authority since the objections ought to have been decided, as fairly stated by the counsel for the revenue. The next submission made by the learned counsel for the revenue that the revenue should be allowed to decide the objections now and the impugned orders should not be quashed, is having no force because as a sequel the impugned orders become illegal and will have to be quashed. The next submission made by the learned counsel for the revenue is that the revenue should be permitted to pass speaking order so also fresh assessment orders simultaneously. This submission has been objected to by the learned counsel for the petitioner on the ground that the right of the petitioner to challenge adverse orders after adjudication on the objections of the petitioner, if any, cannot be taken away. We find merit in her submission. The petitioner may have his legal remedy. The Court cannot prevent him. Petitioner then submitted that the petitioner should be given an opportunity to raise objections regarding limitation in respect of the proceedings in question. In our opinion, there can be no prohibition for the petitioner in raising the question of law, namely the issue of limitation before the authority and therefore, the petitioner is always at liberty to do so. All the question of law and the objections raised by the petitioner will have to be decided by the authority according to law. The averments made in the petition about furnishing of documents as contemplated by Section 78(6) of the Evidence Act is a matter of legal objection which may be decided by the authority.
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2018 (12) TMI 334
Recovery proceedings - 20% of the demand recovered from the petitioner in pursuant to the impugned order - stay petition - Held that:- There is no dispute to the fact that the very same Appellate Authority has already passed an order on 27.06.2018 granting stay of 80% of the demand subject to the condition that the petitioner pays 20% of the total demand. No doubt, that the said order was set aside and the matter was remitted back to the Appellate Authority for passing fresh orders in the stay petition. It is true that the stay petition was dismissed by the Appellate Authority and the appeal itself was heard and reserved for orders. As the fact remains that 20% of the total demand has been recovered from the petitioner in pursuant to the impugned order dated 11.10.2018, this Court is of the view that interest of justice would be met, if the respondents are directed not to make any further recovery till an order is passed by the Appellate Authority in the appeal filed by the petitioner, which is reserved for orders on 25.09.2018. The first respondent-Appellate Authority shall pass orders in the appeal within a period of 12 weeks from the date of receipt of a copy of this order, since it is stated that there is some change of officer.
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2018 (12) TMI 333
Entitlement to claim deduction u/s 35AD(v)(aa) - Held that:- The test would be as to whether the provisions of Section 35AD of the Act would apply to specified business referred to in Sub-Section (2) if it commences operations and in the case of business like that of the assessee, on or after 01.4.2010, where specified business is in the nature of building and operating new hotel of two star or above category as classified by the Central Government. Nowhere in Clause (aa) to Sub-Section (5) of Section 35AD of the Act mandating that the date of certificate should be with effect from a particular date. Therefore, the provision, which is obviously to encourage establishment of hotels of a particular category, should be read as a beneficial provision and therefore, the interpretation given by the Tribunal considering the facts of the case is perfectly valid - Decided against revenue
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2018 (12) TMI 332
Allowance of interest expenditure under Section 37 - investment made by the partners in the sister concerns and the income derived by way of more interest - speculative computation of interest earned based on the investment made, but on different grounds - Held that:- A camouflage or not, the assessee had arranged the affairs in such a manner as no interest being earned directly by the assessee firms through the investments made by its partners. The assessee had accepted deposits from the public and also made advances to its partners. In any event, the partners were entitled to take advances from the firm on payment of interest, which cannot be taken to be a business carried on by the assessee-firms. The advances obtained by the partners were not in the nature of business carried on by the assessee and, hence, there could be no claim of business expenditure insofar as the interest paid to the depositors, the public. We, hence, answer the other questions of law framed against the assessee and in favour of the Revenue. We delete the order of the Tribunal insofar as the allowance of interest expenditure u/s 37. The order of the AO disallowing the expenditure on interest paid to the depositors is sustained on the grounds herein above mentioned as distinguished from the view taken by the AO. The appeals would stand partly allowed.
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2018 (12) TMI 331
Exemption from computation of income as per Section 115JB - proceeds from the sale of agricultural land and rubber trees could be deemed to be agricultural income under Section 10 - when the proceeds received out of the sale of rubber trees, for reason of the trees having become old and unyielding; whether the amounts credited in the profit and loss account could be included in the computation of book profits as per Section 115JA - Held that:- The proceeds from the sale of the estate not being an income of a current or recurring nature, was shown as an exceptional item in the profit and loss account and the same adjusted against the losses of the previous years as per accounting standards. We see that the Assessing Officer had considered the aspect and ruled against the assessee. However, the Tribunal has not considered this specific issue and had merely followed the decision in Harrisons Malayalam Ltd. to grant exemption to the profit received on sale of estate from computation of the book profits. We are of the opinion that the aforesaid appeals have to be remanded back to the Tribunal to consider the issue afresh. We do this despite the fact that the assessee has not filed an appeal, which was not necessary since the Tribunal had allowed the appeal on a different ground which we have answered against the assessee following the Division Bench judgment of this Court. Disallowance of employees' contribution to Provident Fund and Welfare Fund made u/s 36(1) (va) and Section 224(1) - Held that:- Question to be decided against the assessee and in favour of the Revenue in Popular Vehicles and Service (P) Ltd. v. Commissioner of Income Tax [2018 (8) TMI 133 - KERALA HIGH COURT]. Hence the aforesaid question has to be answered in favour of the Revenue and against the assessee. Whether the sale of Boyce Estate has to be treated as capital gain under Section 50B - Held that:- on a reading of the said decision, we find that therein also the consideration agreed was the aggregate value for the land, building, machinery and all equipment with liability specifically mentioned in the agreement entered into between the parties. The facts are quite distinct in this case. The liabilities were not sold and the sale agreement did not include investments and deposits was the clear finding of the Tribunal. All the investments, deposits, receivables, stock and such other current assets in the form of financial and other assets remained with the assessee Company along with the liabilities. Only those assets enumerated in the Schedules and Annexure were sold to the vendee. The consideration had also been specifically assigned to the sale of immovable property and separate consideration has been assigned to the sale of movable properties including vehicles, buildings and so on and so forth. We do not find any reason to interfere with the finding of fact by the Tribunal that there is no case of slump sale for a lumpsum consideration. However, the consideration is not attributable to any particular item of asset. We hence decline to answer the question framed for reason of the findings of facts being unassailable raising no question of law. Long term capital loss suffered on sale of shares was assessable as speculation loss within the meaning of Explanation to Section 73 - Held that:- Assessing Officer assessed it as capital gains, while the CIT appeals directed it to be treated as speculation loss. The Tribunal found that the assessee had held the shares as an investment and not as a stock in trade. The loss arising out of the sale of shares would hence be in the nature of capital loss and not in the nature of speculation loss, was the clear finding. There was also no evidence on record to show that the assessee was indulging in the business of buying and selling of shares. The shares held by the assessee Company were clearly investments and on finding no dispute on facts, the Tribunal directed it to be treated as capital gains. Again, we refuse to answer the third question raised for reason of the Tribunal having answered it on facts and there arising no question of law. When the third question is thus answered in favour of the assessee, necessarily the fourth question also, in the matter of set off, has to be answered in favour of the assessee and against the Revenue. Addition made by the AO invoking the provisions of Sections 37 and 14A - Held that:- The AO found that the expenditure was dis-allowable under Section 14A of the Act. In this context, the decision of the Hon'ble Supreme Court in Commissioner of Income Tax v. Essar Teleholdings Ltd. [2018 (2) TMI 115 - SUPREME COURT OF INDIA], which held that the applicability of Section 14A can only be from the assessment year 2007-08 has to be noticed. We, hence, answer the question in favour of the assessee and against the Revenue, upholding the order of the Tribunal. Treating the consideration received on sale of shade trees as long term capital loss entitled to be carried forward from the earlier years - We see that the Tribunal had considered the facts and had held that the order of the CIT (Appeals) directing deletion of such deduction in the capital gains has to be set aside, on facts. The Tribunal has also held that it being long term capital loss, is entitled to be carried forward. We do not see any question of law arising from the order of the Tribunal and, hence, uphold the order to that extent. Income from the sale of old rubber trees, the decision to treat it as subjected to Central Income Tax would go contrary to the findings of a Division Bench of this Court in CIT v. Thiruvambadi Rubber Company [2011 (6) TMI 452 - KERALA HIGH COURT]. We, hence, do not think that any interference can be caused to the order of the Tribunal on that count. Issue of indexation allowed of sale proceeds of Grevellea trees - the Tribunal has found that the said issue was the subject matter of an appeal before the CIT (Appeals) and then before the Tribunal. Under Clause (c) of Explanation to Section 263(1) since the issue was subject matter of appeal, there could not have been any suo motu power exercised by the Commissioner under Section 263. We are in agreement with the findings of the Tribunal and we answer the question of law against the Revenue and in favour of the assessee. Expenditure incurred in connection with the transfer of shares - Held that:- The Tribunal has found that as a matter of fact the said expenses have been incurred in connection with the maintenance of share-holders' register. The Tribunal has relied on the instructions issued by the CBDT, vide F. No. 10/25/63-IT(A. a) dated 18. 06. 1964, wherein it was clarified that "the remuneration paid by the Company to its Registrar for performing duties in connection with the Company's legal obligations to be discharged under the Company Law, should be regarded as revenue expenditure". We do not think that the finding on the said issue also calls for any interference.
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2018 (12) TMI 330
Penalty u/s 271(1)(c) - penalty originally levied was 200%, which was reduced to 100% by the Appellate Tribunal - unexplained income - returns filed subsequent to the search - Failure on the part of the assessee to file the returns voluntarily - Held that:- Admittedly there was unexplained income as discernible from the records maintained by the assessee revealed on search and subjected to seizure. Admittedly, there was no explanation offered by the assessee as to the non-filing of the income tax return. Under such circumstances, we are of the opinion that the returns filed subsequent to the search would not absolve the penal provisions under Section 271(1)(c). Failure on the part of the assessee to file the returns voluntarily, as statutorily prescribed, would be a culpable act or omission attracting penalty under Section 271(1)(c). It was only subsequent to the search that the assessee filed returns and this reveals the intention of the assessee to avoid payment of tax; if the search had not been taken out. There is also clear evidence of attempt to evade payment of tax on rental income, which is received by his wife for property belonging to him. The fact regarding the sale of the property in variance with the consideration mentioned in the agreement is also evidence of intention to evade payment of tax - Decided in favour of the Revenue and against the assessee
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2018 (12) TMI 329
Computation of income in respect of charitable trust/institution for the purpose of claiming exemption under sections 11, 12 and 13 - applicability of normal computation of income under respective heads as envisaged under sections 15 to 59 - depreciation could not be taken into account because, full capital expenditure had been allowed in the year of acquisition of the assets - Held that:- The income of the trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. When the Income-tax Officer stated that full expenditure had been allowed in the year of acquisi tion of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as 'application of income' of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. See CIT v. Rajasthan and Gujarati Charitable Foundation [2017 (12) TMI 1067 - SUPREME COURT]. Claim for depreciation on new assets put into use during the accounting year relevant to this assessment year, even though the entire cost of these assets have been claimed by the assessee as an application of income for charitable activities - Held that:- Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious pur poses in the subsequent year in which adjustment had been made having regard to the benevolent provisions contained in section 11 of the Act and such adjustment will have to be excluded from the income of the trust under section 11(1)(a) CIT - See (Exemptions) v. Ohio University Christ College [2018 (11) TMI 1055 - KARNATAKA HIGH COURT]
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2018 (12) TMI 328
Reopening of assessment - change of opinion - Held that:- The action of the AO is a change of opinion case because the original assessment has been framed in the case of the assessee u/s. 143(3) of the I.T. Act, after making detailed enquiry and the AO has accepted the version of the assessee. Therefore, assessee had made full and true disclosure during the original assessment proceedings. Reopening had been done merely on change of opinion in as much as that in the original assessment made u/s. 143(3). AO has no fresh material to form his opinion regarding escapement of assessment and he has also not found any tangible material to record the reasons for reopening of the assessment of the assessee. It is a settled law that merely change of opinion is not permissible under the law. This view is supported by the Hon’ble Delhi High Court decision in the case of Commissioner of Income Tax vs. Usha International Ltd. [2012 (9) TMI 767 - DELHI HIGH COURT] and the decision of the Hon’ble Supreme Court of India in the case of CIT vs. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA]. - Decided in favour of assessee.
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2018 (12) TMI 327
Disallowance of expenditure on the ground that the same should be capitalized to the cost of building - Held that:- Amount was paid to consultants for planning and concept design, architectural services, designing of AC & ventilation system and basement work relating to the hotel structure. As the hotel structure is yet to be completed and the business is yet to commence, these expenses directly relating to the hotel building are to be capitalized towards the cost of building. In these facts and circumstances of the case, the expenses claimed by the appellant are disallowed which shall be added to the capital cost of the hotel building. Allowable business expenses - Held that:- The finding of the Ld. CIT(A) of holding the expenses as capital expenditure is well reasoned in view of the evidences is available on record. Evidently all these expenses are towards creation of a new asset or for enhancing the capacity of the existing asset and thus same are in the nature of capital expenditure. We do not find any error in the finding of the Ld. CIT(A) on this issue. Disallowing carry forward of the unabsorbed depreciation claimed by the assessee - Held that:- We find that depreciation in the year under consideration was added back by the assessee in the computation of the income and thus we do not understand how the assessee is claiming carry forward of the said depreciation as unabsorbed depreciation. On perusal of the grounds of appeal raised before the Ld. CIT(A), we find that the issue of disallowing carry forward of unabsorbed depreciation was raised in ground No. 2. CIT(A) has also reproduced the submission of the assessee in the impugned order, where the assessee itself has not pressed for adjudication of the ground No. 2. Thus it is evident that CIT(A) has not adjudicated the ground in view of the ground not pressed by the assessee. In the circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we dismiss the ground No. 2 of the appeal of the assessee.
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2018 (12) TMI 326
TPA - comparable selection criteria - Held that:- The assessee provided software development services (CSD), information technology enabled services (ITES), marketing support services (MSS) to its associated Enterprises (AEs) on cost-plus basis, purchased fixed assets and availed legal, finance, human resource, IT support and other support services from AEs, thus companies functionally dissimilar with that of assessee need to deselected from final list. Exclude the Infosys BPO Ltd on the basis of the high brand value and high turnover of the company.
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2018 (12) TMI 325
Charitable activity u/s 2(15) - Exemption under Section 11/12 - Held that:- The assessee has received royalty and sponsorship fee towards organizing of the sports activity it is not a regular business activity of the society which has been spent for the object of the Society. CIT(A) has given cogent reasoning for holding that provision to section 2(15) would not apply in the facts of the present case, against which there is nothing on record from the side of the Revenue. In respect of the other issue the assessee has complied the procedures laid down by the Government of India for organizing the sports aboard. The case laws cited by the AR of the assessee could also not be controverted on behalf of the Revenue. No justification to interfere with the impugned order. Accordingly, the appeal of the Revenue deserves to fail.
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2018 (12) TMI 324
Penalty u/s 271(1)(c) - claim of loss made on the basis of tax audit report - Held that:- The assessee had made ineligible claim, for which the bona fide of the assessee stands proved from the fact that as per Form No. 3CD, at item no. 17(a), the auditor has reported that there is no expenditure of capital nature which has been debited to the profit and loss account. Therefore, in our considered opinion, the claim of loss made on the basis of tax audit report cannot be said to be non-bona fide. As gone through the decisions relied by the CIT(A) and we find that in the present scenario, the said decisions are found applicable to the case in hand and the distinguishing features given in the grounds of appeal are not found tenable in the eyes of law. It is also worth consideration that at the initial stage of original assessment, the assessee had claim similar loss, which was partly accepted by AO and penalty proceedings initiated at that point of time were also dropped. Therefore, there appear different opinions of revenue authorities at different points of time. As relying on decision in CIT vs. Reliance Petro Products Pvt. Ltd, [2010 (3) TMI 80 - SUPREME COURT] where it has been held that “mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars.” - Decided against revenue.
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2018 (12) TMI 323
Rejection of claim for deduction u/s 80P(2)(d) in respect of interest received on deposits kept with Cooperative Banks - assessee is a registered Co-operative Housing Society - Held that:- There is merit in the contentions of the assessee as it is supported by the order passed by the SMC Bench in the case of Citiscape Co-operative Housing Society Ltd. [2017 (12) TMI 1639 - ITAT MUMBAI] and also the decision rendered by the Division Bench in the case of Sea Grean Co-operative Housing Society Ltd. [2017 (3) TMI 1728 - ITAT MUMBAI]. We set aside the order passed by the learned CIT(A) and direct the Assessing Officer to allow deduction u/s 80P(2)(d) of the Act in respect of interest earned by the assessee from the deposits kept with Co-operative Banks. - decided in favour of assessee
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2018 (12) TMI 322
Disallowing deduction claimed u/s 36(1)(viia) - assessee was not having any rural advances and hence, was not eligible to claim of deduction u/s 36(1)(viia) - whether in the absence of any rural branches, can the benefit of deduction be allowed under section 36(1)(viia) of the Act and that also to the extent of 7.5% of total income - Held that:- The assessee is entitled to the claim of deduction under section 36(1)(viia) of the Act to the extent of 7.5% of total income. The assessee co-operative bank do not have any rural branches, hence is not entitled to the second part claim of 10% of advances made by rural branches. The deduction is allowable with a rider to satisfy the provisions of said section i.e. making a provision to that extent in the books of account. The first issue which is raised in the case of different co-operative banks stands decided in favour of assessee. Addition made on account of interest on NPAs - Held that:- The said issue is squarely covered by the decision in CIT Vs. Deogiri Nagari Sahakari Bank Ltd.[2015 (1) TMI 1218 - BOMBAY HIGH COURT]. In view of the issue being covered, we find no merit in the aforesaid addition and the same is deleted. The ground of appeal No.2 raised by assessee is thus, allowed. Addition on account of unclaimed dividend - Held that:- The said issue also stands covered by the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Deogiri Nagari Sahakari Bank Ltd. [2015 (1) TMI 1218 - BOMBAY HIGH COURT] wherein it was held that unclaimed dividend amounts to excess provision for dividend made by the assessee on an earlier occasion, which has been reversed by the assessee in the year under consideration and transferred to reserve account - also where the provision for dividend made earlier was not charged on profits but it was appropriation profits available post taxation, then there is no merit in the taxability of unclaimed dividend. - Decided in favour of assessee.
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2018 (12) TMI 321
Assessment u/s 153A - Disallowance of bogus purchases - no search warrant issued - Held that:- In the absence of search warrant and copy of Panchanama in the case of the assessee and in view of the contradictory findings by the Assessing Officer that there is a survey in the case of the assessee and there is a search in the case of assessee and there is search in the case of M/s. Kores Group, we hold that there was only survey proceedings carried out in the case of the assessee u/s. 133A and statements were also recorded on oath during the survey proceedings. In the course of survey in the premises of assessee at Goa inward raw material registers belonging to the assessee were impounded u/s. 131 of the Act on 19.09.2016 as observed by the Assessing Officer at Para No.5 and the purchases were treated as inflated and bogus only based on these impounded materials in the course of survey. It is clear that when there is no search warrant issued there cannot be an assessment u/s. 158BC/153A of the Act. On a reading of the Assessment Order passed u/s. 143(3) r.w.s. 153A of the Act in assessee’s case, we find that there are contradictory findings regarding the action taken by the Revenue i.e. Survey and Search, and further in the absence of any documentary proof submitted by the Revenue to prove that the search warrant was issued in the name of the assessee the assessment made u/s. 143(3) r.w.s. 153A is bad in law and void ab-initio. - Decided in favour of assessee.
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2018 (12) TMI 320
Exemption u/s 11(1)(d) - grant received - proof of charitable activities - Held that:- Grants were received by the appellant from Government of India for specific purpose. As per the notifications issued by Government of India it has been specifically laid down that these Grants are for specific purposes and only the interest earned on the same it to be used/applied for the purposes of the objects of appellant institute. The amounts received in Grants have to be held as deposits and only interest earned therein is to be applied towards objects of institute. The Grants as such cannot be applied or utilized. The appellant has accounted the interest earned on the Grants as its income. Once a grant is received from Government Agency with certain conditions and stipulations provided therein and it is also specified for which purposes such grant has to be utilized, then that grant cannot be the income of the assessee. If such grant is not utilized for specific purpose, then automatically it has to be refunded back again to the Government Agency. The grants so received by the appellant from the Government to tie utilized for specific purpose cannot be held to be income of the appellant. - decided in favour of assessee.
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2018 (12) TMI 319
Disallowance u/s 14A r.w. Rule 8D(2)(iii) - working out the ‘book profit’ under Sec. 115JB - MAT computation - Held that:- Only those investments are to be considered for computing average value of investments which yielded exempt income during the year under consideration. See VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] As persuaded to subscribe to the claim of the A.R that the disallowance worked out under Sec. 14A r.w. Rule 8D can only be used for computation of income under the normal provisions of the Act, and the same cannot be transposed for working out the ‘book profit’ under Sec. 115JB of the Act. We direct the A.O to re-work the disallowance under Sec.14A r.w Rule 8D by taking the average value of such investments which had actually yielded tax free income to the assessee during the year under consideration. In terms of our aforesaid observations the order of the CIT(A) therein concluding that the A.O was justified in working out the average value of investment for the purpose of computing the disallowance under Rule 8D(2)(iii) by considering the investments in shares, irrespective of whether such investment had yielded any exempt income during the relevant period, is set aside. The matter is restored to the file of the A.O with a direction to re-work the disallowance under Sec. 14A r.w Rule 8D(2)(iii) in terms of our aforesaid observations.
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2018 (12) TMI 318
Assessment u/s 153A - Calculation of deduction u/s 80HHC - excluding 90% of net surplus received on cancellation of foreign exchange contracts while calculating deduction - Held that:- Though the terminology used is incriminating material by the Revenue regarding the documents found during the search from the records of the original assessment u/s 143(1), it appears that all these materials were present during the original assessment proceedings for which entries are available in books of accounts. The decision in case of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] which lays down the entire law with regard to Section 153A has given certain conditions while proceedings with Section 153A proceedings and when there is no incriminating material. The decision in case of Kabul Chawla (supra) clearly stated that Section 153A cannot be invoked in absence of any incriminating material found /seized during the course of search. Therefore, we are allowing the additional legal ground in A.Y. 2002-03 - decided in favour of the assessee AO jurisdiction to revisit the claim u/s 80HHC allowed in the original assessment u/s 143(3) - Held that:- Assessing Officer had no jurisdiction to revisit the claim u/s 80HHC allowed in the original assessment u/s 143(3), which was completed well before the search; it was because no incriminating material was found in search or in subsequent enquiry. Since, no evidence was found during search and there is no remote nexus with the determination of claim u/s 80HHC, the Assessing Officer had no jurisdiction to revisit the claim in re-assessment u/s 153A.
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2018 (12) TMI 317
Disallowing the claim of capital loss incurred by the appellant due to reduction of capital by the investee company - an extinguishment and relinquishment by the appellant - transfer u/s 2(47) - face value of shares remains the same - Held that:- The face value per share remains same i.e. ₹ 10 per share before reduction of share capital and after reduction of share capital but the total number of shares has been reduced from 153505750 to 10000 and out of this, the present assessee was holding prior to reduction 153340900 shares and after reduction 9988 shares. In addition to this reduction in number of shares held by the assessee company in ANNPL, the assessee received an amount of ₹ 3,17,83,474/- from ANNPL. Hence it is seen that in the facts of present case, on account of reduction in number of shares held by the assessee company in ANNPL, the assessee has extinguished its right of 153340900 shares and in lieu thereof, the assessee received 9988 shares at ₹ 10/- each along with an amount of ₹ 3,17,83,474/-. As per this judgment of Kartikeya V. Sarabhai Vs. CIT [1997 (9) TMI 2 - SUPREME COURT], there is no reference to the percentage of share holding prior to reduction of share capital and after reduction of share capital and hence, in our considered opinion, the basis adopted by the CIT(A) to hold that this judgment of Hon’ble Apex Court is not applicable in the present case is not proper and in our considered opinion, this is not proper. In our considered opinion, in the facts of present case, this judgment of Hon’ble Apex Court is squarely applicable and by respectfully following this judgment we hold that the assessee’s claim for capital loss on account of reduction in share capital in ANNPL is allowable.- Decided in favour of assessee
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2018 (12) TMI 316
Revision u/s 263 - no query raised by the AO with regard to bad debts written off and advances written off by assessee - inadequate v/s no enquiry by the AO - Held that:- As per contents of the notice issued by the AO u/s. 142(1) this is seen that learned DR is correct in saying that there is no query raised by the AO with regard to bad debts written off and advances written off but as per the two replies dated 18.01.2016 and 21.11.2016, the details about these write offs were submitted by the assessee and this is the submission of the learned AR of the assessee that these submissions are in reply to oral queries of the AO. Hence, it is seen that details were filed by the assessee before the AO in course of assessment proceedings in replies filed before him and this is the submission of the learned AR of the assessee that the reply on this account of write off is with reference to oral queries of the AO and we find no reason or basis to doubt this submission. Hence, it is seen that in the facts of the present case, queries are raised by the AO and reply was filed by the assessee. This may be a case of inadequate enquiry but this is not a case of no enquiry. This is by now a settled position of law that for inadequate enquiry by the AO, the CIT cannot invoke section 263 and only if no query is made by the AO in the course of assessment proceedings and because of that, certain claim of the assessee for deduction stands allowed without enquiry then such an assessment order is erroneous as well as prejudicial to the interest of revenue. Hence, it is not a case of no enquiry by the AO and therefore, ld. Pr. CIT is not justified to invoke his revisional powers u/s. 263 - decided in favour of assessee.
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2018 (12) TMI 315
Depreciation on intangible assets - case of conversion of partnership firm into a company - determination of WDV / cost of acquisition - binding force of contradictory decision of ITAT for earlier years - Held that:- In all the three circumstances above, the erstwhile company ceases to exist and a new company comes into existence. In the case on hand also, on account of conversion, the erstwhile partnership firm ceased to exist while the company has come into existence. Therefore, the assets come to vest in the hands of the company and there is no cost of assets to the company on such vesting. When the transaction itself has been treated to be not a transfer, but is akin to succession, in our opinion the 5th proviso to subclause (ii) of sec. 36(1) applies and the depreciation has to be calculated as if there is no transfer. Further, as there is no transfer, there is no cost to the assessee. Depreciation is allowable on the WDV of the asset and WDV has been defined u/s 43(6) to mean in the case of assets acquired in the previous year, the actual cost to the assessee. As actual cost to the assessee was ‘Nil’, the WD value of the assets in the hands of the predecessor firm shall be considered for the allowance of depreciation. Therefore, we do not see any reason to interfere with the orders of the authorities below. Although in Assessment Year 2013-14, the Tribunal has stated in para no. 10 of that Tribunal order which has been reproduced above that the Tribunal finds no reason to take a contrary view in this appeal and therefore, following the Tribunal order for earlier years, the AO was directed to allow depreciation on intangible assets. When the issue was decided by the Tribunal against the assessee for Assessment Years 2005-06 and 2008-09 and also for Assessment Year 2012-13, this Tribunal order for Assessment Year 2013-14 in which, it is stated that the earlier tribunal orders are being followed, it cannot be considered as binding precedence and hence, by respectfully following the earlier Tribunal orders for Assessment Years 2005-06, 2008-09 and 2012-13, the issue in dispute is decided against the assessee.- decided against assessee.
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2018 (12) TMI 314
Deduction of expenses towards municipal taxes - to be deduced from “Income from Other Sources” u/s 57(iii) OR “Income from house Property” u/s 23 - Held that:- We find that the issue involved in the present appeal is squarely covered by the order of the Tribunal in the assesses own case for A.Y. 2009-10 and A.Y 2010-11 [2015 (6) TMI 757 - ITAT MUMBAI]. We find that in the aforementioned orders the Tribunal had observed that as payment of municipal taxes are directly related to letting out of the property, therefore, the same could not be allowed as a deduction under Sec. 57(iii) for the purpose of earning of amenities charges by the assessee. We thus finding ourselves as being in agreement with the view taken by the Tribunal in the assesses own case for the aforementioned years viz. A.Y. 2009-10 and A.Y. 2010-11, respectfully follow the same. - decided in favour of revenue.
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2018 (12) TMI 313
Levy of penalty u/s. 271(1)(c) - non-appearance of the Assessee - no proper serving of notice - Held that:- The import of Explanation 1 to s. 271(1)(c), deeming a concealment of particulars of income when the assessee is unable to furnish an explanation or furnishes one which is found to be false or is unsubstantiated, which is applicable in respect of any facts material to the computation of income, i.e., irrespective of whether the default prima facie is for furnishing inaccurate particulars of income or concealment of particulars of income, may also have a bearing in the matter. As indicated by the Bench during hearing, considered proper that the matter be decided by the first appellate authority while considering the assessee’s appeal, which also remains to be decided by him on quantum. Under the circumstances, it may not be proper for the tribunal to proceed to decide the appeal on penalty on merits, and explains the disinclination of the tribunal to decide the penalty on merits.[Accountant Member decision] As per judicial member Judicial Member in both the appeals, the Ld. CIT(A) has passed the order ex- parte and not on merit. The stand of the assessee was that the notices for the hearing have been sent to the Kathua address where the assessee was doing work, had already been closed, however, the notices were never been served at Delhi address which is specifically mentioned by the assessee in Form No.35. The assessee has also filed an affidavit in support of its contention. The Bench even verified the appellate record of the Ld. CIT(A) and found that the notices were never been sent/served at Delhi address which is mentioned in Form No.35. As proper notices have not been served to the assessee, therefore, the assessee did not get reasonable and proper opportunities of being heard and even otherwise the Ld. CIT(A) did not pass the orders on merit, hence, proper course would be to set aside the cases to the files of the Ld. CIT(A) to decide afresh while affording reasonable and proper opportunities of being heard to the assessee. Hence ordered accordingly. Assessee's appeals allowed for statistical purposes.
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2018 (12) TMI 312
Set off the business losses against the capital gains - option v/s mandation - reliance on provisions of section 71 - The assessee in the return of income did not set off the business loss against the short term capital gain. However, after adjusting the capital gains of the year against the brought forward short term capital loss and claiming deduction u/s 80 returned the taxable income at ‘nil’ with carry forward business loss Held that:- A perusal of the above Legislative history reveals that the assessee has always been given an option to set off his losses against the income from capital gains. However, as per the provisions of sub section (3) of section 71, the assessee is not allowed to set off capital loss against income under any other head. The above view is fortified by the decision of ‘Coated Fabrics (P) Ltd. vs JCIT’ [2006 (1) TMI 228 - ITAT PUNE-A]. No justification on the part of the lower authorities in making the impugned adjustments and, therefore, the same are set aside. The Assessing officer is directed to accept the returned income /computation of the assessee, as such. - Decided in favour of assessee.
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2018 (12) TMI 311
Addition on payment made towards Employee Contribution to Provident Fund after specific due date - scope of amendment to Sec. 43B - Held that:- It is an admitted fact, that though the assessee had deposited the employees contribution to provident fund beyond the time period allowed under the PF act, however, the said amounts were paid before the ‘due date’ of filing of the return of income by the assessee under Sec. 139(1) of the Act. We are unable to accept the observations of the lower authorities, that the provisions of Sec. 43B would not be applicable as regards the employees contribution to provident fund, and the same would continue to be governed by Sec. 36(1)(va) r.w.s. 2(24)(x) of the Act. We find that the issue under consideration is squarely covered by the judgment of the Hon’ble High Court of Bombay in the case of CIT Central, Pune Vs. Ghatge Patil Transports Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT) clearly observed that both employees and employers contribution would be covered under the amendment to Sec. 43B of the Act - Disallowance to be deleted - Decided in favour of assessee.
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2018 (12) TMI 310
Disallowance on account of interest expenses on the diversion of interest bearing loans to the associated concerns - Held that:- As decided in this is not a sound accounting policy as at outset it should have been recognized the same as income on accrual basis and thereafter would have given the deduction of claim of bad debt which the assessee failed in these years. Further, when we visualize this situation as a whole traveling from three assessment years, then, it is observed that interest income was recognized on accrual basis and thereafter claimed as a bad debt of its non-realization, this has been allowed by ld. CIT(A). If we remit the issue to the file to assessing officer in subsequent years by holding that income is to be recognized on accrual basis and thereafter, it is to be claimed as bad debt whether allowable or not, then, to our mind, it will be an academic and futile exercise because in reality assessee has not received any interest income from its sister concern. It is to be recognized that in all the aforesaid three years the income from interest on accrual basis remained unrecoverable which was allowed as a bad debt. Thus, in order to avoid multiplicity of the proceedings, we allow the appeal of the assessee on this issue accordingly. Claim of brought forward and set off of unabsorbed business losses and depreciation - Held that:- As decided in assessee's own case CIT(A) has directed the assessing officer to determine the claim of brought forward and set off of unabsorbed business loss for assessment year 2008-09 after giving effect to the appellate order. We restore this matter to the file of assessing officer to decide it afresh after examination of the claim of the assessee as per law
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2018 (12) TMI 309
Validity of assessment order - period of limitation - CIT(A) annulled the assessment order - Settlement Commission rejected the application on the grounds that the admitted tax and interest on the income disclosed had not been paid - Held that:- Keeping in view the fact that the assessee's case has been duly taken up and an order has been passed by the ITSC against which the assessee has filed writ petition before the Hon'ble High Court of Punjab & Haryana by the virtue of whose orders the assessee has been granted the benefit of being heard by the ITSC in the second round which abated the proceedings and since the Assessing Officer, having received the information regarding the abatement of the cases on 25/04/2016 has completed the proceedings on 22/06/2016 which is well within the time allowed by the Act as the orders have been passed within 60 days from the order of the ITSC under section 245HA(1) r.w.s 245D(2D) of Income Tax Act,1961. Hence, we hold that the order of the Ld. CIT(A) cannot be sustained neither on the factual grounds nor on the legal grounds. As per section 245A the 'case' is admitted to the Settlement Commission when the proceedings are pending before the Assessing Officer and the assessment proceedings gets initiated only by issue of Section 143(2) which is a sine-qua-non for filing of application before the ITAT. Thus at this juncture revisiting the issue of notice under section 143(2) issued in the year 1996 after a period of 12 years would be an infructuous exercise as the settlement application would be accepted only if the assessment proceedings are pending and fact that the application has been allowed by the order of the ITSC under section 245D(1). Since the assessment order passed by the Assessing Officer is as a consequent to the order passed by the ITSC under section 245HA(2) the C.O of the assessee is liable to be dismissed.
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Customs
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2018 (12) TMI 308
Justification for import of Gold granules (non-monetary) - gold in semi-manufactured form classifiable under chapter heading 7108 13 00 of the CTA, 1975 - It is the case of the revenue that import of gold granules is permitted only through a nominated bank or a nominated agency or a holder of the status of star in premium trading houses, subject to RBI regulations and procedures - appellant is not a nominated bank or a nominated agency or a holder of the status of star in premium trading houses and are not entitled to import gold granules - RBI’s Master Direction No. 17/2016-17 dated 1.1.2016. Held that:- As per the import policy notified by the DGFT, gold in any form, other than monetary gold, are placed under “FREE” category with policy condition subject to RBI regulations. The RBI in the master circular only prescribed regulation at Para C.11.1 for method of import and types of payment vis-à-vis credit facility by banks for gold imports by nominated agencies notified by DGFT and at Para C.11.2 for others. In fact, the RBI categorically permitted the banks to open Letters of Credit for maximum period of 90 days for importing gold in any form. Nowhere in the master circular, the RBI has notified category of persons eligible for import of gold and have not imposed any restrictions on such imports - RBI directions, at the most, are restrictions made at regulating import and export of goods in terms of restrictions on current account transactions in foreign exchange but not prohibiting import and export of goods as such. In the present case, gold granules were neither imported on a consignment basis nor on a credit basis. The importer/appellant paid an advance payment through bank Letter of Credit/Swift - the contention of the learned Commissioner (Appeals) that the Appellants are prohibited from importing gold granules, in terms of Circular No. 34/2013-CUS, dated 04.09.2013 and Circular No.27/2016-CUS dated 10.06.2016 is not legally sustainable. They are only clarificatory/procedural circulars, to give effect to the exemption contained in the above notifications, with special reference to disposal and monitoring of the gold imported, duty free, by the nominated agencies. The appellants are eligible to import gold granules, in terms of Para C.11.2 of RBI’s Master Direction No. 17/2016-17 dated 1.1.2016 to which the said notifications and circulars are not applicable - appeal allowed - decided in favor of appellant.
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Service Tax
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2018 (12) TMI 344
Valuation - includibility - inclusion of certain amount received on account of their services, such as NSE/BSE transaction charges and SEBI turnover fees in assessable value - Held that:- The issue is that the statutory NSE / BSE charges paid by the appellant Broker and subsequently collected from the client is includable in the gross value of Stock Broker service of the appellant. The very same issue has been considered by this Tribunal in the case of Indses Securities & Finance Ltd [2018 (2) TMI 569 - CESTAT AHMEDABAD], where it was held that the charges realized by appellants were not being of commission or brokerage are not taxable and shall not form part of gross value of taxable service. Demand not sustainable - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 343
Penalty u/s 78(1) of the Finance Act, 1994 read with Rule 15(3) of the Cenvat Credit Rules 2004 - incorrectly availed CENVAT Credit - suppression of material fact - EA audit-2000 was conducted where credit was denied - Held that:- Admittedly there is no mechanism available for determination of admissibility of cenvat credit in the self assessment era for which EA audit 2000 procedure has assumed its importance. Statutory audit procedure - Held that:- It cannot be said that only because audit party had found non-observance of partial reverse charge mechanism procedure in respect of certain services, without any reference to the categorising of service provider, appellant is to be tested for suppression etc. Time Limitation - Held that:- The audit is a process which is carried on upwards from the last financial year audited till the last completed financial year preceding the date of audit which is contrary to the provision of Section 73(1) whereby if any fraud collusion, misstatement or suppression is noticed by the department, while processing a return or investigating a firm, the respondent department can go up to five years and serve show-cause to justify tax liability - In the instant case, show-cause was issued on 03.02.2017 calling for imposition of penalty under Section 78 for irregularity found in the financial year 2012-15. It is not understood as to what irregularity was noticed by the respondent department between 01.04.2015 to 03.02.2017, comprising of a period of 23 months to invoke extended period jurisdiction and go back to financial year starting from March 2015 to April 2012. The irregularity as found in EA audit vis a vis prompt payment of service tax and subsequent payment of penalty in conformity to Section 78 (B), the confirmation of penalty under Section 78 is uncalled for - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 342
Advance insurance commission received - demand of service tax - case of appellant is that they are not required to pay service tax on said income as service tax was already remitted at the time of receipt of advance on 31.03.2014 - Held that:- In view of the certificates furnished by the Chartered Accountant certifying that they had already remitted the tax on ₹ 6,50,000/- received from ICICI insurance company as advance commission and subsequently reduced the taxable insurance income to the extent of ₹ 2,29,544/- in 2014-15 and ₹ 4,20,456/- in 2015-16. In view of the certificate of Chartered Accountant, the confirmation of demand of ₹ 27,842/- is not sustainable and therefore the same is set aside - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 341
Refund of cenvat credit taken on the inputs services - inputs services used in the manufacture of the finished goods which were subsequently exported - appellant is denied eligibility to avail cenvat credit on input services due to being exclusively used for exempted goods as per Rule 6(1) of CCR, 2004 and refund is also denied - refund also denied on the ground of non-registration of manufacture and also on the ground of non-distribution of credit - Held that:- Any manufacturer who clears a final product or an intermediary product for export is entitled for credit subject to above conditions. The appellant in the present case admittedly is engaged in clearing excisable goods however the controversy is whether the goods i.e. gems and jewellery were fully exempted or not. Under Central Excise, “exemption” means exemption by Notification No. under Section 5A of Central Excise Act, 1944 thus goods exported under bonds are not exempted from duty. A conjoint reading of this Circular with the above requirements of Rule 5 makes it clear that a manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking which is exported without payment of service tax shall not be an exempted goods and as such shall be allowed refund of cenvat credit in view of Rule 5 of Cenvat Credit Rules - Notification No. 12 of 17.03.2012 is therefore not applicable in the case of export of excisable goods. Non-registration of appellant for manufacture of excisable goods - Held that:- Rule 3 of Cenvat Credit Rules, 2004 prescribes that cenvat credit can be taken by a manufacturer or a provider of due to service and that there is no requirement of the registration at all - The finding of the Commissioner(Appeals) mandating the registration are therefore not sustainable. Non distribution of the credit - Held that:- The goods of the appellant are excluded from the scope of “exempted goods” - Rule 7(b) of CCR, 2004 to reject the refund is not applicable. Refund allowed - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 306
Benefit of reduced Penalty u/s 78 of FA - part payment of tax made before issuance of SCN and part payment with interest made after issuance of SCN - Held that:- It is settled position that the assesee is required to be given an option by the adjudicating authority whether he is willing to pay the duty with interest and 25% penalty within 30 days from the date of adjudication. Whenever such option is not given, the facility of paying reduced penalty by fulfilling the condition of deposition of the same with interest within 30 days (along with tax dues if any) should be granted. In the instant matter despite the fact that the Appellant has discharged the amount of Service Tax along with interest before passing the order by the Original Authority, the option about the reduced penalty has not been given to the Appellant - In the interest of justice the said option is extended to the Appellant and if the Appellant so desired he can deposit the reduced penalty of 25% within a period of 30 days from the date of communication of this order. Failing which he has to pay 100% penalty i.e. ₹ 1,95,692 after the expiry of 30 days. Appeal disposed off.
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2018 (12) TMI 305
Liability of Service Tax - amount paid for services received from the foreign company under reverse charge mechanism - CENVAT Credit - common input services used for trading activity - Rule 6(3A) of the CENVAT Credit Rules, 2004 - Extended period of limitation. Non-payment of service tax - Service tax on services received from the foreign company - service tax with interest and penalty paid before issuance of SCN - Held that:- The appellant had accepted their liability and paid the entire amount of Service Tax with interest and later availed CENVAT Credit of the Service Tax paid, as mentioned in their written submission and the services stated in the said work-sheet were taxable services - analyzing the issue raised about proper classification of the service, in our opinion, would become more of academic exercise. consequently, the confirmation of demand of Service Tax, interest and penalty on this count in the impugned order does not merit interference and accordingly upheld. Recovery of proportionate CENVAT Credit availed on various input services used for trading activity - Held that:- The admissibility of CENVAT Credit availed on input services used in providing trading activity, is no more res integra and covered by the recent judgment of this Tribunal in the case of Commissioner of Service Tax, New Delhi Vs. AVL India Pvt. Ltd. [2017 (3) TMI 793 - CESTAT NEW DELHI] where this Tribunal analyzing the amendment to the definition of exempted services w.e.f. 1.4.2011 observed that since trading activity itself is not a taxable service or activity subject to excise duty, therefore, subsequent amendment considering trading activity as 'exempted service' cannot entitle the assessee to avail the proportionate credit on various input services attributable to the trading activity. Extended period of limitation - Held that:- The issue is clarified in the case of M/S AKSH OPTIFIBRE LIMITED VERSUS CCE, JAIPUR-I [2017 (11) TMI 1449 - CESTAT NEW DELHI], where it was held that The input services, on which credit was availed by the appellant, were consumed for trading activities and such credit could not have been availed or taken for discharging service tax on the services provided by the assessee, there is no scope for any interpretational misconceptional on this aspect - extended period rightly invoked. The impugned order is upheld and the appeal is dismissed - decided against appellant.
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2018 (12) TMI 304
Cash refund of accumulated CENVAT Credit - export of Service - refund denied on the ground of limitation - claim filed by the appellant for the quarter January, 2016 to March, 2016 on 31.3.2017 - Held that:- The relevant date from the date of receipt of FIRC is on 14.3.2016 - The issue is no more res integra and covered by the judgment of the Larger Bench of this Tribunal in the case of Span Infotech (I) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE], where it was held that In respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis. Refund is not barred by limitation - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 303
Penalty u/s 78 - failure to discharge tax - Construction services - construction of Power House near Hydro Electric Power Project - Held that:- Undisputedly the appellant had constructed Power House near Hydro Electric Power Project but wrongly claimed that they have constructed dam. From the records, it is clear that they have failed to discharge Service Tax continuously for the period 2007-2008 to 2010-2011 even though they have rendered taxable services under the category of Construction Services - both the authorities below have rightly imposed and upheld penalty under section 78 of the Finance Act, 1994. The impugned order is modified to this extent and appeal is partly allowed to the said extent of allowing to discharge 25% of penalty subject to fulfilment of condition prescribed under Section 78 of Finance Act, 1994 - appeal allowed in part.
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Central Excise
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2018 (12) TMI 340
Extended period of limitation - classification issue - Interpretation of statute - When Section 11AC fails to get attracted for want of essential ingredients, can the proviso to sub Section 1 of Section 11A of the Central Excise Act, 1944 stands attracted, as both the provisions are mutually inclusive? Held that:- The order impugned before us has to be tested as a whole and cannot be truncated, as requested by the learned counsel for the appellant. Assuming that if we accept the stand taken by the appellant before us and interfere with the order passed by the Tribunal, the resultant position would be that the Department has to be held to be wrong in deciding the classification issue against the assessee - appeal not maintainable and is dismissed.
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2018 (12) TMI 339
Extended period of limitation - irregular availment of CENVAT credit - Suppression of facts - contravention of Rule 4(4) of Cenvat Credit Rules, 2002 - Held that:- On merit the appellant has no case in view of the judgment of the Karnataka High Court in the case of Suprajit Engineering [2010 (3) TMI 414 - KARNATAKA HIGH COURT]. Time limitation - Held that:- The entire demand is beyond limitation because in the present case the demand for recovery of credit availed during financial year ending 31.03.2004 and 31.03.2005 were made in the show-cause notice dated September 2016 is fully barred by limitation because there was no malafide intention as the appellant had a favourable case. The entire demand in the present case is barred by limitation - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 338
Valuation - petroleum products cleared by the appellant to other OMCs - appellant adopted Import Parity Price as the assessable value for payment of Central Excise duty - Revenue is of the view that they are required to pay Excise duty on the price at which they are selling petroleum product to independent buyers through the appellant’s own Depot/Dealer - demand of differential duty. Held that:- In the decision of the Tribunal in the case of M/s BPCL [2009 (6) TMI 166 - CESTAT, MUMBAI], the Tribunal had taken a view that the price as per MoU with other OMCs, cannot be considered as transaction value under Section 4 of the Central Excise Act, 1944. Accordingly, the issue was decided in favour of the Revenue. But we note that this decision has been distinguished by the Tribunal in the later decision in the appellant’s own case [2014 (8) TMI 220 - CESTAT MUMBAI]. In this decision, the Tribunal has held that Import Parity Price agreed between one OMC and another based on MoU reached between them, can be considered as transaction value for assessment purpose in terms of Section 4 of the Central Excise Act, 1944. Thus, Import Parity Price agreed between one OMC and another based on MoU reached between them, can be considered as transaction value for assessment purpose in terms of Section 4 of the Central Excise Act, 1944 - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 337
Condonation of delay of 215 days in filing appeal - no proper justification given for such delay - difference of opinion - Held that:- As there is difference of opinion, matter is referred to Third Member for resolving the Difference of Opinion on the issue: Whether the delay has to be condoned subject to imposition of cost of ₹ 2000/- as held by the Member (Judicial) or the Condonation of Delay has to be rejected as the appellant has not given plausible and just explanation explaining the delay in filing the appeal, and consequently, the appeal is to be rejected as barred by limitation.
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2018 (12) TMI 302
Demand of interest on the ineligible credit availed - matter remanded for recalculating their liability in terms of Rule 6(3AA) of the CENVAT Credit Rules, 2004 - Held that:- We refrain ourselves from expressing any opinion at this juncture, since the Tribunal remanded the matter to the Adjudicating Authority for de novo consideration to arrive at the net liability of the assessee after calculating the same in terms of Rule 6(3AA) of the said Rules. Since jurisdictional issue has also been raised by the Revenue, the Adjudicating Authority shall also consider the submissions of the Revenue as regards applicability of Rule 6(3AA) of the said Rules during de novo consideration - appeal allowed - decided in favor of Revenue.
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2018 (12) TMI 301
Refund claim - Provisional assessment - whether evidence stand produced by the appellant prove excess payment and refund would result in unjust enrichment to the appellant? - Held that:- The denial to finalise the assessment not treating the same as provisional is bad and against the provisions of law The impugned order set aside and matter remanded to the Original Adjudicating Authority for fresh decision - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2018 (12) TMI 300
Assessment under Compounding scheme as per the returns - exemption with respect to the labour contracts - Held that:- The assessee had applied under the compounding scheme under Section 8 of the KVAT Act, 2003 and had been granted permission to pay tax at the compounded rates. As has been found by the Tribunal, the assessee cannot turn around and challenge such benefit availed on the assessee's own application especially after the assessment year is over - revision dismissed. Addition made of suppression and omission - failure to produce books of accounts - Held that:- The Assessing Officer had granted an opportunity to the assessee to produce books of accounts and the agreements evidencing the turnover, of the contracts awarded to the assessee. The assessee had failed to produce the same. It was in such circumstances that the Assessing Officer had made an addition for probable omission and suppression. The addition made for probable omission and suppression would be akin to the addition made on an actual detection of suppression; especially when it is on account of failure of the assessee to produce the books of accounts - The Tribunal had merely noticed that there was no reason to discredit the compounding permission granted and that alone would not be sufficient ground to delete the addition made by the Assessing Officer on best of judgment - the addition made for probable omission and suppression at the equal amount is restored. Revision is partly allowed restoring the estimation made but however, making it clear that for the conceded turnover, tax would be levied under Section 8 and for the quantum made addition of; tax would be levied at the regular rate but after giving deduction under Rule 10 of the KVAT Rules - decided partly in favor of the State and partly in favor of the assessee.
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2018 (12) TMI 299
Imposition of penalty - CST Act - purchase tax not paid - exemption under Annexure A notification claimed - invocation of Section 67 of the Kerala Value Added Tax Act, 2003 - Held that:- In the present case, admittedly, an audit report was filed and after that penalty proceedings were initiated noticing the discrepancy and the revised returns were filed after the penalty proceedings were initiated. Hence the assessee failed to correct the mistakes in the return by filing a revised return along with the audit report; which was what is enabled by Section 42. The assessee attempted revision of returns only after penalty proceedings were issued, which is not permissible as per the proviso to Section 42(2). The proviso stands against the assessee and there could be no revised return accepted by the Assessing Officer against the clear mandate of the statutory provision. Invocation of section 67 - Held that:- Section 10A applies to a purchasing dealer and these are specific offences enumerated under Section 10, none of which is attracted here. Here the offence is of evasion of tax payable under the CST Act, on the interstate sale of rubber, by claiming an exemption without complying with the condition of the exemption notification. The penalty imposed under the CST Act is only proper - decided in favor of Revenue. Revision dismissed.
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2018 (12) TMI 298
Review of Order - power of Tribunal constituted with the Chairman and one members to review an order of the Tribunal constituted of the Chairman and two members - cope of review u/s 39(7) of the Act - reopening/reassessment of an assessment after the limitation provided of four years. Held that:- We cannot but observe that the two member Bench of the Tribunal ought not to have attempted a review of an order passed by a three member Bench. Even with respect to a co-ordinate bench, Section 39(7) of the Act is the power conferred on the Tribunal to carry out a review of its own orders - Tribunal constituted of two members to have acted without judicial propriety in having considered review of an order passed by a three member Bench. The specific power granted for review to an Appellate Tribunal does not even include correction of errors apparent on the face of the record. For rectification of errors, there is a specific provision under Section 43 of the Act. The petition filed herein is under sub-section (7) of Section 39 of the Act, which allows a review only on the basis of the discovery of new and important facts, which, after the exercise of due diligence, were not within the knowledge of the review petitioner or could not be produced by him. There is no new or important facts, which were urged before the Tribunal on review - the review to be one not maintainable for reason of the ingredients under sub-section (7) of Section 39 of the Act being absent - decided against Revenue. Revision allowed.
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2018 (12) TMI 297
Liability of Sales tax - transaction of sale taking place or not - source of miscellaneous income not proved - addition made on Gross Profit - Held that:- Unless there was sufficient material to show that a particular transaction was one of sale of goods, there could be no turn over addition made for the purpose of imposition of Sales Tax. For the purpose of levy of sales tax, it would be necessary to show not only that the source of money has not been explained but also the existence of some material to indicate that the acquisition of money by the assessee has resulted from transactions liable to sales tax and not from other sources. The assessee herein had taken a specific contention with respect to the miscellaneous income being income generated from real estate business; which could be easily proved by production of documents. The assessee having failed to so prove the transactions which geerated the income, with documents and materials available with the assessee, the Assessing Officer was perfectly justified in drawing an adverse inference - decided in favor of Revenue. Addition made on Gross Profit - Held that:- The books of accounts shows the amounts as miscellaneous income. The income if derived from the dealership, would definitely include gross profit. The addition made of gross profit, to the income disclosed, is not sustainable - decided in favor of Assessee. Decided partly in favor of Revenue.
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2018 (12) TMI 296
Refund of the amounts paid at the time of admission - amounts paid on the basis of an estimation made of the toll charges, which could have been collected on operation of the toll for a period of 19 years - Compounding of Offences - Cancellation of suo moto order - Held that:- In the present case, it is not clear from the assessment order as to the date on which the application for compounding was filed in the year 1999-2000. Further, the application stood allowed by the AO when the assessment order was passed in the year 2004. There was admittedly payment before the AO of the tax at the compounded rate on receipts by the assessee. The Deputy Commissioner, invoking powers of suo motu revision had merely directed denovo assessment for reason of audited balance-sheet having not been filed and there being a shortfall of turnover. Denovo assessment can only be under the compounding scheme/provision, since admittedly tax was paid at the compounded rate and in any event, atleast, at the time of assessment the application for compounding was allowed by the AO; which was not the subject of suo motu revision. Sub-rule (1) of Rule 30 speaks of an application to be filed at the commencement of the year, at least before the first of May of that assessment year. Form Nos. 21 and 21A also indicate that the permission is granted for a specific period; mostly the assessment year. Rule 30 and the Forms prescribed thereunder are period specific; while Rule 30A and the Forms prescribed thereunder are contract specific, is the contention of the assessee, which we are inclined to accept. If that be so, when the compounding has been applied for the first year, necessarily, it has to be applied in the second year also, when the very same contract is continued in the second year. The cancellation of the suo motu order is set aside - The refund shall be only after the working of the assessments under the compounding scheme and under the regular scheme - appeal allowed in part.
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Indian Laws
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2018 (12) TMI 349
Gift Deed executed for consideration - Conditional gift - Whether a document styled as gift deed but admittedly executed for consideration, part of which has been paid and the balance promised to be paid, can be treated as formal document or instrument of gift? Held that:- Gift means to transfer certain existing moveable or immoveable property voluntarily and without consideration by one person called the donor to another called the donee and accepted by or on behalf of the donee as held by the Supreme Court in Naramadaben Maganlal Thakker Vs. Pranivandas Maganlal Thakker and Others [1996 (9) TMI 618 - SUPREME COURT] - A conditional gift with no recital of acceptance and no evidence in proof of acceptance, where possession remains with the donor as long as he is alive, does not become complete during lifetime of the donor. When a gift is incomplete and title remains with the donor the deed of gift might be cancelled. It was held in the case of RENIKUNTLA RAJAMMA (D) BY LRS. VERSUS K. SARWANAMMA [2014 (7) TMI 1284 - SUPREME COURT] that there is no provision in law that ownership in property cannot be gifted without transfer of possession of such property. However, the conditions precedent of a gift as defined in Section 122 of the Transfer of Property Act must be satisfied. A gift is transfer of property without consideration. Moreover, a conditional gift only becomes complete on compliance of the conditions in the deed. In the instant case, admittedly, the deed of transfer was executed for consideration and was in any case conditional subject to the condition that the donee would look after the petitioner and her husband and subject to the condition that the gift would take effect after the death of the donor - thus there was no completed gift of the property in question by the appellant to the respondent and the appellant was within her right in cancelling the deed. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 307
Principles of natural justice - Recall of ex-parte order after expiry of 30 days from publication of the award - Refusal of employment - whether refusal of employment to Shri Mahabir Prosad Choudhary by the management w.e.f. 02.05.2005 is justified? Held that:- Tribunal was required to intimate date and time for receiving of the written statement by the company. Neither the order sheet of Tribunal indicate that any date was fixed for such service of W/S nor any intimation was sent to the company. Thus, there was a clear breach of subrule( 5) of Rule 20B, no error has been committed by High Court in taking the view that Rule 20B(5) has been violated, resulting in violation of principles of natural justice. Rule 21, which empowers the Tribunal to proceed when any party to a proceeding fails to attend. Learned counsel for the appellant is right in his submission that the plain language of Rule 21 does not indicate that it is necessary for Tribunal to issue any notice to a party before proceeding exparte. However, the expression used in Rule 21 is “may proceed”. Thus, on nonappearance on one day does not oblige the Tribunal to proceed exparte - But even otherwise accepting, the submission of the learned counsel for the appellant that no mandatory notice under Rule 21 was required to be issued by the Tribunal to the company, there being violation of Rule 20B(5), the High Court committed no error in setting aside the order of the Tribunal’s exparte award by directing the Tribunal to proceed afresh. There is no error in the judgment of the High Court - appeal dismissed - decided against appellant.
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